III. DISCUSSION

A. The Challenged Decision Is Supported By The Findings

The CLECs argue that the challenged decision is not supported by the findings because the adopted plan: a) does not provide any incentive for Pacific to provide and maintain nondiscriminatory OSS for its competitors, b) adjusts payment amounts at certain performance levels so that noncompliance is essentially "forgiven," and, c) the Commission errs in directing the parties to amend Performance Measure 16.

With respect to the first issue, the CLECs argue that the plan must be improved. Pursuant to D.02-03-023, the plan is subject to Commission review, adjustment and modifications as set forth in Ordering Paragraph No. 6. Thus, the CLECs are afforded an opportunity to timely raise their concerns and the facts supporting them at that time. Presentation of them at this time is premature. The CLECs argue that unless Pacific faces greater liability for discriminatory conduct there will be no viable competition offered by CLECs and telephone customers will be subject to a monopoly. Yet the CLECs offer no proof to support their supposition. The CLECs' argument is premised on the theory that the incentives plan is nothing more to Pacific than the cost of doing business, but they do not provide any factual support of their contention. Without factual support, the CLECs' theories of what Pacific might do in the future do not provide a basis for a finding that our decision is legally erroneous. The issue is without merit.

The CLECs next argue that "[e]ven though the Commission did not adopt a plan to `mitigate' the effect of random variation by excusing a certain number of violations linked to the adopted confidence level as urged by Pacific, the lower payment-per-miss results in reduced financial liability to Pacific, just as if instances of noncompliance had been 'forgiven' under a mitigation plan." The CLECs admit that we "correctly denied Pacific's attempts to have failures below the confidence level `forgiven' because they were due to random variation," but take issue with Finding of Fact No. 70, arguing that by adopting "sub-nominal payments" for failures below the confidence level the Commission will effectively be forgiving those failures.² The essence of the CLECs' argument here, as elsewhere, is that the adopted plan does not provide for a higher level of payments that the CLECs believe should apply. The CLECs are using their application as a means to request us to change our policy decision and increase the incentive payment amounts to a higher level. Again, this argument appears to be a rehash of the CLECs' comments and arguments made during the proceeding, and does not establish legal error.³

Thirdly, the CLECs take issue with Ordering Paragraph No. 4, claiming the decision lacks any finding of a need to revise the performance measure. The CLECs would have us order Pacific to implement Performance Measure 16 as written and not devise ways to change it. While it is true that we adopted the performance measures arrived at by the parties after collaboration, the CLECs have not accurately portrayed our findings on this issue. We explicitly stated in our findings that "[m]oving Performance Measure 16 into Category B (ex-Category 3) assessments improve[s] the plan and is reasonable only as a temporary solution;" and that "[m]oving Performance Measure 16 into Category B (ex-Category 3) assessments still does not capture the ideal data." (D.02-03-023 at 92, Findings of Fact Nos. 141 and 142, emphasis added.) The CLECs argue that the parties negotiated the performance measure, but they have not established how we committed legal error by requiring the parties to again "collaborate to review and recommend any appropriate revisions for the definition and/or use of Performance Measure 16." Our order logically (and legally) follows from the findings on this issue. The allegation is without merit.

B. The Findings Are Supported By Substantial Evidence.

The CLECs next argue that the findings are not supported by substantial evidence and that we have abused our discretion in choosing the Pacific proposal for a curvilinear approach. The CLECs argue that the curvilinear relationship between the likely percentage of nonperformance and the consequential payment amount adopted by the challenged decision is not supported by the evidence gathered in the proceeding and is arbitrary. The CLECs take issue with the term "ambiguous" in Findings of Fact Nos. 68 and 69, stating that it is being used in a vague, enigmatic or equivocal manner that fails to shed light on what outcomes are being interpreted; and further that the purpose and method of "interpretation" is not explained. To the contrary, numerous findings explain the rationale for the plan we adopted. We note that we also found that "Pacific's performance is likely to remain at levels where our plan accurately follows the curvilinear target," and that "Pacific is unlikely to deteriorate to levels where the plan payments miss the target." (Id., Findings of Fact Nos. 77 and 78.) These findings follow logically from our discussion in the text of the challenged decision of the curvilinear payment structure as a method of reducing payment rates for lower failure rates. Further, we detailed the reasons why we preferred Pacific's proposed curvilinear relationship between payment amounts and performance, stating among other things that:

[t]he meaning of smaller percentages of deficient performance is ambiguous relative to larger percentages... considerable analysis must be performed to understand the actual impact of 10 percent missed performance measures, whereas with levels of 20 percent, 30 percent, and 40 percent missed measures it becomes increasingly clear that parity is not being provided. Additionally, we suspect that after additional evidence is provided and analyzed, that some mitigation may be warranted. (Id., at 43-44.)

Moreover, we "acknowledge[d] and address[ed] the ambiguity inherent in the performance measures, benchmarks, and statistical tests by requiring lower relative penalty amounts for lower failure rates and by increasing the penalty rates as performance worsens." (Id., at 45.) Based on the evidence presented, we were "persuaded that Pacific's increasingly higher penalty rates (curvilinear) are more appropriate for an incentive plan than the CLECs' more uniformly increasing rates (linear)." (Id.) We included a graph that is set forth at page 46 of our decision (figure 5) and the calculations upon which we relied are set forth in Appendixes E, F, and G.

It is clear that the CLECs do not agree with the curvilinear approach, believing that Pacific will not pay as much in penalties as it would under the approach preferred by the CLECs. However, this argument raises policy rather than legal issues. We are fully aware of the CLECs' position but based on the evidence as we discussed in D.02-03-023, we chose the Pacific proposal after reviewing all of the other proposals. The CLECs have not established how our determination violates any specific law, nor have they established that substantial evidence does not support the determination.

C. The CLECs Have Failed To Establish That The Commission Abused Its Discretion.

The next issue raised by the CLECs is that our decision constitutes an abuse of discretion because the plan provides "practically no incentive for Pacific to comply with performance standards for up to 10% of the performance submeasures used by a CLEC in one month." The CLECs' allegation is entirely speculative and theoretical at this point in time. The CLECs also argue that we abused our discretion by permitting certain Tier II payments to be distributed to Pacific's ratepayers (rather than entirely to the CLECs) because to do so will create goodwill for Pacific when in fact Pacific is paying the amounts because it discriminated against its competitors.⁴ Further, the CLECs take issue with the billing cap. These arguments were presented by the CLECs during the proceeding. We fully explained our rationale for Tier II payments in the challenged decision, including the reasons why those billing credits termed Tier I payments will be adjustments to the rates that each CLEC pays to Pacific for OSS services and for local exchange wholesale services, and why those billing credits termed Tier II payments, which "exceed the measure of CLEC economic harm," appropriately go to the ratepayers as credits. (D.02-03-023, at 63-64; see also, id., 65-68.) The CLECs take issue with our statement, and in particular that portion of it set forth above, demanding that it be stricken because "[t]here is no reliable factual basis for any assertion about the amount of economic harm suffered by a CLEC as the result of poor OSS performance." Yet one goal of the adopted plan is that "incentive payments [are] based on overall industry effects. (Id., at 63-64.) As the decision provides, "[I]ndividual CLEC results are aggregated into one performance result for each sub-measure. Payments are generated from each sub-measure with failing performance." (Id.) The focus here is not on any individual CLEC but on the industry as a whole. The CLECs are using the rehearing process to impermissibly rehash old arguments. The CLECs have failed to establish that we abused our discretion on this point.⁵

D. The CLECs Have Not Shown That The Decision Errs By Requiring Proceedings To Modify The Joint Partial Settlement Agreement And D.01-05-087 To Be Completed Before Any New Payment Measure Can Be Implemented.

The CLECs next contend that we should not prohibit parties from implementing negotiated alternative payment measures for performance failures, citing the challenged decision at page 71, wherein we noted the rationale for the Joint Partial Settlement Agreement (JPSA) adopted in D.01-05-087 to be completed before any new measure can produce payment. We have previously stated our belief that the Pacific-CLEC agreement regarding new measure implementation be included in the JPSA modification proceedings and not be included in the incentives plan. The CLECs have not provided any legal argument in the application for rehearing on this issue but rather are using the rehearing process as a vehicle for their policy argument. An application for rehearing is properly used to inform the Commission of any perceived legal errors in a challenged decision. "Applications for rehearing shall set forth specifically the grounds on which applicant considers the order or decision of the Commission to be unlawful or erroneous. Applicants are cautioned that vague assertions as to the record or the law, without citation, may be accorded little attention. The purpose of an application for rehearing is to alert the Commission to an error, so that error may be corrected expeditiously by the Commission." (Commission Rules of Practice and Procedure, rule 86.1.) The CLECs have not complied with the Commission's Rules of Practice and Procedure regarding applications for rehearing and this argument is without merit.

E. The Commission's Taking Official Notice Of Staff Calculations Was, At Most, Harmless Error, And The CLECs Do Not Challenge The Information.

Finally, the CLECs argue that our taking "official notice" of theories and numbers compiled by Pacific's consultant at the request of our Telecommunications Division staff, for the staff's review, violates our Rules of Practice and Procedure, and that the numbers and theories were not subject to review and discussion by the parties.⁶ The CLECs, however, do not challenge the information and seek for a modification of the decision removing the term "official notice" from the decision rather than a hearing on this issue.⁷

Rule 73 of the Commission's Rules of Practice and Procedure provides for the Commission's official notice of facts, and states: "Official notice may be taken of such matters as may be judicially noticed by the courts of the State of California." Judicial notice by the California courts is established by Evidence Code section 450, et seq.

The calculations at issue were made by the staff-not a party to the proceeding-from information supplied by Pacific. In their application for rehearing the CLECs do not challenge the work performed by Pacific at the staff's direction. The CLECs request only that we modify the decision by deleting the term "official notice," and that the "source of the information," presumably Pacific's consultant, "be clearly identified." (Id., at 19.) Thus although the CLECs raise an issue of legal error, they appear to concede that the error, if any, is harmless.

Even if the information provided by Pacific is not information from which judicial notice can be properly taken, since the CLECs do not challenge the information, rehearing is not necessary (or even desired by the CLECs). With respect to their request that the source of the information be identified, D.02-03-023 clearly provides that the information was provided by Pacific's consultant. (D.02-03-023 at 76, fn. 104.) Further, with respect to the actual information, the CLECs in their application for rehearing state that "the Commission may properly rely upon and incorporate the work performed by a party's consultant the appropriate disclosure have been made and the factual matter is subject to public review in a subsequent phase of the proceeding. [sic]" Given that the CLECs do not seek rehearing on this issue, the matter is at most, one of harmless error. Rehearing therefore is denied.