ORDER NO. 97-389

ENTERED OCT 03 1997

This is an electronic copy. Footnotes are not included.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

ARB 9

DISPOSITION: AGREEMENT APPROVED WITH CONDITIONS; PARTIES ALLOWED TO REQUEST DISPUTE RESOLUTION AFTER COMPLETION OF PROCEEDINGS BEFORE THE EIGHTH CIRCUIT

SUMMARY

In this order, the Commission reviews the submitted agreement and the briefs filed by the parties. We find that no changes to the proposed agreement are necessary at this time and the agreement shall go into effect immediately. However, we order MCImetro not to request any combined network elements other than those combinations of elements that already exist on GTE's network. In addition, MCImetro may not request that GTE provide a quality of service greater than that level which GTE provides for itself. The parties may request the Commission to modify the agreement to comply with the decisions of the Eighth Circuit in Iowa Utilities Board, after the Court completes its review of all pending petitions for reconsideration or rehearing. We conclude that the interconnection agreement, as limited in this order, comports with the requirements of the Act, the Federal Communications Commission rules where applicable, and relevant state laws and regulations, and should be approved.

BACKGROUND

On February 3, 1997, the Commission issued its order in MCImetro Petition for Arbitration with GTE, Order No. 97-038, adopting the arbitration decision issued by Arbitrator Thomas G. Barkin, with modifications. On May 30, 1997, the Commission issued Order 97-193, denying an application for reconsideration filed by MCImetro Transmission Services (MCImetro). On May 5, 1997, MCImetro served upon GTE Northwest Incorporated (GTE) an Interconnection Agreement based upon the Commission’s decision in Order No. 97-038. GTE declined to sign the interconnection agreement and filed a letter with the Commission, dated May 30, 1997, setting out its objections. On June 11, 1997, MCImetro filed a petition for adoption of the interconnection agreement.

On June 18, Arbitrator Thomas G. Barkin held a hearing on GTE’s objections to the interconnection agreement. GTE and MCImetro presented argument to the Arbitrator, who issued oral rulings on the disputed issues. The Arbitrator established a schedule that called for MCImetro to present GTE with an interconnection agreement conforming to his decisions and then to file it with the Commission. On June 23, 1997, MCImetro submitted a proposed interconnection agreement (proposed agreement) to GTE for consideration. On July 7, 1997, MCImetro filed the interconnection agreement with the Commission, signed by both parties.

On July 18, 1997, the United States Court of Appeals for the Eighth Circuit vacated portions of the Federal Communication Commission’s (FCC) First Report and Order and vacated a number of FCC rules. The FCC Report and Order and the accompanying rules specified terms and conditions for interconnection agreements between incumbent local exchange carriers, such as GTE, and competitive local exchange carriers, such as MCImetro. The parties withdrew the proposed agreement to allow for additional briefing on the impact of the Eighth Circuit decision. The parties filed additional briefs. On September 11, 1997, the parties resubmitted the proposed agreement to the Commission for review under §252 of the Act.

COMMISSION DISPOSITION

Standard of Review

The Act sets forth the following standard that the Commission must apply when reviewing interconnection agreements:

(2) GROUNDS FOR REJECTION.—The State commission may only reject—

an agreement (or any portion thereof) adopted by negotiation *** if it finds that—

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

the implementation of such agreement or portion is not consistent with the public interest, convenience, and necessity; or

an agreement (or any portion thereof) adopted by arbitration *** if it finds that the agreement does not meet the requirements of section 251, including the regulations prescribed by the Commission pursuant to section 251, or the standards set forth in subsection (d) of this section.

(3) PRESERVATION OF STATE AUTHORITY.—Notwithstanding paragraph (2), but subject to [the barriers to entry prohibitions in the Act], nothing in this section shall prohibit a State commission from establishing or enforcing other requirements of State law in its review of an agreement, including requiring compliance with intrastate telecommunications service quality standards or requirements.

47 U.S.C. §252(e)

Arbitrator’s Decisions at the June 18, 1997, Hearing

Order No. 97-038 directed the parties to develop a contract that conforms to our decisions in this case. The subsequent proceedings, including the June 18, 1997, hearing, clarified some of those decisions. We have examined the record, the Arbitrator’s decisions, and a transcript of the June 18, 1997, proceeding. We conclude that the Arbitrator’s decisions are an appropriate application of the decisions we made in Order No. 97-038. We discuss below some of the more significant issues.

GTE’s Claim that Certain Provisions Were Not Arbitrated. GTE argues that several provisions in MCImetro’s best and final offer contract and in the contract MCImetro has now submitted for approval were imposed by the Commission through the best and final order process. It claims these provisions were not arbitrated or agreed to and must therefore be excluded from the contract. GTE cites §§252(b)(1) and 252(b)(4)(a) in support of its position. Those sections require a party seeking arbitration to petition the state commission to arbitrate any "open issues." They limit consideration by the state to "the issues set forth in the petition and in the response, if any . . . ." GTE claims that the issues in question are not open issues and thus cannot be considered part of the arbitration. GTE cites decisions from other states declining to impose contract conditions that were not arbitrated.

The contract terms GTE claims were not arbitrated were in a contract incorporated in MCImetro’s petition for arbitration (this contract will be referred to as the Petition Contract). GTE did not mention them in its response to the petition for arbitration. Neither party presented evidence on these terms at the arbitration hearing. Following the arbitration hearing, MCImetro submitted a contract to GTE for consideration (this contract will be referred to as the Best and Final Offer or BFO). The BFO contained the terms in question, either exactly as they were in the Petition Contract or differing in insignificant ways from the wording of the Petition Contract. In his Arbitrator’s Decision, the Arbitrator adopted the BFO as the "base contract" for the proceeding. The Commission affirmed that decision in Order No. 97-038. The terms at issue now are those terms that were in both the Petition Contract and the BFO but that were not specifically litigated in the original arbitration proceeding.

GTE’s position is not persuasive for several reasons. First, GTE had ample notice that we intended to use the best and final offer process for concluding arbitrations. More than two months before MCImetro filed its petition initiating this proceeding, we adopted procedural guidelines for conducting arbitrations at a special public meeting, which GTE attended. Those guidelines direct the Arbitrator to choose between the final offers submitted by the parties. GTE's brief after the arbitration hearing in November acknowledges that it was aware of the Arbitrator’s intent to use the best and final offer process. GTE Brief, December 9, 1996, at 102-103.

Second, GTE also had notice at the outset of the proceeding of each provision that was adopted through the best and final offer process. The Petition Contract was incorporated in MCImetro’s petition to arbitrate. GTE had notice by that inclusion that MCImetro was proposing certain language, including the terms GTE now claims were not arbitrated. GTE could have explicitly acceded to the language on a particular term, thereby removing it from the arbitration. If it did not wish to accede, however, it had the choice of either presenting evidence and argument on the issue or simply ignoring it. If, as happened in this case, GTE chose to ignore certain proposed terms, MCImetro was not under an obligation to present evidence on them. MCImetro had no basis for assuming that GTE’s silence indicated disagreement and no way of determining the basis for GTE’s objection, if it had one. If we were to adopt GTE’s theory, MCImetro would have been obligated to present evidence on each and every issue contained in a lengthy contract, even though it had no knowledge of GTE’s objection to a particular term.

By failing to voice an objection to the MCImetro petition contract terms, GTE waived its right to challenge the terms in a later stage of the proceeding. The terms in question were properly before the Arbitrator. The Arbitrator was not required to accept the terms in dispute, but was obliged to consider whether the proposed terms are appropriate under our policies and the Act. The Arbitrator did so and concluded that they were. We agree and conclude that our decision to adopt MCImetro’s wording on these issues was correct.

Dispute Resolution. GTE argued that MCImetro’s proposed wording relating to dispute resolution is inconsistent with the Commission’s Order because it could allow a party to bypass the Commission and seek relief in another forum. As a result, a party could engage in "forum shopping" to seek a favorable resolution. The Arbitrator ruled that all disputes, service related or not, must go to the Commission first for attempted resolution. The Commission can then determine whether or not to consider the issue or send it to arbitration. We conclude that this ruling is consistent with our directive in Order No. 97-038 regarding dispute resolution and we affirm it.

Cost Recovery. The testimony and argument on several terms in the contract focused on recovery of costs incurred by a party performing an obligation under the contract. The Arbitrator noted that the contract has provisions for a bona fide request (BFR) process and for cost recovery. He affirmed that they apply to all instances where a party is required by the other party to incur significant costs in performance of the contract (such as removal of retired cable and provision of wavelength division multiplexing and need not be restated in each instance in the contract. We affirm the Arbitrator’s conclusion. It should be clear, however, that the BFR process does not apply for costs already covered by monthly and nonrecurring charges for unbundled network elements.

Aggregation. GTE objected to the contract provision relating to volume discounts. GTE claims that MCImetro's interpretation of the arbitration order would allow MCImetro to qualify for volume discounts in addition to the resale discount ordered by the Commission in Order No. 97-038. The Arbitrator clarified that the intent of the Order was not to allow MCImetro to "stack" the volume discount on top of the general wholesale discount. The proposed agreement conforms to our order.

Removal of Retired Cable. The Arbitrator properly ruled that requests by MCImetro for removal of retired cable would be subject to the general cost recovery provisions of the contract consistent with the cost causation concepts in Order No. 97-038.

Modifications Due to the Eighth Circuit Decision

GTE claims that the Eighth Circuit decision requires comprehensive rewriting of the agreement. Its analysis would require modification of the principal features of the agreement, including the specification of the network elements GTE is required to provide and the pricing of those elements. In addition, GTE asserts that numerous other provisions of the agreement must be modified to conform to the directives of the Eighth Circuit. In total, GTE insists that over 300 provisions of the agreement must be rewritten.

Pricing of Unbundled Network Elements and Resold Services. GTE's first attack is on the prices for unbundled network elements and resold services set forth in the proposed agreement. In Iowa Utilities Board, the Eighth Circuit vacated the FCC's pricing rules. GTE claims that the basis for the Court's decision stems from the responsibility in the Act for state commissions to establish prices that are not confiscatory. As a result, GTE claims that we must reexamine our orders regarding the resale discount and cost recovery for development of new facilities.

GTE also asserts that the Commission’s orders are tainted, because we followed the FCC's methodology for calculating resale discounts. In addition, GTE argues that the decisions respecting cost recovery for new facilities must also be modified because the Arbitrator referenced FCC rules that have now been vacated. GTE also claims that the Commission's decisions in Investigation into the Cost of Providing Telecommunications Services, UM 351, must be "reviewed to the extent that they may have in fact partaken of or agreed with the same forward-looking methodology used by the FCC." GTE Supp. Mem. at 5.

Furthermore, GTE claims that the Court's decision on service quality mandates a change to the Commission's pricing methodology. The Eighth Circuit concluded that the Act does not require ILECs to provide CLECs service superior to the service that ILECs provide to themselves. GTE claims that this portion of the Court's decision emphasizes the need for compensatory prices that will avoid a taking of property and makes clear that GTE must be compensated for the costs of its actual network. Because it is required to sell CLECs not an unbuilt superior network but its existing network, GTE reasons that its compensation must be determined by reference to its actual network and not to some other provider’s network that bears no relation to GTE's costs. GTE Supp. Mem. at 6.

GTE's arguments go far beyond the language of the Eighth Circuit decision. That decision relied exclusively on jurisdictional arguments to conclude that the FCC exceeded its authority when it mandated prices and pricing methodology for local intrastate telecommunications services that ILECs are legally obligated to provide to their new competitors. Iowa Utilities Board at 9-21. In fact, the Court expressly stated, at 21:

Having concluded that the FCC lacks jurisdiction to issue the pricing rules, we vacate the FCC's pricing rules on that ground alone and choose not to review these rules on their merits.

If anything, this decision reaffirms our plenary authority over pricing of local exchange services sold by ILECs to CLECs. We find no basis in GTE's arguments to support a reading that the Eighth Circuit has mandated a review of our pricing decisions.

As for the methodology for calculating resale rates, GTE misconstrues the Commission's position. The Arbitrator, and ultimately the Commission, analyzed the positions of MCImetro and GTE. The MCImetro position was based on the FCC methodology. We concluded that the MCImetro methodology is consistent with the conclusion that reasonably avoided costs should be included in the discount calculation and that the FCC reading of the law is more in keeping with the basic concepts underlying the statute. Order No. 97-038, Appendix A at 6-7. This analysis was based on independent evaluation of the evidence, not mere acceptance of the FCC rule. We reject GTE's claim that Iowa Utilities Board requires us to modify the pricing provisions of the proposed agreement.

Access to Unbundled Network Elements. For the most part, the Eighth Circuit upheld the FCC's interpretations of the Act regarding unbundled network elements. The Court determined that the FCC interpretation of technical feasibility was reasonable. However, the Court vacated the FCC's rule establishing a presumption that ILECs must provide an unbundled network element if it is technically feasible to do so. GTE argues that, as a result of the Court's decision, the agreement must be reexamined, given the possibility that the Commission made its unbundling decisions on the basis of the FCC's incorrect interpretation of the Act. GTE Supp. Mem. at 10.

There is no basis for concluding that the Commission ordered elements to be unbundled because of the presumption in the FCC's regulation. As MCImetro points out, GTE agreed to an initial list of unbundled network elements that it must provide to MCImetro. See Order No. 97-038 at 27. In addition, the Commission’s arbitration order, Order No. 97-038, adopted the conclusions found in two previous Commission orders that specified the network elements that GTE must unbundle. The first order relies upon state law for authority to unbundle a wide variety of network elements, including dark fiber. Order No. 96-188 at 10-13. Since this order predated the First Report and Order, a taint as alleged by GTE, is impossible. Furthermore, in Order No. 96-283, we supplemented the list of unbundled network elements to include the minimum list that the FCC adopted in 47 C.F.R. §51.319. Id. at 2-3. See also Order No. 97-071 at 6. The Eighth Circuit let this FCC regulation stand.

Combinations of Network Elements. Section 251(c)(3) of the Act requires GTE to "provide unbundled network elements in a manner that allows [competitors] to combine such network elements in order to provide telecommunications service." The Eighth Circuit affirmed the FCC's view that CLECs must be allowed under the Act to provide telecommunications services completely through access to unbundled network elements on the ILEC’s network. Iowa Utilities Board at 143.

Although the Court concluded that the "Act unambiguously indicates that requesting carriers will combine the unbundled elements themselves," Iowa Utilities Board at 24-25, the Court let stand an FCC rule that prohibits an ILEC from separating requested network elements that the ILEC currently combines. 47 C.F.R. §51.315(b). The Court struck down only those regulations that would have imposed on the ILECs the duty to "perform the functions necessary to combine unbundled network elements in any manner, even if those elements are not ordinarily combined" in the incumbent’s network. 47 C.F.R. §51.315(c)-(f). The dispute over §51.315(b) is still before the Eighth Circuit. On August 19, 1997, GTE and other ILECs filed a petition for rehearing to ask the Eighth Circuit to clarify, or in the alternative, to reconsider the portion of Iowa Utilities Board related to 47 C.F.R. §51.315(b).

MCImetro argues for a limited reading of the Eighth Circuit decision. MCImetro agrees that the decision relieves ILECs from the obligation to combine network elements at a CLEC’s request where those elements are not ordinarily combined by the ILEC. Other than that, MCImetro maintains that the Eighth Circuit decision retains the ILEC’s obligation to provide elements that are already combined on the ILEC’s network.

MCImetro states that the proposed agreement does not have to be modified at all. The proposed agreement now requires GTE to offer unbundled network elements separately or in combination. Proposed agreement, Art VI §2.4. In addition, the proposed agreement also provides that GTE shall provision unbundled network elements as combined by GTE unless MCImetro specifies that the network elements ordered in combination shall be provisioned separately. Proposed agreement, Art. VIII, §3.2.17.1-6. Although MCImetro takes issue with this part of the Eighth Circuit decision, it agrees not to request combinations of network elements that GTE does not combine for itself.

GTE argues that the Eighth Circuit decision imposes strict distinctions between the provision of a complete service through resale and the provision of service through a combination of unbundled network elements. GTE insists that the Court refused to require ILECs to prepackage and sell combinations of unbundled network elements, holding that the Act "unambiguously indicates that requesting carriers will combine the unbundled elements themselves." Iowa Utilities Board at 24-25.

Based upon this interpretation, GTE identifies several provisions of the proposed agreement that should be changed. In addition, GTE proposes that MCImetro be required to establish a collocation arrangement for the provision of services through the use of unbundled network elements.

The Commission concludes that no changes should be made to the proposed agreement at this time. The uncertain status of 47 C.F.R. §51.315(b) complicates the disposition of this issue. The provisions of the proposed agreement that refer to combinations of elements can be limited to combinations currently existing on GTE's network. As the law now stands, we have no discretion to ignore the FCC's regulation. Furthermore, MCImetro has agreed not to request combined elements that are not currently combined on GTE's network. With this proviso, we are satisfied that proposed agreement is consistent with the Eighth Circuit decision. The parties may ask the Commission to revisit this issue, after the Eighth Circuit issues a final decision on GTE's petition for rehearing on 47 C.F.R. §51.315(b).

Proprietary Network Elements. The Eighth Circuit upheld the FCC's order that ILECs may be required to provide access to network elements that are proprietary in nature. The Court found reasonable the FCC's definitions of the terms "necessary" and "impair," as those terms are used in the Act. GTE asks that the Commission require modifications to the proposed agreement adopting the FCC's definitions of "necessary" and "impair." We agree with MCImetro that the proposed agreement should not include legal standards. These standards can be applied by the parties, the Commission, and the courts when deciding what network elements GTE must provide. Those standards will apply regardless of whether they are incorporated into the contract. Furthermore, we are concerned about additional claims to incorporate other legal standards into the agreement. Such requests could be endless. We conclude it is unnecessary to reopen the contract to include these standards.

Superior Levels of Quality. The Eighth Circuit vacated the FCC's regulations requiring ILECs to provide CLECs interconnection, unbundled network elements, and access to such elements that are "superior in quality" to the level of quality the ILEC provides to itself. Iowa Utilities Board at 24. In addition, the Court endorsed the FCC's statement that "the obligations imposed by sections 251(c)(2) and 251(c)(3) include modifications to incumbent LEC facilities to the extent necessary to accommodate interconnection or access to network elements." Id.

GTE claims that the proposed agreement contains numerous technical, service ordering, unbundling, and interconnection requirements that may require GTE to provide a higher quality of service or develop new facilities and procedures. As a result, GTE argues that the proposed agreement must be revised to state that MCImetro will receive unbundled network elements, interconnection, and service in general at parity with what GTE provides itself. GTE identifies nearly 300 provisions of the proposed agreement that it claims must be revised or deleted.

GTE cites portions of the record in this proceeding to demonstrate that it has negotiated in good faith a contract that implements the requirements of the Act as expressed in the Arbitrator’s award and the Commission's decision. GTE quotes the following language from its post-hearing brief to show that its position was that, if portions of the FCC's rules were vacated, corresponding portions of the proposed agreement would need to be reformed:

GTE agrees with a number of the FCC's unstayed rules, but others will be subject to review in the 8^th Circuit appeal. Throughout this brief GTE notes its opinion of the lawfulness of various unstayed rules… . If such rules are overturned by the Court, then the agreement will need to be reformed accordingly. GTE Brief at 100.

MCImetro responds that the proposed agreement comports with the Eighth Circuit decision and does not have to be modified. In addition to the ILEC obligations noted above, MCImetro emphasizes that §251(c)(2)(D) of the Act requires the ILECs to provide access to the existing network on conditions that are just, reasonable, and nondiscriminatory. Taken together, these statutory requirements entitle MCImetro to request and receive a higher level of service quality under circumstances where the level of service provided by the ILEC is below that required by competitors to provide service to its end users in an effective and competitive manner. This result adheres even if the service quality offered by the ILEC is "equal" to that which it provides to itself.

MCImetro also argues that GTE agreed to most of the provisions that it claims must now be modified because they contain references to a superior quality of service. MCImetro asserts that of the approximately 279 provisions that GTE claims must be revised or deleted, all but 20 reflect agreed-upon language that GTE advocated including in the agreement. MCImetro claims that GTE waived the right to object to those provisions.

GTE responds that MCImetro has not met the standards for waiver as established in Oregon law. GTE states that Oregon courts will decline to enforce an illegal provision of a contract, even if the defense of illegality "may have been expressly waived" by the parties. GTE claims that it has not intentionally relinquished its objections to proposed terms that conflict with the Eighth Circuit decision. Id. at 4.

Commission Disposition. As the Eighth Circuit recognized, the Act requires ILECs to modify their facilities to the extent necessary to accommodate interconnection or access to network elements, but does not require ILECs to provide CLECs with service that is "superior in quality" to that which ILECs provide to themselves. These provisions must be read together with GTE's obligation under state law to provide adequate service and the legislative goal of Oregon "to secure and maintain high-quality universal telecommunications service at just and reasonable rate *** and to encourage innovation within the industry ***." ORS 759.035; 759.015. Thus, GTE must provide competitive entrants such as MCImetro with a level of service quality that will enable the entrant to compete effectively with the ILEC, even if the service quality provided by the ILEC to itself is inadequate.

We reject GTE's claim that it preserved its right to challenge stipulated provisions in the proposed agreement pending resolution of the Eighth Circuit decision. To begin with, the portion of the post-hearing brief cited by GTE is quoted out of context. The full passage shows that the contract modifications GTE mentions did not refer to the stipulations it had reached with MCImetro, but rather with contested provisions that the Arbitrator was called upon to resolve. In other words, while GTE acknowledges that arbitrated decisions might have to be revised as a result of the Eighth Circuit decision, it did not maintain that contract provisions previously negotiated by the parties would also have to be modified.

The record does not support GTE's claim that it did not intend that stipulations with MCImetro would be binding. For example, although GTE contends that the definition of Carrier Access Billing System (CABS) included in the contract must now be revised, the testimony and briefs submitted by GTE demonstrate that the parties were engaged in in-depth negotiations with the intention to adopt national operating protocols that would facilitate interconnection. Indeed, GTE’s post-hearing brief states:

Implementation teams from both GTE and MCI have been working over the past several weeks to develop mutually agreed upon processes that will enable GTE to provide the necessary billing and usage recording functions for MCI in a manner that is satisfactory to both companies. The terms and conditions applicable to such functions are being determined jointly, on an outgoing [sic] basis.

At the present time, the parties are negotiating a resolution of a number of business process issues.

There is no indication in the record that GTE negotiated with MCImetro on the CABS issue because it felt bound by an FCC regulation. Obviously, GTE could not have been negotiating pursuant to our directive, because we had yet not issued our order. Moreover, GTE showed no reluctance during the hearing process to advocate that the Commission reject FCC rules, when GTE felt it was in its interest to do so. Based on the evidence before us, it appears that GTE waived its right to object to CABS.

We reject GTE's claim that the Eighth Circuit rendered negotiated agreements such as the definition of CABS, illegal and unenforceable. To the contrary, the Eighth Circuit vacated FCC rules that governed agreements reached by compulsory arbitration under 47 U.S.C. §252(b) of the Act. Those provisions that were freely negotiated by GTE and MCImetro must be reviewed under the standard of review set forth in 47 U.S.C. §252(e)(2)(A). Under that provision, our ability to reject negotiated agreements requires a finding of discrimination or that the "agreement or portion is not consistent with the public interest, convenience, and necessity." We do not find that the negotiated portions of the GTE/MCImetro agreement violate these standards.

If we are called upon to review each of the nearly 300 provisions of the proposed agreement that GTE claims must be revised, we would be enmeshed in an proceeding that would go on for months. In the meantime, MCImetro would be unable to begin operations under the Act. Such a result would contravene Congress’s intent to expedite entry into the local exchange telecommunications market. A more appropriate approach is to approve this agreement with the proviso that MCImetro may not request that GTE provide it service superior to the service that GTE provides to itself. This condition is subject to the requirements of the Act that GTE must make changes to its network to accommodate interconnection and provide adequate service as required by state law. If GTE believes that a particular MCImetro service request violates this condition, it may seek dispute resolution under the terms of the interconnection agreement.

Pick and Choose. GTE argues that the Eighth Circuit's decision to vacate the FCC's "most favored nation" regulation requires that the most favored nations provision of the proposed agreement be revised. That provision requires GTE to make network elements available to MCImetro on the same terms and conditions as it provides the services to other CLECs. See Proposed agreement, Art. VI, 2.7.3.

We agree with MCImetro that the Eighth Circuit decision has no impact on the proposed agreement. Our Order No. 97-038 specified that GTE was not required to include a most favored nations clause in the proposed agreement. We stated:

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 MCImetro to incorporate into its contract a term from another CLECs contract that MCImetro deems preferable. Such a term discourages comprehensive contract negotiations, a result inconsistent with the purposes of the Act.

Id., Appendix A at 38.

Notwithstanding our decision, GTE negotiated the provision that it now challenges. Furthermore, GTE agreed to this provision while the FCC's "most favored nations" rule was stayed by the Eighth Circuit. This provision meets the requirements of 47 U.S.C. §252(e)(2)(A), the standard of review for negotiated agreements. We will not disturb this provision of the proposed agreement.

Dispute Resolution. GTE asserts that the dispute resolution provision of the proposed agreement must be modified to prohibit MCImetro from requesting the FCC to resolve a dispute arising under the contract pursuant to 47 U.S.C. §208. GTE cites the Eighth Circuit’s conclusion that the FCC does not have authority under §208 to enforce the terms of an interconnection agreement. MCImetro points out that the proposed agreement does not create jurisdiction with any body where none exists. The questioned provision states:

This provision shall not preclude the Parties from seeking relief available in any other forum except that all disputes must first be brought to the Commission.

Proposed agreement, Art. III, 41.1.

We conclude that the challenged provision does not offend the Eighth Circuit decision. It merely permits the parties to seek relief in other available forums after seeking resolution from this Commission. It cannot confer jurisdiction on the FCC or any other forum, if such jurisdiction does not exist.

Cost Recovery. GTE claims that the proposed agreement must be modified to include additional language specifying that GTE shall recoup the costs involved in providing interconnection and access to unbundled network elements from MCImetro. There is no reason to include this language. Order No. 97-038 is clear regarding MCImetro's obligation to pay for the facilities it uses. Id., Appendix A at 4-5.

Universal Service Charges. GTE claims that the effective date of the proposed agreement must be set so that GTE will only be required to meet its obligations at such time as the Commission has established, and MCImetro is complying with, a mechanism whereby universal service is ensured by an intrastate system of support. GTE asserts that this provision is required by Competitive Telecommunications Assoc. v. FCC, 1997 WL 352284, 1997 LEXIS 15398 (8^th Cir. 1997) (Comptel).

According to GTE, Comptel recognizes that the allowed charges on interstate minutes in the FCC's First Report and Order, ¶720, were not cost based, but allowed them to stand for a transitional period so that universal service would not be adversely affected while cost-based rates were established. GTE argues that the Court decision also means that state commissions must adopt an interim universal service funding mechanism to preserve existing intrastate subsidies. GTE claims that without explicit subsidies, it is alone responsible for supporting universal service in the territories in which it operates. GTE believes that as CLECs capture the sources of revenue contributions, GTE will be unable to sustain its obligation to preserve universal service. GTE also claims that the advent of competition will force it to relinquish margins on other services that permit it to provide the supported services. As a result, GTE asks the Commission to mandate an interim universal service charge and not to allow the proposed agreement to go into effect until MCImetro is complying with the requirement.

We decline to adopt GTE's proposal. Comptel does not mandate that state commissions adopt interim universal service charges. In fact, the Eighth Circuit is silent with respect to any requirements on state commissions. Furthermore, as GTE is aware, the Commission has an ongoing investigation, Universal Service, UM 731, to establish an intrastate universal service funding mechanism. GTE is actively participating in that docket. MCImetro's participation in the local exchange markets should not be delayed pending the outcome of that docket.

Finally, at its September 30, 1997, public meeting, the Commission adopted Staff’s recommendation that it open an investigation into GTE’s earnings, and GTE has agreed to file a general rate case in mid December 1997. If GTE believes that it needs additional revenues to meet its universal service obligations, it may include that request in its rate case filing.

CONCLUSION

We have evaluated this agreement under the standards set forth in 47 U.S.C. §252(e)(2) and (3). Based on the forgoing, we conclude that the proposed agreement should be approved, with conditions. Approving the proposed agreement will expedite MCImetro's entry into the local exchange market with little prejudice to GTE. With the conditions adopted here, we avoid the need to engage in a protracted proceeding while the appeal of the FCC regulations continues before the Eighth Circuit. As we have demonstrated above, the process for evaluating each provision cited by GTE could be arduous with no assurance that GTE will ultimately prevail. MCImetro should not be denied entry while the final nuances are hammered out. Finally, the conditions set forth below will ensure that the implementation of the agreement will conform to Iowa Utilities Board.

ORDER

IT IS ORDERED that the Interconnection Agreement filed by MCImetro on July 7, 1997, is approved, effective upon the issuance of this Order, with the following conditions:

1. MCImetro shall not request that GTE provide combined network elements other than the combinations of elements that currently exist on GTE's network.

2. MCImetro shall not request that GTE provide services superior in quality to the services it provides to itself, except that:

GTE shall provide MCImetro with changes to its network necessary to accommodate interconnection; and

GTE shall provide MCImetro unbundled network elements and resale services of adequate quality to enable MCImetro to provide a high-quality telecommunications service.

Made, entered, and effective ________________________.

A party may appeal this order pursuant to applicable law.