Appeals of the Presiding Officer's Decision

Both parties appealed the Presiding Officer's Decision.

Telscape asserts that the POD commits legal error in finding that the Commission has jurisdiction to hear this case. In reaching that conclusion, the POD follows the reasoning of the Commission in a recent decision involving nearly identical facts, Pac-West v. AT&T D.06-06-055, which was on appeal to the Federal District Court at the time the POD was issued. On August 12, 2008, the District Court ruled in favor of the Commission and Pac-West and against AT&T on cross-motions for summary judgment. In particular, the District Court held that Federal Communication's Commission's so-called "ISP Remand Order" relied on by both Comcast and AT&T as the basis for their jurisdictional argument, did not pre-empt the Commission from hearing and resolving a dispute between two CLECs regarding termination charges for ISP-bound traffic imposed under an intra-state tariff, precisely the situation at issue in this case:

"Accordingly, the Court finds that the question of how two CLECs should be compensated for the exchange of ISP-bound traffic was not before the FCC when it crafted the ISP Remand Order and, therefore, concludes that the ISP Remand Order does not govern the parties' relationship. For the reasons set out above, the Court also concludes that the CPUC decision to apply the Pac-West tariff does not conflict with the [Federal Telecommunications Act] and the FCC's implementing regulations. Accordingly, the CPUC's Decision is not preempted by Federal law."12

Following our own precedent and the reasoning of the District Court, we reject Telscape's Federal pre-emption argument.

Telscape's arguments that Pac-West's local tariff is inapplicable to VNXXX calls and ISP-bound calls are both based on the proposition that we lack jurisdiction to adjudicate this dispute. Having rejected that proposition, we reject these arguments.

Telscape re-iterates its argument that the Pac-West complaint is in the nature of a collection action over which the state courts have jurisdiction rather than the Commission. This characterization misconstrues the nature of the complaint. Pac-West does not seek to collect damages for breach of contract; rather, it seeks a Commission ruling that Pac-West's local tariff applies to the calls in dispute and a Commission order enforcing that tariff. As noted in the POD, both remedies are encompassed within the broad grant of regulatory authority to the Commission set out in Pub. Util. Code § 701.

Finally, Telscape reiterates its argument that the two-year federal statute of limitations applies to this action rather than the state three-year statute. Having determined that the FCC has not pre-empted this matter, the state statute sets the appropriate limitation period.

Pac-West argues that the POD commits legal error by declining to order Telscape to pay late payment charges on its unpaid termination fees. On reconsideration of this matter, we conclude that Pac-West is correct and the POD will be modified accordingly. Section 2.10 of the Pac-West local tariff provides that late payment charges accrue on any unpaid portion of a bill resulting from imposition of the tariff. As Pac-West recognizes, the Commission has broad equitable powers to set aside or modify such tariff provisions in order to avoid an unjust result. However, in this case Telscape was on notice at least from the date of the decision in D.06-06-055 more than two years ago that the Commission rejects the pre-emption arguments on which Telscape based its refusal to pay termination charges to Pac-West. Furthermore, Telscape, as a state-licensed carrier, may be presumed to know that under the so-called "filed rate" doctrine Pac-West's tariff has the force of law and should be complied with in its entirety, including that portion of the tariff that provides for late payment charges.

Pac-West also argues that the POD errs in failing to order Telscape to make payments pursuant to the Pac-West local tariff from the date of the complaint (October 19, 2007) to the date, if any, on which Telscape and Pac-West enter into an agreement superseding the tariff. We concur. The failure to include an order requiring payment of charges incurred following the filing of the complaint was inadvertent error and the ordering paragraphs of the decision will be modified accordingly.

Pac-West also requests that the payment order be made effective immediately rather than 30 days after the effective date of the decision. We concur.

Findings of Fact

1. Telscape and Pac-West are both CLECs.

2. No interconnection agreement is in effect between Telscape and Pac-West, but they exchange traffic indirectly by using the transit services of Pacific Bell Telephone Company.

3. Many of the customers served by Pac-West are ISPs.

4. The overwhelming majority of the traffic terminated by Pac-West for Telscape is traffic that originates with Telscape's local exchange customers who use dial-up telephone service to connect with their ISPs.

5. The volume of local exchange traffic terminated by Pac-West for Telscape is many times greater than the volume of local exchange traffic terminated by Telscape for Pac-West.

6. The decision whether to award late payment charges on unpaid amounts due under a utility's tariff is a matter within this Commission's equitable jurisdiction

7. Under a bill-and-keep regime, neither of two interconnecting carriers charges the other for terminating traffic that originates on the other's network, but instead recovers from its own end-users (a) the costs of originating traffic that it delivers to the other carrier, and (b) the costs of terminating traffic that it receives from the other carrier.

8. Since 1998, Pac-West has had on file with this Commission a tariff, Schedule Cal. CLC 1-T, that sets forth Pac-West's charges for terminating local and IntraLATA toll traffic originated by CLECs with which Pac-West has not entered into an interconnection agreement. This tariff has been amended several times since 1998.

9. When calculated at the rates set forth in the Pac-West tariff described in Finding of Fact (FOF) 8, the charges due for the traffic originating on Telscape's network and terminating on Pac-West's network, for the period from September 1, 2004 to February 28, 2008, total $554,605.39.

Conclusions of Law

1. Neither the ISP Remand Order nor any other federal decision dictates what compensation, if any, should be paid by one CLEC originating ISP-bound traffic on its network to another CLEC that terminates such traffic on its network.

2. In the absence of any controlling federal authority on the issue described in the preceding Conclusion of Law (COL), this Commission has discretion to determine the compensation, if any, that should be paid by one CLEC that originates ISP-bound traffic on its network to another CLEC that terminates such traffic on its network.

3. The Commission has jurisdiction over terms and conditions for interconnection and exchange of VNXX traffic, including intercarrier compensation for such traffic, whether ISP-bound or not.

4. In the absence of either an interconnection agreement or any other reciprocal compensation arrangement between the parties, it is reasonable to require Telscape to compensate Pac-West for terminating ISP-bound traffic originating on Telscape's network at the minute-of-use and set-up rates set forth in the tariff described in FOF 8.

5. Under the circumstances of this case, it is reasonable to require Telscape to pay Pac-West interest or late charges on the amounts computed pursuant to the preceding COL.

6. The applicable statute of limitations is three years.

7. This order should be made effective today.

ORDER

IT IS ORDERED that:

1. Telscape Communications, Inc. shall pay to Pac-West Telecomm, Inc. (Pac-West), (a) the sum of $554,605.39 for the period from September1, 2004 to February 28, 2008; (b) all termination charges for termination services provided by Pac-West to Telscape since February 28, 2008 and all future termination charges Telscape incurs under Pac-West's Intrastate Tariff unless and until Telscape and Pac-West enter into an agreement superseding the Intrastate Tariff; and (c) all late payment charges on the amounts of (b) and (c) above that were not or are not paid on the date due in accordance with § 2.10 of Pac-West's Intrastate Tariff.

2. Case 07-10-018 is closed.

This order is effective today.

Dated December 4, 2008, at San Francisco, California.

I reserve the right to file a concurrence.

/s/ RACHELLE B. CHONG

Concurrence of Commissioner Rachelle Chong

Decisions on Unpaid Call Termination Fees

Modified Presiding Officers' Decisions - Items 4 and 5

December 4, 2008

We should be closely monitoring what the FCC does in its intercarrier compensation proceeding, CC Docket 01-92. In a recent Further Notice of Proposed Rulemaking, among other issues, the FCC is seeking comment on proposals that would require states to adopt a state-wide uniform reciprocal compensation rate that would apply to all carriers.

It seems increasingly unlikely that the FCC will issue a comprehensive order on intercarrier compensation in the near future, and I would not hold my breath for FCC action. I suggest that we continue to conduct reform at the state level no matter what is going on, or not going on, at the federal level. We should open a proceeding in 2009 to review reciprocal compensation rates in California to follow up on the good work led by President Peevey in recent years reforming intrastate intercarrier compensation.

Dated December 4, 2008, at San Francisco, California.

12 Order on Cross-Motions for Summary Judgment in Case No. C 06-07271 JSW at pp. 17-18. The order is unpublished but is referenced by both AT&T and Pac-West in their pleadings regarding the appeals in this case.

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