6. Comments on Proposed Decision

The proposed decision of the Commissioner in this matter was mailed to the parties in accordance with Section 311 of the Public Utilities Code and comments were allowed under Rule 14.3 of the Commission's Rules of Practice and Procedure. Comments on the proposed decision were received from AT&T California; Cox California Telecom, LLC ("Cox") and jointly from DRA and TURN on April 3, 2008. Reply comments from AT&T California and jointly from DRA and TURN on April 8, 2008.

Most of the comments re-argue positions already taken in briefs and are accorded no additional weight. We consider below those comments that raise substantive questions about the proposed decision that were not previously considered.

As an initial matter, we will revise the reference to the scoping Issues 1 and 4 in our decision (as noted by DRA and TURN) and refer instead to the September 11, 2007 Assigned Commissioner and Administrative Law Judge Ruling instead of the preliminary ruling of August 6, 2007 setting forth tentative issues. Therefore, Issues 1 and 4 are revised to read as set forth in the September 11, 2007 Ruling.

DRA and TURN argue that the PD incorrectly changes the scope of the proceeding, by reducing the number of issues that AT&T must address to establish its case.⁹⁴ DRA and TURN assert that the PD incorrectly permits AT&T to satisfy its burden of proof by demonstrating that Issue 1 of the Final Scoping Ruling has been met. There is no merit to these assertions. The Assigned Commissioner and Administrative Law Judge Ruling of September 11, 2007 did not establish the specific evidence that AT&T must demonstrate to support its Rule 12 modifications. Instead, the September 11 Ruling set forth the scope of issues that AT&T may address; however, the Ruling stated that AT&T "may produce such evidence as it believes will support the modification[s]" that it made in its Rule 12 Advice Letters.⁹⁵ Therefore, the September 11 Ruling did not prescribe the manner in which AT&T should meet its burden of proof and recognized that AT&T might produce evidence that would fit under any of the scope of issues.

DRA and TURN further note that the PD's description of AT&T's burden of proof is inaccurate, to the extent that it indicates that the burden placed on AT&T was for it to demonstrate that "conditions in the voice communications marketplace and/or AT&T's marketing methods had changed sufficiently since 2001" to justify eliminating the Rule 12 Decision requirements.⁹⁶ As discussed above, we established issues that the parties could address to demonstrate whether AT&T should be permitted to modify its Tariff Rule 12. We stated that AT&T may provide evidence on such issues to meet its burden of proof. We agree that the sentence in the PD may be confusing as to the scope and burden of proof that we placed on AT&T, and thus we revise the sentence that was in the PD accordingly:

Consistent with this approach, we placed on AT&T the burden of proving that conditions in the voice communications marketplace and/or AT&T's marketing methods had changed sufficiently since 2001 that the marketing controls imposed on AT&T in the Sales Practices Decision were no longer necessary.

DRA and TURN also argue that the record does not contain substantial evidence to support the approval of any modifications to AL 28982. We reject this assertion. The record has reflected that AT&T has revised customer relationship tools that provide it with the ability to offer customers targeted service offerings. The record also reflects that the market has changed considerably since 2001 when the Rule 12 Decision was issued. We note that the combination of a competitive market and AT&T's revised customer relationship tools, along with our requirements in this decision for AT&T to modify its Tariff Rule 12, should protect consumers from marketing abuses. Given these changes, we believe that the record supports the modifications that this decision approves.

Cox argues that the restrictions imposed by the decision on AT&T's marketing practices should expressly apply only to AT&T. AT&T argues that the restrictions imposed on it should also be imposed on all its competitors. DRA and TURN argue that if another competitor engages in the types of marketing practices that the decision finds to be in violation of Pub. Util. Code § 2896, that competitor would also be violating the statute.

With regard to Cox's arguments that the language in Conclusions of Law 4 and 5 could be misconstrued to apply to all telecommunications carriers and not only to AT&T, we clarify that these conclusions are specific to AT&T in the context of this proceeding and our consideration of whether to modify the Commission's Rule 12 Decision. This proceeding grants in part and denies in part AT&T's de facto petition to modify the earlier sales practices decision. Cox's understandable concern derives from the fact that we reach this conclusion in a rulemaking proceeding. However, as the September 11, 2007 Ruling makes plain, the resolution of AT&T's petition to modify is being taken up in this rulemaking as a matter of procedural convenience and in recognition of the unique circumstances under which the issue of modifying the earlier decision arose. Our findings and conclusions are made based on the specific facts and circumstances of this case. AT&T's conduct at issue here, combined with AT&T's past marketing abuses, form the basis of our conclusion that AT&T should explain the difference between flat rate and measured rate service and the prices for each before offering to sell a bundle of services. We will revise Conclusions of Law 4 and 5 into one paragraph as follows:

4. AT&T's marketing script disclosures regarding its stand-alone basic services and its flat and measured basic service rates failure to explain the difference between flat rate and measured rate service before offering to sell a bundle of services does not demonstrate that it provides consumers with sufficient information on which to make informed choices, as required by Pub. Util. Code § 2896.

5. AT&T's failure to disclose the price of stand-alone basic service before offering to sell a bundle of services does not provide consumers sufficient information on which to make informed choices among services, as required by Pub. Util. Code § 2896.

We reject AT&T's argument that the decision imposes "asymmetric" requirements on AT&T. This phase of the URF rulemaking was specifically characterized by the Assigned Commissioner as equivalent to a consideration of a petition to modify a prior enforcement decision. Further, the Commission has made clear that conditions or restrictions imposed in a prior enforcement decision cannot be lifted by the filing of an advice letter. The decision's modifications to the Rule 12 Advice Letters are equivalent to modifications of a prior enforcement decision and, as such, affect only the party against whom the restrictions were originally imposed. We re-affirm our stated intention to enforce Section 2896 whenever appropriate.

We reject DRA and TURN's argument that the PD should impose monetary penalties on AT&T for violations of Section 2896. As noted above, this phase was focused on whether there should be modifications to AT&T's Tariff Rule 12. We have determined that AT&T should further modify its existing practices. We will not impose penalties as we have permitted the Rule 12 Advice Letters to be effective, pending further consideration of the issues in this proceeding.

AT&T argues that the proposed requirement of informing customers of rates and terms for basic service before offering to sell bundles is overbroad. AT&T argues that its customer service representatives should be excused from the basic service disclosure requirements if a customer calls specifically to inquire about bundles or affiliate services or if AT&T is making a bundles offer to win back a former customer. DRA and TURN do not object to the exceptions for customer-initiated inquiries about bundles or affiliate services but argue that permitting such an exception should be conditioned on continued monitoring of AT&T's customer service representatives.

We agree with AT&T that no disclosure of basic service rates or explanation is required prior to providing information about bundled services, if a customer calls specifically to inquire about purchasing a service bundle or affiliate services. However, we caution AT&T that we will interpret this exception strictly. It is the carrier's obligation to provide the consumers with adequate information to make informed choices, as required by Section 2896. Unless a customer specifically and without prompting from a customer service representative requests information about bundles or affiliate services, the requirement to offer information about basic service flat rate and measured rates shall apply. AT&T's customer service training materials should be modified to include a clear explanation of the limited nature of these exceptions to the decision. We reject the recommendation of DRA and TURN that these exceptions be conditioned on continued monitoring of customer service representatives.

With regard to so-called "win-back" calls, we agree with DRA and TURN that there is no reason to suppose that such previous customers might only want bundles and not basic service. Therefore, we reject AT&T's proposal to create an exception for "win-back" calls.

AT&T objects to the requirement that information about basic service options should be displayed on its web site in conjunction with its bundled service offerings. AT&T argues that web site disclosures are beyond the scope of the proceeding.

We disagree. This proceeding is in substance a modification of a prior enforcement proceeding and decision. We have determined that this new disclosure requirement should be applied in lieu of prior requirements, in recognition of the reality of today's web-based marketing. Such substitution or modification of disclosure requirements is within the remedial powers of the Commission and an appropriate response to changing technology.

⁹⁴ Joint Comments of DRA and TURN on Proposed Decision of Commissioner Chong (April 3, 2008).

⁹⁵ Assigned Commissioner and Administrative Law Judge Ruling dated September 11, 2007, at p. 6.

⁹⁶ Joint Comments of DRA and TURN on Proposed Decision of Commissioner Chong (April 3, 2008) at p. 3.