STATE OF VERMONT
PUBLIC SERVICE BOARD
Joint Petition of Verizon New England Inc.
d/b/a Verizon Vermont, Certain Affiliates
Thereof and FairPoint Communications, Inc.
For approval of asset transfer, acquisition of
Control by merger and associated transactions
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SURREBUTTAL TESTIMONY OF
F. WAYNE LAFFERTY
ON BEHALF OF
THE DEPARTMENT OF PUBLIC SERVICE
August 10, 2007
Docket No. 7270
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A. IDENTIFICATION AND QUALIFICATION OF WITNESS
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Q.
What is your name and business address?
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A.
My name is F. Wayne Lafferty and my business address is 2940 Cedar Ridge Drive,
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McKinney, Texas 75070.
Q.
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Are you the same F. Wayne Lafferty who filed direct testimony in this proceeding
on May 24, 2007?
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A.
Yes.
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Q.
Mr. Lafferty, on whose behalf are you testifying in this proceeding?
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A.
My testimony is presented on behalf of The State of Vermont Department of Public
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Service (Department).
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B. PURPOSE OF SURREBUTTAL TESTIMONY
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Q.
Mr. Lafferty, what is the purpose of your Surrebuttal Testimony?
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A.
My surrebuttal testimony provides the Vermont Public Service Board (Board) with a
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response to portions of the rebuttal testimony of FairPoint Communications, Inc.
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(FairPoint) and Verizon New England, Inc. (Verizon).
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testimony addresses the following regulatory and competitive matters raised in the
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FairPoint and Verizon rebuttal testimony:
Specifically my surrebuttal
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
FairPoint’s obligations as a Bell Operating Company (BOC) successor.
20

Wholesale and Interconnection Agreements and Requirements.
21

Competitive safeguards.
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
Appropriate Regulatory Framework for FairPoint in Vermont.
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 1
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In each area, I recommend several conditions which the Board should apply if it
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determines that the acquisition is to be approved. I believe the Board should address all
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of these issues in its analysis of the proposed acquisition of the Verizon wireline assets in
4
Vermont by FairPoint.
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C. SUMMARY OF TESTIMONY
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Q.
Please provide a summary of your Surrebuttal Testimony.
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A.
My surrebuttal testimony responds to the regulatory and competitive issues raised in
9
FairPoint’s rebuttal testimony. In many cases FairPoint appears to making commitments
10
which are very similar to the conditions I proposed to the Board; therefore, FairPoint
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appears to agree in principle to many of the requirements I proposed. 1 However, if the
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Board decides to approve the acquisition, the company does not believe it is necessary for
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the Board to adopt any formal conditions. I disagree. Firm conditions established by the
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Board would provide clear direction to FairPoint, customers, competitors and the Verizon
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employees without adding unnecessary burden to FairPoint.
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FairPoint has been clear that it intends to meet Verizon’s regulatory and competitive
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obligations including adopting Verizon’s tariffs, interconnection contracts (ICAs) and
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other competitive requirements, Statement of Generally Acceptable Terms (SGAT),
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amended Alternative Regulatory Plan (Amended ARP) and amended Service Quality
21
Reliability Plan (Amended SQRP). In addition, FairPoint has agreed to meet Verizon’s
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obligations as a Bell Operating Company (BOC) associated with Section 271 of the 1996
1
A complete list of proposed conditions will be provided later in my surrebuttal testimony.
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 2
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Telecommunications Act (1996 Act). FairPoint has also agreed not to assert a rural
2
exemption for the acquired Verizon exchanges. If it approves the acquisition, the Board
3
should adopt all of these FairPoint commitments as conditions. Furthermore, FairPoint
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should be required to either assume Verizon’s ICAs or adopt new agreements which
5
mirror those of Verizon. In addition, several of Verizon’s regulatory obligations are due
6
to its classification as a BOC and while the Board may not be able to classify FairPoint as
7
a BOC, the Board should adopt as state regulatory policy for FairPoint the BOC
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obligations outlined in the 1996 Act.
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FairPoint’s testimony indicates its systems and processes for wholesale customers,
11
including competitive local exchange carriers (CLECs), will be very similar to Verizon
12
and/or follow the most current industry standards. However, it is possible wholesale
13
customers might be forced to make changes to their own systems solely as a result of the
14
acquisition. In these limited cases, FairPoint should provide compensation to wholesale
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customers including impacted CLECs and neighboring systems which incur costs.
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FairPoint should also provide the same billing options to customers which were available
17
from Verizon.
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consistent with providing non-discriminatory treatment to retail and wholesale customers
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including CLECs.
Furthermore, FairPoint’s business rules and processes should be
20
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FairPoint and other parties provided significant testimony addressing the challenges of
22
the system development and conversion process. While a complete operational support
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system (OSS) certification process may be unnecessary, verification that FairPoint’s
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 3
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systems are consistent with the market opening requirements of the 1996 Act should be
2
included in the criteria followed by the independent monitor proposed by Mr. Mills in his
3
testimony.
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From a regulatory standpoint FairPoint should adopt and follow the terms of the ARP for
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tariff changes, introduction of new services and bundles.
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restricted from offering new bundles or packages as long as it follows the parameters of
8
the ARP. The Board should adopt FairPoint’s agreement to prorate the volume for
9
special access and other services to ensure its customers receive the same pricing
10
FairPoint should not be
treatment available from Verizon before the closing.
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Many questions and challenges have been raised by other parties and have been
13
addressed by FairPoint in its rebuttal testimony. If the Board decides to approve this
14
acquisition, it is clear that firm conditions should be established to ensure FairPoint meets
15
all of its commitments and the transaction is beneficial to customers.
16
Q.
If the Board decides it is appropriate to approve the acquisition, what conditions
17
should be adopted to ensure FairPoint meets its regulatory and competitive
18
obligations in Vermont?
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A.
If this acquisition is to be approved, it is critical the Board establish clear conditions for
20
FairPoint. Following is a summary of the conditions I propose for FairPoint for the
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acquired Verizon Vermont properties in my testimony as amended where appropriate by
22
my surrebuttal testimony.
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 4
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
FairPoint should provide the Board and Department updates on the FCC
2
approval status for the license transfers under section 310(d) of the FCC’s
3
rules and the section 214 authorizations prior to closing. Final approval of the
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Acquisition in Vermont should be conditioned on FairPoint obtaining the
5
required approvals from the FCC.
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
FairPoint and Verizon should provide notice to the Board and Department of
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receiving regulatory approval in Maine and New Hampshire prior to closing
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on the transaction in Vermont.
9
should be required to obtain specific Board approval to close the Vermont
10
portion of the acquisition without closing the Maine and New Hampshire
11
portions.
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
In the alternative FairPoint and Verizon
FairPoint should adopt all of Verizon’s ICAs and other contracts. Where a
13
contract cannot be adopted, FairPoint should implement contracts which
14
mirror the rates, terms and conditions in Verizon’s contracts. All services
15
offered to wholesale customers including CLECs under contract, the SGAT or
16
tariffs by Verizon prior to close should be continued under the same rates,
17
terms and conditions and following the same processes by FairPoint.
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
FairPoint has agreed to extend in writing all carrier agreements (including
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ICAs) in effect as of the closing date for one-year following the stated
20
expiration date including agreements which have expired or renewed on a
21
month by month basis.
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condition.
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
The Board should also adopt this proposal as a
FairPoint must adopt all other Section 251 and 252 obligations of Verizon.
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 5

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FairPoint should compensate wholesale customers including CLECs and
2
owners of neighboring systems which must make any modifications to
3
systems solely as a result of the acquisition.

4
FairPoint should file tariffs which match the rates, terms and conditions in
Verizon Vermont’s current tariffs.
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
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FairPoint should prorate all volume pricing provided for in any tariff or other
7
agreement such that the volume pricing terms exclude volume requirements
8
from states outside of the acquired Verizon operations.

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FairPoint should adopt the Verizon Amended ARP, Amended SQRP, SGAT
10
and performance assurance plan (PAP) for the acquired Vermont operations.
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All tariffs and rates should comply with Verizon’s obligations under the ARP,
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SGAT or other applicable regulatory requirements.

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If FairPoint fails to meet any of the broadband deployment or service quality
14
requirements of the Amended ARP or the Amended SQRP, it should be
15
required to freeze dividend or other payments by the acquired Verizon
16
Vermont property to the FairPoint Parent Company. 2

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The Board should adopt the Section 271 Checklist, SGAT, Section 251 (f)(2)
18
2% exemption and Section 272 affiliate transaction requirements for FairPoint
19
as regulatory policy in Vermont.

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An independent monitor should be established to ensure FairPoint’s system
21
conversion process is implemented in a manner which eliminates risk to
22
customers, and the monitor should include as one of its criteria an assurance
2
Mr. Wheaton discusses FairPoint’s concerns with this condition in his surrebuttal testimony.
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 6
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that FairPoint’s systems comply with the market opening requirements of the
2
1996 Act.
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4
FairPoint must not seek a rural exemption in Vermont under Section 251(f)(1)
of the 1996 Act for the acquired Verizon Vermont properties.

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FairPoint should work with its wholesale customers to develop a proposal to
the Board for a “Rapid Response Team” within six months of the closing.
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
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FairPoint should appoint a senior level person with responsibility for
8
communicating with the Board and Department.
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located in Vermont to be readily accessible by the Board and Department.

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This person should be
Neither FairPoint nor its wholesale customers including CLECs should use the
11
process for adopting or obtaining a required new ICA to renegotiate any
12
aspect of an existing ICA.

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FairPoint should complete any of the identified service improvement projects
which Verizon has not completed prior to close.
Q.
Beginning on page 6 of his rebuttal testimony Mr. Skrivan provides a list of
16
potential conditions which includes some additional items you have not included.
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Should these items be included in the Board’s conditions?
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A.
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I would not be opposed to the additional conditions outlined by Mr. Skrivan being
included as long as these items did not conflict with the conditions I outlined above.
Q.
You noted that FairPoint has agreed to the substance of many of these
21
requirements, but opposes the Board establishing actual conditions. Could you
22
comment further on this dilemma?
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 7
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A.
Yes. A condition formally outlined in a Board order provides more certainty and limits
2
the potential for future confusion and disagreement. The Board should be encouraged by
3
the regulatory and competitive commitments being made by FairPoint through the
4
testimonies or Mr. Lippold and Mr. Skrivan among others. However, if FairPoint is
5
making a commitment, the company should have no concerns with the Board outlining
6
the commitment as a condition in its order. Since this acquisition presents the first time a
7
smaller carrier has acquired an entire BOC wireline business in a state (or multiple
8
states), it is certainly unique.
9
complete, previously untested OSS suite which provides significant risks to customers
10
and regulators. Furthermore, the commitments made by FairPoint could be open to
11
interpretation at a future point in time. Therefore, assuming the Board decides to approve
12
the acquisition, all parties are best protected by clear concise conditions spelled out in the
13
Board’s order and leaving little room for interpretation or disagreement.
Added to the uniqueness are FairPoint’s plans for a
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D. FAIRPOINT’S OBLIGATIONS AS A BELL OPERATING COMPANY
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Q.
Why is it important that FairPoint be treated like a BOC in Vermont?
17
A.
All incumbent local exchange carriers (ILECs) including BOCs are subject to most of the
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market opening provisions of Sections 251 and 252 of the 1996 Telecommunications Act
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(1996 Act). Among other things, these sections require ILECs to interconnect with other
20
carriers and provide unbundled network elements at cost-based rates in a
21
nondiscriminatory manner. However, the 1996 Act also has several provisions which do
22
not necessarily apply to non BOC entities. For example, in return for the ability to obtain
23
approval to enter the interLATA long distance market, Section 271 of the 1996 Act
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 8
1
requires BOCs to comply with additional market opening requirements known as the
2
“Section 271 Checklist” set forth in Section 271 (c)(2)(B) of the 1996 Act. As a BOC
3
Verizon is required to follow several of these provisions today and FairPoint should do
4
the same to allow competitors and consumers in Vermont to continue to enjoy the same
5
level of service and provide regulators the same level of oversight as with Verizon. In
6
testimony FairPoint has said it will meet all of the regulatory obligations which apply to
7
Verizon in Vermont; the Section 271 Checklist is one of those obligations. Therefore,
8
since FairPoint is not listed as a BOC in the 1996 Act, the Board must take action to
9
ensure FairPoint continues to meet the commitments made by Verizon and spelled out by
10
the Board in conjunction with the Board’s findings in compliance with the statutory
11
requirements enumerated in Section 271(c) of the Act.
12
Q.
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What other aspects of competitive protections or regulatory oversight specific to
BOCs are necessary for FairPoint in Vermont?
A.
FairPoint should also meet Verizon’s obligations associated with the Section 251(f)(2)
15
“2% exemption,” Statement of Generally Acceptable Terms (SGAT) and Section 272
16
BOC affiliate transactions and related requirements.
17
sections and FairPoint should be required to fully “step into Verizon’s shoes” by
18
complying with these requirements.
Verizon was bound by these
19
Q.
Has Verizon met the Section 271 Checklist requirements in Vermont?
20
A.
Yes. On January 16, 2002, the Board sent a letter to Verizon Vermont acknowledging
21
Verizon Vermont’s compliance with the requirements of Section 271 in the state (Board’s
22
Section 271 Letter). That letter in part stated the following:
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 9
“The record shows that Verizon VT has developed the tariffs, the
Statement of Generally Available Terms ("SGAT"), interconnection
agreements, processes, and procedures necessary for a competitive market
in Vermont. At this time, Verizon VT has taken the appropriate steps to
open the local exchange and exchange access markets in Vermont to
competition in accordance with standards set forth in the Act. We base
this decision on the evidence presented during our review of Verizon's
filing in this docket, as well as consideration of our decisions in prior
dockets in which we have taken active steps to ensure that we have
established a framework that allows effective and fair competition.
Therefore, we conclude that, upon satisfaction of the conditions specified
below, Verizon VT has demonstrated its compliance with the requirements
of Section 271.”
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A complete copy of the Board’s letter is attached as Exhibit FWL Surrebuttal 1.
16
It is clear from the Board’s letter that Verizon, the Board and other parties
17
invested significant time and money to ensure the local exchange market in
18
Vermont would be open to competition, and the acquisition of these markets by
19
FairPoint should not change the competitive landscape or level of regulatory
20
oversight.
21
Q.
22
23
Subsequent to the closing of the acquisition will FairPoint have the same market
power in Vermont as Verizon?
A.
Yes. FairPoint will be the incumbent LEC in the same fashion as Verizon and use the
24
same network with the same scale throughout the state as Verizon. It will operate the
25
only network in Vermont which reaches all parts of the current Verizon territory and will
26
maintain carrier of last resort obligations.
27
Q.
28
29
30
Do the parties agree on the application of the Section 271 requirements to
FairPoint?
A.
No. Mr. Ball testifying on behalf of Sovernet and segTEL proposes that FairPoint should
be subject to the same Section 271 regulation as Verizon (Ball Direct, page 22). In my
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 10
1
direct testimony I proposed that FairPoint be required to meet the Section 271
2
commitments made by Verizon in Vermont and adopt the Section 271 Checklist
3
requirements in the same manner as Verizon. However, FairPoint witness Skrivan claims
4
that FairPoint should not be treated as a BOC. (Skrivan, page 29). Thus, there are
5
significant differences among the parties. Absent resolution in some fashion by the
6
Board, the potential for future uncertainty about this issue is significant.
7
Q.
8
9
Why is it necessary for FairPoint to be bound by the 271 Checklist in the same
manner as a BOC?
A.
The 271 Checklist was established to provide significant market opening conditions in
10
BOC markets to provide competitors a chance to compete in exchange for allowing the
11
BOCs to participate in the interLATA long distance market. Verizon has met those
12
conditions in Vermont and competitors have had the benefit of the commitments made by
13
Verizon and the associated marketing opening requirements established by the Board and
14
the FCC.
15
testimony:
Furthermore, as Mr. Ball correctly concludes on page 18 of his direct
“Absent Section 271, FairPoint’s obligations to provide certain UNEs will
be limited to those available under the FCC’s impairment analysis
conducted in the TRO and TRRO. The FCC in the TRO has ruled that,
even if a UNE is no longer required based upon the 251 necessary and
impair standard, it still may be required under Section 271.”
16
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22
Given the FCC’s ruling in the TRO, the Board appears to have the latitude to require
23
Verizon to offer UNEs under Section 271 which would not otherwise be available under
24
Section 251. The Board should have the ability to treat FairPoint the same as Verizon.
25
26
Q.
Has FairPoint committed to provide the same services and meet the same
requirements as Verizon as found in the Section 271 Checklist?
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 11
1
A.
Yes. On Page 28 of his rebuttal testimony, FairPoint Witness Skrivan says the following:
“As a practical matter, FairPoint will agree to provide anything that
Verizon would be required to provide under the 14-point competitive
“checklist” set forth in section 271(c)(2)(B) of the Communications Act,
pursuant to the applicable pricing standard adopted by the FCC (as noted
in Mr. Nixon’s and Mr. Lippold’s testimony).”
2
3
4
5
6
7
8
Therefore, FairPoint does not seem to be opposed to meeting the requirements of the
9
Section 271 Checklist.
10
Q.
11
12
Is it necessary for the Board to specify that FairPoint is a BOC with all of the
regulatory requirements as Section 271?
A.
No. The Board only needs to adopt as state regulatory policy the same requirements as
13
found in the Section 271 Checklist.
14
complying with these requirements. To provide certainty to customers and avoid any
15
confusion and related disputes concerning FairPoint’s obligations in the future, the
16
current Verizon 271 Checklist requirements should continue with FairPoint.
17
treatment is clearly in the public interest.
18
Q.
FairPoint does not appear to be opposed to
Such
On page 28 of his rebuttal testimony Mr. Skrivan points out that in the past no non-
19
BOC has been deemed subject to Section 271 as a result of an acquisition. Why
20
should the Board establish different requirements in this case?
21
A.
Almost all of the parties have commented on the unique aspects of this acquisition.
22
Never before has a small rural incumbent local exchange carrier (RLEC) such as
23
FairPoint acquired all of the access lines and operations of an incumbent BOC in a state,
24
much less in three states. If this transaction closes, overnight FairPoint will become the
25
largest and most dominant LEC in all of northern New England.
26
acquisitions of BOC assets have been limited to groups of exchanges within a state. In
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Previous RLEC
Page 12
1
all of these past situations the BOC has continued to be the dominate LEC in the state.
2
Therefore this type of situation and some of the associated consequences faced by the
3
Board in this case have never been addressed in prior acquisitions.
4
Q.
5
6
Please explain the Section 251(f)(2) 2% exemption and its application to Verizon
and FairPoint in Vermont.
A.
Section 251(f)(2) provides ILECs serving less than 2% of the access lines in the United
7
States in the aggregate to petition the state commission (the Board in the case of
8
Vermont) for a suspension or modification of some or all of the requirements of
9
subsections b or c of Section 251. These subsections address the requirements for resale,
10
number portability, dialing parity, access to rights of way, reciprocal compensation, the
11
duty to negotiate interconnection, interconnection itself, unbundled network elements and
12
collocation. Companies meeting the 2% criteria are often called “2% Companies.” Since
13
it serves more than 2% of the aggregate access lines in the country, Verizon does not
14
qualify as a 2% Company; however, FairPoint currently qualifies and will continue to be
15
a 2% Company after the acquisition closes.
16
Q.
17
18
Why should FairPoint not be able to claim the exemption available under Section
251(f)(2)?
A.
The 2% exemption would provide FairPoint an opportunity to potentially avoid certain
19
competitive market opening obligations which Verizon currently is required to meet. The
20
acquisition should not be used as a tool to change the competitive and regulatory
21
safeguards appropriate for competitors and consumers in Vermont. On its own the
22
acquisition has not changed the level of competition in the state in any significant
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 13
1
manner. The public interest is best served by applying all necessary safeguards to ensure
2
the acquisition does not contribute to decreased competition in the future.
3
Q.
Doesn’t Section 251(f)(2) require the Board to make a finding that use of the 2%
4
exemption is appropriate before FairPoint or any other ILEC can use the
5
exemption?
6
A.
Yes. However, given the unique circumstances associated with this acquisition I cannot
7
envision any situation which would justify such a finding. Therefore, to provide certainty
8
to competitors and consumers that the acquisition will maintain the status quo for the
9
competitive landscape, the Board should specify that the 2% exemption will not apply to
10
FairPoint in the future. In addition, significant potential litigation which consumes Board
11
and other parties’ resources can possibly be avoided.
12
Q.
Please explain the importance of FairPoint adopting Verizon Vermont’s SGAT?
13
A.
The SGAT provides wholesale customers a single source of terms, rates and other
14
information concerning all wholesale services an ILEC offers to competitors. BOCs
15
developed, filed and obtained approval of SGATs usually in conjunction with the review
16
by state regulators of their potential to obtain Section 271 interLATA long distance
17
authority. Verizon has an approved SGAT in Vermont which is linked to the Board’s
18
website and has been updated periodically.
19
Q.
Has the Board recognized the importance of Verizon Vermont’s SGAT?
20
A.
Yes. In the Board’s Section 271 Letter, the Board wrote the following:
21
22
23
24
The record shows that Verizon VT has developed the tariffs, the Statement
of Generally Available Terms ("SGAT"), interconnection agreements,
processes, and procedures necessary for a competitive market in Vermont.
At this time, Verizon VT has taken the appropriate steps to open the local
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 14
1
2
3
4
exchange and exchange access markets in Vermont to competition in
accordance with standards set forth in the Act.3 {Emphasis added.}
As this letter notes, the Board made a connection between the SGAT and Verizon
5
Vermont’s steps to open the local exchange market to completion in accordance with the
6
1996 Act.
7
Q.
Are SGAT’s similar to tariffs?
8
A.
Yes. However, the format and approval process for changes can be different.
9
Q.
Could the SGAT be incorporated into Verizon’s or FairPoint’s tariffs?
10
A.
Yes. One option would be to convert the existing SGAT to a state wholesale services
11
tariff as recommended by Mr. Ball. Little work would be required as the new tariff could
12
include almost verbatim the existing SGAT language.
13
administrative benefits, but is not be required.
14
Q.
15
16
This solution might provide
If the Board decides not to require the SGAT be incorporated into a tariff, how
should the Board address the SGAT requirement for FairPoint?
A.
FairPoint should be required to adopt Verizon’s SGAT and maintain it on a going-
17
forward basis in the same manner as Verizon does today. FairPoint has already testified
18
that it will honor Verizon’s ICAs and comply with the obligations of Section 251 of the
19
1996 Act. On page 4 of his rebuttal testimony, Mr. Skriven states the following:
“FairPoint will: …
20

21
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
3
Assume or replicate Verizon’s interconnection and traffic
exchange agreements;
Comply with FairPoint’s obligations as an incumbent local
exchange carrier (“ILEC”) pursuant to section 251 of the federal
Communications Act, 47 U.S.C. Section 251 – and FairPoint will
not assert rural exemptions of its section 251 obligations pursuant
to section 251(f)(1) of the federal Communications Act.”
The complete letter is found in Exhibit FWL Surrebuttal 1.
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 15
1
2
In addition on page 6 of his rebuttal testimony Mr. Skrivan states the following:
“FairPoint has already committed to adopting Verizon’s rights and
obligations under state regulation in Vermont. The Board will retain its
authority to enforce tariffs, contracts, interconnection agreements and the
SGAT, as well as regulatory requirements.” {Emphasis added.}
3
4
5
6
7
8
Since the SGAT is clearly one of Verizon’s obligations, FairPoint should be required to
9
adopt the SGAT.
10
Q.
If the Board requires FairPoint to adopt the SGAT, does FairPoint lose the
11
flexibility to propose changes to the SGAT as the competitive marketplace and
12
FairPoint’s network and operations evolve?
13
A.
No. If the transaction is approved, after closing FairPoint can propose changes to the
14
SGAT at any point in time in the same manner as Verizon. FairPoint would not lose any
15
regulatory flexibility which Verizon did not have as a result of adopting Verizon’s SGAT
16
in Vermont.
17
Q.
Is FairPoint required to follow the SGAT for all CLEC customers?
18
A.
No. FairPoint and individual CLECs or groups of competitors can negotiate different
19
requirements as part of an ICA. Thus, FairPoint (and competitors) do not lose any
20
flexibility to customize solutions to individual circumstances.
21
Q.
The last area you mentioned where the Board should apply BOC type requirements
22
to FairPoint addresses affiliate transactions. Please explain the requirements which
23
should apply to FairPoint.
24
A.
In his direct testimony Mr. Wheaton discusses the importance of properly managing
25
affiliate transactions and proposes that FairPoint maintain a separate legal entity for its
26
Vermont operations. In their rebuttal both Mr. Leach and Mr. Skrivan discuss issues
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 16
1
related to a separate Vermont legal entity and cost allocations among affiliates. FairPoint
2
dismisses the need for a separate legal entity or any additional affiliate transactions
3
requirements.
4
5
All ILECs are required to follow the FCC’s Part 64 cost allocation rules to allocate
6
expenses and investments between regulated and deregulated operations and among
7
affiliates. On pages 17-18 of his rebuttal testimony Mr. Skrivan mentions that FairPoint
8
is already subject to the FCC’s Part 32 and 64 rules which address among other things
9
affiliate transactions.
Mr. Skrivan believes the FCC rules are adequate to control
10
FairPoint’s affiliate transactions and claims it is unnecessary for the Board to place any
11
specific restrictions on FairPoint’s affiliate relationships. However, Sections 272(a-e)
12
and 272 (g) of the 1996 Act provide specific affiliate transactions safeguards for BOCs.
13
While Section 272(f) provides a sunset for many of the Section 272 requirements, which
14
has occurred in Vermont, the Section 272(e) non-discrimination requirements applicable
15
to BOCs continue for Verizon in the state and should apply to FairPoint.
16
Q.
Does FairPoint plan to operate multiple affiliates?
17
A.
Yes. Even if the Board does not require FairPoint to operate the acquired Verizon
18
Vermont property as a separate affiliate from the acquired New Hampshire and Maine
19
operations, FairPoint will have at least two operations in Vermont – its embedded (i.e.
20
classic) property and the former Verizon exchanges. It also has operating companies in
21
many other states.
22
23
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 17
1
Q.
Does FairPoint plan to provide both traditional regulated and deregulated services?
2
A.
Yes. Initially, with the exception of bundles including wireless services, FairPoint plans
3
to offer all the same services and bundles currently available from Verizon. Some of
4
these bundles include services provided by Verizon as a BOC through more than one
5
affiliate. In addition, FairPoint has announced its intention of introducing additional
6
bundles and pursuing a wireless product partnership. New services and bundles are
7
designed to provide choice to customers and should be encouraged. However, the Board
8
must ensure that customers purchasing mainly traditional regulated services do not
9
unwillingly subsidize customers purchasing bundles of regulated and deregulated
10
services.
11
Q.
Should the Board apply the Section 272(e) BOC affiliate requirements to FairPoint?
12
A.
Yes. FairPoint has stated that it will accept Verizon’s regulatory obligations in Vermont,
13
and it should be required to comply with the affiliate transactions requirements in the
14
same manner as Verizon. If FairPoint does not establish a separate legal entity for
15
Vermont, these requirements are even more important to ensure costs and investments are
16
properly allocated among FairPoint’s operations especially in the northern New England
17
states.
18
Q.
19
20
21
22
23
24
25
Has FairPoint acknowledged its intention to follow the FCC’s affiliate transactions
and cost allocation rules?
A.
Yes. On page 17 or his rebuttal testimony Mr. Skrivan states the following:
“…FairPoint is already subject to applicable federal requirements which
include allocations of costs between regulated and deregulated operations
pursuant to Part 64, distributions of corporate costs pursuant to its Cost
Allocation Manual (CAM) and compliance with affiliate transaction rules
in accordance with Part 32 rules.”
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 18
1
2
However, Mr. Skrivan also expresses a concern that any additional conditions associated
3
with affiliate transactions might be confusing, but he also notes the following:
“… in the event the Board finds it necessary to impose conditions on
affiliate transaction, I suggest that any such restrictions recognize that
FairPoint must comply with Part 32 and Part 64 requirements in the event
of any discrepancy between state and federal requirements.”
4
5
6
7
8
9
Therefore, FairPoint appears to acknowledge the requirement to comply with the FCC’s
10
Part 32 and 64 rules which cover most of the requirements of Section 272 of the 1996
11
Act. Compliance with Part 32 and 64 rules can be paramount; however, the affiliate
12
transactions and cost allocation requirements in Section 272 should also apply to
13
FairPoint in the same manner as Verizon.
14
Q.
15
16
What action should the Board take with respect to the regulatory requirements
associated with affiliate transactions and cost allocations?
A.
Not withstanding the related conditions proposed by Mr. Wheaton and Mr. Campbell, the
17
Board should require FairPoint to follow the BOC requirements of Section 272(e).
18
FairPoint has multiple affiliates which provide services in Vermont and plans to offer
19
bundles which will likely include regulated and non-regulated services and services
20
which can be provided by multiple affiliates.
21
FairPoint already recognizes the importance of following the FCC’s affiliate transactions
22
and cost allocations rules. Therefore, the Board can apply the BOC requirements without
23
adding any administrative burdens to FairPoint, and customers and regulatory authorities
24
will be assured that FairPoint operates in the same manner as Verizon.
Based on Mr. Skrivan’s testimony,
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 19
1
Q.
Is it necessary for the Board to specifically classify FairPoint as a BOC to apply the
2
BOC requirements of the 1996 Act to FairPoint and obtain the competitive and
3
regulatory safeguards inherent in these obligations?
4
A.
No. As discussed earlier, the Board can adopt as state regulation the same applicable
5
requirements found in the 1996 Act and associated FCC and states rules which apply to
6
Verizon as a BOC. Nothing in the Act prohibits the Board from adopting the same rules
7
as the FCC. For example, many states require ILECs to follow the FCC’s Part 32 rules,
8
which FairPoint acknowledges it will in Vermont. To give customers a level of certainty
9
that affiliates and non-affiliates are treated the same will help avoid confusion and related
disputes concerning FairPoint’s obligations in the future.
10
11
Q.
12
13
Are there any other aspects of BOC type regulatory requirements which the Board
should address?
A.
Yes.
In my direct testimony I discussed the importance of FairPoint certifying its
14
systems in a manner similar to that which Verizon was required to do prior to receiving
15
its Section 271 approval. In that situation Vermont followed closely the system testing
16
work done for Verizon in Massachusetts. Once FairPoint converts to its new system
17
platform, competitors will no longer have the security of the previous testing work or the
18
proven Verizon system capabilities.
19
discriminatory treatment and receive services in a timely and accurate manner, a system
20
certification process appeared to be a rational solution.
Therefore, to assure competitors receive non-
21
22
23
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 20
1
Q.
2
3
Do you have any new thoughts in light of FairPoint’s rebuttal and other testimony
in this proceeding?
A.
Yes. In his testimony Mr. Lippold discusses in detail FairPoint’s plans for developing its
4
systems, training its employees, testing systems, training wholesale customers which
5
FairPoint believes provides a robust plan to ensure competitors and other wholesale
6
customers are treated fairly, service orders are processed properly and billing is accurate
7
among other things. All else being equal these commitments by FairPoint would be
8
inadequate as no independent third-party review is proposed. However, Mr. Mills has
9
proposed that an independent monitor be appointed to oversee the system development
10
and conversion process. In lieu of a certification process, one of responsibilities for the
11
independent monitor could be to ensure that the new systems are developed and
12
implemented to comply with the competitive market opening requirements of the 1996
13
Act. Given the importance of a successful system conversion process and the role of the
14
independent monitor to help provide the Board some assurance that the system
15
development and conversion process is accurate, a separate OSS certification process
16
might be duplicative and disruptive for FairPoint.
17
Q.
Do you have an alternate proposal?
18
A.
Yes. Assuming the independent monitor proposal is adopted by the Board, I would
19
propose the independent monitor include, as one of the criteria for moving forward with
20
conversion, that verification that FairPoint’s new systems are developed and
21
implemented in a manner which is consistent with the requirements established for
22
Verizon’s systems during the Section 271 approval process. Compliance with the market
23
opening requirements of the 1996 Act is clearly critical to FairPoint’s wholesale
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 21
1
customers that will use the company’s OSS for pre-ordering, ordering, provisioning,
2
billing and other functions. Under this scenario a separate pre-conversion certification
3
process would not be necessary and potential duplication could be avoided.
4
Q.
Once the conversion is complete and the independent monitor is no longer checking
5
the conversion process, how would the Board be assured that FairPoint’s systems
6
continue to treat competitors in a non-discriminatory manner?
7
A.
The Board should require FairPoint to conduct an independent audit one year after the
8
final conversion to test whether its systems operate in a manner that provides accurate
9
information to wholesale customers in a non-discriminatory manner. The audit should be
10
paid for by FairPoint using an outside firm selected by the Department.
11
Q.
Might there be circumstances under which the audit would not be necessary?
12
A.
Yes. If FairPoint can provide evidence to the Board that its systems are operating in the
13
appropriate manner and providing competitors the same level of service as Verizon prior
14
to the closing, FairPoint could be relieved of the requirement to conduct the independent
15
audit.
16
comment on FairPoint’s request to cancel the audit.
Competitors and other wholesale customers can be given an opportunity to
17
18
E. WHOLESALE AND INTERCONNECTION AGREEMENTS AND REQUIREMENTS
19
Q.
On page 18 of his rebuttal testimony, FairPoint witness Brian Lippold discusses
20
FairPoint’s plans to “assume Verizon’s obligations under applicable interconnection
21
and traffic exchange agreements with other carriers.” 4 If the Board decides to
4
Mr. Nixon made similar claims in his direct testimony.
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 22
1
approve the acquisition, should it establish a condition that FairPoint adopt all
2
Verizon ICAs?
3
A.
Yes. This condition will provide clarity to competitors, customers and regulators. Since
4
FairPoint has stated its intention to assume Verizon’s obligations, it should not be
5
opposed to such a condition. This condition will ensure competitors have the same
6
opportunities with FairPoint as they did with Verizon in Vermont.
7
Q.
Mr. Lippold goes on to testify “Where these agreements cannot be assigned,
8
FairPoint has said that: [i]f an ICA is not assignable, then FairPoint would propose
9
to enter into a mirror agreement with such CLECs.” {Emphasis added.} Should the
10
Board establish a condition that requires all FairPoint ICAs for the acquired
11
Verizon Vermont operations to “mirror” the Verizon agreements?
12
A.
Yes. FairPoint appears to agree with the substance of this condition. However, their
13
testimony is somewhat contradictory. On one hand Mr. Lippold uses the term “mirror”
14
which usually means the same. However, in the very next sentence on page 18 he uses
15
the term “essentially the same agreement” which opens the door for deviations. In
16
addition, on page 6 of his rebuttal testimony, Mr. Skrivan claims “… FairPoint will
17
implement contracts with substantially the same rates, terms and conditions…”
18
{Emphasis added.}. It is hard to tell whether some of FairPoint’s ICAs will deviate in
19
some manner from the Verizon agreements. I realize that FairPoint may need to carve
20
other states out of an ICA; however, any other changes to the rates, terms and conditions
21
should not be permitted. The combination of FairPoint’s agreement to assume ICAs
22
where possible and develop “mirror” agreements in other situation suggests FairPoint
23
should not be opposed to a condition which requires its initial ICAs contain the same
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 23
1
rates, terms and conditions as the Verizon agreements. In addition, the confusion which
2
has arisen over the language used by FairPoint to discuss this obligation further heightens
3
the need for a specific condition from the Board that FairPoint adopt Verizon’s ICAs or
4
enter into “mirror” agreements with CLECs where adoption is not possible.
5
Q.
Mr. Lippold on pages 3 through 6 discusses FairPoint’s plans for its OSS.
6
According to his testimony, FairPoint’s systems will be the same or better than
7
Verizon’s systems and will comply with the current industry standards. Should
8
FairPoint’s new systems provide competitors the same level of service as Verizon’s
9
OSS?
10
A.
Yes. In many cases it appears FairPoint’s OSS will provide wholesale customers the
11
same level of service as Verizon’s systems. Mr. Mills discusses the status of FairPoint’s
12
system development and conversion plans in this testimony.
13
regulatory policy standpoint, the acquisition of the Verizon Vermont operations by
14
FairPoint should not change any OSS requirements for competitors.
15
Q.
However, from a purely
On pages 19-20 of his rebuttal testimony Mr. Lippold claims FairPoint should not
16
bear any costs for changes to CLEC systems which are required due to the new
17
FairPoint systems. He supports this argument at least partially with a claim that
18
FairPoint’s new systems will comply with current industry standards.
19
FairPoint’s systems meet current industry standards should FairPoint still be
20
required to compensate CLECs for any system change expenses?
21
A.
If all
In some circumstances, yes. If the only cause of a CLEC incurring expenses to modify
22
its systems is the acquisition of the properties by FairPoint, then FairPoint should
23
compensate the CLEC.
Verizon also introduces new systems or makes changes to
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 24
1
existing systems; however, Verizon usually leaves the old system in place to provide
2
CLECs time to adopt the changes. Department discovery request DPS 3-104 requested
3
the following from Verizon:
4
5
Does Verizon plan to require its wholesale customers to change any
interfaces or systems to implement any new industry standards?
6
7
a. If the response is yes, provide a list of changes Verizon plans to
implement.
8
9
b. If the response is yes, are wholesale customers required to implement
the new standards?
10
Verizon provided the following response:
11
12
13
14
15
Generally speaking, when a new interface or system that affects wholesale
customers is implemented, Verizon leave the previous interface or systems
in place for a period of time.
Verizon also references its change management process which addresses the process for
16
among other things implementing changes to bring its OSS to the level required by new
17
industry guidelines. FairPoint is not following the Verizon change management process.
18
The driving force for the system changes is the acquisition, not the industry standards.
19
Verizon would not have required a flash cut to a new standard.
20
Q.
Are there any other possible alternatives for resolving this situation?
21
A.
Yes.
FairPoint appears to have established a dialog with CLECs; Mr. Lippold’s
22
background with Level 3 and other competitive carriers should be helpful to FairPoint in
23
maintaining communications and relations with wholesale customers including CLECs.
24
FairPoint could hold a workshop with its interested CLEC customers to jointly determine
25
what changes, if any, CLECs will be required to make and whether any compensation is
26
necessary. Joint planning could both resolve any CLEC exposure for the changes posed
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 25
1
by FairPoint’s choice of a new OSS and build the customer-supplier relationships
2
necessary for competition to expand in the state.
3
Q.
Would the same requirements for FairPoint to work with CLECs and ensure the
4
appropriate system modifications are made apply to other non CLEC neighboring
5
systems?
6
A.
Yes. While on page 20 of his rebuttal testimony Mr. Lippold FairPoint argues “there is
7
no precedent for requiring an ILEC to compensate owners of neighboring systems for
8
costs to modify their systems,” there is no precedent for this type of unique acquisition.
9
The current situation faced by neighboring carriers, wholesale customers and regulators is
10
unique. In all previous acquisitions involving BOC access lines, the BOC has continued
11
to be the dominant ILEC in the state and few changes by neighboring carriers have been
12
required.
13
relatively small companies, should not be precluded from requesting FairPoint
14
compensate them for any expenses associated with OSS changes which result solely from
15
the acquisition.
16
Q.
17
18
19
20
21
22
23
24
25
In this situation, the owners of neighboring systems, some of which are
Will FairPoint offer its wholesale customers the same alternatives for billing as
Verizon?
A.
No. Regarding the available billing options, Verizon provided the following response to
DPS 3-103:
“The formats by which a Verizon wholesale customer in Vermont can
receive its billing statements are as follows:
Electronic Transfer via Electronic Data Interchange (EDI)
Magnetic Tape
CD-ROM
Printed Hard Copy…”
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 26
1
On page 5 of his rebuttal testimony Mr. Lippold states that “FairPoint will support paper
2
statements and on-line statements.”
3
Q.
4
5
Should FairPoint be able to use the acquisition to cause a wholesale customer to
change its method of receiving a bill?
A.
No. Unless a wholesale customer agrees to the change, FairPoint should be required to
6
offer the same billing options as Verizon. Given the apparent plans for FairPoint to
7
reduce the number of billing alternatives, the Board should establish a condition that
8
FairPoint provide CLECs the opportunity to receive bills in the same manner as Verizon.
9
Wholesale customers can agree to make a change, but should not be forced to do so.
10
Q.
Mr. Lippold notes that FairPoint has begun a dialogue process with wholesale
11
customers about the expected impacts, if any, from the conversion to FairPoint’s
12
planned systems. Is a condition related to communication still required?
13
A.
The communication noted by Mr. Lippold is good and should be encouraged. While a
14
specific condition associated with FairPoint’s communication with customers may not be
15
necessary, the conversion to FairPoint’s new OSS should not be permitted until the
16
independent monitor discussed in Mr. Mills’ testimony is comfortable that FairPoint’s
17
OSS are developed in a manner consistent with the market opening requirements of the
18
1996 Act. In addition, as noted earlier the Board should require FairPoint to assume all
19
Verizon ICAs or develop mirror agreements. Most, if not all, of these agreements will
20
contain notice periods which can be enforced to ensure CLECs are kept informed of all
21
relevant changes in the proper manner.
22
23
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 27
1
Q.
2
3
FairPoint has also offered training for wholesale customers. Should this training be
mandatory and who should bear the costs?
A.
The Board should require FairPoint to offer the training.
The development and
4
presentation costs for the training should be borne by FairPoint. The decision whether to
5
attend and the associated costs of attending should be left up to each specific wholesale
6
customer. Given the communication process in place and related commitments made by
7
FairPoint, wholesale customers should be able to decide whether to attend formal
8
training.
9
Q.
Even FairPoint acknowledges wholesale customers will experience some changes as
10
a result of the acquisition to FairPoint’s OSS. FairPoint plans to provide wholesale
11
customers notice of the new systems six months in advance of cutover.
12
previously recommended FairPoint not implement the conversion until each
13
interconnecting carrier provided written notification that it is ready for the change.
14
Given the plans presented by FairPoint and other safeguards proposed by the
15
Department, is it still necessary for each wholesale customer to provide written
16
notice to FairPoint that it is prepared for the change?
17
A.
You
No. The appropriate condition should be that FairPoint provide all wholesale customers
18
including CLECs and neighboring systems at least six months notice of the planned
19
conversion.
20
concludes that FairPoint’s OSS meets the market opening requirements of the 1996 Act,
21
no formal response from wholesale customers is necessary. However, should the Board
22
not adopt Mr. Mills’ proposal, additional safeguards concerning the cutover such as
23
formal acceptance by wholesale customers would be necessary.
Assuming the independent monitor proposed in Mr. Mills’ testimony
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 28
1
Q.
According to Mr. Lippold on page 24 of his rebuttal testimony FairPoint does not
2
plan to use the process for adopting or obtaining the required ICAs to renegotiate
3
any aspects of existing ICAs. Do you agree?
4
A.
Yes. Neither FairPoint nor CLECs should be allowed to renegotiate any aspects of the
5
agreements as part of the process for adopting or obtaining the required ICAs associated
6
with the acquisition. The Board should establish this condition to protect both CLECs
7
and FairPoint from any changes. Most ICAs contain a process for requesting changes
8
which can be followed by either party.
9
arbitration process. The acquisition approval proceeding is not the appropriate place for
10
Furthermore, most agreements contain an
any party to renegotiate or change any aspect of the agreements.
11
12
13
F. COMPETITIVE SAFEGUARDS
Q.
On pages 11 and 12 of his rebuttal testimony Mr. Lippold provides a list of
14
components for the business and wholesale organization training. Do you have
15
anything to add to the list?
16
A.
Yes. On the surface FairPoint’s plans appear to be comprehensive. While it may be
17
inherent in the plans outlined by Mr. Lippold, FairPoint should clearly state and the
18
Board should require FairPoint to establish business rules and processes and train its
19
personnel to ensure parity in the treatment of wholesale CLEC and retain customers in all
20
aspects of service. Until such time as FairPoint, its wholesale CLEC customers and other
21
interested parties can negotiate appropriate, if any, changes to the Performance Assurance
22
Plan (PAP) consistent with the competitive market characteristics of Vermont, FairPoint
23
should be required to follow the current Verizon PAP.
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 29
1
Q.
2
3
of the acquisition?
A.
4
5
Will the level of local service competition in Vermont change significantly as a result
No. FairPoint will merely step into Verizon’s shoes as the largest LEC in the state and
will be the dominate provider of wireline local exchange service in Vermont.
Q.
Beginning on page 27 of his rebuttal testimony Mr. Lippold responds to a proposal
6
that “… FairPoint implement a “rapid response team similar to that created in
7
Maine…” Do you agree with the formation of such a team?
8
A.
Yes.
The unique aspect of this acquisition and the challenges faced by FairPoint
9
becoming the largest ILEC in several states as well as converting to an entirely new OSS
10
platform raise the potential for more disputes than normal. The rapid response team
11
would be a vehicle to quickly respond to problems which could not have been foreseen.
12
Both FairPoint and its customers could benefit.
13
Q.
Is FairPoint opposed to the concept of a rapid response team?
14
A.
No.
According to Mr. Lippold FairPoint will discuss the idea with its wholesale
15
customers. In addition, this team could reduce the burden on regulators from having to
16
resolve disputes in the future.
17
Q.
18
19
What condition would help to bring the benefits of this type of process to FairPoint
and its wholesale customers?
A.
FairPoint should be required to work with its wholesale customers to jointly develop a
20
proposal for a rapid response team and report back to the Board within six months of the
21
closing. The Department should be invited to participate in the process.
22
23
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 30
1
2
G. APPROPRIATE REGULATORY FRAMEWORK FOR FAIRPOINT IN VERMONT
Q.
Beginning on page 23 of his rebuttal testimony Mr. Lippold discusses FairPoint’s
3
commitment to not seek increases to tariff special access rates for 18 months after
4
closing and following all terms of the Amended Vermont Incentive Regulation Plan
5
(ARP). Mr. Skrivan discussed a similar situation beginning on page 18 of his
6
rebuttal testimony.
7
aspects of tariffs associated with access and interconnection services, was it your
8
intent to change any aspect of ICAs, the SGAT or the ARP?
9
A.
No.
In your direct testimony, when you proposed freezing all
FairPoint should adopt the current Verizon ARP and SGAT in Vermont as
10
committed in Mr. Lippold’s and Mr. Skrivan’s rebuttal testimonies. The aspects of that
11
plan which address access and interconnection pricing, terms and conditions should apply
12
to FairPoint in the same manner as Verizon. Any changes required by law under the plan
13
should be followed by FairPoint. Any compensation to customers or other parties should
14
be addressed by the terms of the ARP.
15
Q.
16
17
concerning tariffs, the ARP and the SGAT?
A.
18
19
If the Board approves the acquisition, should the Board include a commitment
Yes. FairPoint has agreed to adopt Verizon’s tariffs, ARP and SGAT and therefore
should be in agreement with a condition which mirrors these commitments.
Q.
Mr. Lippold also commits FairPoint to “prorate all volume pricing provided for in
20
agreements of either type of agreement described above, so such volume pricing terms
21
will be deemed to exclude volume requirements from states outside of the 3-state area.”
22
Does this commitment address the issues related to volume pricing arrangements
23
outlined in your direct testimony?
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 31
1
A.
To the extent “either type of agreement” covers the tariffs, SGAT, ICAs and ARP, yes.
2
Prorating the volume requirements to allow customers to receive the same benefits as
3
prior to the acquisition will ensure customers are treated the same as by Verizon.
4
Q.
If the Board decides to approve the acquisition, should the Board include a
5
condition that FairPoint prorate the volume commitments in the manner outlined
6
by Mr. Lippold?
7
A.
Yes. This condition should not be controversial as FairPoint appears to agree with the
8
concept. Since access tariff arrangements are regularly reviewed by regulatory agencies,
9
the condition could include a caveat allowing for change of law situations to supersede
10
11
the condition.
Q.
Beginning on page 22 of his rebuttal testimony Mr. Skrivan discusses your proposal
12
for FairPoint to continue offering the existing Verizon bundles. He claims your
13
proposal would “freeze in place service offerings as they stand now” and “restrict
14
FairPoint from responding to customer needs…” Is this your intent?
15
A.
16
17
FairPoint the flexibility to introduce new services and bundles.
Q.
18
19
No. It is my intent to preserve these offerings and associated discounts, but permit
Did you propose continuing any bundling arrangements for Verizon wireline and
wireless services?
A.
Yes. However, I have since learned these arrangements may not be in place at the time
20
the acquisition closes. On July 27, 2007, in response to discovery, FairPoint provided the
21
following information:
22
23
24
“FairPoint intends to offer all of the bundled services that Verizon offers
at the time of close immediately after closing, for the lines of business and
assets being transferred to FairPoint. Verizon has notified FairPoint that
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 32
1
2
3
4
5
6
7
it intends to terminate the joint billing arrangement with Verizon Wireless
for Vermont, New Hampshire and Maine prior to close and expects
Verizon Wireless to directly bill its customers. Therefore, how the
customers will be notified of this change is a matter between Verizon and
Verizon Wireless.”
Thus, the issue of bundling Verizon wireline and wireless services appears to be outside
8
of the acquisition as Verizon will be terminating the arrangements.
9
Q.
Should FairPoint be allowed to introduce new bundles?
10
A.
Yes. Customers could benefit from new alternatives. However, FairPoint should be
11
required to follow the terms of the ARP (as it has committed) when it adds, changes or
12
eliminates any service or service bundle.
13
Q.
In her rebuttal testimony Verizon witness Pam Porell outlines several service
14
improvement projects Verizon has undertaken to address shortfalls in its reported
15
service quality results. What action should the Board take in this proceeding with
16
regards to these projects?
17
A.
Based on Ms. Porell’s testimony and discovery responses from Verizon and FairPoint, it
18
appears Verizon and FairPoint expect some, if not all, of the listed projects to be
19
completed by the closing date. If the Board decides to approve the acquisition, the only
20
required action would be to require FairPoint to complete any of the projects outlined by
21
Ms. Porell which have not been completed by the closing date.
22
Q.
Is it appropriate to require a specific condition required for this issue?
23
A.
Yes. FairPoint has outlined a variety of capital investment programs and spending plans
24
in its testimony, discovery responses and media advertisements. Given the size and
25
scope of FairPoint’s announced plans, it is possible these specific service improvement
26
projects cited by Verizon could get overlooked. The Board should ensure that FairPoint
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 33
1
makes it a priority to complete any portions of these projects which have not been
2
completed as of the closing date.
3
4
H. CONCLUSION
5
Q.
Does this conclude your Surrebuttal Testimony?
6
A.
Yes.
7
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007
Page 34
Exhibit FWL Surrebuttal 1
Surrebuttal Testimony of F. Wayne Lafferty (on behalf of the Department of Public Service)
August 10, 2007