BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION

In the Matter of the Petition of  )
      ) DOCKET UT-990021
U S WEST COMMUNICATIONS, INC.  )
                ) 
      ) ORDER GRANTING PETITION
for Competitive Classification of its ) 
IntraLATA Toll Service                       )     
.   .   .   .   .   .   .   .   .   .   .   .   .   .   )


INTRODUCTION

   On January 8, 1999, U S WEST Communications, Inc. (“U S WEST”), filed its 
petition for competitive classification of its intraLATA toll service pursuant 
to RCW 80.36.330 and WAC 480-120-022.

  In a written memorandum presented by staff at the Commission’s open meeting 
conducted on January 27, 1999, staff recommends that the Commission grants 
competitive classification to U S WEST’s intraLATA toll with conditions 
enumerated below.

COMMISSION DISCUSSION AND DECISION

  Pursuant to RCW 80.36.330 the Commission is authorized to “classify a 
telecommunications service provided by a telecommunications company as a 
competitive telecommunications service” if it finds that the service is 
“subject to effective competition.”  The statute defines “effective 
competition” to mean that “customers of the service have reasonably available 
alternatives and that the service is not provided to a significant captive 
customer base.”

  In determining whether a particular service is a competitive service, the 
Commission should consider, among other factors, the following:

 (1) the number and size of alternative providers of services;

 (2) the extent to which services are available from alternative providers in 
the relevant market;

 (3) the ability of alternative providers to make functionally equivalent or 
substitute services readily available at competitive rates, terms, and 
conditions; and

 (4) other indicators of market power, which may include market share, growth 
in market share, ease of entry, and the affiliation of providers of DOCKET 
UT-990021              PAGE 1

services.

Once a service is classified as a competitive telecommunications service, the 
Commission may reclassify any such service if reclassification will protect the 
public interest.

I. Effective Competition

  U S WEST  provided a list of telecommunications companies registered to 
provide interexchange service in the state of Washington which it postulates as 
a meaningful indicator of the number and size of alternative service 
providers.  U S West also provided a list of 23 providers who have notified U S 
WEST of their intend to provide one plus intraLATA toll service in U S WEST’s 
service territory after February 8, 1999.  Many of these alternative service 
providers are of sufficient size to be capable of offering similar toll 
services for both intraLATA and interLATA calls from a single source.  The 
Commission is satisfied with the number and size of alternative providers and 
the availability of alternative services to that of U S WEST.

  In its petition, U S WEST states that U S WEST does not currently have a 
captive customer base for intraLATA toll service in Washington.  Alternatives 
to  U S WEST’s long distance services currently exist in the form of “dial 
around” access to other long distance providers.   Effective February 8, 1999, 
U S WEST is offering one plus (“1+” ) dialing parity in all of its exchanges in 
Washington.  With ease of entry into the market and functionally equivalent or 
substitute services readily available in the marketplace, U S WEST’s intraLATA 
toll service is subject to effective competition.  
 

II. Other Issues

 1. Termination of Service for Non-payment of Toll Charges

  WAC 480-120-081 prohibits local exchange companies, such as U S WEST, from 
terminating a customer's local service for non-payment of interexchange carrier 
charges, such as U S WEST's intraLATA charges.  In a letter submitted on 
Janaury 21, 1999, U S WEST agreed not to discontinue local basic exchange 
service for outstanding U S WEST intraLATA toll charges, though the company 
said it may restrict a customer's toll access for non-payment of such toll 
charges.

  The Commission believes that U S WEST's commitment is consistent with the 
rule and will prevent the company from using its market power over local 
service to gain an undue advantage in the competitive intraLATA toll market.  
The use of toll restriction is a reasonable approach to the non-payment 
problem. However, it would not be appropriate for U S WEST to restrict a 
customer's access to other interexchange carriers, whether interLATA or 
intraLATA, because of non-payment of an unpaid U S WEST toll bill.

 2. Notice of Price List Changes

  The Commission will prescribe the same notice requirement as has appeared in 
all orders granting competitive service or competitive company classifications.


 3. Review of Competitive Service Classification

  The Commission has authority to undertake a review of competitive 
classifications pursuant to RCW 80.36.330(7) in order to protect the public 
interest.

 4. Prices Sufficient to Cover Cost and Prevent Cross-Subsidy  
  
  The current rates for U S WEST intraLATA toll service were supported by cost 
studies demonstrating rates were above costs of providing the service, and, 
after investigation, were approved by the Commission.  The initial price lists 
filed pursuant to competitive classification of these services should mirror 
the current tariff rates.  Thereafter, any rate changes must continue to cover 
its related costs and pass the imputation test. 

 5. Primary Toll Carrier obligation

  In Cause No. U-85-23, the Commission directed U S WEST (then “PNB”) to 
continue to serve as the designated carrier of intraLATA toll and to continue 
to serve as “carrier of last resort” for intraLATA toll customers in 
Washington.  Currently U S WEST is the designated carrier for customers of all 
independent incumbent local exchange companies except General Telephone and 
Sprint.     Under this arrangement, the independent company is the provider of 
the intraLATA toll service, but it uses U S WEST to provide the service.  The 
rates charged by the independent companies appear in their own tariffs (though 
they generally concur in the U S WEST toll tariff). The independent companies 
in turn pay these revenues to U S WEST as compensation for its toll service.  U 
S WEST compensates the independent companies for use of their local network by 
paying switched access charges.
  In its January 21 letter, U S WEST agreed that, should it wish to be relieved 
of this primary toll carrier obligation, it would pursue such a request in a 
separate proceeding.

  The Commission will make clear that granting this petition does not affect 
the obligation and responsibility imposed on U S WEST in U-85-23.  

 6. Average toll rates

  U S West currently charges geographically averaged toll rates.  This practice 
is consistent with the public policy of ensuring affordable and comparable 
service to all customers and avoids any possible claim of undue 
discrimination.  State policy generally favors geographically averaged toll 
rates, but the law does not require it.

  When the Commission competitively classified the corresponding interLATA 
service of AT&T in 1987, it required that AT&T maintain geographic averaging 
but allowed it to petition the Commission for a change in this requirement. 
U-86-113.  AT&T has never done so.

  U S WEST does not object to a similar condition being placed on its 
competitive classification, but the company does not believe this requirement 
should apply to its provision of toll as a primary toll carrier.  U S WEST 
notes that it does not establish the retail toll price paid by customers of 
independent company and that the financial arrangements dictated by the primary 
toll carrier arrangement have no parallel in AT&T's interLATA services.  For 
example, a reseller purchasing wholesale toll services from AT&T is not 
required to charge the same retail rates as AT&T.

  The Commission will adopt a geographic averaging requirement for U S WEST 
comparable to that imposed on AT&T in the interLATA market.  U S WEST may seek 
relief from this requirement at a later date.  The requirement will directly 
apply to U S WEST's provision of retail toll service only, but independent 
companies may continue to concur in U S WEST’s toll rates as provided in U-85-2.


III. CONCLUSION

  Based upon the entire record and file in this matter, the Commission makes 
the following findings of fact and conclusions of law.

 
FINDINGS OF FACT

  1. The Washington Utilities and Transportation Commission is an agency of the 
state of Washington, vested by statute with authority to regulate rates, rules, 
regulations, practices, accounts, securities, and transfers of public service 
companies, including telecommunications companies.

  2. U S WEST Communications, Inc., is registered as a telecommunications 
company providing service within the state of Washington as a public service 
company.

  3. On January 8, 1999, U S WEST filed a petition requesting competitive 
classification of its intraLATA toll services pursuant to RCW 80.36.330 and WAC 
480-120-022. 

   4. The relevant product market is the intraLATA toll market in the state of 
Washington.

  5. On February 8, 1999, U S WEST will implement intraLATA equal access or 
dialing parity, which will permit customers to presubscribe to one-plus service 
of other interexchange carriers.  Such implementation will eliminate a barrier 
to competition that has heretofore provided  U S WEST a captive customer base 
in this market.

  6. With implementation of intraLATA dialing parity, there are alternative 
providers of the telecommunications services to those U S WEST offers in the 
relevant market.

  7. There are no regulatory barriers to entry into the relevant market, and 
entry is occurring.

  8. With implementation of intraLATA dialing parity, the intraLATA toll 
services offered by U S WEST are subject to effective competition.
  
  9. The petition should be granted subject to certain conditions as listed in 
Conclusion of Law No. 4.  These conditions shall remain in effect until U S 
WEST comes before the Commission in a separate proceeding and carries the 
burden of proving to the Commission that the conditions are no longer necessary 
to protect the public interest. 
  
  10. U S WEST’s prices for this service are subject to the cost standard and 
other conditions described fully in the text of this Order until otherwise 
ordered by the Commission.

  
CONCLUSIONS OF LAW

  1. U S WEST’s toll service meets the requirements of RCW 80.36.330.    

  2. U S WEST should be permitted to include U S WEST’s intraLATA toll services 
under price list.

  3. Pursuant to WAC 480-120-081, U S WEST is prohibited from terminating local 
exchange service for non-payment of U S WEST’s intraLATA toll service.
  
  4. The Commission concludes that U S WEST’s petition for competitive 
classification should be granted subject to the following conditions:

  (1)  U S WEST shall continue charging state-wide, averaged retail toll 
rates.  This requirement does not directly apply to the toll service provided 
by independent local companies using U S WEST under the primary toll carrier 
arrangement, but independent companies may continue to concur in U S WEST’s 
toll rates as provided in U-85-23; and

  (2)  Granting this petition does not relieve U S WEST of its obligation to 
provide retail intraLATA toll service in each exchange where it currently 
provides such service and does not affect U S WEST’s obligation pursuant to 
U-85-23. 


ORDER


  THE COMMISSION ORDERS:

  1. The petition of U S WEST Communications, Inc., for competitive 
classification of its intraLATA toll service is granted with conditions set 
forth in Conclusion of Law No. 4 .

  2. U S WEST Communications, Inc.’s, prices for intraLATA toll services are 
subject to the cost standard described fully in the text of this Order until 
otherwise ordered by the Commission.

  3. U S WEST Communications, Inc., may not terminate local exchange service 
for non-payment of the intraLATA toll service.
  
  4. U S WEST Communications, Inc.,  is authorized to offer services under 
price list, the format of which is subject to prior approval by the Commission, 
to be effective after ten days notice to the Commission and to customers.  In 
the event of a price reduction or a change in terms or conditions which do not 
have rate impact, personal notice to customers is not required.  Although the 
Commission does not have authority to waive this notice requirement, petitioner 
does have the option to publish notice of price reductions by a display 
advertisement in such newspaper or newspapers as are geographically situated so 
as to be circulated over the company's service area.

  5. U S WEST Communications, Inc., shall within 30 days file revisions 
removing its intraLATA toll service from its tariff and offering it under a 
price list.


  DATED at Olympia, Washington, and effective this 27th day of
January, 1999.


    WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION




      CAROLE J. WASHBURN
      Secretary



NOTICE TO PARTIES:

This is a final order of the Commission.  In addition to judicial review, 
administrative relief may be available through a petition for reconsideration, 
filed within 10 days of the service of this order pursuant to RCW 34.05.470 and 
WAC 480-09-810, or a petition for rehearing pursuant to RCW 80.04.200 and WAC 
480-09-820(1).