BEFORE THE
WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION










        )
        )
In the Matter of Determining Costs    ) DOCKET NO. UT-980311(a)
for Universal Service      )
        )
        )






THIRD SUPPLEMENTAL TESTIMONY
of
Timothy W. Zawislak


STAFF OF THE
WASHINGTON UTILITIES AND
TRANSPORTATION COMMISSION


September 17, 1998

THIRD SUPPLEMENTAL TESTIMONY OF TIMOTHY W. ZAWISLAK
DOCKET NUMBER UT-980311(a)
September 17, 1998 




EXHIBITS




     Exhibit C-       (TWZ-C-2c) 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 [using CAPPED costs for CenturyTel only].



     Exhibit C-       (TWZ-C-3c) Details behind Staff’s Example for CenturyTel 
of Washington, using the FCC’s revenue benchmarks
[using CAPPED costs].






















i

Q. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
A.  My name is Timothy W. Zawislak.  My business address is 1300 S. Evergreen 
Park Drive S. W., 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 filed testimony in this proceeding on August 3, 1998, Supplemental 
Testimony on September 2, 1998, and Second Supplemental Testimony on September 
10, 1998.

Q. WHAT IS THE PURPOSE OF THIS THIRD SUPPLEMENTAL TESTIMONY?
A.  The purpose of this testimony is to provide the Commission with my analysis 
of WITA’s response to Staff Data Request No. 27, which we just received on 
September 15, 1998.

Q. WHAT IS THE NATURE OF STAFF’S DATA REQUEST No. 27, AND WHY ARE YOU BRINGING 
IT UP AT THIS POINT IN TIME?
A.  Staff’s Data Request No. 27 stems from WITA’s Supplemental Testimony, dated 
August 25, 1998.  Mr. Otis, at page 1, lines 17 through 19, of his Supplemental 
Testimony, dated August 25, 1998, describes his use of uncapped BCPM3.1 (proxy 
cost) results.  Then Mr. Smith, at page 2, lines 15 through 18, of his 
Supplemental Testimony, dated August 25, 1998, refers to a new Exhibit C-     
(RAS-C-7), in which CAPPED (BCPM) proxy costs are summarized (which means they 
were available).
 So, Staff is providing its analysis at this time because both the Supplemental 
Testimony and the Response by WITA were just recently produced in this 
proceeding. Now that Staff has this information, we can more fully respond to 
WITA’s August 25, 1998, Supplemental Testimony.  Additionally, the use of 
CAPPED proxy costs will provide the Commission with a more reasonable and more 
plausible estimate of embedded costs to use for purposes of this proceeding.  
On September 2, 1998, Staff could not make this determination because it did 
not have the individual specific wire center numbers, that have been recently 
provided by WITA in response to Staff’s Data Request No. 27.  This information 
is necessary to appropriately analyze and respond to both Mr. Smith’s and Mr. 
Otis’s Supplemental Testimony, which were submitted on August 25, 1998.

Q. YOUR EXHIBIT LIST, PROVIDED FOR THIS TESTIMONY, INDICATES THAT YOU HAVE ONLY 
USED CAPPED COSTS FOR CENTURYTEL IN YOUR REVISED EXHIBIT C-___ (TWZ-C-2C), IS 
THAT CORRECT, AND WHY DID YOU DO THIS?
A.  Yes, that is correct.  I did this to provide the Commission with an updated 
example to show how the use of CAPPED costs, as summarized by Mr. Smith, could 
be used in my “Staff Example of USF Support Based on Embedded Costs”.  It is 
true that my Exhibit C-     (TWZ-C-2c)   The “c” denotes the use of CAPPED 
proxy costs for purposes of allocating revenue requirements. only completes 
this exercise for CenturyTel, to arrive at a new total intrastate support for 
the WITA companies of approximately $29 Million, as stated at the bottom of 
column (h) of that exhibit.
 Of course, that number is subject to all of the other recommendations I have 
made in this case (such as ratemaking adjustments, benchmark decisions, and 
federal funding levels).  If the Commission follows my recommendation and 
chooses to use CAPPED proxy costs for allocating revenue requirements, which 
would be more reasonable than the use of uncapped proxy costs, as advocated by 
Mr. Otis, it may result in a slightly smaller funding level for the other 
companies as well.

Q. DO YOU RECOMMEND THE USE OF CAPPED PROXY COSTS FOR ALLOCATING REVENUE 
REQUIREMENTS ONLY TO REDUCE THE POTENTIAL SIZE OF THE UNIVERSAL SERVICE FUND?
A.  No.  Although it does slightly reduce the size of the potential universal 
service fund to approximately $29 Million from my original estimate of $31 
Million (submitted on September 2, 1998), it does much more than that.  The use 
of CAPPED proxy costs for allocating revenue requirements among wire centers 
(and rolled up into the exchange level) will not only minimize costs, but will 
also recognize that current technology, such as wireless, microwave, fiber 
optics, and electronics, has been increasingly available and in use in local 
exchange company networks, over the last ten to twenty years.  Although I am 
not an engineer or a forward looking proxy cost model expert, I find it more 
reasonable to use CAPPED proxy costs as applied in Mr. Otis’ methodology for 
determining costs (as reflected in WITA’s response to Data Request No. 27).  
The use of CAPPED proxy costs is appropriate to use for this purpose in this 
proceeding.

Q. HAVE YOU PROVIDED A REVISED EXHIBIT C-     (TWZ-C-3) REFLECTING THIS 
REALLOCATION FOR CENTURYTEL?
A.  Yes I have.  The revised exhibit is also provided with this testimony as 
Exhibit C-    (TWZ-C-3c) for purposes of identification.  The “c” denotes the 
use of CAPPED proxy costs for purposes of allocating revenue requirements.

Q. DOES THIS CONCLUDE YOUR THIRD SUPPLEMENTAL TESTIMONY?
A.  Yes it does.