ALJ/TRP/avs

Decision 01-11-067 November 29, 2001

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Order Instituting Rulemaking on the Commission's Own Motion Into Reciprocal Compensation for Telephone Traffic Transmitted to Internet Services Providers Modems.

Rulemaking 00-02-005 (Filed February 3, 2000)

OPINION ON PAC-WEST MOTION ON
IMPLEMENTATION OF FCC ORDER ON INTERNET TRAFFIC

I. Background

On June 15, 2001, Pac-West Telecomm, Inc. (Pac-West) filed a motion in this docket for an order relating to Incumbent Local Exchange Carriers (ILEC) compliance with existing interconnection agreements and related measures. The motion was filed as a result of recent actions in response to the Order of the Federal Communications Commission (FCC) which establishes a rate structure for intercarrier compensation in handling calls to Internet Service Providers (ISPs).¹

On April 27, 2001, the FCC released its Order on Remand² establishing a new rate regime for Internet service provider (ISP) traffic. The order was published in the Federal Register on May 15, 2001, and became effective on June 14, 2001. The FCC declared that ISP-bound traffic constitutes "information access" and thus is not subject to the reciprocal compensation requirement of Section 251(b)(5) of the Telecommunications Act of 1996 (ACT). The FCC concluded that it has the authority under Section 201 of the Act to regulate ISP-bound calls and to establish inter-carrier compensation rules for such calls.

Under the FCC plan, reciprocal compensation rates for ISP-bound traffic are subject to declining rate caps over a 36-month period. Traffic exceeding a three-to-one ratio of terminating to originating traffic is presumed, unless proven otherwise, to be ISP-bound traffic subject to the FCC's rate structure. After the 36-month period, bill-and-keep compensation would apply to such traffic instead of reciprocal compensation.

While the new rate regime went into effect on June 14, 2001, for carriers entering into new or renegotiated interconnection agreements, the FCC envisioned prospective application of the new rates for existing interconnection agreements. The FCC stated:

"The interim compensation regime we establish here applies as carriers re-negotiate expired or expiring interconnection agreements. It does not alter existing contractual obligations, except to the extent that parties are entitled to invoke contractual change-of-law provisions. This Order does not preempt any state commission decision regarding compensation for ISP-bound traffic for the period prior to the effective date of the interim regime we adopt here."³

In its motion, Pac-West asks the Commission to address substantive questions as to whether the ILECs are properly implementing the provisions of the FCC Order. Pac-West's motion also raises jurisdictional questions regarding the proper role for this Commission relative to that of the FCC in resolving issues relating to implementation of the FCC Order. To the extent this Commission does have jurisdiction to implement the measures proposed by Pac-West, the question is whether Pac-West's proposed measures are procedurally appropriate and administratively efficient. We deny Pac-West's motion, in part, and grant it, in part. The motion is denied to the extent that it seeks to establish generic review and preapproval procedures as a condition of carriers' implementing the provisions of the FCC Order.

The motion is granted to the extent that it seeks confirmation that this Commission retains jurisdiction to adjudicate and enforce the terms of existing contracts relating to payment of reciprocal compensation (where change-of-law provisions do not provide for the immediate unilateral implementation of capped rates under the FCC Order).