Decision 00-05-020 May 4, 2000

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

In the Matter of the Application of Pacific Bell (U 1001 C), a Corporation, for Authority to Categorize Centrex as a Category III Service. ____________________________________________ In the Matter of the Application of Pacific Bell (U 1001 C), a Corporation, for Authority to Categorize Toll-Free (8XX) and Business MTS IntraLATA Toll Services as Category III Services.

Application 98-07-020 (July 8, 1998) Application 98-07-029 (July 10, 1998)

Colleen O'Grady, Attorney at Law, for Pacific Bell; and Pillsbury, Madison and Sutro, by Patrick Thompson, Attorney at Law, for applicant.

Tony Diterro, for MCI Telecommunications; Glenn Stover, Attorney at Law, for AT&T Communications; and Peter A. Casciato, a Professional Corporation, by Peter Casciato, Attorney at Law, for California Cable Television Association, interested parties.

Janice L. Grau and Sindy Yun, Attorneys at Law, for the Office of Ratepayer Advocates.

TABLE OF CONTENTS

Title Page

O P I N I O N 2

I. Summary 2

II. Jurisdiction 2

III. Background 3

IV. Price Flexibility 3

V. Proceeding Type 5

VI. Prehearing Conferences 5

VII. Presiding Officer and Scope of Proceeding 5

VIII. Customer Notice 6

IX. Public Correspondence 6

X. Evidentiary Hearing 7

XI. Market Power Standard 8

A. Pacific Bell's Position 9

B. ORA's Position 10

C. Discussion 11

D. Conclusion 12

XII. Centrex Service 12

A. Centrex Proposal 13

B. Pacific Bell's Position 14

1. Relevant Market 14

2. Entry & Exit 15

3. Demand Elasticity 16

4. Supply Elasticity 17

5. Cost Support and Ceiling Rate 17

C. AT&T, MCI WorldCom, & CCTA's Joint Position 18

D. ORA's Position 19

E. Market Power Discussion 22

F. Price Discussion 25

G. Above the Line Discussion 26

H. Conclusion 26

TABLE OF CONTENTS

(Continued)

Title Page

XIII. Toll-Free (8XX) and Business Toll Service 27

A. Toll-Free and Business Local Toll Service Proposal 29

B. Pacific Bell's Position 29

1. Relevant Market 30

2. Entry and Exit 30

3. Demand Elasticity 30

4. Supply Elasticity 31

5. Cost Support and Ceiling Rate 32

C. Interested Parties Position 33

D. ORA's Position 34

E. Market Power Discussion 34

F. Price Discussion 38

G. Above-the-Line Discussion 39

H. Reporting Requirements 39

I. Conclusion 40

XIV. Draft Decision Comments 41

Findings of Fact 41

Conclusions of Law 45

ORDER 46

O P I N I O N

I. Summary

By this decision Pacific Bell is authorized to move its Category II Basic Centrex Line, Centrex Basic Features, Centrex Optional Station Features, Centrex Optional System Features, Toll-Free, and Business MTS IntraLATA Toll Services (Business Local Toll) services to Category III. The ceiling rate for Basic Centrex Line, Centrex Basic Features, Centrex Optional Station Features, and Centrex Optional System Features may be increased up to ten percent of the currently effective ceiling rate. All services being moved from Category II to Category III shall continue to be accounted for as above-the-line services for ratemaking purposes.