BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION In the Matter of the Petition of AT&T ) COMMUNICATIONS OF THE PACIFIC ) NORTHWEST, INC., for Arbitration of ) Docket No. UT-960307 Interconnection, Rates, Terms and Conditions ) with GTE NORTHWEST INCORPORATED, ) Pursuant to 47 U.S.C. Section 252(b) of the ) Telecommunications Act of 1996 ) AT&T'S INITIAL BRIEF REGARDING COMBINATIONS OF UNBUNDLED NETWORK ELEMENTS AT&T Communications of the Pacific Northwest, Inc. ("AT&T"), hereby files this brief pursuant to the Notice of Call for Briefs issued by the Washington Utilities and Transportation Commission (the "Commission") on November 24, 1997, in which the Commission asked the parties to address GTE's obligation to make available to AT&T unbundled network elements in existing combinations in light of the recent Eighth Circuit Court Order on Reconsideration vacating 47 C.F.R. 51.315(b) ("Eighth Circuit Order"). I. INTRODUCTION GTE has argued in other jurisdictions that it is not required to provide unbundled network elements ("UNEs") in combination and that any CLEC wanting to reassemble the UNEs which GTE has separated must combine the elements itself in a collocated space. For instance, in Virginia, GTE recently proposed the following: "GTE proposes to break the link between the main distribution frame (MDF) and the switch line card (port). GTE would then run jumpers from the MDF to the collocation space and from the port to the collocation space. The CLEC would use a cross-connect within the collocation space to perform the actual 'combination' of the loop and port." GTE Motion to Conform Proposed Agreement to Federal Court Holdings, Case No. PUC960117. GTE's position is contrary to the public interest, the federal Act, the FCC Rules and the Eighth Circuit Court Decisions and is in direct violation of the laws of the State of Washington. This Commission has ample authority to impose upon GTE the obligation to provide UNEs in existing combinations and is not restricted from doing so by the Eighth Circuit or federal law. Because this authority stems from independent state law, neither the Eighth Circuit decision nor any appeal of that decision would mandate a change in contract language. II. FAILING TO ALLOW CLECs TO ORDER AND OBTAIN COMBINATIONS OF NETWORK ELEMENTS -- PARTICULARLY WHEN SUCH ELEMENTS ARE CURRENTLY COMBINED -- IS CONTRARY TO THE PUBLIC INTEREST UNDER THE LAWS OF THE STATE OF WASHINGTON AND SHOULD BE REJECTED BY THIS COMMISSION. The issue here is whether it serves the public interest to permit GTE to physically break apart unbundled network elements ("UNEs") that are already combined when GTE provides services to its customers. This issue arises because of the Eighth Circuit decision which held that the Act does not require GTE to offer combined unbundled network elements to CLECs. Failing to allow CLEC's to order combinations of UNEs is bad news for Washington consumers. Implementation of local exchange competition has proven difficult enough. A determination that GTE need not offer existing combinations will effectively foreclose the use of UNEs to serve most, if not all, of a CLEC's customers. foreclose competition through UNEs-- which is the form of competition most likely to produce significant benefits for consumers-- for the foreseeable future. This is because this would steeply escalate CLEC costs, create major inefficiencies, and result in inferior service to customers seeking to obtain the services from the CLECs, including totally unnecessary service disruptions. These effects will be described in more detail below. Sadly, this would mean that the many Washington consumers served by GTE would be forced to continue waiting for the benefits that true local exchange competition can deliver – more choices, lower prices, and improved service quality. AT&T remains committed to providing competitive local exchange services in GTE's Washington territory. AT&T, as well as other CLECs, will find it far more difficult to enter the Washington GTE markets do so, however, unless and until GTE provides AT&T unbundled elements on a combined basis where those elements are already combined. For these reasons, AT&T hereby requests that the Commission find that under Washington law: (1) GTE may not separate network elements that are already combined in GTE's network before offering them to AT&T, unless otherwise requested by AT&T; and (2) GTE must allow and facilitate the ordering of already combined network elements on a single order, unless otherwise requested by AT&T. 1. The purchase of combinations of"platform" of combined UNEs is an effective means by which AT&T and other CLECs can provide efficient, reasonably-priced competitive local exchange services in GTE's territory. The UNE "platform" The purchasing of is the combinations of network elements that GTE has already combined in its network and uses to provide service to its customers offers CLEC an efficient means through which to enter the local market. . The purchase of the platform It is an effective means by which competing LECs can offer competitive local exchange services to a broad range of customers. It enables a new entrant to offer services using unbundled elements without any disruption of a customer's service and without need for other costly and redundant facilities. Where the piece-parts of a customer's service are already connected, they stay connected; unbundling them merely introduces a costly and unnecessary and time consuming step in the process.. Where CLECs can purchase combined elements as they are combined in GTE's network, cCosts are kept to a minimum, and the customer's transition to a new carrier is smooth and seamless. The Federal Communications Commission ("FCC") has identified several individual elements to be unbundled, and that list has been approved by the Eighth Circuit. The FCC Local Competition Order Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, CC Docket No. 96-98, First Report and Order, released August 8, 1996 ("FCC Local Competition Order") at ¶¶ 366-541. requires that GTE and other incumbents unbundle their existing local exchange services into a number of discrete elements including, at a minimum, the network interface device ("NID"), the loop, the switch port, switching functions, transport capabilities, database and signaling systems, and operational support systems. The Eighth Circuit, in its July 18, 1997 decision, upheld the FCC's initial list of unbundled elements, stating that: We believe that the FCC's determination that the term "network element" includes all of the facilities and equipment that are used in the overall commercial offering of telecommunications is a reasonable conclusion and entitled to deference. Iowa Utilities Board at 808-809. It is also settled that new entrants have the right to combine elements to offer finished services up to and including all of the elements used by the ILEC to offer local service to that customer. The Telecommunications Act expressly contemplates such an approach to competitive entry. Section 251(c)(3) provides, in part, that "An incumbent local exchange carrier shall provide such unbundled network elements in a manner that allows requesting carriers to combine such elements in order to provide such telecommunications service." As the Eighth Circuit found in its July 18 Order: [W]e believe that the plain language of subsection 251(c)(3) indicates that a requesting carrier may achieve the capability to provide telecommunications services completely through access to the unbundled elements of an incumbent LEC's network. Nothing in this subsection requires a competing carrier to own or control some portion of a telecommunications network before being able to purchase unbundled elements. . . . The . . . terms of this subsection . . . expressly contemplate that competing carriers will use these elements to provide finished services. (Emphasis added) By allowing CLECs to purchase combined UNEs as they are already combined in GTE's network, CLECs can provide service to customers in a manner that minimizes the inconvenience to the customer because elements that were connected to serve this customer remain connected and For existing GTE customers, the platform of unbundled elements is already in place, connected together, and fully operational. A new entrant that wants to offer service to an existing customer using the already combined elements should be able to order the elements from GTE in a manner that allows it to serve customers without interrupting service. Once ordered, the new entrant will pay GTE its unbundled element rates for the existing elements being used to serve the customer. UNE-based offers provide a number of benefits that resold services do not. For example, using UNE combinations, a CLEC can offer unique pricing plans, differentiate feature packages and offer new additional features and capabilities. In addition, UNE-combination based offers will facilitate a smoother transition from the incumbent LEC's network elements to the CLEC's own facilities. On the other hand, the use of UNEs create a greater risk to CLECs, as the Eighth Circuit recognized. Iowa Utilities Board at 815. 2. Allowing GTE to physically pull apart UNEs previously combined, thereby forcing AT&T to recombine UNEs in collocated space, achieves nothing except inefficiency, waste, and potentially poor service to Washington consumers. Allowing GTE to separate UNEs which are already combined would utilize the Eighth Circuit's opinion as an opportunity to create a roadblock for CLECs that might otherwise seek to compete with GTE in the local exchange market. If GTE does not provide UNEs in existing combinations, then after GTE has pulled the combined network elements apart, AT&T may use them only if AT&T combines the elements in a collocation space that AT&T would need to obtain from GTE (for a fee and after delay, which can be significant given GTE's collocation procedures and the limited collocation space). This serves no legitimate objective whatsoever. It is inefficient, anticompetitive and anti-consumer. As a practical matter, this would mean that an existing customer's service would be physically disassembled into its various piece parts, only to be reassembled by the new entrant to provide the exact same service arrangement. This is the equivalent of digging a hole and filling it back up. It serves no purpose other than to drive up a new entrant's costs and make its service less attractive, while at the same time lining GTE's pockets with unearned revenues. First, it will create enormous unnecessary expenses for a new entrant. Under GTE's proposal, aAny new entrant that wants to serve an existing GTE customer using unbundled elements would incur the added expenses of collocating facilities in GTE's central offices (if collocation space is available), obtaining jumpers from GTE between GTE's elements and the collocation space, and performing the cross-connect functions between the elements. In addition, the CLEC would incur the expense and inefficiency -- not to mention the potential confusion and inconvenience -- of submitting individual service orders for each UNE instead of a single order for the platform or other combination of UNEs. These added expenses would make the provision of competitive local exchange services far more expensive and far more difficult, and would severely impede the pace and scope of new firms' competitive entry in GTE territory. Second, GTE's proposedthese collocation requirements would make service to Washington consumers worse, not better, because the introduction of additional jumpers and cross-connects and the work required to disconnect and then reconnect a loop and a port (for example) introduces additional complexity, opportunity for error, and increased potential for service outages, and the risk of deteriorated service quality. It would mean that, at least for some period of time, any customer served through unbundled elements would be out of service, even if the installation goes smoothly. And, if it did not – a real possibility given that the new entrant must submit multiple service orders in order to reconstruct the platform, GTE must provision them correctly, the new entrant must perform the cross-connects, and must ensure that the elements are "recombined" in the proper configuration – the customer's service disruption could be substantial. At best, being out of service is an inconvenience. At worst, it can be life-threatening if the outage occurs during an emergency. It is not clear whether GTE would carry the "logic" of this position beyond de-coupling of the loop and port. For example, GTE could send a technician to the customer's house in order to disconnect the loop from the NID and thereby require the CLEC to send another technician to reconnect them. If nothing else does, this would ensure that service to the customer is disrupted. In either event, the customer is likely to be unhappy with the new entrant's service, blame it on the new entrant rather than GTE, and ultimately leave the new entrant only to return to the GTE. and the new entrant is likely to lose its customers. There is no technical or service-enhancing reason for GTE to require that the customers' existing service arrangements be dismantled and then reassembled at the new entrant's collocation space. Indeed, the only party to benefit from this arrangement is GTE because recombining elements, which places a substantial roadblock in the path of its potential competitors, and a source of new revenue from selling pointless collocation space and jumper cabling. That may be good for GTE, but it is not good for consumers or for local service competition in Washington. Furthermore, it will indefinitely delay entry while CLECs seek to collocate in the many switching centers in GTE's network. In addition, if collocation is the only available path to access UNEs, it is doubtful that GTE would be willing or able to accommodate all CLECs that might seek access to UNEs through collocation. This Commission is already well familiar with the claims of ILECs that collocation space is exhausted. 3. Discriminatory access to network elements is contrary to the Act, the FCC's rules, and the Eighth Circuit's decisions. The Act, at § 251(c)(3), requires that GTE provide "nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory" (emphasis added). In furtherance of this statutory nondiscrimination requirement, the FCC's rules, at 47 C.F.R. §51.311, provide that "the quality of an unbundled element, as well as the quality of access to the unbundled element, that an incumbent LEC provides to a requesting telecommunications carrier shall be at least equal in quality to that which the incumbent LEC provides to itself" (emphasis added). If CLECs are limited to combining elements in collocation space and are forced to incur the expense and suffer the service degradation that this arrangement entails, then the arrangement does not comply with the nondiscrimination requirements of the Act, because GTE would have far better access to UNEs than it would be affording CLECs. GTE would be able to combine elements directly, but a CLEC may only do so through expensive and less-efficient collocation arrangements. This FCC rule was not vacated by the Eighth Circuit. To the contrary, the Eight Circuit expressly endorsed it. The Court found that "a requesting carrier may achieve the capability to provide telecommunications services completely through access to the unbundled elements of an incumbent LEC's network. Nothing in this subsection [§251(c)(3)] requires a competing carrier to own or control some portion of a telecommunications network before being able to purchase unbundled elements." Iowa Utilities Board at 814 (emphasis added). If a CLEC is not required to "own or control some portion of a telecommunications network" to provide service using UNEs, then logically it cannot be required to use (and incur the cost of using) collocation space and associated equipment in order to obtain nondiscriminatory access. Any suggestion by GTE to the contrary cannot stand. AT&T is not alone in this view. The Department of Justice, commenting on why BellSouth's South Carolina § 271 application should be rejected, noted that BellSouth's offer to physically deliver unbundled network elements to CLEC collocation space, "does not satisfy the checklist requirements regarding unbundled elements." Evaluation of the United States Department of Justice, In the Matter of Application by BellSouth Corporation, BellSouth Telecommunications, Inc., and BellSouth Long Distance, Inc., for Provision of In-Region, InterLATA Services in South Carolina, FCC Docket No. 97-208, November 4, 1997, at 19. The Department of Justice noted that: [A]t least with respect to some combinations, it appears from the BellSouth South Carolina revised SGAT that instead of providing requesting carriers with supervised access to its network to allow them to do the work of combining the BellSouth network elements, BellSouth would require a new entrant to collocate its own facilities in a central office in order to combine these elements. In many cases, however, it would appear to be far less costly to allow CLECs to obtain supervised access to BellSouth's network so that they may perform the work of combining elements in a manner that would enable them to provide a telecommunications service "entirely" with unbundled elements obtained from an incumbent, without contributing any facilities of their own. Id. at 22 (footnotes omitted). At footnote 32, the DOJ, while noting that it has "reached no conclusions as to the requirements needed to ensure that unbundled elements may be combined," suggests that "it would appear that BellSouth could permit requesting carriers to have supervised access to its network to perform this simple operation without any substantial additional investment. A requirement that requesting carriers invest in additional collocation facilities in order to combine these elements might unnecessarily add costs to the provision of telecommunications services." (emphasis added). As the Department of Justice, and the Eighth Circuit itself, realized, there are alternatives to the collocation proposal. For example, access could be an electronic, not physical, connection to the GTE switch. It need not require the physical entry of a CLEC technician into GTE's central office except in those instances when, for example, a new line is installed. Another alternative would require the dispatch of a CLEC technician into GTE's central office to access GTE's switch directly, rather than after the loop has been rerouted to a collocation cage. This at least would avoid the expense, dislocation and service disruption inherent in GTE's proposal. Yet, GTE elsewhere has not even acknowledged the possibility of such alternatives, claiming instead that physical recombination of previously combined network elements in collocated space is the only way CLECs can perform the actual bundling of UNEs to provide telecommunications services. Indeed, the Eighth Circuit based its ruling on the FCC's combination rules at least in part on the view that the ILECs preferred direct access by the CLECs to the ILEC central office to the alternative of having to provide combinations of UNEs: The FCC and its supporting intervenors argue that because the incumbent LECs maintain control over their networks it is necessary to force them to combine the network elements, and they believe that the incumbent LECs would prefer to do the combining themselves to prevent the competing carriers from interfering with their networks. . . . [T]he fact that the incumbent LECs object to this rule indicates to us that they would rather allow entrants access to their networks than have to rebundle the unbundled elements for them. Iowa Utilities Board at 813 (emphasis added). This is not to say that the Department of Justice, the Eighth Circuit, or AT&T claim that direct access to the network by a CLEC is the most efficient way to obtain access, because such access raises a host of issues that must be resolved between the parties. It does, however, illustrate the unacceptability of collocation as the sole solution, and further illustrates the public benefit of a Commission ruling requiring GTE not to disassemble combined network elements, pursuant to Washington law. 4. The Commission has ample authority to require GTE to offer combinations of UNEs under the laws of Washington, and nothing in the Eighth Circuit's Order on Rehearing is to the contrary. Nothing in the Eighth Circuit's Order on Rehearing precludes incumbent LECs from agreeing to combine elements or to leave them in existing combinations. Nor does anything in the Court's decision preclude a state commission from directing that incumbent LECs combine elements or leave them combined, following the mandates of State law. This Commission did not previously address the issue of UNE combinations under Washington law in the GTE arbitration because there was no need to do so at that time. Now, however, is the time to address the issue, in light of the Eighth Circuit's decision vacating, under federal law, the FCC rule requiring an ILEC to "not separate requested network elements that the incumbent LEC currently combines." As shown below, the Commission has ample power to proceed under Washington law and should do so. The Eighth Circuit's decision addressed solely what ILECs may be required to do under federal law. The Court did not say that incumbent carriers could not agree to combine elements. It did not say that states are precluded from establishing their own re-bundling requirements based on state law. It did not reach the merits of the most pressing issue before this Commission of whether re-bundling furthers the development of local exchange competition. All the Eighth Circuit said is that the Act, as written, cannot be read as a federal mandate that incumbents offer combined network elements. This Commission should not -- and need not -- permit GTE to engage in discriminatory, anticompetitive, and anti-consumer conduct, which would violate Washington's prohibition on discriminatory and unreasonable conduct by common carriers. That is especially so because its sole purpose and effect would be to impose costs on competitive carriers that GTE does not incur and would ensure that new entrants are unable to provide service at parity with GTE. The GTE proposal would also affect the affordability and quality of services provided to Washington consumers, again contrary to the policies expressed in Washington law. In its Fourth Supplemental Order Rejecting Tariff Filings and Ordering Refiling; Granting Complaints, In Part, (Docket No. UT-941464 et al.), the Commission stated, "This Commission is charged by statute to determine adequate and efficient practices to be observed by telecommunications companies, and to correct practices that tend to stifle competition." (citing R.C.W. 80.04.110), and "...requiring new entrants to duplicate all of the facilities of existing LECs is highly inefficient, and ... tends to stifle competition." Id. Furthermore, section 80.36.170 of the Revised Code states that "[n]o telephone company shall … subject any particular person, corporation or locality to any undue or unreasonable prejudice or disadvantage in any respect whatsoever." Finally, section 80.36.300 states that, "[t]he legislature declares it is the policy of the state to … (2) maintain and advance the efficiency and availability of telecommunications services, and… (5) promote diversity in the supply of telecommunications services and products in telecommunications markets throughout the state…". Requiring GTE to provide unseparated combinations of UNEs is entirely consistent with the laws of Washington. The availability of the existing combined network elements will guard against discriminatory treatment of CLECs, prevent an unreasonable preference to GTE and a competitive disadvantage to AT&T, enhance the affordability and quality of competitive services available to consumers, and speed rather than stifle the deployment of competitive local exchange services in GTE's service area within the State of Washington. There is nothing in the federal Act that would preclude this Commission from exercising its independent authority under Washington law to require GTE to provide the platform. Indeed, numerous provisions of the Act expressly acknowledge independent state authority. For example, § 261(c) (47 U.S.C. § 261(c)), entitled "Additional State Requirements," provides that: Nothing in this part precludes a State from imposing requirements on a telecommunications carrier for intrastate services that are necessary to further competition in the provision of telephone exchange service or exchange access, as long as the State’s requirements are not inconsistent with this part or the Commission’s regulations to implement this part. (emphasis added). Section 601(c) of the Act similarly states that "[t]his Act and the amendments made by this Act shall not be construed to modify, impair, or supersede . . . State, or local law unless expressly so provided in such Act or amendments." (emphasis added) The Act further reiterates this principle in the specific context of State review of interconnection agreements. Section 252(e)(3) of the Act (47 U.S.C. § 252(e)(3)), entitled "Preservation of Authority," provides that a State Commission may "establish[] or enforc[e] other requirements of State law in its review of an agreement." And § 251(d)(3) of the Act (47 U.S.C. § 251(d)(3)), entitled "Preservation of State Access Regulations," states that the FCC: [M]ay not preclude the enforcement of any regulation, order, or policy of a State commission that (A) establishes access and interconnection obligations of local exchange carriers; (B) is consistent with the requirements of this section; and (C) does not substantially prevent implementation of the requirements of this section and the purposes of this part. GTE and other incumbent LECs have conceded that these very provisions preserve substantial State authority. See, e.g., Iowa Utilities Board, Brief for Petitioners Regional Bell Companies and GTE at 24 (Nov. 18, 1996) ("Congress specifically preserved the authority of states to enforce any 'regulation, order, or policy' relating to LEC's intrastate access and interconnection obligations, so long as it is consistent with the requirements of section 251 and does not substantially prevent implementation of those requirements or the purposes of the Act's local competition provisions"); Id., Brief of Mid-Sized Incumbent Local Exchange Carriers at 9 (Nov. 18, 1996) ("Congress expressly chose not to preclude state regulations providing for local competition"). See also Southwestern Bell Tel. Co. v. AT&T, No. A-97-CA-132-SS, SWBT's Consolidated Reply to Defendants' Summary Judgment Responses at 41 (July 1, 1997) ("state commissions were designated as potential arbitrators precisely because Congress thought they would give effect to and apply the laws their own states had put in place, laws that were carefully preserved in FTA 96"). A state law requirement that guards against discrimination by GTE plainly does not conflict with that Act. Such a requirement does not seek to relieve GTE from complying with any provision of the Act; rather, it reasonably supplements GTE's obligations in a manner that complements the purposes of the federal Act. Nor would such a requirement be an obstacle to achieving Congress' objectives. To the contrary, it would only hasten accomplishment of the Act's central objective, which is to introduce competition into local exchange markets and "erode the monopolistic nature of the local telephone service industry." Iowa Utilities Board at 791. Moreover, no provision of the Act "expressly" preempts or supersedes State law on this matter, see § 601(c), and preemption is inferred only "where Congress has legislated comprehensively to occupy an entire field of regulation, leaving no room for the States to supplement federal law, or where the state law at issue conflicts with federal law, either because it is impossible to comply with both, or because the state law stands as an obstacle to the accomplishment and execution of congressional objectives." Northwest Cent. Pipeline v. Kansas Corp. Comm’n, 489 U.S. 493, 509 (1989) (citations omitted). None of those conditions is met here. The many provisions of the Act expressly preserving State authority make it manifest that Congress did not intend for the Act to "occupy the field" of telecommunications regulation on this issue. "[P]re-emption is not to be lightly presumed," California Fed. Sav. & Loan Ass’ n v. Guerra, 479 U.S. 272, 281 (1987), and a conflict analysis must be "narrow and precise, 'to prevent the diminution of the role Congress reserved to the States while at the same time preserving the federal role.'" Downhour v. Somani , 85 F.3d 261, 266 (6th Cir. 1996) (quoting Northwest Cent. Pipeline, 489 U.S. at 515). Indeed, to justify preemption, the asserted conflict must be particularly "sharp . . . where Congress legislates 'in a field which the States have traditionally occupied.'" Boyle v. United Technologies Corp., 487 U.S. 500, 507 (1988) (quoting Rice v. Santa Fe Elevator Corp., 331 U.S. 218, 230 (1947)). And "[t]he principle is thoroughly established" that the State's power "is superseded only where the repugnance or conflict is so 'direct and positive' that the two acts cannot 'be reconciled or consistently stand together.'" Kelly v. Washington, 302 U.S. 1, 10 (1937) (quoting Sinnot v. Davenport, 22 How. 227, 243 (1859)). III. CONCLUSION Allowing GTE to physically separate elements previously combined in its network and then require requesting carriers to recombine them in collocated space is discriminatory and prejudicial, placesuts AT&T at a competitive disadvantage and is contrary to the public interest. Accordingly, the Commission should, pursuant to Washington law, reject any attempt by GTE to modify the existing agreement with AT&T so as to preclude AT&T's purchase of GTE's combined network elements. Respectfully submitted this 12th day of December, 1997. ATTORNEYS FOR AT&T COMMUNICATIONS OF THE PACIFIC NORTHWEST, INC. By _____________________________ Maria Arias-Chapleau Susan D. Proctor Margaret B. Graham AT&T Communications of the Pacific Northwest, Inc. 1875 Lawrence St., Ste. 1575 Denver, Colorado 80202 298-6164 DAVIS WRIGHT TREMAINE LLP Dan Waggoner 2600 Century Square 1501 Fourt