2. Background

Sprint Communications Company LP (Sprint) and Verizon California Inc. (Verizon) exchange telecommunications traffic pursuant to an existing IA. On March 31, 2000, Sprint and Verizon began negotiating a successor IA. Having been only partly successful in their negotiations, Sprint filed an application for arbitration on September 7, 2000. The application sought arbitration of 7 issues. The parties stipulated to a schedule, and revisions thereto, that acknowledged that the Commission would not have time to resolve the disputed issues within 9 months from the date the parties commenced negotiations. That deadline would have been 9 months from March 31, 2000, or December 31, 2000. Therefore, the parties waived the 9-month deadline, and agreed to the schedule reflected below.¹

On October 2, 2000, Verizon filed its response to Sprint's arbitration request. Subsequently, the parties settled all but 3 issues. The parties submitted two of these three issues on briefs, and sought hearing on the single remaining issue. The three issues are:

1) Sprint's contention that local calls include Verizon customer-originated calls that route over access trunks to the Sprint Operator Service (OS) platform, and then return to the called Verizon customer located in the same local calling area as the calling party (the "local over access" issue);

2) Sprint's contention that it should be allowed to purchase at wholesale vertical features (call waiting, forwarding and the like) without also purchasing the underlying dial tone line (the "resale of stand-alone vertical features" issue); and

3) Sprint's contention that it may order unbundled network elements (UNEs) from Verizon in combinations that are not do not currently exist in Verizon's network (the "new UNE combinations" issue).²

The assigned Arbitrator, Administrative Law Judge (ALJ) Sarah R. Thomas, held the arbitration hearing on November 28, 2000. Three witnesses testified, and 6 exhibits were received in evidence. The parties filed post-hearing briefs on December 6, 2000 on the 3 remaining issues not settled prior to hearing.

The Arbitrator filed and served her Draft Arbitrator's Report (DAR) on January 10, 2001. The parties filed opening comments on the DAR on January 24,  2001. At the Arbitrator's request, Verizon filed reply comments limited to one issue of contention on February 7, 2001. The Arbitrator denied Sprint's request to file a surreply to Verizon's reply comments. The Arbitrator filed and served her FAR on February 23, 2001.

The FAR found in Verizon's favor on issue 1 above (the local over access issue), and in Sprint's favor on issues 2 and 3 above (the resale of vertical features issue and the new UNE combinations issue, respectively).

The parties then sought approval of their entire IA on March 3, 2001. With their March 3, 2001 filings, the parties (1) identified the criteria we must use to test the IA that would result from decisions in the FAR, (2) explained whether such IA would pass or fail each test, and (3) said whether we should approve or reject the resulting IA.

Each party reserved the right to challenge the FAR on the issues decided against it (Sprint on issue 1 and Verizon on issues 2 and 3). Otherwise, both Sprint and Verizon contended that assuming the Commission upholds the FAR's conclusions, the IA that would result from decisions made in the FAR would comply with the Telecommunications Act of 1996 (Act) and Commission rules. For the same reasons raised in their comments on the DAR, Sprint recommended reversal of the result on issue 1 (local over access), and Verizon recommended reversal of the outcome in the FAR on issues 2 (resale of vertical features) and 3 (new UNE combinations).