August 23,2006. Re: A copy of this document has today been served upon all Parties of Record.
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1 211 LEON SULLIVAN WAY CHARLESTON, WV * FAX August 23,2006 VIA HAND DELIVERY Sandra Squire Executive Secretary Public Service Commission P.O. Box 812 Charleston, WV iv C d.-... Re: Case No T-PC Verizon West Virginia Inc. Dear Ms. Squire: Enclosed for filing please find an original and twelve (12) copies of the Reply Brief of FiberNet, LLC ( FiberNet ) in the above-captioned proceeding. A copy of this document has today been served upon all Parties of Record. If you have any questions relative to this filing, please feel free to contact me at your convenience. I may be reached directly at (304) Thank you. Director of Regulatory Affairs FiberNet, LLC 4580) SHIs cc: Parties of Record 328 Neville Street 1102 Third Avenue 221 E.Antietam Street 225 South Maple Ave. 142 Gazebo Park, Suite 201 Beckley. WV Huntington, WV Hagerstown, MD Greensburg, PA Johnstown, PA Fairmont Avenue, Suite Market Street. Suite Fifteenth Street, Suite th Street Baltimore Street, Suite 204 Fairmont, WV Parkersburg, WV Wheeling, W Altoona, PA Cumberland, MD
2 PUBLIC SERVICE COMMISSION OF WEST VIRGINIA CHARLESTON CASE NO T-PC VERIZON WEST VIRGINIA TNC. Petition of Verizon West Virginia Inc. To Cease Rate Regulation of Certain Workably Competitive Telecommunications Services REPLY BRIEF OF FIBERNET, LLC I. Introduction After having had the opportunity to review the initial briefs of the other parties to this proceeding, especially the compelling case laid out by the Consumer Advocate Division, it appears clear that Verizon has not satisfied all of the criteria under West Virginia Code (c) necessary to justify the deregulation of its local business services. More importantly, none of the assertions presented by Verizon in its initial brief have caused FiberNet to rethink its position in opposing Verizon s Petition, and while FiberNet believes that it has adequately covered the primary issues presented by this case in its initial brief, there remain a few issues that warrant further discussion. 11. Intermodal Competition - To the Extent It Exists - Does Not Support the Granting of Verizon s Petition in this Case. The intermodal alternatives cited by Verizon in this case are not grounds for approving its Petition, as there is no reliable evidence that any of the cited technologies 1 FiberNet takes no substantive position with respect to Verizon s request for price deregulation of its local Directory Assistance Services. However, FiberNet would note that all of the CLEC parties to this proceeding have their local directory assistance services provided to their end users by Verizon pursuant to contract. Whether this type of contractual service arrangement satisfies the requirements of West Virginia Q.& (c) is obviously a question that the Commission will ultimately have to determine in rendering a decision on this particular issue.
3 and service categories has yet posed anything like the significant competitive antidote to Verizon s market power sufficient to satisfy Code (c). For example, the Federal Communications Commission ( FCC ) recently found in the Triennial Review Remand Order ( TRRO y), that the record does not indicate that other intermodal options, such as fixed wireless and satellite, offer significant competition in the enterprise loop market. 2 In further support of its Petition, Verizon s also cites to potential cable broadband competition in West Virginia as a further example of intermodal competition. (VZ Exhibit No. 1, p. 12). As the FCC has recently observed, however, cable modem service is primarily residential ~ervice. ~ Indeed, statistics show that fewer than 1% of cable modem subscribers are medium or large business or government en ti tie^.^ The TRRO hrther confirms that cable modem service is unsuited, and therefore not a substitute, for ILEC services for a number of reasons, including that it is asymmetrical, relatively low bandwidth, and lacks sufficient reliability and ~ecurity.~ Indeed, the FCC has found that the RBOCs provided little evidence that cable companies are providing service at DS-1 or higher capacities. 6 Simply put, there is no evidence that cable operators in West Virginia provide a serious competitive alternative to Verizon in the local business market at this point in time. 2 UnbundledAccess to Network Elements, WC Docket , Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, CC Docket , Order on Remand, FCC ,1193 n. 508 ( TRO Remand Order ). 3 Inquiry Concerning the Deployment of Advanced Telecommunications Capability to AI1 Americans in Reasonable and Timely Fashion, and Possible Steps to Accelerate Such Deployment Pursuant to Section 706 of the Telecommunications Act of 1996, GN Docket No , Fourth Report to Congress, GN Docket No , Fourth Report to Congress FCC , at p. 14 (rel. Sept 9,2004) ( Fourth Advance Services Report ). 4 High Speed Services for Internet Access: Status as of June 30, 2003, Industry Analysis and Technology Division, Wireline Competition Bureau (December 2003), Table 1 and Table 3. 5 TRO Remand Order at Id. 2
4 Voice over Internet Protocol ( VoIP ) is likewise not as significant a competitor as Verizon contends. In the first place, similar to issues faced by providers seeking to compete with Verizon in the business market segment, VoIP requires customer access be provided by local network operators - and in the vast majority of its exchanges that will be Verizon. To use VoIP, a customer needs to obtain broadband Internet access, which may not be available for all customer classes, except from wire line carriers such as Verizon. Moreover, VoIP has only been readily deployed for the past several years, and there are significant questions remaining about its scalability (i.e., can it serve tens of millions of users), service quality, security, and 911 capabilities. Even leaving aside the problems that VoIP providers have had with 911 and call reliability, long-run future gradual substitution of VoIP for traditional wire line local voice services - assuming that it occurs at all - does not put VoIP applications on par with Verizon s traditional wire line services at the present time. Simply put, VoIP is not a viable substitute for Verizon s traditional wire line telecom services, and Verizon has not provided any tangible evidence in this proceeding of price-related substitution of VoIP for traditional wire line business ~ervice.~ Nor is there any evidence that wireless service providers could provide the type of competitive alternative that Verizon claims. In the initial Triennial Review Order ( TRO 7, for example, the FCC discounted mass-market broadband competition from the I But even assuming for the sake of argument that a significant number of consumers do eventually migrate to a VoIP based technology for basic telecommunications service, it is clear that Verizon will be a beneficiary of that trend as well, as Verizon has its own VoIP service - Voicewing. Thus, even if VoIP is present in the same market as wire line, it is unlikely that Verizon s overall market share would be significantly smaller in a VoIP/wire line market that it is in a solely wire line market. And again, as noted previously, most of the VoIP competitors would still be beholden to Verizon for last mile access to the end user customer using the VoIP application over those facilities. 3
5 wireless sector, observing that fixed wireless and satellite services remain nascent technologies, with limited availability. * And while millions of American consumers, including those in West Virginia, have admittedly started using cell phones more frequently in recent years, Verizon could produce little tangible evidence proving that cell-phone technology has become a viable economic substitute for traditional wire line technologies - especially with regard to business customers. In short, save for limited situations, Le., the traveling salesman, the real estate agent, or the landscaper, very few business customers have cut the cord and become wireless only users, and cell phones are generally used to complement rather than replace traditional wire line technology Verizon s Motion for Protective Order Should Be Granted. In its initial brief, FiberNet provided its thoughts with respect to the granting of the Protective Order being requested by Verizon in this case. (FiberNet Initial Brief at pp. 9-12). FiberNet continues to believe that Verizon s Motion should be granted and nothing putting forth in any of the initial briefs has served to change FiberNet s position. Indeed, the Staff provides but a cursory discussion of this issue (Staff Initial Brief at pp. 2-3), while the CAD does not even appear to address the issue in its initial brief. On the other hand, Verizon presented a comprehensive Post-Hearing Submission in support of its Motion. As Verizon correctly notes in this document, two distinct but similar legal provisions apply to the proper consideration of its Motion - Rule 26(c) of 8 Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers; Implementation of the Local Competition Provisions of the Telecommunications Act of 1996; Deployment of Wireline Services Offering Advanced Telecommunications Capability, CC Docket Nos , 96-98, , Report and Order and Order on Remand and Further Notice of Proposed Rulemaking, Released August 21,2003 ( Triennial Review Order ) at Id. at
6 the West Virginia Rules of Civil Procedure and the West Virginia Freedom of Information Act 9 29B-1-1 et seq. ( FOIA ). Verizon then presents a thorough analysis of not only the applicable legal standards but also how these legal standards apply to the data at issue in this case. Using the criteria enunciated under either Rule 26(c) or FOIA, Verizon correctly concludes that the legal standard for the granting of its Motion has been met in the instant case. In addition, FiberNet supports Verizon s recommendation that the Commission adopt the reverse FOIA procedure currently used by the FCC. FiberNet agrees with Verizon that this Commission s adoption of a similar procedure on a prospective basis would not conflict with the current imposition of state FOIA obligations upon the Commission as a result of the state Supreme Court s ruling in AT&T Communications of West Virginia, Inc. v. Public Service Commission, 423 S.E. 2d 859 (W. Va. 1992). FiberNet also agrees that the adoption of a reverse FOIA procedure would be a reasonable procedural means of ensuring FOIA compliance and would most likely go a long way toward eliminating, or at least reducing, the controversy surrounding future requests for confidential treatment of company specific business information. In short, FiberNet strongly urges to the Commission to reconsider its initial rejection of Verizon s Motion for Protective Order. Based upon the legal analysis and arguments presented in its Post-Hearing Submission, FiberNet believes that Verizon has more than adequately demonstrated that it is legally entitled to a Protective Order in this case. 5
7 IV. If Verizon s Petition is Granted Either in Whole or in Part With Respect to the Price Deregulation of its Local Business Services An Appropriate Adjustment will have to be made to the Process by which Verizon Provides Resale Services to Competitive Carriers. The CAI> raised a very important issue in its prepared testimony in this proceeding that was largely overlooked at hearing. Specifically, as CAD witness Gregg pointed out, under current law Verizon must offer resale of its various retail services at a discount off the retail price. (CAD Exhibit No. 4, p. 10). In West Virginia, for example, CLECs can purchase for resale Verizon s retail offerings at discounts ranging from 15.05% to (Id.). If Verizon s business local exchange service is rate deregulated to some degree as a result of this proceeding, the CAD rightly inquires as to how Verizon s retail price is going to be determined, and more importantly verified, so that the appropriate resale discount can then be applied. (Id.). Consequently, the CAD concludes that if the Commission decides to deregulate Verizon s business local exchange services within any given area, conditions concerning future resale will have to be established. (CAD Exhibit No. 4, p. 10). Certainly, the CAD S concerns in this regard have merit and need to be further explored so that CLECs utilizing Verizon s resale services can ensure that they are being charged appropriately. Otherwise, CLECs will be forced to essentially except whatever resale charges Verizon deems appropriate, which given the wholesale billing nightmares that CLECs have been forced to endure in the past, gives serious pause for concern. 10 The applicable resale discount is 17.84% if the involved CLEC provides its own operator services. If, the involved CLEC utilizes Verizon s operator services platform, however, the applicable resale discount is reduced to 15.05%. 6
8 V. Conclusion. For all of the reasons discussed in both its initial brief and herein, FiberNet respectfully submits that Verizon has failed to meet its burden of proof justifying the deregulation of its local business services as required by West Virginia Code (c). The Commission should thus reject Verizon s Petition with respect to the proposed price deregulation of its local business services. Notwithstanding this fact, FiberNet does strongly support the granting of Verizon s Motion for a Protective Order in this proceeding. Respectfully submitted this 23rd day of August FiberNet, LLC By Counsel, 21 1 Leon Sullivan Way Charleston, West Virginia Telephone: (304) Fax: (304) shamula@,wfibernet.net 7
9 CERTIFICATE OF SERVICE I, Steven Hamula, counsel for FiberNet, LLC, do hereby certify that copies of the foregoing document have been served upon the following parties of record by United States, First Class Mail, this 23rd day of August J. David Fenwick. Esquire P.O. Box 2107 Charleston, WV David B. Frost, Esquire Verizon West Virginia Inc MacCorkle Avenue, S.E. Charleston, WV Mark D. Kauffelt, Esquire P.O. Box 3082 Charleston, WV Jeffrey A. Ray, Esquire Citynet West Virginia, LLC 113 Platinum Drive, Suite B Bridgeport, WV Patrick W. Pearlman, Esquire Consumer Advocate Division 70 1 Union Building Charleston, WV Lisa Wansley-Layne, Esquire Public Service Commission Legal Division P.O. Box 812 Charleston, WV Steven Hamula 8
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