IV. Discussion

When we adopted an interim switching discount of 69.4% for local switching and ports and 79.3% for tandem switching, we based this on evidence that switching prices proposed by SBC's affiliate in Illinois either equal or exceed the appropriate cost-based rates for California. The switching discounts were also based on public data showing uniformity across regions in switching cost trends. Parties now ask that we apply these same discounts to the other port types for which we set rates in D.99-11-050.

We must essentially decide whether it is reasonable that the non-basic ports would be similarly impacted by the cost declines we found in D.02-05-042, or whether these non-basic ports are so significantly different in terms of hardware, software and switch usage that there is no correlation between the discounts affecting the basic port and the other ports.

We find that there is a correlation between the basic port and the other port types and that the discount we adopted for the basic port should extend to the other port types listed in Table 1.

In the declaration of Scott Pearsons provided by Pacific, Mr. Pearsons admits that Centrex and basic ports do share most of the same equipment, even though they do not share all of the same equipment. (Pearsons Declaration, 7/11, p. 2) He also agrees with Joint Applicants that the Common Block feature used by the Centrex port resides in the same memory chips that are used for basic call processing. (Id., p. 3) Because of these admissions, we find that the basic port discount should apply to the Centrex port as well.

Mr. Pearsons also agrees that the Coin Port, DID Port, DID Number Block, ISDN Port, Trunk Port Terminations and DS-1 Ports have some equipment and facilities in common with the basic port, although each port has unique equipment requirements. (Id.) In the declaration of Catherine Pitts presented by Joint Applicants, Ms. Pitts describes specific equipment commonalities between the basic and non-basic ports. For example, she describes how the Coin and Centrex Ports share a main distributing frame (MDF) termination, line card, and a portion of the line peripheral with basic ports. (Pitts Declaration, 7/11/02, p. 2.) A chart provided by Pacific's witness Mr. Pearsons substantiates these commonalities. Ms. Pitts states that the DID Number Block uses the same memory components to store a DID number as the Centrex Common Block and all other information stored in the switch's memory. (Id., p. 2, footnote 4.). In addition, she states that ISDN Ports also use a MDF termination and line peripheral in common with the basic port. (Id., p. 3.)

While Mr. Pearsons describes specific differences and unique switching equipment used by some of these ports, we find that the existence of some commonality, as detailed by Ms. Pitts and Mr. Pearsons, whether it be use of line cards, memory chips, or MDF terminating equipment, makes it reasonable to extend the basic port discount to all port types. Furthermore, we think there are sound policy reasons to maintain the general pricing differentials that existed among the port types prior to our adoption of an interim discount to the basic port in D.02-05-042. By discounting the basic port, and not the other port types, we have skewed the pricing structure that existed before. With the statements from Mr. Pearsons that these other port types do have some equipment and facilities in common with the basic port, there is ample reason to extend the basic port discount to the non-basic ports and by doing so, reinstate the pricing differentials among these port types that we adopted in D.99-11-050.

We do not agree with Pacific's assertion that the Commission can only extend the discount to non-basic ports if they use all of the same switch equipment and resources as the basic port. It is not necessary for there to be exact replication of all switch equipment and resources. As long as non-basic ports use some of the same switch equipment and resources that were found to have declining costs in D.02-05-042, we find it reasonable that non-basic port prices should decline by the same percentages that were found to apply to basic ports.

With regard to trunk ports (i.e. DID, end-office and tandem trunk port terminations, and DS-1 ports), Ms. Pitts contends they should be discounted the same as the basic port because they use the same equipment components that are included in interoffice usage rates which were discounted in D.02-05-042. At first glance, Pacific appears to take a contradictory position, stating that trunk ports are not a subset of usage. We find that the difference in these positions is one of semantics. Pacific does not directly dispute Joint Applicants' implication that trunk port rates are derived from the same equipment components that are already included in the interoffice usage rate elements. While Pacific states that trunk port costs are not a subset of interoffice usage rates, it does not contradict the assertion that the equipment from which usage costs are derived is also used to derive costs for trunk ports. If it is true, as Joint Applicants state in their declaration, that trunk port costs and usage costs use the same equipment components, then we should extend the usage discounts to trunk port terminations as well. We find Ms. Pitts declaration credible on this matter.

Therefore, we will extend the basic port discount to trunk ports as set forth in Table 2 below.

We deny the request of TMC and Call America to lower all port rates to the same rate as the basic port. This would eliminate the differential in prices that was established in D.99-11-050. The declarations provided by both Pacific and Joint Applicants only support applying the same interim discounts to all the port types. The evidence thus far does not support equalizing these rates. Moreover, we decline to adopt the suggestion of TMC and Call America to extend the issue sanction applied in D.02-05-042 to non-basic port rates.

Finally, we disagree with Pacific's claims that its due process rights are violated if the Commission were to discount non-basic rates in what Pacific calls an "abbreviated fashion," based on a single set of opening and reply comments, particularly when it took over a year to establish the interim prices in
D.02-05-042. The comment period in this case has afforded Pacific ample opportunity to make its case, just as it was given that opportunity when interim rates were considered in D.02-05-042. A comparison of the time taken to adopt interim switching and loop rates with the time taken to then apply that same discount to other port types is not a fair comparison, particularly when the effort to establish interim rates did not begin in earnest until six months into the UNE reexamination proceeding.

In summary, the following interim discounts should apply to the port rates established in D.99-11-050:

Table 2