5. Jurisdictional Challenge by AOL

While SBC's motions were under consideration, AOL pursued its motion to dismiss the complaint against it on grounds that the Commission does not have jurisdiction over ISPs like AOL because they are not public utilities. It noted that the Commission in the past has specifically disclaimed jurisdiction over ISPs. (See, Broadband Report of California Public Utilities Commission in Compliance With the Mandates of Assembly Bill 1712, at 28 (2002)), stating that Commission jurisdiction over local telephone companies for universal service purposes does not include jurisdiction or authority over Internet services, such as Internet access provided by ISPs; see also, Davenport v. AT&T Communications of California, Inc. (1999) D. 99-06-026 (Commission does not have jurisdiction over ISP service or rates).) AOL stated:

The only tenable relationship or affiliation with a "public utility" in California for purposes of this proceeding is that some AOL subscribers in California use telephone lines to call AOL for the purpose of accessing its internet service.... This, however, does not subject AOL to the Commission's jurisdiction any more than it would subject any other person or entity to the Commission's jurisdiction by the mere receipt of a telephone call from a California resident. (AOL Motion to Dismiss, at 4-5 (October 21, 2002).)

While acknowledging that AOL is not a public utility, UCAN argued that the new "cramming" statutes, Pub. Util. Code §§ 2889.9 and 2890, give the Commission jurisdiction over a "non-public utility" that provides a product or service, charges for which appear on subscribers' phone bills. If those charges are unauthorized, the Commission is empowered to levy penalties under the provisions of Pub. Util. Code §§ 2102 through 2114 against such entities "as if the persons, corporations, or billing agents were a public utility." (Pub. Util. Code § 2889.9(b).) UCAN stated:

At the heart of the complaint are customers who claim they called AOL at a number under the control of AOL which should have been free. Instead, at the precise time and duration of the call to AOL, their phone was in fact connected to a different, toll number. As a result, they received a charge on their phone bill to which they did not consent. Since they were dialing a number under the direction and control of AOL, if the complaints are verified through investigation, AOL would be in violation of section 2890. (UCAN Response, at 8 (November 15, 2002).)

In a ruling dated August 14, 2003, the ALJ denied the motion to dismiss. The ruling noted that the Legislature from time to time grants authority to the Commission over non-utility entities. (See, e.g., Pub. Util. Code §§ 314(b) [inspection of holding company records], 394.1 [jurisdiction over energy service providers], 739.5 [jurisdiction over certain mobile home park rates].) The ruling also noted that Section 2111 of the Code grants the Commission the ability to enforce its authority over "[e]very corporation or person, other than a public utility and its officers, agents, or employees" which or who knowingly violates orders of the Commission or aids or abets a public utility in such violation.

Similarly, the ALJ ruled, Section 2889.9 grants limited jurisdiction to the Commission over non-utility persons or corporations that are responsible for placing unauthorized charges on subscriber's telephone bills. Specifically, the statute provides:

If the commission finds that a person or corporation or its billing agent that is a nonpublic utility, and is subject to the provisions of this section and Section 2890, has violated any requirement of this article, or knowingly provided false information to the commission on matters subject to this section and Section 2890, the commission may enforce Sections 2102, 2103, 2104, 2105, 2106, 2107, 2108, 2109, 2110, 21111, and 2114 against those persons, corporations, and billing agents as if the persons, corporations, or billing agents were a public utility.

Thus, pursuant to the jurisdiction given it in Sections 2889.9 and 2890, the Commission three years ago levied a fine of $1.75 million on a Kansas City aggregator of billings for telecommunications-related services such as voicemail. (Investigation of USP&C, D.01-04-036, rehearing denied, D.03-04-062.) Similarly, under the same jurisdictional authority, the Commission imposed fines and other sanctions against several billing companies that had caused unauthorized charges for telephone services to appear on subscribers' telephone bills in California. (Investigation of Coral Communications, D.01-04-035, vacated on other grounds, D.01-10-073.)

The ALJ Ruling held that whether a subscriber's dial-up call to the AOL Internet service can be deemed to be an unauthorized call under the provisions of Sections 2889.9 and 2890 is a question of fact to be decided based on the evidence. Similarly, the parties dispute whether AOL is an entity "responsible" for generating toll charges for such a call. Nevertheless, as to the jurisdictional issue of whether Sections 2889.9 and 2890 extend the Commission's jurisdiction to ISPs like AOL for complaints of this nature, the ALJ Ruling concluded that they do.

While AOL in this case has reserved the right to challenge the jurisdictional ruling of the ALJ before the full Commission, it does not do so at this time because of the settlement agreement it has reached with UCAN.