Small ILEC Issues/Positions

Implementation of provider number portability for facility based competition relative to small ILEC's is one of the troublesome implementation areas alluded to in the Four Small LEC Position Paper of Cause 39983. This task force has focused primarily on moving ahead with number portability implementation for the major urban areas as fast as possible. The task force has not, however, given adequate consideration to the "real world" small ILEC implementation problems, economic impact upon the small ILEC areas nor the impact as measured by the rates paid by small ILEC subscribers. The benefits have been assumed and the implementation and economic impacts have been "shelved" to a future date. The task force appears to have taken a "one-size-fits-all" approach attempting to force a large urban company solution upon the distinctly different operating environment and characteristics of a small ILEC. In effect, the task force appears to have taken the view that since large companies have their number portability agenda and solution, small ILEC considerations should not delay or compromise the given solution. Since the small ILECs represent less than five percent of the Indiana access lines, such an approach is probably practical and reasonable as long as there is no negative economic impact on the small ILEC or its customers.

The Illinois Experience and Indiana Small ILECs

To date, the Indiana task force has focused its efforts on the Illinois task force experience. It is extremely important for the Commission to understand the significance of three facts:

1. No small ILEC was involved, even in the meetings on number portability, in Illinois. As a result, no small ILEC billing system vendors were involved. While switch manufacturers may create solutions for number portability, other small ILEC critical system considerations (such as operational support systems) have not been analyzed. In Illinois, small company considerations were, at best, swept under the carpet.

2. Illinois is not a flat-rate local service state like Indiana. Illinois permits local measured services, a rate design that is more compatible to the recovery of per-message or per-minute costs arising from the processing of a call to a ported customer. Thus, in Indiana, there is no simple way to pass on or integrate local service prices for minute or message sensitive costs affecting large volumes of traffic.

3. The cost of deployment and operation of number portability including administrative and bill process changes is unknown. The Illinois experience has not shed any light on the actual cost of number portability for the Indiana task force. The cost estimate included in this report is, at best, little more than a guesstimate of the initial cost for some of the participants. There is no estimate of the recurring costs which some believe will be much larger than the initial costs. There are certainly no cost estimates readily available for small ILECs and there is no information to suggest why such costs would not be proportionally more significant than with the large companies. The lack of specific cost information regarding the deployment and operation of number portability in either a large company or a small ILEC exchange renders conclusions regarding the cost/benefits or economic impacts of number portability incomplete and premature.

Federal Orders and Law

With regard to the specific economic impact issues, the FCC's recent orders are not enlightening. However, the FCC acknowledges that areas may be of concern to small companies, and that Congress provided for suspensions and modifications for small companies. Specifically, the FCC has relied on TA96, Section 252 (f) (1) and (2) to solve the small company implementation problems and in its July 2, 1996 Order on Telephone Number Portability (CC docket No. 95-116, RM 8535, paragraph 83) states:

83. "We note that the 1996 Act exempts rural telephone companies from the "duty to negotiate...the particular terms and conditions of agreements to fulfill the [interconnection] duties" created by the 1996 Act, including the provision of number portability, and that carriers satisfying the statutory criteria contained in section 251 (f) may be exempt from the obligations to provide number portability as set forth herein. In addition, section 251 (f) (2) permits a LEC with fewer than two percent of the country's total installed subscriber lines to petition a state commission for suspension or modification of the requirements of section 251. In our recent notice of proposed rulemaking implementing sections 251 and 252 of the Communications Act, we address the applications of this statutory exemption, and we believe that specific application of such provisions is best addressed in that proceeding. We intend to establish regulations to implement these provisions by early August 1996, consistent with the requirements of section 251 (d)."

Thus, as long as this Commission grants 251 (f) (2) suspensions relative to 251 (b) (2) Number Portability to small Indiana ILECs, the adverse economic impact of number portability for five percent of the, primarily rural, access lines of Indiana can be avoided in a manner fully consistent with what Congress intended.

Indiana Task Force Small ILEC Exchange Selection

The initial task force selection of exchanges for number portability in the Indiana MSA's included, as we expected, blanket requests that included all small ILEC exchanges. While the requests associated with the small ILEC exchanges were later removed, if facility-based competition for even one or two business subscribers comes to such exchanges, the bona fide requests can certainly be anticipated.

A Problem Exists

Unfortunately, the current nonselection of small ILEC exchanges and the 251 (f) (2) suspension relative to 251 (b) (2) does not alleviate the impact for small Indiana ILECs and their subscribers. Any small ILEC exchange with EAS to a selected number ported exchange will be impacted. An EAS call from a small ILEC exchange to a number ported exchange will require processing in the LRN systems to be delivered to the appropriate service provider in the number ported exchange. For the 100 top MSA's this situation will involve fourteen small ILECs in Indiana. Either the small ILEC will need to install SS7 and number portability into each switch and perform the dip, contract with a vendor to perform the dip or rely on a carrier within the number ported region to perform the dip and appropriate routing. At this time, the latter alternative appears to be the most practical for small ILECs. As noted, this task force has not produced any solid costs for "dips", let alone switch modifications relative to small companies.

Since the number ported exchange and its service providers are totally the beneficiaries of such EAS routing, the small ILECs in the task force believe all costs to keep small ILEC EAS calling viable should be born by the number ported exchange service providers. A Commission order in this Cause is warranted on this issue on a timely basis. In the absence of a Commission order on this issue, small ILECs with EAS to selected number ported exchanges may very well incur costs with no rational cost recovery or rational rate design policy to use. Only an order on this issue will resolve this situation.

The Bigger Issue

Finally, the small ILECs in this task force would be remiss if this report did not clearly point out the massive administrative problems the number portability will require of the small ILEC if they are ever required to implement such number portability.

Where a small ILEC experiences a facility based provider building into a few business customers or the three block business area of a village such providers likely will not duplicate the plant in the rural areas. Yet, the small ILEC can fully expect to receive a number portability bona fide request for the exchange. In this scenario, the small ILEC may be faced with incurring company wide facility, switching, dip and routing costs for the presumed benefit of the limited CLEC customers. Who is the beneficiary in such a situation? But the inequity doesn't stop there. We reference for the Commission the "Process Flow" diagrams distributed at the December 10, 1996 task force meeting: 1) service provision, 2) cancellation of service order, 3) disconnect, 4) repair, and 5) conflict resolution. Literally every subscriber administrative function must go through LRN translation. Existing phone numbers become extinct for subscriber administration transactions. Yet, none of these administrative system effects have been addressed in a small LEC context nor has there been any meaningful discussion regarding the costs of such undertakings. Just think of the complexity of processing a repair order in an exchange with resale competition and number ported facility based competition. Just a mere glance at these flow charts should convince anyone that the massive administrative burden would require additional personnel, administration, training and EDP cost. Economic burden on the small ILEC and adverse economic impact on subscribers are very obvious results. This is why Congress included Section 251 (f) (2) in TA96.

The Commission, through this task force and TA96, has sufficient record before it to determine that number portability should not be applicable in small ILEC areas for decades. An order of such at this time would clear the table on this issue and eliminate the need to expend countless hours and money to respond to any such request for number portability.

Prepared by: D. Glancy and M. Proctor