BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION Case No ... · PDF filebefore the new...

BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION

IN THE MATTER OF THE DEVELOPMENT OF AN ALTERNATIVE FORM OF REGULATION PLAN FOR QWEST CORPORA TION

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Case No. 09-00094-UT

RECOMMENDED DECISION OF 1rHl~ HEARING EXAMINER

October 22, ::a009

TABLE OF CON1'ENTS

Page

STATEMENT OF THE CASE •..•••..••...•..•..•... ,....................... •••••••.• 1

DISCUSSION .............................................. ,.............................. 7

1. Background and :Introduction.,I.... .............................. 7

2. Applicable Legal Standards.................. .................. ...... 11

A. Commission authority to impose quality of service and investment rc:!quirements in an AFOR •......••....•........•....... ,.............................. 12

B. Commission authority to order customer credits ............................. " ... ,............................... 15

C. State investment requirernel!lts for information services ............ , ............................. .

3. Competition Claims .................. " .... , ............................. .

4 P · . . rlclng ................ ~ ....................................................... .

A. [B.] IFR and IFB, Switched Access, and Residential Public Interest F,eatures and

17

22

39

Sel'V'ices Price Caps.............................................. 40

B. [C.] Services other than IFR and IFB access Lines, switched access services and Residential Public Interest Features alld Services.................. 48

C. [F.] Promotional Offering:s.................................. 56

D. [I.] Price Floors.................................................. 60

E. [H] Individual Contracts.................................... 64

F. [D.] Tariff Changes.............................................. 70

G. [M.] Facilities Relocation Cost Recovery (Qwest proposed additionaL.................. 77

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Page

H. [J.] Competition Zones...... ...... ...... ...................... 80

I. [N.] Filing of Materials Reh:Lted to the AFOR III Pricing Plan (Staff Proposed Addition); and [P.] Filing (Staff proposed addition)...................... 83

J. [E.] New Serv-ices .......... t...................................... 85

K. [G.] Packaging of Products iind Services............... 87

L. [A.] Definitions.................................................... 89

5. Quality of Service.............................................. ........... 93

A. Background and Overview ()f Positions............ 93

B. The Staff and Qwest pro)osals........................... 1 00

1. Definitions.................. .............................. 100

a. Trouble Reports................................... 101 b. Access Lines~."'f""I"""""""""""""""" 1 0 1 c. Out of Service Trc)uble Reports............ 101 d. Extraordinary c)r Abnormal

Operating Conditi.ons.......................... 102

2. Reporting RequiremE~nts........... ......... .......... 105

a. Elimination of 'Wilre Center Reporting ........ " ... ,............................... 106

b. Trouble Reports... ... ...... ........ .... ........... 107 c. Reporting of Custl)mer Credits

Issued to Individuals........................... 109 d. Business Office and Repair

Office Answer T'imes............................ 110 e. Underlying numtbers for out of

Service and rep1eat: trouble reports........ 110 f. Held Orders .......... I................................ 111

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3. Standards: Deletion of installation standard for premises located greater than 1,000 feet froIn a. distribution

Page

terminal .................. o ••• , ••••••••••••••••••••••••••••• II. 113

4. Alternative Service ... II •••••••••••••••• II •• It II ••••• II. 114

5. Customer Credits.................................... ... 115

a. Statewide and Wire Center Credit-s........................................... . 115

b. Individual Cus~tomer Credits......... . 120 c. Designed S€~rvices Credits.............. 123

6. Qwest's Proposed Rc::sponsive Resolution Processe:s................................. .. 124

6. Investment in Infrastructure............ ....... ..... ............... .. 125

Level 3'8 Filing................................................. 145

Qwest's Suggested Tran.scdpt Revisions........... 146

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BEFORE THE NEW MEXICO PUBLIC :REGULATION COMMISSION

IN THE MATTER OF THE DEVELOPMENT ) OF AN ALTERNATIVE FORM OF ) REGULATION PLAN FOR QWEST ) Case No. 09-00094-UT CORPORATION )

----------------------------------,

RECOMMENDED DECISION OF THl~ HEARING EXAMINER

James C. Martin, Hearing Examiner in this case, hereby submits this

Recommended Decision to the New Mexico Public Regulation Commission

("Commission" or "NMPRC") pursuant to NMSA 1978, § 8-8-14, and NMPRC

Administrative Procedures rules 1.2.2.29.D(4} and 1.2.2.37.B NMAC. The Hearing

.~xaminer recommends that the Commission adopt the following Statement of the

Case, Discussion, Findings Paragraphs, and Decretal Paragraphs in its Final Order.

STATEMENT OF THE CASE

On March 24, 2009, the Commission entered its Initial Order commencing this

case "for the purpose of developing an alternative form of regulation ("AFOR")

concerning Qwest Corporation ["Qwest" or "Company"], to become effective after the

expiration of Qwest's current AFOR II Pricing cmd Quality of Service Plan," as further

described and provided by that Order. Id., at ~ A, p. 2. Among other things, the

Initial Order directed that the "scope of this proceeding shall extend to all issues

necessary and convenient to the development of a new AFOR plan concerning Qwest

Corporation, including but not limited to, pricing, quality of service, infrastructure

investment, and deployment of advanced services." Id., at ~ B, p. 2. The Commission

also appointed the undersigned as Hearing Examiner for this case.

On March 31, 2009, the Hearing Examiner filed an Order Scheduling Pre-

Hearing Conference and on April 9, 2009 entered a Notice and Procedural Order.

On April 13,2009, Qwest filed a Motion for Admission Pro Hac Vice on behalf of

Tim Goodwin and an Unopposed Motion for Protective Order.

On April 15, 2009, the Attorney General of New Mexico ("AG") filed a Motion for

Leave to Intervene and Request for Discovery. Qwest filed an Affidavit of Compliance.

On April 17, 2009, the Hearing Examiner issued a Protective Order.

On April 24, 2009, the City of Albuquerque ("COA") filed a Motion to Intervene

and Request for Discovery documents. On April 27, 2009, Cyber Mesa Computer

Systems ("Cyber Mesa") filed a Motion to Intervene and Request for Discovery. On

April 29,2009, tw telecom of New Mexico ("tw telecom") filed a Motion to Intervene and

Request for Discovery.

On April 24,2009, a Nondisclosure Agreement was filed for Carolyn Fudge.

On April 27, 2009, Nondisclosure Agreements were filed on behalf of Bruce

Throne, Jane M. Hill, M. Eric Lucero, Jace Colbert, John Hill and Michael Lea.

On April 30, 2009, Commission Utility Division Staff ("Staff') filed their

Nondisclosure Agreements for Georgette Ramie, Ashley Schannauer, Roy Stephenson,

Michael Ripperger, Mark Cessarich, Joan Ellis, Eugene Evans, Nancy Burns, Ken

Smith and Cydney Beadles. Also on April 30, 2009, Nondisclosure Agreements were

filed in the case for Carol Clifford, Lyndall Nipps, Brian Harris, Loretta Martinez, and

Timothy Gates.

On May 4,2009 a Nondisclosure Agreement for Marianne Granoff was filed.

On May 26, 2009, Nondisclosure Agreements were filed for Robert Spangler,

Stephen Melnikoff, Victoria Baca and Richard Levin.

Recommended Decision of the Hearing Examiner


2

On June 2, 2009, Nondisclosure Agreements were filed for Thomas W. Olson,

Reed Peterson, Robert Brigham, Timothy Goodwin, Michael G. Williams, Chris Viveros

and Dennis Pappas.

On June 5, 2009, a Nondisclosure Agreement was filed for Peter Gould.

On June 8, 2009, a Nondisclosure Agreement was filed by Michael R.

Horcasitas.

On June 11, 2009, Nondisclosure Agreements for Mack Greene and Greg

Rogers were filed.

On June 19,2009, a Nondisclosure Agreement was filed by Robin Terry.

On June 30, 2009, a Nondisclosure Agreement for Teresa Million was filed. On

July 2,2009, a Nondisclosure Agreement was filed for Loretta A. Armenta.

On May 7, 2009, tw telecom filed a Motion to Compel Responses to Discovery by

Qwest and a Motion for extension of time to file testimony. On that date the Hearing

Examiner issued an Order on Motion for Admission Pro Hac Vice and a Minute Order

pertalning to the Motion to Compel of tw telecom for its First Set of Discovery Requests

to Qwest.

On May 8, 2009, a Motion to Intervene and Request for Discovery Documents

was filed by the New Mexico Department of Information Technology ("DoIT"). On the

same date, Level 3 Communication ("Level 3") filed a Motion for Leave to Intervene and

Request for Discovery and a Motion for Admission Pro Hac Vice for Greg Rogers, Esq.

On May 11, 2009, the United States Department of Defense and all other Federal

j\gencies ("DoD /FEA") filed a Motion to Intelvene and Request for Discovery

Documents.

On May 20,2009, the Hearing Examiner issued an Order Revising Service List.



3

On May 22, 2009, Direct Testimony of Mack D. Greene was filed by Level 3.

Direct Testimony of Nicholas Schiavo was filed by the AG. Direct Testimony of Jane

M. Hill was filed by Cyber Mesa. Direct Testimony of Lyndall Wayne Nipps was filed by

tw telecom. Direct Testimony of Timothy J. Gates was filed by the AG. Qwest filed

Direct Testimony of Michael G. Williams, Michael Horcasitas and Robert H. Brigham.

Staff filed Direct Testimony of Mark Cessarich, Eugene Evans, Georgette Ramie and

Michael Ripperger.

On June 3, 2009, Qwest filed an Errata Notice to Direct Testimony of Robert H.

Brigham.

On June 15, 2009, Qwest filed a Response to Cyber Mesa's Motion for

Extension of Time and a Corrected Response to Cyber Mesa's Motion for Extension of

Time.

On June 16,2009, a Motion to Compel was filed by Staff. Also on that date, tw

telecom of NM filed its Opposition to Qwest's Request to File Supplemental Testimony.

On June 17, 2009, the New Mexico AG filed a Motion to Compel Qwest

I(esponses to Discovery. Also, the AG filed a Revised Motion to Compel Qwest

H.esponses to Discovery.

On June 18, 2009, tw telecom filed a Motion to Compel Responses to Discovery

by Qwest and Request for Expedited Consideration. Also, an Errata Notice to Direct

Testimony of Lyndall W. Nipps was filed by tw telecom.

On June 18, 2009, the Hearing Examiner held a status conference on

outstanding discovery disputes and on various scheduling matters.

On June 22, 2009, Qwest filed its Response to AG's Motion to Compel and its

Response to tw telecom's Motion to Compel.

R.ecommended Decision of the Hearing Examiner


4

On June 23, 2009, the Hearing Examiner entered a Minute Order Concerning

Motions to Compel.

On June 24, 2009, Qwest filed Response Testimony of Michael Horcasitas,

Robert H. Brigham, Teresa K. Million and Michael G. Williams. Also on that date, the

Response Testimony of Georgette O. Ramie and Michael S. Ripperger was filed by

Staff. Rebuttal Testimony of Timothy Gates was filed by the AG. An Errata Notice to

Direct Testimony of Jane M. Hill was filed by Cyber Mesa. Response Testimony of

Lyndall Wayne Nipps was filed by tw telecom.

On June 29, 2009, Qwest filed a Motion to Compel Discovery Responses from

the AG and a Motion to Strike Affidavit of Nicholas Schiavo. Also on this date, Staff

filed an Errata to Response of Testimony of Georgette Ramie.

On June 30,2009, Qwest Corporation med a Motion to Limit Scope of AFOR III.

On July I, 2009, the Hearing Examiner entered an Order on Qwest's Motion to

Compel and a Scheduling Memo Order.

On July 2, 2009, a Second Errata Notice to Direct Testimony of Lyndall W.

Nipps was filed by tw telecom.

On July 6, 2009, a Third Errata Notice to Direct Testimony of Lyndall W. Nipps

was filed by tw telecom, and the AG filed an Errata for the Testimony of Timothy J.

Gates.

Also, on July 6, 2009, the Hearing Examiner held a prehearing conference at

which he heard oral argument on Qwest's Motion to Limit the Scope of AFOR III and

remaining discovery disputes. The Hearing Examiner allowed the other parties to file

written responses to Qwest's Motion with the parties' post-hearing briefs-in-chief.



5

The hearing in this matter commenced at 10:00 a.m. on July 7, 2009, and

continued on July 8, 9 and 10, 2009.

The following persons entered appearances in this proceeding.

For Qwest

Timothy J. Goodwin, Esq., and Thomas W. Olson, Esq.

For the Attorney General

Brian Harris, Assistant Attorney General

For tw telecom

Carol A. Clifford, Esq.

For Cyber Mesa

Bruce C. Throne, Esq.

For DoD/FEA

Stephen S. Melnikoff, Esq.

For City of Albuquerque

Carolyn S. Fudge, Esq.

For Level 3

Peter J. Gould, Esq.

For Utility Division Staff

Ashley C. Schannauer, Esq., and Joan T. Ellis, Esq.

DolT was excused.

Public comments were received from State Senator Carlos Cisneros, Senate

district 6; State Representative Roberto G. Gonzales, House District 42; State

Representative Jim Trujillo, House District 45; Leo Baca, on behalf of the Association

of Commerce and Industry of New Mexico (Mr. Baca also presented a letter from State

Recommended Decision of Ithe Hearing Examiner


6

Senator Linda Lopez); Marianne Granoff, retired internet professional; Bill Garcia, Vice

President of Governmental Affairs for Wind Stream Communication; and (in writing)

Mark Anthony, a Qwest customer from Tesuque, :~ew Mexico.

On July 13, 2009, a Joint and Unopposed Motion Asking the Commission to

Extend the Deadline for Issuance of a Recommended Decision was filed by Qwest. The

Commission's Order of July 23, 2009, extended the deadline for the Recommended

Decision to October 16, 2009.

The transcripts of the July 7-10 evidentiary hearing, together with exhibit

volumes, were filed by the Court Reporter on August 3,2009.

Qwest filed its Suggested Transcript Corrections and Motion for Leave to File

Out of Time on September 24, 2009. tw telecom 1i1ed Objections to Qwest's Suggested

Transcript Corrections on October 5, 2009. Staff filed its Response and Objection to

Qwest's Motion for Adoption of Suggested Transcript Corrections on October 7, 2009.

Qwest filed a Motion for Leave to Reply to Staff's Response and Objection, and its

proposed Reply, on October 13, 2009.

DISCUSSION

1. Background and Introduction

The Commission's Final Order of March 8, 2001, in Utility Case Nos. 3215, et

§~ ("AFaR Final Order"), 2001 WL 849469,1 explained that the initial AFaR ("AFaR I")

"had its genesis in the convergence of two developments." First was the passage of

House Bi11400 ("HB 400", i.e., NM Laws 2000, eh. 102; codified as NMSA 1978, §§ 63-

9A-2, 63-9A-8.2 and 63-9A-8.3). Among other things, HB 400 directed the

Commission "to eliminate rate of return regulation of incumbent telecommunications

1 The Commission takes administrative notice of the Final Order and the record in Case Nos. 3215, et a!., in accordance with 1.2.2.35.D(1) NMAC.



7

carriers with more than fifty thousand access lines and implement an alternative form

of regulation that includes reasonable price caps for basic residence and business

local exchange services." Section 63-9A-8.2(C). The second development was the

merger of Qwest and U S WEST. AFOR Final Order, at 8.

Qwest's AFOR I was submitted as part of a contested Stipulation that settled

the great majority of outstanding issues and was approved as provided by the AFOR

Final Order. The AFOR became effective upon the date of approval for a term of five

years from that date. AFOR Final Order, at 75, ~ D; AFOR (Ex. B to AFOR Final

Order), § IV.C. The AFOR set the terms and conditions of regulation applicable to

Qwest's retail services in New Mexico during the term of the AFOR. AFOR Final Order,

at 13. AFOR I's broad array of terms is summarized at pp. 13-19 of the AFOR Final

Order.

HB 400 also required the Commission to adopt rules (1) establishing consumer

protection and quality of service standards; (2) ensuring adequate investment in the

telecommunications infrastructure in both urban and rural areas of the State; (3)

promoting the availability and deployment of high-speed data services in both urban

and rural areas of the State; (4) ensuring the accessibility of interconnection by

competitive local exchange carriers in both urban and rural areas of the State; and

(5) establishing an expedited regulatory process for considering telecommunications

matters before the Commission. NMSA 1978, § 63-9A-8.2(B). As the Commission has

found, nothing in HB 400 dictates the means of compliance with or implementation of

that legislation. AFOR Final Order, at 29.

The HB 400 rulemakings were carried out in NMPRC Utility Case Nos. 3227,

3237, 3437, 3438, and 3439. In two of the HB 400 rulemaking proceedings, the



8

Commission determined that when a carrier is operating under a Commission-

approved AFOR plan, any provisions in that plan will take precedence over

corresponding provisions in the rule. If the AFOR does not address a particular

provision in the rule, then the rule would apply. Final Order Adopting 17.11.22 NMAC

(Quality of Service Standards Rule), at 18, Case No. 3437; Final Order Adopting

17.1l.17 NMAC (Infrastructure and High Speed Data Services Rule), at 4-5, Case No.

3438. The HB 400 rules were approved by the Commission on December 12, 2000,

and became effective January 1, 200l.

At the end of Period 2 of AFaR I, Staff expressed concern about an apparent

decline to pre-AFaR levels in Qwest's reported New Mexico infrastructure investment

levels. Responding to these concerns (and similar ones voiced by the AG) the

Commission's Order Commencing Investigation of July 15,2004, opened a new docket

in Case No. 04-00237-UT to investigate whethe;~ Qwest was and would remain in

compliance with its AFaR I obligations, and to consider what remedial measures

would be necessary in order to ensure compliance through the entire term of AFOR I.

In that proceeding, the Commission determined. that a new incentive was necessary to

encourage Qwest to comply with its investment obligations under AFOR I, and that

Qwest would likely be deficient in its investment obligations in the amount of

approximately $220 million by the end of AFOR l.2

The Commission found and concluded in Case No. 04-00237-UT that, for Period

4, it would consider whether credits or refunds should be required, and that it would

require credits or refunds pertaining to Period 5 jf the AFaR requirements were not

2 The Commission later opened a separate docket in Case No. 05-00094-UT for implementation and enforcement of its decision in the Case No. 04-00237-UT, and for the consideration of remaining or ongoing AFOR I issues, including how credits or refunds should be determined and passed on to Qwest's customers.



9

met at the close of the S-year life of the AFOR I Plan. Qwest appealed the

Commission's Order, which was affirmed in its entirety by the New Mexico Supreme

Court on June 29, 2006. On September 19, 2006, the Supreme Court rejected

Qwest's motion for rehearing of the Court's ruling. Qwest v. NM Public

Regulation Comm., 140 N.M. 440, 143 P.3d 478, 2006 -NMSC- 042.

On November 29, 2005, the Commiss:lon began the "AFOR II" proceeding in

Case No. 05-00466-UT by issuing its Order Closing Case No. 05-00437-UT and

Docketing Case No. 05-00466-UT, "for the purpose of developing, through an

adjudicated case, an AFOR for Qwest to apply after expiration of Qwest's current

AFOR." During the pendency of that proceeding, the Commission found it necessary

to establish an "Interim AFOR" for Qwest. See, Interim Order Extending AFOR, issued

on March 7, 2006; and Order Establishing Interim AFaR, issued on March 14,2006.

The ongoing AFOR I issues were decided by the Commission in its Final Order

on Customer Credits Relating to Quality of Service Violations in Periods 1, 3 and 4,

entered November 28, 2006 in Case No. OS-00094-UT; and in the Order for Contingent

Approval of Amended Settlement Agreement entered December 28, 2006 in that case

a.nd in Case No. 06-0032S-UT. The latter provided for the filing and approval of the

Second Amended Settlement Agreement ("SASA"J,. which settled issues arising from

Qwest's AFOR I investment commitment, and specified the remaining amounts and

types of investment Qwest was to make in its New Mexico infrastructure as a part of

that investment commitment.

The Commission's Final Order on Pricing and Quality of Service, entered in

Case No. 05-00466-UT on November 28, 2006, authorized the AFOR II Pricing and

Quality of Service Plan effective from January 1, 2007, through December 31, 2009.

10 Recommended Decision of

1the Hearing Examiner C;ase No. 09-00094-UT

Id., at ,-r D. In that case the Commission had before it pricing proposals encompassing

pricing, quality of service, investment in infrastructure, and deployment of advanced

services. However, by its express terms the AFO:R II Order addressed only the pricing

and quality of service provisions of AFOR II. I dl,. , at 11-12.

2. Applicable Legal Standards

Just prior to the hearing in this case, Qwest filed its Motion to Limit Scope of

AFOR III. The Motion questions the legal basis for much of the scope of this case

established by the Commission's Initial Order. Some of the parties have been critical

of the "11th hour" filing of this Motion. 3 See, e.g., tw telecom's Brief-in-Chief, at 51;

AG's Reply Brief, at 1-2.4 As the Motion itself recites, all of the active parties (with the

possible exception of Level 3, which has not taken a formal position) resist Qwest's

proposed limitation of what should be included in AFOR III. Because of the timing of

this Motion, the Hearing Examiner permitted responses to be made in the parties'

post-hearing briefs.

Qwest's Motion generally argues that the Commission lacks the jurisdiction to

include in the AFOR any provisions relative to quality of service, investment

requirements, customer credits and information services. More particUlarly, Qwest

claims that exercise of the Commission's jurisdiction over quality of service and

investment is limited by statute to rules, not AFOR proceedings. The Company further

maintains that states are preempted by federal law from having any regulatory

3 The Motion was filed on June 30, 2009. The hearing on the merits began a week later on July 7, 2009. 4 The AG argues that Qwesfs Motion should be dismissed on ::Jrocedural grounds, principally because the Motion was filed late in the day even though Qwest had known the grounds for the Motion for some time. AG's Reply Brief, at 1-2 (citing 1.2.2.12.A(1) NMAC: "The commission discourages any delay in the filing of a motion once grounds for the motion are known to the movant."). The AG's argument has merit, especially because virtually all of Qwest's arguments have been made before, either in this (e.g., in prefiled testimony) or in previous proceedings. Even so, the main legal issues raised in Qwest's Motion have or would likely have come up in the ordinary course of this proceeding, and so should not be disposed of summarily. This finding does not, of course, endorse or excuse the tardiness of Qwest's Motion.



11

authority over investment requirements for information services, and that the

Commission cannot authorize the type of customer credits advocated by Staff (and

approved by the Commission in earlier cases) because no statute confers that power

on the Commission. Motion to Limit Scope, at 2,5, and 10-1l.

DoDjFEA, the AG, tw telecom, Cyber Mesa and Staff oppose the Motion. The

issues arising from the Motion provide the starting point for examination of the

general legal principles underlying AFOR III. Neither those issues nor their

examination are new or unique to AFOR III.

A. Commission authority to impose quality of service and investment requirements in an AFOR.

In the AFOR I case, the Commission declal'ed without objection that the AFOR

was "consistent with the objectives set out in HB 400." Final Order, Case Nos. 3215,

~:t al., at 49. See also, the discussion and conclusions at 48-51 of that Final Order.

The Commission expressly found in the AFOR I case (Final Order, at ~ 8, p. 74) that

the AFOR was consonant with HB 400's rulemaking requirements: 5

The proponents of the Amended AFOR have met their burden of proving by substantial evidence that their proposed Amended Joint Stipulation and Amended AFOR are reasonable under the circumstances presented, consistent with the public interest, consistent with HB 400 and satisfy the HB 400 requirements that the Commission adopt rules that, (a) establish consumer protection and quality of service standards; (b) ensure adequate investment in the telecommunications infrastructure in both urban and rural areas of the state; (c) promote availability and deployment of high-speed data services in both urban and rural areas of the state; and (d) establish an expedited regulatory process for considering matters related to telecommunications services that are pending before the Commission.

5 See also, the Commission's investment and quality of service rules, adopted and effective earlier (December 12, 2000, and January 1, 2001, respectively), which both provide that "[wJhere the Commission has approved an alternative form of regulation plan for an ILEC, and a provision in the approved plan is inconsistent with a provision in this rule, the provision in the approved plan shall apply." 17.11.22.2.A and 17.11.17.2.A NMAC.

R«~commended Decision of the Hearing Examiner

C~Lse No. 09-00094-UT

12

As the title of the AFOR indicated ("Amended Alternative Form of Regulation Plan,

Including I.nvestment and Service Quality Commitments, for Qwest Corporation"),

quality of service and investment requirements were among the terms the Commission

approved in AFOR I.

In the AFOR II case, as in this one, Qwest contended that the Commission lacks

the statutory authority to impose quality of service and investment requirements in an

AFOR plan. Qwest's argument in that case was, like its argument in this one, based

:for the most part on its reading of NMSA 1978, ~l 63-9A-S.2. Final Order on Pricing

and Quality of Service (Case No. OS-00466-UT) at 14.6 The complete text of this

statute is as follows.

A. No later than December 31, 2000, the commission shall review existing rates for public telecommunications services offered by incumbent local exchange carriers with more than fifty thousand access lines and identify all subsidies that are included in the rates. The commission shall issue rules requiring that the identified su bsidies appear on customer bills and establish a schedule not later than April 1, 2001 whereby implicit subsidies be eliminated through implementation of the state rural universal service fund or through revenue-neutral rate rebalancing or any other method consistent with the intent of the New Mexico Telecommunications Act.

B. No later than January 1, 2001, the cDmmission shall adopt rules that:

(1) establish consumer protection and quality-of-service standards;

(2) ensure adequate investment in the telecommunications infrastructure in both urban and rural areas of the state;

(3) promote availability and deployment of high-speed data services in both urban and rural areas of the state;

6 Qwest actually pushed its statutory interpretation further in AFaR II than it has in this case. In the p::evious case Qwest claimed the Commission lacked the authority to impose an AFOR on Qwest. Final Order on Pricing and Quality of Service, at 14. Qwest does not go so far in the case at hand, arguing in stead that the Commission is without the authority to include most of the discrete provisions, such as quality of service and investment requirements, that have bee::! featured in previous AFORs. Regardless, tr..e Commission rebuffed the entirety of Qwest's AFaR II arguments.



13

(4) ensure the accessibility of interconnection by competitive local exchange carriers in both urban and rural areas of the state; and

(5) establish an expedited regulatory process for considering matters related to telecommunications services that are pending before the commission.

C. No later than April 1, 2001, but in no case prior to the adoption of the rules required in Subsection B of this section, the commission shall eliminate rate of return regulation of incumbent telecommunications carriers with more than fifty thousand access lines and implement an alternative form of regulation that includes reasonable price caps for basic residence and business local exchange services.

The Commission rejected what it described as Qwest's "spartan" interpretation

of the statute under consideration, concluding that "Qwest's narrow interpretation

concerning our authority is erroneous as a matter of law." Final Order on Pricing and

Quality of Service, at 14.

In reaching that conclusion, the Commission determined that § 63-9A-8.2(C)

grants the Commission broad discretion to decide what proposals may be included in

an AFOR, and that § 63-9A-8.2(B)(I) directs the Commission to adopt rules and

standards regarding consumer protection and quality of service. The Commission

found that the language of § 63-9A-8.2(C) does not restrict the Commission to an

AFOR consisting only of price caps for basic residential and business local exchange

service. Rather, since the Legislature did not specify what should or should not be

included in an alternative form of regulation plan, the Commission is obliged to use its

discretion and regulatory expertise "to devise an alternative form of regulation that will

advance the goals of the New Mexico Telecommunications Act and, at the same time,

protect the public interest."/' For these reasons, consumer protection and quality of

7 The Commission had arrived at virtually identical conclusions in AFOR I while discussing the AG's claim in that case that the Commission was without power to eS':ablish service quality standards that are

Recommended Decision of 1the Hearing Examiner

Cl:..se No. 09-00094-UT

14

service requirements are among the elements that may be included in an AFOR. Final

Order on Pricing and Quality of Service, at 15-16.

Qwest did not appeal the Final Order on Pricing and Quality of Service, nor

does it show why any of the Commission's legal conclusions in that case should be

reconsidered in this case. Accordingly, Qwest's request to remove consumer

protection, quality of service and investment requirements from the considerations for

AFOR III should be denied.

B. Commission authority to order customer credits.

Like consumer protection and quality of se::-vice requirements, customer credits

have been a feature of Qwest AFORs since AFOR I. In fact, customer credits have gone

hand in glove with quality of service standards. The original Amended AFOR

contained a lengthy section (§ X, "Guarantees, Credits and Incentives Tied to Qwest's

Quality of Service Commitments") that set out~nconsiderable detail the customer

credits and other incentives for Qwest to adhere to the AFOR quality of service

standards to which Qwest had agreed.

Customer credits were continued in AFOR II. There, as Qwest had urged, the

Commission incorporated its revised quality of service rule into AFOR II. Final Order

on Pricing and Quality of Service, at 51. That rule requires the imposition of customer

credits for failure to meet the variously prescribed quality of service standards. See

17.11.22.21 through 23. Qwest, of course, did not appeal or object to the AFOR II

Final Order.

The Commission's broad authority to adopt AFORs and their components,

explained above, also applies to the use of customer credits as an incentive for

implemented through an AFOR. In ruling against the AG's claim, the Commission observed that "HB 400 does not dictate the means of implementation." Final Order (AF<OR I), at 28-29.



15

compliance with quality of service standards. Questions about the nature of that

authority, or its applicability in the present context, were addressed by the New

Mexico Supreme Court's decision in Qwest Corp. v. NM Public Regulation

.commission, 2006-NMSC-042, 140 N.M. 440, 143 P.3d 478.

That case involved Qwest's appeal of a Commission decision in an enforcement

proceeding (Case No. 04-00237-UT) arising from AFOR 1. Among other things, Qwest

asserted that there was no express statutory authority for the Commission's directive

that Qwest issue a credit or refund. The Court held that,

the AFOR plan and order are within the PRC's express authority to regulate Qwest. While the Legislature did not expressly give the PRC the authority to issue consumer credits or refunds, the New Mexico Telecommunications Act and PRC's broad regulatory authority demonstrate the Legislature's intent to authorize the PRC to approve the terms of individual AFOR plans. The authority to choose a proper incentive to ensure compliance with those terms, expressly found in the AFOR plan, is implicit in the Legislature's grant of authority.

lAO N.M. at 447, 143 P.3d at 485.

The Court also found that the Commission's ability to fashion administrative

remedies for fluid and complex matters such as its continuous regulatory oversight of

an AFOR were not confined to the two avenues proposed by Qwest:

Qwest argues that there are statutory limits to the PRC's enforcement authority. The PRC "may apply to the district court for injunctions to prevent violations of any prOVISIOn of the New Mexico Telecommunications Act ... or of any rule or order of the [PRC] issued pursuant to that act," Section 63-9A-20, and "impose an administrative fine on a telecommunications provider fix any act or omission that the provider knew or should have known was a violation of any applicable law or rule or order of the [PRC]," NMSA 1978, § 63-7-23(B) (2000). Qwest argues that the PRC is limited to these two mechanisms to enforce Qwest's compliance. We refuse to so limit the PRC's regulatory authority. The Legislature has given the PI~C the discretion "to enforce [its] orders by appropriate administrative action and court proceedings." Section 8-8-4(B)(5) (emphasis added). Since the Legislature has implicitly authorized that the PRC create and enforce this incentive on



16

Qwest, the incentive is an appropriate administrative action. We find that these statutes provide the PRC additional avenues to prevent violations of the New Mexico Telecommunications Act.

140 N.M. at 448, 143 P.3d at 486.

The establishment of customer credits--u:~challenged until now-as a specific

regime of incentives for Qwest to satisfy its AFOR quality of service standards falls

within the type of administrative action found authorized and appropriate by the

Court. Consequently, customer credits should remain a subject of this case, and

Qwest's motion to the contrary should be denied.

C. State investment requirements for information services.

Qwest maintains that because the FCC bas classified DSL as an "interstate

information service," it has "preempted the area" from state regulation. Qwest argues

that, for this reason, "[tJhe Commission cannot regulate these services indirectly by

placing investment requirements on Qwest to enable deployment of these services,"

and asks that the issue of investment requirements be excluded from the case. Qwest

Motion, at 4-5.

Deliberation on a preemption allegation begins "with the well-established

principle that 'in a field which the States have traditionally occupied,' 'the historic

police powers of the States [are] not to be superseded by the Federal Act unless that

was the clear and manifest purpose of Congress. (Citations omitted.)'" United

Nuclear v. General Atomic Co., 96 N.M. 155, 198-99, 629 P.2d 232 (1980) (quoting

~~ce v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)). This is true regardless

of whether the State police power8 at issue involves primarily economic or health and

8 The Supreme Court of the United States has recognized that "the regulation of utilities is one of the most important of the functions traditionally associated with the police power of the States." Arkansas ~Jectric Cooperative Corp. v. Arkansas Public Service Comllll. 461 U.S. 375, 377 (1983).



17

safety considerations. See, e.g., Pacific Gras & Electric Co. v. State Energy

~esources Comm., 461 U.S. 190, 222 (1982) (Despite NRC preemption of nuclear

plant safety regulation, "Congress has allowed the States to determine-as a matter of

economics-whether a nuclear plant [or] a fossil fuel plant should be built.").

Congressional intent to preempt a State's exercise of its police power "will not be

inferred lightly." Behles v. NM Public Service Commission, 114 N.M. 154, 158, 836

P.2d 73, 77 (1992). The Behles Court cited Penn Terra Ltd. v. Dept. of Environ.

I~esources, 733 F.2d 267 (3 rd Cir. 1984) for that principle. The Penn Terra decision

added that, "Where important state law or general equitable principles protect some

public interest, they should not be overridden by federal legislation unless they are

inconsistent with explicit congressional intent such that the supremacy clause

mandates their supersession." 733 F.2d at 273.

No such explicit intent to occupy the field, either by Congress or the FCC, IS

manifested toward state regulation of infrastructure investment.

This holds true with respect to 47 U.S.C. § 253, a section of the

Telecommunications Act of 1996 on which Qwest relies for its arguments about the

nature of the open entry requirements of that Act. Qwest contends that under the

federal Act state regulations may not prohibit the ability of any entity to provide any

interstate or intrastate telecommunications service, and that permissible state

regulations must be "competitively neutral" and "consistent with the Act's universal

service requirements." Motion to Limit Scope ofAFOR III, at 10.

The federal statute aims at market entry, and governs the "rates, terms, and

conditions" under which a firm may enter into a business relationship with another

telecommunications provider. At the same time, ~l 253(b) preserves state regulatory

R.~commended Decision of the Hearing Examiner


18

authority by declaring that "[n]othing in this section shall affect the ability of a State to

Impose, on a competitively neutral basis and consistent with section 254,

requirements necessary to preserve and advance universal service, protect the public

safety and welfare, ensure the continued quality of telecommunications services, and

safeguard the rights of consumers."9 So long a~, they do not prohibit market entry,

then, States retain broad authority to do anything reasonably required to "protect the

public safety and welfare, ensure the continued quality of telecommunications

services, and safeguard the rights of consumers." That part of the field is not federally

occupied.

Qwest also relies on the Commission's decision in In the Matter of U.S. West's

Proposed Tariff Revision to its Advanced Services Tariff Sec. 8, Megabit Service, Utility

Case No. 3084 (Dec. 14, 1999), and the "Brand X" case, National Cable &

1r.elecommunications Association v. Brand X Internet Services, 545 U.S. 967, 989

(2005). In its Megabit case, the Commission declined to regulate the terms on which

U.S. West planned to provide DSL service, based on the Federal Communications

Commission's ("FCC") tentative conclusion that DSL is an "information service" and

not a "telecommunications service." In the Brand X case, the Supreme Court of the

9 Among the universal service principals enunciated in 47 U.S.C. § 254 are the following (at § 254 (b)):

1) QUALITY AND RATES .. Quality services should be available at just, reasonable, and affordable rates. (2) ACCESS TO ADVANCED SERVICES .. Acces.s to advanced telecommunications and information services should be provided in all regions of the Nation. (3) ACCESS IN RURAL AND HIGH COST AREAS ... Consumers in all regions of the Nation, including low-income consumers and those in rural, insular, and high cost areas, should have access to telecommunications and information services, including interexchange services and advanced telecommunications and information services, that are reasonably comparable to those services provided in urban areas and that are available at ::ates that are reasonably comparable to rates charged for similar services in urban areas.



19

United States determined that the FCC could rule that cable-modem service was an

information service.

However, as Staff points out, these cases simply stand for the preemption of

State regulation of the rates and charges of information services. Neither addressed

State authority to regulate infrastructure or investment requirements. The

Commission's decision in the Megabit case spoke to the Commission's interest, if any,

in regulating the rates on which the service was proposed to be offered. It did not

involve any questions about the oversight of infrastructure.

The Megabit case concerned U.S. West's attempt to withdraw its tariff to begin

to provide Megabit services for the first time in New Mexico in 1998, after the parties

in the tariff proceeding sought discovery regarding U.S. West's costs. Shortly after the

Commission denied U.S. West's motion to withdraw its tariffI O and while U.S. West

was appealing the Commission's order to the New Mexico Supreme Court, the FCC

determined that services, such as U.S. West's proposed Megabit service, were

"interstate" in character. Finding that there appeared to be no imminent intrastate

use for the service, the Commission determined that it would not assert jurisdiction

over the case. ll

1(1 The Commission initially denied U.S. West's motion to withdraw its tariff because, under the Commission's rules, U.S. West failed to show good cause for its request, given that the other parties had expended substantial sums litigating the proceeding and that allowing dismissal "would deny New N:exicans the opportunity to take advantage of the new and emerging 'rapid advances in telecommunications technology' that the MegaBits Service represents." Order on Motion to Dismiss Megabit Tariff, In the Matter of U.S. West's Proposed Tariff Revision to its Advanced Services Tariff Sec. 8, Megabit Service, Docket No. 98-119-TC, State Corporation Commission (October 9, 1998), at 12-13. J J The Commission reserved the right to review a tariff for int:~astate DSL service should such service be offered in the future. "Nothing in this Order prohibits any company from seeking Commission approval to offer purely intrastate DSL service. It is possible that, at some future point, increased demand for intrastate DSL service could create the need for an intrastate DSL tariff." Order on Remand (Megabit), ~ 13, p. 4.



20

Unlike this case, the Megabit case involved U.S. West's proposed pricing for the

Megabit service. The instant case involves app:'.ication of the rule the Commission

subsequently adopted to regulate telecommunications infrastructure.

Almost exactly a year after the Megabit decision, the Commission adopted

[along with its other HB 400 rulemakings)12 its rule regulating investment m

l:elecommunications infrastructure, the purpose of which was stated as follows:

OBJECTIVE: The purpose of this rule is to impose requirements on incumbent local exchange carriers to ensure adequate investment in a telecommunications infrastructure in New Mexico capable of providing high-speed data services, and to encourage the competitive supply of high-speed data services, promote the timely provision of local exchange service, and ensure that New Mexico's quality of service standards are upheld. The requirements in this rule are in addition to the requirements in the federal Telecommunications Act of 1996, Pub. L. 104-104 (1996).

17.11.17.6 NMAC. As mentioned above, the Commission also announced in the

service quality and infrastructure rules that it would retain the discretion to establish

more specific requirements for quality of service and infrastructure investment

through the AFOR process. Under rate of return regulation, the prospect of a return

on funds spent for network infrastructure had provided an incentive for carriers to

modernize and maintain their infrastructures. With the elimination of rate of return

regulation by HB 400, the Commission's rules on quality of service and network

infrastructure included explicit investment incentives and requirements. The quality

of service rule provided for customer credits as em incentive for carriers to achieve

quality of service standards, and the infrastructure rule established requirements for

investment plans in distribution plant, in interoffice facilities and for the deployment

of advanced services.

12 Qwest did not challenge or appeal any of the HE 400 rulemakings. 21

Rlecommended Decision of the Hearing Examiner


Along these same lines, the Brand X decision similarly does not prohibit states

from regulating infrastructure. The "transmission components" to which Qwest refers

are the telecommunications services that comprise a portion of the information service

at issue there. The Court only ruled that the information service could not be broken

jnto the various service components for the purpose of state regulation. It did not hold

or intimate that states cannot regulate the infrastructure that is used to provide

servIces.

Along with its other requests to narrow the scope of this case, Qwest's

arguments about investment requirements for information services should be rejected.

As a result, the Company's Motion to Limit Scope of AFOR III should be denied in its

entirety.

3. Competition Claims

Claiming that it operates in a competitive environment, Qwest argues that

"straightforward" New Mexico law "requires the Commission to transition from

regulation to a competitive market environment." Qwest's Brief-in-Chief, at 1.

Concurrently (arId as discussed above), Qwest believes that the Commission is limited

by § 63-9A-S.2(C) to a consideration of price caps for basic residential and business

local exchange services, and nothing else, in AFOR proceedings. Id., at 3. Moreover,

Qwest maintains that because it does not seek deregulation through its AFOR III

proposals,13 and is not asking for relief under NMSA 1978, § 63-9A-8, that statute's

l~ Qwest instead portrays its proposals as an "alternative form of regulation to rate of return regulation," which includes a "reasonable increase" in the price caps, cDntinuation of many of AFOR II's "pricing restrictions and filing requirements," and a "comprehensive service quality plan." The service quality pian, says Qwest, should be temporarily approved in AFOR III until the Commission can rule on Qwest's



22

standards do not apply. Hence, the Company need not prove in this case that effective

competition exists in relevant market areas as required by that statute. Id., at 5.

Nonetheless, on the next page of its Brief Qwest insists that its evidence in this

case meets the standards of § 63-9A-8 because the Company faces "tremendous

competition throughout its serving area from a variety of provider and technologies."

Jd., at 6. Qwest relies on the testimony of its witness Brigham to support that

contention.

Qwest's main argument for increased competition is its continuing loss of

access lines. In 2001, Qwest claims, the Company had over 850,000 access lines in

New Mexico. By the end of 2008, Qwest says, the count was reduced by 29% to just

over 600,000 lines. Qwest Ex. 1 (Brigham Direct) at 30. During this same period, the

population of New Mexico increased by 8.5%, and the number of households increased

by 8.4%. Id., at 30-31. Qwest asserts that thes,e additional people and households

use telecommunications services at the same rate, i.e., approximately 92% of 2008

households had some form of telephone service, relatively the same penetration rate as

in. 2001. Id., at 32-33. With a larger population presumably subscribing to some form

of telephone service at a relatively constant rate, Qwest argues that a decline in

Qwest's access line count demonstrates that these households are obtaining telephone

service from other sources. Id., at 33.

Responding to the claim that Qwest's access line loss can be explained by

consumers disconnecting additional lines that were previously used for dial-up

internet access, Qwest contends that this impact on line loss is "quite small." Of the

more than 150,000 residence lines Qwest says it has lost since 2003, only 37,000

quality of service proposals in the rulemaking for which the Company has petitioned. Id., at 5, and n.2 on that page.



23

were additional lines, and that there is no basis to assume that even these line losses

were associated only with moving from dial-up internet access to Qwest broadband

connections. Id., at 34. Qwest argues that some additional lines were lost to other

broadband providers, some to wireless substitution,14 and still others to transfers by

customers of all services, including both primary and additional lines, from Qwest to a

competitor. Qwest's Brief-in-Chief, at 18.

Qwest disputes the argument that vvireless must be a perfectly identical

substitute to wireline service. The Company admits that wireless service is not

identical to wireline service and is not a substitute for all customers for all purposes,

but says it does not need to be. Qwest testifies that because a significant portion of its

customers view wireless as a substitute and are "cutting the cord," this constrains

Qwest's pricing and service quality behavior. Iel, at 50-51.

Qwest witness Brigham also claims that Comcast is providing cable telephony

service throughout New Mexico. He admitted that Comcast does not report its

subscribership to either the FCC or this Commission, as Comcast uses Voice Over

Internet Protocol ("VoIP") technology for its telephony service, so the precise number of

customers Comcast currently serves in New Mexico is unknown. IS

Qwest argues that the Commission should consider what the Company calls

"competitive capacity." Competitive capacity, Qwest avers, means that the

Commission should not look only to historical market share to determine the presence

l'I Qwest cited evidence from the Centers for Disease Control's National Center for Health Statistics s~ating that wireless substitution in New Mexico exceeded 21 oj., in 2007, compared with 14.7% of "wireless only" households in the U.S. rd., at 49-50. 1,. tw telecom Ex. 5 included subscribership reports from one Comcast entity, Comcast Phone of New Mexico LLC, but as indicated in Qwest Ex. 3 there are several Comcast entities that do business in New Mexico. There is no evidence that the Comcast entity providlng retail voice communications services in New Mexico has ever reported its subscribership levels to the Commission. Qwest witness Brigham testified that the FCC reports do not include cable telephony provided using VoIP technology. 2 Tr. at 49-50.



24

of effective competition, but should also take mto account th e capacity, I.e., the

potential, existing in the market to provide competitive services. Qwest Ex. 2 (Brigham

I~ebuttal), at 41. It is, says Qwest, the "pervasive presence of wireless carriers and

cable telephony providers like Comcast" that provides effective competition that acts to

constrain Qwest's ability to price its services or otherwise behave in an anti-

competitive manner. Qwest's Brief-in-Chief, at 20

With regard to rates for unbundled netwcrk elements ("UNEs"), Qwest states

that it enjoys no cost advantage over potential competitors. Competitors relying on

unbundled network elements can, the Company claims, purchase pieces of the Qwest

network in exactly the quantities need to serve their current customers without

incurring the costs required to serve an entire wire center like Qwest or other facilities-

based providers would face. Qwest claims this Commission and the FCC have

previously concluded that "barriers to competitive entry in the [New Mexico] local

exchange markets have been removed, and that these local exchange markets are

open to competition." Id., at 20-21 (citing "In the Matter of Application by Qwest

Communications International, Inc. for Authorization To Provide In-Region, InterLATA

Services in New Mexico, Oregon and South Dakota, "~ 117, WC Docket No. 03-11, FCC

Release No. FCC 03-81, 18 FCC Rcd 7325; 2003 FCC LEXIS 2013 (April 15, 2003,

Released; April 15, 2003, Adopted); and Final Order, Utility Case Nos. 3269, 3537,

3495, and 3750 (October 8, 2002))." The Company argues that this Commission's

continuing oversight of wholesale pricing and service quality will ensure that

competitors will continue to provide effective discipline to Qwest's market behavior for

the foreseeable future. Id., at 21.



25

According to Qwest, competition in business markets is every bit as fierce as in

the residential sector. Business consumers are generally more sophisticated than

residential consumers, says Qwest and, the Company claims, have many alternatives

to Qwest service. Qwest testified that it lost 23.5% of its business lines in New Mexico

between 2001 and 2008, and that it has several competitors for business services in

New Mexico. Qwest Ex. 2 (Brigham Rebuttal), at 18-19. Qwest points to Intervenor tw

telecom as an example of how competition in the business markets in New Mexico is

significant and robust. At hearing, Qwest says tw telecom presented evidence that it

served more than 20,000 business access lines in New Mexico in 2008, which

represented a 25% increase from 2007. Qwest's Brief in Chief, at 21.16

Finally, Qwest calls it "telling" that no party presented any evidence that price

caps are necessary to protect competition or consumers of business services. Qwest

argues that in view of the "significant competition for the sophisticated business and

government customers of complex business services and the Commission's continued

jurisdiction to regulate the prices competitors pay to be able to provide the necessary

network elements to provide these services," the Commission should limit itself to

what Qwest sees as the requirements of § 63-9A-8.2(C), "not expand upon them, and

limit the reasonable rate caps to basic residential and business local exchange

services (lFR and IFB services)." Id., at 22.

DoD / FEA, Staff, tw telecom, the AG and Cyber Mesa strongly contest Qwest's

daims about the existence and level of its competition in New Mexico. All argue that

16 Qwest cites "tw telecome [sic] Exhibit 2" in support of this statement, but does not specify where in the numerous pages of that exhibit these facts may be found. That exhibit is comprised of annual reports of CLECs named by Qwest witness Brigham as competitors of Qwest.



26

Qwest has not even attempted to meet the standards set out in § 63-9A-8(B) for a

showing that effective competition exists for relevant markets. These parties also

challenge, in varying degrees, the accuracy and sufficiency of Qwest's factual

arguments for the existence of competition.

tw telecom, a New Mexico CLEC,17 starts off by claiming that in order to

determine whether effective competition exists in New Mexico, the Commission would

have to look at particular markets for particular products. tw telecom Ex. 8 (Nipps

Response) at 23. But Qwest has no current data on its market share and those of its

competitors. tw telecom Ex. 8 (Nipps Response) at 23 and 27. Nor, says tw telecom,

does Qwest distinguish between geographic markets or customer size. Qwest's

testimony is described as being about competition from all sources, regulated and

unregulated, taken together for the entire Qwest territory. tw telecom's Brief-in-Chief

at 7 (citing, e.g., Qwest Ex. 1 (Brigham Direct), at 29-30). Even so, Qwest seeks

reduced regulation in all parts of its service territOlY for all customer categories. Id.

tw telecom testifies that for business services, the presence of competition III

New Mexico is very limited geographically. tw telecom Ex. 7 (Nipps Direct) at 16. It is

too expensive for most CLECs to penetrate smaller markets beyond Albuquerque. rd.

H is claimed that Qwest's control of "last-mile" facilities and the high price charged to

competitors to purchase those facilities to offer competing services have restricted the

development of competition for business customers in the state. Id., at 17. Cable,

wireless and VoIP competition, the subject of much of Qwest witness Brigham's

17 tw telecom provides telephone service to "businesses and organizations in the New Mexico market." It '''collocates' equipment in Qwest's central offices to obtain interconnection and access to Qwest facilities and services that tw telecom uses to provide service to its customers." tw telecom Ex. 7 (Nipps Direct), at 3·4.



27

testimony, has not focused on business customers. Id., at 17; tw telecom Ex. 8 (Nipps

Response) at 27.

tw telecom refers to the QSI Study (Exhibit LWN-4 to (tw telecom Ex. 7), which

concludes that New Mexico is dead last nationwide in CLEC market share. Id., at 8.

Barriers to CLEC entry include low population density, high costs and low operating

margms, leading to the concentration of competition in Albuquerque and a few other

markets. Id., at 5. QSI recommended in its study that Qwest be required to produce a

geographically-disaggregated market-by-market analysis to determine the true status

of competition in the state. Id. This, tw telecom contends, is not what Qwest has

provided.

tw telecom argues that its Exhibit 2 impeaches the testimony of Qwest witness

Brigham with regard to his claims about alleged Qwest competitors. That exhibit is a

compilation of the annual reports of the CLECs listed by Mr. Brigham as being the

biggest competitors of Qwest. The data was printed off the Commission's web site.

That data includes business and residential customers and access lines. tw telecom

Ex. 2; Conf. Exs. 2-A & 2-B. Mr. Brigham testified he was not familiar with the

reports, and admitted they were available to Qwest from the Commission's website. 1

Tr. at 138, and 212-213. 18 Of the companies listed, tw telecom is by far Qwest's

biggest competitor with 20,180 business access lines served. tw telecom Ex. 2. Qwest

has 190,682 business access lines in the state. tw telecom Ex. 4. Examination of the

compiled CLEC annual reports for the companies that Mr. Brigham named as Qwest's

biggest CLEC competitors shows that Qwest's bus:lness access lines outnumber these

CLEC competitors more than 3 to 1. tw telecom Ex. 2; tw telecom Exs. 2-A, and 2-B.

18 Transcript citations herein to the evidentiary hearing corres::Jond to volumes in sequence by the date of the hearing day. Thus, for example, the transcript for July 7, 2009 will be cited as "1 Tr. _."



28

Focusing on business customers, tw telecom says the record shows that

competition for these customers has grown slowly in New Mexico. Qwest's own line

loss data for business customers shows that Qwest has, according to tw telecom's

computation, lost about 3% of its business customers per year over the last 8 years.

tw telecom Ex. 4. tw telecom argues that these data paint a very different picture than

the "hemorrhaging" of access lines cited by Mr. Brigham to support his testimony

about competition. tw telecom's Brief-in-Chief, at 11 (citing Qwest Ex. 2 (Brigham

Rebuttal) at 6). Using the question of the degree of competition for business

customers in New Mexico as an example, tw telecom criticizes Mr. Brigham for relying

on composite numbers for residential and business customers. tw telecom's Brief-in-

Chief, at 11 (citing Qwest Ex. 1 (Brigham Direct) at 30 and 31). tw telecom asserts

that this is a problem overall with Qwest's approach and that of its chief witness to the

subject of competition: the citation of genercu information about competition from

various sources without identifying geographic areas, product markets or categories of

customers whom competitors are luring away. tw telecom's Brief-in-Chief, at 11.

With Qwest demonstrably dominating the landline business market in the state,

the only remaining competition would come from VoIP, cable and wireless providers.

tw telecom argues that Qwest simply did not show with any meaningful proof that

VoIP, cable or wireless entities compete in any meaningful way for business customers

in the state. Qwest's witness admitted that his presentation on wireless competition

included residential, not business services. 2 Tr. at 47-48.

Qwest witness Brigham testified that competition from VoIP providers in New

Mexico is "rapidly growing." Qwest Ex. 1 (Brigham Direct) at 57. But tw telecom says

that he only uses national data on the growth of VoIP, with no distinction between



29

residential and business competition. Id., at 57. Mr. Brigham's testimony about VolP

competition is directed at competition for residential customers. See, e.g., Id., at 58-

60. While he mentions that VoIP providers are offering "business plans," Mr. Brigham

does not describe such plans or compare them to Qwest's offerings. Id., at 60. tw

telecom asserts that the Commission and parties have no way of knowing where such

plans are being offered, by which VolP companies, and how many customers of

Qwest's have been lured away.

tw telecom witness Nipps testified that the Commission may conclude the

following from Qwest's discovery responses: that VolP providers are not operating like

CLECs; they do not buy wholesale elements from Qwest; that VolP customers are

buying their broadband connections from carriers like Qwest; and that Qwest is

benefiting from sale to end-users of the connections required to use VoIP technology.

tw telecom Ex. 8 (Nipps Response) at 27. Qwest's competitive affiliate also sells VolP

services. 1 Tr. at 255. tw telecom contends that the foregoing suggests that line

count data from CLECs and Qwest could encompass VolP business users. tw

telecom's Brief-in Chief, at 12.

Tw telecom argues that, as with VoIP, Qwest's evidence of cable competition

focuses on competition for residential customers, but provided no evidence of the

number of residential or business customers to whom Comcast provides voice service.

Tw telecom's Brief-in-Chief, at 12-13 (citing Qwest Ex. 1 (Brigham Direct) at 47-51; 1

Tr. at 229. For cable competition for business customers, Qwest refers to the

"Comcast Business Class," "Comcast Business Class Voice" and "Enterprise Solutions"

services marketed on Comcast's website. This, says tw telecom, is the only proof



30

offered by Qwest to support its argument that cable companies compete for business

customers. Id., at 13 (citing Qwest Ex. 1 (Brigham Direct) at 37-38; 2 Tr. at 54-55.

tw telecom contends that Qwest has provided no specific information as to the

locations in New Mexico where cable companies serve business customers. in its

experience in the markets it serves, tw telecom claims, cable providers compete for

small businesses and only in a very limited way. tw telecom Ex. 8 (Nipps Response) at

25. Tw telecom argues that "the mere presence of cable companies in the state does

not establish effective competition," and that Qwest's proof of competition from VoIP,

wireless and cable companies, focused almost: exclusively on the residential market,

does not show effective competition for business services in the state. ld. (citing Qwest

l~x. 1 (Brigham Direct) at 37-38, and Ex. RHB-5; Qwest Ex. 2 (Brigham Rebuttal) at

~22).

Qwest, as tw telecom correctly notes, made similar arguments to the FCC

seeking relaxation of its obligations to provide loop and transport unbundling to

competitors under §§ 251(c) and 271 (c)(2)(B)(ii) of the Communications Act of 1934,

(as amended, 47 U.S.C. § 151-615b (1934 with amendments to 2008)) (the "Federal

Act"), in its most competitive markets, the Denver. Minneapolis-St. Paul, Phoenix and

Seattle Metropolitan Statistical Areas. tw telecom Ex. 7 (Nipps Direct), Ex. LWN-5

(FCC Memorandum Opinion and Order, WC docket No. 07-97-July 25, 2008), at 2.

Qwest also sought relaxation of tariffing, price cap and other regulations related to

mass market and enterprise services. Id., at 2-3.

The FCC denied Qwest the requested relief, finding that the Company had not

met the legal standards of the Federal Act. ld., at 3 and 8; see also, 27-33. The FCC

found that CLEC competitors relied significantly on access to Qwest last-mile facilities,



31

and that there was no evidence in the record to justify consideration of VolP service as

a close substitute service. Id., at 12. Of parhcular import for the case at hand, the

FCC specifically rejected the use of reductions in retail lines as proof of competition.

!9.} at 29-30. 19 Qwest's ability to exercise "exclusionary market power" threatened to

lead to charges, practices and classifications that were unjust, unreasonable and

discriminatory. Id., at 33. The FCC concluded that this potential harm to consumers

justified continued regulation of Qwest in the public interest. Id. tw telecom urges

that "the type of rigorous analysis of services, markets and providers conducted by the

FCC in the forbearance[20] proceeding is warranted here. And the same concerns

should guide the Commission in determining whether to deregulate Qwest." tw

telecom's Brief-in Chief, at 14. Those concerns are reasonable ones.

DoDjFEA represents "numerous" federal offices and installations, "both

military and civilian, throughout New Mexico," that vary in SIze. The business

telecommunications it purchases from Qwest "range from large complex systems to

small office services." DoD jFEA's Brief-in-Chief, at 2. On the question of competition,

and particularly with regard to competition for business customers, DoDjFEA

contests Qwest's position for many of the same specific reasons advanced by tw

telecom. DoD jFEA also cites the testimony of AG witness Gates and Staff witness

Ripperger as more accurately summarizing the competitive market in New Mexico.

DoD j FEA's Brief-in-Chief, at 4. See also, the dis.cussion at Id., 4-10.

19 The FCC rejected "Qwest's attempt to demonstrate the MSAs are competitive by calculating percentage reductions in retail lines. As the Commission has explained, the abandonment of a residential access line does not necessarily indicate capture of that customer by a competitor, but, for example, may indicate that the consumer converted a second line used for dial-up Internet access to an incumbent LEC broadband line for Internet access." Id. (footnotes omitted). 20 See the FCC's Order, at 3, for a capsule description of the significance of FCC forbearance from dcminant carrier regulation.



32

In response to a statement by Qwest witness Brigham that competition for

Qwest services comes from "over 35 non-cable traditional CLECs operating in Qwest's

New Mexico operating territory" (Qwest Ex. 1, at 40), DoDjFEA claims that

conclusions about the extent of competition from these companies, and their ability to

constrain Qwest's pricing decisions, are best found in the data compiled by the FCC in

its semi-annual Local Competition Report. This report collects data uniformly for all

states, and the reporting is required of all CLECs. Citing the latest FCC report, which

lS for local access lines as of June 30, 2008,21 DoD jFEA says that report shows that

for the 49 states for which data are available (CLEC market share for Alaska is not

reported), the CLEC market share in New Mexico is the lowest at 9%, or less than half

the national average of 19%. DoD/FEA's Brief-in-Chief, at 5 (citing FCC Local

Competition Report June 30, 2008, Table 7). DoDjFEA argues that the CLEC market

share percentage includes lines that are resold £~om the incumbent or are provided

with UNEs supplied by the incumbent. CLECs relying on the incumbent for essential

elements of their service, DoD jFEA contends, are not in a position to constrain the

incumbent's pricing decisions. "It is beyond reason that one could conclude that

CLECs operating in New Mexico have a sufficient customer base such that their

presence could constrain Qwest from charging unreasonable or unjustifiable

discriminatory prices." DoD /FEA's Brief-in-Chief, at 5.

DOD /FEA points out that a study cited by Qwest for the proposition that VolP

providers have penetrated the New Mexico telecommunications market (Qwest Ex. I

21 DoD/ FEA notes that Mr. Brigham referred to the FCC's Local Competition Report in his Direct Testimony (Qwest Ex. 1, at 46). The latest FCC data when that testimony was filed was as of December 31, 2007. DoD/FEA offers the more recent report for its more recent data (Federal Communications Commission, Local Telephone Competition: Status as of June 30, 2008, released July 23, 2009), and requests that administrative notice be taken. Administrative notice will be taken of both of these FCC Local Competition Reports.



33

(Brigham Direct) at 57) was apparently limited to residential service. It is, DOD jFEA

asserts, "highly doubtful" that many businesses would "cut the cord" in favor of VoIP,

given, for example, that a power outage would shut down service completely. Also,

when Mr. Brigham was asked about Qwest's VoIP service at the hearing, he testified

that Qwest has only "a few" VoIP business and residential customers. 1 Tr., at 199.

DODjFEA maintains that if "VoIP is such a competitive threat as Qwest asserts, one

would believe that Qwest would market the service aggressively to business

customers, and thus achieve more than 'a few' customers." DoD jFEA's Brief-in-Chief,

at 7.

DoDjFEA argues that there is no evidence of record that cable companies serve

or even aggressively market their services to business customers. It says that

witnesses other than those for Qwest confirm that competition for business customers

is limited. For example, Staff witness Ripperger stated that cable companies "do not

provide a strong threat in the New Mexico business market." Staff Ex, 8 (Ripperger

Response), at 25. 22 tw telecom's witness agreed that, "Cable competition in New

Mexico is not directed at business customers." tw telecom Ex. 7 (Nipps Direct), at 17-

] 8. DoDjFEA endorses Mr. Nipps' statement that wireless companies cannot provide

the types of services that businesses require and thus are not direct substitutes for

Qwest's business service. 23 Id., at 17. Overall, DoDjFEA agrees with Mr. Nipps'

conclusion that there has been a "steep decline" in competition for facilities-based

business services. DoD jFEA's Brief-in-Chief, at 8-9 (citing tw telecom Exhibit 7 (Nipps

Direct) at 18, and other testimony identified above in this paragraph).

22 Mr. Ripperger also stated in his analysis of competition in the business market that the "progress of the CLEC market in New Mexico has for the most part stalled." Id., at 24-25. 23 DoD /FEA also refers to AG Ex. 2 (Gates Rebuttal), at 26··27, for examples of services that wireless pl-oviders do not provide.



34

The AG and Staff join with other parties in insisting that Qwest's claims about

telecommunications competition in New Mexico have no support in the record. In

addition, the AG and Staff argue that Qwest is wrong when the Company suggests

that AFOR III can be established without reference to NMSA 1978, § 63-9A-8. That

statute is quite clear, they say, that Qwest's ability to exercise "pricing flexibility,"

including the lifting of price caps for the majority of Qwest's regulated services, is

contingent upon an unequivocal showing of "elIective competition," as required by the

statute.

Staffs position is that Qwest must petition for and receive a declaration of

effective competition before the Company can have the pricing flexibility permitted by §

63-9A-8. Staff Ex. 8 (Ripperger Response) at 18-19. Moreover, the differences in

regulatory treatment about which Qwest complains vis-a.-vis itself, mid-size carriers

cmd rural carriers are specifically mandated by statute. Staff correctly points out that

NMSA 1978, § 63-9H-2 of the Rural Telecommunications Act of New Mexico declares

that "it is necessary to provide disparate regulatory' treatment between rural telephone

carriers and non-rural telephone carriers," and that "disparate regulatory treatment

for rural telephone carriers requires relaxed regulation for rural telephone carriers

with the objective of reducing the cost of regulation as well as the regulatory burden,

permitting pricing flexibility and expediting required rate approvals, all in a manner

consistent with both the purpose of an orderly transition from regulation to a

competitive market environment and the federal act." Also, NMSA 1978, § 63-9A-

5.1(B)(2) states that "the Commission shall differentiate mid-size carriers from other

telecommunications companies and establish a level of regulation between the levels of



35

regulation applying to rural carriers and other incumbent local exchange carriers."

This discrepancy of regulatory treatment is intentional, by legislative design.

Even if Qwest disagrees with the "effective competition" statute or feels that it is

"outdated" and a "distraction" (citing Qwest Ex. :2 (Brigham Rebuttal) at 60), the AG

asserts, that does not mean that the Company can ignore the law. Yet Qwest

acknowledges that it did not even attempt to employ the "effective competition"

standard AG's Brief-in-Chief, at 22 (citing AG Ex. 2 (Gates Rebuttal) at 8; and Staff

Ex. 7 (Ripperger Direct), at 13). The AG says that Qwest's position is found in the

statement in Qwest Ex. 2 (Brigham Rebuttal) at 60: "It is true that Qwest has not

initiated a formal proceeding pursuant to NMSA § 63-9A-8 to prove that it is subject to

'effective competition' within the meaning of that section of the statute, and Qwest

does not seek to do so in this proceeding." However, the AG argues that Qwest cannot

ignore the effective competition standard established by § 63-9A-8(B) or pretend that

law is not still on the books. The AG claims its witness, Mr. Gates, was not rebutted

when he showed that Qwest is not subject to eCective competition on a total state

basis according to publicly available information; and that regulation is still required

to protect the public interest. AG's Brief-in-Chief, at 22-23 (citing AG Ex. 1 (Gates

Direct), Attachment TJG-2; see also Attorney General Ex. 2 (Gates Rebuttal)).

Regardless of whether competition is a fac1:, as Qwest sees it, or is merely a

specter, as most of the other parties see it, Qwest's view of the significance of

competition as it relates to AFOR III is decidedly ambivalent. The Company disavows

any intention to pursue in this case or elsewhere a formal proceeding to establish,

pursuant to § 63-9A-8(B), that it is subject to "effective competition." Yet Qwest

R,ecommended Decision of the Hearing Examiner


36

nonetheless urges the Commission to institute pricing flexibility and other measures

:tn AFOR III that would lead to what the CDmpany alternatively describes as

"regulatory parity" or the "transition to a competitive marketplace." See, e.g., 4 Tr. at

58-60 (Horcasitas) .24 In short, while Qwest does not seek a Commission declaration of

effective competition, Qwest still asks for the benefits of such a declaration.

The standard established by the legislature for "effective competition" is set out

in § 63-9A-8(B). Though it predates HB 400, that statute was not altered or

superseded by HB 400-as the Commission essentially found m the AFOR II case.

That statute reads as follows:

In determining whether a service is subject to effective competition, the commission shall consider the following:

(1) the extent to which services are reasonably available from alternate providers in the relevant market area;

(2) the ability of alternate providers to make functionally equivalent or substitute services readily available at competitive rates, terms and conditions; and

(3) existing economic or regulatory barriers.

In AFOR II, Qwest argued, as it does in this case, that the Commission should

ignore the commands of § 63-9A-8(B) while reaching a conclusion that can only come

from the observance of those commands. The Commission rejected that argument in

its AFOR II Final Order on Pricing and Quality of Service. The Commission found (at

20-21) that,

When arrIVIng at a decision regarding the prOVISIOn of telecommunications services in the state, the Commission must read all of the governing statutes; and, if those statutes appear to conflict, they must be construed, if possible, so as to give effect to each.

24 Qwest acknowledges that its proposal for an AFOR III differs "only slightly" from the changes it advocated in the 2009 Session of the New Mexico Legislature. Qwest Ex. S (Horcasitas Direct), at 2. Among other things, Qwest's proposed legislation (SB 445) would have eliminated the "effective competition" finding requirement in § 63-9A-S. SB 445 did not pass.



37

',~'

When interpreting a statute, "the entire act ... is to be read as a whole and each part construed in connection with every other part so as to produce a harmonious whole." Trujillo v. Romero, 82 N.M. 302, 481 P.2d 89 (1971); Burroughs v. County of Bernalillo, 88 N.M. 303, 540 P.2d 233 (1975); Methola v. County of Eddy, 95 N.M. 329,333,622 P.2d 234, 238 (1980); High Ridge Hinkle Joint Venture v. City of Albuquerque, 126 N.M. 413, 970 P.2d 599 (1998). We find tha1: taken as a whole, the New Mexico Telecommunications Act requires a finding of "effective competition," as defined in § 63-9A-8, as a prerequisite for granting Qwest the full scope of pricing flexibility it seeks in these proceedings for all services it provides, except for the price capped services of 1 FR and 1 FB (basic residential and basic business service, respectively), Switched Access, and Residential Public Interest Features and Services.

Qwest also argued in AFOR II, as it does here, that it is exposed to effective

competition now throughout the State. However, in that case, as in this one, there

was evidence to the contrary. The arguments and evidence on both sides of the

competition question have been summarized above. Qwest has not shown anything

more definite than indications of competition for residential customers, and less so for

business customers. The extent of any such competition, as the other parties have

demonstrated, is indeterminate or unknown. Significantly, Qwest has not attempted

to comply with the standard of § 63-9A-8(B) by establishing that effective competition

exists at present in relevant markets.

A similar failure by Qwest to meet this statutory standard in AFOR II led the

Commission to rule against Qwest in that case (Id., at 22):

We note that Qwest has chosen not to petition the Commission for a finding of effective competition for those services for which Qwest here seeks pricing flexibility. The Commission therefore finds that Qwest has failed to meet its burden of proof on this issue. Accordingly, flexible pricing is not appropriate for Qwest's New Mexico products or services, except for the limited downward pricing flexibility and for the pricing flexibility for New Services, provided in this Order.

None of the parties to AFOR II, including Qwest: appealed the Commission's Final

Order.



38

.,----"

In this case, Qwest has once again chosen not to petition the Commission for a

finding of effective competition. That, coupled \vith the corresponding state of the

record, requires a finding that Qwest has not met the burden of proof imposed by the

statute that the Company would have the Commission ignore. Whether effective

competition truly exists is, as a result, a question to be resolved at a future time when

c'2west explicitly seeks such a declaration from the Commission. For now, any pricing

nexibility or similar relief will have to be justified by the Company on other grounds

consistent with the public interest.

4. Pricing

This part of the Order is devoted to the consideration of various revisions and

additions that have been proposed by the parties fDr inclusion in the pricing section of

Qwest's AFOR for implementation during the AFOR III plan period. The pricing

components of the proposed plan under discussion in the current docket are:

Purpose and Scope (Staff proposed addition)25

A.Definitions B.IFR and IFB, Switched Access, and Residential Public

Interest Features and Services Price Caps C.Services other than IFR and IFB access lines, switched

access services and Residential Public Interest Features and Services

D.Tariff Changes. E.New Services F.Promotional Offerings G.Packaging of Products and Services H.Individual Contracts I. Price Floors

25 The section designations (A, B, etc.) and sequence utilized below do not necessarily follow those which may appear in the submissions made by the parties. So as to minimize any confusion that might arise when discussing the various proposals put forth by the parties, a standardized outline has been created that depicts the various sections proposed for AFOR III utilizing the structure of Appendix A from AFOR II a~~ a template. A bracketed citation to this outline appears at the start of each sub-section of the discussion of pricing in this part 5.


elClSe No. 09-00094-UT

39

J. Competition Zones K. Customer Surcharges L.Discontinuance of Service

M.Facilities Relocation Cost Recovery (Qwest proposed addition)

N.Filing of Materials Related to the AFOR III Pricing Plan (Staff proposed addition)

O.Filing P.Term and Duration

It is fair to say that the majority of the discussion concerning these components

'Nas devoted to AFOR II components B, C, F and 1. Before considering these items,

however, the Commission first addresses those AFOR pricing components where either

no changes have been proposed, or the parties are in agreement concerning the

changes proposed. These are sections K. Customer Surcharges, L. Discontinuance of

;3ervice, and P. Term and Duration. The Commission finds that the language utilized

for these sections as contained in Qwest's AFOR II should be incorporated into Qwest's

AFOR III as well, with the exception of the language for section P. Term and Duration,

which shall be updated to read as follows:

The term of the AFOR III Pricing and Quality of Service Plan shall be three (3) years, commencing with the effective date of this Order. The AFOR III Pricing and Quality of Service Plan shall become effective beginning on January 1, 2010, until and through December 31,2012.

These three sections of the proposed AFOR HI plan having been disposed of, the

remaining sections of the proposed plan win now be considered, beginning with

section B. 1FR and 1FB, Switched Access, and f~esidential Public Interest Features

and Services Price Caps.

A. [B.] 1FR and 1FB, Switched Access, and Residential Public Interest Features and Services Price Caps



40

'-Qwest proposes to increase the monthly price cap by up to one dollar for single

line business and residential local exchange services (IFB and IFR), during each year

of the plan. Qwest's Brief-in-Chief, at 7. This could result in IFR price caps

jncreasing to $16.50 by the end of the AFOR 3 period. Qwest argues that this

proposal is reasonable as it would align Qwest's New Mexico rates with rates in other

states Qwest serves and because the proposed increase roughly tracks inflation since

:2003, when the current cap was first effective. Id." at 13. This approach, according to

Qwest, " ... recognizes the difficulties presented by the "price squeeze" arguments while

preventing rapid increases in prices." Id., at 7. Qwest also states that under its plan

prices for public interest residential class features and services26 will be frozen at

current levels for the entire period of the AFOR III plan. Qwest's Reply Brief, at 10.

And that "[r]ates for residential basic local exchange rates for New Mexico low-income

telephone assistance program customers shall not be increased during the period of

AFOR III." Qwest's Proposed Appendix A-AFOR III Pricing Plan, at §B, No.5, page 2.

Furthermore, Qwest points out, its proposal contains additional safeguards for

consumers due to Qwest's commitment to apply the same rates for its IFR and IFB

services throughout its New Mexico service territory, thereby granting rural customers

the same rates as urban customers, even though l:he costs for serving rural areas are

higher. Qwest's Reply Brief, at 12-13.

In support of jts proposed increase Qwest points out that at hearing Staff

" ... acknowledged that if the current $13.50 cap for IFR services (which has been in

effect since 2003) were adjusted by the gross domestic product price index ("GDPPI")

mentioned in Staffs testimony as a basis for its proposal for increasing caps on other

26 Public Interest Residential Class Features and Services are identified as follows: per line and per call blocking, call trace, busy line verification, busy line interrupt, non-listed and non-published services.



41

"~'

services, the current price cap would be $15.75." Qwest's Brief-in-Chief, at 15. Qwest

goes on to point out that if the GDPPI increases at only 2% over the three years of the

plan, a not unreasonable assumption given Staffs testimony that the 4% annual

J.ncreases it proposes for non-basic service price caps roughly approximates GDPPI

increases, the IFR price adjusted for GDPPI inflation since 2003 would be $16.71 in

2012 - twenty cents more than Qwest would be allowed to charge under its price cap

proposal. Qwest's Reply Brief, at 9. Qwest argues that these calculations

demonstrate that Qwest's proposed increases are modest and roughly track the

observed inflation of the 2003 to 2009 period. Qwest's Brief-in-Chief, at 13.

Staff asserts that Qwest's pricing proposal is of limited value during these

difficult economic times as the Low Income Telephone Assistance ("LITAP") program is

only available for residential customers many of whom are not on social programs

such as Medicaid or LIHEAP that would make them eligible for LITAP. Staffs Brief-in-

Chief, at 14. In addition, Staff goes on to point out, small businesses are not eligible

for the LITAP program, thus many small business customers and marginal and/or

fixed income residential customers would feel the squeeze of the incremental monthly

increase that Qwest proposes. Id., at 14-15. Staff concludes, after extensively

pointing out Qwest's reliance on the use of the term "reasonable" in support of its

proposed price increases for IFB and IFR senTices, by urging the Commission "". to

review the facts and evidence before it and approve an AFOR III plan for Qwest that is

'reasonable' not only from Qwest's perspective but from the perspective of Qwest's

residential and business customers in New Mexico." Staffs Reply Brief, at 5.

The AG also opposes Qwest's proposed cap increases for lFB and lFR services

and argues that Qwest has provided no support for the proposed increase. AG's Brief-



42

in-Chief, at 33. What is more, according to the AG, a study by its witness

demonstrates that " ... the current 1FR service with only three popular features is more

than compensatory for Qwest." Id. According to the AG, the unrebutted analysis of its

witness, Mr. Gates, demonstrates that Qwest's 1FR customers are covering the costs

of providing them service and are providing a net profit to Qwest as well, thus showing

that an increase in the 1FR rate is unwarranted. ld., at 45 What is more, the AG

further asserts, if Mr. Gates had utilized the $29.99 price of Qwest's Home Choice

product instead of the $24.78 price of the IFR rate ($13.50) plus features revenue

1$11.28), the positive net margin accruing to Qwest would have increased by $5.21,

almost doubling Qwest's profits on this product. ~::l., at 47.

The AG goes on to argue that Qwest's desire to raise its rates for 1FB and 1FR

is inconsistent with the company's contention that competition is rampant because

companies do not typically raise prices on products that are under competitive

pressure from rivals. ld. The AG buttresses this line of reasoning by pointing to what

it asserts is Qwest's faulty logic on this issue. As the AG notes, Qwest witness Mr.

Brigham has stated that if a rate of $15 for its IF1"< service is too high ($15 is the IFR

rate that would be reached in year 2 of the AFOR III plan under Qwest's proposal),

then Qwest would lose more customers than it currently has and would be forced to

reduce the rate. ld., at 35. Taking this statement as a starting point, the AG then

argues that it makes no sense to request a rate increase if, as Qwest has stated, it is

already losing customers as doing so would only increase the rate of customer flight.

According to the AG, the only way such an action could be seen to make sense would

be because either an increase in rates would not amplify the customer loss Qwest

contends it is experiencing, or that the loss in customers resulting from the rate

~~ecommended Decision of the Hearing Examiner


43

-

increase would be minimal compared to the boost m revenue that the proposed

increase would generate. L<1

The AG concludes by arguing that if the price caps established years ago under

AFOR I were considered reasonable then, those same rates are more than reasonable

today. That this is so, the AG avers, stems from the statements made by Qwest

executives concerning the dramatic cost reductions the Company has achieved as well

as the fact, as asserted by the AG, that " ... telecommunications is a declining cost

industry." Id.

DoD /FEA opposes leaving the price caps on Qwest's IFR and IFB services

unchanged. As DoD/FEA points out, Qwest derives a significant portion of its

interstate revenue from these services. Keeping these rates frozen, argues DoD /FEA,

while permitting the rates on services other than 1 FR and IFB to rise will cause Qwest

to seek to make up any revenue shortfalls from these other services. In support of this

assertion DoD jFEA points to the admission of Staffs witness, Mr. Ripperger, that

large and mid-sized customers would bear the brunt of the AFOR III price increases

under Staffs plan, which proposes no change in the current IFR and IFB prices.

DoD/FEA's Brief-in-Chief, at 11. In addition, DoD/FEA avers, if IFR and IFB rates

are below their respective costs, as some parties have insisted they are, then capping

those rates at their current levels while allowing the rates of other services to increase

would cause distortion in the marketplace; an assertion that both the Qwest and AG

witnesses agreed with. Id., at 12. Furthermore, DoD/FEA expresses concern that

proposals to cap the IFR and IFB rates, while permitting rates on services other than

IFR and IFB to rise may hamper Qwest's ability to continue an acceptable level of

investment in New Mexico. Jd., at 13.

F~ecommended Decision of the Hearing Examiner


44

DoD jFEA concludes by observing that the IFR and IFB freeze has been in

place since the beginning of AFOR I and argues that it is unreasonable to freeze these

rates indefinitely. Accordingly, the DoD jFEA recommends that these rates be subject

to the indexing limitations set forth in AFOR II for rates other than IFR and IFB.

DoD jFEA's Brief-in-Chief, at 13.

Neither Cyber Mesa, nor tw telecom, are proposing any price caps on Qwest's

IFR or IFB services, or on any of Qwest's other services, in this case. See, for

example, Cyber Mesa Brief-in-Chief, at 2.

Staff also proposes the following changes to this section:

For Item No.2., Staff proposes striking the phrase "associated with the IFR"

from the sentence "The rates for Public Interest Residential Class Features and

Services associated with the IFR service shall be capped at the rates for these services

as of the effective date of this plan." Staffs Proposed Appendix A-AFOR III Pricing

Plan, at §A, page 4.27

For Item No.4., Staff proposes striking the sentence "Prices for a service subject

to this section may be decreased as provided in Section D, below." from the language

contained in this item. Id.

No party has provided specific comments concermng this proposal. Qwest

does, however, generally disagree with these types of proposals by Staff on the

grounds that they " ... add more regulation and are inconsistent with the Purpose

Section of the Act, and are unnecessary and redundant." Qwest Ex. 9 (Horcasitas

Response), at 13.

Qwest, in its turn, proposes Item No.7 be changed to read as follows:

27 The section and page designations utilized refer to those contained in Staffs Proposed Appendix A, as submitted.



45

If the Commission or the FCC orders reductions in New Mexico intrastate switched access prices rates or surcharges after the implementation of this Plan, such price reductions may be implemented in a revenue neutral manner to Qwest and may include increases to the IFR and IFB line rates, or a flat-rated end user charge. Qwest may petition the Commission for a reasonable adjustment to the price caps set forth herein or to applicable surcharges, and the Commission shall make adjustments to the price caps or permit surcharges to permit revenue-neutral recovery of revenue lost as a result of such orders.

Qwest's Proposed Appendix A-AFOR III Pricing Plan, at §B, No.7, page 2.

Qwest's proposal to increase the price caps on the IFR and IFB serVIces IS

reasonable, subject to the discussion below regarding infrastructure investment, in

light of the changes telecommunications markets have experienced since 2003, the

year price caps for these services were last changed. The proposed increase roughly

tracks the rate of inflation observed over the 2003-2009 years and so would not

amount to an increase in the real prices of these services should Qwest choose to raise

the prices of these services up to the level of the allowable cap. Furthermore,

permitting an increase in the price caps of these services may work towards alleviating

the "price squeeze" concerns and allegations that have been a significant part of the

discussions during the course of these proceedings. Additionally, there is the

possibility that maintaining the IFR and IFB price caps at their current levels while

permitting increases in the caps on services governed under Section C of the AFOR, as

has been agreed to below, could cause distortions in the state's telecommunications

markets.

While the Commission shares Staffs concern regarding the impact this decision

may have on some small business customers and marginal and/or fIxed income



46

-residential customers, the relative insignificance in the magnitude of the proposed

increase should limit any deleterious effects such an increase may cause.

With the exception of Qwest's proposed changes to Item No.7, all other changes

the Company has proposed to this section are accepted. As for Item No.7, all

proposed changes to this section are rejected with the single exception of the proposal

to change "switched access prices" to "switched access rates". The other proposed

alterations to this Item No.7 are overly broad and inappropriate.

Staffs proposed changes to Item Nos. 2 and 4 of this section are also rejected.

The proposed modifications to Item No. 2 are rejected as they do not provide any

greater clarity to the sense and import of language currently contained in this item.

The adjustments proposed to Item No. 4 are rejected on the grounds that, as is

discussed below, the changes Staff proposes to Section D. Tariff Changes, to which

this proposal is linked, should be denied.

Taking into account the accumulated revisions to this section that the

Commission has agreed to accept, the language for this section shall be modified in

AFOR III to read as follows:

Qwest's prices for 1FR (flat-rated residence local one party access line service), lFB (flat-rated business local one party access line service), switched access services and residential public interest features and services, as defined by Section A, shall be capped as set forth, below.

1. The statewide rate cap for single-line flat-rated residential basic local exchange service (lFR), except for service rates for New Mexico low-income telephone assi.stance program customers, may be increased by no more than one dollar ($1.00) per twelvemonth period beginning January 1, 2010 and ending December 31,2012.

2. The statewide rate cap for single line flat-rated business basic local exchange service may be increased by no more than one dollar ($1.00) per twelve-month period beginning January 1, 2010 and ending December 31,2012.



47

-3. Qwest will charge the same rates for single line flat-rated

residential basic local exchange service in each local exchange calling area served by Qwest within the state, whether urban or rural. Qwest will charge the same rates for single line flat-rated business basic local exchange service in each local exchange calling area served by Qwest within the state, whether urban or rural.

4. Public Interest Residential Class Features and Services are identified as follows: per line and per call blocking, call trace, busy line verification, busy line interrupt, non-listed and nonpublished services. The rates for Public Interest Residential Class Features and Services associated with the 1 FR service shall be capped at the rates for these services as of the effective date of this plan.

5. Rates for residential basic local exchange rates for New Mexico low-income telephone assistance program customers shall not be increased during the period of AFOR 3.

6. Prices for a service subject to this section may be decreased as provided in Section D, below. Prices may not be decreased to a level below the cost, as defined in Section IH, below, for the particular service.

7. If the Commission orders reductions in intrastate switched access rates after the implementation of this Plan, such price reductions may be implemented in a revenue neutral manner to Qwest and may include increases to the IFR and IFB line rates, or a flat-rated end user charge.

8. The authorization to raise the 1FR and1FB rates will be subject to revocation if Qwest does not authorize the expenditures for the Company's AFOR III infrastructure investment plans by no later than six (6) months from the effective date of AFOR III, and complete those investments withir:~ eighteen (18) months from that date. Any failure to act in accordance with those investment plans and this O:rder will subject Qwest to a reduction and/ or revocation of price cap increases.

Having dealt with the revisions proposed to this section of the AFOR, attention

IS now turned to the parties' requests concerning services other than 1FR and 1FB

access lines, switched access services and residential public interest features and

services.

B. [C.] Services Other Than 1FR and 1FB Access Lines, Switched Access Services and Residential Public Interest Features and Service~!

Qwest proposes the following language for this section of its AFOR III: 48



~'

1. During the term of AFOR 3, services other than IFR and IFB access lines, switched access services and residential public interest features and services are not subject to price caps.

2. Prices for a service subject to this section may be increased or decreased as provided in Section D, below. Prices may not be decreased to a level below the cost, as defined in Section H28, below, for the particular service.

Qwest's Proposed Appendix A-AFOR III Pricing Plan, at §C, page 2.

As pointed out by DoD/FEA, a major retail customer of Qwest's business

services, this aspect of Qwest's AFOR III pricing proposal is tantamount to a request

for the total deregulation of all business services other than IFB--a prospect the

DoD/FEA urges the Commission to reject. DoD/FEA's Response Brief, at 4-7. The

language contained in Qwest's proposal would also extend this deregulation to all

residential services other than IFR. Qwest's support of this request relies solely on the

arguments and analyses presented by its various witnesses regarding the competitive

nature of the telecommunications markets within which the Company operates in New

Mexico.

The prevIous discussion in part 3 of this Order addressed the competition

analysis relied upon by Qwest in support of its various AFOR III proposals, including

the one under consideration here. The conclusion of that discussion was a finding

that the competition analysis presented by Qwesi: did not meet the burden of proof

requirements the Company is obligated to meet in order to be granted the degree of

regulatory relief it is seeking and that, for now, arty pricing flexibility or similar relief

will have to be justified by the Company on other grounds consistent with the public

interest.

28 This is in reference to the Price Floors section of Qwest's submitted Appendix A-AFOR III Pricing Plan. 49



As Qwest has proffered no other justification in support of the language it

proposes for adoption in this section of its AFOl~ III beyond that of the competition

analysis it has presented, and as this analysis has been found to be lacking in

sufficiency for the degree of regulatory relief being sought by Qwest in this section of

its AFOR, the Company's request is hereby denied.

Having disposed of Qwest's proposed language for this section of the Company's

AFOR, consideration is now given to those modifications Staff recommends, which are:

Staff recommends removing the term "new services" from the preamble language to

this section. Staffs Proposed Appendix A-AFOR III Pricing Plan, §B, page 5. 29

For Item No.1 Staff recommends eliminating the sentence "Prices for a service subject

to this section may be decreased as provided in Section D, below." Id.

For Item No.2, Staff recommends the entire section be changed to read:

During the term of the Plan, with the exceptions listed in 2.a. 30 below, the price cap for a service subject to this section may be increased by up to 12% above the current price, no individual service price may increase more than 4% in any year, except that Qwest may accumulate possible price cap increases for multiple years in order to make a price cap increase of greater than 4%. Id.

For Item No.3, Staff recommends adding " ... must include an affidavit and

provide information sufficient to show that the new price covers the cost of service,

and shall provide information sufficient ... " so that it reads as follows:

Any filing for a change in price cap must include an affidavit and provide information sufficient to show that the new price covers the cost of service, and shall provide information sufficient for the

2S The section and page designations utilized refer to thos.e contained in Staffs Proposed Appendix A as submitted. 30 It should be noted that Staffs submission, while it contained a reference to a "2.a," did not, in fact, contain any separate section designated as "2 .a".



50

Commission to determine whether the proposed price cap complies with Section B. 231 , above. ld.

For Item No.4, Staff recommends making "the determination of effective

competition pursuant to the New Mexico Telecommunications Act" reference more

explicit by adding a reference to the specific section of the Act, NMSA 1978 63.9A.8,

governing such a determination. ld.

Arguably, the most significant of the changes proposed by Staff to this section

of the AFOR are Staffs recommended changes to Item No.2, its proposal to change the

rate of price cap increases on services governed under this section from being pegged

to the GDPPI to being permitted to increase by up to 4% in any given year, thereby

permitting prices on any given service governed under this section to increase by a

total of no more than 12% by the end of the Plan's term.

Staff notes that its proposal grants Qwest more flexibility than the current plan

allows for in the pricing of services and that it reflects the degree of flexibility that was

previously permitted under AFOR I. Staff also argues that its proposal would be easier

to administer than the current one. Staffs Brief-in-Chief, at 15.

DoD/FEA opposes Staffs proposal for price increases on two grounds. The first

objection raised by DoD/FEA is that there is nothing in the record supporting Staffs

conclusion that the current method of indexing rate changes to these services utilizing

the GDPPI has been hard to administer. As the DoD /FEA points out, neither Qwest

nor the Commission has raised concerns in this regard. DoD /FEA's Reply Brief, at 8.

Furthermore, argues DoD/FEA, utilizing a set percentage as opposed to the indexing

method currently in use is " ... unwise and irrational in a time of reduced or declining

prices throughout the economy." Id. The DoD /FEA concludes by urging the

31 The section designations utilized refer to those contained in Staffs Proposed Appendix A as submitted.


,the Hearing Examiner Case No. 09-00094-UT

Commission to retain the current indexing method to setting price caps under this

section rather than adopting an " ... arbitraty percentage, which exceeds current

inflation indexes." Id.

Qwest notes that, while Staffs proposal marks a slight improvement over the

previous GDPPI-based price caps, it falls short of providing Qwest with the flexibility to

compete fairly and so should be rejected in favor of Qwest's proposal for this section.

Staff recommends the removal of the term "new services" from the preamble to

this section. Staffs recommendation is linked to its recommended changes

concerning the New Services section of the AFOI~, section E, where Staff makes the

recommendation that all new services should be subject to tariffing and review by the

Commission.

Qwest opposes Staffs recommendation, argumg that "[tJhis is one more

example of where Staff would like to move to more regulation in violation of the

statutory direction and in opposition to the regulatory trend in every other state in the

Qwest region." Qwest Ex. 2 (Brigham Response), at 84.

No other party comments on this suggestion.

Staffs recommended elimination of the sentence "Prices for a service subject to

this section may be decreased as provided in Section D, below." from Item No.1 in this

section is linked to the modifications it recommends to the Tariff Changes section of

the AFOR. The proposed revisions to that section are discussed below. Staff provides

no additional discussion as to why the revision it requests here is appropriate.

Qwest's response to this proposal is contained its response to Staffs proposed

changes to Section D. Tariff Changes of the AFOR.

:Recommended Decision of the Hearing Examiner


52

Staff recommends the addition of the follQ\.ving: " ... must include an affidavit and

provide information sufficient to show that the new price covers the cost of service,

and shall provide information sufficient ... " to Item No.3.

No party has provided specific comments concerning this proposal. Qwest

does, however, generally disagree with these types of proposals by Staff on the

grounds that they" ... add more regulation and are inconsistent with the Purpose

Section of the Act, and are unnecessary and redundant." Qwest Ex. 9 (Horcasitas

Response), at 13, lines 3-12.

Staff recommends adding the reference, NMSA 1978 63.9A.8, to the wording of

Item No.4.

No party has provided comments on this proposal.

Staffs recommendation that price caps for services governed by this section be

permitted to increase by no more than 4% per annum is a reasonable recommendation

in that it grants the Company more pricing flexibility than is available to it under the

GDPPI indexing methodology currently being utilized. Since the implementation of the

last AFOR, market conditions in telecommunications market have changed such that

a grant of greater, yet limited, pricing flexibility appears to be warranted and so Staffs

revisions to that effect are granted.

However, the wording of Staffs proposal, particularly the reference to a non-

existent subsection 2.a., is confusing. Accordingly, the following language shall be

a.dopted in its place:

During the term of the Plan, the price cap for a service subject to this section may be increased by up to 12% above the prevailing price for the service at the inception of the Plan provided that:



53

a. The price cap for the service is increased by no more than 4% in anyone plan year except that, i) possible price cap increases fDr multiple years may be

accumulated in order to make a price cap increase of greater than 4%.

The Commission disagrees with Staffs proposed removal of the term "new

services" from the preamble to this section. Staffs proposal is, apparently, being

made so as to avoid any confusion that might arise from the language of the New

Services section of the AFOR where Staffs suggested revisions would result in new

services being subject to the tariffing provisions of the AFOR. However, the

elimination of the "new services" reference from this section of the AFOR could give

rise to the belief that "new services" would then be subject to the price cap provisions

of this section, which they should not be. For this reason Staffs suggestion here is

denied. The term "new services" shall remain in the preamble to this section.

Staffs recommendation that the sentence "Prices for a service subject to this

section may be decreased as provided in Section D, below." be removed from Item No.

1 of this section is also rejected because, as is mentioned below, the changes Staff

proposes to Section D. Tariff Changes, to which this proposal is linked, should be

denied.

Staffs proposed revisions to Item 3 of this section are accepted because the

additional language will make it easier to ascertain whether or not the conditions

concerning price decreases contained in Item No.1 of this section have been complied

with.



54

Finally, Staffs proposed addition of the reference, NMSA 1978, § 63-9A-8, to

the wording of Item No.4 is accepted as a reasonable clarification to the language of

that section.


Commission has agreed to accept, the language for the section shall be modified in


Prices for telecommunications services other than IFRs, and IFBs, residential public interest features and services, new services, and services subject to effective competition are capped as follows:

1. Prices for a service subject to this section may be decreased as provided in Section D, below. Pric.es may not be decreased to a level below the cost, as defined in Section I, below, for the particular service. Any filing for a decrease in price shall include an affidavit and provide information sufficient to show that the new price covers the cost of service.

2. During the term of the Plan, the price cap for a service subject to this section may be increased by up to 12% above the prevailing price for the service at the inception of the Plan provided that: a. The price cap for the service is increased by no more

than 4% in anyone plan year except that, i) possible price cap increases for mUltiple years may

be accumulated in order to make a price cap increase of greater than 4 cyo for anyone year.

3. Any filing for a change in price cap shall provide information sufficient for the Commission to determine whether the proposed price cap complies with Section C.2: above.

4. Services that are determined by the Commission to be subject to effective competition pursuant to NMSA 1978, § 63-9A-8 shall not be subject to the price caps set forth in this section.

5. The authorization to raise the prices for a service subject to this section will be subject to revocation if Qwest does not authorize the expenditures for the Company's AFOR III infrastructure investment plans by no later than six (6) months from the effective date of AFOR III, and complete those investments within eighteen (18) months from that date. Any failure to act in accordance with those investment plans and this Order will subject Qwest to a reduction and/or revocation of price cap increases.



55

The Commission is cognizant that the decision to permit an mcrease m the

monthly price of 1FR and 1FB of up to one dollar in each of the three years of the

plan, and for the monthly price of many other services to increase by up to four

percent in any given year during the term of the plan could provide a significant

amount of additional revenues to Qwest. For example, the record suggests that Qwest

had 547,538 1FB and 1FR access lines in 2008. AG Ex. 1 (Gates Direct), Attach. TJG-

2, "Status of Competition in Qwest's Certificated Areas in New Mexico," at 11.32

Assuming that Qwest increased its 1FB and 1FR monthly rates by $1 per month

during AFOR III, and maintained the 547,538 access lines, this would generate

approximately $40m in additional revenues. 33 In addition, Qwest may raise

additional revenues due to the four percent per annum rate increase authorized under

this section for other services.

When considering the investment aspects of the AFOR, the Commission will

also be cognizant that upgrades to the network should result in a reduction of Qwest's

operating expenses. That reduction in expenses, along with the boost in revenues that

will result from the price caps increases authorized by this Order, should provide

ample incentive for Qwest to carry out the infrastructure investment the Company will

need to make in the near term. See the discussion in the section on Investment in

LClfrastructure, below.

C. [F.J Promotional Offering.§

The Attorney General, Staff, Cyber Mesa and. tw telecom all proposed alterations

to this section of the AFOR. The DoDjFEA proposed no alterations to this section.

32 416,144 residential POTS + 131,394 business POTS. 33547,538 access lines * $1 * 12 months + 547,538 * $2 * 12 + 547,538 * $3 * 12 = $39,422,736.


the Hearing Examiner Case No. 09-00094-UT

Qwest also proposed no alterations to this section as it was more concerned with the

revisions suggested by the parties to the Price Floors section of the AFOR.

The AG proposed limiting promotional offerings to the geographical areas where

Competitive Zones have been established. AG's Proposed Appendix A-AFOR III

Pricing Plan, at §F, No.1, page 3.

The AG provided no discussion in support of this proposal.

Staff recommends revisions to the language of this section of the AFOR that:

1) Clarifies what procedures shall govern a promotional protest if one is filed;

2) Sets specific limits on how long and how often a promotion should be offered;

3) States the terms of the tariff should be specific and offered on a non-discriminatory basis;

4) Adds similar language regarding competitive zones as it had in Staffs proposed section on tariffs;

5) Sets conditions on the offering of promotions to Winback customers, and for customers who have an active service request in with another competitor;

6) Changes the implementation date for promotional filings to 7 days; and,

7) Allows for electronic notification of tariff filings to Staff, the AG, and any interested party.

Staff Ex. 7 (Ripperger Direct), at 19-20.

Staff argued that these recommended revisions were necessary because, among

other reasons, the procedures currently in place:

1) Made it difficult for objecting parties to review the promotion, and then difficult for the Commission to get the objection on the agenda and acted on in time;

2) Failed to define the promotional timelines enabling Qwest to back-to-back promotions for an indefinite period oftime; and,

3) Failed to prevent unfair competition from Qwest in gaining back customers who had chosen to leave the company's service in favor of the service provided by a competitor.

Staff Ex. 7 (Ripperger Direct), at 19-2l.



57

The revisions recommended by Cyber Mesa and tw telecom to this section of the

Order impose conditions along the lines of those proposed by Staff, but are more

detailed, restrictive and convoluted than necessary. For that reason they are rejected

and will not be described here.

Qwest generally argues that all the revisions proposed by the parties' to this

section should be rejected on the grounds that they are unprecedented in the Qwest

region. Qwest Ex. 1 (Brigham Direct), at 69.

Qwest argues that all revisions proposed by Staff should be rejected as being

unfair to Qwest and to New Mexico consumers. Qwest particularly objects to Staffs

proposal that" ... Qwest must "wait for 30 days" from the time a customer disconnects

from Qwest before Qwest can offer a customer a "winback" promotion .... " Qwest avers

that this language is completely inappropriate given the fact that a "winback" situation

is by definition a competitive situation and so should have no restrictions imposed

concerning it. rd., at 73.

Given the record presented m this case, the Commission finds the revisions

proposed by Staff are timely and clear and propose needed clarity to this section of the

AFOR. Nor, given the record, does the Commission agree with the objections raised by

Qwest that the proposals by Staff are unduly restrictive. For this reason the

Commission accepts these for inclusion in AFOR III.




1. Any promotional offering shall be for a limited duration not to exceed 90 days. Qwest may run the same promotion twice in anyone year



58

time frame. Barring suspension by the Commission for good cause, such promotions shall be effective upon 7 business days of filing with the Commission and may include any combination of primary or regular telecommunications services, non-telecommunications services, advanced telecommunications services, and enhanced services.

2. The filing shall include a description of the period in which the promotional offer will be available, the duration of the promotional terms, the types of products and services offered, the geographic range of the offering, the specific class of customers to whom the promotion is offered and include clear, specific, and comprehensive language describing the terms and conditions of service and the specific discounts, temporary rate waivers, special incentives or other inducements included as part of the promotional offering. Qwest shall specify how a promotional offering varies from with regard to the rates, terms, and conditions of service from a specific tariffed offering, and shall specifically reference the corresponding tariffed services from which the promotional offering varies.

3. The price of the sum of the regulated services in a promotional offering shall not exceed the highest prices of the a la carte prices of the regulated services available in the promotional package.

4. Qwest shall offer a promotional offering on a nondiscriminatory basis, to the specific class of customers described in the promotion. Should the Commission approve of a competitive zone(s) for Qwest under Section I of the AFOR III Pricing Plan, Qwest may offer separate promotions to be applied on a non-discriminatory basis within the competitive zone(s) approved by the Commission.

5. Qwest may offer promotional offerings to Winback Customers as described in this section of the AFOR III Pricing Plan. Qwest may not offer a promotion to any Qwest customer who has decided to switch from a Qwest service, and for which an official request for service, such as the submission of a Local SeIvice Request (LSR) , has been issued by a competing carrier, until such time as that customer then is eligible to qualify for a promotion as a Winback customer as defined in this rule. Qwest may not offer promotions to Winback customers until 30 days past the date when that customer has completed the migration from Qwest's service to the competitor's service.

6. Staff or any interested person may file an objection to a promotional offering within 7 business days after filing. The only grounds on which an objection to a promotional offering will be permitted are either that the promotional offering does not cover cost, or that the applicable non-price related terms or conditions of the promotional



59

offering do not comply with applicable law or Commission rules, or not in the public interest by review by Staff, or that the new price or price cap exceeds the applicable increases allowed under the cap set by this part V.B.2. If no objection is filed, or if an objection is filed and the Commission elects not to suspend the Promotional Offering for good cause, then the promotional offering is deemed to be effective 7 business days after filing.

7. The Commission may determine that the objection establishes good cause, and may suspend or reject the promotion immediately, or the Commission may schedule a hearing within 20 calendar days after the objection is filed, and will decide at the conclusion of the hearing whether the promotion should be rejected or allowed to remain in effect. If the Commission does not issue a decision within 20 calendar days of the filing of the objection, the promotion is deemed to be effective.

8. Qwest shall notice through electronic filing the day of the filing of the promotional offering the following parties: Staff, the New Mexico Attorney General, and any party who formally requests electronic notice of Qwest's filed promotional offerings in Case No. 09-00094-UT.

D. [I.J Price Floors

Qwest states that the Decision reached by the Commission in the Competitive

F(esponse Cases (Case Nos. 08-00187-UT and 08-00326-UT) now governs these and

proposes that the Commission adopt as the AFOR III plan the provisions of the

Competitive Response Order, with certain clarifications, as the methodology for testing

whether promotions or lowered prices cover cost. Qwest's Response Brief, at 2-3.

Qwest acknowledges that the Commission must make its decision in this case on the

record presented in this case. Qwest asserts that the record in this case supports the

conclusions reached m the Competitive Response case, and that several other

conclusions reached by the Commission are legal and policy determinations that

stand outside any factual record. Id., at 16. First, citing the Competitive Response

Order at paragraphs 34 through 36, Qwest maintains that the Commission

determined as a matter of law that carriers may recover costs over some "location life," 60



or average period of time a customer uses a service. Second, Qwest asserts that for

purposes of determining whether a service is anticompetitively priced below cost, the

Commission concluded that "[tJhe TSLRIC for a service is generally considered the

appropriate "price floor" for that service." Id., at 17 (citing the Competitive Response

Order at paragraphs 44 and 59). Third, Qwest asserts that the Competitive Response

Order also demonstrated consistency with the Case No. 3325 cost approach by

excluding shared costs from the TSLRIC34 of a particular service. Id.

Qwest opines further that "The Competitive Response Order provides a

sufficiently clear and workable framework for detemining whether promotional pricing

covers cost." Id., 19. Qwest follows this by then arguing that clarifying language is

required in applying the set of remedies spelled out in the Competitive Response Order

to the pricing section of the AFOR III plan. Qwest asserts that such language is

necessary so as to make it absolutely clear tha.t the comprehensive set of information

requirements discussed in that Order were intended to apply as an option in cases

where a particular promotion might require such information. The language Qwest

proposes to add to this section can be found in Section H 'Price Floors', on page 19 of

its Response Brief.

Staff recommends that the Commission not attempt to integrate the ruling in

the Competitive Response Case into the instant proceeding because it claims there is a

lack of clarity in many provisions of that Final Order and because there was an

34 Total Service Long-Run Incremental Cost. The TSLRIC for a new service measures the increase in costs causally associated with the supply of the new service at the full volume of its likely demand, other things being constant. The TSLRIC for an existing service measures the decrease in costs associated with discontinuing supply of the service in its entirety, other things being constant. Case No. 3325, Final Order, December 19, 2000, at 9, n.l.

};~ecommended Decision of the Hearing Examiner


61

absence of full participation of all parties possibly affected by the decision m the

Competitive Response Case. Staffs Response Brief, at 7.

Staff states that it has problems with the CLECs' price floor proposal, and that

the quickest and easiest solution as to determining the appropriate price floor

methodology to apply would be for the Commission to revisit its minimum pricing

rules. Staffs Brief-in-Chief, at 17-18.

Similarly, tw telecom asserts that there are a number of problems with

importing the Final Order in the Promotions Cases into this Case. tw telecom expects

that the Final Order will be the subject of one or more motions for rehearing or

clarification or both so the content of the Final Order may change. 35 Furthermore,

because the response brief is the parties' last chance to address the facts and law in

this case, if the Final Order in the Promotions Cases is changed, the parties'

arguments here may be rendered moot, or new issues may arise that cannot be

addressed. Finally, tw telecom asserts that if the Commission were to enter an order

in this case that relied upon testimony, evidence and argument in the Competitive

Response Case that has not been tested here, it would deprive the parties of their

procedural due process rights. tw telecom's Response Brief, at 1-2.

The AG and tw telecom oppose Qwest's "location life" proposal in which Qwest

amortizes its cost over the time it expects that a customer who is the recipient of a

promotional offer will retain the service in questlon. AG's Brief-in-Chief, at 31; tw

telecom's Brief-in-Chief, at 26. tw telecom maintains that location life is un-tested,

3~; Cyber Mesa has since filed a Motion for Rehearing, Modific<ltion and Clarification of Final Order in that case on September 24, 2009. Staff filed a Motion for Clarificetion on that same date. On September 25, 2009, the Commission entered an Order Extending Time for Commission Action on Motions for Rehearing that, among other things, waived the rule limiting the time for Commission action on motions for rehearing to 20 days. Qwest filed Responses in opposition to the Staff and Cyber Mesa Motions on October 7, 2009.



62

unproved and un-provable as a means to calculate a price/cost comparIson. tw

telecom's Response Brief, at 13. Cyber Mesa proposes to prohibit Qwest from allegedly

competing unfairly with CLECs by using location life data to claim that temporary

promotional offerings are not below cost. Cyber Mesa's Brief-in-Chief, at 24. Staff

offers no opinion as to whether the use of "location life" is appropriate when

determining whether a promotional offering is above cost. Staffs Brief-in-Chief, at 17.

The AG, tw telecom, and Cyber Mesa support an imputation requirement in

which Qwest must prove that its retail rates are greater than the wholesale rates for

the network elements and services it sells CLECs to provide a competing service. AG's

Brief-in-Chief, at 29; Cyber Mesa's Brief-in-Chie:f, at 8; and tw telecom's Brief-in-

Chief, at 21. Staff expresses concerns regarding pnce floor imputation proposals

because not all of the network elements or services Qwest leases or sells to

competitors are sold under TELRIC36 pricing and substituting non-TELRIC based

pricing would cause the Commission to stray from a fully forward looking cost

imputation in applying the price floor standard. Staffs Brief-in-Chief, at 17.

In the Subsidy case the Commission determined that the degree to which a

promotional rate is subsidized should be judged by comparing the promotional price

with the TSLRIC. Case No. 3325, Final Order, December 19, 2000, at 9, n.l. For an

individual rate element, the comparison is done between the price of the rate element

and the TSLRIC of providing the rate element. For promotional offerings that are

undertaken with the intention of retaining existing customers, or attracting new

customers, the analysis is done at a higher level of aggregation. This point was

36 Total Element Long-Run Incremental Cost. TELRIC is the incremental or additional cost a firm incurs ir.. the long run in providing a network element, assuming all of its other production activities remain unchanged.



63

explained by the Commission at ~47 of the Competitive Response Final Order (Case

Nos. 08-00197-UT and 08-00326-UT):

The relevant costs and revenues are those associated with serving a customer. Whereas, in the Subsidy Case, the price of exchange service was compared with the incremental cost of providing local calling, in the instant case, the relevant frame of reference is the totality of the revenues and costs associated with serving a customer.

In reaching this conclusion, the Commission also reaffirmed its view that it is

not necessary for Qwest to file an imputation test because the analysis should "focus

on Qwest's costs and revenues, rather than on those incurred by CLECs." Id., at ~ 51.

Therefore, based on the evidence in this case, no reason has been shown for

reversing the Commission's prior finding that Qwest does not need to file imputation

studies in support of its rates. However, any flnal decision on these issues should be

deferred pending the outcome of the motions for rehearing that have been filed in the

Competitive Response Case.

E. [H.] Individual Contracts

Qwest initially argued that, while it has demonstrated full compliance with the

ICB filing requirements contained in the AFaR I and II pricing plans, continuing the

AFOR II ICB filing requirements into the AFOR III plan period are inconsistent with the

Purpose Section of the Act and are overly stringent and burdensome. In an effort to

reduce the administrative burdens associated with ICB filings, Qwest was

recommending the elimination of the ICB filing requirements. In support of this

recommendation, Qwest asserted that the current New Mexico AFaR ICB filing

requirements are among the most stringent an.d burdensome found in Qwest's 14-

state local service area. Qwest Ex. 9 (Horcasitas Response), at 19-20.



64

Post hearing, however, Qwest altered its position and now advocates that the

ICB rules currently governing CLECs, as these are set out in 17.11.19.17 NMAC, be

adopted as part of Qwest's AFOR III plan. Qwest's Brief-in-Chief, at 24. Qwest argues

that this position is supported by statements made by Mr. Nipps of tw telecom and

\1s. Hill of Cyber Mesa. In support of this assertion, Qwest states Mr. Nipps testified

" ... that the intent of [tw telecom's] plan is that Qwest would be held to the same

standards that tw telecom is in regard to ICB contracts" and "Ms. Hill testified that

the Cyber Mesa plan (which is identical to the tw telecom plan) for ICB filings is

'reasonable because they are consistent with tl:.e Act and with the contract filing

requirements in the PRC's rules concerning expedited procedures for competitive local

exchange carriers.'" Id., at 23.

Qwest vigorously opposes the ICB plan put forward by tw telecom and Cyber

Mesa. Qwest claims that this plan is radically different from the current ICB rules and

is contrary to the intent expressed by tw telecom and Cyber Mesa in testimony as the

rules they are proposing place more requirements on Qwest than are imposed on the

CLECs. Furthermore, argues Qwest, the requirement for Qwest to provide complete

and confidential information concerning the ICB contract could undermine

competition. If competitors were able to obtain complete information regarding ICB

bids or negotiations between Qwest and its customers, those competitors would have a

significant incentive to use this information to improve their own bids. Id., at 24.

Staff proposes adding clarifying language to the AFOR II Individual Contract

l.mguage for inclusion in AFOR III going forward. According to Staff, the purpose of

tClis language is to:

l1~ecommended Decision of the Hearing Examiner


65

• Permit other persons besides Staff to protest the filing of an Individual Contract ("ICB") under Section NMSA 63-9A-9, provided said party can show reasonable grounds for doing so;

• Add language requiring Qwest to file electronically a notice the day an individual contract is filled; and,

• Require Qwest to file individual contracts for all agreements that vary from the rates, terms, conditions and tariffed pricing for the services offered by Qwest in the agreement. Staffs Proposed Appendix AAFOR III Pricing Plan, §G, at 8-10.37

In support of its proposals, Staff argues that if another party can show there

are reasonable grounds for protest, they should have standing to do so. According to

Staff, language permitting this possibility is necessary because a protest by another

party besides Staff has occurred in the past. Staffs Brief-in-Chief, at 18.

Staffs proposed requirement that Qwest file ICBs for any agreements that vary

fI"om the terms and conditions and tariffed pricing for those services, is tied into

language contained in Staffs proposed Scope of the Pricing Plan. Specifically, to

language stating that Qwest shall tariff specific rates, terms and conditions of service

~~)r all retail telecommunications services under the Commission's jurisdiction. Staff

Ex. 7 (Ripperger Direct), at 26. Staff argues that such language is necessary given

Qwest's use of the term ICB in its tariffs. For example, Staff goes on to assert that

when it has examined some of Qwest's tariff filings involving certain services or volume

of services it has often found, in lieu of specific pricing or terms and conditions of

service, language stating that said services will be offered on an "ICB Basis". Id. Staff

goes on to affirm that conversations it has had with Qwest regarding this situation

indicate that Qwest is under the impression that agreements for services listed as

being available on an "ICB Basis" in the tariffs do not have to be filed with the

37 The section and page designations utilized refer to those contained in Staffs Proposed Appendix A as submitted.



66

Commission for review. Staff believes this is a violation of § 63-9A-9. Staff believes

that Qwest must file specific rates, terms and conditions of service for all tariffed

services, and that the Company must also file any agreements that vary from those

specific tariffed rates, terms and conditions of service with the Commission under §

63-9A-9. Staff goes on to remind the Commission that there is currently an open

docket involving a protest of a Qwest tariff over tariffed ICB language. Id.

Concerning Qwest's original filing eliminating the individual contract section

from its AFOR III proposal, Staff professes to be mystified given that the requirements

of this section have their origin in statute. Staffs Brief-in-Chief, at 18-19.

On the subject of Qwest's new proposal, that the ICB rules currently governing

CLECs, i.e., 17.1l.19.17 NMAC, be adopted as part of Qwest's AFOR III plan, Staff

argues that there is no evidence in the record that supports this proposal.

Accordingly, Staff argues that the proposal should be dismissed. Staffs Response

Brief, at 3.

The AG did not propose any changes to the AFOR II ICB section.

Cyber Mesa and tw telecom are concerned that Qwest offers below cost

individual contracts in order to win back customers. tw telecom Brief-in-Chief, at 44.

The Companies propose that Qwest show that its contract rates cover imputed

wholesale costs. Id., at 21-24. Cyber Mesa and tw telecom contend that the current

ICB process does not provide an interested party the opportunity to learn of Qwest's

contracts since only Staff is notified of the filings. Jd., at 47.

Cyber Mesa and tw telecom propose that when Qwest files an ICB, it should file,

among other items:

• A copy of the contract;



67

• "A summary of the contract containing a description of the services to be offered and all prices, terms and conditions applicable to the offered services;" and

• A cost study that comports with tw telecom's advocacy for a showing that the contract rates cover imputed wholesale costs

Cyber Mesa's Proposed Appendix A-AFOR III Pricing Plan, at §H, Item No.3, pages 8-

9. 38

Cyber Mesa and tw telecom also propose that when the filing is made a non-

confidential copy of the filing be sent electronically to any person or entity that files a

Request for Service in this docket. Id.

DoD jFEA argues that sensitive nature of ICB filings make electronic service of

this material inappropriate as it would be highly sought after by competitors.

DoD jFEA also expresses concern about opening up those filings to multiple parties

'who might try to identify Qwest's customers from those records or may try to oppose

an ICB for competitive reasons. DoDjFEA urges the Commission to reject the

inclusion of language calling for the electronic filing of ICBs and that permits the filing

of third parties objections to ICBs. DoDjFEA's Brief-in-Chief, at 14-15.

DoDjFEA concludes by requesting that the current ICB provisions be kept in

effect for AFOR III. However, in the event the Commission does feel that additional

ICB procedures are required, DoD jFEA argues that the revisions to this section

requested by Staff ought to be adopted over those proposed by Cyber Mesa and tw

telecom because Staffs are less intrusive and far reaching. DoD jFEA's Brief-in-Chief,

at 16-17.

The Cyber Mesa and tw telecom proposals are unacceptable because, among

other reasons, they propose to use imputation to judge the reasonableness of the

38 The section and page designations utilized refer to those contained in Cyber Mesa's Proposed Appendix A as submitted.

R,ecommended Decision of the Hearing Examiner


68

proposed rates. As stated elsewhere in this decision, the Commission decided in

AFOR II not to rely on imputation to judge the reasonableness of retail rates, and this

view has been reaffirmed in the recent Promotions case. 39

Neither of Qwest's proposals is acceptable. The initial proposed elimination of

all ICB filing requirements advocated for at hearing by Qwest witness Mr. Horcasitas is

rejected due to the fact that such a filing is required under § 63-9A-9.

Qwest's post-hearing filing of its alternative request, that its ICB filing

requirements by governed under NMAC 17.11.19.17, the rules currently governing

CLECs, should also be rejected. To begin with, this proposal was made after hearings

were closed. The proposals made during the course of the hearing were sufficiently

rich that it is not necessary to consider the advantages and disadvantages of Qwest's

proposal that was made post hearing without any supporting testimony. For another,

Qwest is not free to pick and choose the statute or rule that shall govern its ICB filing

requirements. The applicable rule governing the ICB filings Qwest must make is

KMAC 17.11.13.21 and it is to that rule that Qwest must adhere.

Staffs proposal is, for the most part, reasonable, with the exception of the

suggested elimination of " ... performed pursuant to one of the cost methodologies

discussed in the Minimum Pricing Policy section of NMAC 17.11.13.17." This

suggestion is made without putting in its place any direction as to how the cost study

mandated immediately before this phrase is to be conducted. Accordingly, Item No.

3 J, which contains the phrase to be struck, shall state the following:

f. A cost study and a supporting affidavllt attesting to the accuracy of the cost study, briefly describing the methodology of the cost

39 However, it must be noted that petitions for rehearing have been filed concerning that subject in the Promotions case.



69

study and indicating that the prices in the contract cover cost according to the requirements of Section I.

With this one change to Staffs proposed revisions to this section, the remainder

of those revisions should be accepted. The language of Section H. Individual

~;:::ontracts for AFOR III shall read as follows:

1. Contracts shall become effective 10 calendar days after the filing of a verified application with the Commission, unless otherwise ordered by the Commission.

2. Contracts shall be filed with the Commission within 10 days after the conclusion of negotiations between the provider of public telecommunications services and the customer.

3. The verified application shall include: a. A copy of the contract; b. A description of the telecommunications services to be provided under

the contract; c. An identification of the service pri(:es that vary from the tariffed prices

for such services; d. An identification of the terms cmd conditions that vary from the

tariffed terms and conditions for such services; e. An affidavit identifying telecommunications carriers that are offering

the customer competing services; ,:md f. A cost study and a supporting affidavit attesting to the accuracy of

the cost study, briefly describi.ng the methodology of the cost study and indicating that the prices in the contract cover cost according to the requirements of Section I.

4. Staff or other interested party may file an affidavit within five working days making a recommendation to approve or disapprove the proposed contract. If Staff or other interested party does not file an affidavit, or if Staff or other interested party files an affidavit but the Commission does not deny the contract for good cause, then the contract shall become effective 10 calendar days after the filing of the application.

F. [D.] Tariff Changes

For this section of its AFOR Qwest proposes the elimination of Item No.3, "The

previous rate shall be in effect pending final determination as provided herein." Qwest

also proposes that the phrase "then the Tariff is suspended" be struck from the



70

language contained in Item No. 4.40 Furthermore, Qwest proposes the removal of the

"public interest" objection reason from this section of the AFOR. Finally, Qwest

proposes the addition of a new item, Section D. 5: 41

For tariff changes, new services, or promotions, if a person wishes to receive notice of such filings, he or she shall file a Request for Service in this Case No. 09-00094-UT containing the name(s) of person(s) to receive such notice electronically, together with a current e-mail address or postal addresses to which such notice must be sent. The Request for Service shall also be served upon Qwest. Upon receipt of such a Request for Service, Qwest shall serve the identified person(s) with e-mail notice of any filing of a tariff change, a new service, or a promotion on the same day such filing is delivered to the Commission.

Qwest's Proposed Appendix A-AFOR III Pricing Plan, at §D, page 3. Id.

Qwest argues that the elimination of the phrase "then the Tariff is suspended"

is necessary so as to avoid the suspension of a rate change pending the outcome of

any Commission action regarding a complaint made in reference to that rate change.

Qwest avers that without this change its ability to respond to market changes quickly

would be severely hampered, especially in today's competitive environment. To avoid

this occurrence, declares Qwest, rates should become effective within the timeframe

permitted in this section, and should be suspended only in the event that the

Commission, after an evidentiary hearing, has found just cause for doing so. Qwest

also argues that this change is necessary so as to avoid providing incentives to its

competitors to simply object to any tariff filing made by the Company so as delay

Qwest's efforts to compete. Qwest Ex. I (Brigham Direct), at 25.

Qwest argues that the removal of the "public interest" objection reason on the

grounds that this language encourages unwarranted objections by any CLEC on a

4(1 This Item No. corresponds with the numbering contained in Qwest's Proposed Appendix A as submitted. 41 The section and page designations utilized refer to those contained in Qwest's Proposed Appendix A as submitted.



71

broad "public interest" basis in order to have Qwest's increase or decrease suspended.

Qwest Ex. 2 (Brigham Response), at 80.

Qwest provides no discussion concerning the other changes it proposes for this

section.

No party provides comments concernmg Qwest's proposed changes to this

section of the AFOR.

Staff proposes extensive revisions to this section that would:

• Eliminate Item No.3, "The previous rate shall be in effect pending final determination as provided herein."',

• Make all rate decreases effective with the same time span as rate increases, 10 business days;

• Permit all price increases or decreases to be deemed effective within 10 business days if no objections have been filed within that time period;

• Add a new item, Item No.4 stating: "Qwest shall offer tariffed service offerings on a statewide, nondiscriminatory basis to the specific class of customers described in the tariff. The tariff filing shall include clear, specific, and comprehensive language describing the terms and conditions of service. Should the Commission approve of a competitive zone(s) for Qwest under the terms of Section J of the AFOR III Pricing Plan, Qwest may offer services under separate tariffs to be applied on a non-discriminatory basis within the entirety of the competitive zone(s) approved by the Commission."; and,

• Add another new item, Item No.5, requiring Qwest to notice Staff and the AG electronically on the day of any tariff filing.

Staffs Proposed Appendix A-AFOR III Pricing Plan, at §C, pages 5-6.42

In support of, 10 business days, Staff argues that its proposal to make all rate

decreases effective within 10 business days is necessary because under the previously

allowed one-day time span, a price decrease would already be in effect and offered to

customers even though an objection may be forthcoming from an interested party and

possibly acted upon by the Commission. Staff goes on to argue that its review of

42 The section and page designations utilized refer to those contained in Staffs Proposed Appendix A as submitted.


Cilse No. 09-00094-UT

72

Qwest's tariff offerings over the last several years has persuaded it that all Qwest's

downward pricing has been done through promotional activities and so little harm

results from equalizing the review time for tariff price decreases and increases to a

uniform ten days. Staff Ex. 7 (Ripperger Directl, at 17.

Staff argues that the new Item No.4 proposed for addition to this section of the

AFOR is necessary to clarify Qwest's responsibility to offer its tariffed services on a

statewide, non-discriminatory basis to a clearly specified class of customers.

I~egarding the reference to competition zones contained in this addition, Staff avers

that since it is also recommending the retention of the Competitive Zone section of

AFOR II (Section J), Staff believes it should be made clear that if the Commission does

approve of a competitive zone or zones for Qwest, that Qwest be allowed to file

separate tariffs for the same services, but that those tariffed offerings need to be

offered on a non-discriminatory basis to a specific class of customers within the entire

area of a competitive zone. Id., at 17-18.

Finally, regarding the notification language Staff proposes adding to this

section, Staff points out that notification on Qwest tariff filings and promotional

offerings has been an issue in a number of Commission cases. Timely notification to

an interested party is crucial to the filing of an objection by a party.

The changes to this section proposed by Cyber Mesa and tw telecom are too

numerous and procedurally complex to be easily summarized here. They may be

found in Cyber Mesa's Proposed Appendix A-AFOE III Pricing Plan, at §C, pages 3-5.

Cyber Mesa and tw telecom argue that their proposed revisions to section D.l of

their pricing plan are intended to make clear the distinction between temporary

"Promotional Offerings" and proposed changes to Qwest's existing New Mexico tariffs


C:ase No. 09-00094-UT

73

or new tariffs that, if accepted by the PRC, would remain in effect for an unlimited

time period. The Companies argue that this change is necessary as a result of the

litigation that arose in Case Nos. 08-00197-UT and 08-00326-UT. The other language

contained in this section is proposed to clarify the procedures regarding the filing and

notification requirements of Qwest's tariff filings. Cyber Mesa Ex. 10 (Hill Direct), at

.38-39.

Cyber Mesa and tw telecom propose making all rate decreases effective with the

same time span as rate increases, 10 business days, for reasons similar to those

advanced by Staff. Id., at 40.

Cyber Mesa and tw telecom propose modifications to section D. 4 of their

pricing plan that they claim develop clear procedures for Staff and any interested

persons to object to any tariff changes filed by Qwest, and clear but limited grounds

f()r making such objections. The Companies argue that these changes are necessary

to avoid the substantial controversy and litigation in Case Nos. 08-00197-UT and 08-

00326-UT. ld., at 47.

Cyber Mesa and tw telecom propose alterations in section D. 5 of their pricing

plan so as to, according to them, clarify the procedures the PRC ought to follow in

promptly reviewing any objections to tariff changes proposed by Qwest in order to

eliminate the confusion and litigation concerning them that arose in Case Nos. 05-

00466-UT, 08-00 197-UT and 08-00326-UT. ld.

Qwest objects to increasing the effective date for price decreases to 10 days on

the grounds that it should have the ability to quickly decrease a price in response to

competition. Qwest Ex. 2 (Brigham Response), at '79.



74

Qwest objects to all the changes to this section proposed by Cyber Mesa and tw

telecom, first on the general grounds that they are overly cumbersome and confusing.

Qwest Ex. 2 (Brigham Response), at 81. In particular Qwest notes that changes

proposed by Cyber Mesa and tw telecom to Section D. 1 of the plan provide such a

detailed prescription for every step of the filing process that the process is made more

complicated and confusing than is necessary. Qwest argues that its own proposed

Section D. 5 is simpler version of the procedures that assures all parties with interest

:in a case will be notified promptly when Qwest makes a filing. ld.

As to the revisions contained in Section D. 4 of Cyber Mesa and tw telecom

proposed AFOR Plan, Qwest argues that the Companies' proposed language allowing

them to object because "any non-price term or conditions set forth therein is unjust,

unreasonable ... " is so open ended and undefined as to virtually guarantee that any

filing may be suspended and investigated. Id., at 82.

Finally, Qwest objects to the modificatjons contained III Section D. 5 of the

Cyber Mesa and tw telecom proposed AFOR Plan 8.S the suspension process contained

therein unfairly disadvantages Qwest. Id., at 82.

Qwest has no objections to any other language proposed for this section beyond

what has been enumerated here.

The proposal to make all rate decreases effective within the same time span as

rate increases is rejected as Qwest should have l:he same opportunity as any other

operator in the market to rapidly adjust its rates downwards in the event

circumstances warrant such action.

Qwest's proposal to eliminate the "Public Interest" objection option is also

rejected. A plain reading of the entire sentence containing this option indicates that



75

Qwest has misinterpreted the breadth of this option's application. When read in its

entirety the sentence is more properly interpreted as enabling only Staff to bring an

objection that a proposed tariff is not in the public interest and then only after a

careful review of said tariff. Even so, that sentence has been slightly revised for the

sake of clarity.

The Commission, after a careful review of '~he modifications proposed by Cyber

Mesa and tw telecom to this section of the AFOR Plan, find those to be overly

cumbersome, confusing and burdensome. Accordingly, they are rejected in their

entirety.

Seeing that there have been no objections by the parties to the proposal to

eliminate the sentence "The previous rate shall be in effect pending final determination

as provided herein[.]", the elimination of this language from the AFOR Plan is

accepted.

The addition of Section D. 4 suggested by Staff in its proposed AFOR Plan is

accepted as is a melded together version of the additional D. 5 sections proposed by

both Staff and Qwest in their respective AFOR Plans.

Taking into account the accumulated changes agreed upon by the Commission,

the language for this section of AFOR III shall read as follows:

1. Rate decreases may take effect I business day after a tariff change is filed with the Commission, provided that such decreases shall be subject to objection and Commission review, as set forth in Section D.3-4, below.

2. Rate increases may take effect ten (10) business days after a tariff change is filed with the Commission, provided that such increases shall be subject to o~jection and Commission review, as set forth in Section D.3-54, below.

3. Staff or any interested person may file an objection to a price or price cap change within ten (10) business days after the filing. The only grounds on which an objection to a price or price cap



76

change will be permitted are either that the new price or price cap does not cover cost, as defined in Section IH, below, or that the non-price related terms or conditions of the tariff do not comply with applicable law or Commission rules, or are not in the public interest in Staffs judgment after its review, or that the new price or price cap exceeds the applicable increases allowed under a cap set by Section B, above.

4. Within twenty (20) calendar days after the objection is filed, the Commission will determine whether good cause exists to investigate the objection. If the Commission determines that good cause exists for an objection to a price cap change, the Commission shall resolve the objection within sixty (60) calendar days after the filing of an objection. If the Commission does not issue an order within sixty (60) calendar days after the filing of an objection, then the price will remain in effect.

5. Qwest shall offer tariffed service offerings on a statewide, nondiscriminatory basis to the specific class of customers described in the tariff. The tariff filing shall include clear, specific, and comprehensive language describing the terms and conditions of service. Should the Commission approve of a competitive zone(s) for Qwest under the terms of Section J of the AFOR III Pricing Plan, Qwest may offer services under separate tariffs to be applied on a non-discriminatory basis within the entirety of the competitive zone(s) approved by the Commission.

6. For tariff changes, new services, or promotions, Qwest shall notice Staff and the New Mexico Attorney General through electronic filing the day of the tariff filing. If any other person wishes to receive notice of such filings, they shall file a Request for Service in this Case No. 09-00094-UT containing the name(s) of person(s) to receive such notice electronically, together with a current e-mail address or addresses to which such notice must be sent. The Request for Sendce shall also be served upon Qwest. Upon receipt of such a Request for Service, Qwest shall serve the identified person(s) with e-mail notice of any filing of a tariff change, a new service, or a promotion on the same day such filing is delivered to the Commission.

G. [M.l Facilities Relocation Cost Recovery (Qwest proposed addition)

Qwest argues that this requested charge " ... would allow Qwest to recover from

its retail customers, without a request for a change in rates, the actual costs incurred

for the alteration, change or relocation of infrastructure or facilities requested by the

federal government, state, a political subdivision or other party." Qwest Ex. 1



77

(Brigham Direct), at 27, lines 10-13. Qwest goes on to argue that such a recovery

mechanism is necessary to recover the costs it incurs for relocation projects based on

government mandates, for which it cannot foresee or make budget allowances.

According to Qwest, because it is a price-regulated company operating in an

:increasingly competitive environment it has no mechanism or revenue source in place

1:0 recover all of these costs as it is not able to do so by adjusting its rates and so this

charge is necessary so that it may recover these costs. Id., at 28.

Qwest maintains that the allegations by various parties that the relocation costs

for which Qwest is seeking reimbursement are already included in Qwest's existing

rates are mistaken. In support of this statement, Qwest points out that rate-of-return

regulation was abolished in 2001 and says that the Commission has examined

Qwest's rates twice since then " ... without considering the exogenous costs Qwest faces

and cannot control resulting from orders from governments to relocate facilities in

public rights-of-way." Qwest's Response Brief, at 39. Qwest maintains that its

proposal is simple and fair and asks for nothing more than the recovery of actual costs

incurred as a result of forced relocations. Id.

Staff, the AG, and DoD /FEA all oppose Qwest's proposal to add this section to

AFOR III. Neither Cyber Mesa nor tw telecom provides comments on this issue.

Staff objects to this proposal on the ground that this sort of request for the

recovery of a discrete service cost is "contrary to the concept of price cap regulation for

telecommunications carriers" and the elimination of rate of return regulation that

Qwest supported. Staff goes on to point out that Qwest's request in this regard is

similar to the surcharge assessment contained in SB 470 proposed during the 2009

legislative session, which bill did not pass. Staffs Brief-in-Chief, at 19-20.

R1ecommended Decision of the Hearing Examiner


78

Echoing Staffs objections, the AG asserts that Qwest's surcharge proposal is

inconsistent with price cap regulation. The AG expands upon this objection by

arguing that when Qwest's price caps were put into place these facility relocation costs

were already being incurred by Qwest and were included in the revenue requirement.

The AG supports this argument by pointing to an exchanges between first, the Hearing

Examiner, then Commissioner Marks, with Qwest witness Brigham that, according to

the AG, confirms the fact that Qwest's rates alread.y recover the costs that Qwest seeks

1:0 recover again in this proceeding. AG's Brief-in-Chief, at 41-42.

Another reason for rejecting Qwest's surcharge proposal, according to the AG, is

the fact that Qwest's proposal fails to identify, quantify or describe the magnitude of

the effect the proposal might have on consumers going forward. Not only does Qwest's

proposal fail in this regard, the AG asserts,. it also fails to provide any specific

methodology by which this surcharge would be assessed. The AG goes on to state that

if Qwest desires to recover costs of this type then it must do so by seeking a rate

increase and so be willing to allow the Commission to investigate all of its costs and

revenues. Id., at 43-44.

DoD jFEA argues that facility relocation costs are already "built into" the price

cap rates, as was acknowledged by Qwest witness Brigham, and that no rationale has

been provided which justifies now treating these costs as an exogenous price cap

factor and thereby authorizing a facility relocation surcharge in addition to what is

already included in the rates. DoD jFEA's Response Brief, at 13-14.

Qwest's proposal is, as has been pointed out by its various critics, misguided

and misplaced. First, the AG and Staff are correct in saying that recovering relocation

costs through a surcharge is contrary to how pnce cap regulation operates. While



79

price cap regulation can allow for the recovery of costs associated with unique events,

Qwest has failed to show that the relocation costs satisfy this criterion. Rather the

record suggests that relocation costs are an on gO:lng expense that is built into Qwest's

rates. If the Company believes that the rates do not make an appropriate allowance

for relocation expense, a request for recovery of l:hese expenses would have to occur

within the context of a general rate proceeding in which other changes in its

operations are considered.

Qwest's proposed addition of section M. Facilities Relocation Cost Recovery is

denied and shall not be included in AFOR III.

H. p.] Competition Zones

Only two parties filed proposed changes to this section of the AFOR, Qwest and

the AG.

Qwest's proposed Appendix A for AFOR III eliminates all competition zone

language from AFOR III. Qwest is, presumably, suggesting this change on the

grounds that such zones are unnecessary given the level of competition the Company

asserts it is experiencing in the state as a whole.

The earlier discussion in part 3 of this Order addressed the competition

analysis relied upon by Qwest in support of its various AFOR III proposals, including

the one under consideration here. At the conclusion of that discussion it was found

that the competition contentions made by Qwest did not meet the burden of proof

requirements the Company is obligated to meet in order to be granted the degree of

regulatory relief it is seeking and that, for now, arty pricing flexibility or similar relief

will have to be justified by the Company on other public interest grounds.



80

~'

As Qwest has proffered no other justification in support of its proposed

elimination of this section of the AFOR beyond that of the competition claims it has

presented, the Company's request is hereby denied.

Having disposed of Qwest's proposed elimination of this section from the AFOR,

attention is now turned to a consideration of the changes to this section recommended

by the AG.

The AG's proposed extensive reVISIOns to this section of the AFOR are as

follows:

2. The creation of a competitive zone must be consistent with the procedures and showings prescribed in NMSA 1978, § 63-9A-8. A petition to establish a competitive zone shall include a showing that there is effective competition within the zone, including detailed data addressing:

(1) the extent to which services are reasonably available from alternate providers in the relevant market area;

(2) the ability of alternate providers to make functionally equivalent or substitute services readily available at competitive rates, terms and conditions; and

(3) existing economic or regulatory barriers.

3. The Commission shall decide the matter within 180 days of the initiation of the proceeding. The Commission may approve or reject a party's proposal in its entirety, or approve a proposal with modifications, including altering the range of services and/ or the geographic extent of the proposed competitive zone.

4. If a competitive zone is approved by the Commission, it shall be established in Qwest's Exchange and Network Competitive Services Price List, by identifying the geographic boundaries of the competitive zone and specifying the rates, terms, and conditions for the service(s) subject to competitive zone treatment. Thereafter, Qwest may change those services' prices upward or downward without limitation and on its own volition, without prior Commission review or approval, as long as the notice requirements set forth in this Section of the Plan are satisfied. Qwest could also undertake promotional offerings, including discounts and/ or waivers from certain charges, within a competitive zone without limitation other than the requirements set forth in Section F., Section I, and this Section of the Plan. Qwest shall not be required to provide a showing

81 R4~commended Decision of

the Hearing Examiner C~lse No. 09-00094-UT

that a price decrease in a competitive zone meets the NMAC 17.11.13.17 Minimum Pricing requirements other than as prescribed in Section I. of this Plan.

5. For any price decrease (or discount/waiver from charges), Qwest shall provide 7 calendar days' notice via appropriate postings on its website that describe the pending change(s), plus a link to its Price List, which must be kept updated. Qwest shall notify the Commission Staff and CLECs of the pending price change via email, 7 calendar days in advance. An e-mail that indicates that a price decrease is pending and provides a specific link to the notice supplied on Qwest's website shall be considered sufficient notification. CLECs may request to be added to Qwest's e-mail distribution list for such notices, li:nited to two points of contact (e-mail recipients) per CLEC.

6. For any price increase, Qwest shall provide 15 calendar days' notice via appropriate postings on its website that describe the pending change(s), plus a link to :lts Price List, which must be kept updated. Qwest shall provide e-mail notification to Staff and CLECs on the same terms as described in part 5, above, but with 15 calendar days' advance notice. Qwest also shall provide the 15 calendar days' advance notice of the price increase to current subscribers of the affected service via bill inserts or flyers.

f~G's Proposed Appendix A-AFOR III Pricing Plan, at § J, pages 6-7.

The AG asserts that this additional language " ... builds upon the Competitive

Zone concept that was included, but not fully defined, in the AFOR II." Attorney

General Ex. 1 (Gates Direct), at 42.

Staff opposes the AG's competitive zone proposal on the grounds that the

specifics of how pricing flexibility should be implemented in a competitive zone(s)

would best be left to the testimony and hearings associated with the establishment of

said zone(s), and should not be included in a peremptory fashion in AFOR III prior to

one of those proceedings. Staff Ex. 8 (Ripperger Response), at 11.

The Commission agrees with Staffs assessment concerning the AG's

competitive zone proposal and so, for the reasons articulated by Staff, the AG's

competitive zone proposal is denied.



82

Having denied the proposed alterations to this section suggested by Qwest and

the AG, the Competitive Zone section to be included in AFOR III shall read as follows:

1. Qwest, or any other party of interest, may request that the Commission commence a proceeding for the approval for the creation of a competitive zone or zones for the regulation of public telecommunications services under this plan. The creation of a competitive zone or zones will allow for a different, and more flexible pricing scheme within the designated competitive zone or zones.

2. The creation of a competitive zone must be consistent with the procedures and showings prescribed in NMSA 1978, § 63-9A-8.

3. Any proceeding initiated before the Commission for the creation of a competitive zone or zones under this plan will commence and end within 180 days from the date of a petition by an interested party.

1. [N.] Filing of Materials Related to the AFOR III Pricing Plan (Staff Proposed Addition); and, [P.I Filing (Staff proposed addition)

Staff proposes adding the following sections to Qwest's AFOR Plan:

Any proposed Tariff, Promotional Offering, or Individual Contract filing shall be filed with the Commission in a case docket to be determined by the Commission. Any confidential materials requested in reference to the review of any Tariff, Promotional Offering or Individual Contract filing are to be filed under a protective order in case docket determined by the Commission, and shall be restricted by the terms of the Commission's protective order in that case. Staffs Proposed Appendix A-AFOR III Pricing Plan, at §H, page 10. (Id.) Except for the Annual Report, all reports and filings will be submitted in the form of an Advice Notice in a case docket to be determined by the Commission, with the original to be filed with the Records Bureau of the Commission. Electronic copies will be provided to Staff and any interested person who submits a timely request to Qwest. In addition, Qwest will post on its website all reports and information required by this Plan that are not subject to a protective order. (Id., at §C, page 12.)

Staff argues that these proposed additions to AFOR III are necessary for

purposes of clarity and transparency. Since Qwest is largely regulated under the

terms of AFaR III, Staff believes that Qwest filings should reference a separate, specific

docket. Staff also states that it is important for Qwest to provide electronic copies to



83

parties when requested and that Qwest be required to post to its website all reports

and information required by AFOR III that are not subject to a protective order for

notification purposes to its customers as detailed in Staffs proposed section P.

filing. 43 Staff Ex. 7 (Ripperger Direct), at 8, Lines 19-21.

Qwest is opposed to the addition of these two new sections to AFOR III. In

support of its stance, Qwest argues that while it has previously agreed to post AFOR I

and AFOR II reports on its external website, the competitive pressures it is currently

facing are causing it to seek to reduce expenses and eliminate administratively

burdensome requirements and so it is opposed to these two new additions for

inclusion in AFOR III. Qwest does not, however, provide any specific information

denoting the level of expense and extent of the "burdens" these new requirements

would impose upon them.

Staffs recommended modifications are reasonable as they both have the

purpose of making the regulatory materials more accessible without imposing a

s.ignificant cost on Qwest. Accordingly, Staffs modifications are accepted.


Commission has agreed to accept, the language for these sections shall be modified in


N. Filing of Materials Related to the AFOR III Pricing Plan Any proposed Tariff, Promotional Offering, or Individual Contract filing shall be filed with the Commission in a case docket to be determined by the Commission. Any confidential materials requested in reference to the review of any Tariff, Promotional Offering or Individual Contract filing are to be filed under a protective order in case docket determined by the Commission, and shall be restricted by the terms of the Commission's protective order in that case. P. Filing

43 For reasons explained at footnote 25, above, Staffs designation of this section of its filed Appendix A Proposal as C. Filing was changed to P. Filing for the purposes of the discussion contained in this Order.

84 R.ecommended Decision of


Except for the Annual Report, all reports and filings will be submitted in the form of an Advice Notice in a case docket to be determined by the Commission, with the original to be filed with the Records Bureau of the Commission. Electronic copies will be provided to Staff and any interested person who submits a timely request to Qwest. In addition, Qwest will post on its website all reports and. information required by this Plan that are not subject to a protective order.

J. [E.] New Services

Qwest proposes only a modest change to this section by way of clarification and

update for inclusion in AFOR III. To that end Qwest proposes changing the last

sentence of this section to read "New telecomr::lUnications services introduced by

Qwest during the periods of AFOR I or AFOR II are to be considered New

Telecommunications Services for the purposes of AFOR III as well." Qwest's Proposed

Appendix A-AFOR III Pricing Plan, at 3-4. The AG makes essentially similar minor

adjustments to this section.

Staff, on the other hand, proposes changing this section so that new

telecommunications services would be subject to the tariffing provisions of AFOR III,

as these are spelled out in Section D. Tariff Changes of the AFOR. Staff also proposes

eliminating the provision that any new telecommunications services introduced by

Qwest during the AFOR I and AFOR II periods would be considered new

telecommunications services for AFOR III as well. Staffs Proposed Appendix A-AFOR

In Pricing Plan, §D, page 5. 44

Staff asserts that subjecting a new telecommunications service to the tariffing

provisions of AFOR III is necessary so as to permit a review of the service to determine

'whether the service in question is in fact a "new telecommunications service" and not

simply an old service or group of services that have been given a new name. Staff

4' The section and page designations utilized refer to those c:mtained in Staffs Proposed Appendix A as s·~lbmitted.



85

states that this filing would also allow review of the terms and conditions of that

service, as well as the rate. Staff goes on to assert that, given the confusion regarding

1:he treatment and/ or tariffing of new services under AFOR I and II, it is also

recommending a transitional process wherein previously defined "new

telecommunications services" would be grandfathered in to the tariffs by a filing by

Qwest within 30 days from the effective date of the AFOR III Plan. Staffs Brief-in-

Chief, at 16.

Qwest opposes Staffs language revisions for this section on the grounds that it

is a move backwards towards more regulatory oversight of Qwest that is not necessary

and because Staff provides no rationale for this proposed change beyond its own

opinion that new telecommunications services should be subject to tariffing and

review by the Commission. Qwest Ex. 2 (Brigham Response), at 84.

There is no perceived value in now having new services tariffed as Staff

suggests. The Commission is not aware that there have been any allegations that

Qwest has attempted to re-brand old services under a new name and should Qwest

attempt to do so at some point in the future there are adequate remedies currently in

place to address that situation if it occurs, or is suspected of occurring. Nor is the

Commission aware of the confusion Staff refers to regarding the treatment and/or

tariffing of new services under AFOR I and II. For these reasons Staffs proposed

alterations are denied.

The minor modifications suggested by Qwest and the AG are more acceptable

and will be adopted with one small change. The wording of "the periods of AFOR I or

AFOR II" shall be changed to "the periods of AFOR I and AFOR II". Accordingly, the

language for this section shall be changed to read a.s follows for inclusion in AFOR III:



86

AFOR.

'~'

New telecommunications services shall no': be subject to price caps. A "new telecommunications service" is a service providing features, functions, or capabilities that were not offered by Qwest in New Mexico on the effective date of the Plan. New telecommunications services introduced by Qwest during the period of AFOR I and AFOR II are to be considered new telecommunications services for the purposes of AFOR III as well.

K. [G.] Packaging of Products and Services

Neither Qwest, the AG, nor DoD/FEA propose any changes to this section of the

Staff proposes the following language:

1. Packaged and Bundled products and services shall be exempt from the price cap provisions of this plan, provided that the individual regulated products and services or products in the package are made available separately. Packaged offerings shall be tariffed and effective within 10 business days of filing with the Commission.

2. Bundled offerings shall be filed with the Commission with an affidavit for record in a case docket to be determined by the Commission. The filing shall include a description of the packaged or bundled offering, including the price or prices for the packaged or bundled offering, and types of regulated products and services included in the packaged or bundled offering.

3. The price of a package shall be no higher than the sum of the highest prices of the a la carte prices of the services available for the package.

Staffs Proposed Appendix A-AFOR III Pricing Plan, at §F, pages 8-9.45

In support of these revisions, Staff asserts that it is necessary to differentiate

between a package of services, which is a tariffed combination of regulated services,

and a bundle, which is a combination of regullated and unregulated services. Staff

notes that it has added a definition for bundled services in the Definitions Section of

its proposed AFOR III Plan. Staff further asserts the filing requirements it suggests for

Qwest's bundled offerings are necessary so that the Commission may be kept informed

45 The section and page designations utilized refer to those contained in Staffs Proposed Appendix A as s'ubmitted,


C:ase No. 09-00094-UT

87

\'Vhen its regulated services are being offered in conjunction with unregulated services

so that it may be assured that the regulated services are not being offered in any

manner which would violate Commission rules or statutes, or may be in violation of

the new AFOR III Plan. Staff Ex. 7 (Ripperger Direct), at 23-24.

Cyber Mesa and tw telecom propose the addition of a 4th item to this section to

read as follows:

4. The filing, notice, objections, suspension and other prOVISIOns m Section D above and the "Price Floor" provisions in Section I below shall apply to all offerings of packaged products and services.

Cyber Mesa's Proposed Appendix A-AFOR III Pricing Plan, at §G, page 8. 46

In support this proposed change Cyber Mesa argues that its proposed language

is consistent with the language in the "Price Floors" section of Qwest's current AFOR

Pricing Plan, which states that "all regulated products and services, including those

included in promotional and packaged offerings, shall be priced above the cost of

providing those individual products and services." Cyber Mesa Ex. 10 (Hill Direct), at

57-58.

No party to these proceedings provided comment on the proposed changes to

this section put forward by Staff, Cyber Mesa and tw telecom.

The language proposed by Staff is acceptable, with the exception of Staffs

reference to "tariff' in Item No. 1. The inclusion of the reference to "tariff' in this

section would imply that packaged services are subject to the price cap provisions of

the plan, which they are not.

Concerning the proposed addition of Item No.4 by Cyber Mesa and tw telecom,

the first part of the proposed language having to do with Section D. Tariff Changes is

41; The versions of the Proposed Appendix A-AFOR III Pricing Plan filed by Cyber Mesa and tw telecom are substantially the same. tw Ex. 7 (Nipps Direct), Ex. LWN-2.



88

rejected for the same reason Staffs reference to the term "tariff' was rejected. The

language referring to Section I. Price Floors is acceptable given that this section

similarly references packaged offerings. Accordingly, the language for Item No.4 as

proposed by Cyber Mesa and tw telecom shall be changed to read:

4. The "Price Floor" provisions in Section I below shall apply to all offerings of packaged products and services.

Taking into account the accumulated changes agreed upon by the Commission

for this section, the language for this section should be changed to read as follows for

inclusion in AFOR III:

1. Packaged and Bundled products and services shall be exempt from the price cap provisions of this plan, provided that the individual regulated products and services or products in the package are made available separately. Packaged offerings shall be effective within 10 business days of filing with the Commission.


3. The price of a package shall be no higher than the sum of the highest prices of the a la carte prices of the services available for the package.

4. The "Price Floor" provisions in Section I below shall apply to all offerings of packaged products and services.

L. [A.] Definitions

Staff proposes adding the following definitions to AFOR III that are pertinent to

the pricing section under consideration here:

Bundled Services: Shall mean an offering by Qwest of a combination of regulated and unregulated retail services. A bundled service offering may be a single regulated service or a package of regulated services offered in combination with one or more unregulated services. Winback Customer: Shall mean a customer who was once was a customer of Qwest's service or services, and is identified as such by Qwest for the purpose of a promotional offering.

~:ecommended Decision of the Hearing Examiner


89

Staff Ex. 7 (Ripperger Direct), at 7-8.

All other definitions Staff proposes for addition to AFOR III have to do with

Staffs Quality of Service proposals and are addressed below in that section.

Staff recommends adding the definition concerning a bundled service offering so

as to make a distinction between a packaged offering, consisting entirely of regulated

services and an offering consisting of both regulated and non-regulated services. Staff

makes this distinction because of its recommendation that Qwest submit information

on its bundled service offerings so the Commission will remain informed of those

Qwest offerings which may include regulated services. Staff Ex. 7 (Ripperger Direct),

at 11.

Staff recommends the addition of a Winback Customer definition to its

proposed pricing plan. Staff argues that this addition is necessary given the

restrictions Staff proposes imposing on Qwest's promotional activities concerning

these types of customers. Id.

III:

Cyber Mesa and tw telecom propose adding the following definitions to AFOR

Advanced Telecommunications Services: Shall mean any advanced communications services offered by Qwest pursuant to its New Mexico retail tariffs or otherwise subject to the Commission's jurisdiction. Commission: shall mean the New Mexico Public Regulation Commission. Designed Services: Shall mean the provisioning of circuits subject to the Commission's jurisdiction requiring treatment, equipment, or engineering design offered by Qwest pursuant to its New Mexico retail tariffs or on an Individual Contract Basis, including but not limited to Analog Private Line services, DSI (including channelized), DS3, ISDN-BRI, special assemblies, Frame Relay Service, ATM service and LAN Switching Services. Packaged Services: Shall mean a number of intrastate products or services and any included Regular Services as defined in this Section that are subject to the Commission's jurisdiction and offered together by Qwest, with or without any other products or services that are not subject to the Commission's jurisdiction, as a single offering.



Primary Services: Shall mean 1FR (residence flat rate local one party access line) and 1FB (business flat rate local one party access line) services. Promotional Offering: Shall mean a temporary offering of products or services that are subject to the Commission's jurisdiction, including but not limited to Packaged Services containing such product or services and included Regular Services, for no longer than ninety (90) consecutive calendar days, that offers any temporary discounts, temporary tariff or rate waivers, temporary special incentives or other temporary inducements applicable to any such products or services subject to the Commission's jurisdiction. A Promotional Offering may include any combination of Primary or Regular telecommunications services, Designed Services, Advanced Telecommunications Services and non-pUblic telecommunications services. For the purposes of interpreting any Promotional Offering and implementing Section F below addressing Promotional Offerings, the term "existing customer" shall mean Clny person, business or commercial entity or governmental agency who or 1:hat, at the time that promotional offering is made by Qwest, is responsible for paying Qwest for any intrastate products or services offered by Qwest that are subject to the Commission's jurisdiction, and the term "new customer" shall mean any person, business or commercial entity or governmental agency who or that, at the time that promotional offering is made by Qwest, is not responsible for paying Qwest for any intrastate products or services offered by Qwest that are subject to the Commission's jurisdiction. For those purposes, an "existing customer" that is offered additional Qwest regulated or unregulated products or services or is offered an upgrade of a regulated product or service for which the customer is responsible for payment shall not be classified or treated as a "new customer." Regular Services: Shall mean services that enhance or supplement a customer's Primary (1FR or 1FB) Services. Examples include additional lines, CLASS features and line moves or changes. Residential Public Interest Features and Services: Shall mean those residential telecommunications features and services associated with the Primary line 1FR that have been identified for purposes of this plan as those features and services that have a unique public interest value.

Cyber Mesa and tw telecom argue that their proposed definitions are

" ... necessary and reasonable to make those specific terms in the proposed Plan clear

to the Commission, Qwest and all others interested throughout the term of Qwest's

next AFOR. ... to eliminate the sorts of ambiguities, uncertainty and confusion about

the meaning of key words and terms in Qwest's next AFOR Pricing Plan that arose

concerning the Pricing Plan in Qwest's current AFOR." As an example of what the

Companies mean by that they point to Case No. 08-00 197-UT and, according to them,



91

'''-"''

the confusion that arose concerning " ... whether temporary "promotional offerings" filed

by Qwest were "tariff changes" governed by the provisions in section D of Qwest's

current Pricing Plan." Cyber Mesa Ex. 10 (Hill Direct), at 35.

Cyber Mesa and tw telecom claim their proposed definition of "Promotional

Offering" is necessary to " ... clarify the customers to whom Qwest would be allowed to

make a 'promotional offering.'" The Companies also argue that his definition is

required as a result of issues that were raised in Case No. 08-00197-UT. As an

example, the Companies point to the discussJ~on in that docket about whether it is

"fair and reasonable" to permit Qwest to " ... offer temporary discounts or waivers of

recurring and non-recurring charges in Qwest's New Mexico tariffs to existing Qwest

business customers that had either already notified Qwest of their intention to switch

to another provider or were simply 'shopping around' for the best price .... " Id., at 36.

Qwest argues that there is no need for the a.dditional definitions being proposed

by Staff and Cyber Mesa and tw telecom " ... as they relate to proposed sections of the

AFOR that should be rejected by the Commission.". Qwest Ex. 2 (Brigham Response),

a.t 78.

The majority of the definitional changes proposed by Cyber Mesa and tw

telecom it has to do with the Companies' suggested alterations to the Promotional

Offerings section of their recommended pricing plan. As the discussion above

concludes, these suggestions were rejected in favor of those put forward by Staff. For

that reason the proposed definitions of Cyber Mesa and tw telecom no longer serve a

purpose and so are denied.

The addition of the pricing definitions proposed by Staff are accepted as these

are pertinent to Staffs suggested alterations to the Promotional Offerings section of



92

their recommended pricing plan, which was accepted the conclusion of the above

discussion.




Bundled Services: Shall mean an offering by Qwest of a combination of regulated and unregulated retail services. A bundled service offering may be a single regulated service or a package of regulated services offered in combination with one or more unregulated services. Packaged Services: Shall mean a number of regulated retail services that are tariffed and offered together by Qwest as a single offering. Promotional Offering: Shall mean a temporary offering of products or services which may include discounts, temporary rate waivers, special incentives or other inducements designed to promote the products or services included as part of the promotional offering. Residential Public Interest Features andl Services: Shall mean those residential telecommunications features and services associated with the Primary line IFR that have been identified for purposes of this plan as those features and services that have a unique public interest value. Winback Customer: Shall mean a customer who was once was a customer of Qwest's service or services, ~md is identified as such by Qwest for the purpose of a promotional offering.

The Pricing rules are compiled in Appendix A, "Price Caps for Basic Residence,

Basic Business Local Exchange Services, and Intrastate Switched Access Services",

which is attached hereto and incorporated herein by reference.

5. Quality of Service

A. Background and Overview of Positions

Quality of service rules and requirements have been a part of Qwest AFORs

since the very beginning. The Commission has also had a quality of service rule in

place since before the adoption of AFOR I. That rule was among those mandated as a

part of the overall HB 400 rulemaking requirement. In AFOR I, the quality of service



93

rule was stipulated. In AFOR II, the Commission approved Qwest's recommendation

that the (revised) quality of service rule be incorporated into that AFOR. In this case,

Staff and Qwest strongly disagree on what types of provisions should be in the AFOR

quality of service requirements. None of the other parties address quality of service

lssues.

Qwest argues that any service quality regulations approved by the Commission

should be done by a rulemaking proceeding rather than the AFOR process. After the

commencement of this case, Qwest petitioned the Commission for a rulemaking to

adopt the Company's proposed service quality plan (Case No. 09-00184-UT; Petition

filed May 26, 2009).47 Noting that the Commission has not acted on Qwest's

rulemaking petition, the Company suggests that its proposed service quality plan

("SQP") be adopted as a temporary measure pending completion of the rulemaking.

Qwest's Brief-in-Chief, at 26. Qwest's Brief aJso repeats the arguments made in its

Motion to Limit Scope that customer credits should be eliminated because they are

penalties that go beyond the Commission's authority. Id., at 27-28.

To fIx the problems it claims are caused by customer credits, Qwest proposes

an SQP that focuses on what it calls the "key measures" of average speed of answer in

business offices and repair centers, trouble report rate, installation timeliness, and

repair timeliness. Qwest would report these measures on a statewide basis. The

Company says it would be obligated to invest and otherwise act in good faith to

maintain service quality levels that meet or better the specifIed standards. Id., at 28

(citing Qwest Ex. 6 (Williams Direct), at 15; and SQP § 12 (Exhibit I to Williams

Direct)).

47 Staff filed a Response in opposition to Qwest's Petition on June 8, 2009.



94

As a remedy for any failure to meet servIce quality standards, Qwest's SQP

proposes what the Company terms "an escalating series of Commission-supervised

a.ctions for Qwest to undertake" in place of customer credits. This proposal is found at

SQP § 12: "Responsive Resolution Processes." The first level is "Response Levell," in

which Qwest is required to determine the contributing factors, examine solutions, and

implement action to mitigate or resolve the shortfall. If Response Level 1 "does not

promptly cure any service quality shortfalls," "R'::!sponse Level 2" requires a written

Action Plan to be developed with Qwest vice president oversight, then is to be

submitted to and discussed with Commission Staff. If the problem persists after

Response Level 2, "Response Level 3" requires additional examination and expansion

of the Level 2 action plan, with discussion between a Qwest vice president and Staff,

filing the revised action plan for approval by the Commission, and regular updates to

Staff regarding Qwest's progress towards correcting the shortfalls. If a Response Level

3 action plan fails to resolve the problems wi~:hin ninety (90) days of its being

triggered, Qwest is subject to fines or other penalties imposed by the Commission.

Qwest contends there is no link between quality of service and service quality

"penalties." Instead, Qwest claims that competitive market pressures and the

"escalating pace of access line losses generate powerful incentives to meet quality of

service standards." Qwest criticizes Staffs proposal to continue, with some changes,

the current quality of service rule, stating that current rule does not reflect the above

realities. The Company offers its SQP as the means by which Qwest will be enabled to

deliver high service quality to its New Mexico customers. Qwest's Brief-in-Chief, at 30.

Qwest argues that Staffs assumption that service quality credits reflect the

quality of Qwest's network is contradicted by two important facts. Qwest agrees that

~~ecommended Decision of the Hearing Examiner


95

timely repairs are important, and says its SQP obligates the Company to meet the

current 85% standard for repairing out of service conditions. However, this metric

does not measure the quality of the Qwest network or the sufficiency of its investment

in the network, but rather reflects Qwest's investment and management of its

resources to repair problems and outages. Qwest's Response Brief, at 24.

Qwest claims that a large portion of the credits it paid during AFOR II resulted

from failures in small wire centers or in wire centers with very few trouble reports. As

Qwest improves its service quality, trouble reports decrease. Id., at 25 (citing Qwest

Ex. 7 (Williams Response), at 8-14). As trouble reports decrease, missing a single

repair deadline can "enormously impact" the percentages for Qwest's timely repair of

out of service conditions. Qwest contends that Staffs reliance on the amount of

service quality credits Qwest paid is misleading and creates an inaccurate picture of

Qwest's network qUality. Id.

Qwest challenges as unsupported Staffs position that service quality credits are

:r:~ecessary to ensure that Qwest satisfies the Com:nission's service quality standards.

The Company claims that nothing in the record accompanies Staffs premise that (1)

actual service quality performance problems existed that theoretically could be

impacted by rehabilitation expenditures, (2) Qwest's rehabilitation expenditures were

actually necessary to correct those service quality problems, or (3) the extent to which

the SASA rehabilitation expenditures made a "dent" in Qwest's service quality

performance. Id., at 26.

What Qwest calls "Staffs proposed penalty scheme" is, the Company contends,

bad policy. Staffs argument that wire center credits are "important in targeting

Qwest's attention to areas in need of rehabilitation and provide some measure of



96

compensation to affected customers" is, Qwest says, factually untrue. When Qwest

pays customer credits, those dollars cannot be spent to improve Qwest's network.

This is a critical shortcoming of the current system, which Qwest portrays as reacting

to a service quality problem by punishing Qwest and diverting funds away from

solving the problem. Qwest states its plan reacts to a service quality problem by

l.nvolving Staff and the Commission to direct and approve Qwest's plan for solving the

problem. ld., at 27 (quoting Staffs Brief-in-Chief at 30).

Qwest argues that prior AFOR plans and rulemakings have never linked

customer credits to the amount of harm suffered by the customers to whom they are

paid, and Staff provides no evidence that the credits accurately "compensate"

consumers. Service quality credits, says Qwest, currently go to many customers who

never experienced a problem. The current scheme is not compensatory in any way.

Qwest's claims its SQP solves this problem by providing direct credits to all customers

experiencing outages, under a Commission-approved plan. ld., at 27-28 (citing Qwest

gx. 6 (Williams Direct), at 10).

Staff opposes Qwest's SQP and instead recommends continuation of the current

AFOR II quality of service terms, with thei.r reliance on the provisions of the

Commission's quality of service rule, as the basis for service quality in AFOR III.

Staffs approach is to maintain the system that has worked relatively well over the last

:2: 1/2 years. Staffs proposal includes the solutions the Commission adopted to

resolve the ambiguities in the quality of service part of AFOR II. Staffs Brief-in-Chief,

at 20 (citing Order on Preliminary Recommended Decision, Case No. 08-00 189-UT).

Staff argues that the current AFOR II quality of service rule has generally

worked well, that recent interpretations provided by the Commission have resolved

l1~ecommended Decision of the Hearing Examiner


97

AFOR II's ambiguities and that, with the ambiguities resolved, the continuation of the

terms should provide for a fair and efficient regulation of service quality going forward.

Staff maintains that the continuation of a "clarified set of quality of service standards

from AFOR II is preferable to Qwest's proposal for an entirely new plan." Id. (citing

Staff Ex. 10 (Ramie Direct), at 7-8).

Staff styles its recommendations as terms that supersede or supplement terms

in the Commission's current quality of service rule. This, says Staff, is in accord with

17.11.22.2 NMAC of the Quality of Service Rule, which provides for the adoption of

terms in AFORs that supersede inconsistent provisions in the Rule. Staffs states that

its approach does not entail an amendment of the Rule, but rather represents a

tailoring of terms to meet the specific issues that apply to Qwest's telecommunications

network in New Mexico. Staffs Brief-in-Chief, at 21.

Staff charges that Qwest's "very general" description of its SQP48 "conceals the

number and complexity of the changes Qwest is proposing to AFOR II and glosses over

the need there will be in the future to resolve the resulting confusion." Qwest's

proposal, Staff contends, actually entails a whole new system for regulating quality of

~;ervice that will invite further disputes. Staff claims that it is unclear how Qwest will

be held accountable to satisfy the four key quality of service standards the Company is

proposing. Staff alleges that Qwest is offering an AFOR under which the Company has

the ability from time to time to propose, change Dr eliminate customer credits to be

issued to individuals harmed by any specific failure of the standard. This, Staff

axgues, frees Qwest to propose, change or eliminate the existence and magnitude of

41l Qwest devotes only four pages of its Brief-in-Chief to its SQP proposals. The Company saved most of its explanation and argument on this subject for its Response Brief, in which the subject is covered from pp. 22 through 35.


Gase No. 09-00094-UT

98

the credits upon thirty days notice, subject to Commission approval. Staffs Reply

Brief, at 9.

In place of the statewide and wire center customer credits from AFOR I and II,

Staff says, Qwest also proposes an entirely new Responsive Resolution Process to

ensure compliance with quality of service standards. "Perhaps most important,"

(2west proposes substantial changes in the definition of Trouble Reports and Trouble

:Report Rate. Staff says these changes are being brought forward without explanation.

ld. Staff argues that Qwest's proposal to have the ability to change its system of

quality of service credits upon thirty days notice will encourage litigation and mUltiple

regulatory proceedings. The Responsive Resolution Process, and especially the

Commission's role in the process, is vague enough, according to Staff, to cause the

Commission to be faced with future uncertainty and disputes about how the Process

will be implemented. 49 Moreover, Staff says Qwest's proposed definitional changes

would immediately require interpretation and resolution by the Commission. ld., at

lO.

Staff contends that most of Qwest's changes are made without explanation,

which will leave their interpretation open to dispute. Others, even after explanation,

also create ambiguities that will need to be resolved in the course of AFOR III. Staff

identifies the following changes that it believes pos·e the prospect of significant declines

in service quality:

Qwest's primary recommendation-to eliminate aggregate credits statewide and by wire center for quality of service violationswould remove an important incentive to maintain Qwest's network infrastructure.

49 In its Brief-in-Chief (at 33), Staff had said that the "Responsive Resolution Process is not objectionable, but, until there is a showing that it may be effective, it does not appear to have the teeth needed to produce the intended results."



99

-- The proposal for individual customer credits eliminates credits for important issues and, by itself, is not sufficient to incent Qwest to maintain its infrastructure.

-- Staff disagrees with Qwest's recommendations to revise the definition of trouble reports and the formula for calculating trouble report rates.

Staffs Brief-in-Chief, at 33 (citing Staff Ex. 11 Ramie Response, at 4-9).

Turning to the specific quality of service proposals submitted by Qwest and

Staff, both proposals are appended to their respective Briefs-in-Chief. As noted,

Qwest's proposal is in the same form as the one made by the Company in its separate !

petition for a rulemaking, but in response to the cross-examination of one of its

'ivitnesses at the hearing, Qwest has adapted its SQP so that it would apply only to

Qwest if approved as a part of AFOR III. Qwest's Brief-in-Chief, at 28. For the

purposes of this case, both quality of service proposals must be viewed as potential

components of AFOR III, and will be treated as such. Both proposals, as required, use

the format of the current Quality of Service rule, 17.11.22 NMAC, as their point of

departure. The consideration, immediately below, of the substantive proposals made

by Qwest and Staff follows that format.

B. The Staff and Qwest proposals

1. Definitions

Staff generally recommends the continued use of the Definitions in the current

R.ule (17. 11. 22.7 NMAC). Staff also recommends the use of the interpretations the

Commission gave to the definitions addressed in its decision in Case No. 08-00189-

UT, where the Commission resolved interpretational disputes that arose during AFOR

II. Staff Ex. 10 (Ramie Direct), at 9.



100

a. Trouble Reports. Staff recommends the adoption of the

interpretation the Commission gave to the term "Trouble Reports" in Case No. 08-

00189-UT. In addition to the exclusions in the rule, "Trouble reports" would, under

the Commission's Order, exclude "troubles beyond the Network Interface Device

[NID)." Staff Ex. 10 (Ramie Direct), at 9-10; Order on Preliminary Recommended

Decision, Case No. 08-00 189-UT (May 5, 2009), at 12, ,-r 34.

Qwest's definition would change the references to LECs to references to Qwest,

but does not address the Commission's NID exclusion in No. 08-00 189-UT. The

definition should be revised to reflect both Staff's recommendation and Qwest's change

of references.

b. Access Lines. Staff recommends the adoption of the interpretation

t.he Commission gave to the term "Access Lines" in Case No. 08-00 l89-UT. The

definition would be modified to exclude wireless services and internal ILEC services,

since these are not considered to be subscribers of the ILEC's services. Staff Ex. 10

(Ramie Direct), at 10; Order on Preliminary Recommended Decision, at 12-13, ,-r,-r 35-

::17.

Qwest would retain the current definition, but apparently has no specific

objection to what Staff suggests. Staffs change should be adopted.

c. Out of Service Trouble Reports. The Quality of Service rule, and

hence AFOR II, do not include definitions of either "out of service" or "out of service

trouble reports." Staff recommends the adoption of the following definition based

upon the interpretation the Commission gave the term "Out of Service Trouble

Eeports" in Case No. 08-00189-UT:



101

Out of Service Trouble Reports means reports that a Primary and Regular Services customer is unable to receive or place calls on an access line due to lack of dial tone or severe noise that prevents effective communication. This includes troubles beyond the network interface.

Staff Ex. 10 (Ramie Direct), at 11; Order on Preliminary Recommended Decision, at

13-15, ~~ 40-44.

Qwest does not propose to define out of service trouble reports, but does offer

this definition of "out of service": "out of servic(~ means an access line is unable to

receive or place calls due to lack of dial tone or severe noise that prevents effective

communications." The Company does not explain this proposal, which in any case

would be largely duplicative and unnecessary if Staffs definition is accepted. Staffs

definition appears reasonable and should be made a part of the AFOR III quality of

service rule.

d. Extraordinary or Abnormall Operating Conditions. The term

"extraordinary or abnormal conditions of operation" is currently listed in the definition

of Trouble Reports as an exclusion, but is not defined in the rule. Staff recommends

that the term be defined as follows:

Extraordinary or abnormal operating conditions means third party cable cuts, lightning strikes or other severe weather caused damage to network components, vandalism, theft, fire, vendor action, and customer action, as coded by Qwest network technicians. Lightning strikes qualify under this definition if all accepted grounding, bonding, and shielding practices were followed by the ILEC at the damaged location.

Staff Ex. 10 (Ramie Direct), at 11-12.

Instead of incorporating the term "circumstances beyond the reasonable control

of the LEC" as an exclusion to the definition of "trouble reports," as Qwest proposes,

Staff recommends that the term "extraordinary and abnormal conditions of operation"

be defined to refer to the exclusions Staff claims Qwest actually uses. Staffs Brief-in-



102

Chief, at 23 (citing 3 Tr., at 137-139; and St:3..ff Ex. 3). Staff says the exclusions it

recommends as "extraordinary or abnormal operating conditions" are derived from the

definition of trouble reports Qwest uses in day to day reporting by network technicians

and in its reporting under AFOR II. Id.

The term, Staff asserts, should not include annual, cyclical, and seasonal

conditions that occur with some regularity in nature and thus can be reasonably

foreseen and prepared for. Therefore, any general cause of adverse weather should

not be considered in this category. Staff says that for clarity, examples that would not

be considered "extraordinary or abnormal ope:rating conditions" would be rainstorms

during "monsoon season", snowfall, droughts or other normal weather conditions.

Staff Ex. 10 (Ramie Direct) at 12. Lightning strikes would be excluded if Qwest had

implemented its grounding, bonding, and shielding standards at the site of the strike.

J~.50 Such standards, Staff claims, are used in Qwest's network to minimize the

damage and, hence, the duration of such outages. Staffs Brief-in-Chief, at 23 (citing

Tr. 7/9/09, pp. 142-144, 154; Staff Exhibit 4).

Qwest opposes Staffs definition and offers in its place retention of the existing

definition of "circumstances beyond the reasonable control" and a new definition of

'~force majeure." Qwest argues that in Case No. 08-00189-UT, the Commission

adopted a "harmonizing approach" to incorporate the term "beyond the reasonable

control of the ILEC," which the Company claims is defined in the current rules in

order to clarify the meaning of "extraordinary or abnormal conditions of operation,"

'which is not defined. Qwest contends its proposal follows this policy, while that of

Staff would change the rule and depart from the Commission's guidance in the AFOR

50 Staff bases this recommendation on a similar standard in the quality of service rule in Oregon that applies to Qwest. See Staff Exhibit 5; 3 Tr., at 154-157.



103

JI case by narrowing the events that are deemed beyond the reasonable control of

Qwest, and would require the Company to request a variance to establish the

existence of such events or conditions. Such a requirement, Qwest insists, would

invite and perhaps even require unnecessary and wasteful litigation. Qwest's

Response Brief, at 31-32.

These disagreements carry forward a debate that was litigated in (and even

preceded) Case No. 05-00094-UT and has recurred in one form or another ever since.

Though any Commission resolution may not guarantee that peace will reign in this

area, nonetheless the Commission decision manifested in the current Quality of

Service rule, and AFOR II, should not be revisited unless there is good reason. Qwest

tacitly admitted as much by saying that, "if necessary, ... the Commission could simply

adopt the defined term 'beyond the reasonable control of the ILEC' and discard the

'extraordinary and abnormal conditions of operation' exclusion," because

extraordinary and abnormal conditions of operation "are subsumed by the 'beyond the

reasonable control' definition." Qwest's Response Brief, at 32, n.55 (citing 3 Tr., at

162-163). Staff in effect makes a similar admission by not removing the definition of

"circumstances beyond the reasonable control" from its proposed quality of service

rule. Thus, the Qwest and Staff positions appear to be closer than they may

recognize.

The logic of the two positions, then, is that the rule should remain as is-with

two exceptions, one of which is unmentioned by the parties. The stated exception is

Staffs sentence about the exclusion of lightning strikes. Qwest makes no objections

to this proposal, which seems a reasonable one, and the sentence would fit in the force

majeure paragraph under the definition of "circumstances beyond the reasonable



104

control." The unmentioned exception has to do with the use of the phrase

"extraordinary or abnormal conditions of operation" in the current definition of

"trouble report." That phrase is neither defined nor occurs elsewhere in the current

rule. For the sake of clarity and consistency, that phrase should be replaced with the

defined and oft-used "circumstances beyond the reasonable control [of QwestJ." That

definition, as revised herein, should remain in place. Correspondingly, the proposed

definition of "extraordinary or abnormal conditior:.s of operation" would be cumulative

and otherwise unnecessary, and should not be included in the AFOR III Quality of

Service Rule.

The other changes Qwest proposes to the Definitions section are not explained

and are not self-evident. Consequently, they should not be adopted.

2. Reporting Reguirement~!

Staff generally recommends that the Commission use the reporting

requirements in the Commission's Quality of Service rule at 17.11.22.8 NMAC, with

the revisions discussed below. Qwest would delete reporting requirements for held

orders, repeat trouble reports, average repair intervals, business office and repair

office answer times and carrier profile.

The deletions proposed by Qwest, Staff argues, raise the prospect that the

Company's New Mexico customers could be left more exposed to poor service quality,

and would limit or even remove the protections that have been established for them.

The required reporting of the items enables Staff and the Commission to monitor

Qwest and to pursue questions about quality of service in a manner timely enough to

permit early, or at least earlier, resolution of any issues. See, Staff Ex. 11 (Ramie

R:esponse), at 4-9.



105

Staff uses repeat trouble reports as an example. If a customer continued to

have the same trouble over and over, after Qwest has closed the trouble ticket and

considers this issue completed, Staff claims there would not be any way to know if this

is a trend beginning in a wire center, or an isolated incident that affected only that

particular customer or several customers. A similar example regarding average repair

intervals would be if the reports show in one month the interval was 18 hours, then

the next month is 22 hours (which is beyond the current 20 hours metric), then the

f()l1owing month the number is higher still, according to Staff that would demonstrate

a problematic trend. Without the reports or metrics to cover these items, the

Commission would have no way to know that this occurred, if the situation improved

in following months, or if the situation continued to deteriorate. rd., at 6.

Having shown no reasons to eliminate the subject reporting requirements at

this time, Qwest's proposal to that effect should not be adopted.

a. Elimination of Wire Center Reportin;g. Qwest proposes to provide wire

center results for trouble reports and out of service reports not cleared within 24

hours only to Staff and only for "reporting quarters in which the monthly statewide

results fail to meet standards or for purposes of auditing." (Emphasis supplied.) This

contrasts with the wire center reporting requirements presently in AFOR II (at

17.11.22.8 NMAC).

Staff objects to Qwest's proposal because Staff thinks the reports should be

filed with the Commission, not merely served upon Staff. More importantly, Staff

claims, the wire center reports should continue to be filed quarterly and without

regard to Qwest's statewide performance. The problems of individual wire centers will

not necessarily show up in statewide performance results, with the result that wire



106

center specific problems will go undetected. Staffs Brief-in-Chief, at 38 (citing 3 Tr.

(Williams), at 88-90).

Qwest would also revise the formula used to calculate trouble report rates.

Under AFOR II, trouble report rates were calculated as the number of trouble reports

received divided by the number of access lines. See 17.11.22.8.B NMAC. Qwest now

proposes that the numerator be changed to the number of trouble reports "closed"

instead of when the notification is received. Qwe st Ex. 6 (Williams Direct), Exhibit 1,

at 6. Qwest additionally proposes to change the denominator to "installed basic local

exchange services" instead of "access lines." Staff disagrees with these changes. Staff

l~x. 11 (Ramie Response), at 17.

There is, as Staff states, no apparent reason for the changes, and it is unclear

what effect they may have. The changes will also lead to confusion in their

implementation (e.g., the current definition relates to a dial tone line while Qwest's

proposal relates to services provided). Id.; see also Exhibits GOR-R7, GOR-R8, and

GOR-R9.

For the reasons stated by Staff, the current wire center reporting requirements

s.hould be continued.

b. Trouble Reports. Staff says Qwest should include in its quarterly quality of

service reports the numbers of Trouble Reports as the term Trouble Reports is defined

in the rule, plus the numbers of trouble reports Qwest proposes to exclude as non-

trouble reports (i.e., "circumstances beyond the reasonable control of an ILEC" or

"extraordinary or abnormal conditions of operation"). The proposed exclusions should

be contained in a matrix, which indicates the number of exclusions Qwest seeks under

each category of permitted exclusions. Staff Ex. 10 (Ramie Direct), Exhibit GOR-3. In

Ftecommended Decision of the Hearing Examiner


107

l.tS response testimony, Qwest agreed to provide its results as proposed by Staff (both

with and without trouble tickets Qwest identifies as beyond its control), but did not

agree that the process includes a requirement that the Company apply for a waiver or

a variance for each proposed exclusion. Qwest Ex. 7 (Williams Response), at 19, 22-

23.

The Commission agrees that intended exclusions should be reported so that

they may be reviewed by Staff and the Commission. Even so, Qwest's understanding

of the process is a correct one. In the event Staff Dr the Commission has questions or

concerns about reported exclusions, these may be examined formally or informally to

determine whether such exclusions come within the permissible categories.

Qwest also proposes to eliminate the AFOR II requirement that Qwest include in

its quarterly reports an explanation of why wire centers failed the trouble report rate

and repeat trouble report rate standards. 51 Staff objects to these proposed

eliminations as having been made without explanation. Staff says the explanations

are helpful to an understanding of the sources of the problems in the failing wire

centers. Staffs Brief-in-Chief, at 37.

Qwest responds that its proposed SQP actually does more than the current

system. The SQP requires Action Plans that address not only the problem and its

cause, but what Qwest is doing to resolve the probl.em. Qwest's Response Brief at 33.

How its SQP would continue or improve upon the current "exceedances"

reporting requirement, Qwest does not explain. That requirement should, therefore,

be retained.

5 t The requirements for the reporting of reasons for what Staff labels "exceedances" are specified in 17.11.22.8.B and D NMAC.



108

c. Reporting of Customer Credits Issued to Individuals. Staff proposes that

(:;?west be required to include in its quarterly reports the amounts of the individual

customer credits Qwest issues under each quality of service standard. This

i.nformation, Staff argues, is relevant to the Commission's ongoing review of Qwest's

service quality performance, but it is not currently reported and was only available in

this case through discovery requests. Staff Ex. 10 (Ramie Direct), at 14-16. Staff

says its credit proposal is based upon AFOR II and provides individual credits for out

of service clearances greater than eight hours, held orders and missed repair

commitments. Staffs Brief-in-Chief, at 24, n.4 (citing Staff Ex. 10 (Ramie Direct), at

13-14; 17.11.22.23 NMAC; 17.11.22.15 NMAC (designed services); and Final Order on

Pricing and Quality of Service, Case No. 05-00466-UT, at 51-52).

Staff refers to discovery responses from Qwest that show that Qwest has issued

"substantial" amounts of individual credits for 2007 and 2008: $540,543 (47,488

credits issued) and $278,865 (37,619 credits issued), respectively, for non-designed

services. It is also significant, Staff asserts, that these amounts included substantial

sums, $187,099 (with 1,940 occurrences) and $74,833 (with 677 occurrences) for held

order failures. Staffs Brief-in-Chief at 24 (citing Staff Ex. 11 (Ramie Response),

Exhibit GOR-R4).

Qwest claims that held order regulation is no longer necessary, testifying that

"held orders do not represent an area of continuing problems" and that the problem "is

small or no longer exists." Qwest Ex. 7 fWiUiams Response) at 29. Qwest's

performance, however, demonstrates that a problem still exists. The number of held

order failures during AFOR II indicates that continued regulatory oversight of held

orders remains a necessary part of AFOR III.



109

Qwest argues against many of the reporting requirements advocated by Staff,

but appears not to have specific objections to the reporting of individual customer

credits. Because such reporting is an important aspect of the Commission's ability to

monitor Qwest's service quality performance, it should be made a part of Qwest's

reporting requirements.

d. Business Office and Repair Offic:e Answer Times. Staff proposes to

eliminate the reporting requirement in 17.11.228.H NMAC that requires Qwest to

include in its quarterly reports the percentage of calls answered within the time

frames specified in 17.11.22.20 NMAC by Qwest's business and repair offices. Staff

suggests that the reporting requirement in 17.11.22.20.B NMAC that Qwest file

"exception reports" after any month in which it fails to meet the standards for answer

times in 17.11.22.20.A NMAC should be sufficient for the Commission's purposes.

Staff Ex. 10 (Ramie Direct), at 16. Qwest agrees with this proposal. Qwest Ex. 7

(Williams Response), at 24.

Staffs proposed change should be approved,

e. Underlying numbers for out of service and repeat trouble reports. Staff

states that in the course of AFOR II Qwest orally agreed to provide the underlying

numbers of trouble reports, repeat trouble reports and access lines used in the

calculation of the trouble report rate and repea.t trouble report rate percentages

included in its quarterly reports for Out of Service Trouble Reports and Repeat Trouble

F~eports. For example, the All Out of Service Tro-c,bles Cleared in 24 Hours report in

Qwest's current quarterly reports has a column for Out of Service report numbers

cleared in less than or equal to 24 hours and a column that gives the total number of

Out of Service tickets. The information in these columns are the values that support

~:ecommended Decision of the Hearing Examiner


110

the percentages shown in the column Percent of Out of Service cleared in less than or

equal to 24 hours. Staff compares this example to Qwest's report for Out of Service

Non-designed Troubles Cleared in 24 Hours, wh:'ch only has the columns giving the

percentages. Staffs Brief-in-Chief, at 25.

Staff recommends that for the sake of conformity, consistency, as well as

completeness it is necessary to have the underlying numbers of reports used in the

computation of percentages as they relate to whether a specific benchmark has been

met or not. Staff Ex. 10 (Ramie Direct), at 16-17. Qwest has agreed to accept this

proposal. Qwest Ex. 7 (Williams Response), at 24.

Staffs proposal should be approved.

f. Held Orders. Staff recommends the continuation of AFOR II's held order

standards (statewide and individual). Staff Ex. lo, (Ramie Direct), at 19. AFOR II

includes reporting requirements for held orders, explicit deadlines for filling customer

orders for service, customer credits (i.e., statewide, wire center and individual credits)

for missed standards, and waiver procedures when the failures are for reasons beyond

Qwest's reasonable controp2 Qwest argues that this held order regulation is no

longer necessary. The Company's position is that "held orders do not represent an

area of continuing problems" and that the problem "is small or no longer exists."

Qwest Ex. 7 (Williams Response), at 29.

As indicated by the performance figures mentioned above, however, held orders

is not a problem that has gone away. In 2007, Qwest issued credits 1,940 times to

individuals for failing AFOR II's held order standard for a total of $187,098. In 2008,

52 See 17.1l.22.8, 17.1l.22.9, 17.1l.22.12, 17.1l.22.21-23, and 17.1l.22.25 NMAC. 111



Qwest issued 677 credits for a total of $74,833. As found above, given these numbers,

continued oversight of held orders is necessary for AFOR III.

Staff proposes a waiver procedure for held orders that it says is more

streamlined and simpler than the process in the current rule and in AFOR II. Under

the rule, the deadline for completing installations of individual customer orders can be

waived upon Qwest's filing of a Petition that demonstrates that the delay is due to

"circumstances beyond the reasonable control" of Qwest. 17.11.22.25.B NMAC. The

Petition is required to include (a) the names and addresses of all known customers

who will be affected by the waiver request and an estimate of the number of unknown

customers who might be affected; (b) a detailed explanation of the relief being sought;

Ic) the date when the service orders are expec1:ed to be filled; and (d) a detailed

explanation of the circumstances giving rise to the waiver request. Within thirty days

of submittal, the Telecommunications Staff must approve or deny Qwest's waiver

petition.

Staff claims its streamlining proposal provides clear information for the

consumer whose order is being held and sufJicient oversight by Staff and the

Commission to monitor Qwest's performance in fil1ing the orders. The proposal would

change the waiver process to a monthly report that contains similar, but less,

information and that allows for approval for one year without an explicit approval from

Staff. If the held order continues longer than one year, the proposal provides for a

streamlined petition process. Staff Ex. 12 (Cessarich Direct), at 7-9.

Staff claims to have discussed the streamlining option with Qwest for several

years and it appears to be generally acceptable to Qwest. Staffs Brief-in-Chief, at 27.

Qwest responds that the Company would cons:idel~ supporting the recommendation if



112

it were made in a quality of service rulemaking, but not in an AFOR, "as it represents

,::l reasonable first step toward streamlining what is currently an administratively

burdensome requirement." However, Qwest still maintains that any service quality

rule, regardless of whether it is a general rule or part of an AFOR, should not include

held order standards or associated credit obligations. Qwest Ex. 9 (Horcasitas

Response), at 16-17.

Qwest insists again that the held order problem is nonexistent. Qwest refers to

Staff witness Cessarich's testimony (Staff Ex. 12 (Cessarich Direct), at 5) as admitting

that, "Qwest has never had any (non-waived) pending orders that were held more than

180 days." Qwest also argues, without citation, that "the quantities supplied in Staffs

brief represent less than one-third of a percent of lines in New Mexico in 2007 and

one-tenth of a percent in 2008 - hardly a basis for claiming there 'still remains a

problem.'" Qwest's Response Brief, at 34.

Staffs "Exemption or Variance" section does not expressly state whether Staff

may inquire into the propriety of a given waiver wi':hin the year-long period of approval

if there is good cause for doing so. Ragardless, since the Commission's oversight of

AFOR III is ongoing, any such inquiries are necessarily an implicit part of that

oversight. The section should be approved with that understanding.

3. Standards: Deletion of installation standard for premises located greater than 1,000 feet from a distribution terminal

Staff recommends that the Commission continue to use the Quality of Service

Standards in the current AFOR II with one exception. The portion of 17.11.22.12

NMAC (Installation of Basic Local Exchange Service), that regulates installations at

premises located greater than 1,000 feet from a distribution terminal, is unnecessary



113

and should be deleted. The Commission held in Case No. OS-OO IS9-UT that Qwest

should be granted a variance from this provision for AFOR II. Staff therefore

recommends that the special treatment for installations beyond 1,000 feet of a

distribution terminal should be removed. Staff E:x. 10 (Ramie Direct), at 17-19. The

new language recommended is included in Staffs Appendix A.

Qwest has not stated any objections to this specific proposal, which should be

adopted consistent with the Commission's ruling in Case No. OS-00IS9-UT.

4. £\lternative Service

Qwest proposes the deletion of the cunenl: requirement in 17.11.22.13 NMAC

for the provision of alternative service if there is a request for service but there is a

delay (such as a held order) in which the customer has no other means of establishing

telecom services. Under this provision, Qwest provides the customer with a wireless

or equivalent phone service until Qwest is able to provide the requested service. Staff

is against Qwest's proposal, arguing that without this provision being in place, almost

SOO New Mexico residents who received this alternative service in 2007 and 2008

would not have telephone service at all until the Company could resolve the

outstanding issue to provide service. Staff Ex. 11 (Ramie Response), at 7-8, and

Confidential Exhibit GOR-RS.

Qwest's Briefs do not explain why the alternative service requirement should be

eliminated, and do not address Staffs arguments for the retention of this requirement.

While most of the alternative service to which Staff refers was furnished in

2007, it is too early to say whether the 2008 reduction is indicative of a long-term

lessening of the need for this service, or the extent of any such lessening. Hence, the

alternative service requirement should continue for now.



114

5. Customer Credits

a. Statewide and Wire Center Credits. Staff recommends that the

Commission continue the same statewide and wire center credit requirements for non-

designed services that the Commission adopted in AFOR II. Staffs Brief-in-Chief, at

28 (citing 17.11.22.14,15, and 21-24 NMAC, ~md Final Order on Pricing and Quality

of Service, Case No. 05-00466-UT, Appendix B). Staff insists that statewide and wire

center credits are a necessary incentive to ensure that Qwest satisfies the

Commission's quality of service standards. Staffs Brief-in-Chief, at 28. Qwest

opposes the use of customer credits as an incentive or, as the Company prefers,

"punitive measure," regarding compliance with quality of service standards.

Staff maintains that the data supports its position. The first table below, Staff

says, shows that Qwest's quality of service performance declined as Qwest's

infrastructure spending (and its spending on outside plant rehabilitation) declined. It

shows the trend by which Qwest's capital expenditures fell from a level of $193 million

in 2001 to $65 million and $71 million in 2005 and 2006. Further, the decline in

capital spending for the rehabilitation of outside plant fell similarly from $4.9 million

in 2001 to $122.8 thousand in 2004 and $l.S and $2.6 million in 2005 and 2006.

Staff Ex. 11 (Ramie Response), Exhibit GOR-Rl..

Capital Expenditures

AFORI 2001

2002

2003

2004

2005



$193 million

88

79

88

65

115

Outside Plant Rehabilitation

$ 4.9 million

1.4

2.5

.123

1.5

Interim AFOR

AFOR II

2006

2007

2008

71

78

125

2.6

5.3

10.9

The second table shows an increase in customer credits issued by Qwest from

AFOR I through the present. From 2001 and 2002, when Qwest satisfied all of its

quality of service standards and owed no customer credits, Staff claims that Qwest's

service quality performance steadily declined until it reached its low point in 2006,

when it issued $6.8 million in customer credits.

AFORI Periods 1-2 Periods 3-5 (July 2003 - March 2006) Interim AFOR (March 2006-December 2006) AFOR II (January 2007 - December 2007) (.January 2008 - December 2008) Additional credits for 2007 & 2008 (per settlement)

Customer Credits

$ 0 $ 10,000,00053

$ 6,835,282

$ 2,094,288 $ 198,501 $ 400,00054

Staff contends that together the two tables show that, with increased capital

spending on infrastructure and increased capital spending on the rehabilitation of

outside plant in 2007 and 2008, Qwest's quality of service performance improved.

Spending on the rehabilitation of outside plant increased from $122.8 thousand in

2004 to $5.3 million in 2007 and $10.9 million in 2008. Over that same period, Qwest

reduced its customer credits from $6.8 million to $198.5 thousand.

5:3 The $10 million figure is a total for the three compliance periods. 54 See Uncontested Stipulation, Case No. 08-00189-UT (July 10, 2009), at 13.1, p. 3.



Staff admits that it is not clear whether the customer credits, by themselves,

were totally responsible for the improvement in Qwest's quality of service performance.

Staff "suspects" that the $255 million spending commitment in the SA SA (which

resolved controversies over Qwest's refusal to spend the entire infrastructure

investment commitment the Company had made :~n AFOR I), with its requirement that

Qwest spend $30 million over 3.5 years on cable improvement projects, played an even

more important role. Nevertheless, Staff points out that the term of the SASA expires

on July 31, 2010, or six months after the projected start of AFOR III, and argues that,

'..l.pon the SASA's expiration, the sole incentive Qwest will have to satisfy AFOR Ill's

quality of service standards will be the customer credit provisions of the AFOR. Staffs

Brief-in-Chief, at 29-30.

Staff further argues that the above tables show that customer credits must be

available in a magnitude that is sufficient to influence Qwest's behavior. If annual

rehabilitation expenditures of $5.3 to $10.9 million are required to make a dent in

Qwest's quality of service problems, Staff contends, then the incentives to make those

expenditures must be of a similar size. Thus, the level of credits in the current AFOR

If should be maintained. Id., at 30.

Staff claims that the continuation of AFOR II's wire center credits is an

important incentive in focusing Qwest's attention on areas in need of rehabilitation

and in providing some measure of compensation to affected customers. Apart from

the credits issued on a statewide basis, AFOR II requires Qwest to issue credits to the

customers in wire centers in which Qwest fails quality of service standards for trouble

reports, repeat trouble reports, out of service clearances, and average repair intervals

for two consecutive months or any three months in the calendar year. l7.11.22.22.G



117

NMAC. Staffs conclusion is that Qwest has continued to miss the out of service

clearance standard in numerous WIre centers during AFOR II. Wire center credits

compensate customers in t he affected areas and help Qwest identify the specific

central offices and related infrastructure that need the most attention. ld. (citing Staff

Ex. 11 (Ramie Response), at 12-13).

Qwest proposes to eliminate the statewide and wire center based credits for

Qwest's failure of quality of service standards now found III 17.11.22.21 and .22

NMAC. Qwest would delete the Company's responsibility for "aggregate" customer

credits entirely (i.e., statewide and wire center credits). Customer credits would also

be eliminated entirely for Qwest's failure to satisfy quality of service standards for

installation of service, held orders up to 180 days, held orders in excess of 180 days,

trouble reports, out of service clearances, and repeat trouble reports. Qwest would

also eliminate wire center specific standards for the same standards plus the wire

center standard for average repair intervals. 55

Qwest's legal arguments against the use of customer credits have been

discussed above, and have been found to be without merit. For its other arguments in

support of the elimination of customer credits, Qwest begins by reiterating previous

claims that the credits are punitive and are not "market-based." Competition,

according to Qwest, is a sufficient incentive for the Company to invest in and maintain

its network infrastructure. Better, says Qwest, is its "problem-solving approach,"

including its proposed Responsive Resolution Process and a limited version of

individual credits. Customers would continue to have recourse before the Commission

under this approach, which Qwest describes as the filing of complaints and petitioning

55 See 17.11.22.19.D(2) and 17.11.22.22.G NMAC.



118

the Commission to investigate quality of senrice problems. Qwest Ex. 6 (Williams

Direct), at 9-10; 3 Tr., at 78-80,89.

Qwest asserts that the current servIce quality system is more restrictive and

punitive than any other state in the nation. "This system relies on retroactive

penalties that no other carrier pays to correct service quality shortfalls, and has

resulted in Qwest paying millions of dollars in customer bill credits, most of which are

directed to customers that experience no troubles, and many of which result from

statistical aberrations that result because Qwest's excellent service quality or small

wire center access line counts exaggerate the impact of individual service quality

misses." Qwest's Response Brief, at 22-23 (citing Qwest Ex. 6 (Williams Direct), at 8).

Staff counters that aggregate credits-both statewide and wire center credits-

are not, and are not intended to be, punitive, but are necessary "incentives" for Qwest

to satisfy the Commission's quality of service standards. 56 Staff Ex. 11 (Ramie

E'.esponse), at 10-14. Staff also argues that the degree of competition that exists to

date is an insufficient incentive for Qwest to achieve applicable quality of service

standards, and that Qwest has provided no empirical support for its claim that

competition is, has been or will be sufficient to ensure that Qwest satisfies the

Commission's quality of service standards. Competition, says Staff, exists, if at all,

primarily in urban areas. "Thus, any incentive that competition might arguably

provide for improved quality of service will not be effective in areas in which there is no

56 Staff repeats its legal argument that the State Supreme CO'.lrt has upheld as an authorized "incentive" a similar measure that Qwest also had claimed was "punitive." "In Qwest v. New Mexico Public !3;egulation Commission, 2006 - NMSC - 042, 140 N.M. 44C, 143 P.3d 478 (2006), the Court held that the Commission had the authority to establish the incentive of customer credits in the amount of Qwest's eventual spending shortfall in AFOR I and that the incentive was not punitive." Staff's Brief-in-Chief, at 4 L (emphasis in original).



119

competition, and customer credits (i.e., especially wire center-based customer credits)

in areas lacking competition will be essential." Staffs Brief-in-Chief, at 40.

Staff further points out that Qwest has long claimed the existence of

competition, but says that Qwest's service quality performance has steadily declined

along with its capital expenditures. "Only in 2007, after Qwest issued its largest

single year aggregate credit of $6.8 million and onset of the explicit spending

requirements of the SASA did Qwest's service quality performance begin to improve."

Staff does not agree with Qwest that customers should have as their sole

remedy the filing of complaints or petitions for investigations in the event competition

does not work as an incentive for Qwest to meet its quality of service standards. The

AFOR should retain its established mechanisms to address these issues. Id., at 41.

As previously found, Qwest has not shown that the level and extent of

competition, such as it may be, can replace customer credits as an incentive for the

Company to comply with quality of service standards. Of at least equal importance,

Qwest has not established that, even if a certain degree of competition were to exist,

there is a direct relation between such competition and the ability, or the motivation,

of the Company to satisfy or exceed applicable quality of service standards.

Accordingly, for the AFOR III term, Qwest's service quality provisions should include

statewide and wire center based credits.

b. Individual Customer Credits. Staff also recommends that the Commission

continue the credit requirements for individual customers from AFOR II. These

requirements include credits to individual customers for failures to meet the

standards for installations of basic service, held orders and missed repair



120

commitments. The individual credit requirements for installations of basic service and

held orders are in the Quality of Service rule at 17.11.22.23 NMAC. The missed repair

commitment requirement was established in the Commission's Final Order on Pricing

.:md Quality of Service (at 52) for AFOR II:

A Repair Commitment Customer Remedy shall be in effect, such that if Qwest misses a dispatched service repair call for Primary or Regular services, Qwest shall automatically issue a credit of $12 for residential service or $40 for business service to the account of the customer impacted by the missed call.

Staff argues that Qwest's performance in regard to this standard under AFOR II

has shown the value of this standard and the need to continue applying it in AFOR III.

Of the three standards for which AFOR II authorized individual customer credits for

failures, the missed repair commitment standard had the largest number of failures

and the largest number of credits issued:

2007

Out of service not cleared within 8 hrs (17.11.22.23.A NMAC) Held orders (17. 11.22.23. B NMAC) Missed repair commitments AFOR II order, p. 52 Totals

2008 Out of service not cleared within 8 hrs (17.11.22.23.A NMAC) Held orders (17.11.22.23.B NMAC) Missed repair commitments AFOR II order, p. 52 Totals

Staff Ex. 11 (Ramie Response), Exhibit GOR-R4.

Credits to Individuals Occurrences

$130,540.80 33,632

187,098.57 1,940 222,904.00 11,916

$540,543.37 47,488

$ 76,264.33 30,450

74,833.42 677 127,768.00 6,492

$ 278,865.75 37,619

Staff recommends that the Commission incorporate its AFOR II holding through

the language Staff proposes to add as ~ C to 17.11.22.23 NMAC, and continue to use



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"-the two individual credit requirements in that section of the Rule. Staffs Brief-in-

Chief, at 31 (citing Staff Ex. 10 (Ramie Direct), l~xhibit GOR-2).

Qwest proposes an essentially voluntary "Remedy Plan" that would permit

Qwest to propose and change the terms during the duration of AFOR III. Qwest's

proposal states that the Remedy Plan must, at a minimum, cover basic local exchange

servIces. Otherwise, Qwest can change its Remedy Plan by filing the modified plan

with the Commission with 30 days notice, subject to "Commission approval or

:3uspension pending due process." Qwest Ex. 6 (Williams Direct), at 20-22, and

l:<:xhibit 1, at 7-8. Qwest states that this approach "permits Qwest to be responsive to

the marketplace, while continuing Commission oversight." Id., at 20.

Staff calls Qwest's proposal a "moving target" and objects to it, arguing that

changeable Remedy Plans will only promote more disputes, more confusion and more

proceedings. Staff claims that the fixed credits under AFOR II are more efficient and

predictable. Staffs Brief-in-Chief, at 42.

The malleable nature of any Remedy Plans offered by Qwest is a strong

argument against their use in AFOR III. One of the few areas of agreement among the

parties is the desire to reduce, if not avoid, the multiplicity of disputes and litigation

that arose from previous AFORs. Making the terms of AFOR III as definite as possible,

and in the process building on the experience gained from previous AFORs, is a better

means toward that desired end. The AFOR II credit requirements for individual

customers should be continued with the addition Staff proposes.

Staff also objects to the elimination and reduction of what it thinks are "key

credit provisions from AFOR II." For example, Qwest missed the standard for a

dispatched repair call 18,408 times during 2007 and 2008 and issued $350,672 m



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credits. Similarly, there is no apparent reason why the credits for held order violations

should be reduced. Qwest missed the held order standard 2,617 times over 2007 and

2008, for $261,931 in credits. Staff Ex. 11 (Ramie Response) Exhibit GOR-R4.

Staff argues that although Qwest claims that the intent of the individual

customer credits is to "compensate" individual customer, Qwest admits that the

credits issued for specific failures are also not large enough to compensate customers

f()r the harm they have suffered. Staffs Brief-in-Chief, at 42-43 (citing 3 Tr. (Williams)

at 117-118). For example, if a business or residential customer lost its service for a

day, the amount of harm will probably be a lot more in terms of lost revenue, lost

wages, and inconvenience than the credit on the monthly bill that Qwest is proposing.

ld., at 43.

Finally, Staff urges that individual customer credits not be considered a

replacement for the incentive purpose of the aggregate statewide and wire center

credits. Their magnitude, Staff argues, is too small to be a meaningful incentive for

Qwest to invest. Even in 2006 and 2007, when the size of the individual credits

reached its highest levels, they only totaled $540,543 and $278,865. Staff says these

amounts are insufficient incentives for Qwest to invest the $5 to $10 million solely in

outside plant rehabilitation required to enable Qwest to meet its quality of service

st.andards. Id.

The subject credit provisions should be retained for the reasons brought

forward by Staff.

c. Designed Services Credits. Staff believes it is important to keep the out of

service credits for designed services. When the Commission adopted the quality of

service rule, and later approved AFOR I, it believed that designed services standards



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were important to ensure the deployment of high-speed data services. Final Order,

Utility Case No. 3437, at 23-24; Final Order, Case Nos. 3215, et al., at 16-17, and 51-

52. Staff cites the following data (at Staff Ex. 10 :Ramie Direct), Exhibit GOR-l) as an

indication that Qwest still has difficulty satisfying the Commission's quality of service

standards for designed services:

2007 2008

Designed Services Credits $s Credit Occurrences $65,203.52 419 $32,610.00 207

Qwest does not say why designed services credits should be left out of AFOR III.

Dropping those reporting requirements and credits could have a negative impact on

the Commission's goal )consistent with HB 400) for designed services, as well as on

the general principle that designed services customers are entitled to good quality

service. See Staff Ex. 11 (Ramie Response), at 8. Designed services credits should be

kept in AFOR III.

6. Qwest's Proposed Responsive Resolution Processes.

Qwest believes its Responsive Resolution Process, as described above, i s a

proactive approach to resolving quality of service failures. Staff does not oppose the

plan except for the use of the plan to replace the use of aggregate credits. Staff agrees

that the establishment of an explicit internal process to address quality of service

failures is preferable to Qwest's current case-by-case approach. Even so, Staff argues

that there is no indication that the plan will be successful in correcting Qwest's service

quality failures. Qwest has not, Staff says, provided any information in that regard.

Staffs Brief-in-Chief, at 43-44 (citing Staff Ex. 11 Ramie Response), at 18, and GOR-

F~10).



124

There are other potential difficulties with Qwest's plan. 57 Along with providing

few specifics, the time frames for the first two levels of the process are indefinite or

unclear. This could cause both long delays in the resolution of problems and lead to a

procedure that is unduly cumbersome. This plan is also uncertain about the nature

of the Commission's role. For instance, may the Commission be involved or intercede

before Level 3 is reached, or must it wait until a Level 3 "Action Plan" is submitted for

:~ts approval?

These and similar questions lead to the conclusion that more details about

Qwest's Responsive Resolution Processes need to be worked out before the plan can be

considered for adoption.

The Commission's Quality of Service ~Rule, 17.11.22 NMAC, as adapted to

Qwest by this Order, should be approved. Those adaptations are compiled in

Appendix B, "Qwest AFOR III Quality of Service Rule", attached hereto and

incorporated herein by reference.

6. Investment in Infrastructure

Arguing that such requirements are within the Commission's authority, both

Staff and the AG advocate the inclusion of infrastructure investment requirements in

AFOR III. Qwest fundamentally disagrees, claiming that investment requirements can

only be imposed with Qwest's agreement, and are otherwise beyond the Commission's

reach. Qwest does not agree to any such requirements for AFOR III. The other parties

take no position on these issues.

5~' For example, the vice president-level review that is to take place in Level 3 does not identify which vice president, or say where that person will be located or whether their regular duties will encompass any matters directly related to Qwest's New Mexico operations,



125

The AG and Staff point to two basic sources for Commission authority over

Qwest's infrastructure investments. Statutorily and first, they rely on § 63-9A-8.2(B),

which requires the Commission to approve rules that:

(1) establish consumer protection and quality of service standards; (2) ensure adequate investment in the telecommunications

infrastructure in both urban and rural areas of the state; (3) promote availability and development of high speed data services

in both urban and rural areas of the state; (4) ensure the accessibility of interconnection by competitive local

exchange carriers in both urban and rural areas of the state; and, (5) establish an expedited regulatory process for considering matters

related to telecommunications services that are pending before the commission.

They emphasize the provisions that are aimed at the Commission's authority to

"ensure adequate investment in the telecommunications infrastructure" and to

"promote availability and development of high speed data services" in New Mexico.

These, along with the statute's references to "both urban and rural areas of the state,"

confer upon the Commission authority to "require investments and high-speed data

infrastructure deployments to satisfy the public necessity and convenience where they

might not necessarily be made (or to the same level) by a regulated, private company

acting solely in its own economic self-interest." AG's Brief-in-Chief, at 7; see also,

Staff's Brief-in-Chief, at 61-63. The AG argues that the statute "clearly differentiates

between 'services' and 'infrastructure', a distinctlon that Qwest seems unwilling to

make, or even acknowledge." AG's Brief-in-Chief, at 7-8 (citing 2 Tr. at 155-158).

The second authority cited by the AG and Staff is the Infrastructure and High

Speed Data Services rule: 17.11.17 NMAC.58 Staff recommends that the Commission

use this rule as the basis for the Staffs AFOR III Investment Proposal. The rule

5,: The purpose of the rule is stated at 17.11.17.6 NMAC, the text of which is set out above.



126

establishes minimum standards for an ILEC's annual investment m

telecommunications infrastructure and requires ILECs to develop and implement

specific plans for network infrastructure investment III distribution plant and

interoffice facilities. Staffs Brief-in Chief, at 44-45; see also, AG's Brief-in-Chief, at 8.

The sections of the Infrastructure and High Speed Data Services rule most

pertinent to the Staff and AG positions are the following:

17.11.17.8 CAPITAL INVESTM1~NT: A. An ILEC's annual investment in telecommunications

infrastructure shall be adequate and sufficient to meet and maintain: (1) the timely provision of basic local exchange service; (2) the requirements for infrastructure upgrades and

deployment of high-speed data services set forth in this rule; and (3) the quality of service standards adopted by the

Commission. B. An ILEC shall meet at least annually with the Commission

regarding the status of the ILEC's infrastructure investments in New Mexico.

17.11.17.9 DISTRIBUTION PLANT: An ILEC shall develop and implement a plan to upgrade its distribution plant to:

A. relieve congestion on routes marked by high line growth; B. meet demand for and enhance the quality of basic local

exchange service; C. facilitate the introductlon and deployment of high-speed

data services; and D. meet the quality of service standards adopted by the

Commission.

17.11.17.10 INTEROFFICE TRANSMISSION FACILITIES: A. An ILEC shall develop and implement a plan to deploy

and/ or upgrade transport facilities on interoffice routes marked by high growth in order to:

(1) meet demand for and enhance the quality of basic local exchange service;

(2) facilitate the introduction and deployment of high-speed data services;

(3) meet the quality of service standards adopted by the Commission;

(4) (5) (6)



relieve congestion; improve service; route traffic more efficiently;

127

(7) accommodate growth in traffic; and (8) support the services and features offered by the ILEC.

B. An ILEC may lease such facilities from other carriers rather than build its own facilities.

The AG and Staff contend that Qwest's unique status as a telecommunications

provider in New Mexico furnishes compelling reasons for the Commission to include

network investment requirements in AFOR III. Disputing Qwest's portrayal of itself as

just one service provider among many, the AG and Staff argue that instead the

Company continues to play a dominant role as a provider of wire line

telecommunications services in this State, to both retail and wholesale customers.

Qwest is "by far the largest provider of wire line telecommunications services within the

state, whether measured in terms of customers served, capital investment in network

infrastructure, or the geographic scale and scope of their network." AG Ex. 1 (Gates

Direct), at 52. In support of this position, they cite the following (page references are

to AG Ex. 1 (Gates Direct)):

• Qwest is the only wireline telecommunications service provider in New Mexico to have a network designed to reach virtually every residential dwelling, small business, and larger business/institutional location within its service territory. This ubiquity reflects Qwest's prior status as the former franchised monopoly provider of local and intrastate telephone services in its territory, and its continuing obligation as the carrier of last resort. (Id., at 53)

• Qwest serves some 670,000 access lines in New Mexico, which represents one for every three people living in the State. 59 No other telecommunications service provider comes close to having a customer base of that size in the State. (Id., at 26).

• Qwest's total network capital investment in the state, of approximately one-half billion dollars, far exceeds the estimated twenty-eight million dollars of investment made by all of the CLECs in the State combined. (Id., at 53, n.7S).

59 Total Qwest access lines, 668,614; total New Mexico population as of July 2008, 1,984,356; the ratio of population to access lines, 668,614 +1,984,356 = 3.0. rd., at 26-27.



128

See also, AG's Brief-in-Chief, at 9-10; Staffs Brief.·in-Chief, at 50-51.

The AG attributes Qwest's dominance to more than the Company's relative size.

"Rather, it stems from the firm's historical status as the franchised monopoly service

provider of telephone infrastructure and service and the continuing dependence of

other, erstwhile competitive service providers on Qwest's wholesale provisioning and

network facilities." AG's Brief-in-Chief, at 10 (citing AG Exhibit 1 (Gates Direct) at 3

and 52). In addition to Qwest's own retail customers,

Wireless providers, cable providers, CLECs, ISPs and others all use various parts of Qwest's network to either complete their own services or to originate and terminate services to consumers. Wireless backhaul is a good example. Despite the growth in wireless customers and usage, wireless companies continue to rely on and pay Qwest for backhauling traffic to and from their wireless facilities.

Taken together, these considerations demonstrate that Qwest continues to playa unique, and dominating, role in the state's telecommunications infrastructure. It is essential that the Commission recognize this, and thus view Qwest's New Mexico network not just as one for-profit corporation's network among many, but as a key public resource, which must be kept as high quality, technologically state-of-the-art and efficient as possible in order to safeguard and promote the public interest.

AG Exhibit 1 (Gates Direct) at 54.60

The AG and Staff argue that there will be a continuing need to encourage Qwest

to invest in its infrastructure after the expiration of the spending requirements in

6(1 Testifying that "wireless carriers depend upon the ILEC's wireline network for part or all of their call carriage after a call has been picked up by a cell tower and needs to be transported onward to its destination," AG witness Gates quotes a recent study by the National Regulatory Research Institute (NRRI, Peter Bluhm with Dr. Robert Loube, Competitive Issue~' in Special Access Markets, Revised Edition, J,:tnuary 21,2009, at page 6):

One way to understand cell phone networks is as a la.ndline telephone service in which the traditional 'last mile' copper loop has been replaced by a two-way radio. Seen in that light, wireless carriers need a wireline network almost as '~xtensive as a CLEC. Most wireless carriers have purchased their own backbone transpo:~t facilities, but independent wireless companies cannot generally justify the expense of builc!ing dedicated facilities to every one of their cell towers. Instead, wireless carriers purchase 'backhaul' special access circuits for this purpose, mainly from ILECs. Wireless carriers buy hundreds of thousands of special access backhaul circuits, mostly from incumbent LECs. Typically, a single cell site requires one or two DS-1 lines, although increasingly sophisticated services require greater capacity.

AG Exhibit 1 (Gates Direct), at 55-56.



129

SASA on July 31, 2010, or seven months after AFOR III is slated to begin. Without

continuing commitments by Qwest to invest in network modernization, the AG and

Staff contend, "New Mexico and its consumers would be left vulnerable to potential

decisions by Qwest's management to cut back on network investment in the state,

imperiling service quality and reliability, and the progress of advanced services." ld.,

at 56-57; see also, Staffs Brief-in-Chief at 51.

Staff proposes that Qwest be required to include four measures in the

Company's plans for network infrastructure investment in distribution plant and

interoffice facilities. First is increased access to high-speed data facilities to rural

areas. To implement this recommendation, Staff proposes to include the following

additional terms in AFOR III:

Qwest shall design and construct new distribution facilities and/or upgrade existing distribution areas as necessary to qualify at least 75 percent of Qwest's New Mexico Working Living Units in each exchange serving fewer than 5,000 access lines with high-speed data facilities by the end of AFOR III.

Staff Ex. 13 (Evans Direct), at 11-12.61

Staff would also revise some other terms in the infrastructure rule as applied to

AFOR III. The definition of "high speed data services" would be revised to "high speed

data facilities;" the speed of "high-speed data facilities," as defined in the rule would be

increased from 200 kbps to 512 kbps; and the data rates would be defined as

s.ymmetric to correspond with the definition in the SASA:

61 SASA currently requires Qwest to deploy high-speed data facilities on a statewide basis at the rate of 83% of working qualified living units, while requiring only a 50% deployment in rural wire centers under the SASA. Staff wants Qwest to install infrastructure unc,er AFOR III that will increase the rate of availability in the rural areas to help bring its working qualifying living units closer to the overall statewide average of 83%. Staff recommends the rate of 75% per rural wire center based partly upon a [I;:view of the costs Qwest estimated it would incur for varlou~; levels of deployments, and partly upon the fact that Staffs recommended percentage looking forward incrementally falls within the range of previous Staff recommendations for AFOR II rural infrastructure investment. rd.



130

D. "high-speed data facilities" means. facilities that support data transmission at a minimum rate of .!il.2000Jdlobits per second in both the consumer-to-carrier direction and the caIrier-to-consumer direction.

Staff would include the following additional definitions, also adopted from the

SASA, to help explain the deployment standard in terms of a "working qualified living

unit:"

"Exchange" means a wire center. "Working living unit" means a customer (residential or business) that has at least one working Qwest landline. "Working qualified living unit" is a working living unit that is located within the operational distance, for Qwest, of a DSLAM and has a working Qwest landline capable (i.e., free of load coils, bridge taps, split pairs, shorts and opens) of providing high-speed data services to the customer.

Staffs final revision in this area would change the requirement for Distribution

Plant to focus on facilities rather than services. Thi s is in response to Qwest's

argument that high speed data services are information services subject to the FCC's

Jurisdiction, not to that of the Commission. While not conceding the validity of that

argument, Staff asserts that the proper focus is actually on infrastructure, not on

services, and recommends the new language to make that distinction clear:

17.1l.17.9 DISTRIBUTION PLANT: An ILEC shall develop and implement a plan to upgrade its distribution plant to:

A. relieve congestion on routes marked by high line growth; B. meet demand for and enhance the quality of basic local

exchange service; C. facilitate the introduction and deployment of high-speed

data facilities; and D. meet the quality of service standards adopted by the

Commission.

I~L at 13-15.

Staffs second recommendation is that Qwest's plan for Distribution Plant under

17.11.17.9 NMAC include the continuation of the characterization program Qwest



131

used under the SASA to identify and rehabilitate deteriorated infrastructure in high-

trouble report areas and in rural areas. As Staff proposed it, this plan would include

procedures to identify and replace defective, deteriorating or aging lead, air core and

other cables and associated network elements in Qwest's New Mexico network with

modern copper or fiber and associated utilities. Claiming that the characterization

work performed under the SASA appears to have improved Qwest's quality of service

performance, Staff says that this would be a reasonable way to focus and prioritize

Qwest's efforts to rehabilitate deteriorated infrastructure. Id., at 16.

Third, Staff proposes that Qwest's plan for Distribution Plant under 17.11.17.9

NMAC should include devoting any funds received through the Federal Broadband

Stimulus Recovery Act62 to help finance the efforts toward the continuation of the

modernization of New Mexico's rural area infra8tructures. Staff also invokes The

American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5, 123 Stat. 115

(2009)), which has a commitment to the expansion of broadband infrastructure and

services that will provide rural communities with access to worldwide markets, and to

education and health care resources they need to prosper and compete. Staff

contends that bringing broadband to unserved and underserved areas "should be the

highest priority for the National Telecommunications and Information Administration

("NTIA") and Rural Utilities Services ("RUS") agencies as they consider the allocation of

their broadband funding." Staffs Brief-in-Chief, at 48-49.

6. That Act includes a Congressional finding that: "The deployment and adoption of broadband technology has resulted in enhanced economic development and public safety for communities across the Nation, improved health care and educational opportunities fo:~ all Americans." Broadband Data Services IrnprovementAct, Pub. Law 110-385, Section 102, Finding No.1 (Oct. 10,2008)



132

Fourth, Staff recommends that Qwest continue its efforts to address all issues

on providing interoffice facilities ("IOF")63 redundancy and diversity for the Santa Fe

North, Fort Wingate and White Rock wire centers. These wire centers, Staff claims,

have been affected by "seemingly interminable right-of-way disagreements and

negotiations," which have delayed the further deployment of redundancy and diversity

in those locations. The "continuous delay because of this issue" should cause the

Commission to require Qwest to describe in its phm under 17.11.17.10 NMAC the root

causes of failing to comply with the objectives and have Qwest and the parties involved

show the Commission "why progress cannot be made in this very important area."

Staff says its recommendation is consistent with the requirement in 17.11.17.10

NMAC regarding plans for IOF improvements, and is also incremental to the SASA IOF

requirements. Staff Ex. 13 (Evans Direct), at 18-19.

As a part of its fourth recommendation, Staff would revise the IOF terms from

the Commission's Infrastructure Rule for use in AFOR III. The focus would again

change to facilities rather than services.

17.11.17.10 INTEROFFICE TRANSMISSION FACILITIES: A. An ILEC shall develop and implement a plan to deploy

and/or upgrade transport facilities on interoffice routes marked by high growth in order to:

(1) meet demand for and enhance the quality of basic local exchange services;

(2) facilitate the introduction and deployment of high-speed data facilities;

(3) meet the quality of service standards adopted by the commission;

(4) relieve congestion; . . Improve servIce; (5)

(6) (7) (8)

route traffic more efficiently; accommodate growth in traffic, and support the services and features offered by the ILEC.

63 "Interoffice Facilities connects central offices through high-capacity fiber optic cables. These cables carry the traffic from central offices and tandem switches." Staff Ex. 13 (Evans Direct), at 5.



133

B. An ILEC may lease such facilities from other carriers rather than build its own facilities.

Jd., at 19.

The AG agrees with Staffs first recommendation, except that he proposes a

requirement that Qwest qualify at least 83% of the working living units in each rural

exchange for high-speed data facilities. AG Ex. 2 (Gates Rebuttal), at 55. The AG

characterizes this proposal as "a moderate incremental step beyond the 75% rural

'wire center avajlability requirement recommended by Staff. Relative to Stairs

proposal, it would require additional capital investments that represent less than 2%

of Qwest's annual intrastate revenues in New Mexico for 2008." AG' Brief-in-Chief, at

18 (citing AG Ex. 2 (Gates Rebuttal) at 56). The AG continues to support a long-term

objective of 95% or more broadband accessibility in New Mexico, but sees an 83%

minimum qualification threshold for Qwest's rural wire centers as a reasonable and

achievable goal over the presumed three-year duration of AFOR III. AG Ex. 2 (Gates

I~ebuttal) at 56.

The AG makes these additional recommendations:

i. Continuation of Qwest's systematic evaluation of its distribution cable facilities and related outside plant (vi.a the "characterization process" described in its SASA 4Q2008 Report), and timely investment in replacing and/ or rehabilitating those fac1lities found to be deficient;

11. Increasing the degree of route diversity and redundancy established in its rural wire centers beyond "critical route diversity" with the objective of reaching parity with the route diversity established for Qwest's urban wire centers;

iii. Continued further deployment of DSL and/or other technologically-advanced facilities supporting high speed Internet access, with the goal of affording even wider broadband access to Qwest's customers than the 83% overall availability level that will be achieved pursuant to the SASA;

iv. To help ensure that Qwest dedicates sufficient resources to meet these goals, a commitment that its annual capital expenditures in New Mexico will equal or exceed Qwest's average annual capital



134

expenditures for its fourteen-state region, measured in terms of: Total Telephone Plant Additions / Total Switched Access Lines, per a threeyear rolling average; and

v. Quarterly monitoring reports, similar to those supplied under the SASA, detailing its network investment plans and progress on a project-by-project basis, for the duration of the AFOR after the SASA reporting has ended.

AG Ex. 1 (Gates Direct), at 69-70.

In support of these recommendations, the AG argues that the cable

rehabilitation undertaken under SASA does not mean that no further investments

need be made in Qwest's distribution plant during the term of the next AFOR,

especially in view of the constant wear-and-tear, limited lifetimes in the case of older,

aging components, changes in demand patterns and technological innovation. The AG

contends that the Commission should expect that Qwest will need to continue to make

significant investments in its New Mexico distribution plant every year, so as to ensure

that the Commission's quality of service standards will be met. "Unless the

Commission includes such investment as a commitment by Qwest within the next

AFOR, there is the very real danger that ongoing distribution plant maintenance and

rehabilitation, and the consumers affected by it, will simply be left by the wayside as

Qwest's management chooses to focus on other priorities after SASA has expired."

AG's Brief-in-Chief, at 19-20 (citing AG Exhibit 1 (Gates Direct) at 58).

The AG claims that "Qwest appears poised to essentially stop pursumg

additional route diversity projects once its related SASA commitments (per SASA

Paragraph 4(b)) have conc1uded."64 Despite what the AG calls Qwest's willingness to

6-1 The AG claims that Qwest has stated that it does not plan to achieve "complete" diverse and redundant routing in New Mexico, but instead aims for a lesser level the Company calls "critical route diversity," in which certain circuits (911, FAA, Message Switch Trunking, SS7) are protected, but ordinary residential and business end users could be exposed to unknown levds of call blocking and! or interruption of s,~rvice in the event of a cable cut or other contingency. AG Ex. 1 (Gates Direct) at 61-62.



135

risk inconveniencing its rural customers from a business standpoint, "from a public

interest standpoi;1.t, all of the end users served by Qwest's network, including those

served out of its :;maller, more rural wire centers, deserve the same level of reliability

and quality of service." The AG maintains that: such a commitment should be adopted

as part of Qwe::::t's AFOR. AG's Brief-in-Chief, at 20 (citing proposed Network

Investment Requi::ements rule D, at AG Ex. 1, l~xhibit TJG-l).

The AG de:;cribes his proposal concerning capital expenditures across Qwest's

14 state region as "essentially a benchmarking requirement, intended to ensure that

Qwest will dedicate sufficient resources towards these investment objectives (including

the high-speed facilities deployment discussed earlier), and not short-change New

Mexico in favor of potentially more lucrative investments elsewhere in its operating

territory."65 According to the AG, this benchmarking requirement, when applied in

conjunction with quarterly monitoring reports, will be an efficient way to promote

adequate investment in the State's telecommunications infrastructure, pursuant to §

63-9A-8.2(B)(2). ~L at 21-22 (citing proposed Network Investment Requirements rules

l~ and B, at AG Ex 1, Exhibit TJG-l).

Qwest adamantly opposes the investment recommendations made by Staff and

the AG. The Company's opposition primarily rests on its legal arguments that the

commission lacks the authority to impose any investment requirements on Qwest

without its consent. Qwest admits that the Commission may adopt investment rules,

but nonetheless, and rather inexplicably, may not "unilaterally impose a specific

investment requirement." Also, Qwest believes that the inclusion of broadband

6: The AG avers that the "specific calculation described (a) avoids establishing a preset investment level, which could induce wasteful investment, (b) takes into aCCJunt yearly fluctuations in investment by a:~Jplying a three-year nlling average, and (c) also takes into account state variations in total numbers of access lines, by expres~:ing investment on a per Switched Access Line basis." AG's Brief-in-Chief, at 21.

Recommended Decision of the Hearing Exarniner


136

investment requirement in the Infrastructure and High Speed Data Services rule is

preempted by federal regulation of broadband services. Nonetheless, Qwest proposes

no change to the existing rules. Qwest's Brief-:ln-Chief, at 30-31, n.54.

Qwest characterizes the AG and Staff investment proposals as arbitrary, and

claims that there is no evidence that Qwest can afford these investments. For

example, agreeing with what it claims is an admission by the AG's witness, Qwest says

it "has no economic incentive to invest in rural broadband facilities because of the

high costs and low customer counts involved." The proposed investments would,

Qwest contends, "cripple" the Company's "ability to respond to its customers, and

would amount to a taking of Qwest's assets." !!i., at 31-32. Even so, "Qwest desires to

provide broadband services to rural areas, and agrees with policies aimed at

expanding broadband availability." But, the Company insists, it cannot provide

broadband services at its own expense, and hopes expanded federal or state funding

will make such services possible. Qwest's Response Brief, at 38-39.

Qwest claims that a sufficient level of network investment will result from

compliance with servIce quality standards, instead of specific investment

requirements, because Qwest will need to invest in the network at a sufficient level in

order to comply with the service quality metrics. Qwest says its service quality plan

"is actually superior, since it requires Qwest, in the event of continuing service quality

s.hortfalls, to develop a Commission-approved plar.. specifically targeted to the existing

shortfalls. In contrast, the investment recommendations of Staff and the AGO are

diffuse, with unspecified investment requirements aimed at categories or general

spending levels." Qwest's Brief-in-Chief, at 30-31. Corrections to any persistent or

serious problems "would necessarily include additional investments in either network



137

infrastructure or human resources." A service quality plan to that effect, combined

with market forces, will provide the Commission with assurance that Qwest will make

adequate investments to "guarantee excellent service quality." Qwest's Response Brief,

at 36.

The Commission's Initial Order provided that the scope of this case includes

"infrastructure investment, and deployment of advanced services." Qwest has

provided no legal grounds for the proposition that these subjects cannot be considered

III an AFOR proceeding. Nor, as discussed above, has Qwest furnished any authority

to support its contention that infrastructure development and investment plans

cannot be reviewed and approved in connection with an AFOR proceeding. The rule

itself (at 17.11.17.2 NMAC) clearly contemplates that its provisions, and variations

thereon, may be incorporated in an AFOR.

To satisty the statutory directives in § 63-9A-8.2(B), the Infrastructure and High

Speed Data Services rule requires Qwest to develop plans for its telecommunications

in.frastructure in New Mexico. The Commission has regulatory approval and oversight

of such plans. 66 17.11.17.8 NMAC requires that Qwest's annual investment in

telecommunications shall be adequate and sufficient to meet and maintain (1) the

timely provision of basic local exchange service; (2) the requirements for infrastructure

upgrades and deployment of high-speed data services set forth in this rule; and (3) the

quality of service standards adopted by the commission. The rule (at 17.11.17.9

NMAC) also requires Qwest to develop and implement plans to upgrade its distribution

plant to (1) relieve congestion on routes marked by high line growth; (2) meet demand

66 The rule also sets out a procedure for petitioning for an exemption or variance from any of the rule's requirements, which the Commission must also approve. 17.11.17.15 NMAC. Qwest has not sought any exemptions or variances, and does not ask for any changes to the existing rules.



138

for and enhance the quality of basic local exchange service; (3) facilitate the

introduction and deployment of high-speed data services; and (4) meet the quality of

service standards adopted by the Commission. It further requires Qwest to develop

cmd implement a plan to deploy and/ or upgrade interoffice transmission facilities on

routes marked by high growth. 17.11.17.10 NMAC.

The rule is designed to enable investment requirements to be tailored to

address the particular needs of individual companies and, as Staff suggests, such

railoring can be readily accomplished in an AFOR proceeding that has as its focus the

circumstances of one company. At the hearing, Qwest acknowledged that the

Commission can impose infrastructure investment requirements as a part of an AFOR

proceeding, but said that it should not do so. 3 Tr., at 273. Qwest testified that while

it was not claiming that any Commission-imposed investment requirement would

invariably have a negative effect on the Company. it would be unhappy if ordered by

someone else to make a specific infrastructure investment. 3 Tr., at 290-291. See

also, 3 Tr., at 329.

In this case, Qwest has raised a number of objections to the investment

proposals made by the AG and Staff, but has been notably reticent about countering

those proposals with any of its own. Instead, Qwest essentially says it will make its

investments whenever they are necessary to ensure compliance with service quality

standards-without giving the specifics (e.g., what, when, where and how much) for

such investments. Qwest's assurances that it win get its investments right because

they are partly driven by market forces furnish sc,mt comfort. The Company has not

established whether the level of competition it claims is actual or potential. Even if

Qwest faced the type of competition it alleges, it does not describe how market forces



139

of sufficient magnitude and efficiency to direct Wl.se infrastructure investments would

thereby come into play. Moreover, the efficacy of market forces as the stimulus or

source of good management and marketing decisions is the subject of much

controversy and debate,67 about which Qwest does not go beyond bare assumptions.

In any event that debate could not be settled in this case even with a more complete

record.

Plainly, the way for Qwest to avoid having investments imposed on it is to come

forward with its own investment plans consistent with the Infrastructure and High

Speed Data Services rule. That Qwest has not done so in this case makes it all the

more important for the Commission to undertake a review of the current status of the

Company's infrastructure investments, and what investments may be needed so that

the Company's New Mexico customers can best be served in the near future. The need

flJr such a review is further underscored by the considerable difficulties encountered

by the Commission and other interested persons in getting Qwest to follow through

even on investments about which it has made specific promises and commitments.

See, e.g., the Commission's decisions and the records in Case Nos. 04-00237-UT, 05-

00094-UT and 06-00325-UT.68

On the record of this case, then, such a review must begin with the proposals of

Staff and the AG. Both lead off by advocating increased access to high-speed data

6? This has been especially so in the wake of the current severe recession. See, e.g., R. Posner, How I Became a Keynesian: Second Thoughts in the Middle of a Crisis, The New RepUblic, September 23, 2009, at http://www.tnr.com/articJe/how-i-became-keynesian ("We have learned since September [2008] that the present generation of economists has not figured out how the economy works."); P. Krugman, How Did Economists Get it So Wrong?, The New York Times Magazine, September 6, 2009, at 36 ("As I see it, tbe economics profession went astray because economists, as a group, mistook beauty, clad in impressive-looking mathematics, for truth."). 6<, There have been similar disputes over Qwest's compLance with various AFOR service quality requirements, which raises doubts about how well any AFOR III service quality requirements might serve a::; the launching pad for the Company's future investment~;, See, e.g., Case Nos. 04-00237-UT, 05-00094-UT, 06-00325-UT and 07-00064-UT.



140

facilities in rural areas. SASA currently requires Qwest to deploy high-speed data

facilities on a statewide basis at the rate of 83% of working qualified living units. In

rural areas, the deployment rate under SASA is 50%. Staff recommends that Qwest

install infrastructure under AFOR III that would increase the rate of deployment to

75% per rural wire center. Staff Ex. 13 (Evans Direct), at 11-12. The AG recommends

that Qwest qualify at least 83% of the working living units in each rural exchange for

high-speed data facilities. AG Ex. 2 (Gates Rebuttal), at 55. The principal difference

between the two recommendations is cost, with Staffs coming in lower. Staff Ex. 13

(B:vans Direct), at 12-13.69

While Qwest argues that the Commission has been preempted from overseeing

even high-speed data facilities, the Company does not claim that any such oversight

would amount to Commission regulation of rat·es or the terms and conditions of

market entry for high-speed data facilities. Additionally, the arguments and record do

not indicate that high-speed data facilities operate in isolation from, or are not

otherwise integrated with, the rest of Qwest's infrastructure. See, AG Ex. 1 (Gates

Direct), at 55-60. Thus, they serve or have the capability of serving Qwest's New

Mexico retail customers as well as those customers who use Qwest's system for the

transmission of data.

Qwest has shown no reason why the work begun pursuant to SASA on the

deployment of high-speed data facilities in rural areas should not continue in AFOR

III. The AG and Staff, on the other hand, have made a good case for why the

continuation of that work is in the public interest. In the interests of conservative cost

69 According to figures Staff says were obtained from Qwest, the estimated cost for the 75% level is between $1.4 and $2.8 million, and the estimated cost for the 83% level is between $2.5 and $5 million. Id.



141

management, and gradualism, Staffs recommendation of a 75% level should be

accepted. Staffs attendant recommendations for implementing language in AFOR III,

with which the AG concurs, should also be adopted.

Staff and the AG agree that Qwest's plan for distribution plant should include

the continuation of another SASA program, viz., the characterization program used to

identify and rehabilitate deteriorated infrastructure in high-trouble report areas and in

rural areas. Staff Ex. 13 (Evans Direct), at 16. This program simply recognizes an

ongoing need for the repair, refurbishment, replacement and upgrading of Qwest's

network plant as it experiences the ravages of time, increased use and incessant

technological advances. AG Ex. 1 (Gates Direct), at 58-60. Qwest does not dispute

the abiding need for investment in its New Mexico system. The characterization

program being a reasonable way to address that need, that program should continue

as the AG and Staff recommend.

Should Qwest receive any funds from the Broadband Stimulus Recovery Act,

Staff wants Qwest to use those funds to help underwrite the modernization of rural

area infrastructures in this State. Although its receipt of any such funds would seem

to be an answer to Qwest's prayer for the financing of broadband services to rural

areas from pockets other than the Company's, it does not follow as a matter of law

that Qwest must use Stimulus funds as Staff advises. Staff does not identify any legal

authority that would allow a state regulatory body to require one of its regulated

entities to put federal Stimulus funds to a particular use, even if the use of those

funds is not already dictated by federal law. The Commission is not aware of any such

authority.



142

Since the record is silent about whether Qwest has or will receive Stimulus

funds, the question may be moot. Nevertheless, the goal Staff states for the use of

Stimulus funds is incontestably a worthy one, and is entirely consistent with Qwest's

professed desire to upgrade broadband and other services in the rural areas it serves.

That goal at minimum should be aspirational for Qwest in the event the Company

receives Stimulus funds.

Again invoking SASA, Staff and the AG both urge different degrees of programs

j()r providing route diversity and redundancy for Qwest wire centers. Staff would have

Qwest focus on the Santa Fe North, Fort Wingate and White Rock wire centers. Staff

Ex. 13 (Evans Direct), at 18. The AG claims that Qwest will not have implemented

complete diverse and redundant routing for its New Mexico wire centers by SA SA's

expiration, and that the Company does not: plan to proceed towards that goal

thereafterJo AG Ex. 1 (Gates Direct), at 63. The AG urges that Qwest be required to

go beyond "critical route diversity" by instituting the objective of reaching parity with

the route diversity established for Qwest's urban wire centers. AG's Brief-in-Chief, at

19.

Staffs proposal is a limited one to which Qwest seems to have no objection save

for its overall opposition to any investment :requirements. For that reason, and

because, as Staff says, it is "incremental to the SASA IOF requirements," Staffs

proposal should be adopted.

The AG's proposal, while laudable as a goal, is somewhat indefinite both in

terms of the meaning of "parity" in this context:, and in terms of what it would entail.

70 Citing a Qwest report dated March 2, 2009, the AG says that out of 26 wire centers classified as "Must Builds," a total of 7 were "Complete" as of January 2009, with the others in various stages of progress. AC;' Ex. 1 (Gates Direct), at 61.



143

There is, in addition, no estimate of the cost of achieving the parity the AG envisions.

Accordingly, while the AG's proposal for route diversity and redundancy should be the

subject of further inquiry, it cannot be approved on the record of this case.

A similar lack of record support haunts the AG's recommendation that Qwest's

fmnual capital expenditures in New Mexico equal or exceed Qwest's average annual

capital expenditures for its 14-state region. The AG furnishes no comparative data

regarding how Qwest's capital expenditures in the other states it serves relate to the

needs of the Company's New Mexico customers, or why the average of these capital

expenditures would serve as an appropriate benchmark for the level of investments

Qwest should make for its New Mexico operations. It is not doubted that what Qwest

is doing in its other states has something to tell New Mexico. More needs to be known,

however, before that something can be determined. The AG's proposal in this respect

should not be accepted at this time.

The AG's proposal for quarterly monitoring reports akin to the ones required by

SASA is reasonable and does not appear to have drawn opposition. That proposal

should be approved.

The additional revenue Qwest will receive from the increases in its price caps

(see the discussion above in the Pricing section) should more than cover the

investment plans approved by this Order. Qwest should, in addition, experience cost

savings from the upgrading of its plant and quality of service. Because a major reason

for allowing Qwest the price cap increases provided for herein is to afford the Company

an opportunity, and the wherewithal, to invest in infrastructure improvements, those

increases should be contingent upon Qwest's fulfillment of the AFOR III infrastructure

investment plans. Qwest should therefore be required to authorize the expenditures


Oase No. 09-00094-UT

144

for the Company's AFOR III infrastructure investment plans by no later than SIX (6)

months from the effective date of AFOR III, and to complete those investments within

eighteen (18) months from that date, unless otherwise provided in Appendix C. Any

failure to act in accordance with those investment plans and this Order will subject

Qwest to a reduction and/ or revocation of price cap increases. Qwest's infrastructure

investment plans for AFOR III should be as provided by this Order and Appendix C,

"Infrastructure Investment Plans", which is attached hereto and incorporated herein

by reference.

Level 3's Filing

Level 3 intervenes on only one issue, to define what is included in Qwest's basic

residential and business service offerings insofar as it pertains to accessing the

lnternet. Level 3's request is rejected on the grounds that:

(i) The issue Level 3 asks the Commission to consider is part of Case No.

05-00484-UT, the decision concerning which Level 3 has asked the Commission to

stay pending decisions on related issues by the Ninth Circuit Court of Appeals and

the FCC. Because the Commission has granted Level 3's request for the stay it

sought, it would a violation of that stay to consider Level 3's request in these

proceedings.

(ii) Level 3 has requested that the definition of "basic local exchange service"

in Commission Rule 17. 11.16.7 be modified to include the statement "Customer

access to the Internet is a basic, not a discretionary, feature of this service." A

determination of this nature can only be done in a separate rule making

proceeding and would accordingly be impermissible in an AFOR proceeding such

as this.



145

Owest's Suggested Transcript Revisions

Qwest asks for numerous (Staff counts "approximately 300") revisions to the

transcript. Staff and tw telecom have filed Objections to Qwest's requested revisions.

Cyber Mesa concurs with tw telecom's Objections.

Due to the constraints of time, the Hearing Examiner makes no

recommendations on any of the suggested revisions. The parties are encouraged to try

to devise a process for settling their differences regarding this matter before this case

is presented to the Commission.

The Hearing Examiner recommends that the Commission FIND and

CONCLUDE that:

1. The Statement of the Case and the Discussion, and all findings and

conclusions stated therein or elsewhere in this Order, whether or not separately

stated, numbered or designated as findings or conclusions, are incorporated by

reference herein and are adopted as Findings and Conclusions of the Commission.

2. The Commission has jurisdiction over the parties and the subject matter

of this case.

3. Qwest Corporation is a Colorado corporation that provides

telecommunications services, including local exchange telephone service, 111 areas

throughout New Mexico. As such, Qwest is affected with the public interest (NMSA

1978, § 63-9A-5), and is subject to regulation by this Commission pursuant to N.M.



146

Const., Art. XI, § 2; NMSA 1978, § 63-7-1.1, and the New Mexico Telecommunications

Act, NMSA 1978, §§ 63-9A-1, et seq.

4. Due, proper and legally sufficient notice has been given of these

proceedings.

5. The AFOR III Pricing, Quality of Service and Infrastructure Investment

Plans, as set forth herein, are reasonable under the circumstances presented,

consistent with and in the public interest, consistent with NMSA 1978, § 63-9A-8.2(C)

and other applicable law, and satisfies the requirement of NMSA 1978, § 63-9A-8.2(C)

that the Commission implement an alternative form of regulation that includes

reasonable price caps for basic residence and business local exchange services. The

AFOR III Pricing, Quality of Service and Infrastructure Investment Plans, as set forth

herein, provide a balanced and reasonable resolution to the issues under

consideration in this proceeding. Approval of the subject AFOR III Plans, as set forth

and provided herein, is therefore in the public interest.

6. The AFOR III Pricing, Quality of Service and Infrastructure Investment

Plans, as set forth herein, should be approved as provided by this Order.

7. As provided by this Order, the AFOH. III Pricing, Quality of Service and

Infrastructure Investment Plans should be effective for a term of three (3) years,

commencing January 1,2010.

The Hearing Examiner recommends that the Commission ORDER that:

A. As provided by this Order, the AFOR III Pricing, Quality of Service and

Infrastructure Investment Plans, as set forth herein, are hereby adopted, approved,

and entered as an Order of the Commission.



147

B. Also as provided by this Order, Appendices A, Band C attached hereto

are hereby adopted, approved, and incorporated i:Clto this Order.

C. The term of the AFOR III Pricing, Quality of Service and Infrastructure

Investment Plans shall be three (3) years, commencing January 1, 2010.

D. The AFOR III Pricing, Quality of Service and Infrastructure Investment

Plans shall become effective beginning on January 1, 2010, and shall remain effective

until and through December 31,2012; provided, that the Commission may investigate

or otherwise address any matter related hereto, consistent with the provisions of this

Order, as set forth herein; and further provided, that any rate changes affecting 1FR

and 1FB customers that are to go into effect on the effective date of the AFOR shall go

into effect no sooner than with Qwest's first billing cycle for January 2010.

E. The procedural time frames and deadlines set out in the AFOR III Pricing,

Quality of Service and Infrastructure Investment Plans, as set forth herein, are hereby

approved; provided, that any procedural time fra.me or deadline set out herein, or

otherwise established by this Order, may be altered by the Commission sua sponte, or

upon the filing of an appropriate motion by an interested person, for good cause.

F. As approved and as provided by this Order, the provisions of the AFOR

III Pricing, Quality of Service and Infrastructure Investment Plans shall be carried out

and shall be complied with.

G. Qwest shall file an advice notice as soon as possible containing tariff

amendments consistent with the AFOR III Pricing, Quality of Service and

Infrastructure Investment Plans, as approved by this Order and as necessary for its

implementation, subject to Staff review for comp:liance with applicable Commission

rules and orders. No later than January 31, 2010, Qwest and Staff shall file written



148

reports on the posting of reports, tariffs and orher documents required to be filed

pursuant to the AFOR III Pricing, Quality of Service and Infrastructure Investment

Plans on, respectively, Qwest's and the Commission's web sites. In the event any of

the subject materials are not timely posted as required by this Order, those reports

shall furnish any appropriate recommendations relative thereto, and provide reasons

for all recommendations and conclusions.

H. In accordance with 1.2.2.3S.D(I) NMAC, the Commission has taken

administrative notice of all Commission orders, rules, decisions, transcripts and other

relevant materials in all Commission proceedings cited in this Order.

1. Any outstanding matter not specifically ruled on during the hearing or in

this Order is disposed of consistent with this Final Order.

J. Copies of this Order, with the Appendices hereto, shall be mailed to all

persons listed on the attached official Certificate of Service for this case. This Order,

along with the Appendices hereto, shall be posted on the Commission's web site

(\II/WW.nmprc.state.nm.us) as soon as possible.

K. This Order is effective immediately.

L. This Docket is closed.

ISSUED at Santa Fe, New Mexico this 22nd clay of October, 2009.

NEW MEXICO PUBLIC REG-UI.ATION COMMISSION

-:C-~-______ ~~~ __ ~~L-~_



JAMES C. MARTIN HEARING EXAl~INER

149

Qwest AFOR III ~)endix A

PRICE CAPS FOR BASIC RESIDENCE, BASIC BUSINESS LOCAL EXCHANGE SERVICES, AND INTRASTATE SWITCHED ACCESS SERVICES

A. Definitions

Bundled Services: Shall mean an offering by Qwest of a combination of regulated and unregulated retail services. A bundled service offering may be a single regulated service or a package of regulated services offered in combination with one or more unregulated services.

I>ackaged Services: Shall mean a number of regulated retail services that are tariffed and offered together by Qwest as a single offering.

Promotional Offering: Shall mean a temporary offering of products or services which may include discounts, temporary rate waivers, special incentives or other inducements designed to promote the products or services included as part of the promotional offering.

Residential Public Interest Features and Serviices: Shall mean those residential telecommunications features and services associated with the Primary line 1 FR that have been identified for purposes of this plan as those features and services that have a unique public interest value.

"Tin back Customer: Shall mean a customer who was once was a customer of Qwest's service or services, and is identified as such by Qwest for the purpose of a promotional offering.

R IFR and IFB, Switched Access, and Residential Public Interest Features and Services Price Caps

Qwest's prices for IFR (flat-rated residence local one party access line service), IFB (flatrated business local one party access line service), switched access services and residential public interest features and services, as defined by Section A, shall be capped as set forth, below.

1. The statewide rate cap for single-line flat-rated residential basic local exchange service (lFR), except for service rates for New Mexico low-income telephone assistance program customers, may be increased by no more than one dollar ($1.00) per twelvemonth period beginning January 1, 2010 and ending December 31, 2012.

QWEST AFOR III ApPENDIX A Case No. 09-00094-VT Page 10f8

2. The statewide rate cap for single line flat-ratl~d business basic local exchange service may be increased by no more than one dollar ($1.00) per twelve-month period beginning January 1,2010 and ending December 31,2012.

3. Qwest will charge the same rates for single line flat-rated residential basic local exchange service in each local exchange calling area served by Qwest within the state, whether urban or rural. Qwest will charge the same rates for single line flat-rated business basic local exchange service in each local exchange calling area served by Qwest within the state, whether urban or rural.

4. Public Interest Residential Class Features and Services are identified as follows: per line and per call blocking, call trace, busy line verification, busy line interrupt, non-listed and non-published services. The rates for Public Interest Residential Class Features and Services associated with the IFR service shall be capped at the rates for these services as of the effective date of this plan.

5. Rates for residential basic local exchange rates for New Mexico low-income telephone assistance program customers shall not be increased during the period of AFOR 3.

6. Prices for a service subject to this section may be decreased as provided in Section D, below. Prices may not be decreased to a level below the cost, as defined in Section IH, below, for the particular service.

7. If the Commission orders reductions III intrastate switched access rates after the implementation of this Plan, such price reductions may be implemented in a revenue neutral manner to Qwest and may include increases to the IFR and IFB line rates, or a flat-rated end user charge.

r. Services other than IFR and IFB access lines, switched access services and Residential Public Interest Features and Servic.~s

Prices for telecommunications services other than I FRs, and I FBs, residential public interest features and services, new services, and services subject to effective competition are capped as follows:

1. Prices for a service subject to this section may be decreased as provided in Section D, below. Prices may not be decreased to a l'~vel below the cost, as defined in Section I, below, for the particular service. Any filing for a decrease in price shall include an affidavit and provide information sufficient to show that the new price covers the cost of service.

2. During the tenn of the Plan, the price Gap for a service subject to this section may b~~ increased by up to 12% above the prevailing price for the service at the inception of the Plan provided that:

a. The price cap for the service is increased by no more than 4% in anyone plan year except that,

QWEST AFOR III ApPENDIX A Case No. 09-00094-VT P:a.ge 2 of8

i. possible price cap increases for multiple years may be accumulated in order to make a price cap increase of greater than 4% for anyone year.

3. Any filing for a change in price cap shall provide information sufficient for the Commission to determine whether the proposed price cap complies with Section C.2, above.

4. Services that are determined by the Commission to be subject to effective c:ompetition pursuant to NMSA 1978, § 63-9A-8 shall not be subject to the price caps set forth in this section.

p. Tariff Changes.

5. Rate decreases may take effect 1 business day after a tariff change is filed with the Commission, provided that such decreases shall be subject to objection and Commission review, as set forth in Section D.3-4, below.

6. Rate increases may take effect ten (10) business days after a tariff change is filed 'with the Commission, provided that such increases shall be subject to objection and Commission review, as set forth in Section D.3-54, below.

7. Staff or any interested person may file an objection to a price or price cap change within ten (10) business days after the filing. The only grounds on which an objection to a price or price cap change will be permitted are either that the new price or price cap does not cover cost, as defined in Section IH, below, or that the non-price related terms or conditions of the tariff do not comply with applicable law or Commissiion rules, or are not in the public interest in Staffs judgment after its review, or that the new price or price cap exceeds the applicable increases allowed under a cap set by Section B, above.

8. Within twenty (20) calendar days after the objection is filed, the Commission will determine whether good cause exists to investigate the objection. If the Commission determines tbat good cause exists for an objection to a price cap change, the Commission shall resolve the objection within sixty (60) calendar days after the filing of an objection. If the Commission does not issue an order within sixty (60) calendar days after the filing of an objection, then the price will remain in effect.

9. Qwest shall offer tariffed service offerings on a statewide, nondiscriminatory basis to the specific class of customers described in the tariff. The tariff filing shall include clear, specific, and comprehensive language describing the terms and conditions of service. Should the Commission approve of a competitive zone(s) for Qwest under the terms of Section J of the AFOR III Pricing Plan, Qwest may offer services under separate tariffs to be applied on a nondiscriminatory basis within the entirety of the competitive zone(s) approved by the Commission.

Q'~'VEST AFOR III ApPENDIX A Case No. 09-00094-UT Plllge 3 of8

10. For tariff changes, new services, or promotions, Qwest shall notice Staff and the New Mexico Attorney General through electronic filing the day of the tariff filing. If any other person wishes to receive notice of such filings, they shall file a Request for Service in this Case No. 09-00094-UT containing the name(s) of pers.on(:3) to receive such notice electronically, together with a current e-mail address .or addresses to which such notice must be sent. The Request for Service shall also be served upon Qwest. Upon receipt of such a Request for Service, Qwest shall serve the identified person(s) with e-mail notice of any filing of a tariff change, a new service, or a promotion on the same day such filing is delivered to the Commission.

Eo New Services

New telecommunications services shall not be subject to price caps. A "new telecommunications service" is a service providing features, functions, or capabilities that were not offered by Qwest in New Mexico on the effectiw date of the Plan. New telecommunications services introduced by Qwest during the period of AFOR I and AFOR II are to be considered new telecommunications services for the purposes of AFOR III as well.

I~. Promotional Offerings

1. Any promotional offering shall be for a limited duration not to exceed 90 days. Qwest may run the same promotion twice in anyone ye6,r time frame. Barring suspension by the Commission for good cause, such promotions shall be effective upon 7 business days of filing vvith the Commission and may include any combination of primary or regular tdecommunications services, non-telecommunications :;ervices, advanced telecommunications services, and enhanced services,

2. The filing shall include a description of the period in which the promotional offer will be available, the duration of the promotional terms, the types of products and services otfered, the geographic range of the offering, the specific class of customers to whom the promotion is offered and include clear, specific, and comprehensive language describing the te:rms and conditions of service and the specific discounts, temporary rate waivers, special incentives or other inducements included as part of the promotional offering. Qwest shall specify how a promotional offering varies from with regard to the rates, terms, and conditions of service from a specific tariffed offering, and shall specifically reference the corresponding tariffed s<;:rvices from which the promotional offering varies.

3. The price of the sum of the regulated services in a promotional offering shall not exceed the highest prices of the a la carte prices of the regulated services available in the promotional package.

Q'WEST AFOR In ApPENDIX A Case No. 09-00094-UT Page 4 of8

4. Qwest shall offer a promotional offering on a nondiscriminatory basis, to the specific class of customers described in the promotion. Should the Commission approve of a competitive zone(s) for Qwest under Section I of the AFOR III Pricing Plan, Qwest may offer separate promotions to be applied on a non-discriminatory basis within the competitive zone(s) approved by the Commission.

5. Qwest may offer promotional offerings to Winback Customers as described in this section of the AFOR III Pricing Plan. Qwest may not offer a promotion to any Qwest customer who has decided to switch from a Qwest service, and for which an official request for service, such as the submission of a Local Service Request (LSR), has been issued by a competing carrier, until such time as that customer then is eligible to qualify for a promotion as a Win back customer as defined in this rule. Qwest may not offer promotions to Winback customers until 30 days past the date when that customer has completed the migration from Qwest's service to the competitor's service.

6. Staff or any interested person may file an objection to a promotional offering within 7 business days after filing. The only grounds ,:)n which an objection toa promotional offering will be permitted are either that the promotional offering does not cover cost, or that the applicable non-price related terms or conditions of the promotional offering do not comply with applicable law or Commission rules, or not in the public interest by review by Staff, or that the new price or price cap exceeds the applicable increases allowed under the cap set byt this part "'Ii.B.2. If no objection is filed, or if an objection is 1iled and the Commission elects not to suspend the Promotional Offering for good cause, thl~n the promotional offering is deemed to be effective 7 business days after filing.

7. The Commission may determine that the objection establishes good cause, and may suspend or reject the promotion immediately, or the Commission may schedule a hearing within 20 calendar days after the objection is filed, and will decide at the conclusion of the hearing whether the promotion should be rejected or allowed to remain in effect. If the Commission does not issue a decision within 20 calenda.r days of the filing of the objection, the promotion is deemed to be effective.

8. Qwest shall notice through electronic filing the day of the filing of the promotional offering the following parties: Staff, the New Mexico Attorney General, and any party who formally requests electronic notice of Qwest's filed promotional offerings in Case No. 09-00094-UT.

G. Packaging of Products and Services

1. Packaged and Bundled products and services shall be exempt from the price cap provisions of this plan, provided that the individual regulated products and services or products in the package are made available separately. Packaged offerings shall be effective within 10 business days of filing with the Commission.

QWEST AFOR III ApPENDIX A Case No. 09-00094-UT Page 5 of8


3. The price of a package shall be no highe:' than the sum of the highest prices of the a la carte prices of the services available for the package.

4., The "Price Floor" provisions in Section I below shall apply to all offerings of packaged products and services.

111. Individual Contracts

1. Contracts shall become effective 10 calendar days after the filing of a verified application with the Commission, unless otherwise ordered by the Commission.

2. Contracts shall be filed with the Commission within 10 days after the conclusion of negotiations between the provider of public telecommunications services and the customer.

3. The verified application shall include:

a. A copy of the contract;

b. A description of the telecommunications services to be provided under the contract;

c. An identification of the service prices that vary from the tariffed prices for such services;

d. An identification of the terms and conditions that vary from the tariffed terms and conditions for such services;

e. An affidavit identifying telecommunications carriers that are offering the customer competing services; and

f. A cost study and a supporting affidavit attesting to the accuracy of the cost study, briefly describing the methodology of the cost study and indicating that the prices in the contract cover cost according to the requirements of Section I.

QWEST AFOR III ApPENDIX A

C:<lse No. 09-00094-UT Page 6of8

4. Staff or other interested party may file an affidavit within five working days making a recommendation to approve or disapprove the proposed contract. If Staff or other interested party does not file an affidavit, or if Staff or other interested party files an affidavit but the Commission does not deny the contract for good cause, then the contract shall become effective 10 calendar days after the filing of the application.

:r. Price Floors I

For any change to Qwest's existing tariffs that has the effect of lowering the price of one or more tariffed services, or for any new promotion, Qwest shall file the information set forth in Appendix A to the Commission's Final Order in Case Nos. 08-00197-UT and 08-00326-UT under the procedures specified in that Final Order to the extent required to establish that each service affected by the tariffed price reduction or the promotion is priced above the cost of providing that service.

J". Competitive Zones

5. Qwest, or any other party of interest, may request that the Commission commence a proceeding for the approval for the creation of a competitive zone or zones for the regulation of public telecommunications services under this plan. The creation of a competitive zone or zones will allow for a different, and more flexible pricing scheme within the designated competitive zone or zones.

6. The creation of a competitive zone must be consistent with the procedures and showings prescribed in NMSA 1978, § 63-9A-8.

7. Any proceeding initiated before the Commission for the creation of a competitive zone or zones under this plan will commence and end within 180 days from the date of a petition by an interested party.

K. Customer Surcharges

A customer surcharge authorized by the Commission or the FCC, or implemented in response to an FCC or Commission decision, including, but 1I10t limited to, a surcharge pursuant to Commission rules related to funding of the State Universal Service Fund, shall not constitute an

I Section I is subject to change pending the fmal outcome of the Competitive Response Cases (Case Nos. 08-00187-UT and 08-00326-UT).

QWEST AFOR III ApPENDIX A C~llse No. 09-00094-VT Page 7 of8

increase in the price of the 1 FR or 1 FB service for purposes of the price cap established in this section, and such surcharges may be added to the price cap without violating this plan.

L. Discontinuance of Service

1. At least 30 days prior to the proposed date of discontinuance, Qwest shall file with the Commission a petition to discontinue a service. At the same time, Qwest shall provide notice of such filing to the affected customers of its inte:1t to discontinue the service.

2. Persons or interested parties shall have 10 days from the date of filing to file comments on the petition. Reply comments may be filed 5 days after the initial comments.

3. If comments are filed, or issues raised by the Commission, the Commission shall hold such hearings as it deems appropriate and issue a final order within 90 days of the filing of the petition by Qwest. If no comments are filed, or if no issues are raised by the Commission such that a hearing is deemed necessary, the discontinuance of service shall proceed within the timeframe allowed under this section.

M. Filing of Materials Related to the AFOR III Plricing Plan

Any proposed Tariff, Promotional Offering, or Individual Contract filing shall be filed with the Commission in a case docket to be determined by the Commission. Any confidential materials requested in reference to the review of any Tariff, Promotional Offering or Individual Contract filing are to be filed under a protective order in case docket determined by the Commission, and shall be restricted by the terms of the Commission's protective order in that case.

N. Filing

Except for the Annual Report, all reports and filings will be submitted in the form of an Advice Notice in a case docket to be determined by the Commission, with the original to be filed with the Records Bureau of the Commission. Electronic copies will be provided to Staff and any interested person who submits a timely request to Qwest. In addition, Qwest will post on its website all reports and information required by this Plan that are not subject to a protective order.

o. Term and Duration

The term of the AFOR III Pricing and Quality of Service Plan shall be three (3) years, commencing with the effective date of this Order. The AFOR III Pricing and Quality of Service Plan shall become effective beginning on January 1,2010, until and through December 31,2012.

QWEST AFOR III ApPENDIX A Case No. 09-00094-UT P:ilge 8 of8

Qwest AFOR III A]~PENDIX B

Quality of Service Rule

AFOR III Quality of Service The Quality of Service provisions for AFOR III consist of the provisions of 17.11.22 NMAC, as superseded and supplemented by the following:

1. Definitions (17.11.22.7 NMAC): Revise or add the following definitions:

17.11.22.7 DEFINITIONS: As used in this rule: A. access line means a dial tone line that provides local exchange service from

a carrier's switching equipment to a point of termination at the customer's network interface. Access lines do not include wireless services or internal ILEC services;

B. answer means a company representative is ready to assist the customer or is ready to accept infornlation necessary to process the call;

C. basic local exchange service means the customer's voice grade access to the public switched network, dual tone multi frequency (DTMF) signaling or its functional equivalent, and access to emergency services (911 and E-911), operator services, toll services, directory assistance, and toll blocking services for qualifying low income customers;

D. busy hour means the uninterrupted period of sixty (60) minutes during the day when traffic is at a maximum;

E. carrier means any person that furnishes telecommunications service to the public subject to the jurisdiction of the commission, regardless of the facilities used and regardless of whether the person relies in part or entirely on another carrier's facilities;

F. circumstances beyond the reasonable control of Qwest means delays caused by:

(1) a vendor in the delivery of necessary equipment or supplies, where Qwest has made a timely order of the equipment or supplies;

(2) local or tribal government entities in approving easements or access to rights-of-way, where Qwest has made a timely application for such approval;

(3) the customer; (4) negligent or willful misconduct by third parties not in privity with

Qwest; or (5) force majeure (meaning causes which are outside the control of Qwest

and could not be avoided by the exercise of due carc~, including but not limited to terrorism, explosions, fires, floods, severe storms (including lightning strikes if all accepted grounding, bonding, and shielding practices were followed by Qwest at the damaged location), epidemics, civil unrest, wars, injunctions, strikes, work stoppages, and other emergencies and catastrophes);

G. competitive local exchange carrier (C]l.EC) means a carrier that provides competitive local exchange service in its service area and is not an ILEC;

H. customer means any person that has applied for or is currently receiving telecommunications services;

I. designed services means the provisioning of regulated circuits requiring treatment, equipment, or engineering design purchased from an ILEC's tariff or on an individual contract basis, including but not limited to analog private line services, DDS, DS-1 (including channelized), DS-3, ISDN-BRl, and special assemblies, where all facilities and equipment provided are physically located in the state of New Mexico;

J. discretionary services means voicemail.caIlerID.callernameID.caIl waiting, 3-way caIling, caIl forwarding, call return, call blocker, and auto redial, and any similar service sold as an add-on to a customer's basic local exchange service;

K. end office switch means a switch to which a telephone subscriber is connected; frequently referred to as a class 5 office, it is the last central office before the subscribers (sic) phone equipment and is the switch that actually delivers dial tone to the subscriber;

L. facilities-based CLEC means a CLEC providing local exchange service that relies predominantly on its own facilities, including switching equipment, to route calls for at least twenty-five (25) percent of the local exchange access lines it serves;

M. held order means any order for telecommunications service that is not filled within the time frames set forth in 17 .1l.22.14 ;\J"MAC or within fifteen (15) calendar days of the time frames set forth in 17.1l.22.12;

N. high density zone means all wire centers that Qwest has classified within its lowest cost density pricing zone pursuant to 47 C.F.R. Section 69.123;

o. incumbent local exchange carrier (ILEC) means a person, or an affiliate of a person, that was authorized to provide local exchange service in New Mexico on February 8, 1996, or a successor or assignee ofthc~ person or affiliate; a carrier will also be treated as an ILEC if the federal communications commission determines that such provider (or class or category of carrier) shall be treated as an ILEC pursuant to 47 U.S.C; Section 251 (h)(2) but does not include an incumbent rural telecommunications carrier;

P. incumbent rural telecommunicatiion carrier (IRTC) has the meaning given in NMSA 1978 Section 63-9H-3;

Q. installation commitment means a date pledged by a LEC to provide basic local exchange service or designed services to a customer;

R. local exchange carrier (LEC) includes incumbent local exchange carriers and competitive local exchange carriers;

S. low density zone means all wire centers that Qwest has classified within any zone other than the lowest cost density pricing zone pursuant to 47 C.F.R. Section 69.123;

T. out of service trouble reports means reports that a primary and regular services customer is unable to receive or place calls on an access line due to lack of dial tone or severe noise that prevents effective communication. This includes troubles beyond the network interface;

U. primary local exchange line means the first exchange access line installed by a LEC to serve a customer at the customer's premises, as distinct from additional lines that may be ordered at the same or a subsequent time at the same premises;

Qwest AFOR III APPENDIX B Quality of Service Rule Case No. 09-00094-UT

2

V. repeat trouble report means a trouble report received within thirty (30) days of a closed trouble report on the same line regarding the same trouble;

W. tandem switch (local, access, or toll) means an intermediary switch or connection other than the end office switch between an originating call location and the final destination of a call; it serves to connect end of1ice switches without the need for direct interoffice trunking;

X. trouble report means notification of1Touble or perceived trouble by a subscriber, third party, or employee acting on behalf of a subscriber to a Qwest's repair office; it shall include troubles reported on access lines by Qwest's own retail customers and the retail customers of LECs that purchase wholesale services from Qwest but shall not include troubles beyond the network interface device, troubles associated with customers' unfamiliarity with new features or customer premises equipment, or circumstances beyond the reasonable control of Qwe~;t;

Y. wire center means a facility where local exchange access lines converge and are connected to a switching device which provid.es access to the public switched network, and includes remote switching units and h051 switching units.

2. Reporting Requirements a. Add the following to the first paragraph of 17.11.22.8 NMAC:

17.11.22.8 REPORTING REQUIREMENTS FOR ILECS: Unless otherwise specified, Qwest shall provide data both by wire center listed alphabetically by name, and on a statewide average basis. Qwest shall submit all reports to the commission in printed and electronic spreadsheet format. Qwest shall file separate reports for nondesigned and designed services for the categories specified in subsections A through F. Qwest shall file reports quarterly, except for held order reports, which shall be filed monthly, but shall compile data on a monthly basis. If Qwest intends to ,~xc1ude trouble reports or out of service trouble reports based upon the definition of extraordinary or abnormal operating conditions, Qwest shall file a matrix that shows th~~ number of reports Qwest requests permission to exclude per each of the exclusion categories of the term extraordinary or abnormal operating conditions. Reports shall be filed with the commission within thirty (30) days of the period covered by the report.

b. Add the following to subsections C and D of 17.11.22.8 REPORTING:

C. Trouble reports cleared. Qwest shall report the total out-of-service trouble reports cleared in 24 hours by each wire center, the total out-of-service trouble reports received by wire center, and the percentage of out-of-service and all other trouble reports cleared by each wire center within twenty-:B::mr (24) hours, and the average repair interval for out-of-service trouble reports.

D. Repeat trouble report rate. Qwest shall report the total number of repeat trouble reports for each wire center, the total number of lines for each wire center, and the repeat trouble report rate for out-of-service and all other trouble reports for each wire


3

center (number of repeat trouble reports per hundred access lines per wire center) and, where applicable, the reason a wire center exceeded the applicable repeat trouble report rate.

c. Add the following as a new subsection I to 17.11.22.8 REPORTING: I. Individual customer credits issu{~d. Qwest shall report the following

information regarding the individual customer credits issued each quarter pursuant to 17.11.22.15 NMAC (Designed Services) and 17.11.22.23 NMAC (Individual Customer Credits): total dollars of credits issued per each rule section and total number of customers to whom the credits were issued.

d. Delete the reporting requirement in subsection H (Business Office and Repair Office Answer Times) of 17.11.22.8 REPORTING and renumber subsection I Carrier Profile to subsection H:

H. Business offiee and repair offiee ltftS-'~'ler time. An ILEC shall report separately for its business office and its repair office-the percentage of calls answered within the time frames specified in 17.11.22.20 NJV1A~

H. Carrier profile. No later than March 1 of each year, ILECs shall also report the following information to the commission, based on its operations as of December 31 of the previous year:

(1) total number of switched access lines in service; (2) total number of residence switched access lines in service; (3) total number of business switched access lines in service; and (4) total number of orders received.

[17.11.22.8 NMAC - Rp, 17.11.22.8 NMAC, 2-1-06]

3. Standards Modify 17.11.22.12 NMAC as follows:

17.11.22.12 INSTALLATION OF BASIC LOCAL EXCHANGE SERVICE: A. Order tracking. At the time of each service order, a LEC shall provide to

each applicant for basic local exchange service a unique indicator that will permit an applicant to track and verify the order.

B. Time for provisioning service.Premis(ls within 1000 feet of distribution terminal.

(1) Whenever Qwest receives an application for installation of a primary local exchange line for a premisesfor premises tfiat.-is-->.'1ithin 1000 feet of a distribution terminal, Qwest shall provision service within five (5) business days of receipt of the service request, or by such later date as the customer may request.

(2) When Qwest cannot fill an order for a primary local exchange line within ten (10) business days of receipt of the order, it shall provide written notice to the customer noting the date of the service order and stating the expected installation date and


4

the reason for the delay. This notice must be postmarked within ten (10) business days of the date the service order is received by Qwest. Qwest shall promptly notify the customer of any changes in the expected installation date.

C. Premises 1000 feet or more from---di!;tribution terminal. \Vhenever an ILEC receives an application for installation of a primary local exchange line for a premises that is 1000 feet or more from a distributiert terminal, the ILEC shall provision service within thirty (30) business days ofreceipt-Bf.1:he service request, or by such later date as the customer may request, unless installati-en-cannot be completed due to circumstances beyond the reasonable control of HHHl~

C. Line extension policy. Each ILEC shall file its line extension policy for commission review and approval by March 1, 2001 and shall file any subsequent material changes to the policy for commission review and approval in accordance with commission procedures for tariff changes.

4. Credits Add the following to supplement 17.11.22.23 NMAC:

17.11.22.23 INDIVIDUAL CUSTOMER CREDITS:

* * * C. Repair Commitments. If Qwest misses a dispatched service repair call for

primary or regular services, Qwest shall automatically issue a credit of $12 for residential service or $40 for business service to the account of the customer impacted by the missed call.

5. Waiver of Held Order Standard: Replace subsection B of 17.11.22.25 NMAC with the following:

17.11.22.25 EXEMPTION OR VARIANCE:

* * * B. Waivers for Held Orders and Designed Services Held Orders

l. Waiver List: Within 30 days of the end of each month, Qwest shall submit a list to Commission Staff requesting that specific orders that would otherwise qualify as Held Orders or Designed Services Held Orders in that month be exempted from held order treatment. Each monthly report shall contain: a. Order number; b. Wire center name; c. Application date; d. Requested date of service; e. The circumstances beyond Qwest's control that have caused the

order to be delayed;


5

f. Explanation of what steps Qwest has taken within the 30 or 45 day period since the order was received to overcome the circumstances beyond Qwest's control;

g. Date customer notification letter sent; h. Job number; and 1. An affidavit from a manager having direct knowledge of the

conditions leading to Qwest being unable to provide service for the orders on the list.

J. Status report of prior existing waivers and if they are removed from the list, the details including the date and the circumstances that resulted in the removal of that waiver.

2. Form of Reports: Lists of Waivers will be cumulative and filed monthly as well as emailed to Commission Staff in electronic form.

3. Waivable Conditions: For every order on the Waivers List, Qwest must be able to demonstrate that construction of facilities is necessary in order to provide the requested service, and such construction cannot be completed in the time frame set out in the Held Order or Designed Services installation standards because of circumstances beyond Qwest's control. Circumstances beyond Qwest's control are limited to:

a. Failure of the customer (or the customer's contractor) to complete the construction or renovation of the building to be served, or to provide the necessary backboard, trench, ground wire, or conduit.

b. Failure to obtain necessary rights-of-way or permits, including those from Sovereign tribal authorities, despite the filing of timely applications.

c. Extraordinary weather and other acts of God. d. Supplier or vendor issues. e. Strike or work stoppage.

4. Period of Waivers: Waivers for Held Orders or Designed Services Held Orders are granted for the period of one year from the application date. At the end of the one-year period, Qwe~st must remove the order from the Waivers List and the order shall be subject to the applicable Primary Services or Designed Services installation interval standards and reporting requirements. At that time, Qwest may petition the Commission to allow an order that has been on the Waiver List for one year to remain on the list for an additional specified amount of time. In the petition, Qwest must explain why the extension is needed, the length of time the extension is needed but not to exceed one more year, and what it has done to overcome the conditions beyond its control within the first year.


6

QWEST AFOR III APPENDIX C

Infrastructure Investment Plans

AFOR III Infrastructure The Infrastructure provisions for AFOR III consist of the provisions of 17.11.17 NMAC, as superseded and supplemented with the following:

1. Definitions (17.11.17.7 NMAC): The following definitions should be revised or added as follows:

17.11.17.7 DEFINITIONS: As used in this rule: A. basic local exchange service mean:) the customer's voice grade access

to the public switched network, Dual Tone Multifrequency (DTMF) signaling or its functional equivalent, and access to emergency services (911 and E-911), operator services, toll services, directory assistance, and toll blocking services for qualifying low income customers.

B. carrier means any person that furnishes telecommunications service to the public subject to the jurisdiction of the Commission, regardless of the facilities used and regardless of whether the person relies in part or entirely on another carrier's facilities.

C. competitive local exchange carrier (CLEC) means a carrier that provides competitive local exchange service in its service area and is not an ILEC.

D. exchange means a wire center. E. high-speed data facilities,senrie1es means, facilities,technology that

supports data transmission at a minimum rate of 512~;e kilobits per second in both the consumer-to-carrier direction and at a minimum rate-of 200 kilobits per second in the carrier-to-consumer direction.

F. incumbent local exchange carrier (ILEC) means a person, or an affiliate of a person, that was authorized to provide local exchange service in New Mexico on February 8, 1996, or a successor or assignee of the person or affiliate. A carrier will also be treated as an ILEC if the Federal Communications Commission detennines that such provider (or class or category of carrier) shall be treated as an ILEC pursuant to 47 V.S.c. Section 251(h)(2).

G. interconnection means the linking of two (2) networks for the mutual exchange oftraffic, but does not include the transport and tennination of traffic.

H. loop means a transmission facility between a distribution frame (or its equivalent) in a central office and a demarcation point at an end user customer premises.

I. unbundled network element (UN"E) means a facility or equipment used in the provision of a telecommunications service that an ILEC must provide to any requesting carrier on an unbundled basis, pursuant to Section 251 (c )(3) of the Telecommunications Act of 1996, Pub. L. No.1 04-1 04 (1996). The tenn includes, but is not limited to, features, functions, and capabilities that are provided by means of such facility or equipment, including but not limited to, subscriber numbers, databases, signaling systems, and information sufficient for billing and collection or used in the transmission, routing, or other provision of a telecommunications service.

J. working living unit means a customer (residential or business) that has at least one working Qwest landline.

K. working qualified living unit is a working living unit that is located within the operational distance, for Qwest, of a DSLAM and has a working Qwest landline capable (i.e., free of load coils, bridge taps, split pairs, shorts and opens) of providing high-speed data services to the customer.

2. Plan for Distribution Plant (17.11.17.9 NM[AC): The requirement of 17.11.17.9 NMAC Distribution Plant should be revised and added to as follows:

17.11.17.9 DISTRIBUTION PLANT: An ILEC shall develop and implement a plan to upgrade its distribution plant to:

A. Basic Requirements: 1. relieve congestion on routes marked by high line growth; 2. meet demand for and enhance the quality of basic local exchange

servIce; 3. facilitate the introduction and deployment of high-speed data

facilities; and 4. meet the quality of service standards adopted by the Commission.

B. Additional Requirements: 1. Qwest shall design and construct new distribution facilities and/or

upgrade existing distribution areas as necessary to qualify at least 75 percent of Qwest's New Mexico Working Living Units in each exchange serving fewer than 5,000 access lines with high-speed data facilities by the end of AFOR III.

2. Qwest's plan for Distribution Plant should include the continuation of the characterization program Qwest used under the SASA to identify and rehabilitate deteriorated infrastructure in high-trouble report areas and in rural areas. Qwest's plan should include procedures to identify and replace defective, deteriorating or aging lead, air core and other cables and associated network elements in Qwest's New Mexico's network with modern copper or fiber and associated utilities.

3. Plan for Interoffice Transmission Facilities (17.11.17.10 NMAC): The requirement of 17.11.17.10 NMAC Interoffice Transmission Facilities should be revised and added to as follows:

17.11.17.10 A.

INTEROFFICE TRANSMISSION FACILITIES: Basic Requirements:

1. An ILEC shall develop and :Implement a plan to deploy and/or upgrade transport facilities on interoffice routes marked by high growth in order to:

(i) meet demand for and enhance the quality of basic local exchange service;

Qwest AFOR III Appendix C Infrastructure Investment Plans Case No. 09-00094-UT

2

facilities;

Commission;

(ii) facilitate the introduction and deployment of high-speed data

(iii) meet the quality of service standards adopted by the

(iv) (v) (vi) (vii) (viii)

relieve congestion; . . Improve servIce; route traffic more efficiently; accommodate growth in traffic; and support the services and features offered by the ILEC.

2. An ILEC may lease such facilities from other carriers rather than build its own facilities.

B. Additional Requirements: (i) Qwest should describe in its plan under 17.11.17.10 NMAC the

root causes of any failure to comply with the objectives of this provision and why progress has not been or cannot be made in this very important area.

Qwest AFOR III Appendix C Infrastructure Investment Plans Case No. 09-00094-UT

3

BEFORE THE NEW MEXICO PUBLIC REGULATION COMMISSION

IN THE MATTER OF THE DEVELOPMENT OF AN ALTERNATIVE FORM OF REGULATION PLAN FOR QWEST CORPORATION

) ) )


CERTIFICATE OF SERVICE

I HEREBY CERTIFY that a true and correct copy of the foregoing

Recommended Decision of the Hearing Examiner, issued October 22, 2009, was

mailed fist class, postage pre-paid to each of the following:

Timothy Goodwin, Esq. ()west Corporation '1801 California Street, 10th

Floor Denver, CO 80202

Carolyn S. Fudge, Esq. }\ssistant City Attorney Albuquerque Attorney's Office PO Box 2248 ,l~lbuquerque, NM 87103

Hobert W. Spangler 17304 13yth Avenue, SW Vashon Island, WA 98070

Victoria B. Garcia, Esq. Dept. of Information Technology John F. Simms Bldg. 715 Alta Vista Santa Fe, NM 87502

Jane Hill Cyber Mesa Computer Systems, Inc. 4200 Rodeo Rd. Santa Fe, NM 87507

Michael Horcasitas Owest Corporation 400 Tijeras, NVV, Suite 510 Albuquerque, NM 87102

Richard H. Levin Attorney at Law Post Office Box 240 Sebastopol, CA 95473-0240

Stephen S. Melnikoff Regulatory Law Office U.S. Army Liti£Iation Center 901 N. Stuart St., Ste. 700 Arlington, VA 22203-1837

Jack Pestaner New Mexico Teleeom Solutions, LLC. 133 La Placita Circle Santa Fe, NM 87e,05

Mariane Granoff Zianet 801 Calle Fuerte NE Albuquerque, NM 87113

Thomas W. Olson Montgomery & Andrews, P.A. Post Office Box 2307 Santa Fe, NM 87504-2307

Brian Harris, Esq. Assistant NM Attorney General Post Office Drawer 1508 Santa Fe, NM 87504-1508

Carol Clifford, Esq. Jones Firm PO Box 2228 Santa Fe, NM 87504-2228

Peter J. Gould P.O. Box 34127 Santa Fe, NM 87594-4127

Bruce C. Throne, Esq. 1440 B. S. St. Francis Drive Santa Fe, NM 87505

Greg Rogers, Esq. Senior Corporate Counsel Level 3 Communications, LLC '1025 Eldorado Blvd. Broomfield, CO 80021

Mr. Lynda" Nipps tw telecom of new mexico, IIc VP for Regulatory Affairs 845 Camino Sur Palm Springs, CA 92262-4157

DATED this 22nd day of October, 20mJ.

Hand delivered to: Joan Ellis, Esq. Ashley Schannauer, Esq.

Mike Ripperger NMPRC-Utilities Division Director

NEW MEXICO PUBLIC REGULATION COMMISSION

ft·.~ Eliz~sa~ Clerk

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