VI. Assignment of Proceeding

Commissioner Michael R. Peevey is the Assigned Commissioner and Dorothy Duda is the assigned Administrative Law Judge in this proceeding.

Findings of Fact

1. In D.03-03-033, the Commission set new nonrecurring prices for Verizon which took effect on May 27, 2003.

2. Verizon has not completed the billing system changes necessary to charge CLCs the nonrecurring prices adopted in D.03-03-033.

3. In D.03-03-033, the Commission stated that any contracts entered into with customers based on the price floors adopted in that order would be subject to change upon adoption of final price floors.

4. Under GO 96-A, Verizon is required to state in customer contracts that the contracts are subject to change or modification by the Commission.

5. D.03-03-033 allows Verizon to enter long-term contracts based on interim price floors, in advance of a determination of Verizon's actual price floors.

Conclusions of Law

1. Verizon's request to allow it to continue to charge its former nonrecurring prices until March 2004 is unreasonable and does not give Verizon the proper incentives to implement the new rates.

2. Verizon should defer billing for nonrecurring charges, with interest, until its billing system changes are complete.

3. The following language should be added to Ordering Paragraph 7 of D.03-03-033:

If Verizon cannot bill nonrecurring charges at the effective rate, it should track the types of orders it receives and defer billing until it can render a correct bill. Verizon may include interest at the three-month commercial paper rate on its deferred bills. If Verizon is unable to track the types of orders it receives during this deferred billing period, it should assume the lowest rate in any category in which the proper charge cannot be determined.

4. The customer notification required in D.03-03-033 goes beyond that required by GO 96-A and is unnecessary.

5. Because Verizon's actual price floors have yet to be determined, the Commission should not modify language that states that prices in customer contracts will be subject to change upon adoption of final price floors.

6. The second full paragraph on page 52 of D.03-03-033 should be modified as follows (new text is underlined):

Joint Commenters suggest that some sort of true-up mechanism is necessary if these interim price floors are too low. In D.99-12-018, the Commission did not establish a true-up mechanism for interim price floors. Clearly, in the final phase of this case when the Commission sets final UNE rates for Verizon, new prices floors will be adopted. At that time, any interim price floors will be replaced with new ones, but we will not institute any kind of true-up mechanism. In other words, Verizon is not required to modify contracts retroactively to charge new price floors. We will, however, require Verizon to make prospective adjustments to the prices in any of its customer contracts upon the adoption of final price floors by the Commission if contract prices are below the new price floors. Verizon should ensure that its contracts adhere to the existing requirements of General Order 96-A to notify customers that agreements are subject to change or modification by the Commission.

7. Conclusion of Law 30 of D.03-03-033 should be replaced with the following:

Verizon should make prospective adjustments to the prices in any of its customer contracts upon the adoption of final price floors by the Commission and should adhere to GO 96-A requirements to notify customers that contracts are subject to change or modification.

8. Ordering Paragraph 9 of D.03-03-033 should be replaced with the following:

Verizon shall make prospective adjustments to the prices in any of its customer contracts upon the adoption of final price floors by the Commission if contract prices are below the newly adopted price floors.

ORDER

IT IS ORDERED that:

9. The May 12, 2003 petition of Verizon California Inc. (Verizon) to modify Decision (D.) 03-03-033 to suspend the schedule for implementing revisions to the nonrecurring price structure is denied.

10. The May 12, 2003 petition of Verizon to modify Ordering Paragraph 9 of D.03-03-033 regarding customer notification of price changes is granted in part, as set forth in this order, and denied in all other respects.

11. D.03-03-033 is modified as set forth in this order.

This order is effective today.

Dated October 16, 2003, at San Francisco, California.

MICHAEL R. PEEVEY

President

CARL W. WOOD

LORETTA M. LYNCH

GEOFFREY F. BROWN

SUSAN P. KENNEDY

Commissioners

APPENDIX A

Revised Ordering Paragraphs for Decision 03-03-033⁵

IT IS ORDERED that:

12. The monthly recurring prices for unbundled network elements (UNEs) offered by Verizon California, Inc. (Verizon) that are set forth in Appendix A to this decision satisfy the requirements of Sections 251(c)(2), 251(c)(3), and 252(d)(1) of the Telecommunications Act of 1996 and are hereby adopted on an interim basis and made subject to adjustment, either up or down, from today's date until final prices are adopted.

2. Verizon shall prepare amendments to all interconnection agreements between itself and other carriers substituting the interim monthly recurring prices for UNEs set forth in Appendix A of this order for the UNE prices set forth in such interconnection agreements. Such amendments shall be filed with the Commission's Telecommunications Division, pursuant to the advice letter process set forth in Rules 6.2 and 6.2 of Resolution ALJ-181, within 30 days after the effective date of this order. The amendments do not require a signature of the carriers involved as long as the amendments are limited to substituting the UNE rates adopted in today's order. Unless protested, such amendments will become effective 30 days after filing.

3. The interim UNE prices set forth in Appendix A of this order shall be effective on the date this order is effective. Verizon shall make all billing adjustments necessary to ensure that this effective date is accurately reflected in bills applicable to these UNEs, except that the rate for any CentraNet switch feature that Verizon currently offers in California and for which a non-zero rate is contained in Appendix A (listed as "billed features") shall be set at zero, subject to true-up. The listing of individual features in Appendix A is not intended to either restrict or expand the availability of CentraNet switch features offered in California.

4. Verizon shall have 60 days from the effective date of this order to complete the billing program changes necessary to reflect in bills the interim monthly recurring prices for UNEs adopted in this order. Upon completion of said billing program changes, Verizon shall notify the Director of the Telecommunications Division in writing that all of the necessary billing program changes have been completed.

5. Within 10 days of the effective date of this order, Verizon shall file an advice letter to establish a balancing account to track the revenues received from the interim monthly UNE rates adopted herein, beginning on the same date the interim rates become effective. The balancing account should accrue interest at the three-month commercial paper rate. Unless protested, the advice letter shall become effective five days after filing.

6. Verizon shall make the following changes to its nonrecurring charge proposal:

· Verizon should configure its order processing system in order to charge separate rates depending on whether the CLC employs a mechanized, semi-mechanized, or manual system to place its order.

· Verizon should separate its charges for initial and additional orders so that CLCs only pay for additional orders when they make them.

· Verizon should not collect disconnect charges in advance, as it proposes, because this is a requirement placed on CLCs that Verizon does not bear itself.

· Verizon should charge separately for Record Orders so that only those CLCs that actually make record changes pay the charge.

· Verizon should add a markup of 22% to its nonrecurring charges, once the changes above are made.

7. Verizon's nonrecurring charge proposal is adopted, with the modifications set forth in this order. Within 20 days from the effective date of this order, Verizon shall file and serve a revised list of its nonrecurring charges complying with the changes set forth in this order. Interested parties shall have 14 days to comment on that filing, unless the assigned Administrative Law Judge (ALJ) adopts a different schedule for responses. Verizon's nonrecurring charges shall go into effect 75 days after the effective date of this decision, unless the assigned ALJ issues a ruling suspending this effective date pending further Commission action. If Verizon's revised nonrecurring charges are suspended, the existing nonrecurring charges shall remain in effect, subject to refund from the 75^th day after the effective date of this order, until all outstanding issues with nonrecurring charges are resolved. If Verizon cannot bill nonrecurring charges at the effective rate, it should track the types of orders it receives and defer billing until it can render a correct bill. Verizon may include interest at the three-month commercial paper rate on its deferred bills. If Verizon is unable to track the types of orders it receives during this deferred billing period, it should assume the lowest rate in any category in which the proper charge cannot be determined.

8. When submitting an advice letter to the Commission regarding interim Category II price floors, Verizon shall calculate interim price floors according to the formula described in this order.

9. Verizon shall make prospective adjustments to the prices in any of its customer contracts upon the adoption of final price floors by the Commission if contract prices are below the newly adopted price floors.

10. Verizon's petition to take official notice of UNE rates adopted for Verizon in Florida on October 14, 2002 is granted.

11. Joint Commenters' November 22, 2002 motion to strike Verizon's November 12, 2002 reply comments is granted.

12. The May 31, 2002 ruling of the Assigned Commissioner and Administrative Law Judge is affirmed.

13. This proceeding shall remain open so that the Commission can determine final monthly recurring charges and price floors for Verizon's UNEs.

This order is effective today.

Dated March 13, 2003, at San Francisco, California.

(END OF APPENDIX A)