Agenda Date: May 4, 1999 Item Number: 4A Revision 2 Docket: UT-980370 Company Names: Electric Lightwave, Inc., and GTE Northwest Incorporated -Interconnection Agreement Staff: Glenn Blackmon, Assistant Director, Telecommunications David Griffith, Telecommunications Engineer Lawrence Berg, Review Judge Recommendation: No recommendation regarding the treatment of ISP-bound traffic. Approve other items in the Interconnection Agreement between Electric Lightwave, Inc., and GTE Northwest Incorporated, as submitted pursuant to the Arbitrator’s Report. Introduction: On May 1, 1998, Electric Lightwave, Inc. (ELI), requested GTE Northwest Incorporated (GTE) to negotiate an interconnection agreement. On October 7, 1998, ELI filed a Petition for Arbitration with the Washington Utilities and Transportation Commission. Prehearing conferences were held and the parties agreed to waive a formal hearing, accepted prefiled testimony and exhibits as evidence, and submitted briefs on the unresolved issues in this proceeding. Opening briefs were filed on January 27, 1999, and reply briefs were filed on February 1, 1999. Supplemental briefs were filed on March 8, 1999. On March 22, 1999, the Arbitrator, Hon. Lawrence Berg, issued the Arbitrator’s Report and Decision. Issues: The disputes in this proceeding consist of five issues, including issue number 4, which was raised in the supplemental briefs, and issue number 5, which was raised in GTE’s “Memorandum in Opposition, dated April 12,1999. The issues are: 1. Should GTE and ELI compensate each other for the costs of transport and termination for traffic that is exchanged between their networks when that traffic terminates at Internet Service Providers (ISPs)? 2. What compensation mechanism should be used for the costs of transport and termination for traffic that is exchanged between their networks when that traffic terminates at ISPs? 3. Should GTE compensate ELI for traffic that is exchanged between their networks at the tandem switching rate or at the end office switching rate? 4. Should the Commission shorten the negotiated and agreed to term of the Agreement or establish procedures to clarify or modify interim rules for inter-carrier compensation? 5. Should Article VII of the Interconnection Agreement be modified to allow provisions for changing the Agreement pending new and final rules on unbundled network elements (UNEs) from the FCC with regard to vacated Rule 51.319? Compensation for ISP Traffic While GTE and Electric Lightwave agreed to the method of reciprocal compensation for local interconnection agreement, they asked for arbitration on the issue of whether traffic bound for Internet service providers should be included in the reciprocal compensation arrangement. Electric Lightwave contended that these calls should be included; GTE took the opposing view. Commission Staff offers no recommendation on issues 1 and 2. Staff is a party in a complaint case, Worldcom v. GTE Northwest (Docket No. UT-980338) in which essentially the same issue is raised. An order in that case is pending. ELI’s Compensation Rate GTE argues that ELI should be compensated for the transport and termination of traffic at the end office rate. GTE believes that ELI’s switch is equivalent to an end office switch and that its extensive fiber ring is nothing more than an extension of customer loops (i.e., very long loops). ELI argues that its network covers a broad geographic area, extending throughout most of GTE’s service territory, and the territory of other carriers. Therefore, because the network includes such a large area, its switch, and corresponding network, function more like a tandem switch than an end office. In a previous decision the Commission has supported the treatment of a CLECs switch as functionally similar to a tandem switch and therefore eligible for compensation at the tandem rate. The Commission ruled in favor of using the tandem rate for compensation in UT-960323, Interconnection Agreement between MFS Communications Company, Inc. and U S WEST Communications, Inc. The FCC also supports the treatment of CLEC switches at the tandem rate where the CLEC switch serves a comparable geographic area. Local Interconnection Order, ¶ 1090. Therefore, Staff supports the use of the tandem rate for compensation. Terms and Procedures GTE would like to change the term of the contract to one year and stipulate rules for modifying the agreement based on contract language that may be impacted by FCC rulings on ISP-bound traffic. ELI does not support changing the contract at this time. Staff notes that the issues regarding a shorter contract term, and rules for modification pending the outcome of the FCC’s NPRM on ISP-bound traffic were not introduced until March 8, 1999, in GTE’s supplemental briefs. The Arbitrator states that the Commission’s authority to reject any portion of an interconnection agreement adopted by negotiation is governed by section 252(e)(2) of the Telecommunications Act. Both ELI and GTE originally negotiated a term for this agreement and conditions for resolving disputes. Neither party requested arbitration on either of these items. Therefore, Arbitrator and Staff agree that the term of the contract should not be shortened, and other procedures to clarify or modify interim rules for inter-carrier compensation should not be established. Impact of FCC Rules on Unbundled Network Elements On January 25, 1999, the United States Supreme Court issued its decision on the appeals of the Eighth Circuit Court’s decision in Iowa Utilities Board et al v. FCC. The Supreme Court vacated FCC Rule 51.319 in the FCC’s First Report and Order on Interconnection, FCC 96-325, and modified several rulings regarding pricing and unbundled network elements (UNEs). The FCC had established a list of UNEs to be made available for interconnection in Rule 51.319. It is uncertain what components the new and revised list of UNEs will have, but the list will probably be different. GTE would like to provide contract language that protects GTE from any harm resulting from changes in Rule 51.319. GTE agrees to continue to provide “Old Rule 319" UNEs, but expects “recovery of actual costs,” and provisions to incorporate any changes in the “appropriate UNEs under the Act.” In its Request for Approval, ELI maintains that this additional language was not introduced during the normal negotiation/arbitration process and should be disallowed. ELI also notes that other changes in law have occurred since ELI filed its petition for arbitration, and these changes have not become part of this Interconnection Agreement. GTE “ may use the dispute resolution proceedings and change of law proceedings in the Agreement to seek whatever remedy it believes is appropriate.” Commission Staff agrees with ELI. The Interconnection Agreement contains dispute resolution and change of law provisions for making subsequent changes to the Agreement. Staff also feels that the requested language change has been introduced late in the process, and neither the parties nor the arbitrator have been given ample opportunity to address the issue fully. Conclusion: Commission Staff offers no recommendation on the issue of whether GTE and ELI should compensate each other for the transport and termination for traffic that is exchanged between their networks when that traffic terminates at Internet Service Providers. Commission Staff offers no recommendation on the issue of what mechanism GTE and ELI should use for compensating each other for transport and termination for traffic that is exchanged between their networks when that traffic terminates at Internet Service Providers. Commission staff recommends that GTE’s proposed language for Article VII of the Interconnection Agreement, regarding further rulemaking by the FCC on unbundled network elements not be approved. Commission staff recommends the Commission approve other items in the Interconnection Agreement between Electric Lightwave, Inc., and GTE Northwest Incorporated, as submitted pursuant to the Arbitrator’s Report, and issue an order allowing the appropriate sections of the Interconnection Agreement to go into effect.