BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION

 
  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 for  ) DOCKET NO. UT-960370
  Interconnection, Unbundled Elements, Transport )
  and Termination, and Resale for U S WEST )
  COMMUNICATIONS, INC.                                 )
       )
  In the Matter of the Pricing Proceeding for  ) DOCKET NO. UT-960371
  Interconnection, Unbundled Elements, Transport )
  and Termination,and Resale for GTE   )
  NORTHWEST INCORPORATED                        )


GTE'S POST-HEARING BRIEF



        RICHARD E. POTTER
        Associate General Counsel
        GTE Northwest          Incorporated
        1800 41st Street
        Everett, Washington  98201
        (206) 261-5321

        JOHN B. WILLIAMS
        MARK L. AUSTRIAN
        BRIAN P. FARLEY
        Collier, Shannon, Rill &         Scott,
          PLLC
        3050 K Street, N.W.
        Suite 400
        Washington, D.C.  20007
        (202) 342-8400

        Counsel for GTE Northwest,         Inc.

 The evendence demonstrates that the cost methodologies and models submitted by 
GTE Northwest Incorporated (“GTE”) are the only ones capable of establishing 
GTE's costs in a manner consistent with the requirements of the 
Telecommunications Act of 1996 (the "Act") and the U.S. and Washington 
Constitutions.  They are based upon sound methods and analyses and reflect 
actual costs  and current costs for forward looking technology.  The Hatfield 
Model,/ AT&T and MCI rely in this proceeding on Version 3.1 of the Hatfield 
Model.  When GTE refers herein to the "Hatfield Model" or "Model" GTE refers to 
Version 3.1, unless otherwise stated./ on the other hand, is a result oriented 
devise -- designed to obtain low interconnection prices/ Unless otherwise 
noted, GTE uses the term "interconnection" as including the transport and 
termination, unbundled network elements, and other services covered in the Act 
arbitrations and this follow on investigation.  See, Order Instituting 
Investigation (Nov. 21, 1996). / for its proponents, AT&T and MCI.  Hatfield's 
inputs can not be verified by reference to actual costs, current costs, or 
empirical data.  They reflect methodologically unsound data shopping practices 
and the biased "expert opinions" of their proponents.  In addition, GTE's 
Avoided Cost Study accurately calculates the appropriate wholesale discount 
rate, while the proposals of AT&T and MCI do not satisfy the requirements of 
the Act.
 I.  LEGAL PARAMETERS AND ISSUES
  A. As a Matter of Constitutional Law, The Models Adopted in This Proceeding 
Must Permit GTE to Recover its Actual Costs

 Established principles of statutory construction mandate that interconnection 
prices be based upon the actual costs incurred by the regulated firm./ See, 
e.g., United States v. Security Indus. Bank, 459 U.S. 70, 78-80 (1982) 
(narrowing construction of statute applied to avoid taking); TCI of North 
Dakota, Inc. v. Schriock Holding Co., 11 F.3d 812, 815 (8th Cir. 1994) (same)./ 
 When an act of Congress requires the determination of “just and reasonable 
rates,” that language is universally construed to require compensation 
sufficient to meet constitutional standards./ See, e.g., FPC v. Hope Natural 
Gas Co., 320 U.S. 591, 595 (1944); see also Jersey Cent. Power & Light Co. v. 
FERC, 810 F.2d 1168, 1175 (D.C. Cir. 1987) (explaining that statutory standard 
“coincides with that of the Constitution”)./  The Fifth Amendment to the U.S. 
Constitution requires that a utility to be permitted to obtain a revenue stream 
sufficient to "maintain its financial integrity, to attract capital, and to 
compensate its investors for the risk [they have] assumed."  Duquesne Light Co. 
v. Barasch, 488 U.S. 299, 310 (1989) (quoting FPC v. Hope Natural Gas Co., 320 
U.S. 591, 605 (1944)).  Under that standard “it is important that there be 
enough revenue not only for operating expenses, but also for . . . capital 
costs” which “include service on the debt and dividends on the stock.” Hope, 
320 U.S. at 603.  Thus, “[o]ne of the elements always relevant to setting the 
rate . . . is the return investors expect.”  Duquesne, 488 U.S. at 314 
(emphasis added).  There can be no return to investors if a company cannot even 
recover its actual capital outlays.  See Tenneco Oil Co. v. Department of 
Consumer Affs., 876 F.2d 1013, 1020 (1st Cir. 1989) (to meet constitutional 
standards “rates must provide not only for a company’s costs, but also for a 
fair return on investment”).  Duquesne and Hope thus require that compensation 
be sufficient to cover an incumbent LEC’s operating costs and service on the 
debt and equity used to finance investment.
  B. The Telecommunications Act Requires That GTE's Current and Actual Costs Be 
Used To Establish Interconnection Prices

 Under the Act, GTE is entitled to recover all its costs./ GTE’s actual costs 
include, but are not limited to, (1) its forward looking costs, (2) the costs 
it incurs to support universal service, and (3) its stranded historical costs.  
Interconnection prices an d prices for GTE’s other services -- together with 
any universal service and historical cost recovery mechanism -- must be 
sufficent to permit GTE the realistic opportunity to recover all its costs.  
See, e.g., Seaman, Exh. 81 at 7-8./