Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

+----------------------------------+---+-------------------------------+
| In the Matter of                 | ) | CC Docket No. 01-140          |
|                                  |   |                               |
| Bell Atlantic Telephone          | ) | Transmittal Nos. 1373 and     |
| Companies                        |   | 1374                          |
|                                  | ) |                               |
| Revisions in Tariff FCC Nos. 1   |   | Transmittal Nos. 23 and 24    |
| and 11                           | ) |                               |
|                                  |   |                               |
| Verizon Telephone Companies      | ) |                               |
|                                  |   |                               |
| Tariff FCC Nos. 1 and 11         | ) |                               |
|                                  |   |                               |
|                                  | ) |                               |
+----------------------------------+---+-------------------------------+

**ORDER DESIGNATING ISSUES**

**FOR INVESTIGATION**

**Adopted:** June 26, 2001 **Released:** June 26, 2001

**Direct Case Due Date:** July 17, 2001

**Oppositions to Direct Case Due Date:** July 31, 2001

**Rebuttal Due Date:** August 7, 2001

By the Chief, Common Carrier Bureau:

**[Table of Contents]{.smallcaps}**

Paragraph No.

I. INTRODUCTION [3](#introduction)

II\. BACKGROUND [4](#background)

III\. ISSUES DESIGNATED FOR INVESTIGATION
[8](#issues-designated-for-investigation)

A. Input Prices [8](#input-prices)

B. Comparison to Previous Cost Studies
[10](#comparison-to-previous-cost-studies)

C. Central Offices Supporting Collocation Arrangements
[10](#central-offices-supporting-collocation-arrangements)

D. Engineering, Furnished and Installed ("EF&I") Factor
[11](#engineering-furnished-and-installed-efi-factor)

E. Building and Land Investment Factors
[13](#building-and-land-investment-factors)

F. Annual Cost Factors ("ACFs") [14](#annual-cost-factors-acfs)

G. Switching Depreciation ACF [14](#switching-depreciation-acf)

H. Overhead Loading Factors [16](#overhead-loading-factors)

I. Comparisons with Other Carriers' Rates
[16](#comparisons-with-other-carriers-rates)

J. Cumulative Analysis [17](#cumulative-analysis)

K. Non-Recurring Charge Augmentation Fee
[17](#non-recurring-charge-augmentation-fee)

L. Terms and Conditions [17](#terms-and-conditions)

IV\. PROCEDURAL MATTERS [19](#procedural-matters)

A. Filing Schedules [19](#filing-schedules)

*B.* *Ex Parte* Requirements [20](#ex-parte-requirements)

C. Paperwork Reduction Act [20](#paperwork-reduction-act)

V. ORDERING CLAUSES [20](#ordering-clauses)

# INTRODUCTION

1.  On April 11, 2001 and April 12, 2001, the former Bell Atlantic
    Telephone Companies filed Transmittal Nos. 1373 and 1374,
    respectively, to revise Tariff FCC Nos. 1 and 11.[^1] Both became
    effective on April 26, 2001. The revisions in Tariff FCC No. 1
    revise the monthly rate for DC power for physical collocation, and
    establish a new rate element for DC power for virtual collocation,
    in the Bell Atlantic--South region. The revisions in Tariff FCC No.
    11 revise monthly rates for DC power for physical and virtual
    expanded interconnection arrangements in New York/Connecticut and
    New England.

2.  On April 17, 2001, Conversent Communications filed a petition to
    reject or, in the alternative, to suspend and require an accounting
    of Verizon's tariff filings.[^2] On April 18, 2001, Sprint Corp.
    filed a petition to reject or suspend and investigate;[^3] Qwest
    Communications International, Inc. and Qwest Communications
    Corporation filed a joint petition for suspension or rejection;[^4]
    WorldCom, Inc. filed a petition to suspend and investigate;[^5] AT&T
    Corp. filed a petition to suspend and investigate;[^6] and the
    Association for Local Telecommunications Services, Allegiance
    Telecom, Inc., Choice One Communications, Inc., Covad Communications
    Company, Network Plus, Inc., Rhythms Links, Inc., and XO
    Communications, Inc. ("Joint CLECs") filed a petition to suspend,
    investigate, or reject Verizon's tariff filings.[^7] On April 25,
    2001, Verizon filed a reply.[^8] On that same day, the Common
    Carrier Bureau suspended the tariffs for one day, and set them for
    investigation.[^9] In this Order, we designate issues for the
    investigation of Verizon's transmittals, and we direct Verizon to
    file additional information as described below.

# BACKGROUND

3.  The historic dominance of incumbent local exchange carriers
    ("ILECs") and the ubiquity of their networks led the Commission, in
    a series of orders beginning in 1992, to order certain ILECs to file
    tariffs offering expanded interconnection services to competitive
    access providers ("CAPs"), interexchange carriers ("IXCs"), and end
    users.[^10] Expanded interconnection allows parties to collocate
    network equipment dedicated to their use in the LECs' central
    offices, thus providing them with direct access to bottleneck
    facilities and enabling them to compete on a facilities basis with
    LEC access services by interconnecting their circuits with those of
    a LEC at a LEC central office.[^11] The Commission found that the
    availability of expanded interconnection at reasonable rates, terms,
    and conditions would result in numerous public interest benefits,
    including enhanced choices for telecommunications services,
    increased efficiency, technological innovation, and lower prices for
    interstate access services.[^12]

4.  When Congress passed the Telecommunications Act of 1996 to promote
    the development of competition in all telecommunications markets, it
    too recognized the essential role of collocation in fostering
    facilities-based entry. Congress required incumbent LECs "to provide
    for physical collocation of equipment necessary for interconnection
    or access to unbundled network elements at the premises of the local
    exchange carrier."[^13] In the *Local Competition Order*, the
    Commission adopted the existing interstate expanded interconnection
    requirements, with some modifications, for collocation provided
    under section 251,[^14] one difference being that section 251 does
    not require tariffing of collocation services. The existing
    tariffing requirements continue to apply, however, for interstate
    special access and switched transport expanded interconnection.

5.  Expanded interconnection can promote competitive entry, however,
    only if it is offered at rates that reflect costs and under terms
    and conditions that are just and reasonable. Competitive providers
    must buy collocation and all associated inputs, including power,
    from their ILEC competitors. We must ensure, therefore, that ILECs
    offer these services at just and reasonable rates so as not to raise
    their rivals' costs.

6.  Carriers employing either physical or virtual collocation
    arrangements require electrical power to operate their collocated
    telecommunications equipment. Verizon's Transmittal Nos. 1373 and
    1374 modify the rates and rate structure applicable to its provision
    of --48V DC (direct current) power. DC power provided by an ILEC to
    collocated competitors must be provisioned on an uninterrupted basis
    in order for the collocators to provide services comparable in
    quality to those offered by the ILEC. If the flow of commercial AC
    (alternating current) power is disrupted for any reason, the ILEC's
    central office power serving arrangements, which ordinarily will
    include a back-up generator, batteries, rectifiers, and other
    equipment,[^15] ensure a continuous flow of power to the
    collocators' equipment. A collocator typically orders two power
    "feeds" to deliver power from the ILEC's fuse panel to its
    collocated equipment.[^16] One feed is the primary feed, or A-feed,
    and the other is a back-up feed, or B-feed, again ensuring a
    continuous power supply in the event that the flow on one feed is
    disrupted for some reason.[^17] The feeds are connected to fuses on
    the fuse panel, and it appears to be standard industry practice to
    fuse the feeds somewhere between 125% and 250% of predicted peak
    load.[^18] In the instant transmittals, Verizon proposes to change
    the basis for determining its monthly DC power rates from a
    "per-fused amp" basis to a "per-load amp" basis. Under the previous
    per-fused amp rates, a collocator's power usage was assessed and
    billed based upon the total fused capacity of each power feed
    ordered by the collocator on its collocation application.[^19] When
    power is charged on a per-load amp basis, however, a collocator's
    power usage is assessed and billed on a per-load amp basis for the
    total number of amps ordered by the collocator on its collocation
    application for all feeds.[^20]

7.  Verizon's proposed monthly DC power rates, determined on a per-amp
    basis, are \$25.32 per load amp in New York/Connecticut, \$16.61 per
    load amp in the rest of its New England region ("Verizon New
    England"), and \$20.23 per load amp in its southern region ("Verizon
    South").[^21] Verizon does not propose to impose any non-recurring
    charges (NRCs) for DC power.

8.  Verizon's proposed monthly rates for DC power, determined on a
    per-load amp basis, reflect significant increases relative to its
    previous monthly rates per *fused* amp. Verizon's previous monthly
    rates for DC power were \$6.44 per fused amp in New
    York/Connecticut, \$4.88 per fused amp in Verizon New England, and
    approximately \$8.72 per fused amp in Verizon South. As such,
    Verizon's proposed monthly per-load amp rates represent increases of
    approximately 293%, 236%, and 132% relative to its monthly per-fused
    amp rates in New York/Connecticut, Verizon New England, and Verizon
    South, respectively.

9.  Verizon offers three primary reasons why its proposed monthly DC
    power rates are neither unreasonable nor anti-competitive, and
    should not therefore be subject to investigation. First, Verizon
    argues that it is not appropriate to compare monthly per-fused amp
    rate levels to monthly per-load amp rate levels because the latter
    rate structure reduces the total number of amps for which a given
    collocator will be billed on a monthly basis (all else equal).[^22]
    Accordingly, because Verizon is entitled to recover the cost of
    providing power to collocators, its monthly per-amp rates will be
    higher than its monthly per-fused amp rates. Second, Verizon argues
    that the prices of inputs used to provide power to collocators have
    increased since the 1993 and 1996 cost studies that support the
    per-fused amp rates (*e.g.*, inflation in power equipment
    prices).[^23] Third, Verizon argues that the cost study used to
    determine its proposed rates (the "2000 study") is a more accurate
    reflection of the actual costs incurred to provide DC power to
    collocators than its 1993 and 1996 cost studies.[^24] For example,
    referring to the 1993 study and its former per-fused amp rates,
    Verizon states that "\[t\]he rates that Verizon charges currently in
    its FCC tariffs are based on cost studies that are outdated, and
    that were done with very little experience providing power to
    expanded interconnection. Verizon's inexperience in expanded
    interconnection 8 years ago resulted in studies that *grossly
    underestimated* the costs of providing collocation."[^25]

10. Verizon's methodology for determining its monthly recurring DC power
    rates in its 2000 study can be conceptualized as an "inverted cost
    pyramid." At the base of this pyramid are the fundamental materials
    costs used to derive initial unit investment estimates. Verizon then
    applies a successive series of "cost factors" to these initial
    estimates, causing the base of the inverted cost pyramid to expand
    upward and outward. The *rate* at which the pyramid grows is largely
    determined by the levels of the various cost factors used in its
    methodology. The *width* of the "top" of the inverted cost pyramid
    determines Verizon's proposed monthly DC power rates.

11. In light of this approach, the monthly DC power rates that Verizon
    charges to collocated competitors will be increased significantly
    (*i.e.*, widening the top of the inverted cost pyramid) if: (1) the
    initial unit investment estimates derived from its materials, labor,
    and power plant data are too high; and/or (2) *any one* of its cost
    factors is too high.[^26] Of course, the potential impact of any
    such upward bias is greatly exacerbated if *more* than one of the
    cost factors is inappropriately large.

12. The specific steps comprising Verizon's pricing methodology are as
    follows. Verizon first derives estimates of various *state-specific*
    "total DC power plant unit costs of investment."[^27] Verizon
    increases these unit investment estimates by application of an
    Engineered, Furnished and Installed ("EF&I") factor to derive an
    estimate of "total installed investment."[^28] Total installed
    investment is then inflated by Land and Building Factors.[^29] The
    resulting state-specific investment estimate is then referred to as
    "total unit investment."[^30]

13. The total unit investment estimates are then used to determine the
    state-specific annual direct cost of investment. Verizon
    disaggregates its total unit investment estimates into three
    distinct investment categories: land, building, and "switching"
    equipment.[^31] Applied to each of these categories are six
    category-specific direct cost factors, otherwise known as Annual
    Cost Factors ("ACFs"): (1) depreciation; (2) cost of money; (3)
    income tax; (4) maintenance; (5) administration; and (6) other
    tax.[^32] Total annual direct costs, by state, are derived by
    multiplying all the ACFs by their respective category of investment,
    and then summing over all the categories.[^33] Each state-specific
    annual direct cost estimate is then weighted by the proportion of
    total access lines in the region that are located within
    each state.[^34]

14. Verizon's region-specific monthly weighted direct cost estimate is
    calculated by summing over each state's weighted annual direct cost
    estimate and dividing by 12. Verizon increases its region-specific
    monthly weighted direct cost estimate by multiplying it by a
    region-specific overhead loading factor. The specific overhead
    loading factors employed by Verizon in its 2000 study are 1.32 for
    New York/Connecticut, 1.23 for states in Verizon South, and 1.0 for
    Verizon New England. The resulting region-specific calculations are
    referred to as the "monthly rates."

15. Verizon appears to have conducted its 2000 study for each state and
    corresponding region with respect to: (1) power provision at less
    than or equal to 60 amps; and (2) power provision at greater than 60
    amps. Verizon then assigned weights to the resulting rates to derive
    the single blended monthly recurring rates reflected in its
    tariffs.[^35]

16. Given the significant potential for Verizon's methodology to yield
    inflated estimates of the actual monthly costs of providing DC power
    to collocated competitors and the apparently significant rate
    increases, we designate in this Order several issues for
    investigation. We also direct Verizon to conduct additional studies
    and file information as described below.

# ISSUES DESIGNATED FOR INVESTIGATION

## Input Prices

17. [Historical Prices]{.underline}. Verizon cites inflation as one
    reason for its rate increases (*i.e.*, increases in the cost of
    inputs used to produce power).[^36] WorldCom claims, however, that
    Verizon's revised rates indicate a quadrupling of direct costs that
    would amount to an equivalent *annual* inflation rate of almost 19
    percent.[^37]

18. To the extent that Verizon seeks to justify the reasonableness of
    its new rates on the basis of inflation, we direct Verizon to
    provide a time series for the period 1993 to 2000 of *nominal annual
    material prices* for the following power equipment items: (1)
    microprocessor plant (BUSS BAR); (2) rectifiers; (3) batteries; (4)
    automatic breakers; (5) power distribution cabinets; (6) emergency
    engines/turbines; (7) battery distribution fuse bays; (8) plant
    distribution bays; and (9) any other plant associated with the
    provision of DC power, including jumpers, distribution cable, and
    any other bundled cable or connection equipment used in providing
    this service.[^38] Verizon also must provide supporting billing
    and/or vendor price data used in setting its annual equipment price
    estimates.

19. Verizon must calculate and present an annual chain-type power
    equipment price index derived from the price data of all equipment
    directly related to the provision of DC power. This shall include
    each individual power item referred to above, and any other plant
    used in establishing a typical power arrangement, including jumpers,
    distribution cable, and any other bundled cable or connection
    equipment used in providing this service. In addition, Verizon must
    fully document and justify its method of performing this
    calculation. This index shall be provided for the years 1993
    through 1999.

20. Verizon also must compare the annual changes in the power equipment
    price index it constructs pursuant to paragraph 19, above, against
    the annual changes in the telecommunications equipment price indexes
    with respect to private fixed investment in equipment and software
    provided by the U.S. Bureau of Economic Analysis (BEA).[^39]

21. [Current Prices]{.underline}. AT&T and the Joint CLECs criticize
    Verizon's lack of supporting data to verify the costs it seeks to
    recover in its DC power rates.[^40] We direct Verizon to provide a
    detailed description of the precise functionality of each general
    type of hardware and plug-in item used to calculate the total
    material investment estimate.[^41] For example, without limitation,
    in Pennsylvania, one plug-in item is listed as "202T Modem." Verizon
    should explain precisely how each such item is required for the
    provision of DC power to collocation arrangements. Verizon must
    provide the sources of the data used to derive the "material cost"
    of each hardware and plug-in item that factors into the total
    material investment estimate.

22. For all equipment that Verizon installs to establish power service
    to a given collocation arrangement, Verizon must identify the Part
    32 account category into which the equipment and associated
    installation fees fall for cost recovery.[^42] This listing should
    include any plant used in establishing a typical power arrangement,
    including jumpers, distribution cable, and any other bundled cable
    or connection equipment used in providing this service.

23. Verizon has not submitted to the Commission the 2000 study to which
    it refers throughout its Reply.[^43] We direct Verizon to provide
    the cost study and all supporting data and assumptions. As noted
    previously,[^44] Verizon appears to have conducted its 2000 study
    for each state and corresponding region with respect to: (1) power
    provision at less than or equal to 60 amps; and (2) power provision
    at greater than 60 amps. Verizon then assigned weights to the
    resulting rates to derive the single blended monthly recurring rates
    reflected in its tariffs. Verizon must identify and justify the
    weights it assigned to the monthly rate for amps less than or equal
    to 60, and the monthly rate for amps greater than 60. Furthermore,
    Verizon must explain and justify its decision to divide its cost
    study into the two components of less than or equal to 60 amps, and
    greater than 60 amps. We note that the greater than 60 amps
    calculations employed a plant distribution bay in place of a battery
    distribution fuse bay.

## Comparison to Previous Cost Studies

24. Several petitioners contend that the cost support for Verizon's
    revised rates is inconsistent with Verizon's 1993 and 1996 cost
    studies.[^45] Verizon replies that its previous cost studies
    "grossly underestimated the costs of providing collocation" and do
    not accurately reflect the actual costs of provisioning DC power to
    collocated competitors.[^46] To the extent that Verizon seeks to
    preclude comparison to its old rates by contending that those rates
    provided inadequate cost recovery, Verizon must provide a detailed
    analysis of inputs and associated costs, relevant to the
    provisioning of DC power to collocated competitors, that were
    underestimated or omitted from its 1993 and 1996 cost studies.
    In addition, Verizon must detail those inputs and associated costs
    that it determines were overestimated in its 1993 and 1996 cost
    studies.

25. Verizon must quantify the effects of correcting for the defects in
    its 1993 and 1996 cost studies. In other words, Verizon must show
    what its tariffed region-specific monthly DC power rates for New
    York/Connecticut, Verizon New England, and Verizon South would have
    been in 1993 and 1996 had Verizon correctly estimated and/or
    included all relevant power provisioning costs.

26. Verizon also asserts that changing its DC power rate structure from
    a per-fused amp to a per-load amp basis will decrease the total
    number of amps for which a collocated competitor will be charged on
    a monthly basis.[^47] To the extent that Verizon contends that its
    revised rates are reasonable in light of this rate structure
    modification, it must demonstrate that its previously tariffed DC
    power rates were based upon cost studies that assessed power costs
    on a per-fused amp basis. Verizon furthermore must demonstrate that
    it charged its collocation customers for DC power on a per-fused amp
    basis. To make this demonstration, Verizon may submit, by way of
    example, collocation applications and bills.

## Central Offices Supporting Collocation Arrangements

27. Verizon's 2000 study divides state central offices into four types
    based upon the number of lines served in each: (1) metro; (2)
    urban; (3) suburban; and (4) rural.[^48] Verizon derived its
    state-specific estimates of total unit investment in order to
    calculate an average cost of power for each state. In deriving its
    total unit investment estimates by state, Verizon appears to have
    assumed that collocation occurred in all central office types. As a
    result, central offices in which collocation arrangements are less
    likely to be found (*e.g.*, rural offices) may have been included in
    the analysis. We note that there are significant disparities between
    per-amp investment in rural offices and per-amp investment in larger
    offices. We designate for investigation: (1) whether it was
    reasonable for Verizon to include in its analysis central offices
    that lack collocation arrangements;[^49] and (2) given the cost
    disparities relative to the provision of power to metro, urban,
    suburban, and, in particular, rural offices, whether it was
    reasonable for Verizon to develop a single, averaged DC power rate.

28. We direct Verizon to confirm whether it included in its analysis
    central offices that lack collocation arrangements, and, if so, to
    justify the inclusion of those offices. We also direct Verizon to
    provide a listing of the total number of collocators in each central
    office, by state, that it used in determining its state-specific
    total unit investments. Verizon also must recalculate its
    state-specific total unit investment estimates based upon the
    *actual* distribution of collocation arrangements among its offices,
    weighted by the number of collocators in each office. In other
    words, if Verizon determines that a central office upon which it had
    previously relied *does not* have any collocation arrangements, then
    Verizon must note the absence of collocation, and delete the costs
    associated with that central office from the calculation of its
    various state-specific unit investment estimates. Verizon must then
    calculate and present the results of its various state-specific unit
    investment estimates after making this adjustment and weighting the
    remaining offices by the number of collocators in each office. In
    addition, Verizon must calculate and present the corresponding
    region-specific monthly DC power rates. For each of these
    calculations, Verizon must follow the tabulation structure that it
    used in its instant transmittals to calculate its state unit
    investment estimates, annual direct cost estimates, and monthly rate
    estimates.[^50]

29. Finally, we seek comment from all interested parties on any
    alternative methodologies of accounting for: (1) offices that lack
    collocation arrangements; and (2) the cost disparities relative to
    the provision of power to metro, urban, suburban, and, in
    particular, rural offices. We specifically seek comment on the
    reasonableness of developing a single DC power rate, representing an
    average of costs across a given region. Any party proposing an
    alternative methodology should provide a full explanation and
    justification of its proposed methodology and, in the case of
    Verizon, all data necessary to this calculation.

## Engineering, Furnished and Installed ("EF&I") Factor

30. Several petitioners oppose Verizon's federal EF&I factor of 2.7852,
    questioning its derivation.[^51] Verizon replies that the federal
    EF&I factor used in the 2000 study represents a weighted average of
    state EF&I factors that these petitioners unsuccessfully contested
    in state proceedings.[^52]

31. Verizon must explain and justify the specific methodology used to
    determine its federal EF&I factor. For each specific ordered and
    completed power equipment installation job used to calculate its
    federal EF&I factor, Verizon must provide: (1) a brief narrative
    describing the purpose of the job and how it relates to the
    provision of DC power; and (2) bill(s) for the job including the
    actual costs incurred by Verizon for completing it. Verizon derives
    its federal EF&I factor from the ratio of "total installed
    investment" to "total material investment." With respect to "total
    installed investment," Verizon is directed to explain in detail the
    derivation of the "in-place cost" associated with each hardware and
    plug-in item. In its Reply, Verizon states that "\[i\]n 2000, the
    vendor material price was multiplied by a Verizon regional
    power-specific installation factor to obtain the total EF&I
    investment."[^53] Verizon must explain this statement. How was the
    region-specific factor derived? Was the same region-specific factor
    applied to each state? If more than one region-specific factor was
    employed, then which region-specific factor was applied to each
    state and why? In addition, Verizon must provide the sources of the
    data used to derive its various "in-place cost" estimates.[^54]

32. We also direct Verizon to recalculate its federal EF&I factor by
    removing from its calculations any costs related to engineering,
    furnishing, and installing power equipment in central offices that
    lack collocation arrangements. Verizon also must recalculate the
    corresponding region-specific monthly DC power rates associated with
    this change in the federal EF&I factor. For each of these
    calculations, Verizon must follow the tabulation structure that it
    used in its instant transmittals to calculate its state unit
    investment estimates, annual direct cost estimates, and monthly rate
    estimates.

33. Furthermore, we direct Verizon to recalculate its federal EF&I
    factor including *only* costs of engineering, furnishing, and
    installing the following hardware items: microprocessor plant (BUSS
    BAR), rectifiers, batteries, automatic breakers, power distribution
    service cabinets, emergency engines/turbines, power plant
    distribution bays, and battery distribution fuse bays. Verizon then
    must recalculate its monthly region-specific DC power rates
    incorporating these changes to the federal EF&I factor. For each of
    these calculations, Verizon must follow the tabulation structure
    that it used in its instant transmittals to calculate its state unit
    investment estimates, annual direct cost estimates, and monthly rate
    estimates.

34. We also direct Verizon to recalculate its federal EF&I factor as
    described in paragraph 33, above, while excluding all costs relating
    to engineering, furnishing, and installing the equipment identified
    in that paragraph in central offices that lack collocation
    arrangements. Verizon then must recalculate its monthly
    region-region specific DC power rates incorporating these changes to
    the federal EF&I factor. For each of these calculations, Verizon
    must follow the tabulation structure that it used in its instant
    transmittals to calculate its state unit investment estimates,
    annual direct cost estimates, and monthly rate estimates.

35. If, pursuant to Section III.C, above, Verizon proposes an
    alternative methodology of accounting for offices that lack
    collocation arrangements or for cost disparities across offices, it
    must calculate its federal EF&I factor as described in paragraph 33,
    above, in accordance with its proposed methodology. Verizon also
    must calculate the corresponding region-specific monthly DC power
    rates. For each of these calculations, Verizon must follow the
    tabulation structure that it used in its instant transmittals to
    calculate its state unit investment estimates, annual direct cost
    estimates, and monthly rate estimates.

36. Finally, to the extent that Verizon seeks to justify its federal
    EF&I factor by reference to EF&I factors approved in state
    proceedings, Verizon must provide all relevant state decisions and
    all cost support adduced in those proceedings.

## Building and Land Investment Factors

37. We direct Verizon to explain in detail the methodology used to
    derive its Building and Land Investment Factors for each state.
    Verizon also must explain why it believes its methodology accurately
    estimates the shared costs of land and building *occupied by power
    equipment*. To the extent that its building factor reflects costs
    associated with power equipment located outside its enclosed central
    office space (*e.g.,* rooftop), Verizon must justify this inclusion
    and report the degree to which power equipment is located outside
    its enclosed central offices.

38. To the extent that any of the central offices upon which Verizon
    relied to derive its Land and Building Investment Factors lack
    collocation arrangements, Verizon must recalculate its Building and
    Land Investment Factors after removing any costs associated with
    those offices. Verizon also must calculate and present the
    corresponding state-specific unit investment estimates and
    region-specific monthly DC power rates that reflect any such
    changes. For each of these calculations, Verizon must follow the
    tabulation structure that it used in its instant transmittals to
    calculate its state unit investment estimates, annual direct cost
    estimates, and monthly rate estimates.

39. "[Double recovery]{.underline}." Some petitioners contend that some
    of the expenses Verizon recovers through application of the land and
    building investment factors may be recovered through other tariffed
    recurring or non-recurring collocation charges,[^55] such as, for
    example, space preparation charges. Verizon denies that its space
    preparation charges recover any of the costs of installing power
    facilities.[^56] Verizon must demonstrate that no "double recovery"
    is occurring. In other words, it must demonstrate that no building
    or land expenses recovered through DC power rates are recovered
    through any other collocation charge.

40. To the extent that Verizon discovers any such "double recovery," it
    must recalculate the relevant state unit investment estimates, and
    the corresponding region-level monthly DC power rate. Verizon also
    must make this calculation excluding all costs related to central
    offices that lack collocation arrangements. For each of these
    calculations, Verizon must follow the tabulation structure that it
    used in its instant transmittals to calculate its state unit
    investment estimates, annual direct cost estimates, and monthly rate
    estimates. In addition, if, pursuant to Section III.C, above,
    Verizon proposes an alternative methodology of accounting for
    offices that lack collocation arrangements or for cost disparities
    across offices, it must calculate its building and land investment
    factor in accordance with its proposed methodology. Verizon also
    must calculate the corresponding region-specific monthly DC power
    rates.

41. [Alternative Methodology]{.underline}. Verizon also must present the
    following information for each central office with collocation
    relied upon in its Transmittal Nos. 1373 and 1374: (1) the amount of
    building investment;[^57] (2) the amount of land
    investment;[^58] (3) the number of square feet in each central
    office dedicated to power equipment; (4) the number of square feet
    occupied by collocation arrangements in each central office; and (5)
    the average number of amps generated by each central office. Verizon
    must then calculate building and land investment per-amp according
    to the following two formulas, using as variables the inputs 1-5
    defined above, for each central office:

    \[(1)\*{(3)/(4)}\]/(5); and

    \[(2)\*{(3)/(4)}\]/(5).

## Annual Cost Factors ("ACFs")

42. As mentioned above, Verizon employed six separate ACFs
    (depreciation, cost of money, income tax, maintenance,
    administration, other tax) within each of three separate unit
    investment categories (land, building, and "switching"
    (*i.e.*, installed investment)). Verizon must present a complete
    listing of all ACF values for each state relied upon in its instant
    transmittals.

43. Verizon must explain and justify the derivation of, and accounting
    logic relevant to, each state-specific ACF. Verizon must
    include: (1) a summary and explanation of the specific cost
    components embedded within each state-specific ACF; (2) the
    methodology used to transform the individual components to the
    applied ACF; and (3) an explanation of how each derived ACF is
    relevant to cost recovery associated specifically with power
    equipment (*e.g.*, how exactly does the installation of power
    equipment justify the need for a separate Land Maintenance ACF? what
    is the nature of the Administration expense associated with the
    provisioning and operation of a battery or other power equipment?).
    Verizon also must present a summary of all data sources used to
    construct each individual state-specific ACF. We also seek comment
    from all interested parties on whether it is appropriate to apply
    each of these cost factors to power equipment when calculating a
    rate for power provided to collocated competitors.

44. Verizon must explain the reasons for the apparent differences in the
    various Maintenance and Administration ACFs applied to different
    states within and across its various regions. For example, without
    limitation, Verizon must explain why the applied Land Administration
    ACF is 0.0623 in Washington, D.C., yet only 0.0291 in Delaware.

45. Finally, Verizon must demonstrate that the costs recovered through
    each separate ACF are not also recovered in any other collocation
    charges. For example, without limitation, Verizon must demonstrate
    that no part of the cost recovered through application of its
    Building Maintenance ACF is also recovered through its space
    preparation charges.

## Switching Depreciation ACF

46. Verizon applies a uniform depreciation factor (*i.e.*, the Switching
    Depreciation ACF) to all types of central office power investment,
    including generators, based upon a 377C Digital Switching Account
    category.[^59] WorldCom notes, however, that Verizon used a
    depreciation life of 44 years for backup generators in a 1993 cost
    study,[^60] the same cost study upon which Verizon bases its current
    overhead loading factors.[^61] Verizon replies that the Commission's
    rules require it to use the digital switching account to calculate
    the depreciation life of power equipment.[^62] We seek comment from
    all interested parties on the extent to which the Commission's rules
    either require or support Verizon's use of the digital switching
    account for determining power equipment depreciation. Moreover, we
    seek comment on whether it is appropriate to apply a uniform
    depreciation factor to power equipment when calculating a rate for
    power provided to collocated competitors.

47. In addition, Verizon must provide data regarding the expected life
    of the following power investment items: microprocessor plant (BUSS
    BAR), rectifier, battery, automatic breaker, power distribution
    service cabinet, emergency engine/turbine, battery distribution fuse
    bay, and power plant distribution bay. Verizon also must cite the
    sources used to derive these estimates.

48. Verizon must explain its decision *not* to base its depreciation
    rate for installed power investment on the actual depreciation lives
    of individual power equipment. For instance, Verizon must explain
    why the 44-year life for a backup generator used in its 1993 study
    does not accurately reflect the actual life of the equipment (based
    on Verizon's own experience). We note that power equipment is
    atypical of most telecommunications equipment, in that power
    equipment is less susceptible to obsolescence, and is typically
    changed-out only at the end of the equipment's designed service
    life.

49. We direct Verizon to verify whether the company used a leveled net
    investment rate in calculating its applied Switching Depreciation
    ACF. If so, we direct Verizon to provide this figure. In addition,
    we direct Verizon to report the identity and the expected life of
    the digital switching equipment used in calculating its Switching
    Depreciation ACF.

50. [Alternative Methodologies]{.underline}. Verizon must calculate, on
    a state-by-state basis, its Switching Depreciation ACF based upon
    two alternative methodologies. First, Verizon must calculate the
    Switching Depreciation ACF based upon the *average* expected lives
    of the following power equipment items: microprocessor plant (BUSS
    BAR), rectifier, battery, automatic breaker, power distribution
    service cabinet, emergency engine/turbine, battery distribution fuse
    bay, and power plant distribution bay. Verizon also must calculate
    and present its region-specific monthly DC power rates resulting
    from this recalculation of the Switching Depreciation ACF.

51. Second, Verizon must calculate its Switching Depreciation ACF based
    upon the *weighted average* of the expected lives of the following
    power equipment items: microprocessor plant (BUSS BAR), rectifier,
    battery, automatic breaker, power distribution service cabinet,
    emergency engine/turbine, battery distribution fuse bay, and power
    plant distribution bay. The weight used for each item's expected
    life shall be the proportion of total unit investment (on a per-amp
    basis) comprised by that same item (on a per-amp basis). To
    calculate the weights assigned to each item, Verizon must divide the
    weighted equipment item cost estimate for provisioning power at less
    than or equal to 60 amps, by the total unit investment level for
    each state for provisioning power at less than or equal to 60
    amps.[^63] Verizon also must calculate and present its
    region-specific monthly DC power rates resulting from this
    recalculation of the Switching Depreciation ACF. For each of these
    calculations, Verizon must follow the tabulation structure that it
    used in its instant transmittals to calculate its state unit
    investment estimates, annual direct cost estimates, and monthly rate
    estimates.

52. Finally, we direct Verizon to apply this same alternative Switching
    Depreciation ACF weighting to the Switching Other Tax ACF for each
    of the following power equipment items: microprocessor plant (BUSS
    BAR), rectifier, battery, automatic breaker, power distribution
    service cabinet, emergency engine/turbine, battery distribution fuse
    bay, and power plant distribution bay. Verizon also must calculate
    and present its region-specific monthly DC power rates resulting
    from this recalculation of the Switching Other Tax ACF. For each of
    these calculations, Verizon must follow the tabulation structure
    that it used in its instant transmittals to calculate its state unit
    investment estimates, annual direct cost estimates, and monthly rate
    estimates.

## Overhead Loading Factors

53. Several petitioners object to Verizon's overhead loading factors. In
    particular, Sprint criticizes Verizon's reliance on the overhead
    loading factors established by the Commission in 1997 (which were in
    turn based upon cost studies from 1993).[^64] Sprint asserts that
    Verizon's overhead costs may have decreased since 1993, due to
    mergers and other economies of scale.[^65] Verizon maintains that
    its reliance on the Commission's 1997 order is justified.[^66] We
    seek comment from all interested parties on the reasonableness of
    Verizon's reliance on the overhead loading factors prescribed by the
    Commission in 1997.

54. The Commission derived the overhead loading factors contained in its
    1997 order on the basis of direct costs reported by the Bell
    Atlantic and NYNEX telephone companies in 1993, subject to direct
    cost revisions to reflect statistical disallowances.[^67] This
    resulted in prescribed overhead loadings of 1.32 for New
    York/Connecticut, 1.23 for Verizon South, and 1.0 for Verizon New
    England.[^68] To the extent that Verizon proposes a region-specific
    overhead loading factor greater than 1.0, it must demonstrate that
    its proposed factor does not exceed the lowest overhead loading
    factor applicable to any interstate service that competes with
    services offered by collocators, including DS1, DS3, and Digital
    Subscriber Line (DSL) services. In calculating the overhead loading
    factors applicable to these services, Verizon must take into account
    any and all volume and term discounts.

55. Verizon must calculate and present its region-specific monthly DC
    power rates resulting from any recalculation of its overhead loading
    factors pursuant to paragraph 54, above.

## Comparisons with Other Carriers' Rates

56. Several petitioners assert that Verizon's DC power rates
    significantly exceed those of other ILECs in federal and state
    collocation tariffs.[^69] Verizon replies, however, that such
    comparisons of its own monthly recurring rates to the monthly
    recurring rates of other ILECs are improper, because other ILECs
    impose typically high non-recurring (up-front) charges, while
    Verizon recovers its up-front costs through higher recurring
    rates.[^70]

57. To the extent Verizon contends that its revised DC power rates are
    reasonable in light of rates charged by other ILECs for the same
    services, Verizon must provide an analysis to support that
    comparison, including all supporting assumptions.

## Cumulative Analysis

58. We direct Verizon to recalculate each of its various state-specific
    total unit investment estimates and region-specific monthly DC power
    rates after taking into account each of the following changes to its
    methodology: (1) removal of the costs associated with central
    offices that lack collocation arrangements from the calculation of
    its total unit investment estimates, federal EF&I, Land and Building
    Investment Factors, and any other factors where this change would be
    relevant; (2) substitution of its Switching Depreciation ACF with an
    ACF based upon the methodologies described in paragraphs 50 and 51,
    above; (3) the elimination of any source of "double recovery" of its
    power costs; and (4) substitution of the previous overhead loading
    factors with those requested in paragraph 54, above. For each of
    these calculations, Verizon must follow the tabulation structure
    that it used in its instant transmittals to calculate its state unit
    investment estimates, annual direct cost estimates, and monthly rate
    estimates. In addition, if, pursuant to Section III.C, above,
    Verizon proposes an alternative methodology of accounting for
    offices that lack collocation arrangements or for cost disparities
    across offices, it also must calculate a cumulative analysis in
    accordance with its proposed methodology. Verizon also must
    calculate the corresponding region-specific monthly DC power rates.

## Non-Recurring Charge Augmentation Fee

59. If a collocation customer should order a change to its power
    configuration that requires a new --48‑volt DC power feed, Verizon
    charges the customer a Non-Recurring Charge Augmentation Fee.[^71]
    In Tariff FCC No. 1, the fee is \$963.00 for virtual collocation and
    \$1506.00 for physical collocation; in Tariff FCC No. 11, the fee
    for both virtual and physical collocation is \$1,500.00 for
    New York/Connecticut, and \$1,717.02 for all other states. Verizon
    offers no justification for the imposition of this fee, or why it is
    necessary for the reconfiguration of DC power.[^72]

60. Verizon must provide the non-recurring cost information that formed
    the basis for this fee, and any justification for imposing it.

## Terms and Conditions

61. [Certification of Not Exceeding Load Power Ordered]{.underline}.
    Verizon's tariff revisions require each collocator annually to
    submit a written statement signed by a responsible officer of the
    collocator's firm attesting that it is not exceeding the load power
    ordered for each collocation arrangement within Verizon's operating
    territories.[^73] Failure to submit such statement within a 30-day
    notice period results in the billing of DC power at each collocation
    arrangement to the total number of amps fused.[^74]

62. WorldCom and the Joint CLECs argue that this provision is
    unnecessarily burdensome because the tariff already defines the
    requirements for obtaining DC power.[^75] Verizon does not explain
    the need for this provision in either its transmittals or its Reply
    to the petitions.

63. Verizon must justify precisely why it requires such a written
    statement for each arrangement. In addition, Verizon must justify
    why it is reasonable to charge collocators for the total number of
    amps fused if such a statement is not submitted within 30 days.

64. [Commencement of Billing]{.underline}. Verizon's tariff revisions
    also require that monthly billing begin on the occupancy date, or 30
    days from the date Verizon provides access to the collocation
    arrangement, whichever comes first.[^76]

65. Conversent and Sprint object to this provision for commencement of
    billing.[^77] They claim that, after construction, Verizon must
    complete other tasks such as inspections before power can be
    drawn.[^78] They propose that billing begin only when the power
    feeds have been fused and power can, in fact, be drawn by the
    collocator.[^79] In its Reply, Verizon argues that it should not
    have to wait to recover its costs for the "several months" that it
    may take for the collocators to install their equipment and to
    receive the necessary inspections and fusing.[^80]

66. Verizon must justify why it should charge the monthly rate when the
    collocator has its equipment in place either on the occupancy date
    or within 30 days from the date Verizon provides access to the
    collocation arrangement, even in such circumstances when Verizon's
    inability to inspect and/or fuse power prevents the collocator from
    drawing power.

67. [Ordering of Power Reduction]{.underline}. The tariff revisions
    allow Verizon to bill a non-recurring charge when a collocator
    orders a reduction in its power requirements. Verizon waived this
    charge if a collocator ordered a power reduction prior to May 26,
    2001, which was 30 days after the effective date of Transmittal Nos.
    1373 and 1374.[^81]

68. WorldCom and the Joint CLECs argue that the 30-day waiver is
    insufficient.[^82] WorldCom suggests that three months is more
    reasonable.[^83] Verizon does not justify why 30 days is reasonable
    in either its transmittals or its Reply to the petitions.

69. Verizon must explain why 30 days is a reasonable period of time for
    a collocator to order a reduction in power requirements without
    incurring this charge. In its explanation, Verizon must indicate the
    number of collocators that had this charge waived, and the number
    that were actually assessed this charge after the 30-day period.

70. The Joint CLECs also argue that this requirement is unnecessarily
    burdensome because it is redundant, irrelevant, and time-consuming.
    Any original collocation application plainly sets forth the
    collocator's requirements for load amps, and actual power drawn does
    not necessarily relate to the size of a fuse.[^84] Verizon must
    justify its non-recurring charge in light of these criticisms.

# PROCEDURAL MATTERS

## Filing Schedules

71. This investigation will be conducted as a notice and comment
    proceeding, for which we have designated CC Docket No. 01-140.

72. Verizon shall file its direct case(s) no later than **July 17,
    2001.** Verizon's direct case(s) must present its positions with
    respect to the issues described in this Order. Pleadings responding
    to Verizon's Direct Case(s) may be filed no later than **July 31,
    2001**, and must be captioned \"Oppositions to Direct Case\" or
    \"Comments on Direct Case.\" Verizon may file a \"Rebuttal\" to
    oppositions or comments no later than **August 7, 2001.**

73. An original and four copies of all pleadings shall be filed with the
    Secretary of the Commission. In addition, parties shall serve with
    three copies: Competitive Pricing Division, Common Carrier Bureau,
    445 12th Street, S.W., Room 5-A452, Washington, D.C. 20554, Attn:
    Paul Moon. Parties shall also serve with one copy: International
    Transcription Service, Inc. (ITS), 445 12th Street, S.W., Room
    CY-B402, Washington, D.C. 20554, (202) 857-3800. Members of the
    general public who wish to express their views in an informal manner
    regarding the issues in this investigation may do so by submitting
    one copy of their comments to the Office of the Secretary, Federal
    Communications Commission, 445 12th Street, S.W., Room TW-A325,
    Washington, D.C. 20554. Such comments should specify the docket
    number of this investigation, 01‑140. Parties are also encouraged to
    submit their pleadings via the Internet through the Electronic
    Comment Filing System at \<http://www.fcc.gov/e-file/ecfs.html\>.
    Generally, only one copy of an electronic submission must be filed.
    In completing the transmittal screen, commenters should include
    their full name, Postal Service mailing address, and the applicable
    docket number, which in this instance is CC Docket No. 01‑140.
    Parties may also submit an electronic comment via Internet e-mail.
    To get filing instructions for e-mail comments, commenters should
    send an e-mail to \<ecfs@fcc.gov\>, and should include the following
    words in the body of the message: "get form \<your e-mail
    address\>." A sample form and directions will be sent in reply.

74. All relevant and timely pleadings will be considered by the
    Commission. In reaching a decision, the Commission may take into
    account information and ideas not contained in pleadings, provided
    that such information, or a writing containing the nature and source
    of such information, is placed in the public file, and provided that
    the fact of reliance on such information is noted in the order.

## *Ex Parte* Requirements

75. Pursuant to 47 C.F.R. § 1.1200(a), which permits the Commission to
    adopt modified or more stringent *ex parte* procedures in particular
    proceedings if the public interest so requires, this proceeding will
    be governed by "permit-but-disclose" *ex parte* procedures that are
    applicable to non-restricted proceedings under 47 C.F.R. § 1.1206.
    Designating this proceeding as "permit-but-disclose" will provide an
    opportunity for all interested parties to receive notice of the
    various technical, legal, and policy issues raised in *ex parte*
    presentations made to the Commission in the course of this
    proceeding. This will allow interested parties to file responses or
    rebuttals to proposals made on the record in this proceeding.
    Accordingly, we find that it is in the public interest to designate
    this proceeding as "permit-but-disclose."

76. Parties making oral *ex parte* presentations are reminded that
    memoranda summarizing the presentation must contain a summary of the
    substance of the presentation and not merely a listing of the
    subjects discussed. More than a one or two sentence description of
    the views and arguments presented generally is required. *See* 47
    C.F.R. § 1.1206(b)(2), as revised. Other rules pertaining to oral
    and written presentations are set forth in Section 1.206(b) as well.
    Interested parties are to file any written *ex parte* presentations
    in this proceeding with the Commission Secretary, Magalie Roman
    Salas, 445 12th Street, S.W., TW-B204, Washington, D.C. 20554, and
    serve with three copies: Competitive Pricing Division, Common
    Carrier Bureau, 445 12th Street, S.W., Room 5-A452, Washington, D.C.
    20554, Attn: Paul Moon. Parties shall also serve with one copy:
    International Transcription Service, Inc. (ITS), 445 12th Street,
    S.W., Room CY-B402, Washington, D.C. 20554, (202) 857-3800.

## Paperwork Reduction Act

77. The collections of information contained within this Order are
    contingent upon approval by the Office of Management and Budget, in
    accordance with the provisions of the Paperwork Reduction Act, 44
    U.S.C. §§ 3506 *et seq.*

# ORDERING CLAUSES

78. IT IS ORDERED that, pursuant to Sections 4(i), 4(j), 201(b), 203(c),
    204(a), 205, and 403 of the Communications Act, 47 U.S.C. §§ 154(i),
    154(j), 201(b), 203(c), 204(a), 205, and 403, and Sections 0.91 and
    0.291 of the Commission's rules, 47 C.F.R. §§ 0.91, 0.291, the
    issues set forth in this Order ARE DESIGNATED FOR INVESTIGATION.

79. IT IS FURTHER ORDERED that Verizon Telephone Companies SHALL
    INCLUDE, intheir direct case(s), a response to each request for
    information that they are required to answer in this Order.

    FEDERAL COMMUNICATIONS COMMISSION

    Dorothy T. Attwood

    Chief, Common Carrier Bureau

[^1]: The former Bell Atlantic Telephone Companies are now doing
    business as Verizon Communications (Verizon). Subsequent to filing
    Transmittal Nos. 1373 and 1374, Verizon filed its Transmittal Nos.
    23 and 24 in order to issue the Verizon Telephone Companies Tariff
    FCC Nos. 1 and 11 to replace Bell Atlantic Tariff FCC Nos. 1 and 11.
    These became effective April 28, 2001. The tariff revisions filed
    under Bell Atlantic Transmittal Nos. 1373 and 1374 were moved into
    the Verizon tariffs without change.

[^2]: Conversent Communications, Petition to Reject or, in the
    Alternative, Suspend and Require an Accounting of, the Proposed
    Revisions of Verizon to its Monthly DC Power Rates in FCC Tariff No.
    11 (filed Apr. 17, 2001) ("Conversent Petition").

[^3]: Sprint Corporation, Petition to Reject or Suspend and Investigate
    (filed Apr. 18, 2001) ("Sprint Petition").

[^4]: Qwest Communications International, Inc. and Qwest Communications
    Corporation, Joint Petition for Suspension or Rejection of Revisions
    to Verizon Communications Tariff FCC Nos. 1 and 11 (filed Apr. 18,
    2001) ("Qwest Petition").

[^5]: WorldCom, Inc., WorldCom Petition to Suspend and Investigate
    (filed Apr. 18, 2001) ("WorldCom Petition").

[^6]: AT&T Corp., Petition of AT&T Corp. (filed Apr. 18, 2001) ("AT&T
    Petition").

[^7]: Association for Local Telecommunications Services, Allegiance
    Telecom, Inc., Choice One Communications, Inc., Covad Communications
    Company, Network Plus, Inc., Rhythms Links, Inc. and XO
    Communications, Inc., Petition to Reject or Suspend and Investigate
    Proposed Tariff Revisions (filed Apr. 18, 2001) ("Joint CLEC
    Petition").

[^8]: Reply of Verizon to Petitions to Suspend and Investigate (filed
    Apr. 25, 2001) ("Verizon Reply"). The Common Carrier Bureau grants
    Verizon's Motion to Accept Late-Filed Reply (filed Apr. 24, 2001).
    Verizon also filed Transmittal No. 1375 on April 24, 2001, to remove
    certain penalty provisions that the petitioners have contested.
    Verizon notes that it may file the penalty provisions through a
    separate transmittal on a later date.

[^9]: The Bell Atlantic Telephone Companies, Revisions for Tariff FCC
    Nos. 1 and 11; The Verizon Telephone Companies, Tariff FCC Nos. 1
    and 11, *Order*, DA 01-1077 (Com. Carr. Bur. rel. Apr. 25, 2001).

[^10]: Expanded Interconnection with Local Telephone Company Facilities,
    *First Report and Order*, 7 FCC Rcd. 7369 (1992), vacated in part
    and remanded, Bell Atlantic Telephone Companies v. FCC, 24 F.3d 1441
    (1994) ("*Bell Atlantic v. FCC*"); Expanded Interconnection with
    Local Telephone Company Facilities, *Memorandum Opinion and Order*,
    8 FCC Rcd. 127 (1993), vacated in part and remanded, *Bell Atlantic
    v. FCC*; Expanded Interconnection with Local Telephone Company
    Facilities, *Second Memorandum Opinion and Order on
    Reconsideration*, 8 FCC Rcd. 7341 (1993); Expanded Interconnection
    with Local Telephone Company Facilities and Amendment of Part 36 of
    the Commission's Rules and Establishment of a Joint Board, *Second
    Report and Order and Third Notice of Proposed Rulemaking*, 8 FCC
    Rcd. 7374 (1993), vacated in part and remanded, *Bell Atlantic v.
    FCC*; Expanded Interconnection with Local Telephone Company
    Facilities, *Memorandum Opinion and Order*, 9 FCC Rcd. 5154 (1994)
    ("*Virtual Collocation Order*"), remanded for consideration of 1996
    Act, Pacific Bell v. FCC, 81 F.3d 1147 (1996) (collectively referred
    to as "*Expanded Interconnection*").

[^11]: Physical collocation allows an interconnector to locate its own
    transmission equipment in a segregated portion of the LEC central
    office. The interconnector pays the LEC for use of the central
    office space and may enter the space to install, maintain, and
    repair its equipment. Virtual collocation is a service that allows
    an interconnector to terminate its circuits in central office
    transmission equipment owned by the LEC and under the physical
    control of the LEC. The interconnector has the right to designate
    its choice of central office equipment, which is dedicated to the
    exclusive use of the interconnector, and is installed, maintained,
    and repaired by the LEC.

[^12]: *See* Local Exchange Carriers' Rates, Terms, and Conditions for
    Expanded Interconnection Through Physical Collocation for Special
    Access and Switched Transport, CC Docket No. 93-162, *Second Report
    and Order*, 12 FCC Rcd. 18730, 18733 (1997) ("*Physical Collocation
    Tariff Investigation Order*").

[^13]: 47 U.S.C. § 251 (c)(6).

[^14]: *See* Implementation of the Local Competition Provisions in the
    Telecommunications Act of 1996, CC Docket No. 96-98, *First Report
    and Order*, 11 FCC Rcd. 15499, 15787 (1996).

[^15]: *See, e.g.,* *Physical Collocation Tariff Investigation Order*,
    12 FCC Rcd. at 18791.

[^16]: *See, e.g.,* Conversent Petition at 8.

[^17]: *See, e.g., id.*; *see also* Verizon Transmittal No. 1373; Tariff
    FCC No. 1, § 19.3.9 (A) and Tariff FCC No. 11, § 28.2.1(C).

[^18]: *See, e.g.*, Qwest Petition at 2 (standard industry practice for
    customer to order a fuse size up to 2.5 times the load amps
    ordered); *id.* at 5 (standard industry practice to fuse power
    cables for collocated equipment between 125% and 150% of predicted
    peak load); Verizon Transmittal No. 1373; Tariff FCC No. 1, § 19.3.9
    (A) and Tariff FCC No. 11, § 28.2.1(C) (Verizon "will permit the
    Collocator to order a fuse size at up to 2.5 times the load amps
    ordered"). This relationship between the load amps ordered and the
    fuse size is the "fusing factor."

[^19]: *See* Verizon Reply at 3. For instance, suppose that a given
    collocator requests two power feeds at 40 amps per feed in its
    collocation application. If we assume a fusing factor of 1.5, which
    is the multiplier that converts the requested load amps per feed to
    fused feed capacity, the total number of amps billed monthly to the
    collocator would be:

    (2 feeds)\*(40 amps/feed)\*(1.5 fusing factor) = 120 amps.

[^20]: *See* Verizon Transmittal No. 1373; Tariff FCC No. 1, § 19.3.9
    (A)(1) and Tariff FCC No. 11, § 28.2.1 (C)(1) (the collocator "will
    be charged on the basis of the total number of load amps ordered, .
    . . and not based on the total number of amps available for the fuse
    size ordered"). Again, assuming a request of two power feeds at 40
    amps per feed, the total number of amps billed monthly to a
    collocator would be:

    (2 feeds)\*(40 amps/feed) = 80 amps.

[^21]: The remaining states in Verizon New England are Massachusetts,
    Maine, New Hampshire, Rhode Island, and Vermont. Verizon South
    includes Washington, D.C., Delaware, Maryland, New Jersey,
    Pennsylvania, Virginia, and West Virginia.

[^22]: Verizon Reply at 1-2.

[^23]: *Id.* at 5.

[^24]: *Id.* Verizon has not submitted to the Commission the 2000 cost
    study to which it refers throughout its Reply. *See, e.g.,* Verizon
    Reply at 5-6, 10-11. We direct Verizon to provide the study and all
    supporting data. *See infra *paragraph 23.

[^25]: *Id.* at 4-5 (emphasis added).

[^26]: Verizon's initial state-specific unit investment estimates are
    made with respect to: (1) the per-amp costs of individual power
    equipment items; and (2) the distribution of power plant types by
    state. Verizon's subsequent application of the cost factors is made
    only at the unit investment level, not at the individual equipment
    or power plant level. *See, e.g.,* Verizon Transmittal No. 1373;
    Workpaper 1.0, page 3, line 46; *id.* at page 2, lines 2-10; *id.*
    at page 1, lines 2-8.

[^27]: *See, e.g.,* Verizon Transmittal No. 1373; Workpaper 1.0, page 3,
    line 46 (total unit investment in Washington, D.C.).

[^28]: The EF&I factor generally reflects all costs associated with the
    provisioning of power arrangements to Verizon's collocated
    competitors.

[^29]: *See, e.g.,* Verizon Transmittal No. 1373; Workpaper 1.0, page 2,
    lines 6-7 (land and building investment factors in Washington,
    D.C.).

[^30]: *See, e.g.,* Verizon Transmittal No. 1373; Workpaper 1.0, page 2,
    line 10 (total unit investment in Washington, D.C.).

[^31]: Note that the land and building components are identical to the
    total land and building expenses used to derive the total unit
    investment estimates. The "switching" investment is simply the
    difference between total unit investment and the sum of land and
    building investment, and is therefore identical to total installed
    investment.

[^32]: *See, e.g.,* Verizon Transmittal No. 1373; Workpaper 1.0, page 1,
    lines 2-7 (ACFs in Washington, D.C.). As a result, there are:
    (3 investment categories)\*(6 unique ACFs per category) = 18 unique
    ACFs for each state.

[^33]: For example, the annual direct cost associated with the building
    investment category for a given state is:

    Building Direct Cost = (Building Investment)\*(Building Depreciation
    ACF + Building Cost of Money ACF + Building Income Tax ACF +
    Building Other Tax ACF + Building Maintenance ACF + Building
    Administration ACF).

    A similar procedure is used to calculate the state-specific direct
    costs associated with the land (Land Direct Cost) and switching
    categories (Switching Direct Cost). Total annual direct costs, by
    state, are then calculated as:

    Annual Direct Cost = (Building Direct Cost) + (Land Direct Cost) +
    (Switching Direct Cost).

[^34]: For example, in Verizon South, the weights used are:

    [Proportion of Total Verizon South]{.underline}\
    [State]{.underline} [Access Lines in State]{.underline}

    Washington, D.C. 0.03644

    Delaware 0.02566

    Maryland 0.16245

    New Jersey 0.29196

    Pennslyvania 0.29019

    Virginia 0.15549

    West Virginia [0.03782]{.underline}

    TOTAL 1.00000

[^35]: Again, the tariffed monthly DC power rates are as follows:
    \$25.32 per load amp in New York/Connecticut, \$16.61 per load amp
    in Verizon New England, and \$20.23 per load amp in Verizon South.
    *See* Verizon Transmittal No. 1373; Workpapers 1-1, 1-2, 2-1.

[^36]: Verizon Reply at 5.

[^37]: WorldCom Petition at 3. WorldCom notes that the actual rate of
    inflation experienced by telecommunications firms is significantly
    lower. *Id.* The Joint CLECs cite to a recent Commission study that
    observed an increase in the gross domestic product chain-type price
    index (GDP-CPI) of 17 percent *cumulatively* since October 1992.
    Joint CLEC Petition at 5 (citing Annual Adjustment of Revenue
    Threshold, *Public Notice*, DA 01-903 (Apr. 11, 2001).

[^38]: Verizon refers to this list of equipment for the purpose of
    calculating its state-specific unit investment estimates. *See,
    e.g.,* Verizon Transmittal No. 1373; Workpaper 1.0, page 3;
    Workpaper 1.1, page 3.

[^39]: U.S. Bureau of Economic Analysis (BEA) publishes indexes of
    annual changes in telecommunications equipment prices.

[^40]: *See, e.g.,* AT&T Petition at 2; Joint CLEC Petition at 4 (noting
    lack of supporting data to verify "Engineering" costs).

[^41]: Total material investment estimate is equivalent to the
    denominator used in calculating the federal EF&I factor. *See infra*
    Section III.D.

[^42]: *See* 47 C.F.R. Part 32.

[^43]: *See, e.g.,* Verizon Reply at 5-6, 10-11.

[^44]: *See supra* ¶ 15.

[^45]: Conversent Petition at 7; WorldCom Petition at 1-3; Joint CLEC
    Petition at 3-5.

[^46]: Verizon Reply at 3-4.

[^47]: Verizon Reply at 1.

[^48]: Verizon Reply at 6. For New York, Verizon further subdivides the
    Metro category into "Major Cities" and "High Rise Major Cities."

[^49]: For purposes of this Order, "collocation arrangements" refer to
    those instances in which Verizon has completed all work necessary to
    prepare a collocation space and has turned the space over to the
    collocator.

[^50]: *See, e.g.,* Verizon Transmittal No. 1373; Exhibit pages 1-4;
    Verizon Workpaper 3.0, pages 1-3; Verizon Workpaper 3.1, pages 1-3.

[^51]: *See* Sprint Petition at 3 (noting that Sprint's own EF&I factor
    is only 1.7); WorldCom Petition at 2 (describing Verizon's EF&I
    factor as valuing the "installed" investment at three times the
    "material" investment); AT&T Petition at 2-3 (arguing that certain
    new requirements for collocators to pay Verizon to change fuse sizes
    and reconfigure power feeds may already be embedded in the EF&I
    factor).

[^52]: Verizon Reply at 6-7.

[^53]: Verizon Reply at 6.

[^54]: With respect to "total material investment," Verizon must provide
    the information as requested in *supra* Section III.A.

[^55]: *See, e.g.,* Conversent Petition at 6-7.

[^56]: Verizon Reply at 11.

[^57]: This corresponds to the numerator used in determining its
    building investment factor, but on a central office-basis.

[^58]: This corresponds to the numerator used in determining its land
    investment factor, but on a central office-basis.

[^59]: Verizon Reply at 10.

[^60]: WorldCom Petition at 3.

[^61]: *See infra* Section III.H.

[^62]: Verizon Reply at 10 (citing 47 C.F.R. § 32.2212); *see also* 47
    C.F.R. § 32.9000 (defining "associated equipment" to include network
    power equipment, and classifying associated equipment according to
    predominant use rather than its own characteristics).

[^63]: *See, e.g.,* Verizon Transmittal No. 1373; Workpaper 1.0, page 3
    (comparing total unit investment to separate statewide unit
    investments, according to power equipment item). For example, the
    weight to be attributed to rectifiers in Washington, D.C. is \$33.49
    \$221.40 = 0.15.

[^64]: Sprint Petition at 3-4. Verizon uses the overhead loading factors
    established by the Commission's 1997 physical collocation tariff
    investigation order. *See* *Physical Collocation Tariff
    Investigation Order*, 12 FCC Rcd. at 18982, Appendix D (1997); *see
    also id.* at 18853-59 (discussion of overhead loading standards and
    prescriptions).

[^65]: Sprint Petition at 3.

[^66]: Verizon Reply at 9.

[^67]: *See Physical Collocation Tariff Investigation Order*, 12 FCC
    Rcd. at 18921, Appendix C.

[^68]: *See* Verizon Reply at 9; *Physical Collocation Tariff
    Investigation Order*, 12 FCC Rcd. at 18858-59, 18982, Appendix D.

[^69]: *See* Conversent Petition at 4-5 (noting that SNET charges CLECs
    \$9.37 per amp in Connecticut; Ameritech charges \$7.99 per amp
    (federal) in Illinois, Indiana, Michigan and Ohio, \$6.43 per amp
    (federal) in Wisconsin and \$5.95 per amp (state) in Michigan;
    BellSouth charges \$3.48 per amp (federal) and \$8.86 per amp
    (state) in Florida; SBC charges \$5.25 per amp (state) in Texas; and
    Pacific Bell charges \$7.40 per amp (federal)); Sprint Petition at
    2-5 (noting that, for 40 load amps, SNET's charge is 1.8 times lower
    in New York/Connecticut, and Ameritech's charge is 2.6 times lower
    in Wisconsin); WorldCom Petition at 3-4 (noting that, depending on
    location, Qwest charges \$9.31 to \$12.66 per amp, Pacific Bell
    charges \$5.05 to \$7.40 per amp, BellSouth charges \$3.42 per amp
    and the former GTE companies charge \$9.90 to \$13.85 per amp);
    Joint CLEC Petition at 6.

[^70]: Verizon Reply at 8-9 (noting that Ameritech, Qwest, SBC, and
    BellSouth require collocators initially to pay cabling costs, or to
    lay cable themselves, in addition to recurring charges). Conversent
    alleges, however, that Verizon may be double-recovering certain
    non-recurring costs. Conversent Petition at 6-7 (citing *Physical
    Collocation Tariff Investigation Order*, 12 FCC Rcd. at 18762).
    Verizon denies this allegation. Verizon Reply at 11.

[^71]: *See* Verizon Transmittal No. 1373; Tariff FCC No. 1, §
    19.3.9(F); Tariff FCC No. 11, § 28.2.1(H).

[^72]: The petitioners did not comment on this provision.

[^73]: *See* Verizon Transmittal No. 1373; Tariff FCC No. 1, §
    19.3.9(D); Tariff FCC No. 11, § 28.2.1(F).

[^74]: *Id.*

[^75]: WorldCom Petition at 4-5; Joint CLEC Petition at 15.

[^76]: *See* Verizon Transmittal No. 1373; Tariff FCC No. 1, § 19.3(R).

[^77]: Conversent Petition at 11-12; Sprint Petition at 8.

[^78]: *Id.*

[^79]: Conversent Petition at 12; Sprint Petition at 8.

[^80]: Verizon Reply at 11-12.

[^81]: *See* Verizon Transmittal No. 1373; Tariff FCC No. 1, §
    19.3.9(E); Tariff FCC No. 11, § 28.2.1(G).

[^82]: WorldCom Petition at 6; Joint CLEC Petition at 16-17.

[^83]: WorldCom Petition at 6.

[^84]: Joint CLEC Petition at 16-17.