Issue 1. Whether any other events subsequent to the issuance of D.01-09-058 support the modifications made by the AT&T Advice Letters.
AT&T relies on the factual finding of the Phase 1 decision in this URF Phase I docket that the market for voice communications in California is now competitive.17 It argues that this event alone is sufficient to justify the tariff changes made by the Rule 12 Advice Letters. As support for this argument, AT&T cites the Commission's 2001 Rule 12 Decision for the proposition that marketing practices regulation is no longer appropriate as competition develops.18 In that decision, the Commission exempted local toll and other services it deemed to be competitive from the marketing restrictions enumerated in Tariff Rule 12. Applying the competition finding to the facts of this case, AT&T argues that all company or sector specific marketing regulations restrain competition19 and should be eliminated from tariffs in accordance with Ordering Paragraph 21 of the URF Phase 1 decision.20 In short, AT&T argues that:
"Competition alone - and the consumer control that has resulted from it - is a sufficient reason to eliminate the asymmetric requirements of the [Rule 12 Decision]."21
and that in light of a competitive market,
"...companies that mistreat, mislead, or appear unresponsive to their customers, or who are unable to offer what the market has come to expect, will pay the ultimate price by losing their customers to a competitor."22 (Italics in original.)
AT&T also argues that a second major change has occurred since the 2001 Rule 12 Decision; namely, a change in AT&T's methods of dealing with its customers:
"AT&T California has developed tools and processes that allow its service representatives to quickly identify the right service or combination of services for a customer based on information provided by the customer, to let the customer know about potential savings or new products, and to ensure the customer is getting the best value AT&T California has to offer."23
AT&T's new tools and processes are discussed in detail under Issue 3 below.
In contrast, DRA and TURN state that D.01-09-058 should not be modified on the grounds that the Commission found that asymmetric regulation should be eliminated in Phase I of this proceeding. DRA and TURN assert that D.01-09-058 was based on the relationship of Pacific with its customers and on Pacific's dominant market position. Moreover, they argue that neither the typical customer's relationship with AT&T nor AT&T's dominance of the wireline market has changed since 2001. Therefore, they contend, any changes that have taken place in the market for phone services since 2001 are irrelevant to whether the original Tariff Rule 12 restrictions on AT&T's marketing practices should be removed. In support of this argument, they assert that:
a) There is a relationship of trust between AT&T and its customers based on its long history as "the phone company." DRA and TURN contend that the AT&T name is synonymous with phone service and millions of people still rely on this ILEC as their primary source of telephone services. Furthermore, they state that AT&T is the sole carrier of last resort (COLR) everywhere in its service territory other than Orange County and that AT&T served 3.4 million Lifeline customers in California in 2004.24
b) There is a relationship of asymmetrical information between customer and company that disproportionately benefits the company.25 DRA and TURN contend that the typical telephone customer has "only one contact with the company," and during that contact, "AT&T strictly controls the information available to the consumer."26 DRA and TURN assert that, with AT&T, "consumers are not provided the most essential term - the rate - about the most essential service AT&T provides..."27
c) AT&T's relationship of trust with its customers has historically been subject to abuse. DRA and TURN cite the series of Commission decisions (D.86-05-072, D.93-05-062 and D.04-09-062) that have found that AT&T and its predecessors had abused their relationship of trust with consumers in the past two decades. They assert that the conduct found abusive in these decisions as well as D.01-09-058 closely parallels the marketing practices that AT&T engages in today.28 Furthermore, DRA and TURN argue that AT&T has exploited its dominant market positions to constrict the information available to consumers by making switching costs high through early termination fees and other strategies to make its services as "sticky" as possible.29 In addition, DRA and TURN argue that AT&T has a track record of anti-competitive practices.30
With regard to AT&T's position in the residential wireline market, DRA and TURN argue that AT&T's own data fail to demonstrate that it has changed in any material way since 2001. D.01-09-058 mandated the continuance of the original Tariff Rule 12 restrictions so long as Pacific Bell served 60% or more of residential access lines in California. DRA and TURN assert that AT&T has failed to provide evidence to show that AT&T has reached this benchmark.31
17 D.06-08-030, Finding of Fact 50, p. 265.
18 AT&T California's (U 1001 C) Opening Brief at p. 6, citing the Rule 12 Decision at p. 80 ("In contrast, some services offered by Pacific Bell, such as local toll, are subject to actual competition. Pacific Bell needs to be free to market toll and other optional services in order to be on a level playing field with its competitors.")
19 Id., p. 3.
20 Id., p. 7.
21 Id., p. 3.
22 Id., p. 18.
23 Id., p. 3.
24 Joint Opening Post-Hearing Brief of the Division of Ratepayer Advocates and The Utility Reform Network on AT&T's Proposed Modifications of Decision 01-09-058, pp. 26-28.
25 Id., p. 29 and see footnote 66.
26 Id., pp. 28-29.
27 Id., p. 30.
28 Id., p. 32 and see footnotes 73-80.
29 Id., p. 34.
30 See D.02-09-050 (Bottleneck Services Decision).
31 DRA-TURN Opening Brief, p. 35.
