Discussion

The FCC Order sets forth the process to be followed by carriers with respect to implementation of the FCC rate structure. The ILECs are already bound by the requirements of FCC orders as provided for within federal jurisdiction. There are no provisions within FCC rules that contemplate additional state commission rules or preapproval before those provisions may take effect. Therefore, we find no basis to impose additional layers of generic state filing requirements and preapprovals before carriers may otherwise implement the provisions of the FCC rate structure.

Pac-West has not justified the administrative burden or delay resulting from its proposals for comprehensive submissions of detailed implementation plans and identification of California carriers with which the ILEC does not propose to implement the rate order. Moreover, Pac-West has not explained what specific form such "detailed plans for implementing the FCC Order" would take, or what "details" would require review or approval by this Commission in light of the jurisdiction over ISP traffic exercised by the FCC. Even assuming the FCC Order contemplated additional state review and preapproval, we question whether it is the best use of this Commissions scarce time and resources to administer the preapproval process proposed by Pac-West.

While we decline to adopt a generic preapproval process as proposed by Pac-West, we do agree that this Commission retains jurisdiction to resolve disputes relating to the reciprocal compensation terms of interconnection agreements that were in force prior to the effective date of the FCC Order. While the FCC has asserted jurisdiction over intercarrier compensation for ISP traffic for prospective interconnection agreements, the FCC has also stated that reciprocal compensation provisions of preexisting interconnection agreements remain in effect until contract expiration, "except to the extent that parties are entitled to invoke contractual change-of-law provisions." Therefore, until or unless existing contracts expire (except where contractual change-of-law provisions apply), carriers remain subject to ISP reciprocal compensation provisions in existing contracts.

Accordingly, we conclude that Verizon has taken an overly broad interpretation of its unilateral discretion to implement the FCC rate caps immediately in all of its interconnection agreements merely by sending a letter to interconnecting carriers stating its intention to do so. The capped rates may be applied to previously existing contracts only to the extent that under the pricing terms in such contracts, parties are entitled to invoke change-of-law provisions. This Commission retains jurisdiction to enforce compliance with the reciprocal compensation terms of existing interconnection agreements that do not contain change-of-law provisions. The question of whether a change-of-law provision exists is a question that depends on the particular language in each interconnection agreement, and is not the proper subject for a generic rulemaking such as this.

The recourse for carriers that cannot agree on whether the FCC rate caps may be invoked immediately in a particular interconnection agreement would be to initiate legal action through an appropriate dispute resolution process. Carriers have continuing rights to file formal complaints with this Commission or to seek dispute resolution under applicable contract provisions to the extent they believe a carrier is violating any contractual provisions or taking unlawful actions. For example, Pac-West has availed itself of the dispute resolution process under its interconnection agreement with Verizon relating to the implementation of the FCC rate structure under the FCC Order.⁶

Any other carrier that believes that an ILEC is improperly changing the terms of an existing interconnection agreement similarly may seek legal recourse against the offending carrier. Such disputes, however, essentially involve enforcement of existing rules and laws, rather than generic rulemaking.

As noted by AT&T Wireless, the Commission also has rules in place concerning the filing of amendments to interconnection agreements as embodied in Resolution ALJ-181, effective October 5, 2000 as provided for under

Commission Rule 6.2. Carriers are obliged to comply with those Commission rules for any contract amendments that are executed, including amendments to invoke the rate cap provisions of the FCC Order. In its advice letter, the carrier shall verify compliance with the FCC Order by confirming that it has offered to all carriers statewide to exchange all traffic both originating and terminating, and including Internet-bound traffic, at the FCC's capped rates. To the extent that notice of advice letter filings appears in the Commission's Daily Calendar, all carriers within California subject to interconnection agreements will thereby receive notice of the proposed interconnection agreement amendments.

B. Memorandum Accounts

Parties' Positions

Pac-West, in its motion, also asks for an order requiring all ILECs to establish and maintain memorandum accounts to track the amount of out-of-balance traffic for which they are paying reduced reciprocal compensation payments pursuant to the FCC's rate structure. If the FCC Order is stayed or ultimately reversed on appeal, Pac-West argues, memorandum accounting would facilitate calculating the amounts owed to carriers.

Pacific responds that any memorandum accounting requirements should apply to all traffic so that all parties will be equally protected in the event that the FCC Order were to be overturned. Verizon argues that no memorandum accounting is necessary since both parties already have ready access to the information to derive the intercarrier compensation paid for out-of-balance traffic.