7. Invoicing

7.1. Invoicing 1

SBC-CA says the billed party should not be entitled to withhold payment on disputed amounts. Rather, SBC-CA proposes that the billed party either (a) pay the entire bill subject to disputing portions as necessary, or (b) pay undisputed amounts with the disputed portions deposited into an escrow account pending resolution.

MCIm says the billed party should pay undisputed amounts but be entitled to withhold payment of disputed amounts.

Discussion

SBC-CA's proposed language is adopted.

The 2001 ICA implements the same options SBC-CA proposes here: (a) pay the entire bill and dispute portions as necessary or (b) pay undisputed amounts and deposit disputed amounts in an interest bearing escrow account held by a neutral third party. In fact, the arbitrator in 2001 specifically considered the issue; rejected MCIm's proposed language (that contained no escrow requirement); and directed that the billed party also be given the option to pay the full amount, including the disputed portions. (FAR dated July 16, 2001, page 17.) No new facts or law justify a change.

MCIm argues that withholding the disputed amount is standard industry practice. To the contrary, it may or may not be the practice in some portions of the industry, but it was not the practice in the 2001 ICA. It is also not the practice for disputes between parties which are brought to the Commission (wherein disputed amounts are placed on deposit with the Commission).

MCIm claims payment into an escrow account will cause it accounting difficulties, arguing that MCIm is an accrual-based company and must accrue expected costs based on published rates and expected volumes. As such, MCIm says if an invoice is too high due to errors, "MCIm will have to adjust its accruals to set aside excess monies until the error on the invoices can be identified and properly documented." (MCIm Opening Brief, page 118.) This concern is unpersuasive. Setting aside money internally or in an interest bearing escrow account presents no apparent significant difference. Moreover, MCIm does not show that increased work, if any, due to it being an accrual-based company is burdensome or unreasonable, (e.g., given that accurate accounting of amounts due and paid without excessive burden should be possible using existing accounting techniques and computer-based accounting tools, whether or not MCIm is an accrual-based company). Also, MCIm presents no evidence that the language in the 2001 ICA has presented unworkable problems.

Finally, MCIm contends it has no incentive to capriciously withhold payment since it must pay substantial late fees on disputed amounts resolved in the billing party's favor. Therefore, according to MCIm, it should be permitted to withhold payment on disputed amounts. This is not persuasive. The 2001 ICA also included late fees and interest, but did not permit withholding of disputed amounts. There is no reason to change that practice here.

Moreover, the existing approach is simply a good business practice. When disputes are resolved in the billing party's favor the funds are readily available. When resolved in the billed party's favor, funds are returned with interest, thereby reasonably neutralizing the effect of the time value of money. Moreover, this ICA may be adopted by other CLECs. Not every CLEC will necessarily be able to maintain a pattern of timely payments. Given the potential for more generalized use of this ICA, it is reasonable to continue the good business approach already embodied in the 2001 ICA.

Thus, SBC-CA's language is adopted.

7.2. Invoicing 2

SBC-CA proposes that disputed amounts either be paid to SBC-CA pending resolution of the dispute, or placed into an interest-bearing escrow account.

MCIm opposes paying disputed amounts to SBC-CA or into an escrow account.

Discussion

SBC-CA's proposed language is adopted.

As discussed above (see Invoicing 1), SBC-CA's proposed language continues the approach used in the 2001 ICA. No new facts or law justify a change.

Moreover, placing the money in an interest-bearing escrow account reasonably treats the time value of money while eliminating needless conflicts about the availability of funds once the dispute is resolved. This benefit is all the more important given that other CLECs may adopt this ICA.

MCIm contends the administrative burden and cost of establishing an escrow account is unnecessary given that SBC-CA states it will strive to resolve billing disputes within 30 days. MCIm says this is particularly true given that MCIm has a long history of successfully resolving disputes without escrow accounts. To the contrary, MCIm's argument supports the approach of allowing the billed party to determine whether or not to use the escrow account, not the elimination of the escrow account option.

MCIm is concerned that it may be penalized by having to pay millions of dollars into escrow pending dispute resolution. To the contrary, the evidence does not show a significant number of ongoing bill disputes in California, significant dollar amount of ongoing disputes in California, or significant resolution of disputes against SBC-CA (which would have potentially tied up MCIm's money). There is no credible evidence to suggest this will change. Moreover, the escrow account bears interest, reasonably compensating the prevailing party for the time value of money without penalty.

Therefore, SBC-CA's proposed language is adopted.

7.3. Invoicing 3

SBC-CA proposes 30 days.

MCIm proposes 90 days.

Discussion

MCIm's proposed language is adopted.

The 2001 ICA allows 90 days for the disputing party to provide the other party all information related to the dispute. No new facts or law justify a change.

SBC-CA says a bona fide dispute should not require an additional 90 days (three months) after the payment due date before the provision of necessary data. To the contrary, as MCIm says, some billing disputes require the query of a large number of records (e.g., reciprocal compensation over several months may require the extraction of millions of call detail records). Ninety days is reasonable.

SBC-CA says its proposed 30 days will benefit both parties by expediting dispute resolution. A shorter time, however, has just as much potential for increasing disputes as expediting dispute resolution (e.g., in cases where data is not available in 30 days and an extension is sought by one side but opposed by the other). Both parties state they already do everything reasonably possible to resolve disputes in 30 days, or as little time as possible. Continuing the allowance of 90 days is reasonable given both parties' stated commitment to resolve matters earlier when feasible.

SBC-CA contends that giving CLEC's 90 days encourages improper behavior by giving CLECs an incentive to delay payment by disputing changes. This is not true. The disputing party must either (a) pay in full and dispute or (b) pay disputed charges to an escrow account. Moreover, interest and late payment charges apply, as appropriate. This provides adequate incentive against capricious billing disputes.

Finally, SBC-CA argues that the concern addressed in the 2001 ICA was different. In 2001, SBC-CA proposed that failure to provide certain information in 29 days should result in MCIm waiving its right to dispute the subject charges. The arbitrator felt 29 days was too short, and adopted 90 days. SBC-CA says that concern does not occur now because the language here only specifies the amount of time to provide information supporting a dispute, not the amount of time to file a billing dispute.

This is not entirely accurate. SBC-CA is correct that the time for filing a billing dispute is addressed elsewhere in the ICA (e.g., stake date in § 6.3). SBC-CA is also correct that the 2001 ICA specifically stated that failure to provide the required information and evidence within the required number of days "...shall constitute MCIm's irrevocable and full waiver of its right to dispute the subject charges." (2001 ICA, § 29.13.4.1.) That language is not in the 2006 ICA. Nonetheless, the 2006 ICA is silent on what happens after 30 or 90 days. It may or may not be that failure to file necessary supporting data constitutes a waiver of further pursuit of the claim. Rather than increase the likelihood of needless conflicts by adopting 30 days, it is more reasonable to continue the 90 days used in the 2001 ICA.

The evidence here is that 90 days worked reasonably well in the 2001 ICA. There is insufficient reason to adopt a shorter period here. MCIm's proposed language is adopted.

Comments and Replies on DAR

SBC-CA asserts that the DAR errs in allowing 90 days for documentation of disputes because it overlooks a change in the time allowed to lodge disputes between the 2001 and 2006 ICAs. SBC-CA states this is a factual error, and concludes that the outcome in the DAR must be reversed.

To the contrary, the dispute here is between 30 and 90 days. Both parties already affirm that they do everything reasonably possible to resolve billing disagreements in 30 days or less. As such, the dispute here in nearly all cases will be moot. Nonetheless, in a few difficult cases, it is not unreasonable to provide an additional 60 days (from 30 to 90). Providing this additional 60 days has just as much potential for helping matters in difficult cases come to resolution as not. SBC-CA fails to show that 90 days is unreasonable. SBC-CA's comments on the DAR do not result in any change in outcome.

7.4. Invoicing 4

SBC-CA proposes that the Stake Date be tied to the date a claim is raised by one party to the other.

MCIm proposes that the Stake Date be tied to the Bill Date.

Discussion

MCIm's proposed language is adopted.

The Stake Date sets a point in time before which no billing adjustments may be made. One purpose is to limit parties' risk by specifying the timeframe within which a dispute may be raised.

Parties agree that Stake Date provisions were not included in the 2001 ICA, but agree to include them now to provide additional certainty about billing and accounting procedures. MCIm's proposal provides the most clarity and certainty by setting a concrete date for the Stake Date. SBC-CA's proposal would set a floating date that is less clear, less certain, and less precise in limiting risk.

SBC-CA argues that MCIm's proposal should be rejected because it is unclear what the Stake Date is if no bill has been issued. This is not persuasive. The adopted language is based on the Bill Date. The 2006 ICA states: "Each Party will establish monthly billing dates ("Bill Date") for each bill type, which Bill Date will be the same day from month to month." (2006 ICA, Appendix Invoicing § 2.6.) Thus, the bill date is firmly established, and is not dependent upon issuance of the bill.

Therefore, MCIm's proposed language is adopted.

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