ORDER NO. 98-508

ENTERED DEC 8 1998

This is an electronic copy. Appendices and footnotes may not be included.

OF OREGON

ARB 5

Introduction

On January 13, 1997, the Public Utility Commission of Oregon (Commission) entered Order No. 97-021, adopting, with minor modifications, the arbitrator’s decision issued in this matter. On April 23, 1997, the Commission entered Order No. 97-149, granting limited reconsideration, and requiring AT&T Communications of the Pacific Northwest, Inc. (AT&T) and GTE Northwest Incorporated (GTE) to file an executed interconnection agreement consistent with the terms of that order.

Subsequent to the Commission’s orders, GTE and AT&T spent several months negotiating specific contract language to be included in the interconnection agreement. Notwithstanding these efforts, several issues remain to be resolved. GTE and AT&T request that the Commission resolve these disputes. The disputes arise, in part, from differing interpretations of decisions made by the United States Court of Appeals for the Eighth Circuit in Iowa Utilities Board v. FCC, 120 F.3d 753 (8^th Cir. 1997) (Iowa Utils. Bd.) and Competitive Telecomm Ass’n v. FCC, 117 F.3d 1068 (8^th Cir. 1997) (Comptel).

The disputed contract language is set forth below in boxed sections. Contract language shown in plain text is not disputed by either party. Language proposed by GTE to which AT&T disagrees appears in double underlined text. Language proposed by AT&T to which GTE disagrees is shown in bold text.

Main Agreement, Section 23.8

Regulatory Agency Control - This Agreement shall at all times be subject to changes, modifications, orders, and rulings by the FCC and/or the applicable state utility regulatory commission to the extent the substance of this Agreement is or becomes subject to the jurisdiction of such agency. This Agreement is subject to approval of the Board in accordance with Section 252 of the Act. This Agreement shall not become effective until five (5) Business Days after receipt by the Parties of written notice of such approval; provided, however, that this Agreement shall not become effective until such time as the Commission has (1) put in place a mechanism to provide GTE the opportunity to recover its historic costs, and (2) established a universal service system that is competitively neutral. "Business Day" shall mean Monday through Friday, except for holidays on which the U. S. Mail is not delivered.

GTE Position. GTE states that the proposed language for Section 23.8 acknowledges that appropriate cost recovery mechanisms are not yet in place to accommodate an agreement of this magnitude. It contends that the interconnection agreement should not take effect until such mechanisms are in place.

AT&T Position. AT&T claims that the language proposed by GTE would reduce the interconnection agreement to a "meaningless intellectual exercise," because the agreement would be conditioned upon GTE’s recovery of stranded costs, as well as profits or losses occurring as a result of competition under the Telecommunications Act of 1996 (the Act). AT&T states that a federal court has held that such costs are not recoverable as a matter of law. It further maintains that the Commission already rejected this argument in the GTE/MCImetro arbitration. See Order No. 97-389 at 15.

AT&T also asserts that GTE’s proposal is beyond the scope of this proceeding. It emphasizes that the FCC has prescribed a method to fund the provision of universal service and that the Commission has an ongoing universal service proceeding in docket UM 731. It also states that GTE’s concerns regarding revenue sufficiency were addressed in docket UT 141, a general rate proceeding.

Commission Decision – Main Agreement, Section 23.8. The Commission finds that the contract language proposed by GTE for Section 23.8 should be deleted from the interconnection agreement. The mechanisms necessary to enable GTE to recover its historic or embedded costs are already in place. As we have emphasized in a number of recent decisions, GTE’s status as a regulated utility allows it to seek rate relief if it believes that it does not have a reasonable opportunity to earn a fair rate of return. In fact, the Commission just concluded a general rate case proceeding for GTE, approving a stipulated $25 million annual rate reduction for that company. See Order No. 98-388, entered September 28, 1998.

We also disagree with GTE’s position that a universal service mechanism must be in place before the interconnection agreement with AT&T may take effect. In Order No. 97-389, we rejected a similar argument by GTE regarding its interconnection contract with MCImetro Transmission Services. Furthermore, as AT&T points out, the Commission has an ongoing investigation to establish a universal service funding mechanism in OPUC docket UM 731. GTE is an active participant in that docket.

GTE Position. GTE does not agree to include "Unused Transmission Media" (e.g., dark fiber) in the list of unbundled network elements that it must provide. It states that the arbitrator did not apply the correct standard in concluding that unused transmission media should be unbundled, because the ‘technical feasibility" standard prescribed by the FCC in 47 CFR §51.317 was subsequently vacated in Iowa Utils. Bd. GTE states that the legal standard articulated by the Eighth Circuit requires AT&T to show that the failure to provide access to unused transmission media will "impair" AT&T’s ability to provide the services it seeks to offer.

GTE claims that AT&T has not demonstrated that lack of access to unused transmission media will impair AT&T’s ability to provide service. GTE asserts that any such showing would be flawed in any case, because AT&T can already purchase common or dedicated transport from GTE on an unbundled basis.

If the Commission concludes that unused transmission media should be made available as a network element to AT&T, GTE recommends that the Commission adopt GTE’s proposed language in Attachment 2, Sections 14.2.6 and 14.2.7. Those sections provide:

Attachment 2, Section 14.2.6

In leasing loop feeder dark fiber and dedicated interoffice dark fiber to AT&T, GTE will allocate its dark fiber capacity among requesting CLECs on a first-come, first-served basis and in a competitively neutral manner. GTE lease agreements for such fiber may provide that they are revocable upon twelve months' notice by GTE, provided that, in order to exercise its right of revocation, GTE must demonstrate that the subject fiber is needed to meet GTE's bandwidth requirements or the bandwidth requirements of another LSP. In addition, if GTE can demonstrate within a twelve month period after the date of a dark fiber lease that AT&T is using the leased capacity at a transmission level less than OC-12 (622.08 million bits per second), GTE may revoke the lease agreement. Whenever GTE revokes a dark fiber lease agreement under this section 14.2.6, it will provide AT&T a reasonable and sufficient alternative means of transporting the traffic.

Attachment 2, Section 14.2.7

GTE is not required to make available for lease by AT&T more than twenty-five percent (25%) of its Unused Transmission Media or dark fiber capacity in a particular feeder or dedicated interoffice transport segment.

GTE claims that the language in sections 14.2.6 and 14.2.7 of Attachment 2 prevent AT&T from stockpiling transmission media by giving GTE a right to reclaim transmission media that AT&T does not use efficiently and by limiting AT&T’s purchases to 25 percent of the unused media available. GTE asserts that these provisions are consistent with the Arbitrator’s ruling that "GTE should have full control over AT&T connections to dark fiber."

AT&T Position. AT&T argues that GTE’s concerns regarding dark fiber are unfounded. With respect to GTE’s claim that the incorrect legal standard was applied, AT&T emphasizes that the arbitrator’s decision to unbundle dark fiber was based on OPUC decisions issued prior to the FCC regulations in the First Report and Order. See Order Nos. 96-188 at 10-13, 40-41, 97-389 at 8. That being the case, AT&T contends that the "taint" perceived by GTE cannot exist. AT&T further maintains that evidence produced during the arbitration hearing demonstrates that its service will be impaired unless dark fiber is unbundled.

Commission Decision – Main Agreement, Section 32.9; Attachment 2, Sections 14.2.6 and 14.2.7. GTE correctly states that the Eighth Circuit vacated the FCC’s rule establishing a presumption that the ILECs must provide an unbundled network element if it is "technically feasible" to do so. The Court also held that §251(d)(2) sets forth the standards that must be considered in determining which network elements must be made available to competing carriers. That subsection requires consideration of (a) whether the element is proprietary in nature and (b) whether failure to provide access to the element will impair the services the requesting carrier seeks to provide. Since GTE acknowledges that unused transmission media is not a proprietary element, the applicable standard is whether AT&T’s proposed services will be impaired by the inability to purchase unused transmission media.

Because the arbitration hearing in this case was held before the Iowa Utils. Bd. decision was issued, AT&T was not on notice that it would have to show "impairment" in order to obtain access to unused transmission media. As noted above, the FCC rule in effect at the time only required a showing of technical feasibility to create a presumption in favor of unbundling. Notwithstanding this fact, there is sufficient evidence in the record to support a finding that failure to provide unused transmission media will adversely impact both the cost and quality of AT&T’s service. AT&T witness Lynott testified that unbundling dark fiber is important to AT&T and its customers because:

[T]here are no limitations (other than the electronics used to terminate the fiber) on the bandwidth and types of services (e.g., Interactive and Broadcast Video, Distance Learning, Asynchronous Transfer Mode (ATM), Frame Relay (FR), Integrated Services Digital Network (ISDN), Digital Data Services (DS1, DS0, DS3), Internet Access and other services) that can be delivered to end-user customers. Absent dark fiber, AT&T is forced to buy at DS1, DS3 and SONET rates. With dark fiber, high bandwidth competition should flourish.

In other words, the record shows that access to dark fiber will permit AT&T to provide a greater array of competitive services at lower cost. This evidence satisfies the requirements of §251(d)(2) and is consistent with our findings in prior cases. For example, in Order No. 97-003, we found:

[T]he provision of dark fiber is necessary to provide new entrants with the flexibility to expand the reach of their networks and employ new technologies. Without dark fiber, entrants would be required to either undertake the expensive and time consuming process of installing their own fiber optic lines or purchase the use of "lit" fiber from USWC. As MCI witness, David Agatson explained, it does not make sense for new entrants to purchase ILEC electronics where spare fiber capacity is available, particularly if using ILEC electronic technology forces the entrant to adhere to the ILEC’s network technology and design, instead of newer more efficient technologies that may be available.

The evidence in this proceeding demonstrates that AT&T’s proposed services will be impaired if it does not have access to unused transmission media. Accordingly, the contract language recommended by AT&T for Section 32.9 is adopted.

Sections 14.2.6 and 14.2.7 of Attachment 2 attempt to accommodate GTE’s need for efficient utilization of its facilities with the needs of competing carriers to maintain an inventory of unused facilities to meet anticipated customer demand. Although AT&T does not address these sections in its brief, our analysis indicates that Section 14.2.6 may produce unreasonable results. We acknowledge that it may be appropriate in certain circumstances for GTE to revoke fiber lease agreements where facilities are unused or underutilized by a competitor. However, the second sentence of Section 14.2.6 appears to allow GTE to revoke fiber leases even if those facilities are fully utilized. All GTE must show is that it needs the facilities for its own purposes or those of another carrier. Such a provision could be used to discriminate against AT&T and should not be adopted.

Section 14.2.7 provides that GTE does not have to lease AT&T more than 25 percent of the unused transmission media in a particular feeder or dedicated interoffice transport segment. Absent evidence to the contrary, this level of utilization would appear to reasonably accommodate AT&T’s requirements while also taking into account the facility requirements of GTE and other telecommunications carriers. Section 14.2.7 is therefore adopted.

Before deploying any service enhancing copper cable technology (e.g., HDSL, ISDN, etc.) over unbundled 2-wire analog voice grade loops provided by GTE, AT&T shall notify GTE of such intentions to enable GTE to assess the loop transport facilities to determine whether there are any existing copper cable loop transport technologies (e.g., analog carrier, etc.) deployed within the same cable sheath that would be interfered with if AT&T deployed the proposed service enhancing copper cable technology. If there are existing copper cable loop transport technologies already deployed within the same cable sheath, or if GTE already has existing near term (within 18 months of the date of facility certification) plans specific planned projects to deploy copper cable loop transport technologies that would be interfered with as described above, within the next six months for which it can demonstrate a specific commitment by producing detailed engineering plans, GTE will so inform AT&T and AT&T shall not be permitted to deploy such service enhancing copper cable technologies.

AT&T Position. AT&T asserts that the parties agreed in November 1996 to notification procedures for the deployment of service enhancing copper cable technology (e.g., HDSL and ISDN) provided over 2-wire analog voice grade loops supplied by GTE. It maintains that the procedures found in §§3.1.2-3.1.3 of Attachment 2 provided for reciprocal obligations based on a six-month time frame. AT&T also states that all of the interconnection agreements subsequently filed by AT&T and GTE, and all agreements currently in effect, use the language that AT&T proposes here.

AT&T acknowledges that the arbitrator agreed with GTE regarding the need for advance notice where AT&T deploys service enhancing copper cable technology. It emphasizes, however, that the arbitrator "did not adopt or order GTE’s proposed terms or discuss the time frame," or "the equal need for AT&T to be notified" if GTE intends to deploy such technology. AT&T claims that failure to adopt the time frames and procedures agreed upon in the November 1996 negotiations would result in discrimination between competing carriers and should be denied.

GTE Position. GTE claims that the 18-month time frame it has proposed was specifically adopted in the arbitrator’s decision and approved by the Commission in Order No. 97-021. It acknowledges that the six-month limitation has been included in other contracts, but emphasizes that the Commission reached a different result in this arbitration.

Commission Decision – Attachment 2, Section 3.1.2.1. GTE’s position is adopted. The arbitrator’s decision adopts the GTE notification proposal and makes clear reference to a provision in the GTE interconnection agreement containing the 18-month time frame. Insofar as we are aware, AT&T did not propose the six-month notification period during the arbitration proceeding. Although the parties may have engaged in negotiations regarding the shorter notification period, there is no evidence indicating that the parties agreed to that time frame prior to the time the arbitrator’s decision or Order No. 97-021 was entered.

Main Agreement, Signature Block. The parties dispute whether GTE can be required to sign the final interconnection agreement.

GTE Position. GTE asserts that it is not required to sign the agreement for the following reasons: (a) the interconnection agreement is the functional equivalent of a Commission order and is not a mutual agreement between two consenting parties; (b) the Act does not mandate execution of interconnection agreements arrived at through compulsory arbitration, and (c) GTE’s refusal to sign does not indicate that it will not abide by legally promulgated orders of the Commission.

AT&T Position. AT&T alleges that GTE’s refusal to sign the agreement is another tactic designed to allow GTE to avoid complying with §251 of the Act. AT&T states that GTE expects those portions of the Act requiring GTE to negotiate the agreement in good faith will be overturned on appeal, and does not want an independent contractual obligation in that event.

Commission Decision – Main Agreement, Signature Block. GTE correctly states that the Act does not require the parties to submit an executed interconnection agreement when there is an arbitration pursuant to §252. In prior arbitration proceedings, the Commission has requested an executed agreement from the parties to provide us with evidence that the parties have read the agreement and agree to abide by its terms. If GTE submits a written statement to that effect, it does not have to sign the interconnection agreement.

IT IS ORDERED that the interconnection agreement between AT&T Communications of the Pacific Northwest, Inc., and GTE Northwest Incorporated shall include the contract language specified in this order. Each party shall either execute the interconnection agreement or submit a written statement affirming that it has read the interconnection agreement and will abide by its terms.

 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.