ALJ/TRP/sid * BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA Order Instituting Rulemaking ) FILED on the Commission's Own Motion ) PUBLIC UTILITIES COMMISSION into Competition for Local Exchange ) APRIL 26, 1995 Service. ) SAN FRANCISCO OFFICE ) R.95-04-043 ) Order Instituting Investigation ) FILED on the Commission's Own Motion ) PUBLIC UTILITIES COMMISSION into Competition for Local Exchange ) APRIL 26, 1995 Service. ) SAN FRANCISCO OFFICE ) I.95-04-044 I. Introduction We institute the formal rulemaking proceeding and investigation captioned above as a procedural vehicle to develop and adopt subsequent rules for local exchange competition. We herein issue proposed interim rules for comment that would 1 authorize competitive local carriers (CLCs) to seek authority to offer local exchange services within major markets in California beginning in June 1995. The proposed interim rules are set forth in Appendices A and B of this order. In our November 1993 report entitled Enhancing California's Competitive Strength: A Strategy For Telecommunications Infrastructure (Infrastructure Report), we stated our intention of opening all telecommunications markets to competition by January 1, 1997. The California Legislature subsequently adopted Assembly Bill 3606 (Ch. 1260, Stats. 1994), __________ 1 Competitive Local Carrier (CLC) refers to a common carrier who is issued a Certificate of Public Convenience and Necessity after the effective date of this order to provide local exchange telecommunications service for a geographic area specified by such carrier. - 1 - R.95-04-043, I.95-04-044 ALJ/TRP/sid similarly expressing legislative intent to open telecommunications markets to competition by January 1, 1997. We have already taken significant steps toward achieving this goal. On September 15, 1994, we issued Decision (D.) 94-09-065 (Investigation (I.) 87-11-033) in which we opened intraLATA toll markets to competition effective January 1, 1995. We now focus on the process of opening local exchange markets to competition. An Assigned Commissioners' Ruling issued November 4, 1994 in I.87-11-033 solicited comments on the appropriate process whereby local exchange markets could be opened to competition by January 1, 1997. Responsive comments were filed during November 1994. On December 8, 1994, a second Assigned Commissioner's Ruling presented a plan for achieving the Commission's and the Legislature's goal of local exchange competition by January 1, 1997. The December 8 ruling proposed that rules for competition be developed by formulating three separate subject areas: (1) Open Access and Network Architecture Development (OANAD); (2) local competition; and (3) consumer protections and regulatory streamlining. Interdivisional staff teams would be formed to work informally to research appropriate interim rules, identify overlap with ongoing proceedings, determine the best docket for resolving overlapping issues, and publish proposed rules. Upon publication of rules, each team would move into the traditional rulemaking process. This entire process would be facilitated by a managing Commissioner. By issuance of D.94-12-053, we formally adopted this procedural plan to meet our stated goals. Our plan called for use of a parallel-track approach. One track involved the efforts of telecommunications industry participants to undertake negotiations with the goal of achieving an all-party settlement on any or all issues covered by D.94-12-053 by March 31, 1995. The participants in these negotiations submitted a joint report for March 31, 1995, indicating that the parties did not reach settlement, although the - 2 - R.95-04-043, I.95-04-044 ALJ/TRP/sid process had been useful and fruitful. We thank the parties for their diligent efforts to identify issues relevant to the development of interim rules. We trust that the negotiation process has been of assistance in focusing parties' positions on the issues relevant to this rulemaking. The second track involved the work of our own Commission interdivisional team to research and develop interim rules. We instructed the Commission Advisory and Compliance Division (CACD) Telecommunications Branch to accept parties' informal proposals for interim rules for local competition, as submitted on January 31, 1995. Several parties submitted proposals regarding the scope and content of interim rules to CACD. The Commission's interdivisional team subsequently met informally with various parties to further discuss and clarify their proposals. We have reviewed parties' proposals and taken them into account, as appropriate, in developing the proposed interim rules herein. Up to the present time, the development of rules has proceeded on an informal basis to permit the maximum input from industry and consumer organizations as part of the information gathering process. With this issuance of proposed interim rules, we now move into a formal rulemaking process, and shall proceed hereafter under the rulemaking docket instituted herein. On April 3, 1995, the California Committee for Large Telecommunications Consumers (CCLTC) on behalf of 14 parties filed a "Joint Motion to Open Rulemaking Proceeding and Set Procedural Schedule on Interim Rules for Local Competition (Joint Motion)." The Commission's Division of Ratepayer Advocates (DRA) filed a response to the Joint Motion on April 7, 1995. DRA generally supports the Joint Motion but believes that more time is needed for the filing of comments than the 12 working days proposed in the Joint Motion. To the extent that D.94-12-053 has already mandated that proposed interim rules would be issued in April 1995 through the - 3 - R.95-04-043, I.95-04-044 ALJ/TRP/sid initiation of a formal rulemaking proceeding in the event parties had not arrived at a settlement of local competition issues, the Joint Motion is moot. As stated in D.94-12-053, it remains our intention to adopt interim rules in June 1995 that will authorize interested competitors to seek authority to offer local exchange service. Accordingly, we direct interested parties to file comments on the proposed interim rules set forth herein under the schedule as prescribed in Section IV below. II. Positions of Parties CACD received 12 sets of comments on interim rules for local exchange competition, dated January 31, 1995. A Coalition of 2 Telecommunications Consumers and Providers (Coalition), the Commission's Division of Ratepayer Advocates (DRA), and GTE California, Inc. (GTEC) each filed comprehensive draft interim rules. Pacific Bell (PacBell) addressed issues regarding interim rules through extensive comments. Other parties addressed issues of particular concern, such as franchise obligations for small LECs and outreach to underserved communities (Public Advocates). Parties' comments represent different views concerning both the scope and content of interim rules. PacBell advocated an approach focusing on rules for immediate entry by CLCs with competition limited to resale of LEC services while the development __________ 2 The Coalition consists of American Telephone and Telegraph Company, Bay Area Teleport, California Association of Long Distance Telephone Companies, California Committee for Large Telecommunications Consumers, California Cable Television Association, California Payphone Association, ICG Access Services, MCI Telecommunications Corporation, MFS Communications Company, Sprint, Teleport Communications Group, Time Warner AxS and Toward Utility Rate Normalization. - 4 - R.95-04-043, I.95-04-044 ALJ/TRP/sid * of rules for unbundling, interconnection, number portability and universal service would be addressed later. Parties such as the Coalition and DRA urged that a broader scope of interim rules should be addressed prior to entry, including unbundling, interconnection, and number portability rules applicable to LECs. III. Discussion As stated in the Assigned Commissioner's Ruling of December 8, 1994, our goal to achieve local competition requires (1) removal of barriers to competition, (2) leveling the playing field, and (3) implementing appropriate consumer protections. As a first step in this rulemaking process, we have identified the highest priority issues requiring interim rules and address those items herein. The scope of interim rules proposed herein shall be limited to the service territories presently served by PacBell and GTEC. We shall defer until a later decision rules which would permit local competition within the markets served by small and mid-sized LECs by January 1, 1997. We have also evaluated which rules are appropriate to address through our newly instituted local competition rulemaking, and which rules should be developed in the OAND or Universal Service proceeding. We have given priority in the attached interim rules to providing necessary authority for market entry of CLCs beginning in June 1995 while assuring appropriate consumer protection rules are in place. We have organized the interim rules into two appendices: Appendix A focuses primarily on the rules governing the competitive relationships between the CLCs and LECs. Appendix B focuses on the relationships between CLCs and the consumer and is intended to assure adequate protection for the consumer against fraud or other - 5 - R.95-04-043, I.95-04-044 ALJ/TRP/sid * abusive practices by the CLC, consistent with its obligations as a public utility. To the extent appropriate, we have drawn upon the existing certification and market entry principles applicable to nondominant interexchange carriers (NDIECs) in crafting the rules applicable to CLCs since the NDIEC standards reflect the competitive conditions we seek to emulate in the local exchange market. Where circumstances warrant a different treatment for CLCs in comparison with NDIECs, we have crafted provisions tailored to the CLCs' market. Our interim rules also address the CLCs' obligation to serve. We propose that CLCs be required to serve all customers requesting service within the CLC's designated service area. All facilities-based CLCs shall, at a minimum be required to serve all customers requesting service whose premises abut the right of way occupied by the CLC's facilities and where access to customer's premises is feasible. We shall not, however, require CLCs to build out facilities not abutting the CLC's facilities. Incumbent LECs shall continue to be the provider of last resort and remain subject to existing regulations unless otherwise noted. We propose to resolve competitive universal service provisioning issues in the Universal Service Proceeding (R.95-01-020) during 1996. We do not establish any rates for unbundled components in this order, but intend to address fully in the OANAD proceeding (R.93-04-003/I.93-04-002) issues related to unbundling. At a minimum, we intend that the six network components identified in Appendix A should be unbundled, by January 1996 as part of the OANAD proceeding. In D.94-12-053, we expressed our intention to open proceedings in May 1995 to resolve all outstanding concerns related to NRF review and intraLATA presubscription in the event parties did not reach a settlement. We shall institute dockets to address these issues in a separate order. - 6 - R.95-04-043, I.95-04-044 ALJ/TRP/sid * We intend to address through this local exchange competition docket outstanding factual issues relating to interconnection and number portability which require additional comments and/or limited evidentiary hearings to resolve. We intend to adopt a strictly enforced schedule for resolving these disputed issues through this docket by January 1, 1996. The initial rules which we intend to adopt by June will, however, permit CLCs to begin the process of securing CPCNs for immediate competitive entry. Rules developed in the OANAD proceeding could affect number portability provisioning. We also address in the attached proposed interim rules the joint provisioning of LEC/CLC switched carrier access services, information services, and other additional intercompany arrangements. We are particularly concerned about intercompany interconnection service quality as well as overall service quality. General Order (GO) 133-B establishes uniform standards of service to be observed in the operation of telephone utilities. The rules in the GO are applicable to all telephone utilities providing service within California. Existing standards were developed for residential and small business end-users, or line-side connections. With the advent of competing local exchange utilities, uniform intercompany interconnection service standards are necessary. The service standards by which the industry must operate are best addressed by the GO 133-B Review Committee. The purpose of the committee is to review the state of the art in telephony, to examine the measurements set forth in the General Order, and to suggest revisions, additions and deletions to said measurements. We hereby direct the GO 133-B Review Committee to develop additional standards applicable to interconnection service orders. The Committee shall report its draft GO 133-B revisions to the Commission no later than by December 31, 1995, as prescribed in the order below. We recognize the need to incorporate the input of all relevant interest groups into the work product of the GO 133-B - 7 - R.95-04-043, I.95-04-044 ALJ/TRP/sid * Review Committee. Accordingly, we solicit parties comments on how to reconfigure the representation on the GO 133-B Review Committee to include CLCs. Another major concern in adopting interim rules for local exchange competition is to ensure that adequate consumer protection and information disclosure rules are in place. Accordingly, in Appendix B, we have set forth interim consumer protection rules. It is critical that with the introduction of local competition, consumers are adequately protected from fraud and other abusive practices. We have included appropriate rules to make certain customers are provided adequate information by the CLC provider, including how to make inquiries or institute complaints regarding service, protections against unwarranted service discontinuance and unauthorized transfers of service provider. IV. Requirements for Comments on the Proposed Rules We shall direct the Executive Director to serve this order on all parties in I.87-11-033 and R.93-04-003, as well as on all cities and counties within California. To the extent not covered by the above lists, this order shall also be served on all certificated telephone, electricity and gas utilities within California. We direct all prospective parties who wish to remain on the service list for this rulemaking proceeding to send a letter no later than May 8, 1995 to the attention of the Commission's Docket Office with a copy to Administrative Law Judge (ALJ) Thomas R. Pulsifer, requesting to be included on this service list. On May 16, 1995, a ruling shall be served on all parties who were served with this order, establishing the service list for this rulemaking proceeding. The service list shall be limited to those parties requesting to be placed on the list, as directed above. - 8 - R.95-04-043, I.95-04-044 ALJ/TRP/sid * Parties are directed to file comments on the proposed rules no later than May 24, 1995 and to concurrently serve a copy of their filed comments on the service list for this rulemaking proceeding as set forth in the ALJ ruling to be issued on May 16, 1995 as directed above. Parties are directed to limit filed comments to no more than 50 pages including attachments and to identify in a clear and focused manner any additions, deletions, clarifications or modifications they believe are appropriate in the interim rules set forth herein. Parties shall also clearly identify the scope of any issues to be addressed through this rulemaking docket which they believe need further input from parties prior to resolution. Parties shall also state whether they believe evidentiary hearings will be required to resolve any outstanding disputes over appropriate interim rules, or further written comments will be sufficient. Any party which believes that changes or additions to the interim rules are appropriate, but that no evidentiary hearings are required should clearly set forth in their comments any additional information they believe the Commission should consider before adopting rules. Parties which believe evidentiary hearings are warranted are directed to present a proposed schedule for conducting discovery, preparing testimony, holding hearings, and filing briefs to resolve these disputed issues to allow sufficient lead time for a Commission decision before January 1, 1996. Each party should indicate whether it would intend to offer testimony, and on what issues. We direct the assigned ALJ to issue a ruling identifying the scope of issues for which evidentiary hearings are required, and establishing a schedule for these evidentiary hearings after review of parties' comments on the interim rules proposed herein. In order to adopt rules resolving factual disputes relating to interconnection and number portability by January 1, 1996, a focused, expedited timetable shall be adopted for - 9 - R.95-04-043, I.95-04-044 ALJ/TRP/sid * scheduling any required evidentiary hearings. We place parties on notice that any adopted hearing schedule shall be strictly enforced and focused on resolving essential factual issues to ensure that relevant rules can be adopted by January 1996. IT IS ORDERED that: 1. A rulemaking and investigation on the Commission's own motion into competition for local exchange carriers are hereby instituted. We direct all prospective parties who wish to remain on the service list for this rulemaking proceeding to send a letter no later than May 8, 1995 to the attention of the Commission's Docket Office with a copy to Administrative Law Judge (ALJ) Thomas R. Pulsifer, requesting to be included on this service list. On May 16, 1995, a ruling shall be served on all parties who were served with this order, establishing the service list for this rulemaking proceeding. The service list shall be limited to those parties requesting to be placed on the list, as directed above. 2. Parties are directed to file comments on the proposed interim rules herein with the Commission's Docket Office, and to concurrently serve a copy of their filed comments on the service list for this rulemaking proceeding as set forth in the ALJ ruling to be issued on May 16, 1995 as directed above. The comments shall be limited to no more than 50 pages, including attachments, and indicate in a clear and focused manner any additions, deletions, clarifications or modifications they believe are appropriate in the interim rules set forth herein. Filed comments are due no later than May 24, 1995. 3. Parties shall also clearly identify the scope of any issues to be addressed through this rulemaking docket which they believe need further input from parties prior to resolution. 4. Parties shall state whether they believe evidentiary hearings will be required to resolve any outstanding disputes over appropriate interim rules, or further written comments will be sufficient. - 10 - R.95-04-043, I.95-04-044 ALJ/TRP/sid * 5. Any party which believes that changes or additions to the interim rules are appropriate, but that no evidentiary hearings are required should clearly set forth in their comments any additional information they believe the Commission should consider before adopting rules. 6. Parties which believe evidentiary hearings are warranted are directed to present a proposed schedule for conducting discovery, preparing testimony, holding hearings, and filing briefs to resolve these disputed issues to allow sufficient lead time for a Commission decision before January 1, 1996. 7. The GO 133-B Review Committee is directed to develop additional standards applicable to interconnection service orders, and to report its draft GO 133-B revisions to the Telecommunications Chief of the Commission Advisory and Compliance Division by December 31, 1995. 8. The Executive Director shall have this order and appendices served by regular mail on all parties to Investigation (I.) 87-11-033 and Rulemaking (R.) 93-04-003 as well as on all cities and counties within California and all certificated telephone, electric and gas utilities within California. 9. Unless a party files a request with the Commission's Docket Office to be retained on the service list, they shall not be included on the newly-established service list for this proceeding. This order is effective today. Dated April 26, 1995, at San Francisco, California. DANIEL Wm. FESSLER President P. GREGORY CONLON JESSIE J. KNIGHT, JR. Commissioners I abstain. /s/ HENRY M. DUQUE Commissioner - 11 - R.95-04-043, I.95-04-044 ALJ/TRP/sid * (See Formal Files for Appendixes or see someone in the ALJ Steno Room for a WP5.1 diskette.) - 12 -