COM/CXW/jyc Mailed 9/23/2002

Decision 02-09-049 September 19, 2002

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF ALIFORNIA

Joint Application of AT&T Communications of California, Inc. (U 5002 C) and WorldCom, Inc. for the Commission to Reexamine the Recurring Costs and Prices of Unbundled Switching in Its First Annual Review of Unbundled Network Element Costs Pursuant to Ordering Paragraph 11 of D.99-11-050.	Application 01-02-024 (Filed February 21, 2001)
Application of AT&T Communications of California, Inc. (U 5002 C) and WorldCom, Inc. for the Commission to Reexamine the Recurring Costs and Prices of Unbundled Loops in Its First Annual Review of Unbundled Network Element Costs Pursuant to Ordering Paragraph 11 of D.99-11-050.	Application 01-02-035 (Filed February 28, 2001)
Application of The Telephone Connection Local Services, LLC (U 5522 C) for the Commission to Reexamine the Recurring Costs and Prices of the DS-3 Entrance Facility Without Equipment in Its Second Annual Review of Unbundled Network Element Costs Pursuant to Ordering Paragraph 11 of D.99-11-050.	Application 02-02-031 (Filed February 28, 2002)

Application of AT&T Communications of California, Inc. (U 5002 C) and WorldCom, Inc. for the Commission to Reexamine the Recurring Costs and Prices of Unbundled Interoffice Transmission Facilities and Signaling Networks and Call-Related Databases in Its Second Annual Review of Unbundled Network Element Costs Pursuant to Ordering Paragraph 11 of D.99-11-050.	Application 02-02-032 (Filed February 28, 2002)
Application of Pacific Bell Telephone Company (U 1001 C) for the Commission to Reexamine the Costs and Prices of the Expanded Interconnection Service Cross-Connect Network Element in the Second Annual Review of Unbundled Network Element Costs Pursuant to Ordering Paragraph 11 of D.99-11-050.	Application 02-02-034 (Filed February 28, 2002)
Application of XO California, Inc. (U 5553 C) for the Commission to Reexamine the Recurring Costs of DS1 and DS3 Unbundled Network Element Loops in Its Second Annual Review of Unbundled Network Element Costs Pursuant to Ordering Paragraph 11 of D.99-11-050.	Application 02-03-002 (Filed March 1, 2002)

OPINION ON REMAND ADDRESSING

SHARED AND COMMON COST MARKUP

ESTABLISHED IN DECISION 99-11-050

AND UNBUNDLED NETWORK ELEMENT

RECURRING PRICES

I. Summary

This decision addresses a remand ordered by the U.S. District Court for the Northern District of California. (AT&T Communications of California Inc. et al., v. Pacific Bell Telephone Company, et al., Order on Cross Motions for Summary

Judgment, No. C01-02517 (CW)(N.D. Cal. August 6, 2002)("Remand Order"). In response to the Remand Order, this decision modifies the shared and common cost markup percentage, which is a component of the price of unbundled network elements (UNEs) that Pacific Bell Telephone Company (Pacific) charges competing local telephone carriers for use of its network. The shared and common cost markup that was originally adopted in Decision (D.) 99-11-050 is increased from 19% to 21%. This increase results from removal of $537.8 million in non-recurring UNE costs that appear to have been inadvertently double-counted in D.99-11-050.

This decision also orders modification to Pacific's monthly UNE recurring charges. The Commission concludes that the total direct UNE cost figure that the Court remanded for review was also used to set Pacific's monthly recurring charges. Therefore, the double-counting must be remedied in those charges as well. The decision calculates the amount of overstatement in recurring costs and directs Pacific to remove 13% from the expense portion of its UNE recurring costs. The Commission will review and adopt these changes after further filings by the parties in response to today's order.

The changes ordered by this decision to the markup and recurring costs shall be made on a prospective basis from the effective date of this order. The implementation of the 2% increase in the markup is stayed pending resolution of the amount of adjustment needed to monthly recurring charges so that both of these changes can be implemented simultaneously. Once the adjustment to recurring costs is identified, all UNE rate changes ordered today will be implemented with today's effective date. Pacific is directed to track the UNEs purchased by other carriers that are impacted by these UNE rate changes so that once the net rate change is identified, it can be made effective today.