Statement of the Case

In June 1997, Cox and SBC California entered into two ancillary agreements, pursuant to their ICA, for the exchange of customer billing data. These two agreements were a DEA⁴ and a Meet-Point Billing (MPB) Agreement. The purpose of such agreements is to set out a process for how one local exchange carrier (LEC) trades call message records with other LECs to allow for the billing and collection of charges where the customer of one LEC uses the facilities of another LEC. The call message records take one of three forms: (1) calling card⁵ and third party billed⁶ (CATS)⁷ messages, (2) non-CATS messages⁸, and (3) switched-access messages involving meet-point billing records. The Cox-SBC California DEA provided for the CATS and non-CATS message records, and the Cox-SBC California MPB Agreement provided for the meet-point billing records.

All local exchange telephone companies exchange billing records where the call is originated and transported over one carrier's network, but the billed party is served by another carrier. The actual charges for the calls are determined by the tariffs of the transporting company, which "rates" the bill messages and sends them to the billing telephone company. The billing telephone company bills its customers, then remits the proceeds to the transporting telephone company, minus a small billing and collection fee. It is not uncommon to have messages received by the billing company that are unbillable, or for which the amounts billed are not collectable, returned for write-off by the transporting company.

Typically, there are three parties involved in the exchange of CATS message records: (1) the LEC with the customer that incurs the bill (the customer to be billed); (2) the LEC that actually transports the customer's traffic; and (3) a third carrier, designated as the CMDS⁹ host, that performs the transfer of the records from the transporting carrier to the billing carrier. Non-CATS message records involve two parties, the transporting carrier and the billing carrier that occasionally exchanges those messages directly. MPB message records also involve two LECs, which are providing interexchange carrier access, and the facilities of both carriers transport part of the traffic to allow for that access. While Cox and SBC California had transactions dealing with each of the forms of message billing records, the dispute in this proceeding involves non-CATS message records.

Cox's Position

Cox designated two different billing agents for the three types of message records it was to receive from SBC California. In August 1997, Communications Data Group (CDG), one of Cox's billing agents, notified SBC California that it would act as Cox's agent for the meet-point billing records. In December 1997, representatives of SBC California and Cox discussed the establishment of a different agent for receipt of CMDS messages on behalf of Cox. At that time, SBC California's representative informed Cox that the usage file for CMDS messages could not be separated from the meet-point billing file. Cox asked that duplicate sets then be sent to each agent. SBC agreed to send all call records to both agents. In February 1998, Billing Concepts, Inc. (BCI) d/b/a ZPDI notified SBC California that it was authorized to act as agent for all Cox-bound CMDS data (CATS and non-CATS). (Cox Expedited Complaint at 5.) In all, Cox paid CDG and Billing Concepts $1.3 million to have them segregate the message records in accordance with the two agreements. (Cox Opening Brief at 1.)

In the case of non-CATS messages, SBC California failed and/or refused to send the appropriate billing records to the designated billing agent. Specifically, SBC California sent the magnetic tapes for Cox's non-CATS messages to the meet-point billing agent, which had not prepared its automated data processing system to process these non-CATS message records for billing and, therefore, ignored them. At no time was the DEA amended in writing to allow SBC California to transmit Cox's billing records to anyone other than Cox's designated billing agents. (Cox Expedited Complaint at 6.)

The two companies operated under this arrangement for approximately two years before the problem became serious enough to cause concern. Between mid-1997 and April 2000, Cox noticed certain discrepancies between SBC California's statements for CMDS and meet-point revenue settlements and the magnetic tapes Cox's billing agents received for billing and collection purposes. The billing discrepancies (often less than $5000 per month) seemed relatively minor in light of the expansive growth of Cox's customer base. Consequently, Cox paid the bills without questioning the discrepancies. (Id.)

However, in April 2000, the discrepancies began increasing significantly from less than $5000 per month to over $40,000 per month. At that time, Cox representatives began contacting SBC California to investigate the discrepancies and to help identify and correct the problem. SBC California either ignored Cox's attempts to resolve the problem, or passed the issue from one SBC California employee to another without any substantive attempts to understand or correct the problem. Consequently, SBC California began applying significant late charges to the unpaid amounts, even though Cox had requested SBC California's assistance in identifying the source of the billing discrepancies and SBC California had failed to initiate a timely investigation. Finally, in or about November 2000, Cox paid over $200,000 in disputed fees to avoid SBC California terminating its CMDS hosting services to Cox. At that time, SBC California agreed to investigate the disputed amounts. (Id. at 6-7.)

Despite SBC California's agreement to investigate the discrepancies, it took an additional eight months for SBC California and Cox to identify the source of the billing problem: SBC California was conveying the non-CATS billing records to the wrong billing agent. Once the source of the problem was discovered, Cox continued to be unable to bill and collect for a significant portion of the third-party billed messages. As the billing agents reviewed the magnetic tapes of billing records, they used what they could and ignored the rest. The magnetic tapes were then returned to SBC California for re-use to avoid unnecessary material charges. By the time SBC California acknowledged that it was sending the billing records to the wrong billing agent, it also advised that the billing data could not be re-created. Without the billing data, Cox was never able to bill for the traffic. (Id. at 7.)

During this time period, matters deteriorated further as the growth in Cox's telephone customer base and the fact that Cox was not receiving the non-CATS portion of the call records combined with a fraudulent call scheme that affected it and SBC California. Under this scheme, a relatively small number of Cox's local telephone customers received a large amount of collect calls from some penal institution inmates, and never received a bill because Cox was not receiving the call records from SBC. Apparently, word spread through the prisons and the problem increased dramatically from May 2001 until it was finally resolved in June 2001. As other Cox customers became aware that Cox was not billing for this type of call, the amount of third party billed traffic increased dramatically and the amounts in dispute also increased significantly (with the worst month exceeding $347,000). In or about June 2001, SBC California and Cox identified and corrected the billing data exchange problem; subsequently, the parties have been properly billing and collecting for all CATS, non-CATS and meet-point traffic. (Id. at 7-8.)

Cox contends that SBC California continues to be in breach of the agreements. Since 2002, it has continued to receive all of the message records directly from SBC California, internally segregated them, and forwarded them to Cox's appropriate billing agent at great expense. (Cox Opening Brief at 8.) Cox further maintains that it is not responsible for the amounts owed to SBC California between April 2000 and July 2001 (including associated late fees) totaling approximately $2.25 million. However, if the Commission should find some allocation of liability is warranted between the parties, it should find Cox liable for only SBC California's reasonable costs based on Cox witness Doug Garrett's testimony, as modified. (Id. at 4.)

⁴ Specifically entitled "Data Exchange Agreement For The Distribution Of IntraLATA Message Detail And/Or The Settlement Of IntraLATA Message Revenue Between Pacific Bell And CoxCom, Inc." (Exhibit #1, Attachment B to Joint Statement of Undisputed Facts.) Although not at issue, the DEA was withdrawn in order to correct a minor error soon after its June 1997 filing at the Commission. The agreement was never re-filed. Cox and SBC California stipulated that the terms of the DEA were applicable to the dispute. (Exhibit #1, Joint Statement of Undisputed Facts at ¶ 4.)