00001 1 BEFORE THE WASHINGTON UTILITIES AND 2 TRANSPORTATION COMMISSION 3 4 IN THE MATTER OF AIRTOUCH ) Docket No. UT-990300 PAGING, INC., PETITION FOR ) Volume I 5 ARBITRATION OF AN ) Pages 1-69 INTERCONNECTION AGREEMENT WITH ) 6 US WEST COMMUNICATIONS, INC. ) PURSUANT TO SECTION 252 OF THE ) 7 TELECOMMUNICATIONS ACT OF ) 1996. ) 8 _______________________________) 9 10 11 A hearing in the above matter was 12 held on March 10, 1999, at 1:59 p.m., at 1300 13 Evergreen Park Drive Southwest, Olympia, Washington, 14 before Administrative Law Judge LAWRENCE BERG. 15 16 The parties were present as 17 follows: 18 AIRTOUCH PAGING, INC., by Stellman Keehnel, Attorney at Law, Foster, Pepper & Shefelman, 19 1111 Third Avenue, Seattle, Washington, 98101, and Richard J. Busch, Attorney at Law, Foster, Pepper & 20 Shefelman, 777 108th Avenue, N.E., Suite 1500, Bellevue, Washington, 98004-5118. 21 US WEST COMMUNICATIONS, INC., by Lisa 22 A. Anderl, Attorney at Law, 1600 Seventh Avenue, Room 3206, Seattle, Washington 98191, and John M. Devaney, 23 Attorney at Law, Perkins Coie, 607 Fourteenth Street, N.W., Washington, D.C., 20005-2011. 24 Barbara L. Spurbeck, CSR 25 Court Reporter 00002 1 JUDGE BERG: Okay. We'll be on the record. 2 This is Docket UT-990300, captioned as Petition of 3 AirTouch Paging for arbitration of an interconnection 4 agreement with US West Communications, Inc. Today's 5 prehearing conference was previously noticed in a 6 supplemental order entered by the Commission on 7 February 8th, 1999. 8 Today's date is March 10, 1999. It's 9 approximately 2:00 in the afternoon. This hearing is 10 taking place in the Commission's headquarters in 11 Olympia, Washington. We'll proceed to take 12 appearances of the parties. 13 I'm Lawrence J. Berg, and I was appointed 14 as Arbitrator in this docket. Also sitting with me 15 are Jeffrey Payne, lead Commission Staff, and David 16 Griffith, with Commission Staff, both of whom are 17 serving as advisers to me in this case. Also serving 18 as adviser to me is Ms. Ann Rendahl, Assistant 19 Attorney General. Ms. Rendahl contacted me prior to 20 this conference and notified me that she had a 21 conflict and would be unable to attend. 22 So we'll take up appearances from AirTouch 23 Paging and then from US West Communications. 24 MR. KEEHNEL: Your Honor, for AirTouch 25 Paging, which is the Petitioner in this proceeding, 00003 1 Stellman Keehnel, Foster, Pepper & Shefelman, and my 2 colleague will introduce himself. 3 MR. BUSCH: Richard Busch, also with 4 Foster, Pepper & Shefelman. 5 MR. DEVANEY: Judge Berg, on behalf of US 6 West, John Devaney, outside counsel with the law firm 7 Perkins Coie. 8 MS. ANDERL: Lisa Anderl, in-house attorney 9 with US West. 10 JUDGE BERG: Mr. Busch, had you previously 11 made an appearance here before the Commission on this 12 docket? 13 MR. BUSCH: On this docket, yes. 14 JUDGE BERG: All right. So we already have 15 contact information for you? 16 MR. BUSCH: Yes. 17 JUDGE BERG: All right, thank you. The 18 parties conducted a discussion prior to going on the 19 record of an agenda to follow here this afternoon. 20 There are portions of this conference which will take 21 place off the record and we will be coming back on 22 the record as necessary. At this time, we'll be off 23 the record. 24 (Discussion off the record.) 25 JUDGE BERG: We'll be back on the record. 00004 1 The parties have had an extensive conversation, a 2 discussion regarding both baseball style arbitration, 3 the status of a base agreement between the parties, 4 and timing for exchange of last best offers. I've 5 asked both parties to take no more than five minutes 6 to present their positions on the issues under 7 discussion, at which point in time I intend to make 8 some decision. 9 Mr. Devaney, if you would state US West's 10 positions as a starting point. 11 MR. DEVANEY: Thank you, Judge Berg. The 12 first of the four issues I'll address is the issue of 13 a base agreement. Both parties have filed with their 14 respective pleadings in this case proposed 15 interconnection agreements. And after conferring the 16 last half hour or so with US West, our position is 17 that we would like the opportunity to submit a 18 different agreement from the one we submitted on 19 February 16th, one that we believe will reduce the 20 number of issues between the parties. And we would 21 ask that we be permitted to do that on Tuesday, the 22 day before the hearing, March 16th. 23 Again, the rationale for doing this is that 24 we think it would bring the agreements -- proposed 25 agreements of the parties closer together, will 00005 1 increase the efficiency of the hearing, because it 2 will minimize the issues between the parties, and 3 should be very helpful in moving things forward. 4 Now, tied to the base agreement is the 5 issue of baseball style arbitration. There 6 inevitably is going to be, in whatever base agreement 7 is submitted, a difference in the parties' positions 8 on some number of issues. Right now, best estimate 9 is somewhere in the range of about 14 or 15 issues 10 that are in dispute between the parties. 11 And so the issue becomes, if the 12 Administrative Law Judge adopts one base agreement 13 instead of another, what happens with those 14 unresolved issues that we all agree are in dispute. 15 And our position on that is the best way to resolve 16 those issues is, as I articulated before, have each 17 party set forth its position on the issue and have 18 the Administrative Law Judge render a decision on the 19 issue, on each of the 14 or 15 issues, adopting one 20 or the other party's position on the issue, and then 21 the parties go back and craft language surrounding 22 that issue and incorporate that language into the 23 base agreement. 24 We think this makes a lot of sense for a 25 couple reasons. One, as someone from US West just 00006 1 used the analogy, these issues have tentacles. And 2 if you decide an issue, it can't be done in isolation 3 from the base agreement. You've got to go back and 4 craft language that implement the issue, and it 5 inevitably is going to affect the base agreement. 6 So this is a very hard thing to do by just 7 adopting a contractual provision and saying here it 8 is, because that's going to affect the base 9 agreement. So we think the most logical way, the way 10 that will result in an integrated instrument is as 11 I've articulated. Side issues on an issue-by-issue 12 basis. Let the parties go back and put those issues 13 in contractual language and incorporate them into a 14 base agreement. 15 With respect to the third issue, the issue 16 of whether the adoption of the base agreement ought 17 to be something that's done through a factual 18 presentation of the hearing or something that could 19 be done through argument in the post-hearing briefs, 20 we favor the latter. We think that, at this stage, 21 with testimony having been filed, that it's really 22 the only workable solution right now to allow the 23 parties to argue on brief as to what the base 24 agreement ought to be. 25 Finally, the fourth issue, the issue of 00007 1 best and final offers, the timing of best and final 2 offers, from our experience in 14 states with 3 arbitrations, we have found that the hearing process 4 itself is invaluable to defining what the best and 5 final offer is. You learn a lot about the strength 6 of your positions, the weakness of your positions, 7 and frankly, as a litigator, I can go back and Ms. 8 Anderl can go back and tell our negotiators, Here's 9 how this issue played at the hearing and here's how 10 it ought to affect your view of what the contract 11 ought to look like, and trust AirTouch's counsel will 12 do the same with its clients. 13 Litigators learn a lot when they're in a 14 hearing. And I think if we're allowed to submit our 15 best and final offers after the hearing, that that is 16 further going to minimize issues. 17 I know Mr. Keehnel stated earlier that it's 18 not as efficient to have best and final offers after 19 the hearing, but if you do it before the hearing, 20 it's going to minimize issues, it's going to force 21 people to get their positions on the table and make 22 the Commission's job easier. 23 I think I look at it the other way; that if 24 we're allowed to reduce the number of issues through 25 hearing the evidence in the hearing, it's going to 00008 1 make it that much easier for you to decide this case, 2 because you'll have less to decide. 3 So those are our positions on the four 4 issues. Let me just make sure with Ms. Anderl that 5 I've done things accurately, and I think I have. 6 Thanks. 7 JUDGE BERG: You're welcome. Mr. Keehnel. 8 MR. KEEHNEL: For purposes of me stating on 9 the record here, recognizing the parties, together 10 with the Arbitrator, have had a lengthy 11 off-the-record discussion, I will incorporate what I 12 said in my March 8 letter brief. 13 To address your specific issues and to 14 summarize our discussions at this point, on the point 15 of whether further agreement should be submitted to 16 the Arbitrator in this proceeding, our view is that 17 the parties had already reached agreement on the form 18 of an agreement, while reserving on particular 19 disputes. Parties reflected that agreement in nearly 20 identical matrixes presented to the Arbitrator as 21 part of their pleadings. 22 AirTouch has tried to assist the Arbitrator 23 by explaining what the form of that agreement is. 24 Regrettably, Mr. Devaney's mistaken when he says that 25 US West filed a form of agreement with their 00009 1 response. They didn't. What they filed was a matrix 2 which agreed with our matrix, and it was some several 3 weeks later that they filed a form of agreement. 4 I'm encouraged that Mr. Devaney's client is 5 willing to take a step back and look at the current 6 form of agreement, and I'm hopeful that if they are 7 allowed to file yet another agreement, that it will 8 be in line with the agreement the parties worked with 9 for many months last year and throughout the 10 beginning of this year. 11 However, I must say this. US West did 12 induce us to rely on their form of the agreement. 13 The materials that we have submitted to you in the 14 form of our petition, in the form of the testimony, 15 has all been on the predicate that we are working 16 from an agreement that US West asked us to work from. 17 Concessions were made in doing so. It wasn't 18 AirTouch's preferred choice, but in order to move the 19 negotiations along, AirTouch did accept the 20 inducement and it did work from US West's agreement. 21 If there is no harm that results from that, 22 then we have nothing to complain about. Our concern 23 is that harm has resulted and is resulting from that. 24 We are now being asked to start our review of another 25 agreement the day before the commencement of the 00010 1 evidentiary hearing on this matter. And while this 2 is an arbitration devoted to the utilities and 3 telephones, not railroads, let me say, ladies and 4 gentlemen, that's no way to run a railroad. 5 Our preferred course would be that we stick 6 with the agreement that we have. If time is allowed, 7 I'm hoping against hope that the parties really come 8 to an agreement on what the new form of agreement 9 looks like in its basic structure. 10 If that doesn't happen, we want to preserve 11 our position. And what that means is we want to have 12 an opportunity at the hearing to present evidence -- 13 and it doesn't take much evidence. Much of it is in 14 the form of the petition and the response itself, 15 which would demonstrate to the Arbitrator that there 16 was a basic agreement the parties were working from, 17 which is to say, we would like to reserve, as one of 18 the issues in the baseball arbitration, the issue of 19 which basic form of agreement should be worked 20 from. 21 And if US West is given more time, we also 22 reserve the time to waive the need to do that if the 23 agreements have come into line satisfactorily so that 24 it's no longer an issue. 25 The bottom line here, Your Honor, is the 00011 1 act. Washington's approach under the act, as 2 indicated by orders from the WUTC, says, New issues 3 cannot be raised that weren't formed by the petition 4 and response. 5 Our concern here is that 2/16 agreement 6 certainly raises issues that could only be considered 7 illegally if they were considered by the WUTC. And 8 if that concern evaporates as a result of the new 9 agreement which US West is pleading to be allowed to 10 submit, then fine. No harm, no foul. 11 But if, on the other hand, it, like the 12 2/16 agreement, raises issues that were not presented 13 in the petition and response, then those issues 14 should not, ought not, and really cannot be 15 considered. 16 The parties have spent little time talking 17 about which items go into the baseball elements of 18 the baseball arbitration. It's our view that 19 everything goes into it. There's nothing sacrosanct 20 about numbers that numbers shouldn't be included in 21 that. 22 Indeed, baseball arbitration arose from 23 situations in which the concern was the parties were 24 too far apart on their numbers, and so numbers were 25 the chief instrument that were exchanged between the 00012 1 parties as last best offers as part of baseball 2 arbitration. There's no reason that numbers wouldn't 3 be included here, and we would encourage you to 4 include that as part of baseball arbitration 5 regardless of what time you set as the deadline for 6 parties to submit their best and final offers. 7 JUDGE BERG: By numbers, what do you mean? 8 MR. KEEHNEL: This arbitration, while it is 9 -- 10 JUDGE BERG: I'm just not familiar with -- 11 MR. KEEHNEL: This arbitration is about 12 clauses, but not so much about clauses; it's about 13 numbers. When I say numbers, I mean what rate for 14 termination of compensation, what percentage for 15 transit traffic would not have to be compensated, 16 what charge for facilities by US West for that 17 transit traffic. Those are the key elements in this 18 arbitration. 19 It's not so much about whether there is an 20 integration clause in the contract; it's about 21 economics. And at one point, and maybe US West is 22 not staying with this position, because I didn't hear 23 them talk about it, but at one point early today, 24 they intimated they didn't want numbers included as 25 part of the baseball formula. And I think it's 00013 1 inimical to the entire notion of baseball 2 arbitration. Of course numbers have to be included. 3 That's what it's all about. 4 Finally, on timing, my proposal would be 5 this. If US West is allowed additional time to 6 submit clauses over our objections, so be it. That 7 should be part of their last best offer at whatever 8 time the Arbitrator decides. Obviously, it can't be 9 this week, because they wouldn't be submitting it 10 this week; they'd be submitting it next week, 11 although I think Friday is a better deadline than 12 next Tuesday. 13 However, as to the numbers, there certainly 14 is no reason that, on numbers, the numbers can't be 15 presented immediately. They're not tied up with 16 matters involving language or any details involving 17 points of connection, et cetera; they're simply the 18 parties' economic position. 19 And on numbers, I would encourage the 20 Arbitrator to require the last best offers on numbers 21 to come forward as soon as possible, I would hope it 22 would be this week, to encourage the parties to 23 negotiate, but certainly I would not wait until the 24 time of closing briefs on the last day of this month. 25 JUDGE BERG: All right. Thank you, Mr. 00014 1 Keehnel. 2 MR. DEVANEY: Judge Berg, I'm sorry. I did 3 forget to address the issue of numbers. May I have 4 one minute to address that? 5 JUDGE BERG: Mr. Keehnel, is this also part 6 of the argument, the discussion you wanted to make 7 regarding Section Two of your letter? 8 MR. KEEHNEL: No, this is a different 9 issue, Your Honor, in this respect. There's a small 10 amount of overlap on that, but it's really a 11 different issue. The issue that's in front of you 12 now is when you asked the parties to submit a last 13 best and final offer, which I believe you hinted you 14 may do, what does that consist of? Does it just 15 consist of a position on interconnection or does it 16 consist of we believe the amount of termination 17 compensation that should be paid is this, whether 18 it's in terms of an MOU or whatever the formula it's 19 in. 20 It's that that I'm urging the Arbitrator to 21 require the parties to submit, else we've missed the 22 whole point of baseball arbitration, I think. 23 JUDGE BERG: Okay, I get it. Mr. Devaney, 24 can you respond specifically on the issue of rates as 25 a last best offer and when that last best offer could 00015 1 or should be made as to rates? 2 MR. DEVANEY: Okay. Can I also address 3 whether rates should be subject to baseball 4 arbitration? Is that -- 5 JUDGE BERG: Well, it sounds like that gets 6 into the discussion on Section Two of Mr. Devaney's 7 -- 8 MR. DEVANEY: Mr. Keehnel's. 9 JUDGE BERG: Excuse me, Mr. Keehnel's 10 argument, but go ahead, but we need to really pull 11 this to a quick close here. Otherwise, we'll take a 12 break and I can be back with the parties at 4:30 and 13 have you out by 5:00. But we'll try and wrap 14 everything up. 15 MR. DEVANEY: Mr. Keehnel just articulated 16 AirTouch's position that the rates that come out of 17 this -- let's say, for example, that you disagreed 18 with our position that AirTouch isn't entitled to 19 resolve reciprocal compensation and you decide that 20 you have to go ahead and decide upon rate, AirTouch 21 has advocated a rate in their cost study, and that 22 rate is made up of a large number of cost components 23 and inputs into the study. And to get the rates 24 right, you've really got to do an analysis of the 25 study, go through the cost components and figure out 00016 1 whether, for example, it's appropriate to have a 2 radio tower in the cost study and having US West bear 3 that cost instead of AirTouch. If you decide it's 4 not proper, the rate falls, and you go through each 5 component that way. 6 And the only way to get rates right, if 7 you're going to have a reciprocal compensation rate, 8 for example, in our view, is to do that kind of 9 component-by-component, input-by-input analysis, and 10 the need for that is particularly strong in a case 11 like this, where, as I understand it, the Commission 12 does not want to have a follow-up cost docket. 13 In the arbitrations, if my memory's right, 14 in Washington there may have been the adoption of one 15 rate over another rate in the arbitrations, but then 16 there was an understanding that there was a follow-up 17 cost docket at which the rate could be corrected and 18 perhaps trued up, although I don't recall that. 19 But, you know, so there was an insurance 20 policy that, all right, if you get it wrong in the 21 arbitration, we'll get it right in the cost docket 22 and make sure the rates are correct. That's not the 23 situation here. So we're very concerned that the 24 rates be analyzed in a fair amount of detail in the 25 hearing and be decided not on a baseball basis, but 00017 1 that you have the authority to deduce, for example, 2 AirTouch's proposed reciprocal compensation rate. 3 And the only other point I'll make on that, 4 in true baseball arbitration in major leagues, when 5 George Steinbrenner sits down with Nick Bua, or 6 whoever the Arbitrator is, and talks about Derek 7 Jeter's salary, Derek Jeter's salary isn't made up of 8 cost components. They don't get into, all right, he 9 had 20 errors, and therefore, he's worth one million 10 dollars, he had 60 runs scored, it's worth another 11 million. You can't do that kind of 12 component-by-component breakdown. Here you can, and 13 I think you should, in order to get the rates right. 14 With respect to when could we have sort of 15 our proposed number for, I guess, a reciprocal 16 compensation rate, it's our position, of course, that 17 there should be no reciprocal compensation. I think 18 we made that clear in our filings. 19 But if we were to be asked to propose an 20 alternative and say if there is going to be a 21 reciprocal compensation, what rate do you think it 22 should be, one of the difficulties we face is we were 23 given an amended or corrected -- I'm not sure what 24 it's called -- reciprocal compensation cost study 25 just yesterday by AirTouch. 00018 1 It had been our hope to submit testimony 2 today, a sensitivity analysis that would have 3 corrected their cost study and come up with a 4 different reciprocal compensation rate than the one 5 they proposed, but we haven't been able to do that. 6 We couldn't file it this morning because we just got 7 their new study yesterday. So I'm not sure, without 8 talking to our cost analyst, when we would be in the 9 position to break down their new study and come up 10 with an alternative to it. 11 JUDGE BERG: All right. Let me just ask a 12 couple questions, to the extent you can tell me. Am 13 I to understand, then, that none of these rates are 14 under consideration in the generic cost and pricing 15 docket? 16 MR. KEEHNEL: That is correct for the rates 17 we're talking about. 18 MS. ANDERL: AirTouch's rates and costs are 19 not, and that's what we're really primarily concerned 20 with. 21 JUDGE BERG: Okay. All right. 22 MR. KEEHNEL: The basics are that AirTouch 23 is asking -- it's a difference in the interpretation. 24 AirTouch contends that it should be paid for 25 terminated calls on its paging network. US West 00019 1 claims AirTouch should not be compensated. It's that 2 rate that we're talking about. 3 JUDGE BERG: And so that's the threshold 4 issue. And then, if they are entitled to 5 compensation, the issue is at what rate. 6 MR. KEEHNEL: That's correct. When I refer 7 to other rates, all I meant to indicate by the 8 transit traffic rate is we acknowledge there's some 9 traffic that doesn't originate with US West customers 10 that we would not be compensated for. That's all. 11 JUDGE BERG: Yes, that all makes sense to 12 me. Thank you. My biggest concerns are the 13 possibility that US West's 2/16 agreement in fact 14 contains some terms and conditions which might not be 15 linked to a resolution of the issues between the 16 parties. I am going to allow US West to file another 17 interconnection -- proposed interconnection agreement 18 on Tuesday, March 16th. I think it's important that 19 that agreement be -- let me ask this. Mr. Keehnel, 20 you will be in Seattle. Mr. Devaney, when will you 21 be in Seattle? 22 MR. DEVANEY: On the 16th. 23 JUDGE BERG: All right. Ms. Anderl, would 24 you see to it that there is a distribution of that 25 proposed agreement by noon, 12:00 noon distribution 00020 1 on Tuesday, March 16th. That agreement may be fax 2 filed with the Commission, with a hard copy to be 3 hand delivered and filed the following day. 4 MS. ANDERL: Mr. Keehnel, may I ask if you 5 will be in your office to receive that or will you 6 already be in Olympia? 7 MR. KEEHNEL: I am expecting to be 8 ensconced, busy in witness preparation, so I'm sure 9 will not be able to even look at the agreement until 10 after the arbitration, since I'll be dealing with 11 witnesses, so I won't even know what I'm arbitrating. 12 MS. ANDERL: Where would you like me to 13 send it, is my only question. 14 MR. KEEHNEL: You know what, getting it on 15 the 16th, it really doesn't even matter. You could 16 mail it. I just will not have a chance to look at 17 it. I'll be dealing with witnesses. 18 JUDGE BERG: This is important, because if, 19 in fact, the proposed agreement filed by US West is 20 not acceptable as a base agreement to AirTouch, then 21 I am going to allow the parties to present evidence 22 at the hearing which will address which base 23 agreement should be adopted by the Arbitrator. 24 Now, along those lines, if, in fact, 25 AirTouch is so inclined to file a revised proposed 00021 1 agreement, they would have the same opportunity to do 2 so if it was served and filed at that date. 3 I'll remind the parties that the standard 4 of admissibility of evidence is that evidence is 5 admissible if, in the judgment of the Arbitrator, it 6 is the kind of evidence on which reasonably prudent 7 persons are accustomed to rely in the conduct of 8 their affairs. 9 If it is necessary to continue this hearing 10 to Friday, March the 19th, in order to allow the 11 parties to submit the evidence they deem necessary to 12 make their arguments post-hearing, then the hearing 13 will be extended. That will be one of the issues we 14 will address at the start of the hearing as a 15 preliminary matter on Wednesday, March the 17th. 16 MR. KEEHNEL: Your Honor, could I ask, as a 17 supplement to that portion of your order, that US 18 West be required, at the same time that it delivers 19 its new agreement, to deliver a red line against the 20 Exhibit 5 to the petition that we believe the parties 21 have been working from? 22 MS. ANDERL: If I may ask Mr. Keehnel for 23 clarification on what he means by that? 24 MR. KEEHNEL: Yes, you can. I don't know 25 -- what do you want me to say? There's an agreement 00022 1 that we thought was the base agreement. The 2 Arbitrator has allowed you to submit some different 3 form of agreement by noon on the 16th of March. All 4 I'm asking is will you please give us a red line 5 against the agreement which the parties -- at least 6 AirTouch thought the parties had been working from, 7 so we can quickly note what the differences are? 8 MS. ANDERL: I'd say I don't understand how 9 -- unless you want me to juxtapose each contract 10 provision against the other. I mean, you want US 11 West to red line the Petition Exhibit 5 in such a way 12 so that, in its red line marked-up format, it reads 13 exactly as US West's proposed agreement would? 14 MR. KEEHNEL: Or vice versa. You led me to 15 believe, and I think the Arbitrator, also, that the 16 new form of agreement you're contemplating submitting 17 is going to much more closely track what the parties 18 had in front of them. That's why I asked for the red 19 line. 20 JUDGE BERG: I'm going to take the reins 21 back. What I'll instruct US West to do is, in filing 22 your new proposed agreement, if there is a new 23 proposed agreement on Tuesday, the 16th, that there 24 be some type of markup or delineation that would show 25 how that agreement deviates from the February 16th 00023 1 agreement previously filed. And if, you know, to 2 whatever extent that can be done, please do so. I 3 think AirTouch should be assisted in discerning the 4 changes to the proposed agreement that US West has 5 already presented. 6 To the extent that US West is communicating 7 with AirTouch negotiators during the process and that 8 the new proposed agreement is being worked out in 9 conjunction with AirTouch negotiators, that may 10 streamline the process. 11 My concern is that if, in fact, there is an 12 entirely new agreement put on the table from the 13 agreement that US West has already proposed, that 14 AirTouch may have an undue burden to determine what 15 evidence it needs to put on in the course of the 16 hearing that immediately follows. 17 It could be a summary, it could be a 18 crossed-out, red-lined version with different text 19 fonts, but I'm going to trust that US West will do an 20 acceptable job of making whatever notation to a 21 proposed agreement that will show some difference 22 between the two. I'm not going to put the burden on 23 AirTouch to load the two documents into a computer 24 and run a compare program between them. 25 MR. KEEHNEL: Can we at least have an 00024 1 electronic version? In the fall and winter, what 2 happened was we had one document and we e-mailed it 3 to each other, it was an electronic version, which is 4 one of the reasons I know we were working from the 5 same agreement. Can we have this one in an 6 electronic version? 7 JUDGE BERG: Would there be any problem in 8 producing an electronic version? 9 MS. ANDERL: I don't see why. I think we 10 can do that. 11 JUDGE BERG: All right. So if on noon on 12 Tuesday, the 16th, US West would also serve an 13 electronic version. To the extent that they can fax 14 file with the Commission, an electronic version would 15 not be necessary until the actual hand delivery of a 16 hard copy the following day. 17 MS. ANDERL: All right. 18 JUDGE BERG: All right. I'm going to 19 require the parties to submit a next to last best 20 offer on Tuesday, the 16th, by 12:00 noon, 21 contemporaneous with the agreement of the parties. 22 If, in fact, that next to last best offer is nothing 23 more than what is already on the table, then so be 24 it. I'd like to see that in proposed contract 25 language in response to the issues as they are 00025 1 presently in dispute. 2 The parties shall file a final last best 3 offer on Tuesday, March the 23rd. I think there's 4 merit to the parties having the benefit of the 5 hearing upon which to formulate a final last best 6 offer, and that should also allow the parties 7 sufficient time to integrate that position into their 8 final briefs. 9 MS. ANDERL: Your Honor, if I might just 10 have one moment. 11 MR. DEVANEY: Judge Berg, Ms. Anderl raises 12 a point that I think we should bring to your 13 attention. That is that if the hearing were to 14 conclude on the 19th, which is now a possibility, 15 that doesn't give us much time to go back to our 16 negotiators and say, Based on how the hearing went, 17 here's how we think you ought to alter your final 18 offer. And so we would ask you to consider the 19 possibility of giving the parties a couple more days 20 to submit their last best final offer, so that the 21 effect of the hearing could be incorporated into the 22 last offers. 23 JUDGE BERG: I'll modify my decision till 24 the conclusion of Wednesday, the 24th. 25 MR. DEVANEY: Thanks. 00026 1 JUDGE BERG: And I hope that will be 2 productive. I will want service on the other party 3 by the end of the day. Likewise, fax filing with the 4 Commission is acceptable if a hard copy is delivered 5 to the Commission on the following day. 6 And I am going to reserve decision on 7 whether the salient rates will be by baseball style 8 or by open decision. It's not necessary for the 9 parties to file next to last best offer on rates 10 prior to the hearing. I will inform the parties no 11 later than the start of the hearing as to my position 12 on resolving whether or not rates will be submitted 13 or resolved as a matter of baseball style arbitration 14 or whether it will be an open decision by the 15 Commission. 16 MR. KEEHNEL: Your Honor, there are a 17 number of other issues besides rates. 18 JUDGE BERG: We're out of time here, Mr. 19 Keehnel. I need to leave immediately. If I've 20 missed any of the points that were presented up to 21 this point in time that were presented for 22 resolution, please let me know. Otherwise, if there 23 are other points that need to be addressed, we'll 24 take it up at 4:30. 25 MR. DEVANEY: Thank you. 00027 1 JUDGE BERG: All right. Did I miss 2 anything? 3 MR. DEVANEY: I don't believe so. 4 JUDGE BERG: All right. We'll reconvene at 5 4:30. The conference is in recess. We're off the 6 record. 7 (Recess taken.) 8 JUDGE BERG: Let's go back on the record. 9 Mr. Keehnel, I know you had some opportunity to think 10 about the decision that was made prior to going off 11 the record, and you also implied at that point that 12 there may be other collateral issues that needed to 13 be decided, as well. 14 Is there anything else that you think needs 15 to be decided as part of the decision on baseball 16 style arbitration and last best offer? 17 MR. KEEHNEL: I think there is one issue, 18 Your Honor, and that is we talked loosely about 19 numbers and whether numbers are included, and you 20 were specific in your ruling as to reserving decision 21 on whether rates -- and by that, I took it to mean a 22 reciprocal compensation rate and the transit traffic 23 rate would need to be included in the last best 24 offer. 25 There is one other number. It's not a rate 00028 1 number; it's simply the percentage of traffic that is 2 transit. And for that, it's not like a rate issue, 3 so I don't believe the concerns that prompted you to 4 reserve ruling on that for the present ought to apply 5 to percentage of transit traffic, and I'd encourage 6 you to have the parties include that in their next to 7 last best offer and in their final best offer. 8 JUDGE BERG: Mr. Devaney, has US West 9 established a position that if, in fact, whether -- 10 if there is some compensation to be paid, what that 11 number should be? 12 MR. DEVANEY: With respect to reciprocal 13 compensation, no, we have not. And as I alluded to 14 earlier, part of the reason for that is we just 15 received yesterday the corrected or amended version 16 of AirTouch's reciprocal compensation cost study. 17 It had been our hope to file this morning 18 supplemental cost testimony that had sort of a 19 step-down sensitivity analysis that corrected the 20 AirTouch cost study, came up with a different rate, 21 but because they filed a corrected study yesterday, 22 we just couldn't do it because our person didn't have 23 time to do it. 24 JUDGE BERG: All right. As a matter of 25 policy, in a broader sense, does US West have a 00029 1 position as to whether or not that number is 2 susceptible to different treatment than the actual 3 rates to be established? 4 MR. DEVANEY: I'm not sure I understood. 5 Are we talking now -- there are two numbers that I 6 think Mr. Keehnel raised. One is the transit traffic 7 number and one is the reciprocal compensation rate. 8 JUDGE BERG: I think what we're talking 9 about was a percentage of the exempt traffic versus 10 -- 11 MR. DEVANEY: All right. I'm confused, 12 then. 13 JUDGE BERG: All right. I apologize. 14 MR. DEVANEY: I think it was my 15 misunderstanding. But on transit traffic, we do have 16 a position of what the right number is, yes. 17 JUDGE BERG: And is that a disagreement 18 between the parties that would be any more 19 susceptible to baseball style arbitration than rates 20 would be, in your opinion? 21 MR. DEVANEY: Yeah, I think the transit 22 traffic probably lends itself more to that approach 23 than the rates. 24 JUDGE BERG: All right. Then, when we talk 25 about the numbers, then, what we're talking about are 00030 1 actually the dollar figure for the rates. As far as 2 percentages go, if there is a determination that 3 compensation is due and there is to be some sort of 4 allocation of percentage between exempt and -- 5 MR. KEEHNEL: Chargeable. 6 JUDGE BERG: -- chargeable or non-exempt 7 traffic, that will be a number that will be resolved 8 on the basis of a best final offer. And I would 9 expect to see a number exchanged between the parties, 10 both on March 16th, prior to the hearing, and on 11 March 24th, subsequent to the hearing. Thank you, 12 Mr. Keehnel. I appreciate your attention to detail. 13 Anything else? Anything from US West's 14 perspective of what we may need to address to get 15 closure on this subject area? 16 MR. DEVANEY: I guess the only other issue 17 would be we have proposed our own costs related to 18 some of the dedicated facilities, and this is an 19 issue we think that has to be decided if the 20 Commission finds that AirTouch is required to pay us 21 for facilities. So the question arises as to whether 22 the best final offers of the parties ought to pursue 23 that issue, as well. 24 JUDGE BERG: Mr. Keehnel, are we crossing 25 over into Section Two yet? 00031 1 MR. KEEHNEL: We are into issue number two, 2 and this might be a good time to have Mr. Richard 3 Busch take just a couple minutes and outline that 4 issue, and Mr. Devaney can respond and we could get a 5 quick determination of which way you want to go on 6 that. 7 JUDGE BERG: Okay, good. 8 MR. BUSCH: Thank you. Briefly stated, 9 Your Honor, the Commission's order on arbitration 10 procedure in this matter required US West to file 11 cost testimony with its response to the petition. 12 They did not do so. They filed cost testimony and 13 new prices three weeks later with their first round 14 of testimony. And since they have not complied with 15 the Commission's order, they should not be entitled 16 to present that in this proceeding. 17 JUDGE BERG: And if they did not present 18 that, what would the prices be? 19 MR. BUSCH: They said in their issues 20 matrix attached to their response that the prices are 21 straight from the tariffs. 22 JUDGE BERG: Mr. Devaney. 23 MR. DEVANEY: The vast majority of rates in 24 question for US West are pending in the cost docket 25 that's before the Commission. The outcome of that 00032 1 proceeding should dictate most of the costs relevant 2 to the facilities US West will be providing AirTouch. 3 There is a very limited number of costs that aren't 4 before the Commission in the cost docket. And for 5 those costs, we put forth cost studies, very frankly, 6 as quickly as we could when we discovered that all 7 the costs went before the Commission in the cost 8 docket. 9 And our view is that these costs, while 10 they're not major items, they're items that ought to 11 be taken up by the Commission to assure us full cost 12 recovery, and these are issues that are important to 13 the compensation issues in the case, and if we're 14 going to go forward and try to resolve all issues 15 that are relevant to this proceeding, those cost 16 issues are among the issues that ought to be raised. 17 And no, we didn't file the cost studies 18 with our response to the petition. Frankly, we filed 19 them as quickly as we could, and it wasn't at the 20 time of the filing of our response. 21 I should add, also, that the studies we've 22 put forward are not included in the tariff rates in 23 Washington. And we did an analysis, we concluded 24 that, for these limited number of costs, existing 25 tariffs do not account for them. And that's why we 00033 1 put forth these studies. 2 JUDGE BERG: All right. Let me ask a 3 couple questions so I can understand exactly what 4 those costs are. Are you telling me that there are 5 no tariff rates for those services or only that the 6 tariff rates for those services are outdated? 7 MR. DEVANEY: The former. There are no 8 tariff rates for those services. 9 JUDGE BERG: And how is it that there would 10 be no tariffed rates for those services? Is that 11 because they're a matter of federal jurisdiction? 12 MR. DEVANEY: I frankly don't know the 13 answer. The analysis went as follows. Where we 14 spoke with our cost people and said, Okay, if we're 15 going to provide dedicated facilities to AirTouch, 16 how do we determine what the rates will be? And the 17 response was, Well, virtually all these facilities 18 are before the Commission in the pending cost docket, 19 with the exception of these small number of items 20 that aren't currently before the Commission and, to 21 my knowledge, aren't covered by tariffs. 22 And the decision was made at that point, 23 okay, well, we need to make sure all or the costs are 24 covered, so let's submit studies for these small 25 number of items. And that's how we pursued it. 00034 1 MR. BUSCH: If I may, Your Honor. 2 JUDGE BERG: One second. I need to get 3 something kind of clear in my own head. 4 Mr. Busch, certainly any rates that would 5 be established in this proceeding are interim to the 6 extent that there are permanent rates that are 7 developed in the Commission's generic cost and 8 pricing docket. If, in fact, there is a service for 9 which no tariffed rate exists, is AirTouch arguing 10 that US West should not be compensated for that 11 service, or is this a subservice, so to speak? 12 MR. BUSCH: Our position, Your Honor, is 13 that for some of the services, there are current 14 tariffed rates. And from what it appears -- this is 15 not our official position, but we're still studying 16 it. It appears that what they're trying to do is 17 create a subsegment or a subservice. For example, 18 DID outpulsing service is one of the new services 19 that they've proposed rates for. AirTouch and many 20 other US West customers today subscribe to DID 21 service and we are paying tariffed rates for those 22 services today. 23 Some of the services we, at this point, do 24 not plan to purchase, so we question whether they're 25 required as a part of this docket at all. 00035 1 JUDGE BERG: Well, I would hope that if, in 2 fact, AirTouch could look at a service and a price 3 and say, Well, we are just never going to order that 4 at all, that it would seem like that's a real 5 throwaway in a negotiating situation, and to the 6 extent that you can take some things off the table, I 7 would encourage you to do so, even if it means 8 there's a number in the agreement that you would 9 otherwise not accept. I mean, we've seen that in 10 other agreements. 11 So in terms of -- all I'm addressing now is 12 if, in fact, we go to hearing on the issue as to 13 whether or not a tariff rate exists for a particular 14 service and if your position is, Well, we're never 15 going to order that service anyways, while you never 16 want to say never, if, in fact, that's the case, it 17 may streamline the process and the parties can focus 18 their energy on what really matters. 19 MR. DEVANEY: If I could just echo that, 20 Judge Berg. Needless to say, if you all are 21 committing not to buy some of these items, we'd be 22 more than happy to withdraw the studies and 23 streamline things, so maybe we can work together on 24 that. 25 MR. BUSCH: A good example is the -- I 00036 1 think it's the MF2-SS7 conversion. In the short 2 term, this is why I'm hesitant to say never. In the 3 short term, I don't think there's a plan to convert 4 to SS7. However, in the foreseeable future, there 5 may be a move toward SS7. So to say that we're never 6 going to buy it, I'm not comfortable saying that 7 today. But I don't believe it's one of the services 8 that they plan to -- they don't propose to purchase 9 that service as a part of this interconnection 10 agreement today. 11 JUDGE BERG: And Mr. Busch, in terms of 12 AirTouch's argument that US West is presenting new 13 rates for certain services, I did a comparison of 14 rates in the 2/15 interconnection agreement proposed 15 by US West and rates that were part of an exhibit to 16 Ms. Malone's testimony, and there was some 17 discrepancy between those rates. 18 When you refer to new rates, are the old 19 rates tariff rates or are the old rates the rates 20 that were in the February 15th agreement? 21 MR. BUSCH: The old rates I'm referring to 22 are the prices that AirTouch pays today for the 23 existing services. 24 JUDGE BERG: And is AirTouch looking for 25 some service in this proceeding that it presently 00037 1 does not receive? 2 MR. BUSCH: I don't believe so. 3 JUDGE BERG: And so AirTouch is paying for 4 some services which have not been tariffed; would 5 that be correct? 6 MR. BUSCH: That is incorrect, Your Honor. 7 AirTouch currently subscribes to DID service. There 8 are USOCs associated with those services in the 9 tariff, and in order to do our price comparison, we 10 compared the USOC for certain services today with the 11 USOCs in the proposed rates attached to Ms. Malone's 12 testimony. We found that the rates in Ms. Malone's 13 testimony were higher than the rates that we are 14 paying today. 15 Our concerns about this, Your Honor, are 16 twofold. First, if, as a part of this arbitration 17 proceeding, AirTouch is required to pay these rates, 18 the decision would be binding on AirTouch and 19 AirTouch only. As you know, the paging industry is a 20 highly-competitive market, and if AirTouch were 21 forced to pay higher rates to US West and no other 22 paging carrier was forced to pay higher rates to US 23 West, that would have an impact on their 24 competitiveness in the marketplace and profitability. 25 Second, AirTouch has had all of 00038 1 approximately three weeks to understand that there's 2 new rates being proposed and get ready for a hearing 3 on the interim rates. And everyone in this room was 4 familiar with the fact that rates for tariffed 5 services are usually handled through the ordinary 6 tariff rate proposal process, not through a private 7 arbitration in a shortened time schedule. 8 And AirTouch, I'm sure, would like to have 9 every other paging industry participant scrutinize 10 the cost studies and rates that US West is proposing 11 through this process. 12 JUDGE BERG: So Mr. Devaney and Ms. Anderl, 13 it seems that the most appropriate solution would be 14 that whatever services for which rates don't exist -- 15 excuse me, for whatever services tariffs don't exist 16 -- no, I'm going to strike that, as well, for what 17 that's worth. 18 It seems that the part of the problem, from 19 US West's perspective, is that these rates are not 20 being considered in the generic costing and pricing 21 docket. 22 MS. ANDERL: And that's what I'm confused 23 about. I was going to ask Mr. Busch for a 24 clarification, if he has concerns with just the rates 25 listed in Mr. Thompson's and Ms. Malone's testimony 00039 1 that are supported by new cost studies or all the 2 rates? 3 MR. BUSCH: I don't feel I can answer that. 4 I don't know the answer. 5 MS. ANDERL: Okay. Because it's a 6 different answer depending on whether we're talking 7 about just the four new studies, the four new rates 8 that Ms. Malone and Mr. Thompson are supporting that 9 aren't in the generic docket or if AirTouch's 10 concerns extend even to the proposed rates that are 11 in the generic docket. I mean, there's two separate 12 answers. 13 MR. BUSCH: We took a look only at the new 14 services that were proposed, and we have concerns 15 with those. We did not analyze any of the other 16 rates at this point that are contained in the 17 testimony, so again, I'm not prepared to respond. 18 MS. ANDERL: Then I can just give you the 19 one answer. And that is my belief that what our 20 position will be, when asked to address this at 21 hearing, is simply that people who buy services out 22 of US West's tariffs are generally US West's retail 23 end-user customers. 24 Now, I will concede to you that there are 25 wholesale type tariffs, like access tariffs, where 00040 1 wholesale customers can purchase, but ordinarily 2 carrier-to-carrier relationships are done on a 3 contractual basis and are not for services or rate 4 elements that are tariffed. And that is what I 5 believe that we have here, is that the services that 6 AirTouch has been buying to date are out of our 7 tariffs and we've been treating them as a retail end 8 user customer. 9 And it's really under the new construct of 10 the act where we're required to have a 11 carrier-to-carrier relationship with AirTouch that it 12 kind of changes the whole ballgame, as it were, and 13 what we are proposing are TELRIC-based rates for 14 elements or services that more properly reflect the 15 carrier-to-carrier relationship and more specifically 16 reflect the paging customer cost characteristics, is 17 what I believe we've done here. So that -- I don't 18 know if that lends some clarity to the situation or 19 not. 20 JUDGE BERG: When you tell me those rates 21 are out of the tariff, are you representing that they 22 are less than the tariffed rate? 23 MS. ANDERL: No, I'm not making a 24 representation either way. I don't dispute what Mr. 25 Busch said, nor can I endorse it. 00041 1 JUDGE BERG: Okay. So now it's my turn to 2 be the echo. So I understand US West's position, 3 then, would be that it was not obligated to offer the 4 tariffed rate to AirTouch as a carrier-to-carrier 5 relationship, rather than a retail end user 6 relationship? 7 MS. ANDERL: I think that's part of it, but 8 I also believe, and as I said, I have to confirm 9 this, but my understanding is that when these 10 services are offered to a paging customer, there are 11 different cost characteristics than when they're 12 offered to retail end users, so they then essentially 13 become a different service. 14 The tariff just didn't really fairly 15 reflect what it was that AirTouch was buying or US 16 West was selling, and we were using it because that 17 was all there was, but once we had an opportunity to 18 do an arbitration and really determine specifically 19 that we felt that it was incumbent upon us to get 20 that issue teed up for adjudication, which is why we 21 filed the cost studies, the finding -- that we 22 believe the cost and prices for these particular 23 services to be, which may -- I'm not going to deny 24 it. It may, in fact, be a subset of existing tariff 25 services. I wouldn't dispute that that's a 00042 1 possibility. But that these particular services to 2 paging customers we do not believe are fairly covered 3 by a tariff. 4 JUDGE BERG: But these are services that 5 AirTouch is already receiving and paying a rate for; 6 is that correct? 7 MR. DEVANEY: Not all of them, from what I 8 understand. There are five services that are at 9 issue. As I understood Mr. Busch to say, you may be 10 subscribing to DID, but it's not clear whether your 11 subscription to DID covers these five services. 12 Clearly, you're not buying SS7 right now. 13 MR. BUSCH: That's correct. 14 MR. DEVANEY: Do you know about the other 15 four? 16 MR. BUSCH: I was able to compare or see a 17 comparison of four of the rates, USOC to USOC, so my 18 assumption is that they are currently purchasing four 19 other services, but I'm just going -- that's not 20 testimony from the client; that is my assumption from 21 the information that I have. 22 MR. DEVANEY: Okay. 23 JUDGE BERG: Mr. Devaney, I am somewhat 24 concerned that US West is encouraging me to engage in 25 a tariff rate-setting process. And I understand that 00043 1 there's this distinction you're making on a 2 carrier-to-carrier versus a retail end user customer, 3 but is that to say that if a carrier came to US West 4 and insisted on receiving service under the tariff, 5 that US West's position is if it had a legal right to 6 refuse service at a tariffed rate? 7 MS. ANDERL: No, Your Honor. If the 8 service is purchased consistent with the tariff. And 9 I think that's where we're getting at here, is, in 10 other words, we can legally refuse to provide 11 somebody residential services if we know it's a 12 business sort of thing. 13 But, I mean, I agree, frankly, with 14 AirTouch that we don't want to conduct this 15 proceeding in any way that puts anybody at an undue 16 disadvantage or unfair advantage or litigates rate 17 elements without proper notice or by surprise or in 18 an untimely manner. 19 I would like to have an opportunity, 20 really, which we haven't, since we got Mr. Keehnel's 21 letter on Monday, to do a tariff-to-tariff or 22 tariff-to-rate element, USOC-to-USOC comparison. And 23 it may be that we may be able to make more accurate, 24 complete, and sure representations to you about 25 what's going on here in a day or so. 00044 1 And you know, I will not -- I mean, I will 2 advise US West, as I'm sure Mr. Devaney will, to not 3 encourage you to illegally make a decision. You 4 know, to make a decision on an issue that's not 5 properly raised and somehow taint the proceeding. We 6 really don't want to do that. 7 JUDGE BERG: I'm sure you understand that 8 if I did, it's going to be addressed before the 9 Commissioners in an approval hearing, and in that 10 case, neither one of us would look very good. 11 MS. ANDERL: Absolutely. We have nothing 12 to gain by that, and that's why I would like to 13 reserve the right to clarify our representations to 14 you and suggest either appropriate action for us or 15 for you, based on a little bit more research. 16 JUDGE BERG: All right. I'm going to be in 17 a hearing all day tomorrow and all day Friday. I 18 would like the parties to continue developing their 19 position on this and communicate with each other, 20 since you're all going to be together for the next 21 two business days. 22 And I would like to have some conclusion to 23 US West's analysis such that we could take this up at 24 the start of the hearing, if not sooner. I will 25 certainly be available at times on Monday, the 15th, 00045 1 and Tuesday, the 16th, if the parties feel that they 2 need to talk to me about this issue before the start 3 of the hearing on Wednesday, the 17th. But I need to 4 help the parties prepare for hearing, as well, so -- 5 MS. ANDERL: Your Honor, I don't want to 6 interrupt you, but I'm going to. I have a proposal 7 that might be satisfactory, and I would just suggest 8 that Mr. Busch and I have worked together before. 9 I'm quite hopeful that he and I will be able to 10 resolve this and send a letter to you on Monday that 11 maybe sets forth what the parties have determined is 12 appropriate on this. And even if we agree to 13 disagree, it will set forth our positions. 14 JUDGE BERG: All right. Because the more I 15 think about it, I think that I'm going to have to 16 make some kind of a decision before the hearing 17 starts on the 17th. So if, in fact, I could have a 18 status update. And let's do it this way. If, in 19 fact, there's some resolution, I would like to have 20 faxed notification by 10:00 a.m. on Monday morning. 21 Otherwise, I want the parties to be prepared for a 22 telephone conference at 1:30 in the afternoon, 23 Pacific Standard Time. Do you think that's -- 24 MS. ANDERL: I think that's reasonable. 25 JUDGE BERG: Mr. Keehnel. 00046 1 MR. KEEHNEL: If that's the quickest that 2 US West can move. Part of my concern is that we are 3 deposing Mr. Thompson, who is the proponent of the 4 cost study, on Friday, and my fear is we're going to 5 spend, collectively, with several attorneys involved 6 and an expert witness involved, many thousands of 7 dollars over an issue on Friday investigating one 8 which may be removed from the table. 9 So my strongest encouragement to US West 10 would be to try to reach resolution of this as early 11 as possible tomorrow and give us notice whether we 12 can push this one off the table and avoid that cost 13 on Friday. 14 JUDGE BERG: Ms. Anderl. 15 MS. ANDERL: Your Honor, I'm here tomorrow 16 morning for an oral argument in another docket, but I 17 will make telephone calls both this evening and 18 tomorrow afternoon in the hopes of allowing the 19 parties to remove that issue for Friday. 20 JUDGE BERG: I think that's reasonable. 21 Part of the extension of time to Monday, Mr. Keehnel, 22 is because if the parties, in fact, weren't in 23 agreement, I could not do anything to resolve it 24 until Monday. But I think that it would be 25 appropriate for US West to try and marshal all its 00047 1 resources to get some resolution before Friday, 2 because I know Mr. Devaney would like to move up his 3 plane flight back to the East Coast if he can, 4 presuming that you're planning to be here Friday, Mr. 5 Devaney? 6 MR. DEVANEY: I am. 7 JUDGE BERG: All right. So if you can 8 abbreviate Mr. Thompson's deposition, I think it 9 serves the best interests of both parties. 10 MS. ANDERL: It would especially speed 11 things along if Mr. Busch is able to give me a voice 12 mail tomorrow to tell me -- or where we can talk 13 perhaps about what exactly he looked at that would 14 send me quicker to the right place. So we can talk 15 maybe off the record. 16 MR. BUSCH: Yes. 17 MS. ANDERL: Great. We'll do that, Your 18 Honor. 19 JUDGE BERG: All right. And for what it's 20 worth, I did notice some consistency between the 21 nonrecurring charges proposed by US West in this 22 proceeding and the nonrecurring charges that were 23 attached to the AT&T Wireless agreement with US West, 24 which was arbitrated by the Commission. 25 That's not to say that those rates were 00048 1 arbitrated by the Commission; that's just to say in 2 terms of whether or not there's a competitive 3 disadvantage by some of these rates being proposed by 4 US West. I didn't look at all the type one and type 5 two interconnection agreements that have been fully 6 negotiated and submitted to the Commission for 7 approval, but I did take a look at that one 8 agreement, because it was the product of an 9 arbitration here at the Commission. 10 I would -- again, just mentioning that for 11 the parties' benefit, to whatever extent that may 12 assist their consideration of these rates and 13 charges. 14 MS. ANDERL: Thank you, Your Honor. If I 15 might just point out to you, though, that the AT&T 16 arbitration was for wireless interconnection, which 17 is a much broader set of things than just the paging, 18 and in the AT&T Wireless, in fact, even though some 19 of the paging issues were adjudicated, the parties 20 actually took those aside and out of the 21 interconnection agreement and agreed to negotiate 22 something separately once the FCC had acted on the 23 paging issues specifically. So I don't know whether 24 it matters or not, but I believe that those are, you 25 know, for wireless interconnection, rather than the 00049 1 paging-specific issues. 2 JUDGE BERG: All right. 3 MR. BUSCH: And Your Honor, some of the 4 numbers changed this morning or last night, when we 5 got additional testimony from Mr. Thompson, so I 6 don't know which ones they are. I just noticed that 7 some of the rates have changed. 8 JUDGE BERG: All right. So that comparison 9 doesn't seem to have any relevance to this 10 proceeding. All right, thank you. 11 There was one other point that I wanted to 12 make on a going forward basis. Mr. Keehnel, the fact 13 that we've established some process for addressing 14 current disagreements over the base agreement to be 15 used in this proceeding, I'm not construing that as a 16 waiver of AirTouch's right or opportunity to bring 17 some kind of grievance for negotiations in bad faith. 18 I think it's a preferred solution, and I 19 know that that's a step that AirTouch would not take 20 unless it felt it had no other choice. And I'm 21 hoping that the proposal that has been made would, in 22 fact, provide AirTouch an alternative, if, in fact, 23 it comes to that. I wanted to make that clear on the 24 record so that there was no misunderstanding later 25 about what I've attempted to do here today. 00050 1 Okay, all right. Is there anything before 2 we get down to the nitty-gritty of carving out times 3 for witnesses at hearing and using a worksheet to 4 figure out the order of issues to be presented? 5 MR. KEEHNEL: No. Moreover, I think we've 6 got some good news for you. During one of the 7 breaks, we tried to outline at least some basic 8 order, although we didn't specify times. So if you 9 have your pen -- if everybody has their pens, I'll 10 tell you what the parties have tried to do, and you 11 can help us fill in what we didn't manage to get 12 done. 13 JUDGE BERG: All right. 14 MR. KEEHNEL: Parties on the opening day, 15 Wednesday, the 17th, have the opportunity at the 16 beginning to make short opening statements, each side 17 no more than 20 minutes. That's by the attorneys. 18 We propose there not be panels of witnesses, but 19 witness testimony presented witness-by-witness. 20 Even though we're in a little bit of a 21 hybrid situation, we have agreed that AirTouch would 22 proceed first with its two witnesses, Robert Bidmon 23 and Dr. Zepp, followed by US West's five witnesses. 24 And if there's a need for rebuttal by Robert Bidmon 25 and Dr. Zepp, that would follow the conclusion of 00051 1 testimony by US West's witnesses. And of course, US 2 West having the opportunity to bring their witnesses 3 back for rebuttal and on and on in a leapfrog 4 fashion. Let's just hope it's not necessary. 5 JUDGE BERG: And rebuttal would be limited 6 to new information discussed during the other party's 7 direct presentation? 8 MR. KEEHNEL: Absolutely. We would 9 propose, of course, in view of the fact we've already 10 set a closing briefing schedule, we would not have 11 closing oral argument. We would propose for each 12 witness that they have an opportunity at the outset 13 of their testimony to provide a summary, an oral 14 summary of their testimony, which need not be limited 15 to the prefiled testimony, but can also include a 16 brief summary of the testimony to be provided orally 17 during the hearing. The summary could also involve 18 the witness sharing with the other parties, at the 19 witness's option, a written outline of the testimony. 20 No requirement proposed there. 21 Because of the nature of the proceedings 22 and the fact that relevant testimony has been 23 prefiled, we would propose that the parties have an 24 opportunity to do direct. Of course, that may not be 25 necessary with some witnesses who have twice filed, 00052 1 but I would leave that to the discretion -- we 2 jointly agree to leave that to the discretion of the 3 counsel doing the examination. 4 So there could be direct, and of course 5 cross, redirect and recross, with of course Staff and 6 the Arbitrator having the opportunity to interpose 7 questions, whether at the end of direct and cross, or 8 waiting until redirect and recross, and continue in a 9 leapfrog fashion. 10 JUDGE BERG: All right. 11 MR. KEEHNEL: As I said at the beginning, 12 we didn't propose specific time limits. I think 13 counsel for US West and I share the belief that there 14 shouldn't be time problems in this particular 15 arbitration, given that two days have been provided 16 and that considerable testimony has been provided in 17 writing, but I do think it's probably a good idea to 18 at least set some break points for when it would be 19 expected that one witness would be completed and we 20 move on to the next. 21 JUDGE BERG: All right. Sounds good. I 22 think it sounds like a very good plan going forward 23 with the testimony of the witnesses. 24 I think what would also help the parties is 25 that the Arbitrator and his advisers would ask 00053 1 questions at the conclusion of direct, cross, 2 redirect and recross, but if, in fact, there were 3 follow-up questions that were appropriate for the 4 witnesses based upon questions asked by the 5 Arbitrator and by the advisers, an opportunity will 6 be provided. 7 I think we would like to take full benefit 8 of the parties' own familiarity with the issues and 9 their ability to flesh out the issues before we 10 actually interpose our own questions. And so when 11 we're through with direct, cross, redirect, recross, 12 then we'll go ahead and ask questions, unless there's 13 a need for a clarification along the way, and then 14 we'll give each party an opportunity to follow up. 15 And I'm comfortable with going forward on a 16 somewhat of a laissez-faire approach on the first 17 day, in terms of allocating time between the parties, 18 let them make the best decision, but certainly if we 19 find, at the conclusion of the first day, that we're 20 going to be under some time constraints on the second 21 day, the 18th, at that point, we'll need to talk 22 about it, as to whether or not it means that there 23 should be a marathon session the next day or a 24 carryover to a third day, which I'm sure nobody wants 25 to see, or whether we would need to impose some other 00054 1 kinds of limitations, based upon how things go. 2 I think it's important that the parties 3 have an opportunity to, you know, make their best 4 case, and I also know some of the problems we 5 encountered in our other arbitrations was because, in 6 fact, we had imposed time limits on the parties and a 7 lot of details fell by the wayside. 8 MR. KEEHNEL: Just a casual observation. 9 It is possible we're not going to get a good read 10 from the first day of testimony if it turns out that 11 Robert Bidmon and Dr. Zepp take the entire day as to 12 how the second day will proceed, only because US West 13 has spread the same subject matter over five 14 witnesses, whereas AirTouch has concentrated it in 15 two witnesses. 16 I think we'll get a sense of the flow, but 17 there's not going to probably be a one-to-one 18 correlation, witness-to-witness, even if, as I said, 19 Robert Bidmon and Dr. Zepp took an amount of time 20 such that we multiplied one of those by five, that we 21 could get alarmed. I don't necessarily think the 22 parties would get alarmed. I think we understand 23 that some of the witnesses that US West will be 24 presenting will be very short and maybe almost no 25 questions at all. 00055 1 JUDGE BERG: Would the parties prefer to 2 take some time at the start of the hearing after 3 they've had a chance to conduct depositions to 4 actually break the schedule up, rather than do that 5 now? 6 MR. DEVANEY: I think it would be better 7 next week if we could. 8 MR. KEEHNEL: I'm flexible either way. I 9 just don't think timing's going to be a big issue, 10 but I'm not averse to talking about it. 11 JUDGE BERG: All right. You'll be 12 together, you'll get some sense from the depositions 13 of how long it may take at the hearing. What I'd 14 like to do is for the parties, you know, to the best 15 of their ability, to consult with each other before 16 the start of the hearing on the morning of March the 17 17th. 18 If, at that point in time, the parties can 19 present to me a stipulation as to how we should at 20 least structure our time for the two-day period, then 21 I'd be inclined just to adopt that and we would get 22 right into it without a lot of unnecessary procedural 23 discussion. 24 But, you know, I know the parties are going 25 to have a full schedule between now and then, and if 00056 1 it goes to the morning of the 17th, we'll just either 2 get started and see where we wind up at different 3 points during the day or we'll just set some times 4 then for the first day and see whether we can stick 5 to it. 6 MS. ANDERL: Your Honor, along those lines, 7 may I ask what time will you start on the 17th? 8 JUDGE BERG: I think I planned on starting 9 at 9:00. 10 MR. KEEHNEL: I think there's an order to 11 that effect someplace. 12 MS. ANDERL: Thank you. I forgot. 13 MR. KEEHNEL: Your Honor, we also had some 14 discovery issues, but I've talked to counsel and have 15 received some -- how to say it best -- weak form 16 assurances that they're looking at the issues. So 17 I'm going to trust my instincts here, rightly or 18 wrongly, and not raise that issue now, and hope that 19 this public address of the issue will embarrass Mr. 20 Devaney, bringing attention to bear on it that it 21 will get resolved without having to come back to you. 22 JUDGE BERG: All right. Embarrassment is a 23 powerful social force. And a worst case scenario, I 24 could be available to the parties on Monday to assist 25 them. I understand that there are sometimes just 00057 1 issues that can't be resolved and require some 2 intervention, but I appreciate both sides working 3 together to see if they can come to some agreement. 4 I also wanted to check off that the parties 5 have exchanged exhibit lists. 6 MS. ANDERL: No, Your Honor. We brought 7 along copies for distribution of the exhibit lists 8 for numbering prefiled testimony of our witnesses. 9 As I understand it from Mr. Keehnel, he does not have 10 copies for distribution today, although I do have to 11 say I understand that a copy was faxed to my office, 12 but it was after I had already left. And I'm afraid 13 that is a discussion we're going to have to have, 14 because Mr. Keehnel's exhibit list looks far 15 different from what I expected and it raises 16 significant concerns, so -- 17 MR. KEEHNEL: I do have some. 18 MS. ANDERL: Oh, you do? 19 MR. KEEHNEL: Yes, they were hidden. 20 MS. ANDERL: All right, then. 21 (Discussion off the record.) 22 JUDGE BERG: We'll be back on the record. 23 In a telephone conference that was conducted several 24 days ago, the issue was raised as to whether or not 25 my staff advisers would be allowed to sit in on the 00058 1 depositions to be conducted on Thursday, March 11th, 2 and Friday, March the 12th. It's my understanding 3 that neither party has any objection to their 4 attendance and presence during those depositions. Is 5 that correct on AirTouch's part? 6 MR. KEEHNEL: Yes. 7 JUDGE BERG: Is that correct on US West's 8 part? 9 MR. DEVANEY: It is. 10 JUDGE BERG: All right, thank you. 11 MR. KEEHNEL: Can we know who are the staff 12 who will be attending or is it going to be by 13 telephone or in person? 14 JUDGE BERG: It will be David Griffith. 15 MR. BUSCH: In person? 16 JUDGE BERG: Yes. My understanding, at 17 this point in time, was that he would be attending in 18 person, that if he expects to be able to participate 19 by listening in, he needs to certainly give the 20 parties sufficient notice to allow them to do that 21 without disrupting the deposition schedule. 22 MR. KEEHNEL: I'm hopeful we gave him the 23 information so he knows where to go tomorrow at 8:30. 24 MR. BUSCH: He does. 25 JUDGE BERG: All right. Ms. Anderl, is 00059 1 there anything that we need to talk about these 2 exhibit lists at this point in time? 3 MS. ANDERL: I would just say that we have 4 significant concerns that we cannot tell from 5 AirTouch's exhibit list what some of these documents 6 are. We would suggest that we may -- we would like 7 to reserve the right to argue that some of these 8 documents either don't have an appropriate sponsor or 9 should have been submitted appended to the direct 10 case that AirTouch filed. We just don't know. So we 11 don't want to, by exchanging lists today, be deemed 12 to have waived that argument. 13 We would also suggest that we would 14 stipulate that any attachments to the initial 15 petition should already be considered a part of the 16 record and a part of the arbitration proceeding 17 record. They don't need to be recopied and refiled 18 with separate exhibit numbers, which could just 19 confuse things. I believe that that's what's been 20 done in the past, is that the arbitration petition 21 and response have been considered the documents that 22 are part of the arbitration record, so that just 23 might simplify things and keep the volume of 24 documents down. 25 JUDGE BERG: That has been a routine 00060 1 practice and won't be necessary for the parties to 2 duplicate those documents. And I'll be looking for 3 the parties -- for a stipulation as to the admission 4 of those documents if, in fact, that's appropriate. 5 And do the parties want to discuss an exchange of 6 documents prior to the hearing? Is that possible to 7 do? 8 MR. DEVANEY: I think it would be helpful 9 to do, particularly in light of the potential 10 concerns we have. If we can see the documents before 11 the hearing, it may allay our concerns or may shape 12 our concerns, so I think it's something we ought to 13 try to do. 14 JUDGE BERG: Mr. Keehnel, do you have a 15 position on that? 16 MR. KEEHNEL: I don't think I have 17 difficulty with that at all. What we tried to do was 18 be over-inclusive in our list, Your Honor, so that we 19 would give notice to US West if there were any 20 documents that we conceived might come up as part of 21 a rebuttal case; i.e., they wouldn't have been 22 attached to our testimony, because we only provided 23 filed direct testimony, requested admission. Unlike 24 US West, we did not also file rebuttal testimony in a 25 prefiled fashion. 00061 1 So some of these I was contemplating I 2 would use as part of the rebuttal. And if it turns 3 out that I am going to do that, I will try to get 4 advanced copies to counsel. It may turn out, after 5 the depositions, I don't feel it's necessary to do 6 that, in which case I'm not going to bother. I 7 think, with the exception of a very small handful, 8 everything else there consists of matters that were 9 attached to petition or have otherwise been provided 10 to counsel for US West or consists of the heavy 11 negotiation that occurred between the parties in the 12 form of e-mails and letters in the fall and winter. 13 JUDGE BERG: All right. I think we can go 14 off the record for some of this discussion. 15 (Discussion off the record.) 16 JUDGE BERG: Back on the record. Mr. 17 Devaney, I understand that there is some problem 18 which may be -- it may require some resolution 19 regarding Mr. Thompson's supplemental rebuttal that 20 was filed yesterday; is that correct? 21 MR. DEVANEY: That's correct. 22 JUDGE BERG: All right. Would you make a 23 brief statement on the record of the problem, as you 24 perceive it? 25 MR. DEVANEY: I will. It was agreed, 00062 1 pursuant to the Arbitrator's order, that Mr. Thompson 2 could, on the morning of March 10th, this morning, 3 file supplemental rebuttal testimony in response to 4 AirTouch's reciprocal compensation cost study. And 5 Mr. Thompson was in the process of finalizing that 6 testimony yesterday when we received, through 7 electronic mail, a revised version of the very cost 8 study that he was responding to, testimony to be 9 filed today. 10 And because of the timing of that, he did 11 not have the opportunity to address in what was filed 12 today the revised cost study. And because of that, 13 we are asking for the opportunity for Mr. Thompson to 14 be able to respond to that study, if necessary, and 15 he hasn't been able to analyze it yet. So it may not 16 be necessary, but if the need arises, we ask that he 17 be permitted to address the revised cost study during 18 his oral presentation at the hearing on Wednesday, 19 the 17th. 20 JUDGE BERG: Mr. Keehnel, can you describe 21 the revisions that occurred in that cost study? 22 MR. KEEHNEL: Yes, there were some very 23 minor price changes, no change whatsoever to the 24 structure framework, any of the basic elements for 25 analysis in the study. Very few numbers were 00063 1 substituted. In short, the full-fledged analysis 2 could be done on what Mr. Thompson had many weeks 3 ago, what he has now twice responded to, and as far 4 as what Mr. Devaney denominates as sensitivity 5 analysis, a true sensitivity analysis to cost study 6 could have been done quite a few weeks ago. What was 7 provided to assist US West yesterday, I believe, or 8 the day before, whenever the supplement was made, 9 doesn't affect that at all. If he sees something new 10 from looking at the few price changes, which he's not 11 going to, but if he did, of course he should talk 12 about that tomorrow or Friday at his deposition and 13 talk about it at the hearing. 14 It's not the case, though. And my biggest 15 concern here is that by using the phrase sensitivity 16 analysis, and I'm not sure exactly how Mr. Devaney's 17 using it, but if he's using it to create a huge 18 opening to produce a lot more testimony, then we're 19 going to object vehemently. If all he's doing is 20 going to address the couple of numbers that were 21 substituted, then, of course, that's natural. 22 JUDGE BERG: I understand your concerns. 23 Mr. Devaney, if, after Mr. Thompson has an 24 opportunity to do a comparison on the cost study for 25 which he was preparing rebuttal testimony in the 00064 1 revised cost study and if there are changes that are 2 noteworthy and require some statement of position and 3 testimony, I will allow Mr. Thompson to do so at 4 hearing, but I would also like US West to provide 5 written notice to AirTouch of his intention to do so 6 by noon Monday -- excuse me, noon Tuesday, March the 7 16th. 8 And I understand, Mr. Devaney, that to the 9 same extent that Mr. Keehnel doesn't want to get 10 whipsawed, you don't want to have your witness 11 painted into a corner. So I think that's fair, but 12 that doesn't mean that any testimony that Mr. 13 Thompson would otherwise make can extend beyond that 14 to other materials that we would expect him to be 15 prepared to discuss during his deposition. 16 MR. DEVANEY: Okay. Judge Berg, the one 17 slight complication here is that Mr. Thompson had 18 intended to file today a brief sensitivity analysis 19 of their cost model. And although Mr. Keehnel said 20 we could have done that weeks ago, the fact is we 21 didn't receive the electronic version of the model 22 till I think -- I don't remember if it was Thursday 23 or Friday -- it was Thursday or Friday of last week. 24 And so without that, we couldn't do the 25 sensitivity analysis. Mr. Thompson was going to file 00065 1 one, and then, when the new cost study came in that 2 had new numbers in it, he said to us, I can't do 3 this. I can't file a cost study sensitivity analysis 4 when the numbers have changed. I don't feel 5 comfortable filing testimony when the numbers have 6 changed. 7 So that's the position and that's why we 8 didn't file a sensitivity analysis today. And I want 9 to reserve the right to come back and file one should 10 we deem a need there to have one. 11 JUDGE BERG: When you make use of the term 12 sensitivity analysis, can you give me some other idea 13 of what that -- 14 MR. DEVANEY: What I mean is AirTouch is 15 proposing a specific rate for reciprocal 16 compensation, and that there is components that go 17 into the rate. And what Mr. Thompson was going to do 18 was disagree with the values assigned to some of 19 those components and change a few of the inputs to 20 the study to produce a rate that, in his view, would 21 be more reasonable. 22 And what happened yesterday was some of the 23 price components in the study, as I understand it, 24 changed, and so he couldn't do a sensitivity 25 analysis, because he just didn't have time to do it, 00066 1 didn't feel comfortable filing something where he 2 hadn't had a chance to analyze the numbers in the new 3 study. But that's what it would be. It would be a 4 change in some of the inputs to the study to reflect 5 a rate that he would deem more reasonable. 6 JUDGE BERG: Well, the part that I'm 7 confused about is if the rates have changed and been 8 revised, they'd likely be less reasonable, rather 9 than more reasonable from US West's perspective, and 10 his objections to the study would be based upon 11 methodology, rather than inputs? 12 MR. DEVANEY: Twofold, both. 13 JUDGE BERG: All right. You know, I 14 understand, Mr. Keehnel, that in the abstract, it's 15 difficult to formulate a firm position. I think all 16 I'm hearing from Mr. Devaney at this point in time is 17 that he's reserving the right to present it. 18 Likewise, I'm going to preserve your right to object 19 and I'm going to preserve my right to make a decision 20 on that point. 21 But if it comes to that, I will be looking 22 to make some determination as to whether or not, in 23 fact, Mr. Thompson was prevented from performing some 24 analysis based upon the new information that was 25 received. And what I would be looking at is, first 00067 1 of all, the length of the analysis that's being 2 presented to help ensure that this is truly something 3 that he could have produced, given the time that he 4 had to do so, but for the revised numbers. And I 5 would also be looking to see whether or not, in fact, 6 the revised content was so significant that it would 7 otherwise make any effort on his part unreliable and 8 unusable. 9 MR. DEVANEY: Okay. 10 JUDGE BERG: And again, I know that this 11 has been a long day here, I know that the parties 12 probably had plans to be somewhere else by this point 13 in time, and it's usually a good recipe for creating 14 some disagreements between the parties. So I 15 understand where everybody's at. 16 I hope that you can work this out in such a 17 way that, in fact, we don't have to have a dispute at 18 the hearing itself. And I trust that Mr. Keehnel is 19 going to be reasonable on behalf of his clients. 20 MR. DEVANEY: Okay. Thank you. 21 MR. KEEHNEL: You may give me too much 22 credit on this, Your Honor. There does come a point 23 -- maybe it's just the end of the day -- that you get 24 frustrated with what you start to perceive as a 25 pattern. And look, maybe it will turn out that 00068 1 Thompson didn't make a deliberate choice not to run 2 the sensitivity analysis, but I know the changes that 3 were made. And okay, I've made mistakes before, but 4 based on what I know, he had no justification for not 5 doing it. Now I'll shut up and we can get out of 6 here. 7 JUDGE BERG: Mr. Devaney, you don't have to 8 respond to that. Mr. Keehnel, you may have some 9 advantage, and again, I think a lot of these problems 10 are caused by the process and not necessarily by the 11 parties. At the same time, I'm going to have to make 12 some decisions on what's fair and equitable between 13 the parties, and given the fact that there's really 14 not sufficient time to do a quality job from 15 beginning to end, so I'm going to be driven by some 16 equitable concerns on what's fair under the 17 circumstances. But, hopefully I'll be consistent and 18 if a call is made against one party on one point, 19 there will be another call in favor of a party on 20 another. We'll just try and take this up when it 21 comes. 22 MR. DEVANEY: Okay, thank you. 23 JUDGE BERG: Thank you. Anything else, Mr. 24 Devaney? 25 MR. DEVANEY: No, thank you. 00069 1 JUDGE BERG: Anything else, Mr. Keehnel? 2 MR. KEEHNEL: No. 3 JUDGE BERG: All right. We'll be off the 4 record. 5 (Proceedings adjourned at 6:15 p.m.) 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25