SBC Issues 1 and 2: Discontinuance of UNEs

SBC proposes contract amendment language stating it is only obligated to provide UNEs pursuant to the FCC's lawful and effective rules, which SBC contends is appropriate and consistent with FCC orders requiring it to provide only those UNEs that are lawfully UNEs. According to SBC, its proposed language makes clear that when SBC is relieved of the obligation to furnish a UNE under federal and state law, its corresponding obligation under the ICA will also be relieved. SBC's proposal includes language addressing the proper notice and transition process for future UNE declassifications by the FCC.

SBC does not believe its language impermissibly overrides the existing change of law provisions. When a UNE is no longer required to be made available by the FCC, there is no need for the parties to engage in protracted negotiations to implement the de-listing, which would only delay compliance with federal law. Instead, SBC proposes written notice and a 30-day transition process for discontinuance of the UNE. (See "new section" following Section 1.3.3.3 in SBC's Reply Brief.) Moreover, SBC contends its language incorporates any unbundling obligations under state law, and its proposed language was recently adopted by the arbitrator in the SBC-Level 3 arbitration (Application 04-06-004).

XO opposes SBC's proposal, and instead proposes contract amendment language that requires SBC to provide UNEs or UNE combinations "to the extent required by Applicable Law." (Sections 1.1 through 1.6.) The proposed language includes a list of UNEs that are no longer required to be provided and transition periods, consistent with FCC orders and state unbundling requirements. According to XO, the Commission has required SBC to advise the Commission and "seek leave" before altering its list of UNEs "because such an alteration could significantly impact the competitive local market in California." (Decision (D.) 02-12-081, at 10 and Ordering Para. 2.) Moreover, XO contends the existing ICA requires parties to negotiate any changes of law and file an amendment, whereas SBC's proposed language would modify this change of law provision and implement an automatic process for SBC to discontinue providing UNEs, without providing sufficient opportunity for carriers to negotiate changes of law.

XO maintains SBC cannot unilaterally discontinue providing UNEs upon any event that it deems has relieved it of such obligations and without the required negotiation under change of law provisions, but must continue to comply with federal and state requirements. In XO's view, SBC's proposed language empowers SBC to implement the ICA by second-guessing regulatory and judicial rulings outside regular appellate processes. Moreover, according to XO, the FCC has anticipated carriers would implement changes pursuant to change of law provisions "consistent with their governing interconnection agreements." (TRO at para. 701.)

Finally, XO contends SBC's proposal does not comply with a 6-month transitional period set forth by the FCC in its Interim Rules Order.⁴ (XO brief, 1/7/05, p. 13.) On this point, SBC responds that it does not include a 6-month transition period because this was merely a proposal in the interim rules order that has not been adopted by the FCC.

Essentially, XO and SBC dispute how future changes of law should be incorporated into the ICA. SBC proposes an amendment now that would allow automatic implementation of future rule changes, such as the de-listing of UNEs, that emanate from the FCC, rather than using the existing change of law process to negotiate the implementation details. XO sees no reason to short circuit the change of law negotiation process. While SBC's proposal is certainly efficient in that it allows future changes of law to take effect without any discussion between the parties, SBC's proposed language could conflict with future transition requirements set forth by the FCC or other jurisdictions. For example, SBC language imposes an automatic 30-day transition period if the FCC determines that SBC is no longer required to unbundle a specific network element. In the FCC's recent Triennial Review Remand Order (TRRO),⁵ it established 12-, and in some cases 18-month transition periods for certain UNEs. Thus, SBC's proposed language, if adopted, could lead to future disputes over which transition period would govern-the FCC's or the change of law provision in the amended ICA.

For this reason, I do not find SBC's proposed language on this issue reasonable. I see no reason to unilaterally apply a 30-day transition period when recent FCC rule changes have allowed 12 to 18 months, depending on the UNE involved. In establishing 12- and 18-month transition periods, the FCC discussed the need for orderly transitions and expressed concern that a flash cut transition could disrupt services to mass market customers and the business plans of competitors. (TRRO, para. 226-227.) Therefore, I find it reasonable to adopt XO's proposed language preserving the existing change of law process and avoiding conflicts with specific FCC transition requirements.

Nevertheless, there are certain modifications that are required to XO's language. First, the parties agree to adopt SBC's modifications reflecting the FCC's revised fiber loop rules. (Section 1.3.1(xi).) Second, I agree with SBC that Section 1.3.3.2 is moot and should be removed. Third, I agree that Section 1.3.3.2.1 should be modified as proposed by SBC to state that network elements will be provided "in a manner that is consistent with the new FCC rules(s)." Finally, I agree that references to a "6 month transition period" in Section 1.3 should be removed because this proposal was not adopted by FCC in TRRO.

⁴ In re Unbundled Access to Network Elements, WC Docket No. 04-313 and CC Docket No. 01-338, Order and Notice of Proposed Rulemaking, (rel. August 20, 2004).

⁵ Review of the Section 251 Unbundling Obligations of Incumbent Local Exchange Carriers, CC Docket No. 01-338, Order on Remand, (rel. February 4, 2005).