Issue 1: Routine Network Modifications

XO and SBC agree that the FCC requires SBC to undertake routine network modifications for competitive local exchange carriers such as XO. Nevertheless, the parties cannot agree on contract amendment language in three areas regarding the provision of routine network modifications.

a. Charges for routine network modifications

First, XO and SBC dispute whether SBC should be allowed to charge XO for routine network modifications. Although the parties' latest proposals largely agree on language in Section 3.16 of their contract amendment on this topic, XO asks the Commission to specify that certain network modification costs are already included in UNE rates and SBC cannot charge again when it performs a routine network modification. For example, XO contends that costs for doublers, repeaters, multiplexing equipment, and rearrangement and splicing of cable are already captured in UNE rates. Therefore, XO maintains that SBC should provide routine network modifications at no additional cost and SBC bears the burden of demonstrating that costs of these modifications are not already captured in UNE rates.

SBC responds that XO has not shown that costs for all routine modifications are in UNE rates. SBC's witness Scott Pearsons contends that costs for doublers, repeaters, and multiplexing equipment are not in UNE rates. For rearrangement and splicing of existing cable, SBC argues that while these costs are "typically captured in loop operating expenses," (SBC 12/15/04, p. 3), current UNE rates do not cover these costs sufficiently because the Commission reduced SBC's proposed expense levels far below current levels when it adopted UNE rates. To resolve the dispute, SBC offers language stating it will not charge for routine modifications where it is already recovering the costs elsewhere.

I find that XO did not provide sufficient or compelling evidence that costs for certain network modifications, namely doublers, repeaters, and multiplexers, are already incorporated in UNE rates. While XO requests the Commission to insert language in the agreement specifying that certain costs should not qualify as routine network modifications, its request is vague and does not include contract language specifying the costs it believes are already recovered. The only area where XO has shown that SBC should not charge is for rearrangement and splicing of existing cable. SBC admits that these costs are "typically captured in loop expenses" which were used to set UNE rates. SBC's argument that UNE rates are too low and do not allow sufficient recovery of these costs is insufficient. The fact that the Commission adopted rates lower than SBC proposed does not mean that SBC can now charge XO for routine rearrangement and splicing. SBC's proposed language contained in its January 7, 2005, reply brief is reasonable and should be adopted, except that SBC may not charge for rearrangement and splicing of existing cable.

b. Performance

Second, parties initially disagreed on whether SBC's performance in provisioning loops or transport requiring routine network modifications would be judged using standard provisioning intervals. At the time of hearings, the parties indicated they had agreed on language in Section 3.16.5 to resolve this dispute. The final amendment should incorporate the language proposed by SBC in its Reply Brief.

c. Certification

Finally, parties disagree on the third sentence in Section 3.16.4 requiring that if SBC refuses to perform a modification, it shall certify that it does not routinely perform such a modification for its own customers. In XO's view, since the FCC defines routine network modifications as "activities that [incumbent local exchange carriers (ILECs)] regularly undertake for their own customers" (TRO para. 632), SBC is in the best position to know what it regularly performs. SBC contends this language is unnecessary because the TRO has already defined what constitutes a routine network modification.

I find that XO's certification language is reasonable and is not an unreasonable burden for SBC. The language should be incorporated into the final amendment.