In the Matter of the Pricing Proceeding ) DOCKET NO. UT-960369 for Interconnection, Unbundled ) Elements, Transport and Termination, ) and Resale ) ) In the Matter of the Pricing Proceeding ) DOCKET NO. UT-960370 for Interconnection, Unbundled ) Elements, Transport and Termination, ) and Resale for U S WEST ) COMMUNICATIONS, INC. ) ) In the Matter of the Pricing Proceeding ) DOCKET NO. UT-960371 for Interconnection, Unbundled ) Elements, Transport and Termination, ) and Resale for GTE NORTHWEST ) INCORPORATED ) ) MOTION FOR RECONSIDERATION This motion is respectfully submitted by GTE Northwest Incorporated ("GTE") requesting that the Commission reconsider its April 17, 1997 Order precluding GTE from discovering (1) the costing inputs for network elements that AT&T uses in its own costing model ( the TICM model) that are common with the systems costed out in the Hatfield Model and (2) the evaluation AT&T has done for future wireline loop costs in conjunction with its analysis of wireless costs. AT&T has represented to the Commission that the Hatfield Model is “open and verifiable.” GTE believes that discovery will demonstrate that AT&T’s own forward-looking cost projections are inconsistent with AT&T's costing inputs in the Hatfield Model. Therefore, AT&T’s representation that the Hatfield Model is verified is wrong. The Commission improperly has foreclosed this avenue of inquiry. Because the Hatfield Model produces such incorrect results, GTE is compelled to press this discovery issue and present additional evidence to support its position. AT&T argues that no information concerning its own costing inputs is discoverable because AT&T is an interexchange carrier (“IXC”) and GTE is a local exchange carrier (“LEC”). This misses the point. Both systems use similar equipment. Moreover, this argument has now been rejected by the ALJ in California where AT&T’s motion for a protective order with respect to the TICM model has been denied: This is the motion for a protective order that AT&T referred to at page 2 of its Opposition to GTE’s Motion to Compel. AT&T has mischaracterized the issue. As I read Pacific’s papers, it is requesting an opportunity to determine whether TICM and the Consensus Costing Principles (on which the TSLRIC studies were based) reflect a “consistent set of [costing] principles and criteria”. That is a reasonable area of inquiry for the pricing phase of this proceeding as it now stands, and AT&T is jumping to hasty conclusions when it suggests that giving Pacific access to TICM for this purpose is tantamount to “inflat[ing] the share and common costs of Pacific competitors.” A copy of this Order is attached as Exhibit A. In the California OANAD proceedings, Mr. Frank Murphy, an expert network operations manager, reviewed discovery from AT&T and costing inputs from the Hatfield Model and confirmed the use of similar equipment by IXCs and LECs.: Many of the facilities and investments used in AT&T’s engineered network mirror facilities and investments Pacific uses in its network. Both use operators. Both use switches. Both use interoffice facilities. AT&T’s engineering network data (like Pacific’s) demonstrate [that] the HM inputs are unrealistic. When the inputs are adjusted to reflect the AT&T network data, HM produces significantly higher costs estimates than those reported by AT&T/MCI in their January 13, 1997 filing. Dec. ¶ 2; Exhibit B hereto. AT&T has recognized the similarity of the telecommunications systems in this proceeding. For example, AT&T uses costing inputs from IXCs in the Hatfield Model for a number of systems such as common channel signaling. Some of these inputs come from AT&T’s Capacity Cost Study and Updated Capacity Cost Study of IXCs. This study costed out IXC networks exclusively. AT&T has verified that the following costing inputs used in the Hatfield Model came from those studies: These responses to discovery referred to HM 2.2.2. AT&T continues to use these studies in HM 3.1. See Hatfield Model Release 3.1 Inputs Portfolio (“HIPS”) submitted with the April 25, 1997 Rebuttal Testimony of Robert A. Mercer. Maximum Trunk Occupancy, CCS: Capacity Cost Study, p.10. Trunk termination investment, per end: Capacity Cost Study, 9.7. Average trunk usage fractions: Capacity Cost Study, p.4. Port limit, trunks: Updated Capacity Cost Study, p.9. Common equipment investment[tandem switch] Capacity Cost Study, p.9. STP link capacity: Updated Capacity Cost Study, p.26 STP maximum fill: Updated Capacity Cost Study, p.26 STP investment, per pair, fully equipped Updated Capacity Cost Study, p.26 STP common equipment investment/pair Updated Capacity Cost Study, p.26 Link termination, both ends: Updated Capacity Cost Study, p.26 Signaling link bit rate: Updated Capacity Cost Study, p.25 Link occupancy: Updated Capacity Cost Study, p.24 ISUP messages per interoffice BHCA: Updated Capacity Cost Study, p.25 TCAP messages per transaction: Updated Capacity Cost Study, p.25 Fraction of BHCA requiring TCAP: Updated Capacity Cost Study, p.25 SCP investment per transaction/second: Updated Capacity Cost Study, p.27 See AT&T response to record requests, Exhibit C. A copy of the Overview section of the Updated Capacity Cost Study and the pages referred to above are attached as Exhibit D. There are other areas where AT&T has used costing factors from IXCs. For example, the Hatfield Model originally used a variable corporate overhead default factor of 10%. This is from the interchange carrier industry: Q. Do any of the Hatfield default values assume future competition? A. This particular (10%) factor reflects the telephone companies being able to achieve the same level of corporate overhead that has been achieved by -- in the interchange carrier industry. (Mercer Dep. 70) Cited pages from this deposition are attached as Exhibit E. This factor has since been changed to 10.4%. The support for this is AT&T’s Form M. See HIPS at 5.4.2. Mr. Murphy’s Declaration shows that AT&T uses higher costing inputs for its own operations than it does for the Hatfield Model. The Hatfield Model systematically uses factors and values that produce significantly lower investments and costs than actual and/or engineering AT&T (and Pacific Bell) network data would produce . . . .. GTE has established a prima facie case that AT&T's TICM costing model and the Hatfield Model contain costing inputs for the same type of network elements. This is all that is needed for discovery purposes. Similarly, GTE is entitled to discovery concerning the wireline loop costs estimates that AT&T has made in conjunction with the evaluation of its wireless system. AT&T obviously made such an evaluation of these costs when it was designing its new wireless system. If GTE is incorrect that no such estimates were made, all AT&T has to do is say so. Again, this discovery is relevant to verify AT&T’s costing inputs. AT&T also asserts that its own costs are irrelevant claiming that, by statute, it is the ILECs costs that should be used. But AT&T has rejected GTE’s costs for the Hatfield Model. AT&T is substituting artificial input values for GTE’s costs from alternative sources, including IXC costs for similar elements. Having decided to reject GTE’s costs and to use some IXC costs, but not others, AT&T is not entitled to argue that its own costs are not discoverable. In sum, the Commission's recent Order shields AT&T from any meaningful discovery on a significant issue in this proceeding -- the verification of the Hatfield Model’s costing assumptions and algorithms. AT&T's witnesses can now testify with impunity without fear of being cross-examined with AT&T costing documents demonstrating that their costing assumptions and methodologies are wrong. These documents may provide an effective check on AT&T's conclusory testimony that GTE's proposed costs can be rejected summarily because they are not the "least cost, most efficient approach," when, if discovery were permitted, AT&T’s own costs and direct estimates may well prove the opposite. AT&T is now free to use studies of IXC costs when it supports its inputs and stonewall GTE from discovering and presenting facts which are inconsistent with these inputs. The Commission's Order constitutes a fundamental denial of GTE's due process rights. Dated this _________ day of May, 1997. GTE NORTHWEST INCORPORATED Richard E. Potter Associate General Counsel 1800 41st Street Everett, WA 98201 (206) 261-5006 Fax: (206) 258-9275