960722.docx

WELDON B. STUTZMAN
DEPUTY ATTORNEY GENERAL
IDAHO PUBLIC UTILITIES COMMISSION
472 WEST WASHINGTON STREET
PO BOX 83720
BOISE,  IDAHO  83720-0074
[phone]
Street Address for Express Mail:
472 W WASHINGTON
BOISE ID  83702-5983
Attorney for the Commission Staff
BEFORE  THE  IDAHO  PUBLIC  UTILITIES  COMMISSION

IN THE MATTER OF GTE NORTHWEST)
INCORPORATED'S FILING OF TARIFF )CASE  NO.  GTE-T-96-2
ADVICE NO. 96-10 TO REMOVE)               
RESALE PROHIBITION ON INTRALATA)
TOLL SERVICES AND PROVIDE A)COMMENTS OF
WHOLESALE DISCOUNT FOR MTS.)THE COMMISSION
)STAFF ______________________________________)
COMES  NOW  the Staff of the Idaho Public Utilities Commission, by and
through its Attorney of record, Weldon B. Stutzman, Deputy Attorney General, and
submits the following comments for the Commission’s consideration in Case No. GTE-T-96-2.
BACKGROUND
On May 22, 1996, GTE filed revised tariff sheets (Advice No. 96-10) for approval to remove existing resale prohibition in the Company’s tariff applicable to 1+ intraLATA toll plans and to provide a 5% discount to authorized long distance carriers for the purchase of measured telecommunication service (MTS) station-to-station calls.  GTE proposed using this 5% discount as an “interim measure that would allow a level playing field while the necessary facilities and processes are installed to fully implement intraLATA equal access.”  GTE says the pricing in this tariff  “does not represent, nor is it intended to be, a final rate as contemplated by Sections 251 and 252 of the Federal Telecommunications Act of 1996.”  (This Advice does not affect intraLATA arrangements proposed in GTE’s Advice 95-09 which would allow alternate carriers to purchase feature group access for the provision of intraLATA equal access or “1+ dialing.”)
The Telecommunications Act of 1996 Section 251(c)(4) requires that local exchange carriers “offer for resale at wholesale rates any telecommunications service that the carrier provides at retail to subscribers who are not telecommunications carriers . . .”  In addition, Section 252(d)(3) requires state commissions to “determine wholesale rates on the basis of retail rates charged to subscribers for the telecommunications services requested, excluding the portion thereof attributable to any marketing, billing, collection, and other costs that will be avoided by the local exchange carrier.”
Staff presented GTE’s proposed tariff advice to the Commission at the June 24 decision meeting and recommended, in light of concerns expressed by AT&T, that the Commission receive comments from other telecommunications providers.  Order No. 26505 suspended the tariff and a Notice of Modified Procedure requested comments by July 22, 1996.

DISCUSSION
The major point at issue in this advice is whether a 5 % discount, provided for an interim period, is the appropriate difference between retail and wholesale rates for MTS station-to-station service.  According to Section 252(d)(3), wholesale rates are to be derived from retail rates less avoided costs attributable to wholesale provisioning.
GTE’s existing Local Calling Plans provide most of its callers with a flat rate calling and/or measured rates ranging between $.05 and $.14 per minute (for the first minute) within 23 miles.  Its Econo-Plan provides end users with one hour of calling for $4.50, or $.075 cents per minute (assuming the caller uses all available minutes) and $.07 for additional minutes; the Preferred Area Calling Service incurs $7.00 for 210 off-peak minutes, or $.033 cents per minute and $.04 for additional minutes within a 32-mile band.  Callers without calling plans who use MTS calling are paying $.16 for the first minute and $.07 for additional minutes.  Because the Local Calling Plans provide savings greater than 5% on MTS rates, qualified resellers will still pay more for intraLATA calls than retail customers who subscribe to calling plans.
GTE’s proposed 5% discount is not a result of any financial analysis or cost determination.  Thus there is no cost justification for the discount, but the Company stressed that this is solely an interim discount that is intended to provide relief to intraLATA toll carriers until such time as they can provide feature group access to these carriers.  It is GTE’s expressed intent that after the FCC rules on interconnection are published in August, GTE will determine more precise wholesale rates for these services.  GTE suggested that a new rate can be determined by year end.  
GTE’s intent in this filing is obscured by a letter (copy attached) the Company submitted to the Commission advising that it qualifies for a rural exemption under the Federal Act (Section 3(1)(47)(D)) because it “has less than 15% of the access lines in communities of more than 50,000 residents as of February 8, 1996.”  The rural exemption would exempt GTE from the wholesale pricing requirements in Section 251(c) until the Company receives a bona fide request (BFR) for such pricing and a determination from this Commission that such a request is “not economically burdensome, is technically feasible and is consistent [with other parts of the Act].”  If GTE is claiming it is not required to file wholesale rates, but is doing so voluntarily, then perhaps the implication is that the Commission does not have to determine whether or not the retail rates are adequately discounted.  Staff does not believe, however, that  a voluntary filing can negate the Commission’s duty to ensure that wholesale rates meet the requirements of the federal Act.  Either wholesale rates must comply with the federal Act or GTE can opt not to provide wholesale rates until it receives a BFR and Commission approval.
There may be benefits to an interim discount, even though it might appear inadequate, so long as it does not imply Commission acceptance of a 5 % discount rate as an approved difference between wholesale and retail rates.  Even if a subsequent analysis determines that wholesale rates should be more than 5 % lower than retail rates, competitors may be better off having this discount in the interim.  The alternatives would be no discount at all until the required data can be gathered, or individually negotiated contracts for discounts on intraLATA toll (each of which would require Commission approval).
Staff recommends that the proposed 5 % discount be allowed, only on an interim basis, so long as local rate payers will not suffer from the revenue loss and provided that GTE will calculate accurate wholesale rates by December 31, 1996.  At that time, GTE must submit sufficient cost data for the Commission to determine whether GTE’s revised discount will be adequate and what effect this tariff will have on other ratepayers and on intraLATA competition.  Approval of this tariff should not imply that the Commission accepts 5 % the difference between the cost of providing wholesale and retail service.
GTE’s tariff proposal also removes language that restricts resale of three toll products.  Staff recommends be approval to remove this language.
DATED  at Boise, Idaho, this            day of July 1996
_______________________________
Weldon B. Stutzman
Deputy Attorney General
Technical Staff:
Birdelle Brown
Telecommunications Analyst
bb:ws/gtet962.wsb/umisc/cmts