NOTICE ********************************************************* NOTICE ********************************************************* This document was originally prepared in Word Perfect. If the original document contained-- * Footnotes * Boldface & Italics --this information is missing in this version The document format (spacing, margins, tabs, etc.) is changed too. If you need the complete document, download the Word Perfect version. For information about downloading documents (FTP) see file how2ftp. File how2ftp (.txt & .wp) is in directory /pub/Bureaus/Miscellaneous/Public_Notices/ ***************************************************************** ******** $// Order; SWB; Virtual Collocation; Transmittal No. 2524; DA 96-501 //$ $/ Section 0.291 Delegated Authority /$ TRANSMITTED FOR FCC RECORD ONLY DA 96-501 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 Southwestern Bell Telephone ) Company ) ) Transmittal No. 2524 Tariff F.C.C. No. 73 ) ) ) ORDER Adopted: April 2, 1996; Released: April 4, 1996 By the Chief, Tariff Division, Common Carrier Bureau: 1. On December 14, 1995, Southwestern Bell Telephone Company (SWB) filed Transmittal No. 2524 to revise certain of its existing virtual collocation rates, including deleting interconnector-designated equipment (IDE) for which there is no demand, and to modify a number of its regulations pertaining to virtual collocation. On the same date, SWB filed a request pursuant to Sections 0.457 and 0.459 of the Commission's rules, 47 C.F.R.  0.457 and 0.459, and the Freedom of Information Act (FOIA), 5 U.S.C.  552(b)(4), for confidential treatment of the cost support data filed in support of Transmittal No. 2524. On January 11, 1996, MCI Telecommunications Corporation (MCI) and MFS Communications Company (MFS) filed petitions to reject or, alternatively, to suspend and investigate Transmittal No. 2524. SWB filed a response to the two petitions on January 25, 1996. 2. SWB filed Transmittal No. 2524 to make the following changes in its tariff: (1) include the cost of power in the primary array; (2) redistribute the engineering and labor for installation from the arrays to the basic arrangement; (3) include the maintenance spare plug- ins in the primary, secondary, and tertiary array rate elements; and (4) revise the nonrecurring charge for the cross connect to reflect costs associated with Interexchange Carrier Service Center processing of the cross connect requests. SWB also seeks to make these revisions to reflect certain cost data, vendor changes and SWB's experience in provisioning virtual collocation arrangements, as well as to delete IDE which have no demand. 3. In its request for confidential treatment of the cost support data, SWB states that the documents in question contain confidential information on investments, depreciation, cost of money, ad valorem and income taxes, administrative costs, and overheads. SWB maintains that disclosure of such confidential financial information could substantially harm the competitive position of SWB by assisting competitors in preparing marketing strategies to use in direct competition with SWB. According to SWB, the cost support data contain the specific costs of the equipment required to provide this service. These data indicate the breakdown of capital costs and operating expenses as well as the total installed cost (total investment). SWB maintains that if its competitors had access to this information, they could use it to calculate the factors used by SWB in developing cost data and, in turn, the information could be used to derive competitive information from other SWB filings. Finally, SWB provides information to support its claim that there is competition for the service offered pursuant to Transmittal No. 2524. 4. In its petition, MCI contends that SWB has violated Sections 203 and 412 of the Communications Act of 1934, 47 U.S.C.  203 and 412, and Part 61 of the Commission's rules, 47 C.F.R. Part 61, for filing its cost support under confidential cover. According to MCI, the data do not warrant confidential treatment because, by SWB's own admission, they do not accurately reflect current third party vendor prices. Moreover, MCI maintains that SWB does not make a persuasive showing that it faces sufficient competition for these services to justify confidential treatment of the cost support data. 5. In addition, MCI and MFS state that SWB should not be permitted to delete equipment from its tariff that interconnectors may wish to use in the near future. MCI and MFS contend that the removal of tariffs for this equipment will subject interconnectors to delays should they decided to utilize such equipment. Finally, MCI and MFS contend that SWB should not delete this equipment from its tariff merely on the assumption that interconnectors may not need it any longer. MFS argues that SWB's proposed rates are unreasonable, specifically the rates for moving engineering, installation and power costs from lower level arrays to the basic arrangement and proposed introduction of a floor space rate element. In addition, MFS makes several allegations regarding possible double-recovery or over-recovery of a number of costs, including the floor space rate element, maintenance spare parts and replacement of IDE equipment that fails. 6. In its reply, SWB contends that neither the Communications Act nor the Commission's rules require that tariff cost support material be publicly available. In response to MFS' claims that SWB reallocated costs among existing rate elements, SWB asserts that it identified the direct costs associated with providing each rate element and proposed changes that reflect revisions in the equipment, labor, and engineering included in each rate element to reflect SWB's experience with the actual virtual collocation applications received and processed. Therefore, SWB maintains that it is seeking to recover the costs incurred when they are incurred, and to avoid charging the interconnector for costs not incurred for particular IDE. 7. In addition, SWB opposes MFS' claims regarding the recovery of land, building, and other costs. According to SWB, these costs reflect the direct costs of providing virtual collocation arrangements and that SWB has changed the way in which these costs are recovered to separate cost recovery from the price of the piece of particular IDE. Other LECs have used this method and have shown the reasonableness of this method of cost recovery, according to SWB. Furthermore, SWB states that MFS misuses the term "overhead loading" throughout its discussion of costs. SWB maintains that virtual collocation has a direct cost to SWB, that cost is not recovered through the allowed overhead but is instead included in the cost of development of the appropriate rate element. Therefore, SWB asks that the Commission reject all of MFS' arguments that SWB should use its minimal overhead to pay for costs caused by the interconnector. SWB also states that it must be permitted to recover its costs in keeping IDE operational, including recovering from the interconnector the cost of replacement IDE that is outside of warranty. 8. Finally, SWB asserts that it should be permitted to delete IDE from its tariffs that have no demonstrable demand. According to SWB, it expended a considerable amount of effort to develop rates for each piece of IDE, the result of which its tariffs now contain prices for certain IDE for which no interconnector has expressed any further interest. SWB maintains that changes in equipment technology and vendor prices will require continuous modifications to SWB's tariffs for IDE. SWB states that due to the lack of demand for such equipment, there is no justification for it to retain the equipment in its tariff. Moreover, SWB does not foresee any future demand for this equipment which is rapidly becoming obsolete. SWB also states that the Virtual Collocation Order requires SWB, within thirty days of receiving a request for equipment from an interconnector, to modify its tariffs to offer the requested transmission equipment. 9. Sections 0.453(j) and 0.455(b)(11) of the Commission's rules, 47 C.F.R.  0.453(j) and 0.455(b)(11), provide that material filed in support of tariff revisions are to be publicly available. SWB, however, has filed a request for confidential treatment of its tariff support material filed in Transmittal No. 2524 under the requirements of Section 0.459 of the Commission's rules, 47 C.F.R.  0.459 and Exemption 4 of the FOIA, 5 U.S.C.  552(b)(4). Section 1.3 of the Commission's rules, 47 C.F.R. 1.3 provides that the Commission may, on its own motion, waive any provisions of its rules if good cause is shown. The Tariff Division finds that there is good cause to waive the Commission's rules that cost support data filed with Transmittal No. 2524 be publicly available. Therefore, on our own motion, the Division grants SWB a waiver of Sections 0.453(j) and 0.455(b)(11) of the Commission's rules. As a result, the Transmittal No. 2524 cost support data for which SWB sought confidentiality will not be publicly available. The Division grants this waiver for the limited purpose of reviewing this transmittal. 10. SWB Transmittal No. 2524 raises the same issues regarding cost allocations, rate levels, rate structures, and terms and conditions of service as those identified in the Virtual Collocation Tariff Suspension Order. Therefore, Transmittal No. 2524 is suspended for one day following the effective date, and will be subject to the investigation initiated in the Virtual Collocation Tariff Suspension Order. These rates will also be subject to an accounting order to facilitate any refunds that may later prove necessary. We will designate specific issues, parties to the investigation and establish a pleading cycle for this investigation in a subsequent order. 11. Accordingly, IT IS ORDERED that, pursuant to Section 0.291 and 1.3 of the Commission's rules, 47 C.F.R.  0.291, 1.3, for the purposes of this proceeding, Sections 0.453(j) and 0.455(b)(11) of the Commission's rules, 47 C.F.R. 0.453(j), 0.455(b)(11), ARE WAIVED. 12. IT IS FURTHER ORDERED that, pursuant to Section 204(a) of the Communications Act of 1934, as amended, 47 U.S.C.  204(a), and Section 0.291 of the Commission's Rules, 47 C.F.R.  0.291, the revisions to SWB's Tariff F.C.C. No. 73, Transmittal No. 2524 ARE SUSPENDED for one day and an investigation of the referenced tariff transmittal IS INSTITUTED. 13. IT IS FURTHER ORDERED that SWB shall file tariff revisions within five business days of the release date of this Order to reflect this suspension. 14. IT IS FURTHER ORDERED that, for these purposes, we waive Sections 61.56, 61.58, and 61.59 of the Commission's Rules, 47 C.F.R.  61.56, 61.58, and 61.59. SWB should cite the "DA" number of the instant Order as the authority for this filing. 15. IT IS FURTHER ORDERED that, pursuant to Section 204(a) of the Communications Act of 1934, as amended, 47 U.S.C.  204(a), SWB shall keep accurate accounts of all amounts received by reason of the rates that are the subject of this investigation. FEDERAL COMMUNICATIONS COMMISSION James D. Schlichting Chief, Tariff Division Common Carrier Bureau