2. Background

On October 22, 1998, the Commission issued Decision (D.) 98-10-057 in response to a motion filed in this proceeding by the California Telecommunications Coalition (Coalition). The Coalition sought a ruling regarding the treatment of telephone calls using a local exchange number to access Internet Service Provider (ISPs).¹ The Coalition argued that ISP-bound calls should be treated as local and subject to the reciprocal compensation provisions of applicable interconnection agreements. Pacific argued that ISP calls were interstate and thus not subject to reciprocal compensation that are applicable only to local calls.²

In D.98-10-057, the Commission concluded that it "has jurisdiction over transmissions originating from an end user and terminating at an ISP modem where both the end user and modem are intrastate.³ The Commission also concluded that it had the jurisdiction to order reciprocal compensation for a transmission "terminating at an ISP."⁴ Finally, the Commission ruled that the reciprocal compensation agreements in effect at the time should apply to the termination of calls to ISPs as they do to any other local calls.⁵

Pacific sought rehearing of D.98-01-057, claiming among other things that the Commission violated the Telecommunications Act of 1996 (Act) in purporting to require reciprocal compensation payments for ISP traffic. On July 22, 1999, the Commission issued D.99-07-047, upholding the reciprocal compensation requirements of D.98-10-057 and denying Pacific's application for rehearing. ⁶

On August 25, 1999, GTE California Incorporated (GTEC) filed a Complaint for Declaratory and Injunctive Relief (Civil Action No. C.99-3973) in the United States District Court for the Northern District of California challenging D.98-10-057. In its complaint, GTEC asserts that the Commission lacked the authority to mandate reciprocal compensation under the Act. Pacific likewise filed a complaint in the United States District Court, Northern District of California, challenging the legality of D.98-10-057, as modified by D.99-07-047.

Pacific argues that the issue of the propriety of reciprocal compensation payments has not been finally resolved in California or elsewhere. Pacific also notes that the financial implications are substantial. At the time of filing its motion, Pacific had six interconnection agreements, executed prior to the October 1998 Decision, wherein CLECs are claiming reciprocal compensation payments for ISP traffic. For five of these agreements, Pacific has been placing the amounts claimed due for reciprocal compensation for ISP-bound traffic into escrow. In other cases, Pacific is just starting to receive statements from CLECs claiming reciprocal compensation for ISP-bound traffic, and anticipates that at least two additional CLECs will be making such claims. Over three-fourths of the "local" traffic passed to Pacific by CLECs for the month of July 1999 was ISP-bound traffic. Thus, Pacific seeks the relief set forth in its motion as an interim measure to protect its interests pending final resolution of the matter.

On September 2, 1999, Pacific filed a motion for a Commission order that (1) requires competitive CLECs to provide security for any reciprocal compensation payments for ISP - bound traffic made by Pacific under interconnection agreements in effect on or before the issuance of D.98-10-057, as modified by D.99-07-047; (2) requires the same security for any CLEC that exercises rights under Section 251(i) of the Act to adopt the provisions of an interconnection agreement of another telecommunications carrier that permits such CLEC to receive reciprocal compensation payments from Pacific for ISP-bound traffic; and (3) requires any CLEC that receives reciprocal compensation for ISP-bound traffic to establish and maintain a memorandum account to track the amount of ISP traffic and related reciprocal compensation. Pacific further moves for an order stating that any reciprocal compensation payments for ISP-bound traffic are potentially subject to refund should a court of competent jurisdiction find that the Commission erred in mandating the disputed reciprocal compensation payments.

The (Coalition), ⁷ Office of Ratepayer Advocates (ORA), Pac-West Telecomm, Inc. (Pac-West), and RCN Telecom Services of California, Inc., GST Telecom California, Inc.(GST) and GST Pacific Lightwave, Inc. (RCN), each filed responses on October 12, 1999 to Pacific's motion concerning reciprocal compensation payments for ISP traffic. A response was also filed by GTEC.

Pursuant to Rule 45(g), on October 22, 1999 Pacific contacted Administrative Law Judge (ALJ) Thomas R. Pulsifer to seek permission to file a third-round reply. ALJ Pulsifer granted Pacific permission to file a response which was filed on October 22, 1999, addressing issues raised by Pac-West, ORA, and the Coalition. We hereby dispose of the motion based upon our review of the filed pleadings.