Opinion ID: 77289
Heading Depth: 2
Heading Rank: 3

Heading: The Pricing Model Adopted by the Florida Commission

Text: 12 This appeal arises from the pricing model approved by the Florida Commission that sets the rates for the use of the network elements of BellSouth. The pricing model adopted by the Florida Commission is largely based on the BellSouth Telecommunications Loop Model. Three aspects of the model adopted by the Florida Commission are relevant to this appeal. First, the BellSouth model employs three scenarios that model the different types of wire loops instead of a unitary network comprised of all three types of wire loops. Second, the BellSouth model incorporates an inflation factor to account for its cost of capital. Third, the model approved by the Florida Commission creates three tiers for geographic cost-based deaveraging. 13 The first aspect of the BellSouth model is its use of three scenarios to compute the TELRIC of each unbundled network element. The first scenario is Copper Only: all loops in this hypothetical network are required to be copper. BellSouth maintains that this scenario reflects the type of network that a competitive local carrier would require to provide DSL service. 14 The second scenario is BST2000. The BST2000 scenario uses copper for wire loops up to 12,000 feet and uses fiber optic for loops of longer lengths. In the BST2000 scenario, all fiber optic switch-loop combinations are universal rather than integrated. This technology allows the competitive local carrier to lease the loop but to supply its own switch ( i.e., the loop stands alone). BellSouth maintains that this scenario reflects the type of network that a competitive local carrier would require if it sought to provide its own switches and wished to lease only the wire loops of the incumbent local carrier. 15 The third scenario is referred to as the Combo scenario. The Combo scenario uses only integrated digital loop carrier technology for its fiber optic switch-loop combinations. The competitive local carrier must lease both the wire loop and the switch under this scenario. 16 For each scenario, the average cost per unit for the unbundled network element was calculated by dividing the total forward-looking cost for the wire loops in the scenario by the total number of wire loops in the scenario. BellSouth thus treats its wire loops as three separate unbundled network elements: copper, universal digital loop carrier, and integrated digital loop carrier. BellSouth charges the competitive local carrier based on which technology it requests. 17 The second aspect of the pricing model approved by the Florida Commission that is relevant to this appeal is the use of an inflation factor. When calculating the TELRIC for each unbundled network element, the BellSouth model also adds an inflation factor, which BellSouth contends reflects inflation that will affect the cost of equipment that BellSouth will purchase over a period of several years. BellSouth maintains that the inflation factor is independent of the cost of capital factor that the BellSouth model also takes into account in its pricing model. 18 The third relevant aspect of the pricing method approved by the Florida Commission is its methodology for geographic cost-based deaveraging. The wire centers were divided into three zones in the following manner. First, the wire centers were divided into five groups such that the average rate in each zone is no more than 20% higher or 20% [lower] than the forward-looking cost of providing that element. These five groups were then reduced to three by combining the two highest-priced zones and combining the two lowest-priced zones.