ORDER NO. 97-125

ENTERED APR 07 1997

This is an electronic copy.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

ARB 2

DISPOSITION: RECONSIDERATION DENIED; ORDER AMENDED ON COMMISSION’S OWN MOTION

Procedural Background

On December 9, 1996, the Public Utility Commission of Oregon issued Order No. 96-325 adopting an arbitrator’s decision as amended.

On February 7, 1997, U S WEST Communications, Inc. (USWC) filed a petition for reconsideration. TCG filed a response on March 3, 1997.

Issues and Disposition

I. Sham Unbundling

Sham unbundling is the term used by USWC to describe the purchase by a competing carrier of unbundled elements at unbundled element prices and the recombining of them to constitute a finished service. USWC argues that process allows a competitor to obtain a cheaper price than the Act’s resale price for the same service. The Commission’s decision found that the Act does not allow restriction on the use of unbundled elements. (p. 13)

USWC challenges that conclusion on the grounds that the "very plain" language of the Act assumes that the competing carrier provides some network elements and therefore that such carrier could not "recombine the existing components of [USWC’]s network."

The Commission concludes that USWC’s argument is unpersuasive. The wording of the Act requires the conclusion we adopted.

II. Use of Cost Studies

USWC challenges our decision (pp. 8-11) not to consider the cost studies it submitted in this proceeding. It avers that if the studies are not considered, the Commission cannot determine if the prices established in the order meet the Act’s requirement that USWC be allowed to recover all of its actual costs associated with network elements.

The order sets out in detail our reasons for declining to use the cost studies. USWC offers nothing new on this issue. We conclude, as we did in the order, that the cost studies should not be considered and that the interim price we set for the NAC is based on better information. That price will be subject to modification when the Commission revises prices for unbundled elements.

III. Deregulated Services

USWC challenges the portion of the decision (p. 19) which requires it to make deregulated services available for resale. USWC argues that there is no basis under federal law for the Commission to "re-regulate services this Commission has previously deregulated." USWC suggests that deregulated services may not, in fact, be "telecommunications services," and may thus be outside of the scope of the Act.

The Commission’s decision on this issue was based on the wording in the Act which requires ILECs to "offer for resale at wholesale rates any telecommunications service that the carrier provides at retail to subscribers who are not telecommunications carriers." USWC’s mere assertion that the Commission cannot re-regulate a service is not on point and its unsupported suggestion that deregulated services are not telecommunications services is not persuasive.

Wholesale Discount Rate

USWC asks the Commission to reconsider the discount rate of 17 percent established in this case (p. 18). USWC claims that this figure is based on the proxy rate in the FCC’s Order and is "clearly contrary to the Eighth Circuit’s directive, when it stayed the FCC Order, that the arbitrator proceed ‘free from the influence of the FCC’s proxy prices.’" USWC claims further that there is no basis in the record for the figures chosen by the Commission and that the Commission should use USWC’s cost studies as the basis for the discount rate.

The 17 percent discount rate we chose was TCG’s offer. We chose it because it is reasonable and because the record does not contain any sound basis for choosing another figure. For reasons set out in the order, we declined to use USWC’s cost studies. USWC has provided us with no basis for changing the figure. We noted in the order that it is an interim figure which will be modified when we have approved a cost study of USWC’s avoided costs and established a different discount rate.

V. Resale of Residential Service

USWC asks that the Commission reconsider its decision that USWC must resell residential services. It argues that, because of various regulatory decisions by the Commission, these services are being sold below the costs of service and that requiring it to resell them will result in USWC having to provide "a below service cost at even lower costs."(Sic) It asks that the Commission delay this requirement until a determination can be made that the service is recovering its costs, such as through USWC’s pending rate case.

The Commission sees no way around the requirement of the Act that all telecommunications services are subject to resale. We affirm our decision.

Penalties for Performance

USWC claims that the Commission’s adoption of a contract provision providing for penalties for performance lapses is outside the authority given to it under the Act. (p. 7)

The Commission concludes that it is appropriate for it to resolve open issues that relate to the subject matter of the Act. The challenged provision clearly does so and we affirm our decision.

Collocation

USWC asks the Commission to reconsider its decision "to expand the definition of premises beyond that provided for by the FCC." USWC does not cite or specify the particular portion of our order to which it is referring. Our order quotes the FCC’s definition of "premises," but does not state that the intent of the order is to go "beyond" that definition.

USWC also claims that the order adopts USWC’s interstate tariffs for virtual and physical collocation but that USWC does not have an interstate tariff for physical collocation. USWC asks that the order be clarified on this issue.

The order states: "U S WEST’s interstate expanded interconnection tariff will be used to establish interim proxy rates for both physical and virtual collocation." It goes on to state: "Where U S WEST does not have tariff rates in effect—that is, for floor space and infrastructure charges—TCG has made proposals for specific prices. . . These figures are reasonable. U S WEST has provided no evidence otherwise. . . These figures are adopted." This section was designed to provide rates for physical collocation. There is no need for modification or clarification.

Reciprocal Compensation Arrangements

USWC objects to the Commission’s adoption of a "bill and keep" arrangement for transport and termination. It claims that such arrangements do not compensate it for its actual expenses. Moreover, USWC alleges that the order fails to make findings that "rates are symmetrical and traffic is in balance," as the FCC requires, according to USWC.

The Commission’s order sets out our basis for ordering bill and keep. Contrary to USWC’s contention, it specifically makes findings regarding traffic balance and additional costs. Moreover, the order reiterates that USWC’s cost studies should not be used to set prices. TCG’s bill and keep proposal was thus the only proposal before the Commission. It is a reasonable offer and its adoption was thus appropriate.

Construction Charges

USWC asks for clarification of the portion of the order relating to recovery of construction charges. It notes that later arbitrations (ARBs 3 and 6) contain somewhat different, and more explicit, language on this issue. It asks that similar language be adopted in the present case.

Our decision on this issue in ARBs 3 and 6 (Order No. 97-003) was not a change from the decision in ARB 2. In fact, we cited Order No. 96-325 in our discussion of this matter in Order No. 97-003. The fact that the language is somewhat different does not require reconsideration or modification of the order.

Two-Way Trunking

USWC states that the Commission has concluded that USWC is obligated to accommodate two-way trunking requests where technically feasible and bear the burden of demonstrating technical infeasability of a particular method of interconnection. USWC states further that "The Decision notes that such an effect should be done on a bona fide basis with costs to be borne by the companies desiring the capabilities (Appendix A at p. 5)." It asks for clarification of this language.

The Commission cannot find any such language in our order in this case. USWC has offered no basis for reconsideration or clarification of the order on this issue. The request for clarification is denied.

Interim Number Portability

USWC’s contention here does not seem to relate to anything in the order, which adopted the language agreed upon by the parties. There is no basis for reconsideration.

Conclusion

OAR 860-014-0095 provides that the Commission will reconsider an order if the petitioning party establishes that there is new evidence not available at the time of the hearing, that a change in law or policy has occurred since the order was issued, that the order contains an error or law of fact, or that some other good cause exists for further examination of a matter essential to the decision. USWC has established no basis for reconsideration of Order No. 96-325.

Order Modified on Commission’s Own Motion

Our decision on loop deaveraging needs to be clarified. We provided clarification of that issue in our order in ARB 1 (Order No. 96-324) but failed to do so in our order in ARB 2. We now do so. The "Decision" section (p. 11 of Appendix A) is modified to read as follows:

Geographic deaveraging should not be implemented at this time. Geographic deaveraging is an appropriate mechanism for matching the cost to provide unbundled elements with the price for those elements. However, in this case, we do not have sufficient information in the record to require deaveraging. We also note that USWC is correct in its assertion that deaveraging unbundled elements before deaveraging retail rates would place it at a competitive disadvantage.

ORDER

IT IS ORDERED that:

1. The application by USWC for reconsideration of Order No. 96-325 is denied.
2. Order No. 96-325 is modified as set out above.

Made, entered, and effective ________________________. 

A party may appeal this order to a court pursuant to ORS 756.580.

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