REDACTED PUBLIC VERSION MCImetro Access Transmission Services 201 Spear Street, 9th Floor San Francisco, California 94105 MCImetro’s Answer to U S WEST’s Petition for Administrative Review Page 1 BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION MCImetro ACCESS TRANSMISSION ) SERVICES, INC. ) ) DOCKET NO. UT-970163 Complainant ) ) vs. ) ) U S WEST COMMUNICATIONS, Inc. ) ) Respondent. ) ______________________________________________________________________________ MCImetro ACCESS TRANSMISSION SERVICES, INC. Answer to U S WEST’s Petition for Administrative Review (REDACTED) ______________________________________________________________________________ October 29, 1998 TABLE OF CONTENTS I. INTRODUCTION 1 II. ARGUMENT 2 A. Certain Statements in the USW Petition Are Based On Alleged Facts and Circumstances Outside the Record and Should Be Stricken.2 B. Finding of Fact 15 Is Correct: Statements of Corporate Policy in the Common Funding Documents Are Credible and Reliable.3 C. The Findings that U S WEST’s Forecasting Processes Were Unreasonable and Internet Growth, CLEC Demand and Number Portability Were Foreseeable Are Correct.4 1. U S WEST’s Forecasting Process Is Unreasonable. 5 2. Internet Growth, CLEC Demand and Number Portability Were Foreseeable.13 D. Finding of Fact 44 Should Be Deleted and Finding of Fact 27 Should Be Modified: U S WEST Can Perform Augments to Expand Network Capacity In Less Than Seven Months.18 E. Finding of Fact 46 Is Correct: U S WEST Did Not Timely Initiate Augments to Increase Capacity.21 F. Findings of Fact 51, 53, 58 and 59 Are Correct: U S WEST Had Separate Contractual and Statutory Obligations to Notify MCImetro of Known or Forecasted Facilities Exhaust.23 G. Finding of Fact 62 Is Correct: Capacity Problems at the Local Tandem Have a Minimal Impact on U S WEST.24 H. Finding of Fact 72 Is Correct: The Data Regarding Blockage on MCImetro’s Trunk Group Is Alarming.25 III. CONCLUSION 27 BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION MCImetro Access Transmission Services, Inc., Complainant, vs. U S WEST Communications, Inc., Respondent. ) ) ) ) ) ) ) ) ) ) Docket No. UT-971063 MCImetro ACCESS TRANSMISSION SERVICES, INC.’S ANSWER TO U S WEST’S PETITION FOR ADMINISTRATIVE REVIEW I. INTRODUCTION MCImetro Access Transmission Services, Inc. (“MCImetro”) respectfully submits, pursuant to WAC 480-09-780, this Answer to U S WEST’s Petition for Administrative Review filed in this matter on October 20, 1998 (“USW Petition”). Although U S WEST admits that the Initial Order “displays a comprehensive understanding of the issues . . . and the evidence” (USW Petition at 17, lines 4-5), U S WEST’s Petition makes it clear that it is not willing to accept responsibility for its failure to provide adequate interconnection facilities to MCImetro. U S WEST now asks the Commission to recast the Initial Order so that its conduct was “reasonable.” The record does not support such a change in the Order. For the past three years, MCImetro has struggled to obtain from U S WEST the facilities needed to interconnect their telecommunication networks. If U S WEST had complied with the Commission’s Ninth Supplemental Order in the Interconnection case and not conditioned interconnection upon the availability of facilities, MCImetro would have been able to obtain timely interconnection and meet its customers’ needs. But as the record in this proceeding shows, U S WEST has ignored that order and continues to treat new entrants with disdain. The result of this recalcitrance has been chronic capacity shortages in the U S WEST network. The Initial Order has put competition in Washington at a crossroads. By rejecting U S WEST’s attempts to water down the findings, the Commission can send a strong signal to U S WEST that the law must be obeyed. The Commission must make it clear that U S WEST must affirmatively change its policies and practices and that it must make facilities available for interconnection with competitive local exchange carriers (“CLECs”). The Commission can send that message by rejecting U S WEST’s Petition, adopting the Findings of Fact and Conclusions of Law in the Initial Order and assessing appropriate penalties for U S WEST’s violations of state law. II. ARGUMENT A. Certain Statements in the USW Petition Are Based On Alleged Facts and Circumstances Outside the Record and Should Be Stricken. The USW Petition contains several statements which are based on facts and circumstances outside the record and are contrary to the record herein. They should be stricken from the Petition. The statements are listed below: Page Line Statement 6 19 This is what U S WEST originally thought too, and believed this position to be reasonable. 6 22 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. 14 9 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. 16 8 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. 16 20 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 messages in accordance with the standards set forth in the agreement. 17 9 In fact, the most difficult temptation to resist in this case is the knowledge that we all have today with regard to $19.95 AOL access, and the ubiquity of internet browsers such as Netscape and Explorer. 17 16 . . .before unlimited flat-rated access to the internet, before the internet was even used for commercial transactions -- before a lot of things that ultimately would come together to cause unforeseen demand for capacity. B. Finding of Fact 15 Is Correct: Statements of Corporate Policy in the Common Funding Documents Are Credible and Reliable. In its Petition, at p. 3, lines 18-23, U S WEST asks the Commission to change the finding that the statements of corporate policy in its Common Funding Documents, Exhibits C-94 and C-117, are credible and reliable. The sole support for its position is a cite to the hearing testimony of Craig Wiseman, who “did not participate in the preparation of Exh. C-94” and “does not review common funding documents in the normal course of his business duties.” Initial Order at 9, second paragraph. The Administrative Law Judge (“ALJ”) correctly concluded that “Mr. Wiseman does not appear qualified to testify on the inherent reliability of references to corporate policy in this kind of document. Mr. Wiseman’s opinion of whether Exh. C-94 reliably states corporate policy is given no greater weight than the document itself.” Id. U S WEST could have called the author of the documents as a witness to explain why the documents do not say what they appear to say, but it did not. Its reliance, instead, on a witness who has no personal knowledge of the documents or the preparation of common funding documents in general speaks volumes. Moreover, U S WEST is disingenuous in claiming that this evidence is “unrebutted” (USW Petition at 3, line 20) because U S WEST prevented MCImetro from obtaining evidence to rebut its corporate policy claims. U S WEST objected to the deposition of the author of the Common Funding Documents, and pointed out that the witness could not be subpoenaed. Letter from Lisa Anderl to William Hunt, III, dated May 11, 1998. U S WEST then vigorously fought MCImetro’s request to depose the author. See MCImetro Petition for Administrative Review of Ninth Supplemental Order; Initial Order filed October 20, 1998 (“MCIm Petition”), at 21. C. The Findings that U S WEST’s Forecasting Processes Were Unreasonable and Internet Growth, CLEC Demand and Number Portability Were Foreseeable Are Correct. U S WEST claims that the issues in this case all boil down to the issue of foreseeability (USW Petition at 2, 1ines 19-22), and that capacity shortages were the result of events that could not be foreseen (id. at 4, lines 6-8). U S WEST is refusing to acknowledge that its policies and practices caused the shortages. Moreover, the events that U S WEST claims were unforeseeable were known years earlier, and U S WEST simply failed to plan accordingly. 1. U S WEST’s Forecasting Process Is Unreasonable. U S WEST first suggests to this Commission that its network forecasting process is identical to that of MCImetro. USW Petition at 4, lines 6, 13-14. While both parties use historical growth and other projections to plan their network capacity, only one has ignored the information provided to it by the other carrier: However, U S WEST also required MCImetro to submit trunking forecasts as a prerequisite to placing orders in 1996. U S WEST’s failure to disclose that it did not rely upon MCImetro’s forecasts was unreasonable. MCImetro reasonably believed that U S WEST’s network capacity would be based upon its forecasts and that facilities would be provisioned in a timely manner. This is especially true subsequent to the effective date of the Interim Agreement which provided that the higher number of facilities forecasted by the companies would be provisioned. In April 1997, U S WEST changed its approach to include a consolidated forecast based on CLEC demand. TR 780. Initial Order at 10, first paragraph; FOF 18, 20. U S WEST has not challenged these findings in the Initial Order. U S WEST disregarded MCImetro’s forecasts and did not include them in its network planning, insuring that only U S WEST’s capacity needs were addressed. U S WEST claims that it “considered” MCImetro’s forecasts prior to April 1997. USW Petition at p. 6, lines 1-2; p. 10, lines 15-16. Even if it is assumed that U S WEST looked at MCImetro’s forecasts, it is undisputed that those forecasts were not incorporated into U S WEST’s network planning process until April 1997, at the earliest. A review without any impact on the planning process is useless to MCImetro. U S WEST’s excuse for its failure to incorporate MCImetro’s forecasts into its network planning process is an admission of culpability: 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. USW Petition at 5, lines 17-20. Thus, U S WEST did not plan to comply and did not comply with this Commission’s October 1995 Fourth Supplemental Order and March 1996 Ninth Supplemental Order in the Interconnection Case, requiring U S WEST to interconnect with CLECs. U S WEST makes this point again in its Conclusion, where it fails to acknowledge any interconnection obligations in 1995 and 1996. USW Petition at 17, lines 15-16. U S WEST’s witness Craig Wiseman explained why this Commission’s mandates conflicted with U S WEST’s business practices: If you look at how our company functions as far as funding projects, the network department is really a supplier of facilities. And we have to purchase them and then we have to be reimbursed for purchasing them. And so the units inside US West, the market units have to reimburse network for the expenditure of those facilities. And in order to get reimbursed for the CLEC facilities, we had to establish a process for the wholesale market unit to bring those forecasts to the network and then fund it. And so initially we felt, until that process was in place, that we would provision the orders out of existing capacity and then we'd have to issue subsequent requests for additional capacity, based on how we had filled those orders. And that was just a transition period. And that’s what occurred in 1996, and then that was a process I addressed earlier with Mr. Hunt and said that we had actually resolved that issue in the first quarter of ‘97, and that's -- when the April ‘97 GTF came out, it included a consolidated forecast for CLEC demand. TR p. 779, line 14 to p. 780, line 11. See Exhs. C-118 ( ), C-120 ( ). Since CLECs had no “market unit” to reimburse U S WEST’s network group for interconnection facilities, U S WEST made no effort to build facilities for CLECs. It blithely ignored its legal and contractual interconnection obligations. This decision is supported by U S WEST documents drafted in 1996: . Exh. C-117. U S WEST knew that : . Exhs. C-94, Attachment A (62WD631) and C-116. See TR 811, lines 18-21. This admission of U S WEST corporate policy was made in the fourth quarter of 1996. TR 811, line 21. Thus, the U S WEST capacity shortages throughout 1996 and 1997 were not the result of bad luck, as U S WEST contends, or even bad planning. The shortages were the direct result of U S WEST’s decision to ignore this Commission’s Orders, state and federal statutes and its interconnection agreements with MCImetro. U S WEST made no effort to change its business practices to include CLEC forecasts until April 1997, at the earliest. Since U S WEST claims that it takes at least seven months to implement a CLEC forecast, its failure to comply with state and federal mandates and its contracts guaranteed that U S WEST would not have capacity to accommodate CLECs until November 1997, at the earliest, As discussed below, U S WEST continued to experience network shortages well into 1998. more than two years after this Commission issued its Fourth Supplemental Order in the Interconnection Case. U S WEST’s acts were intentional and willful, as Commission Staff points out in its Petition for Administrative Review. Commission Staff Petition for Administrative Review filed October 20, 1998, at 7-10. MCImetro agrees. MCIm Petition at 29-31. U S WEST tries to deflect criticism by claiming that capacity shortages “were exacerbated by MCI’s demand for capacity in excess of what it had originally forecast” (USW Petition at 4, lines 8-9) and “MCI’s orders consistently exceeded the capacity it had forecast” (id. at 6, lines 8-9 (emphasis in original)). This is a gross misstatement of the facts. First, since U S WEST was ignoring all CLEC forecasts prior to April 1997, no MCImetro forecast could have had an impact on the capacity shortages through all of 1996 and most of 1997. Second, MCI did not do “far better than it had forecast it would.” USW Petition at 6, line 8. Any suggestion that MCImetro has been successful in the market is rebutted by the party representing prospective customers: No end-user will consider ... ordering service from a new entrant if service is available only after a long and uncertain wait or if service quality will be poor because of increased call blocking, even if that blocking is actually the incumbent’s fault. ... No one will feel that it is safe to switch to a new entrant. TRACER Opening Brief filed July 17, 1998, at 2. See MCIm Petition at 2-5. For the Seattle tandem, in its April 1996 forecast (Exh. C-52), MCImetro had forecasted the need for a total of in October 1996 and in December 1996. In its June 20, 1996 forecast (Exh. C-53), it had forecasted the need for a total of in October 1996. See Exhs. C-74, C-75. In October and December 1996, MCImetro had installed . Id. Yet U S WEST would not have any additional capacity until March 1997. See U S WEST Opening Brief filed July 17, 1998 (“USW OB”), at 4, lines 17-18. The record demonstrates that MCImetro’ s Seattle tandem orders have been limited by U S WEST’s lack of network capacity, not its forecasted capacity. Exhs. C-74, C-75. As discussed below (page 27), these chronic shortages forced MCImetro to order direct end office trunks prematurely. Similarly, at the end offices, MCImetro forecasted its needs several months in advance and U S WEST was unable to provide capacity. See Exhs. C-25 (revised), C-28 (revised), C-53, C-54. Set forth in the table below are examples of four Seattle end offices and one Tacoma end office ( ) where MCImetro forecasted its interconnection needs for the first quarter of 1998. End Office Forecast Date Forecast Total DS1s (1Q98) DS1s in place (1Q98) Order Date # DS1s Ordered FOC Due Date Interval (Bus. Days) 6/97 1/13/98 9/11/98 172 6/97 2/11/98 8/7/98 126 6/97 2/18/98 9/11/98 146 6/97 2/11/98 9/3/98 146 6/97 1/26/98 12/24/98 237 MCImetro submitted the forecast in June 1997, after U S WEST purportedly began incorporating MCImetro’s forecasts into its network planning process. Even assuming U S WEST needs seven months to implement a forecast, the forecasted facilities should have been in place by February 1998. Instead, the U S WEST delivery dates are in August, September or December 1998. The only consistency in the record is U S WEST’s repeated failure to provide facilities to interconnect. U S WEST is correct in pointing out that MCImetro’s December 1997 forecast was significantly higher than its June 1997 forecast. USW Petition at 6, lines 10-11. One of the reasons for this increase is that U S WEST forced MCImetro to calculate the number of trunks needed for interim number portability direct end office trunking using a formula that resulted in a higher number of trunks. TR p. 558, line 23, to p. 560, line 1. U S WEST believed the December 1997 forecast was fine and MCImetro did an “admirable job.” TR 549, lines 13-20. U S WEST also claims that “[i]t is also clear that MCI’s initial predictions about its anticipated demand did not contain enough details to constitute actual network planning forecasts.” USW Petition at 6, lines 2-3. Since one of MCImetro’s first forecasts, in June 1996, was on a form provided by U S WEST (Iannotta, Exh. T-40, at p. 9, lines 1-3; Exh. C-48), it is disingenuous for U S WEST to now claim that the forecast did not contain enough details. The formats for subsequent forecasts were also prescribed by U S WEST. Exhs. C-53, C-55; TR 417, lines 2-15. U S WEST claims that “[p]erhaps 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.’” USW Petition at 5, lines 9-12. MCImetro opposes penalties for other reasons, however. U S WEST and MCImetro addressed the issue of overforecasting in the 1997 Definitive Agreement and determined that penalties and incentives were not necessary. The Commission endorsed this approach when it approved that Agreement: 10.2.3 If forecasts vary significantly, the Parties shall meet to review and reconcile such forecasts. 10.2.3.1 If the Parties are unable to reach such a reconciliation, the Local Interconnection trunk groups shall be provisioned to the higher forecast. At the end of three (3) months, the utilization of the Local Interconnection trunk groups will be reviewed and if the average CCS utilization for the third month is under seventy five percent (75%) of capacity, either Party may issue an order to resize the trunk group, which shall be left with not less than twenty five percent (25%) excess capacity. Exh. 12, Attach. 4, Sec. 10.2.3. Thus, the parties discussed the possibility of differences in forecasts and agreed to provision to the higher forecast. After three months, the trunk group can be resized if utilization is under 75%. Although this means that some of the forecasted trunks would not be used by MCImetro and each party would incur the cost of resizing, the Agreement does not penalize the party which submitted the higher forecast. This is in contrast to the 1996 Interim Agreement, which had a similar resizing provision, but required a reimbursement for resizing from the party which submitted the higher forecast: In the event that such resizing is necessary, the party whose higher forecast was used as the basis for the original provisioning will reimburse the other party for the expense of resizing based upon applicable tariff rates for service installation charges. Exh. 11, Sec. 3.5. Even in the 1996 Agreement, however, the parties did not impose a penalty for unused trunks. In the 1997 Definitive Agreement, the parties decided not to impose any penalties. This is because the Agreement expressly required the parties to share information to avoid overforecasting problems. Joint forecasting meetings are required once per quarter. Exh. 12, Sec. 10.1. Forecasts must be exchanged quarterly. Id., Sec. 10.2. Tandem forecasts must include information on the subtending end offices. Id. The parties recognized that, to the extent historical traffic data could be shared between the Parties, the accuracy of the forecasts would improve. Id. Forecasts were required to include information on major network projects, which included 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 forecasting period. Id., Sec. 10.2.2. Thus, the parties discussed the forecasting issues extensively in their negotiations, imposed obligations on each other to exchange information to increase the accuracy of the forecasts, and then established a mechanism to address overbuilding without imposing penalties. In fact, U S WEST’s arguments on this point are designed to mask its general contempt for its contractual obligations. Unhappy with the Initial Order, U S WEST seeks to convert this complaint proceeding into a rulemaking. This argument is disingenuous since U S WEST and Commission Staff admit that there has not been any overbuild as a result of MCImetro’s, or any other CLEC’s, forecast. TR 732, 786. Finally, U S WEST suggests that the Commission Staff’s testimony supports the reasonableness of its initial assessment that it could provision for CLEC demand out of existing capacity. USW Petition at 6, lines 15-22. This is incorrect. First, Staff stated only that interconnection might take traffic off U S WEST’s network. TR 686-88, 697-99, 719-21. Second, since U S WEST relies on direct end office trunking, CLEC tandem interconnection would not free up capacity at the U S WEST tandem. See USW Petition at 9, lines 15-20. Finally, as discussed in Section II.A above, U S WEST presented no evidence that it believed interconnection demand would take traffic off U S WEST’s network, thus freeing up capacity for interconnection. In fact, U S WEST’s cross-examination of Staff witness David Griffith indicates that it believed just the opposite. Id. See USW OB at 15, lines 13-18. U S WEST’s request to revise Findings of Fact 24, 26, 27, 29, 30, 32, 33, 35, 36, 37 and 42 should be denied. 2. Internet Growth, CLEC Demand and Number Portability Were Foreseeable. U S WEST’s contention that Internet usage, CLEC interconnection and permanent number portability are to blame for its chronic network capacity shortages are specious at best and wholly unsubstantiated. As the Commission Staff pointed out in its Opening Brief and testimony, the issues that U S WEST has encountered are not new and have been known by the industry for some time. Commission Staff Opening Brief filed July 17, 1998 (“Staff OB”), at 14-15; Griffith, Exh. T-109, p. 3, line 1, to p. 4, line 2. Even more compelling is the fact that MCImetro has not encountered these types of capacity issues with other incumbent local exchange carriers (“ILECs”). Beach, Exh. T-7, p. 9, lines 9-18; p. 13, lines 4-13. In fact, other ILECs in the state of Washington are not experiencing the same capacity problems. Griffith, Exh. T-109, p. 4, lines 4-19. a. Internet Usage U S WEST was aware of the explosive growth in the Internet. U S WEST Advanced Technologies, a subsidiary of U S WEST, was reporting Internet growth rates of 10 percent a month as early as five years ago. Griffith, Exh. T-109, p. 4, lines 6-12. Thus, it was reasonably foreseeable that this information superhighway would place demands on the voice network. While U S WEST claims that the Internet is a national phenomenon, MCImetro has not experienced capacity issues in other regions due to Internet growth or Internet Service Providers (“ISPs”). Beach, Exh. T-7, p. 9, lines 9-18; p. 13, lines 4-13. U S WEST’s attempts to blame the Internet are also weakened by U S WEST’s admitted refusal to consider CLEC forecasts when planning network capacity. U S WEST claims that it includes forecasts from ISPs served on its network in its general trunk forecast. Wiseman, Exh. T-110, p. 7, lines 24-25. U S WEST now admits that it did not include MCImetro’s forecasts, which would include anticipated ISP traffic, into its general trunk forecast until April 1997. TR 757, lines 13-15. This discriminatory treatment is another example of U S WEST taking steps to insure that its own capacity needs are met while ignoring the needs of competitors. Since MCImetro provided U S WEST with network capacity forecasts, U S WEST cannot now claim that such growth was unforeseen. The truth is U S WEST chose to ignore those forecasts. U S WEST also attempts to confuse the issue of Internet traffic by claiming that a “substantial portion of MCI’s network” is for ISPs. USW Petition at 8, lines 18-19. In order to make this point, U S WEST cites to the testimony of MCImetro witness Michael Beach, but that testimony refers to the actual end-user circuits that connect a customer to MCImetro’s network, not the interconnection trunks used to connect MCImetro and U S WEST’s network: ... I believe from reading this document that this is in reference to the circuits that connect MCI customers. No reference to the interconnection circuits that we have that these customers would generate traffic on and has no indication of which of these circuits are actually used by these customers. TR 286, lines 10-13. See Beach, Exh. T-7 at 14, lines 9-19. U S WEST also states that “MCI was generating traffic in areas that had previously been dormant.” USW Petition at 8, lines 19-20. U S WEST relies on Exhibit 78 and TR 528 and does not mention that the “dormant” area was Tacoma, a new market in which the barriers to entry have been well documented. Since MCImetro did not begin local service in Tacoma until April 1997 (Iannotta, Exh. T-40 at 18; Beach, Exh. T-1 at 7), the relevant time period to which this statement pertains was the two-month period before June 1997 (Exh. 78). At such an early stage of market entry, signing up one customer could and did make a substantial difference in the number of interconnection trunks needed. TR p. 257, line 23, to p. 259, line 15. Finally, U S WEST grasps at a statement by Staff witness distinguishing voice traffic on the Internet with traffic on the Internet itself (TR 690, lines 4-16), and tries to convert it to a statement supporting its argument that growth on U S WEST’s network could not be foreseen. U S WEST Petition at 8-9. However, U S WEST presented no evidence that the increase in Internet traffic generally would not increase traffic on the voice network. It was thus reasonable to conclude that the predicted increases in Internet traffic would increase traffic on the voice network. Findings of Fact 29 and 30 are correct. Try as it might, U S WEST cannot transform its poor performance regarding Internet network capacity into an indictment of new entrants. As the record shows, U S WEST was planning the capacity needs for its ISP customers while ignoring the forecasts of