4. Arbitrated Portions of Agreement

Section 252(e) of the Act, and our Rule 4.2.3, provide that we may only reject an agreement (or any portion thereof) adopted by arbitration if we find that the agreement does not meet the requirements of § 251 of the Act, including the regulations prescribed by the FCC pursuant to § 251, or the standards set forth in § 252(d) of the Act.² At issue is whether Vycera may opt into the reciprocal compensation provisions of the AT&T ICA. The FAR determined that Vycera is entitled to opt into the entire AT&T Agreement, with the exception of the rates paid for the exchange of ISP-bound traffic. The FAR bases its finding on ¶ 82 of the FCC's ISP Remand Order.³ The pertinent language in ¶ 82 reads as follows:

[A]s of the date this Order is published in the Federal Register, carriers may no longer invoke section 252(i) to opt into an existing interconnection agreement with regard to the rates paid for the exchange of ISP-bound traffic.

The FAR determined that October 3, 2002, the date that Vycera obtained its partial facilities-based authority, should be the effective date of the ICA. Vycera would have been unable to exercise portions of the ICA relating to facilities-based service prior to that date. The FAR concurred with Pacific's position that the conversion of resale lines to the unbundled network element platform (UNE-P) should apply only on a prospective basis to those resold lines for which Vycera submits Local Service Requests (LSRs) to convert to UNE-P after October 3, 2002. Pacific had indicated that it could not assume that Vycera would convert all its resale lines to UNE-P because resale lines may contain services and/or features, such as Wholesale Inside Wire Service, that are not available on UNE lines. Vycera may want to keep those services and features and thus may not want to convert resale lines with such features and services.

Pacific also states that the standard process for converting from resale to UNE-P requires CLECs to submit an LSR. Vycera has over 20,000 local service customers, which would require 20,000 LSRs. According to Pacific, it would take time for Vycera to prepare those LSRs, and for Pacific to process them.

In its statement filed at the same time as the conformed ICA, Pacific disputes one outcome in the FAR. According to Pacific, the DAR concluded that Vycera was entitled to adopt the entire AT&T Agreement, with the exception of the rates paid for reciprocal compensation. The DAR held that the reciprocal compensation rates are the same as the rates for ISP-bound traffic. In a proper application of the FCC's mirroring rule, the DAR held that both the rates for ISP-bound traffic and reciprocal compensation must be exempted. The FAR substitutes "reciprocal compensation rates" with "rates for ISP-bound traffic" and concludes that only rates for ISP-bound traffic are exempted from the adoption because they are stale pursuant to 47 C.F.R § 51.809. According to Pacific, the FAR's conclusion ignores the FCC's mirroring rule and contravenes the FCC's ISP Remand Order. Under the "mirroring rule," incumbent LECs that have not elected to implement the FCC interim compensation plan are required to exchange ISP-bound traffic at the state-approved or state-arbitrated reciprocal compensation rates for non-ISP-bound traffic. Pacific concludes that this demonstrates that the rates for non-ISP-bound traffic are legitimately related to the reciprocal compensation rates for ISP-bound traffic, since the FCC ordered that those rates be identical until such time as the ILEC elects to implement the FCC's interim compensation plan. Pacific states that the practical result is that Vycera may opt into the entire ICA in contravention of the FCC's ISP Remand Order. Pacific asserts that the Commission should reverse the FAR to state that any rates, terms, and conditions associated with reciprocal compensation should be exempted from Vycera's adoption of the AT&T Agreement and the parties must negotiate such rates, terms, and conditions.

Paragraph 82 in the FCC's ISP Remand Order is clear that only the rates for ISP-bound traffic are excluded from the provisions of § 252(i). The FCC does not include all reciprocal compensation traffic under its prohibition, only ISP-bound traffic. That means that carriers are not precluded from opting in to rates for other reciprocal compensation traffic. Also, the FCC focuses exclusively on the rates for ISP-bound traffic and does not state that a carrier may not opt into the terms and conditions for ISP-bound traffic.

Also, the FCC's ISP Remand Order states as follows:

For those incumbent LECs that choose not to offer to exchange section 251(b)(5) traffic subject to the same rate caps we adopt for ISP-bound traffic, we order them to exchange ISP-bound traffic at the state-approved or state-arbitrated reciprocal compensation rates reflected in their contracts. This "mirroring" rule ensures that incumbent LECs will pay the same rates for ISP-bound traffic that they receive for section 251(b)(5) traffic. (ISP Remand Order ¶ 89.)

Pacific made it clear that it has not adopted the FCC rate caps, and acknowledges that it is subject to the FCC's mirroring requirement. Under that rule, Pacific must charge the same rate for ISP-bound traffic as it charges for other § 251(b)(5) traffic. Pacific complains that, in effect, Vycera is receiving the entire AT&T ICA, including the rates for ISP-bound traffic, and asserts that is contrary to the ISP Remand Order. We disagree with Pacific's view. Vycera is, in effect receiving the rate for ISP-bound traffic that is in the AT&T Agreement, but that outcome is clearly consistent with the FCC's mirroring rule since Pacific must charge the same rate for all Section 251(b)(5) traffic under the FCC's mirroring rule.

We disagree with Pacific's contention that all rates and terms and conditions relating to reciprocal compensation should be negotiated between the parties. The FCC's order is quite specific that only one element may not be covered by Section 252(i) opt-in provisions, namely the rates paid for ISP-bound traffic. A CLEC is entitled to opt into all other provisions relating to reciprocal compensation, and we have provided that outcome in this decision.

In its comments on the FAR, Vycera asserts that two changes should be made to the conformed agreement: (1) the effective date of the agreement should be changed to September 18, 2002; and (2) the word "sectionally" should be deleted from the third line of the Recitals on page 1 of the ICA. Although the DAR provided that Pacific should charge Vycera at UNE-P rates, rather than resale rates, from October 3, 2002, the FAR revised that earlier holding, and provides that the conversion of resale lines to UNE-P should apply only on a prospective basis to those resold lines for which Vycera submits LSRs to convert to UNE-P on or after October 3, 2002. Vycera states that the revision appears to be based upon statements made in Pacific's comments on the DAR, which Vycera asserts are not true.

Vycera states that it submitted its request to adopt the AT&T Agreement on September 3, 2002. Pursuant to California Rules 7.2 and 7.3.2, Pacific should have honored all provisions of the AT&T ICA that Vycera was adopting beginning on September 18, 2002, subject to retroactive price true-up based on the Commission's resolution of the arbitration of the contested provisions. Instead, Pacific refused to implement any portion of the AT&T Agreement and refused to take those actions necessary for Vycera to convert its resale customers to UNE-P upon Vycera's receipt of partial facilities-based certification on October 3, 2002.

Vycera asserts that until December 5, 2002, Pacific refused to take any of the preliminary steps, such as processing "footprint" combination orders, establishing UNE-P billing account numbers for current Vycera customers, performing pre-conversion testing, necessary for Vycera to convert its embedded customer base to UNE-P. Vycera rebuts Pacific's assertion that providing LSRs is a time-consuming manual process, saying that the process is mechanized. For Vycera to submit thousands of LSRs for its current customers, who are already in its computer system, is a matter of a few keystrokes. Vycera also asserts that it has 12,500 customers in Pacific's territory, not 20,000 customers and that using mechanized processing, Vycera could easily submit 12,500 LSRs in a single morning. Vycera provided a sworn affidavit to that effect. And under the terms of the AT&T Agreement relating to conversion from resale to UNE-P, the CLEC begins to receive UNE-P pricing when the order is submitted, not when Pacific processes it.

Vycera requests that the Commission grant UNE pricing retroactive to October 3, 2002 for customers for whom it submits an LSR to convert to UNE-P within 60 days of the effective date of the order. Vycera also asks for retroactive UNE-P pricing for former customers who discontinued service with Vycera sometime between October 3, 2002 and the present.

Under the rules we adopted for implementation of § 252(i), we included Rule 7.3.2. That rule reads as follows:

Rule 7.3.2 Effective Date of Arbitrated Agreement

Should the ILEC file for arbitration, the ILEC shall immediately honor the adoption of those terms not subject to objection pursuant to Rule 7.2, effective as of the date of the filing of the arbitration request. Furthermore, to the extent the ILEC seeks arbitration of the

costs of a particular interconnection, service or element, the ILEC shall immediately honor such provisions subject to retroactive price-true-up back to the date when the arbitration request was filed, based on the Commission's resolution of the arbitration. The effective date of other disputed issues will be set in the arbitration process and could be made effective retroactive to the date when the arbitration request was filed.

Pacific has asked to be released from this requirement, stating that it is not feasible to implement a partial agreement, where the key area of interconnection is being arbitrated. However, Vycera asserts that as of September 18, 2002, Pacific should have begun billing Vycera under the terms, conditions, and rates for resale services as provided for in the AT&T Agreement. And under Rule 7.3.2, it is clear that Pacific should have implemented the portions of the ICA that were not in dispute. We agree with that determination, and will order that the ICA be effective on September 18, 2002, so that Vycera can take advantage of the resale provisions.

Other elements of the ICA, such as the interconnection attachment, could not be exercised by Vycera until it received its partial facilities-based authority on October 3, 2002. As of that date, Vycera should have been able to convert its resale lines to UNE-P; and from the affidavit filed, submittal of LSRs is not the tortuous process Pacific described, but a simple mechanized process. Also, Attachment 6, section 2.13.4 of the AT&T ICA makes it clear that UNE-P pricing is to be effective upon receipt by Pacific of the LSR, and is not dependent on Pacific's processing of that LSR. We order that Vycera be granted UNE-P pricing retroactive to October 3, 2002, for all customers for whom it submits LSRs within 60 days of the effective date of this order to convert from resale to UNE-P service. We will not grant UNE-P pricing for prior customers who discontinued service with Vycera since we have no way of knowing whether those customers would have chosen to maintain their resale service.

Vycera does not explain why it wants to delete the word "sectionally" from the third line of the Recitals on page 1 of the ICA so we are unable to evaluate the merits of that request.