ALJ/TRP/hl2 * DRAFT Agenda ID #3764
9/23/2004 Item 47
Decision PROPOSED DECISION OF ALJ PULSIFER (Mailed 7/28/2004)
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
Order Instituting Rulemaking on the Commission's Own Motion into Competition for Local Exchange Service. |
Rulemaking 95-04-043 (Filed April 26, 1995) |
|
Order Instituting Investigation on the Commission's Own Motion into Competition for Local Exchange Service. |
Investigation 95-04-044 (Filed April 26, 1995) (FCC Triennial Review Nine-Month Phase) |
(See Appendix 5 for a List of Appearances)
OPINION REGARDING HOT CUT PROCESSES AND PRICING
OPINION REGARDING HOT CUT PROCESSES AND PRICING 11
II. Requirements of the TRO Relating to Hot Cuts: Standards for Approval 1111
III. Procedural and Operational Background 1717
IV. SBC Hot Cut Processes (47 C.F.R. § 51.319(d)(2)(ii)(A)(2));-Overview 1919
V. Batch Size, Capability of SBC's Processes to Meet Demand, and
Provisioning Interval 2323
VI. Verizon's Proposed Hot Cut Processes (47 C.F.R. § 51.319(d)(2)(ii)(A)(2))
and Volume Limitations (47 C.F.R. § 51.319(d)(2)(ii)(A)(1)) 3939
VII. Capability of Verizon's Hot Cut Processes to Meet Demand 47 C.F.R. § 51.319(d)(2)(ii)(A)(3) 4242
B. Positions of Other Parties 4242
D. Verizon's Provisioning Intervals (47 C.F.R. § 51.319(d)(2)(ii)(A)(2)) 5050
VIII. Proposed Revisions to Existing ILEC Processes to Provide Seamless Transition for Migrating Customers (47 C.F.R. § 51.319(d)(2)(ii)(A)(2)) 5151
A. Mechanization of Manual Processes 5151
B. 911 Database Coordination Issues Require Resolution 5656
C. Number Portability Coordination Issues Require Resolution 5959
D. Directory Listing Issues Require Resolution 6161
E. Updating of LIDB and CNAM Databases as Part of Hot Cut Process 6464
IX. Additional Migration Scenarios to be In Included in BHC Processes
(47 C.F.R. § 51.319(d)(2)(ii)(A)(2)) 6666
X. Batch Hot Cut Costing and Pricing (47 C.F.R. § 51.319(d)(2)(ii)(A)(4)) 8787
A. Framework for Analysis 8787
1. SBC Hot Cut Prices Position of SBC 8888
2. Response of MCI and AT&T to SBC Cost Study 9292
3. Disposition of Cost Adjustments for SBC TELRIC Prices 9595
B. Verizon's Proposed TELRIC Pricing for Hot Cut Processes 113113
XI. Performance Measures for Batch Hot Cut
(47 C.F.R. § 51.319(d)(2)(ii)(A)(2)) 122122
B. Performance Measures Proposed For SBC Hot Cut Processes 122122
C. Performance Measures Proposed For Verizon Batch
Hot Cut Processes 126126
XII. Batch Hot Cut Testing Requirements (47 C.F.R. § 51.319(d)(2)(ii)(A)(2)) 132132
XIII. Comments of ALJ Proposed Decision 136136
XIV. Assignment of Proceeding 137137
Appendix 1 Schematic Diagram Illustrating Hot Cut Process
Appendix 2 Schematic Diagram Illustrating Hot Cut for Line Splitting
Appendix 3 Hot Cut Process Prices: Adopted vs. Proposed
Appendix 4 Explanation of Commission-Adopted Pricing Adjustments
Appendix 5 List of Appearances
I. Introduction
This decision addresses the implementation of "hot cut" processes1 and related pricing applicable to Pacific Bell Telephone Company doing business as SBC California (SBC) and Verizon California, Inc. (Verizon) pursuant to the Federal Communications Commission (FCC) Triennial Review Order (TRO), adopted on February 20, 2003.2 The FCC released the text of its TRO on August 21, 2003, which was published in the Federal Register on September 2, 2003 and which became effective on October 2, 2003. The TRO required state commissions, among other things, to approve within nine months of the effective date of the TRO, or by July 2, 2004, a batch cut migration process to be implemented by ILECs. Alternatively, state commissions were directed to make detailed findings explaining why such a process would not be necessary in a particular market.
As originally initiated, these proceedings relating to hot cut processes were part of a larger inquiry to identify those markets, if any, in which competitive local exchange carriers (CLECs) are not impaired without access to designated unbundled network elements (UNEs) offered by incumbent local exchange
carriers (ILECs). In such markets, the TRO required that the ILEC be relieved of obligations to offer the designated network elements on an unbundled basis. The combination of UNEs typically offered to CLECs, including loops, ports, and switching, is generally referred to as the "UNE Platform" (UNE-P).
The TRO recognized that an efficient and economical process would be required to migrate customer loops from the ILEC switch (under UNE-P) to the CLEC switch utilizing the unbundled loop (UNE-L) and to support competition in local markets after the elimination of UNE-P. Accordingly, an integral part of our state proceeding involved development and implementation of "hot cut" processes to migrate both the embedded base of UNE-P loops on a batch basis and to accommodate increased ongoing demand for hot cuts due to the elimination of UNE-P in designated markets.
On March 2, 2004, however, the United States Court of Appeals for the District of Columbia Circuit issued an opinion in United States Telecom Association v. Federal Communications Commission, No. 00-1012 (USTA II).3 USTA II vacated provisions of the TRO relating to both the delegation of state authority to determine whether CLECs are impaired without access to unbundled elements and the substantive tests that the FCC promulgated for making such determinations. On June 16, 2004, the District Court's vacatur order became effective. On June 18, 2004, an Assigned Commissioner's Ruling suspended those provisions of the TRO proceeding that were vacated by the Court, setting
aside submission, until such time as the FCC issues new or interim local competition rules.
On July 2, 2004, a supplemental Assigned Commissioner's Ruling was issued, indicating the portion of the proceeding relating to hot cut issues would continue forward. As noted in the ruling, although USTA II vacates portions of the TRO relating to the deployment analysis for designated UNEs, nothing in USTA II exempts this Commission from the provisions related to development of a batch cut process. While the Court explicitly vacated the national impairment finding, it was conspicuously silent as to the FCC's order to states to develop a batch hot cut process. In any event, implementation of a low-cost, efficient batch hot cut process will be a critical part of any post UNE-P world.
In comments on the Proposed Decision (PD), parties disagreed as to whether the Commission has authority to adopt or approve batch hot cut processes in view of the vacatur ordered in USTA II.
The ILECs argue that USTA II vacated the entirety of the FCC's mass market switching rules, of which the batch hot cut requirements were a part. The ILECs argue that it would therefore be inappropriate, a waste of time, and possibly counterproductive for the Commission to adopt hot cut processes at this point in time since the FCC is now the designated agency to address this issue. SBC argues that there is no need to take any immediate action on hot cuts at this time because, pending issuance of FCC rules, it has offered to provide a batch cut process and to incorporate that offer into amendments to its interconnection agreements.
Parties representing CLECs, as well as ORA and TURN argue, however, that USTA II did not abrogate the CPUC's authority to address the batch hot cut processes under the "impairment" principle of Section 251(d) of the 1996 Act; that moreover, this Commission has independent state and federal authority to adopt BHC rules. The CLEC parties argue that if the Commission does not require the immediate deployment of an upgraded cost effective hatch hot cut process, CLECs may be forced to begin massive customer migrations from UNE-P to UNE-L using inadequate processes, to the detriment of end users and competitive choice in California.
On August 20, 2004, the FCC issued its USTA II Notice of Proposed Rulemaking (NPRM),4 concerning development of rules concerning continuing availability of UNEs. Parties in this proceeding were authorized to file supplemental comments on this Commission's jurisdiction to approve a batch hot cut process in view of the NPRM. The supplemental comments were filed on September 13, 2004. In supplemental comments, parties reiterated their earlier positions. Each side interpreted the language in the NPRM as being consistent with their prior arguments.
We disagree with claims that this Commission's jurisdiction to adopt batch hot cut processes and prices was abrogated by USTA II. As determined in the Assigned Commissioner's Ruling, we conclude that USTA II did not vacate those provisions of the TRO relating to development of a batch hot cut process by state commissions. Moreover, we disagree with the claim that it would be a waste of time for this Commission to finalize efforts adopting batch hot cut processes. Indeed, in the NPRM the FCC did not state that the state commissions' actions to develop batch hot cut processes were a waste of time, or that such state proceedings were undermining federal actions to implement revised unbundling rules. To the contrary, in the NPRM the FCC expressly invited state commissions to submit reports on the progress made in establishing batch hot cut processes.5 Consistent with the invitation of the FCC's NPRM, it is appropriate to bring a conclusion to the process that this Commission has undertaken in developing batch hot cut processes, and to report to the FCC on our progress in this regard. The processes we have developed will be instrumental in assuring that whatever timeline is ultimately implemented by the FCC for eliminating UNE-P, the cutover process will be conducive to a seamless transition so that end users do not experience disruption to their service.
We also find SBC's argument unpersuasive that addressing hot cut processes in a generic proceeding would circumvent the process of negotiation and arbitration mandated by the 1996 Act. In support of this argument, SBC cites the Ninth Circuit Court decision in Pacific Bell v. Pac West Telecomm, Inc. 325 F.3d 1114 (9th Cir. 2003) (Pac West). SBC claims that the Pac West decision precludes this Commission from implementing any rules that might affect the relationship between ILECs and CLECs because all such rules may only be addressed in the context of individual interconnection arbitrations. The Pac West decision merely held that the Commission does not have the authority to interpret or change interconnection agreement terms in a generic proceeding. In the instant order, however, we are not interpreting interconnection agreement language nor imposing specific interconnection terms on any carrier. The 1996 Act, moreover, expressly authorizes the consolidation of proceedings to address generic issues "in order to reduce administrative burdens on ... the State commission in carrying out its responsibilities" under the Act. 47 U.S.C. ¶ 252(g). It is much more efficient to address batch hot cut processes through a generic proceeding such as this one, rather than separately arbitrate the same issue in multiple interconnection agreements.
Thus, the actions we take in this order are not in conflict with USTA II or with the NPRM recently issued by the FCC. The actions we take to implement batch hot cut processes do not disturb the portions of TRO that were vacated by USTA II. By adopting batch hot cut processes, for example, we do not render any findings identifying markets in which CLECs are impaired without access to unbundled switching. Our order is limited to adopting batch hot cut processes that would be put into place in accordance with whatever rules are ultimately adopted by the FCC concerning the schedule for and extent of elimination of UNE-P.
Implementing workshops and further improvements to the batch hot cut processes must proceed now, however, in order to assure that hot cut deficiencies identified in this order are resolved on a timely basis, and that CLECs will have access to a seamless transition from UNE-P to UNE-L by the time that the cutover of loops actually occurs. If full-scale migrations from UNE-P to UNE-L were initiated before identified hot cut deficiencies had been rectified, the result could be either disruptions to end users' service and/or being switched back to the ILEC network, either as a direct customer or on a resale basis.
SBC and Verizon further argue that even assuming that the Commission's authority to implement a batch hot cut process were not vacated by USTA II, the original authority delegated under the TRO was narrowly defined, and did not authorize state commissions to require the sorts of system operational changes as set forth in the Proposed Decision. The ILECs claim that by addressing such issues as part of the batch hot cut implementation, the Commission engages in an operational impairment analysis. The ILECs argue that the only context in which such an impairment issues could have been addressed was in connection with a "potential deployment" analysis of mass market switching, but not as part of a batch cut implementation.
Contrary to the ILECs' claims, our batch cut order does not make findings concerning which markets, if any, are impaired without access to UNE-P. Instead, we are merely complying with the TRO mandated that batch hot cuts be implemented as a "seamless, low cost process." (TRO ¶ 423) In order to meet this requirement, all relevant processes involved in completing a hot cut seamlessly must be examined. In fact, the TRO expressly required that hot cut processes must "take[ ] into account the incumbent LEC's particular network design and cut over practices." 6 To satisfy this requirement, we must assure that all relevant operational systems implicated in a hot cut result in a seamless end-to-end process. In this order, we address those systems and processes that are implicated in assuring a seamless batch cut process.
Accordingly, in this decision, we complete the four tasks that the FCC assigned to states concerning the batch cut process: determining the volume of loops in the batch, adopting a specific process, evaluating the ability of an ILEC to timely migrate lines now served by UNE-P, and adopting Total Element Long Run Incremental Cost (TELRIC) rates for the batch cut process.7
In addition, we recognize that because no immediate change in UNE-P availability will occur as a result of this order, the hot cut processes addressed in this order may not be immediately required.
For SBC, our performance of these four tasks leads us to conclude:
1. SBC's volume limitations of 50 loops for daily batch, 100 for defined batch, and a negotiated higher amount for bulk project are approved on an interim basis.
2. SBC's proposed batch cut process is approved, subject to resolution of specified issues identified in this order, such as 911 coordination, that require resolution before final implementation.
3. SBC's ability to migrate customers through a seven-day notice option reasonable and workable.
4. We adopt TELRIC based prices for SBC, and a detailed price schedule contained in Appendix 1.
Concerning SBC's batch cut process, we conclude that additional work is required in various aspects of the proposed hot cut provisioning, as well as some resolution of pricing issues, before those processes will be adequate for use by CLECs in a seamless, efficiently priced manner. We outline in the order below the additional steps that SBC must accomplish in order to make the hot cut processes acceptable for use in a seamless manner and provide directives for completion of these additional steps.
For Verizon, our performance of these four tasks leads us to the following conclusions:
1. Verizon proposes to set a batch volume based on a "critical mass approach" in each central office and does not propose a specific numerical batch size. We approve this on an interim basis.
2. Verizon's proposed batch cut process is approved subject to resolution of specified issues identified in this order, such as 911 coordination, that require resolution before final implementation.
3. Verizon's proposal to migrate customers in an interval between 6 and 26 days fails to provide a seamless migration. We order Verizon to provide specific provisioning intervals to CLECs.
4. Verizon's proposed TELRIC prices for the batch hot cut process exceed those of SBC by large amounts and are not justified as reasonable. We order further proceedings to develop reasonable prices.
In summary, Verizon's proposed hot cut process is deficient in major elements, and incapable of providing a "seamless" transition without resolution of issues identified in this order. Further proceedings are essential to address these deficiencies.
On September 13, 2004, Verizon filed a request for the Commission to take official notice of the decision of the New York Public Service Commission dated August 25, 2004 (New York Decision) regarding Verizon's batch hot cut processes and pricing. Verizon argues that the New York Decision accepts batch hot cut processes that includes elements with which the Proposed Decision in this proceeding finds fault. Verizon argues that given the parallel issues raised in both proceedings and the need for a uniform national process, this Commission should take official notice of-and be guided by-the New York Decision in the event this proceeding moves forward.
We hereby take official notice of the New York Decision. In so doing, we recognize that our jurisdiction is independent of that of the State of New York, and we have discretion to reach independent conclusions. Thus, we are properly guided by our deliberations of the record developed in this proceeding relating to conditions applicable to California, not by the order of another state commission nor to conditions that exist in the State of New York. Nonetheless, to the extent Verizon or other parties believe additional information presented in the New York proceeding would be useful in resolving issues in the further workshops and proceedings as ordered in this Decision, they may seek to introduce such information for consideration in that context, and in accordance with whatever procedural processes are established by the ALJ.
1 A "hot cut" is the process whereby the incumbent carrier manually disconnects the customer's loop from the incumbent's switch and physically rewires it to the competitive LEC switch, while reassigning the customer's telephone number from the incumbent switch to the competitive local carrier's switch.
2 Report and Order and Order on Remand and Further Notice of Proposed Rulemaking, In the Matter of Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers (CC Docket No. 01-338); Implementation of the Local Competition Provisions of the Telecommunications Act of 1996 (CC Docket No. 96-989); Deployment of Wireline Services Offering Advanced Telecommunications Capability (CC Docket No. 98-147), FCC No. 03-36, ¶ 669 (rel. Aug. 21, 2003) (hereinafter, "TRO").
3 This Circuit Court Opinion is known as USTA II, where USTA I refers to a prior Circuit Court Opinion in United States Telecom Association v. FCC, 209 F.3d 415 (D.C. Cir. 2002) which had invalidated much of the FCC's previous efforts to identify network elements to be unbundled.
4 Re Unbundled Access to Network Elements; Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, Order and Notice of Proposed Rulemaking, WC Docket No. 04-313 and CC Docket No. 01-338, FCC 04-179 (released August 20, 2004) (hereinafter "USTA II NPRM").
5 Id., Par. 15
6 FCC Rule 319(d)(2)(ii)(A)(1)-(4)
7 47 C.F.R. §51.319(d)(2)(ii)A
