Galvin Agenda Dec Verizon Recategoriza Inside Wire Maintenance Plans and Billable Repair Service to Category III

VIII. Recategorization Request and Market Definition

To determine whether Verizon's BRS and IWMP should be classified as Category III service offerings and whether the ceiling rates for these services should be increased, we need to first define the relevant market so that we may determine whether Verizon "has or is expected to have insignificant market power" in each market it serves or intends to serve, the test for a Category III service.

Verizon identifies the relevant market to be the repair of simple inside wire. Simple inside wire includes all non-system premise telephone wiring, including the associated jacks, on the customer's side of the demarcation point, whether owned and installed by the customer or premises owner, or his agent, or previously installed and maintained by Verizon under tariff.⁴ It does not include any premises equipment, such as telephones themselves.

The substitute payment options identified by Verizon are BRS and IWMPs. BRS is an option provided by Verizon to its customers making them responsible for maintaining and repairing their own simple inside wiring. This service is available on the same terms to both business and residential customers who subscribe to individual-line Basic Exchange Access Line Services. These customers are charged on the basis of time actually spent to dispatch a technician, locate the trouble on the simple inside wire, and complete necessary repairs. BRS charges commence only after a customer is notified that the trouble is on the customer's side of the local loop demarcation point. The customer is then advised of competitive alternatives, and of Verizon's rates. When the customer accepts the charges, Verizon can then dispatch one of its technicians. No extra charge is made for minor materials such as wire and jacks.

Alternatively, customers may subscribe to one of Verizon's IWMPs. These plans are available for business and residential customers subscribing to Verizon's individual-line Basic Exchange Access Line Services. CentraNet customers may subscribe to Verizon's CentraNet IWMP, while building owners and agents are eligible for Verizon's Landlord IWMP. For a monthly fee, Verizon assumes the risks and responsibilities for maintenance and repairs of simple inside wire.

Verizon asserts that, in economic terms, its BRS and IWMP are simply different price structures for the same service. That is, customers pay either a relatively large amount per incident (BRS) , or a relatively low amount per month (IWMP), in order to maintain and repair simple inside wire on their premises.

TURN and ORA, on the other hand, contend that Verizon's BRS and IWMP are distinctively separate markets. They both cite various reasons for asserting such a distinction. They contend that IWMPs function as insurance for events that either have yet to occur or for those whose occurrence remains uncertain while BRS covers events which have already occurred. Pacific Bell Telephone Company (Pacific), they contend, raised its IWMPs rates by more than its BRS rates, demonstrating a distinction in the services. Moreover, the costs of IWMPs are calculated by spreading all incurred costs across the entire base of IWMP subscribers, whereas BRS costs are calculated on a per-hour basis. TURN and ORA also conclude that BRS and IWMPs are distinctly separate markets because customers do not have the option to choose between BRS and IWMPs at the time a customer is experiencing a simple inside wire problem.

The determination of a relevant market for the repair of simple inside wire is not a new issue. Our investigation into station connection accounting and the economic consequences of customer owned premise wiring found in 1992, and again in 1993, that the repair of simple inside wire is "offered pursuant to tariff with two payment options (monthly or per visit)."⁵ Verizon,⁶ TURN, and

ORA⁷ were active parties in that proceeding.

Subsequently, in our 1995 local exchange competition investigation, a 1997 decision (D.97-08-059) affirmed that Verizon offers its customers the "option" of paying a fixed amount for a service plan which entitles customers to any necessary simple inside wire repair service or requires paying a separate charge for the service when, and if, needed.⁸ TURN and ORA were also active parties in that investigation. Recently, in D.99-06-053, we affirmed that simple inside wire is one market with two payment options.⁹

The only new evidence offered on the simple inside wire market is that Pacific has raised the rates of its IWMPs 150% to $3.99 a month from the $1.20 authorized by D.99-06-053 while not changing its BRS rates. Although this evidence is not disputed, it has not been established that an increase in rates of only one of the payment options demonstrates a separate inside wire market. We observe that such an increase in rates was requested and approved through the advice letter process. We also observe that neither TURN nor ORA opposed any of Pacific's IWMP increases approved through that advice letter process.

Prior Commission decisions and lack of evidence to demonstrate change in the simple inside wire market precludes us from reversing a well established fact that the repair of simple inside wire is a single market with two payment options. Consistent with D.92-01-023, D.93-05-014, D.97-08-059, D.99-06-053, and
D.99-09-036, simple inside wire maintenance and repair is one market with two payment options and will be referred to as such in the balance of this decision.

⁴ Tariff Schedule CPUC No. A-9, 1^st Revised Sheet 4.1. ⁵ D.92-01-023, 43 CPUC2d 115 at 126 (1992), and D.93-05-014, dated May 7, 1993 at Appendix A, page 10, of which an abstract of the decision is identified in 49 CPUC2d 223 (1993). ⁶ Verizon's predecessor, GTE California, Incorporated, was an active party to the investigation. ⁷ ORA's predecessor, the Division of Ratepayer Advocates (DRA), was a party to the investigation. The functions performed by DRA were transferred to ORA on September 10, 1996. ⁸ 74 CPUC2d 396 at 409-410 (1997). ⁹ ORA and TURN applied for rehearing of D.99-06-053. It was denied in D.99-09-036.