ENTERED NOV 13 1998

This is an electronic copy.

OF OREGON

ARB 9

DISPOSITION: CONTRACT TO BE MODIFIED

PROCEDURAL HISTORY

On February 3, 1997, the Commission issued Order No. 97-038. That order resolved a myriad of disputed issues presented to us in a request for arbitration under Section 252 of the Telecommunications Act of 1996 (Act). The order relied in large part on the regulations issued by the Federal Communications Commission (FCC) implementing the Act.

On July 7, 1997, MCImetro Access Transmission Services (MCImetro) and GTE Northwest Incorporated (GTE) submitted an interconnection agreement for Commission approval in compliance with Order No. 97-038. On July 18, 1997, the United States Court of Appeals for the Eighth Circuit issued Iowa Utilities Board. v. FCC. That decision vacated a number of provisions of the FCC order upon which we relied in Order No. 97-038.

In order to bring the interconnection agreement into compliance with Iowa Utilities Board, GTE filed its Supplemental Memorandum on August 5, 1997. GTE asks the Commission to prohibit MCImetro from requesting GTE to combine unbundled network elements or provide service superior in quality to the service that GTE provides to itself. GTE identified approximately 300 provisions of the interconnection agreement that it claims must be modified or deleted to comply with the Act. On October 3, 1997, the Commission issued Order No. 97-389 approving the interconnection agreement but retaining authority to re-examine the agreement after the Eighth Circuit completed its "review of all pending petitions for reconsideration or rehearing." Id. at 1. On October 14, 1997, the Eighth Circuit amended its decision. Iowa Utilities Board at 820.

On January 7, 1998, GTE filed a petition requesting this Commission to revise Order No. 97-389. GTE asserts that the interconnection agreement must be modified or that implementation of the disputed provisions must be delayed. On January 30, 1998, MCImetro responded claiming that GTE's petition was premature and that GTE was obligated to combine network elements and provide superior quality service by contract and by Oregon law. At the request of the parties, the petition was held in abeyance.

On August 5, 1998, Administrative Law Judge Thomas G. Barkin issued a memorandum setting a schedule for further briefing. On August 28, 1998, GTE filed a response reasserting that the interconnection agreement must be reformed. On September 17, 1998, MCImetro responded. On October 20, 1998, GTE and MCImetro presented a joint document setting forth separate proposed stipulated facts and arguments on whether GTE waived its right to contest certain provisions of the interconnection agreement (Joint Document).

Issues Raised by GTE that Were Disposed of in Order No. 97-389

In its Supplemental Memorandum, GTE argues that, as a result of the Eighth Circuit decision, the interconnection agreement must be reformed. In Order No. 97-389, we disposed of four of the issues raised by GTE. We reaffirm, without discussion, our decisions on the following issues:

We rejected GTE’s claim that the Eighth Circuit decision requires that prices in the interconnection agreement must not be confiscatory and must be based on GTE's actual costs. Id. at 6-7.

We rejected GTE's claim that the interconnection agreement should include the legal standards for unbundling network elements. Id. at 10.

We rejected GTE's claim that the "most favored nations" clause in the interconnection agreement should be stricken. Id. at 13-14.

We rejected GTE’s claim that the Eighth Circuit decision requires that interconnection agreements cannot be effective until an intrastate universal system is established. Id. at 14-15.

Outstanding Issues

In this order, we address two issues that remain from Order No. 97-389: (1) whether GTE must provide combinations of unbundled network elements; and (2) whether GTE is required to provide service superior to that which it provides itself.

Commission Decision

MCImetro and GTE shall remove all provisions in the July 7, 1997, interconnection agreement that require GTE to combine network elements on behalf of MCImetro or which prohibit GTE from separating network elements that GTE currently combines. If the United States Supreme Court issues a decision in Iowa Utilities Board that is inconsistent with this conclusion, the parties may petition to revise the agreement.

Discussion

GTE asks the Commission to remove the requirement that GTE must combine network elements on behalf of MCImetro. As we noted in Order No. 97-389 at 8, the Eighth Circuit concluded that the Act "unambiguously indicates that requesting carriers will combine the [unbundled network elements] themselves." Quoting Iowa Utilities Board at 813. We deferred ruling on GTE’s earlier request to remove these provisions pending the Eighth Circuit's resolution of a petition for rehearing on FCC regulation, 47 C.F.R. §315(b). This provision prohibited GTE from separating network elements that were combined on its network.

On October 14, 1997, the Eighth Circuit vacated the regulation. This ruling eliminated any remaining questions regarding the Eighth Circuit's view that the Act does not require incumbent local exchange carriers to combine network elements on behalf of competitors.

MCImetro acknowledges that the Eighth Circuit found the Act does not require GTE to combine network elements for MCImetro. MCImetro asserts, however, that the Eighth Circuit decision does not preempt state commissions from requiring incumbent local exchange carriers to combine network elements for competitors under their state law authority.

 We considered this issue, at length, in Order No. 98-444, where we stated:

The Commission does not believe that it is preempted by the Eighth Circuit's holding that ILECs cannot be required under the Act to combine network elements. Nevertheless, to avoid conflict with that holding while it is being reviewed by the United States Supreme Court, the Commission reluctantly adopts (unbundled network element) access arrangements that are consistent with the Eighth Circuit's holding. Id. at 13

In this proceeding, we are limited to arbitrating the terms of the interconnection agreement that is the subject of this docket. Consistent with our holding in Order No. 98-444, we decline to require GTE to combine unbundled network elements. As a result, the interconnection agreement must be modified to remove provisions requiring that GTE combine network elements on behalf of MCImetro. In addition, we also follow the decision of the Eighth Circuit to allow GTE to separate network elements that it currently combines.

As we noted earlier, Iowa Utilities Board is on appeal to the United States Supreme Court. Should the Supreme Court overturn Iowa Utilities Board on the combination issue, the parties may ask us to reconsider this order.

Commission Decision

MCImetro and GTE shall remove from the interconnection agreement all provisions actually requiring superior quality service, except those provisions which the parties agreed to at the time GTE submitted its December 9, 1996, last best offer.

Discussion

GTE claims that the Eighth Circuit’s decision in Iowa Utilities Board require modification of the interconnection agreement. It asserts that we must order removal of all provisions requiring GTE to provide MCImetro interconnection, unbundled network elements, or access to unbundled network elements at superior levels of quality to that which GTE provides to itself. According to MCImetro, GTE is asking the Commission to remove or modify 270 provisions of the interconnection agreement.

GTE asks the Commission to take one of three courses of action: (a) reject the disputed provisions as inconsistent with controlling law; (b) place a provision in the July 7, 1997, interconnection agreement stating that GTE does not have to provide superior quality service; or (c) adopt the approach on superior quality that the parties have agreed upon in their national negotiations.

MCImetro’s assertion that the claim is not substantiated: MCImetro raises three arguments why the interconnection agreement should not be modified. First, it contends that GTE has not substantiated its claim that specific provisions of the agreement require it to provide superior quality service. It notes that GTE has not explained why the cited provisions violate the Eighth Circuit decision. According to MCImetro, some of the challenged provisions only require GTE to provide a level of service equal to that which GTE provides to itself. MCImetro lists, as examples, seven provisions, cited by GTE as requiring modification, that do not require superior quality service. The examples are listed in Appendix A.

We agree with MCImetro that GTE has not substantiated its claim. On its face, GTE's list of 270 provisions does not provide enough information for us to form a judgment on which ones actually require superior quality service. Furthermore, MCImetro’s list of examples supports the claim that some of the questioned provisions do not require superior quality service. These provisions paraphrase the Act’s requirement that incumbent local exchange carriers provide service at least equal in quality to that provided by the local exchange carrier to itself.

MCImetro’s assertion that the right to challenge certain provisions was waived: We further agree with MCImetro that GTE waived its right to contest certain provisions in the interconnection agreement. The record demonstrates that GTE and MCImetro agreed to language and principles that were incorporated into the proposed interconnection agreements submitted with the parties’ last best offers in the arbitration proceeding. According to GTE's representations in its briefs, its testimony at the arbitration hearings, and other filings, these agreements were freely negotiated.

We discussed this issue in Order No. 97-389 at 11-13. Two additional items confirm our earlier conclusion. The first is GTE’s accusation that MCImetro was negotiating in bad faith when MCImetro inadvertently submitted the wrong contract language in its last best offer filing on December 9, 1996. On that date, the parties filed their last best offers to the Commission in the form of complete contracts. In this process, MCImetro mistakenly included contract language that was at variance with agreed-to and signed stipulations reached by the parties during their negotiations. On January 13, 1997, GTE expressed its displeasure and pointed out the importance of adhering to stipulations. MCImetro restored the omitted provisions on January 21, 1997.

Second, GTE made no reservations in its December 9, 1996, brief. In fact, GTE's brief states:

… the issues to be resolved by the arbitrator are only those set forth in the petition and response, which have not been resolved by the parties by the time the matter is submitted to the arbitrator for decision. Section 252(b)(4)(A), (C)[.]

A footnote following that language adds, "In fact, the parties are free to negotiate agreements on issues at any time, subject to the requirement to submit their agreements or amendments to prior agreements to the Commission[.]" Id. at fn. 32.

GTE's insertion of its reservation in the July 7, 1997, interconnection agreement does not rescind its representations to us in December 1996 that it had reached agreement with MCImetro on a number of issues in the proceeding. GTE and MCImetro submitted those negotiated provisions to us for approval under Section 252 of the Act. We reviewed those provisions and approved them. That is the end of the matter unless both parties come to us and ask to have the provisions modified. As the arbitrator stated in his recommendation to us:

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. Throughout the briefs and matrix, counsel represented that agreements had been reached. Unless specifically requested, I have not made a decision on the merits of an issue or on contract language necessary to implement an agreement. Furthermore, I am accepting representations of counsel that particular issues are resolved.

In many instances, I have adopted MCImetro proposed contract language on issues where GTE stated that the issues were resolved. I adopted that language with the understanding that the parties may wish to make additional changes to reconcile the MCImetro proposed language with the terms of the stipulation.

Although we agree with MCImetro that GTE agreed to certain provisions of the interconnection agreement, we reject MCImetro's claim that we should rely on a negotiating document as evidence showing which provisions GTE agreed to. First, we did not approve that document. Second, as GTE points out, it did not sign the April 10, 1997, document. Third, our arbitration order followed the FCC rule by requiring GTE to provide services that are superior in quality to that which it provides itself. Order No. 97-038. As a result, there are legitimate questions as to whether GTE agreed to the terms in the April 10, 1997, negotiating document in the give and take of negotiation or as a result of our order. Rather than rely on negotiating documents developed in the course of negotiations, we rely on the representations that the parties have made to us.

MCImetro’s assertion that certain provisions are required by state law: Finally, we reject MCImetro’s claim that the challenged provisions can be justified under state law that requires GTE to provide competitive local exchange carriers with a level of service quality that will enable them to compete effectively. As we made clear in Order No. 97-389 at 11, our decision on this issue is tied to the requirements in state law that GTE must provide adequate service (ORS 759.035) and our obligation to promote innovation in the telecommunications industry (ORS 759.015).

Under some circumstances, a particular provision requiring superior quality service may be necessary for MCImetro to compete effectively. However, we cannot agree that every provision in the agreement that might require superior quality service is necessary for MCImetro to compete effectively or that GTE is violating state law by failing to provide adequate service. If MCImetro believes that a particular service failure by GTE violates state law, it must bring the matter to us through the dispute resolution process in the contract.

Conclusion

We conclude that the provisions of the interconnection agreement requiring superior quality service must be removed, except those provisions agreed to by the parties at the time GTE filed its last best offer on December 9, 1996. Unfortunately, the state of the record makes it difficult for us to specify which provisions of the interconnection agreement must be modified. We would have to engage in a provision-by-provision analysis of the last best offers, the 270 challenged provisions, and the July 7, 1997, interconnection agreement to determine which provisions should be excised. The parties are in a better position to review the record and make the proper changes.

Finally, we also conclude that GTE may not require removal of a provision unless it actually requires superior quality service. If the parties are unable to agree on whether a particular provision based on the "at least equal in quality" standard actually requires superior quality service, the provision should remain in the interconnection agreement. As we concluded above, GTE failed to substantiate which provisions violate the Eighth Circuit decision.

 ORDER

IT IS ORDERED that:

1.  Our decisions in Order No. 97-389 are affirmed, except as modified in this order.

2.  MCImetro and GTE shall remove all provisions in the July 7, 1997, interconnection agreement that require GTE to combine network elements on behalf of MCImetro or which prohibit GTE from separating network elements that GTE currently combines.

3.  MCImetro and GTE shall remove from the July 7, 1997, interconnection agreement all provisions actually requiring superior quality service, except those provisions that the parties agreed to at the time GTE submitted its December 9, 1996, last best offer.

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 of 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. A party may appeal this order to a court pursuant to ORS 756.580.

APPENDIX A

Art. III, §21.7 With respect to Local Resale, order entry, provisioning, installation, trouble resolution, maintenance, subscriber care, billing, and service quality will be provided at least as expeditiously as GTE provides for itself and GTE will provide such services to MCIm in a competitively neutral fashion and at a level of quality which allows MCIm in turn to provide Local Resale at a level of quality equal to the level of quality GTE provides for itself.

Art. IV, §4.3.5 Reciprocal traffic exchange arrangement trunk connections shall be made at a DS-1, multiple DS-1 level, DS-3 or SONET where technically available.

Art. V, §1.4 GTE will provide MCIm with at least the capability to provide an MCIm subscriber at least the same level of service quality as GTE provides its own subscribers with respect to all Telecommunications Services and shall provide such capability in accordance with the specific requirements of Article VIII.

Art. VI, §3.1 Each Network Element shall be furnished at a service level equal to or better than the requirements set forth in the technical references referenced in the following, as well as any performance or other requirements, identified herein. In the event Bell Communications Research, Inc. ("Bellcore"), or industry standard (e.g., America National Standards Institute ("ANSI") technical reference or a more recent version of such reference sets forth a different requirement, MCIm may elect, through the BFR process, that such standard shall apply.

Art. VI, §3.4 Each Network Element and the connections between Network Elements provided by GTE to MCIm shall be made available to MCIm on the same priority basis that GTE provides to itself. GTE’s own subscribers, to a GTE Affiliate or to any other entity.

Art. VI, §4.4.1 The Network Interface Device shall provide a clean, accessible point of connection for the inside wiring and for the Distribution Media and/or cross connect to MCIm’s NID and shall maintain a connection to ground that meets the requirements set forth below.

Art. VI, §4.5.1 The NID shall be the interface to subscribers’ premises wiring for all loop technologies.