Download Intra-state PL Executive Overview

EXECUTIVE SUMMARY
MINNESOTA
DS1 & DS3 ENTRANCE FACILITIES
DS1 & DS3 CAPABLE LOOPS
2006 RECURRING COST STUDY
STUDY ID 9362
9.6% COM
APRIL 2006
Table of Contents
Page
1.
Executive Summary
5.
Study Summary (WINPC3 Summary)
6.
Cost Results Summary (WINPC3 OUTPUT Summary Group)
7.
WINPC3 OUTPUT Summary Subgroup
8.
WINPC3 OUTPUT Detail
9.
Total Products Costs
10.
WINPC3 Investments
11.
WINPC3 Parameters
12.
Default Factor Mapping
PAGE 1
A. PURPOSE, SCOPE, AND APPLICATION
The purpose of this study is to estimate Qwest’s total element long-run incremental costs that would
be incurred to provide Local Interconnection Service and Unbundled Network Elements to a
competitive provider.
A Unbundled Network Element (UNE) is a portion of Qwest’s network sold to Interconnectors or
Certified Local Exchange Carriers (CLECs) for use in building services for their customers. The
interconnector normally would connect to these UNEs in a Qwest wire center. The interconnector may
combine these UNEs together with its own facilities or equipment for this purpose.
Local Interconnection Service (LIS) DS1 or DS3 Entrance Facility is a portion of Qwest’s network sold
to a CLEC so that the CLEC can interconnect from its switch or Point of Interconnection (POI) to
Qwest at the Qwest serving wire center.
The interconnector has design responsibility to insure that these elements will properly work with each
other and with its facilities and equipment to meet its customer’s service needs.
This study develops state wide average Total Element Long Run Incremental Costs (TELRIC). Costs
are specific to the state of Minnesota and are stated on a per unit basis, unless specified otherwise.
Cost results are based on 9.6% Cost of Money (COM).
B. DESCRIPTION OF SERVICE
A Unbundled Network Element (UNE) is a portion of Qwest’s network sold to Interconnectors or
Certified Local Exchange Carriers (CLECs) for use in building services for their customers. The
interconnector normally would connect to these UNEs in a Qwest wire center. The interconnector may
combine these UNEs together with their own facilities or equipment for this purpose.
Local Interconnection Service (LIS) DS1 or DS3 Entrance Facility is a portion of Qwest’s network sold
to a CLEC so that the CLEC can interconnect from its switch or POI to Qwest at the Qwest serving
wire center.
The interconnector has design responsibility to insure that these elements will properly work with each
other and with their facilities and equipment to meet their customer’s service needs.
Many LIS and UNE elements are available from Qwest. The following LIS and UNE elements are
addressed in this study:
 DS1 & DS3 Entrance Facilities
 DS1 & DS3 Capable Loops
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DS1 Entrance Facility:
A DS1 Entrance Facility is a digital transmission path that transports bi-directional DS1 signals with a
nominal transmission rate of 1.544 Mbps. An Entrance Facility extends from the Qwest Serving Wire
Center to CLEC’s Switch location. Qwest provided Entrance Facilities may not extend beyond the
area served by the Qwest Serving Wire Center.
DS3 Entrance Facility:
A DS3 Entrance Facility is a digital transmission path that transports bi-directional DS1 signals with a
nominal transmission rate of 44.736 Mbps. An Entrance Facility extends from the Qwest Serving Wire
Center to CLEC’s Switch location. Qwest provided Entrance Facilities may not extend beyond the
area served by the Qwest Serving Wire Center.
DS1 Capable Loop:
A DS1 Capable Loop is a transmission path between a Qwest wire center DS1 panel and the network
Interface at the end user location. The DS1 Capable Loop is capable of transporting bi-directional DS1
signals with a nominal transmission rate of 1.544 Mbit/s.
DS3 Capable Loop:
A DS3 Capable Loop is a transmission path between a Qwest wire center DS3 panel and a demarcation
point at the end user location. The DS3 Capable Loop is capable of transporting bi-directional DS3
signals with a nominal transmission rate of 44.736 Mbit/s.
C. STUDY METHODOLOGY
DS1 &, DS3 Entrance Facility and DS1 & DS3 Capable Loop investments are calculated using a
Microsoft Excel spreadsheet based model called the HCLM (High Capacity Loop Module). The
HCLM model estimates the installed investment associated with circuits between a SWC and an End
User’s NI.
The Factor Application Program (FAP) was used to convert installed investments to TELRIC by
applying appropriate costs factors to the installed investment to develop the total cost per unit.
PAGE 3
D. DESCRIPTION OF TOTAL ELEMENT LONG RUN INCREMENTAL
COSTS
Qwest performs Total Element Long Run Incremental Cost (TELRIC) studies to estimate the economic
cost of providing network elements.1 The Qwest TELRIC studies identify the forward-looking costs
associated with the provision of the total quantity of a network element in the long run. The forwardlooking Qwest TELRIC studies identify the costs that are likely to be incurred in the future, and
consider the latest forward-looking technologies and methods of operation that are currently available.
These studies are not embedded or historical, and do not measure the impact of prior investment
decisions by the corporation. The Qwest TELRIC studies also identify the long run costs associated
with providing a network element—reflecting a time period over which all inputs (including changes in
the size of facilities, levels of investment, etc.) can be adjusted.
Qwest classifies costs on the basis of occurrence. Start-up costs are costs incurred only once—these
costs will not be incurred over the life of a UNE or Local Interconnection Service. One time start-up
costs may occur when a service capability is established (e.g., when operational support systems are
modified to enable unbundled access). These costs will not be incurred over the life of a UNE or Local
Interconnection Sservice, even when service orders are processed. Nonrecurring costs are incurred on
an ongoing basis over a service’s life. These costs normally result from a customer order, and are
predominantly labor-related. Nonrecurring costs are typically recovered through a nonrecurring rate
element. Recurring costs are the ongoing costs associated with providing a network element.
Recurring costs are generally investment-related and include both capital costs and operating expenses.
These costs are often presented as a cost per month or per unit of usage (e.g., minute of use) and are
incurred throughout the time period the network element is provided to a customer.
The Qwest cost study format disaggregates the cost results, on a unitized basis, into the following
components:
Direct Network Costs are direct product group costs. They include network related investment
based costs and Direct Product/Service Expenses. Investment Based Costs are associated with
recurring cost elements and include the capital costs (e.g., depreciation, return, and taxes) and
maintenance costs associated with the investment required for provisioning a network element.
Direct Product/Service Expenses are other product related costs associated with the provision of a
product/service element such as the labor-related expenses for non-recurring costs.
Direct Expenses are those expenses that vary directly with the provision of the product or service.
This includes Other Operating Taxes and Billing & Collection. Other Operating Taxes consists of
property taxes, gross receipts taxes, licenses & fees from Account 7240.
1 Qwest also performs Total Service Long Run Incremental Cost (TSLRIC) studies to estimate the economic cost of
providing services. Qwest TSLRIC studies identify the forward-looking costs associated with the provision of the total
quantity of a service in the long run.
PAGE 4
Marketing are direct product group costs. Marketing costs include product management and sales
expenses that Qwest’s accounting records typically allow tracking down to a particular product or
service group.
Network Operations include power, plant operations, testing, network administration, and
engineering costs, which are calculated on a per line basis for loop elements. Network operations
costs vary with the provision of all network elements, and are not common to the entire firm.
Support Assets and Uncollectibles are not directly associated with a specific network element.
These costs vary with the provision of all network elements, and are not common to the entire firm.
Support Assets are comprised of the investment related costs and maintenance expenses associated
with the Network Support Assets, General Support Assets, and General Purpose Computers.
Uncollectibles are uncollectible revenues associated with wholesale LIS/UNE/Resale revenues.
Total Element Long Run Incremental Costs (TELRIC) represent the sum of Direct Network
Costs (Investment Based Costs and Direct Product/Service Expenses), Direct Expenses (Other
Operating Taxes and Billing & Collection), Marketing, Network Operations, Support Assets and
Uncollectibles. This measure of costs includes the forward-looking costs incurred in the provision
of a network element. This measure of costs is consistent with TELRIC as defined by the FCC.
Common Costs are associated with the enterprise as a whole. These costs do vary based on the
total size of the firm, but may not vary with the provisioning of individual network elements.
These costs are avoidable only with the elimination of the entire firm, and are sometimes referred
to as general overhead costs.
Fully Allocated Costs represent the sum of Total Element Long Run Incremental Cost plus
Common Costs (TELRIC + CC).
E. STUDY ASSUMPTIONS
a.
Costs are based on a forward looking scorched node scenario and represent the cost of fully
replacing the network required to provision the service, beginning from the existing locations of
network nodes used by Qwest today.
b.
All Network investments are forward looking and all costs displayed are at a 2006 level.
c.
Cost results are based on 9.6% Cost of Money (COM).