C. The Discussion at the PHC
Shortly before January 7, both parties submitted statements on the issues to be addressed at the PHC. In its statement, after summarizing the pleadings, Pac-West stated that the parties "do not fundamentally disagree over the legal issues that give rise to the dispute," and proposed that the Commission should have a two-phase proceeding, with the first phase devoted to the question "whether the law requires AT&T to compensate Pac-West and the structure of that compensation mechanism," before investigating in the second phase "the facts underlying the amounts allegedly due." In keeping with this suggestion for phasing, Pac-West proposed that the first-phase briefs should be deal with the following issues:
"1. To what extent has the FCC, in its ISP Remand Order and subsequent decisions, preempted state jurisdiction over compensation for ISP-traffic exchanged between competitive local exchange carriers?
2. Under what circumstances does the ISP Remand Order mandate a bill-and-keep compensation mechanism in situations where two competitive carriers indirectly exchange traffic
pursuant to the terms and conditions regarding transit traffic set forth in the interconnection agreements each competitive carrier has with incumbent carriers?
3. When a bill-and-keep compensation mechanism is not required, as a legal matter, then what compensation mechanism should apply to the traffic that is the subject matter of this Complaint?" (Pac-West PHC Statement, p. 3; footnote omitted.)
Pac-West proposed that the parties exchange opening briefs on February 18 and reply briefs on March 11, 2005. This schedule, Pac-West asserted, would "allow[] the Commission ample time to issue a decision and conduct any subsequent proceedings, should they be necessary, within the [one-year] time period required by Cal. Pub. Util. Code Section 1701.2(d)." (Id. at 4.) Pac-West also stated that for purposes of briefing in the first phase, it would stipulate to the following facts:
"1. AT&T is not required by 47 U.S.C. § 252 to enter into interconnection agreements with other competitive local exchange carriers;
2. AT&T and Pac-West have not entered into an interconnection agreement;
3. AT&T and Pac-West were exchanging traffic on the date of the FCC's ISP Remand Order; and
4. All of the traffic that is the subject of this dispute is ISP-bound." (Id. at 4.)
In its PHC statement, AT&T agreed that the case presented threshold legal issues as to the scope and effect of the ISP Remand Order, and asserted that the parties' contentions could be set forth in "briefs that can be characterized as briefs on cross-motions for summary judgment." (AT&T PHC Statement, p. 2.) Although differing somewhat in its formulation of the issues to be briefed,7 AT&T also endorsed the February 18 and March 11 briefing dates proposed by Pac-West. AT&T also agreed that if a decision in Pac-West's favor was issued on the threshold legal questions, then a second phase of the proceeding -- with adequate time for discovery -- should be held to determine the amount of compensation due to Pac-West.
At the PHC, the ALJ agreed that the parties' proposal for briefs on the threshold legal issues was a good one, although he thought the due dates should be shortened somewhat. He also asked Pac-West's counsel to state her position on whether ¶ 81 of the ISP Remand Order was dispositive here, since there seemed to be no dispute that the order has continued in effect despite the D.C. Circuit's decision in Worldcom, Inc. v. FCC. In response to the ALJ's question, Pac-West's counsel stated:
"[W]hen you read [¶ 81] in the context of both the rather lengthy section of the ISP Remand Order discussing the whole . . . issue, and when you read it in the context of the subsequent FCC decisions, in particular the Core Communications order that was released back in October . . . that further interpreted it, our theory is that the language in paragraph 81 which AT&T has taken out of context only applies to CLEC-ILEC traffic exchanges; that it does not apply to CLEC to CLEC traffic exchanges [such as those between Pac-West and AT&T]." (PHC Transcript, p. 11.)
The ALJ noted that because of the one-year deadline in Pub. Util. Code § 1701.2(d), it would not be feasible to have a two-phase proceeding, as both Pac-West and AT&T had suggested. Instead, the ALJ stated, at the same time the parties were writing their briefs on the legal issues raised by the ISP Remand Order, "you want to be putting effort in on seeing if you can reach agreement on the number of minutes that are in dispute and what . . . possible amounts due by AT&T to Pac-West would flow from that in the event Pac-West were to prevail on . . . its [liability] theory." (Tr. at 16.) Thus, the ALJ stated, the parties would be required to submit testimony on the amount of compensation that should be paid to Pac-West (in the event it prevailed on liability) at the same time that reply briefs on the liability issues were being drafted.
Pac-West and AT&T both replied that although they still preferred phasing, it would be feasible to submit testimony on compensation issues at the same time the legal issues were being briefed. However, they pointed out that even if they could agree on the number of minutes for which compensation would be due under Pac-West's liability theory, they were likely to submit a menu of possible compensation awards, since there were significant disputes between them as to which rates should apply, as well as the time period for which Pac-West could recover compensation under its liability theory.8
7 In its PHC Statement, AT&T framed the legal issues as follows: "Has the FCC mandated that the exchange of ISP-bound traffic between carriers that have not entered into an interconnection agreement be exchanged on a bill-and-keep reciprocal compensation basis? Does the Telecommunications Act of 1996 and industry practice support the exchange of terminating local traffic on a bill-and-keep basis between CLECs that have not entered into an interconnection agreement? Have AT&T and Pac-West been exchanging terminating traffic on a bill-and-keep basis?" (AT&T PHC Statement, p. 3.)
8 For example, AT&T's counsel stated: "I want to make sure that you understand this, that it wouldn't be just one number. That based on the possibilities of how the legal arguments go, there could be different numbers presented to you for you to decide . . . * * * For example - I don't know this yet because we haven't seen [support for Pac-West's] change from 3-1/2 to 6 million, but we might want to argue that some of that is barred by estoppel or statute of limitations or whatever . . ." (PHC Transcript, pp. 12-13.) At another point, AT&T's counsel noted that as a result of Commission decisions, special rules apply as to how long one can back-bill for various types of telecommunications charges; e.g., 90 days for residential customers and 18 months for access charges. (Id. at 14.) Pac-West's counsel noted that if the Commission rules it is due any compensation, Pac-West might want to argue that not all of the terminating traffic for which it is seeking compensation is ISP-bound. Thus, counsel agreed, the fourth stipulation set forth in the text would not apply to any testimony or briefing on compensation issues. (Id. at 20.)
