Discussion

XO's motion and SBC's response raise issues concerning the timing of implementation of the provisions of the TRRO relating to the provisioning of new UNE arrangements for transport, high capacity loops, dark fiber and unbundled local switching (i.e. UNE-P). Specifically, the question is whether the provisions of the TRRO regarding elimination of these UNEs form a sufficient basis for SBC to unilaterally implement its Accessible Letters on March 11, 2005, even though XO has not yet completed the process outlined in the ICA to negotiate appropriate conforming amendments relating to applicable changes of law under the TRRO. As a basis for resolving the issues in XO's Motion, the relevant authorities are the provisions of the TRRO and the provisions of the existing ICA outlining the sequence of events to occur in order to implement applicable changes of law.

There is no dispute that the TRRO sets new rules for the UNEs at issue. In addition, SBC's Accessible Letters and offers to negotiate commercial agreements signal that it is willing to continue to offer the equivalent functionality of these declassified UNEs, including UNE-P.³ The dispute is over the timing of implementation and pricing of this offering with regard to existing agreements. The critical question is whether the TRRO contemplated change of law amendments through negotiation and arbitration under Section 252 to effectuate the FCC's rule changes, as the FCC's previous Triennial Review Order (TRO)⁴ decision contemplated.

After scrutiny of the TRRO and the existing agreement, and consistent with past practice when a change of law has occurred, we find the provisions in the TRRO support the use of existing change of law language in existing interconnection agreements to effectuate the FCC's unbundling rule changes.

SBC's position that it can sidestep change of law negotiations of new rates for declassified UNEs and unilaterally impose a new rate does not square with the TRRO language that carriers shall implement all FCC rule changes under Section 252 through good faith negotiations. We acknowledge the TRRO does, in fact, set different timetables for the embedded customers versus new customers with respect to the transition period for declassified UNEs that the FCC has found no longer need to be provisioned under Section 251. With regard to dedicated transport obligations (including dark fiber and entrance facilities), the TRRO states: "These [12 and 18-month] transition plans shall apply only to the embedded customer base, and do not permit competitive LECs to add new dedicated transport UNEs pursuant to Section 251(c)(3) where the Commission determines that no Section 251(c) unbundling requirement exists." (¶ 142.) The TRRO contains virtually identical language regarding a transition period for embedded customers served by high capacity loops, dark fiber loops, and unbundled local switching. (See TRRO at ¶¶ 195 and 227.)

SBC interprets this language as prohibiting the CLECs from adding any new dedicated transport, high capacity and dark fiber loops, and unbundled local switching after the effective date of the TRRO. SBC views this prohibition as self-effectuating. This view ignores the mandate of TRRO ¶ 233, entitled "Implementation of Unbundling," that calls for good faith negotiation under Section 252 to arrive at mutually agreeable terms and conditions for interconnection. Further, SBC contends the current change of law language in its ICA with XO supports its views. However, SBC ignores the second portion of this change of law language requiring a 60-day negotiation of disputes, as described further below.

If the FCC intended simply for a unilateral implementation of new terms dictated by the ILEC beginning on March 11, 2005, without mutual bilateral negotiation, then there would have been no point in stating: "We expect that parties to the negotiating process will not unreasonably delay implementation of the conclusions adopted in this Order." (TRRO ¶ 233.) (Emphasis added.) The warning against unreasonable delay is meaningful only where a process for contract negotiation was contemplated to implement change of law provisions that could extend beyond March 11, 2005. The remedy against unreasonable delay is not to circumvent the negotiation process by unilateral implementation of the ILEC's Accessible Letters on March 11, 2005. Rather, the FCC recognized the possibility for some period for contract negotiations extending beyond March 11, 2005, but addressed the potential for abuse through delay by stating: "We encourage the state commissions to monitor this area closely to ensure that parties do not engage in unnecessary delay." (TRRO ¶ 233.)

Although we agree with SBC that the full 12 or 18-month transition period does not apply to new interconnection arrangements that replace UNE-P, the TRRO still contemplated a transitional process to pursue contract negotiations so that CLECs could continue to offer service to new customers through alternative arrangements. With respect to UNE-P, the intent of the Order was for new customers to be served by arrangements other than UNE-P after March 11, 2005, "except as otherwise specified in this Order." (¶ 227.) The exceptions "otherwise specified" are not restricted to only one particular portion of the TRRO. While voluntarily negotiated alternative agreements would be one example of an "otherwise specified" exception, they are not the only exception.

The TRRO contemplates a process for negotiating change of law provisions, including those to implement any arrangements that would replace UNE-P. We conclude that the exceptions as "otherwise specified" in the TRRO noted in ¶ 227 include reference to contracts for which change-of-law amendments have not yet been incorporated into the applicable interconnection agreements. SBC says XO is asking the Commission to flout the deadlines set forth in the TRRO. On the contrary, we find the TRRO specifically contemplated change of law negotiations to replace the declassified UNEs as of March 11, 2005. In so finding, we believe we are upholding, not flaunting, the FCC's specific instruction to undertake good faith negotiation under Section 252.

Further confirmation is set forth in the original Triennial Review Order (TRO) as to the FCC's intent requiring completion of the negotiation/arbitration of contract amendments as a prerequisite to implementing applicable change of law provisions, such as those at issue here. In discussing the transition period to implement the change of law provisions under the original TRO, the FCC affirmed that concerns over expedited implementation of changes of law must not supersede the process for voluntary negotiations for binding interconnection agreements. In this regard, the FCC stated:

". . . We recognize that many interconnection agreements contain change of law provisions that allow for negotiation and some mechanism to resolve disputes about new agreement language implementing new rules. . . [W]e believe that individual carriers should be allowed the opportunity to negotiate specific terms and conditions necessary to translate our rules into the commercial environment, and to resolve disputes over any new agreement language arising from differing interpretations of our rules.

Thus, to the extent our decision in this Order changes carriers' obligations under section 251, we decline the request of several BOCs that we override the section 252 process and unilaterally change all interconnection agreements to avoid any delay association with renegotiation of contract provisions. (TRO ¶¶ 700.701.) (Emphasis added.)

Of course, various substantive portions of the TRO were vacated and superseded by the TRRO. Nonetheless, the principles articulated by the FCC in TRO ¶¶ 700, 701 concerning the primacy of the bilateral negotiation process under Section 252 were not vacated and remain equally applicable in the implementation of TRRO provisions. The FCC did not reverse these principles in the TRRO, and indeed, it affirmed them in ¶ 233 by stating its expectation that carriers "implement the [FCC's] findings as directed by Section 252 of the Act." Thus, we believe SBC cannot unilaterally implement the terms of its Accessible Letters on March 11, 2005 while circumventing the negotiation process to implement change of law provisions.

For UNE-P, ¶ 227 of the TRRO prohibits new UNE-P arrangements "except as otherwise specified in this order." We interpret "new arrangements" as referring to new customers, rather than to changes to the service of the existing UNE-P customer base. If the prohibition against "new arrangements" were to include any changes to the service of existing UNE-P customers, the result would tend to undermine the intent of the TRRO for an orderly transition of the existing UNE-P customer base. The FCC notes in ¶ 226 that "eliminating unbundled access to incumbent LEC switching on a flash cut basis could substantially disrupt service to millions of mass market customers, as well as the business plans of competitors." Such disruption could occur if existing UNE-P customers were unable to receive ongoing service, including processing of periodic changes in UNE-P arrangements that might be required. Thus, it is reasonable to interpret the existing UNE-P customer base as including changes to the service arrangements of such customers occurring after March 11, 2005 and up until such customers are transitioned off of UNE-P in accordance with the 12-month schedule.

Finally, we find XO will be irreparably injured through loss of customers if SBC rejects XO's orders for declassified UNEs while change of law negotiations are pending. In contrast, our actions in this ruling will not disadvantage SBC because it has offered to provide these UNE functionalities anyway and the price for them will be trued up to March 11, 2005. In our view, this approach meets the goals of not disrupting customers and competitors' business plans, as noted in TRRO ¶ 226.

³ Even though the FCC's new rules end unbundling of certain UNEs under Section 251(c)(3), SBC has commercial agreements that offer arrangements functionally equivalent to these UNEs, including UNE-P, to existing and new customers. To the extent that SBC offers a particular functionality to a customer for interconnection purposes, SBC would be obligated to offer that same functionality to any requesting customer on a nondiscriminatory basis. See Sections 252(c)(2)(D) and 202 of the Communications Act. Thus, the ILEC could not lawfully withdraw an offer of a functionality to a customer that it is otherwise providing to another customer.