III. Discussion
A. Is Pac-West Entitled to Tariff Charges for Terminating ISP-Bound Traffic Originated by AT&T Customers?
Although there are ambiguities in the key paragraphs of the ISP Remand Order, we conclude that on balance, Pac-West's reading of these paragraphs more accurately reflects the FCC's intent than does AT&T's reading. Accordingly, we conclude that AT&T cannot rely on ¶ 81 of the ISP Remand Order as a justification for insisting that the ISP-bound traffic it exchanges with Pac-West must be handled on a bill-and-keep basis, because we agree with
Pac-West that only ILECs that have made the mirroring offer described in ¶ 89 of the Remand Order are free to invoke the bill-and-keep arrangements set forth in ¶ 81. As a CLEC, AT&T cannot make a mirroring offer, and so cannot invoke ¶ 81. Moreover, contrary to its claims, AT&T has not established that the common practice within the telecommunications industry is for CLECs to exchange traffic among themselves on a bill-and-keep basis.
We also conclude that Pac-West's intrastate tariff is the appropriate source to look to for the compensation that AT&T must pay Pac-West for terminating ISP-bound calls. As the T-Mobile Ruling indicates, properly-filed state tariffs are an appropriate source to consult where reliance on them would not undermine the policy in the 1996 Telecommunications Act favoring voluntary interconnection agreements. Since both parties here acknowledge that AT&T cannot be forced to enter into an interconnection agreement with Pac-West (because AT&T is a CLEC), no interference with the Act's statutory scheme would result from applying Pac-West's intrastate tariff here. To rule to the contrary and in AT&T's favor on this issue would be to hold that despite the FCC's decision in the Core Order to forbear from enforcing the New Markets Rule after October 8, 2004, Pac-West would still not be entitled to receive any compensation for terminating AT&T's ISP-bound calls, simply because Pac-West had previously been compelled by law to accept a bill-and-keep arrangement. In our opinion, such a ruling would stand the Core Order on its head.
As noted in the description of the parties' positions, AT&T relies heavily on the fact that ¶ 81 refers to "carriers" - a term that encompasses both ILECs and CLECs - to justify its argument that bill-and-keep should apply to its traffic exchanges with Pac-West. We acknowledge that, as the complete quotation of ¶ 81 in footnote 8 of this decision shows, nothing within the language of ¶ 81 itself expressly limits the New Markets Rule to exchanges of ISP-bound traffic between ILECs and CLECs. Since AT&T did not have an interconnection agreement with Pac-West on the effective date of the ISP Remand Order, the language of ¶ 81, standing alone, therefore seems to support AT&T's argument that it is entitled to exchange ISP-bound traffic with Pac-West on a bill-and-keep basis.
However, applying ¶ 81 in this fashion would ignore the concerns about possible ILEC arbitrage expressed in ¶ 89 of the ISP Remand Order, which sets forth the mirroring rule. Paragraph 89 makes it clear that if an ILEC wants to invoke the interim compensation plan in the Remand Order, including the New Markets Rule of ¶ 81, the ILEC must first make a mirroring offer that will foreclose the possibility of profiting from arbitrage when the ILEC is terminating ISP-bound traffic. Paragraph 89 provides in full:
"It would be unwise as a policy matter, and patently unfair, to allow incumbent LECs to benefit from reduced intercarrier compensation rates for ISP-bound traffic, with respect to which they are net payors, while permitting them to exchange traffic at state reciprocal compensation rates, which are much higher than the caps we adopt here, when the traffic imbalance is reversed. Because we are concerned about the superior bargaining power of incumbent LECs, we will not allow them to `pick and choose' intercarrier compensation regimes, depending on the nature of the traffic exchanged with another carrier. The rate caps for ISP-bound traffic that we adopt here apply, therefore, only if an incumbent LEC offers to exchange all traffic subject to Section 251(b)(5) at the same rate . . . For those incumbent LECs that choose not to offer to exchange Section 251(b)(5) traffic subject to the same rate caps we adopt for ISP-bound traffic, we order them to exchange ISP-bound traffic at the state-approved or state-arbitrated reciprocal compensation rates reflected in their contracts. This `mirroring' rule ensures that incumbent LECs will pay the same rates for ISP-bound traffic that they receive for Section 251(b)(5) traffic." (ISP Remand Order ¶ 89; 16 FCC Rcd at 9194-94; footnotes omitted, italics in original, underlining supplied.)
In view of the concern about arbitrage that pervades the ISP Remand Order, we believe that if the FCC had intended the interim compensation plan to cover exchanges of ISP-bound traffic between CLECs, the FCC would have explicitly addressed the obligations of a CLEC that wished to invoke the New Markets Rule. The fact that the FCC remained silent on this question, coupled with the repeated references in ¶ 89 to ILECs, supports Pac-West's argument that the interim compensation plan (including the New Markets Rule of ¶ 81) is intended to apply only to exchanges of ISP-bound traffic between ILECs and CLECs.13
AT&T has offered two arguments in support of its position that the bill-and-keep language in ¶ 81 is not limited by the requirement of a mirroring offer in ¶ 89. First, AT&T argues that to apply ¶ 81 as Pac-West suggests "would require the Commission to accept the premise that the FCC has bifurcated its jurisdictional holding by predicating its jurisdiction on the type of the carrier carrying the traffic rather than the nature of the traffic itself." Asserting that the FCC has "(1) found that all ISP-bound traffic is within [FCC] jurisdiction as interstate traffic; (2) found it is in the public interest to establish a bill-and-keep reciprocal compensation mechanism for ISP terminating traffic; and (3) [has] precluded state commissions from independently applying a compensation rate that conflicts with the FCC's pricing scheme," AT&T continues that there is "no exception" from these rulings for ISP-bound traffic exchanged between CLECs. (AT&T Reply Brief on Legal Issues, pp. 2-3.) Second, AT&T points out that since ¶ 89 directs ILECs that have not made a mirroring offer to "exchange ISP-bound traffic at the state-approved or state-arbitrated reciprocal compensation rates reflected in their contracts," this language lends no support to Pac-West's argument that, as a CLEC, its compensation for terminating AT&T's calls should be determined according to its intrastate tariff. We consider each of these arguments in turn.
As noted in the description of AT&T's position on the Remand Order, AT&T's jurisdictional argument relies heavily on the Ninth Circuit's decision in Pacific Bell v. Pac-West Telecomm. In that case, as noted above, the Ninth Circuit invalidated two decisions issued in a Commission rulemaking proceeding which had held that the reciprocal compensation provisions in all interconnection agreements arbitrated in California applied to ISP-bound traffic. The basis for the Ninth Circuit's ruling was that, apart from the powers conferred by § 252 of the Telecommunications Act, the Commission does not have jurisdiction under the 1996 Act to promulgate rules regarding traffic that the FCC has declared to be interstate. However, in the same decision, the Ninth Circuit upheld the Commission's decision that ISP-bound traffic exchanged between Pacific Bell and Pac-West was subject to the reciprocal compensation provisions in the companies' 1999 interconnection agreement. This latter decision by the Commission, the Ninth Circuit ruled, was consistent with the powers conferred on state public service commissions by § 252 to interpret and enforce specific interconnection agreements.
In essence, AT&T argues that the relief Pac-West is seeking here cannot be reconciled with the jurisdictional boundaries laid out by the Ninth Circuit in Pacific Bell v. Pac-West Telecomm. According to AT&T, "exercising general regulatory authority over interstate traffic is exactly what Pac-West would have this Commission do in this complaint case. It not only asks the Commission to ignore the clear language of the ISP Remand Order, it asks the Commission to authorize fees for terminating traffic outside the bounds of an interconnection agreement arbitration and pursuant to generic state authority (i.e., state tariffs)." (AT&T Opening Brief on Legal Issues, pp. 5-6.)
We disagree with this contention for several reasons. First, we believe that AT&T reads the holding in Pac-West Telecomm too broadly. As described above, that decision was entirely concerned with whether the reciprocal compensation provisions in California interconnection agreements between ILECs and CLECs applied to ISP-bound traffic. The Ninth Circuit held that the Commission did not have the power to promulgate a general rule on this question, but did have authority under the Telecommunications Act to determine whether the reciprocal compensation provisions in a specific interconnection agreement applied to such traffic. Contrary to AT&T's suggestion, the Ninth Circuit's decision is silent about the extent of the Commission's powers where the exchange of ISP-bound traffic takes place between two CLECs, a type of carrier that - as both parties here acknowledge - clearly does not have the right under the 1996 Act to compel another CLEC to negotiate an interconnection agreement.14
In addition, we believe that AT&T gives too broad a reading to the language in ¶ 82 of the ISP Remand Order, on which AT&T also relies to support its jurisdictional argument. AT&T points to the language in ¶ 82 stating that "because [the FCC] now exercise[s its] authority under Section 201 to determine the appropriate intercarrier compensation for ISP-bound traffic . . . state commissions will no longer have authority to address this issue." The thrust of ¶ 82, however, is not broad jurisdictional pronouncements, but the timing of the implementation of the Remand Order's interim compensation plan. Thus, the FCC noted in ¶ 82 that the interim plan "applies as carriers re-negotiate expired or expiring interconnection agreements,"15 and ruled that as of the publication date of the Remand Order, "carriers may no longer invoke Section 252(i) to opt into an existing interconnection agreement with regard to the rates paid for the exchange of ISP-bound traffic." In view of these statements directed at timing, we conclude that ¶ 82 simply does not address the applicability of the interim compensation plan to situations in which both parties are CLECs and do not have an interconnection agreement in effect between them.
Of course, having decided that AT&T cannot invoke ¶ 81 of the Remand Order, we are left with the question of what compensation Pac-West should receive for the ISP-bound calls that it terminates for AT&T. As noted above, AT&T argues that ¶ 89 of the Remand Order sheds no light on this question, because in cases where a mirroring offer has not been made, ¶ 89 directs ILECs to "exchange ISP-bound traffic at the state-approved or state-arbitrated reciprocal compensation rates reflected in their contracts." Since AT&T and
Pac-West are both CLECs and there is no interconnection agreement in effect between them, AT&T argues that Pac-West can take no comfort from this language in ¶ 89.
Even though we agree with AT&T that ¶ 89 does not resolve the question of what compensation should be paid here, we also agree with Pac-West that the question of what compensation it should receive is best determined by resorting to the general principles that support the division of state and federal authority in the Telecommunications Act. We also agree that the FCC's recent ruling in the T-Mobile case furnishes useful guidance because it dealt with a compensation issue analogous to the one here, even though we are not bound to apply T-Mobile to the facts before us.
In T-Mobile, the FCC dealt with a situation in which CLECs and commercial mobile radio service (CMRS) providers were exchanging traffic indirectly without the benefit of interconnection agreements by using the transit services of ILECs. Disputes arose when the ILECs refused to compensate the CLECs for terminating the CMRS traffic, arguing that this was transit traffic and that the CMRS providers were required to pay reciprocal compensation. The
T-Mobile Ruling described the disputes as follows:
"For instance, many CMRS providers argue that intra[Major Trading Area, or MTA] traffic routed from a CMRS provider through a [Bell Operating Company, or BOC] tandem to another LEC is subject to the reciprocal compensation regime because it originates and terminates in the same MTA. Some LECs, however, contend that this traffic is more properly subject to access charges because it originates outside the local calling area of the LEC, is being carried by a toll provider, i.e., the BOC, and is routed to the LEC via access facilities. When a LEC seeks payment of access charges from a BOC in these circumstances, the BOC often refuses to pay such charges on the basis that (1) it is merely transiting traffic subject to reciprocal compensation, and (2) the originating carrier is responsible for the reciprocal compensation due." (T-Mobile Ruling, ¶ 6, 20 FCC Rcd. at 4858; footnotes omitted.)
T-Mobile noted that because of such disputes (which had necessitated rulings by several state public service commissions), the CLECs had begun to file wireless termination tariffs with the state commissions "that apply only in the situation where there is no interconnection agreement or reciprocal compensation arrangement between the parties." (Id. at ¶ 7.) The CMRS providers challenged the validity of these tariffs, arguing that the CLECs "engage[] in bad faith by unilaterally filing wireless termination tariffs without first negotiating in good faith with CMRS providers." (Id. at 20 FCC Rcd 4855, n. 1.)
In its ruling, the FCC noted that "because the existing rules are silent as to the type of arrangement necessary to trigger payment obligations," there was no basis for finding bad faith, and that "it would not have been unlawful for incumbent LECs to assess transport and termination charges based upon a state tariff," because the FCC had been aware of this practice when it last amended the CMRS rules, prior to the passage of the 1996 Telecommunications Act. (Id. at ¶ 10; 20 FCC Rcd at 4860-61.)
The FCC decided, however, that the best solution was to amend its CMRS rules on a prospective basis, and held as follows:
"In light of existing carrier disputes, we find it necessary to clarify the type of arrangement necessary to trigger payment obligations. Because the existing rules do not explicitly preclude tariffed compensation arrangements, we find that incumbent LECs were not prohibited from filing state termination tariffs and CMRS providers were obligated to accept the terms of applicable state tariffs. Going forward, however, we amend our rules to make clear our preference for contractual arrangements by prohibiting LECs from imposing compensation obligations for non-access CMRS traffic pursuant to tariff. In addition, we amend our rules to clarify that an incumbent LEC may request interconnection from a CMRS provider and invoke the negotiation and arbitration procedures set forth in Section 252 of the Act." (Id. at ¶ 9, 20 FCC Rcd at 4860; footnote omitted.)
In view of the fact that the ISP Remand Order is silent on the issue of what compensation should be paid when one CLEC exchanges ISP-bound traffic with another CLEC and no interconnection agreement is in effect between them, and the fact that this Commission has previously held that a CLEC's intrastate tariff is applicable to exchanges with an ILEC where the ILEC has not yet made a mirroring offer (see, 325 F.3d at 1129-31), we conclude that -- subject to the limitations below -- it is appropriate to apply the CLEC's intrastate tariff for termination services afforded to another CLEC where no interconnection agreement is in effect between the two CLECs.
Having reached this conclusion, the computation of the amount payable to Pac-West by AT&T is straight-forward. In the testimony she submitted on behalf of Pac-West on March 7, 2005, Mart McCann calculated the total amount of termination charges that AT&T owed to Pac-West (pursuant to the latter's tariff) for the period July 1, 2001 to January 31, 2005 at $7,115,014.16. (Attachment to Exhibit 1, p. 6.) In the opening brief it filed on compensation issues on May 11, 2005, AT&T expressly stated that "AT&T does not challenge the calculation of the claimed invoices of Pac-West in Exhibit 1 . . . of $7,115,014.16." (AT&T Opening Brief on Evidentiary Issues, p. 3.)16 Thus, the basic amount of termination charges that AT&T owes to Pac-West under the latter's tariff for the period in question17 is not in dispute.
B. Is Pac-West Entitled to Late Payment Charges and Interest on the Tariff Amounts Due?
There remains one further question in this case: whether Pac-West should be able to recover accrued late charges and interest on the $7.115 million due, as Pac-West's brief requests.18 For the reasons set forth below, we conclude that as a matter of both equity and law, AT&T should not be required to pay either late charges or interest to Pac-West.
This was the same conclusion reached in the POD mailed in this proceeding on September 19, 2005. The POD gave four reasons why AT&T should not be required to pay interest or late charges: (1) under Commission caselaw, the decision whether to award interest or late fees on unpaid tariff charges is a matter within the Commission's discretion; (2) neither T-Mobile nor any other federal decision requires application of the intrastate tariffs of the carrier seeking reciprocal compensation; rather, the application of such tariffs is a matter within the Commission's equitable discretion;19 (3) an award of interest and late charges would not be appropriate in view of the long period of time that elapsed between AT&T's initial refusal to pay Pac-West's invoices and the filing of the complaint here; and (4) not awarding interest or late charges would bring the amount awarded to Pac-West more in line with the $.0007 per minute-of-use cap contained in the interim compensation plan set forth in ¶ 8 of the ISP Remand Order. (POD, pp. 30-32.)
In the appeal it filed on October 19, 2005, Pac-West sharply challenges the POD's determination not to award late charges on the amounts due.20 Pac-West places particular reliance on D.93-05-062, Toward Utility Rate Normalization (TURN) v. Pacific Bell, 49 CPUC2d 299. This decision, Pac-West says, "fully supports enforcement by the Commission of Pac-West's tariffed late payment charge, which is `part and parcel' of the tariffed rate structure for the services provided to AT&T." (Pac-West Appeal, p. 7.)
An examination of TURN v. Pacific Bell does not support the reading Pac-West seeks to give it. In D.93-05-062, the key issue was the nature of the sanctions that should be imposed on Pacific Bell (Pacific) for its practice of imposing late charges on numerous customers who had, in fact, paid their bills on time. The evidence showed that Pacific's practice of imposing wrongful late charges had persisted for over five years, and was due largely to the inability of Pacific's computer system to keep track of the dates on which customer payments had actually been received.
The language on which Pac-West relies appears in a discussion of whether Pacific's conduct violated Pub. Util. Code § 532, which provides that "no public utility shall charge, or receive a different compensation . . . for any product or commodity furnished . . . or for any service rendered, than the rates, tolls, rentals, and charges applicable thereto as specified in its schedules on file and in effect at the time . . ." Pacific argued that the wrongfully-imposed late charges were not within the ambit of § 532 because they were not a rate for a product, commodity or service. In response to this claim, the Commission said:
"We disagree. In this particular case, late payment charges and reconnection charges are part and parcel of the rates charged for telephone services which are undeniably subject to PU Code Section 532. Late payment charges and reconnection charges are, therefore, subject to PU Code Section 532.
"Moreover, Pacific interprets PU Code Section 532 too narrowly. PU Code Section 489 requires that all utility charges and rates must be tariffed or otherwise publicly posted . . . Thus, late payment charges and charges for reconnecting service must be tariffed . . . We, therefore, interpret PU Code Section 532 to complement PU Code Section 489 by providing that the utilities shall not deviate from tariffs required by PU Code Section 489. PU Code Section 532 applies to any tariff rate or other provision. Pacific violated PU Code Section 532 each time it assessed improper late payment charges and reconnection fees, and disconnected customers in error." (49 CPUC2d at 307; emphasis added.)
While this passage makes clear that the wrongful imposition of late charges is a violation of the code provision requiring utility billings not to deviate from applicable tariffs, it certainly does not stand for the proposition that the Commission lacks authority in appropriate circumstances to relieve a customer from having to pay interest or late charges when the Commission concludes that requiring such payments would not be equitable.
In this case, we have no doubt that it would be inequitable to impose late charges and interest on the already-substantial sum that AT&T owes to
Pac-West. As AT&T pointed out in its reply to the Pac-West appeal:
"[P]erhaps the strongest evidence of Pac-West's indifference to its own tariff, is the admitted lack of accounting safeguards in its alleged tariff billing. Pac-West filed its original complaint in this case with a demand for terminating fees in the amount of $3.5 million. Pac-West's counsel announced in an e-mail to the [ALJ] dated January 5, 2005 and [at the January 7, 2005 PHC] that it was modifying its claim of $3.5 million up to approximately $6 million (although at that time it still could not be precise)." (AT&T Reply, pp. 9-10, footnote 21.)
Ultimately, of course, Pac-West took the position that AT&T owed $7.115 million in termination charges for the period from July 2001 through January 2005.
In other cases where telecommunications carriers have been cavalier about their tariff billings, other state public service commissions have also refused to impose late charges. In America Phone Inc. v. AT&T Communications, Inc., 72 PUR4th 613 (1986), for example, a South Dakota reseller of long-distance toll service, Phone America, filed a complaint against Northwestern Bell Telephone Company (NWB) contending that the wholesale bills sent by NWB were inflated and did not apply NWB's tariffs properly. One of Phone America's claims was that NWB had failed to send bills for five months after service began, which led Phone America to believe it was benefiting from a credit that it was not, in fact, receiving. (72 PUR4th at 615.) NWB's witness conceded that after the first bill was sent and not paid, a "refusal to pay or disconnect" notice should have been sent to Phone America but was not, and that subsequent bills simply accumulated for several months thereafter. (Id. at 617.)
In its decision, the South Dakota commission found that Phone America "did not learn until several months after service began that a mileage charge would be assessed when the WATS prorate was applied," that the mileage charge significantly increased Phone America's bill, and that "relying on the misunderstanding[,] Phone America continued to expand its system." (Id. at
618-619.) The commission also found that the six-month delay in sending a refusal to pay or disconnect notice caused Phone America to believe that the balance due on its bill was offset by the WATS prorate. Based on this, the South Dakota commission concluded:
"NWB's delay in sending a refusal to pay or disconnect notice resulted in Phone America's delay in paying this bill. Accordingly a late payment fee will not be assessed against Phone America for the bills subject to this proceeding." (Id. at 619; emphasis added.)
Although for somewhat different reasons, a refusal to award late charges is also appropriate in this case. Here, Pac-West concedes that several years elapsed before it discovered the software error of its billing contractor that caused the prayer for relief in this case nearly to double between the time the complaint was filed and the time hearings were held. Although Pac-West has sought to explain this delay away in the testimony of its witness Mart McCann (Exhibit 1, pp. 3-4), the fact that the error took so long to discover raises significant doubt in our minds whether Pac-West was serious about seeking late charges prior to the filing of a complaint. In view of this delay, the fact that there was a bona fide dispute between Pac-West and AT&T about whether any reciprocal compensation was due under ¶ 81 of the ISP Remand Order,21 and the other factors set forth on pages 30-32 of the POD,22 we agree with the Presiding Officer that it would not be equitable to require AT&T to pay late charges or interest on the amount we have found AT&T owes to Pac-West. 23
13 In its appeal of the POD filed on October 19, 2005, AT&T attempts to deal with the issue of how a CLEC exchanging ISP-bound traffic with another CLEC with which it does not have an interconnection agreement could satisfy ¶ 89's requirement of a mirroring offer. AT&T's answer to this dilemma is to argue that in its case, the underlying policy concerns of ¶ 89 have been satisfied:
". . . AT&T and Pac-West have been exchanging both local voice and ISP-bound traffic at a uniform rate - bill-and-keep -- which comports with the underlying policy goals of ¶ 89. Thus, there is no opportunity for AT&T to engage in the type of arbitrage activities that compelled the FCC to establish an interim compensation scheme for ILECs and CLECs that have an interconnection agreement." (AT&T Appeal of POD, p. 16, n. 32.)
While it seems conceivable (despite the silence of ¶ 89) that the FCC might be willing to excuse the requirement of a mirroring offer in the case of a CLEC that indirectly exchanges traffic with other CLECs -- provided the FCC's concerns about arbitrage opportunities could be met -- those concerns have not been allayed here. The only evidence AT&T cited to support its assertion that it "has always exchanged traffic with other CLECs on a bill-and-keep basis," and thus could not benefit from arbitrage, is the rebuttal testimony of Andrew Korsgaard (Exhibit 8). According to AT&T, Korsgaard "testified that he has never authorized nor seen an AT&T billing instruction to bill local traffic to any CLEC in any state." Based on this, AT&T finds "inexplicable" the POD's conclusion that "AT&T offered no evidence to support its claim that the common practice within the telecommunications industry is for CLECs to exchange traffic on a bill-and-keep basis." (POD, p. 22.)
Despite Korsgaard's testimony, the POD's conclusion on this issue was reasonable. Korsgaard deals only with AT&T's billing procedures; he does not appear to have any direct knowledge of the billing practices of other CLECs. (Ex. 8, p. 10.) Further, Pac-West vigorously disputed (in both its testimony and briefs) that Korsgaard's description of AT&T billing practices was an accurate depiction of AT&T's actual conduct. (See, Exhibit 5, Direct Testimony of Barry Lear, pp. 2-3; Pac-West Opening Brief, p. 21;
Pac-West Reply Brief, pp. 25-30.)
As a practical matter, AT&T's position on the ISP Remand Order placed the burden on it to show the existence of a consensus among CLECs to exchange traffic on a bill-and-keep basis. Since Korsggard's rebuttal testimony speaks only to his understanding of AT&T's billing practices, and since Pac-West vigorously disputed the existence of any consensus among CLECs to exchange traffic on a bill-and-keep basis (or that AT&T had, in fact, followed this practice), the POD was correct to conclude that AT&T had not established that during the relevant period, the common practice within the telecommunications industry was for CLECs to exchange traffic on a bill-and-keep basis.
14 In its October 19, 2005 appeal of the POD, AT&T renews its argument that Pac-West's position on the interim compensation plan ignores the FCC's determination that all ISP-bound traffic is interstate. AT&T states:
"The POD errs by ignoring that the FCC's ISP Remand Order preempts this Commission's jurisdiction to establish a reciprocal compensation scheme for the termination of all ISP-bound traffic. This Commission cannot impose a compensation scheme contrary to the FCC's imposed scheme, regardless of the nature of the traffic, regardless of whether the firms have entered into an interconnection agreement, and regardless of whether the two exchanging firms are charging each other terminating fees found in these agreements." (AT&T Appeal of POD, pp. 7-8.)
Despite AT&T's arguments, there is no conflict between the FCC's determination that all ISP-bound traffic is interstate and the POD's determination that traffic terminated by Pac-West for AT&T should be subject to the former's intrastate tariff. As noted in the text, it is clear from ¶89 of the Remand Order (as well as the Core Order) that the interim compensation plan applies only to exchanges of traffic between ILECs and CLECs. Where exchanges of ISP-bound traffic between CLECs are concerned, we think Pac-West is correct when it states:
"The fundamental point that AT&T . . . confuses again in its appeal, is that it is entirely within the power of the FCC to adopt a rate plan for ISP-bound traffic that includes the application of state-approved rates in certain circumstances, as the FCC did in the ISP Remand Order. Thus, for the POD to enforce the ISP Remand Order by applying such state-approved rates in no way invades the FCC's jurisdiction. Instead, the POD properly implements the determinations of the FCC." (Pac-West Response to AT&T Appeal, p. 3.)
As explained in the text, while ¶ 89 of the Remand Order does not definitively resolve the point, the most reasonable way of satisfying the concerns expressed in ¶ 89 - especially in view of (1) the absence of a mirroring offer by AT&T, (2) the Ninth Circuit's decision to uphold the application of intrastate termination charges to ISP-bound traffic in the interconnection agreement at issue in Pac-West Telecom (325 F.3d at 1129-1131), and (3) the guidance furnished by the T-Mobile Ruling -- is to apply Pac-West's intrastate tariff charges to the ISP-bound traffic that Pac-West terminates for AT&T.
15 This is consistent with the Ninth Circuit's observation in Pacific Bell v. Pac-West Telecomm that "the interim alternative payment scheme for ISP-bound traffic established in the Remand Order applies only prospectively, when existing interconnection agreements expire." (325 F.3d at 1131.)
16 In the reply brief on compensation issues that it filed on June 1, 2005, AT&T also stated that it "is not challenging Pac-West's claim as to the amount of AT&T traffic that terminated to Pac-West's network." (AT&T Reply Brief on Compensation Issues, p. 21, n. 34.)
17 See, Pub. Util. Code § 737.
18 Pac-West Brief on Compensation Issues, filed May 11, 2005, p. 23.
19 As the Presiding Officer pointed out in the POD, "nothing in T-Mobile or in any other federal decision we are aware of requires that in cases where the FCC has not prescribed the appropriate form of reciprocal compensation, the intrastate tariffs of the carrier seeking such compensation must be applied. In choosing to follow T-Mobile and apply Pac-West's tariff in this situation, we are therefore exercising our equitable remedial powers." (POD, p. 31.) The Presiding Officer also noted that in its opening brief on legal issues, Pac-West had argued that its intrastate tariffs were the most directly applicable charges, and that "equity and fairness dictate that the state tariff rates control." The POD continued that by the time Pac-West filed its reply brief on legal issues, T-Mobile had been decided, "and Pac-West began to rely on that decision rather than on `equity and fairness' alone to support the argument that its tariff . . . should govern the compensation to be paid here." (POD, p. 31, fn. 17, comparing
Pac-West Opening Brief, pp. 24-25 with Pac-West Reply Brief, pp. 33-36.)
20 To a lesser degree, Pac-West's appeal also disputes the POD's decision not to award interest on the unpaid termination charges. On this question, Pac-West's principal argument is that neither of the decisions cited by the POD, Re Western Union Telegraph Company, D.87-05-063 (24 CPUC2d 350) and Air-Way Gins, Inc. v. Pacific Gas and Electric Company, D.03-04-059, "involved a demand by a carrier for payment of tariffed late charges, much less a demand for such charges which was rejected by the Commission. Furthermore, neither decision even involved denial of interest payments sought by one of the parties." (Pac-West Appeal, p. 4; emphasis in original.)
Pac-West's attempt to explain away these two decisions is unpersuasive. D.87-05-063 states that interest was being awarded to Pacific Bell in that case "since the escrow funds have been placed in an interest-bearing account." But D.87-05-063 also clearly states that "the payment of interest is not a requirement under Section 737," the Public Utilities Code provision governing the recovery of unpaid tariff charges by a utility. (24 CPUC2d at 364.)
Pac-West is also incorrect when it states that in Air-Way Gins, "the Commission did not deny any request for interest or late charges since none was apparently sought." (Pac-West Appeal, p. 6.) Although it is true that D.03-04-059 does not discuss the issue, the complainants in Air-Way Gins did request interest on the refunds they sought, but the decision did not award interest to them. (Compare, July 27, 2000 Opening Brief of Complainants, p. 13, with D.03-04-059, mimeo. at 33, Ordering Paragraph 1.)
21 As noted in the Administrative Law Judge's Ruling Permitting Filing of Rebuttal Testimony and Denying Motions to Strike Without Prejudice, issued on March 25, 2005, it was not until the filing of opening briefs on February 11, 2005 that Pac-West gave a clear statement of its theory in this case. It was largely because of this vagueness that the March 25, 2005 ruling permitted AT&T to file limited rebuttal testimony. (See, March 25, 2005 Ruling, pp. 3, 9-12.)
22 In its October 19, 2005 appeal, Pac-West argues that the POD ignores equitable factors that favor an award of the late payment charges specified in Pac-West's intrastate tariff. These factors are said to include (1) AT&T's awareness of the Pac-West tariff, (2) AT&T's refusal to negotiate an interconnection agreement with Pac-West, and (3) the supposed unfairness before the filing of the complaint herein of requiring Pac-West to terminate substantial amounts of AT&T traffic without receiving any compensation therefor. (Pac-West Appeal of POD, pp. 11-12.)
In our view, these alleged equitable factors are merely ways of restating that Pac-West and AT&T had a business dispute over the meaning of ¶ 81 of the ISP Remand Order. In view of our conclusion that AT&T's position in this case finds some support in a literal reading of ¶ 81, the factors cited by Pac-West do not justify an award of late payment charges.
23 In view of our resolution of the compensation issues in this decision, it is unnecessary to decide the questions that consumed most of the time at the hearings held on
April 12-13, 2005. Those questions included (1) whether the sample of billing data that AT&T provided to Pac-West was statistically sufficient to establish that the ratio of traffic terminated by Pac-West for AT&T exceeded the 3-to-1 ratio set forth in the ISP Remand Order, (2) whether Pac-West had erroneously relied on access charges to support its claim that AT&T's own billing behavior was inconsistent with AT&T's claim that bill-and-keep should apply here, and (3) whether Pac-West's termination rates should apply to the small volume of traffic that AT&T terminated for Pac-West. Although our decision makes it unnecessary to examine the evidence presented on these questions in detail, we observe that there can be little doubt that, whatever the statistical objections to the data provided by AT&T in discovery, the ratio of traffic terminated by Pac-West for AT&T to the traffic terminated by AT&T for Pac-West appears to be many times greater than 3-to-1, and is thus more than sufficient to satisfy the threshold for "ISP-bound traffic" under the ISP Remand Order.
For the same reasons we need not decide the questions litigated at the hearing, it is unnecessary to rule on Pac-West's June 8, 2005 motion to set aside the submission of this case and reopen the record to allow an affidavit to be received which asserts that MCI, another CLEC with which Pac-West has no interconnection agreement, has agreed to pay the termination charges in Pac-West's intrastate tariff for traffic exchanged between the two CLECs. On June 17, 2005, AT&T filed an opposition to this motion, and on June 24, 2005 (with leave from an Assistant Chief ALJ), Pac-West filed a reply in support of the motion. Because we need not rule on the issues raised by these pleadings, Pac-West's June 8, 2005 motion is deemed denied.
