ALJ/DOT/avs Mailed 3/17/2003
Decision 03-03-033 March 13, 2003
BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA
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) |
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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) (Verizon UNE Phase) |
INTERIM OPINION ESTABLISHING INTERIM RATES
FOR NETWORK ELEMENTS OF VERIZON CALIFORNIA,
MODIFYING INTERIM PRICE FLOOR FORMULA ADOPTED IN
DECISION 99-12-018, AND ADOPTING NONRECURRING PRICES
TABLE OF CONTENTS
TITLE PAGE
INTERIM OPINION ESTABLISHING INTERIM RATES FOR NETWORK ELEMENTS OF VERIZON CALIFORNIA, MODIFYING INTERIM PRICE FLOOR FORMULA ADOPTED IN DECISION 99-12-018, AND ADOPTING NONRECURRING PRICES 22
II. Background and Procedural History 44
III. Interim Rates are Warranted 1010
IV. Interim UNE Pricing Proposals 1212
A. Verizon's Proposal Based on Florida Trend Analysis 1212
B. Joint Commenters' Proposal Based on Pacific's Interim Rates 1515
C. Joint Commenters' and TURN's New Jersey Proposal 1919
1. Verizon's Proposal Rests on a Flawed Foundation 2222
2. Problems with Verizon's Switching Proposal 2424
3. Problems with Verizon's Loop Proposal 2828
4. Joint Commenters' and TURN's New Jersey Proposal
is Preferable to the Proposal to Use Pacific Bell Interim Rates 3131
5. Adjustments Using the Synthesis Model 3434
V. Shared and Common Cost Markup 4646
VII. Non-recurring Prices 5555
VIII. Comments on Draft Decision 6767
IX. Assignment of Proceeding 6767
TITLE PAGE
ATTACHMENT A
ATTACHMENT B
ATTACHMENT C
INTERIM OPINION ESTABLISHING INTERIM RATES
FOR NETWORK ELEMENTS OF VERIZON CALIFORNIA,
MODIFYING INTERIM PRICE FLOOR FORMULA ADOPTED IN
DECISION 99-12-018, AND ADOPTING NONRECURRING PRICES
I. Summary
This decision in the "Verizon Unbundled Network Element (UNE) Phase" of the above-captioned rulemaking adopts interim monthly prices for a subset of network elements that Verizon California Inc. (Verizon) sells to competitive local exchange carriers (CLCs). Specifically, this decision establishes interim monthly rates for the following UNEs: 2-wire loops, 4-wire loops, 2-wire port, Centrex Port, DS-1 port, end office switching per minute of use, tandem switching per minute of use, and switch features. All other UNE prices remain at the levels adopted in Decision (D.) 97-01-022 or as determined by interconnection agreements. We find that interim rates are necessary due to the lengthy delays in this case and the fact that current rates for Verizon were not set based on a forward-looking cost methodology.
Specifically, this decision adopts the proposal presented by AT&T Communications of California, Inc. (AT&T), WorldCom Inc. (WorldCom), (collectively, "Joint Commenters") and The Utility Reform Network (TURN) to base interim prices on UNE rates recently adopted for Verizon in New Jersey. The New Jersey rates are adjusted based on the Federal Communications Commission's (FCC's) Synthesis Model and deaveraged into two zones for loops.1 For unbundled loops, the 2-wire interim loop rate is $10.56 in Zone 1 and $22.37 in Zone 2. The Zone 1 rate represents a 37% decrease from Verizon's current statewide average 2-wire loop rate of $16.81. The Zone 2 rate represents a 33% increase to the current loop rate. For unbundled switching, we adopt interim end office and tandem switching rates that are 60% and 31% less than current rates, respectively. We adopt a basic port rate of $2.12 that is 54% less than the current rate. The complete list of adopted interim rates is set forth in Appendix A.
We decline to adopt Joint Commenters' proposal to alter the markup for shared and common costs embedded in current UNE rates. The markup included in Verizon's UNE rates shall remain at 22% as adopted in D.97-01-022, rather than the 8% proposed by Joint Commenters.
This proceeding will remain open to set final UNE rates for Verizon. The interim UNE rates adopted in this order are subject to adjustment, either up or down, from the effective date of this order until final rates are adopted.
As part of its interim rate proposal, Verizon requested that the Commission review the interim pricing flexibility it was granted for Category II services2 in D.99-12-018. In response, this decision modifies the interim price floor formula adopted for Verizon in D.99-12-018. In calculating price floors for Category II retail services, Verizon should use the interim UNE rates adopted in this order and incorporate other changes to the price floor formula, as discussed in this order, to reflect the lower UNE rates adopted today. Ultimately, any interim price floors that are set for Verizon through tariffs or contracts using this updated formula will be replaced, on a prospective basis, with permanent price floors as determined in the next phase of this proceeding. We decline to institute any true-up mechanism for these interim price floors. Nevertheless, we will require Verizon to make clear in any contracts that it enters into with customers based on these interim Category II price floors that the prices in the contract are subject to change upon adoption of final price floors by the Commission in the later phase of this case.
Finally, today's decision sets prices for the initial fees that competitors pay Verizon to order and provision the use of network facilities, otherwise known as "nonrecurring prices." The Commission previously established nonrecurring costs for Verizon in D.98-12-079. Today's order applies a 22% markup for shared and common costs to Verizon's nonrecurring costs and orders Verizon to make several changes in how it has combined these costs to form the nonrecurring prices competitors will pay. Today's order directs Verizon to file a revised list of its nonrecurring charges complying with the changes set forth in this order.
