4. No Evidence of Discrimination

Sprint PCS claims that AT&T is discriminating against Sprint PCS by charging Sprint twice as much for transiting call setup and six times as much for transiting duration as AT&T is charging other wireless carriers, including its own wireless affiliate, Cingular Wireless, for what AT&T acknowledges is the exact same transiting service. Further, Sprint PCS asserts that AT&T failed to abide by the provisions of the ICA when it refused to correct the transiting rates after Sprint PCS invoked the Intervening Law provisions in Section 18 of the ICA.

According to AT&T, under the parties' ICA, the following rates apply to transit service:

AT&T states that the transiting rates are clear and unambiguous. The ICA did not tie the transiting rates to the rates for any other service or facility (such as tandem switching). It did not tie the transiting rates to the Commission's determination of final rates for tandem switching in its Open Access Network Architecture development (OANAD) proceeding.

AT&T notes that, in contrast, the agreements of other carriers, including other wireless carriers like Nextel, stated that the rates for transiting would be based on the tandem switching rates that the Commission would determine. For example, in AT&T's ICA with Nextel, the following rate was specified for transiting:

INTERCONNECTION EQUATIONS

V. TRANSITING

Set-up (per Completed Call): TSS

INTERCONNECTION RATE ELEMENTS & FACTORS

Tandem Switching Setup (TSS) $0.0011130

Tandem Switching Duration (TSD) $0.000021

In September, 2004, the Commission issued D.04-09-063, the order adopting updated and final rates for certain unbundled network elements or UNEs. One of those UNEs was tandem switching. That decision, as modified by D.05-05-031 and D.05-03-037, determined the following rates for tandem switching:

Tandem Switching Setup, per completed message $0.000629

Tandem switching holding time per Memoranda

of Understanding $0.0004535

AT&T notes that D.04-09-063 did not adopt a rate for transit service, nor did it discuss transit service or suggest that carriers' rates for transit service should be changed. As explained above, in some of AT&T's ICAs with carriers other than Sprint PCS, the parties agreed that the rates for transit service would be equivalent to or otherwise based on the tandem switching rates set by the Commission. When the Commission issued its new rates for tandem switching in D.04-09-063, carriers whose ICAs had transiting rates that referenced tandem switching rates had their transiting rates changed to reflect the new tandem switching rates. On the other hand, carriers whose ICAs did not have such
rate-referencing language did not. Sprint PCS was one of those carriers that did not receive the updated transiting rates.

Sprint PCS asserts that unless its ICA clearly and unmistakably provided that there would not be a true-up of transiting prices, Sprint PCS was entitled to assume that such a true-up would occur.

AT&T states that the Unbundled Network Element (UNE) relook decision did not change the rates for transiting, but only changed the rates for the tandem switching UNE, and thus AT&T was only obligated to change the transiting rates of carriers whose interconnection agreements specifically incorporated an "interconnection equation" referencing tandem switching UNE elements. Both AT&T and Sprint PCS acknowledge that AT&T updated the transiting rates charged to those carriers that had "Interconnection Equations" and "OANAD Rate Factors" included in their ICAs. However, Sprint PCS asserts that AT&T's advice letters (ALJs 25684, 26608, and 26940 for implementing, respectively,
D.04-09-063, D.05-03-026 andD.05-05-031) explicitly changed transiting rates-not the OANAD rate factors.

According to Sprint PCS, there is no question that in those ICAs that specify that tandem switching UNE rates will be the source for transiting rates, the tandem switching UNE rates must be used to establish transiting rates. However, Sprint asserts that just because an ICA does not identify tandem switching UNE rates as the source for the ICA's transiting rates does not mean that tandem switching UNE rates should not be used to establish such transiting rates. Sprint PCS concludes that, in order to avoid discrimination, the tandem switching UNE rates must be used to establish transiting rates of all wireless carriers.

Under the 1996 Act, the Congress recognized that ICAs could be negotiated or arbitrated by state commissions. In Section 252(c) of the Act, the Congress set a more stringent standard for state commissions to follow in setting cost-based rates in the course of an arbitration. However, there is no such requirement for negotiated ICAs.

We believe that Sprint PCS should be bound by the four corners of its ICA with AT&T, and not what the ICA does not say. The Sprint PCS/AT&T ICA does not tie the rates for transiting to the rates for tandem switching, as do some other ICAs. The negotiated ICA between those two parties has a rate for transiting that is not tied to any other rate.

Sprint PCS attempts to prove that transiting and tandem switching are the same, and therefore, they should receive the rate for tandem switching for transiting. AT&T emphasizes the differences between the two services, saying that tandem switching does not include a local transport or multiplexing function to and from the tandem switch. Transit service, by contrast, includes more than just the isolated element of tandem switching: transit service also includes transport, multiplexing, record creation, and data distribution functions. According to AT&T, while both tandem switching and transit service establish a trunk-to-trunk connection, there are other, different functions performed at the tandem and within AT&T's data processing system for each type of service.

While AT&T cites the differences, we note that in several other negotiated ICAs, AT&T based the transiting rates on tandem switching rates. Therefore, the similarities must outweigh the differences if AT&T was willing to use tandem switching rates as a proxy for transiting rates. However, the key issue here is not whether some of the agreements base transit rates on tandem switching, but what specific provisions are contained in the ICA between AT&T and Sprint PCS. The parties there set a transiting rate, with no reference to tandem switching or any other rate element.

Sprint PCS would have us believe that AT&T did this on purpose, with the plan of discriminating against Sprint PCS, once the Commission set final rates for tandem switching. Sprint PCS' claim does not hold water. Sprint PCS is a large company with competent legal counsel. Also, as AT&T points out, the previous ICA between the parties included a provision that tied the transit rates to tandem switching. Therefore, Sprint PCS cannot claim ignorance that such a provision could be part of the ICA. That section of the previous ICA reads as follows:

Transit Calls. An originating Party shall pay a transit rate of $0.004 per minute when it uses the other Party's Tandem ("the tandeming Party") to originate a call to a third party local exchange carrier, wireless service providers, or another of its own MSCs or central Offices. Once the Commission has adopted rates for tandem transit by final order in its OANAD proceeding, the applicable rates adopted in the OANAD proceeding would apply.6

Clearly, Sprint PCS was aware that such a provision could have been included in the current ICA with the parties, but agreed to a different provision in the current ICA. Therefore, we find that the transiting rates charged Sprint PCS under its ICA with AT&T were not discriminatory, even though they were significantly higher than the rates paid by other carriers. The carriers that received the revised transiting rates all had the provision in their ICAs that linked those rates to the tandem switching rates. Sprint PCS and four other carriers7 that did not have that provision, did not have their transiting rates updated. Sprint PCS has not identified any carrier with ICA provisions similar to those in the Sprint PCS agreement that had their transit rates updated following the issuance of D.04-09-063.

In its comments on the Proposed Decision (PD), Sprint PCS asserts the PD errs in Findings of Fact 6 when it states that carriers that received the revised transiting rates all had the provision in their ICAs that linked those rates to the tandem switching rates. Sprint PCS points to Exhibit T, which includes excerpts to AT&T's ICA with Fresno MSA Limited Partnership d/b/a Verizon Wireless (Verizon Wireless). According to Sprint PCS, that ICA did not have language linking the transit rates to tandem switching rates yet its ICA was amended with the new transiting rate. Sprint PCS cites the following provision in the Verizon Wireless ICA:

ICA, Section 3.1.1.c:

Transit calls. An originating Party shall pay a transit rate of $0.004 per minute when it uses the other Party's Tandem ("the tandeming Party") to originate a call to a third party LEC, WSP, or another of its own MSCs or Central Offices. Once the Commission has adopted rates for tandem transit by final order in its OANAD proceeding, the applicable rates adopted in the OANAD proceeding would apply.

As AT&T points out in its Reply Comments on the PD, the Verizon Wireless ICA specifically directed that upon the Commission's adoption of new tandem rates, the parties would apply those rates to transit service and update the contract's transit rates accordingly. Consequently, following the issuance of D.99-11-050 in 1999, an ICA amendment executed by the parties adjusted Verizon Wireless' transit rates and stated that "all interim OANAD prices identified in the Agreement are hereby deleted and replaced with the prices contained in the above-referenced OANAD order."8 Several years later in D.04-09-063, the Commission updated the rates in D.99-11-050 and again adopted new tandem switching rates. In that decision, we stated that the rates we were adopting would replace the rates originally adopted in D.99-11-050.9 As set forth above, the Verizon Wireless ICA Amendment explicitly provided that the transit rates contained therein were the result of tandem switching rates adopted in D.99-11-050. On the basis of that language and the Commission's order in D.04-09-063 that the rates adopted in that decision were to replace rates originally adopted in D.99-11-050, AT&T updated Verizon Wireless' transit rates in conformance with the tandem switching rates adopted in D.04-09-063.

We find that AT&T did not discriminate against Sprint PCS by not updating its rates. Only those carriers that had the provision in their ICA linking transiting to tandem switching, or some other provision in their ICA linking their transit rates to rates adopted in the OANAD proceeding had their rates updated. Verizon Wireless had a provision that linked its transit rate to rates adopted for tandem transit in the OANAD proceeding, but Sprint PCS did not have that provision in its ICA.

4 AT&T/Sprint PCS Interconnection Agreement Appendix Pricing, p. 2.

5 D.05-03-037, Order Correcting Errors (March 29, 2005), at Appendix B (corrected);
D.05-05-031, Opinion Modifying Decision 04-09-063 to Correct Unbundled Tandem Switching Rate (May 27, 2005), at 9.

6 PCS Interconnection Agreement between Pacific Bell and Sprint Spectrum L.P., Section 3.1.1(d).

7 According to AT&T, the other carriers that have transiting rates that are not tied to tandem switching rates are NTCH-CA, Inc d/b/a Rio-Tel, Cricket Communications, Inc., SLO Cellular, Inc., and California RSA No. 3 LP.

8 ICA Amendment No. 1, pp. 1-2.

9 D.04-09-063 mimeo. at 4.

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