IV. Positions of Parties

SBC proposes that DALIS prices be based upon what it characterizes as a "market-based" approach, and argues that such pricing is appropriate for DALIS in California. SBC claims that wholesale directory assistance provisioning constitutes a competitive market, and that other currently available commercial sources of directory listings compete with SBC. SBC identifies various former wholesale customers of its DALIS that now receive SBC West listings from other sources.

SBC thus proposes DALIS prices that incorporate a price floor set at its estimated "Total Service Long-Run Incremental Cost" (TSLRIC), with actual prices based on what SBC characterizes as a "market-based" valuation. The price plan proposed by SBC is equivalent to the rates for DA service approved by the FCC in the X2A Agreements in SBC's 271 applications in the states of Missouri, Oklahoma, Kansas, Arkansas, and Texas. The X2A Agreements are the state-commission-approved interconnection agreements that resulted from CLEC collaboration in each specific state.

SBC's proposed pricing plan for DALIS as follows:

SBC argues that its pricing proposal conforms with the FCC adopted standard that merely requires DALIS pricing and availability to be "at nondiscriminatory and reasonable rates..."12 SBC opposes the use of a "Total Element Long Run Incremental Cost" (TELRIC) approach for DALIS pricing, arguing that TELRIC is intended only for the pricing of unbundled network elements (UNEs). Since DALIS is not a UNE, SBC believes that the use of TELRIC pricing is unwarranted. Nonetheless, in order to address the claims by Joint Parties that TELRIC pricing should be used, SBC produced an updated study reflecting prices based on both the estimated TSLRIC and TELRIC for DALIS.

SBC prepared its 2002 DALIS cost study (initially in March 2002, and further revised in June 2002) updated to reflect what it considers to be relevant changes in circumstances and assumptions since its last update in August 2000.

SBC's cost study is based upon the activities and related resource times identified by its subject matter experts for the tasks that SBC claims are required to provide DALIS. These task times were applied to associated unit costs to compute total costs separately stated for recurring and nonrecurring activities. SBC includes a definitive separation of recurring and non-recurring tasks performed for DALIS.

SBC identified the following TSLRIC categories of DALIS functions and related costs:

Customer Support; Client subscription and Extract Criteria

Database Maintenance for DALIS Master File Tape

Preparation, Billing, and Shipping

SBC separately produced a study of additional costs that would be required in the event that DALIS were costed on a TELRIC basis.

SBC identified the following TELRIC-related costs elements for DALIS:

Data Acquisition - Initial

Data Acquisition - Ongoing

Data Storage

Data Maintenance/Update

The essential difference between the TSLRIC and TELRIC approach used by SBC is that the TELRIC reflects higher costs that SBC claims it would incur by assuming a wholesale-only environment for provisioning DALIS. In other words, SBC computed TELRIC on a hypothetical basis assuming no SBC retail operations existed. On this basis, SBC computed the TELRIC that the hypothetical wholesale-only unit would incur for obtaining listing information, assuming no access to SBC retail end-user listings data.

A response to SBC's cost study was filed by the Joint Parties. Joint Parties' response includes transcripts of depositions (filed under seal) taken from officers and employees of SBC as well as declarations of its own consultants.

The Joint Parties disagree with the approach upon which SBC based its DALIS pricing study. The Joint Parties argue that DALIS should be priced based upon a TELRIC approach, as adopted by the FCC for UNEs and interconnection, reflecting the forward-looking economic cost of provisioning DALIS. The Joint Parties object to using SBC's approach, arguing that such pricing standard far exceeds the costs claimed by SBC as required to provide DALIS, and violates the nondiscrimination requirements of the Act and the FCC's orders.

The Joint Parties argue that SBC's proposed DALIS price of $0.0585 per listing bears no congruity to SBC's own claimed forward-looking economic cost for DALIS. Even after adding the currently authorized shared and common cost markup of 21% to SBC's claimed per-listing TSLRIC estimate for DALIS, Joint Parties claim that the resulting price would still be roughly an order of magnitude lower than SBC's proposed "market-based" price. The Joint Parties contend moreover that SBC has failed to show that its proposed DALIS prices reflect prices in a competitive market.

Moreover, the parties argue that market-based pricing is not an appropriate standard upon which to set tariff prices for DALIS because of the lack of a fully competitive market in California. The Joint Parties argue that DALIS should be priced based upon the forward-looking economic cost as determined under the TELRIC pricing approach.

The Joint Parties propose prices incorporating recurring and nonrecurring TELRIC elements plus a mark-up of 21% for shared and common costs, as set forth below. Because certain DALIS customers prefer to use tape delivery as an alternative means of acquiring DA listing data, parties propose an optional per-tape delivery rate. Joint Parties' proposed DALIS rates are as follows:

12 In the Matter of Provision of Directory Listing Information Under the Telecommunications Act of 1934, as Amended, etc. Third Report and Order in CC Docket No. 95-115, Second Order on Reconsideration of the Second Report and Order in CC Docket No. 96-98, and Notice of Proposed Rulemaking in CC Docket No. 99-273, FCC No. 99-227, para. 35 (rel. Sep. 9, 1999).

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