ORDER NO. 99-235

ENTERED MAR 29 1999

This is an electronic copy.

OF OREGON

UD 9

DISPOSITION: PETITION GRANTED WITH CONDITION

Background. On February 26, 1999, U S WEST Communications, Inc. (USWC), petitioned the Commission to price list four new service packages associated with residential access lines. The four new packages are:

VALUECHOICE;

Fax Package;

Teen/Roommate Package; and

Home Office Package.

VALUECHOICE is available to residential customers in conjunction with either an additional or a single flat rate access line. The three other packages are available only to residential customers and only as vertical (add-on) services to additional residential flat rate access lines. Access lines are not part of any of the four packages and would not be price listed. Access lines would be purchased separately at the established tariff rate. Only the feature packages would be price listed, not the individual services in the packages. The individual services would remain in the regular tariff.

Before it filed the petition at issue here, USWC filed a proposed tariff, Advice No. 1755. That tariff filing would establish the four feature packages as tariffed services before they are price listed. Advice No. 1755 was considered and approved at the Commission’s March 16, 1999, public meeting.

Under ORS 759.030(6) and OAR 860-032-0035, the Commission may authorize a telecommunications utility to price list services if the services are not essential services, without any requirement that the services be subject to competition.

Staff Recommendation. Commission Staff reviewed USWC’s petition and presented its analysis at the Commission’s March 16, 1999, public meeting. According to Staff, the filing involves three issues. The first issue is whether the services in the packages to be price listed are essential or not. Staff argues that the services are clearly not essential. Staff reasons that the features underlying the proposed packages can be purchased separately from those packages; therefore the packages are not essential services.

The second issue is whether price listing the service packages could lead to a growth in demand for access lines and thus exacerbate USWC’s service quality problems. USWC does not project any growth in the number of residential lines due to offering the four packages. Staff considers it unlikely that customers would subscribe to additional lines simply because these feature packages are available. Staff maintains that the perceived need for the line itself would probably have to occur first.

The third issue is whether there are other residential feature packages identical or similar to the packages in this petition, so that the company could use them as a basis for price discrimination. Staff believes the answer is no. There are no other USWC residential feature packages identical or similar to the packages in this petition. Moreover, even if USWC did attempt to use these packages for price discrimination, the Commission could order that the services be moved back to the regular tariff and fully regulated.

Under ORS 759.0307, the Commission could suspend the current filing and investigate further regardless of whether the proposed price list services are essential, if it has other public policy concerns. Staff raises no other public policy issues at this time.

The Commission has issued orders regarding two recent USWC petitions to price list packaged services. In Order No. 98-242, UD 6, concerning USWC’s price listing of certain customer calling service packages, the Commission decided that the issue of whether a service is essential should be taken up in a separate proceeding. In Order No. 98-447, UD 7, concerning USWC’s price listing certain service packages, the Commission granted the petition without prejudice to future decisions regarding issues of whether services are essential and whether a service package should be price listed when underlying services are tariffed. Therefore, Staff finds no reason why the current petition should be treated differently from the price list petitions subject to the two above cited orders. Moreover, USWC would have pricing flexibility in its Portland competitive zone for the packages included in this petition once the four packages proposed in Advice No. 1755 are allowed by the Commission. Thus, this petition effectively would only add to the areas where USWC can change its rates for the four packages in the petition without submitting to the Commission’s full regulatory process.

Staff does recommend that for the four proposed price list packages, USWC be required to include a condition of service stating that the price for any package will not exceed the sum of the tariffed rates of the package’s individual service components.

USWC did not submit a financial analysis with the petition and makes no revenue effect estimates for its petition. However, USWC did submit a financial analysis with its related tariff filing, Advice No. 1755. That analysis cites previous cost studies approved by the Commission showing that the proposed rates cover the long run incremental costs of service. USWC does not attribute any further revenue changes to the four packages if this petition is granted.

Commission Decision. At its March 16, 1999, public meeting, the Commission considered and adopted Staff’s recommendation. The Commission notes that its decision in the matter of this petition is made without prejudice to future decisions regarding whether any particular services are essential or not, and whether any particular service package should be price listed when some of the underlying services are tariffed.

ORDER

IT IS ORDERED that:

1. The petition of U S WEST Communications, Inc., to price list the four services set out above is granted.

2. As a condition of service for each of the four packages, USWC shall include a provision that the price for any package will not exceed the sum of the tariffed rates of the package’s individual service components at any time.

Made, entered, and effective ________________________.

 A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A request for rehearing or reconsideration must be filed with the Commission within 60 days of the date of service of this order. The request must comply with the requirements in OAR 860-014-0095. A copy of any such request must also be served on each party to the proceeding as provided by OAR 860-013-0070(2). A party may appeal this order to a court pursuant to applicable law.