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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.

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