$//Order; Various LECs; 500 access service; DA 93-116//$ $/ 47 C.F.R. Section 0.291 delegated authority /$ TRANSMITTED FOR FCC RECORD ONLY DA 95-116 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. In the Matter of ) ) Ameritech Operating Companies ) Revisions to Tariff F.C.C. No. 2 ) Transmittal Nos. 846, 859 ) Bell Atlantic Telephone Companies ) Revisions to Tariff F.C.C. No. 1 ) Transmittal No. 725 ) BellSouth Telecommunications, Inc. ) Revisions to Tariff F.C.C. No. 1 ) Transmittal No. 248 ) Cincinnati Bell Telephone Co. ) Revisions to Tariff F.C.C. No. 35 ) Transmittal No. 673 ) GTE Telephone Operating Companies ) Revisions to Tariff F.C.C. No. 1 ) Transmittal Nos. 937, 938 ) GTE System Telephone Companies ) Revisions to Tariff F.C.C. No. 1 ) Transmittal Nos. 131, 135 ) NYNEX Telephone Companies ) Revisions to Tariff F.C.C. No. 1 ) Transmittal Nos. 329, 357 ) Pacific Bell ) Revisions to Tariff F.C.C. No. 128 ) Transmittal No. 1764 ) Rochester Telephone Corporation ) Revisions to Tariff F.C.C. No. 1 ) Transmittal Nos. 3, 4 ) Southern New England Telephone Co. ) Revisions to Tariff F.C.C. No. 39 ) Transmittal No. 636 ) Southwestern Bell Telephone Co. ) Revisions to Tariff F.C.C. No. 73 ) Transmittal Nos. 2405, 2408 ) United Telephone Company and ) Central Telephone Company ) Transmittal No. 24 Revisions to Tariff F.C.C. No. 1 ) ) US West Communications, Inc. ) Revisions to Tariff F.C.C. No. 5 ) Transmittal No. 570 ) ORDER Adopted: January 26, 1995; Released: January 26, 1995 By the Acting Chief, Tariff Division, Common Carrier Bureau: I. INTRODUCTION 1. In the summer of 1994, the local exchange carriers (LECs) captioned above filed petitions for waiver of Part 69 of the Commission's Rules, 47 C.F.R. Part 69, to establish one or more new rate elements for 500 access service. The Common Carrier Bureau (Bureau) granted those waiver petitions on November 30, 1994. These LECs have now filed tariffs for 500 access service pursuant to the waivers they were granted in the 500 Access Waiver Order. Two parties, MCI Telecommunications Corporation (MCI) and Sprint Communications Company, L.P. (Sprint), filed petitions to reject or suspend and investigate several of those tariff filings, and each carrier filed an opposition to those petitions. In this Order, we deny the petitions against these 500 access service tariffs, and allow those tariffs to take effect on January 28, 1995, as scheduled. II. BACKGROUND 2. LECs provide 500 access service to customers providing 500 service to end users. 500 service is a new "follow me" personal communications service which enables customers, among other things, to instruct their 500 service providers where to route their calls, e.g., to landline or cellular telephones, to pagers, or to voice messaging services. In providing 500 access service, the LECs must screen the first six digits of the ten digit 500 number (i.e., 500-NXX) in order to identify and route calls to the subscriber's designated 500 service provider. There are two ways that a LEC can perform this six-digit screening and routing. First, the carrier can use switch-based translation, in which case it deploys a translation table contained in the software of the LEC switches, located at either the end office or the access tandem, to route the call to the subscriber's 500 service provider. Alternatively, if the LEC's end office or access tandem has Advanced Intelligent Network (AIN) capability, the LEC launches a query to a centralized AIN database to identify the 500 service provider and routing. 3. The Bureau did not impose a uniform rate structure for 500 access service on the LECs, because such a uniform rate structure would force some carriers into rate structures unrelated to the way they incur costs, and a uniform rate structure might have delayed the availability of 500 service. Accordingly, LECs were granted waivers to establish rate structures to recover the costs of providing 500 access service consistently with the way they incur those costs. Specifically, LECs planning to use switch-based translation were granted waivers to establish one or more nonrecurring charges for 500 access service. LECs planning to use AIN-based translation were permitted to establish recurring charges for their 500 access services, and could at their option establish a small nonrecurring charge to recover small customer-specific nonrecurring costs. Similarly, LECs that intended to use switch- based translation initially, in whole or in part, but expected to begin converting to AIN some time in 1995, were granted waivers to establish either recurring charges or a combination of recurring and nonrecurring charges. Finally, the Bureau declined to grant a blanket waiver to all other LECs, but stated that other LECs seeking a waiver comparable to any of the waivers granted in the 500 Access Waiver Order would warrant "expedited consideration." III. SUMMARY OF PLEADINGS A. Ameritech Transmittal No. 846 4. Sprint claims Ameritech's 0+500 Activation Charge of $600 is excessive given that Ameritech's 1+500 Activation Charge is $35.00. Similarly, MCI asserts that Ameritech's 500 activation charge in excessive when compared to Ameritech's 900 activation charge. MCI also argues that the LECs' 500 access labor costs should go down as LECs gain experience and become more efficient in providing 500 access service. MCI criticizes Ameritech for not reflecting these efficiency gains in its labor cost projections. Finally, MCI asserts that Ameritech's estimate of the cross-elastic effects of 500 access service, required by Section 61.49(h)(1)(ii) of the Commission's Rules, 47 C.F.R.  61.49(h)(1)(ii), is unreasonably low in light of Pacific Bell's estimate. 5. Ameritech explains that its 0+ translation subsequent order charge is more expensive because this function requires Ameritech to remove existing routing instructions from all central offices and then reinstall the 0+ routing instructions. In response to MCI's comparison of Ameritech's 500 activation rates with its 900 activation rates, Ameritech asserts that it plans to increase its 900 activation rates to bring them more in line with the 500 activation rates proposed in its transmittal before us now. Ameritech also argues that comparing rates for different services cannot form a basis for alleging unreasonable discrimination. Ameritech maintains that its labor force has developed experience activating 900 NXX codes, that this experience is applicable to 500 activation, and therefore MCI's argument on labor efficiency gains is speculative. Ameritech claims that its cross-elasticity estimate is reasonable, because Ameritech plans to apply existing switched access charges in addition to its 500 charges. Thus, according to Ameritech, any migration from other switched access services to 500 access services will not affect total switched access demand. Ameritech contends that this is consistent with Pacific Bell's projections. B. Bell Atlantic Transmittal No. 725 6. According to Sprint, Bell Atlantic states that it will apply its 500 charges on a per query basis in some parts of its tariff, and on a "per call delivered" basis in other parts of its tariff. Sprint argues that this ambiguity should be corrected. Sprint favors applying the charge on a per call delivered basis, because that would make it easier for interexchange carriers to audit and verify the LECs' billings for access services. Sprint notes that Bell Atlantic's 500 access service rate is almost three times as high as its 800 database service rate. Sprint argues that a rate based in part on switch-based costs should be lower than a rate based exclusively on AIN costs. 7. MCI asserts that Bell Atlantic has failed to show the cross-elastic effects of 500 access service, as required by Section 61.49(h)(1)(ii). MCI also claims that Bell Atlantic's demand estimate, based on the present value of demand for a five-year period, raises several concerns. First, MCI claims that Bell Atlantic should explain its use of present value factors to adjust future demand rather than future income. Second, MCI argues that Bell Atlantic should justify its estimate of three minutes as the average call length on which it bases its per query rate. Third, MCI maintains that Bell Atlantic could have manipulated its demand estimate for the representative 12-month period, by basing it on either a weighted average or an arithmetic average of demand for the five year period, or by allocating costs on an actual demand basis while calculating per unit costs on a present value of demand basis. MCI advocates using a weighted average to calculate demand for the representative 12-month period because MCI believes that demand for 500 access service will be greater in the later part of the five year period. 8. Bell Atlantic argues that 500 service is not "like" 800 service within the meaning of Section 202 of the Communications Act. Bell Atlantic also contends that demand projections for 500 and 800 service are different, and that the costs for the services are different because the AIN database used for 500 service is different from the 800-specific database used for 800 service. Bell Atlantic maintains that, if 500 service were like 800 service, the rate disparity between 500 service and 800 service would be justified by differences in costs and demand characteristics. According to Bell Atlantic, MCI has not shown that Bell Atlantic's estimated average call length or its levelized average demand are inaccurate. Bell Atlantic also contends that its tariff clearly states that it will apply its charge on a per call delivered basis. Bell Atlantic denies that it will experience any significant cross-elastic effects in providing 500 access service. Finally, Bell Atlantic replies to MCI that it calculated its demand estimates in a way that will be consistent with other services that will use the AIN database. C. BellSouth Transmittal No. 248 9. Sprint argues that BellSouth's recurring 500 query charge is much higher than the charges proposed by Southwestern Bell and US West. Sprint also contends that BellSouth's 500 recurring charge of $0.01 per query is unreasonably high relative to BellSouth's 800 query charge of $0.00381. Sprint asserts that this is especially unreasonable given that BellSouth expects its nonrecurring costs for switch-based translation to be $16,150.29. 10. MCI maintains that BellSouth's estimate of the labor time required to activate a 500 NXX code is significantly higher than the estimates of Ameritech, Cincinnati Bell, United, and US West. MCI also asserts that the 12-month period for which BellSouth estimated demand is not a "representative" 12-month period as required by the Commission's Rules, and in this case this causes BellSouth's demand estimates to be unreasonably low. 11. BellSouth contends that its 500 rates are not unreasonable simply because other LECs plan to charge lower rates. BellSouth also argues that it has incurred costs in introducing 500 access service that it did not incur when it introduced 800 database service, because the 800 service access code (SAC) was already defined in BellSouth's switches. BellSouth also contends that its 500 access rate is higher because it anticipates lower demand for 500 service than it has experienced for 800 database service. BellSouth states that its overhead loadings are not unreasonable. BellSouth also contends that other LECs establish separate charges for "route pattern" activity, while BellSouth includes the time for that activity in its NXX activation rate element. BellSouth believes that its first year of projected demand is a "representative 12-month period." BellSouth denies that it will experience any significant cross-elastic effects in providing 500 access service. D. Cincinnati Bell Transmittal No. 673 12. MCI claims that Cincinnati Bell's projected labor time and labor rate is higher than that of the average of similar LECs. MCI argues that this seems unreasonable given that Cincinnati Bell's service region is smaller than that of other LECs who have filed 500 access tariffs. MCI also argues that the LECs' 500 access labor costs should go down as LECs gain experience and become more efficient in providing 500 access service. MCI criticizes Cincinnati Bell for not reflecting these efficiency gains in its labor cost projections. Finally, MCI criticizes Cincinnati Bell for failing to show the cross-elastic effects of 500 access service on its existing price cap baskets. 13. Cincinnati Bell suggests that it is misleading to compare its rates with the rates of other LECs who recover costs in part through recurring and in part through nonrecurring charges. Cincinnati Bell also argues that its labor time is not unreasonable simply because other LECs have projected shorter labor times, and contends that 500 access using switch-based translation is very labor-intensive. Cincinnati Bell alleges that it used the same labor rate to develop 500 access costs as it does to develop costs for other services. Cincinnati Bell denies that it will gain measurable efficiencies or experience any significant cross-elastic effects in providing 500 access service in the future. E. GTOC Transmittal No. 937 and GSTC Transmittal No. 131 14. MCI asserts that GTE plans to charge almost twice as much for each additional 500-NXX activation/deactivation as it does for the same function for 900 access service. MCI maintains that this represents unreasonable discrimination. Also, MCI contends that the first year of service is not a "representative" 12-month period on which to base demand projections. According to MCI, demand is likely to grow more rapidly after the first year, and LECs are likely to become more efficient at activating and deactivating 500- NXX codes as they gain experience providing the service. 15. GTE contends that, if one assumes three "additional activations" for each "initial activation," then GSTC's 500 rates are similar to its 900 rates. GTE asserts that there will be no cross-elastic effects in its provision of 500 service. Finally, GTE considers the first year of service to be a "representative 12- month period" within the meaning of Section 61.49(h) of the Commission's Rules. F. Pacific Bell Transmittal No. 1764 16. Sprint contends that Pacific Bell's nonrecurring charges are excessive when compared to nonrecurring charges proposed by US West, BellSouth, Cincinnati Bell, and United. MCI asserts that Pacific Bell's 500 activation charge is excessive when compared to Pacific Bell's 900 activation charge. MCI claims that Pacific Bell fails to base its rates on a representative 12-month period. MCI also criticizes Pacific Bell for assuming that it will experience 500 access demand in 497 central offices, rather than a limited number of offices in urban areas. Finally, MCI criticizes Pacific Bell for estimating 90 percent cross-elasticity and not reflecting this demand shift in its existing price cap baskets. 17. Pacific Bell argues that it is reasonable for its 500 access nonrecurring charges to be higher than those of other carriers. First, Pacific Bell argues that it plans to recover all its costs through a nonrecurring charge, while US West plans to recover only a portion of its costs through nonrecurring charges. Second, Pacific Bell asserts that labor rates in its region are higher than in other regions, and that the amount of labor required varies greatly by switch type. 18. In response to MCI, Pacific Bell denies that 500 activation is comparable to 900 activation for rate purposes. Pacific Bell states that it does base its rates on a representative 12-month period. Pacific Bell also states that to provide 500 access service only in urban areas would reduce its $163 rate by only $2.39 per switch per code, and would make the service unavailable in most of Pacific Bell's service region. Pacific Bell further argues that its rates are based on unit costs that do not vary with demand. Finally, Pacific Bell states that it expects its shifts in demand to occur more than 12 months after the introduction of 500 service, and claims that it will reflect the cross-elastic effects in its 1996 annual access filing. G. Rochester Transmittal Nos. 3 and 4 19. MCI asserts that Rochester has failed to show the cross- elastic effects of 500 access service, as required by Section 61.49(h)(1)(ii). MCI also criticizes Rochester for not basing its demand estimates on a representative 12-month period. It maintains that Rochester has not adequately explained non-standard customer routing, or the charges that would be applicable to non- standard customer routing. MCI claims that Rochester's nonrecurring charges for 500 access service are discriminatory because they are higher than its nonrecurring charges for 900 access service. 20. Rochester states that its rates are based on unit costs, and therefore are not sensitive to demand. Rochester claims that, unlike a recurring charge, demand estimates are not necessary to determine whether its nonrecurring charges are reasonable. Rochester denies that it will experience any significant cross- elastic effects in providing 500 access service. Finally, in response to MCI's criticism of Rochester's non-standard customer routing charges, Rochester explains that this charge will apply where a specific access customer requests a routing arrangement that differs from the standard arrangements that Rochester offers. H. SNET Transmittal No. 636 21. Sprint observes that SNET's planned charge of $0.015 per query is substantially higher than any 500 per query charge planned by any other LEC. Sprint notes that SNET's 500 access service rate is almost three times as high as its 800 database service rate. Sprint argues that a rate based in part on switch-based costs should be lower than a rate based exclusively on AIN costs. Finally, Sprint notes that SNET plans to impose its charge regardless of whether the associated call is delivered. Sprint contends that this is unreasonable given that most other LECs plan to impose their charges on a per call delivered basis, and a per call delivered basis would make it easier for interexchange carriers to audit and verify the LECs' billings for access services. 22. MCI asserts that SNET has failed to show the cross- elastic effects of 500 access service, as required by Section 61.49(h)(1)(ii). MCI also criticizes SNET for not basing its demand estimates on a representative 12-month period. MCI believes that SNET's inclusion of billing costs in its 500 access rates is inconsistent with the Commission's detariffing of billing and collection services. MCI claims that SNET's recurring rates for 500 access service are discriminatory because they are higher than its recurring rates for 800 access service. 23. SNET lists several reasons why it believes that its 500 access rates should not be expected to be equal to its 800 database rates. SNET states that it maintains its own AIN database, while the 800 database is maintained by a national database management group. SNET also argues that projected demand for 800 database service was much greater than 500 access service. SNET also contends that the Commission required 800 database service to be treated as a restructure under the price cap rules, while 500 access service is a new service. 24. SNET further argues that a per-query rate structure for 500 access service is consistent with the rate structure for 800 database and Line Information Database (LIDB) services, and that Sprint has not explained its anticipated audit problems. SNET denies that it will experience any significant cross-elastic effects in providing 500 access service. SNET states that it incurred costs in revising its billing system for 500 access service, and asserts that MCI is mistaken in concluding that those costs are detariffed billing and collection costs. Finally, SNET maintains that MCI could have derived SNET's cost projections from data provided in its cost support. I. Southwestern Bell Transmittal Nos. 2405 and 2408 25. MCI contends that Southwestern Bell's overhead cost loadings for 500 access service are unreasonable, because the ratio of rate to direct cost is 15 to 1. MCI also asserts that Southwestern Bell has failed to show the cross-elastic effects of 500 access service, as required by Section 61.49(h)(1)(ii). 26. Sprint maintains that Southwestern Bell has not adequately explain the portion of its 500 costs attributable to switch-based translation, and the portion attributable to AIN. According to Sprint, recovery of any switch-based costs through a recurring charge would be inconsistent with the 500 Access Waiver Order. Sprint contends that Southwestern Bell's rate structure is likely to overrecover nonrecurring costs after 500 access service is incorporated into its price cap basket. Sprint recommends that Southwestern Bell recover its nonrecurring costs through a nonrecurring charge, and its recurring costs through a recurring charge. Sprint also maintains that Southwestern Bell's demand estimates are unreasonably low. 27. According to Southwestern Bell, the direct cost ratio in its D&J is based exclusively on AIN direct costs, and if Southwestern Bell had considered direct costs associated with both AIN and switch based translation, the direct cost ratio would be 1.015 to 1. Southwestern Bell denies that there will be any cross-elastic effects, because both access for 500 calls and access "normal" 1+ and 0+ calls are switched access services. Southwestern Bell denies that it based any of its per query demand estimate on its estimate for demand for NXX translations. Southwestern Bell also contends that the 500 Access Waiver Order permitted Southwestern Bell to recover its costs through a recurring charge, and accuses Sprint of attempting to reopen an issue already decided. Finally, Southwestern Bell claims that it complied with the new service cost support rules. J. United Transmittal No. 24 28. MCI claims that United's rates for 500 access service are discriminatory because they are higher than its rates for 900 access service. MCI also criticizes United for not basing its demand estimates on a representative 12-month period, and for failing to show the cross-elastic effects of 500 access service on its existing price cap baskets. 29. United explains that its 900 access rates reflect jurisdictional separations factors in effect when its 900 service tariff was filed in 1988. United also contends that the difference between its 900 and 500 rates is much less than was suggested by MCI. United asserts that it did provide a cost study, and maintains that it did not provide an estimate for the number of NXX activations because the only customer who has expressed interest in 500 access service did not provide this information until after United filed its tariff. Finally, United expects no cross-elastic effects from 500 service. According to United, parties placing 500 calls will be able to reach the called party in situations in which the called party could not be reached using other calling methods. Thus, there will be a net increase in both terminating minutes and 500 access minutes and no shift from other services to 500 service. K. US West Transmittal No. 570 30. Sprint criticizes US West for comparing its 500 access service overhead loading factor to overhead loadings for the Traffic Sensitive basket, rather than the database access sub- basket. Sprint also contends that US West's per query 500 rate is unreasonably high relative to its 800 query rate. Similarly, MCI claims that US West's rates for 500 access service are discriminatory because they are higher than its rates for 900 access service. MCI contends that the rates and cost support in US West's Transmittal No. 525, which was US West's initial attempt to establish rates for 500 access service, are inconsistent with the rates and cost support in its tariff filing before us now. MCI also criticizes US West for not basing its demand estimates on a representative 12-month period, and for failing to show the cross-elastic effects of 500 access service on its existing price cap baskets. 31. US West explains that it incurs more costs in providing 500 access than it does in providing 800 database service. This is because US West maintains its own switch-based translation tables and AIN database, while the 800 database is maintained by a national database management group. US West also claims that comparisons between 500 access service and 900 access service are not relevant, because 900 service does not require a database. US West argues that the traffic sensitive category is appropriate basis on which to judge its 500 access overhead loadings, because 500 access investment and expense will be placed in that basket. US West denies that the database access service category is appropriate for 500 access service. US West attaches as Exhibit A demand projections for the first 12 months of service, and does not expect dramatic growth in 500 access demand, or cross-elastic effects, as does MCI. Finally, US West explains that the rates in its Transmittal No. 570 are lower than they were in its Transmittal No. 525 because they are based on updated and more accurate cost support information. IV. CONCLUSION AND ORDERING CLAUSES 32. We have reviewed the tariffs filed by the carriers captioned above, as well as all associated tariff revisions and pleadings. We conclude that none of those tariffs are patently unlawful so as to warrant rejection, and that an investigation is not warranted at this time. 33. Accordingly, IT IS ORDERED that the petitions for rejection or suspension and investigation filed by MCI Telecommunications Corporation and Sprint Communications Company, L.P., listed in Appendix A to this Order, ARE DENIED. 34. IT IS FURTHER ORDERED that the petition for rejection or suspension and investigation filed by MCI Telecommunications Corporation, against NYNEX Telephone Companies, Tariff F.C.C. No. 1, Transmittal No. 329, IS DISMISSED AS MOOT. 35. IT IS FURTHER ORDERED that the motion for leave to file out of time, filed by Rochester Telephone Corporation, IS GRANTED. FEDERAL COMMUNICATIONS COMMISSION Geraldine A. Matise Acting Chief, Tariff Division Common Carrier Bureau APPENDIX A Parties filing Petitions to Reject or Suspend and Investigate 500 Access Tariffs Petition Tariffs 1. MCI December 19 Ameritech 846; Pacific Bell 1764; and Petition: Southwestern Bell 2405 and 2408. 2. Sprint December 19 Ameritech 846; Pacific Bell 1764; Petition: Southwestern Bell 2405 and 2408; BellSouth 248; and US West 570. 3. MCI December 20 BellSouth 248. Petition: 4. MCI December 21 Cincinnati Bell 673. Petition: 5. MCI December 22 United 24 and US West 570. Petition: 6. MCI December 29 Bell Atlantic 725; Rochester 3; and SNET Petition: 636. 7. Sprint December 29 Bell Atlantic 725 and SNET 636. Petition: 8. MCI January 3 GTE Telephone Operating Companies 937 and Petition: GTE System Telephone Companies 131.