Expect 'Protracted Litigation' if Calif. Expands Service Quality Rules: Verizon

The CPUC is considering changing its 2016 enforcement framework under General Order 133-D, which includes a mechanism that lets carriers avoid fines by promising to invest twice the amount. Criticizing that method, staff proposed different thresholds for assessing service-quality violations, more stringent standards and automatic customer credits, among other changes (see 2406280032).

Industry commenters suggested the CPUC can expect a lawsuit if it signs off on the staff proposal. “Relying on competition … avoids the protracted litigation that would certainly ensue as existing case law solidly establishes federal preemption of the proposed rules,” wrote Verizon.

CTIA dispensed a litany of legal arguments as it sought to dissuade California commissioners from clearing the staff proposal. “The Staff Proposal is unlawful and totally contrary to the record in this proceeding that shows there is no legal, factual, or policy basis to adopt wireless service quality rules," argued the wireless industry group, attaching two testimonies from economic and engineering experts to support its case.

The proposal would violate federal law in many ways, CTIA said. First, requiring automatic customer credits is a form of rate regulation, which isn't allowed for commercial mobile radio service (CMRS) providers. "A credit or refund operates as a deduction from or set-off against the monthly price that the customer pays for wireless service,” it said. “By ordering CMRS providers to provide refunds or credits to customers who sustained covered network outages, the Commission would be directly regulating the rates of CMRS service, which states are expressly prohibited from doing under Section 332(c)(3)(A).”

Second, the proposal that would penalize companies for outages lasting longer than 24 hours "seeks to regulate the technical aspects of wireless providers’ usage of their radiofrequency spectrum and the design of their networks to ensure a quality of service that the Commission deems desirable,” said CTIA. "Such regulation, backed by stiff penalties, is preempted on multiple additional grounds: (a) it is expressly preempted by Section 332(c)(3)(A) of the Communications Act as unlawful entry and rate regulation; (b) it is subject to 'field preemption' because it impinges on the FCC’s exclusive authority over technical matters involving the use of radiofrequency licensed by the FCC; and (c) it is subject to 'conflict preemption' because it obstructs federal policy -- specifically, the FCC’s decision not to penalize CMRS providers for outages of the type covered by the Staff Proposal.”

Third, fining CMRS providers for covered outages and setting a customer service standard "each run afoul of Section 253(a) because they would subject CMRS providers to 'a massive increase in cost,'" which will be even higher if facilities-based companies are liable for reseller outages.

The proposal additionally runs afoul of the U.S. Constitution in various ways, CTIA noted. Penalizing CMRS providers for outages would violate the contract clause because the proposed penalties would "operate as a 'substantial impairment' of CMRS providers’ contractual relationships,” it said. Second, proposed customer service rules, such as requiring that live agents answer 100% of calls in five minutes and requiring chat support on companies' websites, violate the First Amendment because they implicate carriers' rights "to freely communicate with their customers in the manner they choose and to convey information of their choice,” CTIA said. Third, a proposal to double penalties for outages affecting certain vulnerable customers amounts to “disparate treatment” that “would violate the constitutional guarantee of 'equal protection of the laws' even under rational-basis review.”

The proposal is an abuse of discretion under California law because its ideas are unnecessary, added CTIA: It also violates state law by delegating substantive decision-making authority to agency staff.

‘Arbitrary and Unreasonable’

The Wireline, VoIP and cable industries joined in opposing the staff proposal. Staff asks the commission "to exceed its authority, and to adopt a series of unworkable requirements that would do nothing to better the communications experience of Californians,” commented USTelecom.

Regulating VoIP is unnecessary because the broadband industry is competitive, the wireline association said. Besides, the FCC “has consistently rejected attempts to regulate VoIP as a traditional telephone service and has preempted state commissions from regulating over-the-top VoIP as a public utility, including through entry regulation,” said USTelecom: The 8th U.S. Circuit Court of Appeals has said that federal law preempts regulating fixed interconnected VoIP services.

More rules and fines might not improve customer service because many outages are outside providers' control, noted USTelecom. Also, tightening enforcement on copper providers doesn't make sense when those companies are trying to upgrade their networks to fiber or are facing government-funded overbuilds, it said.

"Rather than encouraging good service, the Staff Proposal, particularly as it applies to cable VoIP, appears punitive and would unnecessarily and unjustifiably increase the cost of providing service in a competitive market,” said the California Broadband & Video Association, representing the state’s cable companies. But if the commission moves ahead, it should make changes, including to apply "reasonable exceptions for circumstances outside a provider's control" and to ensure the amount of proposed customer credits isn’t inappropriately detached from the price the customer pays for service, CalBroadband said.

The Voice-on-the-Net (VON) Coalition said the CPUC lacks authority to make a customer service standard for nomadic VoIP. Imposing standards "will violate federal law and undermine the careful light-touch framework that has governed VoIP regulation for more than 18 years." The CPUC could be "wander[ing] down [an] unsteady regulatory path that will likely result in litigation," said VON. Also, standards for nomadic VoIP are unnecessary and implementing them "solely for California customers is impractical.”

"Staff’s proposed outage rules," Verizon said, "are based on fundamentally flawed assumptions, and its customer service rule is patently arbitrary and unreasonable.” It added, “There are also numerous practical flaws with the proposed rules, which if adopted would require providers to divert limited resources and investment into meeting arbitrary regulatory mandates rather than market-based customer preferences.”

CPUC staff didn't show a need for voice service quality rules, said AT&T: Even if staff could show a need, federal law preempts California from applying it to VoIP or wireless. The proposed fines are excessive and may exceed the monthly cost of service, AT&T added. The CPUC can't "legally impose the proposed automatic customer credit on service providers because any amount more than a pro rata rate refund exceeds reparations and constitutes the award of damages.” Other industry opponents included Frontier Communications, Consolidated Communications, the National Lifeline Association and small local exchange carriers.

Essential Services?

The CPUC staff proposal drew support from advocates for consumers, workers, small businesses and rural county officials. "VoIP, wireless, and broadband technologies now serve as the dominant forms of communication used by Californians in both conventional and emergency situations,” commented the CPUC’s independent Public Advocates Office (PAO). “The Commission has an obligation to ensure a minimum level of service quality for VoIP and wireless services because these services are essential to public safety.”

While supporting the aims of the CPUC plan, PAO noted that staff’s proposal to merely extend wireline outage metrics to other types of voice service fails to recognize the difference between traditional and IP-based technologies. On VoIP and wireless, there could be “service degradation that does not result in an outage yet can be an obstacle to safe and reliable communication service.”

Staff developed "a comprehensive, thoughtful proposal ... that will serve customers well,” said joint comments by The Utility Reform Network, Center for Accessible Technology and Communications Workers of America. VoIP and wireless are now essential services, they said. "The proposed revisions to G.O. 133-D reflect these changing circumstances and provide a good framework for ensuring that essential telecommunications services are reliable.”

Proposed rules would especially help "historically disenfranchised communities located in rural, tribal, and disadvantaged areas,” said Rural County Representatives of California. "Automatic customer credits … are a positive way to address service disparity and promote accountability at the customer level,” said RCRC. “Given carriers’ assertions about the extreme competitiveness of the market, this may be one of the more impactful changes to incentivize performance and proactively ensure service quality." Small Business Utility Advocates also supported the staff plan.