9. Comments on Draft Decision
The draft decision of ALJ Jones in this matter was mailed to the parties in accordance with Pub. Util. Code Section 311(g)(1) and Rule 77.7 of the Commission's Rules of Practice and Procedure. Comments were filed on June 7, 2002 and reply comments, on June 14, 2002. We have reviewed the comments and taken them into account, as appropriate, in finalizing this order.
1. Until the FCC issues a further order which becomes final, for the foreseeable future the incumbent LECs will continue to offer line sharing as a UNE.
2. State Commissions have the authority to establish additional UNEs pursuant to § 51.317.
3. Line sharing is the only viable option for a CLEC who seeks to compete with the incumbent LEC in providing DSL service at retail.
4. Under current FCC regulations, a CLEC has no right of access to the high-speed transmission component of cable modem service, which is the functional equivalent of DSL service.
5. The FCC's language in the Line Sharing Order is permissive when it says that states "may" require the ILECs to charge no more than the amount of loop costs allocated to ADSL services in their Federal filings to establish their interstate retail rates for the service.
6. The FCC is silent on the rules to follow in setting of permanent HFPL prices.
7. The HFPL does not fall within the definition of universal service.
8. It is an economically correct outcome to have a positive price for access to the HFPL.
9. An ILEC should not have to subsidize a competitor's operation by providing a valuable asset at no charge.
10. The proper charge for the HFPL is a policy issue and is not based on a TELRIC cost study for the HFPL.
11. In D.99-11-050 the Commission adopted a loop rate of $11.70 for Pacific.
12. The record of this proceeding does not allow validation of TURN's HCPM calculations or Verizon's ICM model.
13. 47 C.F.R. § 51.505(d) lists the factors that may not be considered in calculation of the forward-looking economic cost of a network element.
14. It is not economically feasible for a competitor to pay $11.70 for a loop, and then attempt to compete against the ILEC, or its affiliate's, DSL service provided over less expensive line-shared loops.
15. This phase of the PLS proceeding is scheduled to set a permanent price for the HFPL to replace the interim rates adopted in the interim arbitration phase in D.00-09-074.
16. In D.02-05-042 the Commission adopted an interim loop rate of $9.93 for Pacific.
17. This decision adopts a process to automatically change the rate for the HFPL, if the rate for the unbundled loop changes.
18. This proceeding does not deal with the issue of whether to treat basic service, or the UNE loop, as a shared cost, as was the case in D.94-09-065, D.96-08-021, and D.96-10-066.
19. The Commission is not being asked in this proceeding to include some of the costs of toll or vertical services within the price of the loop.
20. The loop is a shared physical resource.
21. Two UNEs utilize the loop, and costs need to be allocated between them.
22. The FCC acknowledges that the FCC-adopted TELRIC methodology does not directly address the issue of pricing a line-shared loop.
23. The four major users of the loop are: basic exchange service, toll/access, vertical services, and the HFPL.
24. Under the Shapley Value, Pacific's rate for the HFPL, given its current interim loop rate, is $2.48.
25. The Commission has not yet adopted a loop price for Verizon.
26. Since there is no adopted loop rate for Verizon, the Shapley Value cannot be used to determine an appropriate HFPL rate for Verizon.
27. Pacific and Verizon asserted in their filings at the FCC that they were recovering the full cost of the loop through existing services.
28. Introduction of a charge for the HFPL allows Pacific and Verizon to recover more than the full cost of the loop.
29. This proceeding is not the appropriate place to modify our universal service funding mechanism, as adopted in D.96-10-066.
30. The purpose of a true-up is to reimburse carriers for overcharges or undercharges in the amount charged for the HFPL between the time the interim rates went into effect, and the effective date of the permanent rates adopted in this decision.
31. A true-up is warranted for Pacific because the rate adopted for Pacific in the interim phase was $5.85, while a permanent rate of $2.48 is being adopted in this decision.
32. No true-up is warranted for Verizon because the rate adopted for Verizon in the interim phase--$3.00--was identical to the rate adopted in the permanent phase.
33. It is appropriate to credit HFPL revenues to all ratepayers, as opposed to just DSL customers, because all users of the loop benefit from the increased economies of scope brought about by line sharing.
1. Until the D.C. Circuit's order in USTA v FCC takes effect, the FCC's line sharing order is not vacated, and continues to apply as a matter of law.
2. The Commission has independent authority pursuant to Pub. Util. Code § 709.7 to require line sharing and to set permanent rates for the line-sharing UNE.
3. The FCC's Line Sharing Order does not require the states, in setting permanent HFPL rates, to rely on the loop costs allocated to ADSL services in ILECs' interstate filings with the FCC.
4. This Commission has the authority, under the FCC's rules, to set HFPL rates at either a zero-rate or at a rate other than zero.
5. The Commission may decide to endorse all or some of the rulings in D.00-09-074, but is not required to do so, since it has developed a separate record in this proceeding.
6. The Commission should not rely on either the HCPM or Verizon's ICM in making a determination of the proper price for the HFPL.
7. The HFPL is being priced as a UNE, and the Commission must follow the FCC's rules for pricing UNEs.
8. Pacific's proposal to collect $5.85, or 50% of the adopted loop rate, to make up for the shortfall in residential basic exchange revenues, violates 47 C.F.R. § 51.505(d)(4).
9. Verizon's "embedded constraint" theory violates 47 C.F.R. § 51.505(d)(1).
10. The $9.93 interim loop price adopted by the Commission for Pacific has been determined to recover all costs-including shared and common costs--associated with the loop.
11. Twenty-five percent of total loop costs should be allocated to the HFPL.
12. If an ILEC's adopted loop rate changes, the rate for the HFPL will also be recalculated based on 25% of the adopted loop price.
13. If the Commission has adopted geographically deaveraged loop rates for a particular ILEC, the HFPL rate should be set at 25% of the adopted loop rate for each geographic zone.
14. The Commission is obligated to follow the FCC's rules in pricing UNEs.
15. Pacific and Verizon should not be allowed to retain the HFPL revenues since it would result in over-recovery of loop costs.
16. Pacific should reimburse carriers (including its affiliate ASI) which purchased the HFPL over the past several months since the interim rates went into effect with $3.37 per month/per line.
17. The HFPL revenues should be returned to ratepayers as a group.
18. Returning the HFPL revenues to ratepayers does not violate FCC Rule 51.505(d)(4).
19. Since CLECs are not respondents to this proceeding, the Commission cannot order them to return DSL revenues to their DSL customers.
20. Pacific and Verizon should aggregate their HFPL revenues in an interest-bearing account for return to ratepayers in the form of a surcredit.
21. Pacific and Verizon are authorized to request Limited Exogenous Factor treatment for the administrative costs associated with returning HFPL revenues to ratepayers.
IT IS ORDERED that:
1. Pacific Bell Telephone Company (Pacific) and Verizon California Inc. (Verizon) shall continue to offer the High Frequency Portion of the Loop (HFPL) to Competitive Local Exchange Carriers.
2. Pacific and Verizon shall implement the rates for the HFPL adopted herein within 30 days of the effective date of this order.
3. Within 60 days of the effective date of this order, Pacific shall reimburse carriers (including its affiliate ASI) which purchased the HFPL over the past several months since the interim rates went into effect with $3.37 per month/per line, plus interest.
4. With the exception of the revenues referred to in Ordering Paragraph 3 above, Pacific and Verizon shall return all the revenues, plus interest, in the memoranda accounts established pursuant to D.00-09-074 to ratepayers through their existing A-38 (Verizon) and Rule 33 (Pacific) surcharge/surcredit mechanism. Verizon and Pacific shall file advice letters within 60 days of the effective date of this order to make the appropriate change to their respective A-38 and Rule 33 surcharge/surcredit mechanisms.
5. On a going forward basis, Verizon and Pacific shall file advice letters to change the A-38 and Rule 33 surcredit amounts within 30 days of the close of each 6-month period following the effective date of this order. Surcredits to ratepayers shall be on a monthly basis thereafter, following an initial two-month lag time to allow time to calculate the surcredit amounts.
6. The Commission's Telecommunications Division shall review the advice letters to ensure compliance with this order.
7. If the loop rate for an ILEC changes, the rate for the HFPL shall be recalculated, based on 25% of that adopted loop rate.
8. Once the Commission establishes a UNE loop rate for Verizon, the price for the HFPL portion shall be set at 25% of that adopted loop rate.
9. In the interim, the $3.00 HFPL rate adopted in D.00-09-074 shall be maintained for Verizon.
10. With 15 days of the effective date of this order, the Assigned Administrative Law Judge shall issue a ruling to solicit comments on whether Incumbent Local Exchange Carrier (ILEC) reintegration of a data affiliate could result in price squeezes or other anticompetitive behavior on the part of the ILECs.
11. The May 24, 2002 motion of Verizon California Inc. to suspend the comment period of the Draft Decision and not put the Draft Decision on the Commission's meeting agenda until further notice, is hereby denied.
This order is effective today.
Dated , at San Francisco, California.
APPENDIX A
LIST OF APPEARANCES
************ APPEARANCES ************ Lisa Crowley William C. Harrelson Melissa Waksman Eric S. Heath Maria E. Stevens Martin A. Mattes |
Lisa Crowley | |||
