**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the matter of                 | *  | File No. EB-01-MD-004        |
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| MCLEODUSA PUBLISHING COMPANY,    | ** |                              |
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| Complainant,                     | *  |                              |
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| WOOD COUNTY TELEPHONE COMPANY,   | *  |                              |
| INC.,                            | *) |                              |
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**MEMORANDUM OPINION AND ORDER**

**Adopted: March 18, 2002 Released: March 29, 2002**

By the Commission: Commissioner Martin issuing a separate statement.

# introduction

1.  In this Memorandum Opinion and Order, we grant the formal complaint
    that McLeodUSA Publishing Company ("McLeod") filed against Wood
    County Telephone Company, Inc. ("Wood County") pursuant to section
    208 of the Communications Act of 1934, as amended ("Communications
    Act" or "Act").[^1] In particular, we grant McLeod's claim that,
    under section 222(e) of the Act[^2] and our *SLI Order*,[^3] Wood
    County must charge no more than the Commission-prescribed
    presumptively reasonable rate of four cents (\$0.04) per listing for
    "base file" subscriber listing information ("SLI"), rather than its
    proposed rate of \$0.6527 per listing (over 1600% above the
    presumptively reasonable rate). We do so because Wood County has
    failed to meet its burden of providing credible and verifiable cost
    data supporting a rate for base file SLI in excess of the
    presumptively reasonable rate. For similar reasons, we also grant
    McLeod's claim that Wood County must charge no more than the
    presumptively reasonable rate of six cents (\$0.06) per listing for
    "update" SLI listings.

# background

2.  Wood County is a local exchange carrier ("LEC") that provides
    telecommunications services in several areas in Wisconsin.[^4]
    McLeod is a telephone directory publisher that publishes white and
    yellow page directories in competition with large and small LECs,
    like Wood County, in numerous states across the country, including
    Wisconsin.[^5]

3.  SLI refers to telephone company subscribers' names, addresses, and
    telephone numbers, as well as headings under which businesses are
    listed in the yellow pages.[^6] Thus, SLI forms the foundation of
    the directory publishing business. Telephone companies, like Wood
    County, develop SLI when they initiate service to local telephone
    exchange customers.[^7] Independent directory publishers, like
    McLeod, generally must obtain SLI from LECs in order to publish
    current and accurate directories containing listings for the areas
    served by the LECs.[^8] In addition, LECs, including Wood County,
    generally use SLI that they develop during the ordinary course of
    providing exchange access service to publish their own directories
    of residential and business customers.[^9]

4.  Section 222(e) of the Act requires that "each telecommunications
    carrier that provides telephone exchange service shall provide
    subscriber list information gathered in its capacity as a provider
    of such service on a timely and unbundled basis, under
    nondiscriminatory and reasonable rates, terms and conditions, to any
    person upon request for the purpose of publishing directories in any
    format."[^10] The *SLI Order* adopted rules implementing section
    222(e).[^11]

5.  In those rules, the Commission established presumptively reasonable
    rates for LECs' provision of "base file" SLI and "update" SLI
    services to directory publishers.[^12] "Base file" SLI refers to the
    initial load of SLI listings that a directory publisher obtains from
    a LEC.[^13] "Base file" also encompasses a "refresh" service, which
    consists of a complete set of SLI listings that a LEC provides to a
    publisher who has already previously received a complete set of
    listings from the LEC.[^14] "Update" SLI service includes only
    changes to the SLI listings that have occurred between specified
    dates.[^15] Updates include "new connects" registered after a
    publisher has obtained the base file SLI from the LEC.[^16] The
    Commission set the presumptively reasonable base file rate at \$0.04
    per listing and the update rate at \$0.06 per listing.[^17]

6.  Although the Commission established presumptively reasonable rates
    in the *SLI Order*, the Commission acknowledged that those rates
    might not be reasonable for all LECs. The Commission recognized the
    possibility that "\[i\]n certain circumstances, the actual cost per
    listing could be higher than the presumptively reasonable rates. . .
    ."[^18] The Commission pointed out that "for some smaller carriers a
    presumptively reasonable rate of \$0.04 per listing may not be
    enough to cover the costs associated with providing base file
    listings, since the number of listings involved could be
    small."[^19]

7.  Because of these concerns, the Commission did not prohibit LECs from
    charging rates higher than the presumptively reasonable rates set
    forth in the *SLI Order*. The Commission made clear, however, that
    any LEC that seeks to charge more than the presumptively reasonable
    rates for SLI must justify those rates in the event that a directory
    publisher challenges them in a section 208 complaint
    proceeding.[^20] In such a proceeding, "the carrier must present a
    cost study providing credible and verifiable cost data to justify
    each challenged rate."[^21] The LEC's cost study must, *inter alia*,
    "clearly and specifically identify and justify" the following costs
    related to the creation, maintenance, and provision of SLI:
    incremental costs, common costs, and overhead.[^22] The Commission
    emphasized that, "\[i\]n any future federal subscriber list
    information rate proceeding, the burden of proof will be on the
    carrier to the extent it charges a rate above the presumptively
    reasonable rates."[^23] Further, the Commission concluded that,
    "\[i\]n the absence of cost data showing that the carrier's costs
    exceed the presumptively reasonable rates, the Bureau or the
    Commission, depending on the circumstances, shall find in favor of
    the plaintiff . . . ."[^24]

8.  The *SLI Order* clearly stated, therefore, that although LECs may
    attempt to justify a rate higher than the presumptively reasonable
    rate, any such attempt must be detailed and specific. The Commission
    did not prescribe any particular methodology that LECs must employ
    to develop cost studies to justify the higher rate, but mandated
    that the cost data used in any such study be *credible* and
    *verifiable*.[^25] Further, the Commission explained that the LEC,
    in its cost study, must "describe how its methods for allocating
    common costs compare to those the \[LEC\] uses in other
    contexts."[^26]

9.  After release of the *SLI Order*, McLeod and Wood County negotiated
    about rates for Wood County's provision of base file and update SLI.
    Wood County asserted that its costs associated with maintaining and
    providing SLI justified a rate exceeding \$0.50 per listing (over
    1200% above the presumptively reasonable rate of \$0.04 per listing
    for base file SLI), and offered to provide SLI to McLeod at a
    negotiated rate of \$0.42 per listing (over 1000% above the
    presumptively reasonable base file rate) for both base file SLI and
    SLI updates.[^27] Wood County added that it would assess a minimum
    charge of \$100 per transmission for providing updated SLI to
    McLeod.[^28] McLeod disputed Wood County's cost estimates and sought
    to obtain SLI from Wood County at the presumptively reasonable
    rates.

10. McLeod and Wood County failed to reach a negotiated agreement,
    whereupon McLeod filed the instant complaint. In its complaint,
    McLeod asserts that Wood County's refusal to provide SLI at the
    presumptively reasonable rates violates section 222(e) of the
    Act.[^29] McLeod requests that the Commission order Wood County to
    charge the presumptively reasonable rates of \$0.04 per listing for
    base file SLI and \$0.06 per listing for updates.[^30]

# discussion

## Although It is the Defendant, Wood County Bears the Burden of Proving the Reasonableness of Its SLI Rates.

11. As stated above, the *SLI Order* and our rules require that a LEC
    seeking to charge more for SLI than the presumptively reasonable
    rate bears the burden of proof in a complaint proceeding concerning
    the reasonableness of the asserted rate. Wood County challenges that
    requirement here. Wood County argues that, as the defendant in this
    complaint proceeding, it should not have to bear the burden of
    proving the reasonableness of its SLI rates; rather, in Wood
    County's view, the complainant, McLeod, should bear the burden of
    proving the *un*reasonableness of such rates.[^31] According to Wood
    County, because the complainant ordinarily bears the burden of proof
    in section 208 complaint proceedings, the Commission erred by
    shifting that burden of proof to LEC defendants in complaint
    proceedings concerning SLI rates.[^32]

12. We disagree. To the extent that Wood County indirectly challenges
    the Commission's rules adopted in the *SLI Order*, we reject that
    challenge. The Commission has broad authority to conduct section 208
    proceedings "in such manner and by such means as it shall deem
    proper,"[^33] and more generally to "conduct its proceedings in such
    manner as will best conduce to the proper dispatch of business and
    to the ends of justice."[^34] In establishing presumptively
    reasonable rates in the *SLI Order*, the Commission expressly sought
    to promote certainty and reduce the likelihood that parties would
    expend their own and the Commission's resources in litigating the
    reasonableness of SLI rates.[^35] The Commission's allocation of the
    burden of proof to the party seeking to charge more than the
    presumptively reasonable rate helps achieve this objective by
    motivating the party with easier access to critical information to
    refrain from charging rates in excess of the benchmarks unless fully
    prepared to defend such rates.[^36] Moreover, the Commission has
    engaged in this same burden allocation in other circumstances in
    which the Commission has prescribed presumptively reasonable
    rates.[^37] The *SLI Order's* shift in the burden of proof is well
    within the Commission's authority to establish procedures for
    complaint cases. Accordingly, we affirm the *SLI Order* and rule
    that Wood County must bear the burden of proving the reasonableness
    of its proposed SLI rates in this proceeding.[^38]

## Wood County Has Failed to Meet Its Burden of Justifying a Rate for Base File SLI That Exceeds the Presumptively Reasonable Rate.

13. In the *SLI Order*, the Commission set forth three categories of
    costs that a carrier should address in any cost study attempting to
    support a rate higher than the presumptively reasonable rate for the
    provision of SLI: incremental costs, common costs, and overhead
    costs.[^39] In its answer to McLeod's complaint, Wood County
    provided a cost study that addresses those three cost categories. In
    doing so, the cost study purports to justify a rate for the
    provision of base file SLI of \$0.6527 per listing, over 1600% above
    the presumptively reasonable rate of \$0.04.[^40] Wood County
    developed its proposed rate by adding together per listing
    incremental costs of approximately \$0.04, common costs of
    approximately \$0.50, and overheads of approximately \$0.11.[^41]
    McLeod challenges Wood County's data and the cost justification
    provided for each of the three relevant categories, which we analyze
    in sequence below.

### Wood County Has Failed to Provide Adequate Data Concerning the Incremental Costs Associated with Its Provision of Base File SLI.

14. In the *SLI Order*, the Commission required that the LEC in an SLI
    complaint proceeding identify in its cost study "\[e\]ach specific
    function the carrier performs solely to provide subscriber list
    information to the complainant; and the incremental costs the
    carrier incurs in performing each of these specific functions."[^42]
    Thus, incremental costs are restricted to those costs the LEC incurs
    to provide SLI to the complainant. Examples of incremental costs
    include the costs of taking specific orders for SLI, the costs of
    downloading the requested SLI, the costs of the magnetic tape or
    paper on which the SLI is recorded, and the costs of mailing.[^43]

15. Wood County asserts that its incremental costs of providing base
    file SLI to McLeod amount to \$0.0408 per listing.[^44] This amount
    consists entirely of the fee that Wood County's directory publisher
    agent, The Berry Company ("Berry"), charges Wood County for
    providing formatted base file SLI to third parties who request that
    information from Wood County.[^45] Wood County did not provide any
    data from which we could ascertain whether the \$0.0408 figure is
    reasonable or how it compares to Berry's underlying costs.

16. McLeod argues that Wood County has failed to justify any incremental
    costs that can be included in a reasonable rate for SLI. McLeod
    argues that the *SLI Order* limits allowable incremental costs to
    those costs incurred by the LEC for functions that the LEC *itself*
    actually performs.[^46] According to McLeod, incremental costs do
    not include (1) the fee that a LEC pays a third party to perform SLI
    functions on the LEC's behalf, or (2) costs that a third party, such
    as Berry, might incur to provide SLI on the LEC's behalf.[^47]

17. We disagree that allowable incremental costs are as narrowly defined
    as McLeod argues. We believe that it may be appropriate for a small
    carrier, like Wood County, to utilize a third party agent to provide
    formatted SLI to directory publishers who request SLI from Wood
    County. Wood County justifies its reliance on Berry to provide that
    service as a reasonable and efficient way to respond to isolated
    requests for base file SLI.[^48] Such justification might prove
    persuasive in particular cases.

18. We conclude, however, that if a LEC chooses to rely on an agent to
    respond to requests for SLI, then the LEC must, consistent with our
    *SLI Order*, provide credible and verifiable information supporting
    the reasonableness of the amount that the LEC pays the agent charges
    for the provision of SLI to the requesting party. Thus, Wood County
    cannot avoid the obligation set forth in the *SLI Order* to justify
    proposed incremental costs of providing SLI merely by relying on an
    agent to perform the functions from which the incremental costs are
    derived. Such an outcome would invite abuse by LECs and their third
    party publisher agents. For example, a LEC could agree with its
    directory publisher agent to set an exorbitant rate for the
    provision of SLI to independent publishers. Unless we require the
    LEC to justify that rate as reasonable, the LEC could simply include
    the rate, as Wood County has done here, as the "incremental cost"
    the LEC incurs to provide SLI to independent publishers. This would
    undermine the statutory goal of fostering a competitive directory
    publishing market.

19. The need for information justifying the \$0.0408 rate paid to Berry
    is particularly important here, given that this purported
    incremental cost dramatically exceeds the incremental costs that the
    Commission envisioned in the *SLI Order*. There, the Commission
    determined that the presumptively reasonable rate of \$0.04 per
    listing would be adequate to compensate a LEC, in all but
    "relatively rare" situations,[^49] for *both* its incremental costs
    *and* a reasonable allocation of common costs and overheads.[^50]
    Moreover, Wood County has indicated that if it were to calculate its
    own incremental costs associated with providing SLI directly to
    McLeod in at least one format, such costs would likely be *less*
    than the \$0.0408 per listing rate cited by Berry.[^51] Finally, the
    *SLI Order* notes that commercial list providers typically charge
    approximately \$0.04 per listing and that commercial list providers'
    costs in acquiring and maintaining SLI likely exceed those of a
    LEC.[^52] If commercial list providers with generally higher costs
    than LECs can typically recover not only their incremental costs,
    but also a reasonable allocation of common costs and overheads and a
    reasonable profit, by selling their listings for approximately
    \$0.04 per listing, then Wood County's \$0.0408 incremental cost
    projection based on the Berry rate certainly requires substantial
    supporting evidence.

20. We recognize that it may be difficult in some instances for a LEC to
    obtain from a publishing agent information concerning the costs
    incurred by that agent for performing various functions. However,
    Wood County could have offered certain other information that might
    have supported the reasonableness of the rate it pays Berry. For
    example, Wood County could have explained how it selected Berry to
    perform the functions for which it seeks to charge McLeod and
    whether that selection was made through a competitive bidding
    process. Further, Wood County could have described how the Berry
    rate compares to rates charged by other publishing agents for
    similar services. Wood County proffered no such information.

21. Because the incremental cost calculation Wood County proposes
    (*i.e.,* the Berry \$0.0408 rate) is facially questionable for the
    reasons described above, Wood County has a significant burden to
    provide adequate information supporting the reasonableness of this
    calculation. Wood County failed, however, to provide *any*
    information supporting the Berry rate, much less credible and
    verifiable cost data.[^53] Further, the record contains insufficient
    information from which we could, *sua sponte*, ascertain Wood
    County's incremental costs of providing base file SLI to McLeod.
    Accordingly, we cannot consider the alleged incremental costs of
    \$0.0408 in determining whether Wood County has justified a
    departure from the presumptively reasonable rate for base file SLI.

### Wood County Has Failed to Provide Adequate Data Concerning a Reasonable Allocation of Common Costs.

22. In the *SLI Order*, the Commission defined common costs as "the
    cost\[s\] the carrier incurs in creating and maintaining its
    subscriber list information database and the methods the carrier
    uses to allocate \[those\] cost\[s\] among supported services."[^54]
    Thus, common costs, within the meaning of the *SLI Order*, are those
    costs that the LEC incurs in connection with all SLI-related
    activities that are in addition to those activities performed
    *solely* to provide SLI to the complainant. Consistent with that
    definition, the parties agree that some portion of Wood County's
    costs of entering SLI information into a database and maintaining
    the database may properly be allocated to SLI for purposes of
    calculating a reasonable cost-based rate for the provision of SLI to
    McLeod.[^55] The parties disagree, however, concerning the proper
    allocation of such common costs.

23. Wood County maintains its SLI information in a single SLI/directory
    assistance ("DA") database.[^56] According to Wood County, SLI
    information makes its way into the SLI/DA database in the following
    manner: a Wood County customer service representative obtains SLI
    information during the order-taking process and enters that
    information into a service order system database.[^57] Some of the
    information collected by the customer service representatives
    automatically populates the SLI/DA database.[^58] On a daily basis,
    a directory clerk processes all new service orders affecting the
    SLI/DA database and modifies automatically populated data to reflect
    specific requests from subscribers (for example, for an additional
    listing for a child's phone).[^59] A verification clerk then reviews
    the directory clerk's work.[^60]

24. Wood County's cost study analyzes these activities and their
    attendant costs to support a purported reasonable rate for the
    provision of SLI. The categories of common costs that Wood County
    seeks to include in its calculation of a reasonable SLI rate are:
    service order processing costs, directory clerk expenses, computer
    expenses, and computer investment expenses.[^61] Wood County arrives
    at its common cost allocation by determining the service order
    processing costs, directory clerk expenses, computer expenses, and
    computer investment costs that are related to SLI/DA activity. Wood
    County totals those costs and then allocates half of the total costs
    to SLI activity (Wood County asserts that the SLI/DA expenses are
    evenly allocable to SLI and DA activities).[^62] Wood County then
    divides the SLI-related costs by an annual demand figure of 81,267
    SLI listings to arrive at the \$0.5004 per listing figure for its
    common cost allocation.[^63]

25. The cost categories described above seem generally appropriate for
    Wood County to consider in formulating a cost study. McLeod argues,
    however, that Wood County cannot include any of the service order
    processing costs as common costs, because Wood County would incur
    such costs wholly apart from the need to create and maintain an SLI
    database.[^64] According to McLeod, service order processing is an
    integral part of providing telephone exchange service, and
    information related to SLI, although it may initially be collected
    in the service order process, does not become part of the SLI
    database until it is entered into the database by the directory
    clerk.[^65] Thus, in McLeod's view, there are no service order
    processing costs unique to SLI, only directory clerk costs.

26. We agree with McLeod that recoverable common costs, as defined in
    the *SLI Order*, should include only those costs that Wood County
    incurs because of the need to create and maintain an SLI database.
    We do not agree, however, that Wood County has failed to identify
    any such costs in its service order processing. Wood County has
    explained that its customer service representatives spend a discrete
    amount of time in the service order process obtaining information
    that is used exclusively for the SLI/DA database.[^66] For example,
    Wood County explains that customer service representatives ask new
    customers how they want their listings to read in the directory or
    whether they want additional listings.[^67] Wood County persuasively
    argues that, but for the need to create and maintain an SLI
    database, some identifiable amount of time spent by the customer
    service representatives would be eliminated.[^68] Accordingly, we
    will consider those service order processing costs that Wood County
    incurred because of the need to create and maintain an SLI database
    as recoverable common costs, within the meaning of the *SLI Order*.

#### Service Order Processing Costs

27. Wood County identifies six types of service orders that involve SLI
    activity: 1) new installation, not requesting non-published
    status; 2) new installation, requesting non-published or non-listed
    status; 3) disconnects; 4) requests by established subscribers for
    non-published status; 5) requests by established subscribers for
    return to published status; and 6) requests by established
    subscribers for additional listings.[^69] Wood County predicates its
    service order processing costs on estimates of time that its
    customer service representatives spend performing SLI activities for
    each of these six service order types listed above.[^70] For
    example, Wood County estimates that it takes its customer service
    representatives an average of 21 minutes per service order to
    process a new installation request that does not include a request
    for non-published status;[^71] Wood County further estimates that 3
    minutes of the 21-minute total is spent on SLI/DA related
    activities.[^72] Wood County maintains, therefore, that the costs
    associated with this three-minute activity must be considered in
    ascertaining a reasonable SLI rate.

28. For the reasons described below, we conclude that Wood County's time
    estimates for four of the six service order categories are
    unverifiable; we also conclude that Wood County improperly failed to
    account for end user revenues from the remaining two service order
    categories in developing its cost allocation methodology.
    Consequently, we cannot consider any service order processing costs
    in determining whether Wood County may exceed the presumptively
    reasonable rates for providing base file SLI.

##### Wood County's Time Estimates for Four of the Six Service Order Categories are Unverifiable And the Process Used to Develop the Estimates is Not Credible.

29. Wood County states that it obtained estimates of the time spent on
    SLI activities for four of the six service order types from a senior
    customer service representative at the company with expertise in
    service order processing.[^73] However, the customer service
    representative apparently did not conduct any research or make any
    attempts to develop verifiable time estimates or averages in
    providing her estimates.[^74] It appears that she arrived at her
    estimates extemporaneously during the course of a thirty-minute
    conversation with Wood County's chief financial officer.[^75]
    Moreover, although Wood County performed a sampling exercise to
    calculate the total service order processing time spent on various
    customer service activities, Wood County did not track, as part of
    that exercise, how much of that time was spent on SLI-related
    activities.[^76] In fact, the customer service representative was
    not even informed of the results of the sampling exercise so that
    she could compare her estimates of time spent on SLI-related
    activity to the total service order processing time.[^77] Therefore,
    we conclude that the process used to develop the SLI-related time
    estimates for these four service order categories is not credible
    and cannot produce reliable data. Merely asking an employee to
    provide a subjective, extemporaneous estimate of time associated
    with specific activities, without conducting any research or
    reviewing any data whatsoever, does not provide an adequate
    foundation for figures used in Wood County's cost study. Moreover,
    we cannot verify the time estimates associated with the service
    order processing activities for these four service order categories,
    because Wood County has proffered no documents to support the
    SLI-related portion of the time estimates. Thus, we do not consider
    costs associated with these four service order categories in
    determining whether Wood County has justified a rate exceeding the
    presumptively reasonable rate for base file SLI.[^78]

##### Wood County Improperly Fails to Account for Revenue Received From Its End User Customers In Its Cost Allocation Methodology for the Remaining Two Service Order Categories.

30. With respect to the remaining two service order types (requests by
    established subscribers for additional listings, and requests by
    established subscribers for return to published status), Wood County
    maintains that the time spent on SLI activity equals the total time
    spent on service order processing (*i.e.,* the service order
    processing time allegedly consists wholly of SLI-related activity (a
    "pure SLI function")).[^79] These time estimates appear to be
    derived from the same sampling exercise described above, and stem
    from samples of four and five service orders, respectively.[^80] We
    question whether such small sample sizes could adequately justify
    the resulting time estimates. We need not decide that question here,
    however, because we conclude that the cost allocations for these two
    service order categories are deficient for another reason -- Wood
    County's cost study fails to account adequately for revenues
    received from its own end user customers for these two activities.

31. Pursuant to its state tariff, Wood County receives from its end user
    customers \$5.00 per request and \$0.50 per month for each
    additional directory listing requested.[^81] Wood County did not
    account for these revenues in calculating an allocation of common
    costs upon which to base a rate to charge directory publishers for
    SLI.[^82] For the following reasons, this failure precludes us from
    considering Wood County's costs associated with processing
    additional listing requests in determining whether Wood County may
    exceed the presumptively reasonable rates for SLI.

32. The Commission explained in the *SLI Order* that a LEC may recover
    "fair compensation" and a "reasonable profit" for the creation,
    maintenance, and provision of SLI.[^83] It is neither fair nor
    reasonable for a LEC to earn a complete double recovery for these
    SLI activities. In other words, a LEC can choose to recover its
    costs associated with a pure SLI function from either its end user
    customers or its directory publisher customers, but it cannot
    recover all such costs from both. Accordingly, where a LEC charges
    its own end user customers to perform a pure SLI function, and the
    revenues earned pursuant to those charges exceed the costs incurred
    to perform this function, the LEC cannot rely on the same costs in
    attempting to justify a departure from the presumptively reasonable
    rates chargeable to directory publishers.

33. We cannot determine from the record whether the revenues Wood County
    receives from its end user customers for performing the pure SLI
    function of processing requests for additional listings exceeds Wood
    County's costs associated with performing this function. This is
    because, although Wood County's discovery responses provide the
    total revenues allegedly received from the \$5.00 non-recurring
    charge, the responses fail to state the revenues received from the
    \$0.50 monthly recurring charge. This omission is material, given
    the costs and revenue figures contained in Wood County's study.[^84]
    Thus, Wood County has failed to meet its burden of proving
    compliance with the threshold requirement of demonstrating that its
    costs exceed its revenues with respect to the pure SLI function of
    processing requests for additional listings. Accordingly, we cannot
    consider such costs in determining whether Wood County may charge
    more than the presumptively reasonable rate.

34. Similarly, with respect to the service order category of requests by
    established subscribers for return to published status, Wood County
    also did not properly account for the revenue received from its end
    user customers for such pure SLI function (five dollars per request)
    in computing its recoverable costs. In particular, Wood County
    apparently did not subtract these revenues from its costs in
    developing its common cost allocation to support its SLI rate.[^85]
    Although Wood County at least made a superficial showing that its
    costs exceed its revenues for this service order category, the
    amount of un-recovered costs is so low (approximately \$700
    annually) that it, standing alone, is insufficient to justify a rate
    for SLI higher than presumptively reasonable rate.[^86]

35. Wood County argues that we should not consider revenues for these
    pure SLI functions, because the tariffed charges were not set to
    recover the specific costs associated with those functions.[^87]
    Wood County's explanation, however, is not sufficient. Wood County
    does not explain how the end-user charges *were* set by the state
    commission and what specific costs the charges *were* intended to
    cover. Wood County does not assert that the charges were designed to
    compensate Wood County entirely for other costs unrelated to the
    SLI-activities for which the charges are levied. Nor does Wood
    County assert that the charges do not defray at least some of the
    costs associated with the SLI activities. Accordingly, we reject
    Wood County's contention that it is improper to consider revenues
    earned with respect to these service order categories in evaluating
    Wood County's cost study.

36. In sum, given Wood County's failure to submit sufficient evidence
    supporting its estimates of the costs allocable to the SLI portion
    of four of the six service order processing functions, and Wood
    County's failure to account for customer revenues for the two pure
    SLI functions, we conclude that Wood County's service order
    processing costs are unverifiable and unreliable.[^88] Further, with
    respect to at least four of the service order categories, although
    we acknowledge that Wood County reasonably asserts that *some* of
    these service order costs stem from SLI activities, Wood County
    provides insufficient information from which we can independently
    determine the amount of those costs. Accordingly, we find that Wood
    County has not met its burden of providing credible and verifiable
    cost data supporting the allocation of service order processing
    costs to SLI. Therefore, we decline to consider these costs in
    ascertaining whether Wood County may charge McLeod a rate higher
    than the presumptively reasonable rates for the provision of SLI.

#### Directory Clerk Costs

37. A large portion of Wood County's common cost calculation stems from
    costs allegedly incurred in connection with Wood County's entry of
    information into the SLI/DA database and verification of the
    accuracy of that information. The most critical component of these
    costs, similar to the service order costs discussed above, is Wood
    County's estimate of the time that its directory clerks spend on
    these activities. Despite Wood County's heavy reliance on such time
    estimates, Wood County again fails to provide credible and
    verifiable data supporting such estimates.

38. Wood County estimates that it takes an average of eight minutes per
    service order for Wood County's directory clerk and verification
    clerk to modify SLI data obtained in the service order process and
    ensure that the appropriate information is contained in the SLI
    database.[^89] The eight-minute estimate consists of a five-minute
    estimate for initial processing time by the directory clerk and a
    three-minute estimate for verification by the verification
    clerk.[^90] Again, Wood County proffers no records or documents to
    support these estimates. Although two Wood County employees
    apparently performed sampling exercises to develop the estimate
    provided, the exercises were too flawed to produce reliable data,
    and the employees failed to keep any records from which the data
    could be verified. As McLeod points out, the directory clerk and
    verification clerk apparently decided, on their own, to conduct the
    sampling exercises in question.[^91] Wood County's chief financial
    officer, who appears to have been responsible for gathering
    information for the cost study, did not instruct the clerks on how
    to perform the exercise or what to measure, and neither did any
    other Wood County officer.[^92] In fact, the chief financial officer
    was not aware that the two clerks had performed any sampling
    exercises until after the exercises were concluded.[^93] Wood County
    could not explain what type of service orders were sampled, how the
    timing of those service orders was measured, whether the timing was
    interrupted if the employee's work was temporarily interrupted, or
    what conventions the clerks may have used in measuring the
    processing time.[^94]

39. Further, although Wood County alleges that the eight-minute estimate
    is an average derived from the sampling exercises just described,
    Wood County provides no information or documents showing how that
    average was calculated or even whether it resulted from a
    mathematical calculation. The average may have simply been a
    subjective estimate that the directory clerks provided after the
    sampling exercises but without performing any mathematical
    calculation (similar to the subjective estimate provided by the
    customer service representative described above). How the average
    was calculated in this case is critical, because the record
    indicates that there is a wide disparity in the amount of time it
    may take to process and verify different service orders.[^95]
    Whether Wood County properly considered that range, and the probable
    mix of service orders therein (*i.e.,* 95% of service orders are
    "simple" ones requiring only a minute of directory clerk time to
    complete and 5% are more complicated, requiring additional time to
    complete) is important in determining the reliability and
    credibility of the resulting average.[^96] Wood County offers us
    nothing from which we can determine how it calculated the average
    and whether it considered these critical factors in making the
    calculation. The record does indicate, however, that if the
    directory clerks did perform a mathematical calculation to develop
    the eight-minute time estimate, they did so without any guidance,
    direction, or instruction from either the Wood County officer
    responsible for the cost study or Wood County's expert.[^97] For all
    the foregoing reasons, we find Wood County's process for developing
    its directory clerk time estimate to be not credible and, therefore,
    do not consider the estimate in determining whether Wood County may
    exceed the presumptively reasonable rate.

40. Moreover, Wood County inexplicably failed to keep its notes or
    records of the sampling exercises. Wood County's failure to provide
    any documents which McLeod and the Commission could use to verify
    both the process used to obtain the time estimates and the resulting
    time estimates themselves also renders the estimates unreliable,
    because they cannot be verified.[^98]

41. After the close of discovery, and after McLeod had already submitted
    its responsive expert report, Wood County proposed in its rebuttal
    report an entirely different methodology for ascertaining
    recoverable directory clerk expenses than was contained in its
    previous cost study. In doing so, Wood County unfairly prevented
    McLeod from timely inquiring into the basis for this new
    analysis.[^99] In any event, this tardy analysis suffers from the
    same flaw that permeates much of Wood County's analysis -- it lacks
    the requisite underlying support. Wood County states that, "as part
    of \[its\] preparation of \[its\] rebuttal report," Wood County
    conferred with one of its executives with respect to accounting for
    the directory clerk's time.[^100] The executive indicated that "the
    directory clerk charged 53.66% of her time on the processing of
    directory listing orders (based on a two-month analysis of the
    directory clerk's time coding)."[^101] Wood County then estimated
    the number of hours worked annually by the directory clerk, applied
    the percentage referenced above to the total estimated service
    orders with SLI activity, and arrived at an estimate for time spent
    by the directory clerk on SLI activities per service order. Although
    this may be a reasonable way to develop a time estimate for
    recoverable directory clerk expenses, Wood County offers no
    underlying data that McLeod or we could review for verification
    purposes. Wood County does not identify the months used to develop
    the 53.66% figure, does not explain why those months are
    representative, does not produce the time coding documents to
    support the calculation, and does not explain how the time coding
    documents support the resulting calculation. We are left solely with
    Wood County's bald assertion that the calculation on which it relies
    is correct, and Wood County asks us, and McLeod, to accept that
    assertion on faith. We decline to do so.

42. Wood County contends that we cannot reject Wood County's estimates
    based on alleged inadequacies in how Wood County developed or
    recorded the time estimates or conducted the sampling that support
    the estimates.[^102] We disagree. Where, as here, there are no
    records or notes supporting critical time estimates that make up a
    portion of the cost data upon which a carrier relies to justify a
    certain SLI rate, we simply cannot conclude that such estimates are
    reasonable and verifiable and, accordingly, will not consider them.
    Allowing or relying on such estimates without supporting data or
    documents from which a third party could verify the estimates would
    lead to inevitable abuse and is precisely what the Commission sought
    to avoid when the *SLI Order* required that supporting data be both
    credible *and* verifiable.

43. For the foregoing reasons, we conclude that Wood County has failed
    to meet its burden of producing credible and verifiable costs
    associated with directory clerk activities related to SLI. Because
    Wood County has failed to meet its burden, we do not consider any
    directory clerk expenses in determining whether Wood County may
    exceed the presumptively reasonable rate for base file SLI.

#### Computer Expenses and Computer Investment Costs 

44. Wood County allocates a portion of computer expenses and computer
    investment costs to SLI.[^103] However, the allocations of both
    computer expenses and computer investment costs depend on Wood
    County's estimates of time spent by directory clerks entering SLI
    information into the SLI/DA computer database and verifying the
    accuracy of that information.[^104] These are the same time
    estimates addressed in section III(B)(2)(b) above. Because we have
    concluded that those time estimates are not verifiable, the
    allocations of computer expenses and computer investment costs that
    depend on those time estimates are equally flawed. Accordingly, we
    conclude that Wood County has failed to meet its burden of providing
    credible and verifiable cost data supporting its allocation of
    computer expenses and computer investment costs. Thus, we do not
    consider such costs in determining whether Wood County may exceed
    the presumptively reasonable rate for base file SLI.

### Wood County Has Failed to Provide Adequate Data Concerning Overhead Costs Associated with the Provision of Base File SLI.

45. In the *SLI Order*, the Commission defined overheads as "\[a\]ny
    other costs the carrier incurs to support its provision of
    subscriber list information to the complainant; the other activities
    those costs support; and the methods the carrier uses to allocate
    those costs."[^105] Wood County develops its allocation of overhead
    expenses attributable to SLI activities by determining an overhead
    allocation factor and applying that factor to the service order
    processing and directory clerk expenses it developed
    separately.[^106] These are the same service order processing and
    directory clerk costs we discuss and reject in sections III(B)(2)(a)
    and (b) above. Because we find those calculations to be flawed and,
    therefore, do not consider them, we also conclude that the overhead
    calculation is flawed for the same reasons. Thus, we do not consider
    such costs in determining whether Wood County may exceed the
    presumptively reasonable rate for base file SLI.

    \* \* \*

46. In sum, based on the analysis above, we conclude that Wood County
    has failed to meet its burden of proving, with credible and
    verifiable cost data, that its proposed rate for the provision of
    base file SLI to McLeod is reasonable. Accordingly, we grant
    McLeod's claim related to base file SLI and rule that Wood County
    must charge McLeod no more than the presumptively reasonable rate of
    \$0.04 per listing for base file SLI.[^107]

47. We emphasize that we are fully aware that "for some smaller carriers
    a rate of \$0.04 per listing may not be enough to cover the costs
    associated with providing base file listings, since the number of
    listings involved could be small."[^108] Thus, we do not conclude in
    this Order that Wood County could not have cost-justified a rate for
    base file SLI higher than the presumptively reasonable rate.
    Further, this Order should not be construed as limiting the ability
    of LECs in the future to charge more for SLI than the presumptively
    reasonable rates, assuming they are prepared to justify those rates
    in accordance with the *SLI Order*. We simply conclude here that,
    for the reasons described above, Wood County's effort to support a
    rate higher than the presumptively reasonable rate for base file SLI
    is too deficient to be credited. Had Wood County not engaged in the
    fundamental errors described above, which rendered unreliable many
    of the most critical components of its cost study, we might have
    concluded that Wood County was justified in exceeding the
    presumptively reasonable rate. However, that is not the record
    before us.

## Wood County Has Failed to Meet Its Burden of Justifying a Rate for Update SLI That Exceeds the Presumptively Reasonable Rate.

48. In its complaint, McLeod also requests that we declare that Wood
    County's proposed rate of \$0.42 per listing for SLI updates is
    unlawful and order Wood County to charge no more than the
    presumptively reasonable rate of \$0.06 per listing for
    updates.[^109] Wood County concedes that it did not attempt to
    justify a proposed rate for updated SLI in its cost study.[^110]
    Wood County asserts that it could not attempt to justify a proposed
    update rate without knowing the frequency with which McLeod wanted
    to receive updated SLI.[^111] We agree with Wood County that the
    frequency of provision of updated SLI may be relevant in justifying
    a rate for the provision of SLI. We note, however, that Wood County
    proposed to McLeod a rate of \$0.42 per listing for updated SLI
    without regard to the frequency or format that McLeod might
    request.[^112] Thus, Wood County must have believed that it could
    roughly cost-justify this rate, even without knowing exactly how
    often it would provide update SLI to McLeod. Nevertheless, Wood
    County subsequently failed in this proceeding even to attempt to
    justify that or any other rate for updated SLI services.
    Accordingly, we conclude that Wood County has failed to meet its
    burden of proving its entitlement to a rate exceeding the
    presumptively reasonable rate for update SLI. Therefore, we grant
    McLeod's claim related to update SLI and order Wood County to charge
    no more than the presumptively reasonable rate of \$0.06 per listing
    for updated SLI.[^113]

# ordering clauses

49. Accordingly, IT IS ORDERED, pursuant to sections 4(i), 4(j), 208,
    and 222(e) of the Communications Act of 1934, as amended, 47 U.S.C.
    §§ 154(i), 154(j), 208, and 222(e), that the formal complaint of
    McLeodUSA Publishing Company is GRANTED.[^114]

50. IT IS FURTHER ORDERED, pursuant to sections 4(i), 4(j), 208, and
    222(e) of the Communications Act of 1934, as amended, 47 U.S.C. §§
    154(i), 154(j), 208, and 222(e), that Wood County must charge McLeod
    no more than the presumptively reasonable rate of \$0.04 per listing
    for base file SLI and \$0.06 per listing for update SLI.[^115]

FEDERAL COMMUNICATIONS COMMISSION

William F. Caton

Acting Secretary

SEPARATE STATEMENT OF

**COMMISSIONER KEVIN J. MARTIN**

*Re: McLeodUSA Publishing Company v. Wood County Telephone Company,
Inc.,* Memorandum Opinion and Order, File No. EB-01-MD-004

While I support the result in this case, I write separately today to
emphasize two points. First, I encourage carriers to submit specific
cost information when attempting to justify a rate higher than the
presumptively reasonable rate set out in the Commission's rules. I
recognize that the presumptively reasonable rates were based on data
from the largest carriers and may not adequately compensate smaller and
rural carriers. Thus, our rules allow carriers to provide data
justifying a higher rate. I am committed to ensuring that smaller and
rural carriers are fairly compensated, and I strongly recommend that
carriers develop and submit the requisite cost data in future cases.
While the data in this case was inadequate for the reasons discussed in
the Order, I hope that we have provided some guidance on the kind of
showing that would be sufficient.

Second, I am concerned about the presumptively reasonable rates
established by the Commission for updates to directory information. Even
though the Commission conceded that costs for providing updates to
subscriber list information would vary widely depending on the exact
nature of the request, it nevertheless set a single, presumptively
reasonable rate. I have concerns with this approach. While this case
does not present an appropriate opportunity to revisit the Commission's
decision, I look forward to considering the issue in future proceedings.

[^1]: 47 U.S.C. § 208.

[^2]: 47 U.S.C. § 222(e).

[^3]: *In re Implementation of the Telecommunications Act of 1996:
    Telecommunications Carriers' Use of Customer Proprietary Network
    Information and Other Customer Information,* Third Report and Order,
    14 FCC Rcd 15550 (1999) ("*SLI Order*").

[^4]: Formal Complaint of McLeodUSA Publishing Company, File No.
    EB-01-MD-004 (filed Feb. 12, 2001) ("Complaint") at ¶ 5; Joint
    Statement of Stipulated Facts, Disputed Facts, and Key Legal Issues,
    File No. EB-01-MD-004 (filed Mar. 29, 2001) ("Joint Statement") at ¶
    3.

[^5]: Joint Statement at ¶ 1.

[^6]: *SLI Order*, 14 FCC Rcd at 15554, ¶ 2.

[^7]: *Id.* at 15554, ¶ 3.

[^8]: *Id.* at 15554, ¶ 2.

[^9]: *Id.* at 15554, ¶ 3.

[^10]: 47 U.S.C. § 222(e).

[^11]: The implementing rules include, *inter alia*, section 64.2309
    (requiring carriers to provide SLI on a nondiscriminatory basis and
    under reasonable rates, terms, and conditions); 64.2325
    (establishing presumptively reasonable rates of \$0.04 per listing
    for base file SLI and \$0.06 per listing for update SLI); and
    64.2333 (placing the burden of proof in a complaint proceeding
    arising under section 222(e) of the Act on the carrier to the extent
    that it seeks to charge rates for SLI higher than the presumptively
    reasonable rates). 47 C.F.R. §§ 64.2309, 64.2325, and 64.2333.

[^12]: *SLI Order*, 14 FCC Rcd at 15607, ¶ 105; 47 C.F.R. § 64.2325.

[^13]: *SLI Order*, 14 FCC Rcd at 11562-63, ¶ 16; 47 C.F.R. § 64.2305.

[^14]: *SLI Order*, 14 FCC Rcd at 11562-63, ¶ 16*.*

[^15]: *SLI Order*, 14 FCC Rcd at 11562-63, ¶ 16; 47 C.F.R. § 64.2305.

[^16]: *SLI Order*, 14 FCC Rcd at 11562-63, ¶ 16.

[^17]: *Id.* at 15599-607, ¶¶ 93-103; 47 C.F.R. § 64.2325.

[^18]: *SLI Order*, 14 FCC Rcd at 15607, ¶ 105.

[^19]: *Id.*

[^20]: *Id.* (citing 47 U.S.C. § 208).

[^21]: *Id.* at 15607, ¶ 106.

[^22]: *Id.* These categories are defined, *infra*, at Sections
    III(B)(1)-(3).

[^23]: *Id.* at 15607, ¶ 105; 47 C.F.R. § 64.2333.

[^24]: *SLI Order*, 14 FCC Rcd at 15607, ¶ 106.

[^25]: *Id*.

[^26]: *Id.*

[^27]: Complaint at ¶ 12 and Exhibit 13; Joint Statement at ¶ 9.

[^28]: *Id.*

[^29]: Complaint at ¶¶ 1-2 and Prayer for Relief.

[^30]: Complaint at Prayer for Relief.

[^31]: Answer of Wood County Telephone Company, File N. EB-01-MD-004
    (filed Mar. 19, 2001) ("Answer") at ¶ 2; Initial Brief of Wood
    County Telephone Company, File No. EB-01-MD-004 (filed Sep. 14,
    2001) ("Wood County Brief") at 6-7.

[^32]: *Id.*

[^33]: 47 U.S.C. § 208(a).

[^34]: 47 U.S.C. § 154(j).

[^35]: *SLI Order*, 14 FCC Rcd at 15607-08, ¶ 106.

[^36]: We note that Wood County has unique access to information
    concerning its costs. The Commission has previously concluded in
    other similar circumstances that the party with unique access to
    crucial information may have to bear the burden of proof. *See In re
    Implementation of the Telecommunications Act of 1996, Amendment of
    Rules Governing Procedures to be Followed When Formal Complaints Are
    Filed Against Common Carriers*, Report and Order, 12 FCC Rcd 22497,
    22615, n.782 (1997) (subsequent history omitted) (explaining that,
    in cases alleging discrimination under section 202(a), the burden
    shifts to the defendant to justify discrimination once the
    complainant has presented *prima* *facie* evidence that
    discrimination in the provision of like services exists); *see
    also*, *National Communications Assoc., Inc. v. AT&T Corp.,* 238
    F.3d 124, 130 (2d Cir. 2001) (explaining that it is generally
    appropriate to shift the burden to the party with easier access to
    relevant information). Wood County cites a recent Commission
    decision in which the Commission did not shift the burden of proof
    to the party with easier access to relevant information. *See AT&T
    Corporation v. Bell Atlantic -- Pennsylvania*, Memorandum Opinion
    and Order on Reconsideration, 15 FCC Rcd 7467, 7471-72 ¶ 10 (2000).
    However, that case did not involve a Commission-prescribed
    presumptively reasonable rate or a rulemaking proceeding in which
    the Commission established specific cost-study requirements for
    carriers seeking to exceed a presumptively reasonable rate.

[^37]: *See* 47 C.F.R. § 76.1504(d) (assigning the burden of proof to
    the defendant open video system operator in complaint proceedings
    involving claims that the operator is not charging the presumptively
    reasonable rate).

[^38]: Wood County also contends that McLeod waived its right to argue
    the burden of proof issue by purportedly failing to address it in
    its initial brief. Reply Brief of Wood County Telephone Company,
    File No. EB-01-MD-004 (filed Sep. 28, 2001) ("Wood County Reply") at
    9 (citing 47 C.F.R. § 1.732(b) (providing that, unless otherwise
    directed, all claims and defenses must be included in the parties'
    briefs or will be deemed abandoned). We do not agree that McLeod was
    obligated to address the burden of proof issue in its opening brief,
    because the burden is clearly specified in Commission rules. In any
    event, McLeod did assert in its initial brief that Wood County bore
    the burden of proof in this proceeding, and, accordingly, we reject
    Wood County's contention. Initial Brief of Complainant McLeodUSA
    Publishing Company, File No. EB-01-MD-004 (filed Sep. 14, 2001)
    ("McLeod Brief") at 4-5, ¶¶ 10-11.

[^39]: *SLI Order,* 14 FCC Rcd at 15608, ¶ 106.

[^40]: Wood County's SLI Cost Study, File No. EB-01-MD-004 (filed Mar.
    19, 2001) ("Wood County Cost Study"), attached as Exhibit 1 to the
    Answer.

[^41]: Wood County Cost Study at Schedule 1*.*

[^42]: *SLI Order*, 14 FCC Rcd at 15608, ¶ 106.

[^43]: *Id.* at 15591, ¶ 77.

[^44]: Wood County Cost Study at Schedules 2 and 2a.

[^45]: *Id.* at Schedule 2a.

[^46]: Report of Stephen E. Siwek, File No. EB-01-MD-004 (filed Jun. 26,
    2001) ("McLeod Report") at 11-12.

[^47]: *Id.*

[^48]: Rebuttal Cost Report prepared by Douglas Meredith and Scott
    Duncan of John Staurulakis, Inc. File No. EB-01-MD-004 (filed Aug.
    15, 2001) ("Wood County Rebuttal") at 8-9.

[^49]: *SLI Order*, 14 FCC Rcd at 15606, ¶ 102.

[^50]: *Id.* at 15592, ¶ 79.

[^51]: Wood County Rebuttal at 14. Wood County points out that its costs
    would be less than the Berry rate if it provided unformatted SLI to
    McLeod, and that the Berry rate is based on the provision of
    formatted SLI to publishers. *Id.* However, Wood County does not
    attempt to calculate the formatting costs associated with Wood
    County's provision of formatted SLI directly to McLeod; nor does
    Wood County state that such costs would raise the total incremental
    cost calculation above \$0.0408 per listing. Wood County simply says
    that the formatting costs "may" lead to an incremental cost
    calculation exceeding the Berry rate. *Id.*

[^52]: *SLI Order*, 14 FCC Rcd at 15602-03, ¶ 96. Commercial list
    providers differ from directory publishers in that they obtain SLI
    from sources other than a LEC (*e.g*., already published directories
    or information maintained by local Chambers of Commerce). *Id.* at
    15596, ¶ 87.

[^53]: For example, Wood County could have ascertained how long it took
    for Berry employees to provide the requested SLI to McLeod, the
    costs associated with the time to perform the required tasks, and
    the cost of the material used to prepare and send the information to
    McLeod.

[^54]: *SLI Order*, 14 FCC Rcd at 15608, ¶ 106.

[^55]: Reply Brief of McLeodUSA Publishing Company, File No.
    EB-01-MD-004 (filed Sep. 28, 2001) ("McLeod Reply") at 2-3; Wood
    County Brief at 17-18.

[^56]: Wood County's Answers to Interrogatories, File No. EB-01-MD-004
    (filed Apr. 23, 2001) at Response to Interrogatory 1.

[^57]: Wood County's Answers to Interrogatories at Response to
    Interrogatory 2.

[^58]: *Id.*

[^59]: *Id.*

[^60]: *Id.*

[^61]: Wood County Cost Study at Schedule 3. The service order
    processing and directory clerk expenses comprise over 95% of the
    calculated common costs.

[^62]: Wood County Cost Study at Schedule 3.

[^63]: *Id.*

[^64]: McLeod Report at 20-21; McLeod Brief at 13-14.

[^65]: McLeod Report at 20.

[^66]: Wood County Rebuttal at 27-28.

[^67]: *Id.*; Wood County Answer's to Interrogatories at Response to
    Interrogatory 2*.*

[^68]: Wood County Rebuttal at 27-28; Wood County Brief at 18-19.

[^69]: *Id.* at Schedule 3a.

[^70]: Wood County Cost Study at Schedule 3a, Column D.

[^71]: *Id.* at Schedule 3a, Column B.

[^72]: *Id.* at Schedule 3a, Column D. Wood County provides the
    following times estimates for the remaining five categories of
    service orders: Wood County estimates that it takes an average of 19
    minutes to process new installation requests that include requests
    for non-published or non-listed status, of which 3 minutes consists
    of SLI/DA activity; 6 minutes to process disconnects, of which 3
    minutes consists of SLI/DA activity; 14 minutes to process requests
    by established subscribers for non-published status, of which 3
    minutes consists of SLI/DA activity; 8 minutes to process requests
    by established subscribers for return to published status, which
    consists entirely of SLI/DA activity; and 6 minutes to process
    requests by established subscribers for additional listings, which
    consists entirely of SLI/DA activity. *Id.*

[^73]: Wood County Rebuttal at 22-24. These four service order
    categories are: 1) new installation -- not requesting non-published
    status; 2) new installation -- requesting non-published or unlisted
    status; 3) disconnection; and 4) requests by established subscribers
    for return to published status. Wood County Cost Study at Schedule
    3a.

[^74]: McLeod Report at 15-16 (citing Deposition of Jerold R. Johnson,
    File No. EB-01-MD-004 (Jun. 5, 2001) ("Johnson Dep.") at 123-25,
    133).

[^75]: Johnson Dep. at 123-25.

[^76]: McLeod Report at 15.

[^77]: Johnson Dep. at 123-25, 133.

[^78]: We also question whether costs related to honoring requests for
    non-published or non-listed status are appropriately included in a
    cost study seeking to establish rates for the provision of SLI. The
    definition of SLI in the Commission's rules does not include
    non-published or non-listed information. 47 C.F.R. § 64.2305(e). In
    any event, we need not decide this issue here, because we find the
    cost information to be defective for other reasons.

[^79]: "Pure SLI function" in this case refers to functions performed in
    connection with maintaining the single SLI/DA database that Wood
    County uses for SLI purposes. Thus, a "pure SLI function," as
    defined here, does not involve activities that are unrelated to Wood
    County's maintenance of the SLI/DA database, such as billing or
    maintenance and repair activities.

[^80]: McLeod Report at 15.

[^81]: Wood County Answers to Interrogatories at Response to
    Interrogatory 2-3; McLeod Report at 23; Wood County Rebuttal at 30.

[^82]: Rather, Wood County argued that revenues need not be considered
    at all. Wood County Brief at 15-17.

[^83]: *Id.* at 15590, ¶ 73, and 15595, ¶ 84.

[^84]: As McLeod points out, Wood County's cost study does not indicate
    the number of additional listings that its customers request
    annually. McLeod Report at 23. Although Wood County indicates that
    it processes 444 service orders annually that contain additional
    listings (Wood County Cost Study at Schedule 3a), it is quite
    possible that a portion of these service orders contain multiple
    requests for additional listings. McLeod Report at 23. If less than
    half of these service orders contain requests for more than one
    additional listing, the revenues received entirely offset the
    alleged costs. For example, if the 444 service orders resulted in
    650 additional listings, then Wood County's revenues would exceed
    the asserted costs: 444 service orders times \$5.00 per service
    order plus 650 listings times \$0.50 per listing times 12 months
    totals \$6120.00; Wood County's alleged costs for this service order
    category total \$6083.00. Wood County Answers to Interrogatories at
    Response to Interrogatory 2-3. Even if the revenues did not entirely
    offset the costs for this category, the shortfall would be too
    insignificant, standing alone, to justify a rate above the
    presumptively reasonable rate. *See* analysis, *infra*, at n.86.

[^85]: Again, Wood County elected not to engage in such an analysis,
    because it argued that revenues need not be considered at all, an
    argument we reject, *infra.*

[^86]: Wood County Answers to Interrogatories at Response to
    Interrogatory 2-3. If we applied Wood County's methodology to the
    \$700 cost described above, we would find a per listing SLI rate
    much lower than the presumptively reasonable rate: if we assume
    \$700 in total common costs attributed to SLI/DA activities,
    allocate those costs evenly between SLI and DA, and divide the SLI
    portion (\$350) by the 81,267 demand estimate used by Wood County,
    we arrive at a per listing figure of \$0.004. We assess the effect
    of these costs "standing alone" because, as described throughout
    this Order, Wood County has failed to meet its burden of proof
    regarding consideration of any other category of costs.

[^87]: Wood County Rebuttal at 30.

[^88]: The SLI-related costs that Wood County includes in its
    interrogatory response for the two pure SLI functions include both
    service order processing costs *and* directory clerk expenses. Thus,
    Wood County's failure properly to consider revenues associated with
    these two functions applies to our consideration of both service
    order processing costs and directory clerk expenses. In any event,
    as discussed, *infra*, we do not consider Wood County's directory
    clerk costs as a whole because they are unverifiable and are derived
    from a flawed process.

[^89]: Wood County Cost Study at Schedule 3b.

[^90]: Wood County Answers to Interrogatories at Response to
    Interrogatory 2-4.

[^91]: McLeod Report at 16-17.

[^92]: *Id.* (citing Johnson Dep. at 214-25 and 221-22).

[^93]: *Id.*

[^94]: *Id.*

[^95]: For example, Wood County indicates that the directory clerk has
    taken as long as four hours to perform the activities related to SLI
    for a single listing and as little as one-minute for a simple,
    one-line listing. McLeod Report at 18 (citing Johnson Dep. at 213).

[^96]: It is also unclear whether Wood County properly excluded certain
    activities not related to SLI in developing its eight-minute
    average. In particular, Wood County points out that the directory
    clerk references the customer's credit history when processing
    service orders. McLeod Report at 17. We agree with McLeod that this
    activity is unrelated to SLI and should not be included in any time
    estimate designed to capture SLI-related activity. Wood County has
    not indicated whether it removed time associated with this activity
    in developing its eight-minute estimate.

[^97]: McLeod Report at 17-18.

[^98]: Johnson Dep. at 214-15, 221-22. McLeod also challenges the
    adequacy of the sampling exercises themselves: Wood County's
    directory clerk sampled fifty different service orders to develop a
    time estimate for entry of information, and the directory
    verification clerk performed a self-timing exercise over a four-hour
    period to develop an estimate of verification time. McLeod Report at
    16-17 (citing Johnson Dep. at 214-15, 221-22). We do not decide
    whether the scope of the sampling exercises Wood County performed is
    sufficient, because we find that the estimate that purportedly
    resulted from the sampling exercises is unverifiable for the reasons
    described above.

[^99]: McLeod understandably moved to strike the new information. Motion
    of Complainant McLeodUSA Publishing Company for an Order Striking
    From the Record the Portions of Wood County Telephone Company's
    Rebuttal Cost Report That Introduce New Supporting Information for
    Wood County's Costs, File No. EB-01-MD-004 (Filed Aug. 23, 2001)
    ("McLeod Motion to Strike") at 2. Because we find that the new
    analysis does not meet the requirements for submission of cost data
    set forth in the *SLI Order*, we need not and do not rule on
    McLeod's Motion to Strike.

[^100]: Wood County Rebuttal at 24.

[^101]: *Id*.

[^102]: Wood County Brief at 18-19.

[^103]: The computer expenses and computer investment costs represent
    only three percent of the total common costs. Wood County Cost Study
    at Schedule 3.

[^104]: Wood County developed its allocation of computer expenses and
    computer investment costs by calculating a computer usage factor
    related to SLI activities. *See* Wood County Cost Study at Schedules
    3c and 3d. The computer usage factor was based, in part, on the
    estimate Wood County used for the time spent by directory clerks on
    service orders. *See* Wood County Rebuttal at Schedule JSI(c).

[^105]: *SLI Order*, 14 FCC Rcd at 15608, ¶ 106.

[^106]: *See* Wood County Cost Study at Schedule 4.

[^107]: McLeod also argues that Wood County's proposed rate for the
    provision of SLI is discriminatory. McLeod Brief at 24-25. Wood
    County contends that we should not consider McLeod's discrimination
    allegations because McLeod did not allege a discrimination claim in
    its complaint. Wood County Brief at 20-22. We need not consider
    either contention here because we have resolved McLeod's claims on
    other grounds.

[^108]: *SLI Order*, 14 FCC Rcd at 15607, ¶ 105.

[^109]: Complaint at ¶¶ 2, 23-24, and Prayer for Relief.

[^110]: Answer at ¶ 5.

[^111]: *Id.*

[^112]: Complaint at ¶ 12, Exhibit 13.

[^113]: We note that McLeod's complaint does not challenge the minimum
    transmission charge of \$100 that Wood County proposed for the
    provision of SLI updates. Accordingly, although we find that Wood
    County can charge no more than \$0.06 per listing for updated SLI,
    we make no ruling on the reasonableness of Wood County's proposed
    transmission fee, because it is not at issue here.

[^114]: After the record closed in this proceeding, Wood County filed a
    "Suggestion to Inquire Into McLeodUSA\'s Ability to Go Forward and
    Whether This Case is Stayed." Suggestion to Inquire Into
    McLeodUSA\'s Ability to Go Forward and Whether This Case is Stayed,
    File No. EB-01-MD-004 (filed Feb. 6, 2002) ("Wood County\'s
    Suggestion"). Wood County inquired as to whether the Commission
    would stay the formal complaint proceeding in view of the fact that
    McLeod\'s parent company, McLeodUSA, Inc., had filed for
    re-organization under Chapter 11 of the bankruptcy code. McLeod
    responded to Wood County\'s filing and argued that this proceeding
    should not be stayed. Opposition of McLeodUSA Publishing, File No.
    EB-01-MD-004 (filed Feb. 8, 2002) ("McLeod\'s Opposition"). We agree
    with McLeod that a stay is inappropriate here. First, complainant
    McLeodUSA Publishing Company is not a party to the bankruptcy
    proceeding. Second, even if McLeod were considered a \"debtor\" in
    the bankruptcy proceeding, the stay provision of the bankruptcy code
    applies to actions brought against the debtor, not actions brought
    by the debtor. *See* 11 U.S.C. § 362(a)(1); *Farley v. Henson*, 2
    F.3d 273, 274 (8th Cir. 1993) ("Because the automatic stay applies
    to \'the commencement or continuation . . . of a judicial proceeding
    against the debtor,\' it is well established that it does not apply
    to a proceeding brought by the debtor that inures to the benefit of
    the debtor\'s estate."). Accordingly, we reject Wood County\'s
    suggestion that we stay this action.

[^115]: McLeod's expert included in his report a request that the
    Commission award damages to McLeod to cover the costs associated
    with litigating the complaint. *See* McLeod Report at 38. However,
    McLeod's complaint does not contain a claim for damages.
    Accordingly, we reject McLeod's expert's request and do not award
    any damages to McLeod in this order.