Free Notice (Other) - District Court of Colorado - Colorado

Case 1:02-cv-01977-RPM

Document 92-3

Filed 03/09/2006

Page 1 of 2

Exhibit 2 Regulatory Regime Faced by Qwest in Eight States (as of September 2004)
State Arizona Regime Type Rate-of-Return with Price Caps(1) Details Local rates and other non-competitive services are subject to non-indexed caps that allow for price movement under cap. Competitive services are flexibly priced, but subject to revenue cap for entire basket of competitive services. Prior to April 2001, Qwest was subject to full rate-of-return regulation, although prices for intraLATA long distance were flexible within a range specified by the Arizona Corporation Commission. Basic services are subject to non-indexed price caps. (2) Other services flexibly priced. Price cap regime in place since 1996. Price caps since 1995. Basic services are subject to indexed price caps. (3) Other non-competitive services can rise up to 6% annually. Competitive services are deregulated. Price caps in effect 1999-2005. Local exchange service is subject to non-indexed caps. Other basic and emerging competitive services are flexibly priced. Rates for fully competitive services are deregulated. In 2004, Minnesota deregulated business rates in three major metropolitan areas. Rate-of-return regulation until April 2001, although prices for intraLATA long-distance were flexible within a range set by the New Mexico Public Regulation Commission. Basic services are currently subject to non-indexed price caps. Prices for Qwest's nonbasic services capped at the average of rates in its 14-state territory. Price caps since 2000. Non-indexed price caps for residential and small business basic exchange, except for cost-justified rate increases. Non-indexed price caps for all other services, with cost floors. Qwest can lower its rates for all services without prior approval from the Oregon Public Utility Commission. Price caps since 1997. Basic exchange and other noncompetitive services under indexed caps. Competitive services flexibly priced. Rate deregulation granted to Qwest's toll, directory assistance and business services to large customers in markets where competitors operate. Changes to intraLATA toll rates require prior notice to the Washington Utilities and Transportation Commission.

Colorado Iowa

Price caps Price caps

Minnesota

Price caps

New Mexico

Price caps

Oregon

Price caps

Utah Washington

Price caps Rate-of-Return

Notes: (1) Under a price cap regime, services are generally grouped in "baskets" based on their degree of competitiveness. More competitive services are subject to less regulation. Rate-of-return regulation sets rates such that the monopoly company earns sufficient revenues to cover its long run costs. (2) Basic telephone service is local and toll service for business and residential customers. (3) An indexed cap generally allows prices to increase annually with inflation, less the estimated productivity growth rate in the industry. Exhibit 2 Page 1 of 2

Expert Report of John B. Hayes

Case 1:02-cv-01977-RPM

Document 92-3

Filed 03/09/2006

Page 2 of 2

Exhibit 2
Sources: National Regulatory Research Insititute (Ohio State University), "State Retail Rate Regulation of Local Exchange Providers as of September 2004," November 2004. National Regulatory Research Institute, "The State of Regulation: An Annual Examination of The Four Utility Sectors," July 2001. Arizona Corporation Commission, Opinion and Order in Qwest Rate Case, Docket No. T-01051B-99-0105, March 30, 2001. "Colorado Well-Positioned for Coming Telecom Battle," Denver Business Journal , November 15, 1996, available at ttp://www.bizjournals.com/denver/stories/1996/11/18/editorial4.html. New Mexico Public Regulation Commission, Amended Joint Stipulation in Re Qwest Corporation's Petition for Approval of an Alternative Regulation Plan, January 23, 2001. Testimony of Qwest cited in Montana Department of Public Service Regulation, Final Order in the Matter of the Application of Qwest Corporation for Authority to Detariff its Toll and Operator Services, Docket No. D99.8.205, November 3, 2000.

Expert Report of John B. Hayes

Exhibit 2 Page 2 of 2