Motion for Confidentiality

SBC requests that certain information contained in its reply to A.04-03-013 be filed under seal. The information pertains to SBC's cost of providing local and tandem switching, and dedicated transport services. SBC contends that competitors in telecommunications markets should not have access to SBC's business-sensitive cost data. SBC has designated this information as confidential and proprietary, and made the information available to parties under nondisclosure agreements. There were no responses to the motion for confidentiality. The Commission has granted similar requests for confidentiality in the past and will do so here.

Comments on Draft Decision

Pursuant to Section 311(g)(1) of the Public Utilities Code and Rule 77.7 of the Commission's Rules of Practice and Procedure, the draft decision in this matter was mailed to the parties for comments.

Comments were filed by MCI, TURN, Mpower Communications Corp., Navigator Telecommunications, LLC, Telscape Communications, Inc., and XO Communications Services, Inc. (collectively "Joint Commentors"). Reply comments were filed by SBC.

The Joint Commentors contend the draft decision contains factual and legal errors in denying the request to reexamine the shared and common cost markup. They contend the draft legally errs by imposing a higher burden of proof on the applicants than is required. Based on D.99-11-050, applicants need only present a prima facie case that the costs in question have declined by at least 20 percent. Instead, Joint Commentors maintain the draft decision holds applicants to an impossible to meet standard by requiring a "convincing showing." They contend it would be impossible to provide a complete recalculation of the markup in the opening filing. Joint Commentors allege the requirement to show a 20 percent change in costs should no longer be required. They note it is undisputed that direct UNE costs, the denominator of the markup equation, have declined, rendering the 19% markup calculation obsolete. Further, they contend the Commission must review the markup to fulfill the remand order by the Ninth Circuit on the same subject because the Commission's earlier "true-up" decision, D.05-03-026, promises an expeditious review of the markup. Joint Commentors maintain the draft decision factually errs by relying on a markup methodology that is now irrelevant, and by dismissing the applicants' ARMIS data.

In response, SBC defends the draft decision as written. According to SBC, the draft decision does not employ an inappropriate burden of proof but applies the correct standard in finding that the initial evidence provided by applicants was flawed and inadequate. SBC notes that applicants' factual allegations were flawed and that they failed to include any alternate calculations of the shared and common cost markup. SBC agrees that direct UNE costs have declined, but the application is fatally deficient in not providing a reasonable analysis of a revised numerator for the markup calculation. The age of the markup percentage alone does not prove it is wrong, and Joint Commentors' attack on the requirement to show a 20% change in costs is an inappropriate and untimely. SBC further contends that the Commission has adequately responded to the Ninth Circuit remand order through its correction of the markup in D.05-03-026, and that the remand order does not require any further prospective review of the markup calculation. Finally, SBC reiterates its earlier argument that applicants' ARMIS analysis was flawed and an insufficient basis on which to open a reexamination of the markup.

We agree with SBC that the draft has not imposed an improper standard in analyzing applicants' request to reexamine the markup. Although direct UNE costs have declined based on the new UNE rates adopted in D.04-09-063, applicants have not successfully presented a prima facie case that overhead costs have declined more than the decline in direct UNE costs. As SBC points out, the applicants did not provide any attempted recalculation of the markup, either with the initial OANAD methodology, or a new one. The ARMIS analysis they did present had been examined and discredited by the Commission in D.99-11-050 and is not a sufficient basis on which to open a reexamination. Joint Commentors largely reargue applicants' initial request for review. Moreover, we agree that D.05-03-026 corrected the error in the markup which the Ninth Circuit had found and that a prospective review is not required. There are no changes to the draft in response to comments.