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? 14

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 32

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? 44

a) Lower CLEC Switching Costs Due to Use of Trunk-to-Trunk Switching for ISP Calls 46

(1) Parties' Positions 46

(2) Discussion 48

b) Lack of Line Concentration using ISDN-PRI 52

(1) Parties Positions 52

(2) Discussion 56

c) Longer Call Duration of ISP-Bound Traffic 58

(1) Parties' Positions 58

(2) Discussion 62

d) Higher Call Completion Ratio 64

(1) Parties' Positions 64

(2) Discussion 65

e) Other Differences in Network Configurations and Facilities 66

(1) Parties' Positions 66

(2) Discussion 72

D. Does the Payment of ISP Reciprocal Compensation Result in Unrecoverable Losses to the ILECs? 79

1. Parties' Positions 79

2. Discussion 85

VII. Alternative Compensation Arrangements: Reciprocal Compensation Versus Bill-And-Keep 90

A. Parties' Positions 90

B. Discussion 93

VIII. Comments on Proposed Decision 97

Findings of Fact 98

Conclusions of Law 106

ORDER 108

OPINION