BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION


MCI Telecommunications Corporation and AT&T Communications of the Pacific 
Northwest, Inc.,

                                            Complainants,

            vs.

U S WEST Communications, Inc., GTE Northwest, Inc. and United Telephone Company 
of the Northwest,

                                            Respondents.	)
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		DOCKET NO. UT-970658
		
		OBJECTIONS TO THE MCI/AT&T “CONCLUSIONS OF FACT” AND PROPOSED FINDINGS OF FACT 
AND CONCLUSIONS OF LAW OF U S WEST

 Pursuant to the ALJ’s direction on March 3, 1998, U S WEST Communications, 
Inc. (U S WEST) hereby objects to the proposed “Conclusions of Fact” put forth 
by MCI/AT&T, and submits U S WEST’s Proposed Findings of Fact and Conclusions 
of Law. Unless otherwise noted, all defined terms have the same meaning as 
those given in U S WEST’s post-hearing briefs. 
OBJECTIONS
U S WEST objects to MCI/AT&T Conclusion of Fact No. 4.  The correct title for 
the document which commenced this litigation is “Formal Complaint and Petition 
for Declaratory Order to Remove Payphone Investment from Access Rates.”  In 
addition, a more accurate statement of the relief requested by the Complaint is 
contained in U S WEST’s Proposed Findings of Fact.
For the reasons stated in its Post-Hearing Brief, U S WEST objects to Finding 
of Fact Nos. 5, 7, 9, and 11, because neither MCI/AT&T nor the Commission Staff 
demonstrated the existence of a subsidy in U S WEST’s payphone operations.
U S WEST objects to Conclusions of Law Nos. 2 and 3, because MCI/AT&T have not 
proven that a payphone subsidy exists from U S WEST’s payphone operations.
 U S WEST requests the Commission to reject MCI/AT&T’s Conclusions of Fact and 
substitute U S WEST’s Proposed Findings of Fact and Conclusions of Law set 
forth below.
FINDINGS OF FACT
 1. The Washington Utilities and Transportation Commission (“Commission”) is an 
agency of the State of Washington vested by statute with authority to regulate 
rates, rules, regulations, practices, accounts, securities and transfers of 
public service companies, including telecommunications companies.
 2. U S WEST Communications, Inc. (“U S WEST”) and GTE Northwest Incorporated 
(“GTE”) are telecommunications companies doing business in the state of 
Washington and are subject to the jurisdiction of the Commission.
 3. MCI Telecommunications Corporation (“MCI”) and AT&T Communications of the 
Pacific Northwest, Inc. (“AT&T”) are telecommunications companies doing 
business in the state of Washington and are subject to the jurisdiction of the 
Commission.
 4. On April 16, 1997, MCI/AT&T filed a Formal Complaint and Petition for a 
Declaratory Order to Remove Payphone Investment from Access Rates.  MCI/AT&T 
asked the Commission to direct U S WEST and GTE to reduce rates to remove 
deregulated payphone investment and associated expenses from their intrastate 
operations; to certify to the FCC and the parties to this proceeding that U S 
WEST and GTE are in compliance with the FCC payphone requirements; to inform 
the FCC that U S WEST and GTE are eligible to receive payphone compensation, 
and, to award damages to MCI and AT&T to the extent that payphone subsidies are 
not removed from intrastate carrier access operations of U S WEST and GTE.
 5. An evidentiary hearing on the MCI/AT&T Complaint was held on March 2 and 3, 
1998.  At the conclusion of the MCI/AT&T direct case, U S WEST moved to dismiss 
the complaint against it.  This motion was denied.
 6. The key factual issue in this case is the identification and elimination of 
any subsidies that were present in U S WEST’s payphone operations at the time 
of the deregulation of payphone services pursuant to the FCC’s Payphone Orders 
and § 276 of the Telecommunications Act of 1996.
 7. MCI/AT&T’s only witness, Peter Gose, testified that he calculated a subsidy 
of $6,117,000.00 in U S WEST’s payphone operations, based upon the results of a 
payphone subsidy determination model (“PSDM”).  
 8. Mr. Gose’s PSDM contained a significant number of errors.  Among them:
a. Including access line costs as well as an imputed Smart PAL rate, resulting 
in a double-counting of access line expenses.

b. Failing to adjust U S WEST’s commissions expenses incurred in providing 
intraLATA toll service.

c. Failing to adjust U S WEST’s coin collection expenses incurred in providing 
intraLATA toll service.

d. Improperly deducting 10% of U S WEST’s payphone revenues as revenues from 
“operator services.”

 9. When the errors in the PSDM are corrected, the PSDM does not demonstrate 
the existence of a subsidy in U S WEST’s payphone services.  
 10. MCI/AT&T failed to make a prima facia showing that U S WEST had any 
pre-deregulation payphone subsidy which was not removed as a result of payphone 
deregulation. 
 11. The Commission Staff’s sole witness, Tim Zawislak, did not identify any 
subsidy in his opening testimony.  In Mr. Zawislak’s rebuttal testimony, he 
calculated a “subsidy analysis” which was an adjustment to U S WEST’s booked 
cost analysis.
 12. Among the errors committed by Staff in its subsidy analysis was the 
failure to properly exclude expenses connected with regulated toll services.  
Among these expenses are an adjustment for toll commission expenses and toll 
coin collection expenses.  Toll commission expenses total approximately 
$1,662,000 and toll coin collection expenses total approximately $264,000.  
 13. When expenses properly attributable to toll services are deducted from 
Staff’s analysis, Staff’s analysis demonstrates that U S WEST’s payphone 
services generate a surplus.
 14. U S WEST’s payphone services also passed an imputation analysis in Docket 
No. UT-920174, a holding which was subsequently affirmed in Docket No. 
UT-950200.  The Commission’s findings in each of these earlier dockets 
demonstrates that U S WEST’s payphone services were not subsidized as of April 
15, 1997.
 15. U S WEST properly deregulated its pay telephone operations and 
reclassified all revenues and expenses associated with its payphone equipment.  
In addition, U S WEST certified to the IXCs and the Commission that it had 
complied with the FCC’s Payphone Orders to qualify for per call payphone 
compensation.
 16. Because the revenues generated by U S WEST’s pre-deregulation payphone 
operations exceeded U S WEST’s total annual intrastate costs, no payphone 
subsidy existed on the date of deregulation.
CONCLUSIONS OF LAW
 1. The Washington Utilities and Transportation Commission has jurisdiction 
over the subject matter of this proceeding and the parties.
 2. U S WEST has complied with all the intrastate requirements in the FCC 
Payphone Orders and is entitled to the compensation established by those orders 
retroactive to April 15, 1997.
 Respectfully submitted on May 13, 1998.
      U S WEST Communications, Inc.


      By_____________________________
       Peter J. Butler, Attorney