STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

February 4, 2003

TO: ALL PARTIES OF RECORD IN RULEMAKING 93-04-003/I93-04-002.

Decision 03-01-077 is being mailed without the Dissents of Commissioner Lynch and Commissioner Wood. The Dissents will be mailed separately.

Very truly yours,

/s/ Carol A. Brown, Interim Chief

Administrative Law Judge

CAB:vfw

COM/GFB/RW1/vfw

Mailed 2/04/03

Decision 03-01-077 January 30, 2003

Rulemaking on the Commission's Own Motion to Govern Open Access to Bottleneck Services and Establish a Framework for Network Architecture Development of Dominant Carrier Networks.	Rulemaking 93-04-003 (Filed April 7, 1993)
Investigation on the Commission's Own Motion into Open Access and Network Architecture Development of Dominant Carrier Networks.	Investigation 93-04-002 (Filed April 7 1993) (Permanent Line Sharing Phase)

INTERIM OPINION ESTABLISHING A PERMANENT RATE FOR THE

HIGH-FREQUENCY PORTION OF THE LOOP

(See Appendix A for a List of Appearances)

TABLE OF CONTENTS

Title Page

INTERIM OPINION ESTABLISHING A PERMANENT RATE FOR THE

HIGH-FREQUENCY PORTION OF THE LOOP ...............................................................1

INTERIM OPINION ESTABLISHING A PERMANENT RATE FOR THE

HIGH-FREQUENCY PORTION OF THE LOOP ...............................................................2

1. Summary 2

2. Background 3

3. The D.C. Circuit's USTA Decision Does Not Preclude This Commission from Setting Permanent Rates for the HFPL 5

3.1 Background 5

3.2 Parties' Positions 6

3.3 Discussion 9

4. The Appropriate Charge for Use of the High Frequency Portion of the Loop is $0 16

4.1. Parties' Positions 16

4.1.1. Rhythms' Links, Inc.'s (Rhythms) Position 16

4.1.2 TURN's Position 18

4.1.3 ORA's Position 21

4.1.4 Pacific's Position 22

4.1.5 Verizon's Position 25

4.1.6 Discussion 27

5. True-up and Treatment of Balances in Memoranda Accounts 36

6. Limited Exogenous (LE) Factor Treatment 37

7. Comments on Alternate Decision 38

Findings of Fact........................................................................................................39 Conclusions of Law................................................................................................. 41

INTERIM ORDER.....................................................................................................42

INTERIM OPINION ESTABLISHING A PERMANENT RATE FOR THE

HIGH-FREQUENCY PORTION OF THE LOOP

1. Summary

In this decision, we exert our independent state authority under Public Utilities Code § 709.7 to order Pacific Bell Telephone Company (Pacific) and Verizon California Inc. (Verizon) to offer the line sharing Unbundled Network Element (UNE). We adopt a permanent UNE rate for the High-Frequency Portion of the Loop (HFPL)¹ of $0 for both Pacific and Verizon.

The Interim Line Sharing (ILS) decision determined that there should be a true-up from the interim rates adopted in the ILS proceeding, and the final rates adopted in this Permanent Line Sharing Phase. The ILS proceeding established memorandum accounts to track the revenues from the purchase of the HFPL by Competitive Local Exchange Carriers (CLECs). Since a rate of $0 is adopted for the HFPL, Pacific is required to refund the revenues from the $5.85 monthly recurring rate, and Verizon, the $3.00 monthly recurring rate adopted in the ILS proceeding, to the CLEC that purchased each loop.

Our interest is in encouraging the availability of affordable broadband services to California consumers. As a policy, we wish to encourage competition in residential DSL offerings because today there is a lack of affordable, ubiquitously available broadband service options provided by alternative cable modem, satellite and wireless technologies. Until such time that comparatively affordable, competitive broadband alternatives are widely available to residential consumers, line sharing should continue to be offered as a UNE.