5. Previous Commission Treatment of VNXX Traffic

In D.99-09-029,⁴ the Commission allowed CLECs to designate different rating and routing points for traffic intended for their customers, in an effort to encourage carriers to develop innovative service alternatives in the most economically and technologically efficient manner. This traffic which is disparately routed and rated has been termed Virtual NXX or "VNXX" traffic. In many cases, the routing of the call requires the ILEC to transport that call across a LATA to where the CLEC's customer is actually located.

In light of the requirement to transport traffic beyond the local calling area, the Commission also concluded:

While we recognize carriers' discretion to make such use of NXX prefix assignments from a foreign exchange where economic efficiencies warrant it, we expect carriers to negotiate reasonable intercarrier compensation arrangements for the routing, switching, and for the use of facilities to deliver such calls.

The Commission made it clear that it was dealing with VNXX calls where the ILEC is required to transport the call across its network to where it can be considered a local call:

The provision of a local presence using an NXX prefix rated from a foreign exchange may avoid the need for separate dedicated facilities, but does not eliminate the obligations of other carriers to physically route the call so that it reaches the proper destination. A carrier should not be allowed benefit from the use of other carriers' networks for routing calls to ISPs while avoiding payment of reasonable compensation for the use of those facilities. A carrier remains responsible to negotiate reasonable compensation with other carriers with whom it interconnects for the routing of calls from a foreign exchange. (D.99-09-029, mimeo. at 32.)

Since the Commission first addressed this issue in D.99-09-029 in 1999, it has addressed this specific issue in several ICAs brought to the Commission for arbitration pursuant to § 252. Because VNXX calls are often routed by the originating carrier far beyond the local calling area, the Commission has determined that the originating carrier should be fairly compensated for the costs of long-haul transport.

Pac-West cites various arbitrations to make this point. First, in approving the ICA between AT&T Communications Inc. and Pacific Bell Telephone Company (Pacific), the Commission concluded: "For calls with disparate rating and routing points, AT&T will pay switching and transport for calls routed across Pacific's network from distant exchanges while Pacific will continue to pay AT&T reciprocal compensation for terminating those calls."⁵

Pac-West also points to D.00-10-032 which addressed interconnection arrangements between Level 3 Communications, LLC and Pacific. The Commission explained that the required payment of compensation for VNXX traffic is "for Pacific's facilities used in the carriage of traffic from the rate center where the calling party physically resides to the point of interconnection closest to the switch used for terminating calls to the NXX rate center where the call terminates.⁶

Similarly, in addressing interconnection arrangements between Global NAPS, Inc., on the one hand, and Pacific and Verizon California, Inc. (Verizon) on the other hand, the Commission observed, "By allowing disparate rating and routing, we are allowing for those calls to become local calls, and as such, subject to reciprocal compensation. However, GNAPs is required to pay the additional transport required to get those calls to where they will be considered local calls."⁷

In all three of the cases cited, the CLEC is required to pay the costs of the additional transport required to get those calls to where they could be considered local calls. We need to explore the issues in this arbitration to see if they are similar. Is SureWest transporting Pac-West's calls across its network beyond the local calling area?

The undisputed testimony of Pac-West's witness Mart McCann reads as follows:

Pac-West and SureWest currently interconnect using a meet-point facility that extends from SureWest's tandem wire center to certain Pac-West's facilities that are collocated at an SBC wire center in Sacramento. The interconnection facility is jointly operated by SBC and SureWest. It is my understanding that the existing meet point for this facility, which determines their respective and financial responsibilities, is at the border between their service territories. In any event, that point that has been deemed to be the POI between Pac-West's and SureWest's networks. The POI is approximately 5 miles from SureWest's tandem wire center and well within the boundaries of the local calling areas for SureWest's end users.

SureWest's witness Marie Rita Whitmore, whose testimony is also undisputed, describes the interconnection arrangements between the two companies as follows:

Currently Pac-West has 624 trunks (26 T1s) connected to SureWest's Citrus Heights Central Office, 984 trunks (41T1s) connected to SureWest's Roseville Central Office, and 72 trunks (3 T1s), for the purpose of overflow traffic, connected to SureWest's 04T tandem located at SureWest's Roseville Central Office. SureWest charges Pac-West approximately $3,900 per month for these trunks, which represents one half of their cost, under the existing interconnection agreement. These trunks exit SureWest's service area via two separate routes. The first route travels from the Roseville Central Office to a point of interconnection ("POI") at a controlled environmental vault ("CEV") operated by SureWest (designated the Antelope CEV). The second route travels from the Citrus Heights Central Office to a POI in a manhole on San Juan Avenue in Citrus Heights. Each route is approximately five miles from the central office to the POI.⁸

SureWest does not attest that it is carrying the traffic beyond the local calling area, and both parties concur that SureWest carries traffic destined for Pac-West from its COs, 5 miles to its POIs with Pac-West. Also, the parties have agreed on the location of the POIs. Pac-West does not dispute that the traffic it is carrying would be considered VNXX traffic, but the difference between this case, and those cited above, is that it is Pac-West, not SureWest that is transporting the traffic over its network. Since the 5 mile range from SureWest COs to the POIs is within the 12-mile local calling area, SureWest is not entitled to additional compensation for transporting such traffic. Therefore, the arbitration cases cited above are not on point.