state of illinois illinois commerce commission

STATE OF ILLINOIS

ILLINOIS COMMERCE COMMISSION

Illinois Bell Telephone Company ) -vs- ) CIMCO Communications, Inc., ) Forte Communications, Inc. and ) McLeodUSA Telecommunications Services, Inc. ) Docket No. 05-0171 ) Complaint pursuant to Section 10-108 ) of the Illinois Public Utilities Act and ) 83 Ill. Adm. Code 200.170. )

DIRECT TESTIMONY OF

AUGUST H. ANKUM, PH.D. SIDNEY L. MORRISON

On behalf of

CIMCO Communications, Inc. Forte Communications, Inc.

McLeodUSA Telecommunications Services, Inc.

McLEODUSA/JOINT EXHIBIT 1

May 11, 2005

***PUBLIC VERSION***

Direct Testimony of August Ankum Sidney Morrison ICC Docket No. 05-0171

TABLE OF CONTENTS

I. QUALIFICATIONS OF PANEL MEMBERS ....................................................1

A. QUALIFICATIONS OF AUGUST H. ANKUM ........................................................1 B. QUALIFICATIONS OF SIDNEY L. MORRISON .....................................................3

II. PURPOSE AND RECOMMENDATIONS .........................................................7

III. THE COMMISSION ORDERED THAT NRC STUDIES FOR DESIGN LOOPS BE BASED ON THE MOST EFFICIENT WORK GROUPS.............11

IV. SBC ILLINOIS FAILED TO SELECT THE “MORE EFFICIENT” WORK GROUPS FOR THE STANDALONE LOOP NRC STUDIES, AS ORDERED BY THE COMMISSION................................................................16

V. CORRECTION OF SBC STANDALONE LOOP NRC STUDY BY SUBSTITUTING THE HPC TIMES FOR THE CPC WORK TIMES.............19

A. REQUIRED CORRECTION ................................................................................19 B. IMPLEMENTATION..........................................................................................21

ATTACHMENTS

Attachment 1 CV August H. Ankum Attachment 2 CV Sidney L. Morrison Attachment 3 Corrected Stand-Alone Loop NRC Study


1

I. QUALIFICATIONS OF PANEL MEMBERS 1 2

Q. PLEASE STATE THE NAMES OF THE PANEL MEMBERS 3

SUPPORTING THIS TESTIMONY. 4

A. The panel members supporting this testimony are Dr. August H. Ankum and Mr. 5

Sidney L. Morrison. 6

7

A. QUALIFICATIONS OF AUGUST H. ANKUM 8

Q. PLEASE STATE YOUR NAME, OCCUPATION AND BUSINESS 9

ADDRESS. 10

A. My name is Dr. August H. Ankum. I am a Senior Vice President at QSI 11

Consulting, Inc., a consulting firm specializing in economics and 12

telecommunications issues. My business address is 1261 North Hoyne, Suite #1, 13

Chicago, IL 60622. 14

15

Q. PLEASE DESCRIBE YOUR EDUCATIONAL BACKGROUND AND 16

WORK EXPERIENCE. 17

A. I received a Ph.D. in Economics from the University of Texas at Austin in 1992, 18

an M.A. in Economics from the University of Texas at Austin in 1987, and a B.A. 19

in Economics from Quincy College, Illinois, in 1982. 20

21

My professional background covers work experiences in private industry 22


2

and at state regulatory agencies. As a consultant, I have worked with large 1

companies, such as AT&T, AT&T Wireless and MCI WorldCom, as well as with 2

smaller carriers, including a variety of competitive local exchange carriers 3

(“CLECs”) and wireless carriers. I have worked on many arbitration proceedings 4

between new entrants and incumbent local exchange carriers (“ILECs”). 5

Specifically, I have been involved in arbitrations between new entrants and 6

NYNEX, Bell Atlantic, US West, BellSouth, Ameritech, SBC, GTE and Puerto 7

Rico Telephone. Prior to practicing as a telecommunications consultant, I worked 8

for MCI Telecommunications Corporation (“MCI”) as a senior economist. At 9

MCI, I provided expert witness testimony and conducted economic analyses for 10

internal purposes. Before I joined MCI in early 1995, I worked for Teleport 11

Communications Group, Inc. (“TCG”), as a Manager in the Regulatory and 12

External Affairs Division. In this capacity, I testified on behalf of TCG in 13

proceedings concerning local exchange competition issues, such as Ameritech’s 14

Customer First proceeding in Illinois. From 1986 until early 1994, I was 15

employed as an economist by the Public Utility Commission of Texas (“PUCT”) 16

where I worked on a variety of electric power and telecommunications issues. 17

During my last year at the PUCT I held the position of chief economist. Prior to 18

joining the PUCT, I taught undergraduate courses in economics as an Assistant 19

Instructor at the University of Texas from 1984 to 1986. 20

21 Of particular importance to the current proceeding is my extensive background in 22


3

and experience with SBC’s cost models. A list of proceedings in which I have 1

filed testimony is attached hereto as Attachment 1. 2

3

Q. DID YOU REVIEW SBC’S NRC STUDIES AND TESTIFY ON VARIOUS 4

NONRECURRING CHARGE (“NRC”) ISSUES IN DOCKET NO. 02-0864? 5

A. Yes. 6

7 B. QUALIFICATIONS OF SIDNEY L. MORRISON 8

Q. PLEASE STATE YOUR NAME, OCCUPATION AND BUSINESS 9

ADDRESS. 10

A. My name is Sidney L Morrison. My business address is 550 Sunset Lakes Blvd. 11

SW, Sunset Beach, NC 28468. 12

13

Q. PLEASE SUMMARIZE YOUR PROFESSIONAL EXPERIENCE. 14

A. I have over 30 years of experience in the telecommunications industry. I began 15

my telecommunications career in 1966 in Charlotte, North Carolina as a cable 16

helper for Southern Bell Telephone and Telegraph. Southern Bell was an 17

incumbent local exchange carrier managing numerous exchanges throughout 18

North Carolina. My duties involved splicing underground, buried and aerial 19

cable. I also worked as a switching technician and special services technician. 20

21

Beginning in August of 1970, I transferred to Mountain Bell in Denver, 22


4

Colorado as a central office technician. In 1972, I was promoted to supervise 1

main distributing frame (“MDF”) operations. My duties included supervising the 2

installation of POTS, Specia l Services, Central Office area cuts, main distribution 3

frame replacements and many other projects. In 1980 and 1981, I performed time 4

and motion studies for service provisioning on approximately 75 of Mountain 5

Bell’s MDF operations. These time and motion studies included components for 6

jumper running and administrative activities on each of these frames. From 1983 7

until 1986, I was the switching control center and MDF subject matter expert for 8

US WEST. In this position, I was responsible for staff leve l support for service 9

provisioning and maintenance including the development of enhancements for 10

operational support systems (“OSS”) supporting these activities. From 1986 until 11

1993, I was responsible for the US WEST Automatic Message Accounting 12

teleprocessing organization for the fourteen state US WEST region. 13

14

In 1993, I retired from US WEST and began contract engineering work and 15

consulting. In 1995 I took an assignment in Kuala Lumpur, Malaysia as a 16

contractor/consultant with a team of specialists to build a CLEC network 17

consisting of a Global System for Mobile communications services, fixed network 18

services, cable television services and data services integrated into a common 19

transport backbone. 20

21

I had a number of responsibilities in Malaysia, the most important of which was 22


5

organizing and implementing a field operations group (“FOG”) that was 1

responsible for the installation and maintenance of all fixed network and cable 2

television services. My responsibilities included the planning, organizing, 3

staffing and implementation of the FOG, including an installation and 4

maintenance group, assignment center, dispatch center, test center and a repair 5

center. I also had the responsibility of developing business processes and OSS 6

system requirements for provisioning and maintenance supporting the FOG. 7

8

Subsequently, I managed the day-to-day operations of the FOG, ultimately 9

refining the organization into an ISO 90021 qualified organization. In January 10

1997 the Binariang Maxis FOG became the first certified ISO 9002 service 11

organization in Southeast Asia. 12

13

I returned from Malaysia in June of 1997 and worked for approximately two years 14

as a contract outside plant/central office equipment engineer, and trained new 15

engineers for US WEST collocation efforts. 16

17

In May 1999, I accepted a contract in Switzerland building a new CLEC under the 18

market name of diAx telecommunications. My responsibilities involved project 19

management to establish OSS supporting all wireless, wireline, and data services 20

offered by diAx. I also provided consulting services developing business 21

1 International Standards Organization, ISO 9002 is the standard set of requirements for an organization

whose business processes involve production, installation and servicing.


6

processes supporting the establishment of the diAx Internet Provider Operations 1

Center (“IPOC”) and diAx data services offerings. I established system 2

requirements based on IPOC business processes for fault management systems, 3

provisioning systems, capacity inventory systems, customer service inventory 4

systems and workflow engines controlling overall maintenance and provisioning 5

processes. 6

7

In December 2000, I returned from Switzerland and began working for QSI 8

Consulting Inc. as a Senior Consultant. I provide telecommunications companies 9

with engineering advice and counsel for direct network planning, management 10

and cost-of-service support. My specific areas of expertise include network 11

engineering, facility planning, project management, business system applications, 12

incremental cost research and issues related to the provision of unbundled 13

network elements. 14

15

A more comprehensive description of my work experience and educational 16

background is included as Attachment 2. 17

18

Q. DID YOU REVIEW SBC’S NRC STUDIES AND TESTIFY ON VARIOUS 19

NONRECURRING CHARGE ISSUES IN DOCKET NO. 02-0864? 20

A. Yes. 21

22


7

II. PURPOSE AND RECOMMENDATIONS 1 2

Q. WHAT IS THE PURPOSE OF YOUR TESTIMONY IN THIS DOCKET? 3

A. Following the issuance of the Commission’s June 9, 2004 Order in Docket 02-4

0864 (“June 9 Order”), the filing by Illinois Bell Telephone Company (“SBC 5

Illinois”) of tariffs with charges purportedly in compliance with the Commission’s 6

conclusions in the June 9 Order, and the release by SBC Illinois of its cost studies 7

on which those charges were based, McLeodUSA Telecommunications Services, 8

Inc. (“McLeodUSA”), requested that QSI Consulting review certain of the SBC 9

Illinois “compliance” NRCs and supporting nonrecurring cost studies to 10

determine whether they are in fact in accordance with the findings and 11

conclusions in the June 9 Order. Based on our review, we concluded that certain 12

of SBC Illinois’ “compliance” NRCs were not calculated in accordance with the 13

applicable findings and conclusions in the June 9 Order. The rate elements that 14

we found to be incorrectly calculated are the following: 15

Line Connection (Initial) Line Connection (Additional) Line Connection (Disconnect-Initial) Line Connection (Disconnect-Additional)

These are the four NRCs identified at lines 58-61 of the direct testimony of SBC 16

Illinois witness Dr. Currie and at page 10 of the direct testimony of SBC Illinois 17

witness Michael Silver in this docket. It is our understanding that SBC Illinois is 18

now seeking to have McLeodUSA enter into an amendment to the parties’ 19


8

interconnection agreement for Illinois that would amend the Pricing Appendix to 1

include charges that SBC Illinois claims were calculated in compliance with the 2

June 9 Order, including the four NRCs listed above. As a result, McLeodUSA 3

asked us to prepare testimony for this case explaining why the four NRCs listed 4

above as presented by SBC Illinois were not calculated in accordance with the 5

conclusions in the June 9 Order, and to present calculations of the four NRCs that 6

are in accordance with the June 9 Order. 7

8

Q. WHAT APPEARS TO BE THE SOURCE OF THE DIFFERENCE 9

BETWEEN SBC ILLINOIS’ CALCULATION OF THESE FOUR NRCs 10

AND YOUR CALCULATION OF THESE NRCs? 11

A. The question and disagreement over how to properly implement the June 9 Order 12

concerns the Commission’s conclusions regarding design loops. Specifically, on 13

page 178 of its June 9 Order, the Commission concluded as follows: 14

With respect to designed loops, Staff raises discrepancies in the 15 activities required by various SBC work groups. We agree with 16 Staff that SBC's position is unsupported and, in fact, has changed 17 throughout this proceeding. Moreover, SBC has not specifically 18 identified the activities necessary to design loops. We recognize 19 that SBC's costs may differ based on whether it is provisioning 20 EELs or standalone loops, but SBC has not adequately explained 21 the difference. Although Staff recommends that SBC not charge 22 anything for the work done by the SSC/LOC or the CPC/HPC for 23 standalone loops and EELs, we require SBC to utilize whichever 24 group has the lowest costs and is, therefore, the more efficient. 25 (Emphasis added.) 26

27

The purpose of our testimony is to demonstrate that in calculating the purported 28


9

“compliance” charges for the four NRCs listed above, SBC Illinois has failed to 1

implement this particular Commission conclusion for the aforementioned rate 2

elements. No other issues are addressed in this testimony. 3

4

Q. WHAT ARE THE VALUES FOR THE FOUR NRCs AS CALCULATED 5

BY SBC AND AS YOU HAVE CALCULATED THEM? 6

A. The corrections discussed in this testimony result in the following rates (as 7

compared to SBC Illinois “compliance” rates for these four NRCs): 8

Table 1 9

Rate Element

SBC Rate

Revised Rate

Line Connection (Initial) $49.00 $40.42 Line Connection (Additional) $33.92 $28.75 Line Connection (Disconnect-Initial) $ 9.50 $ 8.95 Line Connection (Disconnect-Additional)

$ 7.03 $ 6.60

10 11

Q. IN REACHING YOUR CONCLUSIONS DID YOU REVIEW THE 12

NONRECURRING COST STUDIES PREPARED BY SBC ILLINOIS 13

THAT IT CONTENDS SUPPORT ITS PROPOSED NRCs? 14

A. Yes, we did. 15

16

Q. WHAT ARE YOUR RECOMMENDATIONS? 17

A. Assuming that McLeodUSA is required by its interconnection agreement with 18


10

SBC Illinois to amend the interconnection agreement to incorporate rates resulting 1

from the June 9 Order, we recommend that the Commission reject SBC’s 2

proposed compliance rates for these four loop NRCs and that, instead, any revised 3

pricing that McLeodUSA is required to adopt for purposes of its interconnection 4

agreement should use the revised rates for these NRCs that we have calculated, as 5

shown in the table above. 6

7

Q. PLEASE EXPLAIN YOUR REFERENCE IN YOUR PREVIOUS 8

ANSWER, “ASSUMING THAT MCLEODUSA IS REQUIRED . . . TO 9

AMEND THE INTERCONNECTION AGREEMENT TO INCORPORATE 10

RATES RESULTING FROM THE JUNE 9 ORDER.” 11

A. It is our understanding that McLeodUSA may have legal or factual arguments as 12

to why it is not required to amend its interconnection agreement with SBC Illinois 13

to incorporate or adopt charges purportedly resulting from the June 9 Order. Our 14

testimony does not address any of those arguments. Our testimony assumes that 15

the interconnection agreement is to be amended to incorporate charges resulting 16

from the June 9 Order, and presents the correct values for four NRCs calculated in 17

accordance with the conclusions in that Order. 18


11

1

III. THE COMMISSION ORDERED THAT NRC STUDIES FOR 2 DESIGN LOOPS BE BASED ON THE MOST EFFICIENT 3 WORK GROUPS 4

5

Q. IN THE CONTEXT OF CALCULATING LINE CONNECTION NRCS 6

FOR STANDALONE UNE LOOPS, WHAT IS A ‘DESIGN LOOP”? 7

A. The issue of whether ordinary unbundled loops require a design process is one of 8

considerable controversy. In order to not rehash the arguments, it is probably 9

simplest to refer to the Commission’s June 9 Order for a description of what 10

might be involved in this process and to let that description speak for itself. On 11

page 174 of the June 9 Order, the Commission discusses SBC Illinois’ 12

representation of the process as follows: 13

SBC asserted that all non-UNE-P unbundled loops, including those 14 used in EELs, must be provisioned using the design loop process, 15 to enable SBC to identify any issues related to the circuit layout. 16 SBC asserted that the CLECs misrepresent the design process and 17 ignore the actual “design” activities at issue. SBC asserted that it 18 did not propose to charge CLECs for “special testing” or placing 19 “additional test points;” rather, SBC performs several minutes of 20 ordinary testing and must process the orders as design circuits so 21 that it can verify the connecting facility assignment information 22 and establish the circuits in the TIRKS database. 23

24

As the June 9 Order also indicates, the CLECs argued that no design activities 25

occur or are required for basic unbundled loops, a notion that was corroborated by 26

at least one SBC witness, Mr. Chris Cass (June 9 Order, p. 176). We do not 27

intend to reargue those issues and controversies. Rather we note the uncertainty 28


12

about what design activities—if any—are performed by SBC to place the 1

Commission’s findings on this issue (to be discussed below) in a proper context. 2

3

Q. IN DOCKET 02-0864, DID SBC ILLINOIS INTRODUCE THE CONCEPT 4

OF DESIGN LOOPS INTO THE CALCULATION OF LINE 5

CONNECTION NRCS FOR BASIC UNBUNDLED LOOPS LATE IN THE 6

CASE? 7

A. Yes. SBC Illinois did not claim that basic unbundled loops required special 8

“design activities” in its direct testimony in Docket 02-0864, and those activities 9

were not reflected in its initial non-recurring cost studies. SBC Illinois’ claim that 10

basic unbundled loops are “designed loops” emerged only late in the proceeding. 11

12

Q. WAS SBC ILLINOIS’ CLAIMS THAT BASIC UNBUNDLED LOOPS ARE 13

DESIGNED LOOPS CRITICIZED BY OTHER PARTIES? 14

A. Yes. SBC Illinois’ notion that basic unbundled loops are designed circuits was 15

poorly supported, if at all, and met with opposition and much criticism from a 16

number of parties, including the CLECs and Staff. Staff’s analysis of the issue, as 17

summarized on pages 176 and 177 of the June 9 Order, was thorough and is worth 18

citing here since it ultimately formed the basis of the Commission’s conclusion on 19

this issue: 20

[…] Staff asserts, in the course of this proceeding, SBC has 21 provided virtually no support, and certainly no credible support, 22 for the charges associated with these activities. When Staff 23 identified discrepancies in its studies, SBC not only failed to 24


13

provide support for its initial estimates, but also made changes to 1 its studies and failed again to support these changes. It is certainly 2 conceivable that some testing by SSS/LOC and CPC/HPC is 3 consistent with TELRIC. However, SBC has utterly failed to 4 prove this to be the case. (June 9 Order, p. 176) 5

6 The June 9 Order goes to note Staff’s argument that: 7

In fact, in the case of standalone loops, the [SBC] witness 8 sponsoring the provisioning costs studies, Chris Cass, indicated no 9 such work need be done. SBC’s addition of such work to its cost 10 studies not only contradicts Mr. Cass’ testimony, but is entirely 11 unsupported by any credible evidence. In the absence of credible 12 evidence to support the work performed by these groups in 13 provisioning UNE loops, the Commission should not permit SBC 14 to assess charges for either standalone loops or for EEL loops, 15 which include costs related to the SSC/LOC and CPC/HPC groups. 16 (June 9 Order, p. 176) 17

18

The June 9 Order then goes on to discuss at length the various efforts of Staff to 19

receive clarification from SBC on this issue and how SBC failed to provide such 20

clarification. The Commission cited Staff’s position in stating its ultimate finding 21

regarding the issue of design loops in the calculation of the Line Connection 22

NRCs for standalone unbundled loops. 23

24

Q. PLEASE STATE THE COMMISSION’S FINDING REGARDING THE 25

ISSUE OF DESIGN ACTIVITIES IN THE CALCULATION OF THE LINE 26

CONNECTION CHARGES FOR UNBUNDLED LOOPS. 27

A. On page 178 of its June 9 Order, the Commission found: 28

With respect to designed loops, Staff raises discrepancies in the 29 activities required by various SBC work groups. We agree with 30 Staff that SBC's position is unsupported and, in fact, has changed 31 throughout this proceeding. Moreover, SBC has not specifically 32


14

identified the activities necessary to design loops. We recognize 1 that SBC's costs may differ based on whether it is provisioning 2 EELs or standalone loops, but SBC has not adequately explained 3 the difference. Although Staff recommends that SBC not charge 4 anything for the work done by the SSC/LOC or the CPC/HPC for 5 standalone loops and EELs, we require SBC to utilize whichever 6 group has the lowest costs and is, therefore, the more efficient. 7 (Emphasis added.) 8

9

In short, the Commission ordered for the standalone UNE loops (at issue in this 10

proceeding) that “SBC utilize whichever group [SSC/LOC or CPC/HPC] has the 11

lowest costs and is, therefore, the more efficient.” To make this criterion more 12

precise one has to note tha t the entire discussion on which the Commission based 13

its decision concerned the relative efficiencies of SSC versus LOC and CPC 14

versus HPC when comparing the basic unbundled loop and EEL NRC studies. 15

For example, on page 177, the June 9 Order cites Staff as having the following 16

concerns: 17

Furthermore, SBC’s LOC group spends much less time 18 provisioning standalone loops than SSC spends provisioning EEL 19 loops. SBC has offered no technological reason for this difference. 20 Thus, SBC’s only explanation for the differing cost estimates is the 21 fact that different groups perform the provisioning activities. All 22 this demonstrates is that SBC’s SSC group is inefficient relative to 23 its LOC group when provisioning UNE loops. In other words, the 24 SSC group cannot possibly be using forward- looking practices, 25 and, at a minimum, the costs for this activity should be reduced to 26 the level of the LOC’s. (Emphasis added.) 27

28

The Commission’s directives concern the relative efficiencies of SSC versus LOC 29

and CPC versus HPC when comparing the basic unbundled loop and EEL NRC 30

studies. 31


15

1

In our analysis of SBC Illinois’ “compliance” NRCs and supporting nonrecurring 2

cost studies, we evaluated and corrected SBC Illinois’ NRC studies for the four 3

loop related NRCs based on this simple criterion: whether SBC used the more 4

efficient groups in the basic unbundled loop NRC study. Again, the critical 5

objective here is to examine the basic unbundled loop NRC study and the EEL 6

study and to see which groups doing design activities are the more efficient and to 7

use those labor times in the basic loop NRC studies. 8

9

Q. PLEASE EXPLAIN THE ACRONYMS “SSC”, “LOC”, “CPC” AND 10

“HPC” AND WHAT THEY REPRESENT. 11

A. The acronyms are defined as follows: 12

HPC - Hi-Cap Provisioning Center 13

SSC - Special Services Center 14

CPC - Circuit Provisioning Center 15

LOC - Local Operations Center 16

These centers provide various tasks (designing and testing of circuits) for SBC’s 17

network in various states from centralized locations, such as Illinois and 18

Wisconsin. As discussed above, not all of these centers are equally efficient even 19

though they appear to perform a large number of similar if not identical tasks. It 20

is for this reason, among others, that the Commission ordered that the task times 21

for the most efficient groups are to be used. 22


16

IV. SBC ILLINOIS FAILED TO SELECT THE “MORE 1 EFFICIENT” WORK GROUPS FOR THE STANDALONE 2 LOOP NRC STUDIES, AS ORDERED BY THE COMMISSION 3

4

Q. DID SBC ILLINOIS SELECT THE MOST EFFICIENT WORK GROUPS 5

FOR DESIGN ACTIVITIES IN CALCULATING THE NRCS FOR 6

STANDALONE LOOPS, AS DIRECTED BY THE COMMISSION ON 7

PAGE 178 OF ITS JUNE 9 ORDER? 8

A. No. As we have noted, the Commission ordered SBC Illinois to use the more 9

efficient of certain work groups in the unbundled loop NRC studies. Again, the 10

choice concerns the more efficient of SSC versus LOC and the more efficient of 11

CPC versus HPC. With respect to the SSC versus LOC choice, SBC Illinois 12

correctly selected the LOC as the more efficient of the two. This is not true for 13

the choice between the CPC and the HPC. SBC Illinois opted to use the CPC 14

work group times, whereas the HPC work group times reflect that the HPC is the 15

more efficient operation. 16

17

Q. PLEASE DEMONSTRATE THAT THE HPC—AND NOT THE CPC USED 18

BY SBC ILLINOIS--IS IN FACT THE MOST EFFICIENT WORK 19

GROUP. 20

A. In its compliance NRC study for standalone loops, SBC Illinois used the CPC 21

work group. The CPC work group is found on Tab 6.3, lines 45 through 57 of the 22

Loops_N_WhslUNE_IL_02-05_Dec02_Compliance_Split study. The total 23


17

minutes for this work group are***BEGIN CONFIDENTIAL 1

END CONFIDENTIAL*** for First and Additional stand-alone 2

loops respectively. The table below is a cut and paste from the aforementioned 3

file and shows the minutes. 4

*** BEGIN CONFIDENTIAL 5

Table 2 6 CPC (Circuit Provisioning Center) - STAND-ALONE Time Time

First (Min)

Add'l (Min)

Installation:

END CONFIDENTIAL*** 7

To see that the CPC is less efficient than the HPC, one has to compare the 8

activities in the basic loop study to the activities in the EEL study and it is clear 9

that nowhere in SBC Illinois’ EEL NRC study is there an instance in which the 10

total work times of the HPC exceed the ***BEGIN CONFIDENTIAL 11

END CONFIDENTIAL*** of the CPC. (Again, as discussed 12

above, the pertinent comparison ordered by the Commission is between the basic 13

loops and the EEL NRC studies.) The table below list all the HPC work group 14


18

activities in the EEL NRC study. The times are taken from the 1

EEL_N_WhslUNE_IL_02-05_Dec02_Compliance_Split study. 2

***BEGIN CONFIDENTIAL 3

Table 3 4

HPC Total Times for Study Tasks in EEL NRC Study2 Time Time

First (Min)

Add'l (Min)


Inspection of the above table shows that the ***BEGIN CONFIDENTIAL 6

END CONFIDENTIAL*** of the CPC work group 7

(for first and additional installs) are larger than any installation work group totals 8

for the HPC group. Thus, the HPC is clearly the more efficient group. 9

10

Q. DOES THIS MEAN THAT SBC ILLINOIS FAILED TO COMPLY WITH 11

THE COMMISSION’S DIRECTIVES FOR STANDALONE LOOPS ON 12

2 These activity times are taken from Tab 6.2 of SBC’s Compliance EEL NRC study: EEL_N_WhslUNE_IL_02-05_Dec02_Compliance_Split.


19

PAGE 178 OF THE JUNE 9 ORDER IN CALCULATING THE LINE 1

CONNECTION CHARGES FOR STANDALONE UNE LOOPS? 2

A. Yes. The above analysis shows that SBC Illinois used the CPC work group times 3

and should have used the times for the more efficient HPC work group. The next 4

section discusses how we corrected SBC Illinois’ standalone loop NRC study for 5

this error. 6

7

V. CORRECTION OF SBC STANDALONE LOOP NRC STUDY 8 BY SUBSTITUTING THE HPC TIMES FOR THE CPC WORK 9 TIMES 10

11

A. REQUIRED CORRECTION 12

Q. HAVE YOU IN THE PREVIOUS SECTION DEMONSTRATED THAT 13

SBC ILLINOIS FAILED TO USE THE MORE EFFICIENT HPC WORK 14

GROUP TIMES IN THE BASIC STANDALONE LOOP NRC STUDY? 15

A. Yes. 16

17

Q. DOES THIS MEAN THAT SBC ILLINOIS’ BASIC STANDALONE 18

UNBUNDLED LOOP STUDY NEEDS TO BE CORRECTED BY USING 19

THE MORE EFFICIENT HPC LABOR TIMES? 20

A. Yes. To correct SBC Illinois’ basic unbundled loop NRC study, it is necessary to 21

substitute the labor times of the more efficient HPC group (from the EEL study) 22


20

for the labor times of the less efficient CPC group. 1

2

Q. HAVE YOU PERFORMED THIS CORRECTION? 3

A. Yes. Attachment 3, which is CONFIDENTIAL, provides the corrected basic 4

unbundled loop NRC study that appropriately reflects the Commission’s 5

conclusion and directive in the June 9 Order that the more efficient work groups 6

be used. Again, we have substituted the labor times of the HPC group from the 7

EEL study for the labor times of the CPC group (which is the less efficient work 8

group.) The precise steps of how this is accomplished are discussed below. 9

10

Q. WHAT ARE THE RESULTS OF YOUR RECALCULATION OF THE 11

STANDALONE LOOP NRC STUDY? 12

A. The results are as follows: 13

Table 4 14

Rate Element

SBC Rate

Revised Rate

Line Connection (Initial) $49.00 $40.42 Line Connection (Additional) $33.92 $28.75 Line Connection (Disconnect-Initial) $ 9.50 $ 8.95 Line Connection (Disconnect-Additional)

$ 7.03 $ 6.60

15 The calculations supporting these results are found in our Attachment 3. 16

17


21

B. IMPLEMENTATION 1

Q. DID THE COMMISSION FIND THAT SBC ILLINOIS FAILED TO 2

IDENTIFY THE PRECISE “DESIGN” ACTIVITIES THAT ARE 3

INVOLVED IN BASIC UNBUNDLED LOOPS? 4

A. Yes. As we previously described, on page 178 of the June 9 Order, the 5

Commission concluded: “We agree with Staff that SBC's position is unsupported 6

and, in fact, has changed throughout this proceeding.” The Commission then 7

went on to note: “Moreover, SBC has not specifically identified the activities 8

necessary to design loops.” This statement echoed that of Staff, as summarized at 9

page 176 of the June 9 Order: 10

It is certainly conceivable that some testing by SSS/LOC and 11 CPC/HPC is consistent with TELRIC. However, SBC has utterly 12 failed to prove this to be the case. (Emphasis added.) 13 14

Adding to the confusion was SBC’s own witnesses Mr. Chris Cass whose 15

testimony supported CLEC testimony that no design activities are required for 16

basic loops that for the most part are already facilities in use by customers. As the 17

June 9 Order stated in summarizing Staff’s position: 18

In fact, in the case of standalone loops, the witness 19 sponsoring the provisioning costs studies, Chris Cass, indicated no 20 such work need be done. SBC’s addition of such work to its cost 21 studies not only contradicts Mr. Cass’ testimony, but is entirely 22 unsupported by any credible evidence. (Emphasis added.) (June 9 23 Order, page 176) 24

25

In short, while the Commission ordered that studies be based on the more efficient 26

of the workgroups, SBC Illinois’ failure to credibly identify and support the 27


22

design activities for basic unbundled loops means that it is not possible to provide 1

a simple one-to-one mapping from the design activities in the EEL study to the 2

design activities in the basic unbundled loop studies, as ordered by the 3

Commission. Some intermediate steps are needed. 4

5

Q. HOW DID YOU IDENTIFY THE LABOR TIMES OF THE MORE 6

EFFICIENT HPC WORK GROUP TO SUBSTITUTE FOR THE LABOR 7

TIMES OF THE LESS EFFICIENT CPC WORK GROUP? 8

A. Given that one cannot perform a one-to-one mapping between the design 9

activities in the EEL studies and the design activities in the basic unbundled loop 10

studies, two intermediate steps are necessary. 11

1. Estimate the average labor times for the various design activities of the 12

HPC work group in the EEL NRC study. 13

2. Use the average labor times, calculated in step 1, to calculate the pro-rated 14

labor times in the unbundled loop NRC to reflect the greater efficiencies 15

of the HPC group. 16

17

We will discuss each step in more detail below. 18

19

Q. PLEASE DISCUSS HOW YOU CALCULATED THE AVERAGE LABOR 20

TIMES OF THE VARIOUS DESIGN ACTIVITIES PERFORMED BY 21

THE HPC GROUP IN THE EEL NRC STUDY. 22


23

A. This intermediate step consists of determining average labor times for the various 1

design activities of the HPC Group in the EEL NRC study. This average is 2

calculated by simply taking all the design activities in the EEL study and 3

averaging them. The table below provides the calculation of the averaging. 4

Table 5 5

***BEGIN CONFIDENTIAL 6

HPC Average Time for all Study Task EEL NRC Study Time Time

First (Min)

Add'l (Min)


As the table shows, the average labor times over 9 design activities in the EEL for 8

first and additional elements are ***BEGIN CONFIDENTIAL 9

END CONFIDENTIAL*** respectively. 10


24

1

Q. PLEASE DISCUSS THE SECOND STEP IN WHICH YOU INTRODUCE 2

THE AVERAGE LABOR TIMES OF THE HPC GROUP INTO THE 3

UNBUNDLED LOOP NRC STUDY. 4

A. As discussed previously, in its compliance NRC study for standalone loops, SBC 5

Illinois used the CPC work group. The CPC work group is found on Tab 6.3 of 6

the basic unbundled loop NRC study (Tab 3, lines 45 through 57 of the 7

Loops_N_WhslUNE_IL_02-05_Dec02_Compliance_Split study.) As also 8

discussed previously, the total minutes for this work group are ***BEGIN 9

CONFIDENTIAL END CONFIDENTIAL*** for first 10

and additional stand-alone loops respectively. (See Table 2.) 11

12

Given that the HPC design activities in the EEL study are on average ***BEGIN 13

CONFIDENTIAL END CONFIDENTIAL*** for first and 14

additional elements, the use of the HPC labor times introduces increased 15

efficiency in the basic unbundled loop cost study. Specifically, the more efficient 16

HPC group provides design activities for first and additional elements of about 17

57% and 43% of the labor time of the less efficient CPC group. These efficiency 18

numbers are calculated as follows: ***BEGIN CONFIDENTIAL 19

END CONFIDENTIAL***. The efficiency percentages 20

are then applied against SBC’s labor time estimates for the inefficient CPC group 21

in the basic unbundled loop NRC study. We believe that the above steps are a 22


25

reasonable implementation of the Commission’s directives on page 178 of its 1

June 9 Order. (The precise calculations are found in the revised basic unbundled 2

loop NRC study, Attachment 3.) 3

4

Q. IS IT POSSIBLE TO MORE DIRECTLY INSERT THE LABOR TIMES 5

OF THE HPC GROUP INTO THE BASIC UNBUNDLED LOOP NRC 6

STUDY (WITHOUT THE INTERMEDIATE STEPS THAT YOU 7

DISCUSSED ABOVE)? 8

A. No, at least not without more information than is provided in SBC Illinois’ cost 9

studies. As we discussed in the previous subsection, it is not possible to do a one-10

to-one mapping of the design activities in the EEL NRC study to design activities 11

in the basic unbundled loop NRC study. This is in large part due to the fact that, 12

as noted in the portions of the June 9 Order that we have previously cited, SBC 13

Illinois failed to identify the specific design activities for the standalone 14

unbundled loops. As a result, the procedure we have used to correct SBC Illinois’ 15

NRC study for standalone unbundled loops is reasonable. 16

17

Q. SBC ILLINOIS WITNESSES DR. CURRIE AND MR. SILVER TESTIFY 18

THAT SBC’S “COMPLIANCE” NRCs AND SUPPORTING COST 19

STUDIES WERE REVIEWED BY COMMISSION STAFF FOR 20

COMPLIANCE WITH THE JUNE 9 ORDER. HAVE YOU REVIEWED 21

THE E-MAIL CORRESPONDENCE BETWEEN SBC ILLINOIS 22


26

REPRESENTATIVES AND STAFF CONCERNING STAF’S REVIEW OF 1

THE “COMPLIANCE” CHARGES AND COST STUDIES THAT WAS 2

PROVIDED BY SBC ILLINOIS TO MCLEODUSA IN DISCOVERY IN 3

THIS CASE? 4

A. Yes, we have. 5

Q. DOES THE DOCUMENTATION SUPPLIED BY SBC ILLINOIS 6

DEMONSTRATE TO YOU THAT STAFF REVIEWED AND 7

CONCURRED IN SBC ILLINOIS’ USE OF THE LABOR TIMES FOR 8

THE CPC GROUP RATHER THAN THE HPC GROUP IN THE NRC 9

STUDY FOR BASIC STANDALONE LOOPS? 10

A. No, we do not believe it does. 11

12

Q. DOES THIS CONCLUDE YOUR DIRECT TESTIMONY? 13

A. Yes, it does. 14

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