00878 1 BEFORE THE WASHINGTON UTILITIES AND 2 TRANSPORTATION COMMISSION 3 4 In the Matter of the Pricing ) Docket No. UT-960369 Proceeding for Interconnection,) Phase II 5 Unbundled Elements, Transport ) Volume IV and Termination, and Resale ) Pages 878-1182 6 _______________________________) In the Matter of the Pricing ) Docket No. UT-960370 7 Proceeding for Interconnection,) Unbundled Elements, Transport ) 8 and Termination, and Resale ) for US WEST COMMUNICATIONS, ) 9 INC. ) _______________________________) 10 In the Matter of the Pricing )Docket No. UT-960371 Proceeding for Interconnection,) 11 Unbundled Elements, Transport ) and Termination, and Resale ) 12 for GTE NORTHWEST, ) INCORPORATED. ) 13 _______________________________) 14 15 A hearing in the above matter was 16 held on December 3, 1998, at 8:15 a.m., at 1300 17 Evergreen Park Drive Southwest, Olympia, Washington, 18 before Administrative Law Judge KARL CRAINE and 19 CHAIRWOMAN ANNE LEVINSON and COMMISSIONERS WILLIAM R. 20 GILLIS and RICHARD HEMSTAD. 21 22 The parties were present as 23 follows: 24 AT&T, by Susan Proctor, Attorney at Law, 1875 Lawrence Street, Suite 1575, Denver, 25 Colorado, 80202. 00879 1 US WEST COMMUNICATIONS, INC., by Lisa A. Anderl, Attorney at Law, 1600 Seventh Avenue, 2 Room 3206, Seattle, Washington 98191, and Douglas N. Owens, Attorney at Law, 1325 Fourth Avenue, Suite 3 940, Seattle, Washington 98101. 4 THE COMMISSION, by Ann Rendahl, Assistant Attorney General, P.O. Box 40128, Olympia, 5 Washington 98504-0128. 6 PUBLIC COUNSEL, by Simon ffitch, Attorney at Law, 900 Fourth Avenue, #2000, Seattle, 7 Washington 98164. 8 NEXTLINK WASHINGTON, TCG SEATTLE, and ELECTRIC LIGHTWAVE, INC., by Gregory J. Kopta, 9 2600 Century Square, 1501 Fourth Avenue, Seattle, Washington 98101-1688. 10 GTE, by Lewis Powell and Jennifer 11 McClellan, Attorneys at Law, Hunton & Williams, 951 E. Byrd Street, Richmond, Virginia, 23219, and 12 Christopher S. Huther, Attorney at Law, Collier, Shannon, Rill & Scott, PLLC, 3050 K Street, N.W., 13 Washington, D.C. 20007. 14 COVAD COMMUNICATIONS COMPANY, by Prince Jenkins, Attorney at Law, 2330 Central 15 Expressway, Santa Clara, California, 95050. 16 MCI WORLDCOM, by Rogelio Pena, Attorney at Law, 707 17th Street, Suite 3600, Denver, 17 Colorado, 80202. 18 19 20 21 22 23 24 Barbara L. Spurbeck, CSR Court Reporter 25 25 00880 1 ____________________________________________________ 2 INDEX OF WITNESSES 3 ____________________________________________________ 4 WITNESS: PAGE: 5 DAVID G. TUCEK 6 Direct Examination by Mr. Huther 909 7 Examination by Dr. Gabel 911 8 MICHAEL R. NORRIS 9 Direct Examination by Mr. Huther 922 10 Cross-Examination by Ms. Proctor 924 11 Examination by Dr. Gabel 936 12 JAMES R. LANGLEY 13 Direct Examination by Mr. Powell 937 14 Cross-Examination by Ms. Rendahl 941 15 Cross-Examination by Ms. Proctor 961 16 Cross-Examination by Mr. Kopta 988 17 Cross-Examination by Mr. ffitch 1000 18 Examination by Dr. Gabel 1026 19 Cross-Examination by Ms. Proctor 1046 20 Cross-Examination by Mr. Kopta 1061 21 R. KIRK LEE 22 Direct Examination by Mr. Powell 1071 23 Cross-Examination by Ms. Rendahl 1072 24 Cross-Examination by Ms. Proctor 1092 25 Cross-Examination by Mr. Kopta 1129 00881 1 Cross-Examination by Mr. Pena 1148 2 Cross-Examination by Mr. Jenkins 1154 3 Examination by Dr. Gabel 1160 4 Cross-Examination by Ms. Proctor 1175 5 Redirect Examination by Mr. Powell 1178 6 Recross-Examination by Ms. Proctor 1180 7 8 ____________________________________________________ 9 INDEX OF EXHIBITS 10 ____________________________________________________ 11 EXHIBIT: MARKED: OFFERED: ADMITTED: 12 Number 555 887 910 910 13 Number C556 887 910 910 14 Number C557 887 910 910 15 Number C558 887 910 910 16 Number 559 881 910 910 17 Number 560 888 924 924 18 Number 561 888 924 924 19 Number 562 888 924 924 20 Number 563 888 938 940 21 Number C-564 888 938 940 22 Number C-565 888 938 940 23 Number 566 888 938 940 24 Number C567 889 938 940 25 Number 568 889 938 940 00882 1 Number 569 889 997 997 2 Number C-570 889 997 997 3 Number 571 889 997 997 4 Number 572 889 997 997 5 Number 573 889 997 997 6 Number 574 890 997 997 7 Numbers 575-587 891 1072 1072 8 Number 588 892 1072 1072 9 Number C-589 893 1066 1066 10 Number 590 893 1130 1130 11 Number 591 894 -- -- 12 Number 592 896 -- -- 13 Number 593 907 -- 940 14 Number 594 1125 -- 1125 15 16 17 18 19 20 21 22 23 24 25 00883 1 JUDGE CRAINE: Let's go on the record, 2 then. The first thing we'll take up this morning are 3 motions, and then, following that, we'll mark 4 exhibits. Did AT&T want to renew the motion to 5 strike? 6 MS. PROCTOR: On the record? 7 JUDGE CRAINE: Do we need to go off the 8 record for a moment and discuss that? 9 MS. PROCTOR: Sure. 10 JUDGE CRAINE: Okay. 11 (Discussion off the record.) 12 JUDGE CRAINE: While we were off the 13 record, Mr. Stapleton reminded me that I should have 14 the parties enter appearances on the record, so let 15 me start with Mr. Powell at the end of the table and 16 have the parties work their way down. 17 MR. POWELL: Thank you, Judge Craine. 18 Lewis Powell, for GTE Northwest, Incorporated. With 19 me is Jennifer McClellan. She and I are with the 20 firm Hunton & Williams, 951 E. Byrd Street, Richmond, 21 Virginia, 23219. 22 MR. HUTHER: Christopher Huther, also on 23 behalf of GTE Northwest, Incorporated, with the firm 24 of Collier, Shannon, Rill & Scott, 3050 K Street, 25 N.W., Washington, D.C., 20007. 00884 1 MS. ANDERL: Your Honor, Lisa Anderl, 2 appearing on behalf of US West Communications, Inc., 3 1600 7th Avenue, Room 3206, Seattle, Washington, 4 98191. 5 MR. OWENS: Douglas N. Owens, lawyer in 6 Seattle, representing US West Communications. My 7 address is 1325 Fourth Avenue, Suite 940, Seattle, 8 98101. 9 MR. JENKINS: Good morning, Your Honor. 10 Prince Jenkins, on behalf of Covad Communications, 11 2330 Central Expressway, Santa Clara, California, 12 95050. 13 MR. PENA: Good morning. Rogelio Pena, on 14 behalf of MCI Telecommunications Corporation, 707 15 17th Street, Denver, Colorado, 80202. 16 MR. KOPTA: Gregory J. Kopta, of the law 17 firm Davis, Wright, Tremaine, L.L.P., on behalf of 18 Nextlink Washington, Inc., TCG Seattle, and Electric 19 Lightwave, Inc. The firm's address is 2600 Century 20 Square, 1501 Fourth Avenue, Seattle, Washington, 21 98101. 22 MS. PROCTOR: Susan D. Proctor, on behalf 23 of AT&T Communications of the Pacific Northwest, Inc. 24 1875 Lawrence, L-a-w-r-e-n-c-e, Street, Denver, 25 Colorado, 80202. 00885 1 MS. RENDAHL: Ann Rendahl, Assistant 2 Attorney General, representing Commission Staff. My 3 address is P.O. Box 40128, Olympia, Washington, 4 98504. 5 JUDGE CRAINE: Okay. Then, for the record, 6 Mr. Butler called me last night to say that Tracer 7 would not be appearing today, but wanted to remain in 8 the case in terms of briefing and those types of 9 things. 10 Okay. And then, while we're on the topic 11 of appearances, since WorldCom, as I understand it, 12 won't be appearing today because the parties reached 13 settlement on the WorldCom testimony, Ms. Anderl, do 14 you want to address that? 15 MS. ANDERL: Yes, Your Honor. I had a 16 discussion with Mr. Posner, for WorldCom, and I 17 believe that we did reach an agreement. However, the 18 letter memorializing that agreement has not yet 19 caught up with me, if he has, in fact, sent one in, 20 and I'd like to see that before I confirm that. My 21 understanding is he's willing to withdraw a certain 22 portion of Mr. Ball's testimony, and on that basis, 23 we would have no cross-examination of the remainder 24 of Mr. Ball's testimony, and would not need Mr. Ball 25 to appear. 00886 1 JUDGE CRAINE: Okay. Yeah, I did receive a 2 letter late yesterday that -- I don't remember the 3 exact page and line numbers, but it represents that 4 the parties have reached a stipulation. 5 MS. ANDERL: That's correct. 6 JUDGE CRAINE: Okay. Let's turn to marking 7 the exhibits. We initially had Mr. Ball going first, 8 but since his testimony is coming in by stipulation, 9 the witness order is Tucek, Norris, Langley, and Lee. 10 And so Mr. Powell, do you have exhibit numbers for 11 those testimonies? 12 MR. POWELL: I don't have numbers, Judge 13 Craine, but I do have the form consistent with -- I 14 guess it's the 13th order for the GTE witnesses, so 15 that we can just fill in the -- I don't remember what 16 the next number in order is. 17 JUDGE CRAINE: Okay. Let's go off the 18 record and just read the next number. 19 (Discussion off the record.) 20 JUDGE CRAINE: Back on the record. Mr. 21 Tucek's direct testimony is 555. The exhibit DGT-1 22 is C-556. Exhibit DGT-2 is C-557. Exhibit DGT-3 is 23 C-558. His rebuttal testimony would be 559. 24 And then, moving into Mr. Norris, his 25 direct testimony -- well, excuse me. Are there 00887 1 cross-examination exhibits for Mr. Tucek? No, okay. 2 Mr. Norris' direct would be 560, then. The Exhibit 3 NRN-1 would be 561. His reply testimony, 562. 4 Supplemental direct would be 563. Exhibit JRL-1 is 5 564. 6 MR. POWELL: Your Honor, you switched to 7 Mr. Langley at the top of page two. 8 JUDGE CRAINE: Oh, you're right. I'm 9 sorry, Mr. Langley's supplemental direct is 563. The 10 JRL-1 is 564. JRL-2 is 565. The rebuttal testimony 11 is 566. The reply testimony is 567. Are there any 12 cross-examination exhibits for Mr. Langley? 13 MR. KOPTA: Yes, I will have several 14 cross-examination exhibits for Mr. Langley. 15 MS. PROCTOR: Could I also ask a point of 16 clarification? There was an updated study filed on 17 November 10th, so JRL-2, the Washington NRC study, 18 which one is that? Because although I'm not really 19 deep into the intricacies of the study, even I can 20 tell that this is not the same as this three-inch 21 exhibit. 22 MR. POWELL: Thank you, Susan. There was 23 an updated study filed in November reflecting the 24 Commission directed cost of money, I believe, and I 25 don't think that's on our list. So we may want to 00888 1 reserve a number. Mr. Langley's not here, but he'll 2 be here shortly. We may want to reserve a number, if 3 that's agreeable. 4 MS. PROCTOR: Could we maybe call that 5 JRL-3? 6 MR. POWELL: That would be sensible. 7 JUDGE CRAINE: Well, if that was filed on 8 the 10th, it would fit in after the November 9th 9 rebuttal testimony, so let's make the JRL-3, assign 10 it the name 567, then, which would make the reply 11 testimony 568. We'll go off the record while Mr. 12 Kopta distributes the cross-examination exhibits. 13 (Recess taken.) 14 JUDGE CRAINE: Back on the record. I'll 15 make sure that I've got the Nextlink 16 cross-examination exhibits straight before we move on 17 to Staff's. I have 569 is the response to Nextlink 18 Data Request Number Five. 570 is the response to 19 Request Number 24. 571 is the response to Request 20 36. 572 is the response to Request 37. 573 is the 21 response to Request 38. 574 is the response to 22 Request Number 35. 23 MR. KOPTA: When we go back to 35, that's 24 Mr. Lee. That's for Mr. Lee. I went ahead and 25 passed out the two exhibits -- the cross exhibits 00889 1 that I had for Mr. Lee. 2 JUDGE CRAINE: Oh, all right. 3 MR. KOPTA: Thirty-two and 35. 4 MS. RENDAHL: And Staff just had one for 5 Mr. Langley. 6 MR. KOPTA: And I would also just point out 7 for the record that Exhibits 569 and 570 are 8 designated as confidential by GTE, and so they ought 9 to have a C in front of them, at least until such 10 time as Mr. Langley says that they don't contain any 11 confidential information. 12 JUDGE CRAINE: You're right, they should 13 have a C in front of them. Okay. So which of 14 Staff's -- 15 MS. RENDAHL: Mr. Langley, the exhibit is 16 Data Request Number Four. 17 JUDGE CRAINE: Okay. And could you give me 18 a couple more copies of that, please? Okay. That 19 would be Exhibit 574, then. 20 MS. RENDAHL: Do you want just the exhibit 21 itself or the whole thing? The list? 22 JUDGE CRAINE: I'm just talking about the 23 exhibit itself. 24 MR. FFITCH: Your Honor, did you want to 25 get -- before you proceed, did you want to get our 00890 1 appearance on the record? We had mentioned that. 2 JUDGE CRAINE: Mr. ffitch. Yes, go ahead. 3 MR. FFITCH: Your Honor, Simon ffitch, 4 Assistant Attorney General, appearing for Public 5 Counsel. We arrived at the hearing room at 8:25 this 6 morning, just before the break. I apologize for our 7 late arrival. We do not have any cross-examination 8 exhibits today. 9 JUDGE CRAINE: Thank you. 10 MR. FFITCH: It's my fault. I voted 11 against the Tacoma Narrows bridge, and it's already 12 biting back. 13 MS. RENDAHL: Am I correct to assume that 14 Staff's Exhibit is 574? 15 JUDGE CRAINE: Yes, that's the response to 16 Staff Data Request Number Four. Are we ready to turn 17 to Mr. Lee, then? So Mr. Lee's direct testimony 18 would be 575. The Exhibit RKL-1 would be 576. RKL-2 19 is 577. RKL-3 is 578. RKL-4 would be 579. The 20 August 20th reply testimony would be 580. 21 Supplemental direct testimony would be 581. Exhibit 22 RKL-5 is 582. The September 4th rebuttal testimony 23 is 583. The October 9th reply testimony is 584. 24 Exhibit RKL-6 is 585. The November 18th reply 25 testimony, 586. Exhibit RKL-7 is 587. The errata 00891 1 sheet will be 588. 2 MS. PROCTOR: I don't seem to have a copy 3 of an errata sheet. 4 MR. POWELL: Only I have copies at the 5 moment. 6 JUDGE CRAINE: Mr. Powell, would you like 7 to go ahead and pass that out? 8 MR. POWELL: I will, Your Honor. While Ms. 9 McClellan is passing it out, let me explain the 10 errata are far less substantial than they appear from 11 the sheet. Because the Commission very generously 12 added 30 cents to the two-wire TELRIC, that caused a 13 massive ripple effect throughout Mr. Lee's testimony, 14 changing many numbers only slightly. But there are 15 changes on 10 pages of his July 9 testimony, and I 16 think four pages of one of the exhibits appended to 17 the July 9 testimony. The resulting effect on the 18 proposed price that GTE seeks for a two-wire loop is 19 a one penny increase. And I apologize for the long 20 errata, but once we started, we couldn't stop. 21 There are a couple of other very minor 22 errata identified in the exhibit that's just been 23 handed out, and they are things such as changes to 24 column headers, a minor change in one of Mr. Tucek's 25 numbers, things of that nature. I think there are 00892 1 only four or five total errata, although errata 2 number one is the one that resulted in such 3 substantial changes in the numbers or substantial 4 number of changes in the numbers. 5 MS. PROCTOR: Mr. Powell, I notice there's 6 a $5 million change, which, obviously in the context 7 of GTE's overall revenues, is not a big number, but I 8 wonder, is Mr. Lee going to explain the basis for 9 that one? 10 MR. POWELL: If you ask him, yes, ma'am. 11 MS. PROCTOR: But he's not going to 12 volunteer the reason? 13 MR. POWELL: He's a good witness, Ms. 14 Proctor. He'll answer your questions. 15 MS. PROCTOR: Got it. 16 JUDGE CRAINE: So going back to Mr. Kopta's 17 cross-examination exhibits, Exhibit 589 would be the 18 response to Nextlink data request number 35. 19 MR. KOPTA: Either way. It could be 32 or 20 35. 21 JUDGE CRAINE: Do you have a preference? 22 MR. KOPTA: Oh, it's just easier if we keep 23 it in numerical order, so if we had 589 be number 32 24 and 590 be 35, it might be a little easier. 25 JUDGE CRAINE: Okay. We'll do that. And 00893 1 that makes the response to Staff Data Request Number 2 Three Exhibit 591. And I just have one copy of that. 3 Can I have a couple more? Thank you. 4 Any other cross-examination exhibits for 5 Mr. Lee? That makes the direct testimony for Mr. 6 Doane 592. The MJD-1 exhibit would be 593. 7 MR. KOPTA: Excuse me, Your Honor. I 8 thought Mr. Doane was not appearing till Monday. 9 MR. POWELL: He's not, that's correct. 10 JUDGE CRAINE: Oh, you're right. I'm 11 sorry. 12 MS. PROCTOR: I also have a concern with 13 that, which I just would like to put on the record. 14 When the Commission scheduled the continued hearing 15 date on Monday, it was in recognition of the fact 16 that there were conflicts with some counsel's 17 schedule. I am going to be in another hearing on 18 Monday, and I did have questions for Mr. Doane, Dr. 19 Doane. Obviously, I will not be able to present 20 those. I will try to coordinate and see if other 21 counsel intend to cover the same areas of inquiry, 22 but I do have a concern that our interests are not 23 going to be represented, because we are not able to 24 have another attorney represent us that morning. And 25 my original understanding had been that all of GTE's 00894 1 witnesses would appear on Thursday. 2 MR. POWELL: We were hopeful that we could 3 put them all in one day, Your Honor, partly because 4 of the witness log jam, but principally because Mr. 5 Doane is testifying in Missouri this week, we pushed 6 him over until Monday. I hope that's agreeable. 7 Like Ms. Proctor, he too could only be at one place 8 at the same time. 9 JUDGE CRAINE: Well, what I'd like to do is 10 to have Ms. Proctor talk to the other counsel about 11 the topics they intend to cover, and then, if there 12 is a problem, she can raise the issue later today or 13 tomorrow. 14 MS. PROCTOR: Okay, thanks. 15 JUDGE CRAINE: Okay. Well, that completes 16 our testimony marking for today, then. 17 MS. ANDERL: Your Honor. 18 JUDGE CRAINE: Yes. 19 MS. ANDERL: I might suggest that maybe we 20 should mark Mr. Ball's testimony. I've had a chance 21 now to review the motion that WorldCom submitted and 22 it is consistent with the agreement that we made with 23 WorldCom in terms of the pages and lines to be 24 withdrawn or stricken. 25 JUDGE CRAINE: Okay, if you're ready to do 00895 1 that, we will. 2 MS. ANDERL: Just so we don't lose track of 3 it. 4 JUDGE CRAINE: Okay. In that event, the 5 direct testimony on August 20th would be Exhibit 592. 6 And that's all I have for Mr. Ball; is that correct? 7 MS. ANDERL: That's all I had. 8 MS. PROCTOR: Doesn't that make it a T? 9 JUDGE CRAINE: Okay. Is that it for 10 exhibit marking? Well, we're finished with that, 11 then. Okay. Mr. Owens, did you have a chance to 12 review the response? 13 MR. OWENS: Yes, I did, Your Honor, and I 14 would like a brief rebuttal, if I might. 15 JUDGE CRAINE: Okay. Are you talking a 16 couple minutes? 17 MR. OWENS: A couple minutes. 18 JUDGE CRAINE: Okay, go ahead. 19 MR. OWENS: Thank you. In the first place, 20 I guess I have a problem that Counsel for Nextlink is 21 making himself a witness on some disputed factual 22 issues, but I'll pass that and move directly to the 23 argument. 24 Counsel suggests that I appeared and then 25 propounded data requests, and that isn't true, 00896 1 because my appearance is of record of October 30th, 2 and my motion states that the responses to the data 3 requests were received by US West on October 27th, 4 and there's no dispute in the answer about that. 5 But more to the point, it's because we've 6 so fundamentally disagreed about what happened at 7 that alleged meeting on the subject of cabling that 8 we needed to know what the basis of Nextlink's 9 evidence in this case was. 10 I will introduce in evidence in 11 cross-examination of Mr. Sobieski a cross-examination 12 exhibit that was introduced in Utah, which contains a 13 bid from a vendor on cabling, and I obtained and I 14 will introduce the portion of the transcript of that 15 cross-examination in Utah, which I believe contains 16 impeaching answers by Mr. Sobieski to the 17 reasonableness of the pricing of those elements. 18 It is because we asked in our discovery 19 request, which was propounded before I became engaged 20 in this case, quotes, and we received a statement to 21 see Exhibit DS-2, and I followed up with a letter to 22 Mr. Kopta on the same day that I entered my 23 appearance asking him, in writing, to supply quotes 24 for the signaling distribution elements that were 25 missing from Exhibit DS-2. 00897 1 We received no answer to that until after 2 we had had to file our testimony on November 9th, and 3 it was too late for us to then act on the basis of 4 the information we received in the discovery 5 deposition on November 19th, that Nextlink was in 6 fact relying on the same information that had been at 7 issue in the state of Utah. If we had known, then 8 our witness could have commented on the lack of 9 support in this exhibit for Mr. Sobieski's prices. 10 So we've been foreclosed from having our witness be 11 able to do that in his testimony because of the 12 procedural arrangement of the case. 13 JUDGE CRAINE: Okay. Thank you. 14 MR. OWENS: So the suggestion that we 15 didn't ask about the signaling cabling prices because 16 our person thought they were reasonable is simply 17 something we disagree about. And I believe that when 18 we introduce this evidence, you will see the basis of 19 our disagreement. 20 JUDGE CRAINE: Thank you. 21 MR. POWELL: Judge Craine. 22 JUDGE CRAINE: Mr. Powell. 23 MR. POWELL: I have a slight modification 24 to the designation for Mr. Langley's exhibits. If I 25 could do it now, since we're close in time to when we 00898 1 handle that, if that's appropriate. 2 JUDGE CRAINE: Okay. 3 MR. POWELL: I just conferred with Mr. 4 Langley, and I appreciate Ms. Rendahl's reminding me 5 that a couple of Mr. Langley's exhibits should have a 6 C designation for confidential. Number 564, which is 7 Exhibit JRL-1; Exhibit 565, JRL-2, which is the NRC 8 study, both of those should be marked with a C. And 9 also Exhibit 567 should have the C designation. 10 Contrary to what we said earlier, however, 567 is not 11 marked JRL-3, but was instead revisions to the NRC 12 study to reflect the Commission approved rate of 13 return, and so Exhibit C-567, filed on November 10 of 14 this year, constitutes revised pages that should be 15 inserted at the appropriate place in Exhibit C-565, 16 which is the comprehensive GTE NRC cost study. 17 JUDGE CRAINE: Ms. Proctor, is that 18 consistent with the document that you were referring 19 to? 20 MS. PROCTOR: Yes, it is. 21 JUDGE CRAINE: Thank you. Okay. I'll 22 change those designations, then. 23 MR. POWELL: Thank you, Judge. 24 JUDGE CRAINE: Any other preliminarily 25 matters? Mr. ffitch. 00899 1 MR. FFITCH: Your Honor, Simon ffitch, for 2 Public Counsel. I just wanted to discuss briefly the 3 order of the cross-examination. I don't know if that 4 had been discussed previously, before my arrival. 5 JUDGE CRAINE: No, we haven't. Go ahead. 6 MR. FFITCH: If you want to bring it up at 7 a later time, that's fine, but I just wanted to say 8 that we're comfortable going last, although on this 9 chart we're shown in the first column. The reason I 10 think that would expedite matters, these are probably 11 generous estimates of our time. We may not have 12 cross for all these witnesses, and it would probably 13 be more efficient if I can wait to see if matters are 14 brought up that are already covered or that we want 15 to follow up on. We may be able to speed matters 16 along that way, so -- 17 JUDGE CRAINE: Okay. Well, are the parties 18 -- 19 MR. FFITCH: If the parties don't have any 20 objection to that. 21 JUDGE CRAINE: Are the parties comfortable 22 with me starting at Mr. Powell's end of the table and 23 then moving towards Mr. ffitch? 24 MS. RENDAHL: That's fine. When I prepared 25 this matrix, I did not intend that to be the order of 00900 1 cross. It was just actually the order I received it 2 from Mr. Manifold's secretary. And not feeling 3 comfortable with this program on the computer, I 4 didn't want to really mess things up, so -- 5 MR. JENKINS: Your Honor, just one caveat. 6 Covad, given the estimates that we have here, they're 7 subject to, again, cross-examination by the other 8 parties, and as with Public Counsel, our estimates 9 could be drastically reduced, given the line of 10 questioning. So we would have no problem starting 11 from Mr. Powell's end, but I would ask that we go 12 after probably AT&T and Nextlink. 13 MS. PROCTOR: Your Honor, one thing that we 14 did try to do was to coordinate somewhat amongst 15 counsel, knowing that we don't do that very well, but 16 we did try. And I guess our presumption had been 17 that Staff usually goes first, if Ms. Rendahl is 18 comfortable with that. 19 MS. RENDAHL: Staff usually goes first 20 among the intervenor -- or I guess it would be the 21 ILECs and Staff and then -- 22 MS. PROCTOR: Right. 23 MS. RENDAHL: I have no problem with that. 24 MS. PROCTOR: Or if you want to go last, 25 whichever you prefer. 00901 1 MS. RENDAHL: That's fine with me. I'll go 2 after GTE and US West. 3 MS. PROCTOR: Okay. 4 MS. RENDAHL: I have one preliminary 5 question. As I'm putting my exhibits into the book, 6 I noticed that we haven't marked, or maybe I've 7 missed, the direct testimony of Mr. Langley on July 8 9th. 9 MR. POWELL: There's a reason for that, 10 Ann. When we filed Mr. Langley's testimony on July 11 9th, we did not know whether we were going -- whether 12 the Commission was going to entertain GTE's new 13 comprehensive NRC study. So his July 9 testimony was 14 based on the old NRC study, but his August 28th 15 testimony, I think, in effect completely replaces the 16 July 9 testimony. So we're not offering the July 9 17 testimony. 18 MS. RENDAHL: Thank you. 19 MR. PENA: Your Honor, like Covad, MCI has 20 minimal cross for GTE witnesses, and we would ask to 21 go after AT&T and TCG, and it may even reduce our 22 time estimates further. 23 MS. PROCTOR: Could I ask for a 24 clarification from Mr. Powell on his response in the 25 July 9th testimony? 00902 1 JUDGE CRAINE: Go ahead. 2 MS. PROCTOR: Obviously, Ms. Starr's 3 testimony addressed Mr. Langley's July 9th testimony. 4 And I haven't gone back to compare, but it looks to 5 me like there is some testimony in the July 9th 6 filing that is not in the August 28th supplemental 7 direct. 8 For example, on page 12 of the July 9th 9 testimony of Mr. Langley, the testimony addresses 10 paragraph 478 of the main supplemental order that 11 does -- is it Eighth in this case -- and addresses 12 the issue of connect and disconnect. Just leafing 13 through quickly, I do not see a similar section in 14 the August 28th testimony. I know Ms. Starr's 15 testimony addresses this issue, and that's going to 16 be confusing, at best, if we don't have the July 9th 17 testimony in the record. 18 MR. POWELL: I think Mr. Langley's 19 subsequent testimony does address the connect and 20 disconnect issue. 21 MS. PROCTOR: Can you point me to the page? 22 MR. POWELL: No, ma'am, I can't. 23 MS. PROCTOR: And since you can't point me 24 to the page, I will maintain -- continue to maintain 25 that it does not appear to be in the testimony. 00903 1 MR. POWELL: I'll look for it and give it 2 to you, if I can. 3 MS. PROCTOR: Nonetheless, I think that his 4 testimony was filed. If GTE were going to change 5 some of the testimony to reflect its new NRC study, 6 that's fine, but what we now have in the record is 7 testimony of the intervenors directed to testimony 8 that doesn't exist. 9 MR. POWELL: But there's also intervenor 10 testimony that -- 11 MS. PROCTOR: I'd be happy to solve the 12 problem by simply marking this as a cross exhibit and 13 introducing it, if that would make life simpler. 14 MR. POWELL: I don't know that it would, 15 actually. Susan, if you'll remember the progression 16 of the testimony on this, it was not until after the 17 July 9 testimony was submitted that the Commission 18 decided that GTE would be permitted to introduce its 19 new nonrecurring cost study. And concurrent with 20 that decision, the Commission set up a separate 21 briefing or testimony schedule that permitted GTE to 22 file its, in effect, opening testimony on August 23 28th, and all the parties then to reply to that 24 thereafter with a final word by Mr. Langley in 25 November. So I think that Ms. Starr has seen and 00904 1 responded to it, as have witnesses for other parties. 2 MS. PROCTOR: I understand and appreciate 3 that. However, Ms. Starr also has testimony in the 4 record, which we intend to introduce into the record, 5 that addresses this July 9th testimony. 6 JUDGE CRAINE: So are you concerned that 7 GTE might object to portions of Ms. Starr's testimony 8 on the grounds that the testimony she's criticizing 9 doesn't exist? 10 MS. PROCTOR: Well, I would assume that 11 since the time has expired for motions to strike 12 testimony, that we would not be seeing that. But it 13 strikes me that it is confusing, at best. I suppose 14 the other difficulty is that some of my cross was 15 arising out of this testimony. So I can just go 16 ahead and do the cross based on the testimony, and I 17 guess we could see what happens. 18 JUDGE CRAINE: And Mr. Powell, what's your 19 concern about making it a cross-examination exhibit? 20 MR. POWELL: I thought we were proceeding 21 efficiently by filing on August 28th what was, in 22 effect, replacement direct testimony by Mr. Langley 23 in support of the new and substantial nonrecurring 24 cost study. His July 9 testimony, by contrast, 25 relates to the old NRC study, which we are now not 00905 1 offering in evidence. 2 So Mr. Langley -- I expect he's perfectly 3 capable of answering questions with respect to the 4 July 9 testimony, but we're not offering the July 9 5 testimony in evidence, and it would seem to me not 6 efficient to have cross-examination on that now 7 defunct and not-offered testimony. 8 JUDGE CRAINE: Well, let's -- 9 MR. POWELL: There's plenty of material 10 that Ms. Proctor's familiar with for 11 cross-examination on the August 28th testimony and 12 the new study. 13 JUDGE CRAINE: Let's do this. As Ms. 14 Proctor gets into her cross-examination, if it 15 appears that we need the earlier testimony, then I'll 16 allow her to mark it as a cross-examination exhibit 17 at that point. 18 MS. PROCTOR: The other question I have, 19 then, is Mr. Lee's July 9th testimony establishes 20 prices based on costs which were in Mr. Langley's 21 July 9th testimony. Mr. Langley's July 9th testimony 22 does not now exist. So how do we admit Mr. Lee's 23 pricing testimony when there is no basis in the 24 record for the costs? 25 MR. POWELL: Mr. Lee also filed 00906 1 supplemental direct on August 28th, which contains 2 the prices that we seek that are based on the new 3 nonrecurring cost study. 4 MS. PROCTOR: Mr. Lee's July 9th direct is 5 60 pages. Mr. Lee's supplemental direct is 18. I 6 presume that the other 32 pages contained material 7 which GTE is still relying upon. 8 MR. POWELL: That's true, because Mr. Lee 9 is our utility infielder pricing witness, and the 10 great majority of his July 9 testimony goes to UNE 11 pricing, not pricing for nonrecurring activity. 12 JUDGE CRAINE: Well, we have very tight 13 hearing time today, and rather than discuss this 14 further and try to figure out whether it's more 15 efficient to have it in or not, I think I'll go ahead 16 and allow Ms. Proctor to go ahead and mark the 17 testimony as a cross-examination exhibit. And to the 18 extent it's duplicative or confusing, we'll have an 19 opportunity to resolve that later. Our next exhibit 20 number is 593. 21 Any other preliminary matters? Okay. None 22 appearing, I do want to make a brief comment before 23 we start cross-examination, so it doesn't appear that 24 I'm picking on one party over another one. We do 25 have, even with the reductions in our estimates, a 00907 1 tremendous amount of work to accomplish in a 2 relatively short period of time. 3 I don't want to arbitrarily cut off any 4 party from meaningful cross-examination, so I do want 5 to admonish the parties that we need to move as 6 quickly as we can and efficiently as we can so that 7 we don't get to the end and cut out matters of more 8 substance than some of the things that we've 9 addressed. 10 And so what I'd like to do is to remind the 11 parties that this is cross-examination. We have the 12 written testimony and we've read it, and so I'll ask 13 each of the attorneys to admonish their witnesses to 14 simply answer the cross-examination questions that 15 the opposing counsels present. And in terms of the 16 direct written testimony, I'd like to avoid witnesses 17 giving long answers that restates the contents of the 18 testimony. I think if we can refer to it and then -- 19 especially in the briefing process, then we could 20 move along more quickly today. 21 Okay. So with that, I believe we're ready 22 for Mr. Tucek. 23 MR. HUTHER: Your Honor, perhaps in advance 24 of that, GTE has its response to the Commission's 25 bench request. And if you'd like for us to 00908 1 distribute that now, I'd be happy to do that. 2 JUDGE CRAINE: Sure. And I'll note for the 3 record that I already have the responses from US West 4 and AT&T. 5 MR. HUTHER: With that done, Your Honor, I 6 think we're ready for Mr. Tucek. 7 JUDGE CRAINE: I apologize for 8 mispronouncing your name. 9 MR. TUCEK: Not the first time it's 10 happened. 11 Whereupon, 12 DAVID G. TUCEK, 13 having been first duly sworn, was called as a witness 14 herein and was examined and testified as follows: 15 JUDGE CRAINE: Thank you. So following our 16 discussion about the order of cross-examination, I'll 17 start with Staff, then. 18 MR. HUTHER: Your Honor, would you like for 19 me to do the limited direct? 20 JUDGE CRAINE: Well, okay. Yeah, let's 21 very quickly establish the credentials. 22 D I R E C T E X A M I N A T I O N 23 BY MR. HUTHER: 24 Q. Mr. Tucek, will you please state your full 25 name and address for the record? 00909 1 A. My name is David G. Tucek. My business 2 address is 1000 GTE Drive, Winfield, Missouri, 63385. 3 Q. And how are you employed and in what 4 capacity? 5 A. I'm employed by GTE as Staff Manager, 6 Economic Issues. In this capacity, I'm responsible 7 for supporting GTE's incremental cost studies. 8 Q. Have you caused to be filed in this matter 9 certain testimony and exhibits that have been marked 10 as Exhibits 555 through 559, inclusive? 11 A. Yes, I have. 12 Q. And if I were to ask you the questions set 13 forth in your prefiled testimony, would your answers 14 be the same? 15 A. Yes, they would. 16 Q. And were the exhibits associated with your 17 testimony prepared by you or under your supervision 18 and direction? 19 A. Yes, they were. 20 Q. And are those exhibits true and correct? 21 A. Yes, they are. 22 MR. HUTHER: I would move Exhibits 555 23 through 559 into the record, Your Honor. 24 JUDGE CRAINE: Okay. Any objection? Okay. 25 They're received. 00910 1 MS. RENDAHL: Staff has no cross questions 2 for Mr. Tucek. 3 JUDGE CRAINE: Okay. I have AT&T for five 4 minutes. 5 MS. PROCTOR: No questions. Thank you. 6 JUDGE CRAINE: TCG, Nextlink, for five 7 minutes. 8 MR. KOPTA: I believe my questions are 9 better addressed to other GTE witnesses, so I have 10 nothing for this witness. 11 JUDGE CRAINE: Public Counsel for 10 12 minutes. 13 MR. FFITCH: No questions for this witness, 14 Your Honor. Thank you. 15 JUDGE CRAINE: Dr. Gabel. 16 E X A M I N A T I O N 17 BY DR. GABEL: 18 Q. Good morning, Mr. Tucek. I'm going to ask 19 you some questions, so you didn't think that you 20 traveled out to Washington for no purpose. Let me 21 begin by asking you about your identification of the 22 cost grooming. Why weren't these costs initially 23 included in the GTE studies that were filed in Phase 24 I? 25 A. In Phase I, we were trying to estimate the 00911 1 total element long-run incremental cost. That 2 technology-integrated DLC would allow you to do 3 electronic grooming. This Commission -- in my 4 testimony, I refer to the order -- the paragraph in 5 the Eighth Order. It is also indicated that, when in 6 the real world, GTE or another ILEC has to go to an 7 integrated digital loop carrier that exists today and 8 unbundled -- take it from a DS1 level to a voice 9 grade level, say with a D4 channel bank system, I 10 think the order specifically mentions that we should 11 be allowed to recover those costs and should be 12 included in the TELRIC. And that equipment was not 13 included in the TELRIC, so we've filed this testimony 14 and this study now. 15 Q. So in Phase I, you assumed an integrated 16 digital line carrier would be used, and that 17 technology was reflected in your loop study; is that 18 correct? 19 A. I believe in Phase I, we used non -- we did 20 not use next generation digital loop carrier, which 21 would allow electronic grooming. But the difference 22 in the TELRIC impact is not that great, and it's 23 certainly lost in some of the adjustments that we 24 made. This study, as I said, reflects costs that 25 we'll actually incur as circuits are ordered to serve 00912 1 end users that are served by existing integrated 2 digital loop carriers, trunk side connections to the 3 switch. You need to bring that down to a voice grade 4 level. You do that with a D4 channel bank system. 5 Q. So in Phase I, GTE assumed the use of 6 integrated digital line carrier; is that correct? 7 A. That's correct. 8 Q. But not next generation digital line 9 carrier? 10 A. No, we did not. 11 Q. And with integrated digital line carrier, 12 how, in Phase I, did GTE identify the cost of 13 stepping down integrated digital line carrier to a 14 DS-O level for the provision of an unbundled loop? 15 A. We did not identify that cost. 16 Q. So was it GTE's position in Phase I that 17 that was a cost that did not need to be recovered? 18 A. That was our position. If you wanted to 19 characterize it, I'd characterize it as an omission. 20 Q. So it was an oversight in the cost study 21 process, and now you're adding this cost back in? 22 A. You have to remember that this Commission 23 has started the process very early, and we were 24 relying on the methodology that we used in the 25 arbitration studies, which was all done on a very 00913 1 compressed time frame, say from August of '96 through 2 the end of that year. 3 Q. Okay. I'd like to turn to your direct 4 testimony, page four, lines 15 and 16. You state the 5 investments per line were multiplied by the 6 proportion of lines served by integrated pair gain 7 devices. Is this proportion the total proportion of 8 lines? 9 A. Yes, it's the total lines served out of 10 such devices in GTE's network divided by all of the 11 switch lines served out of GTE's network. We did 12 that because, as we interpreted the order, it 13 directed us to include these costs in the TELRIC for 14 an unbundled loop, and we determined that to be all 15 loops. 16 Q. Mr. Tucek, do you recall from Phase I that 17 your loop study identified the cost of a business 18 loop versus a residential loop? 19 A. Not the TELRICs. 20 Q. Not -- 21 A. There were TSLRICs, which I believe -- I'm 22 not sure we filed those in Phase I. It might have 23 been filed in arbitration and used by -- I'm not sure 24 we filed TSLRIC, excuse me. 25 Q. All right. In TSLRIC studies that you've 00914 1 seen, do residential customers have a greater 2 likelihood of being served by integrated digital line 3 carrier than business lines because residential lines 4 are typically longer than business lines? 5 A. I have not looked at the data to make that 6 determination. 7 Q. So in your experience in doing cost 8 analysis, you haven't seen data that would indicate 9 that business lines are shorter than residential 10 lines? 11 A. I suspect they are, but I've not carried it 12 through to see what the impact on the proportion of 13 lines, residence versus business, are that are served 14 out of DLCs. 15 Q. And are you familiar with Mr. Lee's 16 testimony in this docket? Have you read it? 17 A. Some time ago, yes. 18 Q. Do you recall Mr. Lee arguing in his 19 testimony that the type of customer who would 20 typically be ordering an unbundled loop would be a 21 business customer and you should use the demand 22 characteristics of business customers to set the 23 price of an unbundled loop? 24 A. I'm afraid I don't recall that part of his 25 testimony. You'd have to ask him about it. 00915 1 Q. Well, let me ask you to just, then, work 2 with this hypothetical, which I believe is reflected 3 in Mr. Lee's testimony, and the record will stand for 4 itself on that. But it's my understanding that Mr. 5 Lee says that, in pricing unbundled loops, the lost 6 contribution should be based on the lost contribution 7 from business customers, and that you should focus on 8 the lost contribution from business customers, 9 because those are the type of customers that are 10 being targeted by CLECs. Do you understand that 11 scenario? 12 A. I understand the scenario. 13 Q. If, in fact, business customers are the 14 type of customers who are going to be taking 15 unbundled loops, shouldn't you use, as the percentage 16 in your calculation, the percentage of business 17 customers served by integrated digital line carrier, 18 rather than the total? 19 A. I would say no, because the order indicated 20 to include the costs in the TELRIC of a loop out of a 21 loop for a business customer, not of a loop for a 22 residence customer, but just a loop. So that was 23 what the order said, and that's what we did. 24 Q. If a business customer was to order 20 25 unbundled loops, what would your cost study -- at one 00916 1 location, so one business location orders -- well, 2 let me restate it. A CLEC serving a business 3 location, where the business customer wants 20 loops, 4 do I understand your study to say that the cost of 5 the grooming would be 20 times your unit cost, which 6 I believe is around $5? 7 A. This study, as well as the TELRIC study, 8 gave you the cost of an unbundled loop or the cost of 9 unbundling a loop from an integrated DLC on a 10 statewide average basis. You're asking the question 11 about a specific situation. That would be your only 12 estimate, but if you actually went out and tried to 13 determine what the costs for that specific incident 14 is, it could be above the average or below the 15 average, but we would tell you that our estimate is 16 20 times that number. 17 Q. So in that case, if your monthly cost was 18 $5, you would charge the CLEC $5 per month times 20 19 lines to recover your cost of grooming; is that 20 correct? 21 A. That's my understanding of the pricing 22 proposal. 23 Q. Now, in this situation -- and let me just 24 also point out, so that the record's clear, the 25 reason I chose 20 as the number, if you look at Mr. 00917 1 Lee's testimony on November 18th at page four, he 2 talks about, well, what kind of cost a CLEC would 3 incur. And he uses, as an example, where a CLEC 4 orders 20 unbundled loops for one customer location. 5 Now, in this situation, Mr. Tucek, where 6 there are 20 lines going to one business location, 7 wouldn't the business location -- would it possibly 8 be served by DS1, and therefore, there would be no 9 need for a grooming? 10 A. Well, no. If it were served by a DS1, I 11 believe you would have to groom. I think -- and this 12 is probably Mr. Langley's area more so than mine. I 13 think it's our position that we're obliged to hand 14 off end user lines at a voice grade level, so we 15 would have to take it from the DS1 level to the DS-O. 16 I think that's Mr. Langley's area of expertise. 17 Q. And if Mr. Langley's -- well, let me -- I'm 18 going to ask you this question, just in case Mr. 19 Langley says this isn't his area of expertise. Why 20 would it be our your obligation to hand it off at 21 DS-O, rather than DS1? 22 A. It's my understanding that's GTE's 23 interpretation of the Telecommunications Act. So if 24 it's not Mr. Langley's area of expertise, it's 25 probably counsel's. 00918 1 Q. As a request from the bench, Mr. Tucek, 2 could you look into the availability of information 3 on the percentage of business lines that are served 4 by digital line carrier, as opposed to the number 5 that you used in your study, which -- the percentage 6 for all loops. See if that information is available, 7 and if it is, provide it as a bench request. 8 A. You want business lines served out of these 9 DLCs, as a proportion of total switch lines? 10 Q. As a proportion of business lines. 11 A. Total business lines. 12 Q. Yes. 13 A. Okay. I can do that as a bench request. 14 Q. I am not going to ask you about a value, 15 but I do want to refer to your exhibit that's 16 attached to your direct testimony. And on -- 17 A. My direct or my rebuttal? 18 Q. Your direct. 19 A. Correct. 20 Q. Here you have the cost of a D4 POTS 21 plug-in. That's on page five of five, the third line 22 down. Is this the cost of a plug-in that serves one 23 customer or four? 24 A. I believe that card has a capacity of four, 25 four pairs, four-wire loop. Subject to check, they 00919 1 would be two four-wire loops. I can tell you that I 2 went through that very carefully with the engineers 3 and got the arithmetic right. 4 Q. So in your development of the unit cost, 5 you would take that cost per card and divide it by 6 four in order to get the DS-O equivalent? 7 A. I'd have to check and see what we actually 8 did. 9 Q. Could you check? 10 A. I could. 11 Q. Now, Mr. Tucek, may I ask you to turn to 12 your rebuttal testimony, page seven, lines 11 to 13. 13 You state that GTE has implicitly worked with a 14 monthly usage of 16,611 minutes per month. Could you 15 please describe how you derived that value? 16 A. Yes, I can. If you recall, in Phase I, 17 there was a file we provided you, WAUSAM file, 18 Washington USAM, is what we call it. In that file, 19 it indicated that we assumed that there were 27 CCS 20 in a busy hour, which equates to 2,700 seconds, or 45 21 minutes of use in the busy hour. At 365 days per 22 year, that comes to 16,425 minutes per year in the 23 busy hour. The busy hour, and you'll find that in 24 that file, is approximately 8.24 percent of the total 25 day. 00920 1 So you take the 16,425 minutes per year in 2 the busy hour, divide by that percentage, and you 3 have 199,333 minutes per year, divide that by 12, and 4 you come up with 16,611 minutes per month per voice 5 grade circuit. 6 I'd like to indicate that while you may 7 disagree with some of the initial assumptions, these 8 are the assumptions that were used to develop the 9 cost. And if you're going to take those results and 10 multiply by some level of usage, you need to use a 11 consistent level of usage. 12 Q. What was the role of 365 days? Did I 13 understand you to state that you took the busy hours' 14 minutes and multiplied by 365? 15 A. Right, and that gave us the 16,425 minutes 16 per year that are in the busy hour. 17 Q. Why did you use a value of 365, as opposed 18 to what I understand is done in some studies is 270 19 or -- recognizing that busy hours don't occur in the 20 weekends? 21 A. That is how we developed the cost study in 22 Phase I. I don't know the answer to your question, 23 but I will tell you again that if you wanted the 24 arithmetic suggested by -- or supported by Mr. 25 Montgomery, you need to use the 365, because that was 00921 1 the number that was used to develop the cost. Had we 2 used the lower number, the cost would have been 3 higher. 4 DR. GABEL: Thank you. I have no further 5 questions. 6 JUDGE CRAINE: Questions from the 7 Commissioners? 8 COMMISSIONER HEMSTAD: I have none. 9 JUDGE CRAINE: Any redirect? 10 MR. HUTHER: I have none, Your Honor. 11 JUDGE CRAINE: You may step down. Thank 12 you. Our next witness is Mr. Norris. 13 Whereupon, 14 MICHAEL R. NORRIS, 15 having been first duly sworn, was called as a witness 16 herein and was examined and testified as follows: 17 JUDGE CRAINE: You may be seated. Go 18 ahead. 19 D I R E C T E X A M I N A T I O N 20 BY MR. HUTHER: 21 Q. Mr. Norris, would you please state your 22 full name and address for the record? 23 A. My name is Michael R. Norris. My address 24 is 600 Hidden Ridge, Irving, Texas, 75015. 25 Q. How are you employed and in what capacity? 00922 1 A. I'm Manager of the Cost Models and Method. 2 Q. And have you caused to be filed in this 3 matter certain testimony and exhibits that have been 4 previously marked as Exhibits 560 through 562, 5 inclusive? 6 A. Yes. 7 Q. And if I were to ask you the questions set 8 forth in your prefiled testimony, would your answers 9 be the same? 10 A. Yes. 11 Q. And were the exhibits -- or the exhibit 12 associated with your testimony prepared under your 13 direction or supervision? 14 A. Yes, they were. 15 Q. And are those exhibits true and correct? 16 A. Yes, they are. 17 Q. Do you have any changes or modifications 18 you would like to make to your prefiled testimony? 19 A. I have just a couple minor corrections to 20 make. 21 Q. Would you please state those? 22 A. On page 10, line 17 of my direct testimony, 23 the amount of common cost there reads currently 24 136,000,789. It should read 136,000,788. In my 25 reply testimony -- 00923 1 JUDGE CRAINE: Excuse me. Could you repeat 2 that again? 3 THE WITNESS: Page 10, line 17 of my direct 4 testimony, the amount of common cost on that line 5 should read 136,000,788, instead of the 136,000,789. 6 JUDGE CRAINE: Thank you. 7 THE WITNESS: And on my reply testimony, on 8 the cover page, where it reads Reply Testimony of 9 Michael J. Norris, that should read Michael R. 10 Norris. Those are the only two corrections I have. 11 MR. HUTHER: I would move into the record 12 Exhibits 560 through 562, Your Honor. 13 JUDGE CRAINE: Any objection? They're 14 received. 15 MR. HUTHER: Mr. Norris is available for 16 cross-examination. 17 JUDGE CRAINE: Okay. I have no time for 18 Staff. Fifteen minutes for AT&T. 19 MS. PROCTOR: Thank you. 20 C R O S S - E X A M I N A T I O N 21 BY MS. PROCTOR: 22 Q. Good morning, Mr. Norris. I'm Susan 23 Proctor, from AT&T. 24 A. Good morning. 25 Q. You state that your educational background 00924 1 has an emphasis in accounting; is that correct? 2 A. My undergraduate degree, yes. 3 Q. And you've been with -- you started with 4 CONTEL in 1969? 5 A. Yes, I did. 6 Q. And then, as a result of the merger of GTE 7 and CONTEL, you became a GTE employee in 1991? 8 A. In 1991, yes. 9 Q. Now, you stated that you're a manager in 10 cost models and cost model and method development. 11 What cost models do you work with? 12 A. Primarily today we are in the process of 13 developing our integrated cost model that we use for 14 developing UNEs and TSLRICs in other proceedings. 15 Q. And when you say we, you're referring to 16 GTE? 17 A. GTE, yes. 18 Q. And are you specifically working on the 19 integrated cost model? 20 A. I'm involved in the development of it 21 directly, yes. 22 Q. Are you involved in the development of a 23 particular section of it? 24 A. My role -- the people in my group are 25 primarily responsible for the development of the 00925 1 entire model or most of the modules of the model, and 2 I am responsible for general oversight and the 3 management of that group and the development of it. 4 Q. And you've held this position since 1997? 5 A. Since I believe May of '97, yes. 6 Q. And during that time, has your work 7 consisted principally of work concerning the 8 development of the -- I'm sorry, what did you call 9 it, integrated cost model? 10 A. Integrated cost model, ICM. 11 Q. I'm sorry, did you answer? 12 A. Yes. 13 Q. Thank you. Now, in your testimony, you're 14 addressing GTE's common costs, and you state that you 15 start with the general ledger account data for 1996 16 for Washington; is that correct? 17 A. As a baseline, yes. 18 Q. And that's consistent with GTE's position 19 that one should use the actual data because it 20 reflects GTE's actual operations; is that correct? 21 A. Correct. 22 Q. And then you made some adjustments to that 23 general ledger account data? 24 A. That's true. 25 Q. And you describe those in your testimony; 00926 1 is that right? 2 A. Yes, I do. 3 Q. Now, the first adjustment that you 4 mentioned is the inclusion of costs for general 5 support facilities. You mentioned that on page six. 6 Are those costs reflected in Accounts 2111 and 2124 7 of the uniform system of accounts? 8 A. The costs that I refer to there are the 9 capital carrying costs. In other words, return, 10 depreciation, income tax, associated with those, the 11 investments that you would find in Accounts 2111 12 through 2124. 13 Q. And Account 2124 is general purpose 14 computers; is that right? 15 A. Yes. That series of accounts, yes. 16 Q. I'm sorry, I didn't hear you? 17 A. That series of accounts, yes. 2111 through 18 2124, yes. 19 Q. But Account 2124 is general purpose 20 computers? 21 A. General purpose computers, yes. 22 Q. Thank you. Now, another adjustment that 23 you made was to remove the costs associated with 24 implementation of reengineering; is that correct? 25 A. Yes. 00927 1 Q. Now, where did you remove those costs from? 2 A. The process reengineering -- the expenses 3 associated with the process of reengineering effort 4 is through a series of a mixed number of accounts. 5 And for all of those accounts that we carried forward 6 into our common cost calculations, whatever process 7 reengineering expense would have been identified as 8 being included within that account has been removed 9 from each of those respective accounts. So it's the 10 series of accounts that those things have been 11 removed from. 12 Q. Well, turning to your exhibit, which is 13 Exhibit 561, which of these accounts were affected? 14 A. Accounts -- I can read each one of them. 15 6711, 6712, 6721, 6722, 6723, 6724, 6725, 6728, 6121, 16 6122, 6123, 6124, 6512, 6532, 6533, 6534, 6535, 6611, 17 6612, 6613 -- no, not 6613, 6623. All those accounts 18 had process reengineering expense in them that were 19 removed. 20 Q. And you know that the accounts that you 21 skipped did not have expenses removed? 22 A. Yes. 23 Q. Now, the numbers that we see on this page, 24 page one of two -- 25 A. Of the exhibit? 00928 1 Q. Yes, I'm sorry. These numbers reflect the 2 total before you made the adjustments? 3 A. No. The amounts on page one of two of my 4 exhibit are common cost in a retail environment and 5 include avoided cost. The numbers used in this 6 proceeding for UNEs are the numbers that are found on 7 page two of two of Exhibit 561, and have the avoided 8 costs removed from those amounts. 9 Q. And that's the only difference between page 10 one and page two, is the removal of avoided costs? 11 A. Yes. 12 Q. So the adjustment that you made to remove 13 the costs of reengineering were done before numbers 14 were entered on these two pages? 15 A. They're removed from the amounts that are 16 found on both of these exhibits. 17 Q. So those amounts were removed before you 18 entered the numbers on page one; is that correct? 19 A. They have been removed from the amounts 20 that are found on page one, yes. 21 Q. And how did you go about determining what 22 costs were related to the reengineering process? 23 A. Those expenses are tracked with specific 24 identifiers within our accounting system, so all 25 that's required is for us to go into our accounting 00929 1 system, run a query against the accounting system to 2 identify those expenses. 3 Q. And what was the reason that these expenses 4 were removed? 5 A. Because they are associated with a one-time 6 event, process reengineering. 7 Q. And on a forward-going basis, GTE does not 8 anticipate any other reengineering efforts? 9 A. Well, this process reengineering effort was 10 a specific, extensive, very comprehensive review of 11 all GTE systems and processes. I imagine, as all 12 companies do, that they will continue to constantly 13 review the systems and processes and continue to 14 update those, but in the near future, at least, we 15 don't anticipate an effort -- especially in light of 16 what we did through this process, reengineering 17 effort -- to be doing that again in the fairly near 18 future, anyway. 19 Q. Now, you also stated that another 20 adjustment that you made was operating expenses 21 associated with special studies were removed. And 22 what did you mean by special studies? 23 A. I believe when we were talking about 24 special studies, we're talking about nonrecurring 25 studies and billing collection studies. 00930 1 Q. And when you say studies, do you mean cost 2 studies or expenses? 3 A. The accumulated expenses that are 4 associated with those activities. 5 Q. And that's called a study? 6 A. Well, that's a poor characterization on my 7 part. They are nonrecurring and billing collections 8 services are provided. We've gone into the 9 accounting system, identified -- or through different 10 mechanisms, gone in and identified the operating 11 expenses associated with those activities and removed 12 those from these calculations. 13 Q. And are those billing and collection 14 services services that GTE provides to other 15 carriers? 16 A. They could be, yes. 17 Q. Well, I'm asking you, are they? 18 A. Not totally, no. 19 Q. What are these billing and collection 20 services that you removed? 21 A. We've identified all of the expenses that 22 are associated with all the billing collection 23 activities that we provide, or that we perform. 24 Q. And those would be billing and collection 25 on GTE's own behalf for its retail customers? 00931 1 A. That would include that, yes. 2 Q. So all of those expenses were removed? 3 A. Yes. 4 Q. And the final adjustment that you made was 5 to remove the costs associated with retail 6 operations, what you call avoided costs. And you 7 state that that's based on the avoided cost study 8 that Mr. Lee is sponsoring; is that correct? 9 A. Yes. 10 Q. So that would be a 10 percent, roughly, 11 adjustment to the cost? 12 A. It removes roughly about $35 million. I 13 believe a starting point of around 170 million, 14 something like that. 15 Q. But my question was about the percentage of 16 avoided costs, because you state that you rely on Mr. 17 Lee's study, which shows a 10 percent discount? 18 A. The avoided cost percentage that's removed 19 by account varies anywhere from 4.96 percent to 28.89 20 percent, or actually, all the way up to 98.29 21 percent. So the amount that's removed varies from 22 account. I didn't do the math to see what that, in 23 total, is the percent of the total amount removed. 24 Q. Those percentages that you were just 25 reciting, where do those appear in your exhibits? 00932 1 A. They're not on my exhibits in there. 2 They're on the work papers that were supplied in 3 response to a data request. 4 Q. Now, in your testimony, on page 10, you 5 use, as an example, Account 6724, which is -- 6 MR. HUTHER: I'm sorry, Susan, did you mean 7 his direct? 8 MS. PROCTOR: What did I say? 9 MR. HUTHER: You didn't identify it. 10 MS. PROCTOR: Yes, his direct testimony, 11 page 10. 12 THE WITNESS: Yes. 13 Q. At the top of the page, you're addressing, 14 as an example, Account 6724, which is information 15 management. 16 A. Yes. 17 Q. And that includes expenses of computers, 18 software, system development? 19 A. Primarily data processing costs, yeah. 20 Q. And you state that you started with a 21 balance of 19.6 million and you adjusted that to 9.1 22 million? 23 A. Yes. 24 Q. Now, if we turn to your exhibit, which has 25 been marked as Exhibit 561, and we look at Account 00933 1 6724, information management, it shows an amount of 2 10.1 million on page one, which is reduced to an 3 amount of 9.1 million, approximately, on page two; is 4 that correct? 5 A. Yes. 6 Q. Where does the 19 million come from? Is 7 that something that happens outside of this exhibit? 8 A. Nineteen million is what is -- it comes 9 from ARMIS reports, the account balances for our 10 Account 6724. 11 Q. So that's the amount in the ARMIS report. 12 How did you get from 19 million to 10 million to 13 start with as the entry on page one? 14 A. Well, 19 million would be the starting 15 point that comes from the ARMIS accounts -- or I 16 mean, the account balance, as it was reported in 17 ARMIS, we removed six and a half million dollars, 18 approximately, for process reengineering from that 19 account; removed approximately $2.4 million from that 20 account for billing and collection. We then removed 21 about $550,000 associated with nonrecurring costs 22 from that account. That will get you to the $10.1 23 million. And then the avoided costs that we removed 24 from that account is $970,000. That gets you to the 25 9.1 million. 00934 1 Q. Thank you. So after these adjustments, you 2 end up with a total of roughly $137 million in common 3 costs? That's your estimate? 4 A. For -- yes. 5 Q. And GTE's view is that that amount is going 6 to remain relatively constant going forward? 7 A. Yes. 8 MS. PROCTOR: Thank you. No further 9 questions. 10 JUDGE CRAINE: We're going to take a 11 stretch break. 12 (Recess taken.) 13 JUDGE CRAINE: Let's go back on the record. 14 My compliments to Ms. Proctor for coming in exactly 15 on time. 16 MS. PROCTOR: For my next act, I intend to 17 come in under estimate. 18 JUDGE CRAINE: Okay. I have TCG, Nextlink 19 for five minutes. 20 MR. KOPTA: Well, if you liked Ms. Proctor, 21 you'll really like me, because I don't have any 22 questions. 23 JUDGE CRAINE: Public Counsel for 10 24 minutes. 25 MR. FFITCH: No questions. 00935 1 JUDGE CRAINE: Well, redirect. 2 MR. HUTHER: I have none, Your Honor. 3 E X A M I N A T I O N 4 BY DR. GABEL: 5 Q. Mr. Norris, I'd like to ask you one 6 question regarding your reply testimony of August 7 20th. At line seven, you state that the common cost 8 calculation provided by GTE in this proceeding 9 includes costs other than those recorded to 10 corporation operation expense accounts. Have you 11 looked to see how the accounts identified at the 12 bottom of page three and at the top of page four were 13 addressed in the BCPM and Hatfield versions that were 14 submitted in Phase I of this docket? 15 A. No, I did not. 16 DR. GABEL: Thank you. 17 JUDGE CRAINE: Questions from the 18 Commissioners? No. Okay. Redirect? 19 MR. HUTHER: No redirect. 20 JUDGE CRAINE: Great. You may step down. 21 Thank you. Mr. Langley, we're ready for. 22 Whereupon, 23 JAMES R. LANGLEY, 24 having been first duly sworn, was called as a witness 25 herein and was examined and testified as follows: 00936 1 JUDGE CRAINE: Be seated. Mr. Powell. 2 MR. POWELL: Thank you. 3 D I R E C T E X A M I N A T I O N 4 BY MR. POWELL: 5 Q. Mr. Langley, as you're unpacking your 6 briefcase, would you please state your full name and 7 business address? 8 A. My name is James Rodney Langley. My 9 business address is 600 Hidden Ridge, Irving, Texas. 10 Q. Mr. Langley, by whom are you employed and 11 in what capacity? 12 A. I'm employed by GTE. I'm Manager of 13 Costing. 14 Q. Mr. Langley, you were here when we marked 15 some exhibits this morning. Have you prepared direct 16 testimony and exhibits that have been marked as 17 Exhibits 563, 564 confidential, 565 confidential, 18 566, 567 confidential, and 568? 19 A. Can you give me just a second? 20 Q. Yes, sir. 21 A. I did prepare all of those, with the 22 exception of 569, 570, 571, 572, and 573. 23 Q. Those are cross-examination exhibits, Mr. 24 Langley. I will not be asking you about those, but 25 you'll have your chance. With respect to numbers 563 00937 1 through 568, however, were those exhibits prepared by 2 you or under your direction and control? 3 A. Yes, they were. 4 Q. And as to those exhibits that constitute 5 testimony in the form of questions and answers, if I 6 were to ask you today under oath those same 7 questions, would your answers today be the same? 8 A. Yes, they would. 9 MR. POWELL: Your Honor, with that, I would 10 move into evidence Exhibits 563 through 568 and 11 tender Mr. Langley for cross-examination. 12 JUDGE CRAINE: Objections? 13 MS. PROCTOR: Your Honor. 14 JUDGE CRAINE: Yes. 15 MS. PROCTOR: I don't know if this is an 16 objection. The July 9th testimony of Mr. Langley, 17 which was submitted as direct and not marked by GTE, 18 on pages one and two, contains Mr. Langley's 19 qualifications, which I would expect normally would 20 be included in the record. 21 And without those qualifications, which is 22 the current state of GTE's proffer, I would challenge 23 Mr. Langley's entire set of testimony. 24 JUDGE CRAINE: Well, as I recall, we marked 25 this as a cross-examination exhibit for you, as 00938 1 Number 593. 2 MS. PROCTOR: Right. But until that point, 3 GTE is intending to offer into the record the 4 testimony and supporting exhibits of a witness for 5 whom they have submitted no qualifications. 6 JUDGE CRAINE: Mr. Lewis (sic), would you 7 like to revisit your interest in submitting this 8 exhibit as your exhibit? 9 MR. POWELL: Well, Your Honor, I can 10 appreciate why Ms. Proctor would not want to 11 introduce Mr. Langley's qualifications in the record, 12 and I do note that his August 28th testimony, number 13 563, does not include his qualifications. I'm 14 perfectly comfortable offering the July 9 testimony 15 for purposes of establishing his qualifications to 16 offer the testimony that he's here to testify about. 17 I would note, however, that past page two, 18 line 14 of the July 9 testimony, all of that relates 19 to GTE's old nonrecurring cost study, which we are 20 not offering in evidence and which has been replaced 21 by the new nonrecurring cost study, which is Exhibit 22 565. So if it's your pleasure to mark the July 9 23 testimony and put it in for purpose of establishing 24 Mr. Langley's qualifications, I'd be very happy to 25 proceed in that fashion. 00939 1 JUDGE CRAINE: Well, I've marked it as 2 Exhibit 593. Any objection? 3 MS. RENDAHL: Your Honor, I have one 4 additional item, I think, that needs to be included. 5 I don't believe that Mr. Langley -- Mr. Langley, in 6 this July 9 testimony, has about half a page, it goes 7 from page 10 to page 11, about collocation issues 8 that I don't believe is replicated in any other 9 testimony. And I would also suggest that that also 10 be included. 11 JUDGE CRAINE: Well, what I'd like to do at 12 this point is simply receive the exhibit, and then, 13 to the extent that there are portions that have been 14 superseded by his subsequent testimony, then the 15 parties can address whatever issues arise from that 16 in their briefs. But at this point, I'll simply 17 receive the entire thing, and then we can move on. 18 MR. POWELL: And that's 593, by my notes. 19 JUDGE CRAINE: Right. 20 MR. POWELL: Very well, Your Honor. Thank 21 you. 22 JUDGE CRAINE: And with that, if I haven't 23 done so, I will receive the other exhibits. I have 24 AT&T down for 90 minutes of cross-examination. Well, 25 excuse me. I also have Staff on this one, so Staff 00940 1 for 30 minutes. 2 MS. RENDAHL: Thank you. 3 C R O S S - E X A M I N A T I O N 4 BY MS. RENDAHL: 5 Q. Good morning, Mr. Langley. My name is Ann 6 Rendahl. 7 A. Good morning. 8 Q. I'd like to start with Exhibit 593. Do you 9 have that in front of you? 10 A. Yes. 11 Q. If you'd turn to page 10 of your July 9 12 testimony. 13 A. Okay. 14 Q. You state that GTE is in compliance with 15 the FCC's Second Report and Order on Collocation. Do 16 you have any documentation that shows that GTE is in 17 compliance with the order, such as a letter from the 18 FCC or some other document? 19 A. Let me clarify a point, in that in terms of 20 GTE's existing collocation tariff, I did not prepare 21 the cost study in support of that. As such, I have 22 provided testimony based on the knowledge and my 23 understanding of that particular cost filing. Or 24 excuse me, that particular tariff, and my statement 25 refers to that understanding. I do not have a 00941 1 document as you requested. 2 Q. How can we verify that the FCC has, in 3 fact, approved this tariff? 4 A. I would have to go back and do some 5 investigation within my company to determine if that 6 document exists. I do not have a personal knowledge 7 of it. 8 MS. RENDAHL: Your Honor, I'd like to make 9 a record requisition at this point for verification 10 of the FCC's approval. 11 JUDGE CRAINE: Do we have a number for 12 that? 13 MS. WEBER: The latest number would be R-5. 14 JUDGE CRAINE: What was the number, again? 15 MS. WEBER: R-5, Record Request Five. 16 MS. RENDAHL: Thank you. 17 Q. On page 11, you discuss the building 18 modification element of the cost study. Do you know 19 if the building modification part of the original 20 cost study was approved by the FCC? 21 A. Again, I do not know. 22 Q. Okay. Do you know what items the building 23 modification element includes? 24 A. Generally speaking, again, based on my 25 limited knowledge of that particular study and our 00942 1 collocation product, it would include any 2 modifications necessary to make collocation 3 available, including the installation -- or the 4 demolition of a wall, installation of external door, 5 installation of security access in the form of card 6 readers, also the erection of a partition cage, and 7 potentially could involve HVAC and also DC power. 8 Excuse me, I need to remove DC power from that. That 9 would not be included in building modification. 10 Excuse me. 11 Q. Is the cost for building modification 12 pro-rated among any additional CLECs that might 13 choose to locate in a central office? 14 A. That is a pricing issue, and I would not be 15 able to clearly define that for you. 16 Q. Would that be Mr. Lee? 17 A. More probably, yes. 18 Q. Turning to your rebuttal testimony, and I 19 believe that is Exhibit 566, do you have that in 20 front of you? It's your November 9 testimony. 21 A. Is that the collocation? 22 Q. Correct. 23 A. Okay, yes. 24 Q. And if you would look at page three, line 25 two of the testimony, could you explain what you mean 00943 1 by a list of requirements for potential contractors 2 to meet before they can be deemed industry 3 appropriate? 4 A. GTE has a set of processes that we employ 5 in determining any outside contractor or vendor, and 6 those fall under the jurisdiction of our contract 7 management group. As such, those requirements 8 include making sure that the vendor or contractor is 9 bonded, follows safety procedures, follows technical 10 parameters relative to the work to be done, has the 11 necessary skills and technical capabilities. So 12 there is a process under which vendors must be 13 reviewed before they're considered an approved 14 vendor. 15 Q. Does GTE maintain a list of approved local 16 contractors who meet these requirements? 17 A. We have a list of approved vendors. I 18 don't know that you could necessarily define them as 19 local. 20 Q. So it's a national list? 21 A. It could be a combination of both local and 22 national. 23 Q. Would you be willing to provide the 24 Commission with a copy of that list, or would GTE be 25 willing? 00944 1 A. For a particular area, or the state, or to 2 what degree? 3 Q. I guess my question to you is whether this 4 was a national list, and I guess I understood you 5 said it could be a national list? 6 A. I believe what I said was that the 7 contractors could be both local and/or national in 8 scope, not necessarily a list. 9 Q. Would GTE have such a list for Washington 10 state? 11 A. Yes. 12 Q. Would you be willing to make that available 13 to the Commission? 14 A. Yes, I would think so. 15 MS. RENDAHL: Okay. I guess could we make 16 that Record Requisition Number Six. 17 JUDGE CRAINE: Very well. 18 MS. RENDAHL: Thank you. 19 THE WITNESS: May I ask for clarification 20 of what type vendor you are requesting this list to 21 contain? 22 Q. I guess, in reference to your statement, 23 any approved contractors for collocation work. Thank 24 you. On page six of that same testimony, beginning 25 on line four, what do you mean by the statement, The 00945 1 fencing material that is used to separate the 2 collocation area from GTE's area is costed in 100 3 square feet of service increments or 100-square-foot 4 partitioned areas, and 25, 50, and 75-square-foot 5 partitioned areas? Does that mean that the CLECs are 6 charged the same amount for a cage, whether it's for 7 25, 50, 75, or 100 square feet? 8 A. No, the context of my testimony at this 9 point is that, first of all, GTE partitions the 10 collocation area from GTE's operating area in order 11 to provide a secured access for the collocator. 12 GTE's standard product for a collocation cage is a 13 cage of 100 square feet. 14 However, due to some offices which may have 15 limited space, GTE has also costed cages that would 16 be smaller. And in our proposed new collocation 17 study, we have included costs for a 25-square-foot 18 cage, 50, and 75. Those costs would vary, based on 19 the size of the cage. 20 Q. And would those -- I would assume that 21 those costs would vary so that instead of having a -- 22 whatever the cost for a 100-square-foot space would 23 be reduced by three-quarters for a 25-square-foot 24 space? 25 A. It is not directly proportional to the 00946 1 size, no. 2 Q. Are those costs laid out in an exhibit? 3 A. These costs that we've referred to, and as 4 I have stated in my testimony, we advocate that the 5 Commission approve our current collocation tariff, 6 its interim prices, and GTE would entertain 7 submitting a new collocation cost study. 8 These references are to that new 9 collocation cost study. And again, it is my 10 intention and effort here to address how we would 11 propose the new collocation cost study. 12 Q. So those costs are not in the record yet? 13 A. That study has not been submitted, no. 14 Q. Okay. How do you suggest that the 15 Commission go ahead and obtain that information in 16 the new cost study? What is GTE's suggestion? 17 A. It's our recommendation that the Commission 18 open a docket for collocation and allow us to file a 19 collocation cost study. 20 Q. A separate docket from this current docket? 21 A. Yes. 22 Q. Going on, on page eight of your testimony, 23 the same testimony, on lines nine and 10, you mention 24 that power supplies are being engineered on a 25 forward-looking needs plus basis. Why are the CLEC 00947 1 requirements for power not included in this process? 2 A. One of the problems that GTE has 3 encountered relative to local competition, not only 4 in collocation, but in other areas, has been to 5 obtain forecasts from CLECs relative to their 6 requirements. When we design the power requirements 7 of a central office, we design them based on known 8 factors plus some excess capacity. And that excess 9 capacity would take into account GTE's future plans. 10 Without a forecast of knowing how many 11 CLECs may want to collocate or other collocators, for 12 that matter, and the requirements that they may 13 request with each of those collocations, it is 14 difficult, if not impossible, to determine the power 15 requirements on that basis. 16 So again, we're saying that our process 17 cannot incorporate unknowns. If we had forecasts, 18 we'd be better able to address those. 19 Q. Well, since the Telecommunications Act now 20 requires collocation in all central offices, why 21 would power supplies not be engineered to accommodate 22 any additional capacity? 23 A. Well, first of all, we have existing 24 offices with existing power supplies that were 25 engineered prior to the Telecommunications Act of 00948 1 '96, and obviously, collocation requirements -- prior 2 to even collocation requirements for other than 3 CLECs, so those existing power supplies and systems 4 were not envisioned to include collocators. 5 And until such time that there is a need to 6 reengineer those power supplies and a basis on which 7 to engineer those, we're saying that the power may 8 not be sufficient to accommodate the collocator's 9 request. 10 Q. Does forward-looking only mean that an 11 incumbent should look at its own demands, rather than 12 a CLEC's demands? 13 A. No, I don't think that it does -- that it 14 means that, but it does mean that we could only 15 anticipate, based on some rational level, and it 16 would be irrational for us to assume a preset level 17 of number of collocators in every central office that 18 GTE has. It would be both inefficient and 19 impractical to do that. 20 Q. I'm going to turn now to another issue 21 besides collocation, and talk about unbundled loops 22 and other UNEs for a minute. Do you know how many 23 unbundled loops GTE has sold in Washington? 24 A. I do not know. 25 Q. Do you know about how many ports GTE has 00949 1 sold? 2 A. I do not. 3 Q. Or NIDs? 4 A. NIDs, no. 5 Q. Who would know that number? 6 A. Well, we do maintain reports on activity in 7 each state and each CLEC. Those are maintained by 8 our operations group. I do not have that information 9 with me, but it is available from that group. 10 MS. RENDAHL: Your Honor, I'd like to make 11 another record requisition. That would be number 12 seven, I believe. 13 JUDGE CRAINE: Very well. 14 MS. RENDAHL: For that information. 15 JUDGE CRAINE: Right. 16 Q. If you would look at your supplemental 17 direct testimony, that would be your August 28th 18 testimony, that's Exhibit 563. If you look at page 19 17 of Exhibit 563, if you look at the paragraphs 20 beginning on line four, could you read that 21 paragraph, starting with, First, GTE tends to 22 automate -- just read that to yourself for a minute, 23 and when you're done, let me know. 24 A. Okay. 25 Q. In the process of reducing the time to 00950 1 process orders, did GTE take into consideration the 2 Commission's directions in its Eighth Supplemental 3 Order specifically relating to GTE's nonrecurring 4 cost? 5 A. I did read the Eighth Order, Supplemental 6 Order, but I don't remember the specific language. 7 Q. Are you familiar with Appendix D to the 8 order? 9 A. I have to confess, it's been some time 10 since I've read it. 11 Q. Would it help if I showed you a copy? 12 A. Sure. 13 MS. RENDAHL: Your Honor, may I approach 14 the witness? 15 JUDGE CRAINE: You may. 16 Q. Have you reviewed the appendix? 17 A. Yes. 18 Q. Does this refresh your memory at all about 19 the requirements in the Eighth Supplemental Order? 20 A. Yes, it does. 21 Q. And so did GTE take these into 22 consideration in the process of producing time to 23 process orders? 24 A. No, we did not. And the reason that we 25 didn't is we've stated previously this data reflects 00951 1 the old cost study. GTE has submitted a new cost 2 study, which is a bottoms-up, forward-looking study, 3 and stands on its own merit. 4 What we did include in our forward-looking 5 study, and the times that you refer to in the 6 paragraph on page 17, is that we have taken work 7 times and we have incorporated processes and systems 8 solutions which provide more efficiency and, in fact, 9 are forward-looking and would, in fact, be more 10 reflective of forward-looking work times and cost 11 than in the appendix which you refer to. 12 Q. So it's your understanding or it's your 13 belief that Appendix D to the Commission's order 14 refers only to your previous nonrecurring cost study, 15 and that the current nonrecurring cost study, because 16 it's forward-looking, does not need to take those 17 into consideration? 18 A. I think you've mischaracterized the two 19 studies with that question. The first study and the 20 adjustments that were ordered, GTE filed a 21 supplemental correction at the Commission's 22 direction. However, the processes that were 23 addressed in the original cost study were reflective 24 of the environment prior to the Telecommunications 25 Act of '96. As such, GTE has made a number of 00952 1 changes in its processes and its systems. To try to 2 take the changes outlined in Appendix D and apply 3 them to new processes and new systems and, in fact, 4 to our new cost study is an apples and oranges 5 exercise. 6 Q. So do you think that or believe that the 7 time estimates that are listed in Appendix D of the 8 Commission's Eighth Supplemental Order are not 9 forward-looking? 10 A. I did not say that. I said they were the 11 costs and the work times that were reflective of the 12 processes prior to the Telecommunications Act of '96. 13 The act, as you're well aware, specified a number of 14 changes relative to how we conduct studies, as well 15 as how we interface with CLECs. And the new cost 16 study is more reflective of those requirements. 17 Q. Because the Eighth Order -- let me see if I 18 can clarify this without belaboring the point much 19 more. The Eighth Supplemental Order came out 20 following the Telecommunications Act; correct? 21 A. That is correct. 22 Q. Now, are you saying, because your previous 23 cost study was based on information prior to the 24 Telecommunications Act coming out, that that's why 25 your new study doesn't need to take those into 00953 1 consideration, the Appendix D into consideration? 2 A. The fact that the Telecommunications Act 3 has placed many more requirements on GTE and other 4 ILECs, GTE has modified its processes, its 5 procedures, and its systems in order to be in 6 compliance with the act. And as a result, it is -- 7 the new study is more reflective of those processes. 8 Because the processes have changed, it is 9 inappropriate to take the work times and the 10 adjustment to those work times from the original 11 study and from Appendix D to try to overlay them to 12 the new study. 13 To give you a comparison, the original 14 study was comprised of -- the following was comprised 15 of about 15 pages, I believe. The study that you 16 have in front of you, as the new study, now comprises 17 about 700. By comparison, there's far more detail in 18 terms of the cost study and far more comprehensive 19 cost study. And for that reason, it is a comparison 20 that is not equitable. 21 Q. Okay. Let's move on. If you could turn to 22 page 22 of your supplemental direct testimony, again, 23 Exhibit 563, and look at lines 12 to 14. You state 24 that after the planned system implementation, other 25 activities that are currently performed manually by 00954 1 NOMC representatives will be automated for all LSRs. 2 Did GTE's nonrecurring cost studies take into account 3 this statement or factor? 4 A. Yes. 5 Q. And -- I'm sorry. 6 A. Yes. 7 Q. Okay. And where would that appear in the 8 cost studies? 9 A. As I say in my testimony, we have -- I have 10 mechanized many processes like line screen table, 11 account completion, service activation. If you look 12 at the cost study itself, in section two, replete 13 throughout section two is the impact of ordering 14 processes. But, generally speaking, beginning on 15 section two, page two, WA62 through to WA107 is where 16 you will find work times that are reflective of the 17 processes and the efficiencies that we have either 18 already attained or will attain through our 19 mechanized solutions. 20 Q. Did you say 52? 21 A. Sixty-two. 22 Q. Do you mean, when you make the statement 23 about automated for all LSRs, is that for the 24 percentages that are listed in the study, or is that 25 for 100 percent of all LSRs? 00955 1 A. For the items that I mentioned in my 2 testimony, it's for all LSRs. 3 Q. For 100 percent? 4 A. Correct. 5 Q. Could you repeat the pages that you 6 referred to? We seem to have those missing from our 7 study. 8 A. They would be section two, the pages are WA 9 -- excuse me 2-WA62 through 2-WA107. 10 Q. Okay, thank you. Do you have in front of 11 you a copy of what's been marked as Exhibit 574, 12 which would be GTE's response to Staff Data Request 13 Number Four? 14 A. Yes. 15 Q. And in response to Staff's data request, 16 GTE hasn't provided a cost of a study requested by 17 Staff; is that correct? 18 A. I'm sorry, would you repeat that? 19 Q. Isn't it true that GTE has not provided a 20 copy of the Northwest region study that Staff 21 requested in the data request? 22 A. Well, it's my belief that what the Staff 23 has requested is contained in the study. What we 24 provided in response to the data request was an 25 explanation of that information. 00956 1 Q. But Staff specifically requested the study, 2 didn't they? 3 A. Again, since it's contained in the study, 4 we didn't see a need to resubmit it. 5 Q. You mean contained in the cost study? 6 A. In the cost study. 7 Q. What did you mean, then? I guess your 8 response revises the last sentence of your 9 supplemental direct testimony, starting on page 33 10 and ending on page 34, correct, so delete the 11 reference to the Northwest region study? 12 A. I'm sorry, I don't follow your question. 13 Q. Okay. If you look at page 34 of Exhibit 14 563, that last sentence, starting on line eight. And 15 then, if you look at GTE's response to Data Request 16 Number Four, Exhibit 574, the last sentence has been 17 modified; isn't that correct? 18 A. It is a different sentence, but I think, 19 again, this was -- and the data request was worded 20 that way for clarification for your benefit. 21 Q. But it does delete the reference to the 22 Northwest region study; correct? 23 A. It does delete those words, yes. 24 Q. Okay. And referring to that sentence or -- 25 yes, referring to that sentence, was the HPU, or 00957 1 hours per unit, for each BRPC activity determined 2 specifically for Washington? 3 A. No, it was not. There is one BRPC that 4 serves the Northwest region. As such, that center is 5 not designed or established so that it has a work 6 group or a work unit dedicated to Washington state 7 specifically. It would also address other states in 8 the Northwest region. 9 As such, we were not able to extract just 10 the work time and the work activity for Washington 11 state. We were able to extract the activity, so we 12 had to determine productivity levels for the region. 13 But, again, those were applied to just Washington 14 state activity. 15 Q. So there is something that is a Northwest 16 region study, as opposed to a Washington-specific 17 study? 18 A. In terms of determining HPU, yes. 19 Q. So would you, then, in light of what you've 20 just said and in light of what's in the data request, 21 would you revise your response to the data request to 22 retain the reference to the Northwest region study? 23 A. Again, I don't know that it's necessary to 24 change the data request. As I said, I think that 25 last sentence was stated for clarification for the 00958 1 benefit of the data requester. And again, it was 2 intended to highlight that we determined HPUs on a 3 work center basis, which is the Northwest region. 4 However, when we determined the cost, we determined 5 the cost based on activity for the state of 6 Washington. 7 JUDGE CRAINE: Mr. Langley, I'll ask you, 8 on a yes or no question, to give a yes or no first, 9 and then the explanation. I think it will move along 10 more quickly if you could do that, please. 11 THE WITNESS: Okay. 12 JUDGE CRAINE: Ms. Rendahl's out of time, 13 but I would allow her to continue because -- 14 MS. RENDAHL: I have one more question and 15 then I will be done, I promise, with this witness. 16 Q. Are you familiar with GTE's pricing 17 proposal for UNEs in this proceeding? 18 A. Somewhat, yes. 19 Q. So would you agree that, when setting 20 prices for UNEs, GTE relies on its retail tariff 21 rates, but for nonrecurring charges, such as INP, GTE 22 considers even a comparison between nonrecurring 23 charges or INP and its related tariff rate to be 24 inappropriate? 25 A. That's a question I have to defer to Mr. 00959 1 Lee. 2 Q. I do have one other question. Do you have 3 a copy of Staff's Data Request Number Three? I think 4 it was put in for Mr. Lee, but I notice that the 5 response was attributed to you. That would be 6 Exhibit 591. 7 A. No, I do not. 8 MR. POWELL: May I give it to him, Your 9 Honor? 10 JUDGE CRAINE: Go ahead. 11 MS. RENDAHL: Thank you, Mr. Powell. 12 MR. POWELL: You're welcome. 13 Q. One of Staff's data requests, Data Request 14 Number Three, asked you to each provide studies, 15 information or documents to project GTE's forecasted 16 numbers. Do you know what GTE's response is to that? 17 A. I've read it, yes. 18 Q. And what is the response? 19 A. First of all, GTE's nonrecurring cost study 20 is based on a bottoms-up, forward-looking approach 21 and does not require a forecast, as such. Although 22 GTE does do forecasting -- or does have a forecast 23 that it uses in its cost and pricing combination, 24 that forecast comes from internal sources, not 25 external, and that's essentially what the data 00960 1 request responds to. 2 MS. RENDAHL: Okay, thank you. I have no 3 further questions. 4 JUDGE CRAINE: Okay. I have AT&T for 90 5 minutes. 6 MS. PROCTOR: Thank you. 7 C R O S S - E X A M I N A T I O N 8 BY MS. PROCTOR: 9 Q. Good morning, Mr. Langley. I'm Susan 10 Proctor, from AT&T. 11 A. Good morning. 12 Q. If you could turn to your July 9th 13 testimony, it's been marked as Exhibit 593. I just 14 had a few questions about your preliminary background 15 information. You state that you're currently a 16 manager in costing? 17 A. Correct. 18 Q. And you've held that position since 19 September of 1997? 20 A. Correct. 21 Q. And you're responsible for the nonrecurring 22 cost study for wholesale services; is that correct? 23 A. Correct. 24 Q. Do you have responsibility for any other 25 cost studies? 00961 1 A. Yes, I also have responsibility for retail 2 and access nonrecurring cost studies, and I am now 3 beginning to have responsibility for collocation 4 recurring and nonrecurring cost studies. 5 Q. So that you can look forward to many more 6 appearances on the stand; right? In the course of 7 preparing the GTE nonrecurring cost study for 8 wholesale services, did you do comparisons with the 9 cost studies for retail and access services? 10 A. For the state of Washington, no. 11 Q. Have you done it for other states? 12 A. Yes. 13 Q. And which states? 14 A. California, Illinois, Florida. But I might 15 add that the retail studies have not been filed in 16 those states. 17 Q. And did you perform that analysis in the 18 context of cost proceedings in those states? 19 A. The studies were prepared in anticipation 20 of dockets in those states, so it was done for 21 comparative purposes. 22 Q. Did you participate in the docket that goes 23 on even longer than this one in California, the OANAD 24 proceeding? 25 A. Yes. 00962 1 Q. Are you familiar with the recommended 2 decision that has been just recently issued in that 3 proceeding -- 4 A. Yes. 5 Q. -- on nonrecurring cost? 6 A. Yes. 7 Q. Did you participate in a proceeding to 8 establish nonrecurring costs in Illinois? 9 A. Yes. 10 Q. And similarly, you've participated in the 11 proceeding in Florida for nonrecurring costs? 12 A. I have prepared studies. Those studies 13 have not been filed in Florida. 14 Q. So you did not participate in those 15 proceedings? 16 A. That is correct. 17 Q. Now, prior to the time that -- prior to 18 September of '97, you served as the group product 19 manager and the senior product manager for network 20 interconnection for open market transition program 21 office? 22 A. Correct. 23 Q. Is that the NOMC that is now the subject of 24 the nonrecurring cost study, the national open market 25 centers? 00963 1 A. No, it is not. 2 Q. Those are different? 3 A. Yes. 4 Q. Okay. Did you have any responsibility for 5 establishing the centers when you were holding that 6 prior position? 7 A. Yes, I did. 8 Q. And what were your responsibilities? 9 A. My responsibilities were to lead an 10 interfunctional group to develop processes and 11 procedures for the ordering, provisioning, 12 installation, maintenance, repair, billing of 13 services associated with local competition. 14 Q. And you started that position in February 15 of '96? 16 A. Yes. 17 Q. Presumably after the passage of the 18 Telecommunications Act or before? 19 A. Actually, I started work on this project in 20 May of 1995. It was in 1996 that I was officially 21 named to the position. 22 Q. And the processes that you've just 23 described, ordering, provisioning, installation, 24 maintenance and repair, billing and collection, are 25 those the functions that the FCC has described as the 00964 1 operational support systems that GTE is to unbundle 2 and make available to the CLECs? 3 A. Those are the functions for which the FCC 4 ordered that we provide access to functions, yes. 5 Q. If you could turn to your August 28th 6 testimony, on page 15, at line three, where you state 7 that wholesale order provisioning at GTE is in a 8 startup mode. Now, in the context of the operational 9 support systems, provisioning and ordering are 10 separate processes, if you will, or functionalities, 11 are they not? 12 A. Yes. 13 Q. So when you're referring here to order 14 provisioning, are you referring to provisioning or 15 ordering or something else? 16 A. In the context of that statement, I am 17 referring to the entire process, from ordering 18 through installation. 19 Q. Okay. So when you state that many of the 20 processes are manual, you're referring to that entire 21 set of functions? 22 A. Yes. 23 Q. And again, at the bottom of that page, at 24 lines 19 and 20, when you state that manual operating 25 processes are being employed that will soon give way 00965 1 to more efficient automated processes, you're 2 referring to the entire set of the functionalities? 3 A. In general, yes, but more specifically to 4 the preordering and ordering areas in terms of 5 automation. 6 Q. So the other areas are not going to soon 7 have efficient automated processes? 8 A. That's not a correct statement. What I'm 9 saying is that the emphasis is on preordering and 10 ordering today, as we interface with local 11 competition. There are other activities going on in 12 the remaining functional areas, but that is less 13 concentrated at this point. 14 Q. Now, you say that, because these processes 15 are in startup mode, GTE has identified a proxy for 16 each wholesale fulfillment activity, and that that 17 proxy is the retail process, with one major 18 exception? 19 A. Generally speaking, yes, and the reason 20 being that, in terms of services that are requested 21 by competitive carriers are those services that GTE 22 offers on a retail basis. GTE has elected to use 23 those same systems and, to some degree, the same 24 processes to satisfy requests from CLECs, so that, in 25 lieu of much history in terms of that activity, GTE 00966 1 has relied on retail work times and activities as a 2 proxy, with adjustments for efficiencies that we have 3 implemented or will be implementing. 4 Q. Now, you said that, generally -- I wonder 5 if we could just go through very quickly each of the 6 functionalities. For preordering and ordering, is 7 GTE using the NOMC rather than a retail proxy? 8 A. For ordering, the NOMC was established 9 specifically for CLECs in that CLEC request. Their 10 sole function is to process requests from CLECs. 11 There is not a counterpart on the retail side to 12 equate to that, although, again, there are some 13 similarities, because we're using the same systems. 14 As far as preordering, the NOMC is used for 15 preordering should a CLEC choose to do manual 16 ordering. However, CLECs may do preordering through 17 an electronic system that GTE has established, called 18 SIGS, S-I-G-S, which is an integrated gateway to 19 allow CLECs direct access for the purpose of 20 obtaining telephone numbers, due dates, determining 21 availability of products and services, and also doing 22 pick selection. 23 Q. So is there a retail proxy for retail -- 24 I'm sorry, for preordering, or are you using 25 wholesale activities as the basis for the cost study? 00967 1 A. Again, because of the interface 2 requirements, GTE developed this SIGS system for 3 CLECs. There is not an equivalent SIGS for retail, 4 although retail and wholesale will be accessing the 5 same systems through the -- wholesale through the 6 gateway, retail directly. 7 Q. So for activities and times, GTE is using 8 values developed in the wholesale environment? 9 A. For preordering? 10 Q. Yes. 11 A. And for ordering -- 12 Q. No, just preordering, I'm sorry. 13 A. Again, for preordering, if, in fact, the 14 CLEC chooses to use the electronic gateway SIGS, 15 essentially there is no work time there, because of 16 its electronic interface. If a CLEC chooses to use 17 manual preordering, then we have, in fact, included 18 work times associated with that based on our NOMC 19 experience. 20 Q. So just so the record is clear, the answer 21 to my question would be yes, the values you have 22 developed come from the wholesale environment for 23 preordering? 24 A. If I could add manual preordering. 25 Q. Okay. And for electronic preordering, the 00968 1 times are zero? 2 A. In terms of GTE personnel work time, yes. 3 Q. And that, again, is developed in the 4 wholesale environment, not the retail environment? 5 A. SIGS was developed in the wholesale 6 environment, if I understood your question. 7 Q. I'm talking about the values that you use 8 in the cost study. The values that you use in the 9 cost study were developed in the wholesale 10 environment? 11 A. Again, if you're talking about manual, yes. 12 Q. I was talking about electronic. 13 A. There are no work times in electronic, so 14 there's no way to develop that time. 15 Q. So zero doesn't count as a work time? 16 A. It's not a work time for GTE personnel. 17 Q. Okay. I want to come back to ordering, 18 because I have some more questions on that, but of 19 the other activities, for example, installation, were 20 the activities and work times that are used in the 21 study proxies that are developed from the retail 22 operations? 23 A. Let me respond to that at two levels. 24 There's central office installation work time and 25 field installation work time. 00969 1 Q. I'm sorry, fill? 2 A. Field. 3 Q. Field. 4 A. Field, f-i-e-l-d. As far as the central 5 office work time, that is the capturing of time 6 necessary to run jumpers on the main frame, or DSX, 7 if it happened to be ICAP service. GTE conducted a 8 special jumper study to develop work times for that 9 activity. Those work times in that study would 10 include retail, wholesale, and access, because we 11 believe that running a jumper is running a jumper, 12 regardless of the jurisdiction. 13 In the field study, we did use work times 14 based on what we have experienced, and again, that is 15 a combination of retail, wholesale and access. 16 Q. In the other states where you did a 17 comparison between the retail and access and 18 wholesale studies, did you compare the work time used 19 in those studies to run a jumper? 20 A. Again, we developed a jumper cost study 21 that we are using in all environments, because we 22 believe running a jumper is ubiquitous regardless of 23 the environment -- excuse me, regardless of the 24 jurisdiction. 25 Q. I'm sorry, my question was did you compare 00970 1 the work times used in the retail and access cost 2 studies to the time used in the wholesale study? And 3 it would be good if you started with a yes or a no. 4 A. I can't answer it yes or no. We conducted 5 a jumper running study, which we use in all cost 6 environments, retail, access, and wholesale. 7 Q. So did you make a comparison when you were 8 looking at the retail study, for example, in these 9 other states, to assure that the time used in the 10 retail study to run a jumper was exactly the same as 11 the time used in the wholesale study? 12 A. Since we have one study, they are the same, 13 yes. 14 Q. Okay. Now, for maintenance and repair, are 15 the values used in the study for the activities and 16 the work times developed from proxies from the retail 17 environment? 18 A. Since this study doesn't address repair and 19 maintenance, there are no values in that study. The 20 repair and maintenance are recurring costs and would 21 be reflected in our recurring cost studies. 22 Q. Thank you. Now I'd like to come back to 23 the ordering process. And the study assumes and 24 develops cost based upon GTE's experience that 77 25 percent of the orders are submitted electronically by 00971 1 the other carriers; is that correct? 2 A. GTE projects that 77 percent of the orders 3 will be received electronically. Currently, only 4 about 45 to 55 percent of the orders are received 5 electronically. 6 Q. But for purposes of the study, the study 7 assumes that 77 percent of the orders that CLECs send 8 are sent electronically; is that correct? 9 A. Yes. 10 Q. Now, once the order is received, there is 11 also an activity of entering the order into GTE's 12 systems; is that correct? 13 A. For some orders, yes. For others, it's a 14 flow-through process. 15 Q. And for which orders is there a 16 flow-through process? 17 A. The study currently reflects only basic 18 orders being a flow-through process. All others are 19 still manual and require entry. 20 Q. And what is a basic order? 21 A. A basic order would be, on a resale basis, 22 would be an R1, a residence one party, business one 23 party, DID, DOD, PBX, HUNT. 24 Q. And what about an order for a loop to serve 25 a basic residential or a basic business customer? 00972 1 A. The study does not reflect that being a 2 flow-through process. It would be manual entry. 3 Q. So the only flow-through is for resale 4 orders? 5 A. At this time, yes. 6 Q. And when, if ever, does GTE intend to have 7 flow-through for orders for unbundled network 8 elements? 9 A. GTE is constantly changing its coding to 10 provide more mechanization. I do not currently have 11 a schedule of when other activities would be 12 mechanized. 13 Q. So the statement at page 17, line four 14 through five, that GTE intends to automate the 15 processing of most basic, nonengineered wholesale 16 orders during the next year does not apply to orders 17 for unbundled network elements; is that correct? 18 A. I think that the correct answer is that we 19 do have plans to mechanize those. This cost study 20 does not reflect those. 21 Q. Now, at line 10, you also refer to the fact 22 that, in identifying differences between current 23 processes and long-run processes, that the customer 24 record systems are being revised so that a single 25 account can be maintained for all CLEC end users, 00973 1 even if they have some residual billing of GTE's 2 services? 3 A. Correct. 4 Q. And you state that the single account 5 structure streamlines the processing of all LSRs. 6 Now, having a single bill that includes residual 7 billing of GTE, is that something that the CLECs 8 asked for? 9 A. No. 10 Q. That's something that is of value to GTE? 11 A. Residual services mean that there are 12 services that the customer has asked GTE to continue 13 to provide, and obviously GTE will bill those. And 14 the single account allows us to render a bill to both 15 the CLEC for the services that they purchase and the 16 end user for the services that they would purchase. 17 Q. So for example, a customer could obtain 18 local service from a CLEC, but retain GTE as the 19 provider of its intraLATA, as well as it's interLATA 20 toll? 21 A. That is possible, but the type of residual 22 services that we're referring to here would be items 23 like Yellow Page advertising, which is under 24 contract, and GTE will continue to bill through the 25 life of the contract, could be voice mail services, 00974 1 any other deregulated service provided by GTE. 2 Q. But it could also be services that have not 3 been deregulated, such as toll? 4 A. If the CLEC chose not to provide that and 5 the customer purchased it from GTE, yes. 6 Q. Well, the customer would be able to choose 7 -- 8 A. Yes. 9 Q. -- in this current environment, would they 10 not? 11 A. Yes. 12 Q. And the customer could choose GTE as the 13 provider of both intraLATA and interLATA toll? 14 A. That is true. 15 Q. Now, I wonder if you could turn to the cost 16 study, and I'm looking at page 2-WA47. 17 A. Okay. 18 Q. And this lists the activities and the 19 estimated times for a basic -- an order for basic 20 nonengineered service for an unbundled loop; is that 21 correct? 22 A. Yes. 23 Q. Now, in your testimony, or in the study, 24 have you defined when a loop will require engineering 25 and when it will not? 00975 1 A. I believe we have defined it in both the 2 study, I believe, and testimony, but certainly the 3 study, that engineering of a loop is any loop that 4 has non-standard technical parameters such as a 5 four-wire loop, a digital loop, a high cap or an 6 advance service. 7 Q. So a loop that is currently being used by 8 US West -- I'm sorry, by GTE to serve a residential 9 customer and provide basic residential service, would 10 it be your view that that would be a nonengineered 11 service? 12 A. Yes. 13 Q. And if the CLEC wants to purchase that loop 14 from GTE as an unbundled network element, would that 15 still be a nonengineered service? 16 A. If a CLEC purchased it, we would expect 17 they would request a two-wire analog loop, and it 18 would be nonengineered. 19 Q. Now, these time estimates reflect the fact 20 that all orders, no matter whether they are received 21 electronically or manually, have to be entered by GTE 22 into its systems, does it not? 23 A. Again, on page 47? 24 Q. Yes. 25 A. Yes. 00976 1 Q. And it also reflects the fact that there 2 may be errors, both in the receipt of the order and 3 in the entry of the order? 4 A. Correct. 5 Q. And those errors would also require manual 6 activity by GTE; is that true? 7 A. Basically, the errors that come from a CLEC 8 would be returned with an identification of error and 9 type. It would be the responsibility of the CLEC to 10 correct those and resubmit. But those errors that 11 are internal, obviously that would be GTE's 12 responsibility to correct those. 13 Q. The error correction entry that occurs 14 here, is that referring to errors by the CLEC or 15 errors by GTE representatives? 16 A. If you're referring -- next to the last 17 line, error correction would be internal to GTE. 18 Q. And you're assuming that -- and I don't -- 19 this percentage of the LSRs I think was in your 20 testimony someplace, but I'm not sure about that. Is 21 that a confidential number, the percentage of the 22 time that you assume errors? 23 A. We would treat all of this as confidential, 24 but those percentages, again, would be what we have 25 experienced and project will continue to experience 00977 1 as far as some type of error which would require 2 correction in order for that order to be completed. 3 Q. Now, recently, in the 271 proceedings at 4 the FCC, BellSouth has said that something like, I 5 think, five percent of their residential orders fall 6 out because of errors. Are you familiar with that 7 type of experience? Is it what you're referring to 8 here? Let me back up. When you're talking about 9 error, is that fallout from processing or is that 10 something different? 11 A. It could be an error which prevents 12 provisioning, or it could be simply an error which 13 prevents the order from passing the system minutes 14 and being completed. In response to your question 15 about BellSouth, I'm not familiar with their study or 16 their data. 17 Q. Did you do any comparison to GTE's 18 experience in its retail operations in the processing 19 of its residential orders, for example, to see what 20 percentage of orders experienced were errors in the 21 entry? 22 A. Yes. 23 Q. And do you regard that as a confidential 24 number? 25 A. Only to the extent that it's the same 00978 1 number that you see here. 2 Q. The rejection of a service request, does 3 that -- and that's the third line item, does that 4 activity refer to the situation where there are 5 errors in the CLEC order that you were referring to 6 earlier? 7 A. Yes. 8 Q. And that is estimated to occur 9 approximately a third as often as GTE's own errors? 10 A. Actually, the study takes a conservative 11 approach and uses a 30 -- excuse me, uses a 12 percentage about the same. However, when you look at 13 the details on page 47, it's only applied to those 14 requests that are received manually. The processes 15 in the cost study reflects the fact that if a request 16 is received electronically, those errors are 17 identified and returned electronically to the CLEC, 18 minimizing any intervention by a GTE rep. 19 However, for those that are received 20 manually, we must return those manually and reflect 21 the appropriate work time necessary to do that. 22 Q. Of the orders that are received 23 electronically and rejected electronically because of 24 errors, are those orders for unbundled network 25 elements or only for resale? 00979 1 A. Well, in the case of this page, it's for 2 unbundled elements, but the process applies to both 3 resale and unbundled elements. 4 Q. I'm a little confused, because I thought 5 you said earlier there was no flow-through for orders 6 for unbundled network elements? 7 A. The first two lines on this particular 8 page, electronic LSR receipt and manual LSR receipt, 9 refer to the method in which GTE receives the request 10 from the CLEC. 11 Q. Right. 12 A. For those orders that are received 13 electronically, they would come into GTE's front end 14 processor, where they're edited. If there are 15 errors, they're identified, and those errors are 16 returned on a report electronically. And the cycle 17 would go back to the CLEC, where they would correct 18 and resubmit. So in terms of the work activity 19 necessary to validate electronically received LSR 20 does not require any manual intervention by GTE. 21 However, for the second line, which has 22 manual LSR receipt, those orders are entered manually 23 into the front end processor where the editing 24 process takes place. When those errors are 25 identified, they are returned manually. Therefore, 00980 1 GTE has work time associated with processing those 2 rejected LSRs. And that's what's reflected in the 3 third line item. 4 Q. So in the case of a CLEC placing an 5 electronic order for an unbundled element, if that 6 order is sent electronically, GTE currently has the 7 capability to electronically review and edit that 8 order; is that correct? 9 A. Correct. 10 DR. GABEL: Excuse me, Ms. Proctor, just so 11 I understand. Is that editing, then, a manual 12 process, because I'm also perplexed by your earlier 13 statement that there's no flow-through on UNEs, as 14 opposed to this page showing the electronic receipts? 15 THE WITNESS: Let me define flow-through 16 for you. Flow-through means that the work comes 17 electronically from the CLEC, is edited, assuming 18 that there are no errors, would be entered 19 electronically into GTE's order entry system, so that 20 the order is into the order entry system without 21 manual intervention. 22 However, what we've reflected here is the 23 first step of that, and that is receiving the LSR, 24 editing the LSR to determine if there are any errors, 25 and identifying those errors back to the CLEC. For 00981 1 electronically received LSRs, it is mechanized and no 2 manual intervention by GTE. If it is faxed or sent 3 other than electronically, then it has to be entered 4 into the editing engine, if you will. The engine 5 would determine what errors exist, a report is 6 printed, and that report is then sent back to the 7 CLEC, so that the rep does have work time associated 8 with processing those requests for the editing 9 process. And again, that's what's reflected on these 10 first three lines. 11 Only those orders that I mentioned earlier, 12 which is basic resale, has the capability to come in 13 electronically, be edited, and entered into the order 14 entry system without any GTE rep being involved. 15 DR. GABEL: Just one more clarification 16 question. I'm sorry, Ms. Proctor, for interrupting. 17 The I order entry, what does the I refer to? 18 THE WITNESS: Install or new. 19 DR. GABEL: And would that be on a 20 flow-through or manual? 21 THE WITNESS: In either case. 22 DR. GABEL: So even if it's received 23 electronically, you still have some manual 24 intervention? 25 THE WITNESS: For this category of service, 00982 1 which is a new unbundled loop, yes. 2 Q. And an order for unbundled loops can only 3 be new in GTE's study; right? 4 A. That's correct. 5 Q. So of the total activity time for ordering 6 an unbundled loop, approximately half is for order 7 entry; is that right? 8 A. I'm sorry, would you repeat that? 9 Q. Yes. Of the total activity time estimated 10 by GTE for an order for an unbundled loop, about half 11 of that time is for order entry? 12 A. Correct. 13 Q. And another portion is for error 14 correction? 15 A. Correct. 16 Q. For correcting GTE's errors? 17 A. That is correct. 18 Q. Now, the last entry is time per phone call. 19 What activity is that? 20 A. Even with orders received electronically, 21 and certainly with orders received manually, we have 22 experienced and continue to expect to experience some 23 amount of interaction with CLECs via the telephone in 24 order to clarify certain items in order to process 25 the order. Again, as the study reflects, this is 00983 1 primarily associated with manual orders. 2 Q. So as a result of the way these costs are 3 prepared, the CLEC who is sending its orders 4 electronically is going to be charged, because these 5 costs become the basis of a charge for the activities 6 that GTE incurs as a result of a CLEC who sends in 7 orders manually; is that right? That's the way the 8 study works? 9 A. I would characterize it a little bit 10 differently, in that we have developed a weighted 11 cost, but the study contains enough information, 12 sufficient information that those costs can be -- can 13 support charges either on a weighted basis or a 14 separate basis. 15 Q. So if the Commission determined that it 16 wanted to establish a separate charge for those CLECs 17 who conveyed orders electronically, do you believe 18 there's sufficient information here for the 19 Commission to sort of separate out the costs of the 20 manual activities? 21 A. Yes. 22 Q. And which of these activities that are 23 listed here on this page, if we were just dealing 24 with electronic transmission of an order, would be 25 eliminated? And I'm sorry, the activity times, I 00984 1 should have said. 2 A. Well, the LSR rejection would not be 3 applicable to electronic. 4 Q. Would the manual LSR receipt also go? 5 A. Yes, by implication, it would. And the 6 time per phone call would be reduced or perhaps 7 eliminated. I'd have to go back and look at that 8 one, but I believe it would be eliminated, as well. 9 Q. And are those the only times that would be 10 eliminated? 11 A. Yes. 12 Q. And the times that remain, then, are -- 13 that would mean that the portion of the time that was 14 attributed to order entry would now be even greater 15 than half, wouldn't it? 16 A. That is true. 17 Q. If you could turn to page 64, also in 18 section two, addressing preordering, and it says 19 preordering manual. You were earlier talking about 20 the fact that preordering can be done electronically? 21 A. Correct. 22 Q. But electronic preordering is not studied 23 here; is that the case? 24 A. Again, since there are no activities that 25 would involve intervention with a GTE service rep, we 00985 1 did not reflect that cost in terms of work times. 2 There are costs, however, in developing the gateway 3 and functionality, and those are reflected in our 4 fixed and shared cost. 5 Q. Now, in your -- I need you to keep that 6 study in front of you. But in your July 9th 7 testimony, you talk about the fact that separation of 8 connect and disconnect cost is inappropriate. That's 9 on page 13 at line seven? 10 A. I see it. 11 Q. Now, nonetheless, the Commission did order 12 GTE to separate disconnect and connect cost, did it 13 not -- 14 A. Yes. 15 Q. -- in the Eighth Supplemental Order? And 16 you've stated in your November 18th testimony, on 17 page 11, that GTE is showing installation and 18 disconnection costs separately? 19 A. Correct. 20 Q. Now, if you could turn to page 140 -- it's 21 2-141. No, that can't be right. I'm sorry, Your 22 Honor. I've got an incorrect page number. If you 23 could give me a minute to find out where I really 24 want to be. Actually, this is in the November 10th 25 update, which has been marked as Exhibit 567, and 00986 1 it's page 2-WA141. 2 A. Okay. 3 Q. Okay. Now, this is some of the supporting 4 detail on the ordering activities for an unbundled 5 loop; is that correct? 6 A. Correct. 7 Q. And for a nonengineered, new order received 8 the same total activity time under the I order type, 9 as we were just looking at on page 47; is that right? 10 A. Are you talking about the I or the O? I'm 11 sorry. 12 Q. The I. 13 A. Yes. 14 Q. Now, the O, is that for outbound or 15 removal? 16 A. That would be a disconnect, yes. 17 Q. And the way the study is set up for each of 18 the types of orders that we're talking about here, 19 nonengineered, sequel, or engineered or complex, we 20 see an order for install and an order for O, or 21 disconnect, do we not? 22 A. Correct. 23 Q. So that there are times for each of those 24 activities, for install and removal; is that correct? 25 A. Correct. 00987 1 Q. Now, in the summary material -- and just 2 looking at here, for the example of the unbundled 3 loop, approximately a fifth of the cost per order is 4 attributable to the disconnect activity; is that 5 correct? 6 A. Yes. 7 Q. And it's GTE's view that that's consistent 8 with the Commission's order of separating and 9 separately identifying the disconnect and install 10 costs? 11 A. Yes. 12 MS. PROCTOR: That's all I have. Thank 13 you. 14 JUDGE CRAINE: Okay. I have TCG, Nextlink 15 for 45 minutes. 16 MR. KOPTA: Thank you, Your Honor. 17 C R O S S - E X A M I N A T I O N 18 BY MR. KOPTA: 19 Q. Good morning, Mr. Langley. I'm Greg Kopta, 20 representing Nextlink, TCG and ELI. 21 A. Good morning. 22 Q. Do you have in front of you, by any chance, 23 cross-examination exhibits that have been numbered 24 C-569 through 573? 25 A. Yes, I do. 00988 1 Q. I'd like to discuss those with you, and 2 start with Exhibit C-569. Are you familiar with this 3 document? 4 A. As I said earlier, I have seen them. I did 5 not prepare them. 6 Q. Is the information contained in the 7 response accurate, to the best of your knowledge? 8 A. Yes. 9 Q. Is this confidential information? 10 A. I believe Exhibit 570 would be the 11 remainder. I would say not. 12 Q. I'm just asking, because Exhibit 569 is 13 marked as confidential, and I just thought that if 14 it's not confidential, we can redesignate it as just 15 Exhibit 569, without the confidential designation. 16 A. Okay. 17 JUDGE CRAINE: So we have agreement that 18 it's not confidential? 19 THE WITNESS: Yes, sir. 20 JUDGE CRAINE: I'm going to change the 21 designation on it, then. Thank you. 22 Q. Now, Exhibit C-570, you have stated does 23 contain confidential information? 24 A. Yes. 25 Q. And are you familiar with the information 00989 1 in GTE's response in this document? 2 A. Again, only to the extent that I've read 3 these data requests. 4 Q. Is this information accurate? 5 A. In terms of which document? 6 Q. In terms of the response, is the 7 information contained in the response accurate, to 8 your knowledge? 9 A. Subject to check on 570, I would say yes. 10 Q. In the response to A, which is the rate 11 that GTE proposes, I'm assuming that that's not a 12 confidential number? 13 A. In terms of the rate, no. 14 Q. So the rate that GTE proposes is $1.31 for 15 the EIS cross-connect? 16 A. I think it's more correctly $1.31, as 17 revised by the Commission. 18 Q. And the description of what's included in 19 that, is that confidential? 20 A. No, I don't believe so. 21 Q. And MDF, I'm assuming, stands for main 22 distribution frame? 23 A. Correct. 24 Q. And it talks about a connection between the 25 main distribution frame, but it doesn't say where the 00990 1 other end of it is. Is it correct that this is a 2 connection from the collocating CLEC's space to the 3 MDF? 4 A. Correct. 5 Q. So it's a direct connection? 6 A. Yes, it is. 7 Q. And is it also correct that GTE is only 8 proposing a recurring charge for this element? 9 A. This reflects what is currently on file and 10 tariffed by GTE, which captures this as a recurring 11 cost -- I mean, a recurring charge, yes. 12 Q. So in GTE's tariff, there's no nonrecurring 13 charge for this collocation element? 14 A. Not that I'm aware of, no. 15 Q. Now, Exhibit 571 is not confidential. 16 Again, I would ask if this information is accurate, 17 to your knowledge, in the response that was provided 18 here? 19 A. Yes. 20 Q. As part of this response, GTE states that 21 if the space in the manhole or conduit outside GTE's 22 central office is not available, the CLEC has the 23 option to pay for the construction of additional 24 facilities. Is this a charge that's reflected in 25 GTE's current tariff? 00991 1 A. Yes, I believe so. 2 Q. And is it on an ICB basis or is it a flat 3 charge? 4 A. I really don't know. 5 Q. If the CLEC pays for the construction of a 6 manhole and conduit, is that facility then dedicated 7 to the use of the CLEC? 8 A. I believe the conduit is dedicated. 9 Depending on the location of the manhole, it may or 10 may not be. 11 Q. And why would it depend on the location as 12 to whether it would be dedicated or not? 13 A. Primarily, I would respond to that by 14 saying it depends on whether some other parties would 15 have use of that manhole. In other words, would they 16 be bringing their facilities to a GTE central office 17 in such a fashion that they could utilize that 18 manhole. 19 Q. Well, let me back up a little bit and make 20 sure that I understand this. Now, this would only 21 apply in circumstances when there is insufficient 22 capacity in the existing manhole and conduit system 23 into the GTE central office; is that correct? 24 A. Primarily, yes. Well, there may be other 25 circumstances that would generate that, but I can't 00992 1 think of any. 2 Q. So let's assume that that has occurred in a 3 particular GTE central office and the CLEC needs to 4 get into the central office. Under those 5 circumstances, would GTE charge the CLEC for the 6 costs of construction in the same way that it charges 7 for building modification? And let me explain what I 8 mean by that, that the CLEC would pay for the entire 9 cost up front and then, as additional CLECs came 10 along and needed that same facility, there would be a 11 pro rata refund? 12 A. I'm going to defer that question to Mr. 13 Lee, since it is a pricing, cost recovery issue. 14 Q. Exhibit 572, is the information in the 15 response in this document accurate, to your 16 knowledge? 17 A. Yes. 18 Q. And Exhibit 573, is the information 19 contained in the response in this document accurate, 20 to your knowledge? 21 A. Yes. 22 Q. Would you turn to your rebuttal testimony 23 of November the 9th, specifically page three. And in 24 the first line, you use the phrase, Letting one's 25 fingers do the walking through the Yellow Pages. And 00993 1 I just wondered whether that's a slogan that GTE gets 2 to use in its advertising, or is that just for the 3 bell -- you don't really need to answer that. It's 4 facetious. But if you could sing the jingle, I'd 5 love to hear it. 6 On line 12, you reference GTE's new 7 collocation cost study, and I think you had some 8 discussion about this with Ms. Rendahl, and clarified 9 that it's not been filed in this proceeding. It also 10 has not been provided in response to discovery 11 requests; isn't that correct? 12 A. That is correct. 13 Q. So there's no basis for the Commission or 14 the other parties in this docket, other than GTE, to 15 compare this new collocation cost study with any of 16 the other cost estimates that have been provided or 17 market prices or any other means of determining rates 18 for collocation? 19 A. In terms of my comments, those comments are 20 based on how GTE currently offers collocation 21 service. But let me add that it is also in support 22 of two items. One is that GTE's current tariff be 23 approved on an interim basis, and that GTE would 24 submit a new collocation cost study for the 25 Commission's review. 00994 1 Q. So your references to this new collocation 2 cost study are simply a preview, if you will, of what 3 you would propose to file in a separate docket or 4 another phase of this proceeding? 5 A. Some of the comments, yes, are from the new 6 collocation study. 7 Q. So for example, on page seven, carrying 8 over to page eight of this same testimony, you 9 discuss cable racking, and on the top of page eight, 10 you're referring to labor and materials being 11 calculated to 10-foot lineal increments. That's not 12 part of GTE's current tariff, but it is part of the 13 new collocation cost study? 14 A. That is correct. 15 Q. On page eight, you also discuss power 16 systems. 17 A. Correct. 18 Q. Specifically, on lines 16 and 17, you're 19 discussing the augmentation of power supplies. And 20 the question I have is does GTE impose a separate 21 charge for augmentation of power supplies on an 22 as-needed basis? 23 A. Again, let me qualify that I have not done 24 -- I did not do the cost study on our current 25 collocation tariff. There is, in our current tariff, 00995 1 a charge for DC power. I can tell you that, from a 2 new collocation cost study standpoint, we would look 3 at the incremental cost of providing power. And 4 again, that's what we're referring to here, that the 5 cost of power has to be based on an incremental 6 basis, and if additional power is required, then the 7 incremental cost for the portion which the collocator 8 requests would be costed on that basis. 9 Q. So let me see if I understand what you're 10 saying, that as it's currently configured in GTE's 11 tariff, the cost of power systems, power supplies 12 used by the CLEC is part of the recurring charge for 13 DC power; is that correct? 14 A. Yes, I believe so. 15 Q. And if a CLEC approaches GTE for 16 collocation in their space and everything is worked 17 out, but GTE, in fulfilling that request, sees that 18 it needs to add some more batteries and a rectifier 19 or some other aspect of the power supply, is there 20 any charge at that point that GTE proposes in this 21 proceeding right now for recovering the costs of that 22 addition or augmentation to the power supply? 23 A. I do not believe there is a charge in the 24 existing tariff, but, again, I'm not familiar with 25 the costs in support of that, as to whether or not 00996 1 those costs have been based on the incremental cost 2 of providing DC power. 3 Q. Well, I'm simply asking to clarify, to make 4 sure that I understand your testimony when you're 5 talking about the augmentation being looked at on an 6 as-needed basis, that that doesn't mean that there's 7 another charge; that, at least in the tariff, these 8 costs are recurred through the recurring charge of DC 9 power? 10 A. Again, I'm not aware of one. 11 MR. KOPTA: Thank you. That's all I have. 12 JUDGE CRAINE: Off the record for a moment. 13 (Recess taken.) 14 JUDGE CRAINE: We're back on the record. 15 MR. KOPTA: I neglected earlier to offer 16 Exhibits 569, C-570, 571, 572 and 573 to be admitted 17 in the record. 18 JUDGE CRAINE: And I understand that Staff 19 also wants to offer its exhibit. Any objection? 20 Okay. They are received. While we were off the 21 record -- oh, okay. Before we break for lunch, Dr. 22 Gabel has one record request for GTE. 23 DR. GABEL: This morning, Mr. Powell, I 24 asked your witness, David Tucek, about how he 25 calculated a number at page seven of his rebuttal 00997 1 testimony, and he read some numbers into the record, 2 and he said that they were from a particular 3 spreadsheet. As a bench request, could you have him 4 identify the cell references in the spreadsheet? 5 MR. HUTHER: We'd be happy to. 6 JUDGE CRAINE: Anything else before we 7 break for lunch? Okay. I need a bit of time to 8 confer with the Commissioners on the motion, so let's 9 come back at 1:15. Thank you. 10 (Lunch recess taken.) 11 JUDGE CRAINE: Okay. During the lunch 12 break, I did have a chance to talk with the 13 Commissioners about the two pending motions that we 14 have. The motion that US West filed on November 23rd 15 to strike portions of the shared transport study, 16 we've decided to deny that motion. 17 The motion that US West filed on November 18 24th related to the Sobieski testimony, we've decided 19 not to strike the testimony, but we will provide an 20 opportunity for US West to provide the surrebuttal 21 testimony. And what I'd like to do, if we can, is to 22 put that on first thing in the morning. Would that 23 work? 24 MS. ANDERL: First thing tomorrow morning? 25 JUDGE CRAINE: Right. 00998 1 MS. ANDERL: I believe that the witness who 2 would be providing that is Mr. Hubbard, and it was 3 our hope that we could just let him do that at the 4 start of his appearance on the stand. 5 JUDGE CRAINE: Okay. My main concern is if 6 there's something where Mr. Kopta needs a little bit 7 of time to figure out if he wants to ask questions. 8 So we have him kind of in the middle of the day. 9 Well, that will probably work, because if Mr. Kopta 10 needs some time, we can figure something out. Okay. 11 MS. ANDERL: I was going to say, my 12 thoughts are if we get done with Mr. Reynolds today, 13 start with Mr. Fleming tomorrow, Mr. Hubbard's the 14 second witness. He'll be here even through the end 15 of the day, even if we moved beyond him and then 16 brought him back in the afternoon for Qs and As. 17 JUDGE CRAINE: Okay. That will work. 18 MS. ANDERL: Fine with us. 19 JUDGE CRAINE: Okay. 20 MS. ANDERL: Thank you, Your Honor. 21 JUDGE CRAINE: And I believe that we've 22 pretty well taken care of the AT&T motion to strike 23 this morning. So if there's nothing else, we'll go 24 back to cross-examination. And Mr. ffitch, you were 25 up. 00999 1 MR. FFITCH: Thank you, Your Honor. 2 C R O S S - E X A M I N A T I O N 3 BY MR. FFITCH: 4 Q. Good afternoon, Mr. Langley. My name's 5 Simon ffitch. I'm an Assistant Attorney General with 6 the Public Counsel section. 7 A. Good afternoon. 8 Q. I have a few questions really just to help 9 me understand a little bit the NRC study that you've 10 placed in the record. And I'm looking at, if I could 11 get you to look with me, at Exhibit C-564, which is a 12 summary sheet of the nonrecurring cost study. It's 13 also your JRL-1. 14 A. Okay. 15 Q. What I'd like to do is understand how I can 16 look at this exhibit and put together the cost 17 components for an order for service to a residential 18 customer by a CLEC. And I want to be able to read 19 through this and, you know, identify the components 20 that I would add together to determine the total 21 cost. And we're talking about -- we'll exclude the 22 resale section. I'm talking about service provided 23 by means of an unbundled loop. So if you could help 24 walk me through this -- well, let me stop there. Do 25 you understand my question? 01000 1 A. Yes. 2 Q. Can we do that with this exhibit? 3 A. Let me qualify that this exhibit is a 4 summary of costs that are extracted from the cost 5 study for purposes of illustration. These costs on 6 this particular exhibit are at a service order level, 7 average service order level. One of the aspects of 8 our cost study is that the way that it is constructed 9 gives GTE the flexibility to do a number of cost or 10 pricing mapping opportunities. 11 And if, in fact, you look at this 12 particular exhibit, you're going to see costs on an 13 average service order basis or per service order 14 basis. In the cost study, you're going to see costs 15 that are also on an occurrence, and in some cases, on 16 a loop, port or line basis. 17 The cost study itself supports our pricing 18 filing and, in fact, can be addressed by Mr. Lee. 19 However, if you look at this particular exhibit alone 20 to equate to pricing, it's going to be a little bit 21 awkward. 22 Q. Is there another exhibit that you can point 23 to, which an interested party could look at, the 24 Commissioners, myself, other parties, and track 25 through the cost to provide an individual order to a 01001 1 CLEC customer, residential customer? 2 A. Part of the responsibility of the group 3 that I'm at is to provide cost mapping to our pricing 4 group. 5 Q. Okay, that's fine. Thank you. But could 6 you just answer my question first? Is there another 7 exhibit that we should better look at to go through 8 that exercise? 9 A. And that's what I'm trying to answer. Part 10 of our responsibility is to provide -- 11 JUDGE CRAINE: Wait a minute. Yes or no? 12 THE WITNESS: Yes. 13 JUDGE CRAINE: All right, thank you. Go 14 ahead and explain, if you want to. 15 Q. I guess I'd like to know, if there is one, 16 then which exhibit is it? 17 A. It is part of the exhibit of Mr. Lee. 18 Q. Part of the exhibits of Mr. Lee? 19 A. Yes, as I was trying to explain, my group 20 prepares costs that are used to map to pricing. So 21 out of our cost study, as part of Mr. Lee's exhibit, 22 are the cost numbers that he uses. 23 Q. I'm sorry, could you repeat that? I'm 24 having trouble understanding the nexus between this 25 cost study and, I guess, Mr. Lee's pricing numbers? 01002 1 A. Well, GTE is filing cost-based pricing. 2 For those prices that we are filing, this cost study 3 supports them and we, in fact, provide information or 4 input from our cost study to his pricing that he's 5 proposing. 6 Q. I guess what I'm envisioning is that I 7 would be able -- and I was hoping with JRL-1 to be 8 able to it sit down and list the cost components that 9 would be imposed on a CLEC providing residential 10 service to come up with a sum of the total cost, 11 which you're proposing for providing that service, 12 and then do a side-by-side comparison of the 13 resulting prices for those same components and a 14 resulting collo price. Can I do that with GTE's 15 exhibits? 16 A. You cannot do it with this exhibit. You 17 can do it with the exhibit that Mr. Lee has filed. 18 MR. FFITCH: Okay. May we have a moment, 19 Your Honor? 20 JUDGE CRAINE: You may. 21 Q. I don't mean to put you on the spot. If 22 you need a moment to refer to Mr. Lee's exhibits to 23 perhaps give me some better guidance, that would be 24 fine. And counsel for AT&T has just pointed out an 25 exhibit to me, RKL-6, which might contain that 01003 1 side-by-side, component-by-component statement of 2 cost and price for GTE. And I'm looking at RKL-6, 3 page two of eight. Is that the exhibit that you were 4 referring to? 5 A. Yes, it is. 6 Q. Are these confidential numbers? I assume 7 they are. 8 A. Yes, they are. 9 MS. PROCTOR: That exhibit is not marked as 10 confidential. 11 Q. I'm looking at RKL-7, which is attached to 12 RKL-T, which is the reply testimony of Lee of 13 November 18th. It does not appear to be marked 14 confidential. My exhibit list is -- 15 A. It's not my exhibit to mark as 16 confidential, but the cost numbers contained in those 17 are confidential, because they're confidential in the 18 cost study filing and in my testimony. 19 JUDGE CRAINE: I do not have the C 20 designation for that exhibit, and the copy I have is 21 white, does not say confidential on it. 22 MS. PROCTOR: I would submit that if there 23 was any confidentiality, it's been waived. 24 JUDGE CRAINE: Mr. Lewis -- or excuse me, 25 Powell. 01004 1 MR. POWELL: That's all right, Your Honor. 2 It was not an inadvertent nonmarking. It's not been 3 the company's practice to mark these prices as 4 confidential. So it's not -- 5 JUDGE CRAINE: Okay. Well, I'm looking at 6 a column that says cost, and under that, it says A. 7 Are those confidential numbers? 8 MR. POWELL: May I have a minute, Your 9 Honor, to confer with Mr. Lee? Judge Craine, I think 10 the question pending from the bench was whether the 11 numbers in Column A on a Lee exhibit originally 12 marked RKL-6 are confidential, and the answer is no. 13 JUDGE CRAINE: Thank you. 14 MR. FFITCH: Thank you, Counsel. 15 MR. POWELL: I don't mean to inject further 16 confusion, but for purposes of the record, it may be 17 that the bench and the parties haven't had a chance 18 to get through Mr. Lee's errata, but the last one on 19 the errata sheet filed this morning corrects the 20 designator for that exhibit. It should have been 21 RKL-7, not RKL-6. 22 JUDGE CRAINE: Okay. 23 MR. POWELL: And it has been marked for 24 identification as 587. 25 MR. FFITCH: That's the November 18th 01005 1 testimony and attachment? 2 MR. POWELL: Correct. The testimony would 3 be 586, the attachment's 587, and corrected to be 4 RKL-7. 5 MS. PROCTOR: Just so we're clear, Mr. 6 Powell, that's an eight-page exhibit? 7 MR. POWELL: Yes, ma'am. 8 MS. PROCTOR: Thank you. 9 MR. POWELL: Your Honor, may I confer with 10 Mr. Langley, as well? Excuse me. 11 JUDGE CRAINE: Sure. 12 Q. Are you ready to go ahead, Mr. Langley? I 13 think I may be, if you're ready. 14 A. Yes. 15 Q. All right. I think I've zeroed in on page 16 four of what's been now identified as RKL-7. And I 17 guess I'll go back to my fundamental question, which 18 is can we look at this exhibit and see the components 19 of cost and then how those are translated into price, 20 so that we could look at a total cost and then price 21 for a representative order for residential service to 22 a CLEC customer? 23 A. Yes. 24 Q. And to do that -- and here I'm going to be 25 asking for your help a little bit, or just to make 01006 1 sure I'm understanding this exhibit, which I will 2 confess I haven't looked at in detail before. The 3 cost figures that are in Column A, those are not 4 confidential? 5 A. The cost figures are in Column A. 6 Q. And perhaps the best thing to do here is if 7 you could sort of walk -- knowing what it is I'd like 8 to try to do, if you could walk through the exhibit 9 from that point and tell me what I need to look at to 10 come up with that result, the cost per order? 11 A. That is going to be dependent on the type 12 of request that you make. If it's for a new service, 13 if it's a change, and which category of service that 14 you want, assuming that it is a nonengineered, basic 15 loop, new installed. 16 Q. So that would be in the first block of 17 numbers? 18 A. Those are all the cost components for that 19 particular function in lines 42 through 45. If you 20 move to the right, under Column D is where you will 21 find the ordering charges associated -- ordering and 22 provisioning charges associated with that particular 23 request. There are three components, ordering, 24 provisioning and dispatch, and disconnect. 25 Q. Those are charges in Column D? 01007 1 A. Those are costs. 2 Q. Those are costs. Now, those are the same 3 as in Column A. Was that just a restatement of the 4 same cost? 5 A. Yes. 6 Q. Now, let me make sure I understand the 7 hypothetical that we're working with here. Would 8 this be a -- to the extent there is a representative 9 order from a CLEC for a residential customer, maybe 10 perhaps quite a hypothetical situation, would they be 11 ordering from this section of the table, a 12 nonengineered, basic loop, new service? 13 A. That is correct. 14 Q. So far, we would sum those three numbers, 15 then, for ordering, provision and -- what is D-i-s-p? 16 A. Dispatch. 17 Q. Dispatch and a disconnect fee? 18 A. Correct. 19 Q. And then, where do we go from there to 20 determine how much this is going to cost? 21 A. You would then go to Column F to determine 22 the cost for the work in the central office in order 23 to complete that connection. That cost is on a per 24 loop basis. Assuming you only had one loop, you 25 would have that cost. If you had multiple loops on 01008 1 the same order, you'd multiply that times the number 2 of loops. 3 Q. Okay. So these are not confidential 4 numbers, so that's $7.37 to do that? 5 A. That's correct. 6 Q. The cost. So far, we're at approximately 7 $38 in cost, subject to check? 8 DR. GABEL: Excuse me, just so that I'm 9 following this, too. I just want to understand why, 10 in Column F, you have $7.37 rather than the $8.02? I 11 see the formula for how it was calculated, but I want 12 to understand the motivation or the process that was 13 being captured through this adjustment? 14 MS. PROCTOR: Could I just ask, Dr. Gabel, 15 where's the formula? 16 DR. GABEL: To the right of Column H, in 17 between Column H and Column J. 18 MS. PROCTOR: In the even tinier numbers. 19 Okay, thank you. This is obviously why you're the 20 consultant. You can read that. 21 THE WITNESS: The process, again, as I 22 started to mention earlier, we provide total cost by 23 each category and each function. In the process of 24 extrapolating this to prices, we have derived a 25 number of formulas in order to weight each of these 01009 1 functions in determining the total price. And 2 really, Mr. Lee needs to address that. But what you 3 see in Column F is a derivative of that formula and 4 the distribution process, rather than the total 5 number that you see in Column A. 6 Q. Can you read me that formula that is next 7 to line 44, Mr. Langley? 8 MS. PROCTOR: It's like an eye test. 9 Q. I confess, I cannot read it, and I did, in 10 fact, purchase some enhanced spectacles just recently 11 because of certain deterioration that was occurring, 12 and I can't read this. So I'm wondering if you 13 could? 14 A. No, I cannot. 15 DR. GABEL: Can I suggest -- I think I can 16 read it, just so that we can make sure we understand 17 this. I think it's F44 is equal to A44 times (N44 18 divided by N44 plus N48 plus N52). 19 MR. KOPTA: Would you do that for all of 20 the formulas? 21 DR. GABEL: And I'm sorry to interrupt, Mr. 22 ffitch, but I still just want to understand, though, 23 this is a distribution, but what's being distributed 24 by that N44, N48 and N52? 25 THE WITNESS: As I said earlier, this is 01010 1 part of the pricing process. And I really need to 2 defer to Mr. Lee to explain that. 3 Q. Well, then, let's continue on. Perhaps 4 before I continue on with the cost components, just 5 going down to line 46, looking across, in Column A, 6 we have, for an engineered basic new loop, we have 7 $20.90. Column B, it goes to $12.44. And how does 8 that occur? 9 A. It occurs by the distribution formula that 10 is shown to the right of Column H. 11 Q. And is that also something that you would 12 defer to -- 13 A. Yes. 14 Q. -- Mr. Lee? 15 A. Yes. 16 DR. GABEL: Mr. ffitch, I'm sorry to 17 interrupt again here, but I'm afraid Mr. Lee may ask 18 this. In the formula, it says it's A46 times FACS, 19 F-A-C-S. Is that a term from your cost study or 20 would that be something for Mr. Lee to address? 21 THE WITNESS: That is data that is provided 22 to Mr. Lee based on activity from our cost study. 23 DR. GABEL: And FACS would represent, then? 24 THE WITNESS: In this case, FAC actually 25 represents the facility assignment center. 01011 1 DR. GABEL: And that's a percentage? 2 THE WITNESS: Well, let me back up. 3 Actually, if you go to -- that is not the FAC center. 4 If you go back to page eight of eight, it's a factor, 5 and each of those factors are defined at the bottom 6 of page eight. 7 MS. PROCTOR: And I'm sorry, which one -- 8 that was -- FAC, was there a number? I understood 9 Dr. Gabel to say FACS, which sounded plural. 10 DR. GABEL: I think it may be FAC8. 11 MS. PROCTOR: Eight. 12 MR. FFITCH: Mr. Langley? 13 THE WITNESS: I believe you're right. 14 Q. All right. Well, we're down to -- we're at 15 approximately $38 so far. Then we come to Column G, 16 field installation. 17 A. Correct. 18 Q. Again, that is a cost. These are -- so 19 far, all of these are cost components? 20 A. Correct. 21 Q. All right. Now, we've completed that first 22 block of cost components for a nonengineered basic 23 new loop. Are there other cost components? We're up 24 to approximately $80 in cost for a loop. Is that the 25 total cost, or are there other components? 01012 1 A. No, there are other components. 2 Q. Could you show me where to find those on 3 this exhibit? 4 A. Yes, if you look at lines 57 through 58B, 5 you'll see, in Column A, either unit or total cost. 6 And again, the determination of those costs is part 7 of the pricing exercise. Those include record order, 8 fixed cost, IT/DP shared cost, which is internal 9 telecommunications data processing cost, and 10 provisioning shared cost. 11 Q. All right. And when you say record order, 12 is it only line 57 that is the record order? 13 A. Yes. 14 Q. You've mentioned there are unit costs and 15 total costs involved here in these additional 16 elements? 17 A. Correct. Line 57 is the unit cost. Lines 18 58, 58A, and 58B are total cost. 19 Q. All right. And those are total 20 company-wide costs, 58, 58A, and 58B? 21 A. 58A is total company, 58B is total company, 22 58A is Washington state specific. 23 Q. How does one determine, then, which portion 24 of those costs are attributed to the individual 25 order, those total costs that you just mentioned? 01013 1 A. That's a question for Mr. Lee. 2 Q. But if we got the unit cost from those 3 three total categories and added it to the previous 4 numbers, we're up to about $80, and we have the $5 5 for ordering, takes us up to 85, and then we have the 6 components -- the total components that would have to 7 be disaggregated to give you the remaining total or 8 unit cost; is that right? 9 A. Actually, for the category that you're 10 talking about, a nonengineered basic loop, you would 11 need to go to Column D, or lines 57, 58, 58A. 12 Q. All right. 13 A. In addition to that -- and I omitted some 14 other costs that would be included for this 15 particular category of service, and that is 16 preordering cost, which is line 54, and a no access 17 customer will advise cost on 58 -- excuse me, on 55A, 18 55B, which would be applicable to this particular 19 exercise that you're proposing. 20 Q. So if you look at Column D and add all the 21 figures in Column D, you come up with a number of 22 $50.77 in line 59? 23 A. That is true. 24 Q. And what does that represent? 25 A. That is a ordering cost -- a weighted 01014 1 ordering -- excuse me. That is a weighted ordering 2 provisioning cost for the nonengineered basic loops 3 initial service order. 4 Q. But that's not the total cost for the 5 purchase of this -- for the elements that would need 6 to be purchased to provide this kind of service, is 7 it? I mean, when you were walking me through it 8 before, we were up to $85, roughly speaking. So 9 there's $30 plus missing so far? 10 A. Well, and what you're doing is you're 11 mixing costing and pricing, and that's the difficulty 12 I'm having in walking you through this. If you want 13 to take a nonengineered basic loop and look at cost 14 only for that, it is different than if you take these 15 on a weighted basis, which Mr. Lee has supplied this 16 exhibit to demonstrate the pricing. 17 If you take the basic loop in isolation, 18 you would have the cost in Column A, lines 42 through 19 45. For the ordering portion, you would have 20 ordering, provisioning, dispatch and disconnect. 21 Those are the first three. 22 If, in fact, central office activity is 23 required, it would be the cost listed in Column A, 24 $8.02 times every loop that you wanted or requested 25 on that service order. If, in fact, it required a 01015 1 field dispatch to complete that installation, it 2 would be Column A, line 45, $54.02. 3 So if, in fact, the order was required, 4 which it will be, if it requires central office 5 jumpering, which it would, if it, in fact, requires a 6 field disconnect, which it may or may not, depending 7 on the network arrangement, you add those -- all 8 those items in Column A, you add the total cost for a 9 nonengineered basic new loop cost. 10 Q. Okay. Well, I may stop there. And some of 11 these things, as you've indicated, perhaps are 12 pursued better with Mr. Lee. I have a couple of -- 13 when I say stop there, that's with regard to the 14 walk-through. I have a couple of other questions. 15 In Mr. Lee's testimony, in fact, he 16 discusses a customer transfer charge. And I can, I 17 think, direct you to that. I just want to -- I'm 18 assuming you're familiar with the concept of a 19 customer transfer charge. I just wanted to ask you 20 -- well, are you familiar with that as part of GTE's 21 testimony in this case? 22 A. Not by that terminology. If you're talking 23 about a changeover charge? 24 Q. Excuse me. Maybe I've used the wrong term. 25 I stand corrected. I was referring to the customer 01016 1 -- well, I'm looking at RKL-T, page 47, which is Mr. 2 Lee's direct testimony filed July 9th. There's a 3 reference there to an interim customer transfer 4 order. Is there a difference between the changeover 5 charge and the transfer order charge? 6 A. I don't have Mr. Lee's testimony, so I'm 7 not familiar with the reference. I'm not able to 8 answer the question, because I'm not sure what you're 9 referring to. 10 Q. Well, the reason I'm bringing this up is I 11 don't want to confuse you about Mr. Lee's testimony. 12 It's obviously not your testimony, but I'm trying to 13 find out where, if anywhere in the NRC study, there's 14 a discussion of these type of charges? 15 A. In this NRC study, the only thing that I 16 would, I guess, equate based on the terminology that 17 you're using is, in the resale segment of wholesale 18 services, we do have a changeover charge to change an 19 existing GTE customer to a CLEC account. And that 20 exists on a couple of levels in the cost study, and I 21 think also in the pricing, but that's the only 22 equivalent that I can think of. 23 MR. POWELL: Mr. ffitch, forgive me for 24 interrupting, but it may be helpful for you and for 25 clarification for the record. Since Mr. Langley 01017 1 doesn't have Mr. Lee's July 9 testimony in front of 2 him, that portion of Mr. Lee's testimony was with 3 reference to the old NRC study, which has not been 4 offered in evidence. So I think part of Mr. 5 Langley's confusion is that the terminology for the 6 activity changed from the old study to the new study. 7 MS. PROCTOR: Could I just ask for a 8 clarification? Mr. Powell has said again that the 9 old NRC study has not been offered into evidence, and 10 I had a recollection that it was in evidence in Phase 11 I. 12 MR. POWELL: You're probably right about 13 that, Ms. Proctor. I meant today. 14 MS. PROCTOR: Okay, thanks, I appreciate 15 it. 16 Q. Well, I'd like to try to avoid getting 17 bogged down in the specifics or the details of what's 18 in Mr. Lee's testimony, because my question's perhaps 19 a bit more direct. Let me start again. Does GTE 20 propose to charge a separate customer transfer or 21 changeover charge to a CLEC who picks up a customer 22 from GTE? 23 A. Again, and I appreciate Mr. Powell's 24 clarification, because I do remember the old transfer 25 of service charge that was in the prior filing. In 01018 1 the NRC that we are discussing, there's not such a 2 charge, but there is, again, as I've said, for 3 resale, for a customer that currently exists with GTE 4 and migrates to a CLEC, there is a resale changeover 5 charge. 6 Q. But in the cost study, 565, that you've 7 submitted, there is no customer changeover charge? 8 A. In the NRC, or the nonrecurring cost study 9 that we filed, those are captured as migration, as 10 is, migration plus or minus, migration as specified. 11 Q. Okay. So if I look on JRL-1, Exhibit 12 C-564, those columns appear to have values in them 13 only with relation to resale -- I'm sorry, let me 14 give you time to find that. 15 A. Okay. 16 Q. Okay. Well, now you're looking at JRL-1? 17 A. Yes. 18 Q. And I'm asking if those migration charges 19 that you've mentioned are shown only in connection 20 with the resale -- 21 A. Yes. 22 Q. -- component? But there is no -- you don't 23 appear to show any customer changeover charges for 24 other types of orders? 25 A. That's correct. 01019 1 Q. Why would there not be or why would GTE not 2 be imposing or seeking that kind of cost recovery for 3 orders other than resale? 4 A. Well, first, if you are ordering new 5 services, it's not a changeover, so those wouldn't be 6 applicable. If it is, in fact, an existing bundle 7 service that you're requesting as an unbundled 8 service, it is not a migration of the current 9 arrangement and, in fact, is a new arrangement, and 10 we view those as such, which means that there is 11 necessary work in order to change the account and 12 change the network configuration. So we do not view 13 migration of unbundled networks as something that 14 would occur. 15 Q. And again, those charges would also be 16 reflected on Mr. Lee's Exhibit RKL-7? 17 A. Which charges? 18 Q. The changeover charges, the customer 19 transfer charge? 20 A. For resale, yes. 21 Q. For resale? 22 A. Yes. 23 Q. I'd like to direct your attention to line 24 64 on JRL-1. 25 A. Okay. 01020 1 Q. And that's a line that's designated GTE 2 telephone operations, wholesale ordering fixed costs, 3 and that is an element or an item that is referred to 4 in your testimony on page 37, your August 28th 5 testimony, starting at line 13, as a transition cost; 6 is that correct? 7 A. Yes. 8 Q. I just want to make sure that I'm looking 9 at the right number on the chart that's related to 10 that testimony. And those are described in your 11 testimony as fixed costs related solely to wholesale 12 nonrecurring operations on a nationwide basis, not 13 associated with a particular order type or affected 14 by volume; is that correct? 15 A. Correct. 16 Q. And I'm sort of paraphrasing just your 17 testimony here. You break it down into NOMC staff, 18 support personnel in Irving, Texas, and Tampa, 19 Florida, and hardware and software. I guess my first 20 question is what does a CLEC actually get for that as 21 a result of that activity by GTE or for that price 22 tag? 23 A. Included in those costs are the 24 establishment of national open market centers, which 25 are dedicated to CLECs, which CLECs have requested. 01021 1 In addition to that would be the cost associated with 2 delivering electronic interfaces as mandated by the 3 Telecommunications Act, and of course the associated 4 support and operational cost necessary to support 5 those systems. 6 Q. It's my understanding from the testimony 7 earlier this morning that the electronic interface 8 doesn't have significant flow-through, that it stops 9 upon receipt of the order, there's some editing 10 function, but then it becomes manual. So my 11 question, again, is what do you actually get as a 12 CLEC for this significant transfer cost that's shown 13 on the exhibit? 14 A. I believe I just answered that question. 15 Q. GTE is engaged in a merger with Bell 16 Atlantic at the present time; is that correct? 17 A. Yes. 18 Q. And the merging companies have stated they 19 expect to see significant efficiencies and cost 20 savings as a result of the merger? 21 A. I believe that statement was made, yes. 22 Q. And both companies are large incumbent 23 local exchange companies, LECs, who are subject to 24 the unbundling and interconnection requirements of 25 the Telecom Act of '96, are they not? 01022 1 A. Yes. 2 Q. So they both presumably are engaged in this 3 same process of providing unbundled network elements 4 through a wholesale ordering process? 5 A. Yes. 6 Q. So this category of national expenses, 7 national level activities that you've referred to as 8 transition cost is going to encompass probably 9 similar activities conducted by Bell Atlantic, is it 10 not? 11 A. Yes, but not for the same operations. 12 Q. So wouldn't it be fair to say that if there 13 is an opportunity for efficiencies or cost savings in 14 this area, that this number shown on line 64 could 15 well be a lower number after the merger is complete, 16 assuming it receives regulatory approval? 17 A. I don't know that factually. I would offer 18 an opinion that, despite the regulatory approval and 19 when that occurs, there's going to be some prolonged 20 period over which both companies are going to have to 21 address their systems or procedures before any kind 22 of synergy can be collectively accomplished by both 23 companies. Until that happens, these costs are 24 appropriate. 25 Q. Do you know how long that period would be 01023 1 for CLECs and their customers to have to wait for 2 those efficiencies or cost savings? 3 A. I don't have any idea, no. 4 Q. Has GTE done any studies to determine -- 5 pardon me. Let me rephrase that. Have you done any 6 studies to determine whether the figure shown on line 7 64 would benefit from cost savings or efficiencies as 8 a result of the merger? 9 A. No. 10 Q. Do you know if GTE -- anyone at GTE has 11 performed a study of that nature? 12 A. Not that I'm aware of. 13 Q. Are there any other categories of costs 14 shown on Exhibit JRL-1, which would benefit from 15 efficiencies of cost savings resulting from a merger 16 with Bell Atlantic? 17 A. I believe it's too early to make that 18 assessment. 19 Q. Do you know when that assessment would be 20 able to be made? 21 A. I'm sure that the first step is to gain 22 approval of the merger, and then we'll move forward, 23 but I have no basis to put that on a calendar, no. 24 Q. So we would actually not be able to tell, 25 then, before the merger, whether there would be any 01024 1 efficiencies or cost savings in any of these areas; 2 is that your testimony? 3 A. I would say yes, with a qualification that 4 I have some limited knowledge of interaction with the 5 various Bell companies, and I do know that there are 6 significant differences between the systems and the 7 processes that the Bell companies use and GTE uses. 8 Therefore, I expect that there would be a significant 9 effort to merge those processes and those systems in 10 order to gain efficiencies. 11 MR. FFITCH: Thank you. I don't have any 12 further questions, Your Honor. Thank you, Mr. 13 Langley. 14 JUDGE CRAINE: Okay. I have Covad for 15 15 minutes. 16 MR. JENKINS: We have no questions, Your 17 Honor. 18 JUDGE CRAINE: No questions. And did MCI 19 have questions? 20 MR. PENA: No, Your Honor. 21 JUDGE CRAINE: Okay. Dr. Gabel. 22 E X A M I N A T I O N 23 BY DR. GABEL: 24 Q. Mr. Langley, I'd like to begin by following 25 up with Mr. ffitch's last line of questioning. Since 01025 1 you said you have some understanding of operations of 2 the Bell companies, are you familiar with what Bell 3 Atlantic South has done to have their OSS operations 4 compatible with Bell Atlantic North, that being -- 5 the old Bell Atlantic being Bell Atlantic South and 6 Bell Atlantic North being NYNEX? 7 A. No, I'm not. 8 Q. So you don't know the degree to which they 9 have achieved cost savings in the provision of 10 operational support systems due to the merger? 11 A. No. 12 Q. All right. Also, as a follow-up to Mr. 13 ffitch, Mr. ffitch was trying to go from Mr. Lee's 14 exhibit to what's the final price. I'd like to go 15 from Mr. Lee's exhibit to your cost study, so I'm 16 sure that I understand where the data was obtained. 17 So I'd like to ask you to look at Mr. Lee's Exhibit 18 7, page four, loop nonengineered basic. And 19 simultaneously, if you'll pull out the November 10th 20 filing, which is the revised wholesale NRC cost 21 study. 22 And first, I'd like to ask you to confirm 23 that the value that appears in Cell 42A of Exhibit 7, 24 page four, comes from page 27.3 of the November 10th 25 study; is that correct -- November 10th filing? 01026 1 A. Yes. 2 MS. PROCTOR: Sorry, Dr. Gabel, what was 3 the cell reference? 4 DR. GABEL: The first one on the page, line 5 42, Cell A. 6 THE WITNESS: Yes. 7 Q. That value that appears on the November 8 10th filing is composed of two components, an I and 9 an O. Does I stand for incoming and O stands for 10 outgoing? 11 A. That's one version. Install and 12 disconnect, yes. 13 Q. Well, if it is disconnect which is included 14 in that first value, the $19.58, why would there also 15 be a disconnect at 43B, and where does that appear in 16 the November 10th filing? 17 A. Actually, that's not in the November 10th 18 filing. The November 10th filing is only the updates 19 that were impacted by the difference in the rate of 20 return. In order to find the amount found on 43 -- 21 line 43B, Column A, you need to go to the full study, 22 and it is on page 5-WA30. 23 Q. That was 5-WA30? 24 A. Correct, which is the field work portion 25 disconnect cost. If you look at the first line, 01027 1 nonengineered basic, going over to the third column, 2 cost per order for disconnect. 3 Q. All right. Has there been any effort by 4 you or Mr. Lee or somebody in GTE that would provide 5 this kind of mapping, because it would have taken me 6 an eternity to locate where the 40 cents was in this 7 study. Have you made any effort to annotate the 8 links between what appears on Mr. Lee's summary page 9 and your cost study? 10 A. In terms of page reference? 11 Q. Yes. 12 A. No. 13 Q. Has an electronic form -- electronic filing 14 been made, which would allow me to do that kind of 15 trace of where -- how one number flows to another 16 number? 17 A. The electronic copy in Excel does have some 18 audit capability. However, the Excel version of the 19 cost study filing doesn't have a direct link to Mr. 20 Lee's testimony. So in that respect, the answer 21 would be no. 22 Q. Returning to Mr. Lee's filing, on Line 44, 23 Cell A, there's a value of $8.02 for CO activity. Is 24 that value found in your initial filing? 25 A. Yes. 01028 1 Q. I'm sorry, Mr. Langley. Actually, before 2 we go for that $8.02, let me go back to the 40 cents, 3 which was on page 5-WA30. 4 A. Correct. 5 Q. How would I know how that 40 cents was 6 calculated? Could I look at that page and tell how 7 it was calculated? 8 A. No, you would need to go to the supporting 9 pages following that. 10 Q. This one -- 11 A. Page 31, as a matter of fact. 12 Q. Okay. And on page 31, the calculation 13 appears -- 14 A. On the second line, nonengineered basic O 15 order activity or disconnect going across to the last 16 column, Column J, which reflects the cost per order. 17 Q. Okay. Was the electronic copy of your cost 18 study filed with the Commission? 19 A. I believe so, sir. 20 Q. Well, as a request from the bench, if it 21 has not, please do so. And also as a request from 22 the bench, and this either is a request for you or 23 for Mr. Lee, is that you identify the links between 24 Mr. Lee's Exhibit 7 and your cost studies. So just 25 as you've provided us guidance that the value that 01029 1 appears on line 43B appears in your cost study at a 2 particular page, that kind of page reference would be 3 very helpful. 4 A. Is that a separate request? 5 Q. It could be the same request. 6 MS. PROCTOR: Do we have numbers for these? 7 JUDGE CRAINE: As we turn to our number 8 expert. 9 MS. ANDERL: We have been keeping track, 10 Your Honor. Depending on whether you want to number 11 the bench request that the parties submitted this 12 morning, which was the one relative to the HCPM 13 Staff-proposed inputs on the FCC model the parties 14 had an opportunity to respond to in writing, if you 15 want to give that a number, that's 117. If you 16 don't, then we start with 117 today. And the request 17 that Dr. Gabel just gave, we have down as 119, and 18 there's -- so one other bench request also issued 19 today. 20 MS. PROCTOR: Could I request that the one 21 that we responded to this morning be given a number? 22 It's easier to keep track than to refer to it as the 23 November 27th request responded to on December 3rd. 24 JUDGE CRAINE: So would that be -- 25 MS. ANDERL: 117. 01030 1 JUDGE CRAINE: 117 for that one. Perhaps 2 you could just recite what you've got down for 3 numbers for what we've done today? 4 MS. ANDERL: Okay. So then the number 118 5 was to Mr. Tucek, to provide the percentage of the 6 business lines served by DLC. Number 119 was also to 7 Mr. Tucek, for the cell references in the spreadsheet 8 mentioned on page seven of his rebuttal. And then 9 120 is the request just now propounded. 10 JUDGE CRAINE: Thank you. That helps. 11 Q. Again, Mr. Langley, looking at the 40 cents 12 on the disconnect, what activity is represented by 13 this disconnect charge of 40 cents that is not 14 already reflected in the ordering costs that appeared 15 on line 42? 16 A. Line 42 reflects the service rip activity 17 to generate the service order in order to promulgate 18 the activity or the action to disconnect the service. 19 In the case of the cost on line 43B, Column A, this 20 is reflective of the cost for a field personnel, a 21 zone technician, in our case, to actually go out and 22 make a physical disconnect in the field. However, we 23 have weighted this with the probability of that 24 occurring, and the probability, as you could see from 25 the study, is very low. So when it's spread across 01031 1 all service orders, you get a very low number, as 2 we've depicted here. 3 Q. Earlier today, I was asking Mr. Tucek about 4 grooming, and there was an issue of a business 5 customer who will be using 20 unbundled loops. That 6 business customer might be served with a DS1, rather 7 than 20 copper pairs. And Mr. Tucek said it was -- I 8 believe he stated it was his understanding that the 9 unbundled loops would be demultiplexed from a DS1 to 10 a DS-O speed. He said that the reason for this was 11 something you might be able to address. Can you 12 explain if, in fact, that is what GTE would do, and 13 if so, why? 14 A. Can I ask a point of clarification? In the 15 scenario, I'm assuming that you're talking about a 16 DS1 from an IDLC to the end user? 17 Q. Yes, an IDLC from the -- say from a PBX, 18 from the PBX, there's a DS1, and it stays at the DS1 19 level. And then, at the central office, would you 20 slow it down to DS-O before sending it over to the 21 CLEC? And if so, why? 22 A. Okay. If I'm understanding your question, 23 if it's DS1 from the end user to the central office, 24 we, in fact, would not need to change the speed or 25 the facility. And if it was a DS1 level, we'd be 01032 1 able to cross-connect at the CO. 2 The other scenario, just for clarification, 3 if it were a DS1 between the end user and the IDLC, 4 at the IDLC, it would be combined with other traffic. 5 So to extend those loops from the end user all the 6 way back to the CO, it would be necessary in that 7 case to take that DS1 traffic and extend it to a D4 8 channel bank in order to get back to the CLEC. 9 Q. And in that first situation, where there's 10 DS1 all the way to the end user, would GTE be 11 charging a customer for grooming? Even though there 12 is no grooming, would there be a charge or does GTE 13 propose such a charge? 14 A. In the case of a dedicated DS1 from the end 15 user to the CO, that presupposes that the end user 16 has purchased a DS1 in order to have digital 17 services. Under that scenario, he is currently 18 paying for the DS1, so there wouldn't be an 19 applicable charge for that, or should not be. 20 Q. Another topic, Mr. Langley. GTE's proposed 21 that a new docket be established by the Commission to 22 consider its new collocation studies. Why weren't 23 these studies filed in Phase I of the docket? Were 24 they just not ready at that time? 25 A. Generally, that's what has happened. The 01033 1 impetus to develop a long-run incremental cost study 2 in support of collocation, rather than the current 3 filings, and to expand that to be more comprehensive 4 is the basic reason that we developed the new 5 collocation cost study. And again, it was not 6 available at the time of the Phase I filings. 7 Q. In this docket, you have filed a new NRC 8 cost study. Have you made any comparison about what 9 are the estimated costs associated with an order for 10 an ordinary unbundled loop, based on your new study, 11 as opposed to what was submitted in Phase I? 12 A. Yes. 13 Q. And what were the results of those 14 comparisons? 15 A. Well, again, as I stated this morning, the 16 Phase I cost study was filed prior to the 17 Telecommunications Act of '96, plus the fact that it 18 was based on a set of operational procedures and 19 systems that had not been fully developed and 20 expanded, again, based on limited experience with 21 competition. 22 Since that time, we have -- the study that 23 we were currently talking about and have on record is 24 more comprehensive in describing the types of resale 25 services and UNEs that can be requested by CLECs, 01034 1 plus it is far more comprehensive in the OSS 2 interfaces, and then, finally, more comprehensive in 3 detailing the actual cost that GTE will incur on a 4 forward-looking basis in order to satisfy requests 5 from CLECs. 6 Q. You've described the qualitative 7 difference. Can you provide the quantitative 8 difference for an unbundled basic loop? 9 A. I do not have the numbers in front of me. 10 If you were to compare a basic unbundled loop, I do 11 not believe that the cost varies significantly. 12 Again, without the numbers, subject to check, I 13 believe that they're probably within 10 percent. For 14 the other categories of services, there are 15 significant differences, because the original study 16 lumped all costs together, rather than providing the 17 full scope of types of services that would be 18 provided to a CLEC. Namely, more complex, more 19 advanced services. 20 Q. As a request from the bench, will you make 21 that comparison for basic loop? And actually, I'd 22 like you to do a comparison first with the study 23 which GTE submitted in Phase I, and then, after Phase 24 I was completed, GTE revised that initial study that 25 was a compliance filing that reflected the numbers 01035 1 that appear in Appendix D of the Eighth Supplemental 2 Order, and then, finally, what's the cost estimate 3 that is supported by your current study? 4 A. Okay. 5 JUDGE CRAINE: Would that be 121? 6 MS. ANDERL: Yes. 7 Q. In the process of providing that, would you 8 delineate how you reached these conclusions? So as 9 opposed to just saying, you know, $70, $77, where you 10 could say, well, that $70 is composed of the 11 following four elements, and where the cost for those 12 four elements were obtained? 13 A. Yes. 14 Q. This morning, Ms. Proctor asked you about 15 your participation in proceedings in California and 16 Illinois. Do you recall that line of questioning? 17 A. Yes. 18 Q. In those proceedings, were you sponsoring 19 the type of NRC cost study that we have before us 20 this afternoon? 21 A. Yes. 22 Q. And were the findings that Ms. Proctor 23 referred to, were they findings of the Commissions or 24 recommended decisions? 25 A. In California, it is a draft decision, and 01036 1 I'm not aware of a decision out of Illinois. 2 Q. Could you describe what was the finding by 3 the administrative law judge in California? Or, 4 actually, just as a -- all right. Let's just take it 5 as a bench request. Would you provide a copy of the 6 ALJ recommended decision and identify the portions of 7 decision that address your study? 8 JUDGE CRAINE: That would be 122. 9 MS. PROCTOR: I might just warn you that 10 that's a 150-page decision, so perhaps it might be 11 fairer if your request were for the selected 12 portions. 13 Q. That would be fine. Just the portions of 14 the decision that address your study. Mr. Langley, 15 in your November 18th testimony, you address some 16 productivity adjustments that were proposed by Mr. 17 Montgomery. Does your study reflect prospective 18 efficiency gains that GTE may achieve in a year or 19 two or three years, or does it just reflect the 20 current work times associated with the different 21 activities that you've identified in your study? 22 A. It reflects the forward-looking work times. 23 And by that, I mean we took work times as we knew 24 were occurring and we adjusted those based upon 25 procedural changes and system efficiencies that have 01037 1 been implemented or are scheduled to be implemented. 2 Q. May I ask you, for your November 18th 3 testimony, to turn to page 11. Would you explain 4 your comment that begins at line 16 and continues 5 through to line two of page 12? And I would like 6 clarification on your statement that since the cost 7 depended upon the mix of nonrecurring categories and 8 network requirements could result in costs to CLECs 9 up to three times greater than GTE's proposed 10 methodology. 11 Would you explain why separation of 12 installation from originating charges would 13 potentially raise the bill to CLECs? 14 A. Yes. Actually, there's an implication that 15 if we take the costs as we have proposed them, 16 particularly on the disconnect side, where we're 17 averaging costs across all orders and separate them, 18 then we believe that if the charge is to be 19 separated, then it should be applied on a cost 20 causative basis, which means that, rather than 21 spreading it across all order activity, then it would 22 be applied to the individual request, based on the 23 costs that were incurred with that disconnect. 24 More specifically, if you look at the field 25 disconnect cost that we were referring to earlier, on 01038 1 page 5-WA30, that number would become significantly 2 higher, because it would be a full dispatch cost to 3 go out and disconnect in the field, rather than 4 spreading that across all orders. 5 So in total composition, if you take the 6 ordering, provisioning, central office and field 7 costs and apply those on a per occurrence basis for 8 disconnect, the charges or the costs will go up 9 significantly, which would result in higher charges 10 for disconnect, again, based on the activities that 11 are necessary with each individual order. 12 Q. So the trade-off is that there's a higher 13 disconnection charge and there's a lower connection 14 charge, but is it your assumption that the sum of the 15 parts is going to be greater than if you just have 16 one unit charge that covers both connection and 17 disconnection? 18 A. No, it's not that the sum of the two is 19 going to be impacted as much as taking the disconnect 20 charge from an average cost basis and make it in a 21 per occurrence basis. What that means is some 22 disconnect orders may only have the ordering charge, 23 while other disconnect orders may have ordering, 24 central office, and field, and so in some cases, the 25 cost could be substantial. 01039 1 It is our concern that it is going to 2 create claims and billing problems associated with 3 that, but it's much more equitable to spread that 4 cost or identify that cost on a per order basis. 5 Q. Now, I'll ask you, Mr. Langley, in that 6 same November 18th testimony, to turn to page 19, at 7 lines 17 and 18. Do I understand you correctly to 8 contend that GTE's practices in Florida are relevant 9 to GTE's practices in Washington? 10 A. In terms of running jumpers, yes. 11 Q. And do I understand you, in the prior 12 lines, to be contending that US West may have 13 different practices in running jumpers than GTE in 14 Washington has? 15 A. I'm not familiar with their practices or 16 their operations. What I'm asserting is that it is 17 inherently unfair to take US West practices and costs 18 and arbitrarily compare those to GTE's. 19 Q. I believe that -- let me begin here. Are 20 jumpers used to make connections between the vertical 21 and horizontal side on a main distribution frame? 22 A. Yes. 23 Q. And would you expect that the time involved 24 in making such a connection would be lower in an 25 office with fewer customers than in an office with a 01040 1 large number of customers, because the size of the 2 frame that the person must negotiate around is going 3 to be smaller in the smaller office? 4 A. Yes. 5 Q. All right. Is it your understanding that 6 GTE generally serves a more -- or the average number 7 of customers in a GTE wire center is lower than in a 8 US West wire center? 9 A. That sounds logical. 10 Q. All right. If that is the case, why would 11 running a jumper in a smaller wire center for GTE, 12 why could it take more time than it does in a US West 13 wire center? 14 A. Well, one of the aspects of jumper running, 15 in addition to the size of the main frame and the 16 length of the jumper run, also is whether or not it 17 is a manned or an unmanned office. The practice that 18 GTE has in running jumpers is we do those as a job. 19 Consequently, there is drive time to go from an 20 assignment center or work center to a remote office, 21 where the office is not manned, in order to run those 22 jumpers. So drive time becomes a factor in an 23 unmanned rule environment. 24 So on a composite basis, GTE's jumper 25 running study would reflect an appropriate amount of 01041 1 time for that purpose. 2 Q. Mr. Langley, I'd now like to ask you to 3 turn to your November 9th testimony. Beginning at 4 page two, you address your concern regarding Nextlink 5 witness Douglas Sobieski's cost estimates. And do I 6 understand this testimony to state that your concern 7 that Nextlink's testimony may not properly control 8 for the cost of construction in a controlled 9 environment, such as the type of environment that 10 exists in a telephone wire center? 11 A. Yes, the concerns I have is the methodology 12 in which cost estimates were obtained by Mr. 13 Sobieski, and the logic that was applied in how they 14 constructed collocation cages, security, and so 15 forth. 16 Q. Are you familiar with the Means 17 construction manuals? 18 A. RS Means? 19 Q. Yes, RS Means? 20 A. Only to the extent that we use those for 21 costing, not construction, per se. 22 Q. Would RS Means provide a way of checking 23 the reasonableness of your numbers versus Mr. 24 Sobieski's numbers? 25 A. I don't believe that an index -- and I'm 01042 1 assuming RS Means for construction is an index, like 2 it is for valuation. An index doesn't necessarily 3 equate the same quality of work or the concerns over 4 safety, security, bonding, protection of the 5 environment and so forth. 6 Again, based on the materials that Mr. 7 Sobieski supplied, it leaves questions as to whether 8 or not those concerns have been met in the same 9 manner that GTE requires for its collocation 10 construction. 11 Q. Do you know if the RS Means construction 12 manual has data on the cost of constructing in a 13 controlled environment? 14 A. I do not. 15 Q. May I ask you, on your November 9th 16 testimony, to turn to page seven, lines 13 to 16. 17 Would you please elaborate on what you believe isn't 18 adequately taken into account in Nextlink's study? 19 A. Well, again, based on the materials 20 supplied by Mr. Sobieski, from our perspective, it 21 appears that he is taking very limited cable racking 22 construction into his 10-cage area, whereas we would, 23 in fact, take cable racking into each collocation 24 cage. That's the reason we believe that it is 25 understated. 01043 1 Q. So you're concerned that the study doesn't 2 reflect the racks outside the cage, the cost of the 3 racks outside the cage? 4 A. Well, the cost outside, plus the cost to 5 each cage. His proposal, in my viewpoint, takes 6 racking to a common point within the 10-cage area, 7 and it does not appear to take it to each individual 8 cage, so that it's understated. 9 Q. Now, may I ask you to turn to page nine of 10 the November 9th testimony, lines 18 to 19. Here 11 you're discussing entrance facilities. And do I 12 understand you to state that an advantage of the CLEC 13 providing sufficient fiber to run from its conduit up 14 to its collocation point is that you avoid the need 15 for a node, a connection that would take place in 16 GTE's manhole outside its wire center? 17 A. No, what we're referring to, and in Mr. 18 Sobieski's proposal, as we evaluate it, shows a fiber 19 cross-connect in the vault. We, in fact, do require 20 some interface at the manhole, but preferably we 21 would have the collocator bring their cable through 22 the manhole core with sufficient length that we would 23 pull that from the manhole through the conduit into 24 the cable vault and up to the collocation cage in a 25 continuous pull, thereby avoiding any cross-connect 01044 1 requirements in the cable vault. 2 Q. And do I understand your testimony at lines 3 18 and 19 to suggest that if there was a connection 4 at the cable vault, that that may have some adverse 5 effect on the quality of service? Is this what 6 you're suggesting when you state it greatly 7 diminishes the possibility of trouble occurrences at 8 termination points? 9 A. Greatly could be a bit of an overstatement, 10 but any time that you have a cross-connect of any 11 nature, you do create the possibility that trouble 12 could occur, and not that service would necessarily 13 be diminished, but I think anybody in the telephone 14 industry would tell you that every cross-connect 15 creates a potential fault location. 16 Q. So you're arguing here, then, that sound 17 engineering would lead you to try to minimize the 18 number of -- well, I'll just drop there. I have no 19 further questions. Thank you. 20 JUDGE CRAINE: Questions from the 21 Commissioners? Redirect. 22 MR. POWELL: No redirect. 23 JUDGE CRAINE: You may step down. Thank 24 you. 25 MS. PROCTOR: Oh, wait. 01045 1 JUDGE CRAINE: Who have I forgotten? 2 MS. PROCTOR: I thought we had an 3 opportunity to follow up, especially on questions 4 from Dr. Gabel. 5 JUDGE CRAINE: Very well. 6 MS. PROCTOR: Sorry. 7 C R O S S - E X A M I N A T I O N 8 BY MS. PROCTOR: 9 Q. Mr. Langley, you were discussing the 10 California decision? 11 A. Yes. 12 Q. In that case, was GTE's submission of its 13 NRC study the same type of study that is being or has 14 been submitted here? 15 A. Yes. 16 Q. So it's the new, bigger study, rather than 17 the five-page study that was the old study? 18 A. No, no. The new study that we're filing 19 here is the same basic study that we filed in 20 California. 21 Q. Okay, good. Are you familiar with the 22 decision that was recently handed down by the Oregon 23 Commission on GTE's study? 24 A. I do know there is one. I haven't had the 25 opportunity to read it yet. 01046 1 Q. Okay. And are you also aware that, in that 2 case, what GTE had submitted was the old NRC study, 3 the one similar to the one that was submitted in 4 Phase I of this case? 5 A. It is my understanding that that order was 6 based on the docket that contained the old study, 7 yes. 8 Q. Okay. Now, in Florida, has there been a 9 decision in that case? 10 A. As I said earlier, we have not filed in 11 Florida yet. We have prepared a study, but it hasn't 12 been filed. 13 Q. Oh, sorry. With Mr. ffitch, you were 14 discussing the proposed merger of GTE and Bell 15 Atlantic. Are you familiar with the filings made by 16 GTE and Bell Atlantic at the FCC? 17 A. No. 18 Q. Have you made any comparison of the cost 19 that you were discussing with Mr. ffitch to change 20 over a resale customer that GTE is estimating in 21 order to know why those costs are almost three times 22 as high as the ones that US West are estimating for 23 the same activity? 24 MR. POWELL: Excuse me, Your Honor. I 25 don't want to interrupt Ms. Proctor, but I thought 01047 1 this was recross based on questions by Dr. Gabel? 2 MS. PROCTOR: Recross by preceding counsel, 3 which would have been Mr. ffitch. 4 MR. POWELL: There's no end to that. I had 5 not thought that was the practice we'd been 6 following. 7 MS. PROCTOR: It is the practice we've 8 always followed. 9 JUDGE CRAINE: Direct your comments to me 10 please, instead of arguing back and forth between 11 each other. 12 MS. PROCTOR: Sorry. 13 JUDGE CRAINE: I'll allow a reasonable 14 amount of follow-up on other counsel's 15 cross-examination. Go ahead. 16 MS. PROCTOR: I think there was a question 17 pending. 18 JUDGE CRAINE: Go ahead and answer the 19 question. 20 THE WITNESS: Can you repeat it? I'm 21 sorry. 22 Q. Have you made any comparison of the costs 23 that GTE is estimating to change over a resale 24 customer to a CLEC to know why the costs that GTE is 25 estimating are almost three times as high as the one 01048 1 US West is estimating for the same activity? 2 A. I have not. 3 Q. You were also discussing the nonrecurring 4 costs GTE is estimating in relationship -- or I'm 5 sorry, the nonrecurring costs that would be incurred 6 when a CLEC orders a loop. Do you recall that area, 7 generally? 8 A. Yes. 9 Q. Now, this morning, when I asked you, I 10 understood you to say that, in the case of ordering 11 an unbundled element such as the loop, there is only 12 one option that is modeled in the study, and that is 13 for a new service; is that correct? 14 A. My answer to that was yes. There is, 15 however, a change in the charge or cost that is 16 applicable if a CLEC wants to make a change on their 17 service arrangement after it's been established. I 18 overlooked that one. But otherwise, yes, it is new. 19 Q. And is there any way that you could point 20 me to where those costs would be for that change 21 order? 22 A. I'm going to go back to Mr. Lee's exhibit, 23 RKL-7. 24 Q. And would that be page four again? 25 A. Just a second. That would be on page five 01049 1 of eight. Those are generally limited to ports. And 2 if you look on lines 63, 64, 68 and 69, is where we 3 have identified those costs to Mr. Lee, and obviously 4 those come from the cost study itself. 5 Q. I'm sorry. If a CLEC orders a loop and 6 then wants to change something on that order, you're 7 saying that the charge -- that the cost estimate is 8 contained here under the port? 9 A. Well, it would be for ports. Yeah, I did 10 say loop, and I'm sorry. There are very limited 11 cases where, in fact, basically, there are no cases 12 where a loop is changed. Usually, if you're going 13 from a two-wire to a four-wire, it means 14 disconnecting the one service and changing it or 15 issuing a new order to change it to a new service 16 because you changed the characteristics of the loop. 17 But there are -- there is a change charge applicable 18 to ports in order to accomplish changes in vertical 19 services and things of that nature. So I apologize 20 in misstating that. 21 Q. Okay. So just so I'm clear, in the context 22 of a loop, there would be no change -- 23 A. Yes. 24 Q. -- cost? 25 A. We're back to the new category. I'm sorry. 01050 1 Q. Okay. As being the only option that is 2 studied in your NRC study? 3 A. Correct. 4 Q. Now, if a loop has already been -- and are 5 you assuming that, in your study, that the loop is 6 currently used by GTE to serve its customer? 7 A. We're assuming that it is a bundle service 8 presently used by GTE, or in this case, for new, it 9 could be a brand new service customer, as established 10 residence or business and is ordering service for the 11 first time. 12 Q. Okay. And have you considered the 13 situation where a CLEC has already -- CLEC A has 14 already ordered this loop, and now CLEC B wants to 15 lease the loop because the end user customer has 16 chosen to get service from CLEC B, rather than CLEC 17 A? 18 A. Yes, we did. 19 Q. And that would also be new order? 20 A. Yes, it would. 21 Q. And if GTE is successful in winning back 22 the customer, are those costs also included in your 23 study? 24 A. There would be the costs for disconnect of 25 that service from a CLEC. The customer going to GTE 01051 1 on a win-back would become a retail application. It 2 would fall under the retail tariff. 3 Q. So is the answer to my question that the 4 costs would be in the retail study, not the wholesale 5 study? 6 A. No, I said the disconnect portion would be 7 out of the study, but the new installation would fall 8 under the retail tariff. 9 Q. I'm sorry, I'm talking about a cost without 10 regard to which part of GTE has to properly account 11 for that cost? 12 A. Then it would fall under the retail cost. 13 Q. But there would be a cost to GTE; is that 14 what you're saying? 15 A. Yes. 16 Q. And it would be the same as this cost that 17 we're talking about here? 18 A. No. 19 Q. That GTE says it incurs from the CLEC? 20 A. No. 21 Q. How would it be different? 22 A. The cost that we reflect -- and again, I 23 want to clarify, you're still talking about 24 CLEC-to-CLEC transfer? 25 Q. No, I'm talking about the second situation, 01052 1 where GTE has won back the customer from a CLEC? 2 A. Okay. If I may, let me go through the 3 CLEC-to-CLEC in order to answer that question. 4 Q. Okay. 5 A. The reason that we treat a CLEC-to-CLEC 6 transfer of a loop is that we have to issue an order 7 to establish that new service arrangement for the 8 CLEC who gains the customer. We also have to do a 9 physical change in the CO to move that cross-connect 10 from one collocation point of interface to another. 11 We also have to do a disconnect order on the losing 12 CLEC in order to close that account out and finalize 13 billing. So that's the reason we treat that in that 14 respect. 15 In the case of a win-back, we would receive 16 an order to disconnect that service from the losing 17 CLEC. However, the retail side of GTE, if we did a 18 win-back, would, in fact, issue orders under normal 19 retail processes and systems, and those costs would 20 be the same as we've reflected in our retail cost 21 and, ultimately, retail tariff. 22 Q. When you were going through with Mr. ffitch 23 on the various costs, my recollection is that you did 24 not mention the initial cost to set up a CLEC 25 account? 01053 1 A. No, I did not. 2 Q. So that would be an additional cost? 3 A. The reason I didn't mention that is that 4 that cost is associated with the service arrangement 5 and the billing arrangement established with a CLEC 6 for the first time in a given state. It's not on a 7 per order basis; it's an initial service and billing 8 arrangement cost. So the first time that a CLEC 9 would order service from GTE in the state of 10 Washington, that's a cost that we incur. Beyond 11 that, that cost is not incurred again. 12 Q. So in your discussion with Mr. ffitch, you 13 were leaving aside a cost such as that. Were you 14 also leaving aside any cost that the CLEC might incur 15 to establish a collocation space? 16 A. No, I did not address collocation at all. 17 Q. And you did not address interconnection, 18 any cost that the CLEC might incur? 19 A. Yes, I did. The cost to connect that loop 20 to the collocator's point of interface is, in fact, 21 the central office cost that I mentioned. 22 Q. That's under the central office connect, 23 Column F, as in Frank? 24 A. That is correct. 25 Q. Now, in talking about the loop, you did not 01054 1 address any of the costs that are shown on page six 2 in connection with the network interface device at 3 lines 82 and 83. 4 A. That is correct. 5 Q. If the CLEC were ordering a loop to serve a 6 residential customer, would they also have to order 7 the network interface device? 8 A. No, it is GTE's position, when you purchase 9 a loop, you also receive a NID. The costs that are 10 identified here are unique costs, where a CLEC has 11 asked GTE to go out and place a NID at the customer's 12 premises, NID only. 13 Q. So for the case of the loop, GTE is willing 14 to bundle and provide to the CLEC the combination of 15 those two unbundled network elements, namely the loop 16 and the network interface device? 17 A. Yes, because we believe that the NID is 18 part of the loop. The FCC is the party who ordered 19 it to be separated as an unbundled element. 20 Q. So you're saying GTE does not agree that 21 those are two separate unbundled network elements? 22 A. We believe that the CLEC can order those as 23 unbundled element. We believe that the loop 24 inherently contains the NID as part of the network. 25 Q. Now, just above the NID, the network 01055 1 interface device, on this page six, there are also 2 costs for number portability. If the customer of the 3 CLEC wanted to retain the same telephone number, even 4 though served by the CLEC, the CLEC would also have 5 to obtain number portability, would it not? 6 A. Correct. 7 Q. So then, we would also have to include the 8 costs of number portability which are shown on lines 9 74 and 75? 10 A. Again, the cost on 74 and 75 for interim 11 number portability applies only when the CLEC orders 12 that as a stand-alone request. If number portability 13 is requested in concert with a loop on the same 14 order, there are no additional costs for installing 15 or activating the number portability associated with 16 that loop. This would apply in a case where -- 17 primarily where an end user has left GTE's network, 18 what I refer to as bypass, but yet wants to retain 19 their existing telephone number or numbers. 20 Q. You call it bypass; you don't call that 21 competition? I just want to be clear here. We're 22 talking about costs, not charges; right? 23 A. If you're looking at Column A, yes. 24 Q. Yes. And you're saying that when the CLEC 25 in the GTE cost study -- the assumptions of the study 01056 1 are that in this case of number portability, these 2 are the costs if the CLEC orders only number 3 portability and nothing else; is that right? 4 A. Correct. 5 Q. So if the CLEC orders a loop and the 6 customer wants to retain the same telephone number so 7 the CLEC orders number portability, how does your 8 study account for the CLEC's doing both of those 9 activities at the same time? 10 A. We factored into our work times and 11 processes the probability of that occurring. We 12 believe that in most instances, in terms of number 13 portability, it's going to occur at the time of the 14 loop establishment or the order for the loop. So 15 it's reflected in the cost for the loop. 16 Q. And can you point me to where in the study 17 that shows up? 18 A. It is not reflected -- it's not reflected 19 as a line item in the loop ordering cost, no. 20 Q. So how would a party tell how many of these 21 types of assumptions have been made in establishing 22 the study? 23 A. Not to be curt, but the narrative in the 24 cost study explains that. 25 Q. Well, I'm sorry, I just asked you to point 01057 1 me where in the cost study I could see that, and you 2 said it wasn't in there, and now you're saying it is 3 in there, so could you just please point me to where 4 it is? 5 A. You asked me where the assumptions were, 6 and I said they're in the narrative. I said there 7 wasn't a line item for number portability associated 8 with the loop order. 9 Q. All right. Where is it in the narrative, 10 please? 11 A. It's on pages 2-WA15, 2-WA16. 12 Q. This is the section that refers to number 13 portability? 14 A. Yes. 15 Q. I'm not finding anything that says that 16 this is a cost only if one orders number portability 17 alone. 18 A. You'll also find the work times for number 19 portability. It's identified as RCF on 2-WA107. 20 Q. I'm sorry, what was the page again? 21 A. 2-WA107. You were asking for work times as 22 far as the process, and that's for stand-alone. 23 Q. Sorry, did you say 2-WA107? 24 A. 107. Should be titled RCF. 25 Q. Mine seems to go from 2-WA106.1 to 108. Is 01058 1 that a new page? 2 A. No. 3 JUDGE CRAINE: Have you found it, Ms. 4 Proctor, the 107? 5 MS. PROCTOR: Well, I found where logically 6 it would be, but it doesn't seem to be in mine. 7 JUDGE CRAINE: It says, carrier markets 8 ordering open market transition. Is that the correct 9 page? 10 THE WITNESS: Yes. 11 MS. PROCTOR: Thank you. Staff loaned me 12 their copy. 13 Q. Now, 2-WA107 lists activities starting with 14 access the customer account, highlight numbers, 15 access the telephone number, enter the data, a number 16 of other activities. What about that would tell me 17 that if this is done in conjunction with another 18 order placement, that there are no activities? 19 A. Again, we're trying to answer your question 20 relative to the fact that if a CLEC orders the number 21 portability associated with a loop, that there is not 22 additional cost and it's not directly identified. 23 But if they do, if they order number portability 24 alone -- so I'm trying to find the references for 25 you. I'm not sure -- 01059 1 Q. Oh, okay. I'm sorry. I thought you were 2 finished. I was just -- you had mentioned this page. 3 A. Yeah. I was looking for one other page, 4 but I can't seem to locate it. 5 Q. Well, perhaps if, just off the record, Mr. 6 Powell, if the witness would be able to find that 7 page and direct me to it, that would be very helpful. 8 JUDGE CRAINE: Should we take a break and 9 let him find that? Is there anything else you wanted 10 him to find? 11 MS. PROCTOR: I just had one more question. 12 Maybe I could ask that quickly. 13 JUDGE CRAINE: Okay. 14 Q. Mr. Langley. 15 A. Yes. 16 Q. The costs for IT/DP, the OSS shared costs 17 that you were discussing with Mr. ffitch, are those 18 included, for example, if the CLEC orders the loop 19 alone, are they included only once, whether the CLEC 20 orders a loop or, say, a loop and number portability, 21 or is that a pricing question? 22 A. It's really a pricing question. 23 Q. As opposed to costing? 24 A. Right. 25 MS. PROCTOR: Okay. Thank you. 01060 1 JUDGE CRAINE: Mr. Kopta. 2 MR. KOPTA: Thank you, Your Honor. 3 C R O S S - E X A M I N A T I O N 4 BY MR. KOPTA: 5 Q. Just a couple of questions, a couple of 6 areas, I should say. Mr. Langley, following up on 7 some questions that you had from Dr. Gabel, you had a 8 discussion with him based on page four of your 9 rebuttal testimony, about the construction of the 10 cage enclosure and your concerns about whether or not 11 proper precautions were included in specifications 12 for that construction that was given to the vendor; 13 is that correct? 14 A. Yes. 15 Q. Does GTE's cost study filed in this docket 16 include a detailed breakdown of what's required for 17 cage construction and associated costs? 18 A. Again, as I said earlier, I didn't do the 19 cost study in support of the current tariff, so I 20 can't answer that question. 21 Q. Would you accept, subject to your check, 22 that it does not? 23 A. No, I would not accept that. 24 Q. You would not accept that? 25 A. I would not accept that. 01061 1 Q. Let me ask it this way. If it does not 2 include a detailed breakdown of all the loop 3 precautions taken and the associated costs, would 4 that necessarily mean that those were not taken? 5 A. Based on my knowledge of GTE's operations, 6 I would say that that would not preclude it. 7 Q. Do you have what's been marked for 8 identification as Exhibit 589, which originally was 9 supposed to be a cross-examination exhibit for Mr. 10 Lee? 11 A. I do not. 12 Q. If you don't, I'll -- may I approach the 13 witness? 14 JUDGE CRAINE: You may. 15 Q. Do you recall the discussion with Dr. Gabel 16 about page seven, I believe, of your rebuttal 17 testimony, concerning Mr. Sobieski's recommendation 18 for cable racking, specifically your concern about 19 the specifications on whether there was sufficient 20 cable racking? 21 A. Yes, I recall. 22 Q. And I believe, if I wrote this down 23 correctly, that you believe that Mr. Sobieski was 24 specifying only cable racking to a common point, not 25 to each individual cage, and thus, it understated the 01062 1 amount of cable racking required. Is that a correct 2 summary of what your discussion was with Dr. Gabel? 3 A. Yes. 4 Q. Would you identify to me what, in the 5 specifications that Mr. Sobieski provided, led you to 6 that conclusion? 7 A. Two things. One was the diagram and the 8 description of the physical layout of collocation 9 that he used, and then the attachment that he used in 10 requesting cost is vague, relative to what he was 11 asking for. So based on those two pieces of 12 information is how I arrived at that conclusion. 13 Q. And vague in what he was asking for, do you 14 mean by simply stating the number of feet that he 15 assumes, or specified, I should say? 16 A. Yeah, because it really doesn't provide any 17 sort of definition, as far as configuration lengths, 18 plus the fact that some of his specifications on 19 distance between hangers appears to be understated, 20 in that the distances are too great. 21 Q. And that would not allow for provisioning 22 to individual cages? 23 A. No, I'm saying that the fact that there 24 aren't sufficient support anchors or hangers in his 25 cable racking specifications would understate what we 01063 1 believe would be the proper spacing and cost. 2 Q. If I could turn your attention to Exhibit 3 589, and before I ask you any questions about this, 4 on the second page, there are some costs -- there is 5 some cost information here, and this was not 6 designated as confidential, but before exploring 7 this, I wanted to give you the opportunity to 8 identify whether this is confidential information? 9 A. I'm sorry, I didn't prepare it, so I can't 10 tell you if this is, in fact, a cost number or if 11 this is a tariff rate. I know it says cost, but it 12 could be either, from my perspective. 13 Q. Well, if you will turn to the first page. 14 And the request was for GTE to provide the cost that 15 it has incurred, specifically A-6, total cost of the 16 construction and installation of the cable racking. 17 Would that be a confidential number? 18 A. I would say it is, yes. 19 MR. KOPTA: Then if I might ask Judge 20 Craine if we can redesignate this as C-589? 21 JUDGE CRAINE: Very well. 22 Q. Now, without revealing those numbers, the 23 total footage of cable racking that GTE has -- well, 24 let me back up a minute. You stated that you did not 25 prepare this. Do you have any knowledge about 01064 1 whether this information is accurate? 2 A. I believe it would be, yes. 3 Q. So you would accept, subject to your check, 4 that this is accurate? 5 A. Yes. 6 Q. And based on the amount of cable racking 7 that GTE has installed in central offices in 8 Washington, you would also agree with me that the 9 total length is substantially less than the length in 10 Mr. Sobieski's specifications? 11 A. Yes, but I would also say that this appears 12 to be racking to individual cages, not 10 cages. 13 Q. So it's your understanding that for each 14 CLEC collocating in a central office, there will be 15 separate cable racking? 16 A. There will be portions that would be 17 separate from the existing racking to each individual 18 cage or from the existing rack to some point at which 19 it can feed out to the individual cages. 20 Q. But we don't have any information in this 21 particular exhibit to demonstrate what the 22 configuration is; isn't that correct? 23 A. No, that's not what you asked for, so it's 24 not there. 25 Q. And does GTE have a standard configuration 01065 1 of cable racking over collocation space? 2 A. We have standards for cable racking. The 3 rack configuration is going to depend upon the 4 available space and how the available space is 5 configured for a collocator. 6 MR. KOPTA: Thank you. That's all I have. 7 I would offer Exhibit C-589. 8 JUDGE CRAINE: Any objection to that 9 exhibit? It's received. Redirect? 10 MS. PROCTOR: Oh, I thought we were taking 11 a break and he was going to look up that question? 12 JUDGE CRAINE: All right. 13 MS. PROCTOR: Whatever you want to do. 14 Just as long as he looks it up and lets me know. 15 MR. POWELL: Do you want that on the record 16 or do you just want him to provide it to you off the 17 record? 18 MS. PROCTOR: If it's easy to do, I would 19 choose A, but if it gets complicated, I would choose 20 B. 21 JUDGE CRAINE: Well, we'll take the break. 22 Let's come back in 15 minutes. We're off the record. 23 Thank you. 24 (Recess taken.) 25 JUDGE CRAINE: My understanding is that the 01066 1 pending question, Ms. Proctor, you wanted to convert 2 that to a records request? 3 MS. PROCTOR: I didn't want to, but I 4 agreed to. 5 JUDGE CRAINE: Ah, you acquiesced to 6 converting that to a records request? 7 MS. PROCTOR: Yes, I did, which -- if the 8 keeper of the numbers -- 9 MS. WEBER: RR-8. 10 MS. PROCTOR: RR-8, which was my original 11 question to Mr. Langley, can you please point me to 12 where -- or I guess identify where in the cost study 13 I can go to determine that if a CLEC orders number 14 portability at the same time as an order is placed 15 for a loop, that the cost study assumes no additional 16 cost for the number portability. 17 JUDGE CRAINE: Okay. Anything else before 18 redirect? Mr. Powell? 19 MR. POWELL: No redirect, Your Honor. 20 JUDGE CRAINE: You may step down. Earlier 21 today, when we were running well ahead of schedule, 22 we discussed having Mr. Reynolds in today and he 23 came. 24 MS. ANDERL: He was here briefly, yes. 25 JUDGE CRAINE: Is he retrievable? 01067 1 MS. ANDERL: Yes, he is. 2 JUDGE CRAINE: So let me ask the parties 3 quickly if there's substantial differences in their 4 time estimates on the cross? I had Public Counsel 5 down for 10 minutes. 6 MR. FFITCH: No substantial difference. 7 JUDGE CRAINE: Staff for 30. 8 MS. RENDAHL: No difference. 9 JUDGE CRAINE: MCI for 25. 10 MR. PENA: Depending on the cross of AT&T 11 and TCG, it may be reduced, but I'm assuming I'd 12 still have some. 13 JUDGE CRAINE: AT&T had an hour. 14 MS. PROCTOR: I don't see a substantial 15 reduction. 16 JUDGE CRAINE: No more pleasant surprises? 17 MR. KOPTA: Only one a day. 18 MS. PROCTOR: I reduced Mr. Langley from an 19 hour and a half to under an hour, so -- 20 JUDGE CRAINE: You know, and we had to 21 actively restrain the applause. Okay, TCG, 45 22 minutes. 23 MR. KOPTA: I hope to have that be less, 24 depending on what Ms. Proctor does. 25 JUDGE CRAINE: Okay. But it's not sounding 01068 1 like we're -- well, we had Covad at 15, and even if 2 he waives, then we're looking at something pretty 3 close to three hours for the party. Dr. Gabel 4 indicates he has a substantial number of questions, 5 and so that would put us at pushing 7:00. 6 MR. FFITCH: And this doesn't help 7 particularly, Your Honor, but we probably will have 8 no cross, as I indicated to you earlier, so that's a 9 small -- when I said 10 minutes, I said max. I think 10 we may have none. 11 JUDGE CRAINE: Well, the question is, do we 12 need to keep Mr. Reynolds on a circling pattern, 13 wherever he is, or should we tell him that he can go 14 home? 15 MS. ANDERL: Your Honor, we're all here for 16 the duration. He's only a quarter of a mile away, so 17 -- 18 JUDGE CRAINE: All right, okay. Well, 19 let's go ahead. 20 MS. PROCTOR: She already sent him home. 21 MS. ANDERL: I told him that if he wanted 22 -- had any hope of getting on the stand, he would go 23 back immediately and change back into his khakis. 24 JUDGE CRAINE: Well, let's go ahead and 25 take Mr. Lee, then. And Mr. ffitch has told me that 01069 1 he needs to leave earlier than we'll be ending today, 2 so he'll be excused when he has to go. But before he 3 leaves, perhaps we should talk about when we're going 4 to start tomorrow, so he'll know when to come back. 5 Should we start at 8:00 again? We've got 13 hours of 6 cross tomorrow. 7 MS. ANDERL: But only five on Saturday, 8 Your Honor. 9 MS. RENDAHL: Actually, there's a 10 mathematical error. It's only 12. 11 MR. KOPTA: Let's start at noon, then. 12 MS. RENDAHL: If you look at Mr. 13 Montgomery's time estimates, it should be two hours 14 and 30 minutes, as opposed to the three hours and 30 15 minutes. 16 JUDGE CRAINE: Okay. 17 MS. RENDAHL: That's a start. 18 MS. ANDERL: I would vote for 8:30 tomorrow 19 morning, but obviously 8:00 is fine, if that's what 20 you would like. 21 MS. PROCTOR: Oh, could we do 8:30? That 22 would be nice. 23 JUDGE CRAINE: 8:30. All right. We'll 24 start at 8:30, then. Okay. Let's take Mr. Lee. 25 Whereupon, 01070 1 R. KIRK LEE, 2 having been first duly sworn, was called as a witness 3 herein and was examined and testified as follows: 4 JUDGE CRAINE: Be seated. Okay. Mr. 5 Powell. 6 MR. POWELL: Thank you, Your Honor. 7 D I R E C T E X A M I N A T I O N 8 BY MR. POWELL: 9 Q. Mr. Lee, please state your full name and 10 address. 11 A. My name is R. Kirk Lee. My business 12 address is 600 Hidden Ridge Drive, Irving, Texas, 13 75038. 14 Q. Mr. Lee, by whom are you employed and in 15 what capacity? 16 A. I'm employee by GTE as sections manager of 17 rate design. 18 Q. I've given you, Mr. Lee, a copy of the 19 index of exhibits that have been marked this morning 20 before you got here, and let me ask you to refer to 21 that. You will see that we have previously marked 22 for identification consecutively Exhibits 575 through 23 588. And if I can consolidate my foundation question 24 here for you, have you caused to be filed in this 25 docket a number of pieces of testimony in Q and A 01071 1 form along with supporting pricing exhibits? 2 A. Yes, I have. 3 Q. And you'll see from the index that the -- 4 well, let me ask you this question before I get to 5 the errata. Were these pieces of testimony, as well 6 as the supporting exhibits, prepared by you or under 7 your direction and control? 8 A. Yes, they were. 9 Q. And for those exhibits that are in the form 10 of question and answer testimony, if we were to ask 11 you those questions today under oath, would your 12 answers be the same as appearing on the written 13 exhibits? 14 A. Yes, they would. 15 Q. And did you prepare a multi-page errata, 16 which has been marked for identification as Exhibit 17 588? 18 A. Yes, I did. 19 MR. POWELL: Your Honor, I would move into 20 evidence Exhibits 575 through 588, and offer Mr. Lee 21 for cross-examination. 22 JUDGE CRAINE: Any objection? The exhibits 23 are received. I have Staff for 30 minutes. 24 C R O S S - E X A M I N A T I O N 25 BY MS. RENDAHL: 01072 1 Q. Good afternoon, Mr. Lee. My name's Ann 2 Rendahl. I'm an Assistant Attorney General. I 3 represent Commission Staff. 4 A. Good afternoon. 5 Q. Good afternoon. I'm going to start off 6 with some questions on collocation and then move into 7 the nonrecurring cost study. Were you here for Mr. 8 Langley's testimony? 9 A. For the portion of it after lunch, yes. 10 Q. Okay. Then you probably didn't hear this 11 question, but I'm going to see if you can shed some 12 light on it. Has GTE's currently filed tariff for 13 collocation been approved by the FCC, as you state in 14 your direct testimony on July 9th? 15 A. The federal tariff that I refer to has 16 become effective at the interstate level. 17 Essentially, it's the FCC's practice to, unless there 18 are objections, to allow the tariffs to go into 19 effect after a period of time. 20 Q. Do you have any document -- I asked Mr. 21 Langley this, and I actually made a record 22 requisition, but if you could put this in on the 23 record, then that might help us out. Is there any 24 documentation that's available to document the 25 effective date of the tariff filed with the FCC? 01073 1 A. I have a copy of the tariff with me. I'm 2 not sure if it's the most current version, but there 3 are effective dates and filing dates, I believe, on 4 each of the pages associated with that tariff. 5 MS. PROCTOR: Could I ask Mr. Lee if you 6 could pull your mic a little closer? 7 THE WITNESS: Sure. Sorry. 8 MS. RENDAHL: Okay. I guess, at this 9 point, I'd still, Your Honor, have the record 10 requisition stand, but I may ask Staff to take a look 11 at that at some point during the -- after the hearing 12 today. And I'll let you know tomorrow whether I 13 still need that record requisition to stand. 14 JUDGE CRAINE: All right. 15 Q. Mr. Lee, beginning at line 10 on your July 16 9th testimony, do you have that in front of you? I 17 believe it's Exhibit 575. 18 A. On which testimony? Excuse me. 19 Q. It's your July 9th direct testimony. It's 20 marked as exhibit -- admitted as Exhibit 575. 21 A. And what page number, line number? 22 Q. Looking at page 10 -- nope, I'm sorry. Let 23 me just ask you this. You discussed the building 24 modification nonrecurring charge in your testimony, 25 and I'm not sure if it's at page 10 here or not. The 01074 1 adjustment that was made to the building modification 2 rate element -- okay, I stand corrected, it's page 3 39, line 10. 4 A. Yes. 5 Q. If I could read my own writing. You 6 discuss the building modification nonrecurring 7 charge. Was the adjustment that was made to the 8 building modification rate element higher or lower 9 than the rate in effect when you wrote your direct 10 testimony? 11 A. The adjustment to the building modification 12 is to the cost, not to the rate. 13 Q. Okay. 14 A. If I understand the question. 15 Q. Does it have an effect in the rate? 16 A. It doesn't have an effect on the rate that 17 we're proposing -- 18 Q. Okay. 19 A. -- in this case. Exhibit RKL-6, which was 20 attached to my reply testimony on collocation, 21 outlines what those costs are. That testimony is 22 dated October 9th. 23 Q. Okay. That would be Exhibit 585, RKL-6? 24 MR. POWELL: That's correct. 25 THE WITNESS: That's correct. 01075 1 Q. Okay. So maybe I'll just rephrase the 2 question having to do with the costs. Was the 3 adjustment to the cost higher or lower? Did it 4 adjust it higher or lower? 5 A. The net effect to the costs was to make 6 them lower. 7 Q. But you said it had no effect on the rate? 8 A. That's correct. 9 Q. And why is that? 10 A. The rates we were proposing were our 11 federal tariff rates in this case. The actual costs 12 that we filed for building modification were -- 13 initially filed were substantially in excess of those 14 rates. Actually, the adjustments that we made to the 15 building modification costs had the effect of 16 bringing them down more into line with what the 17 proposed prices actually were. 18 Q. Moving on to your October 9th reply 19 testimony, and that is Exhibit 584. If you look at 20 page five, you discuss the concerns that other 21 parties have with the collocation cost study. And on 22 page six, you recommend that the Commission allow GTE 23 to file a new state-specific collocation cost study. 24 How would this new cost study be different from the 25 one that's currently filed? 01076 1 A. Well, I would not be preparing this cost 2 study myself or under my supervision. My 3 understanding is that it addresses a lot of the 4 criticisms of the CLECs in this case. For instance, 5 it has much more detailed backup behind the numbers. 6 It also addresses some of the concerns about ICB type 7 pricing by establishing rate elements for certain 8 activities, rather than having them be determined on 9 an ICB basis. 10 Q. Were you here when Mr. Langley suggested 11 how the Commission should handle this request? 12 A. No, I wasn't. 13 Q. Okay. Do you have an opinion on how the 14 Commission should handle the request, GTE's request 15 to allow the new collocation cost study to be filed? 16 A. In my opinion, that could be done either as 17 a separate proceeding or in an additional phase of 18 this proceeding. I guess I would leave that to the 19 Commission's determination on how they'd like to 20 handle that, but I think the effect would be to allow 21 GTE to get better evidence on the record of these 22 costs either way. 23 Q. So either way, would you recommend that the 24 Commission issue some kind of a supplemental order 25 after this hearing specifically dealing with that 01077 1 study? 2 A. Yes. I would also recommend that, in the 3 interim, that GTE's currently proposed prices, based 4 on its federal tariff, be adopted as interim rates 5 until that subsequent order came out. 6 Q. On timing, how soon can GTE begin preparing 7 the study? 8 A. Because I'm not in control of the work 9 group that would prepare it, I'm not sure I can give 10 you a good answer on that. I understand that they 11 need approximately 90 days from notice of when 12 they're authorized to do so to complete such a study. 13 Q. Who authorizes? 14 A. I'm assuming that the Commission would come 15 out with an order saying, We agree with GTE's 16 recommendation, please prepare the study and file it. 17 We would need 90 days from the date of that order 18 that said that to complete the study and file it. 19 Q. Okay. Moving on to page seven of the same 20 testimony, if you look at lines six through nine, 21 when would GTE use environmental conditioning? 22 A. Well, environmental conditioning is used in 23 all of our central offices. Are you referring to 24 when it would be applied to a CLEC who requests 25 collocation? 01078 1 Q. Yes. 2 A. Environmental conditioning is required when 3 a CLEC requesting collocation cannot be placed in a 4 previously environmentally conditioned space. An 5 example of an environmentally conditioned space would 6 be GTE's existing switching room, for instance, which 7 houses its switch equipment. If space is not 8 available to place the CLEC cage within that 9 environmentally conditioned area, instead, they had 10 to be placed in another area of the central office 11 building, which did not have environmental 12 conditioning, then this charge would apply. 13 Q. Is this charge consistent with the FCC's 14 objections to the use of ICB charges in its physical 15 collocation order? 16 A. I think it is consistent with that. 17 Q. Okay. I'm going to move on to nonrecurring 18 cost questions. Are you familiar with GTE's pricing 19 proposal for UNEs in this proceeding? 20 A. Yes, I am. 21 Q. Okay. And so you'd agree, wouldn't you, 22 that when setting prices for UNEs, that GTE relies on 23 its retail tariff rates? 24 A. GTE's pricing proposal for UNEs is intended 25 to address UNE rates from a perspective that they 01079 1 need to be in rough parity with existing retail 2 rates, because it's the underlying UNEs that provide 3 retail services today. So with the exception of 4 avoided retailing costs, the costs for the bucket of 5 services provided by UNEs is essentially the same as 6 retail services. 7 Q. So the answer is yes? 8 A. Yes. 9 Q. But for nonrecurring charges, such as INP 10 charges, GTE considers the comparison between 11 nonrecurring charges for INP and its related tariff 12 rate is inappropriate; isn't that correct? 13 A. Specifically for INP? 14 Q. Uh-huh, and for other nonrecurring charges? 15 A. For all nonrecurring charges, in general, 16 the underlying costs are not the same. The wholesale 17 NRC costs, which Mr. Langley testified to, were 18 developed out of the requirements of the 19 Telecommunications Act, and are intended to reflect 20 forward-looking costing assumptions and so forth. 21 Retail NRCs do not have the same cost basis as 22 wholesale NRCs. Therefore, there is no link, as 23 there is with underlying UNEs. 24 Q. Would you answer that in a yes or no 25 question? Does GTE consider a comparison between 01080 1 nonrecurring charges and related tariff rates to be 2 inappropriate? 3 A. I would say yes, if you're talking about 4 wholesale -- comparing wholesale NRCs to retail NRCs, 5 right. There is no basis for comparison. 6 Q. Okay. However, GTE uses its retail rates 7 and revenue as benchmarks to set parity for proposed 8 prices for UNEs, doesn't it? 9 A. That's correct, because the underlying 10 costs are the same in that case. 11 Q. If you'd look at -- well, there's an $11.23 12 charge proposed in Exhibit RKL-5 that's now been 13 updated to $10.71 in RKL-6 -- RKL-7, I'm sorry. 14 There was a change. Is this rate a per month charge? 15 A. This is a per order charge. These are 16 included -- these costs are included in the costs 17 recovered by the NRC ordering charge. 18 Q. Is that a per order, per month charge? 19 A. No, these are NRCs. These are not monthly 20 recurring charges. 21 Q. So the charge is not made on an ongoing 22 basis? 23 A. No. 24 Q. Okay. Could you look at page four of your 25 August 28th testimony? That's Exhibit 582. 01081 1 Actually, that's not an exhibit -- 581, look at page 2 four. And you're discussing a transition cost 3 identified in GTE's nonrecurring cost study? 4 A. That's correct. 5 Q. Now, is this charge ongoing? 6 A. The charge is part of the service order 7 charge on an ongoing basis, yes. 8 Q. And how does that ongoing basis work? How 9 would you apply it on an ongoing basis? 10 A. On an ongoing basis, the amount that's 11 included in the per order charge is determined on the 12 basis of a national forecast of service order 13 activity for CLECs for UNEs, resale, INP, NIDs, all 14 different order types. 15 Q. Now, you just had said that the charge that 16 I just asked you about was a per order charge and it 17 was not on an ongoing basis. But this charge is on 18 an ongoing basis, even though it's in the 19 nonrecurring cost? 20 A. I think I misunderstood your question. 21 It's part of the per service order cost, and would be 22 included in the total nonrecurring charge per service 23 order each time a CLEC orders service from us. 24 Q. How many years does this national forecast 25 of service ordering project? 01082 1 A. The national forecast that we used was, I 2 believe, a two or three-year average, 1998 activity 3 through 1999 or 2000. It's an average annual 4 forecast to make it on a comparable basis to the $25 5 million in cost, which is the annual cost level 6 associated with these fixed costs. 7 Q. So is the 25 million in shared fixed cost 8 an annual recurring cost? 9 A. That's correct, on a nationwide basis for 10 GTE. 11 Q. Okay. If you'd look at page 11 of this 12 same testimony, lines 12 to 14, you've stated that a 13 separate outside facility connect charge for outside 14 facilities work will be administered when such work 15 is required to complete LSRs for an unbundled loop or 16 NID; is that correct? 17 A. That's correct. 18 Q. Okay. So if you continue on to page 13, at 19 line 11, you give an example that illustrates the 20 rate elements that apply when a CLEC requests a new 21 unbundled loop; correct? 22 A. That's correct. 23 Q. Now, the rate elements apply -- that apply 24 to that order include the outside facility connect 25 charge; right? 01083 1 A. Yes. 2 Q. Is that charge a nonrecurring charge for 3 the loop or the NID? 4 A. It includes -- in this example here, the 5 CLEC has requested an unbundled loop, which, as Mr. 6 Langley described earlier, includes the NID. So the 7 outside facility connect charge that's listed here 8 would be the one related to the loop. There is no 9 separate outside facility charge for the NID. That 10 would only be applied if a CLEC orders a stand-alone 11 NID without a loop. 12 Q. So what kind of outside connecting 13 activities or functions relating to the loop does GTE 14 need to perform for this type of order? 15 A. That question was probably better asked of 16 Mr. Langley. That type of activity would be in his 17 cost study. 18 Q. Can you take a stab at it? 19 A. It would be a wild guess if I did. 20 Q. Let's look at your reply testimony, and 21 that would be Exhibit 584. No, I'm sorry. You have 22 a lot of testimony here, 586, your reply testimony on 23 pricing. If you look at page eight, line two, is it 24 your testimony that GTE's proposal to charge one rate 25 for both connection and disconnection is reasonable 01084 1 because disconnection costs are recovered in retail 2 NRCs this way today? 3 A. Yes, I think that's a reasonable approach. 4 That happens in the retail environment today, as well 5 as in the access, the wholesale access environment. 6 Q. Did GTE separately identify costs for both 7 connection and disconnection when it filed its retail 8 nonrecurring rates? 9 A. I'm not aware of what was filed in relation 10 to the current retail NRC rates. 11 Q. Doesn't the Eighth Supplemental Order 12 require US West to separate out disconnection costs 13 from connection activities? 14 A. I believe that's correct, subject to check. 15 Q. And shouldn't that same requirement apply 16 to GTE? 17 A. Well, I think separating the costs and the 18 actual form of cost recovery are two different issues 19 here. From a cost recovery standpoint, it's a lot 20 more efficient to recover those costs up front. 21 Otherwise, you have problems associated with CLECs 22 going out of business, GTE being unable to collect 23 those costs, and just the administrative -- 24 additional administrative costs of having separate 25 rate elements, and having to apply them and collect 01085 1 them and apply them from the correct account. 2 Q. I think my question is really asking for a 3 yes or no question. I think, given our time 4 constraints, if you could -- maybe I'll ask the 5 bench. 6 JUDGE CRAINE: Please answer yes or no, and 7 then explain. 8 THE WITNESS: Okay. Could you please 9 repeat the question? 10 Q. Shouldn't the same requirement to separate 11 out disconnection costs from connection activities 12 apply to GTE, as well? 13 A. No. 14 Q. Why not? 15 A. I think I just explained that. 16 Q. You did. Thank you. What do you think the 17 purpose -- what do you think the purpose is for 18 separately identifying the costs for both connection 19 and disconnection if it isn't for setting different 20 and separate rates for such activities? 21 A. I can't speculate on that, but I feel 22 strongly that cost recovery needs to be done up 23 front. 24 Q. Didn't GTE separate its costs in the 25 nonrecurring cost study for disconnection and 01086 1 connection? 2 A. That's correct. It is a component of the 3 total cost of the service order, and all those 4 components are separately identified, including the 5 disconnect costs. 6 Q. So what's the purpose of separating the 7 cost if you're going -- then why not show the costs 8 together for connection and disconnection? 9 A. Well, they are shown together in the cost 10 study, but they're identified as separate line items 11 or pages or some other method of identifying them. 12 They do roll forward into total numbers. 13 Q. Do you expect that the probability -- 14 occurrence of disconnection is similar for GTE retail 15 end users and GTE's wholesale customers like CLECs? 16 A. I don't have enough information to answer 17 that yes or no. I have no basis to answer that. 18 Q. So has GTE done any statistical analysis on 19 that issue at all? 20 A. I'm not aware of any. Mr. Langley's 21 sponsoring the cost study, and may be aware of such a 22 study. The costs for disconnect that have been 23 included in the ordering charges are average costs, 24 as he indicated, that are based on the probability of 25 occurrence. So if indeed you do separate out those 01087 1 costs from the initial service order charge and then 2 charge them on a per occurrence basis, those costs 3 grow significantly. 4 Q. Thank you. On page 13, line seven of the 5 same testimony, you use the term "a significant 6 number of CLECs." What, if you know, is the number 7 of CLECs using manual ordering methods with GTE today 8 in Washington? I guess I'll clarify that. 9 A. Excuse me. Can you give me the line number 10 reference to that again? 11 Q. Sure. It would be page 13, line seven. 12 You mentioned a significant number of CLECs continue 13 to use manual ordering methods. Can you tell me what 14 the number of CLECs is using manual ordering methods 15 with GTE in Washington today? 16 A. I don't have the specific numbers on that. 17 Mr. Langley would have that information. From my 18 discussions with him, I believe that we only have a 19 take rate of about 40 percent on electronic orders, 20 which would mean that roughly 60 percent of the 21 orders are manual today. 22 Q. What's the basis for your statement on page 23 14, line seven, that some CLECs will never convert to 24 electronic ordering processes? 25 A. The basis for that statement is based on 01088 1 discussions with Mr. Langley, other subject matter 2 experts with our company, and the fact that small 3 CLECs don't have the resources that an AT&T or an MCI 4 does to develop electronic interfaces on their end. 5 Many of these smaller CLECs, you'll never see convert 6 to an electronic order basis because of that. 7 Q. If you'll turn to page 22 of this 8 testimony, you state that GTE provided certain 9 information to Staff electronically; is that correct? 10 It would be on lines four and five. 11 A. Sorry, my pages are off here, so -- 12 Q. Okay. It's page 22, beginning at line 13 four. 14 A. You're on the November 18th testimony; 15 right? 16 Q. Your Exhibit 586, November 18, page 22, 17 line four. 18 MR. POWELL: Judge, may I give the witness 19 my page 22, which seems to correspond to Counsel's? 20 JUDGE CRAINE: Sure. 21 THE WITNESS: Okay. 22 Q. You have it now? 23 A. Yes, I do. 24 Q. So you state that GTE provided information 25 to Staff electronically; is that correct? 01089 1 A. That's correct. 2 Q. Okay. Isn't it true, though, that the 3 spreadsheet you provided to Staff shows the 4 forecasted numbers used in the NRC studies; not the 5 underlying assumptions for the forecast? 6 A. I believe the formulas by which the service 7 orders were derived are embedded in the spreadsheet 8 itself. 9 Q. But do formulas show assumptions? 10 A. Yes, I believe they do. 11 Q. Were you here when Mr. Langley was 12 referring to the nonrecurring cost study as a 13 bottoms-up cost study? That may have been before 14 lunch. 15 A. I don't recall that. 16 Q. Okay. He did say, though, that he didn't 17 use the forecast numbers. He didn't use forecast 18 numbers in the study, but that he used actual 19 numbers. So -- 20 A. That's correct, the forecast numbers for 21 service order activity are used in the pricing 22 exercise, not in the NRC cost study. 23 Q. If you'd look at what's been admitted as 24 Exhibit 591, I believe. Do you have that in front of 25 you? 01090 1 A. Yes, I do. 2 Q. Would, in reference to this document, 3 Exhibit 591, would GTE have a different response if 4 the question referred to the basis for the pricing, 5 which is the spreadsheet that you sent, than 6 referenced to the cost study? 7 A. Yes. 8 MS. RENDAHL: Your Honor, I'd like to make 9 a record requisition to request any studies or 10 information or documents, assumptions, that support 11 the pricing, the numbers for Washington used in the 12 pricing proposal for nonrecurring charges. 13 JUDGE CRAINE: Do you understand what she's 14 asking for? 15 THE WITNESS: I understand what she's 16 asking for, but I believe we've already provided that 17 via the electronic request that was previously given 18 to Staff. I'm not sure what additional information 19 they're asking for. 20 MS. RENDAHL: The non-numeric assumptions 21 that are used in creating the formulas. 22 MS. PROCTOR: Your Honor. 23 JUDGE CRAINE: Ms. Proctor. 24 MS. PROCTOR: Since this material was only 25 provided to Staff and not to the other parties, I 01091 1 wonder if GTE would be able to provide both the 2 initial electronic information, as well as any 3 supplemental information to other parties? 4 MS. RENDAHL: That concludes my questions. 5 JUDGE CRAINE: Can you do that? 6 THE WITNESS: I don't think that's a 7 problem. 8 JUDGE CRAINE: The records request is 9 number nine; is that correct? 10 MS. WEBER: Yes. I'm sorry, yes. 11 JUDGE CRAINE: Thank you. 12 MS. RENDAHL: I'm finished. Thank you, Mr. 13 Lee. 14 THE WITNESS: Thank you. 15 JUDGE CRAINE: Okay. I've got AT&T for an 16 hour. 17 C R O S S - E X A M I N A T I O N 18 BY MS. PROCTOR: 19 Q. Good afternoon, Mr. Lee. I'm Susan 20 Proctor, from AT&T. 21 A. Good afternoon. 22 Q. I think while we're on NRCs and Public 23 Counsel's representative is still here, I'd like to 24 go through the -- I believe Mr. ffitch called it a 25 walk-through, to try to determine exactly what the 01092 1 charges would be for a CLEC ordering certain services 2 from GTE. 3 And one initial question I have, in 4 response to Staff Counsel's request about what 5 activities are included in an outside facility 6 connection charge, you said that was a question 7 better posed to Mr. Langley, so I'd like to ask a 8 slightly different question. You are proposing a 9 price called an outside facility connection charge. 10 Where is that defined in your exhibits? 11 A. It's defined within the body of my 12 testimony. It would be in the August 28th piece of 13 testimony, which is Exhibit 581, I believe. On page 14 nine, the paragraph beginning on line five, it talks 15 about installation charges. 16 Q. So at line nine, where you state, The 17 outside facility connect charge will apply when field 18 work is required for the establishment of the new 19 unbundled loop or NID, that's the definition of that 20 charge? 21 A. That's correct. Basically, it's when a 22 truck needs to be dispatched to perform any sort of 23 field work associated with installing the service. 24 Q. Okay. In order to follow up on Mr. 25 ffitch's walk-through, would we go to your Exhibit 01093 1 RKL-7? 2 A. Yes. 3 Q. Which basically updates RKL-5? 4 A. That's correct. 5 Q. Now, the situation that he had posited, 6 which was a CLEC providing service to a residential 7 customer and ordering the loop, how would the CLEC 8 know which charges would apply? 9 A. The charges that would apply would be an 10 initial service order, associated with that loop, 11 which, if you look on page one of eight, all the 12 charges are summarized. That would be the amount in 13 Column D for the loop rate, is $50.77. 14 A central office connect charge would also 15 apply per loop. On that same line item, Column F, 16 that amount is $17.97. And if any field work was 17 required, if the truck was required to be sent to the 18 field to complete any work associated with that loop, 19 the outside facility connect charge would apply. 20 That amount is in Column G on the same line for loop 21 rates. It's $88.06. 22 Q. So we're at something over $155? 23 A. Depending on whether the outside facility 24 connect was required, yes. 25 Q. And there's no way for the CLEC to know 01094 1 when they place the order for the loop whether that 2 particular charge will apply or not, is there? 3 A. I don't believe so at that time. 4 Q. Now, you've been assuming that no -- that 5 this is a nonengineered order; is that correct? 6 A. That's correct. 7 Q. Is there a way for the CLEC to know whether 8 it's going to require engineering or not when they 9 place the order for the loop? 10 A. Generally, it's defined by the type of 11 service they intend to use the loop for, and I'm not 12 intimately familiar with all the codes that are 13 placed on the local service request. But based on 14 how that document is populated, what they intend to 15 use the loop for would determine whether engineering 16 is required on that particular loop order or not. 17 Q. So if the CLEC wanted to provide ISDN 18 service to the customer over this loop, would that 19 require engineering? 20 A. I don't recall specifically for ISDN. ISDN 21 PRI, I believe, yes, would be an engineered service. 22 Those questions are probably more appropriately asked 23 of Mr. Langley. 24 Q. Well, I'm asking from a pricing perspective 25 about what the CLEC can tell or not tell? 01095 1 A. Right. If you would -- I'll take as a 2 bench request or whatever to provide a list of the 3 types of services and which ordering charges would be 4 applied. I don't have that with me right here. 5 MS. PROCTOR: So, number guru -- 6 MS. WEBER: Record request number 10. 7 JUDGE CRAINE: Ms. Proctor, would it be 8 helpful to bring Mr. Langley back up to answer that 9 question? 10 MS. PROCTOR: I wasn't asking a costing 11 question; I was asking a price question, how would a 12 CLEC know the price and what charge applies. And I 13 understood that Mr. Lee was the price and charge 14 person. I'm assuming that he's facing the same 15 problem that Mr. Reynolds did, it seems like decades 16 ago, when he was on the stand and we just got the 17 bench request response from US West about when 18 charges apply and when they don't. So it is a little 19 problematic. At that time, we knew Mr. Reynolds was 20 coming back. 21 THE WITNESS: Just as a general statement, 22 in your more complex services, such as ATM frame 23 relay, ISDN PRI, those are generally engineered 24 services. They have to go to different work groups 25 to be processed. But, again, the specifics in a 01096 1 specific situation, if you want a list of those, I 2 can provide those. I don't have them with me. 3 Q. ISDN PRI is basically using a four-wire or 4 a DS1 equivalent loop, is it not? 5 A. I'm not certain of its provision. 6 Q. Have you heard of ISDN BRI, which would be 7 the type of service a residential customer could 8 obtain? 9 A. Yes. 10 Q. And if that were the kind of service that 11 the CLEC wanted to provide to the end user customer, 12 your response is you don't know whether that would 13 require engineering or not? 14 A. I believe that's a nonengineered service, 15 subject to check. 16 JUDGE CRAINE: Are you going to pursue the 17 records request? 18 MS. PROCTOR: Yes. 19 JUDGE CRAINE: Okay. That would be number 20 10. If you get to the point where you need Mr. 21 Langley to answer the question, let me know. 22 MS. PROCTOR: Sure. 23 Q. Now, if the CLEC had not previously placed 24 an order in a state for unbundled network elements, 25 then there would also be the CLEC account 01097 1 establishment charge of $255.82, would there not? 2 A. That's correct. That's a one-time charge 3 to enable GTE to set up the billing records and so 4 forth that are needed to bill the CLEC, provide them 5 service. 6 Q. And if the CLEC wanted to know, in order to 7 be able to serve the end user customer, what services 8 or features, options, the customer currently obtained 9 from GTE, they would also need to have GTE perform a 10 customer records search, would they not? 11 A. If the CLEC desired to have that 12 information, yes, they would request a customer 13 record search. That's an optional rate element at 14 the option of the CLEC. 15 Q. And that's information that GTE has about 16 its own customers, isn't it? 17 A. That's correct. 18 Q. So if the CLEC wanted to be in a comparable 19 position to be able to market and compete with GTE in 20 the provision of the full bundle of services, 21 wouldn't you agree that the CLEC would want to have 22 that information? 23 A. I would agree that, in some cases, it would 24 be useful to the CLEC, yes. 25 Q. Now, if the customer wanted to maintain 01098 1 their same telephone number, the CLEC would also need 2 to request number portability, would it not? 3 A. That's correct. 4 Q. Now, in your Exhibit 7, I'm sorry, RKL-7, 5 you show a service order charge of $43 for number 6 portability. Would that charge also apply if number 7 portability were ordered at the same time as the 8 loop? 9 A. No, it wouldn't. I believe Mr. Langley 10 answered that question earlier. Only the initial 11 service order associated with the loop would be 12 applied if INP is ordered at the same time that the 13 loop is. 14 Q. Mr. Langley was talking about costs and 15 you're talking about prices; right? 16 A. I'm talking about the application of 17 prices, yes. 18 Q. Right, okay. So your answer is that that 19 service order charge would not be applied? 20 A. That's correct. The $43.40 service charge 21 associated with the INP would not be applied in that 22 instance; only the $50.77 charge associated with the 23 loop. 24 Q. Now, on page 17 of this November 18th 25 testimony, you criticize Ms. Starr because she, in 01099 1 trying to estimate the charges that a CLEC would 2 incur, included that, and you stated it would be 3 waived if requested at the same time. How would Ms. 4 Starr have been able to tell, based upon your 5 testimony and exhibits, that that charge would be 6 waived? 7 A. I'm not sure that there's reference in my 8 testimony to how that's applied. I need to go back 9 and search that. 10 Q. And a CLEC, trying to determine how much 11 it's going to cost to serve a customer, how would the 12 CLEC be able to determine what costs it would incur? 13 A. The application of all these charges would 14 be laid out in the interconnection agreement between 15 the two companies, so when and how these rates would 16 apply would all be there in front of the CLEC. 17 Q. Are you familiar with the fact that AT&T 18 and GTE have an approved interconnection agreement in 19 the state of Washington? 20 A. No, I'm not aware of that. 21 Q. Would you be willing to accept, subject to 22 check, that there is such an agreement in place? 23 A. Yes, I would accept that, subject to check. 24 Q. And that the purpose of this proceeding is 25 to establish prices to be incorporated into that 01100 1 agreement? 2 A. Yes, I believe that's one of the purposes 3 of this proceeding. 4 Q. And that that agreement does not currently 5 include any definitions for any of these charges? 6 A. I'm not aware of that. 7 Q. Now, if, in order to serve this residential 8 customer, the CLEC wanted to purchase all of the 9 unbundled network elements needed to provide that 10 service, according to the Eighth Circuit, the CLEC 11 can do that; is that your understanding? 12 A. That's correct. 13 Q. And in that case, the CLEC would have to 14 order, at a minimum, the loop, port, number 15 portability, transport. Would that be your 16 understanding? 17 A. Again, number portability is optional, but 18 those are certainly components that they could order. 19 Q. Now, when you say it's optional, you're not 20 talking about from the customer's point of view who 21 wants to retain their telephone number. You're 22 talking about the fact that maybe somebody really 23 doesn't care about retaining their number, so it 24 might be an option? 25 A. That's what I'm talking about. 01101 1 Q. Okay. But the CLEC would have to purchase 2 all of those unbundled network elements; is that 3 true? 4 A. The loop, the port, local switching, 5 transport, yes, all of those would be purchased to 6 provide service. 7 Q. Okay. And in that case, which of these 8 service order charges would apply if the CLEC ordered 9 all of those simultaneously? 10 A. Separate service order charges would apply 11 for loops and ports at each customer location, end 12 user customer location. 13 Q. I'm just talking about a residential 14 customer, and we're not talking about residential 15 customers that might be lucky enough to have a house 16 someplace else, like Puerto Vallarta. So I'm just 17 talking about one house. 18 A. That's fine. The use of a residential 19 customer in this example is totally unrealistic, 20 however, since AT&T and others have expressed no 21 desire to target residential customers. 22 MS. PROCTOR: Your Honor, I'd move to 23 strike the witness' observations as obviously 24 nonresponsive. 25 JUDGE CRAINE: Sustained. Answer the 01102 1 question. 2 THE WITNESS: Please repeat the question. 3 Q. The question was, for the CLEC who wants to 4 purchase all of the elements necessary to provide 5 service to a basic residential customer, which of 6 these nonrecurring charges would apply? And I think 7 you were describing that there is a one element, one 8 order rule? 9 A. That's right. 10 Q. So sort of a telecommunications equivalent 11 of one person, one vote; right? 12 A. The rates that would apply are the initial 13 service order for a loop and the initial service 14 order for a port, basically, because those are two 15 separate services. In addition to that, central 16 office connect charges would apply per loop or port 17 for the central office activity, the jumpers required 18 to provide the service to the CLEC, and if necessary, 19 an outside facility connect charge would also apply 20 if a truck is dispatched to the field to complete 21 connection for the service. 22 Q. So in addition to the $155 that we had for 23 the loop, potentially, and the $7 customer records 24 search charge, we now add the $52 charge for 25 nonengineered initial service order for a port, and 01103 1 another one of these $18 charges for the central 2 office connect. Is that what we're looking at here? 3 A. That's correct. Those are the charges that 4 would recover the cost GTE incurs to provide those 5 services. 6 Q. So we're talking something in the 7 neighborhood of $230? 8 A. Subject to check on your math, that's a 9 rough total. Again, I don't think that -- 10 Q. Mr. Lee, I'm going to just stop you right 11 there. 12 A. Sure. 13 Q. Now, Mr. Langley was talking about the OSS 14 fixed costs of 10.71 and $3.90, something in the 15 order of $15, and he said that the application of 16 those or the recovery of those costs was a pricing 17 decision. So in our situation, in our first 18 situation, where we're talking about just ordering a 19 loop for the residential customer, do we have to add 20 that $15 in for the service order there? 21 A. No, it's already in the cost of the service 22 order. 23 Q. It's already in there? 24 A. Yes, it's in the price of the service 25 order, excuse me. 01104 1 Q. Okay. Well, you've got these nice little 2 pages that talk about the NRC rate development, so I 3 wonder if you would be good enough to talk us through 4 how we get from the costs to the price, and in this 5 case, it would be the $50 service ordering charge for 6 the loop? 7 A. Okay. If you go to page four of eight of 8 RKL-7. 9 Q. Okay. 10 A. Okay. Which this is the summary of the 11 loop costs that go into the NRC rate elements 12 associated with the loop. The costs in Column A can 13 be traced directly back to Mr. Langley's cost study 14 and testimony. In order to arrive at the correct 15 price for the various categories of NRC charges, be 16 it engineered or nonengineered, central office 17 activity or outside facility activity, the costs on 18 each line in Column A are mapped across to the 19 correct column for the type of NRC which will be used 20 to recover those costs. 21 So for example, in line 42, for a 22 nonengineered, basic, new service order, the cost in 23 Column A for ordering of $19.58 carries across to the 24 nonengineered initial service order column, Column D. 25 Q. And then, if we go down to line 59, we add 01105 1 up all of Column D and arrive at the $50.77 that's 2 the price for the initial service order? 3 A. That's correct. 4 Q. And that has included the $15 for the OSS; 5 is that right? 6 A. Yes, that's correct. 7 Q. Thank you. Now, in the second example that 8 we were talking about, where there are separate 9 service orders for the loop and the port, I take it 10 that the port charge also includes this $15 for OSS? 11 A. That's correct. 12 Q. That's shown on page five? 13 A. Yes, it is. 14 Q. Now, when would there be a subsequent 15 service order? 16 A. Subsequent -- 17 Q. I'm sorry, is that the situation Mr. 18 Langley was talking about, where if you place the 19 order and then later order call forwarding or 20 something, that that would be the subsequent order? 21 A. That's correct. 22 Q. Okay. 23 A. It's associated with the loop. 24 Essentially, there are no change type orders you can 25 do to a loop. So the only change type orders you can 01106 1 make are to services provided through the port, which 2 would be your features. 3 Q. Now, if the customer had two lines to their 4 house and the CLEC ordered two loops at the same 5 time, we would just double the $155? 6 A. No. One service order charge applies per 7 end user customer location for each type of service. 8 So whether that customer has one loop or five loops, 9 just one service order charge associated with those 10 loops. 11 Q. Would there also only be one central office 12 connection if there were two loops? 13 A. The central office connection costs are 14 developed on a per loop or per port basis. It's to 15 recover the jumper wire activities, and those would 16 be incremental based on the number of loops. 17 Q. And there would only be one of the outside 18 facility connect charges imposed if there were two 19 loops? 20 A. That's correct, if that work was required. 21 Q. Which the CLEC won't know ahead of time; 22 right? 23 A. Not to my knowledge. 24 Q. Mr. Lee, your counsel filed a letter 25 identifying the charges that -- or the costs that 01107 1 would go into making up a charge for shared 2 transport. I'm trying to find it. And in that 3 letter, he identified costs for transport termination 4 and transport facility per mile. I am unable to just 5 lay my hands on where your pricing recommendation is. 6 Could you be so good as to identify where that might 7 be? 8 A. It was attached to my direct testimony, and 9 it would be Exhibit RKL-2, which is identified as 10 number 577. 11 Q. And on page one of that exhibit under -- at 12 the bottom of the page, you have common/shared 13 transport, and there's a price for transport 14 termination average minute of use of .0000947; is 15 that right? 16 A. That's correct. 17 Q. So that's nine-thousandths of a cent? Am I 18 translating that right? 19 A. I think that's correct. 20 Q. And the price that GTE is recommending for 21 the transport facility, it says per ALM. What does 22 that stand for? 23 A. Air line mile. 24 Q. Oh. And that's an average minute of use of 25 .0000028; is that right? 01108 1 A. That's per minute of use per air line mile. 2 Q. Ah, okay. 3 A. The previous rate element was per minute of 4 use per termination. Generally, there's a 5 termination at each end of the transport leg. 6 Q. So unlike US West, GTE is proposing shared 7 transport on a per minute of use basis? 8 A. Per minute per air line mile, or per minute 9 per term, yes. 10 Q. I'm sorry. 11 A. Yes, that's correct. 12 Q. Thank you. Now, in your testimony, you 13 discuss resale of finished services by CLECs. Do you 14 have that general area in mind? 15 A. Where I discussed it? 16 Q. Just the topic? 17 A. Just the topic? 18 Q. Of resale? 19 A. Right. 20 Q. Are you also aware that GTE has concluded 21 that a resale strategy alone cannot succeed for 22 market entry? 23 A. I'm not aware of that conclusion, no. I 24 think there are many niche players that have a resale 25 only objective. 01109 1 Q. I'm afraid I only have one copy, but in the 2 declaration of Jeffrey C. Kissel, K-i-s-s-e-l, Vice 3 President of National Marketing for GTE Business 4 Development and Integration, a unit of GTE Service 5 Corporation, filed with the FCC, in the matter of GTE 6 Corporation and Bell Atlantic, for consent to 7 transfer control. Mr. Kissel states, GTE has 8 therefore concluded that a resale strategy alone 9 cannot succeed. You're not aware of that position by 10 GTE? 11 A. I'm not aware of what context that was said 12 in, so I can't comment on it, no. 13 Q. Is it your experience, as Mr. Kissel 14 states, that GTE's experience, along with that of 15 other CLECs, has proven that resale margins alone, 16 although accurately reflecting the ILEC's avoided 17 costs, are not large enough to support a sustained 18 out-of-franchise effort? That's not your experience? 19 A. It's not my experience. 20 Q. In your pricing recommendations, and I'd 21 like to just go back to your direct testimony, you 22 talk about basically three steps that GTE follows in 23 establishing prices. And the first step is that GTE 24 determines its actual total costs; is that correct? 25 A. That's correct. 01110 1 Q. And GTE defines its total actual costs of 2 providing service as its current revenues; is that 3 true? 4 A. It's defined as GTE's current revenues 5 minus avoided retailing costs, essentially. These 6 are the revenues that GTE would receive if it was a 7 100 percent reseller today, all of its services. 8 Q. And in your Exhibit RKL-1, you show that 9 GTE has current revenues of something slightly under 10 $590 million in the state of Washington? 11 A. That's correct. 12 Q. And that you estimate the avoided retailing 13 cost at $27 million? 14 A. That's correct. 15 Q. Now, on page two of that exhibit, where 16 you're calculating the $27 million, you show that the 17 approved resale discount is 10 percent. I'm sorry, 18 there's not a line there. It's in Column B on page 19 two. 20 A. Yes. 21 Q. And at the bottom of that column, the 22 application of the 10 percent has somehow become six 23 percent? 24 A. That's correct. 25 Q. That's what happens in this process here? 01111 1 A. That's what happens when you look at the 2 entire bundle of revenues that a customer line 3 provides GTE. Included in that bundle is access 4 revenues. Access revenues are not subject to a 5 wholesale discount. 6 Q. Ah. 7 A. Only the retail services associated with 8 local, toll, vertical services. 9 Q. Now, in this tally of revenues, are you 10 including GTE's revenues from providing interLATA 11 toll? 12 A. No, that's a separate business unit, and 13 the investment and expenses associated with that are 14 not included in the underlying cost of GTE's UNEs 15 here. Existing services. 16 Q. So when the separate GTE company is 17 providing interLATA toll service and hopefully being 18 paid by its customers, those revenues are not 19 included in the revenues that you're looking at here 20 for GTE in Washington; is that right? 21 A. No, these are the regulated revenues 22 associated with the local service customers here in 23 Washington. 24 Q. And in the interstate access revenues, does 25 that include access that GTE -- the regulated company 01112 1 sells to GTE, the interstate -- I'm sorry, the 2 interLATA toll provider? 3 A. I believe it would include that, yes. 4 Q. Do you know that? 5 A. I have no reason to doubt that it wouldn't 6 be included. 7 Q. Did you prepare this exhibit? 8 A. It was prepared under my supervision. It's 9 based on the books of the company. 10 Q. So you start with actual costs of $560 11 million; is that right? Approximately? 12 A. Five-hundred-sixty million is the total 13 actual cost, that's correct, before removing other 14 miscellaneous services. 15 Q. Now, when you talk about removing other 16 miscellaneous services, where do you do that 17 calculation? Is that on this page, as well? 18 A. On RKL-1, page one of three, line eight. 19 That's where those revenues are removed from the 20 calculation. Those are revenues associated with 21 other services that are not provided via the 22 underlying UNEs. 23 Q. That's this $117 million? 24 A. That's correct. 25 Q. And what are those other miscellaneous 01113 1 services that account for $117 million in revenues? 2 A. They would be things like billing and 3 collection revenue, Yellow Page advertising revenue, 4 other miscellaneous revenue, NRCs. 5 Q. So those would be NRCs from providing 6 wholesale services? 7 A. No, these are all associated with retail or 8 access services. 9 Q. So that produces this $440 some million of 10 actual cost? 11 A. That's correct. 12 Q. Okay. Then, in your step two, you talk 13 about the fact that you then look at the direct 14 costs. And at one point, that was estimated at $214 15 million; is that right? 16 A. That's correct. 17 Q. Now, true to your Counsel's 18 representations, you have not volunteered an 19 explanation. So I'm going to ask, if I can find that 20 errata sheet, is the $214 million, according to your 21 errata sheet, has become $217 million. And in 22 keeping with the old adage that a million here, a 23 million there, and pretty soon you're talking real 24 money, I wonder if you could please explain these 25 three and four and five million dollar changes that 01114 1 were filed under your errata sheet? 2 A. Yes, I believe it was the Commission's 14th 3 Supplemental Order which changed the approved TELRIC 4 for GTE from $20 even to $20.30. When you multiply 5 out that additional 30 cents times the number of 6 lines or loops that GTE has, that is what causes the 7 increase from the 214 million to approximately 217 8 million. 9 Q. Thirty cents produces $3 million? 10 A. Yes. 11 Q. Okay. So we're talking about TELRIC costs 12 of 217 million, and to that, GTE applies its 55 13 percent allocator to account for a reasonable share 14 of forward-looking common costs; is that right? 15 A. That's correct. 16 Q. I'm not able to find the new number. It 17 used to be 117 million in common costs. 18 A. That number has not changed. It's actually 19 118 million. 20 Q. Okay. So in your step three, you compare 21 the fact that you've got current actual costs or 22 revenues of 560 million, but TELRIC plus a reasonable 23 share of -- or what GTE calls a reasonable share of 24 forward-looking common costs only leaves you at about 25 $330 million. So in step three, you established a 01115 1 surcharge to get GTE to the $560 million; is that 2 right? 3 A. No, that's not correct. What we compare is 4 the $442 million in revenues, which is what's 5 generated by the underlying UNEs, network elements. 6 We compare the 442 million to what would be generated 7 by a TELRIC plus a fixed allocator price applied to 8 total units. 9 Q. So we would compare the roughly 330 million 10 to the 440 million? 11 A. That is not the basis, however, for GTE's 12 surcharge. GTE's surcharge is based on the implicit 13 support that's contained in the rates of an average 14 business customer today. 15 Q. And when you say implicit support, you're 16 talking about the fact that GTE estimates average 17 revenues from its business customers of $78, I think? 18 A. That's correct, and if you look at it on a 19 resale basis, the amount generated by an average 20 business customer per line would be $73.41. That 21 amount is compared to the revenues that would be 22 generated by the Commission's ordered TELRICs, plus 23 GTE's fixed allocator, which, on page two of three of 24 RKL-1, you can see in Column E the differences 25 between those two amounts. 01116 1 The 36.24 generated by the Commission's 2 TELRIC, plus 55 percent, and the resale-based 3 revenues is the interim surcharge, which GTE is 4 proposing in this case. It's the amount of implicit 5 support generated by an average business customer, 6 which needs to be made explicit in the form of a 7 surcharge. 8 Q. Now, perhaps a little more readable way to 9 look at this is your table four, which is on page 25 10 of your direct testimony, is it not? It sort of 11 summarizes what you've just been telling us? 12 A. Yes. 13 Q. So you have the average business customer 14 generating about $73 in revenues. If the CLEC bought 15 unbundled network elements, that would be $36 in 16 revenues, so the difference is $37, and that's the 17 surcharge -- 18 A. That's correct. 19 Q. -- that GTE is proposing? 20 A. Yes. 21 Q. And according to your Exhibit 2, RKL-2, 22 that $37 surcharge applies to any two-wire analog 23 voice grade loop purchased by a CLEC; is that right? 24 A. That's correct. 25 Q. So that produces a loop price proposed by 01117 1 GTE of $68; is that right? 2 A. Including the surcharge, that is the total 3 price per loop, yes. 4 Q. And the surcharge would apply to any 5 two-wire analog voice grade loop? 6 A. Right, on an interim basis, until such time 7 that the Commission replaces that with a permanent 8 USF mechanism. 9 Q. And if the Commission establishes a 10 universal service support mechanism that doesn't 11 provide GTE with $73 a month in revenues, is GTE 12 going to be proposing the continuation of an interim 13 universal service surcharge to make up the 14 difference? 15 A. GTE would propose to continue a surcharge, 16 but that surcharge would be reduced by any amounts of 17 universal service funding that the Commission made 18 explicit and permanent. 19 Q. Now, looking at your table four in the case 20 of the residential customer that Mr. ffitch was 21 asking about, you've only shown a cost of UNEs of 22 $35. If your surcharge proposal, GTE's surcharge 23 proposal is adopted, then GTE would be getting 24 substantially more revenues under the UNE scenario 25 than it would under its current residential retail 01118 1 environment, would it not? 2 A. If the surcharge was applied to that, yes, 3 that's correct. However, this table shows pretty 4 clearly that most CLECs won't find it profitable to 5 serve residential customers via cost-based UNEs at 6 all, because it provides such a slim opportunity for 7 additional margin there. 8 Q. Well, in fact, on page 17 of your November 9 18th testimony, in estimating the monthly cost to 10 recover the nonrecurring charges that the CLEC would 11 have to pay, you've estimated that it would take 12 about $4 a month to recoup the nonrecurring charges 13 that the CLEC would have to pay GTE; is that right? 14 That's on line 10, page 17. 15 A. In that particular example, that's correct. 16 With a one-loop customer. 17 Q. So in the case of our residential customer, 18 even without the surcharge, there would be no margin? 19 A. That's correct, which affirms my point, 20 that it doesn't make sense to provide service to 21 residential customers via UNEs, that a resale 22 approach is more appropriate for residential 23 customers. 24 Q. And you say that despite the fact that GTE 25 has advised the FCC that resale is not a viable entry 01119 1 strategy? 2 A. The resale option is certainly a viable 3 strategy when you target your customers. The context 4 that that statement was made in, I'm not aware of. 5 If it's referring to targeting below-cost -- or 6 excuse me, above-cost customers, those that provide 7 little margin, it's probably correct. But when you 8 target high-value, high-volume customers to provide 9 signature margin, a resale strategy is totally 10 viable. 11 Q. Well, in fact, Mr. Kissel was talking about 12 GTE's strategy of targeting business customers out of 13 franchise, so if that would help you in forming your 14 answer. And he was talking about the fact that it 15 was not profitable to serve out-of-franchise business 16 customers. 17 MR. POWELL: Your Honor, I've got to object 18 at this point to Ms. Proctor's continued examination 19 of this witness about a document that she's not 20 provided him, that she's not identified as a 21 cross-examination exhibit at the top of the day this 22 morning. He said, on at least two occasions, that 23 he's not familiar with the document or the context in 24 which the affidavit was submitted. And I think it's 25 unfair and inappropriate for cross. 01120 1 MS. PROCTOR: I'll be happy to mark the 2 exhibit and make copies. The witness has continued 3 to state that resale is a viable strategy in the face 4 of documents filed by GTE at the FCC in the context 5 of persuading the FCC that it would be a good idea to 6 allow GTE and Bell Atlantic to merge. 7 JUDGE CRAINE: In fairness to the witness, 8 I think we should let him have a look at the 9 document. And then, if you want to mark it as an 10 exhibit and offer it, that's fine. 11 MS. PROCTOR: Okay. 12 THE WITNESS: If I might qualify my answer. 13 Based on her disclosure, finally, that this is for 14 out-of-franchise activities, there might be 15 additional -- significant additional costs to GTE 16 that would make that business viable by going out of 17 franchise. So I'm not aware of what all those costs 18 are, so I can't, again, address the viability of that 19 or not. I'm going to have to rely on Mr. Kissel's 20 statement as being correct for out of franchise. 21 Q. And out of franchise, GTE is pretty much in 22 the same position as any other CLEC? 23 A. No, I don't believe so. 24 Q. And what is the basis for your statement? 25 A. GTE has established a serving territory and 01121 1 network in place. 2 Q. I'm sorry, I said out of franchise -- 3 A. Excuse me. 4 Q. -- GTE is in a similar situation to any 5 other CLEC? 6 A. Well, CLECs don't have franchises, so I 7 don't know that you could make a comparison there at 8 all. 9 MS. PROCTOR: I'd be happy to show my copy 10 to Counsel. I don't know how you want to do that, as 11 far as time. I really didn't have any other 12 questions. 13 JUDGE CRAINE: Let's have you show the 14 document to Counsel, and -- 15 MR. POWELL: Would this be an appropriate 16 time for a break, Your Honor? 17 JUDGE CRAINE: Yeah, we can take a break, 18 and Mr. Powell can look at it. And then, hopefully, 19 we can come back and finish up with the witness. So 20 how much time do you think you want to look at that? 21 Would a 15-minute break be long enough? 22 MR. POWELL: It should be, Your Honor. 23 JUDGE CRAINE: Come back at 5:30, then. 24 (Recess taken.) 25 JUDGE CRAINE: Back on the record. And it 01122 1 seems Commissioner Hemstad took my chart. So who's 2 next? 3 MS. PROCTOR: Oh, we were tidying up on the 4 declaration of Mr. Kissel on behalf of GTE that I 5 have shared with Counsel for GTE and Mr. Lee and they 6 have returned to me. And I guess my proposal would 7 be that I make copies of this and mark it as a cross 8 exhibit. These are statements made by GTE before the 9 FCC, talking about the benefits of the GTE merger and 10 how it's going to enhance competition, and commenting 11 on the lack of viability of the resale option 12 established by the Telecommunications Act. So that's 13 what I would propose to do. And I imagine that Mr. 14 Powell will have some comments on that. 15 JUDGE CRAINE: Mr. Powell? 16 MR. POWELL: Ms. Proctor can read me like a 17 book, Your Honor. I'm obliged to object to Ms. 18 Proctor's suggestion, Your Honor, for a couple 19 reasons. As I understood the rules of engagement for 20 this hearing, any cross-examination exhibits were to 21 be proffered at the beginning of each day and marked 22 for identification. That was not done with this 23 exhibit. 24 I think it's clear from Mr. Lee's reaction 25 to it, and Your Honor or Ms. Proctor or anyone is 01123 1 welcome to question him now that he's had a chance to 2 read it. He's not familiar with it. He's not -- the 3 affidavit goes to an area that is outside his area of 4 expertise. 5 I note, parenthetically, that the affidavit 6 is unsigned, undated. It's not altogether clear that 7 it -- it lacks the usual indicia of authenticity. I 8 don't mean to suggest that Ms. Proctor's cooked this 9 up, but it is not in the form that I think the 10 Commission would normally want for an exhibit to be 11 entered into the record, even if it had been tendered 12 and marked on a timely basis. So we would object to 13 Ms. Proctor's suggestion. 14 JUDGE CRAINE: Ms. Proctor, any response? 15 MS. PROCTOR: Yes, to the last point. At 16 the FCC, material is filed electronically that is 17 placed on the FCC's website, and that is how I 18 accessed it, is the reason that it is not a signed 19 copy. It is the electronic version, which GTE filed, 20 presumably. Since I don't file a lot of stuff at the 21 FCC, I'm not sure how they do it. It is obviously 22 not something that was scanned in with the signature. 23 And as far as having marked it as an 24 exhibit, I did not mark it as an exhibit because I 25 incorrectly presumed that the witness would be 01124 1 familiar with positions taken by GTE on such a high 2 visibility manner. So I think that would be a 3 triumph of form over substance. 4 JUDGE CRAINE: Well, I tend to agree with 5 Ms. Proctor on the form over substance argument. In 6 terms of it not being signed, I'm willing to accept 7 her representation that she obtained it from the 8 website. So I think the rest of the objection goes 9 to the weight. I'll go ahead and receive it, then. 10 And as I recall, our last exhibit number was 593, 11 which would make that 594. 12 MS. PROCTOR: Thank you. And I will make 13 copies. I just had a couple of additional questions. 14 Q. Mr. Lee, you state in your testimony that 15 you've testified in Hawaii? 16 A. That's correct. 17 Q. Was that in the case in Hawaii that's 18 similar to this one, a generic costing and pricing 19 docket? 20 A. Yes, that's correct. 21 Q. And the order in that case, the proposed 22 order was also just issued about a week ago? 23 A. That's correct. 24 Q. And the NRC study that GTE had submitted in 25 that case, is that what I guess we've been calling 01125 1 the new NRC study, as opposed to the old NRC study? 2 A. No, I don't believe so. I believe it was 3 the old study that was filed in Hawaii. 4 Q. Okay. And are you familiar with the fact 5 that the decision did criticize many of the 6 assumptions by GTE in that study? 7 A. I understand that the order had many 8 criticisms, yes, and GTE's filing the appropriate 9 responsive comments to those criticisms. 10 Q. And in Michigan, was there an order entered 11 by the Commission for establishing nonrecurring 12 charges for GTE? 13 A. Michigan also has a final generic UNE-type 14 order out, which has been out for several months, I 15 believe. I don't recall if they specifically 16 addressed NRCs. 17 Q. Are you familiar with the NRCs that GTE has 18 tariffed in the state of Michigan? 19 A. GTE has tariffed those rates, UNE rates in 20 Michigan under protest, does not believe that they 21 are required to be tariffed. And I believe that that 22 whole process is hung up in legal maneuvers right 23 now. 24 Q. Like most of the other issues under the 25 act? 01126 1 A. I don't believe the tariff has been made 2 effective. Let's put it that way. 3 Q. So the tariff page that says it was issued 4 March 11, 1998, and effective March 12, 1998, issued 5 under authority of Michigan Public Service Commission 6 Order dated February 25, 1998, in Case U-11281, it's 7 your belief is not effective? Would it help if I 8 showed you this tariff page? 9 A. That might help. 10 MR. POWELL: May I approach, Your Honor? 11 JUDGE CRAINE: You may. 12 MR. POWELL: Susan, do you need this back? 13 MS. PROCTOR: No. 14 Q. Have you had an opportunity to look at 15 that, Mr. Lee? 16 A. Yes, I have. 17 Q. And you said you were familiar with the 18 Michigan case. Are these the nonrecurring charges 19 that you were familiar with -- I believe you stated 20 that GTE had filed under protest? 21 A. I'm not certain, because I haven't reviewed 22 the Michigan information in quite some time, but 23 these look like the rates that could have come out of 24 the Commission's orders. It would not be something 25 GTE would have proposed. 01127 1 Q. And you say that, I presume, because it 2 shows an initial service order charge of $5 for a 3 loop or port? 4 A. That's correct. That would be 5 significantly below our cost. 6 Q. And it also shows an installation 7 nonrecurring charge for an unbundled loop of $4.63? 8 A. That's correct. 9 Q. And a loop facility charge of $25.50? 10 A. That's correct. All these prices are below 11 GTE's cost. The structure, at least, is based on 12 GTE's old NRC cost study. 13 Q. Which was the study before the Michigan 14 Commission, the old NRC study? 15 A. I believe so, yes. 16 Q. Okay. The loop rate that is shown here 17 under Section 3.20.5 for two-wire analog voice grade 18 loop of $23.98, was that also filed under protest by 19 GTE? 20 A. I believe all these rates have been filed 21 under protest. 22 Q. I guess, because the witness is questioning 23 this document, I wonder if there's any way to find 24 out if this tariff is in effect. It was represented 25 by my people to me to be that, but I wonder if 01128 1 there's any way to check that, or would you be 2 willing to accept, subject to check, that it is in 3 effect? 4 A. No, I wouldn't. 5 JUDGE CRAINE: What are you attempting to 6 show through that? 7 MS. PROCTOR: Well, GTE is proposing 8 charges in this case which are, as the witness says, 9 substantially higher than the charges established in 10 Michigan, and I simply wanted to establish that these 11 are the prices in Michigan, but he's unable to 12 apparently agree with me that they are. 13 JUDGE CRAINE: Well, it strikes me as the 14 type of thing where it's like a citation in a brief, 15 if there's a Michigan Commission decision that 16 resulted in those. 17 MS. PROCTOR: Okay. I'll try it that way. 18 That's all I have. Thank you. 19 JUDGE CRAINE: Okay, I have TCG, Nextlink 20 for 45 minutes. 21 MR. KOPTA: Thank you, Your Honor. 22 C R O S S - E X A M I N A T I O N 23 BY MR. KOPTA: 24 Q. Good evening, Mr. Lee. My name is Greg 25 Kopta. I'm representing Nextlink, TCG, and ELI. 01129 1 A. Good evening. 2 Q. Do you have before you what has been marked 3 for identification as Exhibit 590, which is GTE's 4 response to Nextlink Data Request Number 35? 5 A. Yes, I do. 6 Q. And I see your name here under preparer, so 7 are you one of the persons who prepared this 8 response? 9 A. That's correct. 10 Q. And is this response accurate, to the best 11 of your knowledge? 12 A. To the best of my knowledge, yes. 13 MR. KOPTA: I would offer Exhibit 590. 14 JUDGE CRAINE: Any objection? It's 15 received. 16 Q. You probably do not have Exhibit 571. May 17 I approach the witness? 18 JUDGE CRAINE: You may. 19 Q. Are you familiar with the information in 20 this exhibit? 21 A. I have not seen it before. 22 Q. This was something that Mr. Langley and I 23 discussed earlier, and he deferred to you on some 24 questions, and so, having a memory like a steel trap, 25 maybe a rusty steel trap, I thought I would ask you 01130 1 the same questions that he was unable to answer. 2 Specifically, according to GTE's response 3 to this data request, if space in the manhole or 4 conduit outside the GTE central office is not 5 available, a CLEC has the option to pay for 6 construction of additional facilities. And what I 7 was exploring with him was how GTE would charge the 8 CLEC for those costs. Are you familiar with how GTE 9 would charge under those circumstances? 10 A. I'm not a hundred percent certain, but I 11 believe special construction charges would apply. In 12 other words, ICB type pricing for this arrangement. 13 Q. And one of the things that I was asking Mr. 14 Langley was the only time this would occur is if 15 insufficient capacity exists in the existing manhole 16 and conduit, and what would happen in the event that 17 another CLEC wanted access to the GTE central office. 18 Would GTE do the same thing with this charge as it 19 does with the building modification charge? That is, 20 do a pro rata refund to the original CLEC who paid 21 for the construction? 22 A. I don't believe GTE has a current policy in 23 place that would address that situation. At the time 24 that those -- that that manhole was constructed, I 25 suppose that an evaluation would be done as to 01131 1 potential future uses of that space and whether or 2 not those -- some of those costs would be shared or 3 recovered from other parties. But at this point, I 4 don't believe GTE has a position or established 5 policy on prorating these additional costs. 6 Q. Are you aware whether any situation like 7 this has occurred in the central office, GTE's 8 central office? 9 A. For a manhole, before it's been 10 constructed, I'm not aware of a specific situation. 11 Q. If you could turn to Exhibit RKL-2, which 12 is attached to your direct testimony, and 13 specifically page one of five. 14 A. Yes. 15 Q. I wanted to walk through some of these 16 charges with you. And again, from the perspective of 17 my clients, which are facilities-based CLECs, and 18 would be approaching GTE under sort of a -- I won't 19 say hypothetical, necessarily, but if a 20 facilities-based CLEC were to approach GTE for a 21 single loop to provide business service, I just 22 wanted to run through these charges and see what that 23 CLEC would need to pay to GTE. 24 Now, as I understand it, the price for the 25 loop under GTE's proposal is $68.17; is that correct? 01132 1 A. That's correct. That includes interim 2 surcharge, which would be reduced as funding is made 3 permanent. 4 Q. Okay. But for now, it's $68.17? 5 A. That's correct. That's been modified 6 slightly in my errata, but -- 7 Q. I believe by a penny or something? 8 A. Yes. 9 Q. Up or down, do you remember? 10 A. I think it went up a penny. 11 Q. Oh, well that makes all the difference. 12 A. It's rounded. 13 Q. Now, there's also a cost of unbundling 14 charge that Mr. Tucek sponsors, which is $5.02. 15 Would that be in addition to the $68.17? 16 A. That's correct. 17 Q. And I believe you and Ms. Proctor discussed 18 a point in your testimony where you calculated the 19 nonrecurring charge, as GTE has proposed it, to be 20 $3.98 per month? 21 A. That was only a specific example of a 22 one-loop customer in one situation. Certainly, with 23 the multi-loop customers, that per month cost would 24 go down significantly. 25 Q. But at least if we're just talking about a 01133 1 single loop, then we're talking about something in 2 the neighborhood of $3.98? 3 A. Yes. 4 Q. And were you in attendance of the hearing 5 earlier, when I was discussing with Mr. Langley the 6 EIS cross-connect charge? 7 A. No, I wasn't. 8 Q. You would agree with me that a collocating 9 CLEC accessing unbundled loop from GTE would need to 10 acquire an EIS cross-connect? 11 A. Yes, that's correct. 12 Q. And GTE's proposed price for that, based on 13 Commission requirements in this docket, $1.31? 14 A. The cost that GTE filed for cross-connects, 15 as I understand it from Mr. Langley, had some cost 16 component in it associated with the jumper wire, 17 which is, in essence, duplicated in the NRC charge 18 for central office activity that GTE has. But other 19 than that, the other cost components of 20 cross-connect, subject to check, sounds approximately 21 right for a DS-O cross-connect. 22 Q. I will refer you to what has been admitted 23 as Exhibit C-570, in which GTE responded that its 24 proposed price was $1.31 for that element, as revised 25 by the Commission. If you would accept that, subject 01134 1 to check? 2 A. Subject to check, I'll accept it. 3 Q. Now, to the extent that you can trust a 4 lawyer's math, if we add $68.17 for the loop, $5.02 5 for the unbundling cost, $3.98 for the nonrecurring 6 charge, and $1.31 for the EIS cross-connect charge, 7 we come up with a total of $78.48. 8 A. Subject to check, I'll accept that. 9 Q. And I believe in Exhibit RKL-1, you have 10 stated that business revenues for GTE, on an average 11 basis, were $78.23; is that correct? 12 A. That's correct. That's for an average 13 business customer only. 14 Q. So our CLEC obtaining a single unbundled 15 loop is already paying GTE more for the unbundled 16 loop than GTE realizes in average revenues; isn't 17 that right? 18 A. In average revenues, that is correct. But 19 we don't expect CLECs to target average customers. 20 It's pretty clear that they're going to go after 21 GTE's high-margin, high-volume customers first. 22 Q. Now, in addition to the $78.48, a CLEC is 23 going to incur other collocation costs, is it not? 24 A. That's correct. Collocation costs would be 25 shared across all of the loops and customers that it 01135 1 acquires. 2 Q. And CLECs have its own network costs for 3 switching and transport and the various things that 4 one does to run a facilities-based telephone company? 5 A. I assume they have their own costs, yes. 6 Q. And as I understand it, as well, Mr. Doane 7 has recommended that the Commission adopt something 8 called a competition transition charge of $45.83; is 9 that correct? 10 A. I don't remember the exact amount, but yes, 11 a competitive transition charge is being proposed by 12 Mr. Doane. 13 Q. And that would be added to these other 14 costs? 15 A. No, it would not. Part of Mr. Doane's 16 competitive transition charge is associated with 17 GTE's interim surcharge, so to the extent that the 18 Commission approves GTE's interim surcharge, it would 19 reduce Mr. Doane's charge on a dollar-for-dollar 20 basis. 21 Q. So assuming that the $45.83 is the correct 22 figure, one would subtract $37.17, which is the 23 interim surcharge in your exhibit, from $45.83, and 24 the result would be what the competition transition 25 charge would be? 01136 1 A. I believe that's correct. 2 Q. So to state it another way, as I understand 3 it, both the competition transition charge and the 4 interim surcharge apply regardless of whether the 5 CLEC obtains any unbundled network elements from GTE; 6 is that correct? 7 A. Are you talking about applying to 8 facilities-based providers? 9 Q. Wholly facilities-based providers? 10 A. Wholly facilities-based providers? 11 Q. Yes. 12 A. That's correct. That would be our 13 proposal. 14 Q. So in those circumstances, a wholly 15 facilities-based provider would pay only the 16 competitive transition charge of $45.83, since the 17 interim surcharge is included within that; is that 18 correct? 19 A. The net effect would be that they would pay 20 that additional amount, right, subject to the changes 21 in my errata. 22 Q. Right. Well, we won't dicker over a penny 23 at this point. Would you turn to page four of your 24 November 18th reply testimony? And this, I believe, 25 alludes to something that you discussed maybe some 01137 1 with Ms. Proctor, but you were just alluding to in 2 our discussion earlier about a business customer with 3 20 lines, as opposed to a single line; is that 4 correct? 5 A. Yes, a more typical customer that a CLEC 6 would target. 7 Q. Okay. I wanted to ask you about your use 8 of that term, specifically in line four, a typical 9 multi-line business customer with 20 lines. What 10 part of that phrase does typical modify? 11 A. It really is intended to represent a 12 business customer that would be multi-line in nature, 13 that would provide sufficiently high margins that a 14 CLEC would be attracted to. So it's modifying 15 business customer and it's modifying, you know, an 16 approximate number of lines for that business 17 customer. 18 Q. Okay. Let me ask it a little bit more 19 specifically. Does the typical multi-line GTE 20 business customer have 20 lines? 21 A. I don't know if GTE's multi-line customers 22 have that or not. 23 Q. So what is the basis of 20 lines? 24 A. The basis of 20 lines is typical of a 25 high-margin, high-volume customer who would provide a 01138 1 significant amount of implicit universal service 2 support to GTE to fund high-cost customers. 3 Q. Do you know how many such customers GTE has 4 in Washington? 5 A. I don't have statistics on that, no. 6 Q. So you wouldn't know the percentage of the 7 total business customers that have at least 20 lines? 8 A. No, I could find that out, if you make a 9 request. 10 MR. KOPTA: I'd make that a record 11 requisition, if I might. 12 JUDGE CRAINE: It might be more useful, if 13 you're going to provide that information, if you have 14 some kind of breakdown that shows the percentage of 15 business customers that have, for example, under five 16 lines, between five and 10, or however you break that 17 down. I'm not suggesting those particular 18 categories, but if you could provide more than simply 19 the number that have 20 lines. Whatever you have 20 readily available that could show us the dispersion 21 of lines between one and however high they go. 22 THE WITNESS: Yes, I can do that. I have a 23 feeling that this exercise will yield very few 24 customers that have 20-plus lines, because GTE has 25 probably, in most cases, lost those customers 01139 1 already. 2 Q. Well, that sort of was going to be a 3 supplemental request, was, to the extent that you are 4 able to do so, if you can indicate the number of 5 20-plus line customers that GTE has lost to 6 competitors in the state of Washington, then that 7 would be helpful, as well. I'm not sure whether GTE 8 has access to that information, which was why I'm 9 hesitant to -- 10 A. I don't believe we do. 11 JUDGE CRAINE: Our marvelous number record 12 keeper is missing. My notes show that we're up to 13 11. Is that -- so this will be Record Request Number 14 11. 15 Q. Now, on the chart that you have here on 16 page four, describing the nonrecurring charges that 17 would apply to this business customer with 20 lines, 18 would I be correct if I wanted to determine what the 19 charge would be for a single line if I modified this 20 chart to include, instead of the $340, which is $17 21 times 20, it it would just be 17 for the line connect 22 charge? 23 A. That's correct. 24 Q. And then, two lines down, central office 25 connect, that would be $17.09 instead of $359.40? 01140 1 A. That's correct. 2 Q. And that would then leave the retail 3 nonrecurring charge of $65.50 with the wholesale 4 charge of approximately $148; is that correct? 5 A. Subject to check. 6 Q. Again, lawyers' math, yeah, that's a good 7 idea. 8 A. Right. 9 Q. Which is, and I won't even try to calculate 10 it, but the wholesale rate is over twice what the 11 retail rate is? 12 A. That may be possible. As I said in my 13 testimony, you can't compare retail to wholesale 14 NRCs, because the cost basis is not the same. In 15 fact, I'm not certain about Washington, but in many 16 states, retail NRCs are potentially held below cost 17 for universal service reasons, and keeps as many 18 customers on the network as possible. 19 Q. I'm sure the Commission would never do a 20 thing like that to GTE. Just kidding. On page seven 21 of your rebuttal testimony, specifically line five, 22 you state that the factor assumptions used by GTE are 23 only a starting point for pricing with the idea that 24 they would be trued up as GTE gains more experience 25 with wholesale service ordering from CLECs. I'm just 01141 1 curious, what is GTE's proposal for a trueup 2 mechanism, or how would you implement this proposal? 3 A. I think, at some point, we would ask to 4 file an entirely new cost study that reflected the 5 various assumptions we're realizing about activity 6 drivers and costs that they're causing. So as far as 7 the timing of that, it would be dependent on some 8 extent to the pace of CLEC entry into the market and 9 how quickly we could gain that experience. 10 Q. So to some extent, this proposal is in a 11 state of flux and could easily foresee a time in the 12 future where you may need to come back and reexamine 13 these costs; is that what I'm hearing you say? 14 A. That's right. This is a starting point, 15 like any set of rates that the company would propose 16 for any services. Over time, costs change and need 17 to be reevaluated. 18 Q. On page 22 of this same testimony, 19 specifically beginning on line 10, you state, The 20 next forecast of CLEC activity will likely reflect 21 lower numbers as customer loss has not materialized 22 as quickly as expected. What's the basis for this 23 statement? 24 A. The basis for the statement is that GTE has 25 used an average annual forecast in its pricing of 01142 1 service order activity in order to allocate a portion 2 of fixed cost to each service order so that GTE can 3 recover its shared fixed cost. Because that's a 4 forecast, if it's not realized or if it's 5 over-realized, to that extent, you could have 6 under-recovery of those costs or over-recovery and 7 you need to true those up based on how actual orders 8 are coming in. 9 Because this is a new business, GTE's -- 10 the current forecast in the pricing is over a year 11 old at this point, it's -- as it's been measured 12 against the actuals coming in, we're realizing that 13 it's too high. The impact of that, if you lower the 14 forecast, means that the per unit cost has to go up 15 in order to recover the entire bucket of fixed costs 16 that GTE has incurred. 17 Q. Now, do you have specific figures that 18 demonstrate what GTE's customer loss rate has been 19 over the last calendar year? 20 A. I do not have those figures, that type of 21 information. There is an effort to track it. I'm 22 not sure how accurate it is, but those figures and 23 service order activity that's coming through the NOMC 24 by CLECs are used in the forecast of the numbers that 25 we're using. 01143 1 Q. Is that the only basis for your forecast, 2 is, at least at this point, your experience with the 3 number of orders that you have been receiving? 4 A. Again, the experience to date and the 5 forecast out into the near future of customer loss 6 translated to service order activities is the basis 7 for the numbers that are used in the pricing hearing. 8 Q. So GTE doesn't look at its historical 9 revenue trends or potential revenue losses in trying 10 to determine what its total losses are when it comes 11 to customers lost to CLECs? 12 A. We certainly are looking at the units and 13 so forth that are being lost, yes. That's, you know, 14 any experience we have to date on loss is translated, 15 you know, into some future forecast. 16 Q. And I guess I'm just trying to understand 17 what GTE does in coming up with these forecasts or 18 how you can make a statement, as you did here, that 19 says it's going to be lower because you've 20 experienced less loss? 21 A. Right. As the main driver, you know, 22 customer loss and service order activity would be a 23 main driver for what you expect in the future. To 24 the extent that we've realized less than we had 25 forecasted for, say, 1998, that affects the outer 01144 1 years of the forecast, as well. I'm certainly not a 2 forecasting expert, but I know that forecasting 3 people use those numbers in projecting them forward. 4 Q. I think they put them in little rooms and 5 don't let them out. 6 A. Something like that. 7 Q. On page 23 of the same testimony, you're 8 responding to Mr. Dittemore of Commission Staff, and 9 you assert that GTE is not proposing to place all 10 costs on customers who choose to move their service, 11 and I believe this is in regard to GTE's shared fixed 12 transition costs. And you also state that it's the 13 CLEC's choice as to whether it elects to pass that 14 cost directly to the end user in a discrete charge or 15 recover it through the overall retail rates and 16 access rates it collects in total from all of its 17 customers. 18 The bottom line, however, is that the 19 CLEC's customers are paying these costs exclusively, 20 GTE's customers are not; is that correct? 21 A. That's correct. It's the cost causers that 22 are being asked to pay for this cost; that's correct. 23 Q. And you also come up with some figures 24 spreading this cost out, again, over a three-year 25 period, stating that it would be, for a single line, 01145 1 42 cents, and for 20 lines, two cents per month? 2 A. That's correct. 3 Q. And if you spread that same cost over all 4 customers, both CLEC and GTE customers, it would be 5 substantially less than that, would it not? 6 A. I assume, if you increase the base that 7 it's spread over that, that the math would work out 8 that way; that's correct. 9 Q. And why pick a three-year period? 10 A. It seemed like a reasonable period, because 11 most interconnection agreements are for three-year 12 terms. I would expect that an average customer might 13 remain a CLEC customer for that period of time as a 14 reasonable guesstimate. It could be more, it could 15 be less, but that's a reasonable estimate for 16 comparison purposes. 17 Q. And is that based on your experience in the 18 local market or long distance market? Is there some 19 basis for that assumption? 20 A. The primary basis was the length of the 21 interconnection agreement. 22 Q. That reminds me of another assumption that 23 underlies part of your testimony. And that is, in 24 calculating the total business revenues, I believe 25 you assume in your testimony that the CLEC would be 01146 1 providing both local exchange service and toll 2 services; is that correct? 3 A. If the CLEC were to purchase UNEs from GTE? 4 Q. Yes, I believe, in creating your exhibit, 5 that was one of the assumptions you made, is it not? 6 A. Yes, they'd be providing local, toll, 7 access services. As a purchaser of UNEs, they would 8 be collecting those revenue streams instead of GTE. 9 Q. However, they would not necessarily be 10 collecting the toll revenue streams, would they? 11 A. If they're not collecting toll, they would 12 be collecting access in its place. 13 Q. And that's substantial -- 14 A. It's potential that a specific CLEC may not 15 be a toll provider; they may just be an underlying 16 access provider. 17 Q. The customer might choose to go with a 18 carrier other than the CLEC, could they not? 19 A. That's possible, although the whole purpose 20 behind -- or one of the advantages of purchasing UNEs 21 and providing local service that way is that you can 22 bundle your toll services with your local services 23 and offer attractive packages to end user customers 24 so they will take your -- 25 Q. Like GTE does? 01147 1 A. Are you referring to our CLEC, GTE's CLEC? 2 Q. No, we won't get into that, but I will ask 3 you, does GTE provide both local service and toll 4 service to all of its customers? 5 A. We provide intraLATA toll service to our 6 customers. We don't provide it to all of them, 7 because a lot of that intraLATA toll business has 8 been competed away with the introduction of one plus. 9 Q. Do you know what percentage of local 10 customers picked GTE for their local toll? 11 A. I heard a number that's now about six 12 months old. Approximately we have 40 percent of the 13 market share now for intraLATA toll. 14 Q. And that's of your customers or of all 15 customers? 16 A. That's of GTE customers, local, local 17 service customers. 18 MR. KOPTA: Thank you. That's all I have. 19 JUDGE CRAINE: MCI for 25 minutes. 20 MR. PENA: Thank you, Your Honor. 21 C R O S S - E X A M I N A T I O N 22 BY MR. PENA: 23 Q. Good afternoon, Mr. Lee. My name is 24 Rogelio Pena, and I'm here on behalf of MCI. I just 25 have a couple of questions. I don't think it will 01148 1 take 25 minutes. First of all, I'd like to follow-up 2 with a discussion that you had with counsel for Staff 3 regarding electronic interfaces. I believe you 4 testified that it's your opinion that smaller CLECs 5 may never or will never convert to electronic 6 interfaces. Do you recall that? 7 A. Yes. 8 Q. Can you give me an example or name a CLEC 9 that's operating here in the state of Washington that 10 you believe will not be converting to an electronic 11 interface? 12 A. I don't have that knowledge of a specific 13 CLEC. It's possible that Mr. Langley might have that 14 information due to his dealings with the ordering 15 centers and so forth in developing the cost studies, 16 but specifically I do not have that information. 17 Q. Thank you. I have a couple of questions on 18 your reply testimony on collocation, which was filed 19 October 9th, and I believe it's Exhibit 584. On page 20 seven of your testimony, at lines 13 and 14, that you 21 testified at, depending on the layout of the central 22 office and the location of the CLEC's cage or 23 equipment, these costs can vary substantially. And 24 is it reasonable to assume that it's GTE that's going 25 to be determining the location of a collocator's cage 01149 1 or equipment? 2 A. That's correct. 3 Q. So the collocator will not have a say, 4 then, as to where in GTE's central office their 5 equipment will go; is that correct? 6 A. GTE will have to evaluate, first of all, if 7 there's space available within an environmentally 8 conditioned area. If there's not space available, 9 and they have to be placed in an unconditioned area, 10 then the CLEC would be subject to this charge. 11 Q. And again, it's GTE that determines -- 12 A. That's correct. 13 Q. -- the location? 14 A. GTE's engineers will, upon receipt of the 15 collocation request, evaluate the building space. 16 Q. Thank you. I'd like to turn your attention 17 to page nine of that same testimony. On lines 12 18 through 14, you discuss building modification 19 charges, and you testify that you'll be adding 20 separate entryways, doors, and security systems 21 necessary to allow CLEC technicians unlimited access 22 to their equipment. Do you see that? 23 A. Yes. 24 Q. Now, I'm assuming GTE will want these 25 separate entryways for security reasons? 01150 1 A. That's correct. 2 Q. Now, are you going to have a separate 3 entryway for each CLEC or an entryway for all CLECs? 4 A. There would be a common entryway for the 5 CLECs who are collocated within a given space in a 6 central office. I can give you an example where 7 there might be more than one entrance, is if the 8 space in that one collocation area is used up, say 9 there are three or four CLECs in there. The fifth 10 CLEC comes in, there's no space for him. We have to 11 put him in a different area of the building. Then an 12 additional building modification charge would be 13 associated with that new collocation site within the 14 building. 15 Q. So you were expecting multiple collocators 16 in the cages that GTE develops; right? 17 A. In the partitioned area, yes, we would 18 expect multiple -- again, given space availability 19 constraints, that we would expect multiple CLECs to 20 be collocated in those areas. 21 Q. So you have security concerns for GTE's 22 equipment, but collocators will have to, I guess, 23 trust each other, in that you'll have multiple 24 collocators having access to a particular cage? 25 A. Each individual cage will have locks and 01151 1 keys and stuff associated with it so that only the 2 CLEC that leases that space has access to it. There 3 could be several cages within a collocation space, 4 but a common entry into that area and a common 5 entryway, which has access to the various cages, only 6 the CLECs that had keyed access to their cages could 7 get into their cages. 8 Q. Has GTE had any incidents of sabotage of 9 its equipment by collocators here in Washington? 10 A. Not that I'm aware of. However, we don't 11 allow free access into our COs where that would 12 occur. 13 Q. Has GTE had any incidents of sabotage of 14 its equipment by its employees here in Washington? 15 A. Again, not that I'm aware of. 16 Q. And I would ask you the same question 17 regarding contractors, GTE contractors? 18 A. I'm aware of no specific instances. 19 Q. Thank you. I'd like to turn to page 11 of 20 that same testimony. On lines 12 and 13, you're 21 discussing building modification charges, and you 22 testified that those charges come in three flavors, 23 simple, moderate, and complex. Do you see that 24 testimony? 25 A. Yes, I do. 01152 1 Q. I believe, in the previous question, you've 2 already testified that GTE will select the area in 3 which the collocator will place their equipment in; 4 is that correct? 5 A. That's correct. 6 Q. Now, will it be a GTE employee, then, that 7 will determine whether a simple modification charge, 8 building modification charge is applied or moderate 9 or complex? How does GTE make that determination? 10 A. GTE will send the appropriate personnel to 11 an office to evaluate that site to determine, you 12 know, again, where space is available, where the 13 collocators or where the CLECs can be collocated and 14 the configuration of the building and the level of 15 changes that need to be made to that specific 16 building. 17 When they do that site evaluation, 18 essentially the office will be classified into one of 19 the three categories, depending on the amount and 20 level of work that's required to complete the 21 necessary changes to the building. 22 Q. So it will be GTE that makes that 23 determination and not the CLEC? The CLEC will have 24 no say? 25 A. That's correct. 01153 1 MR. PENA: That's all I have Your Honor. 2 Thank you very much. 3 JUDGE CRAINE: Thank you. I have Covad for 4 15 minutes. 5 MR. JENKINS: Yes, Your Honor. And it will 6 probably be a little less than that. 7 C R O S S - E X A M I N A T I O N 8 BY MR. JENKINS: 9 Q. Good afternoon, Mr. Lee. My name's Prince 10 Jenkins. I represent Covad Communications. I want 11 to ask a couple follow-up questions regarding your 12 rebuttal testimony, November 18th rebuttal testimony 13 on NRC pricing. And just by way of reference, it's a 14 follow-up to the questions from MCI Counsel and Staff 15 Counsel regarding EDI and OSS. 16 At page 13, line eight of your testimony, 17 you state that many CLECs do not have the resources 18 which would enable them to implement electronic 19 ordering solutions. My question is, are you aware 20 that there are third party vendors who are building 21 and offering essentially EDI solutions to small 22 carriers or any sort of carrier who is unwilling or 23 unable to expend the resources internally to develop 24 EDI? 25 A. No, I'm not aware of that. 01154 1 Q. Okay. Would you accept, subject to check, 2 that there are, in fact, software vendors out there 3 that are indeed offering these services to CLECs? 4 A. Subject to check, I would accept that. 5 Q. Okay. 6 A. And I don't know that that changes the 7 picture for an individual CLEC as to whether that 8 would make it any more affordable or not. 9 Q. Okay. Are you aware of whether Covad is 10 currently ordering unbundled loops and 11 interconnection from GTE in the state of California? 12 A. I'm not aware. 13 Q. Would you accept, subject to check, that 14 that is, in fact, the case? 15 A. Subject to check, I'll accept that. 16 Q. Okay. Are you aware of whether Covad, 17 through one of these third party vendors, is, in 18 fact, deploying EDI in California, possibly as early 19 as December -- or, actually, later this month? 20 A. I'm not aware of that. 21 Q. Okay. Would you accept, subject to check, 22 that Covad is, in fact, deploying EDI interface, I 23 believe it's Version Nine, or whatever the current 24 version is, in California? 25 A. Subject to check, I would accept that. 01155 1 Q. Okay. Let me ask you a hypothetical. 2 Assuming, then, when Covad begins ordering loops here 3 in Washington with GTE, would you think it would be 4 unfair and a violation of the act to force Covad, you 5 know, assuming that we have developed and deployed 6 our EDI interface here, to pay a higher manual 7 ordering charge? 8 A. We're not proposing a separate manual 9 ordering charge in this proceeding. I'm not sure 10 your hypothetical relates to GTE's proposal. 11 Q. Let me, then, rephrase the question. At 12 line 10 and 11, you state it would be unfair and in 13 violation of the act to force smaller CLECs to pay a 14 higher manual ordering charge, and that's in the 15 context for those CLECs that are unable or that don't 16 have the resources to deploy electronic EDI. 17 My question is simply this. For those 18 CLECs, and I'll use Covad as an example, who are in 19 fact deploying the EDI interface, my question, then, 20 would it be fair for GTE to charge a rate, an NRC 21 rate that, as your testimony indicates here, is a 22 mixture of both manual and electronic orders? 23 A. I think it's fair from the standpoint that 24 you're not discriminating against smaller players who 25 can't afford to purchase vendor-provided interfaces 01156 1 or develop their own interfaces in this situation. 2 As my testimony discusses a little bit, I guess, I'm 3 not totally opposed to the notion of having a 4 separate manual order charge for those CLECs. I just 5 think the Commission needs to be concerned about the 6 effect it will have on competition and development of 7 smaller niche players in the market. 8 Q. Such as Covad? 9 A. If Covad falls in that category, yes. 10 Q. All right. I'm going to turn to your 11 October 9th testimony, and it's Exhibit 584. At page 12 12, starting at line eight through, I guess, 13, you 13 referenced the testimony of Covad witness -- 14 A. Excuse me, what page and line again? 15 Q. Page 12, beginning at line eight through 16 13. 17 A. Okay. 18 Q. Okay. You reference the testimony of Covad 19 witness Tom Regan, and the fact that in Mr. Regan's 20 testimony, he objects on behalf of Covad to having to 21 pay the full up-front cost of building modification 22 and environmental conditioning charges? 23 A. Yes, I see that. 24 Q. Okay. Then, at line 13, your rationale is, 25 in part, that it's not a penalty and it's not unfair 01157 1 because it is the first CLEC that causes the cost to 2 be incurred? 3 A. That's correct. 4 Q. Okay. 5 A. GTE has no way of knowing if additional 6 CLECs will ever come into that office. Therefore, we 7 need to recover those costs from the CLEC and then 8 prorate them back to all CLECs that eventually 9 collocate in that particular office. 10 Q. Gotcha. I'm sure you don't have Mr. 11 Regan's testimony in front of you. 12 A. No, I don't. 13 Q. Okay. I'm going to read from his testimony 14 and, subject to check, and I can provide the witness 15 with -- I can show the witness from where I'm 16 reading. In Mr. Regan's testimony, he states that 17 GTE's charging Covad from 30 to $50,000 for 18 environmental conditioning in certain GTE COs. 19 My question to you, then, would be is it 20 GTE's -- is it your contention that -- let's take the 21 first example, $30,000 for environmental 22 conditioning. Does that $30,000 represent the cost 23 of providing environmental conditioning just to that 24 one CLEC, in this case being Covad, or is that 25 $30,000 sort of spread out or does it account for the 01158 1 environmental conditioning for the entire CO or for 2 the available space in that CO? 3 A. That would account for the environmental 4 conditioning for the space that the collocator 5 operates -- or excuse me, occupies. Now, if that 6 space where environmental conditioning has been put 7 in is subsequently occupied by additional 8 collocators, then the cost is shared. 9 Q. Okay. Let me try to rephrase that 10 question. So is it, then, your testimony that if a 11 second or a subsequent collocator comes in, then that 12 charge for environmental conditioning will then be 13 pro-rated, so in effect -- this is a long question 14 here. In effect, that first CLEC is paying for more 15 or being charged for more environmental conditioning 16 than required for his collocation space alone? 17 A. No, because the amount would be rebated to 18 the first CLEC. Say, for example, the charge is 19 $30,000 for environmental conditioning. That's 20 charged to CLEC A. Six months down the line, CLEC B 21 comes in. They pay the $30,000. Fifteen thousand of 22 it is pro-rated or rebated back to the first CLEC. 23 MR. JENKINS: Okay. I'll stop there. 24 Thank you. 25 THE WITNESS: Can I qualify my last answer 01159 1 for just a second? I just -- I want to clear up a 2 misunderstanding. I didn't want you to believe that 3 GTE is going to charge 30,000 to both CLECs, and seem 4 to be overcharging that way. The way it actually 5 works, I believe, is the second CLEC is charged the 6 full 30,000 up front, but they get rebated 15,000 7 also, in addition to the first CLEC. So their net 8 pay is 15,000, and the net pay of the original CLEC 9 is also 15,000. And the same procedure would apply 10 as additional CLECs come into that space and it would 11 just be pro-rated over more parties. 12 JUDGE CRAINE: Okay. Dr. Gabel. 13 E X A M I N A T I O N 14 BY DR. GABEL: 15 Q. Good evening, Mr. Lee. 16 A. Good evening. 17 Q. This afternoon, I believe it was Staff was 18 asking you about your federal collocation tariff, 19 maybe it was AT&T, and you stated that your 20 collocation tariff is currently in effect; is that 21 correct? 22 A. Yes. 23 Q. But was it approved by the FCC, or does the 24 FCC have a process where they let something go into 25 effect one day after the filing is made, but they 01160 1 investigate the tariff after it's in effect? 2 A. Yes, that's what I was trying to explain 3 earlier. It was allowed to become effective and it's 4 been effective since approximately November of '96 -- 5 or excuse me, '97, I think. 6 Q. But to say it's in effect doesn't mean it's 7 approved. It has not been approved? 8 A. It's not the FCC's practice to write an 9 order saying we approve this tariff. 10 Q. Is the tariff being investigated currently? 11 A. I believe it is now being investigated, 12 yes. It's in progress, is my understanding. 13 Q. I'd like to turn, Mr. Lee, to your direct 14 testimony. First, at page 10, here at the bottom of 15 the page, you're discussing GTE's pricing objective 16 and you're explaining the philosophy that underlies 17 the calculations that appear in RKL-1. I'd like to 18 turn to RKL-1. I just want to make sure I understand 19 what you're doing here. 20 A. Okay. 21 Q. Is the process you first identify your 22 current retail revenues, that's the starting point? 23 Or why don't I just let you take the lead. 24 A. Sure. Yes, the starting point is current 25 retail revenues, okay. From -- if you follow right 01161 1 down the line on RKL-1, page one of three, we then 2 back out the avoided retailing cost associated with 3 the body of services that's provided by the 4 underlying UNEs. So it would be the retailing costs 5 associated with local services, toll services, 6 vertical services, provided to the end user. 7 In addition to that, we also back out all 8 the other miscellaneous service costs or revenues 9 that are not provided by the underlying UNEs. As I 10 discussed before, it's things like Yellow Pages 11 advertising, billing and collection, miscellaneous 12 types of revenues. 13 That gets down to a level of actual cost 14 that you can attribute to a package of UNEs that are 15 used to provide local service. Those actual costs 16 would include the costs associated with providing the 17 bundle of services that you can provide that are 18 associated with the loop, access, toll, vertical and 19 local services. And that amount is the 442 million, 20 which is on line 10. 21 GTE's pricing objective, then, would be to 22 have rough parity between UNE prices and this actual 23 cost of providing the services today in a resale 24 environment, if we were a hundred percent resaler, 25 because the cost should be the same. The network is 01162 1 the same. So whether you're a 100 percent reseller 2 or a 100 percent provider of UNEs, you still have to 3 recover all the same costs. 4 In most instances where GTE is proposing 5 pricing for UNEs now, GTE would propose a set of UNE 6 prices which generated the 442 million in revenues. 7 However, the Commission in Washington set the 8 forward-looking direct costs at a level which was 9 below GTE's actual forward-looking direct costs of 10 approximately 214 million, when you multiplied out 11 units times the ordered TELRICs. 12 So when GTE's forward-looking common costs 13 are added onto that, the 118 million on line 15, the 14 sum of those two is approximately 332 million, 15 roughly, so it's actually a shortfall below GTE's 16 actual costs of 110 million. 17 Q. And are you proposing to make up that 18 shortfall through some other mechanism? 19 A. The shortfall is then made up through the 20 proposed interim universal service surcharge on the 21 loop. That has the impact of recovering some of 22 these stranded costs that the Commission has left by 23 setting TELRICs below what the actual cost level is, 24 as well as temporarily preserves the implicit support 25 that's in the business rates today for a business 01163 1 customer. 2 Q. So you have a 55 percent markup above 3 direct cost to recover your common cost? 4 A. That's correct. 5 Q. And then, after you've done that, you still 6 have a shortfall of over $100 million, and you 7 propose to recover that through the interim 8 mechanism? 9 A. That's correct. 10 Q. Now, turning to page two of the exhibit, 11 what role does Column A have in the calculations that 12 you've made in this exhibit? 13 A. Column A has no role in this. It's 14 presented merely for comparison purposes. And in my 15 errata, I corrected the heading to this column. It's 16 actually the ordered rates from the AT&T and GTE 17 arbitration. And for comparison purposes, it just 18 shows you the revenues that would be generated by a 19 set of UNE prices that came out of that order if GTE 20 was a 100 percent provider of UNEs. 21 Q. I'd now like you to move forward to RKL-2, 22 1-B, the third line there states D4 channel banks, 23 charges will apply as incurred. Would you explain 24 this line, because as I understood Mr. Tucek's cost 25 study, he includes the cost of D4 channel banks, so I 01164 1 was wondering what this tariff rate or this tariff 2 item is designed to recover what type of costs that 3 aren't already reflected in Mr. Tucek's cost 4 calculations? 5 A. That line is there incorrectly. It should 6 be removed. Mr. Tucek's costs are for the D4 channel 7 banks, and that's probably a remnant from a previous 8 filing where it was proposed on an incremental basis 9 as the costs are incurred. In this case, the cost, 10 as Mr. Tucek indicated, are averaging cost of all 11 loops. 12 Q. May I ask you to return to your direct 13 testimony and turn to page 21 to 22? On this portion 14 of your testimony, you've been discussing your 15 concerns about arbitrage, and then you state, at the 16 bottom of page 21, in fact, no incumbent company in 17 any industry could survive if competitors were 18 afforded such arbitrage opportunities. 19 Am I correct to understand that, under the 20 interim rates approved by this Commission, according 21 to RKL-1, the loop rate was $13.82 in Washington? 22 A. The interim rate from the arbitration? 23 Q. Yes. 24 A. $13.82, I believe. That's correct. 25 Q. And since that rate was established, has 01165 1 the pricing practices of rivals and entry by rivals 2 provided support for your contention here at pages 21 3 and 22, that if arbitrage opportunities exist, that a 4 company like GTE could not survive? 5 A. In the long run, GTE will not survive if 6 prices like that continue to subsist, because all of 7 the customers that currently provide universal 8 service support today will be targeted by CLECs. 9 Once that support goes away, GTE will be left with 10 high-cost customers only, and no means by which to 11 gain the support necessary to continue to provide 12 service to those customers, so -- 13 Q. Turning to page 25 and 26, here you 14 identify the arbitrage opportunities that are 15 available. Am I correct that table four -- are you 16 suggesting that there's an opportunity for a CLEC to 17 earn a profit of $37.17? Is that your suggestion 18 here? 19 A. This is based on an analysis of an average 20 business customer. Again, we don't think that CLECs 21 are necessarily going to target just average 22 customers. They're going to go for the even above 23 average customers first. They're going to go for the 24 cream skimming. So this proposal reflects only the 25 average support in the development of the interim 01166 1 surcharge. 2 Q. I'd ask you, Mr. Lee, to turn to now, in 3 the same testimony, the bottom of page 33 and the top 4 of page 34. Here you're expressing your disagreement 5 with the Commission's decision that the loss of 6 market share should be reflected in estimated unit 7 costs of an ILEC like GTE; is that correct? 8 A. That's correct. I think the net result of 9 that is a downward spiral of more bypass and more 10 loss of market share until you have nothing left. 11 Q. Well, I'm having -- what I was wondering 12 about when I read that, I found that hard to 13 juxtapose that next to the other concern that you 14 expressed this afternoon, and also in your testimony, 15 that the Commission has or may set prices that are 16 too low. So if the process here is to raise prices, 17 which is actually what you advocate, why would you 18 oppose such a process? 19 A. Well, I think if prices are set at actual 20 cost, where they should be, you still are going to 21 have some bypass and loss of market share, but it's 22 going to be from efficient competition. It's not 23 going to result from inefficient competition, where 24 you have below cost rates. A CLEC has much more 25 incentive to purchase UNEs from GTE than to, for 01167 1 instance, build their own network and offer advanced 2 services when they can get UNEs at below cost from 3 GTE. 4 Q. You referenced inefficient competition. 5 Would it be inefficient if your prices were set at 6 actual cost, you lost market share, your unit costs 7 went up, and you didn't adjust your prices to reflect 8 increase in your unit cost? 9 A. I think that those costs are more 10 appropriately recovered in a mechanism that GTE 11 witness Michael Doane has proposed, competitive 12 transition charge. 13 Q. Well, this is your testimony here, and I'm 14 asking you if you -- if the Commission sets the 15 appropriate prices and you continue to lose market 16 share and your unit costs go up, would it be 17 predatory not to raise your prices to cover your unit 18 cost? 19 A. I don't think so. I don't think that the 20 costs associated with stranded investment belong in 21 the costs of the UNEs themselves. 22 Q. May I ask you to turn to page 39 of your 23 testimony, lines 14 and 15. You state here that the 24 FCC allowed the building modification NRCs to be 25 marked up to recover common costs. What level of 01168 1 common cost recovery did the FCC permit and how did 2 it determine that level? 3 A. I'm not sure I have their Second Report and 4 Order with me, but that was where that adjustment was 5 discussed. The FCC says that the overhead factor 6 should be based upon the lowest common factor used in 7 previous DS3 and DS1 cost studies filed with the FCC. 8 And for GTE, that factor was 34.47 percent. 9 Q. And do you know why the Commission adopted 10 that as the standard, the lowest markup that had been 11 proposed in DS1, DS3 filings? 12 A. I'm not aware of their rationale behind 13 that. 14 Q. Is the provision of DS1 and DS3 services 15 one of your more competitive markets? 16 A. Yes, I would say so. 17 Q. So would that markup of 31 percent be 18 indicative of what kind of common cost recovery is 19 sustainable in an emerging or competitive market? 20 A. Well, it was 34.47 percent, but -- and I 21 presume that, for interstate special access services, 22 that that would be the case. I don't know that you 23 could apply that rule to other -- or this level of 24 common cost to other services. 25 Q. You say you don't know if you could. Let 01169 1 me just ask you, why would it be inappropriate to do 2 that? 3 A. I think the fact that an overhead factor 4 for a particular level of service, certainly 5 different services recover different levels of common 6 costs. I guess from GTE's standpoint, for UNEs, 7 we're proposing a fixed allocator, just because it's 8 a simple approach and it's a fair approach that the 9 FCC has bought into as an option. 10 I guess it's possible to play with the 11 overhead markups on services, but you risk placing 12 more cost recovery on network elements that are not 13 -- that have, you know, bottleneck access, not as 14 easy to obtain from sources other than the ILEC. So 15 it would be GTE's recommendation to continue to apply 16 a fixed allocator and have a markup that's the same 17 across all elements. 18 Q. But wouldn't this -- what was it, 34 19 percent? 20 A. That's right. 21 Q. Wouldn't that be a fixed allocator? It's 22 just, instead of 55, it's 34? 23 A. It's a fixed allocator, and we could mark 24 it up an additional amount in this case, but 25 collocation, in and of itself, is not a UNE, so it's 01170 1 not part of that proposal. And because we already 2 have existing federal tariff rates for this service, 3 in this case, it makes more sense to have parity with 4 federal rates. 5 Q. And that 34 percent value, you say, is from 6 the Second Report and Order; is that correct? 7 A. I believe so, yes. 8 Q. Can you identify where that appears in the 9 order? 10 A. I have a citation of paragraph 32. I don't 11 know if that's correct or not. I'd have to check. 12 Q. Mr. Lee, could I ask you to turn to page 43 13 of your testimony again, your direct testimony? At 14 lines 16 to 22, you define CLEC dedicated transport. 15 At lines 21 through 22, you have the phrase, but 16 extends no further into GTE's network than the 17 serving wire center. Could you explain what 18 facilities are included in CLEC dedicated transport? 19 Is this the loop; is this interoffice transport? 20 A. Essentially, this is the connection between 21 the CLEC's office and our office. So it has the 22 characteristics of a loop, from that standpoint, or 23 an entrance facility, if you will, if you're 24 comparing it to the interexchange access environment. 25 Q. Mr. Lee, I'm not sure if it was in your 01171 1 direct testimony. I believe it was in your direct 2 testimony you expressed your concern that, because of 3 the adjustments made to GTE's NRC study in Phase I, 4 Appendix D, that for one type of an activity, the 5 effective measured cost was zero. Do you recall 6 that? 7 A. Yes, I do. 8 Q. All right. As long as the Commission is 9 considering your revised study that was filed in 10 August, does your concern about this disappear? 11 A. Yes, it does. That pricing proposal has 12 been superseded by RKL-5, and subsequently RKL-7. 13 Q. Mr. Lee, may I ask you to turn to your 14 November 18th Exhibit 7. That's RKL-7, or Exhibit 15 Number 587. 16 A. Okay. 17 Q. Page four of eight. In Column D, 18 calculations are made using information that's 19 contained in Columns N and O. Could you explain why 20 these adjustments are made? 21 A. Yes, let's take an example where we have 22 some weighted costs here. Go down to line 57 for 23 record order, new ordering. The cost in Column A is 24 $5.31, yet that's been translated into a cost of only 25 53 cents in Column D. What the pricing exercise GTE 01172 1 has put together attempts to do is consolidate rate 2 elements to some extent to simplify the rate 3 structure. In order to do that, we take some 4 miscellaneous types of order types or order 5 activities and weight them based on the probability 6 that they'll occur. And then you apply them to every 7 ordering charge, rather than have a separate rate 8 element that you have to deal with and charge to the 9 CLECs and worry about billing and customer questions 10 and so forth. 11 So the 53 cents, you can see by the formula 12 to the right of Column H, is based on the cost times 13 a factor. And that factor, on the last page, page 14 eight of eight, in this instance is the ratio of 15 engineered basic orders to total engineered orders. 16 Let me get this right, because this is -- do I have 17 the right factor, right line here? Excuse me, factor 18 six. It's the ratio of record orders, change 19 requests to total service orders. 20 So GTE estimates that that ratio is 21 approximately 10 percent. So we take 10 percent 22 times the total cost for a record order and include 23 it in the cost of all service orders, thereby 24 eliminating having separate charges for different 25 types of each and every type of activity that you 01173 1 would have. That's a good example of how that's 2 applied. 3 Q. One last question, Mr. Lee. On your 4 testimony of November 18th, page 20, at the top of 5 the page, you're discussing the cost associated with 6 load coil removal. How was it determined that these 7 costs were not included in the charge, and also, what 8 do you mean by the charge? 9 A. By the charge, I meant outside facility 10 connect charge, which GTE intends to propose when 11 field work is required for UNEs; that the costs that 12 went into that charge were originally thought to 13 include some sort of pro-rated time estimates for 14 activities associated with load coil removal, as 15 well. And subsequent to my initial testimony on this 16 subject, GTE discovered that, in fact, those costs 17 were not -- or activity times were not considered in 18 the costs for that charge. 19 So I guess my proposal is to continue my 20 original proposal in this matter, but as an interim 21 charge, so that GTE at least has partial cost 22 recovery for this type of activity, with the 23 understanding that it will develop costs as 24 requested, specifically associated with this item. 25 We believe Staff requested in their testimony that 01174 1 GTE be required to do a separate cost study for this 2 activity. And we would agree with that. 3 DR. GABEL: Thank you. I have no further 4 questions. 5 JUDGE CRAINE: Questions from the 6 Commissioners? Any follow-up to Dr. Gabel's 7 questions? Ms. Proctor. 8 MS. PROCTOR: Thank you. 9 C R O S S - E X A M I N A T I O N 10 BY MS. PROCTOR: 11 Q. Mr. Lee, in response to my questions, in 12 talking about the gap between the costs, the TELRIC 13 costs plus common costs and the 440 million, you 14 characterize the interim surcharge as being needed 15 for universal service. Did I understand you 16 correctly? 17 A. That's correct. 18 Q. Now, in responding to Dr. Gabel, and 19 perhaps you didn't -- well, I wonder, you referred to 20 that amount as being stranded costs? 21 A. A portion of that amount is stranded cost, 22 because it's -- because of the rates of the costs 23 that were set by the Commission for TELRICs doesn't 24 allow GTE to recover its actual cost. So I guess 25 there's really two components to the surcharge, if 01175 1 you look at it that way. A portion of it is stranded 2 cost. 3 But by setting TELRICs at the level that 4 were set, the Commission is saying that these are GTE 5 costs and, by definition, the difference between the 6 costs and the revenues that you recover from the 7 various services provided by those UNEs is implicit 8 support. 9 Q. Okay. And then, in your discussion with 10 Dr. Gabel concerning cream skimming and -- I wondered 11 if you were familiar with the similar arguments about 12 cream skimming and what used to be referred to as the 13 death spiral that were made by AT&T in the 1980s 14 addressing the entry of MCI and the other providers 15 into the long distance market? 16 A. I'm not familiar with AT&T's arguments on 17 that. 18 Q. If AT&T had made similar arguments, in 19 fact, precisely the same argument that the new 20 entrants would cream-skim and leave AT&T in this 21 death spiral, which I think you characterized, at the 22 end of the death spiral, the incumbent monopolist has 23 nothing. And I take it you're familiar with the long 24 distance market, generally? 25 A. Generally. 01176 1 Q. Would it be fair to say that none of those 2 prophecies have come about in the case of AT&T? 3 A. Well, the instance I'm referring to is 4 where those stranded costs are put back into the 5 price, so if AT&T were to experience similar stranded 6 costs, but, through regulation, were forced to add 7 those costs back into the price of their toll 8 services, yes, they would lose all their customers. 9 It would continue. 10 Q. And in your discussion with Dr. Gabel, you 11 were, I take it, equating loss of market share with 12 loss of revenues? 13 A. Yes, it would be both customers and 14 revenues, that's correct. 15 Q. And would you agree that the experience of 16 AT&T in the long distance market indicates that loss 17 of market share may, in fact, occur at the same time 18 as a dramatic increase in total revenues? 19 A. I'm aware that that's possible. 20 Q. It's not only possible, it has occurred 21 because of dramatic growth in the long distance 22 market? A bigger pie, in other words, of which a 23 smaller share can be larger? 24 A. I'm not saying that wouldn't occur. What 25 I'm saying in regards to market share loss is that 01177 1 when the resultant costs associated with that are 2 forced to be put back into the rate elements for the 3 service and you have to charge more, you're going to 4 continue to lose market share. That's going to then 5 put more costs into your service you have to recover. 6 Every time you raise your price, you'll lose more 7 market share until you have none. That's all I'm 8 referring to. 9 MS. PROCTOR: Thank you. 10 JUDGE CRAINE: Any other follow-up 11 questions? Mr. Powell. 12 MR. POWELL: I have one small area for 13 redirect, Your Honor. 14 JUDGE CRAINE: Go ahead. 15 R E D I R E C T E X A M I N A T I O N 16 BY MR. POWELL: 17 Q. Mr. Lee, you'll remember some examination 18 by Ms. Proctor earlier in the afternoon, and also by 19 Dr. Gabel with respect to the GTE's pricing 20 methodology for UNEs. And in particular, GTE's 21 proposal, as reflected in your testimony, that an 22 interim USF surcharge be added to the price of a 23 loop. Do you recall that testimony? 24 A. Yes. 25 Q. Are you familiar with Dr. Blackmon's 01178 1 testimony in this docket with respect to GTE's 2 pricing proposal? 3 A. Yes, I am. 4 Q. And do you understand that Dr. Blackmon has 5 agreed that the interim USF surcharge would be 6 appropriate for the sale of the business loop, but 7 not for a residential loop? 8 A. Yes, I'm aware of that. 9 Q. What's your reaction to Dr. Blackmon's 10 testimony? 11 A. Dr. Blackmon's testimony is based on the 12 analysis that we've done that, if you go to my table 13 four in my direct testimony, it shows that -- 14 Q. Page 25. 15 A. Page 25, thank you. It shows that the 16 arbitrage opportunity for an average business 17 customer is significantly more than what you could 18 get for an average residential customer. In light of 19 that fact, although, as I've indicated, I don't 20 believe that CLECs will target residential customers 21 with UNEs, I think Dr. Blackmon's proposal is 22 reasonable, from the standpoint that it specifically 23 targets the universal service surcharge to where the 24 support is being generated today. 25 My analysis in table four shows there would 01179 1 also be a small universal service surcharge 2 associated with residential customers, approximately 3 $3 a line, based on the UNE prices that are being 4 proposed. So that direction that -- although from an 5 administrative standpoint makes it more difficult to 6 apply the correct UNE prices, it's logical that Dr. 7 Blackmon has proposed the type of parity that he has 8 proposed, and that a smaller or no universal service 9 surcharge can apply to residential loops. 10 MR. POWELL: Thank you, Mr. Lee. That's 11 all I have. 12 JUDGE CRAINE: Anything else? 13 14 R E C R O S S - E X A M I N A T I O N 15 BY MS. PROCTOR: 16 Q. How are you going to administer that? 17 A. That's why I mentioned, from an 18 administrative standpoint, there are some questions 19 to be answered. I don't have all the answers here 20 today. There would need to be some arrangement where 21 the status of the customer could be verified, as to 22 whether they were residential or business customer, 23 and maybe someone has to police that at the 24 Commission, or some other independent body. I don't 25 have all the answers at this point. 01180 1 Q. You'd have to admit that there's a pretty 2 strong economic incentive for anyone ordering a loop 3 to establish that that's a loop intended for 4 residential service? 5 A. Oh, there's definite incentive to say 6 they're all residential service, so again, there 7 would have to be a strong methodology 8 administratively in place to police that. 9 MS. PROCTOR: Thank you. 10 JUDGE CRAINE: Anything else? You may step 11 down. Thank you. 12 Well, we talked earlier about a starting 13 time. We talked about 8:30, but we got kind of 14 bogged down and did not get to Mr. Reynolds at all. 15 And I've not detected any interest in staying later 16 tonight. So how do the parties feel about starting a 17 little bit earlier than 8:30 tomorrow? Would 8:00 be 18 satisfactory? 19 ALL PARTIES: Yes. 20 MS. PROCTOR: I hope to substantially 21 reduce my examination of Mssrs. Reynolds and Fleming 22 to make up for my going way over on Mr. Lee. 23 MS. ANDERL: Your Honor, I have one final 24 matter I'd like to remind the parties of before we 25 adjourn this evening, and that is that I had sent a 01181 1 letter out asking whether Mr. Buhler's testimony 2 could be stipulated in or, if people would like to 3 cross him, if they would agree to do so by phone. I 4 just wondered if the parties could think about that 5 and maybe have an answer for me tomorrow, so I could 6 alert him as to what his status is. 7 JUDGE CRAINE: Does anyone have an answer 8 now? 9 MS. PROCTOR: I had already told Ms. Anderl 10 that certainly if I did have any cross, I'd be happy 11 to do it by telephone. I frankly just haven't 12 focused on his testimony. 13 JUDGE CRAINE: Okay. 14 MS. PROCTOR: But Ms. Anderl asked me 15 earlier, and I told her I would do so by tomorrow 16 morning. 17 JUDGE CRAINE: Great. Well, if you'll 18 remind me, I'll take that up first thing. 19 MR. POWELL: May we release Messrs. Tucek, 20 Norris, Langley and Lee? 21 JUDGE CRAINE: Are we finished with those 22 witnesses? Yes, you may. 23 MR. POWELL: Thank you, Judge. 24 JUDGE CRAINE: Okay. We'll be in recess 25 until 8:00 tomorrow morning. 01182 1 (Proceedings adjourned at 7:13 p.m.) 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25