BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION MCImetro ACCESS TRANSMISSION SERVICES, INC., Complainant, v. U S WEST COMMUNICATIONS, INC. Respondent. ) ) ) ) ) ) ) ) ) ) ) DOCKET NO. UT-971063 U S WEST’s Petition for Administrative Review U S WEST Communications, Inc. (U S WEST) hereby submits its petition for administrative review of the Administrative Law Judge’s September 25, 1998 initial order (initial order) in this matter. This petition is submitted pursuant to RCW 34.05.464 and WAC 480-09-780. Pursuant to that rule, U S WEST states that it specifically requests review of the following findings of fact and conclusions of law. Findings – 15, 24, 26, 27, 29, 30, 32, 33, 35, 36, 37, 42, 44, 46, 51, 53, 58, 59, 62, 72. Conclusions – 6, 8, 10, 11, 12, 13, 14, 15. U S WEST does not seek review of the ordering provisions, except insofar as requested modifications to the findings and conclusions might affect the obligations imposed by those provisions. INTRODUCTION This petition requests review of certain provisions of the initial order in this matter. As will be set forth more fully herein, U S WEST disputes the provisions of the initial order which conclude that the capacity problems on U S WEST’s network related to number portability, CLEC interconnection, and internet access, were foreseeable and that U S WEST’s forecasting process was unreasonable. The initial order correctly notes the complexities of forecasting and provisioning capacity, and the developing process of interconnection. The initial order states that an indication of the complexity of forecasting and provisioning is that MCImetro and U S WEST entered into three successive interconnection agreements within 24 months. Each successive agreement modified and expanded terms for forecasting and provisioning facilities. These agreements demonstrate an evolving process to establish predictable and reliable business operations. However, in making findings and conclusions regarding the adequacy of U S WEST’s forecasting process and the foreseeability of capacity demands, the initial order does not give proper consideration to that complexity. Thus, U S WEST requests administrative review. This issue of foreseeability, and the ability to forecast for unforeseeable events, is critical, and is central to the decisions made in this case. The issue of foreseeability, if decided in favor of U S WEST, leads inevitably to the conclusion that U S WEST did not violate Washington law and did not breach the interconnection agreement. U S WEST submits that the only decision that can be made on the evidence in this record is that the growth in traffic on the local network due to internet usage and CLEC demand was not foreseeable at the time that U S WEST forecast and planned capacity for the 1996-1997 time frame. When that growth became apparent, U S WEST responded quickly to add capacity to central offices – and in fact added capacity in quantities which far exceeded historical growth. U S WEST also disputes those provisions which conclude that capacity shortages and facilities exhaust are major network projects, and that U S WEST was required to provide notice of those events. U S WEST further disputes that it violated state law or breached the interconnection agreements as set forth in the initial order. The initial order contains a memorandum portion, which discusses the issues in narrative form. The order also contains numbered finding of fact, conclusions of law, and ordering paragraphs. This petition for review addresses the numbered findings and conclusions. However, to the extent that these findings and conclusions are also discussed in the narrative section of the order, U S WEST requests review of that section as well. Review of Findings of Fact U S WEST hereby requests review of the following findings of fact: 15, 24, 26, 27, 29, 30, 32, 33, 35, 36, 37, 42, 44, 46, 51, 53, 58, 59, 62, 72. These findings address six main subjects, and are grouped and discussed by subject, in numerical order. Common Funding Document: Finding 15. U S WEST requests review of this finding of fact insofar as it determines that Exhibits C-94 and C-117 contain statements of corporate policy. U S WEST requests that the finding be modified, based on the unrebutted evidence of record, to read as follows: Official statements of U S WEST corporate policy are not issued in common funding documents, nor are they contained in Exhibit C-94 or Exhibit C-117. Tr. at 811. Foreseeability and Forecasting: Findings 24, 26, 27, 29, 30, 32, 33, 35, 36, 37, and 42. U S WEST requests review of these findings insofar as they determine that U S WEST’s forecasting processes were unreasonable and that the capacity issues related to internet growth, CLEC demand, and number portability were foreseeable. U S WEST acted reasonably to forecast and provision adequate capacity. U S WEST’s forecasting process mirrors the process that MCI uses to forecast its capacity needs. Capacity shortages were the result of circumstances and events that could not reasonably have been foreseen, and were exacerbated by MCI’s demand for capacity in excess of what it had originally forecast. U S WEST sets forth its argument below, and then restates the Findings of Fact that should be entered. U S WEST’S FORECASTING PROCESS IS REASONABLE. U S WEST’s forecasting process is based on historical growth, and includes consideration of actual demand, as well as projected future demand. (Exh. 110 at 10). This is exactly how MCI forecasts. MCI determines its capacity needs by considering historical growth, its expectations of future growth, and its existing traffic. (Tr. 216 and 388). U S WEST also updates its forecasts quarterly, which is reasonable. (Tr. 702). U S WEST’s forecasting process is adequate and reasonable – it is virtually identical to MCI’s, and the same as used throughout the telecommunications industry. (Tr. 215-218). U S WEST has always had to engage in forecasting and planning to meet needs for additional capacity. The intent of the planning process is to have sufficient facilities in place to meet the forecasted demand, and the intent of the forecasting process is to accurately predict the needs for additional capacity, both as to the location and the timing of those needs. (Exh. 112). It is not a perfect process, and contains uncertainties and risks, both for under and over forecasting. It is also not an immediate process, in that facilities to meet forecasted demand cannot be made available overnight. It takes a minimum of seven months from the date of the issuance of the general trunk forecast until facilities to meet the forecasted demand can be made available. (Exh. T-110 at 12). MCI did not dispute that this is how long it takes (Tr. at 238), nor did Staff (Tr. at 717). Neither MCI nor Staff suggested that facilities could generally be made available any more quickly. MCI acknowledges that there is uncertainty in the forecasting and planning process. MCI contended that it is necessary to “accommodate unknowns,” in the forecasting process, but was entirely unable to describe how one does that. (Tr. 526). Perhaps the most compelling evidence regarding the difficult and uncertain nature of the forecasting process is that MCI so adamantly opposes penalties for inaccurate forecasts for itself, making the point that “the CLEC environment is relatively new.” (Tr. 522). This contention reinforces U S WEST’s position that the capacity shortages in the network were due, at least in part, to the new CLEC environment. Further, U S WEST properly included MCI’s forecasts in its network planning process. As noted in the initial order, in 1996 U S WEST had no process in place by which CLEC forecasts could be directly incorporated into U S WEST’s general trunk forecast (GTF) and forecasting process. U S WEST began developing formal processes and procedures to do so, but some of these processes necessarily could not be developed until U S WEST knew what would be required of it, and that was not known until after the FCC order in August of 1996, and the arbitration decisions in 1997. But in the meantime, U S WEST planners did work with gross forecasts of CLEC demand based on expected U S WEST customer losses. Beginning in April 1997, U S WEST implemented a process whereby each CLEC’s specific forecasts were incorporated directly into U S WEST’s general trunk forecast (Exh. T-110 at 8; Exh. 127). However, it is clear that U S WEST considered each and every forecast submitted by MCI (Exhs. 113-115, C-132-135). It is also clear that MCI’s initial predictions about its anticipated demand did not contain enough details to constitute actual network planning forecasts, and could not have been incorporated directly into the GTF in any event (Exh. 129). The evidence in this record shows that U S WEST considered both CLEC demand and CLEC forecasts in determining the need to add capacity in the local network (Exh. C-5; Exh. T-110). Further evidence of the difficulty of forecasting is provided by MCI’s success in the market. MCI did far better than it had forecast it would, and MCI’s orders consistently exceeded the capacity it had forecast. From July of 1997 until January of 1998, MCI provided four different forecasts for the quantity of trunks it would need in 1998. The number forecast for 1998 increased by almost 4 times in just 6 months. (Exh. C-111). MCI may well have planned on ordering these increased quantities, but the realities of network planning and provisioning dictate that U S WEST would have been planning capacity for early 1998 based on the July 1997 forecast, or an even earlier one, not the January 1998 forecast. U S WEST made an initial assessment that it could provision for CLEC demand out of existing capacity. This assessment is shown to be reasonable by Staff’s position in this case. Although Staff opposed virtually all of U S WEST’s positions, even Staff contended that interconnection demand should take traffic off U S WEST’s network, thus freeing up capacity for interconnection. (Tr. 697-8). This is what U S WEST originally thought too, and believed this position to be reasonable. While U S WEST’s actual experience has shown that this is not what actually happened, it is in fact a reasonable conclusion to reach based on anticipated or predicted outcomes when there is no factual data yet available. In other words, it was reasonable at the time to have forecast based on that assumption. Accordingly, no adverse finding of fact should follow when actual experience turns out to be different from what was a reasonable assumption. Thus, U S WEST disagrees with the findings in Findings of Fact 24, 26, 27, 36, 37 and 42. INTERNET USAGE, CLEC INTERCONNECTION AND NUMBER PORTABILITY The actual growth on U S WEST’s network has far outstripped the foreseeable growth accounted for in U S WEST’s forecasts. The convergence of the demands associated with number portability, CLEC interconnection, and internet usage, and the extraordinary increases in capacity requirements, simply could not have been foreseen. (Exh. T-110 at 20). U S WEST has done a good job of increasing capacity and reacting to the actual growth it was experiencing. Historic growth on the network has been in the neighborhood of 15% per year. (Exh. T-110 at 20). U S WEST reacted quickly to increase capacity when it identified offices with increased needs. In spite of the fact that the network had previously been designed and engineered to accommodate the historic growth patterns, U S WEST grew its Seattle offices between 90% and 506% during 1996, 1997, and 1998. (Exh. T-110 at 20). U S WEST’s Exhibits C-125 and C-126 show the port capacity growth in even greater detail, and indicate that U S WEST has doubled or tripled the capacity at the tandem in the past two or three years (through year end 1998). Further, U S WEST has documented dozens of growth jobs and capacity additions in the Seattle/Tacoma metropolitan area during the past several years. (Exhs. C-115 through C-122; C-126). U S WEST explains each phenomenon that impaired its ability to keep up with the demand for facilities below, establishing that Findings of Fact 36, 37, and 42 should be modified. Internet Usage The internet has placed by far the greatest demands on U S WEST’s network. U S WEST characterized the growth in internet traffic as “phenomenal” and Commission Staff agreed. (Tr. 689). No one predicted either the volume of internet calls which would take place, or the fact that the calls would be up 24 hours a day, seven days a week – a far cry from the average 5 minute call the network was designed to handle. (Exh. T-110 at 4). These demands on the voice network were simply not foreseeable. U S WEST and most others in the industry did anticipate increased data transmission, but not over the voice network. Original planning was to have all the data on a separate network. (Tr. 691). Under those circumstances, it likely would have been considered imprudent to engineer and build the voice network to handle traffic for which people knew an offload solution or separate network would be developed. Until such a solution is widely deployed, U S WEST is taking steps to anticipate internet traffic on the voice network. Now, ISPs directly connected to U S WEST’s network provide forecasts, to enable U S WEST to better plan for growth. (Exh. T-110 at 7). MCI itself was caught off guard by internet traffic and usage, in spite of the fact that MCI is able to target customers and market specifically to whom it wants. As MCI stated in October of 1997, they did not know the usage profiles of their customers, and the lengthy “off-hook” time was surprising to them. (Exh. T-110 at 12). Nevertheless, a substantial portion of MCI’s network is devoted to internet services providers (Exh. C-19; Tr. 286), and MCI was generating traffic in areas that had previously been dormant, traffic that neither U S WEST nor MCI predicted. (Exh. 78; Tr. 528). The initial order erred when it found that U S WEST could have researched this issue and known how to estimate internet growth. No party successfully predicted internet growth in connection with dial-up access and demand on the voice network. The initial order sets forth no facts or rationale upon which this finding is based, but merely repeats the prefiled testimony of Staff’s witness. However, in testimony given at the hearing, Mr. Griffith acknowledged that growth in the amount of traffic on the internet is not the same thing as growth in internet traffic on the voice network, “which is a different phenomenon in itself.” (Tr. 690). The initial order fails to recognize the significant difference between growth in internet traffic and growth in access to the internet over the voice network. These are two fundamentally different things. Although the record supports a finding that internet traffic had been growing for some time, that is not the relevant issue. The relevant issue is whether growth in internet access over the voice network had been known for some time. The record is totally devoid of support for that proposition, and for the findings set forth in Findings of Fact 29 and 30. CLEC Interconnection The record establishes that CLEC market entry and interconnection was anticipated, but the details of when, where, and how they would enter could not be predicted with any certainty. (Exh. T-110 at 7). CLEC interconnection has caused increased demands for network capacity, particularly for switch ports at the tandem. Interconnection at the tandem is contrary to the way the network is currently designed and engineered. In general, the tandem switch is used only for overflow traffic. (Tr. 683). U S WEST’s network is designed and constructed based on direct end office connections. Use of the tandem as a routing and primary traffic termination point is not consistent with the past use of the network. U S WEST understands that it is obligated under the law to provide tandem interconnection, and does not seek here to avoid that obligation. However, U S WEST believes that it is necessary to understand why U S WEST did not have huge amounts of tandem port spare capacity when MCI began to interconnect there as its primary point of interconnection. Further, the initial order does not appropriately recognize this in its Findings of Fact 32 and 33. In addition, the initial order affirmatively finds, at Finding of Fact 69, that the CLEC demand for interconnection has caused call blockage problems. This finding is correct, and is contrary to the Finding 33. Finding of Fact 69 should be retained, and 33 should be restated as set forth below. Number Portability Number portability also caused problems relative to capacity on the network. (Exh. T-110 at 18). Number portability requirements were prioritized by vendors and demanded resources and personnel which might otherwise have been available to respond to needs for increased local interconnection capacity. No one disputes that vendor delays caused or exacerbated the provisioning problems as described in Mr. Wiseman’s testimony. (Tr. 703). Thus, U S WEST disagrees with Finding of Fact 35. Consistent with this discussion, U S WEST requests that the findings be modified as set forth below: 24. U S WEST considered MCImetro’s forecasts, but did not directly consolidate MCImetro’s estimates into its forecasts prior to April 1997. U S WEST reasonably believed it could provision MCImetro’s orders from existing capacity. In addition, MCImetro’s early “forecasts” could not have been included in any event, as they lacked sufficient detail to constitute actual network planning forecasts. U S WEST’s modification to its forecasting practices in April 1997 was reasonable. 26. MCImetro’s forecasting practices were responsible for the unavailability of facilities, because MCI consistently placed orders for quantities of facilities in excess of its forecasted demand. 27. U S WEST historically plans for additional capacity to be in place either before or at the time when existing facilities reach 90% exhaust. This requires a planning period in excess of seven months. If U S WEST is required to provision facilities to meet unforecasted demand, there may be capacity shortages. It takes a minimum of seven months from the time of the issuance of the general trunk forecast until the capacity required by that forecast can be ready for service. 29. The rapid growth of the Internet has been known for years. However, growth of the internet is not the same as dial-up access to the internet, which is what places extraordinary demand on the voice network. U S WEST could not have reasonably foreseen and anticipated the demands that internet growth would have on capacity in its network. MCI itself was unable to plan for or anticipate the growth of the internet and the demands that such growth would place on its own network. 30. U S WEST’s claim that it was caught off guard by the growth of the Internet is reasonable and credible. 32. MCI’s requests to interconnect at the tandem or other locations specified in the agreements should not have been a surprise to U S WEST. However, U S WEST’s suggestion that it should not have anticipated interconnection at the tandem is credible because U S WEST could not have anticipated the quantity of interconnection facilities which would be demanded or the timing of that demand. 33. The evidence shows that actual CLEC interconnection has placed a capacity strain on U S WEST’s network. 35. The requirements to deploy number portability were foreseeable and did not impair U S WEST’s ability to forecast capacity to meet MCImetro’s service orders. However, U S WEST was subject to vendor delays as a result of number portability which slowed the provisioning of forecasted and planned capacity. 36. The reasonableness of U S WEST’s forecasts must take all foreseeable factors into account. The actual levels of demand caused by the Internet and CLEC interconnection and the constraint caused by PNP implementation were difficult to predict, and cannot be considered to have been foreseeable. 37. It was not unreasonable for U S WEST to forecast that it could meet initial demand for interconnection facilities from existing capacity. 42. The Seattle tandem capacity exhaust was caused by unforeseeable demand which could not have been reasonably forecast. U S WEST’s Response to Growth: Findings 44 and 46. U S WEST requests review of these findings insofar as they determine that U S WEST did not timely initiate augments to increase capacity. The evidence of record indicates that it takes at least seven months from the date the general trunk forecast (GTF) is issued until the capacity required by that forecast can be ready for service. The seven-month timeframe is a minimum. Staff did not disagree with this timeframe (Tr. 717). Nor did MCI (Tr. 238). The GTF is issued quarterly. In order for U S WEST to include MCI’s forecasts in the GTF, those forecasts must be submitted in advance of the issuance of the GTF. As such, capacity increases will not be scheduled for completion until more than seven months after the date of MCI’s forecast. Thus, to the extent that these findings suggest that U S WEST should have or could have increased capacity within seven month of the date of MCI’s forecast, which in all cases must predate the GTF, they are incorrect and not based on the evidence of record. In addition, these findings fail to recognize that U S WEST increased capacity by significantly more than would have been demanded by historical growth patterns, thus establishing that U S WEST did have a reasonable process in place to timely add capacity. Historical growth of central offices has consistently been 15% per year. (Exh. T-110 at 20). Over a three-year period, such growth would result in a 52% increase over base or starting capacity. U S WEST would have been acting reasonably if it had grown or planned to grow its switch capacity by 52% in three years. Notwithstanding this, U S WEST in fact increased capacity in Tacoma by 336%, in Seattle Main by 506% and at the Seattle tandem by 128% in three years. U S WEST requests that the findings be modified to read as follows: 44. U S WEST requires a minimum of seven months from the date the general trunk forecast (GTF) is issued until the capacity required by that forecast can be ready for service. 46. U S WEST timely initiated augments to increase capacity based upon the consolidated forecasting process, and added capacity to respond to demand that far exceeded historical or foreseeable levels of growth. Major Network Projects: Findings 51, 53, 58, and 59. U S WEST requests review of these findings insofar as they determine that U S WEST should have notified MCI of known or forecasted facilities exhaust under the “major network projects” provision of the interconnection agreement. U S WEST submits that the terms of the interconnection agreement do not, on their face, include facilities exhaust as a major network project, and that U S WEST could not have known, until this initial order, that such an interpretation would be applied. Thus, while U S WEST will, going forward, include and issue such notices, as required by the initial order, there should be no findings of breach of the interconnection agreement or of undue advantage related to this notice requirement. The findings should be modified to read as follows: 51. The scope of “major network projects” is determined by this order to include facilities exhaust. 53. U S WEST did not provide any notices of known or forecasted tandem exhaust. U S WEST is obligated to notify MCImetro in the future of known or forecasted tandem exhaust. 58. U S WEST’s practice to provide notice of the availability of facilities only after MCImetro submitted a service order was not unreasonable based on U S WEST’s interpretation of the contract provisions and on the fact that U S WEST did not know, in advance, when or where MCI would request facilities. 59. [delete] The provisions of the “permanent” interconnection agreement read, in pertinent part, as follows: Forecasts shall be for a minimum of three (current and plus-1 and plus-2) years and shall include: . . . a description of major network projects anticipated for the following six (6) months that could affect the other party. Major network projects include trunking or network rearrangements, shifts in anticipated traffic patterns, or other activities that are reflected by a significant increase or decrease in trunking demand for the following forecast period. (Exh. 12, Attachment 4, § 10.2). Thus, U S WEST’s obligation to provide these notices, under whichever interpretation of the contract is correct, did not begin until after August 20, 1997. A “Major network project” is defined in section 10.2 and does not include tandem exhaust – tandem exhaust is not network rearrangement, nor is it a shift in traffic patterns. Tandem exhaust may be caused by an activity that is reflected by a significant increase in trunking demand, but it is not, in and of itself, such an activity. U S WEST believes that its conduct, and its interpretation of the contract, were reasonable. Interestingly, U S WEST has this same contractual provision in virtually all its interconnection agreements with other CLECs in every state. However, to the best of U S WEST’s knowledge, only MCI has ever advocated this interpretation of the contract provisions. Thus, U S WEST believes that its interpretation of this provision as not including facilities exhaust is reasonable, and that U S WEST could not have been expected to know that such notice would be required. Tandem Capacity: Finding 62. U S WEST requests review of this finding insofar as it determines that tandem capacity problems at the local tandem have minimal impact on U S WEST. The evidence of record establishes that U S WEST uses its local tandem for both overflow and routing purposes (Tr. at 683). There is no evidence that capacity problems (which might impact the ability of the tandem to handle this traffic) have only a minimal impact on U S WEST. Finding of Fact 62 should be restated as follows: 62. Capacity problems at the local tandem impact U S WEST as well as carriers who interconnect at the tandem. Blocking: Finding 72. U S WEST requests review of this finding insofar as it determines that the data regarding blockage on MCI’s trunk group is alarming. U S WEST submits that MCI, as complainant in this proceeding, failed to submit sufficient evidence upon which to base this finding. U S WEST provided MCI with trunk blocking information in discovery, in a data request response that was later admitted as exhibit HC-123. As U S WEST explained in its brief, this report does show some blocking on MCI’s trunk group, as well as trunk groups serving U S WEST’s customers. However, there is no information on the record in this case to establish when or over what period of time this blocking occurred. Thus, U S WEST is unable to determine the cause of the blocking, or if either U S WEST or MCI is at fault. There are many circumstances which can cause blocking, including mass calling events. (Tr. 851). Further, it appears that MCI did not have any additional trunks ordered for that trunk group at the time the report was compiled. Thus, there can be no connection between any blocking shown on this exhibit and MCI’s allegations about capacity constraints at the tandem. U S WEST requests that this finding be modified to read as follows: 72. The data show some blockage on one of MCImetro’s smaller trunk groups. There is insufficient evidence of record to establish the cause of this blockage, or to determine whether U S WEST or MCI is at fault. Review of Conclusions of Law U S WEST hereby requests review of the following conclusions of law: 6, 8, 10, 11, 12, 13, 14, and 15. These conclusions, to the extent that they find breaches of the interconnection agreement and violations of state law and Commission rules, are incorrect and should be reversed or modified as set forth below. The revised conclusions are based on and follow from the discussion above regarding the findings of fact. This discussion will not be repeated here. 6. U S WEST did not breach Section 1.5 of the Initial Agreement. U S WEST used its best efforts to cooperate and install, and make available, services ordered by MCImetro. U S WEST provisioned facilities on an ICB basis, and took all reasonable and necessary steps to provide MCImetro with capacity in the March-May 1996 timeframe, even though MCImetro failed to accurately forecast its demand for this same period. 8. U S WEST did not breach Section 2.3 and 3.9(b) of the Interim Agreement, and Attachment 4, Section 8.4.2, and Part A, Section C of the Definitive Agreement. U S WEST reasonably forecast demand, but unforeseeable demand ultimately resulted in a lack of network capacity. 10. The scope of “major network projects” includes facilities exhaust. U S WEST and MCImetro disagreed about whether this was the case or not. No other carrier has asserted MCImetro’s definition, although the term is contained in many agreements, all of which the Commission has approved and may take official notice of. 11. U S WEST’s failure to provide notices of major network projects or capacity exhaust does not constitute a breach of Sections 2.5, 3.4(c), and Appendix B - Section 3.3(a) of the Interim Agreement, or of Attachment 4, Sections 10.2, 10.2.2, 10.4.1, Part A, Section 29.1 and Part A, Section B of the Definitive Agreement. 12. U S WEST did not violate RCW 80.36.170 which prohibits U S WEST from subjecting MCImetro to any undue or unreasonable prejudice or disadvantage. U S WEST’s failure to provide MCImetro notices of current and forecasted facilities exhaust was based on its reasonable interpretation of what constituted a “major network project”. 13. U S WEST did not violate RCW 80.36.186 which prohibits U S WEST from making or granting any undue or unreasonable preference or advantage to itself. U S WEST’s failure to provide MCImetro notices of current and forecasted facilities exhaust was based on its reasonable interpretation of what constituted a “major network project”. 14. U S WEST’s refusal to allow MCImetro to interconnect and exchange local traffic through its access tandem when capacity was exhausted at the local tandem was reasonable, because interconnection and traffic exchange at the access tandem is not required by the interconnection agreement. U S WEST is required to comply with the interconnection agreement, and as such, there is no violation of RCW 80.36.200. MCI was entitled only to delivery of mes