BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION In the Matter of the Pricing Proceeding for Interconnection, Unbundled Elements, Transport and Termination, and Resale ) ) ) ) ) DOCKET NO. UT-960369 In the Matter of the Pricing Proceeding for Interconnection, Unbundled Elements, Transport and Termination, and Resale for U S WEST COMMUNICATIONS, INC. ) ) ) ) ) DOCKET NO. UT-960370 In the Matter of the Pricing Proceeding for Interconnection, Unbundled Elements, Transport and Termination, and Resale for GTE NORTHWEST INCORPORATED ) ) ) ) ) DOCKET NO. UT-960371 COMMENTS OF GTE ON REQUESTS FOR CLARIFICATION GTE Northwest Incorporated (“GTE”) submits these comments on the various requests for clarification of the Commission’s Eighth Supplement Order (“Order”) in this matter. GTE has received copies of requests for clarification from TRACER, NEXTLINK/TCG/AT&T, U S WEST and the Commission’s Staff. GTE submitted a request for clarification of one point on May 4, to which the Commission has already responded, The Commission advised GTE that the rerun of its avoided cost study should use 1995 ARMIS data rather than more recent data. and a request for clarification of several additional points on May 6, 1998. As noted below, GTE would like clarification of several of the points raised by other parties, and these requests were not, therefore, duplicated in GTE’s May 6 filing. NEXTLINK/TCG/AT&T U S WEST Loop Cost Calculation GTE anticipates that next Tuesday’s conference call will give the parties an opportunity to explore NEXTLINK/TCG/AT&T’s question on the Commission’s calculation of U S WEST’s loop cost. Interconnection/Transport and Termination GTE concurs in the request that the Commission clarify its findings on the costs of interconnection, local call termination and related transport, and their relation to Phase II compensation proposals. GTE does not, however, concur with NEXTLINK/TCG/AT&T’s statutory interpretations, their position that there are no usage sensitive components to such costs, or their assertion that the Commission could not, in Phase II, adopt any compensation mechanism other than bill and keep. Costs for Other Unbundled Network Elements GTE would also like clarification of the Commission’s intended treatment of those unbundled network elements for which the Order makes no cost findings. In GTE’s three arbitrations before the Commission under the Telecommunications Act of 1996, interim rates were set for numerous elements beside those addressed in the Order. TRACER Deferred Taxes TRACER requests that the Commission augment its directives for cost study submissions in future cases by promulgating a specific requirement on the role of deferred taxes in determining the cost of capital. TRACER’s attempt to remake the argument it cites from its brief should be rejected. In any future cost study proceeding, TRACER may attempt to revive its position. Depreciation GTE believes it understands the Commission’s conclusion on the calculation of depreciation expense, but would not object should the Commission feel that clarification is necessary. How Costs Were Developed The first portion of TRACER’s third request is for an explanation of “how the costs for USWC and GTE were developed.” GTE understands that next Tuesday’s conference call will give TRACER an opportunity to pursue this inquiry. Deaveraged Loop Costs The second portion of TRACER’s third request is for an explanation of how the Commission might use the Phase I results in the future to deaverage costs and rates for unbundled loops. GTE, too, is interested in the Commission’s thoughts and intentions on this issue. U S WEST Cost of a 4-Wire Loop GTE supports U S WEST’s request for clarification on this point. GTE’s May 6 filing contains questions on the topic, as well. Loop Costs U S WEST’s request for clarification of the derivation of its loop costs is well-taken. Modification of Non-Recurring Cost Studies U S WEST’s request for clarification of the NRC work-time adjustment is well-taken. Resale U S WEST’s request for clarification of the capital cost component of its avoided cost discount appears to be well-taken. U S WEST suggests that the revenues used in the denominator should include imputed revenues, including at least directory advertising revenues, in order to be consistent with U S WEST’s 1995 rate case treatment. While GTE does not agree that directory advertising revenues should be used for ratemaking in the first place, it concurs with U S WEST’s position for purposes of determining avoided cost discounts at this time. So long as the avoided cost discount is based on rates that were set using directory advertising revenues, those revenues should be used in the avoided cost calculation. Because GTE’s current rates were set by the Commission based on the imputation of such revenues, the avoided cost study that GTE is refiling will show the calculation with and without this adjustment. GTE would also like clarification of the effective date of the avoided cost discount that will be established by the study which it is refiling. COMMISSION STAFF In addition to concurring with the requests of some other parties, the Staff raises two issues of its own. Loop Length Staff cites paragraph 133 of the Order, which deals only with drop lengths, but labels its issue as “loop length” and proceeds to argue the nature of forward-looking cost models. GTE believes that paragraph 133 is clear on the point that it addresses: drop lengths. The Commission would like to see actual drop length studies to validate the drop length assumptions used in, or calculations made by, cost models. GTE’s May 6 filing requests clarification of another portion of the Order’s drop length section. No clarification appears necessary on this aspect of the Commission’s preferences for future cost study proceedings. Fill Factors Staff does not request clarification, but reconsideration. Staff states that the Commission “cites, but does not adopt, the FCC language regarding the derivation of per-unit costs,” and then Staff requests the Commission to clarify that “the Order adopts” the FCC definition and to find that the FCC’s proxy cost models’ default values are reasonable estimates of projected actual fill. Staff’s request should be rejected. While GTE does not entirely agree with the Order’s resolution of the fill factor issue, it does not appear that the Order needs to be “clarified” on the point that Staff addresses. In addition, for the reasons discussed in GTE’s post-hearing brief, the Commission should not rely on any portion of the FCC’s voided proxy cost model rules. And there is no reason for it to do so; the Order is adequate on this point. MAY 8, 1998 J:\LEGAL\RICHARDP\GENERICS\WASH\CLRF-CMT.FNL