BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION In the Matter of Determining Costs for ) Docket No. UT-980311(a) Universal Service ) ) RESPONSE OF GTE NORTHWEST INCORPORATED TO PETITIONS FOR RECONSIDERATION FILED BY SPRINT CORPORATION AND U S WEST COMMUNICATIONS, INC. Pursuant to WAC 480-09-810(4) and the Commission’s Notice of Invitation to Respond to Petitions for Reconsideration dated December 3, 1998, GTE Northwest Incorporated (“GTE”) hereby responds to specific portions of the petitions for reconsideration filed by Sprint Corporation (“Sprint”) and U S WEST Communications, Inc. (“U S WEST”). Each petition for reconsideration addressed certain provisions of the Tenth Supplemental Order Establishing Costs (“Order”) in this docket. I. GTE CONCURS WITH SPRINT THAT THE COMMISSION'S DIRECTIONS WITH RESPECT TO ITS "ACCESS CHARGE" RULING ARE UNCLEAR AND UNAUTHORIZED GTE concurs that the Commission should reconsider, indeed vacate, footnote 18 of the Order (See Order, p. 21, n. 18). Footnote 18 states that the Commission order adopting the "Access Charge" rule in Docket No. UT-970325 contemplates that the instant proceeding results in cost estimates that are sufficient to designate in a company's access charge tariff the charge necessary to meet universal service requirements. Notwithstanding the Commission's determination that the problems and shortcomings of the cost models presented rendered them unsuitable for use in establishing a universal service fund, the Commission deemed the cost estimates sufficiently reliable for revising GTE's access charge tariff pursuant to General Order No. R-450 in Docket No. UT-970325. There is no conceptual or evidentiary basis (nor does the Commission advance one) for concluding that the cost estimates presented are insufficiently precise for estimating the cost of a state universal service fund but sufficiently precise for estimating the cost of the universal service requirement in a company's access charge tariff. The uses to which the cost estimates are to be put are necessarily related. The Commission seems to appreciate the invalidity of the exercise when it later states that the development of more "suitable" USF cost estimates would be used to "update" carrier access charge tariffs. (Id.). Moreover, the Order falls short of meeting the assumptions underlying the Commission's Access Charge Rule. The Access Charge Rule Order assumes that the cost of universal service would be revealed with specificity in Docket UT-980311(a). (See General Order No. R-450, p. 14.) Based on that assumption, the Commission adopted implementation guidelines "for revenue-neutral filings on an interim basis as policies to guide implementation of the rule until universal service costs are determined." (Id. at 7 (emphasis added)). Not until universal service costs are determined will contributions above cost be recovered through originating access charges or rate rebalancing. (Id.). Under these circumstances, the Commission found it reasonable to allow companies to bifurcate the existing terminating access rates into a cost-based rate and a residual temporary universal service increment "pending the resolution of universal service issues." (Id. at 14 (emphasis added)). The Commission explained: "based on the decision and determinations in UT-980311(a) the subsidy necessary to maintain universal service for each company involved should be known." (Id.). Only then would the interim universal service increment be eliminated and replaced with a Commission-authorized increment. (Id.). As the Commission has acknowledged, the final order in UT-980311(a) contains cost estimates that are "not sufficient to support actual assessments or disbursements within a (universal service) fund," and that additional proceedings are necessary for the "accurate and precise determination of costs of state universal service." (Order, at ¶ 1,14). The Commission has also admitted that it "is certainly not unaware of the potential for conflict resulting from the policy directives embodied in the access charge reform rule, the universal service adjudication and the proposed universal service funding rule." (Washington Utilities and Transportation Commission v. Washington Exchange Carrier Association, et al., Docket No. UT-971140, Sixth Supplemental Order Granting Limited Clarification (rel. Dec. 15, 1998), p. 4). Clearly, the costs of universal service have not been determined, nor have universal service issues been resolved as contemplated by the Access Charge Rule. Consequently, the interim universal service rate element authorized by the Access Charge Rule cannot properly be revised or eliminated. Most importantly, for the reasons stated in the Petition for Review of the Access Charge Rule pending before the Thurston County Superior Court, the Commission is without authority to order incumbent carriers to revise tariffs pursuant to the Access Charge Rule as implied by footnote 18. See Washington Independent Tel. Assn., et al., v. Washington Utilities and Transportation Commission, No. 98-2-02413-2 (Thurston County Sup. Ct., filed Nov. 10, 1998). II. GTE AGREES WITH U S WEST THAT THE RECORD DOES NOT SUPPORT ALLOWING 28.8 KBPS MODEMS TO FUNCTION AT REASONABLE RATES FOR LONG LOOPS GTE concurs with U S WEST that "there is absolutely no record evidence to support the Commission's finding that the HAI 5.0a design allows 28.8 kbps modems to function at 'reasonable rates' or that it will allow all customers to have access to 'high speed data transmission.'" (U S WEST Petition for Reconsideration, p. 3). From an engineering standpoint, the HAI network simply does not accommodate advanced services. (Exh. 301T, Duncan, Gregory, et al.,"An Analysis of the HAI Model Release 5.0a," Aug. 3, 1998, pp. 63-64, App. A, p. A-5.). In recognition of the 1996 Telecommunications Act's explicit directive to "encourage the reasonable and timely deployment of advanced services to all Americans, (47 U.S.C. § 706(a))," the Federal Communications Commission's ("FCC") first cost model criterion in the Universal Service Order mandates that the cost model's loop design "should not impede the provision of advanced services." (Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report and Order (rel. June 4, 1997) at ¶ 250 ("Universal Service Order")). The FCC expressly defined the loop to permit the transmission of "digital signals needed to provide services such as ISDN, ADSL, HDSL, and DS-1 level signals," which are in fact advanced services. (In re: Implementation of the Local Competition Provisions for the Telecommunications Act of 1996, CC Docket 96-98, First Report and Order, 11 FCC Rcd. 15499, 15691, ¶ 380). The HAI Model violates the FCC's standard by modeling outdated and expensive copper-based T-1 DLC technology. (Exh. 301T at 64). In addition to being costly and obsolete, use of this technology is not practical for ADSL applications because of the extremely limited bandwidth. (Id. at A-5). The use of an 18,000 foot loop standard in the HAI Model effectively precludes the provision of digital and advanced telecommunications services of the sort mandated by the FCC and this Commission./ This Commission has relied on the FCC’ s Fifth Report & Order, In the Matter of Federal-State Joint Board on Universal Service, CC Docket 96-45, in making its decisions regarding modem speeds and high speed data transmission. (Order at 10, ¶ 13 n. 12). The Fifth Report and Order was issued after the close of evidence in this proceeding. (See Fifth Report and Order (released Oct. 28, 1998). While the Commission may wish to take administrative notice of the FCC's Order issued outside of the evidentiary time frame, it is only reasonable to consider the objections filed to the same Order. Contemporaneous with this filing, GTE is detailing its concerns with the ability of the FCC model platform to provision advanced services. See GTE Petition for Reconsideration, In the Matter of Federal-State Joint Board on Universal Service, CC Docket 96-45 (filed Dec. 18, 1998)./ More to the point, there is no evidence that the real network actually in place will support such functions, or that the universal service fund support estimated by the Commission would allow the network modifications necessary to support such functions. Thus, the Commission should clarify its intent with regard to reconciling its model-based cost estimates with real world conditions. III. GTE AGREES WITH SPRINT THAT THE COMMISSION SHOULD RECONSIDER ESTIMATING COST OF A NETWORK AS ONE THAT SERVES ALL HOUSEHOLDS Sprint has requested the Commission to reconsider its decision ordering current versions of the model to estimate the cost of serving all households. (Sprint Petition for Reconsideration, p. 3). The Commission's ruling in this regard is misguided and contrary to the evidence presented. Both Sprint and GTE presented competent evidence why housing units, not households, should be used to estimate the costs of universal service. (Id. at 3, citing Brief of Sprint Corporation, pp. 17-18; GTE Petition for Reconsideration, p. 11). GTE reiterates that incumbent local exchange carriers have the obligation to provide universal service to all customers in their service territories. Building out a network only to currently occupied households delays service to customers moving into previously unoccupied or new residences and is expressly at odds with the purpose of universal service. It is more prudent and less costly to engineer a network to anticipate the next request for service and to build it out with this expectation in mind. (GTE Petition for Reconsideration, p. 11, citing Collins Exh. 141-T:11). At this time, the Commission's modeled network does not contain sufficient capacity to provide service upon demand to presently unoccupied or new locations. By failing to model sufficient capacity to accommodate the service demands of the existing customer base, the Commission violates the FCC's cost model standards and would impose lengthy service delays on new customers or those in the process of relocating. IV. CONCLUSION Based upon the foregoing, GTE respectfully requests that the Commission reconsider, modify and vacate its Order as outlined in this Response and in GTE’ s previously filed Petition for Reconsideration. Respectfully submitted, Christopher S. Huther Edward S. Hammerman COLLIER, SHANNON, RILL & SCOTT, PLLC 3050 K Street, N.W., Suite 400 Washington, D.C. 20007 (202) 342-8400 Lewis F. Powell, III Jennifer L. McClellan HUNTON & WILLIAMS 951 East Byrd Street Richmond, VA 23219 (804) 788-8200 Attorneys for GTE NORTHWEST INCORPORATED Dated: December 17, 1998 CERTIFICATE OF SERVICE I hereby certify that copies of this Answer of GTE Northwest Incorporated to the Petitions of Reconsideration filed by Sprint Corporation and U S WEST Communications, Inc. in Washington Utilities and Transportation Commission Docket No. UT-980311(a) have been served upon Carole Washburn, Executive Secretary, Washington Utilities and Transportation Commission, 1300 Evergreen Park Drive Southwest, Olympia, Washington, 98504, by hand, and the following by facsimile and first class mail. DATED this 17th day of December, 1998 Christopher S. Huther Gregory Trautman Assistant Attorney General 1400 S. Evergreen Park Drive, SW Olympia, WA 98504 (360) 664-1187 Fax: (360) 586-5522 Ann Pongracz General Attorney Limited Sprint 330 South Valley View Blvd. Las Vegas, NV 89152 (702) 244-7171 Fax: (702) 244-7378 Arthur Butler Ater Wynne LLP TRACER 601 Union Street, Suite 5450 Seattle, WA 98101-2327 (206) 623-4711 Fax: (206) 467-8406 Lisa Anderl U S WEST 1600 Seventh Avenue, Room 3206 Seattle, WA 98191 (206) 345-1574 Fax: (206) 343-4040 Gregory J. Kopta David Wright Tremaine LLP 2600 Century Square 1501 Fourth Avenue Seattle, Washington 98101 (206) 628-7692 Fax: (206) 628-7699 Richard Finnigan WITA 2405 Evergreen Park Drive, SW Suite B-3 Olympia, WA 98502 (360) 956-7001 Fax: (360) 753-6862 Simon ffitch Assistant Attorney General 900 Fourth Avenue, Suite STE 2000 Seattle, WA 98164 (206) 464-7744 Fax: (206) 464-6451 Robert S. Snyder Attorney at Law 30th Floor 1000 Second Avenue Seattle, WA 98104-1064 (206) 622-2226 Fax: (206) 622-2227 Susan Proctor AT&T Communications 1875 Lawrence Street, Room 1505 Denver, CO 80202 (303) 298-6164 Fax: (303) 298-6301 Brooks E. Harlow Miller, Nash, Hager & Carlsen LLP Representing MCI 4400 Two Union Square 601 Union Street Seattle, WA 98101-2322 (206) 622-8484 Fax: (206) 622-7485 Clyde MacIver Managing Partner MCI and MCIMetro 601 Union Street, Suite 4400 Seattle, WA 98101 (206) 622-8484 Fax: (206) 622-7485 Ronald Roseman AARP 2011 14th Avenue East Seattle, WA 98112 (206) 324-8792 Fax: (206) 568-0138 Ron Gayman Government Affairs Manager AT&T Communications 1501 South Capitol Way Suite 204 Olympia, WA 98501-2200 (360) 705-3977 Fax: (360) 705-4177 Jefferey Goltz Senior Assistant Attorney General State Mail Stop 40128 Olympia, WA 98504-0128 (360) 664-1186 Fax: (360) 586-5522 Thomas G. Holcomb Assistant Attorney General Washington Dept. of Information Services State Mail Stop 40100 Olympia, WA 98504 (360) 753-6200 Fax: (360) 664-0229 Nancy L. Judy AVP, External Affairs Sprint 902 Wasco Street Hood River, OR 97031-3105 (541) 387-9265 Fax: (541) 387-9753 Rogelio Pena MCI WorldCom 707 17th Street, Suite 3600 Denver, CO 80202 (303) 390-6106 Fax: (303) 390-6333 Deborah Whiting-Jacques Nextlink Washington 1003 Montello Ave Hood River, OR 97031 (541) 386-6398 Fax: (541) 386-6397