ISSUED November 8, 1996

This is an electronic copy.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

ARB 1

PROCEDURAL HISTORY

On June 24, 1996, MFS Communications Company, Inc. (MFS) filed a petition with the Public Utility Commission of Oregon (Commission) to arbitrate a contract for network interconnection with U S WEST Communications, Inc. (USWC) 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 July 19, 1996, USWC filed a response. An arbitration hearing was held on September 24 and 25, 1996, before Thomas G. Barkin. The following appearances were entered:

For the petitioner, MFS:

Lawrence Freedman, Swidler and Berlin,

Washington DC

Appearing pro hoc vice

For the respondent, USWC:

Molly Hastings, USWC,

Seattle, Washington

Appearing pro hoc vice

 

On October 8, 1996, the parties filed briefs and a Joint Position Statement in the form of a contract. The Joint Position Statement includes proposed contract language from each party where the positions differed. Appendix A to the Joint Position Statement, filed on October 10, 1996, identifies parties’ positions on the rates and charges to be incorporated into the contract.

The parties are to be complimented on the manner in which this case was presented. The negotiations resolved many of the issues that were initially in dispute. In addition, the parties presented their positions in a simple, coherent manner at the arbitration hearing.

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.

 

On August 8, 1996, the Federal Communications Commission (FCC) issued rules on interconnection pursuant to 47 U.S.C. §§ 251 and 252. 47 C.F.R. § 51.100 et seq. USWC asserted that the Arbitrator need not and should not follow the orders issued by the FCC where the orders are contrary to the Act or usurp the jurisdiction of this Commission.

On October 15, 1996, the Eighth Circuit Court of Appeals 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). As a result, I have considered the FCC pricing rules to be advisory and not binding on this arbitration.

On November 1, 1996, the Commission issued two orders that bear directly on this proceeding. In Order No. 96-283 (Reopened UM 351, Phase II), the Commission modified the prices for unbundled elements that it had adopted in Order No. 96-188. Order No. 96-284 (UM 773), issued the same day, established the methodology that will be used to update the prices for unbundled network elements. The timing for pricing network elements using the new methodology has not been established.

I accept the negotiated agreement as proposed by the parties and approve the proffered contract in all respects where there is agreement.

UNBUNDLED LOOPS

Prices

Telecommunications Act. Section 252(d)(1) provides that the prices for unbundled network elements shall be based on cost and may include a reasonable profit.

FCC Rules. Prices for unbundled elements should be set at forward-looking long-run economic cost. In practice, this means prices will be based on Total Element Long Run Incremental Cost (TELRIC) and will include a reasonable allocation of forward-looking joint and common costs.

Parties’ Positions. The parties take markedly different approaches to setting the price for unbundled loops. MFS proposes that the Arbitrator use the FCC's proxy ceiling prices. USWC asserts that the Arbitrator must rely on USWC's TELRIC studies. In the alternative, USWC proposes that the Commission adopt modified UM 351, Phase II, prices.

Arbitrator’s Decision. The interim price for an unbundled loop shall be $17.20 per month. This price was adopted by the Commission in Order No. 96-283. (Reopened UM 351, Phase II.) The final price shall be established in docket UT 125. See Order No. 96-284 at 33. Furthermore, Appendix A shall include the following language:

The prices and discounts in this contract are interim and will be replaced with final prices and discounts approved by order of the Public Utility Commission of Oregon.

 

I am adopting the loop prices adopted in Order No. 96-283 (Reopened UM 351, Phase II), because they represent the most reliable prices for unbundled elements available to me. These prices were established through a formal, open investigation that considered comments, testimony, briefs, and expert advice from all sides of the telecommunications industry. The Commission thoroughly examined the positions of the parties and came to a reasoned resolution of the contested issues. Furthermore, the Commission is continuing its efforts to update and improve the costing methodology and prices for unbundled elements. In Order No. 96-284 (UM 773), the Commission adopted the cost methodology that USWC and the Commission Staff agreed to by stipulation. Revised prices for unbundled elements will be determined in UT 125, USWC's rate case, based on the methodology adopted in UM 773.

USWC claims that it was denied due process in this proceeding because of my stated intent to rely on the UM 351, Phase II, prices. USWC believes that its cost evidence introduced into the record of this proceeding should have been reviewed and considered in this decision. First, the interim prices that I adopt here were established in a generic proceeding in which USWC participated. USWC had ample opportunity to present evidence to the Commission on the proper methodology and assumptions to be used for pricing unbundled elements. USWC has had, and will continue to have, adequate opportunity to participate in the determination of the permanent prices. USWC was an active participant in UM 773, and is now, of course, participating in UT 125. In fact, the stipulation in UM 773, which USWC signed, provides that "all issues associated with pricing and implementation of … (the revised cost format for unbundled elements) will be addressed in the rate design portion of docket UT 125." There are no grounds to claim denial of due process.

Second, I reviewed the cost and price evidence submitted by the parties. Neither approach should be adopted when there is a better alternative. The FCC recognized that the proxy prices, which MFS recommends, are an interim approach to assist states, pending state commission completion of state cost study proceedings. FCC Order ¶ 619. The proxy rates were proposed because the FCC recognized that some states would be unable to complete cost study proceedings prior to the statutory deadlines for arbitration decisions. This is not the case in Oregon.

As for the USWC cost study introduced into the record in this proceeding, I am unable to conclude that that cost study would produce reasonable loop rates. USWC submitted its cost study into the record two weeks before the hearing. This study is over 2,000 pages long. Neither MFS nor this Arbitrator have had adequate time to review the study and make judgments as to the reliability or reasonableness of the underlying assumptions. USWC's suggestion that I adopt its proposal after reading the thirty pages related to unbundled loop costs is unacceptable. Reading a study and verifying the assumptions are not the same.

My conclusion is reinforced by the testimony of USWC witness, Robert Bowman, who stated that an important part of the Company’s validation process for its cost studies is the rigorous review by the Commission Staff. USWC has presented no evidence demonstrating that its cost study has been audited, let alone approved, by any regulatory commission.

Finally, a review of the USWC study raises questions about the advisability of adopting the study here. For example, the assumptions underlying the USWC study differ from the terms of the stipulation that USWC reached with the Commission staff and which was adopted by

the Commission in Order No. 96- 284 (UM 773). USWC should not be allowed to stipulate to one methodology in UM 773 and advocate another in this arbitration.

A second difficulty is USWC's proposed allocation of common costs to network elements. Tr. 24-27. This change has a very significant impact on the proposed incremental cost of a loop. Order No. 96-283 (Reopened UM 351, Phase II) approved a loop price of $17.20. USWC's cost study produces a loop cost of $34.88. Adopting such an increase without the benefit of a detailed review would be imprudent for me and unfair to MFS.

Loop Deaveraging

Telecommunications Act. Rates must be based on costs. 47 U.S.C. § 252(d)(1)(A).

Parties’ Positions. MFS argues that deaveraging is required to obtain accurate cost-based rates for unbundled loops and must be implemented immediately. Until more precise information is available, MFS proposes deaveraging based on data regarding the average loop length by wire center, because loop length is a primary factor in determining the cost of providing unbundled loops. The MFS proposal divides the state into three zones containing roughly equal numbers of unbundled loops. The proposal is based on all lines within Oregon, not just USWC’s lines. MFS claims that the USWC proposal is based on cost data that cannot be reviewed in the short time available to arbitrate this dispute.

USWC asserts that the Commission should not geographically deaverage interconnection and unbundled network element wholesale prices until retail rates are deaveraged. MFS's deaveraging proposal based on loop length results in lower rates in urban areas and higher rates in rural areas. USWC argues that MFS will purchase unbundled loops in urban areas and purchase resold average rated wholesale rates in rural areas. USWC claims that this will result in loss of support from low cost geographic areas to high cost areas--with no way to make up the difference. In addition, this will result in loss of contribution from business customers to residential customers. USWC proposes that, if deaveraging is required, it should be on the basis of the size of metropolitan areas.

Arbitrator’s Decision. Geographic deaveraging should not be implemented unless and until the Commission deaverages retail rates in UT 125.

Geographic deaveraging is an appropriate mechanism for matching the cost to provide unbundled elements with the price for those elements. However, USWC is correct in its assertion that deaveraging unbundled elements before deaveraging retail rates places it at a competitive disadvantage. Deaveraged prices are appropriate when all competitors can price retail services based on the underlying costs.

Additional Charges For Unbundled Elements: Collocation

Parties’ Positions. MFS agrees that installation of facilities by USWC on behalf of MFS may include additional costs, such as the dispatch of personnel to offices which are not regularly staffed, additional testing equipment, personnel with testing skills, and personnel at an appointed time. USWC would impose charges for each line. MFS is willing to accept the USWC charges, but proposes lower additional line rates for additional lines in the same wire center and on the same service order.

USWC also proposes non-recurring installation charges at its TELRIC rates for DS-0 cross-connection to collocation equipment or, in the alternative, FCC proxy rates based on its interstate tariff. MFS believes a reasonable installation cost for running a DS-0 within a single building is $100 and should not be charged in those instances where an unbundled loop is already being installed and the connections must be made anyway. MFS has agreed to pay between $15,000 and $16,000 for installation of a "Point of Termination Bay" to make the USWC cross connection task easier. The charge should be reduced to a reasonable level and should not be separately assessed on unbundled loops.

MFS states that USWC should recover construction costs through the recurring price for the service. If some construction costs cannot be attributed to providing the network element in question, they should not be recovered. MFS is concerned that, under the USWC proposal, the first competitor to request construction of a facility will have to pay the entire cost. Other competitors would not have to pay construction charges in advance. This disadvantages the early competitor.

USWC asserts that if MFS requires the construction of additional facilities for resale or collocation, it should pay the costs that USWC incurs to provide them. Compensation through the unbundled loop rate is not sufficient. Without the ability to charge for construction costs, MFS could abandon the USWC facility, leaving USWC "holding the bag." USWC claims that it would be unlawful and amount to confiscation of property if USWC were compelled to build for a competitor with no assurance of timely recovery.

Arbitrator’s Decision. On an interim basis, I adopt the USWC interstate tariff for Expanded Interconnection Collocation Transmission (EICT) for both physical and virtual collocation. When the unbundled rate elements adopted by the Commission in Order No. 96-283 are incorporated into tariff rates, MFS may purchase the elements necessary for an EICT service. The Commission has previously indicated that the USWC EICT tariff would be a suitable starting point until the adoption of unbundled rates in UM 351, Phase II. Order No. 96-079 at 4. Neither of the parties’ proposals should be adopted. For the reasons stated above, I do not adopt the prices based on the USWC cost study. MFS did not provide a rationale for its proposed EICT rate.

I adopt MFS's proposed quotation preparation fee. In Order No. 96-079 at 9, the Commission eliminated USWC's proposed fee. In this proceeding, USWC proposed a fee of $2349.49. MFS has agreed to pay $1500. The MFS position is more closely aligned with the Commission's decision in Order No. 96-079 and is adopted.

I agree with MFS that the price of an entrance facility should be on a per cable basis. Joint Position Statement, Appendix A at 3. USWC proposes to limit the number of fibers to two. USWC has failed to provide a convincing rationale for that limitation.

I agree with MFS that the nonrecurring charge should not apply to unbundled loops where a separate unbundled loop nonrecurring charge applies. Joint Position Statement, Appendix A at 3. USWC did not provide a convincing rationale for imposing two nonrecurring charges.

I adopt MFS's proposal for a reduced price to install additional loops at a particular wire center on the same service order. Joint Position Statement, Appendix A, at 4. USWC did not provide a convincing rationale for requiring MFS to pay the initial rates for additional installations at the same wire center on the same service order.

I also adopt the MFS position on construction charges as stated in the Joint Position Statement, at 18 (reciprocal compensation), 20 (interconnection), 66 (construction charges), and 78 (unbundled elements). Construction costs are included in the recurring price for the particular service. Allowing USWC to recover construction costs in the price and also impose an additional construction charge would allow the company to recover the same costs twice. Furthermore, including these costs in the price fairly allocates the cost of constructing new facilities to all the competitors. USWC can address the abandonment problem by negotiating term commitments before constructing outside plant for MFS. When dealing with interconnectors that impose a significant risk of nonpayment, USWC can require reasonable security that will assure recovery of costs. See Order No. 96-128.

Sham Unbundling

Telecommunications Act. Incumbent local exchange carriers are required to provide unbundled network elements in a manner that allows requesting carriers to combine such elements in order to provide telecommunications service. 47 U.S.C. § 251 (c)(3). In contrast to 47 U.S.C. § 251(c)(4), relating to resale, paragraph (3) contains no language authorizing any restriction on the sale of unbundled elements.

Parties’ Positions. USWC is opposed to what it refers to as sham unbundling. The FCC Rules appear to allow a carrier to purchase unbundled elements, at unbundled element prices, and have USWC bundle them back again to the finished service. The effect of the process is to develop another price for resale. USWC has proposed language in the Joint Position Statement, at 73, that exempts USWC from combining USWC unbundled loops with USWC unbundled switching element to provide a finished service to MFS. MFS opposes such a restriction.

Arbitrator’s Decision. I do not adopt the USWC proposed contract language. The Act requires USWC to both unbundle and sell at wholesale discounts. The Act contains no provisions allowing restrictions on the use of unbundled elements.

RESALE

Discounts

Telecommunications Act. Under §251(c)(4)(A), USWC must offer for resale, "at wholesale rates" any telecommunications service that it offers at retail, and without any unreasonable or discriminatory limitations. A state Commission may impose a limitation that would prohibit a reseller that obtains at wholesale rates a telecommunications service that is available at retail only to a particular category of subscribers from offering such service to a different category of subscribers. §251(c)(4)(B). The definition of "wholesale rates" is set forth in § 252(d)(3), and requires USWC to discount the rate by any costs "avoided" by USWC as a result of providing the service to a reseller rather than to an end user customer.

Parties’ Positions. MFS argues that USWC must make its services available for resale on an interim basis at wholesale rates within the FCC’s default wholesale discount range of 17 to 25 percent. The wholesale discount should be 21 percent which is the mid-point of the FCC's prescribed proxy range. USWC's cost study should not be used because it was filed too late for careful consideration. Wholesale discounts should apply to any retail rate or other charge that USWC asks its end users to pay, including non-recurring charges.

USWC agrees to offer wholesale services as prescribed by the Act. The USWC cost study calculates a wholesale discount in accordance with the FCC Rules and produces a range of one to eight percent. USWC will not offer for resale enhanced services, promotional offerings of less than 90 days, carrier access services, private line services, or discontinued services except where FCC rules provide that the discontinued services may be resold only to existing customers of the service.

Arbitrator’s decision. I adopt MFS's position regarding wholesale rates in Appendix A, with the following exceptions:

The discount rate for USWC's wholesale services shall be 18.80 percent.

 

Rationale: The positions of the parties have established a range of reasonable discounts supported by the record. The percentage I have selected, within the range, is based on the results of the MCI model, as modified by the FCC. FCC Order ¶ 930. I note that the parties to the FCC rulemaking presented evidence or arguments supporting wholesale discount rates ranging from 4.76 to 55 percent. FCC Order ¶ 921. USWC's proposal, at the bottom of the range, must be carefully evaluated in a cost study proceeding before it can be adopted.

 

MFS shall not use private line services purchased from USWC at wholesale to provide special access service. Intentional violation of this restriction constitutes breach of this agreement and shall terminate MFS’s ability to purchase any additional private line services from USWC.

 

Rationale: Private line and special services are indistinguishable. The parties agree that there should be no discount of special access service. Without a limitation on use, a competitor could purchase private line services at a discount and use the facility to provide special access. For that reason, use restrictions and penalties are appropriate.

 

The discount for services already subject to volume or term discounts should be 9.40 percent.

 

Rationale: This is one half the rate for fully priced retail services. MFS acknowledges that the avoided cost discount that these services "are subject to may be very small and, in some cases may be zero." At the hearing, MFS indicated that any concerns over double discounts could be addressed by properly calculating the avoided cost for the service sold at the volume discount. Until the avoided cost is calculated properly, I will set a reduced discount rate for services sold at a volume or term discount. USWC argues that requiring a wholesale discount on top of a volume discount would allow competitors to "inevitably" underbid USWC. That argument ignores the fact that competitors must recover their own marketing, billing, and collection expenses, and add a profit to calculate the price that they charge the customer.

 

Discontinued Services

USWC must resell discontinued services at a discount only to the extent that USWC grandfathers its own customers of a withdrawn service. The analysis regarding discontinued services in the FCC Order ¶ 968 is adopted. USWC indicates that Centrex is a withdrawn service. It is not and must be resold at a discount. Order No. 96-067.

Deregulated Services

USWC must make deregulated services available for resale. Appendix A, at 5. The federal law requires that USWC offer for sale at wholesale any telecommunications service that the carrier provides at retail to subscribers that are not telecommunications carriers. 47 U.S.C. § 251(c)(4). This arbitration is conducted under federal law and the federal definition of telecommunication service applies. 47 U.S.C. § 252(d)(3) and §153(46).

Billing Procedures

USWC should be able to charge using its standard billing practices. The USWC proposed language in Joint Position Statement, at 72, is adopted. MFS requests that the Arbitrator require USWC to bill all amounts due from MFS for resold services within 90 days. MFS asserts that its proposal fixes a time certain for billing within the four corners of the agreement, rather than relying on an external source that was not necessarily designed for interconnection. USWC states that the MFS proposal would allow MFS to avoid lawfully incurred charges. USWC, as the supplier, should be able to require reasonable, consistent billing procedures for interconnectors. It should not be required to manage separate billing procedures with every reseller.

Restrictions on Sale to Intended or Disclosed Use

I do not adopt the USWC language in the Joint Position Statement, at 67. This language would limit MFS's ability to resell basic exchange service only for its intended or disclosed use. The proposed language would limit MFS's ability to provide service by combining network elements. FCC Order ¶ ¶ 328-341. Such a blanket restriction is overly broad and impairs MFS's ability to remarket wholesale services. It would also require MFS to disclose strategic marketing information.

Nonrecurring Charges

I adopt the MFS position that wholesale discounts should apply to nonrecurring charges. Joint Position Statement, at 71. The Telecommunications Act of 1996 refers to any service. There is no exception for the type of charge.

I adopt MFS's position regarding non-recurring customer transfer charges upon initiating wholesale service. Joint Position Statement, Appendix A at 6. The charge should apply once per user, not once per line. As stated by MFS, there is no justification for charging five times as much for a record change needed to transfer a five-line end user as for the same change for a one-line end user.

INTERIM NUMBER PORTABILITY

Telecommunications Act. "The cost of establishing …number portability shall be borne by all telecommunications carriers on a competitively neutral basis as determined by the [FCC]." 47 U.S.C. § 251(e)(2).

FCC Rules. The costs of currently available measures must be borne by all telecommunications carriers on a competitively neutral basis (such as gross telecommunications revenues, number of lines, or number of active telephone numbers). States may utilize various cost recovery mechanisms, so long as they are consistent with these statutory requirements. (FCC Order 96-286 ¶ 6, 130, 136.)

The FCC directs the forwarding and terminating companies to assess the interexchange carriers (IXCs) charges for terminating access through meet-point billing arrangements, i.e., the terminating carrier would receive the carrier common line (CCL) and local switching charges. The terminating access charges would be shared using meet-point billing arrangements between incumbent local exchange carriers (LECs) as a model. FCC Order 96-286 ¶ 140.

Parties’ Positions. MFS requests that the Arbitrator adopt the framework in the FCC Interim Number Portability Order, July 2, 1996. That order requires competitively neutral cost recovery through a surcharge on each telecommunications carrier in the local access transport area (LATA) based on the number of active lines served by each carrier. MFS asserts that recovery of incremental costs should not be assigned only to the new entrants. FCC Order 96-286 ¶ 134.

MFS also proposes to allocate access charges according to the method specified by the FCC: the terminating carrier receives the carrier common line charge, end office termination charges (primarily the local switching charge), the transport interconnection charges, and some portion of the tandem-switched transport element depending on the difference from the USWC switch to the MFS switch. The tandem-switching carrier would receive the balance of the tandem-switched transport element and all of the tandem switching and entrance facility charges. This proposal is consistent with the meet-point billing arrangement between neighboring LECs.

USWC does not agree with the FCC’s order relating to the recovery of the interim number portability costs nor the sharing of the terminating access charges from IXCs. USWC claims the cost allocation methodology requires USWC to bear almost all of the costs of number portability. USWC proposes specified charges based on its TELRIC study.

Arbitrator’s Decision. I adopt MFS's position to allocate costs based on active local phone numbers served by each party. The Telecommunications Act of 1996 requires that the FCC determine, in a competitively neutral manner, how the costs of number portability costs shall be allocated. 47 U.S.C. § 251(e)(2). MFS's language in the Joint Position Statement, at 36 and 37 is consistent with the FCC's cost recovery mechanism and is adopted.

I also adopt the MFS’s language on allocation of access charges in the Joint Position Statement, at 38. The FCC approach is reasonable and should be adopted.

INTERCONNECTION

Reciprocal Compensation

Telecommunications Act. A state commission shall not consider the terms and conditions for reciprocal compensation to be just and reasonable unless –" (i) such terms and conditions provide for the mutual reciprocal recovery by each carrier of costs associated with the transport and termination on each carrier’s network facilities of calls that originate on the network facilities of the other carrier; and (ii) such terms and conditions determine such costs on the basis of a reasonable approximation of the additional costs of terminating such calls." 47 U.S.C. § 252 (d)(2)(A). Arrangements that waive mutual recovery (such as bill and keep arrangements) are also allowable.

Parties’ Positions. The parties reached agreement on rates for reciprocal compensation. This dispute is over the rate element to apply. MFS asserts that, until a Commission-supervised cost study has been performed, this Commission must apply the FCC’s default proxy rates set forth in 47 U.S.C. §51.707. The proxy rate is the tandem rate.

The FCC does not require comparable switch functionality or cost structure, only a comparable geographic area. The MFS switch will serve customers served by the USWC Portland and Vancouver tandems and the GTE Beaverton tandem. It can serve customers in any wire center in the LATA through the purchase of unbundled transport and loops. As a result, MFS has additional costs that USWC does not face, such as very long loops, fiber rings and distributed processing.

Call termination rates should be symmetrical and based on USWC's tandem rate. If tandem rate treatment is not received for traffic terminated to MFS, the reciprocal, per minute rates should be $0.004 for end office termination and $0.006 for tandem termination, in reflection of the additional costs incurred by MFS.

USWC argues that MFS’s switch is not comparable to USWC’s tandem switch and therefore MFS is not entitled to symmetrical mutual compensation rates. The functions of the MFS switch are not similar to the USWC tandem switch, the costs are not symmetrical, and the geographic area served by the MFS switch is not comparable to the area served by the USWC switch. The MFS switch provides dial tone and end office switching, while a tandem switch connects trunk groups. The MFS switch will not fully serve all the customers within the geographic area. MFS confuses circumference with area. Further, MFS will not allow USWC to avoid the tandem charge by directly connecting to an MFS end office.

Arbitrator’s Decision. I adopt the MFS language applying the tandem rate to transport and termination rates. Joint Position Statement, at 12. I conclude that MFS’s switch qualifies for tandem rate treatment since it serves a geographic area at least as extensive as the USWC tandem switch. The tandem rate adopted in Order No. 96- 283 (UM 351, Phase II) is $0.003330 per minute. This rate will remain in effect, pending Commission approval of rates for unbundled elements in compliance with the revised cost methodology adopted in UM 773. Order No. 96-284.

Enhanced Service Providers

Parties’ Positions. USWC seeks to exempt from the reciprocal compensation agreement all traffic originated and terminated by enhanced service providers. USWC asserts that this traffic should be subject to access charges and that the FCC will address this issue in future proceedings. MFS notes that enhanced service provider (ESP) traffic is not now subject to access charges. MFS claims the traffic from ESP providers, such as internet providers, is truly local in nature. There is no basis for treating this traffic in a unique manner on the basis of its content.

Arbitrator’s Decision. I adopt the MFS proposed language in Joint Position Statement, at 12. There is no reason to depart from existing law or speculating what the FCC might ultimately conclude in a future proceeding.

Interconnection

Telecommunications Act. Every incumbent LEC has "[t]he duty to provide, for the facilities and equipment of any requesting telecommunications carrier, interconnection with the local exchange carrier’s network--(A) for the transmission and routing of telephone exchange service and exchange access; (B) at any technically feasible point within the carrier’s network; (C) that is at least equal in quality to that provided by the local exchange carrier to itself or to any subsidiary, affiliate, or any other party to which the carrier provides interconnection; and (D) on rates, terms, and conditions that are just, reasonable, and nondiscriminatory, in accordance with the terms and conditions of the agreement and the requirements of this section and section 252." 47 U.S.C. § 251(c)(2).

FCC Rules. An incumbent shall provide for interconnection at any technically feasible point within the incumbent LEC’s network including, at a minimum: (i) the line-side of a local switch; (ii) the trunk-side of a local switch; (iii) the trunk interconnection points for a tandem switch; (iv) central office cross-connect points; (v) out of band signaling transfer points necessary to exchange traffic at these points and access call-related databases; and (vi) the points of access to unbundled network elements as described in § 51.319. 47 C.F.R. § 51.305.

An incumbent LEC must accommodate two-way trunking requests where technically feasible FCC Order ¶ 219. An incumbent LEC has the burden of demonstrating the technical unfeasibility of a particular method of interconnection or access at any individual point. FCC Order ¶ 554.

Parties’ Positions. MFS asserts that USWC must make available "any method of technically feasible interconnection or access to unbundled elements at a particular point." (FCC Order ¶ 549). Interconnection at a particular point should be considered technically feasible if USWC currently provides, or has provided in the past, interconnection to any other carrier or customer at that point.

MFS should have the right to choose a desired point of interconnection unless USWC proves that significant and adverse impacts would result from the requested interconnection. FCC Order ¶ 203. As a compromise, MFS is willing to limit its choice of interconnection points by LATA. MFS's proposed language has been included in interconnection agreements with other LECs.

USWC argues that MFS should establish points of interconnection for local traffic within the associated USWC local calling area. The effect of MFS’s proposal is that USWC will have to deliver a local call to MFS in Portland for all local calls within the LATA. The MFS proposal will require USWC to transport a call the entire length of a LATA. This will result in inefficient networking and will impose unreasonable costs on USWC.

USWC asks that the Arbitrator limit the required points of interconnection to those set forth in FCC Order ¶ 212, which are: (1) the line-side of a local switch; (2) the trunk-side of a local switch; (3) the trunk interconnection point for a tandem switch; (4) central office cross-connect points; (5) out of band signaling transfer points; and (6) the points of access to unbundled elements.

USWC also asks that MFS be required to obtain separate trunk groups for non-USWC toll and local traffic. MFS opposes this request.

Arbitrator’s decision. I adopt the MFS proposed contract language. Joint Position Statement, at 7. The Telecommunications Act of 1996 requires that USWC interconnect at any technically feasible point. USWC objects to the MFS proposal based on network efficiency and cost. USWC’s concerns appear to be more a function of price and efficiency than technical feasibility. See FCC Order ¶ 209. MFS's proposal that USWC should interconnect at any point that USWC currently provides, or has provided interconnection in the past to any carrier is reasonable. If MFS chooses to interconnect at points where the cost is greater to USWC than the cost at other points it might have chosen, then MFS must bear the additional cost.

I do not adopt the USWC position that would require separate trunk groups for non-USWC toll and local traffic. USWC has not shown that such a configuration is required for any technical reason.

ARBITRATOR’S ORDER

IT IS ORDERED THAT:

 

MFS shall submit to USWC 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 MFS sign this contract.

Within five days of receipt of the contract from MFS, USWC shall return the contract to MFS with the signature of a person authorized by USWC to sign the contract. USWC shall also file a copy of the contract with the Commission.

 

The contract is effective immediately upon delivery of the signed agreement to USWC.

 

Dated this 8^th day of November, 1996, in Salem, Oregon.

 

________________________________

Thomas G. Barkin

Arbitrator

 

 

 

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