5. Comments on "Second Interim Opinion"

Today's decision, the Second Interim Opinion in this proceeding, was mailed as a draft decision to the parties on October 19, 2001. We received opening comments from five parties, namely, Telco Coalition, TURN, Roseville Telephone Company, a group of small incumbent local exchange company (collectively, the "Small LECs"), and VarTec Telcom, Inc.12 We received reply comments from four of these parties (Telco Coalition, TURN, Roseville, and VarTec) and from two other parties, namely, ORA and Pacific Bell Telephone Company.

In general, the consumer commenters (ORA and TURN) strongly support the notice requirements, while industry commenters are more divided, especially regarding the new requirements for advance customer notice of rate increases. However, all of the commenters provide useful suggestions for improvement or clarification, and our rules as adopted today incorporate many of these suggestions. Discussion of their comments follows.

5.1 Limitations and Exceptions

We have been asked by VarTec and Telco Coalition to clarify two points about what today's decision does not do. First, in adopting rules requiring advance notice to customers of rate increases, we make no change to our current rules that do not require such notice of rate decreases. Second, in rejecting requests for evidentiary hearings regarding the rule changes adopted in today's decision, we reserve judgment on additional requests made in prior comments (especially those submitted on June 29, 2001) regarding the other GO 96-B proposed rules not yet adopted and still under consideration in this proceeding.

Roseville and the Small LECs ask us to confirm their understanding that utilities are not required under these rules to give notice every time we increase one of the public poling program surcharges. Their understanding is correct, and we have modified the rules to state this exception expressly.13

TURN assumes, correctly, that current notice requirements for formal applications will remain in place while we implement these new notice requirements for advice letters. We have modified Sections 1 and 2 of the Opinion to clarify this point. We remind the parties that the scope of this rulemaking is limited to advice letters, but that we are concurrently addressing telecommunications consumer protection issues (including notice requirements for various types of formal applications) in R.00-02-004.

VarTec notes that certain interexchange carriers (VarTec refers to them as "dial around/casual access providers") do not have billing name and address information regarding their customers; consequently, these carriers cannot give customer notice by first-class mail or e-mail as contemplated by our rules. Such carriers do not have customer "subscribers;" instead, customers place a call via the carrier by dialing a code (e.g., 10-10-XXX). Aside from lacking address information, the dial-around service provider cannot be certain who is a current customer, since a particular caller may use that provider frequently, seldom, or once only. VarTec is willing to give notice by newspaper publication of rate increases. However, both Telco Coalition and ORA believe that our customer notice requirements need not cover dial-around service providers at all.

We will not apply specific customer notice requirements to dial-around service providers at this time. While there may be consumer protection issues in connection with dial-around service, we are satisfied that the customer notice requirements we adopt today are suited to "subscribers" and not to users of dial-around service.14 Thus, a utility that does not have a postal or e-mail address at which to contact its customers about bills, accounts, service agreements, or the like, need not provide customer notice under the rules adopted today.

5.2 Timing and Contents of Notices Generally

Many of the comments debate the start date from which to calculate the requisite notice period. Roseville and the Small LECs suggest that the notice period run from the day a mailing is postmarked or, in the case of e-mail, the day it is transmitted. VarTec, Pacific Bell, and Telco Coalition basically agree, although with the qualification that, since bulk first class mail does not have a postmark, the start date should be the day the notice is deposited with the U.S. Mail. ORA and TURN argue that five days should be added if the notice is mailed.

Our Rules of Practice and Procedure settle this debate for purposes of our formal proceedings. Specifically, Rules 2.3(a) and (b) say that service by mail is complete when the document is deposited in the mail, and that service by electronic means (including modem) is complete upon successful transmission. The February 14 ALJ Draft incorporated these rules by reference in its proposed General Rule 3.14. We see no reason to differentiate in this procedural respect between advice letters and formal proceedings; to do so invites confusion and uncertainty. Accordingly, for the rules adopted today, we have added a provision that is identical in substance to Rule 2.3(a) and (b).

However, we will differentiate between the customer notice periods required for transfers and for other types of utility requests subject to the rules adopted today. Public Utilities Code Section 2889.3(a)(1) requires that:


"Before a telephone corporation exits the business of providing interexchange services to all of its customers or to an entire class of its customer, the telephone corporation or any person, firm, or corporation representing the telephone corporation, shall provide those affected customers with a written notice at least 30 days prior to the proposed transfer of those customers to another telephone corporation."

We have modified our 25-day notice provision so that 30 days' notice will be required for transfers, consistent with the statute. Likewise, consistent with Section 2889.3(a)(1)(D), we require the customer transfer notice to include "a toll-free customer service telephone number for the purpose of responding to customers' questions."

Also regarding the 25-day notice provision, Telco Coalition points out an ambiguity that did not exist in the version proposed in the February 14 ALJ Draft. Telco Coalition suggests specific language to eliminate the ambiguity; TURN agrees with the suggestion, although ORA is not convinced that the purported ambiguity exists. We find that the language proposed by Telco Coalition more clearly expresses our intent than either of our versions, so we will adopt the 25-day notice provision as set forth in Telco Coalition's comments.

TURN suggests the customer notice should include information about how to protest the advice letter that is the subject of the notice. We reject this suggestion at this time. We note that the February 14 ALJ Draft (in Telecommunications Industry Rule 3) would require protest information, but only for those advice letters ("Tier 3" in the proposed GO 96-B) that are expected to need approval or rejection by Commission order.15 Unless and until we adopt the GO 96-B tier structure, it would be premature to require inclusion of the protest information, especially considering that in many instances, the only condition to our approval of a utility request is the giving of timely notice of the request to the utility's customers. Moreover, the main purpose of today's decision is to better enable customers to make informed choices. Enabling customer participation through protests is also an important regulatory consideration but one that we may appropriately defer to our adoption of the complete package of GO 96-B reforms.

The Small LECs note they are unique among telecommunications utilities in that they may file general rate cases through the advice letter process, and that these cases take much more time than typical advice letters. Thus, the Small LECs ask that they be allowed to give customer notice of a general rate case advice letter in the first billing cycle after filing of that advice letter. They also question the need for describing in the notice the reason for the proposed change in rates and the impact of the change in dollar and percentage terms. ORA and TURN disagree with the Small LECs. ORA notes that GO 96-A already requires the utility to describe the reason for rate changes and their impact, and that the rules under consideration merely continue the existing requirement. TURN argues that if a utility's billing cycle cannot accomplish timely notice through bill inserts, the utility can do a separate mailing. For the reasons stated by ORA and TURN, we will not modify our customer notice requirements as requested by the Small LECs.

5.3 Transfer of Customers

Comments on the draft of today's decision noted that the transfer rule contained two undefined terms: "telecommunications service provider" and "customer base." We find that neither term is necessary, and that the clarity of the rule is enhanced by replacing these terms with "transferee" and "customers," respectively.

VarTec urges that we not require customer notice of a transfer that is "merely a corporate-level transaction [in which] the customer does not experience any change in rates or conditions." VarTec gives as an example a stock or asset acquisition that does not otherwise result in a change to the service or even to the name of the service provider. TURN appears to agree; in fact, as TURN reads the transfer rule, it does not require notice of a transfer that affects only the "holding or parent company level."

We agree with TURN's reading of the transfer rule. That is not to say customers have no concern with changes that occur strictly at the holding or parent company level; the issue, rather, is to implement Public Utilities Code Section 2889.3 consistent with the legislative intent. Taking our notice rules as a whole, we see that we have required prior notice to affected customers whenever a telephone utility withdraws a service, raises rates (or adopts more restrictive terms), or transfers all or some of its customers. The mere substitution of a different holding or parent company, without other impact on the underlying utility providing service or the service provided, does not appear to be the sort of change for which prior notice to the utility's customers is contemplated under Section 2889.3. Those customers would receive prior notice under our rules should the transferee later propose to make any of the specified changes.

VarTec also is concerned that our rules may be construed to impose a "dual" notice requirement. This concern is based on a misunderstanding, not of the rules themselves, but of the last sentence in Section 2 of the draft of today's decision issued for public review and comment. We have revised the sentence to make clear that we are not requiring duplicate notices of a single transfer.

5.4 Withdrawal of Service

Comments on the withdrawal of service rule raise concerns about its scope, the conceptual distinction between transfer and withdrawal, and the withdrawing utility's obligation to provide for continuity of service. We address these concerns in sequence.

The concern regarding scope arises because the rule as set forth in the draft of today's decision contained certain ambiguities. We now clarify the rule such that it applies whenever a utility is discontinuing a service's availability to at least some customers receiving the service as of the date it is withdrawn. In other words, a utility withdrawing a service only in a particular location would still have to notify affected customers in that location. On the other hand, no notice requirement is triggered under the rules adopted today if the utility is only discontinuing availability of a service to customers who are not currently receiving the service.16

Telco Coalition believes notice of withdrawal should be required "only when a carrier is withdrawing from the market and requiring its customers to change providers," as distinguished from a carrier's "decision . . . that a current product or service should no longer be available to its customers." Telco Coalition therefore proposes to combine the provisions for transfer and withdrawal by, among other things, deleting the definition of "withdrawal of service" and modifying the definition of "transfer" to read:


"[T]ransfer" means a transfer in which another telecommunications service provider would replace the transferring utility for part or all of the transferor's customer base following the transferring utility's decision to withdraw the service(s) subscribed to by the segment of the customer base being transferred or to exit the California telecommunications market altogether.

TURN disagrees with Telco Coalition in this regard, and urges the retention of "transfer" and "withdrawal" as separate concepts. In particular, TURN argues that notice should be given regardless of whether the proposed withdrawal is of all of a utility's service offerings or just a part of them. TURN also notes that under Telco Coalition's approach, a paradoxical situation ensues in which a utility must notify its customers of a withdrawal where a replacement is available but the utility escapes the notice requirement where a replacement is not available.

We will retain both the "transfer" and "withdrawal" provisions. We certainly need to address customers' needs in the situation where a withdrawal occurs without an associated transfer. We also intend to cover all withdrawals of service, whether the withdrawal affects some or all of the utility's customers and some or all of the utility's services.17

TURN asks that we include a provision from the February 14 ALJ Draft requiring a utility that provides basic service over its own facilities to arrange for transfer of affected customers if it proposes to withdraw that service. We will adopt that provision (with slight modifications), and we will also clarify that the term "basic service" applies to such service whether the customer is business or residential.

Pacific Bell and Roseville have objections and concerns about requiring a facilities-based utility to arrange for transfer of customers affected by the utility's proposed withdrawal of basic service. Pacific Bell asserts that utilities have no such obligation today, and notes that in some geographic areas, no other utility may be providing basic service. Roseville hypothesizes that an affected customer may object to the designated default transferee; Roseville is also uncertain how this requirement for noticing withdrawal of basic service interacts with the requirement in today's decision for noticing customer transfer.

In response, we consider that the withdrawing utility's responsibilities arise directly from the Universal Service Rules we adopted in D.96-10-066. We find unacceptable, and inconsistent with the Universal Service Principles and Objectives (see D.96-10-066, Appendix B, 68 CPUC2d 524, 671-82), any possibility that a customer who has paid the bills and who is otherwise in good standing could lose his or her basic telephone service when a utility withdraws that service.

Even now, we do not permit withdrawal of a utility service prior to our authorization. (GO 96-A, Section XIV.) Further, under the Universal Service Rules, a "Carrier of Last Resort" (COLR) that is also the only utility serving a designated geographic area must continue to act as COLR until the Commission has granted its application or a new COLR has been designated. (See generally D.96-10-066, Appendix B, Section 6.D, 68 CPUC2d at 676.) Less clear under the Universal Service Rules is how continuity of service is ensured when there are other utilities providing basic service in the geographic area from which a COLR proposes to withdraw that service. The rules we adopt today provide clarification.

Specifically, the utility proposing to withdraw basic service that it has provided using its own facilities must make arrangements to ensure its customers do not lose basic service, even where a customer has not chosen another utility. There may be several ways to accomplish this; for example, in geographic areas where several utilities will continue to provide basic service, the withdrawing utility may make arrangements with several "default" carriers. The informational requirements of our notice rule are not intended to prescribe the arrangements, but only to tell affected customers what arrangements the withdrawing utility has made.

In sum, these informational requirements pertaining to withdrawal of basic service consist of: (1) prior notice; (2) designation of the default carrier(s); (3) description of arrangements made with the default carrier(s); (4) explanation that the affected customer may choose another utility in lieu of the default carrier(s); and (5) a toll-free number for more information. If no other utility provides basic service in the relevant geographic area, the "arrangements" described in the notice need only state that the withdrawing utility will continue to provide basic service until and unless the Commission relieves it of that obligation.

Lastly, TURN asks us to consider extending continuity of service requirements beyond basic service to (specifically) digital subscriber line (DSL) service and other forms of Internet access. Roseville, Pacific Bell, and Telco Coalition oppose this extension.

In response, we note that the notice requirements in today's decision apply to withdrawal of telephone services, including those that provide access to the Internet. The issue is whether the carrier withdrawing such a service must make arrangements for continuity of access to the Internet by or for its customers (who probably include Internet service providers).

The Internet has become too important in today's society for loss of access to be treated lightly, and we are dismayed by recent events that have disrupted service to Internet service providers and end-users. Nevertheless, given the goal of uninterrupted access, we question whether the best way to achieve that goal is to give the withdrawing carrier the obligation (and the opportunity) to transfer its customers in bulk. Before venturing an answer, we should hear more from affected customers, including Internet service providers. To have withdrawing carriers and their customers (potentially) working at cross-purposes or making conflicting arrangements would be unlikely to minimize disruption. Thus, we will solicit further comment on whether the notice requirements in today's decision appropriately address the problems discussed above, and what requirements, if any, should be imposed on a withdrawing carrier to make specific arrangements regarding continuity of Internet access.

Findings of Fact

1. It is timely and appropriate to adopt new or amended requirements for notice by a telecommunications utility to its affected customers of a proposal by the utility to make certain kinds of changes. Changes for which such prior notice is appropriate include: a transfer in which the transferee would replace the transferring utility for some or all of the transferor's customers; a withdrawal of service; and a higher rate or charge or more restrictive term or condition. Prior notice to customers will promote fairness and efficiency in the competitive market for telecommunications services.

2. For purposes of the rules adopted today, it is appropriate to allow utilities to give notice by one or a combination of means, including by e-mail to those customers who receive their bills by e-mail.

3. For purposes of the rules adopted today, customer notice by newspaper publication is inadequate.

4. Today's decision should take effect immediately so that telecommunications utilities can begin implementing the customer notice requirements as soon as possible.

Conclusions of Law

1. The Commission should ensure that affected customers receive notice of certain kinds of proposed changes to their telecommunications service.

2. The Commission should adopt the rules set forth in the Appendix to today's decision.

3. Today's decision amends certain notice requirements that we originally adopted without evidentiary hearing. Moreover, there are no disputed facts that are material to our consideration of the notice requirements adopted in today's decision. Consequently, we need not hold an evidentiary hearing before adopting these amended notice requirements.

SECOND INTERIM ORDER

IT IS ORDERED that:

1. The rules set forth in the Appendix to this Second Interim Opinion are adopted.

2. The rules set forth in the Appendix shall apply to all advice letters whose proposed effective date is at least 60 days after the effective date of this Second Interim Opinion.

3. This proceeding remains open to deliberate upon final adoption of General Order 96-B, apart from those rules adopted today and in Decision 01-07-026.

This order is effective today.

Dated January 9, 2002, at San Francisco, California.

APPENDIX

1. Applicability and Definitions

As used in the following rules:

For purposes of these rules, an increase to a public policy program surcharge does not constitute a higher rate or charge or more restrictive term or condition. Unless otherwise required by context, use of the singular includes the plural.

2. Means of Giving Customer Notice

A utility may satisfy a notice requirement in these rules by one or a combination of the following means: bill inserts; notices printed on bills; or separate notices sent by first-class mail (or by e-mail to a customer who receives bills from the utility by e-mail). Notice by first-class mail is complete when the document is deposited in the mail, and notice by e-mail is complete upon successful transmission.

3. Notice to Affected Customers

A utility must notify each affected customer of the utility's advice letter requesting approval of (1) a transfer of customers, (2) a withdrawal of service, or (3) a higher rate or charge or more restrictive term or condition. In the case of a transfer of customers, the utility must give this notice at least 30 days before the proposed transfer; otherwise, the utility must give this notice on a date that is at least 25 days before the requested effective date of the advice letter, or on the date when the utility submits the advice letter to the Telecommunications Division's Advice Letter Coordinator, whichever date is earlier.

If the utility requests approval of a transfer of customers, the notice must identify the transferee, describe the changes (if any) in rates, charges, terms, or conditions of service, state that customers have the right to select another utility, and provide a toll-free customer service telephone number for the purpose of responding to customers' questions.

If the utility requests approval of a withdrawal of service, the notice must describe the proposed withdrawal, state that customers have the right to choose another utility, and provide a toll-free customer service telephone number for the purpose of responding to customers' questions. If the service to be withdrawn is basic service (as specified in Part 4 of Appendix B of Decision 96-10-066 and as modified from time to time by the Commission) that the utility provides to residential or business customers by use of the utility's own facilities, the utility must arrange with the default carrier(s) for continuity of service to affected customers who fail to choose another utility, and the notice must describe the arrangements the utility has made to ensure continuity of service to affected customers. If the utility resells basic service, the notice must state that customers may choose another utility or (if no other utility is chosen) receive basic service from the underlying carrier or carrier of last resort.

If the utility requests approval of higher rates or charges or more restrictive terms or conditions, the notice must describe the current and proposed rates, charges, terms, or conditions (as appropriate). If the utility is a local exchange carrier regulated through periodic general rate cases, the notice must also describe the reason for the proposed change to a rate or charge and state the impact of the change on the rate or charge in dollar and percentage terms.

12 The Telco Coalition, for these two rounds of comments, consists of AT&T Communications of California, Inc., Cox California Telcom, LLC, ICG Telecom Group, Inc., Pac-West Telecomm, Inc., Time Warner Telecom of California, LP, WorldCom, Inc., and XO California, Inc. The Small LECs consist of Calaveras Telephone Company, Cal-Ore Telephone Co., Ducor Telephone Company, Evans Telephone Company, Foresthill Telephone Co., Happy Valley Telephone Company, Hornitos Telephone Company, Kerman Telephone Company, Pinnacles Telephone Co., The Ponderosa Telephone Co., Sierra Telephone Company, Inc., The Siskiyou Telephone Company, The Volcano Telephone Company, and Winterhaven Telephone Company. 13 Cf. Resolution T-16585 (October 10, 2001), Ordering Paragraph 4, in which the Commission waived customer notice of revised tariffs to reflect the change there authorized to the California High Cost Fund-B surcharge. 14 We note that VarTec and several other dial-around service providers we checked maintain an Internet site and a toll-free number for inquiries about their current rates. Also, the Internet tariff publication requirements we adopted in our prior interim opinion (D.01-07-026) apply to all telephone utilities with reported gross intrastate revenues of $10 million. 15 In contrast to formal proceedings, advice letters generally concern utility requests whose disposition would be ministerial, and thus their approval or rejection normally would be done by the reviewing Commission staff. 16 In GO 96-B, as proposed in the February 14 ALJ Draft, discontinuing a service's availability to customers not currently receiving the service, but "grandfathering" customers already receiving it, is referred to as "freezing" the service. We think our withdrawal rule, as modified in today's decision, is clear without importing the definition of freezing at this time; adoption of that definition is better considered when we deal with GO 96-B as a whole. 17 We note that under Telco Coalition's approach, a utility that proposed to withdraw its bundled local and long distance service, but to continue to offer local and long distance service separately, would apparently not have to notify affected customers of the proposed withdrawal of bundled service. Cf. D.01-06-036 (concerning the application of Verizon Select Services Inc. to withdraw provision of local bundled service).

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