XI. Comments on Draft Decision

The Commission mailed the draft decision of the ALJ in this matter to the parties in accordance with Section 311(g)(1) and Rule 77.7 of the Rules of Practice and Procedure. Comments were filed by the California Association of Competitive Telephone Companies (CALTEL), ORA, TURN, Verizon, and jointly by a group of competitive carriers (collectively "Joint CLCs"⁵⁴). Reply comments were filed by Covad/Mpower, DMR/Navigator, TURN, Verizon, and XO/Cbeyond.

The comments allege numerous technical and legal errors in the draft decision and suggest corrections to the Commission's UNE modeling. Detailed technical comments are addressed in the section of the order pertaining to the specific topic. Where comments reargued earlier positions or attempted to introduce new facts, they are not discussed. Below we discuss comments that raised general issues affecting the entire decision.

General Modeling Issues

Verizon criticizes the draft decision for "repeated and extensive reliance on the findings of an earlier case considering SBC's costs, instead of the record in this case, which differs in critical respects." (Verizon, 12/14/05, p. 1.) Moreover, Verizon criticizes the draft decision for rejecting VzCost, claiming it is improperly labeled as an "embedded" model when it actually models actual right of way and plant routes. Verizon claims the Commission ignores corrections to VzCost offered by Verizon, which reflects a clear predisposition to select the flawed HM 5.3 model, even when its two principal proponents, AT&T and MCI, have now withdrawn from the proceeding and it is unclear whether there will be a party capable of supporting the model in the future.

TURN responds that claims about future support of HM 5.3 are sheer speculation, and it is unclear whether Verizon will maintain support for VzCost. Covad/Mpower join TURN in commenting that while the Commission controls and has possession of HM 5.3, Verizon's internet-based model is, by Verizon's own admission, "continuously updated" and there is no guarantee of the continued availability of the specific form of the Verizon studies used to generate UNE costs and prices in this proceeding. (Covad/Mpower, 12/21/05, p. 6.)

In addition, Covad/Mpower respond that the record of the case indicates Verizon has made inflated claims that VzCost replicates real plant routes. Specifically, maps of the networks modeled by HM 5.3 and VzCost show Verizon's studies produce a network design that does a poor job of following rights-of-way and does not resemble Verizon's actual network or any other plausible, efficient network. (Covad/Mpower, 12/21/05, p. 4, and n. 15; citing JC Rebuttal, 11/9/04, pp. 1-5.) Further, none of Verizon's proposed corrections to its study are on the record because Verizon withheld the corrections until the record closed, then asked the proceeding to be extended so it could file model corrections after the rebuttal round. (Id., p. 5.) Finally, Covad/Mpower claim the Commission's reliance on SBC inputs is more state-specific, and supported by the recent order in Verizon v. Peevey, than Verizon's proposals to use nationwide, Verizon-specific inputs. (Id., p. 8.)

We have not modified the determination in the draft decision to reject Verizon's cost model and look to the SBC UNE proceeding for guidance on some modeling inputs. We painstakingly reviewed the record in this case, but still find it appropriate to use some SBC inputs for specific areas. This is within our discretion and supported by the record in this case. Where we refer to the SBC case, we do so only after considering the positions and record evidence provided in this proceeding. SBC inputs are used to corroborate findings from this record, or where the record is found to have shortcomings. We consider our use of the SBC case as guidance to be reasonable.

Rate Structure Issues

Verizon alleges the draft decision should correct several rate structure issues. First, Verizon claims the draft fails to include rates for several UNEs that Verizon offers and that were included in Verizon's model. Second, the draft decision adopts rates for UNEs that Verizon is no longer required to provide and these should be removed. Third, Verizon claims the draft decision changed the rate structure for several UNEs by using HM 5.3. Verizon contends it is "enormously complicated, time consuming and costly to implement California-specific structural (as opposed to rate) changes to Verizon's billing systems...." (Verizon 12/14/05, p. 21.) Verizon suggests conversion of these rates into its proposed rate structure. Finally, Verizon recommends several rates be stricken from the draft decision because HM 5.3 provides no explanation of what services they are intended to cover.

DMR/Navigator oppose Verizon's rate structure recommendations, claiming Verizon is improperly attempting to slip into the final decision numerous additions, modifications, and deletions to the HM 5.3 model. They claim Verizon should have raised any rate structure issues in reply comments so they could be properly addressed on the record. (DMR/Navigator, 12/21/05, p. 8.)

XO/Cbeyond also oppose the request, claiming that through these comments, Verizon is attempting to win establishment of a new charge for "clear channel capability" (CCC) on CLCs that use DS-1 UNEs. XO/Cbeyond contend the clear channel capability is simply a setting for a standard feature on a DS-1 UNE circuit and it would be improper to charge CLCs for CCC when Verizon provides the feature at no charge to its retail customers. (XO/Cbeyond, 12/21/05, p. 2.) Further, XO/Cbeyond claim Verizon's rate structure suggestions are inappropriate attempts to double-count costs by adding rate elements for costs that are already captured elsewhere in HM 5.3. Likewise, there is no need to remove rate elements for UNEs Verizon no longer provides because the rate may be necessary for true-up purposes and the existence or absence of a price does not affect Verizon's obligations under federal law.

We agree with DMR/Navigator and XO/Cbeyond that Verizon's rate structure suggestions are, for the most part, procedurally inappropriate. If UNEs were omitted from HM 5.3, Verizon should have highlighted this in reply comments. Plus, XO/Cbeyond provided convincing testimony early in reply comments that Verizon's proposed CCC rate was inappropriate because it attempts to impose an extra charge for a standard feature that is provided to retail customers at no extra charge. (XO, 8/6/04, p. 27, n. 39.) We will not remove UNEs that are no longer offered because the rate may be necessary for true-up purposes. We decline Verizon's request to modify the rate structures that emanate from our use of HM 5.3. Rate structures were litigated during the proceeding and Verizon should have supplied its preferred rate structures for HM 5.3 in reply comments. Finally, we will not strike any of the UNEs produced by HM 5.3 because Verizon should have objected to them in reply comments if it felt the definitions were inadequate. Verizon's last minute "rate structure" comments are too late and deny other parties an opportunity to respond to these new proposals.

Dark Fiber

Verizon claims the Commission erred in its calculation of the "dark fiber" UNE rate. Specifically, Verizon alleges the Commission neglected to divide the rate by twelve to convert the annual cost into a monthly cost.  In addition, Verizon contends the rate is too low because it is based only on maintenance expenses associated with dark fiber and ignores the costs for physical infrastructure to support the fiber.  (Verizon 12/14/05, p. 19.)  Verizon notes that SBC's dark fiber rate is $11.10 per strand plus a per strand foot charge. (Id.)  XO/Cbeyond oppose Verizon's effort to increase the dark fiber rate.  They maintain the rate properly includes only maintenance expenses because dark fiber is spare fiber and the cost of spare fiber has already been included in UNE rates through the use of fill factors that build in spare capacity.  XO/Cbeyond agree with Verizon that the annual rate should be divided by twelve. (XO/Cbeyond, 12/21/05, p. 9.)

We agree that we erred in not dividing the annual dark fiber rate of 41 cents per mile by twelve to convert it to a monthly charge of 3.5 cents per mile.  Verizon's comment that the new dark fiber rate is less than one percent of SBC's rate concerns us.  Although XO/Cbeyond contend dark fiber costs should be based on maintenance expenses only, we are not convinced it would be double counting to charge users of dark fiber for some spare capacity investment.  We have very little record in this proceeding on other dark fiber proposals.  Therefore, in order to adopt a rate today, we find it reasonable to use SBC's rate as a proxy since it is a similarly situated California ILEC that likely faces similar forward-looking dark fiber costs.  Therefore, we adopt SBC's dark fiber rate, as shown in D.03-07-023, for Verizon.

⁵⁴ The Joint CLCs are Cbeyond Communications LLC (Cbeyond), Covad, DMR Communications Inc. (DMR), MPower Communications Corp. (MPower), Navigator and XO.