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 Answer to the Petitions for Administrative Review Pursuant to RCW 34.05.464 and WAC 480-09-780, U S WEST Communications, Inc. (U S WEST) submits this answer to the Petitions for Administrative Review of the Initial Order filed by Commission Staff (Staff) and MCImetro Access (MCI) on October 20, 1998. I. ANSWER TO STAFF’S PETITION Staff raises three main issues in its Petition for Administrative Review: the issue of penalties, the issue of intentional or willful misconduct, and the issue of the confidential designation of certain documents. Staff also discusses whether U S WEST violated the Commission’s order in Docket Nos. UT-941464 et al., and argues that the initial order should have concluded that U S WEST did. U S WEST generally opposes Staff’s request for administrative review as set forth below. A. A FINDING OF WILLFUL OR INTENTIONAL MISCONDUCT IS RELEVANT TO THE ASSESSMENT OF PENALTIES Staff’s discussion regarding penalties is linked with the issue of whether or not U S WEST was guilty of willful or intentional misconduct. Staff contends that the Administrative Law Judge inappropriately linked the determination of penalties to whether or not the company had committed willful or intentional misconduct. U S WEST agrees with Staff that a finding of willful or intentional misconduct is not required by the penalty statutes. However, U S WEST believes that the Administrative Law Judge and the Commission have discretion in determining whether to apply penalties, and that it is appropriate, in exercising that discretion, to consider the nature of the conduct complained of. As such, it is relevant to determine whether the conduct which might result in penalties was intentional or willful. U S WEST believes that the Administrative Law Judge correctly determined that U S WEST had not committed intentional or willful misconduct, and further appropriately determined that no penalties should be imposed in this case. Staff agreed that it would be appropriate to consider the circumstances in determining whether and at what level to impose penalties. (Tr. at 719). Thus, it is certainly appropriate to consider willfulness or intent in determining, as a threshold issue, whether penalties are appropriate. However, as noted above, U S WEST agrees that this linkage is not mandatory. That said, the Commission should nonetheless adopt and affirm the Initial Order on this issue, as there is no requirement under state law or commission rules that penalties be imposed in this instance. B. THE ALJ PROPERLY CONCLUDED THAT PENALTIES SHOULD NOT BE ASSESSED AGAINST U S WEST The Administrative Law Judge correctly determined that U S WEST’s future conduct and performance in light of this ruling would be relevant in determining whether to revisit the issue of penalties, but that penalties were not appropriate at this time. In fact, certain paragraphs of the Initial Order indicate that, while U S WEST’s performance is not yet, in the Initial Order’s opinion, up to standards, it has, in 1998, shown significant improvement. (Initial Order at 16). The simple fact of the matter is that the Commission has consistently considered the nature and severity of a party’s conduct in determining whether or not it is appropriate to assess penalties. The Commission has always considered whether the conduct was willful and has also considered whether violations were repeated, after the company was advised that the conduct was prohibited. The Commission considered whether a violation was willful or intentional in Order M.V. No. 145426, In re Mountain States L.P. Gas Co., Application P-75402, Hearing P-75402 (August 1992). While the carrier appeared to be violating the law and the Commission did not condone the violation, it noted: “. . . it is not shown to be willful or repeated and under the statute it is readily remediable.” In Order M.V.G. No. 1360, WUTC v. Yakima Valley Disposal, Inc., Hearing No. H4975 (October 1988) the Commission affirmed that violations committed by the respondent were not intentional or willful. The Commission also considered the nature of the company’s actions in Everett Airporter Services Enterprises, Inc. v. San Juan Airlines, Inc., Docket No. TC-910789 (January 1993), where it did impose penalties. In this case the Commission stated: “There is no excuse for the frequent and flagrant violations that occurred. The carrier’s management knew or had access to knowledge about the violations, and at the very least tacitly approved improper behavior.” The Commission again considered willfulness or intent in Order M.V. No., In re Gary Merlino Construction Co., App. No. E-19841 (June 1990) when it stated: “However, the Commission recognizes that violations may be unintentional, based on a good faith misinterpretation of a rule. Violations which are immediately halted or corrected after notice are not as damaging to a carrier’s fitness as are continuing, unabated violations.” Finally, in Order M.V. No. 146902, In re Don B. Hightower d/b/a The Navajo Trucking, App. No. E-76397, (August 1993) the Commission stated: “Neither the violations themselves nor any pattern of violations clearly demonstrates an intention to circumvent regulation or an intention to violate the law. They do not demonstrate an inability or unwillingness to conduct lawful operations.” Thus, it is entirely appropriate for the Administrative Law Judge to have made findings with regard to whether or not U S WEST’s conduct was willful or intentional. Further, it was appropriate for the Administrative Law Judge to find that no willful or intentional misconduct had occurred, because MCI’s complaint implicitly makes a request for findings of willful or intentional misconduct. Thus, the Administrative Law Judge was bound to rule on that request for relief and his decision of that issues was appropriate in this case. It is important to note that the finding of willful or intentional misconduct was something that the Administrative Law Judge in this instance was particularly qualified to make, having the opportunity to view the witnesses and their demeanor when they gave their testimony and were subject to cross examination during the hearing. U S WEST believes that the Initial Order evidences a careful consideration of the various allegations in this docket, and the various motives that MCI has to cast U S WEST in the worst possible light. The Administrative Law Judge’s decision with regard to whether or not penalties are appropriate and whether or not willful or intentional misconduct occurred are correct and should not be disturbed on review. Staff’s Petition for Administrative Review requests that the Commission determine that the findings of violations of state law and commission rules in the Initial Order are sufficient upon which to base penalty assessments, even without a finding of willful or intentional misconduct. U S WEST notes that in its own Petition for Administrative Review, also filed on October 20, 1998, U S WEST has requested review of those findings and conclusions and has requested that they be modified to conclude that U S WEST did not violate state law or Commission rules, or breach the interconnection agreements. U S WEST believes those findings and conclusions should be reversed on review, and there will thus be no basis upon which to assess penalties. However, even if those findings and conclusions are not reversed, no penalties should be imposed. The conclusions of law relating to violations of RCW 80.36.170 and 80.36.186 turn on whether or not U S WEST acted reasonably at the time of any given or particular incident. With regard to U S WEST’s obligation to inform MCImetro of facilities exhaust or capacity constraints, U S WEST believes that it was acting reasonably because it did not know, and could not have had any reason to know, that Washington law and the contractual provisions would be interpreted to require it to provide notice of facilities exhaust. Furthermore, to the extent that U S WEST has now been ordered to provide local interconnection through its access tandem, U S WEST does not believe it is appropriate to retroactively impose penalties for violation of RCW 80.36.200 for its failure to allow such interconnection prior to the time the Administrative Law Judge or the Commission ordered such interconnection. As U S WEST explained during the hearing, MCI never formally requested interconnection through the access tandem as opposed to the local tandem. Furthermore, it was not reasonable of MCI to expect U S WEST to have additional access capacity available at the Tacoma tandem for the second half of 1997, when MCI had failed to adequately forecast its need for that capacity or to forecast the need sufficiently in advance for U S WEST to provision that capacity. The record clearly establishes that at the time MCI placed its order for additional capacity in Tacoma, the tandem was undergoing a growth job. U S WEST filled MCI’s order as soon as the additional capacity was in place. It is inappropriate for U S WEST to be penalized for this period of time. U S WEST disagrees with Staff’s contention that the Commission should not adopt the Initial Order’s discussion regarding willful or intentional misconduct because willful or intentional misconduct was not an issue. While it is true that the MCI formal complaint does not contain specific allegations of willful or intentional misconduct, using those exact words, it is clear from the tenor of both the complaint and all of the direct testimony filed in this docket that MCI believes that U S WEST was acting in an anti-competitive manner pursuant to some sort of plan or design. All of this indicates that MCI believes that U S WEST was intentionally or willfully impeding its entry into the local exchange market. This is of course untrue, but it was nonetheless appropriate for the Administrative Law Judge to rule on this issue. For example, in Mr. Beach’s testimony, at page 16 of Exhibit T-1, Mr. Beach accuses U S WEST of showing “contempt” for its obligations under state and federal law and the interconnection agreements. MCI further alleges that U S WEST did not make a good faith effort to open the local network for competition. Id. at 17. Mr. Beach also flatly accuses U S WEST of having a business strategy of refusing to invest in order to make interconnection facilities available. These allegations imply that U S WEST intended to impede entry and acted willfully. It is therefore entirely appropriate that the Administrative Law Judge consider and rule on these underlying issues, which are clearly raised by MCI’s allegations. C. THE ALJ PROPERLY CONCLUDED THAT U S WEST HAS NOT ENGAGED IN WILLFUL OR INTENTIONAL MISCONDUCT. U S WEST’s conduct did not violate the law and was neither willful nor intentional. Commission Staff argues that U S WEST’s conduct was willful or intentional and cites, as examples, numerous findings of fact entered by the Administrative Law Judge. U S WEST does not believe these arguments are well taken. For example, Staff argues that Finding of Fact No. 23 evidences a willful and intentional attempt to hinder interconnection and, therefore, competition. U S WEST strongly disagrees. Regarding Finding of Fact No. 23, U S WEST does not believe that it was under any obligation to disclose that its forecasting system did not accept CLEC forecasts directly even though it required MCImetro to submit forecasts as a precondition to provisioning facilities. U S WEST was under no obligation to directly insert a CLEC forecast into its forecasting process. As U S WEST discussed both on the record and in its own Petition for Administrative Review, “forecasts” that MCI submitted initially lacked any level of detail sufficient to constitute a real forecast. It is also clear that U S WEST did in fact consider MCI’s forecasts from the very beginning of the interconnection agreements. Therefore, there is nothing contained within Finding of Fact No. 23 which evidences willful or intentional misconduct. This same discussion also applies to Finding of Fact No. 26, which is also cited by Staff as evidence of willful and intentional conduct. However, it should be noted that U S WEST has requested modification to Finding of Fact No. 26 in order that it better reflect the evidence of record. Staff’s argument here turns on the misconception that U S WEST was not relying on MCI’s forecasts. See Staff Petition at 8. In fact, the evidence shows that U S WEST did consider MCI’s forecasts. (Exhs. C-5, T-110). Staff suggests that Finding of Fact No. 32 evidences willful or intentional misconduct. Again, U S WEST has requested review of that finding. U S WEST disagrees that the Finding of Fact accurately reflects the record. What the evidence of record does show is that while U S WEST did anticipate interconnection at the tandem, it had no way of anticipating either the timing or the quantity of interconnection facilities which would be demanded. (Exh. T-110 at 7). Nor do the other cited Findings of Fact or Conclusions of Law or discussion sections in the Initial Order establish that there was either willful or intentional misconduct. Finally, there is absolutely no factual basis on the record to adopt Staff’s recommended Conclusion of Law No. 2, which proposes that U S WEST’s refusal to interconnect with MCI was willful and intentional. In fact, U S WEST never once, anywhere on this record or in fact, refused to interconnect with MCImetro. U S WEST did experience difficulties provisioning facilities in accord with the timeframes requested by MCImetro. However, this is entirely different from refusing interconnection, which, as noted above, U S WEST never did. The evidence on the record shows that U S WEST filled each and every order that MCImetro ever placed, and that those orders were filled in the order in which they were received from MCImetro relative to U S WEST’s own provisioning and provisioning to other CLECs. (Exh. T-110 at 15) D. CONFIDENTIALITY OF DOCUMENTS Staff seeks administrative review of the Initial Order on the basis that the ALJ applied the wrong legal standard in determining whether the common funding documents should be designated as confidential. U S WEST disagrees. U S WEST believes that Staff is mischaracterizing the Initial Order when it states that “the ALJ conceded that U S WEST failed to meet its burden but gave U S WEST the benefit of the doubt.” While the Initial Order does state that it resolved all doubts in favor of preserving confidentiality, it is clear that this is dictum, and is not the holding. The Administrative Law Judge, in the Initial Order, determined that the challenged documents were planning documents and contained planning details such that they were appropriately designated as confidential. (Initial Order at 7-8). Staff’s misunderstanding or mischaracterization of the Administrative Law Judge’s Initial Order should not be accepted as a basis for review of that order. It is clear that the order properly considered the relative burdens of proof and did not, in ruling that the documents are confidential, inappropriately shift the burden of proof to MCI. U S WEST also believes that the Commission Staff is incorrect in alleging that the information in the common funding documents is not confidential. The definition of what may appropriately be considered as confidential information includes “planning details” pursuant to the provisions of the protective order. U S WEST reasonably and properly identified the planning details in the common funding documents as confidential. Staff admits at page 12 of its petition that the common funding documents contain planning details. Staff alleges that those planning details are stale. However, that, in and of itself, is no basis for the removal of the confidential designation. U S WEST is entitled to rely on the Commission’s protective order to treat these documents as confidential for purposes of this proceeding, and the information therein remains confidential. E. U S WEST HAS NOT VIOLATED THE NINTH SUPPLEMENTAL ORDER IN THE INTERCONNECTION CASE. Staff recommends that the Initial Order erred by failing to conclude that U S WEST’s conduct violated the Ninth Supplemental Order in consolidated Docket Nos. UT-941464, et al. Staff bases its request for this finding on an allegation contained in Mr. Iannotta’s testimony that “U S WEST would not spend the money to add ports to the switch in a timely manner.” However, it was established on the record that that representation was never made by U S WEST. (Ex. T-29). There is no other evidence on the record upon which a finding or conclusion could be made that U S WEST violated the interconnection order by conditioning interconnection on the availability of facilities. As noted above, U S WEST has accepted and filled every order MCI has placed for interconnection facilities in the order in which those requests for facilities were received. U S WEST has not refused to interconnect but has, in some instances, not had facilities available. In those instances, they have been provisioned as soon as they were available. U S WEST frequently increased capacity in its central offices at rates far greater than historical growth levels, demonstrating that U S WEST was in fact accelerating its provisioning levels to meet interconnection demands. F. CONCLUSION REGARDING STAFF’S PETITION In answering Staff’s petition, U S WEST concludes, as should the Commission, that U S WEST’s conduct was neither willful nor intentional; that penalties should not be assessed; that the confidential documents at issue in this proceeding were appropriately designated as confidential; and that U S WEST did not violate Commission orders. II. ANSWER TO MCI’S PETITION U S WEST takes issue with virtually every aspect of MCI’s Petition for Administrative Review. However, perhaps the most disturbing aspect of the petition is MCI’s willingness to distort and misrepresent the truth in furtherance of its advocacy goals. MCI repeatedly, in its Petition for Administrative Review, engages in a practice of both attempting to rewrite history and “saying it makes it so.” MCI’s willingness to distort the record and misrepresent the facts is best illustrated by MCI’s position, newly advanced in its petition for administrative review, that there is no individual case basis (ICB) provisioning interval. As will be seen in Section B. below, MCI is well aware that both the interim and the definitive agreements contain ICB provisioning intervals; MCI has never disputed the applicability of such intervals to this point. In fact, contrary to MCI’s representations now, MCI’s own witnesses agreed on the record that pursuant to the interconnection agreements between the parties, facilities would be provisioned on an individual case basis where no such facilities were available. (Tr. at 257-259). This is just one example of MCI’s willingness to do and say anything in furtherance of its case, even if it means “spinning” the story until it bears no resemblance to the evidence of record. U S WEST will respond to MCI’s petition in the same general order that MCI presents the issues. The only item on which U S WEST agrees with MCI is that Finding of Fact No. 55 is incomplete and may be corrected as MCI suggests. A. MCI’S SUCCESS IN THE LOCAL MARKET MCI disputes the findings of fact and conclusions of law relating to MCI’s success in the local market. However, MCI’s claims are unfounded and not supported by the record evidence. The Administrative Law Judge’s findings and conclusions should not be disturbed on review. MCI attempts to rewrite both history and the record by suggesting new findings and conclusions that are supported by neither. MCI was entirely unable to identify any losses in sales in its local market that were attributable to U S WEST. U S WEST established this through its cross examination of Mr. Londgren and MCI cannot change that testimony in evidence at this point in time. MCI continues to make a great deal of the fact that it “scaled back its sales effort” or “slashed its sales plan.” However, slashed sales plans do not evidence actual results, nor do they evidence what would have been reasonable expectations for sales in the market. MCI established neither what its actual results were in the local market nor what a reasonable expectation of sales would have been in that market. As such, MCI has entirely failed to establish that U S WEST affected MCI’s sales in any way in the Tacoma market. MCI’s claim that U S WEST’s failure to disclose capacity problems at the Tacoma tandem somehow slowed MCI’s entry into the Tacoma market is similarly unsubstantiated. MCI submitted a forecast only a few weeks before it placed substantial orders for facilities in June of 1997. By this time, MCI had been ordering facilities from U S WEST for over a year and understood how the process worked. MCI was also well aware of how long the provisioning process takes in order to provide capacity for unforecasted demand. MCI’s claim that it forecasted a need for facilities in April of 1997 and had a reasonable expectation that those facilities would be provided in June of 1997 is disingenuous at best. MCI itself was totally unable to accurately forecast its needs for facilities in the Tacoma market, and as such was itself responsible for any delays in provisioning. As U S WEST pointed out in its brief to the Administrative Law Judge, MCI’s only forecast for the Tacoma area prior to April of 1997 was submitted in August of 1996. If MCI had accurately forecast, in August, 1996, what its needs would be in Tacoma in June of 1997, MCI might then have some claim that those facilities should have been available at that time. However, MCI did not. It is unrefuted on this record that the provisioning process for additional capacity could not have allowed additional facilities to be available within the six-week timeframe that MCI allowed between its April, 1997 “forecast” and its demand for facilities. MCI goes on to make recommendations as to what the appropriate findings and conclusions should be on this issue. U S WEST strongly disagrees that MCI’s proposed Finding of Fact No. 21 is supported by the record. Specifically, MCI states that Finding of Fact No. 21 should read in part “U S WEST has behaved more egregiously than other ILECS.” Interestingly, MCI provides no citation to the record or other support for this proposition. This is perhaps not surprising because there is absolutely nothing in the record to support this contention, and no finding of fact to this effect should be made. Further, even given the opportunity to completely rewrite the finding of fact, MCI is totally unable to identify or quantify any losses in sales, market share, or customers that MCI suffered. Thus, MCI’s recommended revised conclusions of law and discussion and decision paragraphs are not well taken and should be rejected. B. THE STANDARD INTERVAL DOES NOT APPLY WHEN FACILITIES ARE NOT IN PLACE. MCI’s Petition for Administrative Review on the issue of whether a standard interval or an individual case basis interval applies to provisioning is perhaps the most disturbing portion of MCI’s petition, because it clearly reveals MCI’s undisguised willingness to flatly misrepresent the record in this case. For example, at page 7, lines 24-25, of the petition, MCI asserts that neither the interim nor the definitive agreement contains an exception to the standard provisioning intervals when facilities are not available. This allegation is both unsupported by the record and contradicted by MCI’s own witnesses. (Tr. 257-259). Furthermore, this assertion is the cornerstone to the rest of MCI’s petition for relief. Unless MCI prevails on the ICB issue, MCI fails on the issue of computation of penalties, and a number of the other provisions for which MCI seeks review. However, as will be set forth clearly herein, MCI’s claim is simply incorrect. Notably, even when MCI is given the opportunity to rewrite the ordering provisions of the Initial Order, MCI itself acknowledges, in its proposed ordering provision, paragraph 2, that an individual case basis does apply when facilities are not available. This is correct. However, it is wholly inconsistent with all of MCI’s arguments as set forth in Section B of its petition, wherein MCI alleges that there is no such thing as an individual case basis provisioning interval. Both the interim and definitive agreements contain references to U S WEST’s standard intervals for provisioning either private line or switched access service. The Interim Agreement, at Section 3.9(b), clearly describes the private line provisioning interval as five business days where facilities are in place. MCI references this interval and correctly references the document, Exhibit 100, which sets forth this interval. Exhibit 100 very clearly states that where facilities are not in place the number of business days for provisioning is determined on an ICB basis. The document, at page 2 of 4, identifies an ICB basis in three separate places; at page 3 of 4, identifies an ICB basis in five separate places; and at page 4 of 4, identifies an ICB basis in five separate places. It is inconceivable that MCI can now come forward and claim that there was no ICB basis for provisioning of facilities where facilities are not in place. MCI disingenuously claims that it never would have agreed to a measure totally within the control of U S WEST (petition at 9, lines 13-15). There is no evidence to support this contention. In fact, MCI’s signature on Exhibit 11, which is the Interim Agreement, clearly evidences the contrary – MCI did agree to such a provision. Having lost this argument, MCI next attempts to distinguish the “standard interval” from the intervals set forth in the service interval guide. However, the standard intervals and the intervals in the service interval guide are one and the same, because U S WEST’s standard interval is set forth in U S WEST’s service interval guide. This is clearly admitted by MCI in its petition at page 9, lines 10-11. The Commission should reject this attempt by MCI to misrepresent the facts. The same arguments apply to MCI’s contention that the Definitive Agreement did not contain an ICB provisioning interval. This contention is again wrong for the reasons set forth above. MCI’s Definitive Agreement contained a reference to the standard intervals for switched access service. Those intervals are set forth in Hearing Exhibit 101. Hearing Exhibit 101 is a 3-page document consisting of an excerpt from U S WEST’s service interval guide. It contains a reference to provisioning facilities on an ICB basis in 15 different places on a 3-page document. MCI, in pressing its position in this petition for administrative review, must believe that the Commission will not read the record and will be persuaded by MCI’s mischaracterizations. U S WEST does not believe this to be the case. Any check of the record evidence in this docket shows MCI’s contentions to be false. Again, MCI agrees at page 10, lines 14-15, that the standard intervals for provisioning are set for in U S WEST’s service interval guide. As such, the reference to the intervals contained in the service interval guide is no different from the reference to “standard interval” within the Definitive Agreement. MCI admits that Exhibit 101 is the applicable version of the guide at the time of the hearing. MCI cannot now escape from the conclusion that an individual case basis applies to orders where facilities are not in place. The Initial Order correctly found this to be a fact. Furthermore, MCI’s witness, Mr. Beach, admitted that the interconnection agreements referenced either the private line or the switched access provisioning intervals. (Tr. at 258, lines 6-9). He also admitted that the private line and switched access provisioning intervals contain provisioning intervals that are to be determined on an individual case basis if the facilities are not available. (Tr. at 258, line 10 through 259, line 8). Despite being given the opportunity, Mr. Beach was not able to identify any mandated or agreed intervals other than those set forth in the service interval guides. Those intervals are either on an individual case basis if facilities are not available, or within a certain number of days if facilities are available. Again, MCI disingenuously claims that because the agreements themselves do not contain “facilities not available” exceptions, then such exception does not exist. MCI has raised this issue for the first time on administrative review and inappropriately so. MCI conceded, as discussed above, that the standard interval guides apply by reference in each of the agreements and that those interval guides contain ICB basis. MCI next goes on to claim that an individual case basis does not apply to special projects. Where MCI has come up with this conclusion is a mystery. MCI agrees that major projects are discussed in the Definitive Agreement and that major projects mandate joint planning and coordination. “Joint planning and coordination” is tantamount to creating an individual case basis delivery date. Furthermore, the Initial Order’s findings and conclusions that special projects are to be determined on an ICB basis are supported by MCI’s own testimony. Mr. Iannotta testified at page 14 of Exhibit T-40 that the large number of orders were treated as a special project and prioritized. Mr. Iannotta also references Hearing Exhibit C-49, which is a memorandum drafted by a U S WEST witness confirming that the parties had agreed to treat the orders as a project. While MCI may dispute that now on administrative review, MCI did not dispute that it agreed to the project treatment either at the time the Hearing Exhibit C-49 was prepared or thereafter, in the hearing. MCI’s contention that an ICB basis does not apply to special projects is neither credible nor supported by the record. Time and time again the record contains references to individual case basis provisioning intervals. Prior to filing its Petition for Administrative Review, MCI had never claimed that such provisioning intervals were not applicable. MCI’s recommended Commission discussion and decision, and recommended ordering provisions, are contrary to the record evidence and would, if adopted by the Commission, establish requirements that fly in the face of the clear provisions of the interconnect