7. Comments on Proposed Decision

The proposed decision of Commissioner Chong in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and Rule 14.2(a) of the Commission's Rules of Practice and Procedure. Comments were filed on August 13, 2007, and reply comments were filed on August 20, 2007. Parties filing comments are AT&T, California Association of Competitive Telecommunications Companies (CALTEL), Cox/Time Warner/XO, DRA, Small LECs, Sprint Nextel, SureWest, TURN, and Verizon. Parties filing reply comments are all of the foregoing except CALTEL, and Small LECs. Parties sought clarification on the tiers in which to file certain advice letters and revisions to the detariffing requirements that were set forth in the Proposed Decision. We have responded to these issues in this decision and/or in our accompanying GO 96-B decision, particularly where revisions to the Telecommunications Industry Rules were required.

We analyze and respond to various issues raised by the comments below. We have reflected some changes resulting from consideration of the comments in the text of the Decision, but our discussion of the issues is set forth below.

7.1. Detariffing Analysis

TURN argues that the Commission cannot pre-approve detariffing applications because Section 495.7 requires a "service-by-service" analysis before detariffing. TURN Comments at 2-3. We disagree with TURN's interpretation of Pub. Util. Code Section 495.7.

TURN claims, for example, that Public Utilities Code Section 495.7 requires a service-by-service analysis before detariffing can be authorized.130 TURN reads more into §495.7 than is in the plain language of the statute. Contrary to TURN's claims, the statute merely authorizes us to detariff any service which meets either of two statutory criteria set forth in Section 495.7(b)(1) or (b)(2) and requires that the Commission make certain findings. The detariffing regime we establish in this decision meets both criteria.

With respect to the market power finding required by Section 495.7(b)(1), in URF Phase I, we conducted a thorough review of the extensive record in this proceeding and we found that the ILECs lack market power in the voice communications market with respect to business and residential services they offer throughout their service territories and further found that competitive alternatives such as wireless, VoIP, and cable-based services are widely available to customers as substitutes for wireline services.131 Specifically, our review of market power for URF ILECs focused on the market of "voice communications services regardless of technology, not just traditional wireline communications services." D.06-08-030 at 124.132 We found:

This lack of market power pertains throughout the service territories of Verizon, AT&T, SureWest, and Frontier, and holds for both business and residential services based on the ubiquity of the UNE-L unbundling scheme throughout the service territories of each of the four ILECs in this proceeding and on the cross-platform competition present throughout California.

D.06-08-030, Finding of Fact 51. These market power findings therefore establish that Section 495.7(b)(1) has been met as to all of the four largest ILECs' telecommunications services throughout their service territories.

The alternative criterion for authorizing detariffing is found in Section 495.7(b)(2). This subsection requires us to make two sub-findings, including: (i) that adequate alternatives exist for any service being detariffed and (ii) that we have adopted and are enforcing broad consumer protection regulations. The evidence that led to the URF Phase I Decision included evidence regarding the availability and substitutability of alternatives such as wireless, cable, and Internet-based voice communications. We rejected arguments by TURN and DRA that we should define the market for telecommunications service more narrowly and focus only on wireline services.136 Instead, we concluded that the market should be defined broadly to include a variety of services and service providers.137 As a result, we found that competitive alternatives are widely available.138 Contrary to TURN's contention, the URF Decision provides ample basis for us to conclude therefore that competitive alternatives are available to most customers.

TURN also asserts that the consumer protection requirements of Section 495.7(b)(2) and (c) have not been satisfied.139 In D.06-03-013, we referred to numerous laws and regulations covering freedom of choice, disclosure of information, privacy, and enforcement that currently protect consumers in California.140 As already mentioned, in the past year, we have significantly increased the staffing of our Consumer Affairs Bureau, added an 800 number for direct assistance to consumers, and adopted new consumer education initiatives in 13 languages via a consumer-oriented website (www.calphoneinfo.com) and by training community-based organizations. We also recently adopted additional rules requiring carriers that market in languages other than English to provide support to those consumers who have limited English proficiency.141 Additional protection against unfair competition and anticompetitive behavior exists in the form of antitrust laws and statutory requirements that prohibit unfair business practices. We also have established a Telecommunications Fraud Unit in our Enforcement Bureau to root out fraud and abuse of telecommunications consumers.

Moreover, in this decision, we are requiring that carriers detariffing their services comply with new rules requiring them to publish on their websites the rates, terms, and conditions for detariffed services substantially equivalent to information available in their tariffs, and provide a toll-free number for consumers to call to obtain a copy of such rates, terms, and conditions as well as archive this information for a period of three years. On review of the comments, we have also decided to expand our web-publishing requirements. In particular, we are amending the requirements for web-publishing to require that the carrier's webpage containing rates, terms, and conditions for detariffed services shall be free of marketing and sales information or ads; the webpages for rates, terms, and conditions shall be accessible to consumers without requiring personally identifying information except for area code, NXX, or zip code; and that the carrier provide the Commission with a link to the carrier's page for accessing tariffed and detariffed rates. As we discuss also in our accompanying GO 96-B decision, we believe that these requirements will ensure that this information is accessible to consumers in a simple and clear format. Carriers shall also comply with notice requirements for increases to rates, or more restrictive terms and conditions for detariffed services. These and other consumer protections discussed in this decision provide the necessary consumer protection against anticompetitive behavior required by the statute.

Finally, we amend our detariffing analysis to add additional findings that Pub. Util. Code Section 495.7 has also been satisfied for "New Services" offered by the URF Carriers. New Services are defined by our companion decision today as a "service that (i) is distinguished from any existing service offered by the Utility by virtue of the technology employed; or (ii) includes features or functions not previously offered in any service configuration by the Utility." See Telecommunications Industry Rule 1.8. Based on our findings in D.06-08-030 that the four largest ILECs lack market power with regard to all telecommunications services in their territories,142 we make an additional finding that, to the extent that a New Service is a "telecommunications service," the URF Carriers lack market power for the New Service. We are clarifying our detariffing treatment for New Services to require Tier 2 advice letters for New Services that do not fall into categories of services that a carrier has already detariffed, as also discussed in our companion GO 96-B decision. Requiring a Tier 2 advice letter for these New Services is consistent with our detariffing framework and Pub. Util. Code Section 495.7.

We reiterate that we will establish an 18-month period for implementing detariffing. We seek to promote detariffing of services within a finite period to allow for some clarity at the end of the period as to which services offered by a carrier are detariffed and which services are not detariffed. We believe that an indefinite period for detariffing will result in more confusion for consumers as carriers might detariff services on a piecemeal basis without finality. For the same reason, we seek to require carriers to detariff in whole or in part their existing services before they seek to detariff any New Services.

7.2. "Basic Service"

DRA asserts that the Commission failed to consider the legislative intent behind Section 495.7, which permits the Commission to establish detariffing procedures for services except for "basic exchange services." DRA Comments at 7. DRA argues that the interpretation of "basic exchange service" should include residential and business basic exchange services.

We will define "basic exchange service" to mean "basic service" as defined by D.96-10-066. We explain earlier in this decision our reasoning for interpreting the term to mean basic service or, effectively, basic residential service. Further, our review of the legislative history, including various Utilities and Commerce Committee Assembly Analysis Reports (from the date of introduction of the bill through September 1995, when the final bill for Section 495.7 was enrolled), does not support an interpretation that "basic exchange service" was meant to include business services. In fact, many of the Assembly Analysis Reports indicated that the detariffing statute was intended to exclude services "classified as monopoly services (residential basic exchange service)."143 If anything, therefore, the legislative intent appears to have been that Section 495.7 exclude only residential basic exchange service.

7.3. Detariffing Resale Services

Verizon asserts that it should not maintain a separate resale tariff for detariffed services, because the resale obligation and wholesale discount are mandated by law and cannot be eliminated by detariffing. Verizon Comments at 2. Although it is true that the resale obligation is mandated by law, we will not allow URF Carriers to detariff their existing resale tariffs at this time. We have not considered fully whether to detariff resale services in this proceeding, nor undertaken the analysis required by Pub. Util. Code Section 495.7 for detariffing of resale services at this time. Accordingly, carriers must continue to file resale tariffs even where the corresponding retail service is detariffed.144

7.4. Detariffing of "Basic Terms and Conditions" Underlying All Services

DRA requests clarification that "basic terms and conditions remaining in the tariff continue to apply even to customers of services that are detariffed." DRA Comments at 14.145 We clarify that terms and conditions that are required by federal or state law or by Commission decisions or orders and which are currently contained in carriers' tariffs (or required to be in carriers' tariffs) must continue to be filed in the tariff and continue to apply generally to all services - tariffed and detariffed.146 We will not permit detariffing of such language at this time until we further consider whether such terms and conditions are unnecessary for detariffed services. Carriers offer many of their services on a bundled basis, and although we may permit detariffing of bundles (that include basic service), we believe that the terms and conditions currently contained in tariffs and which are required by law, or by the Commission's orders or decisions, should continue to remain in the tariff so that we can retain some oversight over any changes to these terms and conditions and the same set of terms and conditions can continue to apply.

To the extent that a carrier is offering detariffed services in a contract with the customer, the carrier shall incorporate by reference any relevant tariffed terms and conditions into its contract.

7.5. Notices/Opt-Out for Increased Rates/Restrictive Terms and Conditions for Detariffed Services

We clarify, pursuant to AT&T's request, that the 30-day notice requirement applies to detariffed services for rate increases, and when more restrictive terms and conditions are imposed. See AT&T comments at 9-10.

We also clarify language in the PD pursuant to DRA's request regarding the 30-day notice provided to customers purchasing detariffed services. See DRA Comments at 12-13. Specifically, we clarify that an URF Carrier must offer 30-day notice to its customers receiving detariffed services of any rate increases, or more restrictive terms and conditions, regardless of whether a contract incorporates information by reference. Further, if the URF Carrier seeks unilaterally to raise rates or impose more restrictive terms and conditions during a term contract for detariffed services, the URF Carrier shall provide 30-day notice and an opportunity for the customer to opt out or cancel the contract without incurring any early termination fees or penalty.

7.6. Detariffing Internet Publication Rules for Business Customers

We reject CALTEL's request that Rule 5.2's web-publishing requirements for detariffed services not apply to services provided to business customers.147 We find that the web-publishing requirements should apply to all detariffed services, including those offered to business customers. The parties have failed to convince us that there is no need for these requirements for business customers; in the absence of tariffs, consumers benefit from being able to access key information about services on the carrier's website so that they can make informed choices. Further, not all business customers are "sophisticated;" many may be small business customers who purchase services from generally available rates, terms, and conditions.148 Carriers already provide such information online for their tariffed customers pursuant to GO 96-B if they meet certain revenue thresholds.

We reject assertions149 that carriers should post on their websites any ICB offerings with business customers for detariffed services. The Commission currently does not require carriers to post ICB contracts for tariffed services150 and there is no need for such additional requirements for contracts for detariffed services.

We also reject DRA's proposal that the Commission require contracts for detariffed services to inform customers that they have the right to submit complaints to the Commission for investigation. DRA Comments at 6. We note, however, that carriers generally have the obligation to include information on customer bills regarding toll-free numbers for the consumer to call, and specifically:

7.7. Detariffing Notice Rules for Business Customers

AT&T asserts that the customer notice requirements set forth for detariffed services (see also Industry Rule 5.3 in GO 96-B Decision) should not apply to business customers. AT&T asserts that carriers and their business customers should be able to establish terms applicable to their business relationship unimpeded by unnecessary regulatory rules. AT&T Comments at 11. SureWest asserts that the Commission should rely on contract law to define boundaries of parties' rights. SureWest Comments at 6. TURN, on the other hand, argues that the notice requirements were not specific enough, and contends that notice should be served on all interested parties, including the Commission; should include certain font size requirements; should appear in a clear and conspicuous part of the bill; and the term "affected customers" must be clarified. TURN Comments at 11-12. Time Warner/Cox/XO recommend that the Commission clarify that notice may be sent electronically via email to a customer who has elected to receive notices in such format. Time Warner et al. Comments at 5.

We will require carriers to comply with the notice requirements in Rule 5.3 for all customers (including business customers) to ensure that there are sufficient safeguards in place to protect consumers in the context of detariffing consistent with the requirements of Section 495.7. We believe that these safeguards may be as necessary for business customers as individual end-user customers. Small business customers may not have the power to negotiate favorable terms regarding notice. We clarify that customer notice may be sent electronically to a customer who has elected to receive notices in such format. We decline to impose prescriptive font size requirements for these notices.

7.8. Filing of Basic Service Tariffs

As discussed in our accompanying GO 96-B decision, we are deferring to the pending R.06-06-028 rulemaking the issue of which tier to file any changes to URF ILEC basic service rates. To the extent that a carrier seeks to file any changes to terms and conditions for basic service, and such changes are not inconsistent with Commission decisions or orders, or state or federal law, and are not more restrictive, such changes may be filed in Tier 1. More restrictive terms and conditions for basic service shall be filed in Tier 3.

7.9. Clarification of Tiers for Services Not Addressed by URF Phase I

7.9.1. Resale Services

AT&T asserts that it requires some clarification as to which tier to file tariffs for services that were not within the scope of URF Phase I, yet are "flexibly priced services," such as resale services. AT&T Comments at 2. AT&T contends that the tariffs for such services should be filed in Tier 1.

We agree with AT&T that Tier 1 is the appropriate category in which to file advice letters to change the rates for resale service tariffs that appropriately correspond to changes to the relevant retail service tariff. Pursuant to Commission decisions, AT&T and Verizon are required to offer resale services at a discount from their retail service rates.152 Thus, if an URF Carrier files a change to a retail service rate in Tier 1, it may also file changes to rates to resale service tariffs in Tier 1 (assuming that the rate changes are permissible pursuant to URF Phase I and the Commission's resale decisions).

An URF Carrier may also change terms and conditions for its resale tariffs that correspond to changes to terms and conditions for its retail tariffs in Tier 1. However, an URF Carrier may not impose more resale restrictions in its resale tariffs than is currently permitted by the Commission.153

7.9.2. Treatment of Special Access Service Filings

AT&T also seeks clarification as to what tier filing would apply to special access and switched access services. AT&T Comments at 2-3. AT&T asserts that, under the current language in the accompanying GO 96-B PD, the phrase "regulated service other than Basic Service or Resale Service" for Tier 1 would apply to its special access and switched access services and would indicate that it may file Tier 1 advice letters for changes to access services. Id. In the alternative, AT&T requests that the Commission clarify that the advice letter procedures previously applicable to those services prior to the URF Phase I decision continue to apply.154 Sprint Nextel expresses concern that the definition of "resale" service would create a distinction between "retail" and "resale" special access services, and argues that in practicality, there is no distinction between retail and resale special access. Sprint Nextel Comments at 4.

The pricing of special access was not part of URF Phase I, and the Commission explicitly carved out "special access" services from the impact of the URF Phase I decision.155 We have deferred consideration of "special access" - whether retail or resale - altogether to a later phase of this proceeding. In the interim, we decline to permit the URF Carriers to file advice letters for special access or switched access in Tier 1. Instead, we will require that URF Carriers file their advice letters for these services pursuant to existing requirements until we define further treatment of these services.

7.9.3. Other Services That Have Full Pricing Flexibility

Aside from reference to special access services, AT&T did not provide specific examples in its comments of other services that have "full pricing flexibility" but were not within the scope of URF Phase I. Thus, in the absence of specific requests for clarification, we are unable to provide guidance on the appropriate Tier treatment for such services. In general, if a service was granted full pricing flexibility in URF Phase I, and does not fall within the exceptions for Tier 1, the URF Carrier may file tariff filings in Tier 1. However, an URF Carrier may always file a tariff in Tier 2, if it believes that there is some uncertainty as to whether the tariff belongs in Tier 1. Further, if a carrier would like to have certainty before its tariff is effective, the carrier could also file the tariff in Tier 1 but seek a later effective date.

7.9.4. General Rule 7.4.2 Grounds for Protest

General Rule 7.4.2 has already been adopted by the Commission as part of GO 96-B in D.07-01-024. We have discussed General Rule 7.4.2 earlier in today's decision because of the guidance the rule provides regarding the permissible scope of protests to advice letters in an industry where the Commission has partially or fully deregulated rates. We noted that the URF Phase I decision granted full rate flexibility except for Basic Service, and subject to that exception the advice letter of an URF Carrier increasing a rate may not be protested on the ground that the rate would be unjust or unreasonable.

SureWest, DRA, and TURN raise concerns with our discussion of General Rule 7.4.2. SureWest believes we should further narrow the grounds of protest in the URF environment; TURN and DRA believe we are unduly restrictive. Having carefully reviewed these parties' comments, we are not persuaded to revise our earlier discussion. We respond first to SureWest, then take up TURN's and DRA's comments.

SureWest objects to two of the six enumerated grounds of protest under General Rule 7.4.2. Neither objection has merit. We allow a protest on the ground that "the relief requested in the advice letter requires consideration in a formal hearing, or is otherwise inappropriate for the advice letter process." General Rule 7.4.2(5). Contrary to SureWest, this ground does not invite broad-based policy argument; the Telecommunications Industry Rules state in detail the contents of the three advice letter tiers, and Industry Rule 7.4 provides guidance on the dividing line between advice letters and formal proceedings, with examples of the latter. Our Rules of Practice and Procedure further delineate formal proceedings. We find that General Rule 7.4.2(5) states a proper ground of protest that staff may readily administer.

SureWest also objects to General Rule 7.4.2(6), which allows protests on the grounds that the relief requested in an advice letter is unjust, unreasonable, or discriminatory. However, as we noted earlier in today's decision, there follow in General Rule 7.4.2 several important limitations on the ability to protest on these grounds, for example, when the Commission does not regulate the rates of a type of utility. These limitations are relevant to many of the advice letters that URF Carriers such as SureWest will file. Nevertheless, some advice letters will continue to be subject to protest as unjust, unreasonable, or discriminatory, depending on the type of carrier filing the advice letter or the service to which the advice letter relates.

TURN asserts:

General Rule 7.4.2 does not contemplate the specific scenario we have here: a utility that has some rates subject to detailed price regulation and some rates subject to price flexibility but still tariffed. General Rule 7.4.2 focuses on preventing parties to a proceeding getting a second bite at the litigation apple to change a previously decided Commission decision where presumably a reasonableness analysis has already been performed.

Opening Comments at p. 14. TURN is partly right: A fair reading of General Rule 7.4.2 reveals that a principal concern of the rule is to bar "a second bite at the litigation apple." See, e.g., General Rule 7.4.2(6) and Example 1. The "reasonableness analysis," at which TURN would like to get a "second bite," is that performed by the Commission in Phase I of the URF rulemaking. Based on this analysis, the Commission determined that all retail price regulations for business services and for many residential services for the four largest incumbent local exchange companies would be eliminated. D.07-01-024, Ordering Paragraph 5.

It is true that Ordering Paragraph 5 does not eliminate all price regulation. We were careful to note in our earlier discussion some of the various ways that URF advice letters remain subject to protest under GO 96-B. (See Section 3.1.3 Protesting URF Advice Letters Under GO 96-B.) To the extent that the Commission has eliminated price regulation, the Commission's determination to do so may not be relitigated by means of protesting an advice letter.

DRA's comments ask the Commission at least to consider the possibility that the above determination may be wrong, if not for all of California, then perhaps for "very-high-cost areas" that prove unattractive to serve and thus do not benefit from competition. Opening Comments at pp. 3-5. DRA argues that the Commission must retain a mechanism for protesting and suspending at least those advice letters relating to rate increases for high-cost areas still requiring a CHCF-B subsidy to support universal service. Moreover, DRA argues, it is unwise to "embark on a major deregulatory experiment without safeguards in place that allow the Commission to act rapidly should rates appear to be increasing unreasonably. The PD goes too far toward opening California to the same type of market manipulation as occurred when electricity was deregulated." Id. at p. 5.

In response to DRA, as GO 96-B explains, when the Commission grants pricing flexibility for services, these services are not subject to protests as to whether the rates are just and reasonable. GO 96-B, General Rule 7.4.2. Because we found that URF Carriers lack market power, we also concluded that URF Carriers will not be able to raise prices for telecommunications services unreasonably due to market forces. Permitting protests to the rates in these advice letters would effectively challenge and refute the findings and pricing flexibility granted in the URF Phase I decision.

The inability to file a protest as to rates does not, however, foreclose consumers' rights to complain that rates are not just and reasonable. Pursuant to Pub. Util. Code Section 1702, and Commission's Rules of Practice and Procedure Rule 4.1, a party may complain as to the reasonableness of any rate or charge, and bring such complaint before the Commission. This procedure affords consumers the opportunity to have the Commission consider whether rates and charges are no longer just and reasonable. In such a complaint proceeding, the Commission may also determine whether conditions have changed to an extent to necessitate revisiting findings made in its prior decisions (including in URF Phase I).

We also believe the Commission will have the information and the capability to take appropriate action on its own, if the telecommunications market in California fails to develop as we expect. In such situations, we might institute an investigation or rulemaking on our own motion.

DRA also argues that our limitation on protests should entail the elimination of protections that carriers enjoy regarding their tariffed services (namely, the filed rated doctrine and limitation of liability). DRA offers no legal support for its argument. In rebuttal, Verizon and Cox/Time Warner/XO cite federal and California appellate decisions holding that the filed rate doctrine applies where tariff filing is still required by statute or regulation, or even where a tariff was voluntarily filed.

We reject DRA's argument. To the extent that a carrier files a tariff, the courts recognize the filed rate doctrine and limitation of liability contained in that tariff. As we discussed above, however, a consumer may bring a complaint to the Commission regarding the rates, terms, and conditions of tariffed services; furthermore, nothing prevents us from considering or opening an investigation into tariffed offerings.

We also reject DRA's suggestion that service quality may serve as the basis for a protest to an advice letter. To the extent that there is a pending proceeding regarding service quality and a carrier seeks to lift requirements governing service quality that are at issue in the proceeding or to lift any other requirements that are being considered in a pending proceeding, the carrier may not do so. See GO 96-B, General Rule 7.4(4).

1. Consolidation of the URF and GO 96-B proceeding will help us to coordinate issues that overlap between the proceedings and to address questions of how or whether GO 96 procedures should relate to URF advice letters.

2. D.06-08-030 granted carriers broad pricing freedoms concerning many telecommunications services, new telecommunications products, bundles of services, promotion, and contracts. It also simplified tariff procedures and made tariffs effective one day after filing and required that all carriers provide a thirty-day notice to customers of any price increase or more restrictive term or condition.

3. On December 21, 2006, the assigned Commissioner issued a revised Scoping Memo seeking comment on, among other things: (i) the relationship between one-day effective advice letters and the notice and protest requirements of GO 96-A and the Public Utilities Code and prior Commission decisions; (ii) whether to detariff telephone service other than basic exchange service; (iii) clarifying the scope of the asymmetric administrative process language of Ordering Paragraph 21 of D.06-08-030; and (iv) whether company-specific marketing and disclosure requirements imposed as a condition or requirement resulting from an enforcement or complaint case should be continued, or whether, in light of changed market conditions, they may be lifted through the filing of an advice letter.

4. In adopting the one-day filing procedure in D.06-08-030, we wanted to provide URF Carriers with the ability to innovate and offer new services or rates, terms, and conditions without regulatory delay.

5. There are Commission precedents for advice letters effective one day after filing. However, the precedents, in particular, Res. T-15139, do not provide advice letter procedures that are consistent with the Commission's intent in D.06-08-030.

6. GO 96-B provides an adequate framework for URF advice letter filings and such advice letters should be filed pursuant to General Rule 7.3.3 (effective pending disposition).

7. Tier 1 under GO 96-B is well-suited to the filing of URF advice letters. Because an advice letter filed under Tier 1 may be effective immediately, Tier 1 enhances the ability of market participants to act quickly in competitive conditions.

8. Tier 1 advice letters may not be suspended. Tier 1 also provides flexibility: If the carrier so chooses, it may designate an effective date later than the filing date, or it may file the advice letter under Tier 2 (effective upon staff approval) if the carrier for whatever reason desires to have prior regulatory approval before taking a particular action.

9. If there is a protest to a Tier 1 advice letter, staff will review the issues raised by the protest. If the Commission or staff finds that the advice letter was impermissibly filed under Tier 1, the carrier may be required to withdraw the filing and take other action as the Commission may require.

10. The large local exchange carriers object to the tier structure of GO 96-B, but they have not analyzed the Commission precedents for one-day filing or recognized that Tier 1 under GO 96-B would promote streamlined regulation. They also do not offer alternative guidelines for processing the URF advice letters.

11. The competitive advantage enjoyed by VoIP and wireless carriers, who do not have to file advice letters at all, is lessened by our adoption today of Tier 1 procedure for URF advice letters, allowing them to become effective immediately. Detariffing can further offset this advantage.

12. DRA and TURN propose to apply GO 96-B procedure, in modified form, to URF advice letters. However, their proposed modifications are inconsistent with the principles and goals of URF.

13. GO 96-B recognizes the emergence of alternative regulatory approaches at this Commission, and the greater flexibility we have accorded utility management in all the regulated industries.

14. In competitive conditions, market participants must be able to act quickly. Tier 1 procedures enable them to do so because Tier 1 advice letters are effective upon filing, and because they are already in effect, they may not be suspended.

15. There is no real benefit to have a one-day delay between filing and effectiveness of an advice letter.

16. Under GO 96-B, the grounds for protest are more narrow where the Commission has determined not to regulate rates.

17. We found in Phase I of the URF proceeding that Verizon, AT&T, Frontier, and SureWest lack significant market power with respect to any retail voice communications service offered within their service territories.

18. In D.06-08-030, we found that the market for all retail voice communications services throughout the service territories of Verizon, AT&T, Frontier and SureWest is competitive and rejected evidence that market share and entity size indicate that a market is not competitive.

19. We rely on the market power findings of D.06-08-030 that the four major ILECs lack market power.

20. Based on our market power findings that AT&T, Verizon, SureWest and Frontier lack market power for retail voice communications services in their service territories, we find that the URF Carriers lack market power for new services as well.

21. We adopt new rules for carriers that seek to detariff to satisfy the requirements of Pub. Util. Code Section 495.7(c)(1) and (2). In particular, we require carriers that detariff services to make available, at no cost, to the consumer information that is substantially equivalent to information previously contained in their tariffs by posting the rates, terms and conditions for detariffed services on their publicly available websites and providing a toll-free number for consumers to call to obtain a copy of rates, terms and conditions. We also require that carriers archive this information for three years, and make this archive available to the public.

22. There are existing Commission rules and safeguards (including those against cramming and slamming) in place to protect consumers against fraud. The Commission has also adopted enhanced investigation and enforcement capability in the Telecommunications Fraud Unit and a consumer fraud toll-free hotline.

23. URF Carriers lack market power and lack the ability to engage in the kind of anti-competitive behavior referenced in Pub. Util. Code Section 495.7(d). We are not deregulating resale rates, and we require that URF Carriers post rates, terms, and conditions for services on their websites; thus, URF Carriers will not be able to engage in anti-competitive pricing without detection.

24. We have deregulated all but Basic Service rates, and thus eliminated the financial incentive for a licensed carrier to engage in cross-subsidization with an unlicensed affiliate.

25. Tariffs afford carriers protection under the Filed Rate Doctrine and limitation of liability provisions. Tariffs are often cumbersome, legalistic and unwieldy documents that are difficult for most consumers to read or understand.

26. It is desirable to establish detariffing procedures for URF Carriers. The Commission's existing rules together with those adopted today will provide adequate protection for consumers.

27. We do not establish mandatory detariffing procedures. Instead, we permit carriers to apply to detariff by filing Tier 2 advice letters pursuant to GO 96-B within an 18-month implementation period after the effective date of this decision.

28. Carriers may detariff new services that fall into categories of services that have not already been detariffed through Tier 2 advice letters beyond the 18-month implementation period.

29. If there is no protest to a Tier 2 advice letter seeking to detariff services and the advice letter is otherwise in compliance with GO 96-B and the services do not fall within the categories for which we prohibit detariffing, the advice letter is deemed approved.

30. If a Tier 2 advice letter is protested, staff will review the protest under the procedures set forth in General Rule 7.6.1 of GO 96-B. Since the grounds for protest are narrow, staff will usually be able to approve or reject the advice letter by the end of the initial 30-day review period.

31. Detariffing of basic service is not permitted under Pub. Util. Code Section 495.7.

32. Detariffing of resale service is outside the scope of this proceeding.

33. On a prospective basis, a carrier may not file an advice letter to remove a requirement or condition in its tariffs resulting from an enforcement, complaint, or merger proceeding.

34. The 911 system provides the public an important public service that must be available to all phone customers and must not be detariffed.

35. Carriers may not detariff services offered by an interexchange carrier that allows a consumer to dial around a local exchange carrier to use the services of the interexchange carrier without a contract.

36. Carriers may not detariff a service that was not granted full pricing flexibility in D.06-08-030, such as resale services.

37. Carriers may not detariff obligations pursuant to existing state or federal law, including Carrier of Last Resort obligations, or Commission decisions or orders.

38. Carriers may not detariff basic terms and conditions that are required by federal or state law or by Commission decisions or orders and which are contained in carriers' tariffs or required to be carriers' tariffs.

39. Any conditions or requirements imposed in a Commission decision may be lifted only by demonstrating compliance with its terms, and by a subsequent Commission decision.

40. We will address the issues raised by protests to the AT&T Advice Letters 28800 and 28982 after we address the request for evidentiary hearings on that issue.

1. D.06-08-030 should be modified such that the URF advice letters formerly qualifying for effectiveness one day after filing must now be filed under the procedures for Tier 1 advice letters, as those procedures are set forth and explained in D.07-01-024.

2. Changes to resale service rates, to the extent that such changes comply with the required discount for resale service rates, may be filed in Tier 1

3. Changes to terms and conditions for resale tariffs that correspond to changes to terms and conditions for retail service tariffs, may be filed in Tier 1.

4. Changes to basic service terms and conditions that are not more restrictive and that do not conflict with law, or Commission decisions or orders, may be filed in Tier 1. More restrictive terms and conditions for basic service shall be filed in Tier 3.

5. Under GO-96-B, the grounds upon which an advice letter may be protested are limited. For example, where the Commission has granted utilities full pricing flexibility, which it has done for URF Carriers with respect to many services in D.06-08-030, an advice letter increasing a rate for one of these services may not be protested an unreasonable.

6. The competitive advantage enjoyed by VoIP and wireless carriers over carriers that file advice letters arises from federal preemption over certain aspects of VoIP and wireless service. The advantage does not result from any action taken in the URF or GO 96 rulemakings.

7. GO 96-B provides procedures that are consistent with the policies we adopted in D.06-08-030 and should govern advice letter filings under URF.

8. Pub. Util. Code Section 495.7 authorizes the Commission, by rule or order, to establish procedures to detariff a service if the Commission finds that the telephone corporation lacks significant market power for that service for which an exemption from tariffing requirements is being requested.

9. The requirements of Pub. Util. Code Section 495.7 have been met for the Commission to establish detariffing procedures.

10. Section 495.7 does not permit detariffing of basic exchange service. We interpret "basic exchange service" to mean "basic service," as defined in D.96-10-066.

11. We rely on the record in Phase I of the URF proceeding to find that Section 495.7(b)(1) is met.

12. The Commission considered various criteria including market share, but did not rely on market share in determining that AT&T, Verizon, Frontier, and SureWest lack significant market power. Pub. Util. Code Section 495.7(b)(1) does not require that the criterion of "market share" be the sole factor to consider in assessing a carrier's market power.

13. Pub. Util. Code Section 495.7(c) is met, because there are existing statutes and rules that address the safeguards that are necessary to protect consumers prior to establishing detariffing procedures.

14. We adopt new requirements for carriers seeking to detariff to satisfy Pub. Util. Code Section 495.7(c), including the requirement that carriers detariffing their services must make available to the public their rates, terms, and conditions for detariffed services on their websites and provide a toll-free number for consumers to call to obtain a copy of rates, terms, and conditions.

15. General contract principles prohibit a carrier from unilaterally changing rates, terms, or conditions to a contract with a customer.

16. Carriers that enter into a term contract (with early termination fees) with a consumer for detariffed services shall not unilaterally increase rates, or impose more restrictive terms or conditions to the term contract unless the carrier has provided the customer 30-day notice and given the consumer an opportunity to opt out of contract..

17. We conclude that Pub. Util. Code Section 495.7(d) is satisfied under URF. We find that URF Carriers that are incumbent local exchange carriers lack market power throughout their service territories and also lack the ability to engage in anti-competitive pricing and lack incentive to engage in cross-subsidization with an affiliate.

18. We establish permissive detariffing procedures that allow URF Carriers to detariff telephone services via Tier 2 advice letters.

19. We intend for these detariffing procedures to apply to all URF Carriers, including the four major ILECs, CLECs, and IXCs.

20. It is not in the public interest for carriers to amend or lift tariffs containing conditions or requirements imposed through enforcement, complaint, or merger proceedings.

21. A carrier seeking to amend or lift a tariff containing conditions or requirements imposed as a result of a prior Commission enforcement, complaint, or merger case must file an application or petition to do so.

22. Detariffing of 911 services is not in the public interest.

23. Detariffing of dial-around services or other forms of direct connection to an interexchange carrier is not in the public interest.

24. Detariffing of obligations pursuant to existing state or federal law (such as Carrier of Last Resort obligations), or Commission orders and decisions, is not in the public interest or lawful.

25. Detariffing of basic terms and conditions that are required by federal or state law or by Commission decisions or orders and which are contained in carriers' tariffs or required to be carriers' tariffs, is not in the public interest.

26. Detariffing of resale services or other services that were not granted full pricing flexibility in D.06-08-030 is not in the public interest.

27. Once a service is detariffed, the carrier need not file anything further with the Commission regarding the detariffed service, such as advice letters regarding rate changes or changes to terms and conditions. The carrier also does not need to file the contract for the detariffed service. The carrier must continue to notify a customer 30 days in advance of increased rates, or more restrictive terms and conditions for detariffed services and must post all available information on its website.

28. The 18-month implementation period for detariffing does not apply to the carrier's offering of new services on a detariffed basis. For example, if an URF Carrier seeks to offer new services on a detariffed basis after the 18-month implementation period, the carrier shall submit a Tier 2 advice letter to offer a new service as a detariffed offering if the new service does not fall into the categories for which the Commission does not permit detariffing, and does not fall into categories that the carrier has already detariffed.

29. The filed rate doctrine does not apply to detariffed telephone services.

30. Detariffed telephone services are not subject to tariffed limitations of liability.

31. Ordering Paragraph 21 of D.06-08-030 was intended to permit carriers to file advice letters removing certain asymmetrical marketing, disclosure, and administrative requirements, as long as such requirements did not pertain to basic service; resale service; include requirements imposed on a carrier as a result of an enforcement, complaint, or merger proceeding; or contain obligations related to Carrier of Last Resort requirements or state or federal law, or Commission decisions and orders.

32. As of the effective date of this decision, URF Carriers that seek to remove conditions or obligations imposed in their tariffs as a result of an enforcement, complaint, or merger case, must file a petition or application to modify the underlying decision that imposes the conditions, obligations, or penalties.

ORDER

IT IS ORDERED that:

1. On or 30 days after the effective date of this decision, an URF Carrier shall file an advice letter for the following services pursuant to General Rule 7.3.3 (Tier 1 treatment) under General Order 96-B:

2. Staff reviewing protests to Tier 1 advice letters shall notify the carrier and the Director of the Communications Division if its review will take longer than the initial 30-day period of review, and thereafter shall report on the status of the review every 30 days. The Commission shall issue a resolution to dispose of the protest no later than 150 days from the date of filing the advice letter.

3. Within the next 18 months, a carrier may detariff existing retail services and tariff sheets for those services by filing an advice letter that complies with the terms of General Order 96-B, General Rule 7.3.4, and does not purport to cancel:

b. A tariff that includes a requirement, condition, or obligation imposed through an enforcement, complaint, or merger proceeding.

c. A tariff for 911 or other emergency services.

d. A tariff relating to customer direct access to an interexchange carrier or customer choice of an interexchange carrier.

e. A tariff for a service that was not granted full pricing flexibility in D.06-08-030 (e.g., resale services).

f. A tariff containing obligations as a Carrier of Last Resort or other obligations under state and federal law, or under Commission decisions and orders.

4. The 18-month implementation period for detariffing does not apply to "new services" as defined in the Telecommunications Industry Rules of GO 96-B. An URF Carrier may seek to detariff new services that fall into a category that the carrier has not previously detariffed after the 18-month implementation period by filing a Tier 2 advice letter with the Commission as long as the new service does not fall into the categories of services for which we do not permit detariffing. A carrier may also offer new services as tariffed if it wishes.

5. Today's decision shall be served on parties protesting AT&T advice letter 28800 and 28982, all parties in R.05-04-005 and R.98-07-038, and all parties in Case 98-04-004.

6. Rulemaking 98-07-038 is closed.

This order is effective today.

Dated September 6, 2007, at San Francisco, California.

130 TURN comments, at 2-4. All references to code sections refer to the Public Utilities Code.

131 D.06-08-030, at 4, (Findings of Fact 50, 51), 262-267 (Findings of Fact 17, 19-20, 32, 36, 39, 44, 50-51, 62-63), 274-275 (Conclusions of Law 13-20).

132 We stated that "[t]here is a single market for voice services, and no carrier has market power within California." D.06-08-030 at 192.

133 See also D.06-08-030, at 125-129, 246-247, 266 (Findings of Fact 57, 60) 275 (Conclusions of Law 22-23).

134 D.06-08-030, Finding of Fact 57.

135 D.06-08-030, Findings of Fact 58-61.

136 TURN comments, at 6-7.

137 D.06-08-030, at 124.

138 D.06-08-030, at 202, 262, Findings of Fact 46-47, 49, 51, 267 (Findings of Fact 62-63), 268 (Findings of Fact 77), 274 (Conclusions of Law 11, 13-14), 276 (Conclusion of Law 28). We found that the ILECs' market power is limited by the FCC's unbundling scheme, "which makes it possible for competitors to provide telecommunications services in every wire center located in their service territories." Id. at 274 (Conclusion of Law 16).

139 TURN comments at 7-9.

140 See, e.g., D.06-03-013, Appdx. D (listing consumer protection statutes and regulations).

141 D.07-07-043.

142 D.06-08-030, Findings of Fact 51, 78; Conclusions of Law 20, 24.

143 See, e.g., Analysis of Utilities and Commerce Committee Assembly Bill 828 and Assembly and Senate Floor Votes (September 1, 1995); see also http://www.legislature.ca.gov/cgi-bin/port-postquery?bill_number=ab_828&sess=9596&house=B&author=assembly_member_conroy

144 If an URF Carrier is not required to file resale tariffs pursuant to the law or this Commission's orders and rules, this decision does not impose new requirements on these carriers to file a resale tariff.

145 DRA notes specifically that if an URF Carrier "has tariffed service conditions that require it to advise residential customers of available low-cost services, those conditions were presumably intended to apply to all interactions with residential customers, regardless of whether the customer subscribes to a service that is still included in the tariff or to one that has been detariffed." DRA Comments at 14.

146 If a carrier is seeking entry as a newly certificated carrier in California and seeks to detariff its services, that carrier shall file a tariff to the extent that certain requirements are required by law or the Commission to be tariffed. See, e.g., GO 96-B, General Rule 8.5.7 (requiring that carriers establish rules on basic matters such as how a customer establishes or terminates an account, or pays or disputes a bill). We are not at this time reconsidering the general language (terms and conditions) currently required to be tariffed for competitive or interexchange carriers, and such language would need to be filed as a tariff.

147 CALTEL argues that "[s]ophisticated business customers are simply not in need to the same levels of protection as mass market residential customers" and the "administrative burden of attempting to maintain detailed information about these complex business services, and archiving that information" would be more time consuming than filing tariffs and related customer contacts. CALTEL Comments at 5.

148 As TURN points out, deleting such requirements for services provided to business customers could harm small businesses and that such proposals should be rejected until the concept of business customer is more clearly defined. TURN Reply Comments at 3.

149 See DRA Comments at 10.

150 D.94-09-065, Conclusion of Law 177.

151 Pub. Util. Code Section 2890(d)(2)(B).

152 D.96-03-020, D.96-12-076, D.97-08-059.

153 See, e.g., D.97-08-059 (permitting certain resale restrictions).

154 AT&T Comments at 5. Sprint Nextel notes that it will refrain from commenting on permitting retail special access to be eligible for tariffing under Tier 1, until it is clear that the Commission will subject retail special access to Tier 1 treatment. Sprint Nextel Comments at 6, n.16. Sprint Nextel also points out that services such as special access were not granted full pricing flexibility under D.06-08-030 and should not be eligible for detariffing.

155 See, e.g., D.06-08-030, Finding of Fact 119.

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