20030723_556.pdf

DECISION MEMORANDUM
TO:CO MMISSI 0 NER KJELLAND ER
COMMISSIONER SMITH
CO MMISSI 0 NER HANSEN
COMMISSION SECRETARY
COMMISSION STAFF
LEGAL
WORKING FILE
FROM:WAYNE HART
DATE:JULY 21, 2003
RE:QWEST TARIFF ADVICE REGARDING PUBLIC ACCESS LINE FRAUD
PROTECTION SERVICE; ADVICE NOS. 03-03-S AND 03-06-
BACKGROUND
This is the second and final part of Qwest' s filings to implement the "Wisconsin Order
issued by the Federal Communications Commission (FCC Order No. 02-025) that provided
additional guidance on pricing for services provided by the Bell Operating Companies to
payphone service providers. The Wisconsin Order directed that rates for such services were to
be determined using forward looking cost models, similar to the methods used in pricing
unbundled network elements (UNEs). On November 12 2002, Qwest submitted Tariff Advices
Nos. 02-24-N and 02-06-S revising the rates for the Public Access Line (PAL), and indicated it
would file revised rates for the fraud protection service at a later date. These submittals address
the fraud protection services.
Qwest provides two basic ways to purchase PAL lines and services, depending upon the
type of equipment used by the payphone provider. For its own payphones, Qwest typically
utilizes a "dumb" phone, and purchases (from itself) a Smart PAL line. Smart Pal lines utilize
the intelligence of the Qwest switch to provide coin supervision, fraud protection and other
payphone services. Most independent payphone providers utilize a "smart" phone, and purchase
a dumb, or Basic PAL line. Smart phones can provide coin supervision and some other
payphone services, but not fraud protection. Therefore, most independent payphone providers
must purchase both a Basic PAL line and fraud protection.
DECISION MEMORANDUM - 1 -JULY 21 2003
STAFF ANALYSIS
There are two general concerns to be examined with this filing. The first is whether the
filing complies with the forward looking cost model pricing requirements of the Wisconsin
Order. The Company provided Staff with results from Qwest's own forward looking cost model
that was used to produce these rates. Although direct comparisons are not available, Staff
compared the rates for these services with the wholesale UNE rates derived from TELRIC
models for other switching services and believes that the rates identified in these proposals is
within the range that one would expect to be produced by such forward looking models.
addition, these are the same rates filed by Qwest at the FCC.
The second issue is whether Qwest's rates for such services are discriminatory. The
Smart PAL line, which includes the line plus coin supervision and fraud protection services
should cost more than the Basic PAL line with just fraud protection. Since Qwest is the primary
purchaser of the "smart" product, and its competitors primarily purchase the Basic or "dumb"
product plus fraud protection, the failure to charge more for the Smart PAL line puts Qwest at a
competitive advantage.
Qwest's Southern Idaho Tariff includes the two Basic Pal products, Basic Pal Line and
Basic Pal Line with Fraud Protection, plus the Smart Pal product. The November filing
essentially eliminated the charges for fraud protection in Southern Idaho by pricing the two basic
products the same, with a Smart PAL line priced $1.75 more. This filing re- instates a charge for
fraud protection, by increasing the Basic PAL line with fraud protection by 11 cents. A Smart
PAL line will be also be increased by 11 cents, maintaining the $1.75 difference between the
most popular smart and dumb line products.
The North Idaho Tariff identifies Fraud Protection as a specific product. The November
filing did not change the $2.00 rate for fraud protection, resulting in the cost for a Basic PAL line
with fraud protection being $1.39 more than a Smart PAL line. This maintained the competitive
advantage that Qwest had over its competitors with the previous rates. This filing reduces the
fraud protection rate to $0., and charges for the Smart PAL line will now be $0.50 more than
the charges for a Basic Pal line with Fraud Protection.
ST AFF RECOMMENDATION
Staff believes these two filings are consistent with the Wisconsin Order. The filing for
Southern Idaho maintains the proper difference between the cost of the lines that are purchased
DECISION MEMORANDUM - 2 -JULY 21 2003
Qwest and its Competitors, while the filing for North Idaho reduces the cost ofthe product
purchased by most competitors to eliminate the slight competitive advantage currently enjoyed
by Qwest. Therefore, Staff recommends approval of both of these filings.
COMMISSION DECISION
Does the Commission wish to approve Qwest Tariff Advice Nos. 03-03-S and 03-06-
dmemos/pal fraud protection wh
DECISION MEMORANDUM - 3 -JULY 21 2003