STATE OF CALIFORNIA ARNOLD SCHWARZENEGGER, Governor

PUBLIC UTILITIES COMMISSION

505 VAN NESS AVENUE

SAN FRANCISCO, CA 94102-3298

November 2, 2004 Agenda ID #4017

TO: PARTIES OF RECORD IN RULEMAKING 95-04-043 AND
INVESTIGATION 95-04-044

This is the draft decision of Administrative Law Judge (ALJ) Thomas R. Pulsifer. It will not appear on the Commission's agenda for at least 30 days after the date it is mailed. The Commission may act then, or it may postpone action until later.

When the Commission acts on the 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.

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. Pursuant to Rule 77.3 opening comments shall not exceed 15 pages. Finally, comments must be served separately on the ALJ and the assigned Commissioner, and for that purpose I suggest hand delivery, overnight mail, or other expeditious method of service.

/s/ ANGELA K. MINKIN

Angela K. Minkin, Chief

Administrative Law Judge

ANG:eap

Attachment

183263

ALJ/TRP/avs DRAFT Agenda ID #4017

Decision DRAFT DECISION OF ALJ PULSIFER (Mailed 11/2/2004)

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking on the Commission's Own Motion into Competition for Local Exchange Service.	Rulemaking 95-04-043 (Filed April 26, 1995)
Order Instituting Investigation on the Commission's Own Motion into Competition for Local Exchange Service.	Investigation 95-04-044 (Filed April 26, 1995)

OPINION ADOPTING RULES FOR
CARRIER INVENTORY OF NUMBERING RESOURCES

TABLE OF CONTENTS

TITLE PAGE

ORDER ADOPTING RULES FOR CARRIER INVENTORY OF NUMBERING RESOURCES 22

I. Introduction 22

II. Procedural Background 66

III. Responses to Parties' Objections to Inventory Rules 88

A. Jurisdiction to Adopt and Implement Inventory Rules 88

B. Effects of Rules on Customer's Choice of Service Provider 1313

C. Adequacy of Existing Conservation Measures 1414

D. Effects of the Rules on New Carriers 1616

E. Carrier's Flexibility to Manage their Numbering Requirements 1717

F. Need to Keep Two Sets of Records 1919

IV. Adoption of Inventory Rules 2020

A. Rules for Carriers that Have Filed
at Least Three NRUF Reports 2020

B. Rules for Carriers that Have Filed
One or Two NRUF Reports 2222

V. Time Table for Implementation of Inventory Rules 2424

VI. Comments on Draft Decision 2424

VII. Assignment of Proceeding 2424

Findings of Fact 2424

Conclusions of Law 2626

ORDER 2727

APPENDIX 1 Adopted Inventory Rules for Determining Six-Month Levels

ORDER ADOPTING RULES FOR
CARRIER INVENTORY OF NUMBERING RESOURCES

I. Introduction

By this order, we adopt rules for determining the inventory of numbering resources applicable to telecommunications carriers that hold codes or thousand-number blocks within rate centers in California. Our purpose in adopting in these rules is to promote more efficient numbering resource utilization, and thereby to extend the life of California's area codes. These rules will provide carriers a clear and objective method to assess their inventory needs. Adoption of these rules will assure that carriers return or donate surplus thousand-blocks to the applicable number pool, thereby decreasing surplus phone number inventories and avoiding premature exhaust of area codes.

Pub. Util. Code § 7943(c) requires that "the Commission shall first ...implement all reasonable telephone number conservation measures" before approving an area code split. Our adoption of inventory rules, as adopted herein, based upon how carriers actually utilize numbers is an essential measure to support the most efficient use of telephone numbers in an area code. Inventory rules that reflect carriers' actual need for numbers and constitutes one of the "reasonable telephone number conservation measures" required in accordance with § 7943(c).

Federal Communications Commission (FCC) Order 00-104¹ adopted various rules relating to the utilization of numbering resources. Among these rules, the FCC authorized each carrier to maintain no more than a six-month inventory of numbers. The FCC stated that "a six-month inventory is appropriate and sufficient to assure adequate access to numbering resources," and to reduce the potential waste of unused telephone numbers.²

The FCC requires pooling carriers to donate to the pool unused numbers or uncontaminated and lightly contaminated thousand number blocks that are not needed to maintain six-month inventory levels. The FCC has not adopted any specific directives as to how code or block holders shall determine their six-month inventory levels. Without specific directives, no objective basis exists upon which to verify whether a carrier's inventory is, in fact, limited to its need for a six-month period. Instead, carriers can simply assert that the amount of blocks of telephones numbers in their inventory constitutes a six-month supply with no independent accountability to substantiate such a claim.

Historical experience, however, shows that carriers have repeatedly taken numbers from the pool for stocking their inventories in excess of their actual needs. As a result, surplus numbers stockpiled in inventory are not available to other carriers that may need numbers to serve their own customers. Such hoarding of numbers may create a perception that an area code is about to exhaust its supply of numbers when, in reality, available numbers are merely being allocated inefficiently. Accordingly, reliance on carriers' projections does not necessarily offer the most reliable means of assuring that the inventory is limited to a six-month supply.

The Commission's Telecommunications Division (TD) has completed a review of North American Numbering Plan Administration (NANPA) Numbering Resource Utilization/Forecast (NRUF) data of carriers' utilization of telephone numbering resources. In its June 7, 2004 report to the FCC on the effectiveness of the 25% contamination rate limited waiver granted in the 310 and 909 area codes, TD staff demonstrated through several scenarios using multiple area codes across California that inventory rules would help to extend the life of an area code. In view of the TD analysis of carrier data, we find that many carriers take far more telephone numbers from the number pool than needed to meet customer demand.

The manner in which telephone numbers are used or held in the 310 area code provides an example of numbering use patterns that is illustrative of other California area codes. For example, the six-month inventory needed to meet the growth in customer demand for all carriers in the 310 area code in 2003 was 363 one-thousand blocks yet carriers retained in their inventories nearly 5,500 one-thousand blocks over 25% contaminated (or used)³ and more than 550 one-thousand blocks less than 25% contaminated (or used). These statistics make it clear that carriers have kept available telephone numbers far in excess of real needs. NANPA data demonstrate that carriers have retained blocks of telephone numbers eligible to be returned to the pool even though carriers have an abundance of phone numbers in their inventories beyond historical need.

In its June 7, 2004, Report to the FCC, the TD staff identified various factors that encourage carriers to keep excess inventories. First, the FCC has not adopted any standard definition or uniform formula to determine a carrier's six-month inventory needs. As a result, carriers can simply claim that the required inventory is double, triple, or quadruple their actual growth during the preceding six months. Thus, the lack of a prescribed formula to determine the six-month inventory needs allows carriers to carry excess inventories.

The uncertainty associated with the timing of donations and returns also contributes toward excess inventories. Some carriers claim that donations and returns are only required at the time that an area code enters into number pooling even though carriers may have excess inventories after the fact. Therefore, they maintain excess inventories, thereby stranding large quantities of telephone numbers, and contributing to area code exhaust. On the other hand, other carriers may donate and return thousand-blocks even after an area code has entered number pooling, but do not do so regularly. Only a few carriers routinely donate and return thousand-blocks in all California area codes consistent with the spirit of the FCC's Numbering Resource Optimization Orders and the Commission's rules.

A third factor identified by the TD staff concerns the lack of a clearly defined forecast methodology for carriers to use to calculate their need for inventories. The TD staff found that carriers generally over-forecast their need for thousand-block inventories. If carriers acquired from the number pools the thousand-blocks based on forecasts of future numbering needs determined by considering their historical need for telephone numbers,⁴ then thousand-blocks would be better allocated and utilized. Therefore, the lack of a clearly defined forecast methodology contributes to the premature exhaust of area codes.

In order to promote conservation and more efficient utilization of California's valuable numbering resources, therefore, we conclude that specific guidelines need to be formulated and adopted prescribing how a six-month inventory is to be determined. Accordingly, we adopt the rules set forth in this decision to be applied by carriers in determining short-term inventory levels for each applicable California rate center in which they hold numbering resources. As described in detail in Section IV below, the adopted methodology allows for growth in inventory based on the carrier's historic experience multiplied by a growth factor capped at 15%.