4. The Settlement

Frontier and Verizon filed their reply to the protests of DRA and TURN, after which the parties discussed a resolution of the issues raised by the protests that would be in the public interest. A formal Settlement Conference was noticed in accordance with this Commission's Rules of Practice and Procedure for August 12, 2009 with all interested parties participating. In the conference a settlement document was developed along with a Joint Motion for Adoption of the Settlement.

The Settlement Agreement (Appendix A) reached by the parties is comprehensive and the parties submit that it is both reasonable and in the public interest. They request that the Commission adopt the Settlement Agreement. The key terms and assumptions in support of the Settlement Agreement are:

(1) Basic Residential Service Rate Caps. For one year following closing of the proposed transaction, the basic primary residential rate for each of the Verizon California Transferred Exchanges will be capped at their current levels as of the date of the closing of this transaction. Thereafter, the parties agree that those exchanges will be subject to applicable Commission orders governing services for Uniform Regulatory Framework ("URF") companies.

(2) Rates for Other Services. For one year following closing of the proposed transaction, the rate for the following services for the Verizon California Transferred Exchanges will be capped at their current levels as of the date of the closing of the proposed transaction: Caller ID, Call Waiting, Single Line Business Service, Directory Assistance, Non-Published Service and Inside Wire Maintenance. Thereafter, the parties agree that those exchanges will be subject to applicable Commission orders governing services for URF companies.

(3) Exogenous Events. Notwithstanding the limitations included in paragraphs one and two, Frontier Communications of the Southwest will be permitted to request reasonable recovery for the impact of exogenous events that materially impact the operations of the Verizon California Transferred Exchanges, including but not limited to, orders of the Federal Communications Commission and this Commission. Nothing herein shall prevent a party from opposing such a request on the grounds of reasonableness. Frontier Communications of the Southwest may apply to the Commission to modify the rates of the exchanges to which paragraphs one and two are applicable. Nothing herein shall be construed to prevent any party from taking a position with respect to the appropriate service rates, if any, which should apply to the affected exchanges, after the dates specified in paragraph one or two above.

(4) Service Quality Reporting. For a period of 12 months after the closing of the proposed Transaction, or until December 31, 2011, whichever date is later, Citizens Telecommunications Company of California d/b/a Frontier Communications of California, with respect to existing exchanges and Frontier Communications of the Southwest with respect to the Verizon California Transferred Exchanges will file separate reports with the Commission concerning installation intervals for their respective exchanges, notwithstanding any exemption from reporting contained in General Order 133-C for URF companies.