VII. Appeal of Presiding Officer's Decision

On May 5, 2005, the Presiding Officer's Decision (POD) in these consolidated cases issued. On June 3, 2005, Verizon filed an appeal of the POD alleging numerous factual and legal errors.²⁷ MCI and Call America and Navigator (jointly) filed an opposition to the appeal.

Additionally, on May 6, 2005, a day after the POD issued, AT&T filed a motion to withdraw its complaint with prejudice. A June 1, 2005 ALJ ruling requested further briefing on this motion. AT&T timely filed a supplement to its motion and Verizon and Call America and Navigator²⁸ (jointly) filed a timely response to AT&T's supplement. We address AT&T's motion and Verizon's appeal individually below.

A. AT&T's Motion to Withdraw Its Complaint With Prejudice

1. AT&T's Supplemented Motion and Responses

AT&T's initial motion to withdraw its complaint with prejudice gave no justification. However, an ALJ ruling requested further briefing on the following points:

· The facts and circumstances justifying AT&T's motion;

· Whether any agreement, implicit or explicit, has been reached between AT&T and Verizon regarding the withdrawal and if so, the agreement's terms;

· How the request for withdrawal resolves the harm to the continuing public interest alleged in the complaint; and

· How the request for withdrawal is consistent with the rationale set forth in prior Commission precedent, i.e., Re Southern California Gas Company, 43 CPUC2d 639, and other Commission precedent.

In response, AT&T states that it seeks to withdraw its complaint with prejudice because it has resolved its dispute with Verizon by means of two agreements, a commercial agreement and an interconnection agreement amendment. According to AT&T, these agreements will insure that AT&T continues to obtain the facilities and features necessary to serve its local exchange customers even without access to the UNE-P, at specified rates. AT&T states that these two agreements enable it to continue to serve residential local exchange customers in Verizon's service territory, and to avoid the business uncertainty of wholesale prices set either through litigation or by regulation.

Supporting AT&T's motion, Verizon believes that granting the withdrawal is in the public interest because the settlement avoids the risk and expenses associated with further litigation, and because settlement should be encouraged at every step of the proceeding. Verizon also believes dismissal is in accord with Commission precedent, because AT&T's reasons for withdrawal are business-related. According to Verizon, the business agreements entered into between itself and AT&T are valid and effective, and should be honored.

Call America and Navigator do not object to AT&T's motion, but argue that withdrawal of AT&T's complaint does not diminish their need for a Commission resolution of their disputes with Verizon. These CLECs state that because Verizon has not offered any alternative for them to consider, the Commission needs to act on the remaining cases so that Verizon does not unilaterally alter the terms of the CLECs' interconnection agreements.

2. Discussion

In Re Southern California Gas Company, 43 CPUC2d 639 (1992), the Commission determined that an applicant no longer had the right to withdraw its application, when the matter had been submitted to the Commission on the evidentiary record and a proposed decision had issued pursuant to Pub. Util. Code § 311(d). At this juncture in the proceeding, the Commission held that the ability of applicant to withdraw its application rests with the Commission's discretion. In exercising its discretion, the Commission balances "a general disposition to permit litigants to control their interaction with governmental bodies with the necessity that entities such as courts and the Commission advance the public business while disposing of private claims and petitions." 43 CPUC2d at 640.

"While earlier California cases suggested that litigants had this right, those cases were arrested by the decision of the Supreme Court in Chadbourne v. Superior Court, 60 Cal.2d 723, 731, n 5 (1964). In Chadbourne the court asserted its discretion to refuse to permit a dismissal where the case involved issues of substantial importance and would impinge upon the orderly development of the law. Accord, Liberty Mutl. Ins. Co. v. Fales, 8 Cal.3d 712, 716 (1973). In Fales the court again asserted its interest in protecting a capacity to address issues of continuing public interest. Not only do we take a similar view, but we find it consistent with unpublished Commission precedent." (Id.)

We agree with the concurrence in Re Southern California Gas Company that in absence of such a policy, "all manner of mischief may go unchecked. Parties would be free to engage our resources and put opponents or intervenors to considerable expense and no little risk only to moot the controversy in the event of an adverse proposed decision. Further, our ability to discharge our own public responsibilities could be thwarted, as is the case here, by the sudden removal of a vehicle which presents the occasion to answer certain vital questions of general interest." (43 CPUC2d at 641.)

Here, AT&T made a motion to withdraw its complaint after the evidentiary record had been submitted and the POD had issued. Therefore, AT&T no longer has the right to withdraw this complaint; the Commission must exercise its discretion to permit AT&T to do so.²⁹

Although both the assigned Commissioner and ALJ encouraged the parties to settle this dispute at the outset of the case, the timing of this settlement is troubling. The parties and the Commission spent significant time and resources litigating this case, and the ALJ had issued her POD before AT&T filed its motion. The settling parties engaged the Commission's resources and put the other parties and the Commission to considerable expense, only to resolve the disputes after they received a result that, but for an appeal, would have been a final decision adverse to one of the settling parties. Although the settlement may save the parties' time and expense in the event of an appeal from the Commission's final decision, it nonetheless has not saved significant resources in litigating this case before the Commission.

However, this is a breach of contract case, and the settlement between AT&T and Verizon resolves the contractual issues before this Commission. We accept AT&T's representation that the agreements allow AT&T to continue to provide service to its local exchange customers with adequate Verizon facilities at a sustainable wholesale rate. For this reason, withdrawal of the complaint serves the limited public interest with respect to AT&T and its customers.

Determining whether withdrawal is in the broader public interest at this late date is a closer question. The Commission relies upon adjudication cases to enunciate Commission policy on a case-by-case basis. This policy is useful not only to the specific parties to the litigation, but as well to similarly situated persons who may have filed their own complaints. Here, three similar complaints have been consolidated, and additional parties have intervened. Although each complainant or intervenor relies upon its own interconnection agreement, the record was developed as a whole, and the discussion, findings, and conclusions with respect to the AT&T complaint help illuminate the entire controversy.

Therefore, in exercising our discretion on AT&T's motion to withdraw its complaint, we grant AT&T's motion out of deference to the settlement between the parties. However, we will retain the discussion, findings and the conclusions made by the POD with respect to the complaint in order to illuminate the entire controversy in this consolidated proceeding. That complaint was fully litigated, in substance it continues to bear on the remaining cases before us, and the record of the proceeding should stand as submitted.

B. Verizon's Appeal

Based upon numerous alleged factual and legal errors, Verizon argues that the decision in the POD should be reversed, and that Verizon should be able to discontinue providing the remaining complainants unbundled access to the Local Switching and Common Transport network elements.

Verizon's appeal, for the most part, raises the same arguments it has made throughout the case. The POD addresses these arguments and that discussion need not be repeated here. We affirm the POD, but make some changes to improve the discussion and correct typographical errors. We also make the following observations on several points that Verizon raises.

Verizon argues that the decision "wreaks havoc" with its investment-backed expectations.³⁰ However, the decision only requires Verizon to continue to permit complainant and intervenor CLECs to purchase Local Switching and Common Transport network elements under the terms of their interconnection agreements. The order does not prohibit Verizon from deploying its new packet switches, nor does the order require Verizon to unbundle and provide the advanced service capabilities of its packet switches to the CLECs.

Verizon also argues that even if the FCC has not squarely addressed whether packet switches are subject to unbundling requirements for voice, the lack of an affirmative FCC ruling on this point is fatal to complainants and intervenors, because the FCC must expressly designate this service as a UNE for the CLECs to obtain access to it. However, complainants and intervenors are not seeking, nor does the decision require, unbundled access to packet switching. The decision requires Verizon to provide unbundled local switching for the limited term set forth in the decision by any technology it chooses. Thus, the absence of an FCC ruling on this issue is not fatal to the CLECs' case.

Verizon also claims that the CLECs' interconnection agreements indicate that it only must provide unbundled local switching from a circuit switch. However, as set forth in Section VI.B of the decision, under the interconnection agreements, Verizon's obligation to provide local switching is not limited to a specific type of hardware or technology. Verizon believes that the technology can be inferred in the interconnection agreements' definition because the definition is similar to a definition of local circuit switching contained in the Triennial Review Order. However, this order was not released when all the underlying ICAs at issue were finalized and approved.³¹

Finally, Verizon tried to install its Nortel switches as pure packet switches for the main purpose of "immunizing against UNE-P business erosion." (See Section VI.A.2.) However, Verizon was unable to install a pure packet switch in this case, and its switch still contains the ENET, which is the TDM fabric used in circuit switching. Thus, even if the legal analysis contained in the decision is incorrect, and Verizon used its new switch to provide local switching to the CLECs, the provision of this UNE would not be contrary to federal law as Verizon views it. This is so because the CLECs would be utilizing the circuit switching functionality that Verizon has retained on its switch.

As noted in the decision, Verizon states that although its Nortel switches have both packet and circuit capability, as currently configured, the switches are packet switches and cannot support UNE-P traffic in a TDM mode without being modified. Verizon argues that it is not technically feasible to reconfigure Verizon's network to provide for circuit switching because it would now be too costly, time consuming, and challenging. However, Verizon was aware of its obligations under the interconnection agreements to provide Local Switching and Common Transport when it installed its packet switches, yet it chose to ignore these obligations. Under these circumstances, Verizon is not relieved of its obligation to provide access to these network elements because modifications may be time consuming and costly.

Finally, Verizon generally asserts that it is legal error to rely upon a Nortel letter to Verizon confirming the understanding that Verizon's main purpose in attempting to create a pure packet switch is to immunize against UNEP business erosion. However, this Nortel letter, produced during discovery, was admitted into the record of this proceeding. Nortel's witness Peeler stated that he had no reason to question the letter's authenticity.³² Therefore, relying on this letter is not legal error. We therefore confirm the outcome of the POD.