ORDER NO. 97-343

ENTERED SEP 5, 1997

This is an electronic copy

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

ARB 26

DISPOSITION: AGREEMENT APPROVED

The Agreement. On June 27, 1997, U S WEST Communications, Inc. (USWC), and GTE Northwest Incorporated (GTE) filed an Exchange Carrier Services Local Interconnection Agreement with the Public Utility Commission of Oregon (Commission). The parties seek approval of the agreement under Section 252(e) of the Telecommunications Act of 1996 (the Act).

Under the Act, the Commission must approve or reject an agreement reached through voluntary negotiation within 90 days of filing. The Commission may reject an agreement only if it finds that:

(1) the agreement (or portion thereof) discriminates against a telecommunications carrier not a party to the agreement; or

(2) the implementation of such agreement or portion is not consistent with the public interest, convenience, and necessity.

The Commission provided notice of the request for approval and an opportunity to comment to a list of persons who have participated in arbitrations under the Act. Comments were filed by Commission Staff.

Staff’s Comments. Staff recommended approval of the agreement, even though the agreement deviates from Commission policies regarding cost recovery for extended area service (EAS). Commission policy favors bill and keep arrangement among utilities and cooperatives for EAS. The GTE/USWC agreement replaces bill and keep with mutual compensation between the parties in certain circumstances.

Staff does not believe that simple deviation from Commission policy in a voluntary agreement is inconsistent with the public interest, convenience, and necessity. The Commission may view approval of a voluntary interconnection agreement as a kind of waiver or variance from its existing policy. Staff notes that the Commission could reasonably decide to disapprove the agreement if we concluded that consumers would be adversely affected by the waiver. Staff has identified no adverse effect on consumers and therefore recommends granting a waiver of the existing EAS cost recovery requirements to GTE and USWC by approving the filed agreement.

The Commission adopted its existing EAS cost recovery policy in Order No. 89-815. In that order, the Commission determined that telecommunications utilities and cooperatives should use bill and keep to recover costs associated with transporting and switching EAS calls. Where two or more utilities or cooperatives are involved in completing EAS calls, each utility or cooperative is to recover its own costs by billing its own customers. In other words, the Commission determined that there should be no compensation between carriers for handling EAS traffic.

In Order No. 96-021, the Commission determined that bill and keep arrangements for local traffic, including EAS, should extend on an interim basis to competitive providers of local services. The Commission limited bill and keep for competitive local service providers to a two-year period, ending in January 1998. In the same order, the Commission established an Industry Interconnection Compensation Work Group to address interconnection compensation issues and to formulate proposals for implementing a reciprocal interconnection rate structure applicable to all switched telecommunications traffic. At its August 26, 1997, public meeting, the Commission adopted Staff’s recommendation to disband the work group. Therefore, unless the Commission extends the bill and keep arrangement, carriers will have to negotiate their own interconnection compensation arrangements after January 1998.

In their voluntary agreement, GTE and USWC no longer rely strictly on bill and keep. The parties have agreed to a mutual compensation arrangement for EAS traffic, except that GTE and USWC will continue to use bill and keep when traffic between their end users is roughly in balance. The parties agree that they will not compensate each other for EAS switching and transport until one party experiences an imbalance of terminating to originating traffic of at least 60 percent terminating to 40 percent originating. In the case of traffic that originates from one party’s end user (e.g., GTE) and then transits to the other party (USWC) for termination to a third party’s network, GTE and USWC have agreed that the originating party will compensate the transiting party for "each minute of originating tandem switched traffic which terminates to a third party (e.g., third party LEC, ILEC, or CMRS)." See Paragraph 4.4.

Appendix A to the GTE/USWC agreement sets forth the compensation rates that each party will charge the other for handling EAS traffic. Rates for USWC are set forth at Appendix A-1, while rates for GTE are set forth at Appendix A-2. The rates apply only to traffic between USWC and GTE and do not have general applicability to other telecommunications service providers. The rates in the agreement differ from the rates the Commission has adopted in dockets UM 351 and UM 844 for the same switching and transport functions. However, the agreement acknowledges that the Commission has authority to change the compensation rates set forth in Appendix A. The language shown below appears at Appendix A-1 for USWC. With the exception of the reference to Appendix A-1, the same language appears at Appendix A-2 for GTE.

The rates contained in this Appendix A-1 are subject to change resulting from future Commission or other proceedings, including, but not limited to, generic proceedings to determine the Parties’ unrecovered costs (e.g., historic costs, contribution, undepreciated reserve efficiency [sic], or similar unrecovered costs of the parties), the establishment of a competitively neutral universal service system, or any appeal or other litigation.

Staff concluded that the agreement does not appear to discriminate against telecommunications carriers who are not parties to the agreement. Staff also concluded that implementation of the agreement does not appear to be inconsistent with the public interest, convenience, and necessity.

Staff recommends that the Commission approve the filed agreement between GTE and USWC. By giving its approval, the Commission would be granting GTE and USWC a waiver from existing Commission policy regarding cost recovery for EAS service in the Portland metropolitan area and vicinity. The waiver would be limited to local traffic between GTE end users and USWC end users, as well as transit traffic that originates from GTE or USWC end users, transits the other party’s tandem switch, and then terminates to a third party. The filed agreement does not govern local traffic arrangements for other telecommunications service providers not subject to the agreement. The parties acknowledge in Appendix A that the Commission may change the rates that GTE and USWC incorporated in the filed agreement.

OPINION

The Commission has reviewed the agreement and the comments. We conclude that there is no basis under the Act to reject the agreement. No participant in the proceeding has requested that the agreement be rejected or has presented any reason for rejection. We conclude that the agreement should be approved, with the following caveats:

The waiver from existing Commission policy regarding cost recovery for EAS service in the Portland metropolitan area and vicinity is limited to local traffic between GTE end users and USWC end users, as well as transit traffic that originates from GTE or USWC end users, transits the other party’s tandem switch, and then terminates to a third party.

The filed agreement does not govern local traffic arrangements for other telecommunications service providers not subject to the agreement.

The Commission may change the rates that GTE and USWC incorporated in the filed agreement.

CONCLUSIONS

1. There is no basis for finding that the agreement discriminates against any telecommunications carrier not a party to the agreement.

2. There is no basis for finding that implementation of the agreement is not consistent with the public interest, convenience, and necessity.

3. The agreement should be approved.

ORDER

IT IS ORDERED that the agreement between U S WEST Communications, Inc., and GTE Northwest Incorporated is approved, subject to the caveats listed in the Opinion section of this order.

Made, entered, and effective ________________________. 

A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A request for rehearing or reconsideration must be filed with the Commission within 60 days of the date of service of this order. The request must comply with the requirements in OAR 860-014-0095. A copy of any such request must also be served on each party to the proceeding as provided by OAR 860-013-0070(2). A party may appeal this order to a court pursuant to applicable law.