BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION In the Matter of the Pricing Proceeding for Interconnection, Unbundled Elements, Transport and Termination, and Resale In the Matter of the Pricing Proceeding for Interconnection, Unbundled Elements, Transport and Termination, and Resale for U S WEST COMMUNICATIONS, INC. In the Matter of the Pricing Proceeding for Interconnection, Unbundled Elements, Transport and Termination, and Resale for GTE NORTHWEST INCORPORATED ) ) ) ) ) ) ) ) ) ) ) ) ) DOCKET NO. UT-960369 DOCKET NO. UT-960370 DOCKET NO. UT-960371 AT&T’S TESTIMONY SUMMARY Pursuant to the Commission’s Sixteenth Supplemental Order on Prehearing Conference, AT&T Communications of the Pacific Northwest, Inc. (“AT&T”) respectfully provides the following brief statement of the principal issues addressed by AT&T witness, Arleen M. Starr. The statement covers the direct testimony of Ms. Starr filed on July 9, 1998 and the responsive testimony filed on August 20, 1998, cross referenced to the Issues List published by the Commission on July 20, 1998. Pricing Methodology (Issues V-1, V-3, V-4, V-6, V-7, V-10, X-1) Ms. Starr’s testimony addresses pricing policy for unbundled network elements (“UNEs”), which includes a critique of the U S WEST and GTE pricing proposals and articulates AT&T’s pricing recommendations. UNE prices should be based on forward-looking economic cost, including a reasonable profit. No additional mark-up is necessary or appropriate. U S WEST’s and GTE’s pricing proposals in this proceeding are excessive, do not comply with the Act and should be rejected. The Commission should not allow any mark-up above a properly conducted Total Element Long Run Incremental Cost (“TELRIC”) estimate plus a reasonable allocation of forward-looking joint and common costs which would be incurred by an efficient firm in providing unbundled network elements. The loop price should be set at the cost determined in Phase I and the remaining UNE prices should include no more than a 4% mark-up. Nonrecurring Charges (Issues X11-1, XII-2, XII-3, XII-4, XII-6, XII-7) Ms. Starr’s testimony includes an analysis of the U S WEST and GTE nonrecurring pricing recommendations presented in this proceeding. AT&T’s pricing recommendation for nonrecurring charges is the same as for unbundled network elements; nonrecurring charges should be based on forward-looking economic cost and a reasonable profit. Additionally, nonrecurring charges should be priced separately for installation and disconnection and should model service order costs separately to allow multiple ordering capability by a CLEC. Some of the flaws found in U S WEST’s nonrecurring costs include: reliance on manual processes, inefficient fall-out included in its OSS, modeling an unbundled loop as a designed circuit and inclusion of the cost of physically connecting a loop. The Commission should defer resolution of this last issue until the questions relating to how U S WEST will meet its obligation to provide access to unbundled elements is addressed. The interim prices should continue in effect until that time. Transition Costs (Issues IV-1, IV-4, IV-5) Ms. Starr’s testimony responds to the U S WEST and GTE proposals for recovery of transition costs. The proposal by U S WEST to recover its OSS costs should be rejected by the Commission. The Commission should provide clear guidance on the methodology to be followed in properly estimating the costs of providing forward-looking, efficient OSS. If the Commission finds there are any legitimate costs to be recovered by U S WEST, they need to be recovered in a competitively neutral manner, keeping in mind that all consumers benefit from competition. GTE’s proposal includes both an Interim Surcharge and a Competitive Transition Charge (“CTC”). Both are in violation of the cost-based standards contained in the Act and should be rejected. Ms. Starr may file additional testimony addressing the filing by GTE of its studies supporting its proposal. Additionally, U S WEST’s proposal includes a requirement that CLECs use a Single Point of Termination Frame (“SPOT”) for the combination of unbundled network elements. The testimony provided by U S WEST is extremely vague and does not include any specific cost estimate for its SPOT frame proposal, other than it intends to recover all costs. The Commission must first establish a cost effective, technically efficient and non-discriminatory method by which ILECs will provide access to UNEs on a combined basis. Only after the method of providing access is established, can the issue of cost recovery be addressed. There is not sufficient evidence in this record to determine cost recovery at this time. Load Coil Removal (Issues V-11, V-12) Ms. Starr’s testimony presents AT&T’s pricing proposal for load coil removal, and demonstrates the flaws in U S WEST’s proposal, including violation of the Commission’s Order requiring U S WEST to submit a rate proposal where the cost is recovered from all cable pairs in a 25-pair binder group. U S WEST’s proposal for the recovery of load coil removal cost should be rejected. The cost of unloading a loop is not consistent with the forward-looking economic cost of a loop and to the extent such order is ultimately upheld. Based on the Commission’s Order, the price for load coil removal should be set equal to the TELRIC, plus no more than 4% to account for common costs. This cost should be divided by 25, consistent with the Commission’s order, and recovered on a recurring, rather than nonrecurring basis. Respectfully submitted this 5th day of October, 1998. AT&T COMMUNICATIONS OF THE PACIFIC NORTHWEST, INC. _________________________________ Susan D. Proctor Maria Arias-Chapleau 1875 Lawrence Street, Suite 1575 Denver, CO 80202 (303) 298-6164