| (a) Application. This section must apply to DCTUs with
annual revenues from regulated telecommunications operations in Texas
of $100 million or more for five consecutive years. An incumbent local
exchange carrier that is not a Tier 1 local exchange company as of
September 1, 1995, at that company's option, may adopt the cost studies
approved by the commission for a Tier 1 local exchange company.
(b) Purpose. This section must be used to determine
the long run incremental costs incurred by DCTUs in the provision
of telecommunications services. The costs determined in this section
must not be used to determine a company's revenue requirement during
a proceeding under Public Utility Regulatory Act, Chapter 53, Subchapters
C and D or E.
(c) Definitions. The following words and terms when
used in this section must have the following meaning unless the context
clearly indicates otherwise.
(1) Ancillary services--The category of basic network
functions (BNFs) (as defined in paragraph (2) of this subsection)
that provide for certain activities that either support or otherwise
are adjuncts to other BNFs or finished services. This category of
BNFs consists of three subcategories of BNFs: Billing and Collection;
Measurement; and Operator Services.
(A) Billing and collection--The subcategory of BNFs
that provide for the function of compiling the information needed
for customer billing, preparing the customer bill statement, disbursing
the bill and collecting the customer payments.
(B) Measurement--The subcategory of BNFs that provide
the functions of assembling, collating and transmitting end office
switch recorded call data (occurrence and duration).
(C) Operator services--The subcategory of BNFs that
provide for the provision of a number of live or mechanized assistance
functions to aid customers in the following ways: obtaining customer
telephone number, street address and ZIP code information (directory
assistance); providing new telephone numbers or explanatory information
to callers who dial numbers which have been changed or disconnected
(intercepts); providing assistance to customers in completing operator
handled toll or local calls (collect, credit card, third party, station-to-station
or person-to-person); checking busy lines to make sure the line is
not out of service (busy line verification); and interrupting busy
lines (busy line interruption). These operator services are provided
to end user customers as well as local exchange and interexchange
carriers.
(2) Basic network function (BNF)--A discrete network
function, which is useful either as a stand-alone function or in combination
with other functions, for which costs can be identified.
(3) Capital costs--The recurring costs that result
from expenditures for plant facilities that are capitalized. The annual
capital costs consist of depreciation, cost of money, and income taxes.
(4) Categories of BNFs--All BNFs must fall into one
of four categories of BNFs. The categories are: network access (as
defined in paragraph (13) of this subsection); switching and switch
functions (as defined in paragraph (16) of this subsection); dedicated
and switched transport (as defined in paragraph (10) of this subsection);
and ancillary services (as defined in paragraph (1) of this subsection).
(5) Common costs--Costs that are not directly attributable
to individual cost objects. For the purposes of this section there
are three types of common costs: general overhead costs; costs common
to BNFs; and costs common to services.
(A) General overhead costs--Costs incurred in operating
and managing the company that are not directly attributable to BNFs
or services.
(B) Costs common to BNFs--Costs incurred in the provision
of BNFs that can not be directly attributed to any one BNF individually
but only to a category or subcategory of BNFs collectively.
(C) Costs common to services--Costs incurred in the
provision of two or more services that do not vary with changes in
the relative proportions of the outputs of those services. Common
costs are not directly attributable to any one service individually
but only to a group of services collectively. In the event a BNF is
used in the provision of two or more services then the volume insensitive
cost of the BNF is a cost common to the services that use the BNF.
However, if the technological requirements for the provision of one
service alter the least cost technology choice for common BNFs or
common facilities, then the increase in costs caused by the requirements
for more advanced technologies is not a common cost but a cost directly
attributable to the service that alters the least cost technology
choice.
(6) Cost causation principle--The principle that only
those costs that are caused by an activity (such as a network function,
service, or group of services) in the long run are directly attributable
to that activity. Costs are caused by an activity, in the long run,
if the costs are brought into existence as a direct result of the
activity.
(7) Cost driver--A specific condition, under which
a BNF is provided, whose change causes significant and systematic
changes in the cost of providing a BNF. For example, if the cost of
providing a network access channel varies with the density and size
of a wire center, then density and size are cost drivers for that
BNF.
(8) Cost of debt--The rate of interest paid on borrowed
money.
(9) Cost of money--The weighted annual cost to the
DCTU of the debt and equity capital invested in the company.
(10) Dedicated and switched transport--The category
of BNFs that provide for dedicated or shared transmission transport
between two or more DCTU switching offices or wire centers. This BNF
category consists of two subcategories of BNFs: Dedicated Transport
and Switched Transport.
(A) Dedicated transport--The subcategory of BNFs that
provide for full period, bandwidth specific (e.g., DS-0, DS-1, DS-3)
interoffice transmission paths between the originating and terminating
points of channel connection.
(B) Switched transport --The subcategory of BNFs that
provide for shared interoffice transmission paths between originating
and terminating points of switching.
(11) Group of services--A number of separately tariffed
services that share significant common costs (as defined in paragraph
(5) of this subsection) that are necessary and unique to the provision
of those services and are not directly attributable to any one service
individually. This term also refers to a situation in which two or
more groups of services are part of a larger group of services because
of significant common costs that are necessary and unique to the provision
of all the services in the group but are not directly attributable
to any one group or service individually.
(12) Measure of unit cost--The measure of usage used
to calculate unit cost for a particular BNF (for example, a minute
of use of a switching function, or a quarter mile of a DS-1 network
access channel). The measure of unit costs may be multidimensional;
for example, it may have both time and distance components. The measure
of unit cost chosen for a BNF must correspond to the basis upon which
the costs of that BNF are incurred.
(13) Network access--The category of BNFs that accommodate
access to other network functions provided by DCTUs. Access is accomplished
by transmission paths between customers and DCTU wire centers. This
category consists of three subcategories of BNFs: network access channel;
network access channel connection; and channel performance and other
features and functions.
(A) Network access (NA) channel--The subcategory of
BNFs that provide the transmission path between the point of interface
at the customer location and the main distribution frame, or equivalent
(e.g., DSX-1, DSX-3), of a DCTU wire center.
(B) Network access (NA) channel connection--The subcategory
of BNFs that provide the interface between the network access channel
and the DCTU wire center switching equipment, subsequent dedicated
transport equipment (dedicated interoffice circuits), or subsequent
channel equipment (dedicated intraoffice circuits).
(C) Channel performance and other features and functions--The
subcategory of BNFs that provide the channel functions associated
with transmission or service type (e.g., analog, digital, coin, ISDN),
bandwidth conversion, signaling, multiplexing, amplification, and
channel performance.
(14) Significant--For the purposes of this section,
the qualifying term significant is used to refer to instances in which
costs or changes affect total study results by at least five percent.
This general guideline for when costs or changes are significant may
be relaxed by considering the cumulative effect of either including
or excluding costs or changes from a study.
(15) Subcategories of BNFs--Groupings of closely related
BNFs in a category of BNFs.
Cont'd... |
