Other Parties' Positions

On May 18, 1999, responses to Pacific's motion were filed by GTEC; Allied Personal Communications Industry Association of California; The Utility Reform Network; AT&T Communications, Inc.; Sprint Communications Company, L.P.; MCI Worldcom; the California Cable Television Association; and the Office of Ratepayer Advocates (ORA). ORA filed a separate motion for an order to deny LE factor recovery for PEP costs. In addition to the parties noted above, the cities of Glendale and Burbank and Roseville Telephone Company (Roseville) responded to ORA's motion.

On June 3, 1999, Pacific filed a reply to the responses to its motion as well as to the separate motion of ORA. ORA filed a reply to the responses of Pacific and Roseville on June 21, 1999.

GTEC supports Pacific's request in its entirety. GTEC also asks the Commission to allow it similar recovery for Group 2 costs incurred by GTEC related to PEP-ordered educational programs. Should the Commission decline to grant Pacific's request to recover all of the Group 1 costs, GTEC would ask the Commission to return to the original order by the Commission (i.e., allocation to carriers based upon their number of NXX codes in the subject NPA) and allow GTEC to recovery its allocated share of the Group 1 costs as an LE adjustment in its annual Price Cap filing.

Roseville notes that the Commission has already opened a proceeding to review Roseville's NRF, including the criteria for recovery of costs by the Z-factor mechanism. (A.99-03-025, filed March 8, 1999.) On May 19, 1999, Assigned Commissioner Neeper issued a ruling and scoping memo in this proceeding identifying changes to the Z-factor criteria applicable to Roseville as an issue to be considered. Roseville argues that this would be the proper place for ORA to raise its recommendation regarding recovery of overlay education costs by Roseville. To the extent ORA wishes to address Roseville's recovery of overlay public education costs, Roseville proposes that ORA submit its proposal as part of its recommendations in Roseville's NRF review proceeding.

ORA argues that any LE factor treatment transferring costs of overlays from telecommunications carriers to ratepayers would violate the express language of the Telecommunications Act of 1996 which states:

"The cost of establishing telecommunications numbering administration arrangements . . . shall be borne by all telecommunications carriers on a competitively neutral basis as determined by the Commission [the FCC]." (See, 47 U.S.C. § 251(e)(2) (emphasis added).)

ORA argues that because the cost of implementing overlays is part of establishing telecommunications numbering administration arrangements, the cost of implementing overlays within California must be borne by telecommunications carriers, not ratepayers.

ORA further denies that the PEP costs satisfy the LE factor criteria for recovery.

ORA asserts that, in D.98-10-026 issued October 8, 1998, the Commission established two narrow areas for LE factor recovery: (1) matters mandated by the Commission, and (2) changes in total intrastate cost recovery resulting from changes between federal and state jurisdictions. (Id. at p. 61.) The Commission further limited this allowance to costs for which LE factor treatment is authorized in the underlying Commission decision. (Id.) In the instance of educational costs associated with the implementation of overlays in California, the Commission did not provide for LE treatment of those costs in its underlying decision mandating the 310 NPA PEP. (See, D.98-12-081, issued December 17, 1998.) The Commission issued this decision two months after D.98-10-026. ORA thus argues that by the terms of D.98-10-026, the educational costs associated with implementing an overlay in the 310 NPA are not eligible for LE factor treatment.

Parties representing competitive local carriers (CLCs) generally oppose Pacific's LE factor recovery proposal, arguing that it fails to meet all of the criteria prescribed in D.98-10-026. Particularly, parties argue that the costs are not exogenous, do not disproportionately impact Pacific, and are a normal cost of doing business. Parties also point out that the PEP costs were not authorized for LE factor recovery in the underlying decision authorizing the PEP. Parties further argue that granting LE factor recovery would be anticompetitive since it would allow Pacific to recoup its share of "Group 1" costs from ratepayers while CLCs and wireless carriers would likely have to absorb their share of such PEP costs. Various CLC parties believe that if Pacific picked up other carriers' share of PEP "Group 1" costs as well through the LE factor, it would neutralize such potentially anticompetitive impacts.