10. Assignment of Proceedings
John A. Bohn is the assigned Commissioner on issues addressed in the Proposed Interim Decision on Alleged Ex Parte Violations. Michael R. Peevey is the assigned Commissioner on all remaining issues in both proceedings. John E. Thorson is the assigned ALJ and the Presiding Officer in both proceedings.
1. AT&T and Cox provide telecommunications services within California.
2. On November 14, 2006, UCAN filed its Complaint and Request for Cease and Desist Order against Cox for Failure to Comply with Public Utilities Code Section 2883 Regarding 911 Emergency Service Access for Residential Units. UCAN filed an almost identical complaint on the same date against SBC Communications, Inc., now known as AT&T California.
3. As remedies for the alleged violations, UCAN's complaints requested, among other things, "any and all reimbursements and penalties" available under the Public Utilities Code, punitive damages upon a showing of intentional conduct, and "all other remedies and penalties and costs" as determined by the Commission.
4. On April 17, 2006, UCAN filed a first amended complaint against AT&T requesting the same remedies as set forth in its initial complaint.
5. Cox answered the complaint and AT&T answered the complaint and the first amended complaint.
6. The proceedings have been coordinated but not consolidated.
7. Both complaints were preliminarily categorized as adjudicatory and that categorization was confirmed in the Scoping Memo on January 20, 2006.
8. No party appealed the categorization of the proceedings as adjudicatory. Indeed, in its prehearing conference statement, AT&T indicated that it agreed that its proceeding should be categorized as adjudicatory.
9. Representatives of AT&T and Cox appeared at the PHC held on January 4, 2006, including Stephanie Holland, attorney for AT&T; Margaret Tobias, attorney for Cox; and Douglas Garrett, Western Regulatory Vice President for Cox.
10. Counsel and other representatives of AT&T and Cox were served with the Scoping Memo of January 20, 2006. The Scoping Memo indicated, "Since both cases are adjudicatory proceedings, ex parte communications with the assigned Commissioner, other Commissioners, their advisors and the ALJ are prohibited. (See Rule 7(b))."
11. Tobias, Holland, and Fenikile all testified that they were aware of the ex parte ban imposed in the Scoping Memo. Garrett was present at the prehearing conference when the ex parte ban was discussed.
12. In its answer of December 22, 2005, AT&T asserted as one its affirmative defenses that "[a] bilateral Complaint proceeding is not the proper venue for the Commission to promulgate its interpretation of Section 2883, which will have general applicability to the entire LEC [local exchange carrier] community in California."
13. In its answer of December 22, 2005, AT&T defended its Section 2883 practices, in part, by indicating that warm line access was discontinued after six months to allow telephone numbers, central office equipment, and loop facilities to be redeployed. AT&T indicated, "These practices constitute reasonable and practical compliance with Section 2883(a), which mandates warm line access only `to the extent permitted by existing technology or facilities' and Section 2883(e), which relieves LECs from warm line obligations if providing it `would preclude providing service to subscribers of residential telephone service.'"
14. In its answer of December 22, 2005, Cox asserted, "UCAN raises policy and new, sometimes novel, interpretations of Public Utilities Code Section 2883 which would potentially affect all telecommunications carriers . . . . The Commission should not waste its valuable resources by reviewing novel policy matters in a misplaced complaint proceeding." In footnote 3 to the answer, Cox indicated, "If the Commission wants to address UCAN's novel policy proposals, it should do so through a rulemaking proceeding . . . and not through the complaint proceedings."
15. In explaining its positions at the PHC, AT&T indicated that numbering resource problems were one of the reasons for its policy of not providing warm line access generally after six months.
16. In explaining its positions at the PHC, Cox argued that UCAN's complaint was misplaced because it ignored two limitations on a carrier's warm line obligations: (1) technological and facilities limitations; and (2) limitations when warm line services prevent service to other subscribers. Cox also indicated that it had renumbering and number harvesting issues similar to those of AT&T.
17. Pursuant to the schedule adopted at the PHC, the defendants filed motions to dismiss the complaints, arguing that, as a matter of law, UCAN had failed to state a cause of action. UCAN briefed and responded to the motions.
18. In its motion to dismiss and reply, AT&T argued that it could avail itself of defenses based on the absence of a residential telephone connection in newly constructed residences, limitations on existing technology or facilities, limitations on phone numbers, and the need to redeploy resources to preserve its ability to serve subscribers of residential telephone service. Additionally, AT&T indicated that "a complaint proceeding is not the proper venue for pursuing industry-wide policy mandates" of the type UCAN, in AT&T's view, was seeking to litigate in these proceedings.
19. In its motion to dismiss and reply, Cox set forth in a discussion running three pages, the following argument: "UCAN is abusing the Commission's process by filing a complaint against Cox instead of filing a petition for a rulemaking."
20. In its motion to dismiss and reply, Cox argued at length that technical and facilities limitations, including the need to efficiently use limited numbering resources, constrained its ability to provide indefinite warm line access.
21. In ruling on the motions to dismiss, the Presiding Officer determined that UCAN had alleged facts sufficient to state one or more causes of action for violations of Section 2883(a) and (c). The Presiding Officer ruled that UCAN had not alleged facts sufficient to state a cause of action for any violations of Section 2883(b) or Sections 2875 to 2897. In addressing the argument that the complaints should be dismissed because the issues are more appropriate for a quasi-legislative proceeding, the Presiding Officer determined that, because Cox had not previously sought to recategorize the proceeding, the argument was waived.
22. On May 18, 2006, AT&T and Cox, in a pleading signed by Holland and Tobias, attempted to file a motion in the complaint proceedings. The motion was captioned "Joint Motion . . . to the Full Commission to Dismiss the Coordinated Complaint Proceeding and Establish a Single Rulemaking Proceeding" (May Motion). This tendered pleading was not filed by the Docket Office. The May Motion, although not filed, asked the Commission to commence a rulemaking "to promulgate a comprehensive, reasoned set of rules delineating the specific obligations of local telephone companies under Section 2883 to provide warm dial tone." The motion also asked that UCAN's complaints be dismissed.
23. On June 2, 2006, defendants filed a joint motion (Rules' Motion) in the Commission's Local Competition Docket, R.95-04-043/I.95-04-044, requesting that the Commission promulgate rules in that docket regarding carriers' "warm line" obligations under Section 2883. Simultaneously, defendants filed a joint motion (Stay Motion) in the two adjudicatory proceedings asking for a stay pending a determination "as to whether the Commission will address the requirements of Section 2883 in a generic, industry-wide proceeding" in the Local Competition Docket. The Stay Motion indicated, "In the event the Commission grants the Local Competition [Rules] Motion, it follows that the Complaints ultimately would be dismissed."
24. The Rules Motion contains numerous arguments as to why a rulemaking proceeding would be preferable to the pending complaints including the following:
- "[A]ny determination in these complaint cases . . . will have generally applicability to all local telephone companies . . . . Yet, because of the nature of the complaint proceedings, only AT&T California and Cox will have a voice . . . .";
- "Significantly, many of the constraints applicable to complaint proceedings are not applicable in generic rulemaking proceedings";
- "In its complaint cases . . . , UCAN has argued for a virtually limitless interpretation . . . . The appropriate forum for soliciting such input is an industry-wide rulemaking . . . .";
- "UCAN argues that this imposes a broad obligation on AT&T California and Cox to notify not only their respective residential customers but all consumers generally by any and all means possible. AT&T California and Cox believe that interpretation is belied by the plain language of the Statue . . . [conditioned] upon the Commission first determining the manner in which telephone corporations should do so . . . . [such as in] a generic, industry-wide proceeding in this docket";
- "The foregoing determinations should be made generically in an industry-wide forum and not in the context of individual bilateral complaint proceedings";
- "A meaningful determination cannot be made in complaint proceedings"; and
- "Moreover, the topics raised in UCAN's two Section 2883 complaints currently pending before the Commission would be more appropriately aired in technical workshops . . . . The proper forum is the Local Competition docket."
25. Section 2883 was enacted in September 1994. Prior to filing the Rules' Motion, neither AT&T nor Cox had sought a rulemaking on Section 2883 issues during the previous 12 years.
26. Prior to Wednesday, June 14, 2006, Fenikile, who previously worked for the Commission for 14 years (and as a personal advisor for eight of those years), contacted Lester Wong, personal advisor to President Peevey, and Tim Sullivan, personal advisor to Commissioner Chong, to schedule a meeting.
27. The meeting was held on June 14, starting at 10:00 a.m., at the Commission's offices, and lasted for one hour. The meeting was attended by Fenikile, Wong, Sullivan, Garrett, Tobias, Rhonda Johnson (AT&T), and Alex Camargo, a summer intern in Commissioner Chong's office.
28. On his way to the June 14 meeting, Fenikile encountered Aram Shumavon, personal advisor to Commissioner Brown (the assigned Commissioner for the complaint proceedings). A meeting was arranged for the following day.
29. The second meeting was held on Thursday, June 15, also at the Commission and also lasting one hour. This meeting involved Fenikile, Garrett, Shumavon, and Peter Hanson, another personal advisor to Commissioner Brown.
30. UCAN was not invited to, and did not attend, either meeting.
31. Fenikile said that he cautioned attendees at both meetings that "the purpose of the meeting was to discuss the joint AT&T California/Cox request set forth in the Rules Motion for a generic rulemaking regarding Section 2883 . . . in the Local Competition Docket. I cautioned all in attendance that we were not there to, and could not discuss substantive issues of UCAN's complaint proceedings . . . ."
32. Fenikile had prepared a seven-page PowerPoint presentation that was distributed at both meetings. The PowerPoint presentation included such text as "An Industry-Wide Issue Deserves an Industry-Wide Proceeding," "[u]nless the Commission addresses Section 2883 generically in the local competition docket, rules will be fashioned in an ad hoc manner on a carrier-by-carrier basis which would create this disparate treatment," and the "local competition docket is the proper venue."
33. The Presiding Officer had previously ruled that the adjudicatory matters could go forward even though they might have industry-wide implications.
34. At the time of the Rules and Stay Motions and meetings with personal advisors, Fenikile, Holland (although not present at the meetings), Garrett, and Tobias all believed or hoped that a rulemaking proceeding, if commenced, would result in a stay or dismissal of the pending complaints.
35. The overlap of people involved (Tobias, Holland, Garrett), the close succession of events (April: failure to secure complete dismissal of complaints; May: attempt to file joint rulemaking motion with Docket Office; June: filing of Joint Motion and Stay Motion, meetings with personal advisors; July: scheduled evidentiary hearing date), and the close relationship of issues pending in the complaints and discussed at the meetings) all convincingly indicate that their purpose was to seek a rulemaking proceeding in the Local Competition Docket so as to defeat, weaken, or postpone relief in the adjudications.
36. The selection of a forum, embodied in the categorization provisions of Section 1701.1, is consequential, as it determines the nature, extent, and scope of the decision making inquiry and the remedial consequences of that inquiry. The Commission recognizes the substantive nature of private, off-the-record communications between parties or interested persons and decisionmakers on forum selection controversies by requiring such communications be reported under Rule 7.1(b).
37. Defendants AT&T and Cox failed to report their June 14 and 15, 2006, private, off-the-record oral and written communications with advisors, leaving UCAN in the dark about the fact that such communications had occurred.
38. On December 31, 2005, AT&T had shareholders' equity, based on the company's consolidated balance sheet, of $54.7 billion. On the same date, Cox had shareholders' equity, based on the company's consolidated balance sheet, of $5.9 billion.
39. UCAN participated in the evidentiary hearing concerning ex parte issues and in the post-hearing briefing and has, therefore, incurred attorneys' fees claimed in the amount of $7,500.
40. The normal statutory deadline for resolving these proceedings was previously extended to July 12, 2007. An additional extension of time is required because of the Commission's consideration of the impermissible ex parte communications determined in this proceeding.
1. AT&T and Cox are public utilities subject to regulation by the Commission.
2. Since the conduct addressed in this decision occurred prior to September 13, 2006, it is evaluated under the Rules of Practice and Procedure in effect at that time. The substance of the current ex parte rules (effective September 13, 2006), however, is unchanged from the earlier version.
3. These proceedings are adjudicatory proceedings under Public Utilities Code Section 1701.1(b)(2) and Rule 5(b) and were so categorized by the Commission.
4. Public Utilities Code Section 1701.2(b), prohibits ex parte communications in these proceedings.
5. The meetings between Fenikile, Garrett and Tobias and the personal advisors constituted oral communications as defined by Rule 5(e).
6. The PowerPoint presentation distributed at the meetings between Fenikile, Garrett and Tobias and the personal advisors constituted a written communication as defined by Rule 5(e).
7. The meetings on June 14 and 15, 2006, dealt with the question of AT&T's and Cox's preferred forum to address questions of the meaning and interpretation of Section 2883, issues embodied in the categorization provisions of Section 1701.1, and as such recognized by the Commission as substantive matters. These specific substantive issues were matters also pending in the adjudications in which AT&T and Cox were party litigants.
8. Defendants AT&T and Cox failed to report these ex parte communications in violation of the Commission's Rules of Practice and Procedure.
9. The oral and written communications during the meetings concerned substantive issues in C.05-11-011 and C.05-11-012, pending formal adjudicatory proceedings, as defined by Rule 5(e)(1).
10. AT&T and Cox were interested persons as defined by Rule 5(h)(1).
11. Fenikile, as an agent or employee of AT&T, an interested person, was also an interested person as defined by Rule 5(h)(1).
12. Tobias and Garrett, as agents or employees of Cox (an interested person), were also interested persons as defined by Rule 5(h)(1).
13. Since the proceedings are adjudicatory, Wong, Sullivan, Hanson, and Shumavon, as Commissioners' personal advisors, were decisionmakers defined by Rule 5(f).
14. The meetings with the personal advisors constituted impermissible ex parte communications concerning categorization and other substantive issues in the pending adjudications (C.05-11-011 & -012), in violation of Public Utilities Code Section 1701.2(b) and Rule 7(b), Rules of Practice and Procedure, by AT&T and by Cox.
15. By engaging in impermissible ex parte communications, AT&T and Cox violated Section 1701.2(b), Rule 7(b), and the Scoping Memo and ruling issued by the assigned Commissioner and Administrative Law Judge in each proceeding.
16. These impermissible ex parte communications have violated the due process rights of UCAN in adjudicatory proceedings pending before the Commission.
17. When ex parte violations are found, the Commission has broad authority to "impose such penalties and sanctions, or make any other order, as it deems appropriate to ensure the integrity of the formal record and to protect the public interest.
18. Based on the seriousness of the violations, the imposition of a $20,000 penalty against each carrier for each meeting is just and proper.
19. Because UCAN was justified in participating in proceedings involving these ex parte violations, UCAN is entitled to recover reasonable attorneys' fees for its participation.
20. Effectively immediately, the statutory deadline imposed by Section 1701.5(a) should be extended for an additional 90 days. Pursuant to Rule 14.6(c)(4) (2006 version), the otherwise applicable period for public review and comment on this extension is waived.
IT IS ORDERED that:
1. AT&T California and Cox California Telecom (defendants), their officers, agents and attorneys are prohibited from engaging in any ex parte communications with covered persons (as those terms are defined in Rules 5(e) & (f)) concerning substantive issues in these adjudicatory proceedings or with the intent of influencing substantive issues in these adjudicatory proceedings.
2. Pursuant to Public Utilities Code Sections 701 and 2107, a penalty of $40,000 is imposed against AT&T and a penalty of $40,000 is imposed against Cox. This amount shall be paid, within 60 days of the effective date of this decision, to the Commission's Fiscal Office, for the benefit of the state's General Fund.
3. Pursuant to Public Utilities Code Section 701, UCAN's reasonable attorneys fees for participating in these ex parte proceedings to date, not exceeding $7,500, are assessed, jointly and severally, against AT&T and Cox (and chargeable against shareholders). UCAN may claim specific fees and costs, plus interest from the effective date of this decision, as part of its post-proceeding claim for intervenor compensation.
4. UCAN's complaint against Cox in Case (C.) 05-11-012 may now be withdrawn and the proceeding dismissed pursuant to the Executive Director's order, at which time that proceeding will be closed.
5. C.05-11-011 is returned to the Presiding Officer for further proceedings and remains open.
6. The statutory deadline for completing these proceedings is extended until October 18, 2007.
This order is effective today.
Dated July 12, 2007, at San Francisco, California.
I will file a dissent.
/s/ MICHAEL R. PEEVEY
President
I will file a concurrence.
/s/ TIMOTHY ALAN SIMON
Commissioner
Commissioner Simon, concurring:
I concur that the actions of Cox and SBC, now AT&T, constitute a violation of the prohibition on ex parte communications in this proceeding. Despite the fact that I agree with the outcomes reached in today's order, I wish to bring a special focus to some of the complexities that this matter presents to the Commission.
First, the recommendation of Cox and AT&T that the Commission open a rulemaking proceeding to set policy and rules concerning "warm-line" telecommunications services that reflect current technologies and market conditions - the communication that led to this fine - is a reasonable recommendation. In general, I do not believe that a complaint case involving one or two parties is the appropriate forum for setting policies that will apply to an entire industry, including companies who cannot make their voice heard in the complaint proceeding. As a consequence, parties should note that I will review with deep skepticism any outcomes of this complaint proceeding that move beyond the facts of this case and attempt to fashion policies for the entire state.
Second, the Commission's ex parte rules and statutory requirements are very technical. Commissioner Peevey's view that the custom and practice here at the Commission have made it difficult to draw a clear line separating a permissible communications on procedure from an impermissible communication concerning the substance of a complaint is one that I share. Given the technical nature of our ex parte rules and the lack of a bright line and enforcement procedures that can ensure that the current rules are followed, it is difficult to see the transgression by Cox and AT&T as anything but a technical violation of very technical rules.
Nevertheless, I agree that in the matter before us a violation of ex parte rules has occurred. I therefore support the findings and sanctions reached here. It is my hope that today's actions will cause all parties in our proceedings to pay closer attention to the ex parte rules and communications.
/s/ TIMOTHY A. SIMON
Timothy A. Simon
Commissioner
Pres. Michael R. Peevey, dissenting on Interim Decision on Alleged Ex Parte Violations:
The decision finds that representatives of AT&T California (AT&T) and Cox California Telecom (Cox) violated our ex parte rules, and imposes a fine of $40,000 on each carrier, based on the seriousness of the violations.
I voted "no" on this decision for the following reasons.
1. Even if AT&T and Cox violated the ex parte rules, the size of the penalty assessed to each carrier is unsupported by any Commission precedent, and is wildly disproportionate to other sanctions we have imposed for ex parte violations.
2. Secondly, the decision makes abundantly clear that this Commission needs to do more work to make parties and its own staff aware of the potential consequences of ex parte violations before imposing severe penalties like the ones proposed in this order.
In support of these points, let me review the single case cited in the decision as the basis for the proposed fines against AT&T and Cox.
In 2002, Pacific Bell and WorldCom, Inc. (WorldCom) engaged in ex parte contacts involving all five Commission offices during the "quiet time" associated with a rate-setting deliberative meeting. The Commission reasoned a "severe" penalty was in order because the violations were so blatantly clear, and because they occurred very close to the end of the decisional process, where ex parte violations can do the most harm to the due process rights of others. Even under these circumstances, the total fine assessed against Pacific Bell was $22,000 and against WorldCom was $1,000.
By contrast, it is unclear from the record in the matter before us whether AT&T and Cox were deliberately violating the Commission's ex parte rules. From the outset of the complaints filed by UCAN, these two carriers made clear that they believed the Commission needed to set rules for "warm line" access in a generic proceeding, and should not go forward with hearing and deciding the complaints, which are clearly adjudicatory matters, until these rules had been adopted. UCAN, the Commission and other parties were aware of this position due to numerous pleadings filed in the complaint cases, the local competition docket, and elsewhere. The types of proceedings envisioned for adoption of generic rules would certainly not be classified as adjudicatory, and therefore the carriers might reasonably assume that the meetings with Commissioner advisors were appropriate under our ex parte rules. Furthermore, as noted on page 17 of the decision, the representative from AT&T took affirmative steps to comply with these very rules. In each of the two meetings, he announced that the discussion was to be about a generic rulemaking regarding Section 2883 in the local competition docket, and, specifically "I cautioned all in attendance that we were not there to, and could not discuss substantive issues of UCAN's complaint proceedings..."
While none of our advisors were asked to testify for the record, there is no indication that the declarations of the AT&T representative were untruthful. If a violation occurred, I place it closer to the "inadvertent error" category than the "deliberate violation" category. Moreover, rather than occurring toward the end of our decision-making process, the meetings here occurred before evidentiary hearings had even begun. Thus, in contrast to the 2002 case, the problematic contacts here occurred during the initial procedural portion of the UCAN complaint cases, rather that immediately before the Commission is poised to decide the pending UCAN complaints.
Even if one were to allow that an incidental violation of our ex parte rules may have occurred, the fines imposed by the PD are both excessive and unreasonable. Based on the facts of the 2002 case involving Pacific Bell and WorldCom, the fines in this matter should be less than $20,000 per carrier, and not more. In our 2002 decision, we weighed mitigating factors before assessing monetary penalties. In the proposed decision, there is no discussion of mitigating factors, such as the carriers' obvious efforts to comply with our rules, the Commissioners' advisors raising no objections in either of the meetings, the fact that the alleged violations occurred early in the complaint cases, or the complete cooperation of the carriers after concerns about the possible violations were raised.
I am not satisfied with the enforcement process we have for assuring adherence with our ex parte rules. Some violations are clear, others are not. Some are cured with a late-filed notice, others with a mere apology and a promise to do better the next time. It is in this context that, all of a sudden, somebody feels it is time to make a point by concocting a decision imposing a very significant penalty for what appears to me to be an unintended violation. Just to keep all parties guessing, as to the "message" sent by the proposed fines, the decision makes clear at page 20 that "...we do not intend to establish any standards by which all communications of the nature referenced by defendants would be in violation of our rules."
Until the Commission or its staff produces such standards, I will continue to be very skeptical of arbitrary outcomes such as the ones in this decision.
/s/ MICHAEL R. PEEVEY
Michael R. Peevey, President
San Francisco, California
July 12, 2007
