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by: Wireline Competition Bureau

June 1, 2012

Please provide comments to the issue below as part of the 2012 WCB cost model virtual workshop for inclusion in the record. Comments are moderated for conformity to the workshop's guidelines.

Background

Hybrid Cost Proxy Model: The Hybrid Cost Proxy Model (HCPM) used carrier-submitted line count data to determine the number of switched business lines and special access lines in a wire center and assumed a certain percentage were provided using a DS1. A DS1 provides 24 voice equivalent channels (DS0s) using two copper pairs. These percentages were then used to reduce the number of DS0 lines deployed by the model in each wire center to account for the DS1s that were deployed to serve business locations and special access locations. Although the costs of special access services were included in the total cost of each wire center, and costs were unitized by both switched access and non-switched access lines, support was only provided to locations served by switched access lines (including business locations).

Connect America Cost Model: In the USF/ICC Transformation Order, the Commission established a performance goal of ensuring "the universal availability of modern networks capable of delivering broadband and voice service to homes, businesses, and community anchor institutions."

The Connect America Cost Model version 3.1.3 (CAM v3.1.3) sizes its network to account for demand for higher speed connections by certain business locations by assuming dedicated fiber connections. This approach also captures the efficiencies of a network designed to serve all locations in an area, by assuming the network can accommodate voice and broadband demand of residential customers and certain business customers, and higher speed special access and/or private line demand of other business customers as well as community anchor institutions and wireless towers. Effectively, it is more economical to build a network that serves a wide range of users in the community.

As explained in the Bureau's Connect America Cost Model Platform Order, the model identifies the locations of business locations based on GeoResults (Q3/2012). The CAM v3.1.3's network topology assumes certain business locations are served using a dedicated, special access/private line fiber. Specifically, the model estimates the potential demand for services based on the type of business; businesses are classified as "technology oriented" or "all other business" based on their North American Industry Classification System (NAICS code) and the number of employees at each location. The model provisions dedicated fiber connections to technology oriented business locations that have 10 or more employees and all other business locations that have 50 or more employees. Business locations with fewer employees are provisioned the same voice and broadband services as residential locations. The model does not include any cost for the associated electronics necessary to light the dedicated fiber service to business locations that are assumed to purchase such services, nor are those locations included when unitizing total cost within a census block.

The CAM v3.1.3 determines how many fiber strands are used by the various demand locations and allocates the cost of fiber and structure between special access/private line locations (including cell towers, business locations with more employees and community anchor institutions) and other locations (i.e., residential locations and those business locations assumed to be purchasing residential-type services), with support calculated based only on costs related to the latter group of locations. The model similarly captures the sharing of middle mile network by estimating that 50 percent of the costs of an interoffice route are attributable to special access/private line services provided to certain business locations, community anchors and wireless towers, and those costs are excluded from cost calculations. Locations served by such special access/private line services (which includes direct Internet access) are also excluded from the unitization of total middle mile cost of a census block, i.e., when the total middle mile cost of serving the census block is divided by all locations passed, the locations passed only include residential and those business locations assumed to receive the same type of voice and broadband services as residential customers.

Additional information about how CAM v3.1.3 models demand for higher bandwidth services and treats the costs associated with such services can be found in sections 5.2.3.2 and 5.2.3.3 and Appendix Seven of the CAM Methodology document.

Questions for Comment

  1. Does CAM v3.1.3's approach of excluding the costs of provisioning higher bandwidth services to business locations that exceed a specified number of employees from cost to serve calculations reasonable? Is it appropriate for the model to exclude these locations when unitizing total costs in a census block? To the extent any commenter argues that the final version of the model should take a different approach, they should describe in detail their proposal, including specifying any sources of data that should be used to identify the specific bandwidth needs of these business locations.

Sources

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