TABLE OF CONTENTS

Title Page

OPINION 2

I. Introduction 2

II. Background 4

III. Procedural History and Scope of this Proceeding 7

IV. Overview of the Proceeding 12

A. Parties' Proposals 12

B. Summary Conclusions and Framework for Approaching the Issues 12

V. Should Calls to an ISP Be Treated As Local Calls as Defined by the 1996 Telecommunications Act? 15

A. Parties' Positions 15

B. Discussion 20

VI. Assuming that the Reciprocal Compensation Provisions of the Act are not applicable to ISP Traffic, Do Other Factors Justify Reciprocal Compensation for ISP Traffic? 29

A. Effects of Reciprocal Compensation Policies on Incentives to Promote Competition and Economic Efficiency 29

1. Parties' Positions 29

2. Discussion 33

B. Can ISP Traffic Be Accurately Identified and Segregated from other Traffic ? 37

1. Parties' Positions 37

2. Discussion 42

C. Are there Fundamental Differences Between Dial-Up ISP-Bound Traffic and Standard Traffic and Between the Network Architectures that Transport and Terminate them? 45

a) Lower CLEC Switching Costs Due to Use of Trunk-to-Trunk Switching for ISP Calls 47

(1) Parties' Positions 47

(2) Discussion 49

b) Lack of Line Concentration using ISDN-PRI 53

(1) Parties Positions 53

(2) Discussion 57

c) Longer Call Duration of ISP-Bound Traffic 60

(1) Parties' Positions 60

(2) Discussion 63

d) Higher Call Completion Ratio 66

(1) Parties' Positions 66

(2) Discussion 66

e) Other Differences in Network Configurations and Facilities 67

(1) Parties' Positions 67

(2) Discussion 73

D. Does the Payment of ISP Reciprocal Compensation Result in Unrecoverable Losses to the ILECs? 80

1. Parties' Positions 80

2. Discussion 87

VII. Alternative Compensation Arrangements: Reciprocal Compensation Versus Bill-And-Keep 92

A. Parties' Positions 92

B. Discussion 96

VIII. Comments on Proposed Decision 100

Findings of Fact 100

Conclusions of Law 109

ORDER 111

OPINION