ISSUED: DECEMBER 12, 1996
BEFORE THE PUBLIC UTILITY COMMISSION
OF OREGON
ARB 5
| In the Matter of the Petition of AT&T Communications of the Pacific Northwest, Inc., for Arbitration of Interconnection Rates, Terms, and Conditions with GTE Northwest Incorporated, Pursuant to 47 U.S.C. § 252(b). | ) ) ) ARBITRATOR’S ) DECISION ) |
PROCEDURAL HISTORY
On August 1, 1996, AT&T Communications of the Pacific Northwest, Inc., (AT&T) filed a petition with the Public Utility Commission of Oregon (Commission) to arbitrate a contract for network interconnection with GTE Northwest, Inc., (GTE) pursuant to 47 U.S.C. §§ 251 and 252 of the Communications Act of 1934, as amended by the Telecommunications Act of 1996 (Act). On September 10, 1996, GTE filed a response. An arbitration hearing was held on September 24 and 25, 1996, before Thomas G. Barkin, Arbitrator. The following appearances were entered:
For the petitioner, AT&T:
Mark P. Trinchero, Attorney at Law
Portland, OregonSusan Proctor, Attorney at Law
Denver, Colorado
Appearing pro hac vice
For the respondent, GTE:
Richard E. Potter, Attorney at Law
Everett, Washington
Lewis F. Powell, III, Attorney at Law
Richmond, Virginia
Appearing pro hac viceAndrew D. Shore, Attorney at Law
Richmond, Virginia
Appearing pro hac vice
On November 12, 1996, the parties filed briefs and proposed contracts. The parties also filed a joint matrix displaying the positions of the parties on the issues.
PRELIMINARY MATTERS
Arbitrator’s Authority
This proceeding is being conducted under 47 U.S.C. § 252(b). The standards for arbitration are set forth in 47 U.S.C. § 252(c):
In resolving by arbitration under subsection (b) any open issues and imposing conditions upon the parties to the agreement, a State commission shall--
(1) ensure that such resolution and conditions meet the requirements of section 251, including the regulations prescribed by the Commission pursuant to section 251;
(2) establish any rates for interconnection, services, or network elements according to subsection (d); and
(3) provide a schedule for implementation of the terms and conditions by the parties to the agreement.
FCC Pricing Rules
On August 8, 1996, the Federal Communications Commission (FCC) issued an order and rules on interconnection pursuant to 47 U.S.C. §§ 251 and 252. 47 C.F.R. § 51.100 et seq. On October 15, 1996, the United States Court of Appeals for the Eighth Circuit stayed the operation of the portions of those rules that relate to pricing and the "pick and choose" provisions. Iowa Utilities Board v. Federal Communications Commission et al., Case Nos. 96-3321 et seq. (8th Cir., October 15, 1996) (Order Granting Stay Pending Judicial Review). Among other matters, the Court found that the FCC's proxy rates would result in irreparable harm to incumbent LECs because they would suffer economic losses beyond those inherent in the transition from a monopolistic market to a competitive one. On November 12, 1996, the United States Supreme Court issued a decision declining to set aside the stay.
GTE argues that the Arbitrator may not rely on any aspect of the FCC pricing rules and that the pricing provisions may not be enforced or relied upon by anyone. I disagree. In this decision, I refer to discussions in the FCC order regarding pricing. At some other points, I adopt positions articulated by the FCC. I consider the FCC order to be a thorough, comprehensive analysis of issues related to interconnection. Where persuasive, the FCC order provides useful guidance for the resolution of the pricing issues in this proceeding. The FCC conclusions are not considered dispositive of the issues.
BASE CONTRACT
Agreements of the Parties
I accept the negotiated agreements of the parties as reasonable and consistent with the Act.
The parties reached agreements on a number of the issues in this proceeding. These agreements are adopted.
Iowa Utilities Board Preliminary Contract
I adopt the AT&T contract, as modified by the Iowa Utilities Board (IUB) in its preliminary decision in ARB-96-3 (November 14, 1996), as the base contract for this decision. references to IUB or Board should be changed to the Oregon Public Utility Commission or Commission, as appropriate.
Both parties to this proceeding submitted proposed contracts as part of their last best offers. After reviewing these contracts, I conclude that a contract of the type submitted by AT&T will best promote the competitive goals of the Telecommunications Act of 1996, because it is more specific in its terms and more explicit on procedures than the GTE contract. The inability of the parties to reach agreement on so many issues in this arbitration demonstrates the need for specificity.
On November 14, 1996, the IUB issued a preliminary decision in In Re Arbitration of AT&T Communications of the Midwest, Inc., and GTE Midwest Incorporated. (ARB-96-3). I am adopting the IUB’s version of the AT&T contract.
The IUB made a number of modifications to the AT&T proposal that promote balance between the parties. Those modifications include more reasonable compliance dates, clarification of payment responsibilites, and deletion of one-sided contract provisions. The modifications, except as provided below, are adopted.
Cost Recovery
The IUB contract term specifying AT&T's obligation to compensate GTE for the economic costs of facilites used by AT&T should be supplemented by the following:
Disputes over the rate structure for cost recovery should be resolved according to the principles and methods set forth in 47 C.F.R. § 51.507 and FCC Order ¶ ¶ 743-754.
The IUB’s preliminary decision included the following language on cost recovery in each section of the contract:
AT&T must compensate GTE AT&T's proportionate share of the additional economic costs whenever AT&T requests the use of facilities not currently in place, facilities with special technical standards, or when it requests services or facilities demonstrably superior in quality to the highest quality of these three items: (1) requirements of FCC rules; (2) requirements of Board rules or orders; or (3) the level of quality GTE provides to itself or its affiliates.
I adopt this language, with an additional clarification on the rate structure for recovering those costs. Consistent with the Commission's decision in Order No. 96-324, I conclude that those costs should be recovered according to the methodology set forth in the FCC's rules and order.
Throughout this decision, there are references to requests for facilities placed on GTE by AT&T. AT&T's obligation to pay for facilities, including the cost of providing the facilites, is implied in each decision below.
PRICING SERVICES FOR RESALE
Issue 1--What is the proper methodology for determining the prices for GTE resold services?
Issue 1A--Are advertising expenses in their entirety an avoided cost?
Issue 1B--Are call completion costs (operator services) in their entirety an avoided cost?
Issue 1C--Are number service costs (directory assistance) in their entirety an avoided cost?
Issue 1D--Are general & administrative costs an avoided cost when GTE is wholesaling a local service?
Issue 1E--Are product management costs in their entirety an avoided cost?
Issue 1F--What percentage of testing and plant administration costs are an avoided cost?
Issue 1G--What percentage of sales expenses is an avoided cost?
Issue 1H--What percentage of uncollectable expenses is an avoided cost?
Issue 1I--Does the Act’s methodology for determining wholesale rates recognize any new costs that might be caused by the requirement to offer services for resale?
Issue 1J--Is a volume discount appropriate in a resale environment, and if so, what should the discount be?
AT&T’s Simplified Cost Study methodology, as modified below, is adopted for calculating avoided costs. AT&T's proposal, however, should be modified to eliminate costs that are not specifically presumed avoidable by the FCC regulations. The following discounts for the sale of services at wholesale are adopted:
For all services other than specified below, 21.0 percent.
Volume discounted services, 10.5 percent.
These discount rates are interim, pending Commission determination of the appropriate discount rate. Order No. 96-283 at 14. The interim rates are subject to true-up. The conclusions regarding specific accounts and the calculation for the avoided cost is set forth in Appendix B.
Calculation of the Avoided Cost Discount
The parties offered a wide range of alternatives for the wholesale discount. GTE proposed an average discount rate of about seven percent, compared to AT&T’s proposed discount rate of 29.29 percent. AT&T's Simplified Cost Study is based on the FCC's analysis for calculating the wholesale discount. The FCC identified certain account categories in the Uniform System of Accounts (USOA) that it considered presumptively avoidable and others that state commissions could find avoidable upon a proper showing by the competitor. AT&T recommended that the avoided cost calculation include costs in both categories. AT&T relied on publicly available data found in the Automated Report Management Information System (ARMIS) filed by GTE with the FCC. AT&T included indirect costs in proportion to the ratio of total indirect costs to total direct avoidable expenses. GTE, on the other hand, conducted extensive studies of its operations analyzing all of its work centers to determine which activities or functions in each work center will be avoided in a wholesale environment.
I am adopting AT&T’s Simplified Avoided Cost analysis for several reasons. The first reason is that the analysis is consistent with the conclusion that reasonably avoidable costs should be included in the discount calculation. The Act requires the Commission to determine wholesale rates on the basis of retail rates charged to subscribers for the telecommunications services requested, excluding the portion attributable to any marketing, billing, collection, and other costs that will be avoided by the local exchange carrier. 47 U.S.C. § 252(d)(3). The FCC interprets avoided cost as those costs that an incumbent LEC would no longer incur if it were to cease retail operations and instead provide all of its services through resellers. The FCC stated:
We do not believe that Congress intended to allow incumbent LECs to sustain artificially high wholesale prices by declining to reduce their expenditures to the degree that certain costs are readily avoidable. We therefore interpret the 1996 Act as requiring states to make an objective assessment of what costs are reasonably avoidable when a LEC sells its services wholesale. We note that Colorado, Georgia, Illinois, New York, and Ohio commissions have all interpreted the 1996 Act in this manner.
FCC Order ¶ 911.
The reasonably avoidable approach is the most reasonable manner for interpreting the statute. GTE contends that this interpretation is contrary to the plain meaning of the statute. GTE excludes only the costs that it believes will in fact be avoided. I conclude that the statutory term "will be avoided" may be read to anticipate the actions of a prudent competitor selling services at wholesale in a competitive market. To keep prices down, the competitor will cut its costs as deeply as possible to retain its customers. It is fair to say that Congress anticipated that the prudent wholesaler will avoid all costs reasonably avoidable. GTE cannot object to this interpretation of the statute without acknowledging its own liberties with the statutory term "avoided cost." GTE claims Congress must have meant "net avoided cost." GTE insists that an adjustment to avoided costs must be made to compensate GTE for the foregone contribution provided by complementary services, such as intraLATA toll. Of the two views, the FCC's reading of the law is more in keeping with the basic concepts underlying the statute.
The second reason is that AT&T's evidence is more persuasive on the costs that are avoidable. I have reviewed the testimony submitted by the AT&T witnesses and agree with their conclusions.
The third reason is that the GTE proposal is simply unacceptable. In this arbitration, the parties were directed to propose their last best offers. GTE chose to submit a wholesale discount calculation that included a factor that compensates GTE for opportunity costs. In theory, this factor is designed to compensate GTE for revenues from complimentary services such as intraLATA toll that it may lose because the customer has gone to a competitor. In effect, the model produces results that are anticompetitive and counterintuitive. The most obvious example is GTE's proposed wholesale rate for basic business service. As a result of the opportunity cost factor, GTE's wholesale rate is greater than the retail rate for the service. There is no basis in the Act for such a result.
While AT&T's methodology is superior to GTE's, AT&T's analysis must be modified. After reviewing the evidence in this proceeding, I find that the FCC conclusions regarding the avoidable costs in particular USOA accounts is persuasive. FCC Order ¶ 928. The FCC concluded that most, but not all, marketing costs, including product management, sales, and advertising, are avoidable. Furthermore, the FCC determined that most customer services costs will also be avoided in a wholesale environment. All operator services and directory assistance costs will be avoided, because AT&T will provide these services itself.
The FCC rules provide that some costs should be excluded from wholesale rates, "only to the extent that a party proves to a state commission that specific costs in these accounts can reasonably be avoided." 47 C.F.R. § 51.609(d). Given the difficulty in evaluating the particular costs in the USOA accounts, I conclude that the amounts which the FCC did not consider presumptively avoidable should not be considered in calculating the discount. For those accounts where the amounts are presumptively avoidable, I am including only those portions allowed by the FCC for its default range. FCC Order ¶ 928. Appendix B shows the calculation of the avoided cost discount rate.
As recognized by both parties, the discount rate adopted here should be interim. I am adopting GTE's proposal that the rates also be subject to true-up after the Commission sets a permanent discount rate.
Discount for Residential and Lifeline Services
GTE asserts that it will not sell at wholesale rates services that it claims are below cost. That includes lifeline services and residential service.
As discussed below, this position conflicts with the requirement of the Act that incumbent local exchange carriers (ILECs) offer for resale at wholesale rates any telecommunications service that the carrier sells at retail to subscribers who are not telecommunications carriers. Residential and lifeline services must be sold at wholesale. FCC Order ¶ 956.
GTE argues that this service is already sold below the cost of providing it. A further discount would be unjustified and unconstitutionaly confiscatory. GTE points out that below-cost services receive contribution from other services, such as toll, access and vertical services, that are priced above cost. If GTE must sell the services at a discount, AT&T would obtain avoided cost discounts for both above- and below-cost services. AT&T would keep the contributions from the above-cost services that subsidize the-below cost services.
Although GTE’s argument has merit, it does not overcome the statutory duty to offer telecommunications services to competitive local exchange carriers (CLECs) at the retail rate, less avoided costs. The law makes no provision allowing GTE to exempt from the resale requirement services that are allegedly sold below cost. The wholesale discount must be applied to GTE's retail rates.
GTE's claim of serious adverse effects cannot stay the implementation of the Act. If GTE believes that it has been disadvantaged by the wholesale resale duty because the retail rate is too low, the remedy is to request the Commission to raise the retail rate. The arbitrator’s authority is limited to implementation of the Act. This arbitrator cannot solve all the problems the Act creates. If there are other actions that need be taken to avoid undue consequences, GTE must raise those concerns in the appropriate forums.
Finally, I do not believe that GTE’s claim of an unconstitutional taking can be addressed with any degree of rigor until the company has taken all reasonable actions to rebalance its rates. There are many steps in the full implementation of the Act that will affect GTE's ability to earn a reasonable return. New retail rates, access charge reform, and universal service charge implementation all will affect GTE's earnings. Until GTE pursues each of these steps, claims of unconstituional takings are premature and speculative.
Volume and Term Discounted Services
GTE should offer volume and term discounted services at a wholesale rate of 10.5 percent. This is one-half the rate for fully-priced retail services. Notwithstanding GTE's assertions, there are avoided costs for services sold at volume and term discounts. While the discounts may be small and, in some cases may be zero, there remain marketing and other costs that GTE must incur to offer the volume and term discounted services. The issue is not whether there are avoided costs, but rather the amount of those costs. Until the avoided cost is calculated properly, I will set a reduced discount rate for services sold at a volume or term discount.
SERVICES SUBJECT TO RESALE
Issue 9--What GTE services should be required to be made available for resale at wholesale rates?
Issue10--Is GTE required to offer for resale at wholesale rates services to the disabled, including special features of that service such as free directory assistance service calls, if that service is provided by GTE?
Issue 11--What resale restrictions should be permitted, if any?
Issue 16--Should each and every retail rate have a corresponding wholesale rate?
GTE shall make all retail telecommunications services available for resale with the following restrictions:
:
Residential service may not be resold to any other class of customers.
Services for the disabled or others mandated by law may not be resold to any ineligible customers.
Promotional offerings of 90 days or less need not be offered at a discount.
AT&T may only resell grandfathered services to customers currently receiving the grandfathered service from GTE.
The requirement to provide retail services at wholesale rates applies to nonrecurring charges, individual case basis charges, operator services, directory assistance services, and private line services. Private line services may not be used for providing access services. Intentional violation of this restriction constitutes breach of this contract and shall terminate AT&T's ability to purchase any additional private line services from GTE.
The Act provides that the ILEC must offer any telecommunications service for resale at wholesale rates that the carrier provides at retail to subscribers who are not telecommunications carriers. The ILEC may not prohibit, or impose unreasonable or discriminatory conditions or limitations on resale. However, a state commission may, consistent with the FCC's regulations, prohibit a competitor from purchasing wholesale services available only to one category of customers and reselling the services to another category of customers. 47 U.S.C. § 251(c)(4).
GTE seeks to exclude from the wholesale discount requirement those services that it claims are sold below cost, promotional services, wholesale services (such as special access), Advanced Intelligent Network services, nonrecurring charges, and various types of pay phone lines. All of these services must be sold at wholesale rates. The Act makes no provision for GTE's proposed limitations on the sale of wholesale services. These are all retail services that must be sold on a wholesale basis.
GTE also claims that it should not be required to provide promotional discounts at wholesale. It asserts that, if resale of promotions is not prohibited, GTE will not be able to distinguish its offerings from those of its competitors. The FCC proposed that promotional discounts of 90 days or less do not have to be offered at resale. FCC Order ¶ 950. 47 C.F.R. § 51.613(2). I believe this provision allows GTE to distinguish its services, but prohibits GTE from offering perpetually discounted, nonstandard promotions.
Finally, GTE seeks to limit the resale of private line services. I conclude that private line is a retail service and must be made available for resale. However, because private line and access lines are indistinguishable, there is a possibility that a competitior could provide access services with a private line service. This could result in improper avoidance of access charges. As a result, the contract should require that private line services may not be used for access service. If AT&T intentionally violates this restriction, GTE may refuse to offer at wholesale any further private line services.
Issue 13--Should GTE be required to offer public pay phone lines to AT&T at wholesale rates?
Issue 14--Should GTE be required to offer semi-public pay phone lines to AT&T at wholesale rates?
Issue 15--Should GTE be required to offer COCOT coin and COCOT coinless lines to AT&T at wholesale rates?
GTE must offer pubic, semi-public, and COCOT coin and COCOT coinless pay phone lines to AT&T at wholesale rates.
All the listed services must be offered to AT&T at wholesale rates. Contrary to GTE's assertion, public pay phone providers who purchase public pay phone lines are subscribers who purchase the service at retail rates. The fact that semi-public pay phone lines are deregulated does not exclude them from the definition of telecommunications services under the Act. The definition of telecommunications services set forth in the Act is binding on the determinations in this arbitration. These services are telecommunications services under 47 U.S.C. § 153(51). These services must be offered at wholesale. GTE claims that COCOT coin and coinless line services are sold under tariff and that there is no additional wholesale discount. Other than cross-class restrictions, there is no limitation in the Act for excluding any service from the wholesale resale requirement. GTE's claim that there are no avoided costs for these services goes to the appropriate rate, not the eligibility of these services for resale.
PRICING UNBUNDLED ELEMENTS
Unbundled Network Elements
Issue 2--Should the Commission adopt the FCC's default proxy rates?
Issue 3--How should the cost of interconnection and unbundled network elements be calculated, and what prices should be established?
On an interim basis, pending determination of permanent rates by the Commission, the prices for unbundled elements in Order No. 96-283, Appendix C, are adopted. For the interim period, geographic deaveraging is not required.
On November 1, 1996, the Commission issued Order No. 96-283 (Reopened UM 351, Phase II). In that order, the Commission modified the prices for unbundled elements that it had adopted in Order No. 96-188. The prices set forth in that order meet the requirement of the Act:
…(T)he just and reasonable rate for network elements …--
shall be—
based on the cost (determined without reference to a rate-of-return or other rate-based proceeding) of providing the interconnection or network element (whichever is applicable), and
nondiscriminatory, and
may include a reasonable profit.
47 U.S.C. § 252(d).
The single most important advantage to the UM 351, Phase II, prices is that the models, assumptions, and underlying cost data are readily available and have already been evaluated in a formal, open investigation. In reaching its conclusions, the Commission considered comments, testimony, briefs, and expert advice from all sides of the telecommunications industry. In contrast, GTE and AT&T spent a considerable portion of the hearing demonstrating that each other’s models are not open to analysis and that each other’s assumptions are not readily available or documented. These complaints occur because the models have not been tested in an open, broadly noticed proceeding before a neutral third party who insisted on disclosure of the relevant factors in the studies and who had the time to verify the study conclusions.
In spite of the obvious advantages, GTE claims that the UM 351, Phase II, prices may not be used in this proceeding because the prices are based on USWC's costs, not GTE's costs. In Order No. 96-283, the Commission explained why the USWC prices for unbundled elements must be used for GTE:
… GTE has had over four years to prepare and submit properly documented studies that reflect company-specific costs. GTE has not prepared such studies, but has instead chosen to rely on cost information prepared by USWC. GTE's election is consistent with the approach that GTE itself recommended as a participant in the UM 351 Phase I cost study workshops. For GTE to now allege that it has been harmed by this process is disingenuous. GTE has always had, and still has, the option of submitting the information necessary to demonstrate that its costs differ from those adopted by the Commission here.
Order No. 96-283 at 9-10.
GTE's claim that it will be irreparably harmed by the use of USWC's costs can be given no weight given GTE's lack of diligence in submitting cost studies for Commission approval and its acquiescence to the approach the Commission followed.
Even if GTE's argument regarding USWC's costs were to be adopted, there is still no basis to adopt GTE's methodology. In this proceeding, GTE submitted a proposal that simply ignored the Commission's methodology for pricing unbundled elements. If the State commission pricing authority means anything under that Act, it must authorize State commissions to determine how prices shall be established. GTE cannot undercut that statutory grant by insisting that its own methodology be adopted, notwithstanding the Commission's carefully crafted policies. A State commission accepting such a claim would be abdicating its pricing authority to the regulated entity, a result clearly illegal under both state and federal laws.
GTE claims that failure to adopt its pricing proposal will result in a taking of GTE's property without just compensation in violation of the U.S. Constitution. This claim is not persuasive. The questions involving takings are numerous and complex. See FCC Order ¶ 733-740. Certainly the issues raised by the Telecommunications Act of 1996 are unprecedented. I see no reason to adopt GTE's assertion that its pricing proposal is the only choice that avoids a conflict with the Constitution.
Aside from GTE's disregard for Commission policies, there are other reasons to reject the company’s pricing for unbundled elements. GTE offers a concept called the market determined efficient component pricing rule (M-ECPR). GTE acknowledges that the FCC correctly rejected the initial version of this methodology, the ECPR. Under this approach, an incumbent LEC would set the price of an unbundled element equal to the incremental cost of the element, plus the opportunity cost of the resold element. The opportunity cost is the revenue that the incumbent loses when the new entrant sells the service to the customer instead of the incumbent. The opportunity cost is the incumbent’s net revenues from the lost sale, including profit and contribution to common costs. The lost revenue calculation is based on the existing retail price of the service sold. FCC Order ¶ 708. The FCC rejected ECPR because the retail prices used to calculate opportunity costs are based on revenues, not costs. As a result, "application of ECPR would result in input prices that would be either higher or lower than those which would be generated in a competitive market and would not lead to efficient retail pricing." FCC Order ¶ 709.
To overcome the FCC's objections, GTE offers the M-ECPR. The principle change in approach is to cap prices for each unbundled element at the price of its market alternative. Several problems with the GTE fix are immediately apparent. First, the basic concerns with ECPR still exist. The most basic is that GTE would set prices based on lost revenues, not costs. Second, there are no market alternatives for some building blocks. For example, GTE proposes to use "internal benchmarks" as a cap for certain kinds of loops. Internal benchmarks are not market determined prices. Third, GTE's cap merely limits the price of the monopoly network element. It does nothing to bring the price of the service down to the actual forward-looking cost of providing the service.
Finally, GTE also insists that pricing of unbundled elements include an end-user charge to recover lost subsidies that were inherent in rate-of-return regulation. GTE claims that, without an end-user charge, facilities-based entry and M-ECPR pricing of unbundled network elements will produce stranded costs equal to the difference between GTE's net revenues under traditional regulation and what GTE will earn under M-ECPR. GTE claims that the provisions of 47 U.S.C. § 254 regarding universal service pricing authorize the end-user charges. Universal service charges are being addressed in a separate Commission proceeding, UM 731. There is simply no basis for including subsidies in the calculation of economically efficient prices.
One other additional topic is addressed in this section. AT&T proposes rates that include geographic deaveraging. Geographic deaveraging is an appropriate mechanism for matching the cost to provide unbundled elements with the price for those elements. It is clear that the cost of providing unbundled loops varies with length and density. However, deaveraging unbundled elements before deaveraging retail rates places GTE at a competitive disadvantage. AT&T should not be able to purchase loops in dense urban areas at a price that only reflects the cost of serving low-cost customers, while GTE is required to provide basic service at a rate that covers the cost of serving both high- and low-cost customers. Deaveraged prices are appropriate when all competitors can price retail services based on the underlying costs.
Bill-and-Keep
Issue 4--What rates are appropriate for transport and termination of local traffic?
The appropriate rates for transport and termination are set forth by the Commission in Order No. 96-283, Appendix C.
Issue 5--Should bill-and-keep be used as a reciprocal compensation arrangement for transport and termination of local traffic on a temporary or permanent basis?
Pursuant to Order Nos. 96-021, 96-129, and 96-160, bill and keep is adopted as the interim method of compensation for transport and termination. The issues regarding traffic balance are being resolved in industry workshops.
The Commission has already found that traffic exchanged between a competitive local exchange carrier (CLEC) and an ILEC is likely to be within a few percentage points of equilibrium. Order No. 96-021 at 55. This conclusion is consistent with the Act which provides for the use of bill and keep as a just and reasonable means to recover the cost of terminating and transporting traffic between ILEC and CLEC networks. The FCC has determined that bill-and-keep may be employed if the amount of local traffic from one network to the other is roughly balanced with the amount of local telecommunications traffic flowing in the opposite direction, and is expected to remain so. 47 C.F.R. § 51.713(b). The FCC further provides that a State commission may presume rough balance, unless a party rebuts the presumption. Id. at (c).
GTE has agreed to bill and keep as long as the proposed arrangement, predicated upon approximately equal traffic flows, would be transport and termination of local traffic only. Further, GTE would require that interLATA access must be carried over separate trunk groups and not intermingled with local and local toll traffic. GTE proposes a definition of roughly balanced as equating to plus or minus ten percent. The originating traffic split could be up to 60/40 percent. If traffic is out of balance, GTE proposes that it charge its access tariff rates.
GTE’s proposal does not address the problems that led the Commission to adopt bill and keep on an interim basis. Order No. 96-021 at 52-61. There is little reason to assume that traffic is not in balance. In any event, the Commission has required that a work group examine interconnection compensation and formulate proposals for implementing a reciprocal interconnection rate structure applicable to all switched telecommunications traffic by January 1998. For the interim, bill and keep is a reasonable means for reciprocal compensation.
Virtual and Physical Collocation
Issue 7--What method should be used to price collocation?
The prices set forth in the Commission and FCC tariffs for virtual collocation are adopted. The prices set forth in GTE's FCC tariffs for physical collocation are adopted, on an interim basis. AT&T may purchase network elements for interconnection at the prices set forth in Order No. 96-283, Appendix C.
On April 19, 1996, GTE filed tariffs for virtual collocation in compliance with Commission Order No. 96-079 (UT 119). GTE has also filed physical collocation tariffs with the FCC. The state and federal tariff rates should be adequate for AT&T. The rates on file with the FCC may be adjusted through the FCC rulemaking proceeding. In the April 19, 1996, letter, GTE indicated it would comply with the FCC's order, when issued, and file a new physical collocation tariff.
AT&T proposes that the Commission adopt the prices for physical collocation embodied in the stipulation between GTE and AT&T in UT 119. Such an action is not proper. Order No. 96-079 approved a stipulation between AT&T and GTE that included physical collocation rates, with the understanding that those portions of the stipulation addressing physical collocation would be disregarded. Id. 3.
I note that the rates for physical and virtual collocation are not the exclusive means by which AT&T may interconnect with GTE. AT&T may purchase unbundled elements, at the prices set in Order No. 96-283, for interconnection, instead of using the Expanded Interconnection Service included in the collocation tariffs. Order No. 96-079 at 4.
EXTENT OF UNBUNDLING
Issue 30--What unbundled network elements should be provided to AT&T?
Issue 40--Should GTE be required to provide both dedicated and common local transport to AT&T on an unbundled basis?
The parties have reached general agreement on the network elements that GTE should provide to AT&T. GTE listed as agreed-upon elements:
Network Interface Device (NID)
Loop distribution, loop feeder and loop concentrator/multiplexer
Local switching
Dedicated Transport, Common Transport
Signaling Link Transport, Signal Transfer Points (STPs), Service Control Points/Databases (SCPs)
Directory Assistance Service
Advanced Intelligent Network (AIN) capabilities
If desired by AT&T, GTE must unbundle and make available all services and network elements ordered by the Commission. Order Nos. 96-188 and. 96-283.
As proposed by GTE, the contract should require AT&T to notify GTE when it intends to deploy any service-enhancing copper cable technology and to certify that the technology will not interfere with GTE's existing or future technology within a given cable sheath or other GTE facility. See GTE Proposed Interconnection Contract, VI-5.
AT&T shall also pay all costs associated with unbundling the loop from the switch, including the costs of testing AT&T's technology and the costs of any loop conditioning.
Issue 34--What should the unbundled switch element include?
GTE is required to unbundle all features, functions, and capabilities of the local switch element. To the extent AT&T requests switch functions that GTE does not use and has not purchased from the switch manufacturer, AT&T must pay the associated costs for use of the functionality and the costs of switch augmentation. GTE must negotiate a cost recovery mechanism that spreads the initial costs across current and future users of the functionality.
The Commission has addressed this issue in Order No. 96-283 at 4-5. The FCC addressed the issue in 47 C.F.R. § 51.319(c). The local switch must be unbundled. Such unbundling is technically feasible. Order No. 96-283 at 4-5. FCC Order ¶ 410-424. GTE objects based on the cost of providing this function. GTE notes that this provision would allow AT&T to obtain access to both the local switching element and the trunk side of the switch. This would allow AT&T to avoid access charges, because GTE could not identify calls routed to an interexchange carrier. These concerns address cost recovery, not technical feasibility.
GTE's concern should be addressed in the FCC's docket regarding access charge reform. In the interim, the FCC allows GTE to require AT&T to track minutes of use and make appropriate payments through June 30, 1997. 47 C.F.R. § 51.515(b).
GTE also notes that AT&T may wish to use capabilites of the switch that GTE does not use, and has not purchased from the switch manufacturer. As discussed above, I agree with GTE that AT&T must pay the costs associated with purchasing these functions.
Issue 33--Is sub-loop unbundling technically feasible, and if so, under what terms and conditions should it be offered?
The parties appear close to agreement on subloop unbundling. The Commission has ordered unbundling of feeder and distribution where a digital loop carrier or remote switching unit is used. These elements should be unbundled. Order No. 96-188 at 46. GTE has agreed to provide subloop elements that AT&T requests where technically feasible. The elements shall be provided on an individual case basis (ICB). Compensation and safety arrangements shall be negotiated by the parties.
AT&T has requested that subloop unbundling apply to cover feeder, distribution and the feeder/distribution interface (FDI). Unbundling of these elements should be negotiated under the conditions described above.
Issue 39--Should AT&T have access to GTE’s unused transmission media ("dark fiber")?
GTE must make dark fiber available on an unbundled basis. Order Nos. 96-188. 96-283. GTE shall retain full control over any AT&T connections to dark fiber. The parties should mutually agree to connections at locations that minimize the risk of customer service impacts.
Dark fiber is a fiber optic facility that is installed in a cable sheath, but not "lit" by GTE-provided electronics. AT&T wishes to purchase access to these facilities so that it may install its own electronics. The record indicates that AT&T can provide unique services, not otherwise available from GTE, if it has the capability to supply its own electronics to GTE's transmission facilites.
Dark fiber is a network element as defined in the Act. Network element means:
… a facility or equipment used in the provision of telecommunications service. Such term also includes features, functions, and capabilities that are … used in the transmission, routing, or other provision of telecommunications service.
47 U.S.C. § 153(a)(45).
GTE argues that, because the fiber optic facility installed in the ground is not actually transporting telecommunications, it is not used in the provision of telecommunications. The facility will only be "used" when lit by GTE electronics. This argument cannot be adopted. To do so would place any spare equipment or facility off limits to unbundling.
GTE compares dark fiber to cable stored on a reel in the warehouse. GTE claims that the cable is in the ground only because it makes better economic sense to do so from a network planning and construction cost perspective. GTE's distinction demonstrates that the fiber is actually used in the provision of telecommunications services. Dark fiber is not stored. It is installed and ready for use when there is a demand. As soon as AT&T makes a demand, the fiber is converted from "ready for use" to "used." The Act does not limit the "user" of the facility in the definition of telecommunications service to the ILEC.
GTE raises practical and operational concerns. GTE claims that handing dark fiber over to CLECs could compromise its system planning efforts and could strand significant investments. The parties must mutually agree on the appropriate utilization of the facilities to avoid waste.
Furthermore, GTE asserts that, if ILECs are compelled to make dark fiber available, they should have full control over connections to avoid damage to the fiber and CLECs should pay for the extra costs of necessary precautions and maintenance. I agree that GTE should have full control over AT&T connections to the dark fiber. The issues regarding cost recovery are addressed above.
Issue 41--Are operator systems (i.e., GTE-provided Operator Services and Directory Assistance) separate network elements that GTE should be required to unbundle?
Unless GTE can demonstrate unbundling is not technically feasible, GTE must provide customized routing of operator services and directory assistance(OS/DA) on an unbundled basis. GTE has committed to short term solutions until facilities are available. AT&T must pay reasonable costs for installing additional facilities to provide the services it requests.
In Order No. 96-021, the Commission ordered unbundling of operator services and directory assistance. In Order No. 96-283 at 2, the Commission required that LECs provide customized routing at any switch that is capable of performing this function. This requirement is consistent with the FCC's conclusion that ILECs must, to the extent technically feasible, provide customized routing, which would include such routing to a competitor’s operator services or directory assistance platform. 47 U.S.C. § 51.319(g). FCC Order ¶ 536.
GTE claims the services should only be available on a bona fide request basis. This is not acceptable. GTE has an obligation to provide these unbundled elements unless not technically feasible. If AT&T makes a request that GTE believes is not techncially feasible, the burden is on GTE to make a proper showing before the Commission.
Issue 17--Should GTE be required to route operator services and directory assistance calls to AT&T’s platforms where AT&T purchases resold services under §251(c)(4) of the Act or state law?
Issue 18--Should GTE be required to route operator services and directory assistance to AT&T’s platforms where AT&T purchases unbundled network elements under §251(c)(3) of the Act or state law?
GTE must route OS/DA calls to AT&T's platforms where AT&T purchases either resold services or unbundled net elements.
GTE argues that it does not have to sell OS/DA services on a resale basis because the service is not sold to retail subscribers. GTE notes that OS/DA is included in basic service. GTE is correct that OS/DA is not sold to retail customers. However, the issue should be resolved since AT&T may purchase unbundled OS/DA to serve its resale customers.
Issue 19--Should GTE be required to provide access to its directory assistance database so that AT&T may provide its customers with AT&T-branded directory assistance?
If technically feasible,GTE must provide AT&T access to its directory assistance database so that AT&T can provide its customers with AT&T-branded directory assistance. GTE must demonstrate to the Commission that such a request is not technically feasible. GTE may mediate AT&T entry of data into its directory assistance database to prevent unauthorized use. The parties should negotiate reasonable accommodations including the provision of updated listings on magnetic tape.
The Commission and the FCC have required ILECs to unbundle access to their directory assistance databases. Order No. 96-283. FCC Order ¶ 536. This access must include the entry of requesting carrier’s customer information into, and the ability to read ILEC customer information from, the database. Entry of the CLEC's customer information into the ILEC’s directory assistance database can be mediated by the ILEC to prevent unauthorized use. FCC Order ¶ 538.
Issue 20-- Should GTE be required to provide directory listing information to AT&T via electronic data transfer on a daily basis so that AT&T may update its directory assistance database and provide its customers with AT&T-branded directory assistance?
GTE has agreed to provide directory assistance listings on magnetic tape. GTE should provide those tapes on a daily basis. If requested by AT&T, GTE shall transfer the data electronically. The cost of transmitting the tapes should be borne by AT&T.
GTE has agreed to provide AT&T with its directory assistance listings on magnetic tape until adequate provisions for third party access have been established. This may be a reasonable short term solution for AT&T. If GTE's proposed solution is not acceptable to AT&T, the parties can use the dispute resolution provisions in the contract.
Issue 21--Should GTE be required to accommodate AT&T’s branding requests concerning operator services and directory assistance?
I adopt AT&T's proposals requiring GTE to take reasonable steps to inform AT&T's customers that it is making service calls on behalf of AT&T. Not only does this requirement avoid unreasonable discrimination, it avoids unnecessary customer confusion, a circumstance that benefits neither GTE nor AT&T. The parties have reached agreement on branding directory assistance.
Issue 31--To what extent should AT&T be permitted to combine network elements?
Issue 32--Should AT&T be permitted to request a combination of network elements which would enable it to replicate services GTE offers for resale?
I adopt the AT&T position that GTE must provide combinations of unbundled elements without restriction, provided those combinations are technically feasible and will not undermine the ability of other carriers to access unbundled elements or interconnect with the ILEC.
New entrants should be able to purchase unbundled elements, individually or in common, regardless of whether they provide their own facilities or purchase elements in such a way that they would comprise a service comparable to resold services under 47 U.S.C. § 251(c)(4). This conclusion is consistent with the Act, FCC rules, and the Commission’s order. 47 U.S.C. § 251(c)(3), FCC Order ¶ 293-296, and 47 C.F.R. § 51.315(c), and Order No. 96-188 at 93. There is no provision in the Act or the FCC's order for imposing limitations on the sale of unbundled elements.
INTERCONNECTION AND COLLOCATION
Issue 42--What are the appropriate interconnection points for the transport and termination of traffic?
AT&T is entitled to interconnection with GTE's network at any technically feasible point. To the extent the costs of constructing facilities for the point of interconnection are not included in the rates for the service, AT&T must pay the costs associated with the interconnection.
The Act is clear. GTE is obligated to provide, for the facilities and equipment of any requesting telecommunications carrier, interconnection with the ILEC’s network at any technically feasible point within the carrier’s network. 47 U.S.C. § 251(c)(2)(B). This includes the ability to interconnect at end offices and access tandems that AT&T deems appropriate. It also includes the ability to use two-way trunk groups and to mix traffic on the trunk groups. GTE's proposed limitation on the points of interconnection is not adopted.
If GTE denies a request for interconnection or access to unbundled elements, it must prove to the State commission that the requested method of interconnection or access at that point is not technically feasible. 47 C.F.R. § 321(d).
Issue 49--When and in what circumstances should collocation be permitted?
AT&T may collocate at GTE premises housing network facilites, including central offices, serving wire centers, and tandem offices, and vaults or manholes on public rights-of-way. GTE may require the implementation of reasonable security measures to protect equipment and facilities of GTE and other collocators.
The Act requires an ILEC to provide collocation at its premises. 47 U.S.C. § 251(c)(6). ILEC premises include any structures owned or leased by the ILEC that house network facilities, including structures on public rights-of-way, such as vaults containing loop concentrators or similar structures. FCC Order ¶ 573. GTE's proposed restriction against vaults, remote switching units, and manholes is not adopted. Reasonable security restrictions are appropriate.
Issue 50--What types of telecommunications equipment may be collocated on GTE’s premises?
Issue 52--What limits, if any, may GTE impose upon the use of the collocated space?
GTE must permit collocation of any type of equipment necessary for interconnection or access to unbundled network elements, including remote switching units. The remote switching units must perform multiplexing and may not be used to avoid access charges. AT&T must comply with reasonable security, space use, and network integrity requirements.
The Act requires that the ILEC must provide for physical collocation of equipment necessary for interconnection and access to unbundled elements. 47 U.S.C. § 251(c)(6). GTE would allow transmission, concentration, and multiplexing equipment, but prohibit switching, enhanced services, and customer premises equipment. AT&T insists on any type of equipment used for interconnection or access to unbundled elements.
The principle dispute here is over AT&T's ability to collocate remote switching units, which are switches that also have interconnection functions. The FCC has determined that any equipment that is necessary in the sense that it is used and useful must be permitted. FCC Order ¶ 579. I conclude that AT&T may collocate remote switching units as long as they provide multiplexing. While less robust equipment can also perform multiplexing, AT&T should be able to choose equipment that will perform the interconnection and access function most efficiently.
GTE's concern that remote switching units are of such size that they will quickly exhaust GTE facilities is not persuasive. If GTE can prove to the Commission that space constraints make restrictions necessary, GTE can set maximum space limits for CLECs. 47 C.F.R. § 51.323(f)(6). The collocator should be able to use its space as it sees fit, so long as the use falls within the bounds sets forth in the Act.
Issue 51--Should GTE be required to provide interconnection between carriers at cost based rates when those carriers are both collocated at a GTE premises?
GTE has agreed to permit interconnection between collocating telecommunications carriers on its premises, as long as the collocators use facilities or service provided by GTE.
This proposal is reasonable, consistent with the FCC's rules, and is adopted. 47 C.F.R. § 51.323(h). See also Order No. 96-079 at 9-10.
Issues 53--Does GTE have the right to reserve central office space for its own use or deny access for lack of physical space reasons?
Issue 54--Is GTE required to make additional space/capacity available to AT&T for collocation if GTE does not have current space available? If so, in what time frame should GTE make such capacity available?
GTE may not reserve central office space for its own use or deny access for lack of physical space, on terms that are more favorable than the terms applying to other telecom-munications carriers seeking to reserve collocation space for their own future use. GTE is not required to construct additional space for collocation when existing space is exhausted. GTE is required to take into account projected demand for collocation of equipment when planning additions to its facilities. GTE is required to make contiguous space available for collocation. GTE must relinquish space under certain circumstances. GTE must provide a detailed floor plan to the Commission if it claims that space is exhausted.
GTE proposes that it be allowed to reserve space in its central office on a five year planning horizon. This period is inconsistent with the requirement that GTE reserve space on terms no more favorable to itself than the terms available to other telecommunications carriers seeking to reserve collocation for their own future use. 47 C.F.R. § 51.323(f)(4).
Further the FCC rules require that, to the extent possible, GTE must make contiguous space available to requesting telecommunications carriers that seek to expand their existing facilities. Id. at (2). GTE must take AT&T's needs into account when planning renovations of existing space or leasing new space. Id. at (3). Finally, GTE must relinquish space held for future use before denying a request for virtual collocation on the grounds of space limitations, unless virtual collocation at that point is not technically feasible. Id. at (5). The FCC order provides that the ILEC claiming space exhaustion must provide the state commission with a detailed floor plan of its premises and justify the denial of space on the grounds of space exhaustion. FCC Order ¶ 602.
Issue 43--Should GTE be required to provide tandem-to-tandem switching for the purpose of terminating AT&T local and intraLATA toll traffic?
GTE shall provide tandem-to-tandem switching on GTE's network for terminating local and intraLATA toll traffic.
GTE's reluctance to provide tandem-to-tandem switching relates to compensation. Such switching is technically feasible and the function must be unbundled. FCC Order ¶ 425. The parties shall negotiate a mechanism to appropriately compensate GTE for providing this functionality.
OPERATIONAL SUPPORT SYSTEMS
Issue 24--What authorization is required for the provision of customer account information to AT&T?
I adopt GTE's position that, until the FCC issues its rules, AT&T must provide a written letter of authorization before GTE gives AT&T access to customer record information in the GTE data base.
This is a legal dispute over the interpretation of § 222(c) of the Act. That provision governs the disclosure of customer proprietary number information (CPNI). AT&T proposes that it be allowed to self-certify that the customer has actually requested to change local carriers from GTE to AT&T with no change in the service offerings or other arrangements.
The general rule is that a telecommunications carrier may disclose CPNI upon affirmative written request by the customer of any person designted by the customer. 47 U.S.C. § 222(c)(2). The Act provides a limited exemption for the disclosure of CPNI to initiate, render, bill, and collect for telecommunications services. 47 U.S.C. § 222(d)(2).
AT&T asserts that the exemption allows GTE to provide CPNI to AT&T upon AT&T's self-certification that the customer has requested a change of carrier. GTE contends that AT&T's reading is stilted and contrary to the legislative history.
I conclude that until the FCC issues its rules, AT&T must provide a written letter of authorization. For years, the area of customer privacy and unauthorized carrier changes has been a burden on the public, the Commission, and carriers in the provision of interexchange services. The potential for extending those problems to the local exchange market is of great concern. The FCC now has pending a rulemaking proceeding to determine how CPNI should be protected when a customer changes local service providers. FCC Docket No. 96-115. GTE indicated its intention to comply with the procedures that the FCC adopts in a final order regarding the release of CPNI to CLECs. Until that time, it is prudent to adopt procedures that strictly protect the interests of the customers.
The base contract should be modified to reflect this decision.
Issue 25--Should GTE be required to perform loop testing on every new line under AT&T's standard of acceptance, and provide reports of test results to AT&T?
I adopt GTE’s position that it should provide loop testing to design specifications for services other than basic voice grade service. GTE does not have to test every voice grade loop.
GTE agrees to test non-voice grade circuits. It does not test every voice grade circuit for itself and argues that it should not be required to do so for a competitor. AT&T merely asserts that it needs the complete results of loop testing prior to the start of service in order to provide competitive services.
GTE's position is adopted. GTE does not test all voice grade circuits before providing the service to a customer. If AT&T wants all circuits tested, it must pay for the additional service. The FCC requires that, where technically feasible, GTE must provide AT&T the access or unbundled network elements at least equal in quality to that which GTE provides to itself. FCC Order ¶ 312. However, the Act requires requesting carriers to pay the costs of unbundling, and thus ILECs must be fully compensated for any efforts they make to increase the quality of access or elements within their own networks. FCC Order ¶ 314.
Issue 44--How should the cost of access to OSS be recovered?
Operations support services (OSS) were unbundled in Order No. 96-283 at 3. GTE is required to file tariffs for this element by December 15, 1996. AT&T should bear the costs of access to OSS through cost-based rates.
In the tariff filing process, GTE can propose for Commission consideration what it believes to be the appropriate costs and a reasonable mechanism for cost recovery. AT&T will have an opportunity to participate in the proceeding.
Issue 45--Should GTE be required to provide AT&T direct access to GTE’s OSS systems through electronic interfaces?
Issue 46--On what basis should OSS electronic interfaces be implemented?
Issue 47--Should AT&T have access to GTE’s OSS processes through electronic interfaces for unbundled elements?
GTE must provide AT&T access to GTE's OSS processes by January 1, 1997, or as soon thereafter, as practicable. According to GTE, the parties agree that OSS functions should be accessed through a nationally standardized gateway. The parties further agree that by the end of March 1997, GTE will implement an interim gateway. Once the national standards are met, GTE will modify its network if necessary and if requested by AT&T.
The FCC has required ILECs to provide, by January 1, 1997, nondiscriminatory access to OSS functions for pre-ordering, ordering, provisioning, maintenance and repair, and billing functions under the same terms and conditions that GTE provides such interfaces to itself. 47 C.F.R. § 51.313. FCC Order ¶ 316, 516-528. GTE indicates that the project will not be completed until the Spring. If there is difficulty meeting the Spring deadline, the parties should inform the Commission. Either party may request that the Commission take action to address the causes for the delay.
Issue 67--Should GTE be required to provide billing and usage recording services for resold services, interconnection, and unbundled elements, and if so, what terms and conditions apply to such services?
Issue 68--If GTE is required to provide the services identified in Issue 67, how should the costs of providing these services be recovered, and from whom?
GTE agrees to provide usage recording systems consistent with what it provides itself. AT&T shall pay GTE for any enhancement to its billing and usage recording services incurred to meet AT&T's demands. The costs must be recovered in a competitively neutral manner, whereby other CLECs will pay for provisioning the service, if they request to use it.
GTE is willing to provide these services so long as it recovers its costs. GTE supports a means of refunding to AT&T any amounts paid which may subsequently be shared with other CLECs. The cost recovery principles are discussed above. GTE's proposal is one of several reasonable cost recovery mechanisms.
Issue 69--Should AT&T be charged for 800/888 database dips that result in that call being routed to GTE as the 800/888 service provider?
AT&T should not pay for GTE's 800/888 data bases.
This issue arises when an AT&T customer initiates an 800/888 call. The call is routed to GTE's DB800 data base on the company’s SS7 switch. GTE must "dip" into its SS7 database to determine the appropriate carrier for routing the call to the end customer. GTE's network then completes the call to GTE's customer.
GTE claims it should be compensated for looking up the appropriate routing, so that the AT&T's customer’s call can be completed. AT&T claims that it receives no revenue from its customer originating the 800 call and should not have to pay for the data base inquiry. AT&T points out that GTE receives revenue from the customer subscribing to the 800/888 service.
GTE should absorb the cost of the data base inquiry and seek cost recovery through a charge on the carrier receiving the revenue for the 800/888 call. It is unfair for AT&T to pay for the data base inquiry and have no way to recover its costs.
ANCILLARY SERVICES
Interim Number Portability
Issue 48--What methods of interim number portability should GTE be required to provide?
Consistent with Order No. 96-021 at 78-79, the parties have agreed that GTE shall provide AT&T with Remote Call Forwarding and Directory Number Route Indexing capabilities for interim number portability. If generally accepted on a nationwide basis, GTE should also provide LERG reassignment in Oregon.
AT&T requested an interim number portability called LERG reassignment to insure that large and small customers can change service providers with minimum disruption. However, GTE points out that a long-term solution is less than two years away, the cost of providing LERG is significant, and LERG cannot be instituted in Oregon unless it is also implemented industry-wide. I conclude that the contract should require that GTE provide LERG reassignment, if that method is generally available throughout the industry. This approach avoids the problem of instituting an expensive interim measure without a clear understanding that LERG reassignment will be useful.
Issue 6--What method should be used to price interim number portability and what specific rates, if any, should be set for GTE?
I adopt the bill-and-keep cost recovery mechanism proposed by AT&T.
The Act requires that the costs for interim number portability must be borne by all telecommunications carriers on a competitively neutral basis as determined by the FCC. 47 U.S.C. § 251(e)(2). See In re Telephone Number Portability, FCC Order 96-286 at ¶134-136. The FCC has indicated that bill-and-keep or a cost recovery mechanism that allocates costs through a surcharge on each carrier's number of ported telephone numbers relative to the total number of active telephone numbers in the local service area are acceptable. The FCC's bill-and-keep method, which is less expensive to implement, is adopted, pending the development of a permanent number portability solution.
GTE advocates that the Commission use the tariff provisions for interim number portability currently in effect in Oregon. These rates are based on incremental costs, a method that does not meet the FCC's criteria for competitively neutral rates. The FCC concluded that incremental cost-based charges would not meet its "competitive neutrality" criterion because a new facilities-based carrier would be placed at an appreciable, incremental cost disadvantage relative to another service provider, when competing for the same customer. The FCC stated:
…(A) cost-recovery mechanism that imposes the entire incremental cost of currently available number portability on a facilities-based new entrant would violate this criterion. This cost-recovery mechanism would impose an incremental cost on a facilities-based entrant that neither the incumbent, nor an entrant that merely resold the incumbent's service, would have to bear, because neither the incumbent nor the reseller would have to use currently available number portability measures in order for the prospective customer to keep his or her existing number.
FCC 96-286 ¶ 134.
Poles, Conduits, and Rights-of-way
Issue 55--Should AT&T have access to GTE’s poles, ducts, conduits, and rights-of-way at parity with GTE?
AT&T should have access to GTE's poles, ducts, conduits, and rights-of-way on the same conditions that GTE gives to itself.
The Act requires LECs "to afford access to poles, ducts, conduits, and rights-of-ways of such carrier to competing providers of telecommunications services on rights, terms, and conditions that are consistent with Section 224." 47 U.S.C. § 251(b)(4). Section 224 requires LECs to provide nondiscriminatory access. The FCC has defined nondiscriminatory to mean on the same terms and conditions as the ILEC gives to itself. FCC Order ¶ 1170.
GTE argues that the proper interpretation of the term "nondiscriminatory access" is that the owner of the facility must treat all other companies seeking access equally. GTE claims the owner’s access is synonymous with its ownership right and that the FCC definition would interfere with the ownership of GTE's property.
I conclude that the FCC's definition of the term "nondiscriminatory" is in effect. The federal law must be followed.
Issue 56--Does the term "rights-of-way" in §224 of the Act include all possible pathways for communicating with the end user?
GTE must provide AT&T access to all disrtibution network facilities which it owns or controls for the provision of telecommunications services, subject to factors related to capacity, safety, reliability, and engineering considerations.
The Act requires that GTE provide AT&T nondiscriminatory access to any pole, duct, conduit, or right-of-way owned or controlled by it. 47 U.S.C. § 224(f)(1). FCC Order ¶ 1123. The FCC concluded that the "intent of Congress in section 224(f) was to permit … telecommunications carriers to ‘piggyback’ along distribution networks owned or controlled by utilities, as opposed to granting access to every piece of equipment or real property owned or controlled by uility. FCC Order ¶ 1185. Further, the FCC declined to establish an exhaustive list of equipment that may be attached when access to utility facilities is mandated. FCC Order ¶ 1186. Finally, the FCC concluded that access disputes should be decided on factors such as size, weight, and other characteristics that have an impact on capacity, safety, reliability, and engineering considerations. FCC Order ¶ 1186.
AT&T and GTE agree that this requirement does not apply to facilites over which GTE does not have legal ownership or control. They also agree that access is subject to legitimate safety, reliability, and engineering concerns.
AT&T wants access to all pathways. GTE objects claiming that the term rights-of-way does not encompass all possible pathways including cable vaults, entrance facilities, equipment rooms and telephone closets. The term should be given its everyday meaning. I adopt the FCC interpretation of the ILEC’s access obligations.
Issue 57--May GTE reserve space for its future use on/in its poles, ducts, conduits, and rights-of-way?
I adopt the AT&T proposed contract language regarding access to poles, conduits, and rights-of-way. The language in the contract should be modified to reflect the recitations in AT&T's brief and the provisions of the FCC's rule.
The Act governs access to poles, ducts, conduits and rights-of-way. 47 U.S.C. § 251(b)(4) and § 224. AT&T's proposal better implements the FCC's requirement that GTE take reasonable steps to accommodate requests for access, including modifying its facilities to inrease capacity. FCC Order ¶ 1161-1164. The FCC concluded that an ILEC may not reserve space for local exchange service, to the detriment of the new entrant, because doing so would favor the future needs of the ILEC over the current needs of the CLEC. FCC Order ¶ 1170.
GTE asserts that it must be able to reserve space to serve new customers readily and to meet its carrier of last resort obligations. In addition, GTE claims that depriving it of the right to reserve space will eliminate its incentive to construct facilities to meet future needs. The provisions below accommodate GTE's concerns. AT&T's proposal should be modified to reflect the following:
GTE may not reserve space for its own use to the detriment of a new entrant. FCC Order ¶ 1170.
GTE may reserve space for its own use based upon a bona fide development plan that reasonably and specifically projects a need for space in the provision of its core utility service. AT&T Br. at 18.
GTE should provide current detailed engineering on the facilities as well as any information on environmental conditions. Once a request is made for space, GTE should reserve those facilities pending attachment and or installation of AT&T facilities. AT&T Br. at 18.
AT&T’s reservation of space must be based on a bona fide development plan as specified above.
GTE may maintain space capacity for its maintenance and administrative purposes. AT&T Br. at 18.
Issue 58--Is GTE required to make additional capacity available to AT&T for poles, ducts, conduits, and rights-of-way if it does not have spare capacity, and if so, in what time frame should GTE make such capacity available?
GTE is required to take reasonable steps to make capacity available to AT&T for poles, ducts, conduits, and rights-of-way, if it does not have spare capacity. No time limits are imposed. To the extent reasonable, GTE should facilitate negotiations with grantors and licensers of the facilities. GTE must exercise its powers of eminent domain to expand an existing right of way over private property to accommodate a request for access. FCC Order ¶ 1181.
When an ILEC does not have available space to meet access requests from a CLEC, the FCC requires the ILEC to modify the facility to increase capacity, when reasonable. The FCC descibes a number of reasonable steps that the ILEC can take to increase capacity. FCC Order ¶ 1161. The FCC's conclusion is based on the principle of nondiscrimination. If the ILEC can take reasonable steps to increase capacity to accommodate its own needs, it should be required to take the same steps on behalf of the CLEC. FCC Order ¶ 1162. The FCC points out a number of situations where expansion of the ILEC facilities would be unreasonable. All the FCC requires of the ILEC is a good faith effort to make accommodations, before denying a request because it lacks capacity. FCC Order ¶ 1163.
The requirements to facilitate negotiations and exercize powers of eminent domain are compatible with the FCC's conclusions regarding the ILECs obligations to make additional capacity available.
Issue 8--What is the proper way to charge for access to poles, ducts, conduits, and rights-of-way?
Until the FCC adopts regulations governing the charges for access to poles, ducts conduits, and rights-of-way, the Commission's administrative rules apply.
The Act provides that no later than two years after enactment, the FCC shall prescribe regulations to govern the charges for pole attachments used by telecommunications carriers to provide telecommunications services, when the parties fail to resolve a dispute over such charges. 47 U.S.C. § 224(e)(1). Until the FCC adopts regulations prescribing the charges for access to poles and conduits, the procedures and formula set forth in the Commission's administrative rules shall apply. OAR 860-022-0055 and 0060.
PARITY/QUALITY
Issue 26--Should GTE be required to provide dialing parity through presubscription, and if so, on what schedule?
While the parties agree in principle on dialing parity, I adopt AT&T's more specific contract language.
Issue 27--Should the contract include terms which require GTE to provide resold services, unbundled network elements, ancillary functions, and interconnection on terms that are at least equal to those that GTE uses to provide such services and facilities to itself?
Issue 28-- Must GTE deploy its resale and unbundled offerings in specific time frames, with service guarantees, and provide for remedial measures for substandard performance?
GTE is obligated to provide service that does not discriminate against other carriers or which is inferior in quality to that provided to itself. FCC Order ¶ 224. 47 C.F.R. § 51.311(b). Upon request and to the extent technically feasible, GTE is also obligated to provide AT&T superior quality network elements and access to that which GTE provides to itself. AT&T is required to pay the costs incurred by GTE to provide the requested services. GTE shall make available to AT&T any and all information regarding its own internal quality standards. The contract should not include AT&T's proposed Direct Measures of Quality or any remedies for failure to achieve performance.
The FCC rules require GTE to provide network elements and access that is at least equal in quality to that which the ILEC provides to itself. 47 C.F.R. § 51.311(b). The rules also require that upon request and if technically feasible, GTE must provide superior quality service. 47 C.F.R. § 51.311(c). The ILEC bears the burden of showing the requested service is not technically feasible. Id. at (c).
GTE agrees to provide service quality to CLECs that is equal to that which it provides to itself and its affiliates. For resold services, AT&T will be in the same position as all customers. For unbundled elements, GTE will provision and maintain services in accord with its normal operation. GTE points out that the "equal in quality" language of the Act appears only in the interconnection section and not in unbundling and resale provisions. GTE insists that to the extent AT&T requires network modifications, AT&T must pay for them.
AT&T requests that the contract include specific, detailed service performance standards to insure that the level of service that GTE provides AT&T will be at least equal in quality to that provided by GTE to itself, and superior to the quality GTE provides for itself, when AT&T requests superior quality. GTE provides general assurances, while AT&T would require detailed standards, called Direct Measures of Quality (DMOQs), as benchmarks. In addition, AT&T recommends service credits for noncompliance.
I agree with AT&T that GTE should provide service according the standards set forth in the FCC rules. Anything less could undermine AT&T's ability to compete for local exchange customers. As AT&T points out, it should be able to differentiate its services by offering a higher quality of service than that offered by GTE. Of course, AT&T must pay for network modifications, especially when it asks for superior quality service.
I do not adopt AT&T's proposed DMOQs. While AT&T is entitled to know the level of quality that GTE is expected to provide, I cannot evaluate the reasonableness of AT&T's proposed standards. Furthermore, given the complexity of AT&T's proposed contract terms, the remedies for failure to comply, including performance and service guarantees, should be eliminated. To insure that reasonable and mutually agreeable performance standards are adopted, the contract should contain language requiring GTE and AT&T to negotiate minimum standards for quality to reflect GTE's current internal standards. If the parties fail to reach agreement, either party may request the Commission to adopt a rule or tariffs specifying the level of quality that GTE must provide to CLECs. I do adopt AT&T's proposed procedures and the supplier performance quality management system. These provisions will provide a road map for negotiating the details necessary for provisioning quality services to AT&T.
Finally, the contract should require GTE to provide to AT&T any documentation that it possesses detailing the quality standards that GTE requires of its own network. This requirement is in response to AT&T’s assertion that it proposed the service standards because GTE refused to provide any information regarding its own internal standards for quality or to even confirm or deny the existence of a comprehensive list of standards.
ANCILLARY SERVICES
Issue 22--Should GTE make secondary distributions of directories to AT&T’s customers without charge?
AT&T has agreed to pay GTE the price GTE pays for secondary distribution of directories to AT&T local service customers.
Issue 29--Should GTE be compelled to provide the same number of directory pages to AT&T as GTE has for its own use for branded service information?
I adopt GTE's proposal regarding directory pages. AT&T has accepted GTE's proposal to provide one directory information page. GTE's proposed 35 percent discount off the retail rate is reasonable.
Issue 12--What is a reasonable period for advance notificiation of new services?
GTE shall provide AT&T notice of new services at least 32 days prior to the proposed effective date of the new schedule.
AT&T requests 45 days’ advance notice of new services. This is 15 days more than the 30 days’ required notice to the Commission under Oregon law. ORS 759.190. AT&T's proposal would give it an unfair advantage over GTE. Two days advance notice prior to the 30-day notice is sufficient. As specified by the IUB, GTE should give AT&T 45 days notice of the discontinuance of a service.
Issue 59--What should the term of the contract be?
I adopt GTE's position that the term of the contract should be two years.
There are many decisions in this arbitration order that should be revisited within a fairly short period of time. This a new environment with a great deal of uncertainly. No party should be left with an unintended advantage or disadvantage merely because the operation of the contract did not comport with vague predictions about how competition for local exchange service might develop. I specifically adopt GTE's caution: "It is anyone’s guess as to what market contours this chaos will eventually produce."
Issue 60--Should the contract be implemented without impairing GTE’s right to file tariffs in the normal course of business?
This contract should be implemented without impairing GTE's right to file tariffs in the normal course of business.
GTE, as a regulated utility, may change intrastate rates only as provided in ORS Chapter 759. GTE requests that tariff changes apply to the services offered under this contract. The request should be granted. This is an early stage in the development of competitive markets. The terms approved in this order are based on the best information available at the time the decisions are made. However, many of the decisions could have benefited from additional study. In fact, several of the rates approved in this order are interim, subject to Commission investigation. Examples include the unbundled rate elements and the wholesale discounts—two critically important factors for determining how competitive markets will develop and how successfully GTE will function as a supplier of wholesale and retail services.
Allowing GTE to propose tariffs that will affect contract terms will provide needed flexibility. AT&T should not be adversely affected because any changes proposed by GTE must be reviewed by the Commission.
Issue 61--Should the contract provide for an accelerated dispute resolution procedure in case of "service affecting" disputes?
I adopt AT&T‘s proposed dispute resolution procedures, as modified in the preliminary IUB decision. The IUB’s preliminary contract included a procedure that provides the parties the option of referring a dispute to binding arbitration, if they mutually agree to do so. Absent mutual agreement, both parties retain the right to file a complaint with the Commission. Parties may request either formal or informal dispute resolution procedures.
Accelerated dispute resolution is important for implementation of the contract. I adopt provisions that allow the parties to refer a dispute to the Commission, or by mutual agreement, to an arbitrator. The contract terms contain detailed procedures to follow, if the dispute is referred to an arbitrator. Consistent with the Act, the dispute resolution process requires that an arbitrator’s decision modifying the terms of contract must be submitted to the Commission for approval. 47 U.S.C. § 252(e).
Issue 62--Should the contract provide for a Most Favored Nations Clause?
This contract should not include a most favored nations clause.
The Eighth Circuit Court of Appeals stayed the FCC's requirement that each term of a contract should be subject to a "pick and choose" provision. This provision would allow AT&T to incorporate into its contract a term from another CLEC's contract that AT&T deems preferable. Such a term discourages comprehensive contract negotiations, a result inconsistent with the purposes of the Act.
Issue 63--Should the contract provide for a Bona Fide Request Process?
I adopt AT&T’s proposed bona fide request process.
The parties agree that the contract should include a bona fide request process. AT&T proposes a process that is to be used when AT&T requests GTE to provide a proposed price and availability date for certain services, features, capabilities or functionality that the parties agree should be ordered as Bona Fide Requests. AT&T's process is more detailed than the GTE process and is, therefore, more likely to avoid delays in the provision of a service.
Issue 64--Should GTE be required to accept financial responsibility for uncollectable and/or unbillable revenues resulting from GTE work errors, software alterations, or unauthorized attachments to local loop facilities?
Section 10 of the IUB preliminary contract should be modified. GTE should not be required to accept financial responsibility for uncollectable or unbillable revenue resulting from GTE's work errors, software alterations, or unauthorized attachments to local loop facilities, unless the losses were the result of GTE's gross negligence. AT&T is entitled to service credits pursuant to GTE's tariffs.
GTE notes that, for resold services, it has a tariff that specifies service credits for interruptions. For unbundled services, GTE proposes adoption of the comparable provisions in GTE's access tariff. GTE asserts that AT&T's proposal would expose GTE to the "unknowable costs of unlimited consequential damage" and that the risk associated with these costs has not been factored into GTE's rates. To be fair, the AT&T contract limits liability to the total revenues owed to GTE under the contract plus owed access revenues. AT&T's contract, specifically, disclaims any consequential damages.
The Commission addressed the issue of liability for lost revenues in Order No.
96-079 at 14-15. The Commission stated:
In spite of USWC's request for absolute protection from liability, we will require willful misconduct as the threshhold of liability for USWC with respect to revenue losses arising from interruptions in services provided under this (virtual collocation) tariff. USWC, as a competitor, has an incentive to delay actions and otherwise interfere with the quality of service of the collocators. We are reluctant to allow any limitation of liability, but willful misconduct is the standard for loss of revenues for services offered under other tariffs. If necessary, the issue can be revisited at a later date.
Section 10 of the IUB preliminary contract should be modified to incorporate the following language based on the limitation of liability in Order No. 96-079, Appendix A, at 10:
In the absence of willful misconduct, GTE shall have no liability for any interruption of AT&T's service under this contract or for interference with the operation of AT&T's facilities, except for a credit allowance for service interruption.
Issue 65--To the extent not otherwise specifically resolved herein, what terms and conditions should be included in the contract adopted in this arbitration proceeding?
As described above, I adopt the provisions of the IUB’s preliminary contract between GTE and AT&T, except as modified in this decision.
Issue 66--Should the contract impose material and reciprocal obligations upon both parties with respect to matters other than reciprocal compensation arrangements for transport and termination?
The contract should impose on AT&T reciprocal obligations for access to
rights-of-way.
GTE argues that to further competition, AT&T should have the same obligations as GTE under the contract. The only mention of what is at stake here is AT&T's statement in the matrix that GTE is requesting to impose on AT&T reciprocal obligations for collocation and rights-of-way. AT&T asserts that the only obligations at issue in this proceeding are those of a ILEC under 47 U.S.C. § 251. AT&T references the FCC’s analysis to support its conclusion. FCC Order ¶¶ 10, 15, 155, 220, 997, 1231.
I conclude that the Act requires that AT&T provide GTE access to rights-of-way. The Act imposes on each local exchange carrier "(t)he duty to afford access to the poles, ducts, conduits, and rights-of-way of such carrier to competing providers of telecommunications services on rates, terms, and conditions that are consistent with section 224." 47 U.S.C. § 251(b)(4). In contrast, the obligation to provide access to collocation is imposed only on ILECs. 47 U.S.C. § 251(c)(6).
The arguments found in the FCC order are not convincing. The most direct reference is FCC Order ¶ 1231, which states:
In addition, incumbent LECs cannot use section 251(b)(4) as a means of gaining access to the facilites or property of a LEC. A LEC’s obligation under section 251(b)(4) is to afford access "on rates, terms, and conditions that are consistent with section 224." Section 224 does not prescribe rates, terms, or conditions governing access by an incumbent LEC to the facilities or rights-of-way of a competing LEC. Indeed, section 224 does not provide access rights to incumbent LECs. We cannot infer that section 251(b)(4) restores to an incumbent LEC access rights expressly withheld by section 224. We give deference to the specific denial of access under section 224 over the more general access provisions of section 251(b)(4). Accordingly, no incumbent LEC may seek access to the facilities or rights-of-way of a LEC or any utility under either section 224 or section 251(b)(4).
The FCC impermissibly reads the duty imposed on each LEC by section 251(b)(4) out of the law. Where possible, the FCC has an obligation to read statutes so as to give all statutes meaning. The inconsistency perceived by the FCC can be resolved by according a common sense meaning to the words "consistent with." Section 224 regulates utilities. These are the entitites directly affected by the law. However, section 251(b)(4) should be read to impose obligations on non-utility LECs that conform to the same principles as the obligations imposed on utilities under section 224. This reading of the statute gives voice to an obvious intent by Congress to impose limited reciprocal obligations for rights-of-way on all local exchange carriers.
ISSUES RESOLVED BY STIPULATION
Issue 22--Should GTE make secondary distributions of directories to AT&T’s customers without charge?
Issue 23--How should PIC changes be made for AT&T’s local customers and should GTE identify PIC charges separately?
Issue 29--Should GTE be compelled to provide the same number of directory pages to AT&T as GTE has for its own use for branded service information?
Issue 35--Should GTE provide AT&T access to its Advanced Intelligent Network (AIN), and if so, under what terms and conditions?
Issue 36--Should GTE be required to exchange AIN transaction capabilities application part message between GTE end offices and AT&T service control points via interconnection of AT&T’s SS7 network to the GTE SS7 network?
Issue 37--Should GTE provide AT&T access to GTE’s SS7 system, and if so, at what points and under what terms and conditions?
Issue 38--Is GTE required to provide unbundled signaling elements (STP, SCPs, Links, etc.) at cost-based rates? Is GTE’s SCP database an unbundled network element as defined in the Act?
ARBITRATOR’S ORDER
IT IS ORDERED THAT:
AT&T shall submit to GTE a contract incorporating terms that reflect the Commission's final decision in this proceeding. The contract shall bear the signature of a person authorized by AT&T to sign this contract.
Within 15 days of receipt of the contract from AT&T, GTE shall notify AT&T of any provisions of the revised contract that GTE believes are inconsistent with the the terms of the final Commission decision.
If GTE does not contest AT&T's language incorporating the terms of this decision, GTE shall return the contract to AT&T with the signature of a person authorized by GTE to sign the contract. GTE shall also file a copy of the contract with the Commission.
If AT&T and GTE are unable to resolve disputes over the language that embodies the decisions in this order, the parties may request the Commission to resolve the dispute on an expedited basis. The Commission will make the final determination and issue a binding contract.
The contract is effective immediately upon delivery of the signed agreement to GTE.
Dated this 12th day of December, 1996, in Salem, Oregon.
________________________________
Thomas G. Barkin
Arbitrator
n:\barkin\arb5\arb5ord.doc
APPENDIX A
CALCULATION OF AVOIDED COST DISCOUNT
Account Category |
Direct Costs |
Percent Avoidable |
Amount Avoidable |
Totals |
| 6611-product management | $ 1,294 |
90 |
$ 1,165 |
|
| 6612-sales | 5,016 |
90 |
4,514 |
|
| 6613-advertising | 2,002 |
90 |
1,1802 |
|
| 6610-total marketing | $ 7,481 |
|||
| 6621-operator services | 771 |
771 |
||
| 6622-directory assistance | 1,527 |
1527 |
||
| 6623-customer services | 14,208 |
90 |
12,787 |
|
| 6620-total services | $15,085 |
|||
| Total direct costs presumed avoidable | $22,566 |
|||
| Allocated share of indirect costs | $10,147 |
|||
| Total avoided direct and indirect costs | $32,713 |
| Presumed avoidable direct costs as a percent of total direct expense less access and miscellaneous adjustments | $22,566 = 17.9% $125,763 |
| Percent of presumed avoidable direct costs times total indirect costs | 17.9% * $56,687= $10,147 |
| Total avoided costs as a percent of total revenues | $32,713 = 21.0% $155,674 |
Source: Exhibits AT&T 21 and 22