S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * *

Transcription

1 S T A T E O F M I C H I G A N BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * * In the matter of the application of ) AMERITECH MICHIGAN for approval ) of cost studies related to calling name database ) Case No. download and branding of operator services and ) directory assistance calls delivered over shared trunks. ) ) At the June 21, 2002 meeting of the Michigan Public Service Commission in Lansing, Michigan. PRESENT: Hon. Laura Chappelle, Chairman Hon. David A. Svanda, Commissioner Hon. Robert B. Nelson, Commissioner OPINION AND ORDER On March 29, 2002, Ameritech Michigan filed an application for approval of cost studies for downloading the calling name (CNAM) database and branding operator services (OS) and directory assistance (DA) calls that are delivered over shared trunks. Ameritech Michigan developed the cost studies to comply with the Commission s December 20, 2001 order in Case No. U and the March 19, 2001 order in Case No. U On May 30, 2002, the Commission Staff (Staff) and AT&T Communications of Michigan, Inc., TCG Detroit, and MCImetro Access Transmission Services, Inc., (collectively, the CLECs) filed comments. Ameritech Michigan filed reply comments on June 7, 2002, a day late.

2 CNAM Database Download Providers use the CNAM database to provide, among other things, Caller ID-type services. A provider has the choice of downloading the entire database at a cost-based rate or retrieving data as needed at a cost-based rate per query. The parties raise three issues. First, the Staff says that the proposed costs are too high because Ameritech Michigan assumed that only one provider will use the service. It says that the assumption is not reasonable because the initial costs for developing the service could, for the most part, be shared by additional providers that request the service. The Staff therefore recommends that the Commission require Ameritech Michigan either to recalculate the costs using a reasonable estimate of the number of providers that will request the service over the long run or to agree to rebate a portion of the cost to the original provider when others purchase the service. The CLECs agree. They acknowledge that only one provider has thus far sought to download the CNAM database, and only in Michigan, but argue that others will likely seek to do so. They therefore criticize Ameritech Michigan s proposal to recover the cost from a single provider in a single state even though the investment could be used to serve multiple providers in multiple states during the ten-year life of the investment. They recommend that the Commission require Ameritech Michigan to assume a demand of 26 CNAM downloads (2 providers in each of 13 states). Ameritech Michigan says that the cost study reflects the fact that only one provider, in Michigan, has expressed an intent to request the CNAM download. It says that one cannot assume that there will be another request, that another state will require the service to be provided in the same manner as Michigan, that the serving arrangements will be the same as in Michigan, or that Page 2

3 cost savings will result. Nevertheless, it says that it does not object to the Staff's suggestion to grant a rebate if additional providers in Michigan request the service in the next three years. The Commission accepts Ameritech Michigan s offer to implement the Staff s proposed rebate mechanism, although for five years, the upper end of the Staff s proposed range, rather than three years. The Staff s proposal reasonably addresses the fact that only one provider has requested the service, the uncertainty about if and when other providers will do likewise, and the uncertainty about the extent to which the investment needed to provide the service in Michigan can be used to provide service in another 12 states. The Commission finds five years more appropriate than three because it will take time for demand to materialize. On the other hand, it would be arbitrary to assume a demand of 26 CNAM downloads as the CLECs recommend. Second, the Staff says that Ameritech Michigan has overestimated the number of hours required to perform the tasks needed to provide the service. The Staff says that this is Ameritech Michigan s first attempt to calculate the cost of this service, and asserts that Ameritech Michigan has previously demonstrated a tendency to initially overestimate the hours required to perform tasks. It says that the OS/DA branding cost study is a good example, where there is a dramatic decline between the costs first proposed in July 2001 and the costs that Ameritech Michigan proposes in this docket. The Staff therefore recommends that the Commission reduce Ameritech Michigan s estimate of the hours by 50%. Ameritech Michigan says that the estimates of tasks and times are based on its actual experience in implementing this service. It notes that the Staff did not pursue discovery related to the time estimates (although the CLECs did). It says that the Staff's recommendation to simply cut labor times in half, rather than seeking further detail about the hours, is not a reasonable solution. Page 3

4 As to the Staff s reliance on the significant reduction in hours associated with the OS/DA branding cost study, it says that the current cost study for that service simply reflects updated information. The Commission agrees that a reduction of 50% is warranted. The Commission has experience with Ameritech Michigan s tendency in the context of cost studies to overestimate the tasks and times required to offer services. As the Staff points out, the costs associated with OS/DA branding is one such example. The Commission s orders in Cases Nos. U and U-11831, Ameritech Michigan s cost dockets, reflect additional reductions that the Commission found necessary in light of Ameritech Michigan s tendency to overestimate when calculating costs. See, for example, the July 14, 1997 order in Case No. U and the November 16, 1999 order in Case No. U These reductions are commensurate with the 50% reduction in this case. Third, the CLECs recommend that the Commission remove the cost associated with the Operator Service Marketing Order Processor as lacking support. Ameritech Michigan says that the cost was incurred (and appropriately included in the cost study) and that the source of this cost input is a third-party vendor. It says that although the CLECs sought information on the identity of the third-party vendor and further details about the price quote, the information was not provided because disclosure requires approval of the third party. The Commission agrees with the CLECs that the cost should be excluded from the cost study. The fact that Ameritech Michigan agreed in its contract with an undisclosed third-party not to provide information to other parties is not a reason to shield the claimed cost from public scrutiny in a proceeding where Ameritech Michigan seeks recovery of that cost. Page 4

5 OS/DA Branding OS/DA branding is a service that identifies the local service provider of each OS/DA call and brands the call with the provider s name. The parties raise two issues. First, for the nonrecurring charge, the Staff notes that Ameritech Michigan has proposed that an average cost be used, even though it developed a cost to create and load the branding announcement at the first switch and a cost to load the same announcement at additional switches. The Staff says that it is unclear why Ameritech Michigan proposes an average cost when it developed two separate costs, particularly because a calculation of the average cost requires an assumption about the number of subsequent installations. The CLECs agree that Ameritech Michigan should be required to use the two costs that it developed rather than an average. Ameritech Michigan does not object to amending the rate structure as the Staff and the CLECs propose. The Commission accepts that proposal as reasonable. Second, for the recurring charge, the Staff objects to the assumed call volume. Ameritech Michigan developed an annualized call volume based on data from June 2001 through January The Staff says that a more forward-looking approach is appropriate. The Staff notes that the data show a steady monthly increase in the number of calls. In fact, it notes that the last month (January 2002) shows more than twice as many calls as the first month (June 2001). At the very least, the Staff recommends that Ameritech Michigan be required to use call volumes for the latest six-month period. The CLECs agree that Ameritech Michigan has underestimated the number of calls. They note that the last month for which Ameritech Michigan accumulated data (January 2002) shows 40% more calls than the monthly estimate used in the cost study. The CLECs recommend that the Page 5

6 Commission require Ameritech Michigan to calculate a revised call volume based on an assumed monthly increase in calls of 10% in 2002, 8% in 2003, and 5% in Ameritech Michigan acknowledges that additional data have become available. It says that if the Commission determines that the cost study should use more recent data, the study could be recast using all or a portion of the monthly call data available since June On the other hand, it says that the Commission should reject the CLECs proposal, which it says results in a call volume that is more than five times that used in the study. It says that there is insufficient support for the CLECs month-to-month growth rate assumptions and that their proposal is not based on any updated data. Further, it says that an increase in call volumes of the magnitude that the CLECs propose would require additional investment, which it suggests might increase the cost per call. The Commission finds that Ameritech Michigan should redetermine the call volume by annualizing data from the most recent six months for which data are available. There is no apparent reason not to use more recent data when the month-to-month increases are significant. On the other hand, the CLECs proposal is likely to overstate the growth rate, is highly speculative, and is not based on updated data. The Commission FINDS that: a. Jurisdiction is pursuant to 1991 PA 179, as amended, MCL et seq.; 1969 PA 306, as amended, MCL et seq.; and the Commission s Rules of Practice and Procedure, as amended, 1992 AACS, R et seq. b. Ameritech Michigan s cost studies for the CNAM database download and OS/DA branding should be approved, as modified above. Page 6

7 THEREFORE, IT IS ORDERED that: A. Ameritech Michigan s cost studies for the calling name database download and the branding of operator services and directory assistance calls that use shared trunks are approved, as modified by this order. B. Within 30 days, Ameritech Michigan shall file revised cost studies and tariffs in conformity with this order. The Commission reserves jurisdiction and may issue further orders as necessary. Any party desiring to appeal this order must do so in the appropriate court within 30 days after issuance and notice of this order, pursuant to MCL MICHIGAN PUBLIC SERVICE COMMISSION ( S E A L) /s/ Laura Chappelle Chairman /s/ David A. Svanda Commissioner By its action of June 21, /s/ Robert B. Nelson Commissioner /s/ Dorothy Wideman Its Executive Secretary Page 7

8 THEREFORE, IT IS ORDERED that: A. Ameritech Michigan s cost studies for the calling name database download and the branding of operator services and directory assistance calls that use shared trunks are approved, as modified by this order. B. Within 30 days, Ameritech Michigan shall file revised cost studies and tariffs in conformity with this order. The Commission reserves jurisdiction and may issue further orders as necessary. Any party desiring to appeal this order must do so in the appropriate court within 30 days after issuance and notice of this order, pursuant to MCL MICHIGAN PUBLIC SERVICE COMMISSION Chairman Commissioner By its action of June 21, Commissioner Its Executive Secretary Page 8

9 In the matter of the application of ) AMERITECH MICHIGAN for approval ) of cost studies related to calling name database ) Case No. download and branding of operator services and ) directory assistance calls delivered over shared trunks. ) ) Suggested Minute: Adopt and issue order dated June 21, 2002 approving, with modifications, Ameritech Michigan s cost studies for calling name database download and branding of operator services and directory assistance calls, as set forth in the order.