b) Bundling of ULTS and CHCF-B Basic Residential Service

TURN and DRA assert the Decision errs because allowing the ILECS to bundle ULTS and CHCF-B subsidized basic residential services encourages predatory pricing and avoidance of the rate cap/floor. They advocate adoption of some interim mechanism or safeguard to ensure preservation of the basic service rate freeze for new service bundles which include subsidized residential lines. (TURN/DRA Rhg. App., pp. 43-44.)

During the proceeding we considered predatory pricing arguments, and rejected the notion that pricing flexibility for bundled services will enable ILECs to set prices below the subsidized rate to undercut the competition. We see no basis to overturn our conclusion that the price cap on subsidized service will effectively restrict carriers from under-cutting the competition because they can only offer that service at the authorized rate. (D.06-08-030, p. 141, and fn. 554.)

Moreover, our Decision does include protective mechanisms and safeguards as TURN and DRA advocate. While we will allow pricing flexibility for bundles not including subsidized basic residential service (D.06-08-030, p. 192.), we do require safeguards with respect to bundles which do include those services. (D.06-08-030, pp. 193-194.) For ULTS customers who choose bundled service, our Decision requires that they continue to receive the ULTS discount for the subsidized basic residential service. (D.06-08-030, p. 193.) For CHCF-B customers, the Decision adopts a safeguard such that if customers find it is not economically advantageous to take bundled service, carriers must continue to offer basic residential service on a stand-alone basis in high-cost areas. These safeguards merely ensure that we maintain existing protective practices and requirements.