II. STAFF INVESTIGATION & FACTUAL ALLEGATIONS

A. Background

Cingular provides cellular or wireless communication services -- generally bundled with cellular or wireless handsets and other equipment -- to residential and business customers.

On September 28, 2001, the Legal and Consumer Services Divisions of the Commission sent a letter to Cingular, stating that the Commission had received over 3,117 complaints against Cingular since January 1, 2000, many of which stemmed from "dissatisfaction with Cingular's quality of service and assessment of an Early Termination Fees (ETF)" [sic]. The letter stated that failing to provide adequate service, misrepresenting service quality, and/or failing to provide "sufficient information to consumers to allow them to make informed choices among services and providers" violated Sections 451 and 2896 of the Public Utilities Code, and other California laws. The letter also "place[d] Cingular on notice that these practices must cease." The practices described in that letter appear to be continuing.

On April 29, 2002, the Commission received from Cingular a response to the September 28, 2001 "cease and desist" letter. In its letter, Cingular states that it is instituting a "15 day cancellation policy that permits a customer to cancel Cingular's service without incurring an early termination fee." Cingular also claims that it "does not misrepresent its coverage area," and that "the number of asserted customer complaints is taken out of context."

B. Complaints & Investigation

In 1999, the Commission's Consumer Affairs Branch ("CAB") received approximately 1,132 customer complaints concerning Cingular's marketing, service and/or billing. In 2000, the number of complaints rose to 1,228, and in 2001 the number of complaints almost doubled to 2,403. A substantial portion of these complaints concerned coverage or capacity problems and/or the ETF.

Staff has reviewed the complaints received by CAB and found that many of the complaint letters expressed frustration over limitations to the utility's coverage area and system capacity. Customers found they did not have coverage where they lived, worked or commuted, or that their calls were routinely dropped. Many stated that limitations in system coverage or capacity were not disclosed to them.¹ Many were angry at Cingular's unwillingness to provide a refund or cancellation without charging the ETF and, in some instances, the full sale price of the phones and other fees as well, even when the customer was willing to return the phone. Customers felt trapped into inadequate service with Cingular.

Newspaper articles have reported consumer dissatisfaction with wireless telephone service coverage,² and Internet websites have become a forum for customer complaints about Cingular in particular, where thousands of Cingular customers have signed petitions evincing their dissatisfaction with Cingular's services.³

Staff interviewed some of the complainants, and a number of the interviewees have executed declarations attesting to the problems they have had with Cingular's marketing, service and billing.⁴ These declarations, along with Staff's Report, are released today and shall be placed in the Commission's public formal file for this proceeding.

C. Advertising & Sales - Inadequate Disclosure of Coverage/Capacity Limitations.

Staff also propounded data requests to Cingular. Based on Cingular's responses, and its own further investigation, Staff reports that Cingular markets its telecommunications products to residential and small business customers throughout California. Cingular sells the telephone equipment and wireless service as a bundled unit through a series of exclusive agents, exclusive dealers, and non-exclusive dealers (including national chains such as Sears, Costco, Staples, Circuit City, and the Good Guys).

Part of Cingular's marketing campaign consists of widespread and frequent newspaper and radio advertisements in California. A recent radio advertisement, for example, claimed that Robinson Crusoe would not have had to spend so long on his desert island had he been provided with a Cingular wireless phone. Before the Cingular name was used, advertisements used the Pacific Bell Wireless (PBW) name. PBW advertisements referred to "our California/Nevada network," "unlimited domestic long distance," a "national rate plan," and the ability "to call nationwide at any time." On some of these advertisements, there is a fine print disclaimer that "coverage limitations apply." Advertisements bearing Cingular's name and logo contain similar representations and disclaimers: large print references to the "Cingular Nation," "unlimited nationwide long distance" and a network stretching "across the state or across the country," coupled with fine print disclaimers that "Cingular does not guarantee uninterrupted service coverage"⁵ or "Cingular does not guarantee access to any site not on the Cingular provided www.mywirelesswindow.com deck." ⁶

At some point, perhaps in mid-2000, PBW began posting coverage maps on the Internet, showing general coverage throughout the Bay Area and Los Angeles, with small-print disclosures at the bottom of the maps related to limitations in coverage area.⁷ Coverage maps now appear to be located at www.cingular.com, although these remain confusing and constantly changing.⁸ This website address is contained on some but not all of Cingular's recent print advertising.

Most immediately available to customers are the coverage maps found in brochures at agent and dealer locations. In a September 28, 2001 data request, CSD asked Cingular to "Provide copies of all promotional materials and sales scripts used to sell Cingular Wireless' telecommunications services. " Cingular produced some brochures, which together with brochures acquired during 2001 site visits, are found as Attachment A to the Staff Report. These tend to show unbroken coverage in the large California metropolitan areas, if not across the entire State. These are accompanied by small-print disclosures that range (in the PBW, pre-Cingular era) from "This map is an approximation. Actual coverage may vary due to terrain, customer equipment, digital network availability and atmospheric conditions" (CCA 0752) to fuller disclosures in the brochures with Cingular's name on them. Staff Report at 10-11.

Cingular failed, however, to produce other brochures that had no such disclosures (Attachment A, Bates no. 00001), or disclosures buried in dark grey background (id. at 00014). These brochures were provided to the Commission by disgruntled customers. See, s.g., Busse Declaration and brochure, Attachment C to Staff Report. We are concerned with what appears to be a selective production of documents by Cingular, and whether such production reflects a lax attitude by the utility concerning its obligations under Rule 1 of this Commission's Rules of Practice and Procedure.

Staff reports that the brochures and print advertisements reviewed also failed to contain any clear disclosure of limits on system capacity (as opposed to coverage area) -- a point clearly material to the numerous customers who have complained about "system busy" signals, particularly during "free nights & weekends."⁹

As this Order Instituting Investigation was being prepared, Cingular announced that it plans to spend almost $1 billion upgrading its network in California and other Western states to increase system capacity and expand its coverage area.¹⁰

D. Contracts

Cingular has provided to Staff sample contract forms, some bearing the name and logo of Pacific Bell Wireless, some of Cingular. The contracts appear to have contemplated, at various times, the incorporation of several different documents, including but not limited to: the Wireless Service & Equipment Agreement ("WSEA"); a "Summary of Terms and Conditions"; 1-2 pages of "Service Highlights"; and a "Terms and Conditions Booklet." A selection of these documents is in Attachment D to the Staff Report; further contract documents are appended to the Declarations in Attachment C to the Staff Report.

Neither the execution pages of the PBW and Cingular contracts, the Service Highlights, or the Summary of Terms and Conditions appear to contain any disclosure of coverage or system limitations; disclosure of those limitations is found in the fine print of the terms and conditions booklets.¹¹ It is unclear whether such limitations are brought to the customer's attention, or whether, how and when the terms and conditions booklet is actually provided to customers. Cingular's "no return" policy (see preceding footnote) is not found on the execution page of the contract or the terms and conditions booklet, but only in the "Service Highlights."

As this Order was being prepared, Cingular began advertising (apparently in Northern California only) a "No Contract, No Commitment" plan which - notwithstanding the name - required the customer to sign a contract for services, but with the ETF eliminated in favor of a cash payment for the phone. ¹²

E. Site Visits

Customer Declarations, and the reports of site visits by Commission staff appended to staff's report, reveal that actual representations by Cingular's sales agents and dealers vary widely from store to store. Most sales personnel either asserted that coverage was "good," "fine," that there were "no problems" with coverage or capacity, or that any problems were minimal and would be rectified by Cingular on notice from the customer. At no time did sales personnel draw the customer's attention to any limitation of coverage in the terms and conditions booklet. Notwithstanding Cingular's stated "no return" policy (see above), actual return policies appear to vary by store, with some sales personnel allowing (reactively, on inquiry) return periods from 30 minutes to several days, while others insisted that Cingular prohibited any return of equipment. See Appendix A to Staff Report, containing reports of the site visits.

F. Respondents

Pacific Bell Wireless, LLC, a Nevada corporation, currently does business as Cingular Wireless, and has its principal place of business in Atlanta, Georgia.

In D.94-10-031 (see below), the Commission required wireless utilities to file a Wireless Identification Registration with the Commission. On November 2, 2000, Cingular (i.e., PBW dba Cingular) made a wireless registration filing pursuant to D.94-10-031. The Commission subsequently gave Cingular a corporate identification number of U-4314, allowing Cingular to "begin to resell wireless service to the public in California."

Cingular's predecessor Pacific Bell Mobile Services obtained U-4135 in November, 1994, and U-3060 in or about December 1995. U-3060 is significant, in that it is a carrier's (as opposed to a reseller's) U-number. It was apparently transferred to PBW in 1999.

The effective owner of Cingular/PBW appears to be an entity known as Cingular Wireless Communications LLC, which is a Delaware Corporation and which Cingular reports is owned 60% by SBC Communications Inc. and 40% by Southwestern Bell. Cingular has reported that PBW

is one of the wireless properties that SBC contributed to the joint venture [Cingular Wireless Communications LLC] and it operates the wireless licenses held by Pacific Telesis Mobile Services, a property of SBC Communications that was also contributed to the joint venture. PBW is the successor in interest to Pacific Bell Mobile Services, a California corporation.¹³

PBW/Cingular has reported to the Commission that "Since January 2000, PBW has done business as 'Cingular Wireless'." Staff's investigation, however, indicates that as late as December, 2000, PBW was still operating under its own name.¹⁴

Staff has discovered that Cingular also currently appears to be marketing its wireless services in conjunction with Earth One Network, Inc., dba Pac Plus Mobile Communications. This product is sold as Pac Plus, and the marketing materials feature the name "Cingular Wireless" in large print, with the contract containing the Pacific Bell Wireless logo and the promise that calls will be carried by "Pacific Bell Wireless' ('PBW's') facilities." Staff Report at 11, Attachment F. The Pac Plus product appears substantially similar to the Cingular product in most respects, although Pac Plus has a somewhat different rate structure and an early termination fee of $200 instead of $150.

Because of the multiplicity and possible confusion of corporate names and products, as well as the preliminary nature of the investigation to date, we grant Staff leave to propose the addition of affiliated parties, factual allegations, or legal theories.

¹See Staff Report, at footnotes 7-16 and accompanying text. ²See, e.g., "Dead Zones Where Cell Phones Don't Work, Companies own data show wide gaps in coverage in Bay Area," San Francisco Chronicle, April 1, 2001, at p. 1 (reporting inter alia on San Francisco PBW/Cingular customer unable to obtain steady coverage in his San Francisco neighborhood). ³Staff Report, at 4-5 (websites critical of Cingular) and Attachment G (online petition). ⁴See Declarations of Lara Buchanan, Karen Busse, Mohamad Dashitzad, Anne Grillot, Donna Halow, Joe/Katherine Ramsey, Mac Rogers, Larry Scott, Colin Smith, Ronald Smith, Afshin Sooferian, Suzanne Strache, Katy Summarland, and Christine Waiton, and complaint letters of Lisa Gaines, Jeanne Loveless, and Rosa Quigley, found as Attachment C to Staff Report. ⁵For example, an advertisement published on March 21, 2002 in the San Francisco Chronicle touted the "Cingular Nation plans" with a headline "Never pay long distance or roaming again." The only language disclosing limited coverage is this fine print disclaimer: "Cingular does not guarantee uninterrupted service coverage." There is no reference to coverage maps found elsewhere. ⁶December 29, 2001 and January 2, 2002 visits to www.mywirelesswindow.com revealed that the coverage maps had been removed, and that there was only a listing of cities, including San Francisco and Los Angeles. 7 Staff Report at 14-15. ⁸Staff Report at 7-8, 14-15. ⁹See, for example, brochures in Attachment A; compare Attachment G (apparent customer complaints on Internet petition, many alleging "system busy" problem). ¹⁰"Cingular hopes to cut complaints - Wireless firm budgets nearly $1 billion in upgrades for West," San Francisco Chronicle, April 2, 2002, page B-1 (noting that wireless carriers AT&T and Verizon plan on spending similar sums). ¹¹ Pacific Bell Wireless: The PBW agreement (WSEA) has blanks for "Service Commitment" (1 year, 2 year, etc.), followed by a smaller-print line stating "Early termination Fee of $150 per Phone Number Applies." There is no disclosure on the WSEA of coverage limitations or a "no return" policy . By signing the agreement, the customer authorizes Cingular (here PBW) to provide "PCS service according to PBW's terms and conditions of Service [sic] and the Charges and Fees described herein." This sentence is in fine print at the bottom of the contract. On the backside of the WSEA is the "Summary of Terms and Conditions," which refers to a separate "Terms and Conditions Booklet." All of the language on the "Summary" is in small or fine print, except for waivers of judge, jury, and class action rights. Under the heading for Service Commitment there is no disclosure or limitation regarding coverage; under the heading for Liability, the "Summary" states that "PBW does not assume any duty to provide uninterrupted service to you." Uninterrupted service is not more closely defined. The page labeled Service Highlights likewise has no disclosure of limitations to coverage area or system capacity. Instead, under the heading of "Home Coverage Area and Roaming," it merely states that "Pacific Bell Wireless is licensed to provide service in California and Nevada." The Service Highlights page does contain a statement of PBW's "No Returns" policy:

Pacific Bell Wireless does not extend cash refunds or credit for returned
phones or other equipment. There is no "cooling off" period. Please check with the retailer regarding its own policy for returns of wireless equipment.

The Pacific Bell Wireless Terms and Conditions booklet, under a section titled "CREDIT FOR SERVICE INTERRUPTION," allows that "quality of transmission may be diminished and calls ... may be dropped or may not be completed," but allows credit "for 1/30^th of your monthly Service fee" only "if and when Service is rendered unusable for 24 consecutive hours." Cingular: The contracts bearing the name Cingular are generally similar to those described above, containing on the face of the contract no disclosure of limitations on coverage area or system capacity, or any disclosure concerning the no return policy. The first text page of Cingular's terms and conditions booklet, in a section entitled "Availability of Limited Service" stresses the positive: "Service is generally available to wireless telephones equipped for the area when within the range of cell sites located in the service area." CCA 6751. There is no elaboration about the referenced "range of cell sites" or "service area." This sentence is also repeated on what appears to be the back of Cingular's "Wireless Service Agreement." At page two, and in small print, the Cingular terms and conditions booklet also contains (at CCA 6752) this paragraph:

SERVICE INTERRUPTION Service may be temporarily interrupted, delayed or otherwise limited for a variety of reasons, including but not limited to, transmission limitations caused by atmospheric and other conditions, availability of radio frequency channels, system capacity limitations, coordination with other systems, equipment modifications and repairs, and problems associated with the facilities of interconnecting areas. There are gaps in Service within the service areas shown on coverage maps. CINGULAR does not guarantee you uninterrupted service. Airtime and other service charges apply to all calls, including involuntarily terminated calls.

. ¹²See Staff Report at 13 (noting that the disappointed customer's liability under this plan is for the full retail price of a phone usable only on the Cingular system, rather than the ETF as earlier). ¹³Cingular's 10/26/01 response to CSD data request no. 2, Attachment E to Staff Report. ¹⁴ See, e.g., Busse Declaration and attached contract, Attachment C to Staff Report.