BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION In the Matter of the Pricing Proceeding ) for Interconnection, Unbundled Elements ) DOCKET NO. UT-960369 Transport and Termination, and Resale ) ) ) In the Matter of the Pricing Proceeding ) for Interconnection, Unbundled Elements ) DOCKET NO. UT-960370 Transport and Termination, and Resale ) for U S WEST COMMUNICATIONS, INC. ) ) ) In the Matter of the Pricing Proceeding ) for Interconnection, Unbundled Elements ) DOCKET NO. UT-960371 Transport and Termination, and Resale ) for GTE NORTHWEST INCORPORATED ) NEXTLINK/TCG/AT&T PETITION ) FOR CLARIFICATION OF EIGHTH ) SUPPLEMENTAL ORDER ) NEXTLINK Washington, L.L.C. ("NEXTLINK"), TCG Seattle ("TCG"), and AT&T Communications of the Pacific Northwest, Inc. ("AT&T"), respectfully request clarification of the Commission's Eighth Supplemental Order Interim Order Establishing Costs for Determining Prices in Phase II ("Eighth Supplemental Order" or "Order") in the above-captioned proceedings. NEXTLINK, TCG, and AT&T request clarification of three issues: (1) calculation of the unbundled loop cost for U S WEST Communications, Inc. ("U S WEST"); (2) costs of interconnection and local call termination and transport; and (3) costs of unbundled network elements not included in the Order. U S WEST LOOP COST CALCULATION 1. The Commission devotes a substantial portion of its Order analyzing the loop cost models and inputs submitted by the parties. Eighth Supp. Order ¶¶ 18-265. The Commission summarized the results of the three models as modified to reflect the Commission's findings regarding unbundled loops provided by U S WEST. Id. ¶ 269. The Commission found that, as adjusted, the Hatfield Model produced a cost of $13.53, BCPM produced a cost of $17.23, and RLCAP produced a cost of $13.76. Id. The Commission then concluded, "Based on the evidence of record, we find that the cost of the unbundled loop is $17.00." Id. 2. NEXTLINK, TCG, and AT&T request clarification of how the Commission calculated the $17.00 cost of a U S WEST unbundled loop. That figure is almost equal to the highest cost produced by any of the individual models. In contrast, the Commission found that the cost of an unbundled loop provided by GTE Northwest Incorporated ("GTE") is $20.00, significantly less than the highest cost model result and slightly less than the midpoint or mean of the results of all of the cost models used to evaluate GTE's costs. The same calculation if applied to U S WEST would produce a loop cost of $15.00. NEXTLINK, TCG, and AT&T, therefore, request that the Commission describe the calculation it used to find a U S WEST loop cost of $17.00 NEXTLINK, TCG, and AT&T request that the Commission's explanation include how the Commission quantified the increases and decreases listed in the chart and how those values were accounted for in the Commission's calculation. and whether the Commission used the same calculation to establish the cost of an unbundled loop provided by GTE. In addition, NEXTLINK and TCG request that the Commission clarify that their position on common costs as summarized in ¶ 250 was that such costs should not be included in the cost model, not that they supported the pricing recommendations of GTE, WITA, and Commission Staff. INTERCONNECTION/TRANSPORT AND TERMINATION 3. The Commission's discussion of the costs of interconnection and transport and termination of local traffic does not address interconnection or call termination but is restricted to interoffice transport, for which the Commission establishes no cost. Eighth Supp. Order ¶¶ 437-43. The Commission concludes in ¶ 443: Currently, transport compensation is handled through a bill-and-keep procedure. Under the bill-and-keep arrangement, there is no need to quantify the cost of transport. In Phase II of this proceeding, the parties may propose alternative compensation methods. If we adopt an alternative method in Phase II, at that time we will require GTE and U S WEST to modify, and to re-submit for verification, their studies to reflect the cost of money and depreciation lives we adopt in this Order. If we adopt bill-and-keep compensation, there will be no need to re-do the studies. 4. NEXTLINK, TCG, and AT&T request clarification of how any party could propose a compensation mechanism for interconnection and local call termination and transport in the absence of any Commission finding of a reasonable approximation of the additional costs of terminating local calls. Local exchange service providers must "establish reciprocal compensation arrangements for the transport and termination of telecommunications," 47 U.S.C. § 251(a)(5), which "provide for the mutual and reciprocal recovery by each carrier of costs associated with the transport and termination on each carrier's network facilities of calls that originate on the network facilities of the other carrier" based on "a reasonable approximation of the additional costs of terminating such calls." Id. § 252(d)(2)(A); accord Eighth Supp. Order ¶ 6. 5. The Commission has established bill-and-keep as the appropriate interim form of mutual, reciprocal compensation for the exchange of local traffic unless the parties negotiate an alternative compensation mechanism or the Commission orders a capacity-based form of compensation. WUTC v. U S WEST, Consolidated Docket Nos. UT-941464, et al., ("Interconnection Docket") Fourth Supp. Order at 28-32 (Oct. 31, 1995). The Commission specifically rejected any requirement for measured compensation for the exchange of local traffic between competing providers as not cost-based and as conflicting with, and potentially undermining, the state's policy in favor of providing telephone customers with the option of flat-rated local service. Id. at 26-28. The Commission has allowed parties to arbitrations to negotiate a per minute of use charge for terminating each others' local traffic, see, e.g., In re MFS/U S WEST Arbitration, Docket No. UT-960323, but the Commission has not established a capacity-based form of compensation for the exchange of local traffic pending the outcome of this proceeding. See Interconnection Docket, Notice of Opportunity to Comment on U S WEST's and GTE's Tariff Revisions Proposing a Replacement for Bill and Keep (April 10, 1997). The Commission did not mention this proceeding in the Eighth Supplemental Order. 6. Neither U S WEST nor GTE submitted any evidence in this proceeding of any "additional costs" that either company incurs to terminate the traffic originated by CLEC end users on which the Act requires mutual, reciprocal compensation to be based. 47 U.S.C. § 252(d)(2)(A)(ii). Neither U S WEST nor GTE produced any evidence in this proceeding to refute the Commission's finding in the Interconnection Docket that a minute of use charge does not reflect the underlying costs of local call transport and termination. Neither U S WEST nor GTE submitted any cost studies or other evidence demonstrating the costs of call transport and termination on a capacity basis. The Commission accordingly made no finding on any "additional costs" associated with transport and termination of local traffic. 7. In the absence of a determination of the existence and quantity of such "additional costs," the Order does not explain how any party could properly propose an "alternative compensation method" that the Commission could adopt to recover these unproven costs. The Commission identified the objective of this Phase of the proceeding as establishing the "costing procedures and cost levels for . . . interconnection, transport and termination." Eighth Supp. Order ¶ 18. The Commission's Order establishes no such costing procedures or cost levels. Even for interim local number portability, which many parties contended was an issue of law that has already been determined by the FCC, the Commission established a cost prior to reserving the issue of determining an appropriate competitively neutral cost recovery for Phase II. Id. ¶¶ 433-36. NEXTLINK, TCG, and AT&T, therefore, request that the Commission clarify that a party in Phase II cannot properly propose that the Commission adopt a mandatory compensation mechanism for interconnection and local call transport and termination other than bill-and-keep in light of the lack of evidence or Commission finding on the existence of any "additional costs." NEXTLINK, TCG, and AT&T also request that the Commission clarify whether and the extent to which the Commission's consideration of this issue in this proceeding impacts the Commission's inquiry into a capacity-based compensation mechanism as part of the Interconnection Docket. COSTS FOR OTHER UNBUNDLED NETWORK ELEMENTS 8. "The objective of Phase I of this proceeding is to establish costing procedures and cost levels for unbundled network elements . . . ." Eighth Supp. Order ¶ 18. "The costs for unbundled network elements established in Phase I of this proceeding will serve as the price floor for network elements. . . . In Phase II of this proceeding, we will determine the extent to which there should be uniform or varying 'mark-ups' for different network elements." Id. ¶ 20. The Commission established recurring costs for unbundled loops and local switching for both U S WEST and GTE, and nonrecurring costs for installation and disconnection of unbundled loops provided by U S WEST. E.g., id. ¶¶ 527-29 & 537. The Commission has ordered both U S WEST and GTE to file revised nonrecurring cost studies for other elements within 30 days of the date of this Order. Id. ¶¶ 537-38. 9. NEXTLINK, TCG, and AT&T request clarification of the recurring costs of unbundled network elements the Commission did not specify in its Order. In addition to loops and switching, unbundled network elements include the network interface device (to the extent not included as part of the loop), interoffice transport (both dedicated and shared), The Commission addressed transport in connection with mutual reciprocal compensation for the exchange of local traffic, but did not establish any costs for transport. Eighth Supp. Order ¶¶ 439-43. signalling networks and call-related databases (including STP ports and trunking), multiplexing, operations support systems functions, and operator services/directory assistance. See, e.g., 47 C.F.R. § 51.319. To the extent that the Commission's findings on switching costs were specific to local switches, see Eighth Supp. Order ¶¶ 275-320, moreover, a separate cost would need to be determined for tandem switching, both as an individual element and as part of tandem switched transport or "transiting" local traffic between two other carriers. See, e.g., 47 C.F.R. § 51.319(c)(2). NEXTLINK, TCG, and AT&T, therefore, request that the Commission clarify the Order to establish how and when these costs will be determined and whether that determination will be made in sufficient time to enable the Parties and the Commission to address pricing of these unbundled elements in Phase II. DATED this _____ day of April, 1998. DAVIS WRIGHT TREMAINE LLP Attorneys for NEXTLINK Washington, L.L.C., TCG Seattle, and AT&T Communications of the Pacific Northwest, Inc. By Gregory J. Kopta WSBA No. 20519 Susan D. Proctor Karen Notsund Maria Arias-Chapleau Michael A. Morris AT&T Communications of the Deborah S. Waldbaum Pacific Northwest, Inc. Teleport Communications Group, Inc. 1875 Lawrence St., Room 1575 1350 Treat Boulevard, Suite 500 Denver, CO 80202 Walnut Creek, CA 94596 Deborah Whiting Jaques NEXTLINK Washington, L.L.C. 1003 Montello Avenue Hood River, OR 97031