Conclusion

At the issuance of D.02-09-050, we did not consider our job with respect to Section 709.2(c) to be over. Our focus then and now is with the development of adequate competitive safeguards for the intrastate interLATA market. While acknowledging that D.02-09-050 was not appealed, most of the parties insist that we have further Section 709.2(c) proceedings and urge us to revisit issues that we have repeatedly declined to entertain. Notwithstanding the demands, we do not consider it appropriate to transplant the bulk of the major telecommunications policy matters to this proceeding. We believe that specific allegations should be pursued in a case dedicated to examining those allegations, not assembled with a vast assortment of past and recent accusations.

Anticompetitive conduct by Pacific that is substantiated will not be sanctioned. Any improper cross subsidization will be uncovered and remedied. Last December, Pacific chose to address Section 709.2(c) through its overall demonstration of compliance with Section 271. We were not persuaded that that showing sufficiently enabled us to make the determinations required under our state law. We reject the notion that extensive discovery and exhaustive hearings are the only way to fulfill our obligations under Section 709.2(c)(2)-(4). We also decline to indefinitely delay Pacific's entry in the intrastate long distance market until all the disputed issues before us are resolved. We believe the better approach is to erect competitive protective measures so that illegal conduct is prevented, revealed and punished.

Continuing Staff's review of the joint marketing scripts when substantial changes are made will inform the Commission about any anticompetitive conduct that emerges in the scripts, and enable us to immediately address it. The EDR process, once promptly conformed to our rules, will be a significant competitive safeguard against any unfair conduct or operational disputes. Additionally, requiring Pacific to make existing special access performance measure results available to Staff as well the competitors will allow us to monitor the data and discuss the issues from a common source of information. With the assurance of these added safeguards, we find in accordance with Section 709.2(c)(2) that there is no anticompetitive behavior by the local exchange telephone corporation.

The current NRF proceeding, R.01-09-001, will determine in one of its phases whether or not Pacific has cross subsidized its operations. We need not replicate that case here. Federal and California law requires separate accounting records "to allocate costs for the provision of intrastate interexchange telecommunications service." As stated in D.02-09-050, we directed that an audit of SBC Long Distance take place once it is operating, pursuant to OP 8 in D.99-02-013. That audit shall include an examination of the methodology of allocating intrastate interexchange telecommunications service costs. We affirm the satisfaction of these requirements under Section 709.2(c)(3), and find that there is no cross subsidization by Pacific.

The Staff review of the marketing scripts, the EDR process, and the availability of special access performance measure results together provide a significant safeguard against potential harm to the intrastate interexchange market. The competitors insist that delaying Pacific's entry into the intrastate long distance market until the Commission resolves various policy questions is an appropriate response to future harm to the market. We consider such an approach to be resource-intensive and unproductive. For our part, we expect these safeguards to mitigate projected damage. Thus, with the safeguards we adopt today and those set out in D.02-09-050, we find that possibility of harm to the competitive intrastate long distance market to be less than substantial. In accordance with Section 709.2(c)(4), we find that there is no substantial possibility of harm to the competitive intrastate interexchange telecommunications markets.

In making the remaining determinations under Section 709.2(c), we find that it is appropriate that Pacific shall have the authority to operate and provide intrastate interexchange telecommunications services provided that it has received full authorization from the FCC pursuant to Section 271 of the Telecommunications Act of 1996. Thus, we grant Pacific the authority to provide interexchange telecommunications services within state of California.

Comments on Draft Decision

The draft decision of ALJ Jacqueline A. Reed in this matter was mailed to the parties in accordance with Pub. Util. Code § 311(g)(1) and Rule 77.7 of the Commission's Rules of Practice and Procedure. Comments were filed on _______________.

The Commission finds that in light of scheduled action by the Federal Communications Commission in Washington, D.C. on December 19, 2002, to act on Pacific's application for interstate long distance service, pursuant to § 271 of the Telecommunications Act of 1996 (47 U.S.C. § 271), it is necessary for this Commission to take action by the effective date of Pacific's long distance service granted by the FCC's action, in order to provide guidance to Commission staff as to what to do with the California tariff filings permitted by the FCC's action. In order to allow the Commission to consider the matter in an expedited manner, the comment period is shortened and comments are due at noon, on December 24th.

The public necessity of deciding California's concurrent jurisdiction pursuant to Public Utilities Code § 709.2 over intrastate InterLATA long distance service in a manner that addresses issues of sovereignty and comity contemporaneous with Pacific's service offering permitted by the FCC's action, outweighs the public interest in having the full 30-day period for review and comment on the proposed decision. The Commission further finds that the normal public interest in a 30-day comment period is here somewhat diminished by the fact that a significant proportion of the disputed factual issues are coextensive with those previously decided in D.02-09-050, and have been addressed and commented upon by parties.

Assignment of Proceeding

Geoffrey Brown is the Assigned Commissioner and Jacqueline A. Reed is the Assigned Administrative Law Judge in this proceeding.

Findings of Fact

1. On September 19, 2002, this Commission issued D.02-09-050, its advisory opinion to the FCC on Pacific's compliance with the fourteen checklist items of Section 271.

2. On October 4, 2002, the Assigned Commissioner issued an ACR noting that although the Commission had favorably assessed Pacific's long distance application for the FCC, the status of Pacific's intrastate interexchange request was hampered by the Commission having affirmatively made only one of the four determinations required under Section 709.2(c).

3. The ACR stated that upon reviewing the proceeding record after the issuance of the decision, the Assigned Commissioner believed that the outstanding Section 709.2(c) issues could and should be resolved promptly.

4. The Assigned Commissioner questioned how beneficial further proceedings and additional rounds of briefings would be in addressing the unfinished aspects of the Section 709.2(c) inquiry.

5. In his view, the remainder of the proceeding should focus on strengthening the safeguards established in D.02-09-050, and establishing additional safeguards, if warranted, to mitigate the potential harms to the intrastate interexchange market.

6. The November 6, 2002 PHC was convened to: (1) to advise the interested parties that the Commission wanted to resolve the remaining Section 709.2(c) issues as promptly as possible; (2) to urge the parties to collaborate on an Expedited Dispute Resolution (EDR) process in order to address the ongoing operational conflicts between Pacific and the competitors; (3) to ask Pacific to work as closely as possible with staff to keep it fully briefed and ready for any and all post authorization regulatory tasks; and (4) to allow the parties an opportunity to further express their views and concerns on the resolution of the Section 709.2(c) open issues.

7. Most parties oppose the ACR's proposal, and urge the Commission to hold further proceedings.

8. A number of parties comment that the existing safeguards established under D.02-09-050 should be strengthened and implemented immediately, and new safeguards added.

9. No party appealed D.02-09-050.

10. Restarting the Section 709.2(c) inquiry from the beginning ultimately will not be productive.

11. The Assigned Commissioner remarked at the September 19 Commission Conference that appropriate safeguards could best mitigate existing anticompetitive conduct and cross subsidization as well as significant future harms to competitors.

12. The public interest is better served by resolving the competitors' disputes with Pacific than by simply cataloguing them.

13. A number of the proceedings that parties propose be considered in Section 709.2 are already before us.

14. Other proceedings identified as imperative, such as switched access charge reform and special access performance incentives, must be considered with full appreciation of the overall industry and the impacts on Commission resources.

15. While the individual theories behind both structural separation and a neutral PIC administrator were articulated in the parties' proposals last year, no implementing details were presented.

16. The language set forth in OP 17 of D.02-09-050 unnecessarily links a customer's decision to purchase long distance and local toll service.

17. Marketing documents tend to be submitted to the Commission in tandem with requests for proprietary treatment.

18. Competitors can inform Staff of script concerns so that Staff can review the joint marketing scripts from a comprehensive perspective.

19. Staff `s review of the marketing scripts has been beneficial for the Commission as well as Pacific.

20. The EDR process submitted by the parties includes a procedure that sets out a more compressed schedule than the Commission's current schedule for adjudicatory matters, and it proposes expedited as well as interim ruling schedules.

21. While the parties have made tremendous progress by agreeing upon and submitting the EDR proposal, some brief period of time needs to be spent conforming the process and its rules to the Commission's Rules of Practice and Procedure.

22. The CLECs state there is a need for special access services OSS performance measurement and incentives.

23. Pacific responds that there is no need for special access services OSS performance measurement and incentives.

24. The CLEC - Pacific Bell dispute over the need for special access services OSS performance measurement can be more easily resolved with objective performance results from special access services OSS services.

25. Continuing Staff's review of the joint marketing scripts when substantial changes are made will inform the Commission about any anticompetitive conduct that emerges in the scripts, and enable us to immediately address it.

26. The EDR process, once promptly conformed to Commission rules, will be a significant competitive safeguard against any unfair conduct or operational disputes.

27. Requiring Pacific to make existing special access performance measure results available to Staff as well as the competitors will allow us to monitor the data and discuss the issues from a common source of information.

28. At the issuance of D.02-09-050, the Commission did not consider its job with respect to Section 709.2(c) to be over.

29. The Commission's focus then and now is with the development of adequate competitive safeguards for the intrastate interLATA market.

30. While acknowledging that D.02-09-050 was not appealed, most of the parties insist that the Commission entertain further Section 709.2(c) proceedings and urge it to revisit issues that it has repeatedly declined to entertain.

31. We reject the notion that extensive discovery and exhaustive hearings are the only way to fulfill our obligations under Section 709.2(c)(2)-(4).

32. We also decline to indefinitely delay Pacific's entry in the intrastate long distance market until all the disputed issues before us are resolved.

33. We believe the better approach is to erect competitive protective measures so that illegal conduct is prevented, revealed and punished.

34. Continuing Staff's review of the joint marketing scripts when substantial changes are made will inform the Commission about any anticompetitive conduct that emerges in the scripts, and enable us to immediately address it.

35. The EDR process, once promptly conformed to our rules, will be a significant competitive safeguard against any unfair conduct or operational disputes.

36. Additionally, requiring Pacific to make existing special access performance measure results available to Staff as well as the competitors will allow us to monitor the data and discuss the issues from a common source of information.

37. The current NRF proceeding, R.01-09-001, will determine in one of its phases whether or not Pacific has cross-subsidized its operations; we need not replicate that case here.

38. We affirm the satisfaction of these requirements under Section 709.2(c)(3), and find that there is no cross subsidization by Pacific.

39. The Staff review of the marketing scripts, the EDR process, and the availability of special access performance measure results together provide a significant safeguard against potential harm to the intrastate interexchange market.

40. With the safeguards we adopt today and those set out in D.02-09-050, we find the possibility of harm to the competitive intrastate long distance market to be less than substantial.

Conclusions of Law

1. Since Pacific neither appealed the D.02-09-050 determination that the record did not support an affirmative Section 709.2(c)(2) finding nor sought leave to address unanswered accusations, we are not persuaded that compelling evidentiary hearings on these ongoing and increasing allegations would benefit the public interest more than finding a method of resolving Pacific-competitor disputes quickly and more efficiently.

2. The Commission could not base the determination of Pacific's Section 271(c) on the resolution of every major telecommunications policy case before it, and cannot adjudge Section 709.2(c) on the basis of the policy demands of the competitors.

3. While certain parties highlight how various major telecommunications policy issues affect their economic well-being, this Commission must consider and weigh how the issues affect all parties as well as California ratepayers.

4. Some time must be devoted to fully fleshing out the costs and ramifications of structural separation and selection of a neutral PIC administrator; to proceed hastily on either would ill serve the people of California.

5. Including the requirements of Tariff Rule 12 into the joint marketing of Pacific's long distance affiliate's services should properly balance the competitive concerns of the intrastate interexchange carriers with the convenience and informational needs of the ratepayer.

6. Given the problem the specific language of OP 17 unintentionally creates, separating the one question into two questions provides the best solution.

7. Staff's review of any substantial changes in the joint marketing scripts, such as new approaches, major language changes or the offering of new products, could help Pacific avoid potential confusion and conflicts with competitors and ratepayers.

8. Staff's continuing review of Pacific's joint marketing scripts should assist Pacific and the Commission in discovering and eliminating the possibility of anticompetitive behavior that might be reflected in the scripts.

9. An approach that addresses operational and interconnection disputes in a timely manner is crucial for the parties in this proceeding.

10. It is important that there not be ambiguities in the EDR process due to differences in terminology.

11. The California Public Utilities Commission has jurisdiction over intrastate special access services.

12. The Commission should examine objective performance results from special access services OSS service before deciding to permanently incorporate special access performance measures and/or incentives into the Commission's performance incentives plan.

13. Pacific should report existing operational special access OSS performance measurement results and work with the parties in crafting a more complete set of measures.

14. Transplanting the bulk of the major telecommunications policy matters to this proceeding would be inappropriate.

15. Specific allegations should be pursued in a case dedicated to examining those allegations, not assembled with a vast assortment of past and recent accusations.

16. Anticompetitive conduct by Pacific that is substantiated will be sanctioned.

17. Any improper cross subsidization will be uncovered and remedied.

18. Extensive discovery and exhaustive hearings are not the only way to fulfill our obligations under Sections709.2(c)(2)-(4).

19. Instead of indefinite delay, the better approach is to erect competitive protective measures so that illegal conduct is prevented, revealed and punished.

20. With the assurance of the added safeguards, there is no anticompetitive behavior, pursuant to Section 709.2(c)(2), by the local exchange telephone corporation.

21. Federal and California law requires separate accounting records "to allocate costs for the provision of intrastate interexchange telecommunications service."

22. The existence of separate accounting records and the mandated audit testing costing allocation methodology satisfy the requirements of Section 709.2 (c)(3); thus, there is no cross subsidization.

23. The Staff review of the marketing scripts, the EDR process, and the availability of special access performance measure results together should provide a significant safeguard against potential harm to the intrastate interexchange market.

24. With the adopted safeguards, there should not be a substantial possibility of harm to the competitive intrastate interexchange telecommunications markets; thereby enabling the Commission to so determine under Section 709.2 (c)(4).

25. It is appropriate for Pacific to have the authority to operate and provide interexchange telecommunications services intrastate provided that it has received full authorization from the FCC pursuant to Section 271 of the Telecommunications Act of 1996.

26. The Commission should grant Pacific the authority to provide interexchange telecommunications services within the state of California immediately for public convenience.

ORDER

IT IS ORDERED that:

1. Pacific Bell's (Pacific) motion, pursuant to General Order (G.O.) 66-C, for a protective order covering documents regarding the California Public Utilities Commission's (Commission) Telecommunications Division Staff's (Staff) review of joint marketing scripts in accordance with Ordering Paragraph (OP) 16 of Decision (D.) 02-09-050 is granted. The documents shall be made available to Commission personnel subject to G.O. 66-C and all other parties to this proceeding who have signed a non-disclosure agreement, for no more than two years from the date of this order.

2. OP 17 of D.02-09-050 shall be modified to read:

Pacific Bell (Pacific ) shall state consumer's equal access right to a long distance carrier of their his/her choice prior to identifying its long-distance services and offer the customer the opportunity to select the carrier of their his/her choice. Pacific shall include in its customer service scripts for a new service connections the following: "You have many companies to choose from to provide your long distance and local toll service including (Pacific Bell Long Distance). If you like, I can read from a list of available carriers and provide their telephone numbers. Who would you like as your long distance carrier? and Who would you like as your local carrier?"

3. Staff shall review any substantial changes that Pacific makes in the future to the sample joint marketing scripts submitted pursuant to OP 19, until such time as the Commission orders otherwise.

4. Staff shall advise the Assigned Commissioner and Administrative Law Judge (ALJ) of its findings and recommendation, if Staff has concerns or discovers problems.

5. Using the Expedited Dispute Resolution (EDR) proposal submitted in this proceeding as the focal point, the Assigned ALJ shall conform and modify it, in conjunction with the parties, so that the EDR process can be implemented as quickly as possible.

6. Beginning with performance for the month of July 2002, Pacific shall report currently internally available performance measurement results for special access OSS services. These results shall be reported in the same time and manner as existing Joint Partial Settlement Agreement "diagnostic" Operational Support System (OSS) performance results.

7. Beginning no later than March 1, 2003, in the Rulemaking 97-10-016/ Investigation 97-10-017 performance measurement proceeding, parties shall review existing Pacific measures and any additional measures in the competitive local exchange carrier competitive local exchange carriers special access OSS performance measures proposal, and shall collaborate to produce a complete set of OSS performance measures for special access service types by modifying, amending, or integrating that proposal where appropriate.

8. No later than six months after the special access performance measurement collaboration has begun, parties shall submit to the Commission an agreement or partial agreement covering all the issues to which parties have agreed.

9. No later than six months after the special access performance measurement collaboration has begun, for any issue not resolved in the collaborations, parties shall submit any proposals to the Commission along with the justification for those proposals.

10. If no issues are resolved, no later than six months after the special access performance measurement collaboration has begun, parties shall submit their complete proposals to establish performance measures and shall include their justification for those proposals.

11. Pacific shall have the authority to operate and provide interexchange telecommunications services intrastate provided that it has received full authorization from the FCC pursuant to Section 271 of the Telecommunications Act of 1996.

12. The Section 709.2 safeguards shall remain in effect until they are discontinued on further order of the Commission, based on a motion by Pacific demonstrating that the safeguards are no longer necessary or appropriate, or that the burden of compliance is outweighed by the potential benefits.

This order is effective today.

Dated , at San Francisco, California.