V. Background

Verizon makes available to its business and residential customers various services to repair customer premises wiring, the maintenance of which is not included in normal monthly fees for service. These services can be obtained by payment of either a recurring monthly fee to cover repairs whenever needed (Inside Wire Maintenance Plan or IWMP) or on a per incident basis billed at an hourly rate (Billable Repair Service or BRS). As set forth in D.89-10-031, telecommunication services for companies operating under the New Regulatory Framework, are classified according to three distinct categories: Category I represents service offerings deemed to be basic monopoly services; Category II designates discretionary or partially competitive service offerings in which the local exchange carriers (LECs) retain significant, though perhaps declining, market power; and Category III encompasses fully competitive service offerings detariffed due to statutory requirements or federal preemption, or upon a LEC showing that it has, or is expected to have, insignificant market power. The rates and charges for Category I and II service offerings can only be established or modified with Commission approval. The rates and charges for Category III service offerings can be set at the highest level for flexibility in pricing allowed by law, provided that certain notice requirements are met.

Inside wire repair services - IWMP and BRS - are currently classified as Category II services. Verizon seeks to obtain maximum price flexibility for its BRS and IWMPs by changing these inside wire repair and maintenance service offerings from Category II to Category III.²

Specifically, Verizon seeks Commission authority to re-categorize its BRS and IWMPs from Category II to Category III and to increase its ceiling rates for one rate element of its BRS and for each rate element of its IWMPs. In addition, Verizon wants to create separate BRS tariff schedule for business and residential customers and to maintain above the line ratemaking treatment for its BRS and IWMPs. We first address the contested issues.

² A price change for a Category II service offering must occur via advice letter. A price reduction at or above the price floor becomes effective with a five-day notice, while a price increase up to the approved Category II ceiling rate is effective with a 30-day notice. An application must be filed to raise a Category II ceiling rate and must demonstrate the need for the rate ceiling increase.

With a change in classification from Category II to Category III Verizon would be able to change its BRS and IWMPs rates below the ceiling rate without becoming subject to protests. Such rates changes would become effective upon one-day's notice. Subsequent decreases or increases of less than 5% in the ceiling rate become temporarily effective with a one-day and five-day notice, respectively. These subsequent changes, if not protested, become permanent on the twentieth day after filing. A 5% or greater increase in a ceiling rate becomes temporarily effective with 30 days' notice and permanent, if not protested, on the 30^th day after filing. Protested ceiling rate changes remain temporary until the protest is withdrawn or resolved by Commission action. If the protest is not withdrawn or resolved, the ceiling rate reverts to its previously authorized level.