Opinion ID: 793196
Heading Depth: 2
Heading Rank: 1

Heading: Reduction of Switching Costs

Text: 20 Switches route telephone calls to their destinations. Switches can either be modern, computerized digital loop carrier (DLC) systems, or older and more expensive analog switches. 6 To comply with TELRIC, MPUC had to establish switch rates that included the percentage of digital switches that a hypothetical efficient network in Minnesota would utilize. MPUC adopted the HAI Model, proposed by AT & T/MCI, which uses the switching investment calculated by the FCC Synthesis Model. See In re Forward-Looking Mechanism for High Cost Support, Tenth Report and Order, 14 F.C.C.R. 20,156 (FCC rel. Nov. 2, 1999) ( Inputs Order ). The HAI Model makes a reduction to the calculated switching investment to reflect the savings that would result from an increased use of DLC systems. The HAI Model assumes that the FCC Synthesis Model accounts for only 18.3% DLC and that in Minnesota DLC penetration in a hypothetical efficient network would actually be 57.5%. Therefore, the MPUC adopted a DLC adjustment to account for the higher DLC penetration and resulting savings. 21 Qwest argues that the DLC adjustment is arbitrary and capricious because there is no evidence that the FCC Synthesis Model assumed only 18.3% DLC, or that the FCC Synthesis Model did not already reflect the savings associated with digital switches. The FCC refused to adopt a DLC adjustment for this very reason in the Inputs Order. See id. ¶ 327. However, the FCC cost model was developed to determine federal universal support and the FCC explicitly cautioned parties against using the federal input values to make claims regarding UNE rate determinations in other proceedings. Id. ¶ 32. Therefore, MPUC was not arbitrary and capricious merely because it reached a different conclusion than the FCC. 22 AT & T's expert testified that the FCC inputs assumed approximately 18.3% of the switches were digital. Moreover, AT & T's expert and an expert for the Minnesota Department of Commerce (Department of Commerce or Department) testified that the FCC inputs from 1999 did not adequately reflect the savings that a forward-looking network would achieve with DLC switches. Qwest provided no evidence to the contrary. Therefore, the ALJ rejected Qwest's argument that the DLC adjustment should be set to zero, as in the FCC Synthesis Model, because this would overstate the switching investment for a forward-looking network. The 1996 Act requires state public utilities commissions to make their decisions based upon the best evidence available, and does not mandate that they independently acquire data to build an evidentiary record. See § 252(b)(4); GTE S., Inc. v. Morrison, 199 F.3d 733, 748 (4th Cir.1999). Even assuming the HAI Model contains flaws, Qwest provided the ALJ with no satisfactory alternative. As a result, MPUC was not arbitrary and capricious in making the DLC adjustment based upon the evidence presented.