HomeMy WebLinkAbout2000-07-05 Agenda Packet - Board (8) . . • E1
Staff Report
To: Board of Directors
From: Peter L. Holzmeister
Date: June 29, 2000
LAFCo review of telecommunications business case analysis
SR Jones, Executive Officer of Nevada County LAFCo, has notified us that she will recommend to
the LAFCo Commission that a consultant be retained to review the Telecommunications Business
Case Analysis that we prepared. She expects the District to pay the cost of that consultant. The
consultant needs four weeks to complete his work after being authorized to proceed.
Attached is a copy of the scope of services that SR circulated and copies of two proposals from
interested consultants.The proposal from econ ONE has a price tag of$35,000 to $45,000, while the
proposal from Charles R. Mahla would cost $10,000. SR believes the expensive proposal is
unwarranted, but she is interested in proceeding with the proposal from Charles R. Mahla.
I will be talking further with SR during the next few days regarding this and other issues.The situation
may be somewhat different by the time the Board meets. Alan and I are working on a different
approach than that being proposed by SR. I will send you information as it develops.
0 Page 1
SCOPE OF WORK
Financial Assessment of the Truckee Donner Public Utility District
Telecommunications Business Case Analysis
The Truckee Donner Public Utility District is an independent special district
with an annual operating budget of $12.3 million located in eastern Ne-
vada County (a small portion is located in Placer County) that provides
domestic water and electrical power to customers numbering approxi-
mately 10,000.
The District proposes to enter the telecommunications field by installing
fiber optic lines within its service area and by providing some or all of the
following services:
• High-speed data transport
• Lease of open internet platform
• Cable television
• Lease of dark fiber
The District must obtain authorization from LAFCo before providing a new
service. The District's application to LAFCo includes a business plan for
providing the listed services. LAFCo is responsible for reviewing this plan
with respect to the following significant issues:
1 . Is the stated cost of developing the plan reasonable?
2. Is there a market for the products and service?
3. What is the level of risk associated with the district's plan?
4. What are the barriers to entry to this market.
Specifically, the consultant should address these issues by providing analy-
sis on the following points:
1. Is the stated cost of developing the products and services to be pro-
vided under the plan reasonable?
2. Is there a market for the products or services to be developed under
the Plan?
a. Who are the likely consumers of those products and services?
b. Is there competition in that market? If so, who are the competitors?
c. Is the market likely to change with the entry of the TDPUD? If so,
how?
d. Is the market (i.e, benefit) adequate to justify the cost of developing
the products and services?
3. What is the level of risk to the ratepayers and/or the bondholders?
a. Is it feasible to expect that revenues from selling the products and
services under the plan may be available to offset the cost of other
public utilities such as water or electricity?
4. Are there any barriers to entry into this market for the products and
services proposed under the Plan?
5.
a. If so, are those barriers to entry significant or minimal?
b. Has the business plan adequately addressed those barriers to entry?
c. Is the pace of technology development in the telecommunications
and television markets a factor that should be considered in the
business plan?
d. Is there a risk to not entering the field and, if so, should that factor
be considered in evaluation of the business plan?
6. What are the benefits of providing the products and services addres-
sed in the business plan?
7. Are there any case studies in other districts to use as a guideline as to
what to expect?
JUN-c'c-_ tY_ 'G-+ =- T0:958'1189 P: 1111
db/1b/2000 13.30 Ell LEE MAHL,A PAGE 02
LOS ANGELES (� 1
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SACRAMENTOI �j
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SR Jones
Executive Officer, Nevada LAFCo
950 Maidu Avenue
Nevada City CA 95959-8617
Re Financial Review of a Business Case for a Telecommunications Proposal
Dear Ms. Jones
I appreciate the opportunity to outline our approach to the analysis of a
financial asses!:�ment of the Truckee Donner PUD Telecommunications proposal
As this project would require a substantial investment on the part of the PUD and
its ratepayers and as any telecommunications system resulting from that
investment wcn_ld likely face ever-increasing competition from private-sector
service providers, a careful economic evaluation of the market for advanced
telecommu-raIions services is an essential first step to insure the projects
success-
Througr the Telecommunications Act of 1996, Congress has clearly
indicated its desire for all Americans to benefit from the advances in
telecommun cations technology. Many providers of telecom services are
broadening the scope of their product offerings to Include services outside of
their traditir>nal (or regulation-constrained) business core. The introduction of
digital television with hundreds of channel offerings by the direct broadcast
satellite providers (Direct TV) has in great part prompted infrastructure upgrades
by the cabiF aimpanies to provide similar product offerings. These upgrades
have ailowsd he cable companies to offer high-speed (broadband) Internet
access over their cable plant - such access is currently enjoyed by nearly 2
million consumers nationwide with predictions of subscriber numbers in the tens
or milliuns witsvn a few years, Not to be left out of the tray, the local exchange
carriers have vitiated what some consider a frenzied rollout of their version Of
broadband lnte�net access over their existing infrastructure — digital subscriber
lines service <C,SL) is being heavily promoted by the ILECs and CLECs alike.
The wirelea; ommunity has also weighed in with the introduction of fixed
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v.h tor .Meg 1s- Tr) Hi LEE MAi-LA FACE 03
wireless ser�ires (MMDS) which provides consumers with impressive data
transmission saaeds utilizing the electromagnetic spectrum. Sprint has recently
introduced its wireless broadband access In Phoenix, and boasts that it will be
providing butt tata and voice broadband transmission services in more than 150
markets by ,^e >nd of next year.
With this competitive backdrop in mind, any proposal to provide some
form of telecommunications services by the Truckee Donner PUD must be
analyzed c<arefvlly. In that regard, the Scope of Work set out by LAFCo appears
vital - the ff.nrr questions regarding the PUD's proposal point to the key issues
regarding the project's benefits and costs. With these questions in mind, we
propose the f-Mowing:
1 We will ,eview the proposed reasonableness of the cost proposed by the
Truckee Donner PUD. We would first secure the documentation that was
used by the TDPUD consultant to review its reasonableness. Second, we
will compare those costs to estimates of constructing a similarly situated
confirluration using the Hatfield Local Loop Costing Model. This model is
usec ty most Public Utility Commissions in the U.S. to estimate the
forw;9rr,-+poking costs of constructing a local loop.
2. We will also examine the proposed market for these services. While this
proposal has some interesting implications for the PUD, it is supported
with vary scant market analysis. The entire financial analysis is based
upon the purported market for advanced telecommunications services by
the r'Ur)'s end-users. Until the size and scope of that market is
undersmod, any financial analysis regarding the viability of a local loop is
of limiter! use.
3 We will examine trends in telecommunications with other electric utilities
with of particular emphasis on rural electric cooperatives, municipal public
utility districts in the Western U.S., and to a lesser extent, smaller, rural
inve:,tor,owned utilities. This analysis will include the relationship between
potential opportunities for government-supported rural telecommunication
tnvestrrient programs for high cost areas. We will highlight these
expencn :es as a number of"case-studies."
4. Thesp first three tasks will highlight the financial viability of the Truckee
Donner proposal. in addition, there are a number of significant risks
assorialed with making an investment of the magnitude proposed by the
Trickpe, Donner PUD (one of the serious shortcomings of the Navigant
Repay i�: that it has not conducted a sensitivity analysis that explores the
range of potential outcomes that could affect the financial returns of this
nvesunent). Our analysis will subject the TDPUD financials to a
sensr.iviry analysis of a number of pre-defined outcomes. (i.e., low market
pencl-1 )n. high-market penetration, higher than expected investment
SR Jones Page 2 C79116100
r4 _ �:: _: ,_r r-_r,: TU 5587L165 P:3Z11
om ie; <CUC I': je. UL LEE MAHLA PAGE 86
costs etc). This sensitivity analysis will provide critical 'what if'
capabilities to L.AFCO's decision making process-
5 We wilt also examine the potential market barriers associated with making
this investment. Of particular interest will be the potential barriers that
could arse from the incumbent local telephone utility in the area, tittle
attenrtor has been given to this significant problem in local
telecommunication markets today. While most states have moved forward
with local exchange competition, market share for the incumbents has
contrnuere to remain exceptionally high, even in the most dense, urban
area; .vhere costs are low and multiple competitors have the technical
opportunity to compete, , For instance, under the Section 271 of the
Telecommunications Act of 1996 requires Regional Bell Operating
Comppri es to prove to the Federal Communications Commission (FCC)
that ,heir local markets are competitive before these RBOCs can enter the
long-disr3nce market. To date, no RBOC has been able to meet this
regutaiory hurdle.
We est:rnate that our analysis would require approximately a month of
analysis at an approximate cost of between $35,000 and $45,000. This analysis
would be conducted by me and Dr. David Dismukes, a Senior Economist who
heads our -'ori-ton office and who has a tremendous amount of experience in
the area of casting and telecommunications systems (i attach his biographical
information aloe=g with my own at the end of this letter). Together, we believe that
we could p,ov+de to LAFCo an insightful analysis upon which a reasoned
decision could n-_ made regarding the Truckee Donner proposal.
I look forward to a chance to discuss this proposal with you. If you have
any questions regarding our proposal or would like further information, please do
not hesitate ic. all me at (916) 449-2860,
Sincerely,
Charles R. Mehia, Ph.D.
Senior Economist
Attachment:,
SR ,tones Page 3 06/16/00
nosib��nrJ� id:dry e-' LEE K*CA PAGE 05
LOS ANGEL €S�
I
SACRAMENTO ' �
HOUSTON �
CHARLES R. MAHLA, PH.D,
Senior Economist
Sacramento, California
Tel_ 916 449 2860
CHARLES R. MAHLA received a Bachelor of Arts Degree cum
taade in economics from Lafayette College and a Ph.D. in economics from the
University of North Carolina at Chapel Hill. While at Lafayette, he was elected to
Phi Beta Kappa. His primary areas of study at North Carolina were industrial
organixatior_, econometrics and financial markets. He served as a teaching
fellow and i+as: awarded the Lurcy Fellowship for academic excellence. He also
taught ec000!i, c theory, banking and industrial organization at the University of
North Carob,i;E
DI Mahia has been employed as a systems consultant with a major
accounting `irtn He helped design and install computer systems for Fortune 100
companies rn the consumer products and computer industries, as well as a
transportat,na system for a state government.
Before joining Econ One, Dr. Mahia was a senior economist with
Micronomic:,. !nc He has extensive experience with issues relating to the
provision of cellular telephone service. Prior efforts include in-depth research
regarding industry structure, conduct and performance. Among other things, Dr.
Mahia has studied the regulatory history of cellular service, the nature and extent
of industry r:or=;petition and a number of related conduct issues. He also has
examined the ;urrent regulatory environment, particularty in California, written
about celluiar issues, and participated in a round-table discussion panel
conducted cr. !',ehatf of the Office of Planning and Research for Governor Wilson.
Dr. Mahia tray testified in Superior Court of California on matters relating to
conduct in the, Los Angeles cellular market. He also has testified in U.S.
Bankruptcy 'o in on the impact of changes in California's regulatory oversight on
the prowsio.1 �!f cellular equipment.
r)r Mahia currently oversees the analysis and production of a _
monthiv wir1less pricing survey for Econ One. This effort includes the collection
and analysF, of data from over 2,000 wireless plans each month, covering
service are.,s ;rt the top 25 cities across the United States. The survey is often
quoted in rn:a;-)r trade and financial publications, and Dr. Mahia is frequently
asked to poblx iy comment on the survey's findings.
,71_
l76i Fo: ZFl k1b i3: 30 Fjl LEE MAHLA PACE 06
r: addition to Dr. Mahla's wireless telecom experience, he has
analyzed the market structure and firm conduct in both the landline teico and
cable industnf>s. Current work includes an analysis of competitive issues
surreunding the access to cable companies' data transmission services for the
provision o' orc.adband Internet services.
D,. Mahla has consulted with companies in the chemical,
biotechnology medical equipment, defense, aerospace, computer, plastics,
telecommu-cartons and food distribution industries. He has extensive
experience :iwi the calculation of damages in antitrust, contract dispute and
intellectual pros arty matters.
Di Mahla is a member of the American Economic Association and
the National Association of Business Economists. He is also the author of
numerous art!cies ranging from the description certain aspects of damage
calcuiatiom' i^ r litigation context to the effects of the so-called Millennium Bug.
TC:9537:15 P:b�il
LEE MAHLA PAGE 07
CHARGES R- AfAHLA, Ph.D.
1215 K Street Suite 1170
Sacramento, California 95814
Tel: (916) 449-2860
Fax: (916) 449-2870
Email: crmahlaseeonone.corn
PROFESSION NI KNPERIENCE:
July, 1997 1,1 1`= ONE RESEARCH, 1NC. Sacramento, California
to Present ,;,•v Kconomist
• I %;,kd expert testimony in U.S.Bankruptcy Court, Central District of California
rn t:it ling damages suffered by a large wireless carrier from fraudulent subscriber
I' udcd expert testimony in Superior Court of the State of Califomia regarding
tl ,n3 _t-s allegedly suffered from fraud and wrongful termination.
i':. •, ,iod expert testimony in US District Court regarding damages arising from a
b ,•:,,. h of contract between a manufacturer and a distributor in the digital imaging
,udu,iry.
11• �.;ded expert testimony in US Bankruptcy Court regarding the effects of changes
.-I i iomia's regulatory oversight on the provision of cellular equipment.
c•red sales and pricing practices of a major soy polymer manufacturer in
� 1 Wcl[on with charges of patent infringement and misappropriation-n wade secrets.
1'•:icd economic aspects of a PBX switch termination agreement in connection
H charges of breach of contract.
+�,vclopcd the Econ One wireless Survey, a nationwide wireless service pricing
v covering 25 major cities. Survey typically analyzes over 2,000 wireless plans
h lionth to determine those that are most cost effective across various levels of
Apnl, 1994 N11( RONOMICS,INC. Sacramento. California
to Juiy, �cr,aor I_conomist
1997
i,,— i,lcd expert testimony in Superior Court of the State of California regarding
1 , a:,e,al damages resulting from below-cost pricing of cellular equipment.
i ,red testimony given before the California Public Utilities Commission on the
.
P:7111
moo;ac< <crr, .J: jo ^i LEE MAN A PAGE 08
H,4RLES' R +; i Fh L- Page 2
PROFEktiIONAL EXPERIENCE(cont`U
e:=,n ,m is consequences of cellular servicelequipment bundling.
1 J tirm's participation in Roundtable on Cellular Regulatory Policy,Governors
t rl;, :of Planning and Research.
C :r t'u, tcd analysis of cellular service pricing behavior in Los Angeles,San Diego.
ai i .a) Francisco relating to allegarionS of price fixing by service providers.
i al.zed pricing practices of major pharmaceutical companies in connection with
t i a c of discriminatory pricing and price fixing brought by numerous retail
c I_.,micrs.
R;tip nsible for development of commercial site on the World Wide Web. Otgard2w
011d _•stablished files for inclusion in the site,contracted supplier, and supervised
u uir=cnance,updates and enhancements.
June, 1992 ',tlt RONOMICS, INC. Los Angelev, California
to March, F,.•nplj
t994
,wucled analysis of a wide atrayo£industries,including banking.biotechnology.
ni, iclevision,cellular telephony.chemicals,computers,defense aria-aerospace,
, I .li%tribution.health-care,HMO reinsurance,and oil and gas distribution.
rn,N,ded estimates of financial damages in antitrust, contract dispute, security
11 =;-:1 closure,child support,and intellectual property cases. Responsible for total
i Irepatation, including development of case theory, data collection and
„ I, "'.ration- writing of expert reports,and the production of all deposition and trial
r•h�ht;_
1989-1992 1 t 1 RSITY OF NORTH CAROLINA Greensboro. North Carolina
sr. Department of Economics
loped and taught undergraduate courses in both Micro and Macroeconomics.
1-n,c, included Principiea of Economics, Industrial Organization,and Money and
1', :rat mg, Relevant topics covered include theory of the firm, market structure,
n .0,:i failure,antitrust analysis,financial economics and decision staking,consumer
f, It, t,,r, monetary/fiscal policy, inflation, unemployment, and international trade.
„ '� ti _•�_;_ rOr�: TO:HSE".;.6H P:Fj'll
,�ni 1 ei tht�t: 13: 30 al LEE MAHLA PAGE 09
CH4R1,rSR ,;,i ' 1. PhD Page
PROFESSJOiN N i EXPERIENCE(COat'd):
1932-1985 H UR ANDERSEN &CO. New York. New York
'onsultant
Ix
,4ed the design and installation of statewide financial accounting (accounts
1;:Ible)system for the Department of Transportation of a large Northeastern state•
;:gym installed on time and on budget.
PROFFSSTON%I AFFILIATIONS:
ln'ti:r,can Economic Association
,xi-mal Association of Business Economists
ARTICLES/Pt 81.1CAT(ONS:
"Prvjud_m, „t Interest, Taxation and Patent Damages: Haw Courts Can Reduce the Bias,”
unpuhlah;tl manuscript,August 1993.
"1'erecn cr: 'r,mmunications Services: A Golden Opportunity for Califirrnia," for the
Rou,uh,.j i. m Cellular Regulatory Policy, Governor's Office of planning and Research,
,lute lk--)
Big L'. „i, The Capital Region Turned A.Lot of Heads in 199R, " Comstock's Magazine,
-Cun 'r,aect Yourselffroin Y2KKiller Bees?, " Comstock's MagaZine, May 1999.
"Ili,.,'<<<'.r cite lbfillennium Bug?,"Comstock's Magazine, May 1999,
'r-Tan, , "h. Growth ofE-Commerce—Is it a Taxing Dilemma? omstock's Business,
"I)i it.+' l ,,nverRencv.- Surfing the Net on The wireless wave 1Cg jflSk�$31SJSt£�£.
Fortho,lwq: _ January 2000.
"1,avt r ,} and Royalties in intellectual Property Disputes: The Need to Avoid Double
Bippim i_Metro titan Cor�oratn Counsel,with Lynette Nihon,Forthcoming, February
2oQu
JUN-29-._eie,j :_y. :7-G FPON: TO:='58711S9 P:9/11
1j011 i.4UUU i.s: �e Ul LEE MAHLA PAGE I
CHARLE ; R Pf!,/_f. Ph.D. Page
EDUCATION:
m:,rvrrY ofivorth Carolina- Chapel Hill, Chapel Hill, North Carolina
Ph t I --Economics, December 1991
D; -'rraiion Title: "State'takeover Statutes and Shareholder Wealth"
of research specialization: Industrial Organization, Financial Economics,and
l ., r. tnietrl CS. '
ur College,Easton, Pennsylvania--Bachelor of Arts, Economics,
rude, May 1982
HONORS ANT) AWARDS:
t;mj(:ton Delta Epsilon, Economics Honor Society, 1981
Phi B,•ta Kappa,Lafayette College, 1982
f wno mics & Business Award, Lafayette College, 1982
UmN v'rsity Teaching Fellow, UNC-Chapel Hill, 1987
Lt r._� Fellowship, UNC-Chapel Hill, 1989
�l1rC>91'1
li lle__9! .'ra!i'i P^fi A^1i Tf]f1u +e'..
T0:556711e5 P:lt;'11
oo, :o� <nnn ij: ,e7 ✓1 LEE MAHLA PAGE 11
LOS ANGELES
SACRAMENTO (� "
HOUSTON tfJi iI�1 J
DAVID E. DISMl1KES, PH.D.
Senior Economist
Houston, Texas
Tel: 713 228 2700
(_)avid E. Dismukes is an expert in the analysis of economic,
statistical, and public policy issues in energy and infrastructure industries. Over
the past 12 yaars, he has participated in over 75 regulatory and administrative
law proceedings in 15 different jurisdictions and has testified as an expert
witness on several occasions. His expertise includes the analysis of traditional
regulatory issues associated with revenue distribution, rate design, and revenue
requirements In addition, he has examined a number of more specialized issues
associated with incentive regulation, industry restructuring (telecommunications,
natural gas ar;d electricity), and mergers and acquisitions.
His quantitative expertise Includes the analysis of a variety of
eoortametr•c time seriieslforecasting, and linear programming models for the
electric power industry including end-use models, essential usage models, short
and long run demand models, time-of-use block usage models, generator
performance benchmarking modeling, transmission and distribution performance
benchmarking modeling, and regional multi-control area models of competitive
markets. His telecommunications modeling experience includes the analysis of
local access demand models, LnterLATA and intraLATA long distance demand
models, and directory assistance demand models. His water and wastewater
industry statistical modeling includes the analysis of commercial and residential
water demand models. His quantitative experience in the oil and gas industry
includes the analysis of environmental and safety performance in the Gulf of
Mexico outer continental shelf, as well as developing specialized input-output
models for measuring the socio-economic impacts that offshore activities have
on coastal _)rrmunities in the Gulf of Mexico.
Dr. Dismukes has prepared over 30 publications on energy and
regulated industries that have appeared in such journals as Resource and
Energy Eco!2orucs, Southem Economic Journal, Utilities Policy, Energy Journal,
Studies in ;=cr�nornic and Finance, Electricity Joumal, Oil, Gas, and Energy
Quarterly, P,jbr,c Utilities Fortnighfly, and the American Oil and Gas Reporter. His
conference pacers have been published in proceedings sponsored by the
Society of Mernanioal Engineers (SME), the Society of Petroleum Engineers
(SPE), the rn•;htute for Electrical and Electronic Engineers (IEEE), and the
intemation<r a. ;ociation of Science and Technology for Development (LASTED).
T9:95971189 P: 1/�11
LEE MAHLA PAGE 12
EDUCATION;
Ph.0 Economics, Florida State University, Tallahassee, Florida
M.S Economics, Florida State University, Tallahassee, Florida
M.S International Affairs, Florida State University, Tallahassee, Florida
B.S- University of West Florida, Pensacola, Florida
EXPERIENCE'
March 2000 - Present Econ One Research, Inc., Senior Economist,
Houston, Texas
199E 2900 Louisiana State University, Assistant
Professor, Baton Rouge, Louisiana
1992 - 1.A95 Florida Public Service Commission, Research
and Planning Economist, Tallahassee, Florida
1988 1992 Ben Johnson Associates, Research Associate,
Tallahassee, Florida
A PROPOSAL TO UNDERTAKE A
FINANCIAL REVIEW OF A BUSINESS CASE FOR A
TELECOMMUNICATIONS PROPOSAL
NATIONAL ECONOMIC
RESEARCH ASSOCIATES
444 MARKET STREET, SUITE 910
SAN FRANCISCo,CALIFORNIA 94111
TEL:415.291.1000 FAX:415.291.1020
INTERNET: httD://www.nera.com
PREPARED FOR
NEVADA COUNTY
LOCAL AGENCY FORMATION COMMITTEE
DUNE 16, 2000
Consulting Econo.m.,
TABLE OF CONTENTS
I. INTRODUCTION.......................................................................................................................................... 1
II. SCOPE OF THE PROPOSED PROJECT...........................................................................................I.......3
III. ABOUT NERA.................................................................................................................I.............................8
NERA'S PROPOSED PROJECT TEAM...................................................................................................................... 9
IV. BUDGET......................................................................................................................................................... 9
Consulting Economists
I. INTRODUCTION
The Truckee-Donner area may suffer from a consequence of the capital intensity of the
fiber optic systems. The deployment of fiber optic telecommunications systems is characterized
by significant economies of scale. Since smaller communities cannot take advantage of
economies of scale, it may be the case that fiber optics can only be provided at a relatively high
average cost to each subscriber. At the same time, the TDPUD (in common with other utilities)
may need to upgrade its internal communication system in a manner that requires at least some
fiber optics.
One solution to this problem is for the utility to build fiber capacity that is in excess of
its internal needs. It can then lease the excess capacity to private parties and to other
government agencies. As a result of economies of scale, the additional fiber capacity (above
that needed by the utility) has a very low incremental cost. The additional fiber can be leased
at a price that more than covers the incremental cost of the additional strands of fiber. As long
as revenues charged for using the incremental strands of fiber are greater than the incremental
cost of the fiber, then that rental makes a contribution to defraying the cost of the capacity that
is being used by the utility for its internal purposes.
The tactic described above has been used by investor-owned and municipal electric and
gas utilities. However, there are instances in which communications companies, including
competitive access providers, have entered small markets and provided the sort of broadband
services envisioned in this proposal to smaller communities. Furthermore, in times of
- 2 -
considerable technological and regulatory change in the telecommunications industry, there is a
significant probability that broadband services could be provided by alternative technologies.
National Economic Research Associates, Inc. proposes to examine the economics of one
such municipal utility proposal put forward by the Truckee-Donner Public Utility District. As
described more completely below, NERA is a firm of consulting economists providing expert
economic analysis and testimony. This project is completely in keeping with the firm's
expertise, resources, and previous and current undertakings. The firm has an extensive
telecommunications practice providing expertise in economics, finance, strategy, cost
modeling, and telecommunications network design to analyze complex telecommunications
proposals before federal and state agencies in the United States and regulatory bodies in
Canada, Europe and other parts of the world. Further, NERA has acted as a strategic consultant
and expert witness to other utilities, such as electricity, water, and gas, on a variety of issues.
This has included the determination of the appropriate price for transfer of "dark fiber" and
other telecommunications facilities from regulated electric utilities to unregulated affiliates,
antitrust issues that have arisen in deployment of fiber optics in smaller communities and the
competitive provision of wireless residential service.
NERA has performed comprehensive analyses and developed various costibenefit
models and algorithms for use in estimating the cost of telecommunications plant, network
access, and unbundled network elements for existing landline or mobile communications
infrastructure. Economists at NERA have a complete grasp of the relationship between costs,
technology, regulation, and competition. The firm has extensive experience in the preparation
of testimony, expert reports, and affidavits on various telecommunications issues, especially
C,nsOmg Economists
cost models, in the US and around the world. We have also undertaken a large number of
studies on the demand for telecommunications services in both the residential and business
sectors.
II. SCOPE OF THE PROPOSED PROJECT
NERA proposes to perform a balanced review of plans of the Truckee-Donner Public
Utility District ("TDPUD") to construct fiber optic lines within the district, to provide
telecommunications services and rent dark fiber. NERA's review will include an assessment of
Telecommunications Business Case Analysis for the Truckee-Donner Public Utility District
prepared by Navigant Consulting, Inc. ("the NCI report") and to respond to the other questions
put forth by LAFCo. In particular, we propose to address LAFCo's questions as follows:
1. Is the stated cost of developing the products and services to be provided under the
plan reasonable?
This task will include a complete review of the underlying data and assumptions used by
NCI including those that may not be explicitly stated in the NCI report. Specifically the
review will include the following items:
a) The design of the proposed network — including a determination of whether all
aspects of the investment necessary to provide the proposed services are adequately
accounted for;
b) Investment costs;
c) Planned network upgrades and replacements; and
d) Network operating expenses.
We will compare the items included in the NCI report with a list we will compile from
our own experience in analyzing telecommunication cost models. At the conclusion of
our examination, we anticipate that we will be able to inform The Nevada County
CnnsaLing Ecwnmisxs
- 4 -
LAFCo whether NCI included all relevant costs and expenses in its cost study and
performed the cost study according to accepted methods.
2. Is there a market for the products or services to be developed under the Plan?
Crucial to the success of TDPUD's strategy is the ability to market the excess fiber
capacity. Fortunately, there are a significant number of communities similar in size to
Truckee-Donner where broadband capacity has been installed. Experience at these
communities can provide some basis for forecast of demand for TDPUD's proposed
capacity.
a) Who are the likely consumers of those products and services?
NERA proposes to perform a demand study, which involves identifying
potential customers and the degree of demand for the products by product and service
category. This will include review of forecasts of population growth and increases in
the number of businesses likely to avail themselves of broadband telecommunications
services.
b) Is there competition in that market? If so, who are the competitors?
NERA proposes to undertake an analysis of the attractiveness of a market with
Truckee's characteristics to CLEC, CAPS and other potential entrants in the market for
the provisioning of broadband services. NERA's report to LAFCo will include a
compilation of"third tier" markets in which such broadband services were provided.
Crucial to the economics of the TDPUD proposal is an examination of the
altemative methods of providing broadband telecommunications services and meeting
the TDPUD's intemal communication needs. We will investigate the comparative
Gm,vu!(iug Lcnnomi.cls
- 5 -
economics of alternative methods of providing broadband services, including DSL,
cable and such wireless solutions as those provided by Winstar, Teligent and others.
We will determine the characteristics of the markets in which these alternatives have
succeeded and compare them with Truckee-Donner.
An important component of the market that the Truckee-Donner PUD proposes
to address is for CATV services. There are several potential competitive threats to this
potential source of revenue. These include direct broadcast satellite television and the
upgrading of the transmission capabilities of the incumbent provider. We will assess
the likelihood of CATV upgrades and of increased deployment of satellite television on
the profitability of the Truckee-Donner proposal.
c) Is the market likely to change with the entry of the TDPUD? If so, how?
As already mentioned, a significant number of municipal and investor-owned
utilities have constructed broadband transmission capabilities. NERA will review the
effects of facility-based entry by public utilities drawing upon its experience in past
engagements. NERA will also review entry effects on the local exchange market as a
result of competitive entry in smaller markets.
d) Is the market (i.e., potential for benefit) adequate to justify the cost of developing
the products and services?
In undertaking the cost/benefit analysis to respond to this question, NERA will
start with the cost assumptions in the NCI report. Costs will be adjusted as needed if
they appear to be at variance with our experience. Costs may include any forgone
revenue from providing right of way to competitive providers. Benefits will be
computed as the margins earned on sales of services and the leasing of fiber capacity to
Consuhing Economists
- 6 -
estimate the net present value of the cash flow produced by the proposed network.
Benefits will also include cost savings to the TDPUC. NERA's analysis will not
contain any intangible benefits resulting from the proposed business case, such as any
increase in consumer welfare due to high speed Internet access.
In measuring the costs and benefits, it will be important that we take account of
the fact that some of the benefits attributable to laying fiber optics can be derived using
other, possibly cheaper technologies. Benefits will be measured against the next best
alternative. This may include alternative wireless and copper-based technologies
described above.
3. What is the level of risk to ratepayers and/or the bondholders?
NERA will review the history of telecommunications companies that have
targeted smaller communities for broadband services and determine the proportion that
were profitable in their respective markets. We will also look at the variability of the
stock price of any publicly traded company that is providing broadband service in
smaller communities. Measures of volatility will allow us to determine the risk that the
company will violate its debt covenants or go bankrupt without raising rates on its other
services. NERA will determine the level of risk embedded in this project on the basis of
cost, benefits, competition, changing market conditions and experience elsewhere.
a) Is it feasible to expect that revenues from selling the products and services under
the plan may be available to offset the cost of other public utilities such as water or
electricity?
As described above, some of the costs of providing water and electricity services
will be the costs of providing the necessary communications services for controlling the
Cnnculting 6connmiecs
- 7 -
water and electricity systems. For revenues from selling the products and services under
the plan to offset the cost of providing water or electricity revenues requires one
condition. The revenues must be greater than the cost of the fiber optic minus the cost
of any communications investments that would have to be made instead of using fiber
optics. We will determine from the cost and revenue studies described above, whether
it is likely that revenue from leasing dark fiber or providing telephone services will
exceed their incremental cost.
4. Are there any barriers to entry into this market for the products and services
proposed under the Plan?
a) If so, are those barriers to entry significant or minimal?
The answer to this question will depend on the information acquired from the analyses
performed to answer the previous questions.
b) Has the business plan adequately addressed those barriers to entry?
The answer to this question also will depend on the analyses above.
c) Is the pace of technology development in the telecommunications and television
markets a factor that should be considered in the business plan?
As already described, NERA will review the technology development in
telecommunications and television markets in order to address this question.
d) Is there a risk to not entering the field and, if so, should that factor be considered
in evaluation of the business plan?
The primary risk arising from TDPUD not entering the market is that private firms will
not be interested providing any broadband services in this community. Our report will
Cm,.Mng Fcan,..fs
- s -
provide some basis for estimating the size of this risk, though we do not propose to state
an exact probability.
5. What are the benefits of providing the products and services addressed in the business
plan?
The answer to this question will be covered by Question 2, Part d).
6. Are there any case studies in other districts to use as a guideline as to what to expect?
NERA will present similar cases and draw useful findings from them.
III. ABOUT NERA
NERA is an international consulting firm of over 300 professional economists with
offices in nine US cities, London, and Madrid. NERA was founded in 1961 and is now a part
of the Mercer Consulting Group, the global consulting organization of Marsh & McLennan
Companies, Inc. NERA provides consulting advice in litigation and regulatory settings as well
as strategic and planning advice with clients in many fields, including energy,
telecommunications, television and broadcasting, securities, transportation, health, banking,
international trade and labor.
Consulting to the telecommunication sector accounts for roughly 15 percent of NERA's
business. NERA has worked for many regulatory agencies, Regional Bell Operating
Companies (formerly AT&T), and large and small independents on a wide range of traditional
regulatory issues. NERA is the leading economic consulting firm in the telecommunications
sector of privatization, restructuring, and regulatory reform. Our clients include government
departments, regulatory authorities, private and public companies, trade associations, and
international agencies, such as the European Union. We advise our clients on a wide range of
Co.Wang Ec.nn.ws
- 9 -
economic and strategic issues, including assessing different cost models used for
telecommunications services, the scope for competition, policy issues, asset valuation, the role
and form of regulation, costing analysis and pricing policy.
NERA's Proposed Project Team
The core NERA team for this project will be Dr. Gregory Duncan, Dr. Alan Cox, and
Mr. Christian Dippon.This team has decades of experience in pricing and cost modeling for the
telecommunications industry. The member's qualifications are included with this proposal as
appendices. Dr. Cox will take overall responsibility for the project. Mr. Dippon will undertake
and supervise most of the day-to-day research.
NERA's project team will present the results of its analyses in the form of a final report.
The due date for the report is open for discussion. The NERA project team will be available for
discussion or questions on any issues as requested. It is NERA's policy to keep the client
informed as to the progress of the project and actively collaborate with the client.
IV. BUDGET
NERA proposes to charge for these services its standard hourly fees with the total
charge for this project not to exceed $10,000. The fees now in effect are attached as Appendix
D. Dr. Duncan's rate is $425 per hour, Dr. Cox's is $310 per hour while Mr. Dippon's is $260.
Consulting Fwm.i,
APPENDix A
GREGORY M. DUNCAN
SENIOR VICE PRESIDENT
BUSINESS ADDRESS
National Economic Research Associates, Inc.
444 Market Street
Suite 910
San Francisco, CA 94111
Office: (415) 291-1000
e-mail: gregory.duncan@nera.com.
Dr. Duncan received a B.A. in Economics from the University of Washington, an M.A. in
Statistics, and a Ph.D. in Economics both from the University of California, Berkeley.
At NERA, Dr. Duncan directs projects in telecommunications, energy, antitrust and labor. He
has testified before numerous State and Federal regulatory commissions, and in Federal court.
He has directed a number of market research studies which serve as the basis of testimony on
elasticities and market share losses, optimal pricing models, and models of the potential
consequences of the Telecommunications Act. He has also directed investigations into the uses
and misuses of cost models in both the energy and the telecommunications industry. He has
advised clients on auction mechanisms, firm valuation, antitrust issues, damages issues, and
market effects of mergers. He has testified in Federal court litigation proceedings as a damages
and anti-trust expert. He holds a concurrent position as Adjunct Professor of Economics at the
University of Southern California.
Prior to joining NERA, Dr. Duncan held tenured and tenure-track positions in both Economics
and in Statistics at Northwestern University and Washington State University-.-He was Staff
Scientist and Principal Member of the Technical Staff at GTE Laboratories, Inc.; and has held
visiting positions at the California Institute of Technology, the Fuqua School of Business at
Duke University, Boston University, the University of California, San Diego, and the
University of Oregon.
Dr. Duncan had a distinguished academic career during which he published papers in a variety
of areas including what is now referred to as modern market research, applied demand and
revenue analysis, cost and production analysis, labor, transportation and in theoretical
econometrics. His papers have appeared in such journals as Econometrica, Information
Economics and Policy, The Journal of Econometrics, and The Journal of Risk and Uncertainty,
Journal ofLabor Economics, among others. He is a past Associate Editor of the academic
journal Econometric Theory, and has been a regular referee for many major economics,
statistics and marketing research journals.
At GTE Laboratories his projects included: the design and simulation of GTE spectrum auction
strategy, specifically, analysis of property valuation; cost and demand modeling for cellular and
PCS technologies, creation of market research designs to support market share and revenue loss
APPENDI.x A-2
calculations made in anticipation of local and IntraLATA toll competition; and analysis of
market effects of potential mergers; optimal pricing and seeping for GTE Directories.
Additionally, he served as GTE's expert on price caps and, particularly, the correct calculation
of the price cap index adjustment.
EDUCATION
UNIVERSITY OF CALIFORNIA, BERKELEY
PH.D. ECONOMICS
UNIVERSITY OF CALIFORNIA, BERKELEY
M.A. STATISTICS
UNIVERSITY OF WASHINGTON
B.A. ECONOMICS AND ENGLISH
DISSERTATION: RESOURCE ALLOCATION IN A PUBLIC UNIVERSITY: PERCEIVED
EQUITY AND THE ALLOCATION OF FACULTY
PROFESSIONAL EXPERIENCE
NATIONAL ECONOMIC RESEARCH ASSOCIATES, INC.
1999-Present SENIOR VICE PRESIDENT. Directs projects in the economics of
telecommunications, antitrust, energy, labor and in market research.
1996-1998 VICE PRESIDENT.
UNIVERSITY OF SOUTHERN CALIFORNIA .
1998-Present Adjunct Professor of Economics
GTE LABORATORIES INCORPORATED
1994-1996 Staff Scientist. Served as consulting economist and statistician. Directed
research and consulting of a group of research economists and statisticians.
1987-1994 Principal Member of the Technical Staff.
WASHINGTON STATE UNIVERSITY
1984-1987 Professor of Economics and of Statistics
1979-1984 Associate Professor of Economics and of Statistics
Northwestern Universitv
1975-1978 Assistant Professor of Economics and of Statistics
Consu;ang Emnnmim
APPENDIX A-3
VISITING POSITIONS
1993 UNIVERSITY OF OREGON
Visiting Professor of Economics
1988-1989 BOSTON UNIVERSITY
Visiting Professor of Economics
1985 UNIVERSITY OF CALIFORNIA, SAN DIEGO
Visiting Professor of Economics
1984-1985 DUKE UNIVERSITY(FUQUA SCHOOL OF BUSINESS)
Visiting Professor of Business and Economics
1984-1985 CALIFORNIA INSTITUTE OF TECHNOLOGY
Institute Associate
HONORS AND PROFESSIONAL ACTIVITIES
NATIONAL COMMITTEES
1996 INTERNATIONAL COMMUNICATIONS FORECASTING CONFERENCE
Board Member
1985-1988 ECONOMETRIC THEORY
Associate Editor
1984 ECONOMETRIC SOCIETY
North American Program Committee
PROFESSIONAL AFFILIATIONS
American Economic Association
American Statistical Association
Econometric Society
Institute of Mathematical Statistics
American Bar Association, Associate Member, Antitrust Section
Carualting Economists
APPENDix A-4
UNIVERSITY COMMITTEES
University Senate 1982-1987
University Computer Access Committee
Chair 1985, Member 1982-1987
State Legislature Liaison Committee, 1986
Statistics Department Organizing Committee 1980-1984
General University Requirements Committee 1981
Provost's Select Committee on University Expansion 1986
PUBLICATIONS
Empirical Studies of Returns to Scale of the Regulated Trucking Sector, in R.
Braeutigam and R. Baesemann, Editors, Motor Carrier Economic Regulation,
National Academy of Sciences (1978).
Specification and Estimation in the Mixed Continuous Discrete Dependent
Variable Model in Classical Production Theory, Econometrica (1980), 48,No. 4,
pp. 839-852.
Wage Determination in the Union and Non-union Sectors: A Simultaneous
Equations Approach, with D. Leigh, Industrial and Labor Relations Review
(1980), 34,No. 1,pp. 24-34.
Data Sets That Exceed Computer Limits: Efficient Estimation and a Test of the
Normal Approximation, Journal of Econometrics (1980), 14, pp. 257-264.
Comment on Koenker's Robust Methods of Econometrics, Eczinometric Reviews
(1982), 1, no. 2, pp. 257-262.
Sample Selectivity as a Proxy Variable Problem: On the Use and Misuse of
Gaussian Selectivity Corrections, Research in Labor Economics (1981), 6,
supplement 2, pp. 333-345.
Estimation and Inference in Heteroscedastic Systems of Equations,International
Economic Review (1981), 24, no. 3, pp. 559-566.
Econometric Evaluation of New Technology with an Application to Integrated
Pest Management, with D. Hall, American Journal of Agricultural Economics
(1984), 66, no. 5.
Comments on Manski's Adaptive Estimation of Nonlinear Regression Models,
Econometric Reviews, (1984).
Consulting E2mmnusn'
APPENDIX A-5
The Endogeneity of Union Status: An Empirical Test, with D. Leigh, Journal of
Labor Economics (1985), 3, no. 3,pp. 385-401.
Evaluation of an Alcohol Abuse Prevention Program: Correcting for
Self-Selection, with T.K. Greenfield, Resources in Education (1985), (ERIC
#ED253807).
Impact of International Trade Shocks on Wage Adjustments in Canada: A
Comment, in Peter Chinloy and Ernst W. Stromsdorfer, Editors,Adjustments in
Labor Markets: An International Comparison, Academic Press (1985).
Review of Newbold and Bos `Stochastic Parameter Regression,Journal of
Marketing Research, (1986).
Review of Feldman, `Multiple Regression in Practice, Journal of Marketing
Research, (1986).
A Semiparametric Censored Regression Estimator,Journal of Econometrics
(1986) 32, no. 1, pp. 5-34.
A Simplified Approach to M-Estimation with Application to Two-Stage
Estimators,Journal of Econometrics (1987), 34, pp. 373-389.
Telecommunications Cost Functions I: Capacity, Random Demand and
Technological Change, with R. Tobin, in H. Trebing, Editor,New Regulatory
Concepts: Issues and Controversies, (1988), Michigan State University Press.
Telecommunications Cost Functions II: Panel Data and Heterogeneous
Technological Change, with R. Tobin, in S. Bhattacharya and-S-Brubaker,
Editors, Telecommunications Costing in a Dynamic Environment, (1989).
The Effect of Probabilistic Demand Structures on The Structure of Cost
Functions,Journal of Risk and Uncertainty(1990), 3, 3, 211-220.
The Use and Misuse of Econometricians, in Marginal Cost Techniques for
Telephone Services, William Pollard, Editor,National Regulatory Research
Institute (1991).
IntraLATA Toll Demand Modeling: A Dynamic Analysis of Revenue and Usage
Data, Information Economics and Policy, 6, (1994) pp. 163-178.
0.,W i g Ecnno m,
APPEND[x A-6
Consulting Reports and Working Papers
"Asymptotic Normality of M-estimator Sieves" GTE Technical Report,
September 1987,revised March 1988, June 1990.
"Dynamic Telecommunications Cost Functions: Panel Data and Heterogeneous
Technical Change," with R. Tobin, March 1989, revised October 1990.
"A Finite Element Approach to Modeling Technological Change," GTE
Technical Report, August 1989.
"The Theory of Kernel Weighted Locally Linear Systems of Regressions"
January 1989, revised May 1991.
"A Nonparametric Simultaneous Equations Estimator" March 1989, revised
September 1991.
"A Dynamic Model of Telecommunication Regulation," GTE Technical
Memorandum, May 1989.
"Total Factor Productivity in Regulated Industries: Analysis of GTE FOCUSsed
Data," GTE Technical Advisory, September 1991.
"Neural Network and Multivariate Adaptive Regression Spline Approaches to
Forecasting and Network Control," September 1991.
"Demand for Basic Business and Residential Access: The Case in California"
GTE Technical Advisory, September 1991.
"Demand for Centrex Using Stated Preference and Contingent Querying" GTE
Technical Memorandum. (with Donald Perry GTE Telephone Operations)
February 1992.
"Stochastic Richardson Schemes for Control Parameter Selection in Dependent
Nonparametric Regressions," March 1992.
"Optimal Pricing for GTE Yellow Page Ads and Application of Non-parametric
GEV."
"Continuous/Discrete Analysis of Yellow Page Advertiser Purchasing
Decisions," August 1992.
"System Ensemble Estimator: Nearly Unbiased Analysis of Nonparametric
Systems of Equations," August 1992.
Cnrtiu(ung F.YWOml rL1'
APPE`iDlx A- 7
"A Method for D-Optimal Five and Six Factor Mixture Designs: A
Combinatoric Optimization Solution," August 1992.
"Champion-Challenger"Partially Rank-ordered Logits: Feasible Partial Order
Designs for Inexpensive Telephone Surveys, August 1994.
"Models for Analyzing Ranked, Partially Ranked and Contingently Ranked
Data,"March 1995.
"An Economic Evaluation and Critique of the Hatfield Cost Model Version
2.2.2". NERA September 1996, revised October 1996, revised January 1997.
Studies supporting testimony on behalf of GTE in 23 states on Local Number
portability.
Studies supporting testimony on behalf of GTE in 23 states on 1+
presubscription for IntraLATA toll.
Studies supporting testimony on behalf of GTE in 23 states and for the FCC on
InterLATA reentry of GTE.
"Notes on Incentive Schemes For Performance Parity,"July 1, 1999.
SELECTED TESTIMONY AND RELATED CASEWORK
Before the U.S. District Court, Southern District of New York, National
Communications Association, Inc. v. AT&T Corp., Analysis of Damages, 1999.
Before the U.S. District Court, Southern District of New York;-World Wide
Communications, Inc. v. AT&T Corp., Analysis of Damages, 1999.
Before the U.S. District Court, Western District of Washington, Electric
Lightwave, Inc. v. US WEST, Inc., Preliminary, Supplemental Reports on
Damage Claims, testimony by deposition and at arbitration, 1998
Before the InterState Commerce Commission "A Critique of the Uniform Rail
Costing System," 1982.
Washington
Before the Washington State Senate Ways and Means Committee "The
Relationship between Washington State Employment and State Economic
Policy", 1986.
Consnlung Ccnnamuls
APPE\'Dix A-3
Before the Washington State Utilities and Transportation Commission `:An
Economic Evaluation of the Hatfield Cost Model Version 2.2.2", Docket No.
UT-960338, UT-960348, UT-960307, 1996.
Rebuttal Testimony Before the Washington Utilities and Transportation
Commission, In the Matter of the Pricing Proceeding for Interconnection,
Unbundled Elements, Transport and Termination and Resale (Hatfield Model),
Docket No. UT-960369, UT-960370, UT-960371, April 25, 1997.
Direct Testimony Before the Washington Utilities and Transportation
Commission, In the Matter of the Pricing Proceeding for Interconnection,
Unbundled Elements, Transport and Termination and Resale (Hatfield Model),
Docket No. UT-960369, UT-960370, UT-960371, March 27, 1997.
Pennsylvania
Direct Testimony Before the Pennsylvania PUC, in the matter of the Joint
Petition of Nextlink Pennsylvania, Inc., RCN Telecommunications Services of
Pennsylvania, Inc., Hyperion Telecommunications, Inc., ATX
Telecommunications, Focal Communications Corporation of Pennsylvania, Inc.,
CTSI, Inc., Intermedia Communications, Inc., MCI Worldcom, E Spire
Communications, and AT&T Communications of Pennsylvania, Inc. for an
Order Establishing a Formal Investigation of Performance Standards, Remedies
and Operations Support Systems Testing for Bell Atlantic-Pennsylvania, Inc.,
Docket No. P-00991643, May 1999.
Rebuttal Testimony Before the Pennsylvania PUC, in the matter of the Joint
Petition of Nextlink Pennsylvania, Inc., RCN Telecommunications Services of
Pennsylvania, Inc., Hyperion Telecommunications, Inc., ATX_---
Telecommunications, Focal Communications Corporation of Pennsylvania, Inc.,
CTSI, Inc., Intermedia Communications, Inc., MCI Worldcom, E Spire
Communications, and AT&T Communications of Pennsylvania, Inc. for an
Order Establishing a Formal Investigation of Performance Standards, Remedies
and Operations Support Systems Testing for Bell Atlantic-Pennsylvania, Inc.,
Docket No. P-00991643, June 14, 1999.
California
Before the California PUC IRD (Direct and Rebuttal Testimony on
Elasticities)(1.87-11-033), 1990.
Before the California PUC PBOP California (Rebuttal Testimony), 1993.
Before the California PUC California NRF Review A.92-05-002, 1995.
Cone,Wang Gmnnmi.rte
APPENDIX A-9
Before the California Tax Equalization Board Alleged Undercollection of 911
Tax, 1995.
Before the California PUC: Rulemaking on the Commission's Own Motion to
Govern Open Access to Bottleneck Services and Establish a Framework for
Network Architecture Development of Dominant Carrier Networks.
Investigation on the Commission's Own Motion into Open Access and Network
Architecture Development of Dominant Carrier Networks. (Analysis of
Benchmark Cost Model, Development of GTE cost Model, development of
position on pricing) (R.93-04-003/I.93-04-002), 1996.
Before the California PUC: Rulemaking on the Commission's Own Motion to
Govern Open Access to Bottleneck Services and Establish a Framework for
Network Architecture Development of Dominant Carrier Networks.
Investigation on the Commission's Own Motion into Open Access and Network
Architecture Development of Dominant Carrier Networks. "An Economic
Evaluation of the Hatfield Cost Model Version 2.2.2," 1996.
Before the California PUC: Rulemaking on the Commission's Own Motion to
Govern Open Access to Bottleneck Services and Establish a Framework for
Network Architecture Development of Dominant Carrier Networks.
Investigation on the Commission's Own Motion into Open Access and Network
Architecture Development of Dominant Carrier Networks. (Development of
Position, Testimony and supporting Studies) R.95-04-043/1.95-04-044, 1996.
Before the California PUC: Rulemaking on the Commission's Own Motion to
Govern Open Access to Bottleneck Services and Establish a Framework for
Network Architecture Development of Dominant Carrier Networks.
Investigation on the Commission's Own Motion into Open Access and Network
Architecture Development of Dominant Carrier Networks. NRF 1.95-05-047,
1996.
Direct Testimony to offer an economic and algorithmic critique of the Hatfield
Model, Version 3.1, July 1997.
Florida
Before the Florida PSC Florida 1+Presubscription Hearings, 1995.
Before the Florida PSC (stay of Florida PUC 1+, local competition order),
February 1995.
Before the Florida PSC (stay of Florida PUC 1+, local competition order,
refiled), August 1995.
CnnsWvi g6'cnnnmurs
APPENDI\A- 10
Before the Florida: In Re: Petitions by AT&T Communications of the Southern
States, Inc., MCI Telecommunications Corporation and MCI Metro Access
Transmission Services, Inc., for arbitration of certain terms and conditions of a
proposed agreement with GTE Florida Incorporated concerning interconnection
and resale under the Telecommunications Act of 1996 (Interconnection and
Unbundling) "An Economic Evaluation of the Hatfield Cost Model Version
2.2.2," 1996, PSC 950984-TP.
Before the Florida PSC: In Re: Petitions by AT&T Communications of the
Southern States, Inc., MCI Telecommunications Corporation and MCI Metro
Access Transmission Services, Inc., for arbitration of certain terms and
conditions of a proposed agreement with GTE Florida Incorporated concerning
interconnection and-resale under the Telecommunications Act of 1996 "An
Economic Evaluation of the Hatfield Cost Model Version 2.2.2," 1996.
Before the Florida PSC 1994 1+ Presubscription hearings (Development of
Position, Testimony and supporting Studies).
Kentucky
Before the Kentucky Supreme Court (stay of Kentucky PUC 1+, local
competition order) March 1995.
Testimony on behalf of GTE vs. AT&T"An Economic Evaluation of the
Hatfield Cost Model Version 2.2.2," 1996.
Testimony on behalf of GTE vs. MCI "An Economic Evaluation of the Hatfield
Cost Model Version 2.2.2," 1996.
Oregon
Testimony on behalf of GTE vs. MCI"An Economic Evaluation of the Hatfield
Cost Model Version 2.2.2," 1996.
Michigan
Testimony of behalf of GTE (stay of Michigan PUC 1+, local competition
order), July 1995.
Idaho
Rebuttal Testimony Before the Public Utility Commission of the State of Idaho
In the Matter of AT&T Communications of the Mountain States, Inc. Petition
for Arbitration Pursuant to Section 252(b) of the Telecommunications Act of
1996 of the Rates, Terms and Conditions of Interconnection with GTE
Northwest Inc., Case No. GTE-T-97-3,
Consulting Emnombbs
APPENDIX A - I i
ATT-T-97-1.
Minnesota
Rebuttal Testimony Before the Minnesota Public Utilities Commission
regarding "Analysis of the Hatfield Model, Version 4.0", Docket No. P-999/M-
97-909.
Hawaii
Rebuttal Testimony on behalf of GTE Hawaiian Telephone Inc, regarding the
Hatfield Model, Docket No. 7702.
Texas
Rebuttal Testimony Before the Public Utility Commission of Texas on behalf of
GTE Southwest, Inc. regarding the Hatfield Model 5.0(a), Docket No. 18515,
February 27, 1998, July 15-16, 1998.
New Mexico
Rebuttal Testimony before the New Mexico State Corporation Commission on
behalf of GTE Southwest Corporation, New Mexico Operations, Docket Nos.
96-310-TC; 97-334-TC.
Missouri
Rebuttal testimony before the Public Utilities Commission on$"ehalf of GTE in
the matter of an investigation into various issues related to the Missouri
Universal Service Fund, Docket No. TO-98-329, December 7, 1998.
SOFTWARE
"TSP User's Manual" (revised Berkeley edition), with Jeffrey Finke and Joseph
Hurd, Department of Economics, University of California, Berkeley (1973).
"QUAIL User's Manual," with Jerry Berkman, David Brownstone and Daniel
McFadden, Paper 7402, Urban Travel Demand Forecasting Project, Institute of
Transportation Studies, University of California, Berkeley (1974).
"FILESYS user's Manual," Department of Economics, University of California,
Berkeley (1975).
Camvtting Eam�mtc[r
tArl`L;NU .AA - IL
APL/METRICS- a set of APL workspaces containing algorithms for numerical
optimization, robust and classical econometric analysis, discrete and mixed
continuous discrete model analysis and kernel analysis (1978/1985).
FILESYS -a floppy disk archiving system for APL work spaces (1974),
KER- a kernel estimation package in PASCAL (1985).
SLMM-An APL2/APL*PLUS workspace for simulated method of moments
applications. Contains a simulated annealing maximization algorithm, as well as
multinomial probit, Tobit, and Local Exponential Minimum Chi-Square
applications, March 1992.
GRAY-An external SAS module to provide D-optimal mixture designs up to
ten levels. Contains a combinatoric optimization algorithm also written by the
author.
PRICE/MOD- A SAS module with a DDE link to LOTUS-123 that analyses
Yellow Page Purchase behavior using multinomial logit analysis, places the
results in a linked LOTUS Spreadsheet, and allows the user to develop an
optimal pricing schedule for directory offerings.
BUSI_MOD-A set of business simulation models allowing for analysis of
new firm/new product entry, pricing and capital planning.
ROLOGIT-A rank-order logit package written in SAS/IML with a parallel
SAS/NLP analog.
RANLOGIT-A random coefficients rank-order logit package mitten in
SAS/IML with a parallel SAS/NLP analog.
MAJOR GRANTS
"Aggregate Residential Electricity Demand and Nonlinear Price Schedules,"
with Robert Baesemann (NERA) from Electric Power Research Institute (1979).
"Semiparametric Econometrics,"National Science Foundation (1980-1981).
"Duration on Welfare,"with W. K. Viscusi (Northwestern University) and D.
Saks (Vanderbilt) from the Department of Labor, U. S. Government
(1981-1985).
October 1999
Cansu!lLrX Fwm.ws
ALAN J. COY
VICE PRESIDENT
BUSINESS ADDRESS
National Economic Research Associates, Inc.
444 Market Street, Suite 910
San Francisco, CA 94111
415.291.1000
alan.cox@nera.com
Alan J. Cox participates in the Antitrust, Securities and Intellectual Property practices of
NERA. He holds a Ph.D. in Applied Economics from the Haas School of Business at the
University of California at Berkeley where he specialized in industrial organization issues and
wrote his thesis on the demand for telephone services. He also holds an M.A. in Economics from
the University of British Columbia. He has previously held positions as a Senior Economist and
Vice President at the Law&Economics Consulting Group and as Visiting Economist at M.I.T.'s
Energy Laboratory.
Antitrust issues on which he has testified include the competitiveness of crude oil and
product pipeline services, allegations of anti-competitive licensing,the competitive consequences
of a major electric utility merger,allegations of price fixing of professional services, and damages
due to software copyright infringement. In Securities matters,he has testified in consumer class
action fraud cases and on the impact of allegedly disparaging statements on securities prices and
the success of public offerings. He has appeared in state court and before the California Public
Utilities Commission. He has performed economic analysis on a wide array of issues including
damages due to infringement of intellectual property,the economics of vertical restraints in
gasoline retailing, allegations of crude oil price fixing,the competitive consequences of mergers
in the telecommunications industry, and the economic costs of restraints imposed on a"dominant"
telecommunications carrier. Dr. Cox also has extensive experience in estimating damages. He is
also a frequent lecturer on issues of estimating intellectual property damages, antitrust market
definition and securities matters.
EDUCATION
UNIVERSITY OF CALIFORNIA, BERKELEY
Ph.D.,Business Administration,Applied Economics Program, 1989
Major Fields: Industrial Organization, Finance,Econometrics
UNIVERSITY OF BRITISH COLUMBIA, VANCOUVER
M.A.,Economics, 1978
YORK UNIVERSITY, TORONTO
B.Sc., Environmental Science, 1976
AYYt.\URt5- _
EMPLOYMENT
1994-present NATIONAL ECONOMIC RESEARCH ASSOCIATES, INC.,—
San Francisco, California,
1998-present Vice President
1994-1998 Senior Consultant.
Undertakes and provides testimony in projects involving economic,
statistical, financial and antitrust analysis.
1989-1994 LAW& ECONOMICS CONSULTING GROUP, INC.,—
Berkeley, California, Senior Economist. Provided economic analysis and
testimony in antitrust and securities litigation and in regulatory
proceedings: Also served as Vice President with day-to-day responsibility
for managing growth for the firm and providing leadership to an
expanding staff of MBAs, MAs and Ph.Ds.
1988-1989 NATIONAL ECONOMIC RESEARCH ASSOCIATES,INC. —
Cambridge,Massachusetts, Senior Analyst. Contributed to antitrust,
telecommunications, natural gas, electricity and airport landing fee cases.
1983-1989 UNIVERSITY OF CALIFORNIA—Berkeley, California,
Research Assistant. Conducted research on California energy policy.
1985-1986 MINIMAAX RESEARCH CORPORATION—Berkeley, California,
Economist. Conducted analysis of electricity demand analysis and
demand-side management and strategic analysis on the impact of
regulatory changes for telephone utilities.
1978-1981 MASSACHUSETTS INSTITUTE OF TECHNOLOGY--
Cambridge,Massachusetts, Visiting Economist. Investigated the
economic consequences to electric utilities of independent power
producers and alternative energy sources.
1978 UNIVERSITY OF BRITISH COLUMBIA—Vancouver, Canada
Research Associate. Conducted research on energy demand and
cogeneration potential in the British Columbia pulp and paper industry.
1975 GEOLOGICAL SURVEY OF CANADA—Western Canada
Field Party Leader. Managed crew gathering data on the electrical
properties of permafrost in remote Arctic sites.
ACADEMIC AWARDS
C�nsulling fcnvrmrsls
APPENDIX B-J
1988 16th Annual Telecommunications Policy Research Conference, Finalist,
Graduate Student Paper Contest.
1981 Ph.D. Fellowship, Social Sciences and Humanities Research Council of
Canada.
1976 Maurice Wagner Memorial Fellowship, University of British Columbia.
1975 York University In-House Scholarship.
TEACHING EXPERIENCE
1994,1995 ST. MARY'S COLLEGE OF CALIFORNIA, Graduate School of
Management,Moraga, CA, Visiting Lecturer. Taught Industrial Structure
and Competitive Strategy.
1989 NORTHEASTERN UNIVERSITY, Graduate School of Management,
Boston,MA, Adjunct Lecturer. Taught Managerial Economics.
1984-1985 UNIVERSITY OF CALIFORNIA—Berkeley, California,
Teaching Assistant. Taught Intermediate Microeconomics.
EXPERT TESTIMONY, AFFIDAVITS AND REPORTS
Antitrust and Intellectual Property
Australia Vision Services Pty. Ltd. v. Dioptics Medical Products Inc. and Henry Lane.
Declaration dated May 12, 2000 to estimate damages for patent infringement and
counter claims. -
SFPP L.P. for Authority to Justify Its Rates for Intrastate Transportation of Refined
Petroleum Products on the Basis of Market Factors. Report dated March 15, 2000
prepared for SFPP, L.P. in support of an application of market-based rates for its refined
petroleum product pipelines within California.
In re: SFPP, L.P. in support of application for market based rate setting authority.
Testimony and cross-examination before the Federal Energy Regulatory Commission
(FERC) on behalf of SFPP, L.P. in Washington, D.C. February 11-15, 2000.
Bryant Cragun v DOES 1-50 inclusive. Declaration in support of application for
temporary restraining order in the matter of Bryant Cragun v. DOES 1-50, inclusive
dated January 27, 2000. Discussion of economics and financial impact of defamatory
Internet postings and press releases.
Comvdfi�g Ecnnnmisu
APPH."DIx B- 4
ARCO Products Companv. Mobil Oil Corp.. and Texaco Refining and Marketing. Inc.
v. SFPP, Inc. Prepared Direct Testimony dated January 21, 2000 submitted to the
California Public Utilities Commission on behalf of SFPP, L.P. to examine the
competitiveness of SFPP's rates charged on its Sepulveda Line and its Watson Station
in Los Angeles,
Time Domain. Preliminary Report dated September 27, 1999 on Damages Suffered by
Time Domain Corporation as a result of patent infringement and unfair competition by
the University of California, Lawrence Livermore National Laboratory.
Western Wireless Corporation and WWC Holding Co. Inc., dba Cellular One v.
Consolidated Telephone Cooperative. Western Wireless provides local access using
wireless technology in rural areas. Service to its customers was interrupted for several
weeks through actions by ILEC. Expert report dated September 23, 1999 assessing
competitive consequences of ILEC behavior and the damages resulting from the
disconnection of numbers. Deposition dated November 3, 1999.
In re: SFPP, L.P. in support of application for market based rate setting authority.
Affidavit submitted to FERC on March 16, 1999 describes protestor's documents
reviewed and why they are relevant to a market power analysis. SFPP answering
testimony, exhibits and work papers dated May 17, 1999 in support of application,
surrebuttal testimony, exhibit and work papers dated October 25, 1999.
Northern Telecom Limited v. Samsung Electronics, Co.,Ltd. Declaration in opposition to
Northern Telecom's motion to exclude evidence pursuant to federal rules of evidence 408,
402 and 403,December 19, 1997
Application of SFPP for Market Power Determination. Expert report filed on behalf of
Santa Fe Pacific Pipelines (SFPP) for a determination that the prices that SFPP can
charge for transportation of product on one of its pipelines are governed by market
forces. Report submitted to the Federal Energy Regulatory Commission, Dec. 31, 1997.
ARCO Products Company, Mobil Oil Corporation and Texaco Refining and Marketing
Inc. v. SFPP. L.P on behalf of Santa Fe Pacific Pipelines, (SFPP) a petroleum products
pipeline company. Submitted report "Competitive Aspects of Santa Fe Pacific
Pipeline's Operations in California" to the California Public Utilities Commission,
November 26, 1997. Cross-examined Jan. 14-15, 1998,
Alumax Inc. v. Hot Metal Molding, Inc. et al. Expert report written on behalf of
Alumax on the appropriate methodology to apply in defining technology markets. This
was undertaken with reference to Alumax' patents used in parts manufacture using a
semi solid process. Report was filed on April 17, 1998. Deposition taken.
Luanne Foley v. California Reporting Alliance, Truck Insurance Exchange, et al.
Affidavit submitted to Los Angeles Superior Court on behalf of defendants and Farmers
C.n,,.Ii gEconomise
APPENDIX B-5
Group on market power issues and the ability of the California Report Alliance to fir
prices, Oct. 1995.
Brooks Fiber Communications of Tucson. Inc., v. GST Tucson Lightwave, Inc. Expert
witness and rebuttal reports submitted and deposition in a matter in which plaintiff
alleged an attempt to monopolize certain telephone services in the Tucson area, June
1997.
City of Long Beach v Unocal California Pipeline Company(UNOCAP) Testimony on
behalf of Unocal California Pipeline Company on competitiveness of crude oil
transportation services in California, before the California Public Utilities Commission,
May 1993 (with Daniel Rubinfeld).
Testimony on behalf of the Division of Ratepayer Advocates of the California Public
Utilities Commission on the competitive impact of proposed merger on bulk power
markets and on transmission access. Proposed merger between Southern California
Edison and San Diego Gas and Electric, before the California Public Utilities
Commission,June, 1990 (with Richard Gilbert).
DCI Computer Systems Inc. v. Bill Pardini, et al.. Testimony on behalf of DCI
Computer Systems, Superior Court of California, Fresno County. Deposition taken on
damages in intellectual property case, Feb. 1990.
Andrews et al. v. California Reporting Alliance et al. Testimony on behalf of the
California Reporting Alliance. Testified on antitrust issues in a case alleging an attempt to
fix prices in certified court reporting,before Superior Court of California, San Francisco
County,August 1994.
Securities ,
BAS Arbitration. Testimony dated May 5, 2000 in arbitration before the National
Association of Securities Dealers, Inc. in the matter of Banc of America Securities, LLC
v. Greg Ager, et al.
BAS Arbitration. Declaration dated March 17, 2000 in Opposition to Motion for
Summary Judgment in the matter of Banc of America Securities LLC v. Greg Ager, et
al.
BAS Arbitration. Expert Report dated February 11, 2000 in connection with Banc of
America Securities LLC v. Greg Ager, et al. Estimated damages due to raiding and
taking of intellectual property by Thomas Weisel Partners of Banc of America
Securities.
Barbara Rosen et al. v. Macromedia. Inc., et al. Declaration dated April 22, 1999 in
Opposition to Plaintiffs' Motion for Class Certification.
CumsufAng Economists
APPEND[\ B- 6
Elliott Miller v NTN Communications Inc. Initial report dated October 23, 1998,
rebuttal report dated November 6, 1998 and deposition taken on December 17, 1998.
The report addresses issues of market efficiency, materiality, and reliance issues in a
I Ob-5 class action.
Traverso v. Eller Media. Report dated October 23, 1998 places value on option rights
that were extinguished by the option writer.
Interactive Networks Inc. v NTN Communications. Inc. Testimony on behalf of NTN
Communications,Inc. Deposition given on the impact of alleged statements on the ability
of plaintiff to make a seasoned offering,April 1996.
Contract Disputes
AMP Inc. v. Raychem Corp. Report dated December 15, 1998 estimates the potential
growth in sales of Halar-insulated LAN cable for the purpose of demonstrating lost sales
as a result of a breach of contract.
Chevron USA v Total Minerals Corp. Testimony on behalf of Chevron USA on the role
of spot markets in an arbitration over the value of uranium in a royalty dispute. Report
submitted, case settled. May 1994.
LITIGATION CONSULTING EXPERIENCE
Antitrust and Intellectual Property
Micron Technology. Inc v Mosel Vitelic. Inc. Managed research assessing damages in
semiconductor patent infringement suits and countersuits. Participated in writing
reports.
Northern Telecom Ltd. v. Samsung Electronics on behalf of Samsung. Responsible for
estimating reasonable royalty on patent for etching semiconductors. Submitted
affidavits in support of various motions.
Advanced Micro Devices v. Intel on behalf of Intel. Arbitration on terms of cross-
licensing agreement for semiconductor products. Estimated impact of cross-licensing
agreements on prices and sales of microprocessors.
The City of Long Beach et al. v. Standard Oil of California et al. on behalf of
defendants Shell Oil and Exxon. Provided detailed analysis of the supply and demand
of crude oil in California in a case alleging conspiracy to hold down the price of heavy
crude.
Consul ing Ecnnnm,a
APPENDix B-7
The Citv of LonQ Beach et al v Standard Oil of California et al Reserved Pipeline
Claims on behalf of Chevron, Mobil and Texaco. Arbitration to determine whether
three heated pipelines in California should be turned into common carriers.
Tucson Electric Power v. Southern California Edison on behalf of Southern California
Edison. Conducted antitrust analysis of the Southwestern bulk power market in the
context of proposed merger that Edison was alleged to have disrupted.
TDM Partners v. IBM on behalf of IBM. Supervised research on factors that contribute
to failure of new product introduction.
State of Florida v. Ross Labs on behalf of Ross Labs. Demand, pricing and performance
analysis in the infant formula industry in price fixing cases.
City of Long Beach v Unocal California Pipeline Company (UNOCAPI on behalf of
UNOCAP. Undertook study of the competitiveness of crude oil transportation services
in California.
Anderson et al v Texaco Refining and Marketing on behalf of Texaco Refining and
Marketing. Case involved pricing of wholesale gasoline to lessee-operated gasoline
stations in San Diego and Los Angeles.
In Re: Catfish Antitrust Litigation U.S.District Court for Northern District of Mississippi,
Delta Division. Undertook statistical analysis of data on the price of frozen pond-raised
catfish to different classes buyers in order to show that behavior of prices were so
fundamentally different that a single class was inappropriate.
Telecommunications
In the Matter of the Joint Application of Pacific Telesis Group and SBC
Communications Inc. for SBC to Control Pacific Bell Assisted in the preparation of
testimony on the extent to which merger-related efficiencies would be passed on to
telephone ratepayers by competitive forces.
Bell Atlantic et al v American Telephone and Telegraph Assisted in evaluating the
competitive consequences of the merger between McCaw Cellular and AT&T.
OPTUS v. Telecom Australia. Undertook analysis of Telecom Australia's alleged
dominance and anticompetitive behavior in Australian cellular markets.
United States of America v. Western Electric Company, Inc. and American Telephone
and Telegraph, Inc. Assisted in undertaking analysis of the welfare losses due to the
MFJ restrictions on the RBOCs.
CnnsuL,ng Ecnnnmun'
'.. APPENDix B -3
Fred Dillet dba Telcom v. GTE. Damage expert for defendant in cellular dealer
termination matter.
Energy Industry
Investigation into Electric Power Competition, before the Pennsylvania Public Utility
Commission, Docket No. 1-940032, on behalf of PECO Energy Company. Assisted in
preparation of position papers on the impact of retail wheeling.
Pacific Gas &Electric 1993 General Rate Case on behalf of Division of Ratepayer
Advocates of the California Public Utilities Commission. Provided economic and
statistical analysis of proposed new methodology for allocating transmission and
distribution costs.
A lication by Trans Power New Zealand, Ltd.. to the Commerce Commission for
Authorization of Restrictive Trade Practices on behalf of Mercury Energy, the
distribution company in Auckland. Assisted in the preparation and writing of a report
and testimony on the appropriate method of charging for the use of the national electric
transmission grid in New Zealand.
Nevada Cogeneneration Associates# 1 a General Partnership and Nevada Cogeneration
Associates#2 a General Partnership v Nevada Power Company,undertook financial and
damage analysis in a dispute on payments to an independent power producer, on behalf of
Nevada Power.
Securities/Financial IndustryNaluation
In the Matter of the Joint Application of Pacific Telesis Group and SBC Communications
Inc for SBC to Control Pacific Bell. Assisted in the preparation of rebuttal testimony on
the stock market's assessment of the merger benefits.
H. K. Porter Com an Inc. and the Committee of Unsecured Creditors of H. K. Porter
Company. Inc v Thomas Mellon Evans, et al. Undertook analysis and wrote report on
the appropriate return to utilize in determining the adequacy of a fund to finance
asbestos settlements in a bankruptcy proceeding.
Roberds Securities Litigation. Assisted in estimating damages in 10(b)-5 claim and in
analysis of stock price movements.
Bums Philp Food Inc v Rvkoff-Sexton. Undertook a review of valuations of brand
equity in connection with an alleged fraudulent conveyance.
Fischer&Porter Co. and Elsag Bailey Process Automation N.V. v. Moorco International,
Inc. Undertook analysis of stock prices to determine financial impact of alleged
interference with a proposed merger.
GnrzsuUing Ecunnman'
APPENDIX B- 9
Resolution Trust Corporation V. Michael Milken et al. on behalf of the Resolution Trust
Corp. Provided detailed analysis of role of Drexel Burnham's high yield department in the
junk bond market.
Resolution Trust Corp v Roy et al. on behalf of defendant officers and directors.
Provided analytic support for expert testimony on behalf of officers and directors of a
failed thrift in Hagerstown, Maryland.
Consolidated Capital Securities Litigation in support of defendant officers in a securities
fraud litigation. Provided analysis in support of expert testimony on the riskiness of Real
Estate Investment Trusts.
Valuation of pension fund investment in energy service company. Assisted Coopers &
Lybrand valuation practice in valuation and provision of advise on prospects for energy-
related investment made by pension fund.
Other
Sindy E. Johnson v Apple Computer. Inc. Econometric and statistical analysis of salary
histories to determine the effect, if any,of gender on salary plus bonus.
American Airlines v.Northwest Airlines. Case involved allegation by American that fare
management software was based upon stolen intellectual property. Assisted in critiquing
plaintiff's damages model.
Northrop Corp v The Queen in Right of Canada. Developed preliminary damage
estimate on behalf of Government of Canada on alleged misappropriation of trade secrets
in market for reconditioning F-5 jet fighters. -
PUBLICATIONS
"Mergers, Acquisitions, Divestitures, and Applications for Market-Based Rates in a
Deregulating Electric Utility Industry," The Electricity Journal 12,No. 4, (May 1999):
27-36.
"Mergers in Regulated Industries: The Uses and Abuses of Event Studies." Journal of
Regulatory Economics; 14:281-304 (1998), (1998 Kluwer Academic Publishers) with
Jonathan Portes.
"Linking Stock Prices and Mergers."Public Utilities Fortnightly, (June 1998) with
Jonathan Portes.
Cnnmtnng 5cnnomsu
APPENDIX B- 10
"Winning Consumers: A Strategy for Developing New Products is the Key to
Competitiveness,"Energy, Vol. XXIII, no. 3:11, June 1998, with James R. Forcier.
"New Product Development and Pricing for Competitive Electricity Markets,"presented
at the Electric Power Research Institute's Conference "Pricing Energy in a Competitive
Market,"Washington, D.C., 19 June 1998, and at the 171h Annual Conference of the
Advanced Workshop in Regulation and Competition,Vergennes, Vermont, 28 May 1998,
with James R. Forcier.
"Wind Power in California: A Case Study of Targeted Tax Subsidies." Regulatory
Choices, A Perspective on Developments in Energy Policy,R. J. Gilbert, ed., (Berkeley,
University of California Press, 1991)with C. Blumstein and R. Gilbert.
"An Economic Evaluation of the Costs and Benefits of Diablo Canyon." Regulatory
Choices,A Perspective on Developments in Energy Policy,R. Gilbert, ed., (Berkeley,
University of California Press, 1991)with R.J. Gilbert.
"A Review of the Energy Productivity Center's Least-Cost Energy Strategy Study."
prepared for the Electric Power Research Institute,MIT Energy Laboratory Energy Model
Analysis Program, E.R.Berndt, M. Manove and D.O. Wood, eds., EPRI Report EPRI-
EA-2753, 1983.
"Homeostatic Utility Control." IEEE Transactions on Power Apparatus and Systems,
Vol. PAS-99,No. 3,May/June 1980,with J. L. Kirtley,Jr., H.R. Outhred,F.H. Pickel,
F.C. Schweppe, and R.D. Tabors.
"Economic Modeling of Energy from Burning Wood Waste at British Columbia Pulp and
Paper Mills." Energy Policy Modeling: United States and Canadian Experiences, 1980,
W.T. Ziemba et al., eds. (Hingham,MA,Martinus Nijhoff Press, 1980)with J. F.
Helliwell.
"Estimation of Logging Costs and Timber Supply Curves from Forest Inventory Data."
The Forestry Chronicle, August 1979,pp. 144-147,with E. R. Berndt and P. H. Pearse.
"Wood Wastes as an Energy Source for the British Columbia Pulp and Paper Industry:
Economic Implications and Institutional Barriers." Energy Policy, The Global Challenge,
P.N.Nemetz, ed., 1979, (Montreal, Institute of Research in Public Policy) with J. F.
Helliwell.
"Electricity Pricing and Electricity Supply: The Influence of Utility Pricing on Electricity
Production by Pulp and Paper Mills." Resources and Energy, Vol. 2, pp. 51-74, 1979,
with J.F. Helliwell.
Cu.,O,ng Ecnn,.w,
APPENDIX 8 - I I
"Simulation Analysis of Energy Production in the British Columbia Pulp and Paper
Industry." MIT Energy Laboratory working paper MIT-EL79-009. Also in Simulation,
Modeling and Decision in Energy Systems, Conference Proceedings, 1978.
PRESENTATIONS AND WORKING PAPERS
"Recent Trends in Securities Litigation and Test of Whether a Stock is Traded
Efficiently," Speech before the Securities Litigation Practice Group of Gibson, Dunn&
Crutcher, LLP in San Diego, CA on March 24, 2000.
"Securities Class Action Damage Analysis Trends in Litigation&Limits,"Presentation to
the Marsh& McLennan Company in San Francisco on January 27, 2000.
"Bursting Bubbles and Stampeding Herds: Was That Stock Trading in an Efficient
Market?" Guest speaker for seminar entitled, "Balancing Disclosure and Litigation Risks
for Public Companies(Or Soon-To-Be Public Companies)"hosted by The Securities
Litigation Practice Group of Alston&Bird,LLP in Atlanta,GA on September 16, 1999.
"Relevant Markets and the Economics of Market Power in Intellectual Property Related
Antitrust Matters,"Presentation to the Practising Law Institute's"Intellectual Property
Antitrust"program held at the Sheraton Palace Hotel in San Francisco, CA on July 15-16,
1999.
"The Law and Economics of Acceptable Non-Infringing Alternatives"NERA seminar on
the Use of Surveys for Damage Estimation in Intellectual Property held in Palo Alto, CA
on October 21, 1998 and in San Francisco, CA on December 9, 1998.
"Antitrust and Intellectual Property Market Definition"seminar delivered-to the
Intellectual Property Antitrust Program of the Practising Law Institute, San Francisco,
California, July 17, 1997. Published in"Intellectual Property Antitrust 1997," Practising
Law Institute 1997.
"Mergers in Regulated Industries: The Uses and Abuses of Event Studies"presented to the
1 Oth Annual Western Conference of the Rutgers University Advanced Workshop in
Regulation and Competition:Network Industries in Transition, San Diego, California, July
9, 1997.
"Privatization: Canada and the USA" speech delivered at the Laurier University
Chancellor's Symposium Trends in Global Trade and Finance: Privatization, Toronto,
Canada, June 18, 1997.
"Antitrust and Intellectual Property Market Definition" seminar delivered to the
Intellectual Property Antitrust Program of the Practising Law Institute, San Francisco, CA,
Consultlrt,�Ecnnnm.ata
APPENDtx S- 12
July 29, 1996. Published in"Intellectual Property Antitrust 1996,"Practising Law
Institute 1996.
"Economic Considerations in Evaluating Utility Mergers", presentation to NARUC Staff
Subcommittee on Management Analysis winter meeting, January 24, 1994.
"Passenger Transport Subsidies—the Case for Government Funding, Central or Local,"
presentation sponsored by Chapman,Tripp, Sheffield, Young, Barristers and Solicitors,
for Transit New Zealand National Conference, Masterton,New Zealand, December 4,
1992. Proceedings published by Transit New Zealand.
"Modeling the Effects of Household Characteristics on Telephone Usage and Class of
Service Choice,"presented"to 16th Annual Telecommunications Policy Research
Conference, Airlie House, Virginia, October, 1988; and to the International
Telecommunications Conference, Cambridge,Massachusetts,June 29 -July 1, 1988.
"Modeling the Effects of Household Characteristics on Telephone Usage and Class of
Service Choice,"International Telecommunications Conference, Cambridge,
Massachusetts,June 29-July 1, 1988.
"The Prospects for Some Alternative Energy Technologies in the United States and
Canada,"Massachusetts Institute of Technology, Industrial Liaison Program,presentation
to Elf-Aquitaine Management,Paris,France, April, 1981; and to Italian Department of
Energy,Rome,Italy,April 1981.
"The Prospects for Some Alternative Energy Technologies in the United States and
Canada," Massachusetts Institute of Technology,Industrial Liaison Program,presentation
to Elf-Aquitaine Management,Paris, France,April, 1981; and to the Italian Department of
Energy,Rome,Italy,April, 1981.
"The Economics and Regulation of Distributed Power Systems in the Utility Grid:
Photovoltaics,"invited paper to the 1981 Eastern Economics Association Meetings,
Philadelphia,MIT Energy Laboratory Working Paper No. MIT-EL81-014-WP, 1981.
"The Impact on Photovoltaic Worth of Utility Rates and of Specific Market, Financial and
Policy Variables,"with T.L. Dinwoodie, MIT Energy Laboratory Report No. MIT-EL80-
025, 1980.
"The Economics of Photovoltaics in the Commercial, Institutional and Industrial Sectors,"
Fourteenth IEEE Photovoltaic Specialists Conference Proceedings and MIT Energy
Laboratory Working Paper No. MIT-EL80-008-WP, 1980, with T.L. Dinwoodie.
"The Use of Wood Wastes for Cogeneration in British Columbia's Pulp and Paper
Industry," Proceedings, Cogeneration Workshop, Electric Power Research Institute, Palo
Alto, California, 1979.
Can,Wung Eca.O. v
APPENDIS B- 13
"Simulation Analysis of Energy Production in the British Columbia Pulp and Paper
Industry," MIT Energy Laboratory Working Paper MIL-EL79-009. Also in Simulation,
Modeling and Decision in Energy Systems, Conference Proceedings, 1978.
May 2000
C,m.hmg fconnmim
APPENDIX C
CHRISTIAN MICHAEL DIPPON
ECONOMIC CONSULTANT
BUSINESS ADDRESS
National Economic Research Associates, Inc.
444 Market Street, Suite 910
San Francisco, CA 94111
Phone: (415) 291-1044, Fax: (415) 291-1020
christian.dippon@nera.com
Mr. Dippon received a Bachelor of Science degree cum laude in Business Administration
from the California State University, Hayward, and a Master of Arts degree in Economics with a
concentration in microeconomics and econometrics from the doctoral program of the University of
California, Santa Barbara.
Mr. Dippon's main area of expertise is telecommunications,where he advises clients on
local competition issues,Regional Bell Operating Company(RBOC) long distance entry, economic
costs, cost proxy models, market research, and general litigation matters. He has presented
testimony, affidavits, and expert reports to federal and state regulatory agencies and has been
published in a telecommunications journal. In particular, Mr. Dippon has analyzed numerous cost
study methods and cost proxy models for telecommunication access services and elements. As a
direct result of his analyses, he has been able to determine if the costs being submitted by various
parties for unbundled network elements and services meet competitive standards and are consistent
with the Federal Communication Commission's and state regulatory agencies' guidelines.
Recently, Mr. Dippon's work has focused on designing an appropriate quality incentive plan for
Operations Support Systems (OSSs) used in RBOC long distance entry applications.
Mr. Dippon also conducts market research studies employing qualitative choice models and
marketing surveying tools. These studies evaluate the effects of competitive entry and the bundling
and unbundling of network elements and services. He also works on damage litigation matters.
Prior to joining NERA,Mr. Dippon was an analyst at BMW in Bangkok, Thailand.
Projects managed by Mr. Dippon included the economic and financial analysis of BMW's Thailand
operations, strategic planning and forecasting to the year 2000, and the development and
implementation of various quality programs.
Mr. Dippon is a native of Switzerland with a truly international background. His native
language is German and is fluent in English and French and proficient in Thai and Spanish.
EDUCATION
UNIVERSITY OF CALIFORNIA, SANTA BARBARA, 1995
APPENDIX C-2
Master of Arts in Economics
CALIFORNIA STATE UNIVERSITY, HAYWARD, 1993
Bachelor of Science in Business Administration
Cum Laude
PROFESSIONAL EXPERIENCE
NATIONAL ECONOMIC RESEARCH ASSOCIATES, INC.
1996- current Economic Consultant(current position)
BAVARIAN MOTOR WORKS, BANGKOK, THAILAND
1993-1994 Analyst
CALIFORNIA STATE UNIVERSITY, HAYWARD
1992-1993 Tutor
Tutored undergraduate students in economics,mathematics, history, and the
German language.
SWISS ARTILLERY, BIERE, SWITZERLAND
1989-1990 Corporal
HONORS
• National Dean's List
• Golden Key National Honor Society
• Dean's Honor Roll for the academic year 1991-1992
��l+a
Cnnaultmg fcnnnmrcts
APPENDIX C -3
PROFESSIONAL TRAINING
• Qualitative Choice Workshop, University of California at Berkeley, 1996
• Advanced Qualitative Workshop, University of California at Berkeley, 1997
• Time Series Workshop, University of California at Berkeley, 1998
• Fundamentals in SAS, The SAS Institute, 1997
• Introduction to Visual Basics 5.0, 1997
• Telecommunications Engineering, TRA, 1997
• Senior Writing Seminar,NERA, 1998
• Business Development Strategy and Skills, Carlson Associates, 1998
• Wireless Engineering and Emdrging wireless technologies, TRA, 2000
LANGUAGES
• Native in German
• Fluent in English
• Fluent in French
• Good in conversational Thai
• Proficient in Spanish
COMPUTER SOFTWARE
• Microsoft Windows
• Microsoft Office
• SAS
• Visual Basic 6.0
• Map Info 4.12
• Corel Suite 8.0
AFFILIATIONS
• American Economic Association
• International Telecommunications Society
TESTIMONIES
Affidavit of Christian Michael Dippon In Support of the Motion ofContel of Minnesota,
Inc. dlb/a GTE Minnesota for Reconsideration of the Commission's Decision to
Recommend HAI 5.Oa. Before the Minnesota Public Utilities Commission, May 10,
1998.
Can'0'i gF.cnnnm'a
APPENDIX C -4
Affidavit of Christian Michael Dippon In Support of GTE's Petition for Reconsideration
of the Fifth Report and Order. Before the Federal Communications Commission, CC
Docket Nos. 96-45, 97-160, December 18, 1998.
Affidavit of Christian Michael Dippon In Support of GTE's Application For Review and
Review of Freedom of Information Action. Before the Federal Communications
Commission, CC Docket Nos. 96-45, 97-160, January 15, 1999.
Supplemental Testimony of Christian Michael Dippon on Behalf of GTE Midwest
Incorporated. Before the Public Service Commission State of Missouri, January 19,
1999.
Supplemental Affidavit of Christian Michael Dippon In Support of GTE's Petition for
Reconsideration of the Fifth Report and Order. Before the Federal Communications
Commission, CC Docket Nos. 96-45, 97-160, January 25, 1999.
Response Affidavit of Christian Michael Dippon On Behalf of GTE North Incorporated.
Before the Michigan Public Service Commission, Case No. U-11832, May 18, 1999.
Affidavit of Harold Ware and Christian Michael Dippon On Behalf of Bell Atlantic
Incorporated. Before the Federal Communications Commission, CC Docket Nos. 96-
45, 97-160, July 23, 1999.
Rebuttal testimony of Christian M. Dippon On Behalf of GTE Northwest, Inc. Before
the Public Utility Commission of Oregon in the matter of the Investigation into
Universal Service in the State of Oregon, UM 731, Phase IV, January 12,2000.
Oral testimony at arbitration hearing on behalf of GTE Northwest, Inc.-in the matter of
the Investigation into Universal Service in the State of Oregon, UM 731, Phase IV,
Salem, OR,February 7, 2000.
Reply testimony of Christian M. Dippon On Behalf of GTE Northwest, Inc. Before the
Idaho Public Utility Commission of Idaho in the matter of the Investigation to determine
an appropriate Cost Model using forward-looking economic costs for calculating the
costs of basic Telecommunication Services in Idaho, GNR-T-97-22, May 24, 2000.
SELECTED CLIENT REPORTS
Economic and Algorithmic Errors in the Hatfield Model, Release 3.1. With Dr.
Gregory Duncan, Dr. Timothy Tardiff, and Dr. Rafi Mohammed. Expert report
prepared for GTE Corporation for interconnection arbitration in various states.
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APPENDIX C-5
Economic and Algorithmic Errors in the Hatfield Model, Release 4.0. With Dr.
Gregory Duncan, Dr. Timothy Tardiff, and Dr. Rafi Mohammed. Expert report
prepared for GTE Corporation in interconnection arbitrations in various states.
Evaluation of the Hatfield Model, Release 5.0. With Dr. Gregory Duncan, Dr. Timothy
Tardiff, Dr. Rafi Mohammed, Mr. Francis Murphy, and Mr. Robert Cellupica. Expert
report prepared for GTE Corporation for interconnection arbitration in various states.
Evaluation of HAI Consulting Inc. 's implementation of actual average loop length into
HM 3.1. Prepared for GTE Northwest, Inc. in response to a bench request by the
Washington Public Utilities Commission.
International Trends In Telecommunications Competition and Regulation. Overview of
the regulatory efforts to facilitate competition in selected countries. Prepared for GTE
Corporation, April 8, 1999.
SELECTED PUBLICATIONS AND PRESENTATIONS
The Cost of the Local Communication Network:A Comparison of Minimum Spanning
Trees and the HAI Model. With Dr.Kenneth Train,University of California at
Berkeley, Telecommunications Policy, Volume 24,No. 3,April 2000.
Dippon C. M.; Murphy F.,"Economic And Engineering Errors in HM 3.1,"presented
before the Hawaiian Public Utilities Commission,Honolulu, HI, February 1998.
Dippon C. M.; Train, K., "The Cost of the Local Telecommunications Network: A
Comparison of Minimum Spanning Trees and the HAI Model"presented at the
Telecommunications Policy Research Conference,Alexandria,VA, O--c ober 1998.
Dippon C. M, "Estimating the Cost of Local Telephone Service. Where are the
customers?"presented at the Advanced Workshop in Regulation and Competition,
Rutgers University,The Sagamore, Lake George, Bolton Landing,NY, May 25, 2000,
06/00
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APPENDS D
SCHEDULE OF HOURLY FEES*
AS OF JANUARY 1, 2000
Officers $260 - $525
Senior Consultants $225 - $375
Consultants $165 - $275
Senior Analysts $150 - $235
Analysts $135 - $195
Associate Analysts $115 - $165
Research Associates silo - $130
Special Consultants $250 - $800
Charges for computer services, secretarial services, duplicating,
travel costs, postage, etc, are billed separately.
*Fees subject to change on notice.