4. Substantive Issues

4.1 Is AMI a Public Utility Requiring Commission
Authority?

4.1.1 Legal Framework for Public Utility Status

The central substantive question before us is whether the business activities of AMI constitute those of a public utility telephone corporation, requiring it to obtain a CPCN pursuant to Section 1001 before lawfully pursuing those activities. If CVC does not meet its burden of proving facts showing that the activities are those of a public utility, we will dismiss this complaint.

Ultimate authority for determining whether a person or corporation is a public utility comes from Article XII, Section 3 of the California Constitution:

"Private corporations and persons that own, operate, control, or manage a line, plant, or system for the... transmission of telephone... messages... directly or indirectly to or for the public... are public utilities subject to control by the Legislature."

Section 216 (b)¹⁰ provides in relevant part that:

"Whenever any... telephone corporation... performs a service for, or delivers a commodity to, the public or any portion thereof for which any compensation or payment whatsoever is received, that... telephone corporation... is a public utility subject to the jurisdiction... of the commission and the provisions of this part."

Section 234¹¹ defines telephone corporations as follows:

(a) "Telephone corporation" includes every corporation or person owning, controlling, operating, or managing any telephone line for compensation within this state.

(b) "Telephone corporation" does not include any of the following:

(1) Any hospital, hotel, motel, or similar place of temporary accommodation owning or operating message switching or billing equipment solely for the purpose of reselling services provided by a telephone corporation to its patients or guests.

(2) Any one-way paging service utilizing facilities that are licensed by the Federal Communications Commission, including, but not limited to, narrowband personal communications services described in Subpart D (commencing with Section 24.100) of Part 24 of Title 47 of the Code of Federal Regulations, as in effect on June 13, 1995.

Under Section 216, we must find that both of two conditions are satisfied to find that AMI is a public utility. First, AMI must fall within the statutory definition of a telephone corporation in Section 234. Second, we must find that AMI provided telephone service, for compensation, to the public or a portion thereof. In addition, we apply the judicially created doctrine of dedication. This doctrine holds that businesses may fall within the statutory definition of a public utility and yet not be subject to our regulation if they have not dedicated their property to public use. (Richfield Oil Corp. v. Public Utilities Commission (1960) 54 Cal. 2d 419.) A finding of dedication to public use is not a trivial thing, and requires evidence of an unequivocal intent to dedicate. (California Water and Telephone Co. v. Public Utilities Commission (1959) 51 Cal. 2d 478, 494.) Dedication is a factual inquiry. (City of Long Beach v. Unocal California Pipeline Co. (1994) 54 CPUC2d 422, 428.) See also Donna Matthews v. Lakeside Water Company (1991), 41 CPUC2d 477 and Pacific Gas and Electric Company v. Dow Chemical Company (1994) 55 CPUC2d 430.

We also look to two decisions (D.92-06-069 and D.93-05-010) that were issued in R.85-08-042, a rulemaking proceeding in which the Commission considered tariff filing rules and other regulations governing certain telecommunications utilities. Addressing policies for regulation of nondominant interexchange carrier (NDIEC) resellers, in D.92-06-069 the Commission noted that the California Supreme Court's repeatedly affirmed test of dedication is "whether or not those offering the service have expressly or impliedly held themselves out as engaging in the business of supplying [the commodity or service at issue] to the public as a class, not necessarily to all the public, but to any limited portion of it, such portion, for example, as could be served from his system..." (44 CPUC2d 747, 750, quoting S. Edwards Associates v. Railroad Commission (1925) 196 C. 62, 70.) The Commission then noted that "[e]ach dedication case turns on a review of the specific facts presented" and that "any individual company may contest its inclusion within the class of regulated businesses at issue and argue that it had not dedicated its property to public use." (Id.) Thus, the long-standing dedication test will be applied to switchless resellers.

Addressing the irrelevance of whether a reseller carrier owns and operates a switch to its public utility status, the Commission held in D.92-06-069 that "[f]rom the customers' viewpoint, the switchless reseller is the telephone company; it orders the establishment of service to the customers' premises and controls the rates that will be charged, and is the business they will look to when problems arise." (Id.)

In D.93-05-010 (49 CPUC2d 197), the Commission described this form of public utility as follows: "In simplified terms, a switchless reseller purchases wholesale long-distance capacity from AT&T or a facilities-based NDIEC and resells the service at retail to its customers." (Id., 199.) The Commission then adopted three operating characteristics that define switchless reseller operations. The third of these characteristics, most relevant here, provides that "the switchless reseller's customers, as distinguished from customers who deal with an agent, view the reseller as their telephone company." (Id., 201.)

Based on the above-described framework for determining public utility status of businesses generally and of switchless resellers specifically, we will look for evidence that AMI is engaged in the business for compensation of purchasing wholesale long-distance capacity from a facilities-based NDIEC and reselling the service at retail to its customers. We will also look for evidence that AMI orders the establishment of service to the customers' premises and controls the calling rates that will be charged, and that AMI's customers or end-use callers view AMI as their telephone company. As we do so, we will also consider the question of dedication, i.e., whether AMI expressly or impliedly holds itself out as engaged in the business of providing telephone service as a switchless reseller. We will first address AMI's contention that it is not a telephone corporation by virtue of the statutory exemption in Section 234.

4.1.2 The Section 234 Exemption

In Murray v. Stanford, supra, 56 CPUC2d 583, the Commission determined that Stanford University's operation of a telephone system providing service to students living in Stanford-owned campus housing did not constitute the operations of a public utility subject to the Commission's jurisdiction. Among other things, the Commission agreed with the contention that Stanford's telephone system fell within the Section 234 exemption for hospitals, hotels, motels, and similar places of temporary accommodation owning or operating message switching or billing equipment solely for reselling services provided by a telephone corporation to its patients or guests. (Id., 591.) The Commission based this conclusion in part on its determination that Section 234 should be read in conjunction with Section 741.2, which provides in part that nonpublic utility providers of telephone services, including hospitals, hotels, motels, universities, and similar places of temporary accommodation, need not file or maintain tariff schedules. (Id., 592; also, Conclusions of Law 7 and 8, 596.)

AMI contends that we need look no further than Section 234 as construed in Murray v. Stanford to find that it is not a telephone corporation. The crux of AMI's interpretation of Murray v. Stanford is as follows:

"[T]he California Legislature has determined that the provision of telephone services to occupants of `places of temporary accommodation' is not subject to regulation by this Commission." (Supplemental Motion of AMI to Dismiss Complaint, p. 1.)

AMI provides inadequate justification for this contention, and it seems to confuse provision of telephone service to occupants of places of temporary accommodations with service by those places. The exemption approved in Murray v. Stanford is not so broad that all telephone service directly or indirectly associated with the operation of a telephone system by a place of temporary accommodation for its guests or tenants is exempt. If a Stanford student makes a long-distance call through Stanford's exempt system, the serving long distance carrier does not become exempt merely because the call goes through an exempt system. We note that AMI does not claim that Com Systems is exempt from regulation by virtue of the fact that the calls at issue in this proceeding go through a system operated by a condominium or timeshare management company, yet that would be a logical extension of its argument.

AMI's president testified that AMI is an agent for the unit owners that order the presubscribed long distance services to the units. (Exhibit 20, p. 9.) However, he also testified that he is not an attorney, and is not familiar with the legal consequences of the term "agent." (Id., p. 18.) The foregoing assertion of an agency relationship does not allow us to conclude that AMI is a place of temporary accommodation. AMI has not shown that it is exempt from regulation as a public utility simply because its customers may be places of temporary accommodation.

4.1.3 Is AMI a Switchless Reseller?

The crux of CVC's complaint is the contention that AMI is a switchless reseller. CVC witness Otis Cranford testified (Exhibit 19, p. 2) that AMI's customers are generally real estate management companies that provide services to condominium owners or, occasionally, the unit owner themselves. The end-use callers who ultimately place long distance calls through facilities provided by AMI are not AMI customers. This evidence introduced by CVC is consistent with, and even appears to corroborate, AMI's own description of its operations as a provider of specialized telecommunications hardware to condominium associations whose members lease their property to vacationers most of the year.

Many of CVC's proffered facts are of little dispositive value. For example, CVC makes much of the fact that AMI employed sales personnel, but such information adds nothing of probative value to the analysis of whether AMI is a public utility. Similarly, the fact that AMI refers to existing customers in its sales literature does nothing to illuminate CVC's claims of public utility status for AMI, nor does the fact that AMI does business in its own name. In general, there is a pattern of disconnection between CVC's claims of public utility status and the hard facts it was able to prove.

Cranford described a collection of AMI promotional literature (Exhibit 1) in apparent support for CVC's claims of public utility status for AMI. But a review of that literature, taken as a whole, reveals little support for CVC's position in this case. For example, AMI described itself to potential condominium management company customers as a provider of sales, marketing, product design, and customer service to the long distance and operator service industry. This does not demonstrate that AMI held itself out as a long distance provider. Providing service to an industry is not the same thing as providing service as a member of an industry. Sales literature in Exhibit 1 also states that AMI has designed a call restriction network that allows owners of condominiums and timeshares to offer long distance telephone service to guests without the risk of those long distance calls being billed to the owners. Again, this is consistent with the description of AMI's operations that AMI itself has advanced in this proceeding, and does little to advance the theory that AMI resells interexchange service purchased from another carrier. The sales literature in Exhibit 1 does state that AMI "will provide the long distance network," which could be construed as support for CVC's claims. However, arranging for service by Com Systems or another carrier is not enough to make AMI itself a carrier. Exhibit 1 does not clearly demonstrate that AMI sold and rebilled long distance telephone service, or offered to do so.

Cranford also described the standard form of agreement between AMI and its customers (Exhibit 2) to buttress CVC's claim that AMI is a public utility. However, the description of the agreement offered by Cranford falls short of an analysis that supports CVC's theory of public utility status. A review of Exhibit 2 itself shows that the agreement can be read as being consistent with AMI's claims of being a provider of call blocking services.

AMI and the property managers receive commissions from the long distance carrier for revenues derived by the carrier from 0 plus dialing. However, the receipt of commissions by unregulated entities is not uncommon. Stores that sell cellular telephones receive commissions from cellular telephone companies. Drugstores that sell prepaid calling cards receive commissions from the card issuer. Thus, the fact that AMI receives commissions from the providing long distance carrier is of little consequence.

CVC has also failed to present and prove sufficient facts showing that AMI, as opposed to Com Systems and other certificated carriers, controls the California intrastate interexchange calling rates charged to end use-callers in condominiums served by AMI's blocking equipment. Nor has CVC shown that anyone (whether condominium and timeshare owners and management companies, or the tenants and guests who make long distance calls from the units where AMI has placed equipment) views AMI as their telephone company. There appears to be little reason why they might be expected to do so.

With respect to 0 plus calls placed from rental units served by AMI, there is no evidence that AMI has billed anyone for such calls. Moreover, AMI's president testified that the serving carrier, Com Systems or Tel-Trust, rates, routes, and bills for such calls. (Exhibit 20, p. 3.) He further testified that "AMI does not, nor has it ever, billed anyone for a 0+ call." (Id.) Exhibit 4 corroborates this evidence. We find no evidence that AMI was or is a reseller of 0 plus calls. Thus, the question of AMI's public utility status turns on its activities with respect to 1 plus calls.

CVC and AMI stipulated that AMI billed for 1 plus calls from April to October 1993 and from April to December 1994, and that all such calls placed after January 1, 1995 and completed through AMI's systems were billed by the local exchange carrier. We find that such rebilling was incidental to AMI's primary business of providing call blocking equipment and receiving commissions from long distance carriers. The systems provided by AMI allow unit owners to bypass or override the blocking of 1 plus calls for the few days or weeks of the year when they occupy their own units. AMI rebilled for these 1 plus calls only during limited periods of time, and only because it began to incur considerable expense for those calls due to the configuration of the equipment and the interexchange carrier's changed billing practices. AMI learned of the interexchange carrier's intent to bill AMI for the costs of 1 plus calls in 1992, but did not immediately begin billing unit owners for those costs. It was only later, when the amount of 1 plus calling grew, that AMI determined it had no reasonable alternative to rebilling the costs that it was incurring.

In conclusion, the record evidence supports AMI's claim that its primary business is that of a specialized telecommunications equipment provider to condominium owners or management companies. AMI only incidentally, and for a limited time in 1993 and 1994, billed the unit owners for 1 plus services that could possibly be construed as regulated services. AMI did not want to provide this limited 1 plus billing, and took steps to avoid doing so. Moreover, AMI did not mark up the costs, but simply attempted to pass through the costs it was incurring.¹² AMI clearly did not set itself up as a business to purchase 1 plus calling capacity at wholesale and resell it at retail. The evidence does not show that AMI held itself out as a business to provide such service to the public or any portion thereof for compensation. It has not been shown that AMI dedicated its facilities to public use with respect to 1 plus calls. AMI is not a public utility subject to this Commission's jurisdiction.

4.2 Did AMI Fail to Pay Applicable Taxes?

The second issue raised by CVC is whether AMI has paid all applicable taxes associated with 1 plus telephone calls that it billed to unit owners. AMI assumed that Com Systems billed AMI for all applicable taxes in the same manner that it billed its other customers, and notes that it has always paid Com Systems' bills in full. There is no showing that AMI is responsible for the payment of taxes associated with the 1 plus calls that it billed to unit owners in 1993 and 1994. Moreover, there is no reason to hold AMI responsible for auditing the interexchange carriers' compliance with applicable tax requirements, yet that is what CVC's complaint implies should be done. We deny this component of the complaint.

4.3 Did AMI Fail any Requirement to Post
Instructions?

CVC's complaint that AMI failed to post instructions on customer phones identifying the long distance carrier as required by Federal Communication Commission (FCC) rules is without merit and will be dismissed for failure to state a cause of action. CVC has not specified a Commission-jurisdictional requirement that AMI is alleged to have violated.

Findings of Fact

1. The California Attorney General has determined that an individual who is not a member of the State Bar of California may represent a party with respect to a formal proceeding before the Commission.

2. At the time of its February 24, 1995 letter to the ALJ, CVC had no reasonable basis for making accusations that AMI had unlawfully or criminally absconded with or kept tax revenue for its own benefit.

3. CVC's making of accusations of unlawful or criminal conduct against defendants in a letter to a Commission decisionmaker can reasonably be interpreted as an attempt to influence decisionmakers through prejudicial, off-the-record statements.

4. Because CVC filed this complaint to prevent AMI from taking CVC's customers, there is no basis for finding that CVC is a customer for purposes of the statutory program of intervenor compensation.

5. CVC is seeking to address its own narrow business interests in this case, and, at best, only incidentally seeks to vindicate any consumer or public interest.

6. CVC fails the economic interest test, and is not eligible for compensation from the Advocates Trust Fund.

7. The statutory exemption from status as a telephone corporation approved in Murray v. Stanford, 56 CPUC2d 583, is not so broad that all telephone service directly or indirectly associated with the operation of a telephone system by a place of temporary accommodation for its guests or tenants is exempt from regulation by the Commission.

8. AMI's customers are real estate management companies that provide services to condominium owners or, occasionally, the unit owners themselves; the end-use callers who rent condominium units and place long distance calls through facilities provided by AMI are not AMI customers.

9. AMI has not billed anyone for 0 plus calls placed from rental units served by AMI; Com Systems or Tel-Trust rates, routes, and bills for such calls.

10. The systems and equipment provided by AMI allow unit owners to bypass or override the blocking of 1 plus calls for the few days or weeks of the year when they occupy their own units.

11. AMI rebilled for 1 plus calls placed by condominium owners from units served by AMI only during limited periods of time in 1993 and 1994, and only because it began incurring considerable expense for those calls due to the configuration of the equipment and the serving interexchange carrier's changed billing practices.

12. AMI's rebilling of 1 plus calls placed by condominium owners from units served by AMI in 1993 and 1994 was incidental to its primary business activity of providing call blocking equipment and related services to condominium and timeshare management companies or unit owners. This rebilling by AMI does not demonstrate a holding out to provide such service for compensation, as a business, to the public or any portion thereof.

13. CVC has not shown that AMI was a reseller of 0 plus calls, and AMI's incidental rebilling of 1 plus calls in 1993 and 1994 without markup does not demonstrate a holding out or dedication by AMI to serve the public or any portion thereof through the provision of such telephone service.

14. It was reasonable for AMI to assume that Com Systems billed AMI for all applicable taxes in the same manner that it billed its other customers.

15. AMI has paid Com Systems' bills in full, and there is no showing that AMI is responsible for the payment of taxes associated with the 1 plus calls that it billed to rental unit owners in 1993 and 1994.

16. In its complaint that AMI failed to post instructions on customer phones identifying the long distance carrier as required by FCC rules, CVC has not specified a Commission-jurisdictional requirement that AMI is alleged to have violated.

Conclusions of Law

1. CVC's making of accusations of unlawful or criminal conduct against defendants in a letter to a Commission decisionmaker constituted a violation of Rule 1, warranting sanctions.

2. As sanctions for violation of Rule 1, CVC should pay AMI the cost of preparing the motion for sanctions, not to exceed $2,000.00.

3. CVC is not eligible for intervenor compensation from any of the asserted sources of such compensation.

4. CVC has not brought forward evidence establishing that AMI is engaged in activities of a public utility telephone corporation subject to this Commission's jurisdiction.

5. AMI is not offering California intrastate telephone services to the public within the meaning and scope of Section 216.

6. The complaint in its entirety should be denied with prejudice.

ORDER

IT IS ORDERED that:

1. The amended complaint of Coachella Valley Communications, Inc. (CVC) in Case (C.) 93-10-023 is denied with prejudice. CVC is entitled to no relief in this proceeding.

2. The motion of AMI Telecommunications Company of Nevada, Inc. (AMI) for sanctions against CVC is granted in part as provided herein. Within 20 days of the date that AMI files a statement of the direct costs incurred in the preparation of its March 9, 1995 motion for sanctions, and the costs of preparing the statement, CVC shall pay AMI the full amount of such costs, not to exceed $2,000.00, as sanctions for the disrespectful actions of CVC's representative in violation of Rule 1 of the Rules of Practice and Procedure.

3. CVC's requests for compensation for its participation in this case are denied.

4. All pending motions not previously resolved, or resolved elsewhere in this decision, are denied.

5. C.93-10-023 is closed.

This order is effective today.

Dated , at San Francisco, California.