3. Statement of Facts

Telscape is a CLEC that focuses on the provision of local and long distance telephone service to Spanish-language dominant Hispanic households, largely in Southern California. It provides facilities-based services, using its own switches and unbundled network elements (UNEs) leased from SBC-CA; this arrangement is often referred to as UNE-Loop (UNE-L). Telscape also provides services using the "UNE platform" (UNE-P), which consists of leasing from SBC-CA all the elements needed for service to the end-user customer.

AT&T is a CLEC that provides local and long distance services, as well as DSL services in some areas. In California, it uses UNE-P for its mass market local voice services.8

MCI is a CLEC that is the largest competitive provider of local residential voice service in the United States. It provides local and long distance services, as well as DSL service in some areas. In California, it uses UNE-P for its mass market local voice services.

SBC-CA is an incumbent local exchange carrier (ILEC) that provides local and long distance services. It is a wholly owned subsidiary of SBC Communications, Inc. (SBC), whose headquarters are in San Antonio, Texas. SBC-CA markets to mass market customers the retail product SBC Yahoo! DSL, which consists of DSL transport provided by SBC Advanced Solutions, Inc. (ASI) through UNEs leased from SBC-CA; internet service provider (ISP) services provided by SBC Internet Services (SBC IS); and content provided by Yahoo!, Inc. The SBC Yahoo! DSL product is advertised throughout the 13-state area in which SBC operates. In California, the SBC Yahoo! DSL product is available only to SBC-CA local voice customers.

SBC-CA provides approximately 73% of residential local voice service in California. Statewide, all CLECs serve about 6% of local residential customers.9 In California, about 49% of broadband connections utilize DSL, and 39%, cable modem. This is different from the nation as a whole, where 59% of broadband connections utilize cable modem and 34%, DSL.10

If a customer wishes to change her local voice provider from SBC-CA to a CLEC, he or she makes arrangements for service with the CLEC. The CLEC then makes a Local Service Request (LSR) to SBC-CA to "migrate" the customer's service to the CLEC. If the SBC-CA customer also subscribes to SBC Yahoo! DSL, however, SBC-CA will automatically reject the request for the local voice service migration. This rejection is triggered by SBC-CA's requirement that the LSR include instructions from the new voice CLEC that specify how DSL service will be provided once the customer's local voice service has been migrated.11 ASI, the DSL transport provider for the retail product SBC Yahoo! DSL, does not have line splitting arrangements with any voice CLEC12 and does not provide DSL transport services unless SBC-CA provides the local voice service. Thus, no LSR for the migration of any SBC-CA voice customer with SBC Yahoo! DSL will meet SBC-CA's criteria of validity, and all will be rejected.13

Telscape estimates that, when it investigated the situation about two years ago, approximately 10 percent of its LSRs were rejected because the potential customer had SBC Yahoo! DSL. SBC-CA rejected approximately 3,000 such LSRs from AT&T in the period from December 29, 2002 through May 3, 2003, and approximately 7,800 such LSRs from MCI in the period from January 1, 2003 to August 15, 2003.

The SBC-CA customer with SBC Yahoo! DSL who wants to change her local voice service to a CLEC must go through several steps. She must first find out that she cannot switch to the CLEC while she maintains SBC Yahoo! DSL. She must then cancel SBC Yahoo! DSL. She next must call the CLEC of her choice and arrange for local voice service. Once SBC-CA has processed the cancellation of SBC Yahoo! DSL, the LSR for the migration of local voice service to the CLEC can be processed. If the customer wants to regain DSL service, she must arrange for another DSL provider. (Some CLECs, such as Telscape, do not provide retail DSL service. Some, such as AT&T, do.) 14 With a new DSL provider, the customer will also have to install hardware and software for the new DSL service. The customer will then also need to find a new ISP to provide connection to the internet (including a new electronic mail (e-mail) address for the customer) using the new DSL service.

Very few SBC-CA Yahoo! DSL customers change their local voice service to a CLEC. Information reviewed by AT&T from several states where SBC Yahoo! DSL is offered shows that all potential AT&T customers informed by AT&T sales representatives that they would have to cancel SBC Yahoo! DSL in order to change their local voice service to AT&T indicated that they no longer wanted to change to AT&T. Because they have concluded that virtually no potential customer with SBC Yahoo! DSL will change local voice service, AT&T and MCI instruct their sales representatives to ask potential customers whether they currently subscribe to SBC Yahoo! DSL, and to turn down the potential customer's business if the answer is "yes." Telscape does not have specific instructions for its sales representatives on this subject, but expects them also to advise potential customers with SBC Yahoo! DSL that Telscape will not be able to provide local voice service. The approximately 11,800 rejected AT&T and MCI LSRs in late 2002 and 2003 therefore represent only orders in which the CLEC did not know about the potential customer's existing SBC Yahoo! DSL, or submitted the LSR in error.

When a customer switches phone service from one carrier to another, the carrier that has lost the customer often engages in "winback" activity to try to persuade the customer to return. SBC-CA has an extensive winback operation for local voice service, in which its retail marketing personnel make use of information compiled from SBC-CA computer data about customers who are changing their service. The CLEC's LSR for the customer migration is entered into SBC-CA's Service Order Retrieval and Distribution system. The starting point for winback activities is the posting of the status "complete" for the order in this system, i.e., SBC-CA's records show that the customer's service has been changed to the CLEC. This information is then moved through various SBC-CA data systems over a period of about two days, resulting in a list of former customers that is provided to the SBC-CA personnel who work on winback programs.

SBC-CA's winback efforts include sending letters and making telephone calls to former customers. SBC-CA uses a variety of winback letters, which may offer special deals to former customers (e.g., discounts or rebates on some services). Some winback letters have also included the suggestion that the customer's service had been switched without the customer's consent (a practice known as "slamming"). Scripts followed by SBC-CA winback personnel in telephone calls to former customers also may include special offers and inquiries suggesting the customer was slammed. The scripts do not require the SBC-CA personnel to verify that the person with whom they are speaking is the only person in the household who is authorized to initiate changes in telephone service. A joint investigation by Telscape and SBC-CA within the last two years showed that Telscape sales personnel and SBC-CA winback personnel often talked with different members of the household for which local voice service was switched from SBC-CA to Telscape. SBC-CA's third-party verification process for substantiating allegations of slamming is applied to slamming allegations about local toll and long distance services, but not to allegations of slamming for local voice service. SBC-CA plans to extend this process to local voice service.

On December 5, 2003, AT&T, MCI, and SBC-CA filed a Motion for Adoption of Partial Settlement. The proposed partial settlement (Settlement), attached as Appendix B, is intended to settle the claims of AT&T and MCI with respect to winback practices.15 The Settlement requires SBC-CA to remove from all its winback materials any suggestion that the former customer was slammed or that the former customer received incomplete or inaccurate information prior to making the local service change, and to educate its winback personnel to avoid making any such suggestions to former customers. The Settlement provides that SBC-CA will implement its provisions within four weeks of our approval. Telscape did not file comments on the Settlement. (See Rule 51.4.)

OSS consists of five major functions supported by the ILEC's databases and information: pre-ordering, ordering, provisioning, maintenance and repair, and billing.16 SBC-CA's OSS functions are available to CLECs on a nondiscriminatory basis.

When a CLEC places an order for UNEs, or requests a change in configuration or disconnection of UNEs, SBC-CA is authorized to assess non-recurring service order charges to cover its costs for the ordering process, separate from the costs of the actual connection, reconfiguration, or disconnection of the UNEs.17 Service orders are processed in different ways. A "fully mechanized" service order is transmitted by the CLEC to SBC-CA electronically, and processed by computers without human intervention. A "semi-mechanized" service order is transmitted electronically by the CLEC, but requires some intervention by SBC-CA personnel in a Local Service Center (LSC) in order to be completed. A "manual" service order is generally submitted by the CLEC in the form of a facsimile transmission and requires personnel in the LSC to enter all the information into SBC-CA's order system. SBC-CA is authorized to charge different rates, based on both the UNEs ordered and the form of processing needed, ranging from a few cents for most fully-mechanized orders to more than $100 for some manual orders.18

Electronically-submitted orders are eligible for fully mechanized processing according to standards and policies established by SBC-CA, with input from CLECs through the Change Management Process, a forum for CLECs and SBC to address OSS issues. Electronically-submitted orders that are processed without the need for work by LSC personnel are said to "flow through." SBC-CA has increased the number of orders that will flow through over the course of several years, and continues to add to that group. Not all orders will flow through, however. Electronically-submitted orders may "fall out of flow-through" either because they are exceptions to flow through (i.e., a special case of an order type that generally would flow through) or because they are exclusions from flow through (i.e., the orders are in a category for which SBC-CA has not made fully mechanized ordering possible). Because of the large differentials in cost among the types of order processing, maximizing the number and utility of orders that are eligible for flow-through is important to CLECs.

Electronically submitted orders for UNE-P service are generally eligible for flow-through. In some circumstances, however, such orders fall out of flow-through. Four such exceptions remain at issue in this proceeding.

First, an order will fall out if it seeks to migrate from SBC-CA to a CLEC one of two telephone lines that do not "hunt" (seek the other line if the one called is unavailable). This type of order falls out of flow-through so that the LSC may create documentation for SBC-CA to use in properly billing the SBC-CA line remaining to the customer.

Second, an order will fall out if one of several UNEs in the order requires LSC intervention to be processed. In that case, all parts of the order are treated on a semi-mechanized basis.

Third, a CLEC's order for new service to a customer will fall out if there is working telephone service on the premises (WSOP) to which the order relates.19 A UNE-P order will fall out for this exception if the CLEC leaves blank one of the fields of the order form.

Fourth, an order to migrate a customer who is eligible for Universal Lifeline Telephone Service (ULTS) to UNE-P or UNE-L with number portability will fall out if SBC-CA does not have a current ULTS certification on file for the customer.20 LSC personnel check the certification status in order to allow SBC-CA to rebill the customer for the difference between ULTS rates and regular retail rates if it turns out that the customer did not meet the requirements for ULTS. After discussions in the CLEC User Forum in 2002, SBC-CA agreed to charge fully mechanized rates for ULTS migrations, although LSC personnel continue to be involved in those orders for SBC-CA's billing purposes. SBC-CA has not, however, changed the billing status of ULTS orders in its OSS system. Telscape is currently billed at semi-mechanized rates for ULTS migrations, with SBC-CA issuing credits for overcharges after Telscape identifies and disputes the semi-mechanized charges.

SBC-CA's OSS does not currently allow all orders that are potentially able to flow through to do so. SBC-CA adds to the list of flow-through eligible orders at various times, either in response to recommendations of the Change Management Process or CLEC User Forum, or for other reasons. Changes to flow-through eligibility are announced in Accessible Letters and then incorporated in SBC's CLEC Handbook.21

For facilities-based service, a CLEC, such as Telscape, must have a collocation facility in the central office of the ILEC, here, SBC-CA. An expanded interconnection service cross-connect (EISCC) connects SBC-CA's intermediate distribution frame to Telscape's collocation facility. In order for the facilities-based service to work smoothly, both SBC-CA and Telscape must, among other things, keep track of the assignment of EISCC cable pairs to their respective facilities. In some cases of trouble on a customer's line, the EISCC can be the source of the problem. To identify and fix the problem, a CLEC can use "tech-to-tech" testing with SBC-CA, which became generally available in April 2002. It can also order a change in "connecting facility assignment" (CFA), which is a change in the relevant EISCC cable pair.

To order a CFA change, Telscape prepares an LSR by following SBC-CA's instructions for the CFA Expedite Process. SBC-CA then makes the CFA change and bills Telscape. The billing includes the following elements: service order connect charge ($30.43); channel connect charge ($18.87); service order disconnect charge ($21.38); channel disconnect charge ($8.71); EISCC cable connect charge ($2.11); and EISCC cable disconnect charge ($3.35). The total that SBC-CA charges for a CFA change is $84.85. The Telscape-SBC-CA interconnection agreement does not establish a charge for a CFA change.23

SBC-CA has a variety of systems and processes that are employed in generating bills for CLECs and resolving billing disputes. The Customer Record Information System is used primarily for SBC-CA retail billing, but also bills CLECs that are resellers. The Carrier Access Billing System is used to bill CLECs for UNEs and interconnection products; recurring charges, non-recurring charges, and usage charges are billed through this system. Bills are presented to CLECs in formats that comply with the standards set by a voluntary national organization, the Ordering and Billing Forum.

SBC-CA LSCs are organized by products. CLECs, such as Telscape, may be assigned to multiple LSCs: Telscape has one LSC for UNE-P orders and one for all other business. LSC personnel answer billing inquiries, process adjustments for incorrectly billed amounts, and participate in resolving billing disputes. CLECs submit billing disputes to the LSC, which has the goal of resolving all correctly presented disputes within 30 days. If the dispute is not resolved in 30 days, the LSC must notify the CLEC of the dispute status. If a billing dispute is not initially resolved to the CLEC's satisfaction, the CLEC may use the LSC "escalation" procedure, which involves going to an LSC manager, then the LSC area manager, then the director of the LSC.

SBC-CA "account team" personnel are organized by CLEC. Multiple account managers may be assigned to one large CLEC or multiple CLECs may be assigned to one account manager; Telscape is in the latter category. There is also a dispute resolution process within the account team structure. The escalation process within the account team is usually invoked if the CLEC is not satisfied with the response from the LSC. Escalation moves from the CLEC's account manager, to the account team director, to the account team vice president.

Disputes may be resolved rapidly, or may take months. Once a billing dispute has lasted beyond 30 days, SBC-CA does not have any quantitative standard for the period of time within which it should be resolved. When disputes are resolved, any credits due to the CLEC may appear on the CLEC's next bill or may appear on a later bill, possibly several months later.

In any given month, Telscape typically has more than two dozen open billing disputes with SBC-CA; Telscape typically disputes $15,000-$30,000 of the amounts billed by SBC-CA. Many of Telscape's disputed bills are for non-recurring charges for UNEs, but bill disputes also arise with respect to usage charges and other billing categories. Some of Telscape's billing disputes relate to inaccurate or incomplete credits for amounts agreed on in previously resolved disputes.

In a series of decisions in our proceeding on Monitoring Performance of Operations Support Systems, R.97-10-016, I.97-10-017, we established performance measurements, performance criteria, and monetary incentives to help ensure that SBC-CA's OSS provides appropriate service to CLECs. In at least one instance, SBC-CA and Telscape have negotiated a settlement of Telscape's claim for overcharges through SBC-CA's internal dispute resolution procedures in which Telscape agreed to waive performance remedies. Following Telscape's waiver, SBC-CA did not report a deficiency in performance to the Telecommunications Division. SBC-CA has made similar agreements involving waiver of performance measure remedies with more than one other CLEC.

8 The parties have referred to residential and small business customers as "mass market" customers, as will we. 9 California Public Utilities Commission, "The Status of Telecommunications Competition in California: Third Report for the Year 2003, " p. 16 (Oct. 31, 2003) (Third Competition Report). Data are as of the end of 2002. We take official notice of the information in the Third Competition Report pursuant to Rule 73. 10 Third Competition Report at 39. Other forms of broadband make up the balance. 11 SBC-CA provided a clear explanation of this ordering requirement for the first time in its appeal of the Presiding Officer's Decision (POD). Because this explanation, though not given at the evidentiary hearing (EH), is not inconsistent with the evidence presented at the EH and was not contradicted by any other parties in their responses to SBC-CA's appeal, we will accept it here. 12 The FCC defines line splitting as "the scenario where one competitive LEC provides narrowband voice service over the low frequency portion of a loop and a second competitive LEC provides xDSL service over the high frequency portion of that same loop." Triennial Review Order, ¶ 251. 13 LSRs may also be rejected when the SBC-CA voice customer has a retail DSL arrangement other than SBC Yahoo! DSL, but there is no evidence in this record of how often or in what circumstances this occurs. We therefore refer to SBC Yahoo! DSL in this order, unless clarity requires otherwise. 14 In some circumstances, it may not be possible to regain DSL service. For example, if no CLEC providing DSL transport has a collocation facility in a central office close to the customer, it will be impossible for the customer to have DSL service because of the limitations on the distance over which signals for DSL are able to travel. 15 As part of the settlement, AT&T MCI withdrew previously distributed prepared testimony of their witnesses on winback issues. 16 Triennial Review Order, ¶ 561. 17 The costs associated with the retail services of SBC-CA (or any ILEC) may not be considered in UNE pricing. (47 C.F.R. § 51.505(d)(2).) 18 The initiation of this system is explained in D.98-12-079, 84 CPUC2d 272, 289 (1998). 19 E.g., the customer wants to add a new telephone line or a renter or a roommate wants his or her own line. 20 General Order 153 sets out the requirements for self-certification and recertification of ULTS eligibility. 21 The CLEC Handbook and other information and instructions for CLECs are available at SBC's CLEC web site, https://clec.sbc.com/clec. At the request of the parties, we take official notice of the contents of this web site. 22 Telscape's petition to set aside the case submission and reopen this proceeding to take additional evidence and briefing on the EISCC issue was granted by an Administrative Law Judge's Ruling dated March 3, 2004. SBC-CA and Telscape then submitted additional briefs and exhibits. 23 At the request of SBC-CA, with Telscape's agreement, we take official notice of the parties' interconnection agreement, which adopted the interconnection agreement between Pacific Bell and MCImetro Access Transmission Service LLC.

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