VI. Comments on Proposed Decision

The proposed decision of the ALJ in this matter was mailed to the parties in accordance with Pub. Util. Code § 311 and Rule 14.2(a) of the Rules of Practice and Procedure. Comments were filed November 20, 2006, by DRA, SBC, City of San Diego, XO Communications, and Telscape. At the request of SBC, the due date for Reply Comments was reset to December 1, 2006, and SBC, DRA, City of San Diego, XO Communications, and the California Cable and Telecommunications Association filed Reply Comments. In addition, Cox California Telcom, LLC dba Cox Communications, Time Warner Telecom Company, and Time Warner Cable Information Services filed a motion to intervene⁷ and with attached comments.

SBC opposed a surcharge based on a percentage of intrastate revenue, and explained the administrative burdens associated with calculating and collecting such a surcharge on its wholesale customers. A flat-rate surcharge, as proposed by SBC, did not create these burdens. SBC also opposed excluding Lifeline customers from the surcharge and including certain customers that take service pursuant to contracts. Finally, SBC requested that the Commission adopt a mechanism to assess the costs of an audit to the Commission, under certain circumstances.

The City of San Diego requested that SBC be allowed to apportion and recover its customers from eligible customers, and that timelines be adopted for implementing the surcharge.

DRA argued that there was "no basis" for the Commission to authorize SBC's requested surcharge for the next 17 years because the Commission deregulated the prices SBC charges in D.06-08-030. DRA contended that the proposed surcharge would "effectively place the Commission back in the role of regulating [SBC's] rates."

XO sought clarification of the surcharge mechanism for competitive local exchange carriers and provided a detailed set of recommended changes to the Proposed Decision. Xo also pointed out that D.06-08-030 granted SBC the power to "raise its retail rates in San Diego . . . by as much as it wishes."

Telscape argued that SBC's request for Commission authorization to impose a surcharge on its San Diego customers, other than basic residential service, was "now unnecessary" due to D.06-08-030. Telscape contended that the Commission has opted to rely on market forces to ensure just and reasonable rates rather than rate regulation as set out in the Proposed Decision. Telscape also requested that SBC's wholesale contracts be exempt from the surcharge to prevent double collection. Finally, Telscape stated that the surcharge on unbundled network elements violated federal law.

In reply comments, SBC contended that D.06-08-030 did not obviate the need for Commission approval of the surcharge because that decision "froze" SBC's residential basic local service rates until January 1, 2009, and did not extend to the lines leased from SBC by its wholesale competitors. The City of San Diego argued that the decision was "not relevant to this proceeding." XO disputed SBC's contentions that the percentage surcharge was unworkable, and DRA urged the Commission to reject SBC's contention that excluding Lifeline customers was impracticable.

The California Cable and Telecommunications Association's reply comments and joint reply comments of Cox California Telcom, LLC, dba Cox Communications, Time Warner Telecom Company, and Time Warner Cable Information Services sought clarification that the surcharge would apply only to SBC customers, retail and wholesale, but not to other competitive local carriers providing service in San Diego using non-SBC facilities. The joint reply comments also supported XO's, Telscape's, and DRA's opening comments contending that "the proposed surcharge is unnecessary" and pointed out that SBC will have "complete pricing flexibility for all of its services for 15 out of the estimated 17 years that the surcharge will be in place." The joint reply comments concluded that approving the surcharge would give SBC the best of "both worlds" with deregulated prices but a regulated surcharge.

In response to the comments and reply comments, the Proposed Decision was substantially revised to conform to Uniform Regulatory Framework adopted in D.06-08-030. As set forth above, Commission authorization for the surcharge is not necessary after full pricing flexibility is implemented, currently scheduled for January 1, 2009, and we have limited our authorization in today's decision. As a now short-term Commission-authorized surcharge, we further concluded that SBC's specified administrative burdens outweigh the need to conform to Commission precedent with a percentage of intrastate revenue surcharge. We will, therefore, authorize SBC to impose a flat fee surcharge on each line served with SBC facilities in San Diego until such time as SBC obtains full pricing flexibility, currently scheduled for January 1, 2009.

⁷ No party opposed the motion and it is granted.