II. BACKGROUND

The proceeding at issue concerns the Commission's rulemaking (R.97-10-016) and investigation (I.97-10-017) into monitoring the performance of operations support systems (OSS) of incumbent local exchange carriers (ILECs) SBC Pacific Bell (Pacific) and Verizon. Performance measures and performance assessment methods have already been established in an earlier phase of this proceeding. (See D.01-05-087 and D.01-01-037.) The challenged decision pertains only to Pacific and was issued in the "performance incentives" phase of the proceeding, as a complete performance assessment plan. It establishes the third critical step of a performance incentives plan: "the corrective actions necessary if performance is deemed harmful to competition." (D.02-03-023 at 4.) The goal of the plan is to ensure that Pacific is in compliance with the direction of the Federal Communication Commission (FCC) that OSS performance shall provide competitors with a true opportunity to compete.¹

Workshops were held in this phase of the proceeding in February 2001 to develop a payment structure that would determine the recipients and the amounts of payments (i.e., performance incentives) by the ILECs for deficient OSS performance. Following the workshops various plans concerning incentive payment structures were submitted by Pacific, Verizon, the Commission's Office of Ratepayer Advocates (ORA), and the CLECs. Each group requested the establishment of fairly widely varying incentive payments by Pacific in the event of deficient performance, with the CLECs requesting the most payments, and Pacific indicating the least. The differences between the plans are set forth in the Findings of Fact section of D.02-03-023.

We adopted a plan based on Pacific's plan, with the modifications set forth in Appendix J to the decision. (D.02-03-023 at 94, Conclusion of Law No. 17.) The decision concludes that the performance incentive plan payments should not be the exclusive remedy for deficient OSS performance. (Id., Conclusion of Law No. 21.) In addition, Pacific and any CLEC may agree to use a different performance incentives plan, subject to our approval. (Id., at 97, Ordering Paragraph No. 3.) The adopted plan is subject to our review, adjustment and modifications following the initial six-month period and at that time resolution of any remaining issues from D.01-01-037 should be addressed as well. (Id., at 98, Ordering Paragraph No. 6.)

The CLECs allege the challenged decision errs on the grounds that : 1) it is not supported by the findings; 2) the findings made are not supported by substantial evidence; and 3) the Commission abused its discretion in adopting the incentive payments policy it adopted. For the reasons set forth below, the CLECs have failed to establish any legal error and therefore we shall deny the application for rehearing.