BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Investigation on the Commission's Own Motion into the Operations, Practices, and Conduct of Pacific Bell Wireless LLC dba Cingular Wireless, U-3060, U-4135 and U-4314, and related entities (collectively "Cingular") to determine whether Cingular has violated the laws, rules and regulations of this State in its sale of Cellular Telephone Equipment and Services and its Collection of an Early Termination Fee and other Penalties from Consumers. Investigation 02-06-003(Filed June 6, 2002)

OPENING BRIEF OF UTILITY CONSUMERS' ACTION NETWORK (UCAN)

Michael Shames

Lee Biddle

UTILITY CONSUMERS' ACTION NETWORK

3100 Fifth Ave. Suite BSan Diego, CA 92103619-696-6966

May 23, 2003

I. Introduction -Summary of Argument

At its heart, this case is about Cingular customers who have been systematically subjected to shabby and irresponsible treatment by a wireless company that has demonstrated little regard for its California customers or state consumer laws. Customers like Brian Whelan and Danique Fraser are representative of Cingular's disregard.
Danique Fraser had Cingular's service for since approximately 1995, when it was known as Pacific Bell Wireless. She was satisfied with the service and, in August 2001, agreed to extend her contract for a year to get a new phone and take advantage of Cingular's "unlimited nights and weekends" promotion. In short order, her service quality deteriorated. She first called Cingular in October 2001 complaining that "system busy" problems kept her from calling during her free night hours. She was promised network improvements in three months. However, in March 2002, she called Cingular three more times since she repeatedly could not get calls through or receive voice mails. Cingular would offer her a few credits but would not agree to let her cancel her contract. Cingular warned her about termination fees when she threatened to cancel. The service quality was so inadequate that she opted to initiate service with another carrier (Verizon) and continued to pay off her Cingular service until her contract ran out. In essence, she paid for two monthly service plans even though she primarily used the Verizon service for her wireless needs.
Mr. Brian Whelan experienced a similar cellular hell. He'd had Cingular service since 2000. When he moved to a new home, he noticed his service quality had deteriorated. When he raised this concern with Cingular, the Cingular customer service representative explained that the problem was related to the phones he used and convinced him to upgrade his two phones. In so upgrading, Mr. Whalen also had to renewed his two contracts with Cingular for another year. The new phones did not help; coverage was still sporadic. Fed up, he called Cingular twelve days later and sought to terminate his contract. Only then was he told that Cingular "doesn't guarantee coverage in a home" and the contract would not be canceled. In order to cancel, he would be subjected to $1100 in termination penalties. He choose to stay with Cingular and pay for the phones even though he stopped using them. [1]
Mr. Whelan's and Ms. Fraser's experience were not unique to California telephone customers. UCAN has uncovered company documents and employee statements that reveal the depth of the problems that began to plague Cingular's customers in 2000 and, in some cases, continue through the present time, both before and after changes to Cingular's return policy.
Cingular's malfeasant activities are described below and attested to by 22 individual Cingular customers sponsored by UCAN who were willing to subject themselves to depositions and interruption of their lives so that the Commission could ensure that other customers would not be subjected to similar trials by Cingular Wireless. [2]
As UCAN will explain below, Cingular's efforts to issue an IPO during the 2001-2002 time period drove the company to boost sales and market share by offering its services in an irresponsible manner. It exaggerated its coverage, hid network deficiencies, concealed extra charges and used inappropriate tactics to preserve its customer base so that it could exaggerate its marketing successes. Like so many other now failed and/or disgraced corporations, Cingular's quest to achieve higher revenue and the IPO grail led it to commit actions that were imprudent and deceptive.
Based the evidentiary record, the Commission must find that Cingular's representations about its services and its treatment of California consumers were systematic and irresponsible. Moreover, Cingular chose to ignore the inadequacies in its network capacity and continued to promote sales without advising its customers of the network limitations. Finally, Cingular set up a sales structure that relied on underinformed agents who made misrepresentations to prospective customers and then denied any responsibility for the misactions of those agents. As will be explained below, Cingular must be sanctioned by this Commission for the specific malfeasant acts:
· Violation of Public Utilities Code Sections 451 and the standards of Civil Code 1770 and Business and Professions Code Sections 17200 and 17500 for the failure to offer customers a reasonable period in which to determine whether coverage and quality was adequate to meet the needs of the customer. Prior to May 2002, Cingular had a official no-return policy that was unreasonable. After May 2002, Cingular initiated a 14-day policy that is unreasonable in light of Cingular's network deficiencies and misleading sales representations.
· · Violation of Public Utilities Code Sections 451 and 702 and the standards of Civil Code 1770 by countenancing the unconscionable contracts imposed by agents that charged excessive liquidated damages to Cingular customers.
· · Violation of Public Utilities Code Section 451 and the standards of Civil Code 1770, and Business and Professional Code Sections17200 and 17500 by advertising $150 termination penalties and when it was aware that agents were adding additional termination penalties of up to $400 per phone purchased.
· · Violation of Public Utilities Code Sections 451 and 702 and the standards established in Business and Professions Code 17200 and the Consumer Legal Remedies Act (Civil Code 1770) by coercing customers to retain a service that was functionally unusable. Cingular used a combination of its own termination penalties along even higher penalties imposed agents to force customers to retain a service that the customers felt was inferior that that promised by Cingular and its agents.
· · Violation of Public Utilities Code Sections 451 and the standards of Civil Code 1770, and Business and Professions Code Sections 17200 and 17500 by placing signal enhancement devices at sales outlets to artificially boost the coverage at sales locations.
· · Violation of Public Utilities Code Sections 451 and 2896 and the standards of Business and Professions Code 17200 by continuing to actively seek new customers through aggressive and expensive marketing even in the face of internal knowledge of capacity restrictions and of mounting customer complaints about Cingular service.
· · Violation of Public Utilities Code Sections 451, 702 and 2896 when it failed to provide accurate information about Cingular's coverage limitations to customers and even to its own sales representatives.
· · Violation of Public Utilities Code Sections 451 and 2896 and the standards of Civil Code 1770 by inducing existing customers to get purchase new phones (and sign new contracts) by falsely blaming network shortcomings on the customer's phone rather than admitting to its own coverage inadequacies.
· · Violation of Public Utilities Code Sections 451 by not adequately responding to customer complaints relating to coverage problems. This includes failing to accommodate customers whose coverage worsened due to changes Cingular made in its network.
· · Violation of Public Utilities Code Sections 451 and 702 by intentionally failing to track complaint data by customers about sales misrepresentations;
· · Violation of Public Utilities Code Sections 451 and 702 by intentionally failing to monitor representations and advertisements made by sales agents of Cingular.
· · Violation of Public Utilities Code Sections 451 and 2896 and the standards of Civil Code 1770 and Business and Professions Code 17200 by providing misleading and inaccurate information to customers about the planned network improvement projects, including promising improvements in areas where local officials prohibited new antenna.
As a result of these actions, untold thousands - and perhaps hundred of thousands -- of Cingular's customers were systematically misled into purchasing wireless service that was not adequately usable by those customers and then forced to continue to pay for this inadequate service thus, denying customers the ability to switch to a Cingular competitor.
Not only did Cingular's customers in California suffer, but the fair and open marketplace for wireless communications was harmed as well. Competitors who actually built systems that would provide needed coverage lost customer to Cingular, who simply claimed to have adequate coverage. Customer who should have been able to cancel Cingular and sign on to another provider were held hostage by poorly disclosed and unfair termination penalties. Customers were promised one level of service, yet forced to pay for a lesser service.

II. II. Argument

A. Legal Standards

1. 1. Jurisdictional Issues

There are two jurisdictional issues raised in this case. The obvious issue is the extent of the Commission's jurisdiction over Cingular in matters relating to customer service, which has already been addressed by the Commission in response to Cingular's motion to dismiss. A second jurisdictional issue has not yet been addressed is this Commission jurisdiction over Cingular's agents, or better put, this Commission's jurisdiction over Cingular regarding the actions of Cingular's agents.

a. a. Jurisdiction over Cingular

In UCAN's view, this matter was already well settled in this Commission's denial of Cingular's motion to dismiss. UCAN will not reargue but will simply incorporate by reference its opposition to Cingular's motion to dismiss and the Commission's ruling dated October 28, 2002. As made clear through the arguments and decision regarding Cingular's motion to dismiss, states have the ability to regulate the terms and conditions of wireless service. The FCC's position on state jurisdiction is unambiguous:

In short, we reject arguments by CMRS carriers that non-disclosure and consumer fraud claims are in fact disguised attacks on the reasonableness of the rate charged for the service. [Citation omitted] A carrier may charge whatever price it wishes and provide the level of service it wishes, as long as it does not misrepresent either the price or the quality of service. Conversely, a carrier that is charging a "reasonable rate" for its services may still be subject to damages for a non-disclosure or false advertising claim under applicable state law if it misrepresents what those rates are or how they will apply, or if it fails to inform consumers of other material terms, conditions or limitations of the service it is providing. We thus do not agree with those commenters who allege that, for consumer protection claims, any damage award or damage calculation, including any refund or rebate, is necessarily a ruling on the reasonableness of the price or the functional equivalent of a retroactive rate (emphasis added); In Wireless Consumers Alliance (2000) 15 FCC Rcd 17022 P 2, at 29, cited in Interim Opinion Denying Motion to Dismiss, D. 02-10-061 at 11)

As will be explained below, this OII relates strictly to misrepresentations made by Cingular and its agents to its customers. UCAN does not endeavor to compel Cingular to modify its prices nor its coverage. The complaint focuses upon the need for Cingular to clearly and honestly represent the terms and conditions for its services and to exercise control over those who sell its services to the public. Cingular may provide whatever level of network quality it deems adequate, but it must be honest with its customers about that service quality and must adhere to the state's consumer protection laws in regards to how it informs its customers of its service quality.

b. b. Jurisdiction over Cingular's agents

UCAN offers the language in FCC's In re Wireless Consumer Alliance ruling (cited above) to provide context for the second issue that has not yet been fully addressed by the Commission. The second issue relates to jurisdiction is the issue of Cingular's responsibility for the actions of its agents in the course of those agents sale of Cingular service. As will be discussed extensively below, Cingular sold a relatively small number of its phones directly. Instead, it relied on a vast network of agents to sell Cingular phone service. Cingular required many agent stores to "look and feel" like company owned stores. (HT 1195:7-9) Cingular also called these agent outlets "Cingular Stores" in its ads, right along side similarly identified company owned stores. [3] Cingular's expert concedes this is potentially confusing. (HT 1113:17-18) In reality it was literally impossible for customers to distinguish between company-owned stores or stores owned by independent agents of Cingular. [4]
This confusion lapses into actionable transgressions because of documented patterns of misrepresentations by these agents relating to termination fees and coverage, and misleading advertisements placed by these agents. [5] Cingular then denied any ability to assist customer in resolving complaints against these agent owned "Cingular Stores". Specifically, a customer was subject to up to $400 in additional termination penalties when purchasing a phone at a "Cingular store" owned by Cingular's agents, and Cingular claimed to have no ability to waive these fees. (HT 692: 28)
It is important to note that UCAN does not maintain that Cingular's agents are subject to this Commission's direct jurisdiction. UCAN relies upon compelling Commission precedent and statutes to hold Cingular responsible for the malfeasance of its agents as it relates to activities over which this Commission has jurisdiction.
The Commission has jurisdiction over misleading advertisements, sales practices and unconscionable contracts of agents for at least three reasons. First the state legislature established express Commission authority over aspects of cellular agent activities. Business & Professions Code Section 17026.1 specifically bestows the Commission with the authority to limit the ability of agents to discount cellular service. The legislature stated, "the Public Utilities Commission may adopt rules and regulations to fully implement and enforce the provisions of this section. (17026.1 (e)) and "Nothing in this section shall be interpreted to reduce, alter, or otherwise modify the authority of the California Public Utilities Commission to regulate, in any manner, or prohibit, the payment of commissions or rebates to distributors or vendors of cellular telephones" (17026.1 (f)). This shows that the agents of cellphone companies have not been deigned by the legislature to be completely outside the purview of the Commission's oversight.
Second and, perhaps more importantly, is this Commission's clear precedent on the matter of cellular carriers and their agents. In D. 95-04-028, the Commission held "PU Code 702 requires cellular utilities to secure the compliance of their agents with Commission rules and orders." [6]
The Commission reaffirmed this long-held doctrine that duties under the Public Utilities Code are not delegable. It reaffirmed this doctrine most recently in the investigation of Vista International Group. [7] This case involved a complaint about "slamming", in which Vista claimed it could not be held accountable for the acts of agents hired to sell its service:
In the regulation of public utilities, entities that are licensed by the Commission to do business within the State of California have regulatory responsibilities and obligations to the public that cannot be avoided by third-party contracts. Section 702 requires all public utilities to "obey and comply with every order, decision, direction, or rule made or prescribed by the commission" and to "do everything necessary or proper to secure compliance therewith by all of its officers, agents, and employees." The California Supreme Court has held that Section 702 imposes a non-delegable duty and does not relieve a utility from liability for a contractor's failure to comply with a Commission regulation. (See Snyder v. Southern California Edison Co. (1955) 44 Cal.2d 793, 801-802; Eli v. Murphy (1952) 39 Cal.2d 598, 600; see also Gamboa v. Conti Trucking (1993) 19 Cal.App.4th 663, 666; Klein v. Leatherman (1969) 270 Cal.App.2d 792, 796; Lehman v. Robertson Truck-A-Way (1953) 122 Cal.App.2d 82, 86-87.) Other California courts have held that statutory duties are presumed to be non-delegable. (See, e.g., California Assn. of Health Facilities v. Department of Health Services (1997) 16 Cal.4th 284, 294; Bonner v. Work. Comp. App. Bd. (1990) 225 Cal.App.3d 1023, 1035.)

Based on this authority, the Commission rightfully cannot absolve Cingular of responsibilities for misactions of their agents To do so would be to render consumer protections in the Public Utilities Code meaningless for most Cingular customers.
Finally, Cingular is responsible for the acts of its agents under basic law of agency. This includes acts of fraud as well as acts that may be in violation of any contract Cingular had with its agents. Civil Code Section 2338 reads:
Unless required by or under the authority of law to employ that particular agent, a principal is responsible to third persons for the negligence of his agent in the transaction of the business of the agency, including wrongful acts committed by such agent in and as a part of the transaction of such business, and for his willful omission to fulfill the obligations of the principal. (see also Eamoe v. Big Bear Land & Water Co. (1980) 98 Cal.App.2d 370, 374; Hartong v. Partake, Inc. (1968) 266 Cal.App.2d 942, 960-61; Filippi v. McMartin (1961) 188 Cal.App.2d 135, 138-39.)

In other words, when the agent appears to be acting in the ordinary course of his or her duties, the principal is liable for the fraudulent acts.
In its defense, Cingular may claim that the agent is some sort of an independent business, and not a general agent of Cingular, and thus Cingular is not responsible for the agent's actions. First, this would fly in the face of the terms of the contract Cingular entered into with its agents, which declare that the agent/principal relationship exists and a fiduciary duty arises between the parties for the purpose of selling Cingular equipment and service. [8] Second, this would contradict California law. According to the Civil Code Section 2300, "An agency is ostensible when the principal intentionally, or by want of ordinary care, causes a third person to believe another to be his agent who is not really employed by him."
Here, there is ample reason to believe that a reasonable person would believe that Cingular's agents (in the literal sense) were Cingular's agents (in the legal sense). While these and other facts will be detailed further below, the following facts are germane:
1. Cingular required most agents to sell only Cingular equipment;
2. 2. Cingular set guidelines requiring agent stores to "look and feel" like company stores
3. 3. Cingular provided training to agents employees and
4. 4. Cingular created ads that did not distinguish between agent owned and Cingular owned outlets. [9]
Finally, there is the issue of equity. Arguendo, even if Cingular were unaware of the malfeasance of its agents, the law requires that it should still be held liable for these actions:
"As between two innocent persons, one of whom must suffer, the loss should fall on the principal who has armed the agent with apparent authority and thus enabled him to obtain the advantage of the person with whom he trades, rather than on the purchaser, where the agent acts within the apparent scope of his authority and there is nothing in the transaction to put the purchaser on notice that the agent is exceeding his authority." Naftzger v. American Numismatic Society, (1996) 42 Cal. App. 4th 421, 430.See also Witkin, Agency § 126.

The Commission touched all of these issues in rejecting Vista International's argument that it cannot be responsible for conduct of its agents that exceeded the contract Vista had with its agents. Vista's argument mirrors that proffered by Cingular, i.e. that it is not responsible for the fraudulent acts of its marketers because such acts fall outside the scope of the telemarketers' assigned duties is similarly without merit. The Commission held that:
By virtue of its status as a public utility subject to Commission regulation, Vista incurred regulatory responsibilities and obligations that cannot be avoided by attempting to delegate its duties to third parties. In addition, Vista is responsible for the actions of its telemarketers because Vista affirmatively put these telemarketers in a position that enabled them, while apparently acting within the authority entrusted to them by Vista, to commit fraud and misrepresentation upon third parties. Thus, Vista ‘s claims of legal error are without merit. (D. 01-09-017 at *11)

In summary, this Commission has all the power necessary to first hold Cingular responsible for the harm done by its agents and second to force Cingular to alter the relationship with its agents on a forward going basis. This includes holding Cingular responsible for the harm done by the secondary contracts agents forced customers to sign.

2. 2. Burden of Proof

The Commission standard on burden of proof is clear and need not be argued at length. UCAN and CPSD have the burden of proving that the defendant has failed to comply with relevant provisions of the Public Utilities Code, including § 2889.5 and § 2890. (See CTS, D.97-05-089, 72 CPUC2d 621, 642, Conclusion of Law 1.) These violations must prove this by a preponderance of the evidence. (72 CPUC 2d at 642, Conclusion of Law 2.). This standard was re-affirmed by the Commission earlier this year. (In Re Qwest, rehearing, Decision 03-01-087 at *14)
Upon making this showing, the burden shifts to Cingular to answer the evidence presented by the complainants. For example, in UCAN v. Pacific Bell, the Commission reviewed evidence presented by complainants, then found that "Pacific Bell has not demonstrated that its marketing practices dispel the potential for customer confusion caused by the package name "The Basics." In that case, the Commission imposed a significant fine of Pacific for this practice shown to be misleading (D. 01-09-058 at *68).
In this OII, Cingular has mounted little, if any, affirmative defense. It has offered no alternative statistics to rebut the complaint numbers advanced by UCAN and CPSD. It has offered no internal reports or independently developed surveys to show that the acts alleged in this OII did not occur. It has not presented any customer witnesses. It does not deny that its network was strained. Nor does it deny that it had an official "no return" policy and that its agents added additional penalties. Its case largely relies upon attempting to discredit the factual assertions made by UCAN and CPSD. UCAN submits that UCAN/CPSD made a showing consistent with its burden of proof and Cingular has not tendered a credible rebuttal.

3. 3. Legal Theories from OII

The OII lists the following actions by Cingular that would tend to mislead or deceive customers and therefore violate Commission rules or state statute. It includes:
(a) Respondents violated P.U. Code § 451 by failing to provide adequate, efficient, just, and reasonable service as necessary to promote the safety and convenience of its customers and the public;
(b) Respondents violated P.U. Code § 451 by rules pertaining to its charges and service to the public, which rules are unjust and unreasonable, defeating the reasonable expectations of the consumer;
(c) Respondents violated P.U. Code § 451 by failing to comply with standards (described in previous Commission decisions and in P.U. Code Section 2896 inter alia) that require all relevant, available, and accurate information be provided to customers so that they can make an intelligent choice between similar services where such a choice exists;
(d) Respondents violated P.U. Code §§ 451 and 702 and Ordering Paragraph 5 of D.95-04-028 by marketing and selling bundled packages of services and goods in a way that was illegal, and therefore unjust and unreasonable, under the consumer protection laws of the State of California, including but not limited to the Song-Beverly Consumer Warranty Act (CC § § 1792-1792.4), the Consumer Legal Remedies Act (CC § 1770), and Sections 2314-2316 of the California Commercial Code;
(e) Respondents violated P.U. Code §§ 451 and 702 and Ordering Paragraph 5 of D.95-04-028 by structuring their marketing and consumer contracts for bundled cellular service in ways that violate fundamental rules of honesty and fair dealing, prevent true competition in the consumer marketplace, and thus violate the standards developed under Section 17200 et seq. and 17500 et seq. of the California Business & Professions Code and Section 5 of the Federal Trade Commission Act, 15 U.S.C. § 45(a).
(f) Respondents violated P.U. Code § 2896 by failing to provide its customers with sufficient information upon which to make informed choices among wireless telecommunications services and providers, including but not limited to information regarding the provider's service options, pricing, and terms and conditions of service, and also by failing to provide reasonable statewide service quality standards.

The evidentiary record supports findings of the violations alleged by CPSD and raised in the OII. In addition to these violations identified preliminarily by the Commission, UCAN alleges that these additional violations have occurred:
· Bait and switch advertising tactics that resulted in customers not being informed of additional early termination penalties charged by agents;
· Misleading customers into retaining service by falsely indicating that network upgrades were imminent;
· Enhancing reception at company-owned or agent-owned locations so as to mislead customers that in-building reception was ubiquitously available;
· Providing customers with "maps" that could mislead a reasonable customer into thinking they represented the coverage that the customer could reasonably expect to receive;
· Failure to provide more specific coverage maps, so as to protect against oral misrepresentations made by Cingular sales personnel about the scope of coverage;
· The failure to offer customers a reasonable period in which to determine whether coverage and quality was adequate to meet the needs of the customer;
· Permitting, and taking advantage of, unconscionable contracts created by and imposed by agents upon Cingular customers.

a. a. Section 451 - just and reasonable

In its motion to dismiss, Cingular made much of the fact that Public Utilities Code Section 451 is directed at rates, and hence cannot be applied to Cingular without impinging on federal jurisdiction. But Cingular ignores the fact that Section 451 applies to much more than rates. On several occasions, this Commission has applied Section 451 to remedy a utility's failure to provide sufficient accurate information to the public, or to remedy misleading practices.
Specifically, Section 451 requires that utilities provide just and reasonable service to the public. As this Commission said just last year in summarizing the law:

Every public utility shall furnish and maintain such adequate, efficient, just, and reasonable service, instrumentalities, equipment, and facilities including telephone facilities, as defined in Section 54.1 of the Civil Code, as are necessary to promote the safety, health, comfort, and convenience of its patrons, employees, and the public. All rules made by a public utility affecting or pertaining to its charges or service to the public shall be just and reasonable. Higginbotham v. Pacific Bell, D. 02-08-069, *8-9.

In the Higginbotham decision, the Commission expressly found that Pacific Bell's practice of providing customers a "less accurate and less convenient means" of obtaining certain pricing information violates § 451. (Id at *11).
Higginbotham is just the most recent of a long line of recent precedent that has affirmed a utility's obligation pursuant to Section 451 to "owe[] its customers a responsibility to provide all available and accurate information as those customers may require to make an intelligent choice between similar services where such a choice exists." (e.g. In re Pacific Bell D. 8605-072, 21 CPUC2d 182 (1986) and National Communications Center Corp. v. PT&T Co., D. 91784, 3 CPUC2d 672 (1980).
Another recent, and perhaps most analogous, finding to this effect is found in UCAN v. Pacific Bell, D. 01-09-058. In this 2001 decision, the Commission ruled that:
"Marketing tactics that are misleading or potentially misleading are clearly not reasonable under section 451" (at *19) "Section 451 imposes an affirmative duty upon Pacific to ensure that services are provided in a manner that promotes the convenience of its customers. Furthermore, any marketing practice that is potentially misleading violates the ‘reasonable service' requirement of section 451" (at *21). Charges obtained by means of misleading or confusing sales likewise are unjust and unreasonable and therefore unlawful under § 451 (*20).

Precedent under Section 451 shows that the Commission can use Section 451 to adjudicate claims of unfair and deceptive sales practices. Most recently, the Commission based its determination in the UCAN v. Pacific Bell case on previous Commission precedent requiring fair marketing and disclosure to customers. Also, the Commission relies upon Section 451 to find that telephone companies are held to a high standard of disclosure. In First Financial Network v. Pacific Bell the Commission articulated this standard:
In the complex field of communications, no layman can be expected to understand the innumerable offerings under defendant's filed tariffs. When defendant sends out one of its communications consultants to a customer's place of business for the explicit purpose of discussion telephone service, the consultant should point out all the alternative communications systems available to meet the customer's needs. This is [a] duty owed by defendant to its customers. (D. 98-06-014, p. 14; quoting H.V. Welker Inc. v. P.T&T. Co, 69 CPUC 579, 582)

First Financial is applicable to the instant case because it reaffirms a high expectation of honesty and accuracy by telephone company representatives, especially smaller customers who are less well versed in the complex field of telecommunications. (Id, p. 25)

b. b. Sections 451/2896 - full disclosure

Section 2896(a) obligates utilities to provide:

Sufficient information upon which to make informed choices among telecommunications services and providers. This includes, but is not limited to, information regarding the provider's identity, service options, pricing, and terms and conditions of service. A provider need only provide information to its customers on the services which it offers.

The Commission has repeatedly rejected attacks on its authority to enforce Section 2896. [10] After an extensive discussion of the legislative history of Section 2896, This Commission concluded:
Thus, in order to protect consumers, the Legislature codified a minimum regulatory standard requiring telecommunications corporations to provide consumers with the information necessary to make informed choices among services and service providers. This minimum standard reflects traditional regulatory concerns for consumer protection and also emerging concerns about fair competition.

This case is certainly about both the "traditional regulatory concern for consumer protection", and the "emerging concerns about fair competition". Evidence presented shows that Cingular concealed information about key terms and conditions of its service, including termination fees and limitations on the service. Cingular induced customers to enter the store based on promises of "unlimited service" and $150 termination fees. Instead service was limited and termination fee were up to $550.

c. c. 451/D.95-04-028 - other consumer protection laws

In discussing "other" laws, there is the issue of the extent to which the Public Utilities Commission can apply standards of law outside the Public Utilities Code when adjudicated claims. UCAN submits that the Commission has and should apply the standards of other consumer protection statutes to companies within its jurisdiction.
As the Commission stated in rejecting Cingular's motion to dismiss "We need not reach Cingular's arguments that we lack jurisdiction to enforce these (non-PUC) statutes because, at a minimum, we may look to cases decided under them for guidance on the kinds of activities that have constituted consumer protection violations. Cingular provides no authority to the contrary. The parties' post-hearing briefs are the proper place to argue the correct use of these statutes in assessing evidence and fashioning appropriate relief, if any." (Decision 02-10-061 at 16)
In fact, courts have actually encouraged the Commission to look beyond the Public Utilities Code for guidance. In the past this Commission has had decisions reversed for failing to adequately address outside standards such as anti-trust law when rendering decisions. Northern California Power Agency (NCPA) v. Public Utilities Com., (1971) 5 Cal 3d 370, 380 . [11]
Just this past year, a State Appeals Court re-affirmed the theory of the NCPA case and again cautioned that the PUC should consider areas of law outside of its jurisdiction in fulfilling its duties:
The PUC may, and indeed sometimes must, consider areas of law outside of its jurisdiction in fulfilling its duties. The NCPA court explained, "by considering antitrust issues, the Commission merely carries out its legislative mandate to determine whether the public convenience and necessity require a proposed development. (Greenlining Institute v. Public Utilities Com., (2002) 103 Cal. App. 4th 1324, 1333)

Most importantly, the Commission specifically put Cingular on notice that the Commission would look to the other consumer protection statues in determining the propriety of Cingular's sales practices. In D. 95-04-028, in which Cingular was a party (then under name Pacific Bell Wireless), this Commission permitted the practice of "bundling" phones with service contracts, despite the potential for unfair competition in such a practice. The Commission stated in that case that, "it is because of such potential abuses in this and other markets that consumer protection and antitrust laws have been established at the federal and state level. Participants in the cellular market must operate within the provisions of those laws." (59 CPUC 2d at 210).
In D. 95-04-028, this Commission repealed its prohibition against bundling of phones and service because, in part, it was confident existing consumer law provides sufficient standards by which carriers and agents sell phones and service. This investigation into Cingular stems from the bundling practices dealt with by the Commission in D. 95-04-028. The potential harms from carrier/agent bundling practices that were raised in that proceeding have been realized through the complaints about Cingular and its agents. As will be explained below, the practice by agents of tacking on additional termination penalties on the basis that was required to recover the cost of the phone sold to customers is a direct consequence of the bundling permitted by the Commission in D. 95-04-028. The Commission is now obligated to look to those same consumer laws it expected to protect consumers and determine which Cingular and its agents may have violated them in their efforts to recover the cost of phone hardware (CPE) sold to customers in bundled transactions.

i. Consumer Legal Remedies Act

This Commission has a clear mission to protect consumer interests. In determining what constitutes the Legislature's expectations for what constitutes a fair consumer transaction, there is no better place to look than the Consumer Legal Remedies Act (CLRA).
In 1979, the Legislature declared its intent "to preserve inviolate the rights of consumers and homeowners to remain free from unconscionable fraudulent and deceptive sales practices." (Stats. 1979, Chap. 819, §1.) Accordingly, Civil Code Section 1670.5 was enacted, authorizing courts to refuse enforcement of any unconscionable contract or clause. And Civil Code Section 1770 followed, which, which defines prohibited deceptive acts for purposes of the Consumers Legal Remedies Act, was amended to cover the insertion of "an unconscionable provision" in any consumer contract for the sale or lease of goods or services. [12]
UCAN raises this law for consideration by the Commission because it establishes the basic standards and guidelines of what is considered improper and illegal behavior in consumer transactions in this state. Specifically, Section 1770(a) establishes specific unfair or deceptive business acts. It lists, in part, a number of actions taken by a business engaged in the sale or lease of goods OR services that relate to the facts in this investigation in the following manners:

(3) Misrepresenting the affiliation, connection, or association with, or certification by, another.
(7) Representing that goods or services are of a particular standard, quality, or grade, or that goods are of a particular style or model, if they are of another.
(10) Advertising goods or services with intent not to supply reasonably expectable demand, unless the advertisement discloses a limitation of quantity.
(15) Representing that a part, replacement, or repair service is needed when it is not.
(16) Representing that the subject of a transaction has been supplied in accordance with a previous representation when it has not.
(18) Misrepresenting the authority of a salesperson, representative, or agent to negotiate the final terms of a transaction with a consumer.
(19) Inserting an unconscionable provision in the contract.

As will be discussed below, each of these consumer transgressions were committed by Cingular and its agents and thus constitute a violation of the state's standard of consumer protections articulated in Section 1770. While the Commission need not find Cingular in violation of Section 1770 per se, it can use the standards in this law in determining whether Cingular violated Section 451.

ii. ii. Song-Beverly

UCAN refers to the discussion presented by CPSD in its opening brief.

iii. iii. 17200/17500

Like Civil Code Section 1770, Business and Professions Code Sections 17200 and 17500 offer the Commission the guidelines by which the Commission can judge whether Cingular's actions were in violation of Public Utilities Code Sections 451 and 702.
The courts have held that what constitutes "unfair competition" or an unfair or fraudulent business practice" under any given set of circumstances is a question of fact, the essential test being whether the public is likely to be deceived. (People v. Toomey, (1984, 1st Dist) 157 Cal App 3d 1).
Specifically, Section 17200 has been interpreted broadly to bar all ongoing wrongful business activity, including misleading advertising, in whatever context it presents itself. (People v. Dollar Rent-A-Car Systems, Inc., supra, 211 Cal.App.3d at p. 129). It is important to reiterate that it is immaterial under the statutes whether a consumer has been actually misled by an advertiser's representations. It is enough that the language used is likely to deceive, mislead or confuse. (Id at p. 129-130). However, as will be discussed below, the evidentiary record contains specific, unrebutted examples of customers who were, in fact, misled. To wit:
"The courts have found that the statutes are meant to protect the public from a wide spectrum of improper conduct in advertising. They may be invoked where the advertising complained of is not actually false, but thought likely to mislead or deceive, or is in fact false. By their breadth, the statutes encompass not only those advertisements which have deceived or misled because they are untrue, but also those which may be accurate on some level, but will nonetheless tend to mislead or deceive... A perfectly true statement couched in such a manner that it is likely to mislead or deceive the consumer, such as by failure to disclose other relevant information, is actionable under these sections" (Day v. AT & T Corp., 63 Cal. App. 4th 325, 332-3)

The Unfair Competition Act (Business and Professions Code Section 17200 et seq.) provides the ability to enjoin activities by a company and to find strict liability. The injunctive relief can be used to prevent unlawful, unfair, or fraudulent business acts or practices, and restitution (that is, disgorgement) of money or property wrongfully obtained "by means of such unfair competition," are authorized (Business and Professions Code Section 17203)
The statute also imposes strict liability. It is not necessary to show that the defendant intended to injure anyone. Because the definition contained in Section 17200, is disjunctive, a "business act or practice" is prohibited if it is "unfair" or "unlawful" or "fraudulent." In other words, a practice is prohibited as "unfair" or "deceptive" even if not "unlawful" and vice versa. The "fraud" contemplated by the third prong of the statute, bears little resemblance to common law fraud or deception. The test is whether the public is likely to be deceived. This means that a violation, unlike common law fraud, can be shown even if no one was actually deceived, relied upon the fraudulent practice, or sustained any damage. (State Farm Fire & Casualty Co. v. Superior Court (1996, 2nd Dist) 45 Cal App 4th 1093, 53 Cal Rptr 2d 229)
Cingular, as a business operating in California, must operate under the rules of B&P Codes Sections 17200 and 17500. While this Commission may not choose to impose penalties under those statues, it can and should use the standards articulated in these rules to determine whether Cingular's treatment of its customers was "just and reasonable".
This Commission has relied upon Section 17200 as the basis for allegations of bait and switch advertising. In 1998, the Commission initiated an action against a trucking firm. (OII 98-03-012, Investigation of Mike Amos Galam, an individual doing business as Load, Lock N Roll, Respondent). In that OII, the Commission found that hiding key terms and conditions of service in ads, then spring them on customers at the last minute constitutes a "bait and switch" in violation of 17200. Specifically, the CPUC alleged that the company hid fuel surcharges and cash discounts from customers:

"Violated section 5139 of the Public Utilities Code, Item 36 of MAX 4 and California Business and Professions Code section 17200 through unfair "bait and switch" business practices, to wit: improper computation of the time and rates of moves, adding a five percent fuel surcharge and cash "discounts" not previously disclosed to its customers (Id at *14; italics added)

iv. iv. Early Termination Penalties Set by Cingular's Agents Are Violative of State Law that Limits Liquidated Damages

While Civil Code section 1770 prohibits unconscionable consumer contracts, the Commission must refer to Civil Code section 1671 to determine why termination penalties are illegal and thus unconscionable.
Under section 1671, any fixed or liquidated damage provision is presumptively void in any contract entered into "primarily for the party's personal, family, or household purposes" (sec. 1671(c)). Liquidated damage provision are only permitted in consumer contracts if:

[T]he parties to such a contract may agree therein upon an amount which shall be presumed to be the amount of damage sustained by a breach thereof, when, from the nature of the case, it would be impracticable or extremely difficult to fix the actual damage. (sec 1671(d)).

So Cingular and its agents can only impose a termination fee in a consumer contract if both the amount of damage is impracticable to ascertain AND that such an amount "must represent a reasonable endeavor by the parties to estimate a fair average compensation for any loss that may be sustained" Garrett v. Coast and Southern Sav. & L. Assn. (1973) 9 Cal. 3d 731, 739.
Here, it is certainly debatable whether the consumers "agreed" to anything, since there is never a negotiation over the amount of the termination penalty. It is presented on a take it or leave it basis by Cingular and its agents and is the same regardless of which phone or the calling plan is purchased. Regardless, Cingular and its agents would fail on the second prong of the test. Although discussed in detail below, the agent loses no commission from a consumer terminating early, since the agent is required to sell to a customer who will stay around through the commission vesting period in order to have earned its commission. It cannot lose what it has not earned. Agents do not earn a commission from Cingular simply for getting someone to sign on the dotted line. [13] At best the agent has lost some costs relating to the phone, which is a readily fixable cost, not "impracticable or extremely difficult to fix". [14]
As noted in Better Food Markets, Inc. v. American District Telegraph Co, (1953) 40 Cal. 2d 179, 185-186, "except on admitted facts this is generally a question to be resolved by the tried or fact . . . [t]he burden is on the party seeking to rely on a liquidated damage provision in a contract to plead and prove facts showing impracticability" (of fixing damages). As to Cingular agents' other costs - the courts have ruled that simple administrative overhead is not properly recouped under a liquidated damages provision. Beasly v. Wells Fargo Bank (1991) 235 Cal. App. 3d 1383, 1404.

B. Factual Discussion

UCAN's discussion of the facts underlying its legal analysis will be divided into two sections. First, UCAN will review Cingular's failure to properly manage and respond to the complaints received by customers. This will be illustrated through a discussion of complaints received by UCAN and other sources, and Cingular's own records (or lack thereof), which demonstrate its improper complaint resolution practices. Second, UCAN will review facts related to Cingular's advertising and marketing of its service. UCAN will only be discussing network related issues to the extent necessary to support the other the arguments on complaints and marketing UCAN defers to CPSD's discussion of detailed network issues and the joint UCAN/CPSD sponsored testimony of network expert Robert Zicker found in Exhibits 17 and 18.
UCAN alleges that Cingular engaged in four statutory violations pertinent to how it dealt with complaints from customers. First, it violated Public Utilities Code Sections 451 and 2896 by not adequately and accurately responding to customer complaints relating to coverage problems. Second, it violated Public Utilities Code Sections 451 and 702 by intentionally failing to track complaint data by customers about misrepresentations. Third, it violated Public Utilities Code Sections 451 and 2896 and the standards of Civil Code 1770 by providing misleading and inaccurate information to complaining customers about the planned network improvement projects.
Finally, it violated Public Utilities Code Sections 451 and 2896 and the standards of Civil Code 1770 by inducing existing customers to get purchase new phones (and sign new contracts) by falsely blaming network shortcomings on the customer's phone rather than admitting to its own coverage inadequacies.
In support of these findings, UCAN offers the following factual assertions:

· Cingular admits that it does not now and has not previously adequately tracked its network-related complaints. It cannot quantify the many network-related complaints it has received from California customers since January 2000;
· Over 145 Cingular customers complained directly to UCAN since January 2000 about Cingular service;
· Cingular had almost two and a half times at UCAN as many complaints as second place Sprint. UCAN has received nearly as many complaints about Cingular than its three main competitors combined;
· Well over 1000 Cingular customers lodged complaints with the Public Utilities Commission citing similar dissatisfaction;
· 22 customers filed declarations submitted by UCAN which detail systematic unresponsiveness by Cingular;
· Cingular's customer service representatives failed to accurately record the substance of the complaints lodged by these customers;
· Cingular misled customers into deferring cancellation of the service by misrepresenting planned upgrades of network antennae in the locations about which its customers complained;
· Cingular customer service and sales representatives misled customers into buying new phones (with renewed contract obligations) when customers complained about service quality.

Cingular's violations of law are supported by facts obtained from three UCAN sources: UCAN's complaint database, extensively discussing the opening and rebuttal testimony of Jodi Beebe (ex. 200 and 201), UCAN's 22 sworn customers declarations (attachments to ex. 200 and ex 202 attachments 58 to 65), and UCAN's Dead Zone project (see ex. 200, 201 and http://www.ucan.org/cellphonedeadzones/index.htm). These sources supplement and complement records at the Commission, presented by CPSD, complaints logged by the Attorney General and internet sources. Most importantly, these complaints demonstrated to be but the tip of the iceberg, based on the 144,000 "trouble tickets" on OII related issues created by Cingular and Cingular's failure to track many other complaints. [15] As discussed below, the record also shows that even this 144,000 figure is an underestimation of the number of dissatisfied customers. These facts undermine Cingular's denial that there is no problem, or and that these complaints are "manufactured" by UCAN/CPSD. [16] Most importantly, it is apparent that Cingular made no effort to formally compile or categorize complaints it received from its own customers. [17] Thus Cingular can do no more than try to attack UCAN/CPSD's customer witnesses, rather than present its own credible evidence supporting its case that large numbers customer were not treated unfairly and misled.

a. a. CPSD complaints

UCAN defers to CPSD's discussion of the complaints it logged. This discussion is set forth in CPSD's opening brief. However, UCAN does note how the substance of complaints logged with the CPUC are consistent with those received by UCAN, as described in section b below.

b. b. UCAN complaints

UCAN presented evidence from consumers harmed by Cingular's practices in three different formats: Customer declarations, complaint records from UCANs database and UCAN's Dead Zone website project.
UCAN has been contacted by at least 145 individuals regarding their Pacific Bell Wireless and Cingular Wireless service since January 2000. [18] Compared to other cellular providers currently offering service in the San Diego area, Cingular had almost two and a half times as many complaints as second place Sprint. UCAN has received as many complaints about Cingular than its three main competitors (Sprint, Verizon, AT&T) combined. [19] At least 75 of these complaints directly addressed OII-related issues.
These complainants identified a wide variety of improper practices. Since some people identified multiple problems, UCAN has recorded approximately 180 separate instances on seven OII related issues. Specific illustrations from among UCAN's declarants are provided for each issue. These are much more extensively detailed in the opening and reply testimony of UCAN witnesses Jodi Beebe and Michael Shames. In particular, the testimony of Mr. Shames details how Cingular's own records support and even amplify the mistreatment of UCAN's declarants. [20]

i. i. False promises of coverage at the time of sale

UCAN's complaint records include at least 20 instances where customers expressly asked the Cingular sales representative if a specific address or location would have coverage, yet there was no coverage at that location. [21]
For example, UCAN declarants Edward and Darrin Drucker were confused about the extent of coverage from San Diego to St. Louis. Their belief was based on a "coverage map" at the store that indicated they would get coverage on most of the route. [22] Cingular provided not facts to rebut the fact that the Druckers were misled at the point of sale about the degree of coverage they should expect.
Mike George was shown a coverage map that included his workplace and his wife's workplace and expected coverage there. Yet he testifies that he later discovered there was no coverage at those locations. [23] Cingular declined to address how this coverage misunderstanding arose.
Virginia Vogel described the problem in great detail in her deposition: "[I]n the store in Montclair that we visited there was a map on the wall which showed the coverage for Cingular, and it clearly showed, you know, an enormous portion of the greater San Francisco Bay Area as being in their coverage zone" However, "with Cingular, we drove down our hill. We drove all the way down Park Boulevard. We crossed Highway 13. We drove further down Park Boulevard. We crossed Highway 580. We drove nearly to Lake Merritt before we picked up any other coverage from Cingular. That was a huge area. I mean this is a couple of miles with no coverage." [24]

ii. ii. Busy signals and "SOS/Emergency only" call limitations

The overwhelming majority of UCAN complaints included problems related to busy signals and the inability to place outgoing calls. [25] These are not isolated, temporary issues of inability to complete calls. Customers went day after day unable to make calls at peak hours or from certain locations.
Vicky Millsap stated at her deposition: "Every time I try to call out it says, "emergency only" on my screen." [26] Pamela Anderson reiterated this complaint: "Around this time in October in 2001, I became unable to make calls or receive call throughout large stretches of San Diego. Specifically, whenever I was driving around Del Mar or Carmel Valley, I could never get my service to function properly. I would repeatedly get a busy signal and the calls would not process." [27] And this problem was echoed by Nichole Schuler: "As soon as the time period for unlimited nights and weekend began, my telephone would usually flash a screen that said ‘system busy' and I was unable to make any calls throughout the unlimited time periods. [28]

iii. iii. Voice mail problems and delays

Another common complaint customers noting that at times, calls to their number were not picked up by voice mail, that some calls terminated in a busy signal, causing friends and family to try their number repeatedly. Since voice mail notification was delay for hours, a customer never even knew they missed a call. [29] Customers also complained that paying for callers to leave a message due. These calls were charged as incoming call plus using additional minutes to access voice mail. The failure to receive notification of voice mail messages in a timely manner cost customers more phone minutes than if Cingular's service were able to provide a network connection directly. [30]

iv. iv. Dropped calls

The second most frequent complaint from Cingular customers was the number of calls that were suddenly dropped in the middle of a conversation. (Ex. 200 at 15). Cingular's own records show the frequency dropped call issues. UCAN declarant Larry Geraci billing records include the following statement written by a Cingular customer service representative;
The CSR notes that she:
"[W]as explaining coverage to this customer and he was complaining about our equip our services and coverage. Explained that when he has 1-2 bars of signal strength and insists on making call . . . of course he is taking a chance on the call dropping off . . . this is a chance he is taking. . . so we will NOT GIVE drop call credit" [31]

This excerpt contradicts Cingular's claims about Cingular providing credit for dropped calls. [32]

v. v. Termination penalty issues

UCAN identified at least 29 of its complainants being assed termination penalties by Cingular or its agents. [33] Even when Cingular itself was willing to waive its termination penalty (often after UCAN intervened for the customer), Cingular repeatedly claimed it had no way to waive or control penalties of its agents. It maintained this position at hearings. (e.g. HT: 692:28 to 693:1)
This had a notable detrimental impact on its customers. Ian Langmore's Cingular's records show that Mr. Langmore tried to cancel his Cingular phone October 20, 2000, just two days after starting service [34]- Cingular did agree to waive its termination penalty, but not the activation fees, monthly service fees, or additional charges. [35] However, the store where he bought the phone had its own separate $200 termination penalty. Since the store would not waive the penalty and Cingular refused to intervene, he decided to stay a Cingular customer, rather than pay well over $250 to cancel service he had for just two days. [36]
Brian Whelan called Cingular to complain just twelve days after signing a new contract. Cingular made no offer to waive his termination fee. It would not have mattered anyway. Since he also owed over $800 ($400 per phone) to the agent if he cancelled, Mr. Whelan was essentially stuck in the contract. [37] Like other declarants, Mr. Whelan remained a Cingular customer, because economically he could not afford to cancel. [38]
Joseph O'Donnell reiterated this penalty problem: " When I saw Cingular ads in the newspaper and on TV, I never saw anything about additional termination penalties charged by Cingular's agents. I figured there would be a termination penalty to pay to Cingular, and I was willing to pay it to get out of the contract. But this extra termination penalty was not disclosed anywhere." [39] Mr. O'Donnell cancelled after UCAN intervened and got Cingular to waive its termination fee (although Mr. O'Donnell was actually willing to pay it, rather than continue service). [40]

vi. vi. Phone/ equipment repair problems

In its reply testimony, Cingular attempted to blame customers' phones for many of the reception problems experienced by its customers. [41] This, unfortunately, was a common refrain from Cingular and its agents - the same parties that sold these phones to its customers. As a result customers went out and bought new phones, which required entering into new contracts. See a more detailed discussion in UCAN's testimony in Exhibit 200 at p. 18-20. It is important to note below that NONE of the customers were informed that the phones sold to them from Cingular would offer substandard reception. Moreover, Cingular offered no evidence on the record that the phones it sold to its customers would not provide adequate reception.
In her deposition, Toya Reece stated: "(Cingular customer service) asked me what kind of phone I had. And I said, well, I had this phone for two years, or more. And she said, well, that's the problem, you need to go and get another phone." [42] She added: "I am very angry because Cingular scammed me into entering into a new contract based upon the false promise that my service quality would improve drastically. If anything my service quality has deteriorated with the new Cingular telephone." [43]
Darrien Drucker offered a similar observation at his deposition: "[T]he reason I believe (my phone was the problem) is because two different sales clerks at these kiosks admitted that the phones they had been selling in 2001 were not very good quality and that they were upgrading. If you renewed your contract, they would upgrade to a new phone, and I thought that was pretty telling." [44] She smartly choose not to enter a new contract.

vii. vii. Unfulfilled promises of more towers and increased coverage

UCAN recorded at least 18 instances in which customers were promised that their service quality problems would be resolved in the near term once new towers were erected in those areas where the customer lacked coverage. However, in not one of those 18 instances did the customer report coverage improving. [45]
UCAN declarant Pamela Andersen states that when she called Cingular with a coverage complaint, she was told that coverage improvements would come soon and she should stay with the company. [46] Cingular's own customer records confirm Ms. Anderson's contacts with the company. They show she discussed network issues with customer service on December 21, 2001 and January 29, 2002. [47] Ms. Anderson remained on the Cingular network through May 2002 and reported no improvement. [48]
Ms. Anderson's experience was affirmed by Deborah Davis. Her main concern was that Cingular did not provide coverage at her homes and then made false promises that towers were going up and coverage would improve. Based on those promises she kept the phone, paid her Cingular bill and did not cancel early [49]. Customer records produced by Cingular confirm that she called Cingular and had a discussion about network coverage on September 15, 2000, and that she canceled in June 2002 because of network issues. [50]

viii. viii. Customers unable to differentiate between Company and Agent-owned stores

The record in this case is chock full of consumers who believed they were shopping at Cingular store, only to later find out that they were actually in a store owned by an agent over which Cingular claims to have no control. [See, e.g. declarations of Charles Yamamoto (ex 202 attch. 58), Sarah Arnold (ex. 202, attach. 61), Cheryl Walker (ex. 202, attch. 60), Joan Howey (ex. 202, attch. 59)]. This inability to differentiate is certainly reasonable, given the ads Cingular placed on behalf of its agents, and the appearance of these "Cingular Stores" owned by agents (as discussed in greater depth below) This factual issue becomes important because of Cingular's refusal to accept responsibility for the actions of these agents. [51]

ix. ix. Customer complaints are mirrored in UCAN's Dead Zone Project reports

UCAN created the Dead Zone project at its website in 2002 as an effort to collect information directly from cell phone users about problem areas in San Diego. This was a carrier-neutral project, designed to solicit information from all company subscribers. [52] In the data collected at UCAN's web site, Cingular is the clear leader in Dead Zones reported. As of March 10, 2003, Cingular had 636 dead zones reported vs. 373 for Verizon, a competing carrier with significantly more customers than Cingular. [53]
Cingular repudiates attack the dead zone reports as "unverified". (HT 703:2-6) The fact that UCAN could not deploy sophisticated equipment and drive around the state to determine the validity of each of the thousands of dead zones reported - as is done by Telephia, is largely irrelevant. UCAN's data is comparative - it shows that unverified reports about Cingular were almost double as many as the unverified reports about a much larger competitor. Moreover, despite CPSD's efforts to provide Telephia data in this proceeding, Cingular and Telephia repeatedly rejected efforts to include this proprietary data in the evidentiary record. Unfortunately, UCAN's information is as good as it gets at the present time. Thus, the Commission and consumers are left to rely upon unverified data.

c. c. Cingular provided complaining customers and the public with misleading information about pending coverage improvements

Cingular denies that it attempted to mislead customers when they provided customers with information about network improvement projects. [54] Yet, the record has far too many facts that counter Cingular's assertion. Both prospective and existing customers were deceived. Cingular's own documents support customer claims of misinformation.
On April 1, 2002, Cingular issued a series of press releases touting coverage improvements which customer should expect shortly. [55] Cingular followed this release with a letter to customers touting the same projects. [56] It also urged it employees to get out the word about the coverage improvements occurring "this year". [57] The information in this press release and the letter was misleading, if not actually false.
First, Cingular's own employees questioned the accuracy of the projects trumpeted by Cingular. For example, a Cingular employee reviewing claimed expansion plans for Central California said, "the information for Central California is misleading at best. They have taken our projected sites and listed them to customers as new coverage (which does not exist)." [58]
Cingular compounded the problem by giving false information to its own employees. It advised its employees that these investments were to take place in 2002. [59] Thus, employees - who presumably relayed this information to customers - were led to believe that the upgrades would occur in 2002. Thus, reinforcing the message in the press releases that the upgrades would occur "this year". But the upgrades were apparently not completed in 2002. An internal Cingular internal document shows three separate phases of significant reductions in the 2002 national capital budget. [60] There are numerous other references to budget cuts in Cingular documents, including discussions among the highest level of Cingular. [61] Documents filed by Cingular at the Securities and Exchange Commission show Cingular spent around $4 billion on its network in 2002, much less capital investment than the initially promised $6 billion. [62] Cingular's west region engineers were informed that "Over the past several months, we reduced our total 2002 capital allocation several times." [63] Cingular witness Kathleen Lee even admits that projects promised to customers have been stalled or delayed for reasons that include "Cingular's budget realities." [64] In light of these factors, the Commission must assume that the company did NOT spend the money promised, notwithstanding representations of Mr. Bennett and others.
It also seems that some of the specific improvements promised in the letter were simply impossible to make. In Jim Jacot's testimony, he identifies Berkeley and Beverly Hills as places with antenna moratorium. [65] He also identifies areas such as Marin County, San Francisco, Los Angeles and Thousand Oaks as areas where new towers are frequently delayed or effectively banned. [66] Yet Cingular's letters and press releases tout projects and improvements in these exact areas. [67]
Cingular made no effort to alert either customers or sales agents of the problems of moratoriums or other legislative action that makes it difficult for Cingular to improve their service. David Garver could not identify any efforts taken by Cingular to contact customers, even for the purpose of getting these customers to lobby legislators. [68] Mr. Garver, unlike Mr. Jacot, does not even see the moratorium as a real problem in Cingular's efforts to expand service. [69] Mr. Garver was not aware of any specific moratorium that went into place. [70]
Perhaps most importantly, Michelle Rodriguez, the only Cingular witness in this proceeding that regularly interacts with customers, was not even aware that Berkeley or Beverly Hills had building moratorium, even though she is on the "front line" providing information about planned coverage improvements directly to customers (HT: 717:3-16). Nor was she aware of the problems regarding the Fairfax, California project about which Mr. Jacot complains. Ms. Rodriguez admits that the notices she receives about upgrade delays are "not that specific" (HT 716:16). Nor could she identify how she received information about delays in projects, other than "its filtered down through the ranks, you know, through the meetings." (HT: 716:27-28). Yet those meetings are not detailed enough to give her and other customer service reps general information like moratorium, let along information about specific projects requested by customers. Simply put, customer service reps are not armed with the information needed to accurately inform customers about pending projects.
While the letters of April 1st, 2002 are the clearest example of Cingular giving overly ambitious information about improvements to customers, it is far from the only example. UCAN presented customer after customer who was told to expect coverage improvements in time periods such as "three months". For example, declarant Kelly Kauffman received very specific information about coverage improvements from Cingular representatives in the office of the President. Those improvements did not occur. [71] Customer witnesses Fraser, Davis, Anderson, Craig, Langmore and Vogel tell the same story, and Cingular's own customer records this up. [72] Cingular could not help but mislead these customers because of the dearth of information about upgrade delays given to their employees.

d. d. Cingular's Failure to Track Complaints And Respond to Them

In response to UCAN and CPSD's evidence regarding customer complaints, Cingular generally attempts to discredit them as isolated or "manufactured" by UCAN/CPSD. [73] Given the huge volume of complaints all on OII-related issues, this argument strains credulity. It is also undermined by Cingular's own network performance numbers which suggest widespread network deficiencies. (See generally Testimony of Robert Zicker at Exhibits 17 and 18)
However, most telling is Cingular's inability to provide any alternative number of complaints for this Commission to accept as accurate. This derives from Cingular failure to note and track complaints. The discussion below details how Cingular failed to make any plausible changes to its sales literature or marketing plans in light of a clear explosion in customer complaints. As a result of Cingular failing to collect complaints and adequately provide them to employees, key decisions effecting customers are made in a relative vacuum without the benefit of critical feedback mechanisms.
This practice of not collecting, tracking or publishing complaint data is a very important deficiency that contributed to many of the abuses described below. By foregoing this important feedback mechanism, the company was provided with a certain amount of plausible deniability. It could claim ignorance about the many customers who relied upon misleading coverage maps. It could feign surprise to learn about misleading sales abuses by its sales force. It could be blissfully unaware of the customer concerns about network deficiencies. And its marketing department was free to whip up a marketing frenzy unencumbered by internal data showing that its marketing activities was fueling customer confusion and dissatisfaction. In fact, most all of the complaints discussed below would likely have been mitigated had Cingular developed a system by which it could accurately record and disseminate "expressions of dissatisfaction" by its customers.
For example, David Garver, head of West Region marketing, states that notwithstanding the weekly reports that he was provided which identified network congestion and call blocking statistics, but "my responsibility was to follow the lead of our sales leaders to create activities that drive traffic into our stores. So I did not review network statistics" [74] Mr. Garver also lacked specific information about the apparent spike in minutes of use.
Q: So no one relayed to you that there was a serious network congestion problem in late 2001 caused by a spike in minutes of use?
A: No [75]
As Kathleen Lee explains, Cingular's "trouble tickets" were the primary means for tracking network problems and complaints from customers. [76] These trouble tickets may have been passed along to certain network operators. However, Cingular made no effort to tally or categorize these trouble tickets or let any senior executive know just how many had been received and what they were about.
Ms. Lee makes much of the fact that she does not believe Cingular should be penalized based on the number of "trouble tickets" it has created. [77] In fact, what Cingular should be penalized for is its failure to disseminate the information gathered through those trouble tickets and its failure to use this information to make decisions about promotions that would burden the network.
The record also shows that while Cingular has spent a great deal of effort in this proceeding attempting to attack CPSD and UCAN's complaint recording procedures, it has not made any attempt to produce an alternative number of complaints. As stated by Mrs. Cook on behalf of Cingular:

Q: The question is, did you at any time - did Cingular at any time quantify the number of OIR-related complaints --
A Okay.
Q -- that it received from customers of Cingular during the January 2000 to June 2002 time period?
A No, we did not.
(HT 578: 1-7)

Cingular also did not even attempt to total the number of complaints received from other state agencies, such as the Attorney General or elected officials:
Q Did you quantify or develop a count of all OIR-related complaint totals from other state agencies other than CPSD?
A No. (HT 578: 12-15)

Similarly, Cingular witnesses could not identify any totaling of complaints received by customer service representatives on OII related issues. (HT 1406-1408)

i. i. Cingular does not record complaints received at sales locations.

It is also apparent that Cingular's records do not record customers' visits to stores to complain and try to get problems fixed. Cingular witness Bennett admitted that Cingular does not track these complaints to agents. (HT 1420:19-22). The records in this case bear out this fact. For example, Cingular claims there is no record of their complaints about network coverage from UCAN declarants Edward and Darrien Drucker. [78] The Druckers' declaration points out that they visited Cingular stores on two occasions to discuss their coverage problems. [79] Yet, Cingular apparently does not consider these visits to be network-related complaints.

ii. ii. Cingular's 144,000 "Trouble Ticket" Complaints are but the Tip of the Iceberg.

The closest UCAN/CPSD have come to determining how many complaints Cingular truly received comes from the 144,000 trouble tickets opened as a result of complaints about network problems. As Cingular admits, these "trouble tickets" represent "expressions of dissatisfaction" by its customers. (HT 1410-1411).
However, Cingular records show that "trouble tickets" are created on only a very small number calls from customers complaining about network-related problems. For example, Danique Fraser's records show that she only one trouble ticket was opened on the three network complaint calls she made in March 2002. [80] Michael George's records presented in this case show no trouble tickets opened on calls he made complaining about coverage and threatening to cancel. [81] Ian Langmore's records show network complaints, but no indication that a trouble ticket was ever opened. [82] Similarly Virginia Vogel's records show Cingular opened a trouble ticket on one of her three network related calls. [83]

e. e. Summary of Complaint Data

In sum, the Commission has been presented with credible and compelling facts that Cingular customers were subjected to a series of misleading and inadequate responses to complaints. And this deficiency was compounded by Cingular's failure to monitor the nature of the complaints submitted by its customers. The record shows that Cingular is unable to quantify the number of complaints/inquiries that their CSRs received from customers about:
1) 1) Coverage inadequacies or problems (HT 1406-1408)
2) 2) False or misleading information given by company-owned and/or agent-owned stores about coverage (HT 575:21-28)
3) 3) False or misleading information given by company-owned and/or agent-owned stores about termination penalties (HT 575:21-28)

As set forth above and summarized in Table 1 below, UCAN's 22 declarants testify to the facts that Cingular did not adequately and accurately responding to customer complaints relating to coverage problems. Second, intentionally failing to track complaint data by customers about misrepresentations. Finally, provided misleading and inaccurate information to complaining customers about the planned network improvement projects.

NAME OF DECLARANT Coverage less than promised or degraded Busy signalor "SOS" only Voice mail problems Dropped calls Termination fee threats Equipment wrongly blamed Promised new towers/ better coverage
1) Pamela Anderson 4 4
2) Verna Craig 4 4 4
3) Deborah L. Davis 4 4 4
4) Noori Townsend 4 4
5) Edward Drucker 4 4
6) Danique Fraser 4 4 4 4
7) Larry Geraci 4 4 4 4
8) Mike George 4 4 4 4
9) Kelly Kauffman 4 4 4 4 4
10) Ian Langmore 4 4 4
11) Vicci Millsap 4
12) Toya Reese 4 4 4 4
13) Nichole Schuler 4 4 4 4
14) Virginia Vogel 4 4 4
15) Brian Whelan 4 4 4
TABLE 1
MATRIX OF UCAN DECLARANTS - from Exhibit 200
MATRIX OF UCAN DECLARANTS from Exhibit 202

NAME OF DECLARANT Coverage less than promised or degraded Busy signalor "SOS" only Voice mail problems Dropped calls Termination fee threats Equipment wrongly blamed Promised new towers/ better coverage

1) Charles Yamamoto 4 4 4
2) Cheryl Walker 4 4 4 4
3) Joseph O'Donnell 4 4 4 4
4) Joan Howey 4 4 4 4
5) Sarah Arnold 4 4
6) Mary Dickerson 4 4 4
7) Mario Medrano 4 4 4 4

1. 1. Cingular's Misleading Advertising, Marketing and Sales Practices

a. a. Advertising Issues

i. i. General Discussion About Violation of Advertising Laws

UCAN submits that Cingular engaged in a number of advertising and marketing violations. Specifically, UCAN alleges that Cingular:

· · Violated Public Utilities Code Section 451 and the standards of Civil Code 1770, and Business and Professional Code Sections17200 and 17500 by creating an atmosphere of confusion about Cingular's relationship with its sales outlets.
· · Violated Public Utilities Code Section 451 and the standards of Civil Code 1770, and Business and Professional Code Sections17200 and 17500 by creating an atmosphere of confusion about Cingular's relationship with its sales outlets.
· · Violated Public Utilities Code Sections 451 by continuing to actively seek new customers through aggressive and expensive marketing even in the face of mounting customer complaints about Cingular service.
· · Violated Public Utilities Code Sections 451, 702 and 2896 when it failed to provide accurate information about Cingular's coverage limitations to customers and even to its own sales representatives.
· · Violated Public Utilities Code Sections 451 and 2896 and the standard of Business and Professions Code 17500 when it concealed network capacity problems from customers.

In support of these findings, UCAN offers the following factual assertions from the evidentiary record:
· Cingular's advertisements and marketing materials from January 2000 to the May 2002 failed to disclose any opportunities for a customer to avoid the termination penalties.
· Cingular's advertisements and marketing materials from May 2002 to the present disclosed only a $150 termination penalty imposed by Cingular but failed to disclose additional termination penalties charged by Cingular's agents of up to $400 per phone.
· Cingular's ads made no distinction at all between Cingular owned stores and agent owned stores, but Cingular claimed it could not help customers who were misled at agent stores.
· Cingular's agent-owned stores were designed in such a way so as to not adequately inform customers that they were not dealing with Cingular directly and thus could not get relief from termination penalties that were imposed by these agent-owned stores.
· Cingular and its agents provided customers with "maps" which confused and mislead customers, and perhaps even sales agents, into believing Cingular's coverage was extensive.
· Cingular initiated an ambitious "Unlimited" service promotion in 2001 and 2002, despite the fact that Cingular's own engineers knew the Cingular network was overloaded and could not provide adequate service to the customers who signed up.
· Cingular's engineers warned of coverage problems but these complaints were not communicated to nor considered by its marketing division.
· Cingular advertisements promoted coverage inside homes and buildings despite the fact that Cingular knew that the coverage for these interior locations was inadequate to meet customers' expectations.
· Cingular's own marketing studies showed that customers had placed high importance upon adequacy of coverage, yet Cingular avoiding giving customers accurate information about coverage.

ii. ii. Cingular Engaged in Bait and Switch Advertising in Regards to Termination Penalties.

Cingular's print ads misled the public into believing that Cingular required only a $150 early termination penalty and that Cingular itself controlled all retail outlets listed in the ads. [84] UCAN submits that Cingular's failure to mention in its ads the extra termination penalties that it knew its agents used combined with its failure to distinguish between agent-owned and company-owned stores resulted in a bait-and-switch advertising abuse.
The key facts, as established in bait and switch law discussed at hearings [85] and discussed above, is that an advertisement listing terms and conditions that are different from (and higher priced) than the actual terms and conditions that would be offered to customers in the store constitutes bait and switch and is illegal pursuant to Business and Professions Code Section 17200. In this case, the Commission is presented with a classic bait and switch scenario. The record shows that customers could not have reasonably discerned from any Cingular advertisement the actual amount of termination penalties that they would be expected to pay.
Cingular's own expert in this case, a Professor of Marketing at the University of Southern California, admitted that certain of Cingular's ads create a "potential for confusion" (HT 1113:17:18). Cingular's Regional Marketing Director admitted that customers would not be able to distinguish between Cingular-owned and agent owned locations based on these ads. (HT 1248:5-8). Yet at the same time Cingular claims to have no control over the termination penalties imposed by agents and it claims to have no ability to get agents to waive the termination penalties they impose. (HT 1415:11-15)
Prior to 2000, Cingular did create ads that did make a distinction between stores owned by agents and those owned directly by Cingular/Pacific Bell. [86] However, newer ads conceal this distinction. Since 2001, all stores - whether owned by Cingular or controlled by agents are listed as "Cingular Wireless Stores". [87] These ads disclose Cingular's own $150 termination penalty. None disclose the additional $150 to $400 termination penalty imposed by the Cingular agent outlets mixed in among the actual Cingular controlled stores listed in the ad.
At hearings, Cingular officials admitted that only about 15 percent of the stores listed in these ads are actually owned by Cingular. (1249:10-13) The remaining 85% of the so-called "Cingular stores" are owned by Cingular's agent. [88] Perhaps most confusingly, these ads continue to list a handful of outlets as "authorized agents", making the distinctions between the "Cingular stores" listed above even more difficult to understand. [89]
Moreover, the stores were uniform in appearance, leaving the reasonable customers with no reason to believe that Cingular Wireless does not own and control the "Cingular stores" and the sales representatives at the stores (and kiosks). This concealment of the differentiation between agent and company-owned stores becomes important because of Cingular's refusal to assume responsibility for the malfeasance of these agents. [90]
Despite important distinctions between company-owned stores and agents, Cingular intentionally sought to establish uniformity among the stores. David Garver testified that Cingular makes an effort to get all exclusive agent locations to "look and feel" the same. [91] In actuality, Cingular's efforts are focused on getting agent locations to "look and feel" the same as company owned stores, not just other agent outlets. [92]
Both UCAN and CPSD sent staff to personally view and photograph Cingular agent locations in San Diego and try to locate the eye level sign notifying the customer that the outlet is not a Cingular controlled location, and is in fact one that sets it own terms and conditions for sales. Pictures of the locations visited were introduced into the record. [93] UCAN's pictures show that in only one of the outlets was any "authorized agent" sign noticeable to the casual observer, however, it seems that the sign was actually just a notice that the store is an authorized ATT agent as well as a Cingular representative. [94] In several storefront locations, the "authorized agent" statement was extremely small, not readily visible, and located well below eye level. [95] At mall kiosk locations, the "authorized agent statement" was either not posted on the kiosk at all, or posted only on one side of the four-sided kiosk. [96] At every location, the prominent signs on top of the store and along all the windows featured highly colorful Cingular Wireless signs, none of which gave an indication that the location was not company controlled. CPSD's investigation produced the same results. [97]
As detailed below, these agents had every incentive to misrepresent the extent of Cingular's service, since they were assured some revenue as soon as a customer signed on the dotted line, either in the form of the agent termination fee paid by the consumer or a commission from Cingular. [98]
The ads upon which customers relied were either created by Cingular or funded by Cingular. Those created by Cingular generally list all "Cingular stores". The second set of ads were created directly by agents, usually paid for by "co-op" money provided by Cingular. [99] These ads generally feature only that particular agent's stores. Numerous examples are discussed in the testimonies of Dr. Anthony Pratkanis as well as Dr. Michael Kamins. [100]
However, the disclaimer that was used by both the agents and Cingular in the ads were developed by Cingular and Cingular required its agents to use this Cingular-developed disclaimer. [101] And no disclaimer developed by Cingular explained or revealed the additional termination penalties that agents would require from consumers. [102] This disclosure either does not mention to termination fee, or states that the termination fee is $150. Not a single ad discloses both the agent fee and Cingular fee.

iii. iii. Ads and Promotional Material Created Unreasonable Expectations of At-Home and In-Building Coverage

As will be explained in greater depth below, Cingular offered wireless service that was not designed for in-building or in-home coverage. [103] Yet, as will be shown below, its ads wrongfully depicted such coverage. Moreover, Cingular never gave its customers (or prospective customers) any indication that coverage at home or in buildings would be anything less than the quality provided by its competitors. This deception led to many, if not most, of the complaints that have been presented in this proceeding.
The advertisements were misleading. This is admitted by Cingular's own advertising expert, Dr. Kamins, who acknowledged that certain Cingular promotional material gave rise to expectations that a customer would get service at home:

Q: In your review of this promotion piece (ex. 220), would a typical customer have a reasonable expectation of being able to use Cingular's service at their home?
A I think they would. (HT 1125: 28-1126:2)

Specifically, exhibit 220 showed scenes inside a home as part of a "family talk" promotional brochure. The text described a family talk together as one member prepared dinner. It is clear that it gave rise to a customer expecting coverage at home. As Robert Zicker testified, consumers will generally expect phones to work where they want them to work, unless the company instructs them otherwise. (745: 17-25).
Yet Cingular witness have repeatedly stated that a customer should not have any reasonable expectation of coverage at home. Cingular admits that a lack of coverage in a building or in a residence is "consistent with the technology" of Cingular's service. [104] Customer Brian Whelan was denied a waiver of his termination fee, because, according to Cingular's customer service representative "we don't guarantee service in the home." [105] Mr. Whelan is like the vast majority of complainants in this case. He expected coverage in his home and Cingular did not provide it. [106]
Cingular presents no study showing that consumers don't expect coverage at home. But it does acknowledge this was the cause of many consumer complaints. [107] But Cingular can point to nothing it has done to educate consumers about its in-building coverage limitations.

iv. iv. Cingular Promised "Unlimited Service" Which It Knew Could Not be Provided at the Time it Promoted The Service.

In 2001 and 2002, Cingular experienced known network limitations - particularly in residential areas. Despite knowledge of these network limitations, Cingular initiated a promotion that would further strain an already over-taxed network. The result was that customers who expected "unlimited service" experienced instead very limited service - even during off-peak times.
The advertisements in question were ones in support of a promotion that began in 2001. These ads encourage customers to expect "unlimited" service, to "forget minutes, let's talk hours" and to have a "marathon for vocal cords". UCAN/CPSD presented dozens of unique advertisements that promoted this "unlimited" use of Cingular's service. [108]
UCAN maintains that at the time that Cingular commenced this promotion, it reasonably should have known that customers' expectations would not be met.
While that statement will be explored in more detail below, what is clear is that Cingular engineers knew in-building coverage was important to customer- particularly those trying to use "unlimited" night and weekend calling and those using unlimited mobile to mobile. They were also aware that Cingular's system was not designed to provide in building coverage- particularly in residential areas. Cingular officials also noted that unlimited mobile to mobile and night and weekend plans moved calling off the highways and into residential areas and inside commercial buildings causing significant call blocking;
"We have seen a shift of usage into residential area as a result of popularity of MTM (mobile to mobile) and N&WE (nights and weekends) offerings. This has lead to network capacity issues in residential areas, (sic) as well as major commuter corridors that previously have been the main focus of network buildout. The combination of factors has lead to significant blocking of BTSs. Los Angeles/ Central Coast blocking has reached 10% and in San Francisco blocking has reached 15%. [109] (Italics added)

This same writer also noted "In 2000, PBW was rated #1 in customer satisfaction in San Francisco by JD Power. This year, the same network ranked lowest of all Cingular properties in customer satisfaction." [110]
In another document, Lynn Pang, Director of Radio Frequency Engineering, West Region noted in June 2002 that:
"We are seeing subscriber usage shifted toward in-building and many of coverage complaints that we received are related to in building coverage issues. In the West region, our markets were not originally designed for in building and therefore, there are still a lot of area in the system where there is inadequate in building coverage. . . More and more customers are expecting coverage throughout the interior of their buildings, be they offices or residences. This has become a major source of churn." [111]

In response, she was informed (by Rudy Hermond) "The problem (at least in my view) is that we will not have capital to fund this level of coverage. Over the past several months, we reduced our total 2002 capital allocation several times." [112] (id).
Cingular apparently focused little on residential coverage, since it found coverage in such areas unprofitable:
"It is not uncommon to find residential areas with little in-building penetration. This (Spring 2001) promotion appears to have the potential to help some of our customers learn more about the quality of our less profitable obligatory coverage." [113]

When first notified of the Spring 2001 promotion, offering unlimited free nights and weekends, Cingular's western area engineers warned:
"the short answer is that we have NO excess capacity" and "increasing sales of this kind would simply make an existing problem worse" "this promotion will cause a need for additional equipment. We are so far behind now in funding." [114]

A second company official warned "if it is extremely well advertised, there could be a noticeable impact." [115] As detailed below, the plan was heavily advertised.
Cingular's network problems extended beyond in-building coverage. Cingular also admits that in 2001 and 2002, a large increase in customer calling overwhelmed its wireless network and impacted the customer. [116] At these pages, Mr. Jacot attempts to rationalize Cingular's actions by depicting the demand generated by the promotion as "unforeseen" and "unexpected". However, Mr. Jacot's testimony is contradicted by Cingular's own documents that suggest that the increase in use and the degradation of Cingular service was no "surprise" at all.
The Commission should reasonably conclude that at the time that Cingular initiated its "unlimited hours" promotion, Cingular engineers knew that Cingular's network had weaknesses, particularly in residential areas. The engineers were aware that new customers on the system would overwhelm the network and largely predicted the network problems. Notwithstanding, Cingular heavily promoted these "unlimited" calling plans, encouraging customer to "talk hours, not minutes." [117] The fundamental problem seems to be a "disconnect" between the network engineers on one hand and marketing and promotion people on the other hand.
Attachment 3 in Exhibit 202 suggests that these engineers were expecting an answer forthwith. However, Cingular's marketing department never provided a response to the engineers. The Commission should reasonably assume that no written answer was ever provided, nor was there any documentation of a verbal answer [118].
Cingular could have reasonably foreseen that its network could not support added customers in 2001. Not heeding warnings of its engineers, Cingular advertised these "unlimited" plans with gusto. Ad spending skyrocketed. For example, in the San Diego/ Las Vegas region alone, Cingular spent nearly $11 million in advertising in the first quarter of 2001, versus just $2.8 million in the first quarter of 2000. In second quarter of 2001, Cingular spent $6.25 million in this same region, versus approximately $2.5 million in the same period of 2000. [119] The following year saw similar increase throughout the West, with ad spending going up 38%. [120]
Cingular promoted these plans through advertisements as well as through direct sales strategies. Cingular gave specific instructions to all its sales representatives to promote these "Chat All You Want" plans, and to contrast them to competitors who did not have unlimited plans. [121] Thanks to heavy promotion and sales tactics during 2001, Cingular's sales of minute intensive "unlimited nights and weekends" plans were high as compared to competitors. [122] This same document shows that Cingular also had numerous subscribers enrolled in unlimited mobile-to-mobile plans, allowing them to make unlimited free calls to other Cingular subscribers, exceeding nearly all its competitors.
The story of college campuses exemplifies how Cingular's corporate strategy were marketing-driven to gain as many customers as possible with little regard for the network's ability to accommodate those customers. Mr. Jacot uses the "College Campus phenomenon" as an example of how Cingular couldn't anticipate all of its customers responses to marketing initiatives. [123] In fact, Mr. Jacot's testimony is revealing about the company's relative disregard for its network capabilities. This conclusion is supported by the fact that Cingular continued to advertise on campuses, loading more people onto the system. Much of this occurred when there was no return policy at all.
Jim Jacot articulates the full extent of the network problems in his deposition:
Q So, if you call at two in the morning, you may
be more likely to get a channel than you would be at five
p.m.?
A. As long as you're not on a college campus,
you're probably in pretty good shape.
Q Why? Do they have a lot of traffic at two in
the morning?
A But you do see an unusual college calling
pattern at college campuses. (sic) They don't call all day and
then they get that 9:00 free hour, and the traffic goes
up dramatically for three or four hours before it drops
back off. [124]

. . .
A. We had a -- it surprised us in late
August 2001, all these college students showed up on
college campuses, and as a result of the free nights and
weekend plans we put together, a lot of them are showing
up with mobile phones that their parents had provided
them, in order that they can avoid paying the long
distance fees that college dorms typically charge
students. [125]

Clearly, Cingular was well aware that college campuses had call congestion problems- at least on the engineering side.
The important point that is missed in Cingular's testimony is how the company responded to this unanticipated demand. The marketing side of the company appears to have been either blissfully ignorant or disinterested in network problems associated with unmanageable demand levels.
David Garver, the head of Cingular's west region marketing during 2001, claims to have been unaware of Cingular's unique problems:
Q: [A]re you aware specifically of Cingular having problems on college campuses in the fall of 2001?
A: No I am not
Q: So Mr. Jacot or anyone from his organization never tried to alert you to this fact that there was a call blocking, heavy usage issue on college campuses?
A: Mr. Jacot and his team provided call-blocking statistics to our management team.
Q: Did you review those statistics?
A: Not thoroughly, no
. . .
Q: Did you make any effort to reduce advertising in college newspapers in the fall of 2001?
A: Not that I can recall.
.. .
Q: Did you send out information in the newsflashes alerting agents or your sales reps about the college campus call-blocking problem?
A: No [126]

Mr. Garver's responses are telling. Simply put, Cingular made no effort to back off sales, even when its operational departments knew there was limited capacity on the system for new subscribers.
The Commission might reasonably ask why Cingular would heavily promote a service that it knew it could not reasonably provide. Marketing history suggests that it is not unusual for companies to promote services or goods that they know are not consistent with the expectations established in advertisements. (HT: 1101-1102) Dr. Kamins also acknowledged that a company can control demand through levels of marketing spending. (HT:1114:7-19) UCAN submits that the driving factor was that during the 2001-2002 time period, Cingular was preparing to issue an IPO to secure low-cost financing and to establish market value of the company. (HT 1401) In order to maximize its IPO, the company had a compelling financial basis upon which to boost its sales and its market share during the period in which this "unlimited service" promotion was offered.

v. v. Cingular Provided Cash Incentives to Employees to Burden the Network Further

In addition to promotion of sales through ads, during the same 2001-2002 time frame, the company provided cash incentives to all levels of the company for putting yet more subscribers on the system. For example, the "Game Time" first quarter 2002 incentives provide cash incentives to all employees for "gross activations" to the network. Regional Vice Presidents/ General Managers could receive up to 23.29% of their salary if gross customer activation goals were reached. Other employees could receive up to $11,700 cash. Company store managers could get up to $6,250 for reaching their store sales goals. All employees could also be entered to win a "Grand Prize Trip". The number of times they could enter the contest was based on reaching higher and higher sales goals, not satisfaction or performance levels. [127]
Just when Cingular should have been focusing on building out its network and reducing the burden on current customers, each employee had an incentive to add even more people to the network, and Cingular was offering cash to make sure it happened.

vi. vi. Cingular's Coverage Information Was Misleading

One the most confusing strategies deployed by Cingular was its use of "maps" to depict its coverage. What the record in this case will show is that the maps offered by Cingular are not coverage maps at all, but "rate area" maps. But their calculated ambiguity permitted Cingular sales agents to portray them as coverage maps and lead customers to believe that the scope of Cingular's coverage was comparable to its competitors. As shown through customer declarations, this was not the case. [128]
The critical facts that will be established by UCAN in the discussion below is that Cingular's coverage was limited, relative to other wireless carriers. Notwithstanding this limitation, Cingular created materials that suggested robust coverage through the use of "rate area" maps. These maps could be reasonably construed as coverage maps by customers who would likely (and did, in fact) miss the fine print disclaimers on these maps. As a result, customers purchased Cingular service only to discover later that the maps were fraudulent.
The scope of Cingular's service was, almost by definition, deficient relative to its competitors. [129] While UCAN is not alleging that Cingular's service was substandard, it is alleging that Cingular knew that its service was more limited than that offered by many of its competitors, yet it withheld that fact from its customers.
In order to respond to customers' interest in coverage quality, Cingular created maps that appeared to depict coverage. In fact, they didn't depict coverage. The fine print of the maps showed that they were "rate area" maps. [130]
Many customers reported being presented with "coverage maps" when they went to Cingular stores to purchase service. [131] UCAN declarants have testified that they relied on these maps when determining where Cingular had coverage. [132] However, these customers had to have been confused, as Cingular maintains that they had no coverage maps - only "rate area" maps.
This confusion is exemplified by the testimony of Cingular witness Ricardo Cruz:
25 Q And you made a statement earlier that you believe
26 that Cingular is giving coverage maps in its stores; is that
27 correct?
28 A Yes.
1 Q And what's your basis for that statement?
2 A I've been in their stores.
3 Q Okay. And you've seen maps on the walls or maps
4 and brochures. What did you see in those stores?
5 A They have maps on the wall, they have maps on
6 their website as well.
7 Q Okay. And those maps on the website depicts
8 Cingular's coverage?
9 A An estimation of the coverage representation for
10 the customers, yes.
11 Q And those maps in the stores also depict the
12 coverage, correct?
13 A Yes.
14 Q And the maps in the brochures --
15 A Actually, can I back up for a second?
16 I think more accurately they reflect service
17 areas, just to be more accurate. When we talk about
18 coverage, I would associate that with signal strength. That
19 may be too narrow of a definition. I think service areas is
20 better.
21 Q In your mind a service area and a coverage area
22 are the same thing?
23 A No. I think I'm trying to make a distinction
24 between what's represented there. I think that is one of the
25 problems of giving the maps. If you look at actual coverage
26 in terms of radio energy, that's not a guarantee of the
27 service area, as we've been discussing. So I think service
28 areas may be a better thing to look at, which is not
1 necessarily a one-for-one representation of the actual signal
2 strength or RF energy in the area.
3 Q So, if a map depicts service area, it is not
4 depicting coverage area?
5 A They are related. (HT: 843-844)

Other Cingular witness displayed the same confusion. Ms. Cook refers to customers seeing coverage maps indicating coverage in their town [133]. Cingular witness Jim Jacot referred to what was in the customer brochures as a "coverage map" [134]
In its discovery efforts, UCAN sought to identify any "officially sanctioned" coverage maps produced by Cingular. We asked for coverage maps and were referred to the very same website maps. [135] However, the Commission should note that none of these maps actually portray Cingular coverage. In fact, no maps display actual coverage. Instead, these maps include various small print disclaimers that the maps are "rate area maps only" or that "Map depicts rate areas only, not coverage areas". [136]
These maps are misleading. The disclaimers are largely unnoticeable and at best, confusing. It is depicted to look like a coverage map yet Cingular calls it a "rate map". [137] It is designed to look like coverage map and includes lightly colored areas that presumably show no coverage at all mixed with darkened areas that depict coverage. The lightly colored areas are not labeled as rate areas. Thus, an average consumer looking at this map could reasonably infer that they are areas in which coverage is not available and can be contrasted to the darkened areas where coverage is available.
Even assuming Cingular's position that customers would heed the disclaimer and would be able to tell that the map does not depict coverage, the statements offered by virtually every UCAN declarant undermines Cingular's assertion. Repeatedly, customers refer to having been shown "maps" by salespeople. The record contains declaration after declaration of customers attesting to having been shown some document that they were told depicts coverage. [138]
Moreover, Cingular is very aware that coverage is one of the most pressing issues for any cell phone shopper. Cingular's own competitive assessment survey establishes that one of the first questions any cell phone shopper asks is about coverage. [139] Cingular witness Ricardo Cruz, a expert on the cellular phone industry, agreed that coverage information is a key piece of information for customers;
Q. [. . .] What information can Cingular provide customers who are contemplating purchasing Cingular service?

A They -- well, whatever they like, but I think what would be most appropriate is an estimation of where coverage may likely -- where it's more likely to be expected. (HT 842:20-24)

The demand for the information is there; Cingular sated that demand by offering coverage maps that were subtly disclaimed to be "rate maps".

b. Marketing and Sales Practices

i. i. General Discussion

This section will focus on three statutory violations. First, Cingular violated Public Utilities Code Sections 451 and the standards of Civil Code 1770, and Business and Professions Code Sections 17200 and 17500 by placing signal enhancement devices at sales outlets to artificially boost the coverage at sales locations without telling customers. By deceiving customers about the quality of signal at certain in-building sales locations, customers were unfairly and unjustly led to believe that Cingular did not have in-building coverage problems.
Second, Cingular violated Public Utilities Code Sections 451 and 702 by intentionally failing to monitor representations and advertisements made by sales agents of Cingular. Moreover, Cingular's failure to provide its agents, or any of its sales outlets, with adequate information about coverage to pass along to consumers. By failing to give sales outlets any accurate information about coverage, customers therefore lack sufficient information upon which to make an informed choice about Cingular service.
Third, Cingular deceived its customers about the true ownership and control over its retails sales people. UCAN maintains that had Cingular customers been informed that stores that were not company-owned could subject customers to additional termination penalties, customers would not have made purchases from those stores.
Fourth, Cingular violated section 451 and 702 -- along with the standards of Business and Professions Code 17200 and Civil Code 1770 -- by using excessive agent termination fees to keep customer enrolled in inadequate service, keeping these customers from moving to competitors who could provide the service the customer needed. The agent termination fees in particular were unconscionable, because they far exceed any "damage" the agent may incur from the cancellation of the contract.

UCAN offers the following evidentiary facts to support these allegations:
· · Cingular placed signal enhancement devices at sales outlets to artificially boost the coverage at sales locations and did not advise customers of this artificially enhanced coverage at those sales locations.
· · UCAN has offered the complaint of Mr. Earl Childers who testified that he was misled into believing that coverage in the vicinity of an enhanced location was adequate.
· · Cingular asserts that it exercises no control over the terms and conditions of service for sales at agent stores, nor does it have responsibility for the misrepresentations of those agents.
· · Agent locations are permitted to charge whatever termination penalty they wish, and, until May 2002, could impose this termination penalty whenever they wanted.
· · Customer were forced to pay termination penalties of up to $550 per phone to cancel service, including up to $400 payable to Cingular's agent for canceling early.
· · These termination penalties were far above the actual costs incurred by Cingular's agent in establishing the service. They were punitive.

ii. In Store Practices - Coverage at Sales Outlets is Artificially Boosted to Deceive Customers

While sales outlets are not provided with meaningful coverage information, The record shows that Cingular has chosen to upgrade the coverage capabilities at many of their sales outlet locations, creating yet another reason why customer might be deceived about coverage limits. Cingular actually installed signal enhancement devices at a number of its stores in order to boost its signal at those locations. [140] These stores, which presumably had weak signals because they were inside malls or in other areas lacking adequate coverage, then appear to customers as having strong coverage. Cingular indicated informally that it would offer evidence into the record that showed other factors compelling the deployment of these enhancement devices but failed to do so during the hearings. [141]
UCAN submits that by boosting the coverage strength at these locations, customers would reasonably conclude that in-building coverage was not an issue. For example, Earl Childers' complaint notes that he could not get coverage at his home, but he could get coverage 2.5 miles down the road at Fletcher Parkway, right by the Grossmont Center Mall where he purchased the phone. [142] And Cingular has admitted that the store at 8960 Fletcher Parkway #B had a special signal enhancement device installed. [143]
Cingular was put on notice of UCAN's finding, yet Cingular provided no information at hearing about this practice. Instead, it persevered to keep this information secret. [144] Cingular's failure to rebut UCAN's interpretation of the Cingular data request response may be viewed by the Commission as tantamount to an admission of this practice. And it should not be countenanced.

iii. iii. Agent Relationships - Cingular Abdicates its Responsibility to Inform and Supervise the Actions of its Agents

One of the frequent refrains of customers is that agents orally represented that Cingular's coverage was adequate for their needs. However, the record shows that there is no way that Cingular sales personnel could make any accurate representations about coverage, as Cingular refrained from offering them any access to such information.
UCAN submits that Cingular's sales representatives and sales materials, effectively frame customer's expectations of Cingular's service. The majority of Cingular customers are subscribed through non-company stores. (HT 1247:22) Cingular acknowledges that agents are the primary source of coverage information fact. [145]
These agents serve as the primary means for customers to learn details of coverage area, terms of calling plans, termination penalties and any other questions. The record shows that these sales agents are not given any tools by which to communicate the extent or absence of Cingular coverage.
For example, Cingular admits that its "Newsflashes" bulletin are the "primary means of communication" between Cingular and its agents. (HT 1227:19) What is telling is what is missing from these documents. There virtually nothing about network expansion plans. Nothing informing agents where existing towers are. No true accurate coverage maps even for the limited area that the agent serves. Also no information about actual cell towers going up. [146] Nothing telling agents that Cingular provides only limited residential and in-building coverage. In essence, Cingular relies on these agents to sell its service, yet Cingular does not provide clear, accurate coverage information to these agents.
Salespersons are not provided with any specifics about network limitations or accurate information about network expansion plans. The impact on the customer is a lack of clear accurate information upon which to make an informed choice about cell phone service. The result was untold instances of customers being misled. Just the past December, Sarah Arnold was promised coverage in remote areas of San Diego County. [147]
Cingular appears to downplay the role of coverage information. Mr. Bennett and Mr. Jacot both make reference to the fact the consumers would not reasonably expect maps to depict real coverage, making reference to an FCC pamphlet. [148] However, they could not cite to any study supporting this belief. (HT:1372) And they are contradicted by their own internal marketing findings. [149]
Moreover, there is no evidence that Cingular made this FCC information available to its customers. No declarant, nor any other complainant to UCAN ever cited