BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION


________________________________________            )
        )
In the Matter of the Petition of  )
        ) DOCKET NO. UT-961632
GTE NORTHWEST INCORPORATED   )
        )
For Depreciation Accounting Changes. )
        )
________________________________________)




POST-HEARING BRIEF OF GTE NORTHWEST INCORPORATED

I.

Procedural History

 On December 23, 1996 GTE Northwest Incorporated ("GTE") petitioned the 
Washington Utilities and Transportation Commission ("WUTC" or "Commission") for 
an order authorizing changes and revisions to its depreciation rates for 
certain plant accounts. The Commission established Docket No. UT-961632 to 
consider GTE's Petition.  Also participating in the docket are the Commission's 
Staff, the Public Counsel Section of the Office of the Attorney General, and 
Telecommunications Ratepayers for Cost-Effective and Equitable Rates ("TRACER") 
(collectively, "Intervenors").
 GTE and Intervenors pre-filed direct testimony, and GTE pre-filed rebuttal 
testimony.  Hearings were held on July 14 and July 28-29, 1997.  By Order dated 
August 21, the Commission requested the parties to file post-hearing briefs on 
September 12.  
Issues/Preliminary Statement
 GTE appreciates the opportunity to serve the consumers of Washington.  GTE 
serves a dynamic, diverse, and growing customer base with a modern, flexible, 
and quality network.  This network has been financed by well over one billion 
dollars of private investment over the years, and large sums will continue to 
be needed to meet the demands and exceed the expectations of the Washington 
marketplace.  Today, capital recovery practices that reflect the economic 
environment are more critical than they ever have been for GTE and for the 
State of Washington.  GTE and the State must not only meet their obligations to 
provide investors a reasonable opportunity to fully recover past investments 
and earn a fair return, but they must also create an environment in which 
investors will have the confidence to continue to commit hundreds of millions 
of dollars to improve the State's telecommunications infrastructure.  GTE has 
carefully prepared its proposals in this case with these imperatives in mind, 
and requests that the Commission join it in keeping faith with past investors 
and making Washington an attractive site for substantial investment for years 
into the future.
 With the onset of competition in the State of Washington, especially in the 
local exchange market, it is time for this Commission to change its approach to 
regulating the capital recovery process of incumbent local exchange carriers 
("ILECs" or incumbent "LECs"), like GTE.  Indeed, the Commission Staff’s own 
witnesses -- Dr. Michael A. Crew and Thomas L. Spinks -- advocate (to varying 
degrees) reliance on a new regulatory paradigm that would look beyond the 
traditional ways of determining depreciation rates and respond to the forces of 
competition and technological change.
 While GTE and the Commission Staff agree on the objective --basing 
depreciation rates on the economic lives of GTE's plant --they disagreed at the 
hearing to some extent on the methodologies that should be used to estimate 
those economic lives.  The Staff would have the Commission continue to rely 
largely on "mortality analysis"; that is to say, measuring past retirements of 
GTE's plant in a single-provider regulated environment.  While that analysis 
worked well enough in the past, it is no longer sufficient.
 GTE, on the other hand, relied on an "economic" analysis that is fully 
responsive to the changing regulatory and competitive environment in 
Washington.  Specifically, GTE assessed the pace of competition in Washington, 
the rapid technological changes facing GTE's network, and the demands for new 
services.  
 GTE also relied on the rigorous, scientific studies performed by Technology 
Futures, Inc. that measure the likely substitution of old technology for new 
technology.  Based on decades of data reflecting the patterns of technological 
change and proven modeling procedures (including the time-tested Fisher-Pry 
Model and the "S" curve that defines patterns of substitution), TFI is able to 
predict when specific assets within the local exchange network will likely be 
substituted.  Once substituted, the "old" technology will generally have a 
diminishing useful "economic" life, i.e., the ability to generate positive cash 
flow or revenues in excess of their costs (including annual depreciation 
expense).  GTE and TFI are able to validate these predictions based on the 
experience of other carriers (and the lives they have chosen for their own 
plant assets).
 Based on this analysis, GTE determined that the depreciation lives used for 
the assets in eight service-providing accounts should be measured by their 
"economic" life.  Because these
accounts are highly sensitive to the forces of the marketplace --competition, 
technological change, and demand for new services --they are particularly well 
suited to an economic life analysis. GTE's proposed changes to these eight 
accounts, as opposed to the more static approach of the Commission Staff, 
better reflect the competitive trends now defining the local exchange in 
Washington.
 Finally, there are no legitimate reasons to leave the current prescribed 
depreciation rates in place for these eight accounts, as suggested by the 
witness for the Commission (Mr. Spinks) and the witness for Public Counsel and 
TRACER (Charles W. King).  Indeed, Mr. King's entire testimony can be 
disregarded because it is premised on three false assumptions:  (1) He assumes 
that there will be no meaningful competition in the local exchange for at least 
the next two decades; (2) he assumes GTE's cash flow under competition for the 
next two decades will equal its cash flows under regulation; and (3) he further 
assumes that the absence of competition for residential customers means that 
there will be a corresponding absence of competition for business customers.
 Although Mr. King failed to appreciate at all that the marketplace for local 
exchange services has fundamentally changed, Mr. Spinks and Dr. Crew, by 
contrast, did not.  Both appreciated that the forces of competition and 
technological change are important factors that must be taken account of by the 
Commission in establishing proper depreciation lives.  Both witnesses, however, 
gave too little weight to those forces of change --competition and change in 
technology.  Moreover, they relied too heavily on suppositions about what will 
likely happen to the telephone network without any supporting data or studies.  
As a consequence, Staff does not plan adequately for the challenges GTE and the 
Commission will face with respect to GTE's capital recovery of over one billion 
dollars of investment that has not -- and may not -- be recovered, given the 
forces of competition and technological change.  The evidence submitted by the 
Commission's Staff, therefore, is not sufficient to disprove the fact that the 
depreciation rates for the eight accounts identified by GTE need to be changed.
II.
Capital Recovery and Depreciation
 Capital recovery is commonly understood as the return of and return on a 
utility's investment.  It is common ground that "regulated public utilities . . 
. are entitled to a reasonable opportunity to recover [a] return on and of 
their capital." (Transcript, UT-961632 ("Tr."), at 252 (Testimony of Thomas L. 
Spinks ("Spinks").)
 Historically, in a single-provider environment, the WUTC could ensure that a 
regulated utility, like GTE, had the opportunity to recover and obtain a return 
on its investments.  It did so through the process of depreciation.  
Depreciation refers generally to the loss of value of an asset.  How that loss 
in value is recovered depends on whether it arises in a non-competitive 
regulated single provider context or a competitive context.  (See, generally, 
Sovereign Direct (Exhibit 1); Sovereign Rebuttal(Exhibit 3); Crew Direct 
(Exhibit 14); Spinks Direct (Exhibit 10).)
 In a regulated context, depreciation serves as the mechanism by which a 
utility allocates its investments in the construction or acquisition of assets 
such as utility plant and equipment (including removal costs net of salvage 
value) to ratepayers.  
 In a regulated context, when an ILEC places new plant into service, it records 
the original cost of the plant on its books. The loss in value of the plant is 
reflected as a depreciation expense; that is, the utility recovers its 
investment by generating revenue sufficient to cover its depreciation expense.  
For an ILEC operating under rate-of-return regulation, the depreciation expense 
is included in the utility's revenue requirement for rate-making purposes.  The 
depreciation expense is calculated using the "straight line" method.  Thus, an 
equal amount of depreciation expense for subgroups within a vintage is charged 
to operations and is recovered each year according to lives prescribed by a 
State commission.  (Id.)
 In a single-provider environment, a state commission can prescribe service 
lives for an ILEC's assets without any regard to possible entry by alternative 
service providers.  Because the ILEC is allowed a fair rate of return on its 
undepreciated assets, it is fairly compensated for its investments -- no matter 
how long the period of depreciation chosen by the Commission.  (Id.)
 Once the service life of a utility's asset is determined, the straight-line 
method is applied to yield a systematic allocation of depreciation expense over 
the approved service life of the asset. The resulting pattern of depreciation 
expense then becomes an input in determining the cash flow to be generated from 
established rates.  (Id.)
 The depreciation lives that a state commission chooses in a single-provider 
environment do not affect the eventual recovery by the ILEC of its investment 
in plant.  It is just a question of timing.  If the allowed rate of return for 
an ILEC equals its cost of capital, the identical present value is obtained 
regardless of how depreciation expense is allocated over time.  Thus, 
allocation methods such as straight-line depreciation are simply mechanisms to 
distribute capital costs over time to achieve desired rate-making goals.  In a 
regulated single-provider environment, if an ILEC's allowed rate of return 
equals its cost of capital, the precise allocation of depreciation expense is 
less critical for capital recovery purposes.  The allocation does, however, 
directly affect how a state commission sets retail prices. (Id.)
 With the onset of competition, a state commission can no longer use the old 
approach to ensure an ILEC a reasonable opportunity to obtain a recovery of and 
return on its capital.  The forces of competition will mean that it will be the 
ILEC's ability to fare in the competitive marketplace and generate positive 
cash flow that will determine whether it will recover and earn a return on its 
capital.  (Id.)
 Under competition, a state commission no longer has the ability to guarantee 
how much of an ILEC's deprecation expense will be recovered in revenues.  As a 
consequence, the regulator no longer has the ability to regulate the cash flow 
of an incumbent LEC.  While the regulator could control the cash flow in the 
prior environment, it no longer can under conditions of competition. Here, the 
concern is that the regulators' "old" practices, which were suited to the 
regulated single-provider environment, will continue in the "new" competitive 
environment, where they are decidedly ill-suited.  Specifically, they will, as 
Dr. Crew himself has recognized, threaten capital recovery:
[U]nder conditions of competition and technological progress, front-loading of 
capital recovery is essential if the regulated firm is to remain viable.  In 
addition, if the introduction of accelerated capital recovery is delayed by 
regulators, they may effectively vitiate any opportunity of the firm to recover 
its invested capital . . . .  There are limited opportunities in the future, 
under technological change and competition, to rectify mistakes made now.

("Economic Depreciation" at 52 (Exhibit 23) (emphasis added); Tr. at 50-51 
(Crew).)
 Under these circumstances, where depreciation will arise in a competitive 
context, depreciation is measured by the change in the market value of an asset 
between two periods.  Thus, the economic depreciation of an asset in a given 
period is defined as (1) the present value of future net cash flow at the start 
of the period minus (2) the present value at the end of the period.
III.
Depreciation Practices Of The Washington Commission
 The past depreciation practices of this Commission reflect the regulated 
single-provider environment.  In return for GTE's investing over one billion 
dollars in constructing and maintaining its telephone system in Washington, the 
Commission ensured GTE a 
reasonable opportunity to earn a return of and on its investments. To that end, 
the Commission used rate-of-return regulation and the straight-line method of 
depreciation accounting to derive an annual depreciation expense that would 
cover GTE's investment.  Because the timing of GTE's recovery did not matter, 
so long as GTE was assured of the recovery, the Commission had the ability to 
prolong the depreciation lives of GTE's assets in order to keep rates as low as 
possible for Washington's consumers.  As Dr. Crew has explained in one of his 
articles, under traditional regulation in a single-provider environment, 
"prices could be kept low by stable depreciation rates which rested on the 
foundation of long service lives for plant and equipment and the understanding 
that under recovery could be rectified in future periods."  ("Incentive 
Regulation" at 62 (Exhibit 24); Tr. at 55-56 (Crew).)  As Dr. Crew further 
explained, "[t]raditional regulatory policies with long asset lives [,however,] 
may have serious adverse consequences for both regulated companies and 
ratepayers under rapid technological change and competition."  ("Incentive 
Regulation" at 74 (Exhibit 24); Tr. at 58 (Crew).)  See generally  Sovereign 
Direct and Rebuttal (Exhibits 1 and 3); Spinks Direct and Supplemental (Exhibit 
10 and 11).)
 In the past, this Commission, like many others around the country, relied 
heavily on the physical life of plant and equipment to determine the 
appropriate projection life, in this context, for depreciation.  (The term 
“projection life,” in this context means the useful life of the asset, which 
was generally measured by the asset's physical life.)  The physical life is 
based on how long an asset remains classified as plant in service.  The 
physical life of an asset ends upon retirement, which is unrelated to the 
pattern or timing of cash flows.  The process of analyzing the frequency of 
those retirements is generally referred to as "mortality analysis." Mortality 
analysis looks primarily at the retirements that the utility has experienced in 
the past as a strong indicator of the retirements that are likely to occur in 
the future.  (Id.)
 Against this backdrop, every three years GTE conducted a depreciation study 
that reviewed its existing depreciation rates. GTE recommended new depreciation 
rates, lives, and salvage values after assessing whether or not existing rates 
and parameters continue to reflect current and future market conditions in 
Washington.  GTE then sought approval of these rates from the Federal 
Communications Commission ("FCC") and the WUTC for use in the calculation of 
interstate and intrastate depreciation expense. (See, generally, Spinks Direct 
and Rebuttal (Exhibits 10 and 11).)
 GTE submitted its depreciation study to the FCC and the WUTC for their 
review.  Following that review, a three-way meeting was held between GTE, the 
Commission, and the FCC to try to reach agreement on the depreciation rates and 
parameters to be used. After the three-way meeting, GTE submitted to the 
Commission and the FCC a formal request for approval of the new depreciation 
rates.  (Id.)
 To be sure, under the prior single-provider regime, the regulator (the WUTC) 
and regulated (GTE) reached some "agreement" on depreciation parameters.  But 
that "agreement" was premised on the underlying assumption that the Commission 
had the ability to ensure GTE the opportunity to recover its investment.  That 
is to say, the Commission could control the cash flow that GTE obtained through 
its annual depreciation expense, which was built into the rates GTE was 
authorized to charge ratepayers.
 Although the WUTC continues to use the straight-line depreciation method, the 
Commission can no longer assure GTE that it will recover its depreciation 
expense for each year on an equalized basis.  In a competitive environment, the 
Commission's choice of a life statistic for depreciation takes on a level of 
importance it never had in a regulated single-provider environment. Now, 
whatever life statistic is chosen will determine the maximum amount of 
depreciation expense GTE will be able to recover for that year through its 
rates, yet GTE will no longer have the assurance that the Commission can 
guarantee it the opportunity for capital recovery.  Thus, the central issue in 
this Docket becomes what life statistic to assign to the accounts of the 
utility's plant given an environment characterized by competition and 
technological change.
 Finally, it is also important to note that the WUTC, in 1995, authorized the 
Equal Life Group ("ELG") procedure for GTE's depreciation of its plant.  (The 
FCC, by contrast, authorized the use of ELG in 1983.)  The depreciable base 
identified in the ELG procedure is property units within a vintage that are 
expected to have the same service life.  The accrued rate derived from the ELG 
procedure provides cost allocation over the estimated life of each subgroup 
such that property units remaining in service beyond the average service life 
of a vintage will not bear any portion of the accrual associated with earlier 
retirements.  With ELG, one would expect the depreciation reserve to be higher, 
reflecting the additional depreciation expense that was taken in the early 
years.
   IV.
Economic Depreciation
 With the onset of competition in the local exchange and the increase in 
competition in other telecommunications markets, it is now time to rely on an 
assessment of future cash flows and changes in the economic values of GTE's 
assets.  Past retirements will no longer provide the forward-looking estimates 
of the economic value that will be associated with GTE's assets.  The 
prescribed lives now in place were established in 1994, prior to the passage of 
the 1996 Telecommunications Act and prior to competitive entry into the local 
exchange market.
 In the face of rising competition and advancing technological change, the 
traditional tools of depreciation are no longer sufficient for analyzing GTE's 
plant.  The models used to determine depreciation lives assumed technological 
change would continue at its traditional pace, without the stimulus of 
competition. Therefore, as Mr. Sovereign explained, "very little weight should 
be given to mortality analysis" for the eight service-providing accounts.  (Tr. 
at 159 (Sovereign).)  Mortality analysis provides an incomplete picture of what 
is likely to happen in a period of technological change and competition.  The 
point is that the emphasis should be on what is going to happen in the future, 
not on what has happened in the past.
 It became clear at the hearing that there was some consensus between GTE's 
witnesses (Messrs. Sovereign and Vanston) and the Staff's witnesses (Dr. Crew 
and Mr. Spinks) regarding many of the principles underlying economic 
depreciation.  Dr. Crew, for example, testified that the purpose of his 
testimony was to "propose that the Commission adopt economic lives as the 
appropriate measure for the prescribed lives used for depreciation purposes."  
(Crew Direct at 2 (Exhibit 14).)  (See also id. at 3-4 ("My approach is based 
upon economic depreciation which is a forward-looking concept.  Economic 
depreciation is driven by cash flows expected from an asset or assets."); Tr. 
at 254 (Spinks) ("economic lives are relevant to attempt to ascertain and use 
in this current environment").)  Accordingly, this Commission should affirm the 
underlying principles of economic depreciation and the use of economic lives 
(i.e., service lives needed to approximate economic depreciation) in this and 
upcoming dockets.
 -- California Commission's Use Of Economic Lives 
 This Commission should join the California Public Utilities Commission 
("CPUC"), which recently endorsed the use of economic lives in cost studies.  
(Sovereign Rebuttal at 6-8 (Exhibit 3).) The CPUC concluded that the economic 
lives used by GTE and Pacific Bell for external financial reporting were the 
appropriate forward-looking lives for cost studies.  The CPUC rejected the 
suggestion by AT&T and others that FCC-prescribed lives are forward-looking.
 -- FCC Lives Are Insufficient
 Several witnesses during the hearing (Dr. Crew, for example) suggested that 
the FCC lives should continue to be used as guidance for this Commission.  But 
the FCC life ranges are based on historical parameters that were used in 
statistical analyses of depreciation represcriptions in 1990, 1991, and 1992.  
Whatever their relevancy in the early 1990's, the FCC lives are significantly 
outdated and out of step with the lives calculated by GTE today, as we 
demonstrate further below.  
 The FCC lives do not purport to be based on changes in economic value.  They 
do not even begin to reflect the passage of the 1996 Act and the emergence of 
competitive entry into the local exchange in Washington.  Indeed, even the FCC 
has recognized that its past practices may be inadequate in today's 
environment.  The FCC is expected to issue a Notice of Proposed Rulemaking 
("NPRM") to revise its depreciation process.  (Sovereign Rebuttal at 6 (Exhibit 
3).)  Indeed, the FCC has recommended that the 1997 triennial review of GTE's 
depreciation studies be suspended pending the outcome of the NPRM.  (Id.)  At 
the very least, it is expected that the FCC will either greatly streamline the 
depreciation process, giving ILECs much more freedom in determining 
depreciation rates, or will completely deregulate the depreciation process.  

////

V.
Effect Of Competition
 Throughout this proceeding, GTE witnesses testified that they took account of 
the introduction of competition in the local exchange in determining the 
appropriate economic lives for its plant.  Further, GTE explained that the 1996 
Act paved the way for competitive LECs ("CLECs") (also known as alternative 
LECs or "ALECs") to enter the local exchange by abolishing the single-provider 
environment, which the Washington Supreme Court had done under state law in 
1994.  In re Electric Lightwave, Inc., 123 Wash. 2d 530, 869 P.2d 1045 (Wash. 
1994).  
 Recent initiatives of this Commission have further accelerated the rapid 
deployment of competition in the State of Washington. Mr. Spinks recognized 
this trend as well.  (Spinks Direct at 10 (Exhibit 10) ("For several years now 
competitive providers have been installing facilities in the Seattle area.  
Competitive providers have installed switches and fiber optic rings in the 
downtown Seattle area").)
 There is currently competition in the State of Washington for GTE's 
customers.  (See Sovereign Direct at 9 (Exhibit 1); Sovereign Rebuttal at 13 
(Exhibit 3).)  This competition is focused on GTE's business customers, whose 
high-margin, low-cost service has traditionally allowed GTE to subsidize its 
low-margin and high-cost residential service.  Indeed, GTE has been open to 
competition in all of its service areas in Washington for at least the past 
three years.  These competitive forces will only accelerate.
 This is a critical point.  The Company and the Commission must look several 
years into the future when establishing depreciation rates.  They can no longer 
risk making short-sighted depreciation rate decisions and plan to make up 
shortfalls at some later point in time.  If depreciation practices do not 
appropriately anticipate market and technological changes, when those changes 
occur it will be too late to make massive depreciation rate adjustments with 
any real hope of the Company actually generating sufficient revenues to cover 
the increased depreciation expense levels. (See "Economic Depreciation" at 52 
(Exhibit 23).)
 In the face of Congress' historic transformation of the local exchange (in the 
1996 Telecommunications Act), the competition initiatives of this State and 
Commission, and the FCC's promulgation of regulations with a decidedly pro-CLEC 
slant (the First Report and Order in CC Docket No. 96-98), Intervenors claim to 
see virtually no meaningful competition in the local exchange that might 
threaten -- or even disrupt -- GTE's recovery of its invested capital.  We 
briefly address the principal arguments raised by the Intervenors below:
 -- Competition In The Local Exchange
 Mr. King's central premise is that there should be no adjustment to the 
depreciation lives of GTE's assets because there is no competition in the local 
exchange; indeed, he asserts that there will be no real competition "for the 
duration of our lifetime."  (Tr. at 312 (King).)
 Mr. King is wrong.  He is so wrong, in fact, that his entire testimony should 
be disregarded by this Commission.  First of all, there is competition right 
now in the local exchange in the State of Washington, as explained above.  But 
even more important, it is competition for the very high-margin business 
customers that matters most to an incumbent like GTE that still retains 
universal service obligations.  Indeed, Mr. King himself conceded that if he 
were a CLEC, "[he] would go after high concentration business customers, and 
[he] would go after possibly apartment complexes in the residential area.  The 
rest I would serve through leased lines from the telephone company."  (Tr. at 
327 (King).)  
 The point, of course, is that the majority of GTE's revenues result from its 
relationship with its business customers.  Even though Mr. King did not study 
GTE's customer base in Washington to determine what percentage of GTE's 
revenues come from business customers before opining about whether competition 
would disrupt GTE's capital recovery, he did acknowledge, under cross 
examination, that he would "suspect given that usually business rates are 
significantly higher than residential rates, a significant portion of GTE's 
revenues come from its business clientele."  (Tr. at 327 (King).)  It became 
clear through Mr. King's testimony that his assumption that there would be "no 
competition" simply meant that he did not foresee facilities-based competition 
for GTE's residential customers.  But that assumption -- even if true -- says 
nothing about GTE's business customers. Yet it is these very business customers 
that make up the revenue base of an ILEC, like GTE.  Therefore, Mr. King's 
testimony does not even begin to address the central question before this 
Commission -- is there likely to be a significant impact on GTE's capital 
recovery with respect to all of its assets in all areas of Washington (rural 
and urban) serving all customers (business and residential), given the forces 
of competition and technological change?
 -- Competition And Cash Flow
 Mr. King also testified at great length that there would be no disruption to 
GTE's cash flow from the forces of competition. Indeed, he testified that there 
is no need for a cash flow analysis because it would be "circular" to have 
one.  (Tr. at 312-314 (King).)  Mr. King reasons that because GTE will continue 
to have a "monopoly" and "exert market power," it will have the "ability to 
charge rates that bear little relationship to the underlying costs as would be 
required by a competitive market."  (Tr. at 316-17 (King).)  As a consequence, 
Mr. King asserts, "this company [GTE Northwest Incorporated] will enjoy market 
power indefinitely, because with market power there will never become a 
situation when it cannot recover its depreciation expense."  (Tr. at 319 
(King).)
 Again, Mr. King misses the point.  His observations about any threats to cash 
flow arising from competition in the local exchange are based on the level of 
competition in the residential portions of GTE's service territory -- not the 
all-important business customers.     
 Mr. King's "forecast" must also be disregarded because it is untethered to any 
data or evidence whatsoever.  He has no studies to back up his assertions, 
which appear to be flatly inconsistent with the trend of increased competition 
and the policy goals of this Commission.  It may well be that not all sectors 
of the local exchange are enjoying full facilities-based competition at this 
time.  But that has nothing to do with whether the initiatives and 
determinations of this Commission to promote competition will take hold in the 
coming years.
 Mr. Spinks, by marked contrast, acknowledged that a cash flow analysis would 
be "relevant" and "useful."  (Tr. at 269, 270 (Spinks).)  GTE does not have 
available to it at this time a full cash flow analysis, and it presented this 
Commission with the best information that was available.  The point, though, is 
not whether the lives proposed by GTE are 100% accurate.  Rather, the goal of 
this Docket should be for the Commission to assess and understand the trends 
affecting the market for local telephone services and respond accordingly.  GTE 
will be able to offer refinements to its proposed depreciation lives as it 
develops more information. Although Intervenors themselves were critical of the 
studies and data GTE presented, they notably presented no studies or data 
supporting their position. 
 -- Competition From Wireless Service
 Dr. Vanston testified that wireless telephony will provide vigorous 
competition to wireline service, especially wireline usage.  (Tr. at 185, 244 
(Vanston).)  This form of competition is independent of whether 
facilities-based wireline competition arises for residential customers.  After 
testifying at length about why he believed that wireline residential 
competition would not emerge, he was asked about wireless competition.  His 
response, although detailed, was limited to what is the best technology for 
cell site trunking (Tr. At 327-29 (King)) -- an issue that is completely 
irrelevant to the question of whether wireless will compete with wireline for 
local access services.  The real issue is whether GTE's customers will use 
their cell phones as a substitute for the use of wireline phones.  On this 
point, there can be no debate --certainly none was raised by Mr. King -- that 
the rising use of wireless phones will mean a reduction in the minutes of use 
(and corresponding charges) of wireline phones.  The revenues that GTE earns 
from its wireline phone service, which establishes its cash flow, are highly 
sensitive to the amount of usage of GTE's wireline phone service.
VI.
Effect Of Technological Change
 GTE demonstrated that the unusually dynamic f