IV. Interconnection Trunking Requirements

F. Combining Traffic Types On Local Interconnection Trunks

SBC proposes separate trunking requirements depending on the type of telecommunications traffic. SBC seeks to have Level 3 use local interconnection trunks for Section 251(b)(5), intraLATA toll (not carried by an interexchange carrier) traffic,²⁷ and ISP-bound traffic, and separate Feature Group D Access trunks for interLATA traffic "where Level 3 is acting in its capacity as an IXC." SBC states that separating the traffic types in this manner is necessary to ensure that each type of traffic is accurately billed based on the appropriate compensation or access charges. SBC further states that its federal access tariff requires that traffic to or from an interexchange carrier shall be carried on Feature Group D trunks that are dedicated to interexchange, access traffic.

Much of SBC's argument is premised on IP-enabled services traffic being subject to access charges. However, as discussed at Section III.A, IP-enabled services traffic is not subject to access charges under the current regulatory regime. Accordingly, SBC's rationale for requiring Level 3 to transport
IP-enabled services traffic over Feature Group D Access trunks, and not local interconnection trunks, is rejected.

The next question is whether Level 3 should be required to route its own interexchange traffic over Feature Group D Access trunks. Specifically, Level 3 acknowledges that it may originate or terminate PSTN-IP-PSTN traffic and that such traffic is subject to access charges.²⁸ Level 3 proposes to use Percent of Local Use, Percent of Interstate Use, and Percent of IP Use allocators to identify and properly compensate the different traffic types.

Level 3 refers to the Commission's observation in D.03-05-031 that "the concept of an interconnecting carrier having to identify traffic for purposes of rating by the local carrier is already an industry practice." However, it is not clear whether Level 3's proposal to commingle interstate interexchange traffic on local interconnection trunks is the industry practice to which the Commission referred. Other authority suggests it is not. For example, although Level 3 maintains that the Commission endorsed the commingling of traffic types in the 2000 arbitration between SBC and AT&T, that arbitration concerned the commingling of intraLATA toll traffic, not interstate interexchange traffic.²⁹ Level 3 refers to the FCC's Virginia Arbitration Order,³⁰ which took Verizon to task for opposing the commingling of traffic. There again, however, the issue concerned the commingling of 251(b)(5) traffic and toll traffic. Level 3 also points to SBC's model interconnection agreements filed as part of its Section 271 application process in Arkansas, Missouri, and Texas,³¹ in which the CLEC would be permitted to commingle traffic, but those model agreements similarly limit the commingling to local, interLATA toll, and intraLATA toll traffic.

Level 3 asserts that, because it is technically feasible to carry jurisdictionally distinct traffic over a single trunk group, Section 251(c)(2) requires that Level 3 be permitted to do so. I am not persuaded that Section 251(c)(2), which requires interconnection "at any technically feasible point," requires it to be accomplished in any technically feasible fashion without regard to other legitimate considerations.

Level 3 asserts that it should be permitted to commingle switched access traffic with Section 251(b)(5) traffic on local interconnection trunks because the ostensible purpose of segregating traffic on Feature Group D facilities - the identification and proper billing of switched access traffic - can be accomplished without the need for costly, redundant facilities. Specifically, Level 3 proposes to calculate the volumes of different traffic types by using Percent of Interstate Use and Percent of Local Use allocators, both of which are industry standards based on the NPA-NXX of the originating and terminating numbers. In addition, because Level 3 would commingle IP-enabled traffic on the local interconnection trunks, that traffic must also be identified in order to extrapolate the traffic that is subject to access charges. For this purpose, Level 3 proposes to develop a Percent of IP Use allocator by attaching an Originating Line Identifier (OLI) to its call records to identify calls that originate as IP-enabled traffic. However, as Level 3 acknowledges, there is currently no industry standard for its proposed Originating Line Identifier code. Level 3's offer to allow SBC to audit its records is not a reasonable proxy for an industry standard allocator; in any event, Level 3 has not proposed any contract language to effect that proposal.

Level 3 is permitted to transport IP-enabled traffic on local interconnection trunks. Level 3 is not permitted to commingle interexchange access traffic (other than intraLATA toll traffic that is not carried by an interexchange carrier), including PSTN-IP-PSTN traffic, on local interconnection trunks. To the extent that Level 3 intends to transport interexchange traffic, it shall maintain separate Feature Group D trunks for that purpose (other than intraLATA toll traffic that is carried by an interexchange carrier; such traffic may be exchanged over Meet Point trunks.)³² Accordingly, I resolve the disputed contract language relating to ITR-1, ITR-2, ITR-11, ITR-12, ITR-18, ITR-19, IC-2 and IC-17 as follows:

· ITR-1: Level 3's proposed § 1.2 is rejected, and SBC's proposed § 1.2 is adopted, except that the term "IP-enabled services traffic" shall be included as a traffic type subject to exchange under this section.

· ITR-2: Level 3's proposed § 3.3 is rejected, and SBC's proposed § 3.3 is adopted, except that (1) the term "IP-enabled services traffic" shall be included as a traffic type subject to combination and exchange over Local Interconnection Trunk Group(s), and (2) the phrase "for the exchange of traffic between each Party's End Users only" shall be deleted, as discussed in IV.B.1.

· ITR-11: Level 3's proposed §§ 5.3 through 5.3.2.1 are rejected, and SBC's proposed §§ 5.3 through 5.3.2.1 are adopted, except that the term "IP-enabled services and ISP-bound traffic" shall be included as a traffic type subject to combination and exchange over Local Interconnection Trunk Groups, as discussed in this section and at IV.A.

· ITR-12: Level 3's proposed § 5.3.3.1 is rejected, and SBC's proposed § 5.3.3.1 is adopted, except that the term "IP-enabled services traffic" shall be included as a traffic type subject to combination and exchange over Local Interconnection Trunk Groups.

· ITR-18: SBC's proposed § 12.1 is adopted, except that the phrase beginning "including, without limitation, any traffic that..." through but not including the phrase "provided, however, the following categories..."is deleted, and the phrase, "provided, however, that Switched Access Traffic does not include IP-enabled services traffic" is added in its stead. Level 3's proposed §§ 12 and 12.1 are rejected.

· ITR-19: Level 3's proposed §§ 13 through 13.1 are rejected. Its purpose is to clarify that IP-enabled services traffic is not subject to access charges. Other modifications ordered by this arbitration report adequately provide that clarification.

· IC-2: Level 3's proposed IC §§ 3.2.2.4 through 3.2.2.5 are rejected. This language provides for the development of a Percentage of IP Use factor for identifying traffic that originates or terminates as IP, for purposes of commingling and distinguishing traffic that is subject to access charges. As traffic subject to access charges may not be routed over local interconnection trunks, these terms are not appropriate.

· IC-17: SBC's proposed § 10.1 is adopted, and Level 3's is rejected. Level 3's proposed language would improperly permit the routing of interexchange traffic over local interconnection trunks.

G. Transit Traffic

14. Is Transit Traffic Subject to Arbitration?

SBC maintains that transit traffic, or traffic that originates or terminates with a third party, is not subject to arbitration under Section 251 or Section 252 of the 1996 Telecommunications Act. SBC's interpretation is rejected.

Section 251(c)(1) requires incumbent local exchange carriers to negotiate the duties in Section 251(b), including the Section 251(b)(2) duty to establish reciprocal compensation arrangements "for the transport and termination of telecommunications." Nothing in the plain language of Section 251(b)(5) limits such telecommunications to telecommunications that either originates or terminates on SBC's network. Transit traffic is a type of telecommunications subject to transport and reciprocal compensation under Section 251(b)(5), and negotiation under Section 251(c)(1).

SBC points to Level 3's witness Hunt's statement that "[t]here is no FCC rule that requires SBC to transit traffic under Sections 251 and 252" as support for its conclusion that transit traffic is not subject to arbitration. This is beside the point. As SBC notes, the FCC has not yet determined, by rule or any other order, whether transit traffic is subject to arbitration because that issue has not yet been before it. SBC has elected to place the issue before this Commission to determine as matter of first impression in this State.

SBC states that the Section 251(c)(2) duty to interconnect implies only a duty to directly interconnect with another carrier for the mutual exchange of traffic. SBC contends that, even if Section 251(a)(1) imposes the duty to interconnect "indirectly" with other carriers, the duty to negotiate is limited to the duties in Sections 251(b) and (c) and does not extend to Section 251(a) duties.

As SBC states, Section 251(c)(2) does not require incumbent local exchange carriers to establish indirect connections between other carriers. Thus, for example, if Level 3 wishes to indirectly interconnect with a third party carrier with whom SBC is not currently interconnected, SBC of course has no obligation to establish such indirect interconnection on Level 3's behalf. However, to the extent that such indirect interconnections exist between other carriers, SBC has a duty to negotiate and establish reciprocal compensation arrangements for transporting transit traffic under Section 251(b)(5). This result is consistent with sound, pro-competitive policy which dictates that the incumbent carrier, who has ubiquitous interconnections to third-party providers, be required to transit traffic where existing interconnections permit.

In its comments on the Draft Arbitrator's Report, SBC argues that the plain language of 47 C.F.R. § 51.701(e) and Section 252(d)(2)(A), and specifically the phrase that refers to "the transport and termination on each carrier's network facilities of calls that originate on the network facilities of the other carrier," is a formulation that cannot apply to transit traffic because it originates on the network of a third party carrier. To the extent that SBC's statement is true, it is irrelevant to this agreement. Not all transit traffic originates on the network facilities of a third party carrier. Transit traffic also originates on Level 3's network for transport to the network of a third party carrier, and it is this traffic that is the subject of the pricing arrangement between SBC and Level 3. The formulation of the plain language of 47 C.F.R. § 51.701(e) and Section 252(d)(2)(A) applies to transit traffic in that originates on Level 3's network. Transit traffic that originates on Level 3's network for transport by SBC to a third party carrier is subject to reciprocal compensation under Section 251(b)(5).

SBC cites to Pacific Bell v. Pac-West Telecomm, Inc., where the Ninth Circuit Court stated that "reciprocal compensation" means payment by one local exchange carrier to a second local exchange carrier for terminating a call from the first carrier's customer to a customer of the second carrier.³³ However, Pacific Bell v. Pac-West Telecomm, Inc. concerned whether ISP-bound traffic is "local" for the purposes of being subject to reciprocal compensation under Section 251(b)(5); it did not concern or require consideration of whether Section 251(b)(5) requires that traffic both originate and terminate with customers of the interconnecting parties in order to qualify for reciprocal compensation. The Ninth Circuit's characterization of Section 251(b)(5) in the introductory background section of the opinion is dicta and is not binding.

SBC assures the Commission that, were it to find that transiting is not subject to arbitration, SBC will nevertheless provide transiting pursuant to separate arrangements. SBC's assurance that it intends to enter into such arrangements is not a reasonable substitute for providing competitors recourse to arbitration in the event that SBC declines to do so under reasonable terms.

15. What Terms and Conditions Should Apply
to Transit Traffic?

SBC requests that, in the event the Commission concludes that transiting terms and conditions should be included in the agreement, it adopt SBC's proposed Transit Traffic Service Appendix, because it is more comprehensive than Level 3's proposed transiting language, for the Interconnection Trunking Requirements Appendix.

I reject SBC's Transit Traffic Service Appendix. It is indeed comprehensive, but it is comprehensively filled with statements and definitions that contradict the conclusions of this arbitration, particularly with respect to SBC's obligation to provide transit traffic under Sections 251 and 252, and compensation and routing for IP-enabled services traffic. Accordingly, Level 3's proposed language makes a better starting point for determining the terms and conditions for the exchange of transit traffic.

Level 3's proposed transiting language states that Level 3 will be required to establish direct trunks when traffic reaches a DS1 or greater level for three consecutive months. SBC objects to this language to the extent that it fails to specify a time frame within which direct interconnection must be established after the trigger is reached, and requires only that Level 3 use "commercially reasonable efforts" to enter into interconnection agreements with third party carriers. SBC proposes that Level 3 be required to establish direct trunks, and cease transiting traffic, within 60 days.

I reject SBC's proposed 60-day deadline for the establishment of direct trunking and interconnection. As Level 3 witness Hunt explained, Level 3 does not have the ability to meet a specific deadline for establishing interconnection agreements with third party carriers because non-incumbent carriers are not required to negotiate interconnection under Sections 251 and 252.

SBC objects that Level 3's proposed language takes the teeth out any requirement to directly interconnect. SBC proposes to increase the price of transiting after 50 million minutes of use in a month to provide an incentive to Level 3 to pursue the required direct interconnections. Countering this concern, Level 3 witness Ducloo asserts that SBC's "base" transit service charge already provides a financial incentive for originating carriers to establish direct connections when traffic reaches the one DS1 threshold. In any event, as Level 3 points out in its comments on the Draft Arbitrator's Report and as SBC does not dispute, to the extent that transit traffic is subject to Section 251(b)(5) reciprocal compensation, the rates must be TELRIC-based. SBC's second-tier pricing proposal violates this requirement.

SBC also opposes Level 3's proposed language requiring SBC to notify Level 3 that the obligation to establish direct interconnection arrangements has been triggered. Level 3 is able to determine when its obligation to establish direct interconnection begins under these terms. This language is therefore unnecessary.

SBC opposes Level 3's proposed language requiring SBC to use reasonable efforts to minimize the amount of transit traffic it routes through Level 3's network. Level 3's witness DuCloo stated that, to the extent Level 3 is compensated for transiting SBC traffic at the same rates as SBC charges for transiting Level 3 traffic, Level 3 agrees to strike the objectionable sentence.

SBC objects to Level 3's language because it doesn't provide that Level 3 will not strip, alter, add, delete or change CPN. As an explanation for this objection, SBC refers to its discussion regarding ITR-11, where SBC discusses the need for Level 3 to route interexchange traffic over Feature Group D trunks. That discussion provides no insight into why SBC believes it needs a term in the agreement specifying, in essence, that the parties will not engage in fraud, or why such prohibition against fraudulent behavior should be limited to the use of CPN and not other representations by the parties.

Finally, SBC objects to Level 3's proposed language for being silent on pricing. It appears that the parties do not dispute SBC's proposed transit pricing for below 50 million minutes per month volumes. The agreement shall provide for that transit pricing, and shall apply it to all volumes.

Accordingly, I dispose of ITR-5, ITR-6, ITR-8, and ITR-9 as follows:

· ITR-5: Level 3's proposed § 4.3 is adopted. It provides that Level 3 shall undertake commercially reasonable efforts to establish direct interconnection when transit traffic to a third party carrier exceeds DS-1 for three consecutive months.

· ITR-6: Level 3's proposed § 4.3.1 is adopted, except that the last sentence regarding SBC's reasonable efforts to minimize transiting traffic through Level 3 is rejected.

· ITR-8: Level 3's proposed § 4.3.3 requires parties to transit traffic until the earlier of when the party arranged interconnection with the third-party carrier or the date transit traffic volumes exceed the volumes specified in Section 4.2.2. This language is contrary to Level 3's stated purpose in that it would end the transiting requirement immediately upon the time that the direct interconnection trigger is met. In addition, there is no ITR Appendix Section 4.2.2. This language shall be amended to provide that the parties will provide transit service until direct interconnection is established.

· ITR-9: Level 3's § 4.3.4 is rejected, as it unnecessarily puts the burden on SBC to notify Level 3 when it must establish a direct connection to a third party.

· SBC's proposed transit traffic rates for up to 50,000,000 minutes of use are adopted, except that they shall apply to all volumes.

²⁷ SBC permits Level 3 to transport intraLATA toll traffic that is not from an interexchange carrier over local interconnection trunks rather than Feature Group D trunks because, as the carrier of the traffic, SBC is able to capture the necessary call information to permit accurate billing. The parties agree that Level 3 will establish a separate trunk group for traffic that is exchanged to and from Level 3 end users and a third party interexchange carrier, or "Meet Point Traffic."

²⁸ PSTN-IP-PSTN traffic is traffic that originates and terminates in PSTN format, although it undergoes protocol conversions in the "middle."

²⁹ Application of AT&T Communications of California, Inc. for Arbitration of an Interconnection Agreement with Pacific Bell Telephone Company, A.00-01-022.

³⁰ Petition of WorldCom, Inc. Pursuant to Section 252(e)(5) of the Communications Act for Preemption of the Jurisdiction of the Virginia State Corporation Commission Regarding Interconnection Disputes with Verizon Virginia Inc., and for Expedited Arbitration, CC Docket No. 00-218 et al., Memorandum Opinion and Order, DA 02-1731 ¶57 (re. July 17, 2002) (Virginia Arbitration Order).

³¹ Level 3's request for official notice of these documents is granted.

³² See footnote 27.

³³ 325 F.3d 1114, 1119-20 (9^th Cir. 2003).