7. Assignment of Proceeding
Carl W. Wood is the Assigned Commissioner and Jean X. Vieth is the assigned ALJ in this proceeding.
1. From January 1, 2000 through April 30, 2002, Cingular's official corporate policy in California prohibited refunds or returns after execution of a contract for service and imposed an ETF of $150 for early contract cancellation; some of Cingular's agents imposed an additional ETF of as much as $400, which increased the total ETF to as much as $550.
2. Cingular concedes that the best way for a customer to assess whether wireless service meets that customer's needs is to use the phone.
3. Cingular's customer growth and an increase in minutes of use per customer between January 2000 and the end of 2001 led to ongoing network coverage and capacity problems during that period. Cingular concedes that its capacity measures failed to meet its own internal targets in 2001.
4. In spite of known network problems, in 2001 Cingular advertised and marketed its services heavily without disclosing its network problems to customers and without modifying its official no return/no refund/ETF policy.
5. At the point of sale, customers cannot obtain detailed coverage and capacity information, including the likelihood of outdoor, in-vehicle or in-building coverage at a given location or within a larger area, since Cingular's sales agents do not have such information and Cingular's maps show rate areas, not coverage areas.
6. Cingular's customer service representatives do not have ready access to detailed coverage and capacity information, including the likelihood of outdoor, in-vehicle or in-building coverage but must contact radio frequency engineers to obtain it, which takes a day or two at a minimum.
7. Cingular's capital investment in its California infrastructure between 2000 and 2002 continued to lag behind infrastructure needs. Cingular invested $1.9 billion, but only 20% was spent in 2000, 30% in 2001 and the final 50%, in 2002.
8. Cingular promotes a consistent image for its exclusive agents so that all such agents' stores or kiosks have the same "look and feel." Cingular permits agents and dealers to use its "Cingular Jack" logo and other brand identification in advertising and marketing materials.
9. Once Cingular determined to implement its new ETF policy, effective May 1, 2002, it required agents and dealers to execute an "Amendment to Agency Agreement Re Phone Return Policy," which requires such entities to honor the new policy as of that date.
10. Cingular concedes that the law of agency applies to its relationships with its sales agents.
11. Caceres and the customer witnesses provide firsthand, verified statements and sworn testimony about problems with Cingular's service. These witnesses' stories are not equally specific nor do they relate equally egregious facts, but they are largely credible.
12. Cingular's evidence lends credibility to and, in some cases, validates, portions of other, albeit unverified, data sources offered by CPSD and UCAN to document customer dissatisfaction with Cingular.
13. Cingular waived part or all of its ETF (which did not include its agents' ETF) for an undetermined number of customers who happened to attempt to cancel their contracts within the first 15 days, but the record includes little persuasive evidence that most eligible customers benefited from this policy.
14. The record includes no persuasive evidence that Cingular and its agents sold ineffective or defective wireless equipment.
15. Reparation of ETF payments to customers who can be identified will help to make them whole and will limit Cingular's unjust enrichment from ETF receipts.
16. Wireless service cannot be guaranteed, given the physics of radio energy, but Cingular (like all wireless carriers) has detailed engineering information that can predict the likelihood of outdoor, in-vehicle and in-building coverage, typically with 95% accuracy.
17. This record does not supply a comprehensive assessment of the range of methods for disseminating useful coverage and capacity information, the comparative utility costs and the associated timelines. These issues should be considered R.02-12-004, the Telecommunications Service Quality rulemaking.
18. Some customers were confused by the disclosures in Cingular's advertising and marketing. Prohibition of fine print disclosures, which is being considered in R.00-02-004, the Consumer Bill of Rights and Consumer Protection Rules rulemaking, would help to avoid such confusion.
19. A 15-day ETF policy, such as Cingular's present policy, may not provide sufficient time for many consumers to reasonably test a provider's service, particularly considering the lack of information about coverage and capacity available to consumers. A longer period, such as the one being considered R.00-02-004, would provide consumers with a more reasonable test period.
1. The record establishes, by a preponderance of the evidence, that Cingular has committed the violations described in Conclusions of Law 2 and 3.
2. From January 1, 2000 to April 30, 2002, Cingular's official no return/no refund/ETF policy constituted an unfair rule resulting in a corporate pattern and practice that failed to provide adequate, just, and reasonable service to customers, in violation of § 451 and D.95-04-028.
3. During 2001, Cingular's corporate pattern and practice of failing to disclose known network problems to customers resulted in a failure to provide adequate, just, and reasonable service, in violation of § 451, 702, 2896 and D.95-04-028.
4. Pursuant to §§ 2107 and 2108 and Commission precedent, for the violations of law for the period January 1, 2000 to April 30, 2002 (849 days), Cingular should pay a penalty of $10,000 per day, or $8,490,000.
5. Pursuant to §§ 2107 and 2108 and Commission precedent, for the violations of law for the period January 1, 2001 to December 31, 2001 (365 days), Cingular should pay a penalty of $10,000 per day, or $3,650,000.
6. Under the law of agency, Cingular is legally responsible for ETFs charged by its agents between January 1, 2000 and April 30, 2002.
7. In order to avoid unjust enrichment to Cingular and provide reasonable reparation to as many deserving customers as possible, Cingular should be required to reimburse, with interest, those customers who paid Cingular or its agents partial or full ETFs for early contract cancellations between January 1, 2000 and April 30, 2002. Cingular also should be required to reimburse, with interest, any customers who paid Cingular or its agents partial or full ETFs after April 30, 2002 for early contract cancellations that occurred between day 1 and day 15 of the contract period. Cingular should prepare and file a refund plan in conformance with today's decision.
8. Binding judicial precedent holds that the Commission lacks jurisdiction to adjudicate the UCL in the Business and Professions Code; accordingly, the Commission lacks jurisdiction to order remedies under the UCL.
9. Because the Song-Beverly Consumer Warranty Act and the Consumer Legal Remedies Act, both codified in the Civil Code, require aggrieved persons to bring actions in the courts for redress, we lack jurisdiction to adjudicate them or order remedies under them.
10. Since the record does not establish that Cingular or its agents sold faulty wireless equipment, we need not resolve whether the Commission has jurisdiction to adjudicate the implied warranty provisions in Com. Code § 2314-2316.
11. Since the record does not establish that Cingular or its agents sold faulty wireless equipment, and since we can assess Cingular's culpability for imposing an unjust and unreasonable ETF and for disclosure failures under §§ 451 and 2896, we do not need to inform our decision making by considering the Song-Beverly Consumer Warranty Act, the Consumer Legal Remedies Act or the UCL. Our decision not to consider those acts does not violate Northern California Power Agency v PUC, 5 Cal.3d 370 (1971).
12. Since the OII's Ordering Paragraphs cannot reasonably be interpreted to provide notice to Cingular of charges under Bus. and Prof. Code 17026.1(b) or Civ. Code § 1671, we disregard these arguments in the parties' briefs.
13. In order to protect customers, provide certainty to the parties and promote an efficient use of the resources of the parties and of the Commission, this decision should be effective immediately.
IT IS ORDERED that:
1. For the two violations of law found herein, Cingular Wireless (Cingular) shall pay a penalty of $12,140,000 to the State of California General Fund within 45 days after the date this presiding officer's decision (POD) is mailed to the service list. Proof of payment shall be filed and served on the service list and shall be provided to the Executive Director of the California Public Utilities Commission (Commission) within 5 days of payment.
2. Within 75 days of date the date this POD is mailed to the service list, Cingular shall file a refund plan for accomplishing customer reparations, as further described in Ordering Paragraph 3. The refund plan shall estimate the total refunds due and shall describe the methodology for locating all customers (including prior customers) eligible for reparations. The refund plan shall be served on the service list for this proceeding and a copy shall be provided to the Director of the Commission's Telecommunications Division so that the Division may monitor implementation of the plan.
3. The goal of the refund plan described in Ordering Paragraph 2 shall be to:
(a) return, with interest, any sums received for early contract cancellation between January 1, 2000 and April 30, 2002, to the customers who paid those sums to Cingular or to Cingular's sales agents; and
(b) review early termination fee (ETF) receipts for contract cancellations beginning May 1, 2002, and determine if any sums were paid for contract cancellations within day 1 and day 15 of the contract period. If so, such sums shall be reimbursed, with interest, to the customers who paid them to Cingular or to Cingular's sales agents.
(c) Interest due shall be calculated at the rate of prime, three-month commercial paper, as reported in Federal Reserve Statistical Release G.13.
4. Any unpaid reparations shall escheat to the State of California General Fund.
5. Rulemaking (R.) 02-12-004, the Commission's review of service quality standards for all telecommunications carriers, including wireless providers, shall examine options to provide wireless consumers with the kinds of coverage and capacity information sufficient to enable them to make informed choices among wireless providers.
6. Cingular shall revise its corporate policies and practices in California regarding marketing, advertising and, service initiation and change, to conform to the rules adopted in R.00-02-004, the Commission's consumer bill of rights and consumer protection rules proceeding.
7. This proceeding is closed.
This order is effective today.
Dated ____________________, at San Francisco, California.
