BEFORE THE
WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION


In the Matter of the Pricing  ) DOCKET NO. UT-960369
Proceeding for Interconnection, )
Unbundled Elements, Transport and )
Termination, and Resale   )
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In the Matter of the Pricing  ) DOCKET NO. UT-960370
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  ) DOCKET NO. UT-960371
Proceeding for Interconnection, )
Unbundled Elements, Transport and ) TRACER TESTIMONY
Termination, and Resale for GTE )      SUMMARY
Northwest Incorporated   )
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 Pursuant to the Commission's request, TRACER respectfully provides the 
following summary statement of the principal issues addressed by its witness, 
Dr. Thomas M. Zepp, keyed to the Issues List generated by the parties.
 UNE Pricing (Issue V-1-10).  Dr. Zepp discusses the requirements of the 1996 
Telecommunications Act as they relate to pricing of UNEs and mark-ups above the 
costs the Commission adopted in Phase I of this docket.  He explains that 
markups should be independent of the incumbent LECs' revenue requuirements 
under rate base, rate of return regulation.  He also explains that the same 
percentage markup should be applied to each UNE and should be the same for all 
ILECs, because the "common costs" that need to be recovered are in effect 
"variable support costs."  Cost causation requires that each UNE be marked up 
by the same percentage to be consistent with the way such costs are expected to 
change. Those markups should be set to produce prices that will give the ILECs 
a reasonable opportunity to earn the profit an efficient firm in a competitive 
industry would earn.
 Dr. Zepp disagrees with the pricing proposals of U S WEST and GTE.  He 
explains that pricing to allow for avoidable costs and an allowance for 
recombination costs, as proposed by U S WEST witness Mark Reynolds, or to allow 
for recovery of "actual costs", as proposed by GTE witness Michael Doane, would 
be inconsistent with the Act and will delay the emergence of competition in 
Washington.
 Similarly, Dr. Zepp disagrees with the Commission Staff's position that UNE 
prices should preserve the basic relationships between price and cost that 
exist in incumbents' retail rates.  As is the case with the pricing proposals 
of U S WEST and GTE, Dr. Zepp explains that Dr. Blackmon's proposal is 
inconsistent with the Act, will not benefit consumers, and will discourage 
efficient investment by competitors.  On the other hand, Dr. Zepp agrees with 
Dr. Blackmon's recommendations (i) that GTE's proposed loop unbundling charges 
be rejected, (ii) that companies establish capacity charges for reciprocal 
compensation, and (iii) that a "tracker mechanism" to recover transition costs 
not be approved.
 Dr. Zepp agrees with TCG witness William Page Montgomery that, if the costs 
adopted in Phase I already contain markups of 15% to 25%, no further markup is 
appropriate.  However, he testifies that the costs and implied prices for Phase 
II should be reduced to reflect the proper inclusion of the effects of deferred 
taxes.  If the costs adoped in Phase I do not contain the markups claimed by 
Mr. Montgomery, Dr. Zepp recommends that the Commission apply a markup of 4.05% 
to the adopted costs, reduced to reflect the effect of deferred taxes.
 Dr. Zepp also disagrees with Mr. Doane's recommendation that GTE be allowed to 
recover alleged stranded costs through a competitive transition charge.  
Specifically, Dr. Zepp disagrees with Mr. Doane's definition of "stranded 
costs" and disagrees that there are any positive stranded costs. Further, Mr. 
Doane's analogies to the electric industry are flawed and his analysis does not 
include consideration of the "benefits" of new marketing opportunities and the 
economies of scope in the telecommunications industry.  Finally, Dr. Zepp 
explains that Mr. Doane's proposal would stifle competition and harm consumers.
 Dr. Zepp also introduces the results of a 4-wire circuit cost study which 
shows that the costs of such circuits are a fraction of what U S WEST claims in 
its response to Bench Request 102.  He recommends that the price of 4-wire 
loops be set no more than 25% higher than the price for 2-wire loops.
 DATED this 5th day of October, 1998.
       ATER WYNNE LLP

       By                     
          Arthur A. Butler
          WSBA No. 04678
       Attorneys for TRACER