7. Comments on Alternate Decision

The alternate decision of Commissioner Brown in this matter was mailed to the parties in accordance with Pub. Util. Code Section 311(g)(1) and Rule 77.7 of the Commission's Rules of Practice and Procedure. Comments were filed on December 13, 2002 and reply comments on December 18, 2002. We have reviewed the comments and taken them into account, as appropriate, in finalizing this order.

8. Assignment of Proceeding

Carl Wood is the Assigned Commissioner and Karen Jones is the Assigned Administrative Law Judge in this proceeding.

Findings of Fact

1. Until the FCC issues a further order that becomes final, for the foreseeable future the incumbent LECs will continue to offer line sharing as a UNE.

2. State Commissions have the authority to establish additional UNEs pursuant to § 51.317.

3. Line sharing is the only viable option for a CLEC who seeks to compete with the incumbent LEC in providing DSL service at retail.

4. Under current FCC regulations, a CLEC has no right of access to the high-speed transmission component of cable modem service, which is the functional equivalent of DSL service.

5. The FCC is silent on the rules to follow in setting of permanent HFPL prices.

6. The proper charge for the HFPL is a policy issue and is not based on a TELRIC cost study for the HFPL.

7. 47 C.F.R. § 51.505(d) lists the factors that may not be considered in calculation of the forward-looking economic cost of a network element.

8. It is not economically feasible for a competitor to pay $11.70 for a loop, and then attempt to compete against the ILEC, or its affiliate's, DSL service provided over less expensive line-shared loops.

9. This phase of the PLS proceeding is scheduled to set a permanent price for the HFPL to replace the interim rates adopted in the interim arbitration phase in D.00-09-074.

10. Pacific and Verizon asserted in their filings at the FCC that they were recovering the full cost of the loop through existing services.

11. A number of states have adopted a $0 rate for the HFPL UNE.

12. The purpose of a true-up is to reimburse carriers for overcharges or undercharges in the amount charged for the HFPL between the time the interim rates went into effect, and the effective date of the permanent rates adopted in this decision.

13. A true-up is warranted for both Pacific and Verizon because the rates adopted for Pacific in the interim phase was $5.85, and for Verizon, $3.00, while a permanent rate of $0 is being adopted in this decision.

Conclusions of Law

1. The FCC's line sharing order is not vacated, and continues to apply as a matter of law until January 2, 2003.

2. The Commission has independent authority pursuant to Pub. Util. Code § 709.7 to require line sharing and to set permanent rates for the line-sharing UNE.

3. The Act's "necessary and impair' standard that limits the FCC's unbundling rules, has no bearing on the states' authority under § 251(d)(3).

4. Section 251(d)(2) does not apply to the states; it applies only to the FCC.

5. The FCC's rules clearly allow states to set a rate of $0 for the HFPL.

6. Since the ILECs recover the cost of the loop from tariffed services, it is appropriate to set a $0 rate for the HFPL.

7. The Commission may decide to endorse all or some of the rulings in D.00-09-074, but is not required to do so, since it has developed a separate record in this proceeding.

8. A $0 price for the HFPL does not violate § 254(k).

9. Pacific's proposal to collect $5.85, or 50% of the adopted loop rate, to make up for the shortfall in residential basic exchange revenues, violates 47 C.F.R. § 51.505(d)(4).

10. Verizon's "embedded constraint" theory violates 47 C.F.R. § 51.505(d)(1).

11. Pacific and Verizon should reimburse all carriers (including their affiliates ASI and VADI, respectively) which purchased the HFPL over the past several months since the interim rates went into effect with $5.85 per month/per line (Pacific) and $3.00 per month/per line (Verizon), plus interest.

12. Interest on the revenues in the memoranda accounts should be calculated using the three-month commercial paper rate.

13. Pacific and Verizon are not authorized to request Limited Exogenous Factor treatment for the administrative costs associated with returning HFPL revenues to the carriers that purchased HFPL.

INTERIM ORDER

IT IS ORDERED that:

1. Pacific Bell Telephone Company (Pacific) and Verizon California Inc. (Verizon) shall continue to offer the High Frequency Portion of the Loop (HFPL) to Competitive Local Exchange Carriers.

2. Pacific and Verizon shall implement the rates for the HFPL adopted herein within 30 days of the effective date of this order.

3. Within 60 days of the effective date of this order, Pacific shall reimburse carriers (including its affiliate ASI) that purchased the HFPL over the past several months since the interim rates went into effect with $5.85 per month/per line, plus interest.

4. Within 60 days of the effective date of this order, Verizon shall reimburse carriers (including its affiliate VADI) that purchased the HFPL over the past several months since the interim rates went into effect with $3.00 per month/per line, plus interest.

5. The May 24, 2002 motion of Verizon California Inc. to suspend the comment period of the Draft Decision and not put the Draft Decision on the Commission's meeting agenda until further notice, is hereby denied.

6. The November 21, 2002 motion of Speakeasy, Inc; Earthlink, Inc; Sonic-Net Inc; InReach Internet LLC; DirecTV Broadband, Inc; and DSLExtreme.com to intervene in this proceeding is hereby denied.

This order is effective today.

Dated January 30, 2003, at San Francisco, California.

MICHAEL R. PEEVEY

President

GEOFFREY F. BROWN

SUSAN P. KENNEDY

Commissioners

I reserve the right to join Commissioner Wood's dissent.

/s/ LORETTA M. LYNCH

Commissioner

I reserve the right to file a dissent.

/s/ CARL W. WOOD

Commissioner

APPENDIX A

LIST OF APPEARANCES

************ APPEARANCES ************ Rose Johnson Attorney At Law AT&T COMMUNICATIONS OF CALIFORNIA, INC. 795 FOLSOM STREET, ROOM 2149 SAN FRANCISCO CA 94107 (415) 383-9491 rejohnson@att.com For: AT&T Anita Taff-Rice JEREMY MEIER Attorney At Law BOWEN LAW GROUP 235 MONTGOMERY STREET, SUITE 920 SAN FRANCISCO CA 94104 (415) 394-7500 anitataffrice@earthlink.net For: RHYTHMS LINKS, INC. Stephen P. Bowen ANITA TAFF-RICE Attorney At Law BOWEN LAW GROUP 235 MONTGOMERY STREET, SUITE 920 SAN FRANCISCO CA 94104 (415) 394-7500 steve.bowen@bowenlawgroup.com For: RHYTHMS LINS, INC. and COVAD COMMUNICATIONS COMPANY Jeffrey F. Beck SEAN P. BEATTY Attorney At Law COOPER, WHITE & COOPER ,L.L.P. 201 CALIFORNIA ST., 17TH FLOOR SAN FRANCISCO CA 94111 (415) 433-1900 smalllecs@cwclaw.com For: EVANS TELEPHONE, HAPPY VALLEY, HORNITOS, KERMAN, PINNALCES, SISKIYOU, VOLCANO, WINTERHAVEN Mark P. Schreiber E. GARTH BLACK Attorney At Law COOPER, WHITE & COOPER, LLP 201 CALIFORNIA STREET, 17TH FLOOR SAN FRANCISCO CA 94111 (415) 433-1900 mschreiber@cwclaw.com For: Roseville Telephone Company Christian E. Binnig THEODORE A. LIVINGSTON Attorney At Law MAYER, BROWN & PLATT 190 SOUTH LA SALLE STREET CHICAGO IL 60603 (312) 701-7079 cbinnig@mayerbrown.com For: PACIFIC BELL TELEPHONE COMPANY Lisa Crowley COVAD COMMUNICATIONS 4250 BURTON DRIVE SANTA CLARA CA 95054 icrowley@covad.com William J. Cobb Iii COVAD COMMUNICATIONS COMPANY 816 CONGRESS AVENUE, STE. 1100 AUSTIN TX 78701 bcobb@covad.com For: Covad Communications Jennifer L. Mc Clellan Attorney At Law HUNTON & WILLIAMS 951 E. BYRD STREET RICHMOND VA 23219 (804) 788-8571 jmcclellan@hunton.com For: VERIZON CALIFORNIA INC. W. Jeffery Edwards JENNIFER L. MCCLELLAN-JMCCLELLAN@HUNTON. Attorney At Law HUNTON & WILLIAMS 951 EAST BYRD STREET RICHMOND VA 23219-4074 (804) 788-8721 jedwards@hunton.com For: VERIZON CALIFORNIA INC. Earl Nicholas Selby Attorney At Law LAW OFFICES OF EARL NICHOLAS SELBY 418 FLORENCE STREET PALO ALTO CA 94301-1705 (650) 323-0990 ens@loens.com For: ICG TELECOM GROUP, INC. Andrew Worseck Attorney At Law MAYER, BROWN & PLATT 190 S. LA SALLE CHICAGO IL 60603 (312) 701-7367 aworseck@mayerbrown.com For: PACIFIC BELL William C. Harrelson Attorney At Law MCIMETRO ACCESS TRANSMISSION SRVCES, LLC 201 SPEAR STREET SAN FRANCISCO CA 94105 (415) 228-1090 william.harrelson@wcom.com For: WORLD COM, INC. Michelle R. Galbraith Attorney At Law PACIFIC BELL 140 NEW MONTGOMERY STREET, ROOM 1520 SAN FRANCISCO CA 94105 (415) 542-7657 mg9543@sbc.com Randolph Deutsch Attorney At Law SIDLEY, AUSTIN, BROWN & WOOD 555 CALIFORNIA STREET, SUITE 5000 SAN FRANCISCO CA 94104 (415) 772-1280 rdeutsch@sidley.com For: AT&T Melissa Waksman Attorney At Law XO CALIFORNIA, INC. ONE FRONT STREET, SUITE 1850 SAN FRANCISCO CA 94111 (415) 901-3816 melissa.waksman@xo.com For: XO CALIFORNIA Karen P Paull Legal Division RM. 5000 505 VAN NESS AVE San Francisco CA 94102 (415) 703-2630 kpp@cpuc.ca.gov For: ORA Julio Ramos Legal Division RM. 5130 505 VAN NESS AVE San Francisco CA 94102 (415) 703-4742 jur@cpuc.ca.gov For: CPUC OFFICE OF RATEPAYER ADVOCATES Eric S. Heath SPRINT COMMUNICATIONS COMPANY, L. P. 100 SPEAR STREET, SUITE 930 SAN FRANCISCO CA 94105 (415) 371-7177 eric.s.heath@mail.sprint.com For: Sprint Communications Company, L. P. Christine Mailloux THE UTILITY REFORM NETWORK 711 VAN NESS AVENUE, SUITE 350 SAN FRANCISCO CA 94102 (415) 929-8876 cmailloux@turn.org For: THE UTILITY REFORM NETWORK (TURN) Regina Costa THE UTILITY REFORM NETWORK 711 VAN NESS AVE., STE 350 SAN FRANCISCO CA 94102 (415) 929-8876 rcosta@turn.org For: THE UTILITY REFORM NETWORK (TURN) Elaine Duncan Attorney At Law VERIZON CALIFORNIA INC. 711 VAN NESS AVENUE, SUITE 300 SAN FRANCISCO CA 94102 (415) 474-0468 elaine.duncan@verizon.com For: VERIZON CALIFORNIA INC. Richard A. Chapkis Attorney At Law VERIZON CALIFORNIA INC. 112 LAKEVIEW CANYON ROAD CA 500 LB THOUSAND OAKS CA 91362-3811 (805) 372-6233 richard.chapkis@verizon.com Barbara Van Gelder WILEY, REIN & FIELDING 1776 K. ST. NW WASHINGTON DC 20006 (202) 719-7032 bvangeld@wrf.com For: ALCATEL Jason M. Wakefield Associate Counsel WORLDCOM, INC. 701 BRAZOS STREET, SUITE 600 AUSTIN TX 78701 (512) 495-6735 jason.wakefield@wcom.com For: WORLDCOM, INC. Maria E. Stevens Executive Division RM. 500 320 WEST 4TH STREET SUITE 500 Los Angeles CA 90013 (213) 576-7012 mer@cpuc.ca.gov Ting-Pong Yuen Telecommunications Division AREA 3-D 505 VAN NESS AVE San Francisco CA 94102 (415) 703-2895 tpy@cpuc.ca.gov For: CPUC TELECOM DIVISION ********* INFORMATION ONLY ********** Camille A. Estes BOWEN LAW GROUP 235 MONTGOMERY STREET, SUITE 920 SAN FRANCISCO CA 94102 (415) 394-7500 camille.estes@bowenlawgroup.com For: AT&T COMMUNICATIONS OF CALIFORNIA Deborah R. Scott Associate General Counsel CITIZENS COMMUNICATIONS PO BOX 340 EL GROVE CA 95759 (916) 691-5550 drscott@czn.com Charles E. Born Manager-State Government Affairs CITIZENS TELECOMMUNICATIONS CO. OF CA PO BOX 340 ELK GROVE CA 95759 Glenn Harris Deputy City Attorney CITY AND COUNTY OF SAN FRANCISCO 1 DR. CARLTON B, GOODLETT PLACE SAN FRANCISCO CA 94102-4682 (415) 554-6780 GLENN.HARRIS@SFGOV.ORG Ellen Lee CONTRA COSTA TIMES 127 SPRINT ST. PLEASANTON CA 94566 (925) 847-2125 elee@cctimes.com Martin A. Mattes Attorney At Law NOSSAMAN GUTHNER KNOX & ELLIOTT, LLP 50 CALIFORNIA STREET, 34TH FLOOR SAN FRANCISCO CA 94111-4799 (415) 398-3600 mmattes@nossaman.com For: Intermedia Communications, Inc. Karen M. Potkul Vice President-Legal & Regulatory Affair OX CALIFORNIA INC. 1924 DEERE AVENUE, STE 110 SANTA ANA CA 92705 (949) 417-7766 karen.potkul@xo.com David Discher Attorney At Law PACIFIC BELL TELEPHONE COMPANY 140 NEW MONTGOMERY STREET SAN FRANCISCO CA 94105 (415) 542-7673 dd2526@sbc.com For: pacific Bell Telephone Company Greg R. Gierczak Executive Director-Regulatory ROSEVILLE TELEPHONE COMPANY PO BOX 969 ROSEVILLE CA 95678 Linda Lupton Regulatory Manager ROSEVILLE TELEPHONE COMPANY PO BOX 969 ROSEVILLE CA 95661

Lisa Crowley COVAD COMMUNICATIONS 4250 BURTON DRIVE SANTA CLARA CA 95054 icrowley@covad.com William J. Cobb III COVAD COMMUNICATIONS COMPANY 816 CONGRESS AVENUE, STE. 1100 AUSTIN TX 78701 bcobb@covad.com For: Covad Communications Jennifer L. Mc Clellan Attorney At Law HUNTON & WILLIAMS 951 E. BYRD STREET RICHMOND VA 23219 (804) 788-8571 jmcclellan@hunton.com For: VERIZON CALIFORNIA INC. W. Jeffery Edwards JENNIFER L. MCCLELLAN-JMCCLELLAN@HUNTON. Attorney At Law HUNTON & WILLIAMS 951 EAST BYRD STREET RICHMOND VA 23219-4074 (804) 788-8721 jedwards@hunton.com For: VERIZON CALIFORNIA INC. Earl Nicholas Selby Attorney At Law LAW OFFICES OF EARL NICHOLAS SELBY 418 FLORENCE STREET PALO ALTO CA 94301-1705 (650) 323-0990 ens@loens.com For: ICG TELECOM GROUP, INC. Andrew Worseck Attorney At Law MAYER, BROWN & PLATT 190 S. LA SALLE CHICAGO IL 60603 (312) 701-7367 aworseck@mayerbrown.com For: PACIFIC BELL Eric S. Heath SPRINT COMMUNICATIONS COMPANY, L. P. 100 SPEAR STREET, SUITE 930 SAN FRANCISCO CA 94105 (415) 371-7177 eric.s.heath@mail.sprint.com For: Sprint Communications Company, L. P. Christine Mailloux THE UTILITY REFORM NETWORK 711 VAN NESS AVENUE, SUITE 350 SAN FRANCISCO CA 94102 (415) 929-8876 cmailloux@turn.org For: THE UTILITY REFORM NETWORK (TURN) Regina Costa THE UTILITY REFORM NETWORK 711 VAN NESS AVE., STE 350 SAN FRANCISCO CA 94102 (415) 929-8876 rcosta@turn.org For: THE UTILITY REFORM NETWORK (TURN) Elaine Duncan Attorney At Law VERIZON CALIFORNIA INC. 711 VAN NESS AVENUE, SUITE 300 SAN FRANCISCO CA 94102 (415) 474-0468 elaine.duncan@verizon.com For: VERIZON CALIFORNIA INC. Richard A. Chapkis Attorney At Law VERIZON CALIFORNIA INC. 112 LAKEVIEW CANYON ROAD CA 500 LB THOUSAND OAKS CA 91362-3811 (805) 372-6233 richard.chapkis@verizon.com Barbara Van Gelder WILEY, REIN & FIELDING 1776 K. ST. NW WASHINGTON DC 20006 (202) 719-7032 bvangeld@wrf.com For: ALCATEL Jason M. Wakefield Associate Counsel WORLDCOM, INC. 701 BRAZOS STREET, SUITE 600 AUSTIN TX 78701 (512) 495-6735 jason.wakefield@wcom.com For: WORLDCOM, INC.