XII. Assignment of Proceeding
Carl W. Wood is the Assigned Commissioner and Michael J. Galvin is the assigned ALJ in this proceeding.
1. Verizon is a public utility telephone corporation, subject to the jurisdiction of this Commission, as defined in Pub. Util. Code § 234.
2. Verizon filed its application for authority to recategorize its inside wire maintenance plans and billable repair service from Category II to Category III, pursuant to Rule 42 of the Commission's Rules and OP 20 of D.89-10-031.
3. Telecommunication services are classified into three distinct categories: Category I for services deemed to be basic monopoly services, Category II for discretionary or partially competitive services and, Category III for fully competitive services.
4. A service is categorized as Category III upon the local exchange carrier substantiating that it retains insignificant market power for a service.
5. There is no opposition to TURN and ORA's motions for leave to submit under seal non-redacted versions of their opening briefs.
6. The Commission found, via three investigations, that Verizon offered to its customers simple inside wire repair service with, pursuant to tariff, two payment options (monthly and per-visit).
7. D.97-08-059 affirmed that Verizon offers its customers the option of paying a fixed amount for a service plan which entitles those customers to any necessary simple inside wire repair service or authorizes that they pay a separate charge for the service when and if needed.
8. D.99-06-053 affirms that simple inside wire is one market with two payment options.
9. Market power is the ability of a firm to hold its price profitably above competitive levels for a significant period of time.
10. Verizon must substantiate that it has or is expected to have insignificant market power for the services its wants re-classified to Category III.
11. D.99-06-053 identifies ease-of-market entry and exit, supply elasticity, and demand elasticity to be the service-specific market power criteria for the evaluation of repair of simple inside wire for which Verizon offers its customers two payment options.
12. D.89-10-031 leaves the responsibility of proposing those market power criteria to Pacific and Verizon in order to assess market power through the application process.
13. Verizon's repair of simple inside wire service with two payment options is comparable to Pacific's and to other California LECs' repair of simple inside wire service.
14. Ease of market entry by competitors is dependent on the extent to which technical expertise and capital requirements are needed to competently repair simple inside wire.
15. Ease of market exit by competitors is dependent on the extent to which capital investments required in order to enter the market can effectively be redeployed or sold in response to changes in market conditions.
16. A fundamental knowledge of installing and repairing simple inside wire, one which any certified electrician possesses, is the only technical expertise needed to meet the standards for competent performance of that service. For this reason, repair of simple inside wire can be competently performed on a do-it-yourself basis.
17. Alternative business suppliers offer simple inside wire repair service through advertisements.
18. Business competitor surveys were based on a simple random sampling telephone survey of approximately 400 electrical and telecommunication businesses selected from almost 4,000 businesses listed in yellow page directories.
19. The business competitor surveys' sampling size was measured to ensure a 95% confidence level allowing for a 5% margin of error.
20. The business surveys show that 53% of the businesses surveyed would repair simple inside wire for business customers and 66% would repair simple inside wire for residential customers.
21. The necessary tools to enter the market for simple inside wire repair, which many electrical businesses already own, costs less than $1,000.
22. Approximately two-thirds of the 400 businesses surveyed have no additional tool or equipment requirements for repairing simple inside wire.
23. We first concluded in our 1997 competitive LEC decision that any certified electrician could repair simple inside wire, that there is a relatively large base of qualified providers, and that there are relatively low barriers to enter the simple inside wire repair market.
24. D.99-06-053 confirms the existence of a relatively large base of qualified providers as well as the existence of ease of market entry and exit for the repair of simple inside wire.
25. Supply elasticity demonstrates the alternative business supplier's willingness to enter the market or to expand its service.
26. Customer surveys show that 16% of Verizon's business customers and 27% of its residential customers are or would likely repair their own simple inside wire.
27. Competitors do not freely disclose their respective marketing plans.
28. The initial business survey shows that approximately 11% of the respondent businesses currently offer business customers the opportunity to subscribe to a monthly inside wire repair plan and that 15% of the respondent businesses are willing to offer such a plan to business customers.
29. Approximately 16% of Verizon's business customers actually subscribe to Verizon's IWMP.
30. Verizon is not proposing any change in its current business rates for inside wire repair.
31. Verizon is not seeking to change its residential BRS current rates or ceiling rates.
32. Over 300 letters from consumers were received in this proceeding, the majority of which expressed opposition to the 85% requested increase in residential IWMP.
33. Demand elasticity demonstrates the customer's willingness to change suppliers for service within a market in response to a price change for the service.
34. Business and residential end-user surveys are each based on a random sample of 400 end-users.
35. Verizon's market demand calculations are based on the assumption that the frequency of simple inside wire repair experienced by Verizon's subscribers of its IWMP is consistent with the frequency for which such repairs are experienced by its other customers.
36. The business end-user survey shows that 91% of Verizon's business end-users expects Verizon to repair its simple inside wire, while 60% also expect electrical contractors to provide the repair service; 58% other telephone
companies, 35% telecommunications businesses, 25% building managers, and 25% self repair.
37. Verizon's business end-users have opted to use alternative business suppliers 76% of the time.
38. Actual experience shows that only 26%, fewer than one-third, of the residential end-users currently rely on alternative business suppliers for its simple inside wire needs.
39. Actual experience shows that 74% of residential end-users rely on Verizon's simple inside wire repair service, of which 6% rely on its BRS and 68% on its IWMPs.
40. Approximately 75% of the alternative business suppliers responding to the survey charge their BRS customers by either an hourly labor rate or by time and materials.
41. Pacific has been charging a $103 hourly BRS rate sine 1993.
42. Verizon's ceiling rates for its IWMPs have not changed since 1989.
43. Requested increases in the ceiling rates for Verizon's IWMPs are based on national averages.
44. TSLRIC studies are used to establish price floor rates.
45. Other than Pacific, Verizon neither compares nor knows the rates being charged by other California LECs or other businesses offering a similar service in California.
46. There is no opposition to Verizon's request to bifurcate its single BRS tariff schedule into a separate tariff schedule for its business customers and a separate tariff schedule for its residential customers.
47. Pub. Util. Code § 461.2 requires all revenues and expenses associated with the repair of inside wire to be recorded above the line for intrastate ratemaking purposes
1. TURN and ORA's non-redacted opening briefs should remain under seal.
2. It has not been established that an increase in only one of two payment options for the repair of simple inside wire results in the establishment of a separate simple inside wire market.
3. Simple inside wire repair is one market with two payment options; monthly or per-visit.
4. Verizon's service for repair of simple inside wire is a service-specific offering similar to that of other California LECs.
5. Market power criteria consisting of ease of market entry and exit, supply elasticity, and demand elasticity are reasonable factors to assess Verizon's market power in the repair of simple inside wire.
6. As an administrative agency, the interpretation of survey data lies well within our competence and we apply it in our assessment of survey evidence.
7. Alternative business suppliers have entered and are willing to enter the repair of simple inside wire market.
8. There are no barriers when entering, expanding, or exiting the market for simple inside wire repairs.
9. There is a relatively small demand for the business IWMP option.
10. It has not been established that alternative business suppliers do or would provide IWMPs to residential or landlord customers.
11. Supply elasticity in the simple inside wire market for business and residential customers is high.
12. Verizon has not demonstrated the willingness of alternative business suppliers' to offer the residential IWMP option.
13. Verizon's use of market demand calculations is an approach it employs to determine its demand share of the simple inside wire market within a range of reasonableness.
14. Verizon has demonstrated business end-users' demand elasticity.
15. Residential end-users prefer Verizon's optional IWMP.
16. Verizon has not demonstrated residential or landlord demand elasticity.
17. Verizon's requested ceiling rate change for the first billable Weekday hour of its Business BRS is within the range of rates being charged by alternative business suppliers within California and should be approved.
18. The ceiling rates for Verizon's IWMPs should not be based on national averages.
19. Verizon's request to bifurcate its BRS tariff schedule should be approved.
20. All revenues and expenses associated with the repair of simple inside wire should be treated above-the-line for intrastate ratemaking purposes.
IT IS ORDERED that:
1. All data placed under seal in the proceeding shall remain sealed for a period of two years from the date of this order. The sealed data shall not be made accessible or disclosable to anyone other than Commission staff during the two-year time period except on the execution of a mutually acceptable nondisclosure agreement or on further order or ruling of the Commission or the administrative law judge designated at that time to be the Law and Motion Judge.
2. Verizon California, Inc. (Verizon) is authorized to recategorize its Business Billable Repair Services (BRS), Business Inside Wire Maintenance Service Plan (IWMP), and CentraNet IWMP from Category II to Category III service offerings.
3. Verizon's request to recategorize its Residential BRS, Residential IWMP, and Landlord IWMP from Category II to Category III service offerings is denied without prejudice.
4. Verizon is authorized to increase the first billable Weekday hour of its Business BRS from $85 to $100.
5. Verizon is not authorized to increase the ceiling rates for its business service IWMP, CentraNet IWMP, residential IWMP or landlord IWMP at this time.
6. Verizon is authorized to bifurcate its single BRS tariff schedule into a separate Business BRS tariff schedule and a separate Residential BRS tariff schedule.
7. All revenues and expenses associated with Verizon's Business and Residential BRS and IWMPs, shall continue to be treated above-the-line for intrastate ratemaking purposes.
8. Verizon is authorized to file revised tariffs with the Commission's Telecommunications Division for the recategorization of its Business BRS, Business IWMP, and CentraNet IWMP from Category II to Category III service offerings; bifurcation of its BRS tariff schedule into a separate Business BRS tariff schedule and a separate Residential BRS tariff schedule; and to increase the first billable Weekday hour ceiling rate for its Business BRS from $85 to $100. The revised tariffs shall become effective when authorized by the Commission's Telecommunications Division, but not less than five days after filing, and shall apply after the effective date of this order.
9. Application 01-02-012 is closed.
This order becomes effective immediately.
Dated _______________________, at San Francisco, California.
APPENDIX A
Billable Repair Services
Current & Proposed Ceiling Rates
Business BRS _____Ceiling Rate______
Current Proposed_
1st Hour or Less
8 AM - 5 PM Weekdays $ 85 $ 100
5 PM - 8 AM Weekdays & Saturday 127 No Change
Sundays & Holidays 170 No Change
Each Additional 15 Minutes or Less
8 AM - 5 PM Weekdays $ 21 No Change
5 PM - 8 AM Weekdays & Saturday 31 No Change
Sundays & Holidays 42 No Change
Residential BRS
1st Hour or Less
8 AM - 5 PM Weekdays $ 85 No Change
5 PM - 8 AM Weekdays & Saturday 127 No Change
Sundays & Holidays 170 No Change
Each Additional 15 Minutes or Less
8 AM - 5 PM Weekdays $ 21 No Change
5 PM - 8 AM Weekdays & Saturday 31 No Change
Sundays & Holidays 42 No Change
(END OF APPENDIX A)
