STATE OF CALIFORNIA GRAY DAVIS, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

November 1, 2002

TO: ALL CERTIFICATED CLECs AND THE PERMANENT LINE SHARING PHASE OF R.93-04-003/I.93-04-002

The revised draft decision of ALJ Jones is enclosed. The revisions address comments filed and served on June 7, 2002, and reply comments filed and served on June 14, 2002, to the initial draft decision dated May 7, 2002. The revised draft decision is on the Commission's November 7, 2002 meeting agenda. The ALJ will request the Commission to hold the item to consider the comments.

When the Commission acts on the revised draft decision, it may adopt all or part of it as written, amend or modify it, or set it aside and prepare its own decision. Only when the Commission acts does the decision become binding on the parties.

Any certificated CLEC and parties to the proceeding may file comments on the draft decision as provided in Article 19 of the Commission's "Rules of Practice and Procedure." These rules are accessible on the Commission's website at http://www.cpuc.ca.gov. In addition to service by mail, parties should send comments in electronic form to those appearances and the state service list that provided an electronic mail address to the Commission, including ALJ Jones at kaj@cpuc.ca.gov. Finally, comments must be served separately on the Assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious methods of service.

/s/ CAROL A. BROWN         

Carol A. Brown, Interim Chief

Administrative Law Judge

CAB/tcg

Attachment

ALJ/KAJ/tcg ** REVISED DRAFT H-2

11/7/2002

Agenda ID #623

Decision REVISED DRAFT DECISION OF ALJ JONES (Mailed 11/1/2002)

Rulemaking on the Commission's Own Motion to Govern Open Access to Bottleneck Services and Establish a Framework for Network Architecture Development of Dominant Carrier Networks.	Rulemaking 93-04-003 (Filed April 7, 1993)
Investigation on the Commission's Own Motion into Open Access and Network Architecture Development of Dominant Carrier Networks.	Investigation 93-04-002 (Filed April 7 1993) (Permanent Line Sharing Phase)

INTERIM OPINION ESTABLISHING PERMANENT RATES FOR THE

HIGH-FREQUENCY PORTION OF THE LOOP

(See Appendix A for a List of Appearances.)

TABLE OF CONTENTS

Title Page

INTERIM OPINION ESTABLISHING PERMANENT RATES FOR THE
HIGH-FREQUENCY PORTION OF THE LOOP ...............................................................1

1. Summary 2

2. Background 3

3. The D.C. Circuit's USTA Decision Does Not Preclude this
Commission from Setting Permanent Rates for the HFPL 5

3.1 Background 5

3.2 Parties' Positions 6

3.3 Discussion 10

4. There Should be a Monthly Recurring Price for Use of the
High Frequency Portion of the Loop 16

4.1. Parties' Positions 16

4.1.1. Rhythms' Links, Inc.'s (Rhythms) Position 16

4.1.2 TURN's Position 18

4.1.3 ORA's Position 21

4.1.4 Pacific's Position 22

4.1.5 Verizon's Position 23

4.1.6 Discussion 24

5. What is the Appropriate Price for Use of the HFPL? 28

5.1. Parties' Positions 28

5.1.1 TURN's Position 28

5.1.2 ORA's Position 33

5.1.3 Pacific's Position 33

5.1.4 Verizon's Position 38

5.1.5 Discussion 40

6. Having a Positive Monthly Recurring Rate for the HFPL Results
in Over-Recovery of Loop Costs 51

6.1 Parties' Positions 51

6.1.1 TURN's Position 51

6.1.2 ORA's Position 52

6.1.3 Rhythms' Position 52

6.1.4 Pacific's Position 53

6.1.5 Verizon's Position 55

6.1.6 Discussion 55

7. True-up and Treatment of Balances in Memoranda Accounts 62

8. Limited Exogenous Factor Treatment 64

9. Comments on Draft Decision 65

10. Assignment of Proceeding 65

Findings of Fact .......................................................................................................65

Conclusions of Law ..................................................................................................68

INTERIM ORDER ....................................................................................................70

INTERIM OPINION ESTABLISHING PERMANENT RATES FOR THE

HIGH-FREQUENCY PORTION OF THE LOOP

1. Summary

This decision adopts permanent Unbundled Network Element (UNE) rates for the High-Frequency Portion of the Loop (HFPL)¹ for both Pacific Bell Telephone Company (Pacific) and Verizon California Inc. (Verizon). The rate for Pacific is $2.48 per loop per month, and for Verizon, $3.00. The methodology adopted allows the rate for the HFPL to be modified, based on changes in adopted loop rates.

The Interim Line Sharing (ILS) decision determined that there should be a true-up, from the interim rates adopted in the ILS proceeding, and the final rates adopted in this Permanent Line Sharing (PLS) Phase. Therefore, Pacific is required to refund the difference between the $5.85 monthly recurring rate adopted in the ILS proceeding, and the $2.48 (or deaveraged loop rates) adopted in this decision to the Competitive Local Exchange Carrier (CLEC) which purchased each loop. Since this decision retains the $3.00 rate adopted for Verizon in the Interim phase, no true-up is required for Verizon.

We find that establishing a separate rate for the HFPL allows Pacific and Verizon to over-recover their loop costs, since they are currently recovering the full cost of the loop-including the HFPL portion-through rates for their existing tariffed services. Pacific and Verizon will be required to return the balances in their memoranda accounts and future HFPL revenues to each CLEC that leased the HFPL loops for return to their DSL customers.