IX. Price Indexing

A. RTC

RTC requested that the "I-X" price indexing formula, which was adopted and suspended in D.96-12-074, continue to be suspended. RTC pointed out that, in D.98-10-026, the Commission continued suspension of the price indexing formula for Pacific and Verizon.

RTC stated that reinstatement of indexing would cause it financial harm. It stated that it would cause inefficient pricing and resource allocation because it is uniformly applied to all prices. This would cause below cost prices to move further below cost. RTC also pointed out that it cannot use market power to manipulate Category 1 rates because they are set by the Commission. For Category 2 services, it cannot charge below the floor rate and use other revenue to cross-subsidize below cost rates to gain a competitive advantage. For the above reason, RTC believes that there is no reason to reinstate price indexing.

RTC proposed that, if the suspension is lifted, a productivity factor of no more than 2.69% should be used. RTC represents that this value represents the most current information on total industry productivity.

B. ORA

ORA agrees with RTC that the suspension of price indexing should continue. Additionally, there would be no change in rate caps, ceiling or floors for Category 1 and 2 services and no change in pricing flexibility.

C. Discussion

Because the parties agree and the record does not contain a contrary proposal, we will continue suspension of the I-X portion of the price adjustment formula.