III. Settlement Agreement

A. Initial Settlement Agreement

In the initial Settlement Agreement filed on August 12, 2002, the Settling Parties state they have reached a settlement that is more advantageous than proceeding with litigation because it resolves their dispute and serves the interest of ISPs and Californians who want to use DSL service in areas served by ASI. The Settlement Agreement contains provisions addressing: 1) system architecture; 2) the interval for switching customers using DSL Transport from one ISP to another (also known as "customer migration interval"); 3) the provisioning of DSL Transport service to ISPs; 4) access to competitively sensitive ISP ordering information; 5) sales practices of ASI and Pacific personnel; 6) creation of an ombudsperson to report and resolve billing and sales practice disputes between ISPs and SBC/ASI; 7) creation of a marketing fund to promote ASI's DSL services through non-affiliated ISPs; and 8) monetary compensation to independent ISPs to reimburse certain billing expenses. The Agreement also addresses payment of attorneys' fees to CISPA and a provision prohibiting CISPA's involvement in any state or federal proceedings under Section 271 of the Act,⁸ or state proceedings under Pub. Util. Code § 851 regarding claims based on the facts alleged in the complaint.

According to the Settling Parties, the Settlement resolves their dispute, solidifies various remedies regarding DSL service to ISPs that Pacific/ASI have already implemented during the course of this litigation, commits Pacific/ASI to continued improvement, provides resources to CISPA members who sell ASI's DSL service, and ensures CISPA does not suffer a hardship based on the attorneys' fees it incurred in the course of this litigation. They contend the Settlement is in the public interest because it will ultimately benefit California consumers who have or seek DSL Internet service. Specifically, they contend the Settlement benefits consumers by minimizing the time involved in changing from one ISP to another, which will allow consumers to exercise choice in ISP providers without significant downtime. In addition, they assert the Settlement assists independent ISPs in marketing DSL, which should give consumers a wider variety of ISPs to choose from for their broadband services. The Settling Parties believe that the provision limiting CISPA's future involvement in other Commission proceedings regarding the facts alleged in this complaint is a fair trade for other provisions of the Settlement.

In response to the proposed Settlement, several parties filed comments opposing the withdrawal of the complaint and stating that the Settlement is not in the public interest as required by Rule 51.1.⁹ Brand X and TURN/UCAN each filed comments contending that the settlement is not in the public interest because it limits CISPA's involvement in other Commission proceedings¹⁰ and it does not meaningfully resolve the issues presented in the complaint. According to these parties, the Settlement does not give ISPs any enforceable rights to counter the alleged improper actions of SBC/ASI or prevent future recurrence of these alleged abuses.

In their December 2002 ruling, the ALJ and Assigned Commissioner determined that the proposed Settlement should be reviewed under the public interest standard contained in Rule 51.1.¹¹ The ruling went on to note concerns over particular language in the Settlement pertaining to limitations on the ability of other entities to pursue future claims against SBC or ASI.¹² Specifically, the ruling expressed concern that Section 9 of the Settlement, entitled "Settlement Agreement; Release of Claims," was vague and ambiguous and might be used by Defendants to counter future claims of alleged wrongful conduct as violations of the Settlement. In addition, the ruling articulated concerns with a provision limiting CISPA's participation in SBC's Section 271 and various Section 851 proceedings. Finally, the ruling questioned the language in the Settlement limiting CISPA's ability to provide information in future Commission proceedings. As the ruling stated:

It is unclear how such a broad restriction as contained in paragraph 9(a) will be practically enforced. The settlement refers to the "facts" underlying the complaint, but we are unsure what this refers to since the record for the case was not developed. We are concerned this language might unreasonably exclude any future claims of misconduct against Pacific or ASI unless the facts, time periods, and claims referred to are specified. (Id., p. 15.)

The ruling directed the parties to hold an additional settlement conference to consider addressing the parties' concerns and report whether any revisions to the Settlement were made in response.

B. Revised Settlement Agreement

In response to this directive, the Settling Parties held a settlement conference in January 2003 and subsequently filed a revised settlement agreement on February 10, 2003 (Revised Settlement). According to the Settling Parties, the Revised Settlement contains revisions to address the concerns raised in the December 2002 ruling and by the parties in their comments on the initial settlement.

With regard to the concerns expressed by the Assigned Commissioner and ALJ, the Settling Parties revised language in the settlement regarding release of future claims. The Revised Settlement now ties the release of claims to the issues contained in the May 10, 2002 Scoping Memo issued in this proceeding.¹³ The Revised Settlement also deletes language restricting CISPA's participation in the Section 271 proceeding or any Section 851 proceedings, and it makes clear that parties are not prevented from complying with legal obligations to provide information to the Commission or to a third party in future proceedings.¹⁴

In response to other criticisms of the initial settlement, the Revised Settlement contains other modifications including:

· Customer Migration Interval-Recent historic experience has been that subscribers can experience from 7-9 days of downtime in the migration from one ISP to another. Section 7 of the Revised Settlement commits ASI to system enhancements by the end of the third quarter of 2003 that will reduce subscriber downtime to a maximum of one business day if certain conditions are met, and no more than 2-4 days of downtime in other circumstances.

· Ordering Interface-Section 5 of the Revised Settlement sets forth a series of specific dates for completion and availability of a series of enhancements to the ASI service order process that the Settling Parties contend will benefit ISPs.

· Billing-Section 3 of the Revised Settlement clarifies aspects of the Ombudsperson role that was created to reconcile unresolved ISP billing issues and allegations of improper sales practices. The Ombudsperson will report to a high level position in the ISP sales organization, will have full authority to promptly resolve issues; and SBC will retain records of each inquiry under this process.

Despite these revisions to the initial settlement, Raw Bandwidth, Brand X, and TURN/UCAN filed comments opposing the Revised Settlement. SBC/ASI responded to this opposition with additional revisions that it is willing to make to the settlement regarding the customer migration interval and grandfathering of certain services.¹⁵ In response to Raw Bandwidth, SBC/ASI also provided a letter indicating that it is reinstating its web page listing independent ISPs.

The Commission will not approve stipulations or settlements, whether contested or uncontested, unless the stipulation or settlement is reasonable in light of the whole record, consistent with law, and in the public interest.

Resolution shall be limited to the issues in that proceeding and shall not extend to substantive issues which may come before the Commission in other or future proceedings.