AT&T's Petition

On October 4, 2001, AT&T filed a petition pursuant to California Public Utilities Code Section 1708.5 asking the Commission to reduce intrastate access charges. AT&T argues that access charges for SBC and Verizon California (Verizon) should be based on "forward-looking economic costs" consistent with what AT&T perceives to be FCC requirements.

AT&T contends that the Telecommunications Act of 1996 (Pub. L. No. 104-104, 110 Stat 56, codified at 47 U.S.C. §§151, et seq. (Telecommunications Act)) requires the Commission to eliminate disparities in prices charged to IECs and LECs for similar or identical LEC services. AT&T argues that the Telecommunications Act requires cost-based pricing for interconnection services, including the transmission and routing of telephone exchange service and exchange access (Section 251(c)(2)(a)). It proposes that this standard applies equally whether the network function is used for local or switched access purposes.

AT&T contends that switched access is functionally equivalent to call termination for local exchange services. It observes that switched access is comprised of several wholesale network elements (unbundled network elements, or UNEs) and the price for each is currently set based on forward-looking costs. AT&T states that local switching, transport and tandem switching are combined to create access services. AT&T urges the Commission to eliminate what it considers an artificial distinction between "local" and "toll" interconnections and apply the UNE rate to both "toll" switched access and "local" call termination.

AT&T states that access charges were originally set at levels that provide subsidies from long distance services to local phone service. AT&T contends that Section 254(e) of the Telecommunications Act requires that all subsidies be explicit, and the Commission must bring intrastate access charges into compliance with this mandate.

In support of its position, AT&T observes that the telecommunications marketplace has changed significantly since 1994, when the Commission last examined intrastate access charges. These changes include the Telecommunications Act, local toll competition, adoption of the new costing methods, and FCC reforms to interstate access charges. AT&T also refers to California's Universal Service program, and in particular the California High Cost Fund B, which removed from local rates any implicit subsidies to support basic phone service in high cost areas of the state served by large and mid-sized incumbent local exchange carriers (ILECs). AT&T argues that the change in how universal service subsidies are funded eliminates the need for inflated access charges to support local exchange service. The result, according to AT&T, is that the ILECs are making extraordinary profits from access charges.

In addition, AT&T maintains that the entry by Verizon and SBC into long distance markets requires changes to access charges. It believes SBC's high access charges in combination with its low toll rates does not permit competitors to recover their own costs and still keep their toll prices competitive.