BEFORE THE ARKANSAS PUBLIC SERVICE COMMISSION
Docket No. 03-171-U
Direct Testimony of Jon R. Loehman On Behalf of SBC Arkansas Regarding Mass Market Switching
FEBRUARY 10,2004 TABLE OF CONTENTS
Page(s)
I . INTRODUCTION ...... 1
I1. OVERVIEW OF THE FCC’s MASS MARKET SWITCHING CONCLUSIONS ...... 3
I11 . TRIGGER ANALYSIS ...... 4
A . Overview of the FCC’s Trigger Rules ...... 4
B . Description of the Self-Provisioning Trigger Analysis ...... 5
C . Results of the Self-Provisioning Trigger Analysis ...... 12
D . “Internodal” Providers ...... 14 IV . THE DSO CUTOFF ...... 15
V . GEOGRAPHIC MARKETS ...... 25 A . Principles of Geographic Market Definition ...... 25
B . Definition of Geographic Markets in Arkansas ...... 26 1. CLEC Deployment of Switches ...... 29
2 . Unbundled Voice Grade Loops ...... 32
3 . Ported Numbers ...... 33
4 . NXX Codes ...... 35
5 . CLEC Collocation ...... 37 VI . SUMMARY ...... 41
i EXHIBITS
EXHIBIT DESCRIPTION JRL- 1 Little Rock LATA Self Provisioning Trigger Analysis Results
JRL-2 Trigger Analysis Arkansas Map
JRL-3 Arkansas LATAs Self Provisioning Trigger Analysis-Detailed Results by Wire Center JRL-4 Attachment: CLEC Integrated Access Analysis
JRL-5 Integrated DSO-DS 1 Analysis: Results
JRL-6 Arkansas LATA Map JRL-7 SBC Arkansas Wire Centers by LATA, County, and MSA JRL- 8 Arkansas CLEC Switches JRL-9 Comparison of Little Rock LATA to State JRL- 10 CLEC Use of UNE LOODS,Collocation. and Ported Numbers JRL-11 1 Arkansas Ported Telephone Numbers
JRL- 12 Comparison of CLEC Use of NXXs in Little Rock LATA and the State 1 I. INTRODUCTION
2 Q1. PLEASE STATE YOUR NAME AND BUSINESS ADDRESS.
3 Al. My name is Jon Loehman. My business address is 98 San Jacinto Blvd., Austin, Texas
4 42. BY WHOM ARE YOU EMPLOYED AND WHAT IS YOUR POSITION? 5 A2. I am employed by Public Strategies, Inc. as Managing Director.
6 Q3. WHAT IS YOUR EDUCATIONAL BACKGROUND'?
7 A3. I have a bachelor's degree in econoinics from Texas Tech University. I have also
8 completed advanced executive education programs in marketing, strategic planning,
9 finance, and general business topics at Stanford University, Northwestern University, and
10 the University of Michigan.
11 Q4. PLEASE DESCRIBE YOUR WORK EXPERIENCE.
12 A4. I have been employed by Public Strategies, Inc. for the past 2 years as Managing
13 Director. I have primarily consulted for SBC Communications Inc. working on matters
14 relating to federal legislation and regulation, and more recently the Triennial Review
15 activities at the state commissions.
16 Before my employment at Public Strategies I was employed for 30 years by
17 Southwestern Bell Telephone Company (SWBT), SBC and AT&T. I have held positions
18 in regulatory affairs, external affairs, strategic planning, marketing, human resources and
19 operations staff. 1 Q5. HAVE YOU PREVIOUSLY TESTIFIED BEFORE THE ARKANSAS PUBLIC 2 SERVICE COMMISSION?
3 A5. Yes. I have testified before this Commission several times on economic issues related to
4 pricing and regulation. The last proceeding was the 1984 divestiture case.
5 Q6. HAVE YOU TESTIFIED BEFORE OTHER REGULATORY OR JUDICIAL 6 BODIES ON BEHALF OF SBC COMMUNICATIONS INC.?
7 A6. Yes. In addition to testifying in proceedings in Arkansas, I have testified on behalf of
8 SBC in Texas, Missouri, Kansas and Oklahoma. I have also testified on SBC’s behalf
9 regarding regulatory matters in state and federal courts.
10 Q7. WHAT IS THE PURPOSE OF YOUR TESTIMONY?
11 A7. I will address the issues related to mass market switching. Based on the FCC’s Triennial
12 Review Order, SBC Arkansas is seeking a finding of no impairment with regard to local
13 switching used to serve mass-market customers. SBC Arkansas is presenting evidence to
14 show that the FCC’s “self-provisioning” trigger is met in the Little Rock LATA. (The
15 Commission has already defined LATAs as the relevant market for purposes of this case.)
16 The self-provisioning trigger is met in the Little Rock LATA because five different
17 CLECs are using their own switches to serve mass-rnarket customers in that market.
18 Because the trigger is met, the Commission must find no impairment. In support of SBC
19 Arkansas’s request, I will (1) explain the analysis I did to determine whether the FCC’s
20 self-provisioning trigger is met in the Little Rock LATA; (2) discuss the appropriate
21 “DSO cutoff’ to distinguish “mass market” customers froin “enterprise market”
22 customers; and (3) provide information concerning CLECs’ provisioning of local service
23 within Arkansas and the Little Rock LATA specifically.
2 1 11. OVERVIEW OF THE FCC’s MASS MARKET SWITCHING CONCLUSIONS
2 QS. WHAT FINDING DID THE FCC MAKE WITH RESPECT TO THE STATES’ 3 ROLE IN ASSESSING THE UNBUNDLING OF LOCAL CIRCUIT SWITCHING 4 FOR THE MASS MARKET?
5 A8. In the Triennial Review Order, the FCC stated that “[blecause our [impairment] standard
6 and the guidance from the [D.C. Circuit’s] USTA decision require that the determination
7 of impairment be made on a granular basis, and because the record provides insufficient
8 evidence concerning the characteristics of particular markets, we find it appropriate to
9 ask the states to assess impairment in the mass market on a market-by-market basis.”’
10 Q9. WHAT SPECIFICALLY DID THE FCC DIRECT STATE COMMISSIONS TO 11 DO?
12 A9. The FCC directed the states to conduct a review, on a market-by-market basis, to identify
13 the markets in which competing carriers are not impaired without unbundled access to
14 local switching. When an incumbent LEC asserts that there is no impainnent in a given
15 market, the state commission must define the relevant geographic market and then, within
16 that market, determine whether certain “triggers” have been met, in which case there is
17 no impairment. If the triggers have not been met, the state commission may conduct a
18 “potential deployment” analysis of CLECs’ ability to deploy and use their own switches.2
19 In making these determinations, the state commission also must establish a “DSO cutoff,”
20 which is used to differentiate “mass market” customers from the “enterprise market’’
21 customers based on the number of DSO lines a customer uses at a given location.
I In the Matter of Review of the Section 251 Unbuizdling Obligations of Incumbent Local Exchange Carriers, CC Docket No. 01-338, FCC 03-36 (rel. Aug. 21, 2003) (“Triennial Review Ortiei.” or “TRO”)at 7 493.
’ Id., 7 424.
3 1 QlO. WHAT ANALYSIS IS SBC ARKANSAS ASKING THE COMMISSION TO 2 APPLY?
3 A10. SBC Arkansas has decided not to pursue a finding of non-impairment based on a
4 potential deployment analysis, and is requesting only that the Commission apply the self-
5 provisioning trigger with respect to mass market switching, which is satisfied in .the Little
6 Rock LATA.
7 111. TRIGGER ANALYSIS
8 A. Overview of the FCC’s Trigger Rules
9 Qll. PLEASE DESCRIBE THE FCC’S “TRIGGERS” FOR UNBUNDLED 10 SWITCHING FOR MASS MARKET CUSTOMERS.
11 A1 1. The FCC’s rules contain two trigger tests that apply to each geographic market. If either
12 trigger is satisfied in a geographic market, then the Commission “shall find that a
13 requesting telecommunications carrier is not impaired without access to local circuit
14 switching on an unbundled basis” in that market.3
15 Q12. WHAT IS THE FIRST TRIGGER?
16 A12. The first trigger (the “self-provisioning trigger”) addresses the presence of CLECs in a
17 market that serve mass-market customers with their own switches. The FCC’s rules
18 define the self-provisioning trigger as follows,
19 Local switching self-provisioning trig= To satisfy this trigger, a state 20 commission must find that three or more competing providers not 21 affiliated with each other or the incumbent LEC, including intermodal 22 providers of service comparable in quality to that of the incumbent LEC, 23 each are serving mass market customers in the particular market with the 24 use of their own local circuit switches4
’ 47 C.F.R. 3 5 1.319(d)(2)(iii)(A) (emphasis added)
‘ 47 C.F.R. 6 51.319(d)(2)(iii)(A)(l).
4 1 The application of the self-provisioning trigger is an objective and straightforward
2 undertaking. The Commission need only find that there are three or more competing
3 providers, not affiliated with SBC or each other, serving the mass market using their own
4 switches. The trigger is discussed further in paragraph 499 of the Triennial Review
5 Order.
6 Q13. WHAT IS THE SECOND TRIGGER?
7 A13. The second trigger (the “wholesale trigger”) addresses the presence of carriers in a
8 market that offer wholesale switching to other carriers to serve mass-market customers.
9 The FCC defined the wholesale provider trigger as follows:
10 Local switching competitive wholesale facilities trigger. To satisfy this 11 trigger, a state commission must find that two or more competing 12 providers not affiliated with each other or the incumbent LEC, including 13 internodal providers of service comparable in quality to that of the 14 incumbent LEC, each offer wholesale local circuit switching service to 15 customers serving DSO capacity loops in that market using their own 16 s~itches.~
17 Q14. ARE YOU RELYING ON THE WHOLESALE PROVIDER TRIGGER TO SHOW 18 THAT CLECs ARE NOT IMPAIRED WITHOUT ACCESS TO UNBUNDLED 19 LOCAL SWITCHING FOR THE MASS MARKET IN ARKANSAS?
20 A14. No.
21 B.
22 Ql5. HAVE YOU EXAMINED THE GEOGRAPHIC MARKETS DEFINED BY THE 23 COMMISSION TO DETERMINE WHETHER THE SELF-PROVISIONING 24 TRIGGER HAS BEEN MET?
25 A15. Yes.
’ 47 C.F.R. 9 51.319(d)(2)(iii)(A)(2)
5 Q16. WHAT HAVE YOU CONCLUDED FROM YOUR EXAMINATION?
A16. As shown in my Exhibit JRL-1, the self-provisioning trigger has been satisfied in the
Little Rock LATA. While the other two Arkansas LATAs might pass this trigger, I
4 cannot determine whether they do from the data available to SBC Arkansas at this time.
5 Additional information possessed by the CLECs would be required to make that
6 determination. In any event, SBC Arkansas does not propose that the Commission
7 review these areas at this time.
S Q17. HOW DID YOU DETERMINE WHICH GEOGRAPHIC MARKETS MEET THE 9 SELF-PROVISIONING TRIGGER?
10 A17. Using CLEC-related data available to SBC Arkansas, I identified the individual CLECs
11 that are using self-provisioned switches to provide voice service to mass-market
12 customers in each SBC Arkansas wire center within the three Arkansas LATAs. Using
13 these CLEC identities, I prepared a single list of the CLECs in each LATA, excluding
14 any duplication and any CLEC affiliated with a CLEC already listed. None of the
15 identified CLECs are affiliated with SBC Arkansas. Where the resulting list shows three
16 or more unique, unaffiliated CLECs serving mass-market customers in the LATA, the
17 market meets the self-provisioning trigger. Exhibit JRL-2is a map that displays this
1s information.
19 QlS. IS SATISFACTION OF THE SELF-PROVISIONING TRIGGER IN A LATA 20 DEPENDENT ON WHETHER CLECs HAVE SWITCHES LOCATED WITHIN 21 THE LATA?
22 A1 8. No, not at all, but most of the CLEC switches are located within the Little Rock LATA.
23 As explained above, the FCC’s objective rule for the self-provisioning trigger requires
24 only that three or more CLECs be using switches to serve mass market customers in the
25 relevant geographic market, not that three or more CLECs’ switches be physically
6 1 located within the market. As also explain below in my discussion of geographic
2 markets, the broad reach of a switch allows CLECs to serve mass-market customers who
3 are located many miles from the CLEC’s switch. Moreover, it is not possible for SBC
4 Arkansas to discern which CLEC switch is serving which specific groups of customers in
5 which geographic markets.
6 Q19. WHAT DATA HAVE YOU RELIED ON TO DETERMINE THE QUANTITIES 7 AND LOCATIONS OF MASS MARKET CUSTOMERS THAT CLECs ARE 8 CURRENTLY SERVING IN YOUR TRIGGER ANALYSIS?
9 A19. I have relied on SBC Arkansas’s unbundled loop data. I also reviewed E91 1 data to
10 determine whether any CLECs that do not use the incumbent’s UNE loops (but normally
11 use self-provided loops) were providing local residential service in Arkansas; however, I
12 did not find any.
13 420. IF THE COMMISSION HAS ADOPTED A LATA DEFINITION AS THE 14 APPROPRIATE GEOGRAPHIC MARKET, WHY HAVE YOU ANALYZED 15 THESE DATA BY WIRE CENTER?
16 AZO. Unbundled loops are identified in SBC Arkansas’s mechanized systems on a wire center-
17 by-wire center basis6 As a consequence, the data were extracted for my analysis on that
18 same basis. This “raw” wire center data can then be rolled-up into the LATA geographic
19 markets for application of the trigger.
20 Q21. WHAT TYPES OF UNBUNDLED LOOPS ARE USED TO DETERMINE 21 WHETHER THE TRIGGER IS MET IN A PARTICULAR MARKET?
22 A2 1. First, only voice grade loops are used. This assures that enterprise market customers
23 served by higher-capacity loops are excluded. Second, using SBC Arkansas’s proposed
24 DSO cutoff of four loops, I excluded all unbundled voice grade loops where there were
‘The wire center shown for each unbundled loop in SBC Arkansas’s mechanized systems is the location of the central office main distributing frame where the loop is terminated.
7 1 four or more such loops serving the same customer. Third, unique customers were
2 identified in the data using customer address (ie.,location), regardless of customer name.
3 While this third criterion assures the proper exclusion of a single enterprise customer that
4 might appear in the data under two or more names, it also can result in the unnecessary
5 exclusion of legitimately different mass-market customers at the same address.
6 Therefore, this criterion results in a conservative count of mass-market loops for the
7 trigger analysis. Fourth, each unbundled loop counted in my analysis is either (a) a
8 “stand-alone” unbundled loop that is connected to a CLEC’s collocation arrangement in
9 the customer’s serving wire center, or (b) an unbundled loop that is used as part of an
10 EEL between the customer’s premises and another SBC Arkansas wire center that
11 contains the CLEC’s collocation arrangement used for loop aggregation. Conversely,
12 these “stand-alone” unbundled loops are not used with SBC’s unbundled switching.
13 Thus, an unbundled loop that is part of a UNE-P is excluded from my analysis.
14 Q22. WHY IS THE UNBUNDLED LOOP PORTION OF AN EEL INCLUDED IN 15 YOUR ANALYSIS?
16 A22. The only relevant difference between a purely stand-alone unbundled loop and an
17 unbundled loop used as part of an EEL is the location of the CLEC’s collocation space.
18 If the CLEC has collocation space in the customer’s serving wire center, then a purely
19 stand-alone unbundled loop is connected directly to the CLEC’s collocation space. On
20 the other hand, if the CLEC does not have collocation space in the customer’s serving
21 wire center, it can use an EEL to extend the customer’s stand-alone unbundled loop to
22 another SBC Arkansas wire center where it does have collocation space. Either way, that
23 customer’s unbundled loop is eventually connected to the CLEC’s switch. Therefore, it
24 is properly included in my analysis. Figure 1 illustrates both situations.
8 1
Unbundled Loops Connected To CLECs’ Switches
CLEC , Switch Switch
SBC Serving Wire Center Other SBC Wire Center
------CLECLoOp ----- Aggregation Collocation Equipment Collocation Space Space
Customers’ Premises DF \ n n\ n\ Unbundled Dedicated
2
3 Figure 1. Unbundled Loops Connected To CLEC Switches
4 423. ARE ALL UNIQUE, UNAFFILIATED CLECs THAT HAVE UNBUNDLED 5 MASS MARKET LOOPS IN A WIRE CENTER INCLUDED IN DETERMINING 6 WHETHER THE TRIGGER IS MET FOR A PARTICULAR MARKET?
7 A23. No. If a CLEC has fewer than five qualifying unbundled loops in a particular wire
8 center, that CLEC has not been counted for that wire center. I have used this limit as a
9 uniform, objective means designed to exclude any CLEC “customers” that might only be
10 the CLEC’s test lines or administrative lines in that wire center, which would mean that
11 the CLEC is not serving mass market customers in that wire center. However, that same
12 CLEC could still be counted toward meeting the trigger in that market if it has five or
13 more qualifying unbundled loops in one or more other wire centers in the market.
9 1 Q24. IS YOUR ANALYSIS OF THE UNBUNDLED LOOP DATA CONSERVATIVE IN 2 ANY OTHER WAYS?
3 A24. Yes. There are three additional ways my analysis is conservative. The first way
4 concerns data-only CLECs. Data-only CLECs sometimes obtain unbundled voice grade
5 loops (i.e., not xDSL-capable loops), but apparently use them to provide lower-speed data
6 services. Based on the criteria described above, those CLECs and some of their loops
7 would qualify for inclusion in my trigger analysis. Because they are data-only CLECs,
8 however, I have excluded those CLECs and their qualifying loops from the analysis. If a
9 data-only CLEC has also entered into a line-splitting arrangement with a voice CLEC
10 that uses its own switch, the voice CLEC’s service provided over that loop to a mass
11 market customer should be included in my analysis, but has not been, because the loops
12 obtained from SBC Arkansas by all data-only CLECs have been excluded.
13 The second additional way my analysis is conservative relates to unbundled
14 xDSL-capable loops. As described above, unbundled xDSL-capable loops are not
15 included in my analysis at all. However, if a CLEC provides both voice and DSL over
16 that loop, or has entered into a line-splitting arrangement with another CLEC that uses its
17 own switch to provide voice service to a mass market customer, that DSL-capable loop
18 should be included in my analysis, but has not been because that type of loop was
19 excluded.
20 The third additional way my analysis is conservative involves multi-dwelling unit
21 (“MDU”) locations, such as apartment complexes. A CLEC might serve individual
22 tenants, with three or fewer lines each, at such a location by using one or more unbundled
23 DS 1 loops to the single point-of-interface in the MDU location. This arrangement would
24 allow the CLEC to aggregate these individual mass-market customers onto the DS 1
10 1 loops. Because my analysis excludes all unbundled DS 1 loops, any individual mass-
2 market customers served in this way would likewise be excluded from my analysis.
3 425. WHY DID YOU DECIDE TO EXCLUDE THESE THREE TYPES OF LOOPS IN 4 YOUR TRIGGER ANALYSIS?
5 A25. In the first two situations described above, these exclusions are necessary because SBC
6 Arkansas simply does not have the records to determine whether voice service is being
7 self-provided by a CLEC to a mass-market customer. To the extent that voice service is
8 being self-provided by a CLEC in any of these instances, my analysis conservatively
9 excludes those customers. In the third situation, these boiia fide mass-market customers
10 are excluded because SBC does not have the records to determine whether the customers
11 being aggregated onto these DS1 loops are part of the mass market or part of the
12 enterprise market.
13 426. COULD YOUR UNBUNDLED LOOP DATA UNDERSTATE THE USE OF SELF- 14 PROVISIONED CLEC SWITCHING IN THE MASS MARKET IN ANY OTHER 15 WAY?
16 A26. Yes. These data exclude any mass-market customers that might be served by non-cable
17 competitive carriers over self-provisioned loops or loops obtained from a third-party
18 wholesale provider.
19 Q27. IS IT POSSIBLE THAT YOUR ANALYSIS INCLUDED ANY ENTERPRISE 20 CUSTOMERS SERVED BY CLECs USING THEIR OWN SWITCHES?
21 A27. It is highly unlikely that such instances were included in my analysis to an extent
22 sufficient to alter my conclusions. Because of the conservative approaches I have taken
23 in excluding CLECs’ customers from my analysis, the most likely way for the inclusion
24 of enterprise customers to occur would be a situation in which these customers would
25 deliberatelv buy their local service from two or more carriers at each service address, thus
11 1 appearing to be mass-market customers. However, enterprise customers are very
2 unlikely to choose to do this, because they particularly dislike the inconvenience of
3 having to deal with multiple providers of service. Likewise, carriers generally want to be
4 the only provider for a customer at a particular service address.
5 C. Results of the Self-Provisioninp Trigger Analysis
6 428. PLEASE SUMMARIZE THE RESULTS OF YOUR SELF-PROVISIONING 7 TRIGGER ANALYSIS.
8 A28. Exhibit JRL-1 shows these results in tabular form for the Little Rock LATA, where the
9 self-provisioning trigger has been met. This table shows the names of the five CLECs
10 that I have determined are using self-provisioned switching to provide mass-market
11 services in the Little Rock market, and the number of mass-market lines that they are
12 providing. These data show that the self-provisioning trigger is satisfied in the Little
13 Rock market. Exhibit JRL-2 is a map of the areas where trigger CLECs are using UNE
14 loops to provide mass-market services. Exhibit JRL-3 provides the results of this
15 analysis for each SBC Arkansas wire center in a tabular format. I have segmented the
16 results to show the Little Rock LATA, followed by all other SBC Arkansas wire centers.
17 429. DOES EACH CLEC HAVE TO PROVIDE SERVICE TO EACH AND EVERY 18 AREA OF THE MARKET IN ORDER TO COUNT AS PASSING THE 19 TRIGGER?
20 A29. No. The fact that the collective group of CLECs provides service in the market is
21 sufficient for a finding that CLECs are not impaired anywhere in the market. I have
22 shown that CLECs can locate in SBC Arkansas’s wire centers to obtain access to loops
23 through collocation and EELS, making the entire scope of the market accessible to the
24 CLECs as a whole. Also, I have shown that switches, including CLEC switches used to
25 provide local service, can be used to provide service over a wide geographical area. It is
12 1 logical to conclude that existing CLECs using existing switches could expand to serve
anywhere in the Little Rock market. In any event, the decision before the Arkansas PSC
is whether the FCC’s trigger rule is satisfied in the Little Rock market. I have shown that
it is, and thus the Commission is required to find no impairment.
5 Q30. DOES A CLEC HAVE TO PROVIDE ONLY MASS MARKET SERVICE, OR 6 ONLY RESIDENTIAL SERVICE, WITH ITS SWITCH TO BE CONSIDERED 7 AS AN ELIGIBLE TRIGGER CLEC?
8 A30. Nor. The relevant test is whether CLECs, using their own switches, are providing mass-
9 market services in the market under consideration. The FCC’s Order is clear that the
10 mass market is composed of residential and small business. Also, there is no requirement
11 for the eligible trigger CLEC to be providing only mass-market services. In fact, you
12 would expect an efficient self-provider to spread the cost of its switch over as large a
13 customer base as possible, including both mass market and enterprise customers. As in
14 other parts of the telephone industry, you would expect CLECs to move into the most
15 profitable parts of the market first and then add other segments to its business. Once a
16 CLEC has entered the more profitable enterprise market (generally in the business
17 districts and metropolitan areas where the concentration of potential customers is the
18 greatest) it can even more easily and more profitably move into mass market services
19 over its switch. Its margins become greater for the mass-market service because it has
20 established itself and covered its fixed cost with its enterprise business, resulting in a
2s lower cost to extend into the mass market.
13 1 D. “Intermodal” Providers
2 Q31. PLEASE DEFINE “INTERMODAL PROVIDER” IN THE CONTEXT OF THE 3 MASS MARKET FOR LOCAL TELECOMMUNICATIONS SERVICES.
4 A3 1. In the context of mass market telecommunications, the term essentially describes
5 methods of offering local exchange telephone services to customers using technologies
6 and/or network architectures that are different from the traditional wireline, circuit-
7 switched telephone network.
8 Q32. DOES INTERMODAL COMPETITION REPRESENT A SIGNIFICANT 9 COMPETITIVE ALTERNATIVE TO TRADITIONAL ILEC LOCAL 10 TELEPHONE SERVICES?
11 A32. Yes. For example, Internet Protocol (“IP”) telephony and wireless service now place
12 significant - and rapidly growing -- additional competitive pressure on ILECs’ traditional
13 circuit switches. As AT&T has told investors, “[i]nexorably, cable and wireless are
14 going to eat into [the ILECs’] share [of the local
15 Q33. IS SBC ARKANSAS RELYING ON ANY INTERMODAL CARRIERS TO MEET 16 THE SELF-PROVISIONING TRIGGER HERE?
17 A33. No, because even under SBC Arkansas’s conservative approach, more than three carriers
18 meet the trigger without even having to count intennodal competitors.
19 434. DID THE FCC ADDRESS THE USE OF WIRELESS PROVIDERS AS 20 INTERMODAL COMPETITORS COUNTING TOWARD THE SELF- 21 PROVISIONING TRIGGER?
22 A34. Yes. The FCC indicated in the Triennial Review Order that it did not expect state
23 commissions to consider wireless switches in their application of the triggers.* The FCC
’ S. Wooiley, Bad Connection, Forbes (Aug. 12, 2002) (quoting AT&T president David Dorman); see also AT&T UNE Overview at 37 (noting that a “key issue[] that the RBOCs face” is “how to improve their efficiency so they can compete effectively with complete facilities-based carriers (e.g.,CATV) for telephony and DSL”).
8 Id.. fn. 1549
14 1 concluded, albeit erroneously, that wireless service “does not yet equal traditional
incumbent LEC services in its quality, its ability to handle data traffic, its ubiquity, and
its ability to provide broadband services to the mass market.”9
IV. THE DSO CUTOFF
5 Q35. WHAT IS THE “DSO CUTOFF”‘?
6 A35. This cutoff defines a demarcation point between mass-market customers and enterprise
7 market customers. The FCC decided that this demarcation point would be determined by
8 the number of DSO lines the customer uses. As the FCC explained:
9 At some point, [mass market] customers taking a sufficient number of 10 multiple DSO loops could be served in a manner similar to that described 11 above for enterprise customers-that is, voice services provided over one 12 or several DSls, including the same variety and quality of services and 13 customer care that enterprise customers receive. Therefore, as part of the 14 economic and operational analysis discussed below, a state must 15 determine the appropriate cut-off for multi-line DSO customers as part of 16 its more granular review. This cross over point [i.e., the point where the 17 mass market crosses over into the enterprise market] may be the point 18 where it makes economic sense for a multi-line customer to be served via 19 a DSI 100p.’~
Thus, once it is established, the DSO cutoff defines which customers make up the mass
21 market.
22 Q36. WHY IS THE DSO CUTOFF FOR THE MASS MARKET IMPORTANT?
23 A36. This cutoff is important because the Triennial Review Order establishes different
24 unbundling rules and standards depending on whether a CLEC would use local circuit
25 switching to serve mass-market customers or enterprise market customers. In particular,
26 the DSO cutoff is necessary for the purpose of determining which CLEC customers are in
Id. 10 Triennial Review Order, 1497.
15 1 the mass market and for the purpose of deciding whether a carrier serves mass market
2 customers in the relevant market so as to be counted toward meeting the FCC’s self-
3 provisioning trigger.
4 Q37. HOW DID THE FCC DESCRIBE THE MASS MARKET AND THE 5 ENTERPRISE MARKET IN THE TRIENNIAL REVIEW ORDER?
6 A37. The FCC described the mass market as consisting “primarily of consumers of analog
7 ‘plain old telephone service’ or ‘POTS’ that purchase only a limited number of POTS
8 lines and can only economically be served via analog DSO loops.”’ ’ For purposes of
9 determining impairment, the FCC defines “enterprise customers as those customers for
10 which is it economically feasible for a competing carrier to provide voice service with its
11 own switch using a DS1 or above loop.”**
12 Q38. WHAT IS THE FCC’S RULE REGARDING THE DSO CUTOFF?
13 A38. The FCC’s rule for the mass market DSO cutoff states as follows:
14 Multi-line DSO end-users. As part of the economic analysis set forth in 15 paragraph (d)(2)(iii)(B)(3) of this section, the state shall establish a 16 maximum number of DSO loops for each geographic market that 17 requesting telecommunications carriers can serve through unbundled 18 switching when serving multiline end users at a single location. 19 Specifically, in establishing this “cutoff,” the state commission shall take 20 into account the [cross-over] point at which the increased revenue 21 opportunity at a single location is sufficient to overcome impairment and 22 the point at which multiline end users could be served in an economic 23 fashion by higher capacity loops and a carrier’s own switching and thus be 24 considered as part of the DS 1 enterprise market. l3
‘I Id. f 459.
“Id., fn. 1376.
l3 47 C.F.R. 9 5 1.319(d)(2)(iii)(b)(4).
16 1 Q39. DID THE FCC SET A DEFAULT VALUE FOR THE DSO CUTOFF IN THE 2 TRIENNIAL RE VIEW ORDER?
3 A39. Yes. The FCC stated that “[wle expect that in those areas where the [ UNE Remand
4 Order ’SI switching carve-out was applicable (i.e., density zone 1 of the top 50 MSAs),
5 the appropriate [cross-over] will be four [DSO] lines absent significant evidence to the
6 contrary.,, l4
7 Q40. WHY DID THE FCC’S UNE REMAND ORDER CONCLUDE THAT A FOUR- 8 LINE CROSS-OVER WOULD SEPARATE THE MASS MARKET FROM THE 9 MEDIUM AND LARGE BUSINESS MARKETS?
10 A40. First, the FCC observed that that virtually all residential customers would be captured by
11 such a threshold. The FCC stated that while an increasing number of American homes
12 are served by second lines, three lines for residential homes are not common, and four
13 lines are even more unusual. Second, the FCC observed that any business that has three
14 or fewer lines is more likely to share characteristics of the mass market customer than a
15 medium and large business and likely to purchase similar volumes and types of
16 telecommunications services as a residential mass market customer.
17 Q41. WHAT IS SBC’S RECOMMENDED DSO CUTOFF IN ARKANSAS?
18 A41. SBC proposes a cutoff of four DSO lines per customer, meaning that a customer served
19 by one to three DSO lines at a given location would be in the mass market, while a
20 customer served by four or more DSO lines at a given location would be in the enterprise
21 market.” This recommendation is consistent with the FCC’s default value and is
14 Triennial Review Order, fi 497
‘j UNE Remand Order, a 293; 47 C.F.R. 9 5 1.319(c)(l)(B).
I6 The industry often uses the term DSO to describe one of the 24 digital channels making up a DS 1 signal. However, for the purposes of this discussion, and consistent with the FCC’s Tiaiennial Review Order, SBC Arkansas
17 1 supported by an analysis of CLEC offerings to small business customers and an analysis
2 of revenue opportunities for CLECs from serving such customers through higher-capacity
3 (e.g.,DSl) loops.
4 Q42. WHAT ARE THE CHARACTERISTICS OF THE SMALL BUSINESS 5 MARKET?
6 A42. The small business market partly consists of very small businesses, including home
7 offices, with demand for just a few lines with simple services. The very small business
8 customers are typically satisfied with basic local exchange service, long distance service,
9 a variety of vertical features (e.g.,call waiting, Caller ID) and often Internet access.
10 Their needs are much like those of residential customers and can be considered part of
11 the mass market. As noted above, the FCC in its UNE Remand Order recognized this
12 similarity between the small business market and the residential market.I7 By contrast,
13 there are also slightly larger small businesses that have both multiple lines and a need or
14 desire for more sophisticated services, including data services.
15 443. WHAT “INCREASED REVENUE OPPORTUNITIES” WOULD A CLEC GAIN 16 BY SERVING A SMALL BUSINESS CUSTOMER WITH THESE MORE 17 SOPHISTICATED TELECOMMUNICATIONS NEEDS THROUGH A DS1 18 LOOP RATHER THAN MULTIPLE DSO LOOPS?
19 A43. The increased revenue opportunity for a CLEC comes from the ability to combine the
20 customer’s voice and data traffic in an efficient manner on a single high-capacity loop.
21 Rather than obtaining voice services over analog lines and Internet and other data
22 services over a separate broadband data line, these small business customers could obtain
23 combined voice and broadband Internet/data services, at very high speeds, over a single
has defined a DSO line as an analog, two-wire, voice grade loop or subloop to a customer’s premises. Thus, in this context, DSO lines do not include the DSO channels contained in DS1 loops servings customers’ premises.
I’ UNE Remand Order, 1293
18 1 DS1 loop. As explained above, the increased service options for the customer and
2 increased revenue opportunities for the CLEC include web hosting, IP address, DNS
3 support and e-mail.
4 Q44. CAN YOU GIVE SOME EXAMPLES OF SMALL BUSINESS CUSTOMERS 5 WITH THE KIND OF SERVICE REQUIREMENTS THAT MIGHT BE MOST 6 EFFICIENTLY MET BY A DS1 LINE RATHER THAN MULTIPLE DSO LINES?
7 A44. Yes. Typically, enterprise market customers have a need for data services beyond just
8 Internet access to operate their businesses. This is the case even for smaller business
9 customers that have only a handful of voice lines. Some examples of smaller business
10 customers with more sophisticated data requirements may include: franchise customers
11 linking to a corporate or parent computer database; small law firms with large bandwidth
12 needs for research and electronic filings; small retailers providing point-of-sale credit
13 card processing; and small realtors using web-based programs for their property listings.
14 Both the customer and CLEC may achieve economies by serving even the smallest
15 business customers via a higher-capacity (e.g., DSl) loop in lieu of multiple DSO loops.
16 And by using higher-capacity loops, a CLEC can achieve incrementally increased
17 revenue by providing its customers with bandwidth for their data needs at the same time
18 they provide voice lines, all via the same loops.
19 445. ARE CLECs OFFERING SERVICES TO MEET THE MORE SOPHISTICATED 20 NEEDS OF SMALL BUSINESSES?
21 A45. Yes. Many CLECs already offer service packages that include multiple voice, data and
22 Internet combinations over a single DS1 line. I refer to this type of offering as
23 “Integrated Access Service.’’ CLECs report a very rapid growth of this type of product.
19 1 Q46. DO YOU HAVE ANY EXAMPLES OF THIS TYPE OF SERVICE OFFERING?
2 A46. Yes. Xspedius’ “Complete Access” offers integrated T 1 service, providing the
3 flexibility of utilizing a variable number of voice lines, Lnternet access at variable
4 bandwidths (512 Kbps standard), and bundles of long distance minutes. Xpedius claims
5 that “ [b]y integrating voice and data services over multi-purpose T-1 connections,
6 Xspedius Communications Integrated Services make it easy to get the ideal
7 communication services for your business at a compelling value. . .Simply select the
8 Internet bandwidth and amount of phone services that suits your needs, from 4 to 64
9 lines, and grow your services as you grow your business.””
10 Also, XO Communications advertises that, “XO Integrated Access provides a full
11 communications solution by combining local, long distance and Dedicated Internet
12 Access - all over a single facility.’’ XO advertising goes on to point out that its
13 Integrated Access service is “Flexible to meet individual demands and scalable to grow
14 with your business, [and] is ideally suited for any small or growing company with
15 moderate bandwidth (128 kbps to 1.024 Mbps) and voice (6 to 23 lines) requirement^."'^
16 NuVox markets to businesses that require several phone lines, rapid Internet
17 access, or a combination of both. Its NuBundle Business Package provides between 256
18 Kbps andl.54 Mbps of Internet bandwidth capacity as well as local and long distance
19 services on order to cost-effectively meet the customer’s voice, data and Internet needs.20
18 http:/lwww.xspedius.com/businesslcomplete~access.shtml
19 http:llwww.xo.comlproductslsmallgrowing/integrate~integratedaccesslindex.htn~
http:llnuvox.comlindex.php/23
20 1 McLeod, a certificated CLEC in Arkansas that may not yet be serving customers
2 in Arkansas with self-provisioned switching, advertises a service known as Preferred
3 Access Integrated Access service. This service “combines your voice and data over a
4 single, high-speed connection to McLeodUSA’s advanced network, giving your business
5 unprecedented communications power at affordable rates.” It features “six local voice
6 lines and 256k of high-speed Internet access, with the ability to grow in single channel
7 increment^.'^^' In its July 22,2003 Press Release announcing the launch of Preferred
8 Advantage service, McLeod explains that, through the use of IADs, “customers will now
9 have the opportunity to add digital channel increments for additional voice and high-
10 speed Internet service at a single price for voice or data. [.. .] This flexible product
11 structure is scalable, making it easy to add or delete channels as business needs dictate.”22
12 AT&T also has responded to the needs of small business customers for high-
13 speed data services:
14 To support these increased needs, AT&T has made its entire portfolio of 15 services available to the small business market, services that competitors 16 often reserve for much larger businesses. In addition to basic services such 17 as local and long distance voice, the company provides data, hosting, 18 Internet Protocol Virtual Private Network (IP VPN), business continuity, 19 managed services and much more, a11 customized to their individual 20 needs.23
21 http://www.mcleodusa.comiProductDetail.do;jsessionid=0000cwRZlpUCQg3lrTPmy~DOQQ7:uquv7396?com.mcl eodusa.req.PRODUCT-ID=34 1495
McLeodUSA Press Release, July 22, 2003
’’ AT&T Press Release, “Small businesses Benefit From Competitive Local and Long Distance Offer.”
21 1 In particular, AT&T’s “Business Network” offering provides a customized solution for
2 voice, vertical features, data and Internet services.24
3 As a last example, “MCI Advantage” combines unlimited local and long distance
4 calling with high-speed Internet connectivity by replacing existing analog lines with a
5 single VOIP service.25
6 Q47. WHAT NETWORK ARCHITECTURE AND TECHNOLOGY DO CLECS USE 7 TO PROVIDE SUCH DSI-BASED SERVICES TO CUSTOMERS WITH A NEED 8 FOR ONLY A FEW LINES?
9 A47. CLECs typically install an Integrated Access Device (“IAD”) at the customer’s premises.
10 An IAD is a device that is manufactured by a number of different equipment suppliers
11 (e.g.,Lucent Technologies, Larscom, Adtran, Nortel, etc.) that allows a higher-capacity
12 facility (e.g.,DS 1 loop) to provide voice line ports along with broadband data
13 capabilities. IADs can be provisioned in a variety of configurations, depending on the
14 needs of the customer, by allocating the total available bandwidth across varying
15 quantities of voice lines and varyng data speeds. An IAD connected to a DS 1 loop
16 provides 1.54 Mbps of bandwidth to the customer’s premises. That bandwidth can then
17 be divided in 64 Kbps segments to provide up to 24 voice lines, or, if the customer only
18 needs a few voice lines, the remaining bandwidth can be used for data services. Some
19 CLECs’ services are designed such that the bandwidth may be dynamically allocated in
20 accordance with the customer’s use of the voice lines and the data bandwidth. The IADs
21 in the marketplace today are available in different sizes (i. e.,with respect to the
22 maximum number of voice lines and maximum data bandwidth).
22 1 Consequently, IADs allow CLECs to use DSI loops to serve smaller and smaller
2 customers in a flexible, economic, and efficient manner because they enable the
3 integration of voice and data on single higher-capacity loop and the allocation of
4 bandwidth based on the real-time needs of the customer. This provides tremendous
5 advantages, both to the customer (in terms of additional, more-flexible services) and to
6 the CLEC (in terms of additional revenue opportunity from these additional services),
7 compared to using multiple DSO lines, even for the smallest business customers.
8 Q48. YOU HAVE EXPLAINED THE SOURCE OF THE ADDITIONAL REVENUE 9 OPPORTUNITIES AVAILABLE TO CLECs BY SERVING SMALL MULTILINE 10 CUSTOMERS OVER A DSl LINE AND HOW CLECs ARE OFFERING 11 INTEGRATED ACCESS SERVICES OVER DSl LINES. WHAT ANALYSIS OF 12 THE CLECs’ REVENUE OPPORTUNITIES HAVE YOU PERFORMED?
13 A48. Exhibit JRL-4 is an analysis that determines the DSO cutoff for the mass market (Le., the
14 point at which it is more economical to provision the combination of voice and data
15 services to a customer over a DS 1 line rather than multiple DSO lines) by quantifying the
16 amount of CLEC revenue necessary to offset the cost difference between a DS 1 line and
17 multiple DSO lines. In other words, the analysis identifies the combination of voice and
18 data services that make it economic and efficient for a CLEC to use a DS1 line rather
19 than multiple DSO lines. My analysis demonstrates that the amount of CLEC revenue
20 necessary to justify the use of a DS1 line to serve a small business customer that has as
21 few as four DSO lines is not only reasonable, but within the range of the prices CLECs
22 are charging for their integrated service offerings.
23 1 449. WHAT CONCLUSION DOES THIS ANALYSIS SUPPORT?
2 A49. This analysis supports an economically efficient DSO-DS 1 cross-over point from the
3 mass market to the enterprise market of four DSO lines. Thus, customers with three or
4 fewer DSO lines should be considered mass market customers.
5 Q50. PLEASE DESCRIBE THE TYPICAL CLEC THAT IS ASSUMED IN YOUR 6 ANALYSIS.
7 A50. The CLEC is assumed to serve mass market business customers.26 It offers local, long-
8 distance and vertical services. When providing integrated access, it offers business-grade
9 broadband Internet access. As the Internet access provider, the CLEC may also provide
10 other data services, including, as I noted previously, website hosting on a virtual private
11 server, provision of IP addresses, support for DNS and provision of an e-mail server.
12 Q5l. HOW DID YOU MODEL THE PROVISION OF VOICE GRADE SERVICES ON 13 DSO LINES AND INTEGRATED ACCESS SERVICES ON A DSl LINE?
14 A51. This modeling is explained in detail in Exhibit JRL-4.
15 Q52. WHAT ARE THE RESULTS OF YOUR ANALYSIS?
16 A52. Results depend on the three UNE access areas in Arkansas. As shown in Exhibits JRL-4
17 and JRL-5, a DS1 line is more cost-effective than four DSO lines so long as the customer
18 has at least:
19 e $8 1.OO per month of data revenue in the Urban Zone;
20 e $79.36 per month of data revenues in the Suburban Zone; and
21 e $58.78 per month of data revenues in the Rural Zone.
'' In all likelihood, this CLEC also serves business customers in the enterprise market, and may serve residence customers.
24 1 Based on the product bundles and prices discussed above, which CLECs are
2 offering in the market today, a CLEC can very reasonably expect to sell these amounts of
3 data services, even to small business customers with as few as four DSO voice grade
4 lines.
5 Q53. IS THIS ANALYSIS SPECIFIC TO ARKANSAS?
6 A53. Yes. All of the unbundled loop rates, interoffice transport rates, hot cut charges, income
7 and property tax rates, and depreciable lives used in the analysis are Arkansas-specific.
8 Q54. BASED ON THIS ANALYSIS AND THE DISCUSSION ABOVE, DO YOU 9 RECOMMEND THAT THE COMMISSION ADOPT SBC’S PROPOSED DSO 10 CUTOFF?
11 A54. Yes. My analysis provides further support for accepting the FCC’s default DSO cutoff of
12 four DSOs and applying it for purposes of this case. That default value is shown to be
13 entirely reasonable.
14 V. GEOGRAPHIC MARKETS
15 A. Principles of Geographic Market Definition
16 Q55. DID THE FCC PROVIDE ANY DIRECTION TO THE COMMISSION 17 REGARDING THE ESTABLISHMENT OF APPROPRIATE GEOGRAPHIC 18 MARKETS?
19 A55. Yes. First, the FCC has detennined that the geographic market for mass market
20 switching may not be as large as the entire state. Second, the FCC’s rules also specify
21 that in defining geographic markets the Commission must consider:
22 0 locations where competitors are actually serving mass market 23 customers,
24 0 variations in factors affecting competitors’ ability to serve 25 customers in each market, and
25 1 0 competitors’ ability to target and serve specific markets 2 economically and efficiently using currently available 3 techn~logies.~~
4 The FCC also lists other factors that states may consider in paragraph 496 of the
5 Triennial Review Order.
6 B. Definition of Geopraphic Markets in Arkansas
7 Q56. DOES SBC ARKANSAS HAVE A SPECIFIC RECOMMENDATION FOR THE 8 DEFINITION OF GEOGRAPHIC MARKETS?
9 A56. Yes. As noted above, the Commission has already decided this issue and ruled that
10 LATAs form the appropriate geographic markets. However, should the Commission
11 choose to reconsider its decision due to the urging of other parties, I recommend that the
12 Commission give SBC Arkansas an opportunity to provide evidence as to other possible
13 market definitions that are consistent with the FCC’s requirements. In addition, I would
14 note that another definition of geographic markets that is workable and clearly meets the
15 FCC’s requirements on this issue is the Metropolitan Statistical Area (MSA). The self-
16 provisioning trigger is met in the Little Rock MSA as well as the Little Rock LATA.
17 Q57. IS THE LATA AN APPROPRIATE GEOGRAPHIC MARKET DEFINITION 18 FOR ARKANSAS?
19 A57. Yes, the LATA is an appropriate geographic market for this proceeding. LATAs were
20 established twenty years ago to help complete the separation between local and long-
21 distance services with the approval of the federal courts as a result of the legal
22 requirements of the AT&T consent decree. The Bell System was divided into a total of
23 163 LATAs with an average population of roughly 500,000. (It should be noted that
24 AT&T argued at divestiture that each LATA should be large enough to present an
”47 C.F.R. 3 51.319(d)(2)(i).
26 attractive market for potential new entrants.) The courts specifically required each
LATA to be defined to consider communities of interest. Obviously, the LATA has been
used many times in regulatory proceedings, and its boundaries are well established,
administratively feasible and not subject to manipulation.
QSS. WHAT ARE THE LATAS IN ARKANSAS?
A58. Arkansas has three LATAs completely within the state and portions of three other
LATAs that cross the Arkansas borders. Exhibit JRL-6 is a map of Arkansas showing the
State’s LATAs.
9 Q59. ARE THERE OTHER MARKET DEFINITIONS THAT THE COMMISSION 10 COULD HAVE ADOPTED?
11 A59. Yes. In mass market switching proceedings in other states, SBC and other ILECs have
12 recommended MSAs as the proper geographic markets.
13 460. WHAT IS A “WIRE CENTER”?
14 A60. It is both a geographic location and, in the context of this discussion, a geographic area.
15 As a location, it is the physical location where the loop distribution plant can be accessed.
16 The wire center is where the loops serving local customers in an area come together to
17 connect to the local central office switch. For SBC Arkansas or any other incumbent
18 telephone company, a wire center is also the location where a central office switch
19 connects to the loop facilities that cover part or all of a local exchange.
20 As a geographic area, a wire center is the part of the exchange that is served by
21 the loops from the wire center location. Some wire centers have larger areas of coverage,
22 particularly in suburban and niral areas, and some are more compact, such as in central
23 business districts. When it was constructed, each area was defined using engineering
27 1 principles and the economics of telephone plant, and considering the incumbent
2 telephone company’s obligations to provide local service to everyone that requested it.
3 Q61. WHICH SBC WIRE CENTERS ARE WITHIN THE LITTLE ROCK LATA?
4 A61. Exhibit JRL-7 provides a list of these wire centers. Each wire center has a unique eight-
5 character identifying code called a CLLI code (or Common Language Location
6 Identification code). Exhibit JRL-7 shows the CLLI code and common name for each
7 SBC wire center that falls within the Little Rock LATA. There are 90 SBC wire centers
8 in the Little Rock LATA.
9 Q62. SHOULD THE WIRE CENTER BE ADOPTED AS THE GEOGRAPHIC 10 MARKET DEFINITION FOR THIS PROCEEDING, AS SOME CLECS MAY 11 PROPOSE?
12 A62. No. Wire centers are too small to constitute separate markets in urban and suburban
13 areas such as Little Rock and its surrounding area. Such a narrow definition is
14 inconsistent with the FCC’s requirement that the market be defined large enough to
15 permit a new entrant to take advantage of economies of scale and scope. Any efficient
16 CLEC would use each switch to cover as wide an area as possible to spread its costs over
17 as many customers as possible. Single switches can serve areas much larger than a single
18 wire center as exchange. A single switch can easily be used to serve an entire MSA,
19 LATA, or even an entire state.
20 Q63. ARE CLECS PROVIDING MASS MARKET SERVICE IN THE LITTLE ROCK 21 LATA?
22 A63. Yes. There are at least five CLECs providing service to mass market customers in
23 Arkansas using self-provisioned switches in the Little Rock LATA. There is even more
24 facilities-based CLEC activity serving larger business customers due to the higher
25 average revenues that are associated with larger business services.
28 1 Q64. WHAT ARE THE DIFFERENT TYPES OF DATA THAT CAN BE USED TO 2 SHOW THE GEOGRAPHIC AREAS WHERE CLECs ARE USING THEIR OWN 3 SWITCHES TO SERVE CUSTOMERS?
4 A64. The information used in my analysis includes (1) a listing of the switches that CLECs
5 have self-deployed in the state to serve customers, (2) the locations where CLECs have
6 obtained unbundled voice-grade loops for use with self-provisioned switches, (3) the
7 locations from which CLECs have ported telephone numbers to self-provisioned
8 switches, (4) the NXX codes that have been assigned to the CLECs’ switches, and (5) the
9 locations where CLECs have obtained collocation arrangements. Unbundled loop data
10 definitively show the locations of mass market customers served by CLECs using self-
11 provisioned switches. Further, these loop data are supported by the other types of
12 evidence listed above, which also clearly show the presence of CLECs’ facilities-based
13 market entry. In particular, the locations of collocation arrangements strongly coincide
14 with the locations of unbundled loops, as they should. This corroboration demonstrates
15 that CLECs connect unbundled loops (including those used for mass market customers)
16 to their switches through collocation arrangements in the Little Rock market. I will
17 explain my use of each of these types of information below.
18 1. CLEC Deployment of Switches
19 Q65. HAVE CLECs DEPLOYED SWITCHES IN ARKANSAS?
20 A65. Yes. CLECs have widely deployed switches in Arkansas to provide local services. I
21 have identified 10 unaffiliated CLECs that have deployed 12 digital switches in
22 Arkansas, as shown on Exhibit JlU-8. Each of these switches has at least one Arkansas
29 1 NXX2*code assigned to it, and 3 of the switches have over 20 Arkansas NXX codes
2 apiece. Most likely, all but two of these switches are currently being used to offer service
3 to mass market customers in the Little Rock LATA.
4 Q66. WHAT IS THE SIGNIFICANCE OF THE NUMBER OF NXX CODES THAT A 5 SWITCH HAS BEEN ASSIGNED?
6 A66. As I discuss in more detail later, the number of NXXs is an indication of the number of
7 customer lines that are or will be served by the switch. Each NXX consists of 10,000
8 telephone numbers, with the NXX designating the first three digits. For instance, the
9 NXX 373 includes telephone numbers 373-0000 through 373-9999. NXXs also give an
10 indication of the geography that a switch is serving, as certain NXXs are assigned to
11 particular exchanges, so a CLEC that wants to serve a distant exchange would equip its
12 switch with some NXXs from that distant exchange. CLEO that have many NXXs from
13 a wide geography indicate that their switch is serving or will serve many customers from
14 a wide geographical area.
15 Q67. WHAT IS THE SOURCE OF YOUR DATA REGARDING CLEC CIRCUIT 16 SWITCHES?
17 A67. My source of data regarding CLEC switches is Telcordia’s Local Exchange Routing
18 Guide (“LERG”). This is the standard industry database that all switched-based
19 telephone companies, both incumbents and CLECs, use to provide information about
20 their switches to each other and to interexchange carriers to ensure the proper routing of
21 calls.29 This is the guide that all telephone companies follow to be sure that they are able
’*NXX codes are the three digits that follow the area code, also referred to as the Numbering Plan Area (“NPA”) code, in a 10-digit telephone number. The “N” can be any number from 2 to 9, and the “X” can be any number from 0 to 9. NXX codes are also referred to as central office (“CO”) codes.
29 See Telcordia, Telcordia Routing Administration Catalog of Products, http://www.telcordia.codproducts-services
30 1 to send and receive calls throughout the public switched network. Because of the
2 obvious importance to all carriers of maintaining accurate and up-to-date information in
3 the LERG, it is a reliable source of information on the presence of competitive switches.
4 Q68. HOW CURRENT IS THE LERG INFORMATION THAT YOU USED?
5 A68. This data was obtained from the LERG in October 2003.
6 469. IS THE LERG A COMPLETE SOURCE OF INFORMATION CONCERNING 7 CLEC SWITCH OPERATIONS?
8 A69. While the routing information in the LERG can be assumed to be correct, all of the non-
9 routing information in the LERG is not always complete. A carrier is not required to
10 populate certain fields in the LERG and, in that sense, the data may not be complete. For
11 example, a CLEC does not have to indicate the type of switch that it is using, or whether
12 the switch is located outside of the state. If the switch is physically located in one state
13 but also used to serve customers in another state, the CLEC will provide the location of
14 the point of interconnection (“POI”) rather than that of the actual switch. Also, if a
15 CLEC has more than one switch, the LERG does not contain any information identifying
16 which of its customers are served by which of its switches.
17 Q70. CAN CLEC SWITCHES SERVE GEOGRAPHIC AREAS AS LARGE AS (OR 18 EVEN LARGER THAN) A LATA?
19 A70. Yes, central office switches can technically serve or cover a very wide geographic area.
20 Some CLECs have served customers with switches that were located more than 200
21 miles away from those customers. The trade-off for this architectural approach is
/trainfolcatalog~details.html#Telcordia%2OLERG%2ORouting%2OGuide (“The LERG Routing Guide is primarily designed to be used for (1) routins of interLATA calls by interexchange carriers, (2) providing information on the local environment for the numerous carriers involved in the local arena, and (3) any other company needing information about the network, nuinbering, and other data in the product.”).
31 1 basically the cost and engineering of transport versus the cost of installing an additional
2 switch. The Commission should not be concerned about the location of switches in this
3 proceeding, as switches can serve customers that are very remote from the switch
4 location. The Commission should consider where the CLECs are currently serving
5 customers and the ability of existing switches to serve additional areas and customers.
6 2. Unbundled Voice Grade Loops
7 Q71. WHAT INFORMATION DOES SBC HAVE ABOUT THE CLECs’ USE OF 8 UNBUNDLED VOICE GRADE LOOPS IN ARKANSAS?
9 A71. SBC Arkansas maintains records that permit the identification of the number of
10 unbundled voice grade loops obtained by each CLEC and the identification of the SBC
11 Arkansas wire center where those loops are located.
12 Q72. WHY IS THIS INFORMATION SIGNIFICANT?
13 A72. This information is relevant to the Commission’s application of the FCC’s self-
14 provisioning trigger. The locations of the CLECs’ stand-alone unbundled voice grade
15 loops show the geographic areas within which CLECs are providing service using their
16 self-provisioned switches, including service to mass market customers.
17 As Exhibit JRL-9 shows, CLECs are most heavily deploying switches within the
18 Little Rock LATA as opposed to the rest of the state. Unlike the CLECs’ use of UNE-P
19 as a serving method, CLECs disproportionately use their switches and UNE Loops within
20 the Little Rock LATA.30 Sixty-three percent of SBC Arkansas’s retail lines are in the
21 Little Rock LATA and 63% of the CLECs’ use of UNE-P is within Little Rock, but 84%
30 I will explain in the self-provisioning trigger section of my testimony how these loops are identified and counted.
32 1 of the CLECs’ use of UNE loops in providing mass market services is in the Little Rock
2 LATA.
3 Exhibit JRL-9 also shows that those wire centers in the Little Rock LATA where
4 CLECs are currently using self-provisioned switches to serve mass market customers
account for a large portion of the customers in that LATA. In the Little Rock LATA,
switch-based CLECs have stand-alone unbundled loops in 12% of the wire centers in the
LATA but are serving mass market customers in offices that serve 34% of the retail lines
in the Little Rock LATA.
9 And, although I will separately address collocation data below, Exhibit JRL-10
10 demonstrates the close correlation between the CLECs’ use of unbundled voice grade
11 loops and collocation (ie.,this exhibit shows that CLECs’ unbundled loops and
12 collocation arrangements generally appear in the very same wire centers). This
13 correlation is useful for developing a sense of how CLECs connect their switches to these
14 stand-alone unbundled loops.
15 3. Ported Numbers
16 473. HOW DO PORTED NUMBERS IDENTIFY GEOGRAPHIC AREAS WHERE 17 CLECs ARE USING THEIR OWN SWITCHES TO SERVE CUSTOMERS?
18 A73. Local number portability (“LNP”) allows a customer to retain its telephone number when
19 changing service providers by “porting” that telephone number from the ILEC switch to
20 the CLEC switch from which the customer is served. Each ported number represents a
21 customer line served by a CLEC’s self-provisioned switch and identifies the geographic
22 area (i.e., wire center) in which the customer is located. The industry maintains data by
33 1 wire center that identifies which CLECs have ported telephone numbers from SBC
2 Arkansas switches to the CLECs’ own s~itches.~’
3 Exhibit JRL-10 also shows the number of CLECs using ported numbers in each
4 SBC Arkansas wire center and the total quantity of numbers ported by CLECs in each
5 wire center. As shown in this exhibit, there are nearly 88,000 numbers ported by CLECs
6 in SBC Arkansas service territory, and over 89% (78,665) of those occur in wire centers
7 in the Little Rock LATA. Additionally, this porting occurs in wire centers that account
8 for nearly 94% of SBC’s total access lines in the Little Rock LATA.
9 Clearly, the CLECs’ use of self-provisioned switching for ported numbers is
10 widespread in the Little Rock LATA, as can be seen in Exhibit JRL-11, a map showing
11 the location of SBC wire centers with ported numbers.
12 474. DO PORTED NUMBER DATA IDENTIFY ALL OF THE CUSTOMERS THAT 13 CLECS ARE SERVING FROM THEIR OWN SWITCHES?
14 A74. No. The data only identify the customer lines won from SBC Arkansas that want to keep
15 their existing telephone numbers. These data do not include customer lines that
16 (a) CLECs have won from SBC Arkansas when the customers do not keep their existing
17 telephone numbers, (b) CLECs have won from other CLECs that use their own switches,
18 or (c) are growth lines (i.e.,new customers, or new lines for existing customers) that
19 CLECs serve using their own NXX codes that reside in their own switches. Thus, LNP
20 data likely understate the scope of the switch-based CLECs’ geographic coverage.
31 The national database for porting is centrally administered by the Number Porting Administration Center (“NPAC”). Its data is downloaded to SBC (and others who wish to store it) on a region-by-region basis.
34 1 475. DO PORTED NUMBER DATA INCLUDE BOTH MASS MARKET AND 2 ENTERPRISE CUSTOMERS?
3 A75. Yes. However, the relevance of these data is threefold. First, LNP data identify the
4 locations of customers currently being served by CLECs using their own switches.
Second, these data are also indicative of the CLECs’ ability to serve mass market
customers profitably and efficiently using the scale and scope economies referenced in
the FCC’s directions on geographic market area determinati~n.~~Third, the ported
8 number data confirm the geographic patterns of switch-based CLEC entry revealed by the
9 UNE-loop data. In addition, the data are relevant to the geographic market
10 determination even if it were assumed that all of the ported numbers were for enterprise
11 customers, because these data show the CLECs’ ability to serve the mass market if they
12 choose to do so.
13 4. NXX Codes
14 Q76. HOW ARE NXX CODES ASSIGNED?
15 A76. Each NXX code (or “prefix”) is associated with a “rate exchange area” served by an
16 incumbent LEC and contains 10,000 telephone numbers.33 A rate exchange area can
17 generally be thought of as a local exchange or a toll-free local calling scope. The North
18 American Numbering Plan (“NAN€”’) Central Office (CO) Code Administrator assigns
19 NXX codes to CLEC switches. There are usually several NXXs assigned to each rate
20 exchange area, except in the sinallest of exchanges.
” Triennial Review Order, 7 495
33 Rate exchange areas are “geographically defined areas within which calls that originate and terminate (ie.,remain within the area) are considered local calls.” FCC Local Competition Report, Dec. 1998 ed. at 41, n.17. 1 Before it can obtain an NXX code, a CLEC must submit an application to the CO
2 Code Administrator certifying a need to have an NXX code assigned to its switch. For an
3 initial code assignment in a rate exchange area, the CLEC is required to provide
4 documented proof that “( 1) the code applicant is authorized to provide service in the area
5 for which the numbering resources are requested and (2) the applicant is or will be
6 capable of providing service within 60 days of the number resource activation date.’’34
7 To prove its ability to provide service in the geographic area covered by an NXX code, a
8 CLEC may submit an executed interconnection agreement, a business plan excerpt
9 showing planned coverage areas and in-service dates, switch installation schedule, and
10 other indicators of the presence of an installed switch and interconnection. Thus, the rate
11 exchange areas where CLECs have obtained NXX codes are the areas where CLECs
12 have formally certified their capabilities and intentions to use their own switches to
13 provide services. Because NXX codes are a finite resource and NXX assignments
14 directly impact NPA exhaust, NXX codes are not requested or assigned casually. In fact,
15 holders of NXX codes must be prepared to participate in an audit in order to assess code
16 utilization, and if an NXX code holder no longer has a need for an NXX code, the NANP
17 guidelines require the return of the NXX code to the CO Code Administrator.
18 Q77. HOW CAN NXX CODE ASSIGNMENTS BE USED TO DETERMINE WHERE 19 CLECs ARE OFFERING SERVICE TO LOCAL CUSTOMERS ?
20 A77. A CLEC uses its NXX codes to assign new telephone numbers to its customers served by
21 its switch. Because each NXX code is associated with a geographic area, the geographic
22 areas that CLECs serve or are capable of serving with their switches can be determined
-
j4 Section 4, Central Office Code (NXX) Assignment Guideline, INC 95-0407-008 issued August 15,2003.
36 1 by the NXX codes that CLECs have obtained. Telcordia’s LERG contains the location of
2 each CLEC switch, each NXX code associated with that switch and the rate exchange
3 area served by each NXX code. The rate exchange areas served by CLECs’ NXXs can,
4 in turn, be equated to the SBC Arkansas wire centers that comprise those rate exchange
5 areas. Thus, CLEC NXXs can be mapped to SBC Arkansas’s wire centers.
6 Exhibit JRL-12 shows that CLECs have 187 NXX codes assigned in SBC’s
7 service territory in Arkansas and of this total, 134 NXXs (or 72%) are assigned in the
8 Little Rock LATA. With this large number of NXXs assigned to CLEC switches
9 throughout the Little Rock LATA, CLECs have a wide presence in the LATA and a
10 nearly ubiquitous presence in the Little Rock MSA, where most of the LATA’S
11 population resides. CLECs have obtained NXX codes to serve many customers
12 throughout the Little Rock LATA.
13 Q78. CAN AN NXX CODE BE USED FOR BOTH MASS MARKET AND 14 ENTERPRISE CUSTOMERS?
15 A78. Yes. However, as I explained above with regard to ported numbers, the use of NXX code
16 assignments is quite relevant. These data demonstrate where CLECs are providing local
17 services to customers today using their own switches and also are relevant to the
18 determination of the market area as an indicator of the ability of CLECs to provide local
19 services to the mass market.
20 5. CLEC Collocation
21 Q79. HOW DOES A CLEC USE COLLOCATION TO PROVIDE SERVICES TO 22 CUSTOMERS WITH ITS OWN SWITCH?
23 A79. When a CLEC uses an unbundled loop and its own switch to provide local services to a
24 customer, it must have a means to connect that loop (which is terminated in an SBC
37 1 Arkansas central office) to its switch. One way a CLEC can accomplish this is to obtain
2 collocation in the SBC Arkansas central office where the loop is terminated.
3 QSO. IS THERE EVIDENCE THAT CLECs ARE USING COLLOCATION TO 4 CONNECT THEIR SWITCHES TO UNBUNDLED VOICE GRADE LOOPS IN 5 SBC ARKANSAS WIRE CENTERS?
6 A80. Yes. As I explained above in my discussion of unbundled loop data, there is a very
7 strong correlation between the wire centers where CLECs use unbundled voice grade
8 loops and collocation.
9 QSl. HOW ARE COLLOCATION ARRANGEMENTS USED TO INDICATE THE 10 GEOGRAPHIC AREAS WHERE CLECs ARE SERVING AND CAN SERVE 11 CUSTOMERS WITH THEIR OWN SWITCHES?
12 A8 1. The presence of collocation in multiple wire centers within the LATA, as is shown in
13 Exhibit JRL- 10, indicates a capability and intent to do business throughout the LATA,
14 particularly in the most urban of areas. And, when multiple CLECs collocate in multiple
15 offices across LATA, it indicates that they all are viewing the relevant competitive
16 market in much the same way.
17 In addition, Exhibit JRL-10 shows that, of the 58 collocations that CLECs have
18 established in Arkansas, 43 of them are in the Little Rock LATA and 41 of those are in
19 the Little Rock MSA. CLEC collocation exists in SBC wire centers that account for
20 nearly 80% of all SBC Arkansas retail access lines in the Little Rock MSA and 43% in
21 the Little Rock LATA.
22 482. CAN COLLOCATION ARRANGEMENTS BE USED FOR PROVIDING LOCAL 23 SERVICES TO BOTH MASS MARKET AND ENTERPRISE CUSTOMERS?
24 A82. Yes. Again, as explained in my earlier discussions of ported numbers and NXX code
25 assignments, collocation data are used both to demonstrate where CLECs are currently
38 1 providing local services using self-provisioned switches and to provide evidence of the
2 CLECs’ ability to serve mass market customers profitably and efficiently.
3 QS3. DOES THE AVAILABILITY OF COLLOCATION SPACE VARY 4 SIGNIFICANTLY WITHIN THE LITTLE ROCK LATA?
5 A83. No. Physical collocation space is currently available in all SBC Arkansas central offices
6 in the Little Rock LATA.35 In addition, there are other types of collocation available to a
7 CLEC, such as virtual collocation. CLECs have obtained a significant amount of
8 collocation in the Little Rock market and should not face any difficulties in obtaining
9 collocation space in the future, even if local switching for the mass market is declassified
10 as a UNE.
11 QS4. ARE CLECs CAPABLE OF USING THEIR OWN SWITCHES TO SERVE 12 GEOGRAPHIC AREAS SUCH AS THE LITTLE ROCK LATA?
13 A84. Absolutely. Switches are capable of serving very large geographic areas. The LERG
14 data show that CLECs switches serve multiple NPAs. Also, equipment vendors indicate
15 that remote switching equipment can be placed up to 2,000 miles from the host switch to
16 which it is connected, and a digital loop carrier can be placed up to 600 miles from the
17 switch to which it is connected.
18 Q85. HAS THE FCC ACKNOWLEDGED THE BROAD GEOGRAPHIC RANGE OF 19 CLECs’ SWITCHES?
20 ASS. Yes. In its Triennial Review Order, the FCC stated that the “record also shows that
21 vendors have produced switches (at declining prices) that are readily available for
35 Although there are three remote switching units that are closed to additional collocation at this time (LTRKARUA,LTRKARUF, and LTRKARUG), no requesting CLEC has been denied collocation in Arkansas due to lack of space.
39 1 purchase. These switches are capable of serving significantly broader service areas than
2 traditional incumbent LEC rate centers.”36
3 Q86. DID YOU CONSIDER HOW A CLEC’s COSTS MIGHT VARY FROM WIRE 4 CENTER TO WIRE CENTER WITHIN THE LATA?
5 A86. Yes. Although I did not perform a cost study, I did consider whether the UNE and
6 collocation rates charged by SBC Arkansas vary among wire centers in Arkansas. Loop
7 and transport rates vary by UNE rate zone, but collocation rates do not. SBC Arkansas
8 does not charge any more or any less to provide a collocation arrangement in the wire
9 centers within the Little Rock LATA. Since SBC Arkansas UNE rate zones are based on
10 exchange rate group definitions and because the Little Rock local exchange is relatively
11 large, CLECs face uniform UNE rates for a significant portion of the Little Rock market.
12 Similarly, CLECs would generally pay their vendors the same price for collocated
13 equipment, regardless of a wire center’s location within the LATA.
14 Q87. WHAT ABOUT THE COSTS A CLEC WOULD INCUR TO TRANSPORT 15 TRAFFIC WITHIN THE LATA?
16 A87. Transport is a cost that any carrier must bear to provide service within a geographic
17 market. In general, the larger the geographic market, the more transport costs that a
18 carrier will have to bear. There is a trade-off between placing more switches to serve
19 customers and incurring the transport costs to serve the same number of customers from
20 fewer switches. CLECs are able to make sound business decisions based on this trade-
21 off. In fact, the collocation data shown in Exhibit JRL-10 demonstrates that CLECs can
22 and do rely on transport rather than deploying additional switches.
36 Triennial Review Order, 7 436.
40 1 QSS. CAN CLECs OBTAIN TRANSPORT AT REASONABLE RATES?
2 A88. Yes, SBC Arkansas continues to provide unbundled interoffice transport at TELRIC-
3 based rates. Of course, this may change on selected routes within the Little Rock LATA
4 as a result of the analysis being performed by Mr. Gary Smith in this proceeding.
5 However, where interoffice transport will no longer be available from SBC Arkansas at
6 TELRIC-based rates, it will be because the Commission has found that there are other
7 sources of this transport available to CLECs at wholesale rates or that it is economic for
8 CLECs to self-provision interoffice transport on these routes. And, where SBC Arkansas
9 does not seek or does not obtain a finding of non-impairment for any particular
10 interoffice transport route, that transport will continue to be available to CLECs at
11 TELRIC-based rates. In either case, the Commission can be satisfied that transport will
12 be available to CLECs within the LATA.
13 Q89. WHAT DO YOU CONCLUDE REGARDING TRANSPORT COSTS?
14 A89. I conclude that any variation in costs attributable to transport within the market is a
15 normal part of any carrier’s business.
16 VI. SUMMARY
17 Q90. PLEASE SUMMARIZE THE KEY POINTS OF YOUR TESTIMONY.
18 A90. The key points included in this testimony are as follows:
19 a The Commission’s decision to adopt the LATA as the appropriate 20 market definition is reasonable and complies with the FCC’s 21 directives concerning market determination. Also, should the 22 Commission reconsider this decision, it should adopt a definition 23 that is sufficiently broad to permit recognition of economies of 24 scale and scope, in keeping with the manner that CLECs use 25 switches to provide service. I would recommend the adoption of 26 the MSA in that event.
41 e The appropriate DSO cutoff for the mass market is three lines. That is, customers served by three or fewer DSO lines are in the mass market, and those served by four or more DSO lines are in the enterprise market.
e Based on an objective and very conservative analysis of reliable data, the self-provisioning trigger is met in the Little Rock LATA. The Commission should find that requesting carriers are not impaired without access to unbundled local circuit switching for mass market customers in the Little Rock LATA.
10 Q9l. DO YOU AGREE THAT CLECs ARE IMPAIRED IN THE REMAINING 11 MARKET AREAS WITHIN ARKANSAS?
12 A91. No, but the market that I have identified in this testimony is the only one for which SBC
13 has adequate evidence at this time to meet the FCC’s self-provisioning trigger. As
14 conditions change and SBC Arkansas is able to gather needed evidence, SBC Arkansas
15 may petition the Commission at a later date regarding additional market areas.
16 Q92. DOES THIS CONCLUDE YOUR DIRECT TESTIMONY?
17 A92. Yes
42 Exhibit JRL-1
LITTLE ROCK LATA SELF PROVISIONING TRIGGER RESULTS
ARKANSAS 3+ CLECs Providing Facilitles-Based Service to Mass-Market Customers GEOGRAPHIC AREA LATA ASSUMPTION 25 in WC MASS-MARKET THRESHOLD 3 OR FEWER LOOPS PER ADDRESS DATA SOURCE Loop Data 08/03 UNE Loop per Address Data
Total Res E911 Total MM #of CLECs to by Trigger Loops by State LATA LATA Name Meet Trigger CLECs Trigger CLECs ._ ~ ~ ~~ ~~ ~ ~ - ~ ~ AR 528 LITTLE KO?% ARKANSAS 5 4,971 ~- -~ ~ -~ - - Total for LATAs with 3+ CLECS Serving MM Customers 4,971 Number of LATAs Meeting Trigger 1 out of 3 Total in State
MASS MARKET CLECs Wire Centers with MML QTY of MML Adelphia 1 13 ALLTEL 11 4685 NuVox 6 115 WorldCom 3 114 XSPEDIUS 3 44 Trigger Analysis Arkansas Mass-Market
LATA 528
LATAs
0 LATAs Meeting Trigger
SBC Wire Centers
SBC Wire Centers in Trigger LATAs where CLECs serve Mass-Market Customers
A CLEC Switch
Exhibit JRL-2 Exhibit JRL-3 Public Version Arkansas LATAs Self Provisioning Trigger Analysis-Detailed Results by Wire Center
ARKANSAS 3+ CLECs Providing Facilities-Based Service to Mass-Market Customers GEOGRAPHIC AREA LATA ASSUMPTION 25 in WC MASS-MARKET THRESHOLD 3 OR FEWER LOOPS PER ADDRESS DATA SOURCE Loop Data 08/03 UNE Loop per Address Data
MASS MARKET CLECS Adelphia ALLTEL NuVox WorldCom XSPEDIUS
LATAs That Meet the Trigger
LITTLE ROCK LATA Exhibit JRL-3
AR 528 LITTLE ROCK ARKANSAS F~CYARMA - 0 - AR 528 LITTLEROCKARKANSAS FRCYARPA 0 0 AR 528 LITTLE ROCKARKANSAS GRBSARMA - AR 528 LITTLE ROCK ARKANSAS GRDNARMA 0 LITTLE ROCK ARKANSAS GRFYARMA 0 AR 528 __ _- 0 AR 528 LITTLE ROCK ARKANSAS HBSPARMA - - AR 528 LnTLE ROCK ARKANSAS HCRGARMA 0 - - AR 528 LWTLEROCKAR~ LATAs That Do Not Meet the Trigger Wire Center Wire Center Count of CLECs SBC Total State LATA LATA Name (incl. non-retail) with CLEC in Wire Center CLEC MM Loops Access Qty SBC Name redacted Qty MM Access Lines AR 526 FORT SMITH ARKANSAS BNTVARBV 0 redacted redacted AR 526 FORT SMITH ARKANSAS BNTVARCR 0 AR 526 FORT SMITH ARKANSAS ERSPARMA 0 AR 526 FORT SMITH ARKANSAS FTSMARGL FTSMARGL 1 AR 526 FORT SMITH ARKANSAS FTSMARMI FTSMARMI 1 AR 526 FORT SMITH ARKANSAS FTSMARSU FTSMARSU 1 AR 526 FORT SMITH ARKANSAS FWLARHI FWLARHI 1 AR 526 FORT SMITH ARKANSAS GRVTARMA 0 AR 526 FORT SMITH ARKANSAS HNDVARMA 0 AR 526 FORT SMJTH ARKANSAS NTRDARMA 0 AR 526 FORT SMITH ARKANSAS RGRSAREA 0 AR 526 FORT SMITH ARKANSAS RGRSARMA RGRSARMA 1 AR 526 FORT SMITH ARKANSAS SPDLARFO 0 AR 526 FORT SMITH ARKANSAS SPDLARPL SPDLARPL 1 AR 526 FORT SMITH ARKANSAS VNBRARMA 0 AR 530 PINE BLUFF ARKANSAS ALTHARMA 0 AR 530 PINE BLUFF ARKANSAS CALNARMA 0 AR 530 PINE BLUFF ARKANSAS CHDSARMA 0 AR 530 PINE BLUFF ARKANSAS CMDNARCU 0 AR 530 PINE BLUFF ARKANSAS CMDNARSH 0 AR 530 PINE BLUFF ARKANSAS CMDNARTE 0 AR 530 PINE BLUFF ARKANSAS DRMTARMA 0 Exhibit JRL-3 Public Version AR 530 PINE BLUFF ARKANSAS ELDOARMA 0 AR 530 PINE BLUFF ARKANSAS EUDRARMA 0 AR 530 PINE BLUFF ARKANSAS GRDYARMA 0 AR 530 PINE BLUFF ARKANSAS HMBGARMA 0 AR 530 PINE BLUFF ARKANSAS HTTGARMA 0 AR 530 PINE BLUFF ARKANSAS LKVGARMA 0 AR 530 PINE BLUFF ARKANSAS MCDNARMA 0 AR 530 PINE BLUFF ARKANSAS MCGHARMA 0 AR 530 PINE BLUFF ARKANSAS MCNLARMA 0 AR 530 PINE BLUFF ARKANSAS MGNLARMA 0 AR 530 PINE BLUFF ARKANSAS MNTIARMA 0 AR 530 PINE BLUFF ARKANSAS MTHLARMA 0 AR 530 PINE BLUFF ARKANSAS NRPHARMA 0 AR 530 PINE BLUFF ARKANSAS PNBLARCH 0 AR 530 PINE BLUFF ARKANSAS PNBLARJE 0 AR 530 PINE BLUFF ARKANSAS PNBLARWC 0 AR 530 PINE BLUFF ARKANSAS PTLDARMA 0 AR 530 PINE BLUFF ARKANSAS SMCKARMA 0 AR 530 PINE BLUFF ARKANSAS STMPARMA 0 AR 530 PINE BLUFF ARKANSAS STPHARMA 0 AR 530 PINE BLUFF ARKANSAS STRNARMA 0 AR 530 PINE BLUFF ARKANSAS URBNARMA 0 AR 530 PINE BLUFF ARKANSAS VLLGARMA 0 AR 530 PINE BLUFF ARKANSAS WLMRARMA 0 AR 530 PINE BLUFF ARKANSAS WRRNARMA 0 AR 530 PINE BLUFF ARKANSAS WTSNARMA 0 EXHIBITJRL-4 ATTACHMENT: CLEC INTEGRATED ACCESSANALYSIS Table of Contents 1. INTRODUCTION 1 2. BUSINESS OPPORTUNITY FOR CLECS TO PROVIDE BROADBAND DATA SERVICES TO SMALL BUSINESS 1 2.1. THECLEC MARKET 1 2.2. CUSTOMER-PREMISECOMPONENTS 2 2.3. CLEC NETWORKCOMPONENTS REQUIREDTO PROVIDE INTEGRATED ACCESS 2 3. COSTS OF THE NETWORK AND LOOP COMPONENTS 4 3.1. CUSTOMER PREMISE EQUIPMENTCOST 3.2. DLC AND IAD EQUIPMENTCAPITAL COST 3.3. DS1 EQUIPMENTANNUAL COST (%) 3.4. RECURRINGLOOP COSTS 3.5. NONRECURRINGLOOP COSTS 4. CLEC ADDITIONAL DATA NETWORK COSTS 8 5. RESULTS OF ANALYSIS 9 EXHIBITJRL-4 1. INTRODUCTION The FCC has defined the mass market as including residence, single line business and multi-line customers below the threshold established by the state for the DS 1 enterprise market. The FCC directed each state to establish a maximum number of DSOs’ that CLECs can serve through unbundled switching when serving multi-line end users at a single location. In establishing this threshold, the FCC rules state that the state commission should take into account the increased revenue opportunity at a single location and the threshold at which multi-line end users could be served in an economic fashion by higher capacity loops and a CLEC’s own switching and thus be considered as part of the DS1 enterprise market. The FCC includes in the enterprise market not only those customers currently served by DS1 lines to the customers’ premises, but also those multi-line customers currently served by DSO lines that could be economically served by DS 1.2 The purpose of this analysis is to provide the Commission an appropriate economic analysis for establishing the maximum number of DSOs that constitute the mass market as defined by the FCC. This attachment is organized as follows: it describes how CLECs operate and identifies and describes the network components used by an efficient CLEC to provide a DS1 line; it describes the services provided and how the appropriate network arrangement works; and it describes the piece-parts and costs of each component. Calculations are shown on the attached spreadsheet. 2. BUSINESS OPPORTUNITY FOR CLECS TO PROVIDE BROADBAND DATA SERVICES TO SMALL BUSINESS 2.1. THECLEC MARKET In this analysis, the CLEC is assumed to serve business customers in the mass and enterprise markets, and may also serve residential customers. It offers local, long-distance and vertical services. When providing integrated access service it offers business-grade broadband Internet access. As the Internet access provider the CLEC may also provide other data services including ’ For the purposes of this analysis, a DSO line is defined as an analog voice grade loop or sub-loop to a customer’s premises. In this context, DSO does not mean one of the 24 digitized channels making up a DSl line to a customer’s premises. The FCC defines the mass market at 7 459 as follows: “The mass market for local services consists primarily of consumers of analog ‘plain old telephone service’ or ‘POTS’ that purchase only a limited number of POTS lines and can only economically be served via analog DSO loops.” ’ The FCC determined that multi-line customers currently served by DSO “could be served in an economic fashion by higher capacity loops and a carrier’s own switching and thus be considered as part of the DS1 enterprise market.” [See 47 CFR 51.319(d)(2)(iii)(B)(4).] 1 ATTACHMENT: CLEC INTEGRATEDACCESS ANALYSIS hosting the customer’s web site on a virtual private server, providing IP addresses, supporting DNS and providing the customer’s email server. Integrated Access Service allows multiple voice, data and Internet combinations over a single access loop, saving customers money on their overall telecom bills. CLECs report a very rapid growth of this prod~ct.~This analysis models combinations of voice and data access and other data services that make the CLEC provision of DS1 access service viable to small business customers .4 The analysis compares the business case for the CLEC’s providing “only-voice” with that of the CLEC’s providing both data and voice via a single DS1 loop. 2.2. CUSTOMER-PREMISECOMPONENTS CLECs’ Integrated Access Service requires the installation of multiplexinghouting equipment on the customer premise to carry voice and data traffic over a single T-1 line. Most CLECs deploy integrated access devices (“IADs”) that integrate analog voice and high-speed data without conversion of voice to VoIP.’ The most widely used IAD is the Adtran 850. At the customer premise, individual business lines and the premise router connect to voice and data ports on the IAD. The IAD uses TDM technology to create the number of DSO channels specified by the customer, and establishes a broadband channel at a specified data speed. The IAD connects to the CLEC’s 4-wire DS1 loop which terminates at the customer’s serving central office, where the CLEC establishes its remote terminal location, as described below. 2.3. CLEC NETWORKCOMPONENTS REQUIREDTO PROVIDE INTEGRATED ACCESS The facilities-based CLEC establishes remote terminals at ILEC COS where the CLEC is collocated. It provides its own digital-loop-carrier (“DLC”) equipment. The DLC equipment separates voice and data traffic, concentrates the voice and data loops, so that fewer outgoing voice and data channels are required for transport across the local area network to the CLEC’s POP. ’ Allegiance reports that during the quarter ended September 30, 2003, its “Integrated Access Service represented approximately 37% of net lines sold for the quarter (and when including all services delivered via T1 circuits, 54% of our net lines sold for the quarter).” (lOQ for period ending 9-03) Allegiance’s lowest-priced small business service provides up to six business lines and a 256 kbps data line for $330 per month. 4 Large corporate businesses are migrating from circuit switched voice services to Voice over Internet Protocol (“VoIP”) for internal voice communications, integrating voice and data over the corporate data network. Significant savings are possible through the elimination of separate voice and data access lines. VoIP is less practical for the mass market in the short term, because most CLECs already invested in circuit switches. For small and medium-size businesses, CLECs have introduced Integrated Access Service which provides substantial benefits without the need to convert voice to VoIP 5 One exception is Cbeyond Communications which uses VoIP technology throughout its network., and media gateways that convert packet VoIP to analog voice when connecting to the PSTN. 2 ATTACHMENT: CLEC INTEGRATEDACCESS ANALYSIS A CLEC POP has one or more voice switches depending on the number of DSO voice lines it has relative to the number that can be handled by one switch. If the CLEC provides data services, it also has data LANs, servers and routers in the POP. As the customer’s Internet access provider, the CLEC concentrates individual customer data traffic for routing to the Internet backbone. The DLC in a remote terminal configuration can accommodate voice analog loops, 4-wire DSl loops, or some combination of the two.6 For voice lines, the CLEC can achieve a concentration ratio of four DSO lines to one VG channel of a DSl trunk. We estimate that twenty-five data lines may be concentrated at the DLC onto one data DS1 trunk.’ Assume, for example, that a CLEC combines data and four business lines at each of 84 establishments served from its remote terminal. These 84 Tls could be concentrated onto only 8 DLC outgoing Tls from the DLC to the CLEC’s POP as represented in the diagram below. 6 For example, the Alcatel Litespan 2000 DLC, in a remote terminal configuration, can accommodate a maximum of 2,016 DSOs or 84 DSls. ’ According to Covad, one 512Kbps data line can serve 50 data users. It follows that a DS1 can serve 150 users. Assuming an average of six employees per business connecting to the Internet, the CLEC could serve 25 firms with just one outgoing DS 1 transport channel to its POP. 3 ATTACHMENT: CLEC INTEGRATEDACCESS ANALYSIS CLEC Small Business Integrated Access Service Adtran 850 LANIRouter Voice Lines Voice Lines LANIRouter ’’’’ ~ Votce to Swtch Voice Lines Transport CLEC DSI Loops Customer to Collocation Premise CLEC POP Space The cost factors that affect the economic cross-over from multiple DSO lines to a single DS1 line include (1) the estimated cost of customer premise equipment required, (2) the costs of network components used by an efficient carrier to fully realize the potential of a DS1 line, and (3) the non-recurring and recurring charges for both a basic two-wire analog (Le., DSO) unbundled loop and a DS 1 unbundled loop. Some of these costs are network capital equipment costs subject to depreciable lives, some are non-recurring costs associated with the customer “life” or the reciprocal of the CLEC’s expected customer chum rate. Some of these are recurring monthly costs. The analysis describes the procedures used to express these costs on a common basis. 4 ATTACHMENT: CLEC INTEGRATEDACCESS ANALYSIS 3.1. CUSTOMER PREMISE EQUIPMENTCOST The Adtran 850 IAD is widely available online from different equipment suppliers serving the computer equipment market. We use a simple average of the prices and conservatively exclude any additional discount that the CLEC would receive for bulk purchase. The FXS cards and router control unit establish the voice and data channels across the DS1 loop. 8 3.2. DLC AND IAD EQUIPMENTCAPITAL COST The Alcatel Litespan 2000 DLC in a remote terminal configuration provides either a maximum of 2,016 DSO line-side connections or 84 DS1 connections. We derive the fixed and per-line costs under each configuration from Alcatel prices. 9 8 Prices reflected in the table of the Adtran 850 components. NexTag.com provides links to many distributors of both the chassis bundle and individual cards. Prices of required items appear in the table. CDW.com is an online distributor of these components. The chassis bundle comes preconfigured, with power supply unit and router control unit. Prices reflect retail single quantity purchases. ’ Proprietary Alcatel DLC component prices were provided by SBC. Costs were calculated for two system size configurations. Variable costs are derived by calculating the slope per DSO line. Fixed costs were calculated based the minimum system configuration without any line cards. DS1 variable costs were calculated the same way as DSO variable costs after replacing DSO line cards with DS1 line cards. 5 ATTACHMENT: CLEC INTEGRATEDACCESS ANALYSIS IAD $1,653 DLC $538 Total $2,191 3.3. DS1 EQUIPMENTANNUAL COST ($) The annual capital costs per DS1 loop are derived from the following analysis: An annual cost factor per DS1 loop was calculated based on the property tax, the circuit termination equipment depreciation life specified by the Commission, and the weighted average cost of capital at the Arkansas state and federal tax rate. A DLC savings per DSO displaced by the DSl reflect the reduction in DSO line cards replaced by the DS1 line card. The annual savings per DS1 depends upon the number of DSOs that ride the DS1 loop. Monthly costs are calculated as annual costs divided by twelve. I Depreciation Life I 8.00 I I Wtd. Cost of CaDital I 17.1% I IAD+DLC $595.30 I Costs/DSl/yr 1 I Less DLC $17.20 SavingslDSOlyr 3.4. RECURRINGLOOP COSTS The recurring loop costs for DSO and DSlloops are as follows: Loop Type MISIR Recurring 2-Wire Analoa LOOD Metro $1 1.86 I I Suburban I $13.64 I Rural $23.34 4-Wire Digital Loop Metro $64.78 Suburban $70.26 Rural 6 ATTACHMENT: CLEC INTEGRATEDACCESS ANALYSIS 3.5. NONRECURRINGLOOP COSTS The CLEC is assumed to migrate all of the customer’s loops from the ILEC at the same time. CLECs incur an internal cost per line for hot cuts of unbundled network element analog loops from ILECS of $1o per line. lo Ad m inist rat ive lo From CLEC statements in the record of the FCC’s Triennial Review: See Microeconomic Consulting and Research Associates, The Cost of Seiving Residential Customers Using UNE Loops, January 8, 2003, at 6; and Letter from Joan Marsh, AT&T Government Affairs, to Marlene Dortch, Secretary, FCC, re: Notice of Written Ex Parte Communication, In the Matter of Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, CC Docket Nos. 01-338, 96-98 and 98-147, February 4, 2003, at 16. ATTACHMENT: CLEC INTEGRATEDACCESS ANALYSIS Nonrecurring loop costs are customer costs which should be amortized over the life of the customer. The amortization rate should reflect the chum rate of an efficient CLEC. CLECs that target small business customers have reported monthly chum rates of below one percent per month. Our analysis capitalizes all nonrecurring loop costs at the pre-tax weighted cost of capital rate and amortizes these costs at a rate of 1 percent per month or 0.12 per year.” 4. CLEC ADDITIONAL DATA NETWORK COSTS The appropriate measure of data revenues are net revenues, ie., net of the costs of providing data services. To provide Internet access service, the CLEC must provide transport from the DLC remote terminal to its own POP. It is likely that the CLEC will aggregate the data DSls onto higher bandwidth facilities to connect to the Internet. In addition, the CLEC must pay for connections to an Internet backbone provider. Because data concentration occurs at the DLC, little if any further data concentration is required. It is likely that the CLEC will multiplex the DSls from the DLC onto higher capacity channels to send to the Internet. Nevertheless, we can estimate the backbone network costs by reference to the profile of a typical U.S. ISP. A typical U.S. ISP dial service operator pays 30 percent of its total costs for Internet backbone network (including POP aggregation).’* Dial services are available from $7.95 per month per account.13 This would imply that the upstream costs for backbone connectivity are quite small- at most $2.00-- per dial account. We extrapolate per DS1 loop to backbone costs of $12 per DS1 100p.‘~ In addition, the CLEC must pay for the DS1 transport interoffice costs to its POP. The DSls average $77.62 per interoffice DS1 per month or about $3.10 per access DS1 per monthI5. We II See Kelly Shafer, “Finding the Leaks” (downloaded from www.fatpipeonline.comisep2003water.asp,on 9/19/03). Nonrecurring costs per DSO/DSl per month are summed, and multiplied by the sum of annual weighted cost of capital and amortization rate divided by twelve. ‘I See Geoff Huston, ISP Survival Guide, Figure 13.4.,p.516. 1-’Frontline Communications Corporation includes two email accounts with the service. See: http://www.fcc.net/Internet-for-HoineMationwide-Dial-Uphationwide-dial-up.html. 14 We assume six users at the premise riding the DS 1. I5 E.g., $77.62 per DSI backhaul channel divided by 25 DSldata lines it supports. 8 ATTACHMENT: CLEC INTEGRATEDACCESS ANALYSIS believe that a reasonable estimate of data costs in addition to the DLC aggregation is no more than $17 per DS1 100p.l~ This additional cost of providing data service has been reflected in the revenue calculations. ...... I ...... ".-.ll-...... 5. RESULTS OF ANALYSIS ...... I ...... ",I" ...... "I -I ...... The results of the analysis are presented below. The results depend on the UNE density zones. I find that a DS1 line is cost-effective, compared to four DSOs, so long as the customer has at least: rn $81 .OO per month of data revenues in the Metro Zone; H $79.36 per month of data revenues in the Suburban Zone; and rn $58.78 per month of data revenues in the Rural Zone. 16 It includes the $12 backbone costs, the $3 backhaul cost plus $2 additional customer care costs in addition to services already provided. 9 Exhibit JRL-5 INTEGRATED DSO - DSI ANALYSIS: RESULTS General Costs Rates and Costs Amortization Rate 0.12 Income Tax Rate 0.380 Other Taxes 0.010 Depreciation Life 8.00 Wtd. Cost of Capital 16.9% IAD+DLC Costs/DSl/yr $666.24 Less DLC $1 7.39 SavingslDSOlyr Non-Recurring Charges Non-Recurring Charges Required Revenue per $64.00 $62.36 $41.78 DSI /Month Required Data Revenue: $81 .OO $79.36 $58.78 I Exhibit JRL-7 SBC Arkansas Wire Centers by LATA, County & MSA Wire Center CLLl Code LATA SJATE County MSA Name (8-dig) ~~ ARKADELPHIA ARKDARMA LITTLE ROCK Arkansas Clark County, AR ASHDOWN ASHDARMA LITTLE ROCK Arkansas Little River County, AF BODCAW BDCWARMA LITTLE ROCK Arkansas Nevada County, AR BEEBE BEEBARMA LITTLE ROCK Arkansas White County, AR BLACKFISH LAKE BF LKARMA LITTLE ROCK Arkansas St. Francis County, AF BLACK ROCK BLRKARMA LITTLE ROCK Arkansas Lawrence County, AR BRINKLEY BRNKARMA LITTLE ROCK Arkansas Monroe County, AR BATESVILLE NORTH BNLARNO LITTLE ROCK Arkansas Independence County BATESVILLE SOUTH BNLARSO LITTLE ROCK Arkansas Independence County BLYTHEVILLE 532 BWLARLE LITTLE ROCK Arkansas Mississippi County, AF BLYTHEVILLE NORTH BWLARPO LITTLE ROCK Arkansas Mississippi County, Af BLYTHEVILLE 762 BWLARPO LITTLE ROCK Arkansas Mississippi County, AF CHERRY VALLEY CHVYARMA LITTLE ROCK Arkansas Cross County, AR CLEVE LAND CLEVARMA LITTLE ROCK Arkansas Conway County, AR CONCORD CNCRARMA LITTLE ROCK Arkansas Cleburne County, AR CENTER RIDGE CNRGARMA LITTLE ROCK Arkansas Conway County, AR CRYSTAL SPRINGS CRSPARMA LITTLE ROCK Arkansas Garland County, AR CAVE CITY CVCYARMA LITTLE ROCK Arkansas Sharp County, AR DELL DE LLARMA LITTLE ROCK Arkansas Mississippi County, AF FORREST CITY 633 FRCYARMA LIlTLE ROCK Arkansas St. Francis County, AF FORREST CITY 581 FRCYARPA LITTLE ROCK Arkansas St. Francis County, AF GRUBBS GRBSARMA LITTLE ROCK Arkansas Jackson County, AR GURDON G RD NARMA LITTLE ROCK Arkansas Clark County, AR GREERS FERRY GRFYARMA LITTLE ROCK Arkansas Cleburne County, AR HEBER SPRINGS HBSPARMA LITTLE ROCK Arkansas Cleburne County, AR HICKORY RIDGE HCRGARMA LITTLE ROCK Arkansas Cross County, AR HUGHES H G H SARMA LITTLE ROCK Arkansas St. Francis County, AF HELENA 338 HLNAARHI LllTLE ROCK Arkansas Phillips County, AR HELENA 572 HLNAARJ U LITTLE ROCK Arkansas Phillips County, AR HOPE HOPEARMA LllTLE ROCK Arkansas Hempstead County, A HARRISBURG HRBGARMA LITTLE ROCK Arkansas Poinsett County, AR HS LAKE CATHERINE HTSPARCO LITTLE ROCK Arkansas Garland County, AR Exhibit JRL-7 HS LAKE HAMILTON HTSPARLA LITTLE ROCK Arkansas Garland County, AR HS NATIONAL HTSPARNA LITTLE ROCK Arkansas Garland County, AR HS ROCKWELL HTSPARRO LJTTLE ROCK Arkansas Garland County, AR JONES MILL J NMLARMA LITTLE ROCK Arkansas Hot Spring County, AF JOINER JONRARMA LITTLE ROCK Arkansas Mississippi County, AF JESSIEVILLE JSVLARMA LITTLE ROCK Arkansas Garland County, AR JESSIEVILLE DESOTO JSVLARDE LITTLE ROCK Arkansas Garland County, AR LONSDALE LND LARMA LITTLE ROCK Arkansas Garland County, AR LUXORA LUXRARMA LITTLE ROCK Arkansas Mississippi County, AI MENA MENAARMA LITTLE ROCK Arkansas Polk County, AR MORRILTON FLEETWOOD MLTNARFL LITTLE ROCK Arkansas Conway County, AR MORRILTON PETIT JEAN MLTNARPA LITTLE ROCK Arkansas Conway County, AR MALVERN MLVRARMA LITTLE ROCK Arkansas Hot Spring County, AF MOR0 MOROARMA LITTLE ROCK Arkansas Lee County, AR MARIANNA MRNNARMA LITTLE ROCK Arkansas Lee County, AR NASHVILLE NSV LAR MA LITTLE ROCK Arkansas Howard County, AR NEWPORT NWPTARMA LITTLE ROCK Arkansas Jackson County, AR NEWARK NWRKARMA LITTLE ROCK Arkansas Independence County OIL TROUGH OLTRARMA LITTLE ROCK Arkansas Independence County OSCEOLA OSCLARMA LITTLE ROCK Arkansas Mississippi County, AF PARAGOULD CEDAR PRGLARCE LITTLE ROCK Arkansas Greene County, AR PARAGOULD LIGHT PRGLARLI LITTLE ROCK Arkansas Greene County, AR PARAGOULD NORTH PRGLARNO LITTLE ROCK Arkansas Greene County, AR PARKIN PRKNARMA LITTLE ROCK Arkansas Cross County, AR SEARCY SRCYARMA LITTLE ROCK Arkansas White County, AR TUPELO TUPLARMA LITTLE ROCK Arkansas Jackson County, AR WALNUT RIDGE W LRGARMA LITTLE ROCK Arkansas Lawrence County, AR WILSON W LSNARMA LITTLE ROCK Arkansas Mississippi County, AI WYNNE W Y NNARMA LITTLE ROCK Arkansas Cross County, AR CASH CASHARMA LITTLE ROCK Arkansas Craighead County, AF Jonesboro, AR MSA JONESBORO JNBOARMA LITTLE ROCK Arkansas Craighead County, AF Jonesboro, AR MSA BAUXITE BAXTARBX LITTLE ROCK Arkansas Saline County, AR Little Rock-North Little Rock, AR MSA BENTON BNTNARMA LITTLE ROCK Arkansas Saline County, AR Little Rock-North Little Rock, AR MSA BENTON NORTH BNTNARNO LITTLE ROCK Arkansas Saline County, AR Little Rock-North Little Rock, AR MSA CONWAY CNWYARMA LITTLE ROCK Arkansas Faulkner County, AR Little Rock-North Little Rock, AR MSA MAYFLOWER CNWYARMY LITTLE ROCK Arkansas Faulkner County, AR Little Rock-North Little Rock, AR MSA LONOKE LONKARNB LITTLE ROCK Arkansas Lonoke County, AR Little Rock-North Little Rock, AR MSA Exhibit JRL-7 LR CAPITOL LTRKARCA LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA LR EAST LTRKAREA LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA LR FRANKLIN LTRKARF R LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA LR ROSEDALE LTRKARLO LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA LR MOHAWK LT RKAR MO LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA LR SKYLl NE LTRKARSK LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA LR SOUTHWEST LTRKARSW LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA LR SYLVAN HILLS LTRKARTE LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA LR PINNACLE LTRKARTO LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA LR SPRINGLAKE LTRKARTU LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA LR WRIGHTSVILLE LTRKARTW LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA LR PALARM LTRKAR U L LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA LR FERN DALE LTRKARVA LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA LR COLLEGEVILLE LTRKARVI LITTLE ROCK Arkansas Saline County, AR Little Rock-North Little Rock, AR MSA LR WINDSOR LTRKARWI LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA LR SCOTT LTRKARYO LITTLE ROCK Arkansas Pulaski County, AR Little Rock-North Little Rock, AR MSA PARON PARNAR MA LITTLE ROCK Arkansas Saline County, AR Little Rock-North Little Rock, AR MSA CRAW FORDSVILLE CFVLARMA LITTLE ROCK Arkansas Crittenden County, AF Memphis, TN-AR-MS MSA EARLE EARLARMA LITTLE ROCK Arkansas Crittenden County, AF Memphis, TN-AR-MS MSA MARION MARNARMA LITTLE ROCK Arkansas Crittenden County, AF Memphis, TN-AR-MS MSA TURRELL TRRLARMA LITTLE ROCK Arkansas Crittenden County, AF Memphis, TN-AR-MS MSA WEST MEMPHIS W MMPARMA LITTLE ROCK Arkansas Crittenden County, AF Memphis, TN-AR-MS MSA EUREKA SPRINGS ERSPARMA FORT SMITH Arkansas Carroll County, AR HlNDSVlLLE HNDVARMA FORT SMITH Arkansas Madison County, AR BNTV BELLA VISTA BNTVARBV FORT SMITH Arkansas Benton County, AR Fayetteville-Springdale-Rogers, AR MSA BNTV CRESTW OOD BNTVARCR FORT SMITH Arkansas Benton County, AR Fayetteville-Springdale-Rogers, AR MSA FTWL TOTAL FWLARH I FORT SMITH Arkansas Washington County, P Fayetteville-Springdale-Rogers, AR MSA G RAV ETTE GRVTARMA FORT SMITH Arkansas Benton County, AR Fayetteville-Springdale-Rogers,AR MSA ROGERS EAST RGRSAREA FORT SMITH Arkansas Benton County, AR Fayetteville-Springdale-Rogers,AR MSA ROGERS RGRSARMA FORT SMITH Arkansas Benton County, AR Fayetteville-Springdale-Rogers, AR MSA ROGERS LOWELL RGRSARMA FORT SMITH Arkansas Benton County, AR Fayetteville-Springdale-Rogers,AR MSA SPGDL TONTITOWN SPDLARFO FORT SMITH Arkansas Washington County, F Fayetteville-Springdale-Rogers,AR MSA SPGDL PLEASANT SPD LARPL FORT SMITH Arkansas Washington County, F Fayetteville-Springdale-Rogers, AR MSA SPGDL LOW ELL SPDLARPL FORT SMITH Arkansas Washington County, F Fayetteville-Springdale-Rogers,AR MSA FS GLADSTONE FTSMARGL FORT SMITH Arkansas Sebastian County, AR Fort Smith, AR-OK MSA FS 626 OKLA FTSMARMI FORT SMITH Arkansas Sebastian County, AR Fort Smith, AR-OK MSA FS MISSION FTS MAR MI FORT SMITH Arkansas Sebastian County, AR Fort Smith, AR-OK MSA Exhibit JRL-7 FS SUNSET FTSMARSU FORT SMITH Arkansas Sebastian County, AR Fort Smith, AR-OK MSA FS 873 & 875 OKLA FTSMARSU FORT SMITH Arkansas Sebastian County, AR Fort Smith, AR-OK MSA NATURAL DAM NTRDARMA FORT SMITH Arkansas Crawford County, AR Fort Smith, AR-OK MSA VAN BUREN VNBRARMA FORT SMITH Arkansas Crawford County, AR Fort Smith, AR-OK MSA VAN BUREN CMATS TMP VNBRARNO FORT SMITH Arkansas Crawford County, AR Fort Smith, AR-OK MSA NORPHLET NRPHARMA PINE BLUFF Arkansas Union County, AR PORTLAND PTLDARMA PINE BLUFF Arkansas Ashley County, AR SMACKOVER SMCKARMA PINE BLUFF Arkansas Union County, AR STAMPS STMPARMA PINE BLUFF Arkansas Lafayette County, AR STEPHENS STPHARMA PINE BLUFF Arkansas Ouachita County, AR STRONG STRNARMA PINE BLUFF Arkansas Union County, AR URBANA URBNARMA PINE BLUFF Arkansas Union County, AR VILLAGE VLLGARMA PINE BLUFF Arkansas Columbia County, AR WILMAR WLMRARMA PINE BLUFF Arkansas Drew County, AR WARREN W RRNARMA PINE BLUFF Arkansas Bradley County, AR WATSON WTSNARMA PINE BLUFF Arkansas Desha County, AR ALTH EI ME R ALTHARMA PINE BLUFF Arkansas Jefferson County, AR Pine Bluff, AR MSA PB CHERRY PNBLARCH PINE BLUFF Arkansas Jefferson County, AR Pine Bluff, AR MSA PB JEFFERSON PNBLAR J E PINE BLUFF Arkansas Jefferson County, AR Pine Bluff, AR MSA PB WATSON CHAPEL PNBLARWC PINE BLUFF Arkansas Jefferson County, AR Pine Bluff, AR MSA Exhibit JRL-8 Public Versioii Arkansas CLEC Switches CLEC CLLlB Switch Eqpt Equipment Name LATA Street Address Clty (address redacted) ADELPHIA BUSINESS AR LTRKARDR LTRKARDRDSO 5E WESTERN ELECTRIC 5 ESS LITTLE ROCK ARKANSAS LITTLE ROCK ALLTEL COMM - AR FTSMARSU FTSMARSUDSl DS GENERIC DIGITAL SWITCHING SYSTEM FORT SMITH ARKANSAS FORT SMITH ALLTEL COMM - AR FYVLARHI FWLARHlDSl DS GENERIC DIGITAL SWITCHING SYSTEM FORT SMITH ARKANSAS FAYETTEVILLE ALLTEL COMM - AR FYVLARHI FWLARHlDSl RSC NORTHERN TELECOM REMOTE SWlTCHlE FORT SMITH ARKANSAS SPRINGDALE ALLTEL COMM - AR FYVLARHI FWLARHIDSl RSC NORTHERN TELECOM REMOTE SWITCHIF FORT SMITH ARKANSAS BENTONVILLE ALLTEL COMM - AR FYVLARHl FWLARHlDSl RSC NORTHERN TELECOM REMOTE SWITCHIF FORT SMITH ARKANSAS ROGERS ALLTEL COMM - AR LTRKARIY LTRKARIYDSO DMH NORTHERN TELECOM DMS 100 LITTLE ROCK ARKANSAS LITTLE ROCK ALLTEL COMM - AR LTRKARIY LTRKARIYDSO RSC NORTHERN TELECOM REMOTE SWITCH11LITTLE ROCK ARKANSAS LITTLE ROCK ALLTEL COMM - AR LTRKARIY LTRKARIYDSO RSC NORTHERN TELECOM REMOTE SWITCH11LITTLE ROCK ARKANSAS BENTON ALLTEL COMM - AR LTRKARIY LTRKARIYDSO RSC NORTHERN TELECOM REMOTE SWITCH11LITTLE ROCK ARKANSAS CONWAY ALLTEL COMM - AR LTRKARIY LTRKARIYDSO RSC NORTHERN TELECOM REMOTE SWITCHIF LITTLE ROCK ARKANSAS LITTLE ROCK AT&T LOC - NY LTRKNR LTRKARFRDSl 4E WESTERN ELECTRIC 4 ESS LITTLE ROCK ARKANSAS LITTLE ROCK BROOKS FIBER COM AR LTRKARZO LTRKARZODSO 5E WESTERN ELECTRIC 5 ESS LITTLE ROCK ARKANSAS LITTLE ROCK CONNECT TOTAL LTRKARGG LTRKARGGDSO REX HARRIS DIGITAL TELEPHONE LITTLE ROCK ARKANSAS LITTLE ROCK KMC TELECOM V - AR LTRKARGG LTRKARGGOOW C18 NORTEL NETWORKS CVX 1800 ACCESS S LITTLE ROCK ARKANSAS LITTLE ROCK NUVOX COMM OF AR LTRLAR04 LTRLAR04DSO DMH NORTHERN TELECOM DMS 100 LITTLE ROCK ARKANSAS LITTLE ROCK RITTER COMMS AR JNBOARDS JNBOARDSDSO STO SANTERA SYSTEMS INC SANTERAONE LITTLE ROCK ARKANSAS JONESBORO TOTAL CONNECT! - AR LTRKARGG LTRKARGGDSO REX HARRIS DIGITAL TELEPHONE RURAL ELEf LITTLE ROCK ARKANSAS LITTLE ROCK XSPEDIUS MGMT - AR LTRKARFC LTRKARFCDCO 5E WESTERN ELECTRIC 5 ESS LITTLE ROCK ARKANSAS LITTLE ROCK Trigger CLEO are bolded Brook Fiber is aii affiliate of MCI/WorldCorii Trivergeiit became NuVox Alltel acquired Sugarland, 360 Conmiiiiiications, Exhibit JRL-9 Comparison of Little Rock LATA to State Little Rock Percent LATi STATE LATA of State CLEC Mass Market Loops 4,971 5,876 85% SBC WC with trigger CLECs 11 17 65% Ported Numbers 77,733 87,944 88% Collocations 47 66 71 % CLEC NXXs 134 139 96% UNE-P 68,793 108,657 63 % SBC WIRE CENTERS 90 145 62% SBC Retail Lines in WC with MM Loops 205,630 368,068 56% SBC Retail Lines 61 0,275 965,308 63% Exhibit JRL-10 - CLECs coiiocatiow' Ported port,ng LATA County CLLl CodeJ(8-dig) Wire Center \Name MSA Loops " Nos Nos LITTLE ROCK Saline County, AR BNTNARMA BENTON Little Rock-North Little Rock, AR MSA 50 1 2 LITTLE ROCK Saline County, AR BNTNARNO BENTON NORTH Little Rock-North Little Rock, AR MSA LITTLE ROCK Faulkner County, AR CNWYARMA CONWAY Little Rock-North Little Rock, AR MSA 2,403 2 6,824 4 LITTLE ROCK Faulkner County, AR CN