DE 96-420 Freedom Ring, L.L.C. Petition Requesting that Incumbent Local Exchange Carriers (ILECS) Provide Customers with a Fresh Look Opportunity Order Clarifying Timing of Fresh Look O R D E R N O. 23,030 October 5, 1998
APPEARANCES: Swidler & Berlin by Eric Branfman, Esq., for Freedom Ring, L.L.C.; Victor Del Vecchio, Esq. for Bell Atlantic; Chris Zibailo, Esq. for Digital Signal Communications; Downs, Rachlin & Martin, P.L.L.C. by Nancy Malmquist, Esq. for CTC Communications; Office of Consumer Advocate by William Homeyer for residential ratepayers; and, E. Barclay Jackson for the Staff of the New Hampshire Public Utilities Commission. I. PROCEDURAL HISTORY As a result of Order No. 22,798, issued by the New Hampshire Public Utilities Commission (Commission)on December 8, 1997, long-term contract customers of New England Telephone and Telegraph (Bell Atlantic) have an opportunity to take a "Fresh Look" at their contracts and choose a competitive carrier for local exchange service. This Order applies to both special and tariffed long-term local contracts. The Fresh Look opportunity lasts for 180 days, beginning when a competitor is operational within a particular geographic area identified by NXX prefixes. Order No. 22,798 addressed operational competitive local exchange carriers (CLECs) but did not address the effect of an operational reseller. On April 17, 1998, the Commission issued Order No. 22,903, which opened a Fresh Look opportunity in the Manchester and Nashua exchanges and clarified procedures for obtaining and providing termination charge information. Also in that Order, the Commission noted that the Commission Staff (Staff) and other parties had raised the question of whether resale opportunities obviated the need for a Fresh Look opportunity. The Commission determined that because it had not fully considered whether the four-point test, when applied to resellers, opens up a Fresh Look opportunity, it directed that a further hearing be held on this issue. On April 21, 1998, a letter was issued by the Executive Director indicating that a hearing would be held on May 8, 1998 to take comments on the effect of an operational reseller on the Fresh Look opportunity. A duly noticed public hearing was held on May 8, 1998 at which written and oral comments were received from Bell Atlantic, CTC Communications Corporation (CTC), Staff, Freedom Ring L.L.C.(Freedom Ring), and Digital Signal Communications (Digital). The Commission deliberated this matter at its public meeting on August 17, 1998. II. POSITIONS OF THE PARTIES A. Freedom Ring Freedom Ring is a facilities-based carrier. While it supports the notion of resale, and believes that resale offers alternative vendors to the consumer, it argues that resale is distinct from facilities-based carrier alternatives, and that Fresh Look is inapplicable to resellers. Freedom Ring argues that the Fresh Look opportunity allows for the termination of the current ILEC contract; the incumbent local exchange carrier's (ILEC) facilities are no longer used, and therefore customers benefit from an opportunity to obtain services from alternative facilities-based vendors that may not be currently provided by the ILEC. Additionally, Freedom argues that under resale, customers' opportunities for discount are limited to the wholesale discount obtained by the reseller. Further, Freedom submits that because construction of alternative facilities takes longer than 180 days, if a reseller triggers the Fresh Look opportunity, a facilities-based entrant would miss the 180-day window entirely and might stay out of the area since it cannot take advantage of Fresh Look. Thus, in order to promote new facilities-based service, only facilities-based providers should trigger Fresh Look. Finally, Freedom Ring states that resellers do not need a Fresh Look window because the Telecommunications Act entitled resellers to resell contracts from the day it went into effect. B. Bell Atlantic Bell Atlantic argues that the Commission's December 8, 1997 Order (Order No. 22,798) did not make a distinction between facilities-based and non-facilities-based CLECs, and that pursuant to that order, the Fresh Look regulations apply equally to all competitors, including resellers. Support for this interpretation of the Commission's decision is found in several sources. First, Bell Atlantic argues that the statements made by the Commission in the analysis portion of its Order regarding the standards adopted by the Public Utilities Commission of Ohio (PUCO) effectively incorporated those standards by reference. Bell Atlantic submits that the PUCO applies Fresh Look equally to all CLECs, and it was the intent of the Commission to do the same. Second, Bell Atlantic points out that N. H. Admin. Rules, Puc Chapter 1300, the Commission's Local Telecommunications Rules, do not provide separate standards for facilities-based and non-facilities-based competitors, and therefore the term "CLEC" as used in the December 8, 1997 Order includes resellers. Third, the Commission excluded intraLATA toll contracts from the Fresh Look opportunity, basing its decision on the fact that the toll market is open to competition and had been for some time. Bell Atlantic points out that the method for toll competition is largely through the resale of toll service, and by excluding toll contracts from Fresh Look the Commission based its evaluation on the availability of competitive services, not on the type of competitor. Bell Atlantic then argues that since the Commission's December 8, 1997 Order already provides a Fresh Look for resellers, providing a separate Fresh Look for facilities-based competitors would establish multiple Fresh Look windows. Establishing such multiple windows would be inconsistent with the Commission's stated objective to establish only a limited Fresh Look opportunity for each exchange. Continuing with this argument, Bell Atlantic provided testimony which it claimed demonstrated that there would be an increased burden on the company and confusion to customers if multiple windows of Fresh Look are allowed for each of the exchanges in the state. Thus, Bell Atlantic would maintain provision of only one Fresh Look opportunity in each exchange and have it apply equally to both resellers and facilities-based carriers. On this basis, Bell Atlantic's position is that there are broad areas of the state within which the 180 day Fresh Look should be starting now because the exchanges are subject to resale agreements and the first commercial calls have been made. Finally, Bell Atlantic points out that in point number 3 of the four point test for an operational competitor that was defined in Order No. 22,798, the reference to "CLEC" should be revised to "ILEC." This change would clarify the Commission's apparent intent to recognize the two methods available for competitors to secure local exchange services. C. CTC Communications CTC stated that Fresh Look is more applicable to facilities-based carriers where the customer terminates service with Bell Atlantic or the ILEC. CTC also argues that the termination fees payable to Bell Atlantic for the recovery of lost revenue when a customer leaves Bell Atlantic's service should not apply when a reseller assumes the full term of the contract. CTC claims that Bell Atlantic instituted a policy change after its merger with NYNEX Corporation and now charges early termination fees when there is an assumption of a contract by a reseller. CTC requested a ruling that resellers could assume contracts of customers in the services that were contracted without the customers having to pay a termination fee. D. Digital Signal Communications Digital is a reseller of Bell Atlantic as well as a reseller of various other providers such as Teleport, Winstar, Digex, Worldcom, and Intermedia. Digital claims that, although a reseller, it is not limited to simply reselling or repackaging at a discount the same service as provided by Bell Atlantic or the ILEC. Digital offers different products and provides real competition to Bell Atlantic. It is Digital's position that it satisfies the Commission's four point test as soon as it has a customer in the particular exchange, and therefore the Fresh Look opportunity does and should continue to apply to resellers. E. Staff Staff's position is that resellers do not trigger a Fresh Look because resellers do not constitute full competition. The Fresh Look window should only open when a customer terminates its contract with Bell Atlantic in order to accept a better contract with a CLEC. It is Staff's contention that a reseller, when it resells Bell Atlantic's services, does not act to terminate the customer's contract. Thus, Staff argues, only a facilities-based CLEC or a CLEC which operates using a combination of facilities-based and resold services can trigger the Fresh Look opportunity. As additional support for its position, Staff points to the effect of resale on Bell Atlantic's operations. Resale competitors do not affect Bell Atlantic's market share - they continue to provide the service over Bell Atlantic's facilities, and Bell Atlantic continues to receive revenues for those services. While these revenues may be lower than previously obtained as a result of the wholesale discount, the discounted rate was established at a level to provide Bell Atlantic with full cost recovery with the exception of its avoided costs. Therefore, Bell Atlantic is made whole and the provisions for termination fees in the Fresh Look opportunity are inapplicable. Staff believes that the four point test established by the Commission in the December 8, 1997 Order is sufficient when applied to facilities-based competitors, and no additional tests are necessary for a reseller, as a reseller does not open Fresh Look. Staff disagrees with Bell Atlantic's contention that the Commission adopted in full the position of the PUCO when it referenced the Ohio decision. Staff submits that the reference applies only to the portions of the Ohio decision expressly noted. III. COMMISSION ANALYSIS We find convincing the arguments that resellers do not constitute full competition for the purposes of Fresh Look. The effect of resale competition is quite different from that posed by a facilities-based competitor. A reseller cannot offer any services to customers substantially different from what the incumbent offers; other than customer services and billing and collection, the actual telephone service is the same. While resellers and the alternatives that they offer are beneficial to competition, they are limited by the cost structure of the ILEC. A facilities-based competitor, on the other hand, has the ability to have a much greater impact on competition by virtue of putting into place new facilities which bring with them the ability to offer new and innovative packages or offerings. The alternatives that facilities-based CLECs bring to the market will go further than resellers in achieving the goal of a fully competitive market. To hold that the existence of resale opportunities triggers the Fresh Look opportunity would severely limit its effectiveness and defeat much of the purpose for which it was established, especially in a state like New Hampshire which has many rural areas that will probably not see meaningful local facilities-based competition for some time. As it is, the Fresh Look opportunity is already quite limited; it would not be prudent to take any steps to further limit that opportunity. Thus, the existence of an operational reseller within a particular geographic area alone should not trigger the Fresh Look opportunity, i.e., the ability for a customer to terminate a Bell Atlantic contract in order to be served by another carrier; this can only be triggered by the existence of a facilities-based competitive local exchange carrier (CLEC) that meets the four-part test outlined in Order No. 22,798. We disagree with Bell Atlantic's interpretation of our references to the PUCO decision in Order No. 22,798 and its arguments that the Local Telecommunications Rules limit our ability to determine separate standards for facilities-based and non-facilities-based competitors. We did not intend to adopt the standards applied by the Ohio Commission for Fresh Look in their entirety. As Order No. 22,903 makes clear, the purpose of the May 8, 1998 hearing was to consider whether the Fresh Look opportunity applied to resellers. We note that the arguments and allegations raised by CTC with respect to whether Bell Atlantic should be required to allow the assumption of a contract by a reseller without subjecting the customer to early termination fees is addressed in a separate docket. See, DE 98-061. Finally, we agree with Bell Atlantic that number 3 of the Commission's four criteria for an operational competitor should be revised. The reference to "CLEC" therein should be replaced with "LEC." Based upon the foregoing, it is hereby ORDERED, that Order No. 22,798 issued in this docket is clarified to indicate that only the presence of facilities-based CLECs, not the existence of operational resellers within a particular geographic area, triggers the Fresh Look window; and it is FURTHER ORDERED that number 3 of the four criteria for determining the existence of an operational competitor defined in Order No. 22,798 is revised as follows: (3) an executed, approved interconnection agreement or the ability to purchase out of another LEC's schedule for providing basic local exchange services; By order of the Public Utilities Commission of New Hampshire this day of fifth day of October, 1998. Douglas L. Patch Bruce B. Ellsworth Susan S. Geiger Chairman Commissioner Commissioner Attested by: Thomas B. Getz Executive Director and Secretary