15. Reimbursement of Default Carriers' Costs During Mass Migration

At the direction of the assigned ALJ, the parties have been attempting to reach agreement on equitable compensation to providers for assuming TWCIS's non-Lifeline remaining customers and its Lifeline customers, who will not be able to switch to TWC Digital Phone service and continue to remain in the Lifeline program.³¹ To date, TWCIS has reached an accord on the issue with both AT&T California and Verizon. TWCIS has strongly asserted that it does not think that the default carriers should be reimbursed for any of the costs that they sustain as a result of transitioning its nonresponding customers. It argues that reimbursement is not warranted, because as the COLRs in their respective service areas, AT&T California and Verizon are "obligated to provide service to customers in these areas;" if they refuse, they will be abdicating their duties as carriers of last resort.³² AT&T California and Verizon disagree that their status as COLRs negates their entitlement to reimbursement. They contend that the costs that they will sustain as default carriers differ from those that they would bear solely in the role of COLR. We agree.

As directed in the December status conference call, TWCIS met and conferred separately with AT&T California and Verizon³³ regarding (1) the process under which each company will act as a default carrier for TWCIS customers in each one's respective franchise territory, and (2) the issue of reimbursement of extraordinary costs to each company by TWCIS, if any. AT&T California and Verizon have agreed to the following approach, and both parties have advised TWCIS that they do not anticipate incurring any costs that will be subject to reimbursement by TWCIS if this approach is observed.

First, TWCIS sent the current 30-day notice prior to discontinuance, required by the Commission, on or about January 20, 2008. Because soft dial tone is being initiated on a rolling basis, TWCIS will send customers a further notice thereafter, informing them when they will actually be placed on soft dial tone. Second, to help in expediting any transfers of service, TWCIS will provide both carriers a list of remaining customers in their respective service areas. AT&T California and Verizon may choose to directly contact these customers to offer service. Both carriers and TWCIS have agreed that TWCIS will provide the customer lists five days after it distributes its current 30-day notice, and thereafter, on a weekly basis. On a rolling basis, as of the commencement of the discontinuance period set by the Commission, TWCIS will begin placing its customers, who remain on the TWCIS network, on soft dial tone.

Default carriers will not be required to contact TWCIS customers in order to provide them new service. Rather, TWCIS customers will secure new service by contacting the default carriers or any other service provider they choose. When any customer that TWCIS has placed on soft dial tone calls and indicates that they wish to have AT&T California or Verizon service initiated, TWCIS will cooperate with the carriers to either provide the customer with the carrier's appropriate customer service telephone number or transfer the customer to AT&T California's or Verizon's customer service office.

The Guidelines recognize that mass migrations, particularly those involving migrations to a default carrier, will give rise to extra costs. Moreover, default carriers' costs will vary. The costs of complex migrations will not be fully quantifiable until after the migration has occurred.³⁴ The instant migration, entailing the transfer of the customers of discontinued circuit-switched service with the necessary interruption in local voice service, will not be a simple process. In its response to TWCIS's application, AT&T California volunteered to become the default carrier in its service area and stated that it would waive nonrecurring charges and not seek reimbursement from TWCIS. However, at the time, it requested reimbursement of resultant "extraordinary costs."³⁵ In contrast, Verizon asked that it not be designated default carrier because of the attendant burdens, and the uncertainty of reimbursement of migration costs. Verizon takes issue with the assigned ALJ having characterized the allowable migration costs for reimbursement as "extraordinary."³⁶ As Verizon notes, the Guidelines do not qualify the migration costs that are reimbursable. Instead, the Guidelines portend that certain migration costs will be necessary and quantifiable. The agreements between TWCIS, AT&T California and Verizon eliminate the need for us to further reach this issue.

³¹ The exceptions to this are the Lifeline customers in Playa Vista. TWCIS has proposed to transition the remaining Playa Vista Lifeline customers, who do not choose to go to Race once it is certificated, to TWC Digital Phone. TWCIS offered that TWC Digital Phone would provide Digital Phone service to the remaining customers at the Lifeline rate, but would not seek reimbursement from the Lifeline fund, because it is not a participant in the Lifeline program. Response to Inquiry of Administrative Law Judge: Consolidated Summary of Exit Plan Information, at p. 4 (November 20, 2007).

³² Consolidated Reply to Responses of Pacific Bell Telephone Company d/b/a AT&T California and Verizon Inc., at pp. 2 and 5 (August 10, 2007). Race has been silent regarding the issue of reimbursement of migration costs. Therefore, this discussion addresses the issue and agreements with respect to AT&T California and Verizon.

³³ In its comments on the proposed decision, TWCIS advised the Commission about the agreement it had reached with Verizon settling the reimbursement of costs issue. The letters memorializing the two agreements are attached to the order as Appendices A and B.

³⁴ D.06-11-015, mimeo. at p. 13.

³⁵ AT&T California described such "extraordinary costs" as the costs associated with "(a) the distribution of customer notifications, (b) multiple visits to migrating customer's premises (multiple visits typically occur in a mass migration process when the customer has not chosen the default carrier as its new service provider and is not at home when the installation is attempted and/or does not provide AT&T California with the necessary access to complete the installation), and (c) the placement of new facilities in the instance AT&T California facilities do not exist at the customer's premises." AT&T California Response Requesting to be Designated Default Carrier, at p. 4, fn 10 (July 30, 2007).

³⁶ Verizon counsel during December 13, 2007 Telephonic Status Conference referring to the November 28, 2007 ALJ Ruling Designating Default Carriers.