Comments on Draft Decision

The draft decision of the Administrative Law Judge in this matter was mailed to the parties in accordance with Pub. Util. Code § 311(g) and Rule 77.1 of the Rules of Practice and Procedure. In its comments, ORA challenged the draft decision's conclusion that the shared asset methodology could take the place of Section 851 filings for the Service Corp/CSI/VDSI affiliates on grounds that the finding failed to provide advance approval by the Commission of leases to the affiliates. We agree with ORA's criticism of the draft decision, and we have revised the method of dealing with such leases to more closely track the recommendations of ORA. We have emphasized the different regulatory treatment of G.O. 69-C licenses for use of space and office equipment, and given Verizon the option of filing for advance approval of lease arrangements to the three affiliates every three years (with an annual advice letter true-up) or continuing to file an 851 application for each such lease. We also have made certain corrections in the text of the decision as recommended by ORA.

Verizon in its comments objects to ORA's proposal for a triennial filing of anticipated leases of space and office equipment to Service Corp, CSI and VDSI. It notes that the use of the shared asset methodology for leases effectively meets the three standards of approval required under Section 851. While we agree with that assertion, we also have found that the shared asset methodology does not meet the requirement for prior approval under Section 851. Thus, we have clarified our order to provide that (1) Section 851 filings are unnecessary for Service Corp/CSI/VDSI licenses that meet the requirements of G.O. 69-C; (2) Verizon will have the option of filing a Section 851 application every three years for advance approval of all forecasted leases of space and office equipment to the three affiliates; and (3) Verizon may continue to file individual Section 851 applications for approval of each lease of this nature. We believe that this course of action meets the need for expedited treatment of these routine license and lease arrangements, while at the same time acknowledging ORA's primary objection that prior approval of leases (and licenses that do not meet the requirements of G.O. 69-C) is necessary under Section 851.