IV. Price Flexibility
Rate changes for Category II services must occur by advice letter and price reductions at or above the price floor2 become effective on five days' notice, while price increases up to the approved ceiling rate are effective on 30 days' notice.3 The currently effective prices for Category II services were capped as price ceilings for calendar years 1996, 1997, and 1998 with the exception of Z-factor adjustments and Commission approved applications for increases above the rate caps.4 With the phasing out of Z-factor adjustments,5 the Z-factor exception is less likely applicable.
Conversely, rate changes set below the ceiling rate for Category III services are not subject to protests and may be changed upon one-day's notice.6 Subsequent changes to the ceiling rate of a Category III service which decrease the ceiling rate or increase the ceiling rate less than 5 percent (%) become temporarily effective on one-day's notice and five days' notice, respectively, and are made permanent on the twentieth day after filing, if not protested. A 5% or greater increase in the ceiling rate becomes temporarily effective on 30 days' notice and permanent on the thirtieth day after filing, if not protested. Protested changes in the ceiling rate remain temporary until the protest is withdrawn or resolved by Commission action. If the protest is not withdrawn or resolved, the ceiling rate reverts to its previously authorized level.
A Category III classification reduces the number of advice letters that need to be filed, shortens the time period for advice letters, to become effective extends the time allowance for promotions and lessens contract approval requirements. Hence, Pacific Bell can obtain additional price flexibility for its Centrex, Toll-Free, and Business MTS services by re-classifying these services from Category II to Category III.
2 The price floor standard was the lower of the long run incremental cost (LRIC) or direct embedded costs (DEC) for a specific rate element (56 CPUC2d 117, 263). However, subsequent to the submittal of this proceeding, the price floor standard was modified to the volume sensitive portion of TSLRIC for the service plus the contribution from any monopoly building block necessary for the service. See Rulemaking to Govern Open Access to Bottleneck Services and Establish a Framework for Network Architecture Development of Dominant Carrier Networks, Decision (D.) 99-11-050, mimeo., at 271-272, (1999). 3 Id. at 264 and 65 CPUC2d, 156. 4 63 CPUC2d 377, 406. 5 OIR into Third Triennial Review of the Regulatory Framework, D.98-10-026, mimeo., at 93. 6 Resolution T-15139, dated March 24, 1993.
