BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION




WASHINGTON UTILITIES AND  )
TRANSPORTATION COMMISSION,  ) DOCKET NO. UT-970010
 )
   Complainant,  ) JOINT REPLY OF AT&T,
 ) ELI, MCI, METRONET,
 v.  ) NEXTLINK, TCG, AND SPRINT
         ) 
U S WEST COMMUNICATIONS, INC.,  ) 
 ) 
   Respondent.   ) 
___________________________________)

 Pursuant to the Prehearing Conference Memorandum dated July 8, 1997, AT&T of 
the Pacific Northwest, Inc. ("AT&T"), Electric Lightwave, Inc. ("ELI"), MCI 
Telecommunications, Corp./MCImetro Access Transmission Corp. ("MCI"), Metronet 
Services, Inc., ("Metronet"), NEXTLINK Washington L.L.C. ("NEXTLINK"), Sprint 
Communications Company L.P. ("Sprint") and TCG Seattle ("TCG") (collectively 
"Joint Parties") file this Reply to U S WEST Communications, Inc.'s ("U S 
WEST") Answer and the Washington Independent Telephone Association’s (“WITA”) 
Response to the Joint Parties, Public Counsel, and Commission Staff Motions to 
Dismiss U S WEST’s Interconnection Cost Adjustment Mechanism ("ICAM").
I.  INTRODUCTION
 U S WEST’s Answer and WITA’s Response simply provide further basis for 
dismissal of the ICAM because it violates fundamental principles of ratemaking 
and is contrary to the Telecommunications Act of 1996 (the “Act”).  The ICAM 
violates fundamental ratemaking principles for three reasons.  First, it 
constitutes retroactive ratemaking.  Indeed, recognizing that the ICAM’s 
true-up mechanism is likely to be found to constitute retroactive ratemaking, U 
S WEST is now willing to forego the true-up.  WITA also suggests that the 
Commission modify the ICAM by eliminating the true-up. Second, if as U S WEST 
suggests in its Answer, the ICAM is a rate design issue, it should be addressed 
in U S WEST’s rate case.  Third, the ICAM fails to define even the categories 
of costs for which it seeks recovery and the manner in which charges will be 
assessed.
 In addition to violating fundamental ratemaking principles, the ICAM is 
contrary to the Act.  As U S WEST and WITA now agree, the costs which the ICAM 
is designed to recover will be addressed in the Commission’s existing generic 
cost proceeding, which was instituted to implement the pricing provisions of 
the Act.  In addition, the ICAM violates the Act because it is discriminatory 
and a barrier to entry.
 Any one of these reasons alone is sufficient to warrant dismissal of the ICAM 
on the grounds that it is contrary to state and/or federal law.
 The fact that the ICAM is an effort to circumvent the processes for cost 
recovery established by the Act and this Commission, while further impeding the 
development of competition, has been made even clearer by U S WEST’s Answer.  
To avoid dismissal, U S WEST seeks to revise its application by removing the 
true-up mechanism, and postponing resolution “to allow the Commission and all 
the parties to complete the cost and pricing proceeding.”  U S WEST Answer, p. 
4. However, it is Phase 2 of that proceeding which will address specifically 
what costs U S WEST may recover for interconnection, resale, and unbundling, 
and Phase 2 has not even begun.  See Order Instituting Investigation, In Re. 
Pricing Proceeding for Interconnection, Unbundled Elements, Transport and 
Termination, and Resale, Docket No. UT-960369 (WUTC, Nov. 21, 1996) at p. 2.  
The interests of consumers in the development of competition in Washington are 
not served by leaving the substantial up front charges presented by the ICAM 
hanging over new entrants until some unknown date in the future.  The ICAM must 
be dismissed now.
II. COMMISSION AUTHORITY TO REJECT A TARIFF FILING
 WITA’s claim that the Commission lacks authority to reject a tariff filing is 
clearly specious, both on its face and on public policy grounds.  Pursuant to 
RCW 80.01.040, the Commission has the authority to regulate in the public 
interest the rates, services, facilities and practices of telecommunications 
facilities.  If the Commission lacked the authority to reject tariff filings, 
it would lack the ability to regulate in the public interest.  Unscrupulous 
public utilities could include onerous, even illegal, rates, terms and 
conditions in their tariffs and the Commission would be unable to respond.  The 
ultimate burden of such rates, terms, and conditions would, of course, fall 
upon consumers.  Consequently, the Commission cannot possibly lack authority to 
reject a tariff filing.
III.  ARGUMENT
A. The ICAM Violates Fundamental Principles of Ratemaking.

1. Facing the likelihood of Dismissal Based On Retroactive Ratemaking, U S WEST 
Agrees to Forego The ICAM’s True-up Mechanism.
 
 In the face of overwhelming opposition, U S WEST now offers to forego the 
true-up.  U S WEST Answer, page 5, n. 1.   WITA also suggests that the 
Commission could eliminate the true-up.  WITA Response, p. 7.  However, while 
essentially admitting the true-up’s deficiencies, U S WEST and WITA argue, 
nonetheless, that the true-up is wholly valid because it is similar to cost 
recovery mechanisms which the Commission has approved in the past.
 U S WEST and WITA first assert that the ICAM’s true-up is similar to the 
Energy Cost Adjustment Clause (“ECAC”) considered in WUTC v. Puget Sound Power 
and Light Co., Docket No. U-81-41, Sixth Supp. Order (Dec. 19, 1988).  They 
conclude, therefore, that because the ECAC did not constitute retroactive 
ratemaking, neither does the true-up.  However, the ICAM true-up is intended to 
provide cost recovery for a one-time event, not, like the ECAC, for ongoing 
service.  See Puget Sound Power & Light, at p. 4 (stating that the purpose of 
the ECAC is to recognize that the cost of service will vary depending upon 
weather conditions).  Moreover, the ECAC is assessed on all ratepayers, in 
sharp contrast to the ICAM true-up, which is assessed only on competitors. The 
WECA Pooling Mechanism, recovery for permanent number portability, and the 
state’s equal access conversion cost recovery process, which WITA cites as 
further authority for the validity of the ICAM true-up, also places cost 
recovery responsibility upon all end users or on all carriers, as opposed to 
the ICAM which seeks recovery only from CLECs. 
 WITA, furthermore, relies on language from Puget Sound Power & Light which, 
rather than substantiating WITA’s argument that the true-up be upheld, actually 
further distinguishes the ICAM true-up from the ECAC.  WITA Response, p. 5.  
That language describes the ECAC as a “fixed mathematical formula”, a 
description which does not apply to the ICAM because the ICAM permits U S WEST 
to unilaterally add cost categories as it deems necessary.  See Advice No. 
2821T, Attachment B at ¶ 15.  Indeed, ECAC charges are assessed to cover 
readily identifiable fuel costs, as opposed to ICAM charges, which are to be 
assessed for costs which U S WEST’s ICAM filing states must remain unidentified 
throughout the ICAM period in order to provide U S WEST with flexibility to add 
new costs.  Id.
 Further, evidence that U S WEST’s retroactive ratemaking analysis is not based 
on sound legal principles is found at fn. 2 of U S WEST’s Answer, p. 6.  There 
U S WEST suggests that Staff’s analysis of retroactive ratemaking is “patently 
incorrect” because under Staff’s analysis, the use of a historical test year 
would be impermissible.  Apparently, U S WEST has forgotten that the historic 
test year is used to determine levels for revenue recovery on a going forward 
basis - not to determine recovery of past expenses.
 Thus, the authority upon which U S WEST and WITA rely to support the ICAM 
true-up is misplaced.  For this reason, and because, as discussed in Staff, 
Public Counsel, and the Joint Parties Motions to Dismiss, the true-up 
constitutes retroactive ratemaking, the ICAM must be dismissed. WITA suggests 
that the Commission simply eliminate the true-up, leaving the remainder of the 
ICAM request to be resolved at a hearing.  However, for the reasons discussed 
in this Reply, even without the true-up, the ICAM should be dismissed as 
contrary to law and to the development of competition.
2. U S WEST Now Asserts That the ICAM Is A Rate Design Question.

 In its Answer, U S WEST claims that resolution of the ICAM is “a rate design 
question.”  U S WEST Answer, p. 3. This appears to be U S WEST’s first 
suggestion that the ICAM is a rate design issue.  Its ICAM filing, Advice No. 
2821T, was devoid of any similar comment.  There is no logic to U S WEST 
asserting here that this is a rate design question, while also arguing that a 
hearing must be granted in this docket, as opposed to, or in addition to, a 
hearing in its rate case. U S WEST filed a request for rate increases on August 
29, 1997, Advice No. 2887T, which lacked any discussion of the type of cost 
recovery it seeks here.  Indeed, the Oregon Public Utility Commission concluded 
that the rate case docket in that state was the appropriate forum in which to 
address these issues.  See Order, In Re. Application of U S WEST for an ICAM, 
UT 135 (Pub. Util. Comm’n of Or., May 22, 1997) at p. 8.  Moreover, U S WEST 
openly requests ICAM cost recovery in its Utah rate case.  See Utah Public 
Service Commission, Docket No. 97-049-08.   If resolution of the ICAM is, as U 
S WEST asserts in its Answer and in the rate case it recently filed in Utah, a 
rate design question, it should be addressed in U S WEST’s rate case and U S 
WEST’s ICAM must be dismissed. Moreover, concluding that this is a rate design 
question presupposes that expenses and costs have already been determined, 
something that U S WEST admits it has not done. 
3. The ICAM Fails to Specify The Costs It Seeks To Recover And The Manner In 
Which Charges Would Be Assessed. 

 As discussed in Staff, Public Counsel and the Joint Parties Motions to 
Dismiss, and contrary to state law, See, e.g., WAC 480-80-040, 480-80-300. the 
ICAM sets forth only vague parameters of the costs it seeks to recover and 
provides U S WEST with what amounts to a blank check by permitting it to add 
any additional cost categories U S WEST determines are necessary.  In their 
Answers, U S WEST and WITA attempt to frame this issue as one of fact (e.g. 
whether U S WEST provided adequate evidentiary support with its filing), and 
thus, an issue that must go to full hearing.  See U S WEST Answer, p. 14; WITA 
Response, pp. 9-10.  However, the issue is not evidentiary support, but rather 
U S WEST’s complete failure to define the cost categories for which it seeks 
recovery through the ICAM.  Indeed, it is precisely this deficiency which leads 
U S WEST itself to conclude that the ICAM could result in double recovery.  
Advice No. 2821T, Attachment B at ¶ 14.
 The ICAM’s lack of specificity extends to the manner in which charges are 
assessed.  For example, the ICAM fails to explain how monthly charges assessed 
upon CLECs might vary, based on the number of lines a CLEC resells, the number 
of unbundled network elements it purchases, or the number of its points of 
interconnection.  See Joint Parties’ Motion to Dismiss, p. 8; see also Advice 
No. 2821T, Attachment B at ¶ 11, n. 1 (requesting flexibility to assess 
additional charges as necessary).  This lack of specificity, both in the costs 
which U S WEST seeks to recover and the manner in which charges are assessed, 
specificity which is required by state law, makes the ICAM insufficient and 
unreasonable on its face, entirely apart from any question of evidentiary 
support.
B. U S WEST’s Attempt, Through The ICAM, To Assess Entry Fees Upon CLECs 
Violates the Telecommunications Act of 1996.

1. U S WEST And WITA Admit That The Costs U S WEST Seeks To Recover Through The 
ICAM Are Being Addressed In The Generic Cost Proceeding.

 U S WEST now agrees with opposing parties that the Commission’s existing 
generic cost proceeding, Docket No. UT-960369, is likely to address the same 
costs U S WEST seeks to recover through the ICAM. See U S WEST Answer, p. 14, 
n. 6 (stating that the ICAM’s reseller charge might be unnecessary if the cost 
proceeding adequately addresses the costs U S WEST will incur through resale); 
see also Id. at p. 13 (observing the similarity between what AT&T and MCI call 
“competition onset costs” and the costs which U S WEST seeks to recover through 
the ICAM, noting that whether U S WEST may recover such costs is being 
addressed in the cost docket).  WITA also admits that these issues are likely 
to be encompassed by the generic cost docket.  WITA Response, p. 12.  For this 
reason, U S WEST now offers to waive the deadline for decision on its ICAM 
filing “to allow the Commission and all the parties to complete the cost and 
pricing proceeding.”  U S WEST Answer, p. 4. U S WEST suggests that postponing 
the ICAM decision until April 3, 1998 will be sufficient to ensure that the 
cost proceeding has been completed.  However, as discussed above, it is very 
unlikely that Phase 2 of the generic cost proceeding will be completed by April 
3.
 While admitting that the generic cost proceeding may encompass the very same 
issues it raises here, U S WEST and WITA argue that U S WEST must be granted a 
hearing in this docket as well as in the generic case.  As discussed in the 
Joint Parties Motion to Dismiss, the Act defines the process through which U S 
WEST may seek to recover, from interconnecting carriers, the costs it allegedly 
incurs in providing interconnection, unbundled elements, and services for 
resale, and sets forth the pricing standards to be used.  See Joint Parties 
Motion to Dismiss, p. 4. And, the Commission instituted the generic cost 
proceeding, pursuant to the Act, to address that cost recovery. If, as U S WEST 
now admits, the costs encompassed by the ICAM are being addressed in the 
generic cost docket, U S WEST will have the opportunity for a hearing in that 
proceeding.  U S WEST is not entitled to have two such opportunities. As what 
can only be deemed a red herring, U S WEST also claims that the 8th Circuit’s 
conclusion that ILECs need only provide access to the ILEC’s existing network, 
not to an unbuilt superior one, supports U S WEST’s claims for cost ICAM 
recovery.  However, the 8th Circuit did not address the FCC’s requirement that 
ILEC’s accommodate interconnection and access to unbundled network elements, 
even if that means changing or enhancing their networks, much less rule on the 
type of costs ILECs may recover from such services and elements. 
 Moreover, to postpone a decision regarding this tariff, so that U S WEST can 
have additional opportunities to argue for cost recovery, is contrary to the 
Act and State law.  See Joint Parties’ Motion to Dismiss, pp. 4-6.  Deferring 
decision would undermine the purpose of the Commission’s cost proceeding, 
require the Commission and all parties to devote resources to arguing the same 
issues repeatedly, and, most importantly for consumers, would hinder the 
development of competition by creating indefinite uncertainty regarding the 
costs of providing telecommunications services.  Consequently, the ICAM must be 
dismissed now. U S WEST may appeal any decision in the generic cost proceeding 
if it feels that it was not granted adequate recovery.  U S WEST’s federal 
court appeals of the arbitration decisions do, in fact, raise the issue of 
adequate compensation.  It may also file a rate case to address its cost 
recovery concerns, an option it has recently exercised.
2. U S WEST and WITA Fail To Rebut Arguments That The ICAM Is Discriminatory On 
Its Face.

 The ICAM is discriminatory on its face because it treats different types of 
carriers differently, even though they may impose the same types of costs upon 
U S WEST.  First, the ICAM treats carriers entering the market after the ICAM’s 
three year period expires differently than carriers in the market now.  U S 
WEST asserts that this is not evidence of discrimination because “[t]oday’s 
CLEC customers are, by definition, not similarly situated to CLECs entering the 
market three years hence.”  U S WEST Answer, p. 9; see also WITA Response, p. 
9.  Even assuming that CLECs entering later are “not similarly situated”, those 
later entrants may still impose the same types of costs which U S WEST seeks to 
recover through the ICAM.  Yet, the ICAM lacks any mechanism to determine 
whether later entrants do not actually impose similar costs, or allocate an 
appropriate sharing of costs.  Instead, the ICAM places all of the cost 
recovery burden upon today’s CLECs.
 The ICAM is also discriminatory on its face because it requires CLECs to pay 
an interconnection surcharge but does not require non-CLECs, such as incumbent 
local exchange carriers (“ILECs”) and interexchange carriers, to do so.  In 
this regard, U S WEST simply states that ILECs “have not caused [U S WEST] any 
extraordinary network rearrangement costs.”  U S WEST Answer, p. 9; U S WEST 
discusses only ILECs in this regard and does not address the ICAM’s failure to 
account for interconnection costs posed by interexchange or other carriers. see 
also WITA Response, p. 9.  WITA even concludes that CLECs may be treated 
differently from ILECs because CLECs “do not want to build complete systems.”  
WITA Response, p. 9.  Yet the highest category of ICAM charges is imposed on 
“Interconnectors,”  The proposed ICAM Interconnection charge is $143,939 per 
month, four times the proposed charge for an “Unbundler” and sixteen times the 
proposed charge for a “Reseller.”   which U S WEST defines as “A CLEC which 
links their network with that of the Company in order to provide connectivity 
between the customers of that LEC and those of the Company.”  Thus, these 
charges are imposed upon CLECs who merely exchange traffic with U S WEST, just 
as WITA does.  The only difference between WITA and the CLECs in this regard 
is, as WITA knows, WITA members do not compete with U S WEST.  Consequently, 
the ICAM unjustifiably treats CLECs differently from other carriers and is thus 
discriminatory on its face.
 These are the only discrimination arguments U S WEST and WITA address.  U S 
WEST does not explain why the ICAM does not account for the benefits U S WEST 
will receive from the very network rearrangements it decries.  Nor does it 
explain why CLECs alone should fund improvements to U S WEST’s network when any 
number of things may create the need for those improvements, including traffic 
growth that would occur without the CLECs or required improvements in U S WEST’
s service quality.  See Joint Parties Motion to Dismiss, p. 10.  In this 
regard, WITA states simply that no law requires U S WEST to account for the 
benefits that flow to U S WEST for its network improvements.  WITA Response, p. 
12.  WITA fails to explain how U S WEST’s benefiting from those improvements at 
the CLECs’ expense can be considered nondiscriminatory, as required by the Act.
 Thus, lacking any mechanism to ensure that charges are assessed equally among 
all carriers for the costs they may impose, and offset by the benefits U S WEST 
receives from network improvements, the ICAM is discriminatory on its face and 
must be dismissed.

3. The ICAM Is A Barrier To Entry And U S WEST And WITA Fail To Demonstrate 
Otherwise.

 In its Answer, U S WEST attempts to confuse the arguments made by Staff, 
Public Counsel, and the Joint Parties regarding the barriers to entry created 
by the ICAM.  The issue at present is not, as U S WEST frames it, the magnitude 
of the ICAM charges. See U S WEST Answer, p. 10.  Rather, the issue is the 
manner in which those charges are assessed.  The ICAM seeks to impose an up 
front charge on competitors.  That charge would be a sunk cost for new 
entrants, imposed in addition to the payment competitors will make to U S WEST 
for interconnection, unbundling and resale pursuant to the Act, which U S WEST 
does not similarly incur.  Because it is a hurdle not authorized by the Act or 
state law, and not faced by U S WEST, the ICAM thus constitutes a barrier to 
entry.
 WITA also attempts to confuse this issue, concluding that the failure of U S 
WEST to provide CLECs a “free ride” does not constitute a barrier to entry.  
WITA Response, p. 8.  There is simply no basis to support a claim that CLECs in 
Washington are seeking a free ride.  The Joint Parties do not dispute that they 
must compensate U S WEST for interconnection, unbundled network elements and 
services provided for resale pursuant to the Act.  Indeed, all parties are 
participating in the generic cost proceeding to determine what CLECs must pay U 
S WEST for those services and elements.  However, to impose additional up front 
charges upon CLECs, outside of those warranted by the generic cost proceeding 
or a rate case, constitutes a barrier to entry prohibited by the Act and state 
law. If U S WEST feels it is entitled to recover certain costs pursuant to rate 
based regulation, which it is not entitled to recover from competitors pursuant 
to the Act and the generic cost proceeding, it may request that those costs be 
included in its rate base.  
IV.  CONCLUSION
 U S WEST’s ICAM must be dismissed because it violates fundamental principles 
of ratemaking.  Moreover, even if it complied with those principles, the ICAM 
must be dismissed as contrary to the Act.  At this late date, and in the face 
of overwhelming opposition, U S WEST desires to revise its ICAM by removing the 
true-up and deferring resolution until after the generic cost proceeding is 
concluded.  Neither of these proposals eliminates the ICAM’s deficiencies, nor 
lifts the burden on competition posed by the ICAM filing.  Consequently, the 
Commission can, and indeed must, reject U S WEST’s ICAM filing.

 Dated this _____ day of September, 1997.

Respectfully submitted,


 Davis Wright Tremaine LLP



 By  
    Patricia A. Raskin


AT&T COMMUNICATIONS OF THE   
PACIFIC NORTHWEST, INC.
Susan D. Proctor
1875 Lawrence Street, Suite 1575
Denver, Colorado 80202
Telephone:  (303) 298-6164
Fax:  (303) 298-6301


ELECTRIC LIGHTWAVE, INC.
Penny Bewick
8100 NE Parkway Drive, Suite 150
Vancouver, Washington 98662
Telephone:  (360) 816-3381
Fax:  (360) 816-3821


MCI TELECOMMUNICATIONS CORP./MCIMETRO 
ACCESS TRANSMISSION CORP.
Clyde H. MacIver
Brooks Harlow
Miller, Nash, Wiener, Hager,
  & Carlson, L.L.P.
4400 Two Union Square
601 Union Street
Seattle, Washington 98101
Telephone:  (206) 622-8484
Fax:  (206) 622-7485


METRONET SERVICES, INC.
Clyde H. MacIver
Brooks Harlow
Miller, Nash, Wiener, Hager,
  & Carlson, L.L.P.
4400 Two Union Square
601 Union Street
Seattle, Washington 98101
Telephone:  (206) 622-8484
Fax:  (206) 622-7485


NEXTLINK WASHINGTON L.L.C.
Deborah Jaques
Director - Regulatory 
1003 Montello Avenue
Hood River, Oregon 97031
Telephone:  (541) 386-6398
Fax:  (541) 386-6397


TELEPORT COMMUNICATIONS GROUP, INC.
Michael A. Morris
Deborah S. Waldbaum
Karen Notsund
201 North Civic Drive, Suite 210
Walnut Creek, California 94596
Telephone:  (510) 949-0646
Fax:  (510) 949-0658


SPRINT COMMUNICATIONS COMPANY, L.P.
Carol L. Matchett
1850 Gateway Drive, 7th Floor
San Mateo, California 94404-2467
Telephone:  (415) 513-2712
Fax:  (415) 513-2737