BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION


In the Matter of the Pricing proceeding for Interconnection, Unbundled 
Elements, Transport and Termination, and Resale
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In the Matter of the Pricing Proceeding for Interconnection, Unbundled 
Elements, Transport and Termination, and Resale for U S WEST COMMUNICATIONS, 
INC.
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In the matter of the Pricing Proceeding for Interconnection, Unbundled 
Elements, Transport and Termination, and Resale for GTE NORTHWEST INCORPORATED	)
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	)	PHASE II
		
		DOCKET NOS. UT-960369, UT-960370, 
		                           UT-960371
		
		
		U S WEST’S COMMENTS –PURSUANT TO THE REQUIREMENTS OF THE NINTH SUPPLEMENTAL 
ORDER
		


 On June 5, 1998, the Commission entered its Ninth Supplemental Order on 
Clarification.  The Commission imposed several requirements on the parties, 
including the requirement to file cost information and comments on various 
issues by June 19, 1998. U S WEST has identified six items on which it is 
required to comment or submit additional information.  Those items are listed 
below by the paragraph number of the Ninth Supplemental Order which set forth 
the requirement.
 Paragraph 20:  U S WEST is required to provide information demonstrating the 
result of  running the four-wire loop cost study using more reasonable data for 
“257C” investment. The cost difference is contemplated to be greater than 150% 
of a two-wire loop (Paragraph 21), but less than 200% of the cost of a two-wire 
loop (Paragraph 15).
 U S WEST Response:  In Paragraph 16, the Commission acknowledges that doubling 
the number of copper pairs doubles the cost of service for copper loops.  In 
Paragraph 19, the Commission states that it is unreasonable to assume that the 
four-wire, “257C” investment is twice as expensive as the capital required for 
a two-wire loop.  Accordingly, in response to the Commission’s directive in 
Paragraph 20, U S WEST has calculated a 4-wire loop cost, based on the 2-wire 
loop cost analysis, assuming double the copper investment, but holding the 257C 
digital loop carrier (DLC) investment constant.  The following steps were taken 
to develop this estimate:  
Split the length files into two categories: “Inside” (between the MDS and the 
DLC crossover point) and “Outside” (beyond the DLC crossover point).  The 
crossover points are 13 kilofeet for the Very Small wire center group and 15 
kilofeet for the other wire center groups.
Run RLCAP for the “Inside” category (copper only) and “Outside” category (DLC 
only).
Multiply the feeder portion of the “Inside” category times two and times the 
percentage that the “Inside” category  is of the total.  Next, multiply the 
“Outside” category times the percentage that the “Outside” category is of the 
total and add the two results together.
Multiply the distribution from the 2-wire unbundled loop study times two.  The 
distribution portion of the unbundled loop is 100% copper, so there is no need 
to separate it into Copper only and DLC only as is done for feeder.
Add the weighted feeder and the doubled distribution together to develop the 
estimated 4-wire unbundled loop investment.

The results are detailed below:

RLCAP runs	Avg. 2-wire	Copper only	DLC only	
Feeder	$252.96	$139.05	$433.91	
Distribution	$669.13	$498.44	$940.26	
Total	$922.09 	$637.49	$1,374.17	

Quantity	2,342,296	1,479,117	931,182	

Wtd. Average	2-wire	4-wire		
Feeder	$252.96	$338.29		
Distribution	$669.13	$1338.26		
Total	$922.09 	$1,676.55		

Ratio to 2-wire	100%	182%		

This analysis results in a ratio of 2-wire investments to 4-wire investments 
that is similar to the number provided by GTE.  If the DLC investments were 30% 
higher for 4-wire than they are for 2-wire, the weighted average investment 
would be $1,726.85 or 187% of a 2-wire loop.
 Notwithstanding the previous calculations, U S WEST respectfully disagrees 
with the Commission’s conclusion, at Paragraph 20, that it is an unreasonable 
assumption that the 4-wire, “257C” investment is twice as expensive as the 
capital required for a 2-wire loop.  U S WEST would point out that the DLC 
estimate is complicated by the impact that a 4-wire circuit has on the capacity 
of the system and the cost of the channel units. For instance, in a 96 line 
system there is a channel bank with 24 channel unit slots.  For basic 
voice-grade service, these slots are populated with Quad-POTS,  or four circuit 
voice-grade channel units.  These units cost approximately $150.  If the same 
system is used to provide special circuits the slots are now populated with 
dual, or single circuit cards, that cost anywhere from $300 to $1100.  The 
result is a system with a higher total cost that produces fewer circuits.  If 
the system had the same cost as the POTS system but used dual circuit cards the 
cost per derived channel would double.  The higher card cost exacerbates this 
situation.  Ultimately, if these considerations are included in the 4-wire loop 
cost calculation, the result is over 200% of the 2-wire loop cost.            
 Paragraph 38:  U S WEST and others are to comment on the transport cost 
structures proposed by U S WEST and by the Hatfield Model.  The parties are to 
address how the different cost structures can be reconciled and at a minimum 
discuss 1) the need to separately identify dedicated, common, and direct 
transport costs, and 2) if they support the need to make this distinction, how 
the U S WEST cost data can be used to estimate these different types of 
transport costs.
 U S WEST Response:  In Paragraph 38, the Commission finds that U S WEST and 
Hatfield report transport costs using different formats.  The Commission states 
that the Hatfield Model estimates the monthly cost of transport termination on 
a DS-0 equivalent basis and provides the interoffice transport costs on a 
dedicated, common, and direct basis.  The Commission further finds that U S 
WEST’s cost studies do not make the same “distinction[s]” as the Hatfield 
Model, but do provide per minute cost estimates.  The Commission directs the 
parties to submit comments on how the seemingly different cost structures can 
be reconciled, and at a minimum discuss 1) the need to separately identify 
dedicated, common, and direct transport costs, and 2) how U S WEST cost data 
can be used to estimate these different types of transport costs.
 First, U S WEST respectfully disagrees with the Commission’s conclusion that 
its studies do not provide for the transport distinctions referenced in 
Paragraph 38. Entrance facilities provide for dedicated connection between CLEC 
switches and U S WEST wire centers.  Tandem switched transport provides for 
tandem switching to or from CLEC entrance facilities and common transport 
between U S WEST’s tandem switch and the subtending end offices.  Finally, 
direct trunk transport provides for direct, dedicated trunking between U S WEST’
s end offices and tandem switches.
U S WEST’s Transport Elements
 As described above, U S WEST’s entrance facilities, which are available in 
DS-1 or DS-3 bandwidth options, can be leased by CLECs to connect their 
switches to U S WEST wire centers (including either end offices or tandem 
switches).  Alternatively, CLECs could provision their own entrance facilities 
and terminate them at leased physical or virtual collocation spaces at the 
desired wire centers.  To transport traffic between U S WEST tandem switches 
and end offices, U S WEST offers CLECs either tandem switched transport or 
direct trunk transport. 
 Tandem switched transport includes the tandem switching rate element and the 
tandem switched transport rate element.  The tandem switched transport rate 
element includes a distance sensitive  element that recovers the interoffice 
facility costs (i.e., fiber and regenerators), and a non-distance sensitive 
element that recovers the interoffice facility termination costs (i.e., fiber 
distribution panels, 3-1 MUX, etc.).  Tandem switched transport is rated on per 
minute of use basis.  Direct trunk transport, which is available in DS-1 or 
DS-3 bandwidth designations, includes a distance sensitive element that 
recovers the interoffice facility costs (i.e., fiber and regenerators), and a 
non-distance sensitive element that recovers the interoffice facility 
termination costs (i.e., fiber distribution panels, 3-1 MUX, etc.).  Direct 
trunk transport is rated on a per circuit (DS-1 or DS-3) basis.  U S WEST 
believes that these transport elements address the different types of transport 
referenced by the Commission.  
Comparison of U S WEST and Hatfield Model Transport Elements
 The Hatfield Model (HM) transport components include dedicated transport, 
common transport, tandem switching, and direct transport.  The HM dedicated 
transport component is comparable to U S WEST’s entrance facilities elements in 
that it applies to the dedicated connection between a CLEC’s network and a U S 
WEST wire center.  The dedicated transport component is costed on a DS-0 
equivalent basis only and, thus, does not provide for the economies of scale 
and choice that are provided for in U S WEST’s DS-1 and DS-3 entrance facility 
options.
 The HM tandem switching and common transport components are comparable to U S 
WEST’s tandem switching and tandem switched transport components.  Both the HM 
and U S WEST tandem switching element cost are developed on a per minute of use 
basis.  The HM common transport component has a per leg per minute of use 
sub-component that is probably intended to recover interoffice facility 
termination costs, similar to U S WEST’s non-distance sensitive tandem switched 
transport component.  The HM per minute common transport sub-component appears 
to be similar to U S WEST’s distance sensitive tandem switched transport 
component.  The HM direct transport component is similar to the HM common 
transport component, except that it applies only to the transport of traffic 
between end offices.
 The Hatfield Model does not produce costs for dedicated transport components 
such as those contained in U S WEST’s DS-1 and DS-3 direct trunk transport 
elements.  These dedicated transport offerings allow a CLEC to purchase 
dedicated DS-1 and DS-3 transport between end offices and between end offices 
and tandems.  As CLEC traffic grows, these dedicated offering extend the 
economies of high capacity technologies to the CLECs.
Conclusion
 U S WEST believes that the transport cost data which it has submitted in this 
docket is sufficient to provide for all the transport types addressed by the 
Commission and required under the Act, and, in fact, as previously addressed, 
provides for more choices that the Hatfield Model.  
 Paragraph 42: The parties are directed to submit comments to the Commission 
regarding the need to set a UNE price for public telephones, and, if such a 
need exists, how the Hatfield Model cost data should be used to fulfill this 
objective.
 U S WEST Response:  U S WEST responds that there is no need to set a UNE price 
for public telephones.  Section 276 of the Act deregulated the provision of 
payphone service, and required the FCC to promulgate regulations to promote 
competition among payphone providers.  The FCC’s regulations implementing 
Section 276 preempt any inconsistent state requirements  (Section 276(c)).  The 
FCC has determined that the payphone sets themselves are unregulated CPE (Order 
on Reconsideration, CC Docket No. 96-128, November 8, 1996, paragraph 143).  
Thus, they are not subject to any resale or UNE pricing requirements.  Pursuant 
to FCC regulations, U S WEST has effective intrastate tariffs for basic 
payphone services, and has effective intrastate and interstate tariffs for 
unbundled functionalities associated with those lines  (Order on 
Reconsideration, Paragraph 131).  Furthermore, and finally, the FCC has 
explicitly declined to require (as proposed by AT&T) that the pricing regime 
under Sections 251 and 252 apply to all Section 276 payphone services offered 
by incumbent LECs (First Report and Order, CC Docket No. 96-128, September 20, 
1996, paragraph 147).  Thus, there is no need, nor is there authority under the 
Act, to set a UNE price for public telephones.
 Paragraph 43:  The parties are directed to submit comments to the Commission 
to address how the different cost structures and estimates for common channel 
signaling can be reconciled.  The Hatfield Model reports the cost of links, STP 
per signaling message, and SCP per query.  U S WEST reports the fixed and per 
mile costs for direct link transport, as well as the STP monthly cost per port.
 U S WEST Response:  One difference between the two models is that the Hatfield 
Model uses average costs for the transport links between service switching 
points, or SSPs and  STPs, whereas the U S WEST model uses distance sensitive 
transport links through the direct link transport element.  Essentially, the 
Hatfield Model implies that links exist between SSPs and STPs by virtue of the 
interoffice transport model.  U S WEST specifically identifies all links and 
their appropriate mileage and cost.
 The two models also differ in their assumptions regarding STP vendors.  U S 
WEST assumes a vendor whose costs are driven by processor capacity, while the 
Hatfield Model assumes a vendor whose costs are driven by port capacity.  
Accordingly, it would be impossible to reconcile the two models vendor 
assumptions because Hatfield’s data fields are insufficient to account for U S 
WEST’s vendor characteristics, and vice versa.  
 Ultimately, reconciliation of the Hatfield model and U S WEST’s signaling 
model would require an intermediary model in order to integrate  Hatfield’s 
“one-size-fits-all” approach into U S WEST’s specific signaling network.
 Paragraph 44:  The parties are directed to submit comments in which they 
address whether only U S WEST’s cost estimates for DS1, DS3, EICT, 
regeneration, and central office multiplexing are part of the record, or 
whether other parties have placed cost estimates into the record in Phase 1.
 U S WEST Response:  U S WEST has evaluated the cost estimates submitted by the 
other parties and has concluded that no other party has proposed cost estimates 
for DS1, DS3, EICT, regeneration, or central office multiplexing.  Thus, U S 
WEST’s cost estimates should form the basis for the pricing decisions in Phase 
2.
 Paragraph 71:  The sponsors of the BCPM and the Hatfield Models are directed 
to re-run and submit the studies, and are required to explicitly identify and 
describe the modifications to the model algorithms to account for deferred 
taxes.  Other parties are invited to submit their recommended changes to the 
model algorithms.
 U S WEST Response:  There are significant differences between the treatment of 
deferred taxes and depreciation in the BCPM and Hatfield Models.  The BCPM 
Model includes both a deferred tax calculation and the use of the ELG 
depreciation method adopted by the Commission.  The Hatfield Model includes 
neither ELG depreciation nor a deferred tax calculation.  Depreciation in the 
Hatfield Model is based on a simple straight line method which results in an 
understatement of costs when compared to similar studies using ELG depreciation 
methodology.  This understatement of costs is partially offset by the fact that 
Hatfield contains no deferred tax calculations.
 The following example provides a better perspective of the impact this issue 
has on actual cost calculations.  The example is a calculation of the capital 
cost factors for the buried cable account.  
 Buried Cable Capital Cost Factors
	Hatfield (a)	Corrected (b)
Depreciation	.0486 	.0551
Cost of Money	.0567	.0526
Income Taxes	.0194	.0180
Total	.1247	.1257
(a) No Commission prescribed ELG depreciation methods and no deferred tax 
calculation

 (b) ELG depreciation and deferred tax included
 As shown above, if the Hatfield Model is corrected to reflect actual 
prescribed depreciation rates and the impact of deferred taxes, buried cable 
costs would actually increase slightly.  Accordingly, the Commission should not 
make any adjustment for deferred taxes for the Hatfield Model without making a 
corresponding correction to the depreciation methods.  As previously, 
mentioned, the BCPM Model does include both ELG depreciation and a deferred tax 
calculation.   
 Paragraph 85:  U S WEST is required to refile its tariffs, including all terms 
and conditions for service at the listed rate.
 U S WEST Response:  Although U S WEST has petitioned for a stay and for 
reconsideration of this requirement, the tariffs requested by the Commission 
were filed by 
U S WEST on June 12, 1998.  On June 15, 1998, the Commission issued a Notice 
Requesting Response to U S WEST’s Petition, allowing eight business days for a 
response.  The Commission further noted that it intended to issue an order no 
later than July 15, 1998.    

 Respectfully submitted this 19th day of June, 1998.

      U S WEST Communications, Inc.



      By:_______________________________
       Lisa A. Anderl, WSBA No. 13236