ORDER NO. 97-119

ENTERED APR 02 1997

This is an electronic copy.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

AR 317

DISPOSITION: RULES AMENDED

On March 20, 1996, the Commission entered Order No. 96-079 (UT 119) which directed the Commission Staff to propose amendments to the Open Network Architecture Rules, OAR 860-035-0010 et seq. The amendments would authorize collocators to meet the insurance requirements of OAR 860-035-0110 through self-insurance and to eliminate the requirement in the definition of virtual collocation that local exchange carriers must own virtually collocated equipment. Proposed OAR 860-

35-0020(27). The amendments also provide that a customer may purchase equipment necessary for virtual collocation and lease it to the local exchange carrier for $1. The amendment clarifies that the local exchange carrier will be responsible for installation, maintenance, and removal of the equipment. Proposed OAR 860-035-0110(6)(f).

On August 14, 1996, the Commission filed a Notice of Proposed Rulemaking with the Secretary of State and subsequently served it on all interested parties. The notice set out the proposed amendments and included a Statutory Authority, Statement of Need, Principal documents relied upon, Economic and Fiscal Impact, and an Advisory Committee statement. The Secretary of State published notice of this action in the Oregon Bulletin.

The notice invited interested persons to file written comments or request a hearing. On October 15, 1996, U S WEST Communications, Inc., (USWC) filed written comments. No other comments were filed. At its April 1, 1997, public meeting, the Commission adopted the proposed rules in this docket. Appendix A, which is attached to this order, sets out the full text of the amended rules.

DISCUSSION

USWC opposes the amendment that sets the lease rate at $1. USWC asserts that the amount was set by the Commission in Order No. 96-079, because the Commission believed that a lease rate at the nominal rate of $1 would signify an actual lease, whereby USWC would have possession and control of the equipment. USWC claims that since the collocator can remove the equipment at its whim, there is really no lease.

USWC points out that its current tariff which the Commission ordered it to file contains the provision for $1 and that this matter is on appeal to the Circuit Court. As a result, USWC suggests that this rule be deferred until the appeal is resolved.

The Commission adopts the rule as proposed. We included the $1 lease back provision in Order No. 96-079, with the specific understanding that the provision was acceptable to USWC. In fact, the record in UT 119 shows that USWC proposed this term.

USWC’s prefiled testimony, dated December 16, 1994, states:

An option that isn’t in USWC's Oregon tariff is a recent (December 13, 1994) provision filed in our interstate collocation tariff. That provision allows a collocator to obtain its own equipment to be virtually collocated and to supply that equipment to USWC for $1.00. This provision may be attractive to certain Oregon collocators.

At the hearing in UT 119, counsel for USWC referred to a company offering in an FCC tariff for the provision of virtual collocation equipment "where the customer would provide the equipment for virtual collocation and there would not be any consideration that changed hands either way." Counsel indicated that USWC would not oppose a finding by the Commission adopting the FCC provision in Oregon. Transcript, Docket UT 119, May 10, 1995, Vol. II, at 41 and 42.

Furthermore, USWC’s legal arguments are not persuasive. It claims the customer can remove the equipment at its whim, indicating that there is no lease. Leases are often terminable at will. Such a term does not mean there is no lease. Secondly, the proposed rule does not permit a customer to remove the equipment at will. In fact, customers have no access to the equipment. The proposed rule makes USWC responsible for installation, maintenance and removal of the equipment. The tariff adopted in Order No. 96-079 requires USWC and the customer to agree on a date for disconnection, and then provides the customer 35 days to remove the equipment. Order No. 96-079, Tariff 1.3.5.

Finally, we have difficulty understanding USWC's opposition to this rule. The rule is designed to reduce USWC's exposure to unnecessary risk. The alternative would be to retain the existing rule requiring USWC to purchase the equipment itself and lease it back to the collocator. Such a provision subjects USWC to the risk of absorbing the cost of abandoned plant if the collocator terminates service before USWC has recovered its costs. In any number of proceedings, USWC has expressed its concern about being left "holding the bag" because new competitors will be saddling the company with unrecoverable costs. See Order No. 96-187 at 3-4. We find USWC’s opposition to this rule to contradict its positions in other dockets.

No comments were filed on the amendment that eliminates language specifying that local exchange carriers own and maintain the virtual collocation equipment, software, and databases or on the amendment that authorizes collocators to meet insurance requirements through self-insurance

ORDER

IT IS ORDERED that:

1. The Commission's administrative rules should be amended as set forth in Appendix A.
2. The rules shall be effective upon filing with the Secretary of State.

Made, entered, and effective ____________________.

A party may request judicial determination of the validity of this rule pursuant to ORS 183.400.