2. Overview

2.1 The OII

The Commission issued this order instituting investigation (OII or investigation) into Cingular's operations based on the Cingular Investigation Staff Report (Staff Report) and attachments to that report, all released concurrently with the OII and subsequently received at hearing as Exhibit 1. The OII contends that preliminary investigation requires formal examination of whether Cingular's conduct during this period violated §§ 451, 702, 2896 and other law. This preliminary investigation was precipitated by the increase in the number of informal customer complaints to the Commission's Consumer Affairs Branch (CAB) about Cingular since 2000 and by declarations subsequently signed by 14 customers, by an email petition found on the internet and by the personal experience in late 2001 and early 2002 of CPSD's lead investigator and witness, Maricarmen Caceres (Caceres). The gravamen of the OII is this:

· Cingular pursued marketing and sales strategies, and required customers to sign contracts, none of which adequately disclosed the known limitations then existent in its network's coverage and capacity.

· In spite of these inadequately disclosed coverage and capacity problems, until May 1, 2002, Cingular had in place a no return/no refund policy, and its contracts required customers to pay an ETF of $150 per phone for cancellation of service; Cingular's agents' contracts often required payment of an additional, inadequately disclosed ETF of $150 per phone or more.

· Cingular "bundled" sales of wireless service and handsets in ways that violated a prior Commission decision and consumer protection laws found in California's Civil, Commercial and Business and Professions Codes.

The OII's Ordering Paragraph 1, which we have attached to this decision as Appendix 1, sets out the investigative charges. The OII also seeks determination of whether the Commission should impose various remedies, including reparations and fines.

2.2 Cingular's Business Organization and California Presence

As related in the OII, which quotes from Cingular's responses to the initial data requests attached to the Staff Report², Cingular is the name borne by a joint venture owned 60% by SBC Communications Inc. (SBC) and 40% by BellSouth Corporation (BellSouth). Each of these entities contributed most of its wireless subsidiaries in the United States to the joint venture - for SBC that includes subsidiaries acquired through merger with Pacific Bell Telesis Group. In California, accordingly, Cingular is the dba of the SBC subsidiary Pacific Bell Wireless, LLC (PBW), formed in July 1999. PBW is a Nevada corporation and has its principal place of business in Atlanta, Georgia. With respect to its public presence in this state, Cingular's October 26, 2001 data request response states: "In California, from approximately July 1999 to January 2000, PBW did business as `Pacific Bell Wireless.' Since January 2000, PBW has done business as `Cingular Wireless'." (Ex. 1, Attachment E.)

As also related in the OII, on November 2, 2001, Cingular registered with the Commission as a wireless carrier and received corporate identification number U-4314. The OII mentions two other corporate identification numbers, which the Staff Report links to Cingular as the dba of PBW: U-3060, a cellular carrier and U-4135, a cellular reseller. Both of these numbers originally were assigned to Pacific Bell Mobile Services. Cingular's October 26, 2001 data request response states that SBC also contributed Pacific Bell Mobile Services to the joint venture with BellSouth, and that PBW is the successor in interest to Pacific Bell Mobile Services.

2.3 Brief Description of Cingular's Wireless Service

Cingular's October 26, 2001 data request response states that: "Cingular sells wireless personal communication services under a variety of service plans to individual and business customers. Cingular also sells the related handsets and accessories to these customers." (Ex. 1, Attachment E.) Cingular offers these services directly and also through an indirect distribution network consisting of agents and dealers. The indirect distribution network comprises exclusive agents, exclusive dealers, non-exclusive dealers and non-exclusive national retailers. The data request response reports that Cingular also sells wireless services, at wholesale, for resale to retail resellers who repackage and rebrand the services but that these sales account for no more than 5% of its business.

Cingular's wireless system uses the technology known as Global System for Mobile Communications (GSM), which the Staff Report describes as "a digital cellular radio network which allows one to connect his or her GSM-enabled phone to a laptop computer and send or receive e-mail, faxes, browse the Internet, and use other digital data features..." (Ex. 1 at p. 8.)

Worldwide, GSM operates in several different frequency ranges. Cingular operates the 1900 GSM system, a 1900-megahertz (MHz) frequency used in the United States and Canada. Other names for this service are PCS (or Personal Communication Services), PCS 1900 and DCS 1900.³

² In September 2001, when these data requests issued, CPSD was known as the Consumer Services Division, or CSD. ³ According to the Staff Report, GSM 900, sometimes referred to merely as GSM, operates at 900 MHz in much of Europe and the rest of the world. GSM 1800, also called both PCN (or Personal Communication Network) and DCS 1800, operates at 1800 MHz, and its use is increasing in a number of countries including France, Germany, Switzerland, the United Kingdom and Russia.