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PA Bulletin, Doc. No. 97-935



Standardized Cost Support Data to be Provided by ILECs in Arbitration Proceedings

Commissioners Present:  John M. Quain, Chairperson; Robert K. Bloom, Vice Chairperson; John Hanger; David W. Rolka; Nora Mead Brownell

[27 Pa.B. 2825]

Public meeting
held May 22, 1997

Proposed Rulemaking to Establish Standardized Cost Support Data to be Provided by ILECs in Arbitration Proceedings; Doc. No. L-00960119



   On September 9, 1996, at Docket No. P-00961108, TCG Pittsburgh filed a petition (TCG Petition) with this Commission to establish an Interconnection Agreement with Bell Atlantic-Pennsylvania. Additionally, the TCG Petition requested that the Commission initiate a rulemaking proceeding to establish guidelines for the cost support data to be provided by Incumbent Local Exchange Carriers (ILECs) in arbitration proceedings before the Commission.

   By order entered December 6, 1996, the Commission granted the TCG Petition in part, and adopted an order to publish in the Pennsylvania Bulletin an Advance Notice of Proposed Rulemaking to solicit comments regarding standardized cost support data to be provided by ILECs in arbitration proceedings. An Advance Notice was subsequently published on December 21, 1996 at 26 Pa.B. 6100, with a 60-day deadline for comments. On January 10, 1997, the Pennsylvania Telephone Association (PTA) requested an additional 45 days in which to file comments. This request was granted on January 13, 1997, and the comment period deadline was changed to April 7, 1997. All comments were received prior to the revised April deadline.


   GTE North, Inc. (GTE) filed comments which noted that the Commission would determine the cost study methodologies applicable for GTE prior to the establishment, through a rulemaking, of any general standards. GTE also stated that if the Commission intends for a proposed rulemaking to establish requirements for cost proceedings applicable to GTE, then GTE reserved the right to provide additional comments on a late-filed basis.

   TCG did not file formal comments. Instead, TCG submitted a paper titled ''Beyond Cost Models:  Managing Interconnection Pricing to Achieve Sustainable Competition.'' This paper was prepared for TCG to enable TCG to identify pricing policies which will promote viable local exchange competition. This paper contains an extensive discussion of the economic attributes and liabilities of various costing models, but it does not indicate that TCG has any preference for any specific costing model nor does it provide additional comments to support a proposed rulemaking on costing issues.

   Combined comments were filed by the Bentleyville Telephone Company (Bentleyville) and Pymatuning Independent Telephone Company (Pymatuning), two small rural Local Exchange Carriers (LECs). These LECs argue that it is premature for the Commission to act to develop standardized cost support data for arbitration proceedings because the pricing rules established by the FCC under the Telecommunications Act of 1996 (TA-96) have been stayed by the Eighth Circuit Court of Appeals. These LECs also note that costing issues may currently be under examination in other Commission forums. Therefore, these LECs aver that the Commission should not attempt to standardize cost support data requirements while these significant changes are underway.

   By way of further comment, these LECs assert that if the Commission does proceed with a proposed rulemaking, then the Commission should adopt an embedded cost-based methodology because any cost methodology which ignores embedded costs will not allow small, rural LECs to recover their interconnection costs.

   Finally, comments were received from the PTA and Sprint. Both PTA and Sprint argue that the Commission should not proceed with the instant proposed rulemaking. Both PTA and Sprint note that the Eighth Circuit has stayed the pricing provisions of the FCC's Order, and that the FCC's pricing rules may be overturned. These commentators also aver that the need to establish standardized cost support data is reduced because the Commission has already heard the initial series of proceedings involving Competitive Local Exchange Carriers (CLECs) who intend to enter the market. Both commentators suggest that the Commission's time and resources might be better devoted to more time sensitive telecommunications issues.

   PTA argues that if the Commission proceeds with a proposed rulemaking or a related policy statement, then the Commission should adopt an embedded cost-based methodology. PTA asserts that this costing methodology would allow consistent recovery of actual network costs incurred by actual LECs who have incurred network interconnection costs. PTA requests that the Commission not adopt the FCC's TELRIC (Total Element Long Run Incremental Cost) method, which bases rates on hypothetical networks and costs. To the contrary, Sprint believes that if the Commission does act, then the Commission should select TELRIC as the proper cost study methodology to be used in arbitration proceedings. However, Sprint avers that neither TA-96 nor the related FCC Order requires this Commission to adopt a specific cost model. Therefore, parties in arbitration proceedings should be permitted to use the TELRIC methodology to develop and present a cost model they believe to be appropriate.


   We agree with the above comments which recommend that the Commission not proceed with a proposed rulemaking. There does not appear to be a pressing need for formal regulations in this matter. The primary rationale for a rulemaking was to prevent burdensome relitigation, in arbitration proceedings, of the proper cost support data required to be supplied by ILECs. This burdensome situation has failed to materialize. The Commission's Office of Administrative Law Judge has already processed several interconnection request proceedings. Thus far, there have been no reports that the cost support data required in these individual proceedings has been a difficult issue to resolve. Additionally, it appears that the majority of interconnection arbitrations have already occurred. Again, any need for immediate Commission action in this matter has dissipated.

   We also agree that the pricing rules and costing methodology established by the FCC may be altered by the Eighth Circuit. Since the cost issues of local telecommunications competition are in a state of flux, it would be unwise for the Commission to promulgate regulations or establish fixed, standardized cost support data requirements at this time;

Therefore, It Is Ordered That:

   1.  Docket No. L-00960119, Advance Notice of Proposed Rulemaking Order ''To Establish Cost Support Data To Be Provided By ILECs In Arbitration Proceedings,'' be closed.

   2.  A copy of this Order be served upon all commentators, the industry trade associations, the Office of Consumer Advocate, the Office of Small Business Advocate and the Office of Trial Staff.

   3.  A copy of this Order shall be forwarded to the Pennsylvania Bulletin for publication.


[Pa.B. Doc. No. 97-935. Filed for public inspection June 13, 1997, 9:00 a.m.]

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