5. Comments on Proposed Decision
The proposed decision of the ALJ in this matter was mailed to the parties in accordance with § 311 of the Pub. Util. Code and Rule 14.2(a) of the Commission's Rules of Practice and Procedure. Comments were filed on October 30, 2006, and reply comments were filed on November 6, 2006. An additional third round of concurrent comments were filed on November 27, 2006. We have taken the comments into account, as appropriate, in finalizing this order.
1. The Commission has developed a record in previous arbitration proceedings on intercarrier compensation pursuant to interconnection agreements for calls between the major incumbent local exchange carriers and other carriers involving calls utilizing disparate rating and routing points (e.g., D.02-06-076 and D.03-05-031).
2. In D.03-09-005, the Commission directed that issues regarding small LECs' compensation for disparately rated and routed calls (i.e., "virtual" NXX calls) be transferred to the Local Competition proceeding for resolution.
3. A "virtual" NXX arrangement provides retail subscribers with a presence in a local exchange without physically residing there. Although the NXX prefix is associated with a rate center in a designated local exchange, the subscriber's terminal equipment and/or point of interconnection can be physically located in a separate foreign exchange.
4. D.99-09-029 determined that a carrier may not avoid responsibility for negotiating reasonable intercarrier compensation for the routing of calls from a foreign exchange merely by redefining the rating designation from toll to local.
5. Pursuant to D.99-09-029, the carrier establishing a VNXX arrangement is required to pay for transporting VNXX calls to their point of termination.
6. In past arbitrations, the Commission has found that the ILEC must pay reciprocal compensation to the CLEC for terminating VNXX calls.
7. When a Small LEC originates a call intended for an end-user served by a CLEC with which the Small LEC is only indirectly interconnected, the Small LEC is responsible for payment of reciprocal compensation to the CLEC.
8. As a quid pro quo for receiving reciprocal compensation, the Commission has found in past arbitrations that the CLEC would bear the cost of additional transport required to get the VNXX call to where it would be considered "local".
9. In the case of Small LECs, however, their meet point with the ILEC is a significant distance from the ILEC tandem. Accordingly, additional transport is required for VNXX traffic from the Small LEC-ILEC meet point to the ILEC tandem.
10. Both state and federal law require all telecommunications carriers to interconnect, either directly or indirectly, and to establish reciprocal compensation arrangements with respect to the exchange of traffic.
11. Small LECs typically have not entered into interconnection agreements providing for a direct point of interconnection with CLECs, and their respective networks do not interconnect. CLECs and Small LECs each interconnect instead with one or both of the major ILECs.
12. The Small LECs' networks are configured as "islands" within a particular LATA, in contrast with the large ILECs that own facilities throughout each LATA. As a result, the large ILEC controls how it routes VNXX traffic more completely as compared with the Small LEC that relies on other carriers to fulfill traffic obligations.
13. While Small LECs are subject to different regulatory constraints compared with the major ILECs, they have not adequately supported their claims of adverse economic impacts to justify inconsistent intercarrier compensation treatment as compared with the major ILECs.
14. By requiring the Small LECs to pay reciprocal compensation for VNXX calls on the same basis as required for the major ILECs, a competitive environment is promoted for provision of service by ISPs in the rural areas served by the Small LECs.
15. For recognizing extended Area Service calls are appropriately subject to reciprocal compensation that the Small LECs have been reasonably compensated for lost toll revenue associated with provisioning such calls.
16. When a Small LEC originates a VNXX call destined for termination by a CLEC with which the Small LEC is indirectly interconnected, the Small LEC transports the call to its meet point with the ILEC which then transits the call to its tandem where the CLEC is interconnected.
17. The Small LEC/ILEC meet point is typically a significant distance from the ILEC tandem switch.
18. Even though Small LECs may not typically own facilities from the meet point to the tandem, they have worked out arrangements for the transport of their originating traffic to the tandem as necessary to complete VNXX calls terminated by a CLEC.
19. A requirement for the CLEC to pay for transit of VNXX traffic from the Small LEC meet point to the point of interconnection at the tandem would be within the scope of state rule-making authority under § 251(d)(3).
20. Requiring the CLEC to be responsible for transit costs of VNXX traffic from the Small LEC meet point to the point of interconnection at the tandem would not constitute a requirement for direct interconnection.
21. Interconnection agreements between Pac-West and each of the ILECs contain explicit provisions for exchange of third-party transit traffic (including that originated by a Small LEC) at the tandem switch, none of which call for the terminating carrier to pay transiting traffic costs incurred on the originating carrier's side of the point of interconnection.
22. For indirect interconnection, the ILEC tandem is the default that typically serves as a routing point for all other switches serving NXXs assigned to the tandem service area.
23. Although the Commission decided in D.06-06-055 to apply a CLEC tariff for termination services afforded to another CLEC where no interconnection agreement was in effect, the applicability of a CLEC tariff in that proceeding is not applicable to the circumstances here.
24. In D.06-06-055, because there was no incumbent local exchange carrier involved in the dispute, the provisions of Sec. 252 did not apply. By contrast, the dispute at issue here is between CLECs and Small LECs. Under Sec. 252 of the Act, therefore, VNXX carriers such as Pac-West have authority to demand negotiations with a Small LEC with whom traffic is exchanged through indirect interconnection.
1. In situations where the Small LEC originates a VNXX call intended for an end-user served by a CLEC with which the Small LEC is only indirectly connected, the Small LEC is obligated to transport the call to its point of interconnection with the ILEC, as an intermediary.
2. Although reciprocal compensation provisions are prescribed under § 251(b)(5) of the 1996 Act, this Commission did not rely on those provisions, but applied its own balancing test in addressing the compensation between telecommunications carriers for termination of VNXX.
3. Compensation for originating carriers charges generally apply in the case of interexchange traffic.
4. The VNXX reciprocal compensation principles applied in interconnection arbitrations involving the major ILECs should apply similarly with reference to the Small LECs' arrangements.
5. Small LECs have an affirmative obligation to pay reciprocal compensation for the termination of traffic, which utilizes a VNXX arrangement.
6. Absent an alternate arrangement between a Small LEC and a CLEC, the Small LEC must deliver its VNXX traffic to its meet-point with the intermediary ILEC, as applicable, who will then transit such traffic to the ILEC-CLEC point of interconnection. The CLEC shall be financially responsible for indirectly exchanged VNXX traffic from the Small LEC-ILEC meet point to the ILEC-CLEC point of interconnection.
7. In the event that the CLEC has not established a point of interconnection at the Small LEC meet point under the applicable ILEC-CLEC interconnection agreement, the CLEC will be responsible for any transport costs required to get the VNXX call from the meet point to the ILEC-CLEC point of interconnection.
8. The appropriate vehicle through which to establish applicable intercarrier compensation rates, terms, and conditions for VNXX traffic is through the process of negotiating intercarrier agreement (subject to the applicability of the "rural telephone company" exemption).
9. For any Small LEC that does not voluntarily agree to negotiate reciprocal compensation rates based on a claim that it comes under the "rural telephone company" exemption, the CLEC tariff should apply as a default.
10. Under provisions of Sec. 252 of the Act, VNXX carriers such as Pac-West have authority to demand negotiations with a Small LEC with whom traffic is exchanged through indirect interconnection (assuming no "rural telephone company" exemption applies). To the extent that the parties cannot reach a mutually agreeable rate or other terms and conditions applicable to reciprocal compensation, either party has recourse to invoke the dispute resolution process outlined in D.95-12-056 (as outlined in the Appendix of this order).
IT IS ORDERED that:
1. Small Local Exchange Carriers (LECs) and Competitive Local Exchange Carriers (CLECs) are each directed to interconnect, transport and terminate traffic, and to pay intercarrier compensation in a manner consistent with the principles set forth in the Findings of Fact and Conclusions of Law set forth above.
2. For any Small LEC that does not voluntarily agree to negotiate terms and conditions of intercarrier compensation for VNXX arrangements on the basis of a "rural telephone company" exemption, the CLEC tariff shall apply as the default for setting reciprocal compensation rates for VNXX traffic consistent with the provisions of this decision.
3. For any Small LEC not subject to the "rural telephone company" exemption, the determination of the specific reciprocal compensation rates, terms, and conditions for termination of VNXX traffic shall be established through mutual agreement as negotiated between the relevant carriers.
4. Carriers that are impacted by the intercarrier compensation provisions of this decision are hereby authorized to enter into negotiations pursuant to Sec. 252 of the Act to reach agreement on the rates, terms, and conditions applicable to intercarrier compensation, including that associated with VNXX traffic, both prospectively and as applicable, for previously exchanged traffic (subject to the "rural telephone company" exemption as applicable).
5. To the extent that the parties are unable to reach mutually agreeable intercarrier compensation rate levels, either party to the dispute may initiate a filing for dispute resolution pursuant to the process outlined in Decision 95-12-056 (as summarized in the Appendix of this Order).
This order is effective today.
Dated February 15, 2007, at San Francisco, California.
MICHAEL R. PEEVEY
President
DIAN M. GRUENEICH
JOHN A. BOHN
RACHELLE B. CHONG
Commissioners
APPENDIX
Procedures for Dispute Resolution
Adopted in D.95-12-056
Section III(D) of D.95-12-056 provides for an expedited dispute resolution process that addresses interconnection agreement disputes over breach of contract or interpretation of parties' rights and obligations. This process includes the following procedure for mediation by an ALJ:
" If parties are unable to informally resolve their interconnection dispute, one or more of the parties may file a motion to have the dispute mediated by an ALJ who in turn may be assisted by [Telecommunications Division] staff. We will establish an expedited Dispute Resolute Procedure (DRP), within this docket, in which parties can file motions seeking mediation and an ALJ ruling on the merits of their case. All local carriers, including small and mid-sized LECs, will be parties to the DRP, and any local carrier with a valid CPCN may file a motion asking for an ALJ ruling to establish the time and place for mediation to occur.
As a condition of having an ALJ assigned to mediate, the parties must show that they have first attempted to resolve the dispute within their own companies through escalation to the executive level within each company.
Section III(D) also provides the following general guidelines for conducting the expedited dispute resolution process:
"We will leave it to the discretion of the ALJ presiding over the DRP to schedule and conduct the dispute resolution process, to establish new service lists, and to determine the need for any written submittals in the proceeding. The motion requesting mediation need only be served on parties to the dispute, the ALJ assigned to the DRP, and the Director of [Telecommunications Division]. The motion should also be served on the Docket Office which will publish a notice of the motion in the Daily Calendar."
Section III(D) of D.95-12-056 specifies the following procedure for an ALJ ruling:
"If mediation fails, the ALJ will direct parties to submit short pleadings and issue a written ruling to resolve the dispute. The ALJ shall use our adopted preferred outcomes as guidelines under which disputes will be reviewed and resolved. If a party objects to the ALJ's ruling, it may then file a formal complaint under the Commission's expedited process described below."
(END OF APPENDIX)
