Process for Implementing Applicable ICA
Amendments for UNE Replacement

Since further ICA amendments are required to be completed before replacements to existing UNE arrangements can be implemented, we adopt measures to expedite that process. CLECs shall not be permitted to use negotiations as a means of unreasonably delaying implementation of the TRRO or attempting to defeat the intent of the TRRO. We adopt measures below to guard against undue delay. Accordingly, we disagree with SBC's characterization, claiming that granting XO's Motion "seeks to perpetuate the UNE-P indefinitely." (SBC Response at 28.) To the contrary, the TRRO, by referencing negotiations under Section 252, sanctions a limited period of negotiations under change of law provisions, to be monitored by state commissions, after which the prohibition against new UNE-P or other UNE arrangements would take effect.

Section 2.0 and 2.1 of the Second Amendment Superseding Certain Intervening Law, Compensation and Interconnection and Trunking Provisions of the current ICA between SBC and XO sets forth the process and sequence of events whereby changes of law are implemented.

2.0 Intervening Law/Change of Law:

2.1 ... [I]f any reconsideration, agency order, appeal, court order or opinion, stay, injunction or other action by any state or federal regulatory or legislative body or court of competent jurisdiction stays, modifies, or otherwise affects any of the rates, terms and/or conditions ("Provisions") in this Second Amendment or the current ICAs or any future interconnection agreements(s), ...the affected Provision(s) will be immediately invalidated, modified or stayed as required to effectuate the subject order, but only after the subject order becomes effective, upon the written request of either Party ("Written Notice"). In such event, the Parties shall have sixty (60) days from the Written Notice to attempt to negotiate and arrive at an agreement on the appropriate conforming modifications. If the Parties are unable to agree upon the conforming modifications required within sixty (60) days from the Written Notice, any disputes between the Parties concerning the interpretation of the actions required or the provisions affected by such order shall be resolved pursuant to the dispute resolution process provided for in the current ICAs or any future interconnection agreement(s). (Emphasis added.)

The process for dispute resolution is set forth in Section XVII "Dispute Resolution and Binding Arbitration" of the ICA.

Thus, in accordance with these provisions of the ICA, parties are to first "attempt to negotiate and arrive at an agreement" on appropriate modifications to the agreement, after Written Notice is provided by either Party. According to XO's motion, it received no Written Notice from SBC pursuant to this provision. Further, XO responded to SBC's Accessible Letters on February 18, 2005, stating they are inconsistent with applicable law and represent an anticipatory breach of the Parties' ICA. SBC responded to XO's letter on February 24, 2005, stating SBC has proposed conforming ICA language consistent with the FCC directive to implement new unbundling rules through good faith negotiations. Nevertheless, SBC reiterated its intention to reject all orders for certain UNEs in California beginning on March 11, 2005.

In any event, XO's and SBC's efforts have failed to reach agreement on the appropriate modifications to implement the change of law provision relating to the elimination of the UNEs identified in the TRRO. Until such time as the currently effective ICA is amended to incorporate such change of law provisions, SBC remains obligated to continue offering the equivalent functionality of dedicated transport, high capacity loops, dark fiber and UNE-P for both existing and new customer arrangements under the current ICA. As noted above, the FCC also prescribed the basis for pricing of these UNEs for existing customers during the transition period as provided pursuant to Section 251 (c)(3). Until the ICA is amended to comply with new FCC rules, the pricing of new declassified UNE arrangements should likewise apply the same basis for transition pricing during the intervening period until applicable contract amendments have taken effect.

The next step prescribed under the Agreement is to move into the dispute resolution process. Absent completion of this process, there is no legal basis for SBC to impose its unilateral prices and terms for implementation as set forth in its Accessible Letters, prior to pursuing the dispute resolution process as required under the Agreement.

If the parties had completed the applicable contract amendments by now, then the new amendments replacing these UNEs could simply take effect on March 11, 2005. Since that process has not been completed, however, some additional process is required to bridge the gap between March 11, 2005 and the actual date that the contract amendment process can be completed.

The most reasonable way to bridge this timing gap is for negotiations to amend the ICAs to proceed expeditiously, and to include provision for true up of applicable charges ultimately incorporated in the ICA. Accordingly, any true up provisions that parties negotiate shall result in adjustment of billings back to March 11, 2005, such that the amended charges shall apply from the effective date of the TRRO forward. Nonetheless, the provision for new arrangements as offered by SBC in its Accessible Letters shall not automatically take effect on March 11, 2005, given that Parties have failed to reach agreement on necessary contract amendments for any replacement service that may be used for new CLEC customers.

In order to expedite the process for resolving remaining disputes and execution of necessary contract amendments, we shall allow 60 days for XO and SBC to negotiate conforming modifications to their ICA. If no agreement is reached in 60 days, XO or SBC may seek an extension of this ruling to allow time for dispute resolution of conforming modifications, as contemplated by their existing change of law provision. Given that this arbitration has been delayed already to accommodate changes in applicable law affecting UNEs, and since SBC itself suggested that the Commission could request supplemental briefing to address the FCC's final unbundling rules once issued,⁵ the Commission may consider further delay of this arbitration to resolve any remaining disputes concerning provisioning of alternative interconnection arrangements to replace declassified UNEs, if parties are unable to reach agreement in 60 days. In addition, the arbitrator in this matter shall schedule a prehearing conference to discuss whether further briefing is needed to address issues arising out of the TRRO so that the ICA amendment the Commission arbitrates herein will be consistent with the most recent changes in federal law.

Therefore, IT IS RULED that:

1. The Motion of XO California, Inc. is hereby granted in accordance with the discussion above.

2. SBC shall continue to honor its obligations under its existing interconnection agreement with XO for 60 days from receipt by XO of SBC's Written Notice of dispute under the change of law provisions or from today's date whichever is earlier, including provision of the equivalent functionality of dedicated transport, high capacity loops, dark fiber, and unbundled local switching (including UNE-P), pending execution of applicable change of law provisions in accordance with the process outlined in the ICA and contemplated in the TRRO, at pricing established in TRRO ¶ 5.

3. Parties are directed to proceed expeditiously with good faith negotiations toward amending the ICA in accordance with the TRRO

4. If parties have not reached an agreement within 60 days of this ruling, XO or SBC may seek extension of this ruling to allow dispute resolution of conforming modifications to their ICA upon a showing of good faith, diligent effort at negotiation.

5. The Arbitrator shall schedule a prehearing conference to discuss whether further briefing is needed to address issues arising out of the TRRO so that the ICA amendment the Commission arbitrates herein will be consistent with the most recent changes in federal law.

Dated March 10, 2005, at San Francisco, California.

/s/ GEOFFREY F. BROWN		/s/ DOROTHY J. DUDA
Geoffrey F. Brown Assigned Commissioner		Dorothy J. Duda Arbitrator

CERTIFICATE OF SERVICE

I certify that I have this day served the attached Assigned Commissioner's and Arbitrator's Ruling on Motion for an Expedited Order Requiring SBC California to Maintain the Status Quo Pending the Outcome of this Arbitration on all parties of record in this proceeding or their attorneys of record by electronic mail to those who provided electronic mail addresses, and by U.S. mail to those who did not provide email addresses.

Dated March 10, 2005, at San Francisco, California.

/s/ TERESITA C. GALLARDO

Teresita C. Gallardo

NOTICE

Parties should notify the Process Office, Public Utilities Commission, 505 Van Ness Avenue, Room 2000, San Francisco, CA 94102, of any change of address to insure that they continue to receive documents. You must indicate the proceeding number on the service list on which your name appears.

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(END OF APPENDIX A)