VII. Ratemaking Treatment of BRS and IWMP

In D.89-10-031 we concluded that there should be no cross-subsidies of competitive services at the expense of basic ratepayers. Hence, as a general rule, services placed in Category III with a showing that a utility has insignificant market power are accounted for below-the-line as non-utility services. If a utility wishes to include a fully competitive (Category III) service above the line, "it would need to overcome the presumption that such a service should be excluded."³

Verizon has requested that its BRS and IWMP for both business and residential customers, currently classified as Category II service offerings, continue to be treated above the line for intrastate ratemaking purposes, if its Category III request is granted. This request is consistent with Pub. Util. Code § 461.2. That code section requires all revenues and expenses from the repair of simple inside wire to be recorded above-the-line in the process of establishing rates for a telephone corporation. Hence, irrespective of whether Verizon's business and residential BRS and IWMP are classified as Category II or Category III service offerings, these service offerings are required to be treated above-the-line for intrastate ratemaking purposes.