BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION ) ) In the Matter of Determining Costs ) DOCKET NO. UT-980311(a) for Universal Service ) ) ) SECOND SUPPLEMENTAL TESTIMONY of Timothy W. Zawislak STAFF OF THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION September 10, 1998 SECOND SUPPLEMENTAL TESTIMONY OF TIMOTHY W. ZAWISLAK DOCKET NUMBER UT-980311(a) September 10, 1998 LIST OF EXHIBITS (revised 9/10/98) Exhibit (TWZ-1) Illustrative Example of Implicit and Explicit USF Support Exhibit C- (TWZ-C-2r) Staff Example of USF Support Based on Embedded Costs with the use of the FCC’s current national average revenue benchmarks of $31 for Residence and $51 for Business Exhibit C- (TWZ-C-3) Details behind Staff’s Example for CenturyTel of Washington, using the FCC’s revenue benchmarks. Exhibit C- (TWZ-C-4r) Staff Example of USF Support Based on Embedded Costs with the use of hypothetical state-specific average revenue benchmarks of $40 for Residence and $75 for Business Exhibit C- (TWZ-C-5r) Staff Portrayal of the Impacts on the WITA Companies resulting from Intrastate Carrier Access Charge Reform ii Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS. A. My name is Timothy W. Zawislak. My business address is 1300 South Evergreen Park Drive South West, Olympia, Washington 98504. Q. BY WHOM ARE YOU EMPLOYED AND IN WHAT CAPACITY? A. I am employed by the Washington Utilities and Transportation Commission (Commission) as a Policy Research Specialist. Q. HAVE YOU PREVIOUSLY FILED TESTIMONY IN THIS CASE? A. Yes. I have previously filed Testimony in this proceeding on August 3, 1998, and Supplemental Testimony on September 2, 1998. Q. WHAT IS THE PURPOSE OF THIS SECOND SUPPLEMENTAL TESTIMONY? A. The purpose of this Second Supplemental Testimony is to provide corrections to my pre-filed Supplemental Testimony and Exhibits filed on September 2, 1998. Q. WHAT IS THE NATURE OF YOUR CORRECTIONS AND HOW DO THEY IMPACT YOUR PRE-FILED TESTIMONY AND EXHIBITS? A. The corrections are in the nature of two incorrect cell references within the Excel© electronic spreadsheets that I have relied on in the preparation of my pre-filed testimony and exhibits. The corrections are relatively and fairly minor in the overall scope of my presentation, but would have a relatively material impact on the Eligible Telecommunications Carrier(s) (ETC(s)) which provide supported services in one of the WITA company’s serving areas. The other company’s change, although not material, has been made to more accurately reflect a consistent basis among all companies to which my presentation applies. Q. WHO ARE THE TWO COMPANIES YOU REFER TO ABOVE? A. Whidbey Telephone Company (Whidbey) and Asotin Telephone Company (Asotin), respectively. Q. PLEASE DESCRIBE THE CHANGE FOR EACH. A. For Whidbey, the change reflects the correction of a formula which the “Total Universal Service Funding Necessary” in column (f) of my Exhibit C- (TWZ-C-2), relies upon. My September 2, 1998, submission included less than the appropriate total derived from the Excel© electronic spreadsheet than it should have. I have prepared revised Exhibits C- (TWZ-C-2r) and C- (TWZ-C-4r) which reflect the correct totals for Whidbey in bold characters for identification of the change. For Asotin, the change reflects the correction of a cell reference in order to present a consistent basis of information for this company (related to the other 18 companies which my testimony and exhibits apply to). Essentially, I previously imputed benchmark revenues for Public Access Lines (PAL) and Foreign Exchange Lines (FEX) for Asotin only. Due to a balanced consideration of the limited timeframe in this proceeding, the possible inconsistencies in the companies’ access line counts, and my judgement about the potential level of materiality, I did not pursue this adjustment for the other 18 companies. So, to be consistent, I have changed the Asotin totals back to a level consistent with the other 18 companies listed in my Exhibits C- (TWZ-C-2) and C- (TWZ-C-4). The revised exhibits now include the consistent totals for Asotin (in bold characters for identification) as reflected in Exhibits C- (TWZ-C-2r) and C- (TWZ-C-4r). Q. WHAT ARE THE IMPACTS OF THESE CHANGES? A. The following table reflects the impacts of these corrections on the first exhibit: Company Exhibit C- (TWZ-C-2) Correction Impact Exhibit C- (TWZ-C-2r) Whidbey Confidential Column (f) $3,289,472 Confidential Column (f) Asotin Confidential Column (f) $3,519 Confidential Column (f) The next table reflects the impacts of these corrections on the second exhibit: Company Exhibit C- (TWZ-C-4) Correction Impact Exhibit C- (TWZ-C-4r) Whidbey Confidential Column (f) $2,115,121 Confidential Column (f) Asotin Confidential Column (f) $5,175 Confidential Column (f) Q. HOW DO THESE INDIVIDUAL COMPANY IMPACTS AFFECT YOUR OVERALL ANALYSIS OF THE WITA COMPANIES IN TOTAL? A. The following table reflects my prior overall analysis: Staff’s Cost-Based Examples WITA’s Lost Revenue $40/$75 Benchmarks $31/$51 Benchmarks (e.g. $22/$42 Benchmarks) In my Supplemental Testimony dated September 2, 1998, I explain that I have extrapolated these benchmarks from WITA’s apparent position regarding the level of intrastate support necessary. $12 Million Intrastate USF Support $31 Million Intrastate USF Support $50 Million Intrastate USF Support The next table reflects my revised overall analysis: Staff’s Cost-Based Examples - Revised WITA’s Lost Revenue $40/$75 Benchmarks $31/$51 Benchmarks (e.g. $24/$44 Benchmarks) I have extrapolated these benchmarks using the same method described above in footnote 1, but used the revised spreadsheets containing the corrected cell references referred to earlier in this Second Supplemental Testimony to arrive at the correct level of extrapolation. $15 Million Intrastate USF Support $34 Million Intrastate USF Support $50 Million Intrastate USF Support This last table reflects the overall impacts (or changes): Staff’s Cost-Based Examples WITA’s Lost Revenue $40/$75 Benchmarks $31/$51 Benchmarks (e.g. $2/$2 Benchmarks) These figures are simply the difference between those listed in the two tables directly above. $ 3 Million Intrastate USF Support $ 3 Million Intrastate USF SupportNo Change in WITA’s Position re: Intrastate USF Support Q. DO THESE TOTAL IMPACTS ALSO AFFECT YOUR ANALYSIS PREVIOUSLY PROVIDED IN EXHIBIT C- (TWZ-C-5)? A. Yes, but only indirectly. The end result will remain revenue neutral (i.e. the net effect on revenue will still be zero). The methodology remains the same as well. The only impact that the total changes will have on my Exhibit C- (TWZ-C-5) is the indirect effect on the level of implicit support allowed to be removed. Because the total amount of explicit intrastate support has risen due to my corrections, the total amount of implicit support allowed to be removed has also increased by a corresponding increment (i.e. by approximately $3,292,000 which is the sum of the corrections made to both Whidbey and Asotin, at the 31/51 benchmark level). Q. HAVE YOU PROVIDED A REVISED EXHIBIT C- (TWZ-C-5) REFLECTING THIS INDIRECT IMPACT? A. Yes I have. The revised exhibit is also provided with this testimony as Exhibit C- (TWZ-C-5r) for purposes of identification. Q. HAVE YOU ALSO PROVIDED A REVISED LIST OF EXHIBITS (i.e. Page ii) TO REFLECT THE EXHIBITS WHICH HAVE BEEN REVISED AND WHICH HAVE NOT? A. Yes. I have provided a revised “List of Exhibits” at the beginning of this Second Supplemental Testimony, as well. The exhibits that have been revised have a “r” after the identification number (and are presented in bold typeface as well). The exhibits without a “r” (and without non-bold typeface) remain as they were provided with my Supplemental Testimony submitted on September 2, 1998, and I continue to offer them as evidence in this proceeding as well. Q. DOES THIS CONCLUDE YOUR SECOND SUPPLEMENTAL TESTIMONY? A. Yes it does.