[33 Pa.B. 6047]
[Continued from previous Web Page] Public Meeting
August 21, 2003Commissioners Present: Terrance J. Fitzpatrick, Chairperson; Robert K. Bloom, Vice Chairperson; Aaron Wilson, Jr.; Glen R. Thomas, Dissenting Statement follows; Kim Pizzingrilli, Dissenting Statement follows
Rulemaking Re Generic Competitive Safeguards Under 66 Pa.C.S. §§ 3005(b) and 3005(g)(2); L-00990141
Opinion and Order By the Commission:
Before us for consideration is the Petition of Verizon Pennsylvania Inc. and Verizon North Inc. for Clarification and Reconsideration (''Petition'') relative to our Final Rulemaking Order entered June 16, 2003, in the above-captioned proceeding.
History of the Proceeding On January 29, 2002, the Commission entered a Proposed Rulemaking Order that solicited comments from jurisdictional telecommunications utilities and other interested parties regarding proposed generic competitive safeguards mandated by Chapter 30 of the Public Utility Code and other applicable law. On June 16, 2003, after receiving comments from a number of parties and the Independent Regulatory Review Commission (''IRRC''), the Commission entered a Final Rulemaking Order in the proceeding.
The final regulations establish competitive safeguards in furtherance of Chapter 30's mandate to encourage and promote competition in the provision of telecommunications products and services throughout Pennsylvania. The competitive safeguards are intended to prevent discriminatory access to the services and facilities provided by incumbent local exchange carriers (''ILECs'') to competitive local exchange carriers (''CLECs''), to prevent ILECs from unlawfully cross subsidizing competitive services from noncompetitive services, and to prevent all local exchange carriers from engaging in unfair competition practices.
Discussion Legal Standard
Section 703 of the Public Utility Code (''Code''), 66 Pa.C.S. § 703, relating to rehearings and rescission and amendment of orders, establishes a party's right to seek relief following the entry of final decisions. Further, such requests for relief must be consistent with section 5.572 of our regulations, 52 Pa. Code § 5.572, relating to petitions for relief following a final decision. Consistent with section 703(g) of the Code, section 5.572 of our regulations, and judicial and administrative precedent, the standards for a petition for relief following a final decision were set forth in Duick v. PG&W, 56 Pa. P.U.C. 553 (December 17, 1985) (''Duick'').
Duick held that petitions for reconsideration under section 703(g) may properly raise any matter designed to convince us that we should exercise our discretion to amend or rescind a prior order, in whole or in part. Furthermore, such petitions are likely to succeed only when they raise ''new and novel arguments'' not previously heard or considerations which appear to have been overlooked or not addressed by us. (Duick, at 559.) The Commonwealth Court in AT&T v. Pa. PUC, 568 A.2d 1362 (Pa. Cmwlth. Ct. 1990), further elucidated the standards for rehearing, reconsideration, revision, or rescission.
Petition for Reconsideration
By their Petition filed July 2, 2003, Verizon Pennsylvania Inc. and Verizon North Inc. (collectively ''Verizon'') request that this Commission clarify or reconsider certain portions of its June 16, 2003 Order adopting final competitive safeguards regulations at 52 Pa. Code §§ 63.141--144 for the telecommunications industry (''Code of Conduct'').
In its Petition, Verizon raises concerns about three provisions contained in the final Code of Conduct that Verizon alleges are drafted for entities that are structurally separated, rather than for a company with a ''separate wholesale unit that deals only with CLECs,'' as is the case with Verizon's own operations. Verizon Petition at 3. The first provision that it contests is section 63.143(5)(i), relating to preventing an ILEC from gaining a competitive advantage by withholding ''market information'' from CLECs. Verizon contends that this provision, which applies to all ILECs, ''was written in terms of a company that had a separate 'competitive' affiliate.'' Id. Verizon, in its Petition, suggests that the Commission has simply adopted ''outdated wording from the original code'' and recommends its deletion from the new Code of Conduct. Id. at 4. Verizon also argues that the definition of ''market information'' is too broad and could include highly sensitive competitive market information or marketing plans. Id. at 5.
The second provision that Verizon raises a concern about is section 63.143(6)(i), arguing that the provision is ''outdated and confusing'' and contending that the provision fails to specify ''the allocation factors'' or define ''retail'' and ''wholesale'' as suggested by IRRC in its original comments. Id. at 8-9. Verizon offers in its Petition suggested language changes to correct the alleged deficiencies.
The last provision that Verizon cites in its Petition is section 63.143(4)(i), the cross-subsidization provision, arguing that the Commission failed to remove the last two sentences of this provision as Verizon suggested in its original comments. Verizon complains that these sentences do not add clarity to the cross-subsidization provision and expresses concerns that this additional language conflicts with current federal rules on affiliate pricing. Id. at 10-11.
Answers to Verizon's Petition were filed within the ten-day answer period provided by 52 Pa. Code § 5.572(e) by the Office of Consumer Advocate and the Pennsylvania Cable & Telecommunications Association opposing the Petition and by the Pennsylvania Telephone Association (''PTA'') and Sprint Communications Company, L. P./The United Telephone Company of Pennsylvania (collectively ''Sprint'') supporting the Petition. ATX Communications, Inc. (formerly Corecomm/ATX, Inc.) filed comments after the ten-day notice period in opposition to Verizon's Petition; these comments will be deemed timely filed and duly considered by this Commission.
Finally, by letter dated July 22, 2003, the House Consumer Affairs Committee (''House Committee'') provided comments to IRRC regarding the final-form regulation, raising three concerns similar to those in Verizon's present Petition. On that same day, in its own letter to IRRC, the Commission advised IRRC of its intent to withdraw the Final Rulemaking Order so as to consider the issues raised in Verizon's Petition.
Resolution
In regard to what is meant by ''market information'' in section 63.143(5)(i), Verizon, the PTA, Sprint, and the House Committee have convinced us that we should exercise our discretion to reconsider the Final Rulemaking Order entered June 16, 2003, at this docket in order to eliminate a potential ambiguity. We also agree with Verizon, the PTA, Sprint, and the House Committee that section 63.143(6)(i) added new language to the Code of Conduct that was confusing and ambiguous, and that we should exercise our discretion to reconsider this provision as well. Finally, after careful consideration of the arguments presented, we again agree with Verizon, the PTA, Sprint, and the House Committee that the last two sentences in section 63.143(4)(i) are not necessary, and that we should exercise our discretion to reconsider this provision by eliminating the unnecessary language.
Section 63.143(5)(i)--Information Sharing
Verizon, the PTA, Sprint, and the House Committee are concerned that the definition of ''market information'' is too broad and could include highly sensitive and proprietary marketing information. The final regulation does attempt to address this concern by defining ''market information'' as ''any information relating to the characteristics of the ILEC's network which would be useful to a LEC [local exchange carrier] in acquiring customers or providing service to customers.'' This language is consistent with the type of network information suggested in Verizon's proposed change in its Petition.
Upon further review, we agree with Verizon that there is potential for ambiguity in the present language of our Final Rulemaking Order, and we believe Verizon's proposed language removes the potential ambiguity. We, therefore, adopt Verizon's proposed changes to clarify our intent that only network-type information not in the public domain be included within its meaning.14 We also note that Verizon did not have an opportunity to address this provision in its filed comments because the provision was added in the final version after receiving comments from IRRC which noted the absence of this competitive safeguard in the proposed-form regulation. IRRC Comments at 3.
Verizon's other contention is that section 63.143(5)(i) is written in terms of a company that has a separate competitive affiliate, which does not apply to Verizon's organizational structure. In approving the final-form regulation, the Commission added the phrase ''or other corporate subunit that performs that function'' as an all-encompassing catch-all so as to include ILECs, such as Verizon, that do not create separate divisions or affiliates to provide local exchange services. Without this language, the competitive safeguard would have a loophole that ILECs could use to avoid its application to them. It is the ILEC's responsibility to ensure compliance with this regulation even if it does not create a separate retail division or affiliate for its local exchange services. We, therefore, will keep this phrase in the final-form regulation.
Section 63.143(6)(i)--Sharing of Employees and Facilities
The language in section 63.143(6)(i) is intended to prevent an ILEC from using its wholesale employees and facilities to support its competitive local exchange services, a retail function. We have given careful consideration to the concerns raised by Verizon, the PTA, Sprint, and the House Committee regarding section 63.143(6)(i), and have concluded that the proposed changes offered by Verizon eliminate potentially confusing and ambiguous language contained in the Final Rulemaking Order.
The intent of this provision is to prevent an ILEC's wholesale employees from crossing over to its retail operations--to prevent inappropriate information sharing between the wholesale and retail operations. We agree with Verizon that the reference to an ILEC's ''competitive local exchange affiliate or division or other corporate subunit that performs that function'' could be construed to mean that an ILEC is required to create such an affiliate, division, or subunit. This problem can be avoided simply by referring to the ''retail portion of the ILEC's business,'' which is what we do in the revised final-form regulation attached hereto as Annex A.15
We also agree that the provision concerning transparent allocation of shared facilities is problematic. While a proper allocation of costs is clearly needed for the purpose of setting rates, this rulemaking is not the appropriate vehicle for addressing the issue. Further, as IRRC previously noted in its comments, this provision does not specifically identify allocation factors nor does it prescribe the criteria for determining ''appropriate factors.'' Accordingly, we adopt a modified version of Verizon's proposed language to address the concerns expressed herein.
Section 63.143(4)(i)--Definition of Cross Subsidization
Verizon argues that the last two sentences of this section provide an unworkable definition of cross subsidization, and that the language conflicts with current federal rules of affiliate pricing. Verizon also asserts that the House Committee correctly noted that the first sentence of this section clearly states the intended prohibition. The PTA and Sprint support Verizon on this issue as well.
Upon further review of this language, we agree with Verizon, the PTA, Sprint, and the House Committee. The purpose of this provision is to prevent cross subsidization between competitive and noncompetitive services. The first sentence of this provision states this explicitly and succinctly. There is no need for the additional language which attempted to further clarify the first sentence, but, in effect, has caused further debate. Accordingly, we will modify section 63.143(4)(i) so that only the first sentence remains in the final-form regulation.
Based on our review of the instant Petition, we conclude that the Petition should be granted in part and denied in part, applying the criteria for a grant of reconsideration as set forth in Duick; Therefore,
It Is Ordered That:
1. The Petition of Verizon Pennsylvania Inc. and Verizon North Inc. for Clarification and Reconsideration relative to our Final Rulemaking Order entered June 16, 2003, at L-00990141 is hereby granted in part and denied in part for the reasons stated in this Order.
2. The regulations of the Commission, 52 Pa. Code Chapter 63, are amended by adding. §§ 63.141--63.144 adopted at this docket by order entered June 16, 2003, to read as set forth in this order and Annex A.
3. The Secretary shall certify this order, the final rulemaking order entered June 16, 2003, at this docket, and Annex A and deposit them with the Legislative Reference Bureau for publication in the Pennsylvania Bulletin.
4. The Secretary shall submit this order, the final rulemaking order entered June 16, 2003, at this docket, and Annex A to the Office of Attorney General for approval as to legality.
5. The Secretary shall submit this order, the final rulemaking order entered June 16, 2003, at this docket, and Annex A to the Governor's Budget Office for review of fiscal impact.
6. The Secretary shall submit this order, the final rulemaking order entered June 16, 2003, at this docket, and Annex A for review by the designated standing committees of both houses of the General Assembly, and for review and approval by IRRC.
7. A copy of this order and Annex A shall be served upon the PTA, the Pennsylvania Cable & Telecommunications Association, all jurisdictional telecommunications utilities, the Office of Trial Staff, the Office of Consumer Advocate and the Office of Small Business Advocate.
8. The final-form rulemaking embodied in Annex A shall become effective upon publication in the Pennsylvania Bulletin.
JAMES J. MCNULTY,
Secretary(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 33 Pa.B. 5579 (November 8, 2003).)
Fiscal Note: Fiscal Note 57-224 remains valid for the final adoption of the subject regulations.
Dissenting Statement of Commissioner Glen R. Thomas This matter involves a Petition of Verizon Pennsylvania Inc. (Verizon PA) and Verizon North Inc. (Verizon North) (collectively, Verizon) for Clarification and Reconsideration relative to our Final Rulemaking Order entered June 16, 2003 (Order). In its Petition, Verizon requests this Commission to clarify or reconsider three sections of our Order. Those sections are: 1) Section 63.143(5)(i) Information Sharing and disclosure; 2) Section 63.143(6)(i) Sharing of Employees and Facilities; and 3) Section 63.143(4)(i) Cross subsidization.
I agree with Staff's recommendation. It is not in the best interest of the Commonwealth, the competitive marketplace or this Commission to grant Verizon's Petition for Clarification and Reconsideration in its entirety since doing so would not be good policy or good precedent. Consequently, I must disagree with the majority on adopting Verizon's revisions for Section of 63.143(6)(i), with some modification, and Section 63.143(4)(i).
Section 63.143(6)(i) Sharing of Employees and Facilities
The proposed Final Rulemaking language is:
ILEC employees or agents who are responsible for the processing of a CLEC order or service of the operating support system on behalf of a CLEC, may not be shared with the competitive local exchange affiliate or division or other corporate subunit that performs that function, and shall have offices physically separated. The competitive local exchange affiliate or division or other corporate subunit that performs that function shall have its own direct line of management, and any shared facilities shall be fully and transparently allocated between the ILEC and its competitive local exchange affiliate or division or corporate subunit that performs that function.Verizon contends that this is new language added by the Commission and finds it confusing and ambiguous. The majority agrees and adopts a modified version of Verizon's proposal:
The ILEC's wholesale employees who are responsible for the processing of a CLEC order or service of the operating support system on behalf of a CLEC may not be shared with the retail portion of the ILEC's business, shall have offices physically separated16from the ILEC's retail employees and shall have their own direct line of management.The majority agrees with Verizon that the reference to an ILEC's ''competitive local exchange affiliate or division or other corporate subunit that performs that function'' could be construed to mean that Verizon is required to create such an affiliate, division or subunit.
I disagree. In changing the language to the version proposed by the majority the Commission is being inconsistent on how the wholesale and retail portions are represented. In other portions of the regulations, the wholesale and retail portions are referred to as ''the ILEC and/or the ILEC's competitive local exchange affiliate or division or other corporate subunit that performs functions on behalf of a CLEC.'' Moreover, Verizon PA's proposal only addresses sharing of wholesale employees who are responsible for the processing of CLEC orders or service of the operating support system on behalf of a CLEC and does not address the concept of sharing between competitive and noncompetitive enterprises within the company. Finally, the majority in adopting the revisions omits the term ''agents'' which was previously included in the language. It is important to include language that makes the Code of Conduct applicable to all possible scenarios including those individuals who may be hired by the company but are not employees. For these reasons, I must disagree with the majority on this revision.
Section 63.143(4)(i) Cross Subsidization
The majority agrees with Verizon in the deletion of the last two sentences of Section 63.143(4)(i) Cross subsidization. I disagree with the majority's decision.
Section 63.143(4)(i) as proposed in the final rulemaking provides:
An ILEC may not use revenues earned or expenses incurred in conjunction with noncompetitive services to subsidize or support any competitive services. An ILEC may not provide any assets, goods or services to its competitive local exchange affiliate, or division or other corporate subunit performing that performs that function at a price below the ILEC's cost, market price or tariffed rate for the goods or services, whichever, is higher. An ILEC may not purchase any assets, goods or services from its competitive affiliate or division or other corporate subunit that performs that function at a price above the market price or tariffed rate for the goods or services.In Duick v. PG&W, 56 Pa. PUC 553 (1985), the Commission held that petitions for reconsideration under section 703(g) may properly raise any matter designed to convince us that we should exercise our discretion to amend or rescind a prior order, in whole or in part. Furthermore, such petitions are likely to succeed only when they raise ''new and novel arguments'' not previously heard or considerations which appear to have been overlooked or not addressed by us. Id. at 559.
Verizon's Petition simply does not meet this standard. Verizon PA has argued for the deletion of the last two sentences with proposed replacement language17 during the informal comment portion of this rulemaking18 as well as the formal comment portion at the proposed rulemaking stage. The Commission received comments to the proposed rulemaking from Verizon PA, Inc. and Verizon North, the Pennsylvania Telephone Association (PTA) as well as comments from the Chairman and a Member of the Consumer Affairs Committee. The PTA stated that the second sentence should be deleted on the basis that it lacks relevance, was overly broad and there is no justification for its inclusion in the rulemaking. (PTA Comments, p.12) Verizon and the House Committee Comments regarding the second sentence state:
The second sentence speaks in terms of a ''competitive local exchange affiliate, division or other corporate subunit,'' an necessarily confusing concept that stems from prior structural separation discussion, but that makes no sense under the functional separation adopted by the Commission. The real prohibition that the Commission intends to impose is what is clearly stated in the first sentence, that ''an ILEC may not use revenues earned or expenses incurred in conjunction with noncompetitive services to subsidize or support any competitive service.'' The second paragraph does not address any activity that would prevent such cross subsidization. Rather, it seems to address affiliated interest issues, but it is inconsistent with the requirements of the Public Utility Code regarding affiliated interests. Section 66 Pa.C.S. § 2102(c) already addresses the limits on prices and services provided among affiliated ILEC companies. It would be highly confusing, if not impossible, to comply with two sets of affiliated interest requirements, and there is no reason to impose different requirements here. All but the first sentence of proposed section 63.144(4)(i) therefore should be eliminated.Verizon PA and Verizon North May 20, 2002 Comments, pp. 16-17 and House Committee June 24, 2002 Letter.
The Commission has previously considered and rejected the requested edit. In our June 16, 2003 Order we stated that after consideration of the issue the better approach was to adopt the language as originally proposed as it provided a clearer, more easily-applied measure for determining whether an illegal cross subsidization has occurred rather than the alternative language proposed by Verizon. In addition, we stated that the real value to the regulation is the additional language as it gives meaning to the cross subsidization standard incorporated into the first sentence by providing a clear standard by which claims of cross subsidization can be evaluated. This Commission voted unanimously to include this provision. Consequently, Verizon has failed to raise any new and novel arguments not previously heard or to prove that the Commission overlooked or failed to address its considerations. Rather, after consideration of the arguments, the Commission disagreed with the proposed edit. It would be bad precedent to grant the petition for reconsideration when the requesting party has failed to satisfy the standard for reconsideration.
Beyond the disturbing procedural precedent set by the motion, prohibition of cross subsidization is a very important concept in providing for a viable competitive market. The legislature itself recognized the potential impact and significance of cross subsidization and enacted Chapter 30 with a provision prohibiting cross subsidization. 66 Pa.C.S.A. §§ 3005(g)(2). Section 3005(g)(2) states:
A local exchange telecommunications company may not use revenues earned or expenses incurred in conjunction with noncompetitive services to subsidize or support any competitive services. The commission shall establish regulations which must be followed by local exchange telecommunications companies for the purposes of allocating costs for accounting and rate making among telephone services in order to prevent subsidization or support for competitive services66 Pa.C.S.A. § 3005(g)(2).
When comparing the language in our Final Rulemaking Order and in the statute, it is clear that the last two sentences in Section 63.143(4)(i) should not be deleted. The first sentence in the section is the exact language from Section 3005(g)(2) of Chapter 30, 66 Pa.C.S.A. § 3005(g)(2) and establishes that a local exchange telecommunications company may not cross subsidize. The last two sentences explain in more detail what cross subsidization means and what activity is prohibited, in accordance with the legislative directive in section 3005(g)(2) which states that ''The commission shall establish regulations'' applicable to LECs for the purpose of ''allocating costs for accounting and ratemaking purposes to prevent cross subsidization or support for competitive services.'' 66 Pa.C.S.A. § 3005(g)(2). As we noted on page 21 of our Final Rulemaking Order:
To only adopt the first sentence [of subsection 63.143(4)] would add nothing to the prohibition contained in the statute as the exact same language already appears in section 3005(g)(2) . . . . The real value to the regulation is in fact the additional language as it gives meaning to the cross-subsidization standard incorporated into the first sentence of Paragraph (4) by providing a clear standard by which claims of cross subsidization can be evaluated.Rulemaking Re: Generic Competitive Safeguards Under 66 Pa.C.S.A. §§ 3005(b) and 3005(g)(2), Final Order, June 16, 2003, p.21.
This Commission has long recognized the need to ensure a level playing field in the competitive marketplace. In our Global Order,19 the Commission noted that some parties to the proceeding provide both retail services directly to local service customers and wholesale services to other telecommunications carriers competing for those same local service customers. Consequently, the Commission recognized the need for a ''Code of Conduct'' (Code). Both of the two Petitions filed by parties to the proceeding proposed a version setting forth rules to ensure fair and nondiscriminatory treatment of telecommunications carriers when they seek to purchase wholesale services from an ILEC in order to provide retail services to end-users in competition with the ILEC as part of the issue of functional/structural separation. Global Order, p. 215. In 1999, as part of its Global Order, the Commission established a Code of Conduct which included a provision that addressed the sale or the purchase of good or services, by the incumbent local exchange company to its competitive local exchange affiliate or division as well as cross subsidy. Id., Appendix C, paragraph 2. Specifically, Paragraph 2 states:
No incumbent local exchange company shall provide any goods or services to its competitive local exchange affiliate or division below cost or market price, nor shall the company purchase goods or services from the competitive affiliate or division at a price above market, and not transaction between the two entities shall involve an anti-competitive cross-subsidy.Id., Appendix C, Para. 2. Accordingly, Verizon PA has been obligated to comply with the Code of Conduct since 1999.
In the Global Order the Commission directed commencement of a proceeding to develop a record for the Commission to implement structural separation. On April 27, 2000 we issued our Order Instituting Structural Separation Proceeding. The proceeding was assigned to the Office of Administrative Law Judge. On January 26, 2001, the Administrative Law Judge issued a Recommended Decision in which he recommended, inter alia, that Verizon be directed to commence a one year transition period to create a separate retail affiliate for retail services within thirty days of the entry of the Commission's Order.
On April 11, 2001 the Commission adopted an order in which it considered an effective and less costly means of structural separation because ''full'' structural separation would require implementation costs which could be substantial and that the parties convincingly argued that even with the implementation of structural separation of Verizon's wholesale and retail arms, no less regulatory oversight than that currently prevailing would be required to ensure compliance. RE: Structural Separation of Bell Atlantic-Pennsylvania, Inc.20 Retail and Wholesale Operations, April 11, 2001 at pp.22-23. (Functional Structural Separation Order). In that Order the Commission offered Verizon the option of accepting the following proposed resolution:
''In lieu of the further litigation that would likely follow from choosing a single structural separation model, we shall present Verizon with the following options: a) accept the terms of a functional/structural separation and further conditions set forth herein, or b) accept the possibility of full structural separation of all retail and wholesale operations upon our further review and consideration of the record in this matter. Acceptance of these terms and conditions will both terminate Verizon's numerous state and federal court challenges to the Global Order and, provided that all terms and conditions set forth herein are executed in good faith, (emphasis added) should create the conditions necessary to all local telephone competition to flourish.''Id., p. 31
One of those conditions was the resumption of a competitive safeguards rulemaking to formulate a comprehensive Code of Conduct. In the Functional Structural Separation Order we agreed to enter the record from the structural separation proceeding into the Code of Conduct rulemaking to ensure consistency, to take official notice of the structural separation proceeding in the context of the Code of Conduct rulemaking and to reopen the Code of Conduct rulemaking. Id. at p. 34-35. We also noted that ''until completion of the final rulemaking in the Competitive Safeguards Proceeding, we expect Verizon to fully comply with the interim Code of Conduct set forth in the Global Order.'' Id. at p. 35.
The Functional Structural Separation Order stated that Verizon PA was to notify the Commission on or before April 20, 2001 whether it would accept and be bound by the structural separation terms and conditions contained in the Order. Id. at p. 42. On April 20, 2001 Verizon PA notified the Commission that ''it accepts the terms and conditions contained in the April 11 Order, based upon our understanding of that Order as written, and consistent with the requirements imposed by state and federal law.'' Verizon's April 20, 2001 Letter, Re: Strucutral Separation of Verizon Pennsylvania Inc.'s Retail and Wholesale Operations, Docket No. M-00001353.
One of the conditions which Verizon PA accepted in the Global Order Code of Conduct was language addressing cross subsidization as well as the sale and the purchase of goods or services between the incumbent local exchange carrier and affiliate or division. See, Global Order, Appendix C, Para. 2. Having accepted the conditions, Verizon PA should be required to abide by the agreement they made in Functional Structural Separation Order in lieu of full structural separation. In addition, the concept and the supporting rationale set forth above are as appropriate today as it was several years ago. Moreover, the need for clear rules to prevent cross subsidization does not evaporate if the company chooses to maintain competitive and noncompetitive enterprises within a single corporate unit.
For the reasons stated above, I respectfully dissent from the motion of the majority.
Statement of Commissioner Kim Pizzingrilli Currently before the Commission is a Petition of Verizon Pennsylvania Inc. and Verizon North Inc. (Verizon) for Clarification and Reconsideration of our June 16, 2003 Order approving a final-form regulation to establish competitive safeguards in furtherance of Chapter 30's mandate to encourage and promote competition in the telecommunications industry in Pennsylvania. In its Petition, Verizon requests that the Commission reconsider the language of three sections of the regulations: § 63.143(5)(i), § 63.143(6)(i), and § 63.143(4)(i). Staff recommends accepting Verizon's position regarding § 63.143(5)(i) but rejects Verizon's position regarding § 63.143(6)(i) and § 63.143(4)(i).
In the final-form regulations adopted on June 16, 2003, the Commission made substantial revisions to address comments and concerns raised regarding the proposed rulemaking. Both § 63.143(5)(i) and § 63.143(6)(i) included new language in the final-form regulation and they are appropriately addressed in Verizon's petition. The third section, § 63.143(4)(i) includes similar language as originally included in the proposed rulemaking. Verizon is raising the same arguments with respect to this section as it did earlier in the process. The Commission set forth its standard for reconsidering orders in Duick v. Pennsylvania Gas and Water Co., 56 Pa. P.U.C. 553, 559 (1982). Accordingly, discretion to reconsider final orders should be granted when ''new and novel arguments, not previously heard, or considerations [are raised] which appear to have been overlooked or not addressed by the Commission.'' Id.
I agree with the staff recommendation and Verizon's petition that Section 63.143(5)(i) should be clarified. I disagree with the staff recommendation regarding Section 63.143(6)(i) regarding sharing of employees and agree with Verizon that amendments to this section are appropriate. I would adopt a modified version of Verizon's proposed language as follows:
''The ILEC's wholesale employees who are responsible for the processing of a CLEC order or service of the operating support system on behalf of a CLEC may not be shared with the retail portion of the ILEC's business, shall have offices physically separated from the ILEC's retail employees and shall have their own direct line of management.''Section 63.143(4)(i) sets forth provisions relating to cross subsidization. This language as adopted in our June 16, 2003 Order is substantially the same language as adopted in our proposed rulemaking order. Verizon's Petition for Reconsideration raises no new or novel argument regarding this section which convince me that revisions are necessary. Therefore, I cannot support revising this section at this time in accordance with Verizon's Petition for Reconsideration.
Annex A
TITLE 52. PUBLIC UTILITIES
PART I. PUBLIC UTILITY COMMISSION
Subpart C. FIXED SERVICE UTILITIES
CHAPTER 63. TELEPHONE SERVICE
Subchapter K. COMPETITIVE SAFEGUARDS Sec.
63.141. Statement of purpose and policy. 63.142. Definitions. 63.143. Code of conduct. 63.144. Remedies. § 63.141. Statement of purpose and policy.
(a) This subchapter establishes competitive safeguards to:
(1) Assure the provision of adequate and nondiscriminatory access by ILECs to CLECs for all services and facilities ILECs are obligated to provide CLECs under any applicable Federal or State law.
(2) Prevent the unlawful cross subsidization or support for competitive services from noncompetitive services by ILECs.
(3) Prevent LECs from engaging in unfair competition.
(b) These competitive safeguards are intended to promote the Commonwealth's policy of establishing and maintaining an effective and vibrant competitive market for all telecommunications services.
(c) The code of conduct in § 63.143 (relating to code of conduct) supersedes and replaces the code of conduct adopted by Commission order entered September 30, 1999, at P-00991648, et al.
§ 63.142. Definitions.
The following words and terms, when used in this subchapter, have the following meanings, unless the context clearly indicates otherwise:
CLEC--Competitive local exchange carrier--
(i) A telecommunications company that has been certificated or given provisional authority by the Commission as a CLEC under the Commission's procedures implementing the Telecommunications Act of 1996, the act of February 8, 1996 (Pub. L. No. 104-104, 110 Stat. 56), or under the relevant provisions in 66 Pa.C.S. § 3009(a) (relating to additional powers and duties), and its successors and assigns.
(ii) The term includes any of the CLEC's affiliates, subsidiaries, divisions or other corporate subunits that provide local exchange service.
Competitive service--A service or business activity offered by an ILEC or CLEC that has been classified as competitive by the Commission under the relevant provisions of 66 Pa.C.S. § 3005 (relating to competitive services).
ILEC--Incumbent local exchange carrier--
(i) A telecommunications company deemed to be an ILEC under section 101(h) of the Telecommunications Act of 1996 (47 U.S.C.A. § 251(h)), and its successors and assigns.
(ii) The term includes any of the ILEC's affiliates, subsidiaries, divisions or other corporate subunits that provide local exchange service.
LEC--Local exchange carrier--A local telephone company that provides telecommunications service within a specified service area. LECs encompass both ILECs and CLECs.
Market price--Prices set at market-determined rates.
Noncompetitive service--Any protected telephone service as defined in 66 Pa.C.S. § 3002 (relating to definitions), or a service that has been determined by the Commission as not a competitive service.
Telecommunications service--A utility service, involving the transmission of messages, which is subject to the Commission's jurisdiction.
§ 63.143. Code of conduct.
All LECs, unless otherwise noted, shall comply with the following requirements:
(1) Nondiscrimination.
(i) An ILEC may not give itself, including any local exchange affiliate or division or other corporate subunit that performs that function, or any CLEC any preference or advantage over any other CLEC in the preordering, ordering, provisioning, or repair and maintenance of any goods, services, network elements (as defined under section 3(29) of the Communications Act of 1934 (47 U.S.C.A. § 153(29)), or facilities.
(ii) An ILEC may not condition the sale, lease or use of any noncompetitive service on the purchase, lease or use of any other goods or services offered by the ILEC or on a written or oral agreement not to deal with any CLEC. In addition, a LEC may not condition the sale, lease or use of any noncompetitive service on a written or oral agreement not to deal with any other LEC. Nothing in this paragraph prohibits an ILEC from bundling noncompetitive services with other noncompetitive services or with competitive services so long as the ILEC continues to offer any noncompetitive service contained in the bundle on an individual basis.
(iii) An ILEC shall offer to CLECs for resale any bundled competitive and noncompetitive services it provides to end-users at the same price it offers the bundled services to end-users less any applicable wholesale discount approved by the Commission, and shall make the unbundled network elements associated with those services available to CLECs as may be required by any applicable State or Federal law.
(2) Employee conduct.
(i) A LEC employee, while engaged in the installation of equipment or the rendering of services to any end-user on behalf of a competitor, may not disparage the service of the competitor or promote any service of the LEC to the end-user.
(ii) A LEC employee, while processing an order for the repair or restoration of service or engaged in the actual repair or restoration of service on behalf of a competitor, may not either directly or indirectly represent to any end-user that the repair or restoration of service would have occurred sooner if the end-user had obtained service from the LEC.
(3) Corporate advertising and marketing.
(i) A LEC may not engage in false or deceptive advertising with respect to the offering of any telecommunications service in this Commonwealth.
(ii) A LEC may not state or imply that the services provided by the LEC are inherently superior when purchased from the LEC unless the statement can be factually substantiated.
(iii) A LEC may not state or imply that the services rendered by a competitor may not be reliably rendered or are otherwise of a substandard nature unless the statement can be factually substantiated.
(iv) An ILEC may not state or imply that the continuation of any requested service from the ILEC is contingent upon taking other services offered by the ILEC that are not technically necessary to provide the requested service.
(4) Cross subsidization.
(i) An ILEC may not use revenues earned or expenses incurred in conjunction with noncompetitive services to subsidize or support any competitive services.
(5) Information sharing and disclosure.
(i) An ILEC shall simultaneously make available to CLECs network information not in the public domain that is used for sales purposes by the ILEC or the ILEC's competitive local exchange affiliate or division or other corporate subunit that performs that function.
(A) The term ''network information'' means information concerning the availability of unbundled network elements or information necessary for interconnection to the ILEC's network.
(B) Network information does not include information obtained during the processing of an order or service on behalf of the ILEC or the ILEC's competitive local exchange affiliate or division or other corporate subunit that performs that function.
(ii) An ILEC's employees, including its wholesale employees, shall use CLEC proprietary information (that is not otherwise available to the ILEC) received in the preordering, ordering, provisioning, billing, maintenance or repairing of any telecommunications services provided to the CLEC solely for the purpose of providing the services to the CLEC. ILEC employees may not disclose the CLEC proprietary information to other employees engaged in the marketing or sales of retail telecommunications services unless the CLEC provides prior written consent to the disclosure. This provision does not restrict the use of aggregated CLEC data in a manner that does not disclose proprietary information of any particular CLEC.
(iii) Subject to customer privacy or confidentiality constraints, a LEC employee may not disclose, directly or indirectly, any customer proprietary information to the LEC's affiliated or nonaffiliated entities unless authorized by the customer under § 63.135 (relating to customer information).
(6) Sharing of employees and facilities. The ILEC's wholesale employees who are responsible for the processing of a CLEC order or service of the operating support system on behalf of a CLEC may not be shared with the retail portion of the ILEC's business, shall have offices physically separated from the ILEC's retail employees and shall have their own direct line of management.
(7) Adoption and dissemination. Every LEC shall formally adopt and implement the applicable code of conduct provisions as company policy or modify its existing company policy as needed to be consistent with the applicable code of conduct provisions. Every LEC shall also disseminate the applicable code of conduct provisions to its employees and take appropriate steps to train and instruct its employees in their content and application.
§ 63.144. Remedies.
(a) A violation of this subchapter allegedly harming a party may be adjudicated using the Commission's Interim Guidelines for Abbreviated Dispute Resolution Process, at Doc. Nos. P-00991648 and P-00991649, which were published at 30 Pa.B. 3808 (July 28, 2000), or any successor Commission alternative dispute resolution process, to resolve the dispute. This action, however, does not preclude or limit additional available remedies or civil action, including the filing of a complaint concerning the dispute or alleged violations with the Commission under 66 Pa.C.S. § 701 (relating to complaints) and § 5.21(a) (relating to formal complaints generally).
(b) The Commission may also, when appropriate, impose penalties under 66 Pa.C.S. § 3301 (relating to civil penalties for violations) or refer violations of the code of conduct provisions in this subchapter to the Pennsylvania Office of Attorney General, the Federal Communications Commission or the United States Department of Justice.
[Pa.B. Doc. No. 03-2357. Filed for public inspection December 12, 2003, 9:00 a.m.] _______
14 In adopting the language proposed by Verizon, however, we have deleted the use of the word ''any'' in several places as unnecessary and consistent with the Legislative Reference Bureau's practice of routinely eliminating the word ''any'' in proposed and final regulations.
15 We further agree with Verizon's understanding of the term ''physically separated'' in the context of this rulemaking. Physical separation under this regulation should mean that there must be some form of physical separation restricting the employees' ability to have contact with each other, but that so long as there is sufficient physical separation (e.g., sound proof wall), the language would not preclude employees from being in the same building or same floor.
16 The majority also agrees with Verizon's understanding of the term ''physically separated'' in the context of this rulemaking. Physical separation under this regulation should mean that there must be some form of physical separation restricting the employees' ability to have contact with each other, but that so long as there is sufficient physical separation (e.g. sound proof wall) the language would not preclude employees from being in the same building or same floor.
17 In its response, Verizon PA suggested deleting the last two sentences of the cross subsidization section and offered the following replacement language: ''An ILEC shall comply with all applicable state and federal rules governing the pricing of services and asset transfers provided between ILECs and their affiliates.''
18 In September 2001, the Commission distributed a copy of the draft Code of Conduct for interested parties' informal review and comment.
19 Joint Petition of Nextlink Pennsylvania, Inc., et al,), P-00991648, P-00991649, September 30, 1999 (Global Order) affirmed Bell-Atlantic-Pennsylvania, Inc. v. Pa. PUC, 763 A.2d 440 (Pa. Cmwlth. 2000).
20 On August 1, 2000, Bell Atlantic-Pennsylvania, Inc.'s corporate name was changed to Verizon Pennsylvania Inc.
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