DT 99-018
Bell Atlantic - New Hampshire
Investigation Into Incremental Cost Methodology
to be Used When Applying RSA 378:18-b
to Special Contracts
Order Approving Intervention and
Establishing Procedural Schedule
O R D E R N O. 23,179
March 30, 1999
APPEARANCES: Victor D. Del Vecchio, Esq. For Bell
Atlantic - New Hampshire (BA); Curtis L. Groves, Esq. For MCI
WorldCom (MCI); Brian Susnock for the Destek Group(Destek); Jay
E. Gruber, Esq. For AT&T Communications (AT&T); William Homeyer
for the Office of Consumer Advocate (OCA); and Larry S. Eckhaus,
Esq. for the Staff (Staff) of the New Hampshire Public Utilities
Commission (Commission).
I. PROCEDURAL HISTORY
On December 22, 1998, Bell Atlantic - New Hampshire
(BA) filed with the New Hampshire Public Utilities Commission
(Commission) pursuant to RSA 378:18, two petitions seeking
approvals for two Centrex Special Contracts (Special Contracts).
See Docket No. DT 98-221 regarding McLane, Graf, Raulerson &
Middleton, and Docket No. DT 98-222 regarding the Easter Seal
Society of New Hampshire. The proposed Special Contracts would
provide Centrex line systems comprised of Analog and Integrated
Services Digital Network (ISDN) lines. Along with the Special
Contracts, BA filed contract overviews and cost study details in
support of the filings. BA's cost study avers that the Special
Contracts' proposed rates exceed the incremental costs of the
services being provided, pursuant to the requirements of RSA
378:18-b.
Staff's review of the proposed Special Contracts raised
questions as to whether the proposed rates meet the requirement
of RSA 378:18-b. BA-NH's filing appears to follow the incremental
cost calculation methodology which was heretofore accepted as
adequate. However, as required by the Federal Communications
Commission (FCC) in implementing the Telecommunications Act of
1996 (TAct), the Commission must employ a Total Element Long Run
Incremental Cost (TELRIC) methodology for calculating the costs
of unbundled network elements (UNEs) that BA offers for sale to
Competitive Local Exchange Carriers (CLECs).
On January 21, 1999, the Commission issued Order No.
23,108 and Order No. 23,109, which denied the Special Contracts
without prejudice. Among other things, the Commission determined
that a separate proceeding should be opened to resolve the
threshold question of which incremental cost methodology should
be used when applying RSA 378:18-b to Special Contracts.
On February 3, 1999, the Commission issued an Order of
Notice establishing this proceeding to address the issue of which
incremental cost methodology should be used when applying RSA
378:18-b to special contracts. This proceeding raises inter alia,
issues related to whether the public interest would be served by
permitting BA to continue pricing special contracts based upon
non-TELRIC costing principles, and whether and how residential
and small business customers may be protected from subsidizing
Special Contract customers.
On March 10, 1999, a Prehearing Conference was held at
which the Parties and Staff provided preliminary statements of
position and an agreed upon procedural schedule.
II. Positions of the Parties and Staff
A. Bell Atlantic - New Hampshire
Rather than go into a lengthy explanation of its
position, BA indicated that its position had already been
presented to the Commission in Docket DE 97-171, Statement of
Generally Available Terms, at pp. 5-19 of the December 3, 1998
transcript. Generally, BA believes that its proposed methodology
is consistent with long standing cost methodology previously
approved by the Commission; no evidence has been introduced or
considered in an evidentiary proceeding that would require a
departure from that procedure; and no unbundled network element
(UNE) prices have yet been approved in DE 97-171.
B. AT&T Communications
AT&T also relied on its statement in Docket DE 97-171
at pp. 5-19 of the December 3, 1998 transcript. Generally, AT&T
believes the special contract rates proposed by BA are lower than
the rates to CLECs, resulting in an anti-competitive price
squeeze. AT&T maintains that the TELRIC standard is the
appropriate standard to be used in setting price floors for
special contracts.
C. The Destek Group
Destek has provided Internet and Wide-Area-Networking
services throughout the New Hampshire region since 1994. Destek
maintains that special contacts that benefit only one
organization minimize or eliminate the ability for other
companies to compete in the New Hampshire market and provide
services covered by special contracts.
D. MCI WorldCom
MCI's Petition to Intervene included a preliminary
statement of position. MCI maintains that the public interest
would best be served by using a TELRIC methodology. According to
MCI, BA's offering services to its retail customers at lower
rates than it proposes to offer unbundled network elements to
CLECs constitutes a barrier to market entry in violation of TAct
(47 U.S.C. 253). MCI suggests that BA be required to price a
special contract at least at the sum of the prices, rather than
the incremental costs, that CLECs pay for the underlying UNEs
necessary to provide service.
E. Office of Consumer Advocate
The OCA states that given a normal wholesale/retail
pricing relationship, prices on network elements offered to
wholesale customer CLECs would be significantly lower than the
prices offered by BA to its largest customers. Unfortunately,
OCA maintains that the cost factors and pricing utilized by BA in
special contracts are lower than those used in the SGAT.
F. Commission Staff
Staff maintains BA's approach does not meet the
requirements of RSA 378:18-b and the TAct. However, further
investigation is required to address the other issues raised in
the Commission's Order of Notice. Staff is particularly
concerned with BA's prices since both customers in Dockets DT
98-221 and Docket No. DT 98-222 represented in letters to the
Commission supporting their special contracts that they might
have to seek other alternatives that would be less desirable but
more costly.
III. INTERVENTIONS AND PROCEDURAL SCHEDULE
There being no objections, all of the Petitions for
Intervention are hereby approved. In addition, the Parties and
Staff have agreed to a procedural schedule which, although it
goes past the April 30, 1999 deadline contained in the Order of
Notice, seems appropriate considering the importance of this
proceeding. The Parties have requested that the Commissioners
hear the matter, pursuant to RSA 363:17, and we note that a
majority of the Commission intends to be present for the hearing.
Several Parties requested the opportunity to submit briefs and
the Commission agrees that briefs should be required.
Based upon the foregoing, it is hereby
ORDERED, that the following procedural schedule be
adopted to govern this proceeding:
Data Responses from BA Within 10 days of request
Direct Testimony - All Parties March 31, 1999
Data Requests to All parties April 7, 1999
Data Responses from All Parties April 16, 1999
Rebuttal - All Parties April 23, 1999
Hearing April 29 & 30, 1999
Briefs May 17, 1999
Commission Decision May 30, 1999
By order of the Public Utilities Commission of New
Hampshire this thirtieth day of March, 1999.
Douglas L. Patch Susan S. Geiger Nancy Brockway
Chairman Commissioner Commissioner
Attested by:
Thomas B. Getz
Executive Director and Secretary