Please note that the Confidential Attachment is not available electronically and was not posted. BEFORE THE WASHINGTON UTILITIES AND TRANSPORTATION COMMISSION JOANNE L. TOMPKINS, MEDIATOR In the Matter of the ) Interconnection Negotiations ) between U S WEST NEW VECTOR ) Docket No. UT-970359 GROUP, INC. and GTE ) TELEPHONE OPERATIONS ) GTE NORTHWEST'S RESPONSE ) TO MEDIATION REQUEST GTE NORTHWEST’S RESPONSE TO MEDIATION REQUEST - 1 GTE Northwest Incorporated (incorrectly denominated in the caption of this matter as "GTE Telephone Operations," and referred to hereafter as "GTE") responds to the request for mediation filed by U S West New Vector Group, Inc. (hereafter, "USWNV") as follows. 1. BACKGROUND USWNV accurately identifies the parties to these negotiations. The mediator is called upon to assist these parties negotiate a contract for interconnection of their telecommunications networks. Although these negotiations arise under the Telecommunications Act of 1996 (the "Act"), there is nothing new about the fundamental idea of negotiating how different telephone companies pass telephone messages to one another. It is, to casual observation, a simple process by which customers of any telecommunications provider are able to easily dial another telephone user, regardless of the entity providing service to that customer. The actuality, however, is not nearly so simple. The public switched telephone network is public in only one sense of the word. The network is, in fact, private property, owned by many telephone companies. These companies range from U S West Communications, the successor in Washington state to the Bell System, down to small cooperatives serving no more than a few hundred subscribers. For the convenience of their customers, however, these companies have long managed to create systems which allow them to hand off to one another their customers' local and toll messages. This system was adapted to the widespread growth of mobile telecommunications providers, such as cellular telephone companies such as USWNV. For now many years, GTE has connected with cellular providers in Washington. The Act changed many of the specific requirements for interconnection between established local telephone companies such as GTE and mobile providers such as USWNV. GTE has, however, been able to continue its success in negotiating interconnection agreements with mobile telecommunications companies. In fact, GTE has agreements with several mobile providers either approved or filed pending approval. Under the Act, new interconnection agreements must be submitted to the relevant state utilities commission, such as the Washington Utilities and Transportation Commission ("WUTC", or the "Commission"). Such agreements must then be approved by the Commission. None of GTE's negotiations with mobile providers -- other than USWNV --have gone to mediation, much less arbitration. 2. Background of Negotiations. GTE concurs that the parties commenced negotiations as a formal matter on February 1, 1997. Thus, more than 160 days have passed since the parties commenced negotiations. USWNV therefore is unable, pursuant to Section 252(b)(1) of the Act, to demand arbitration of the outstanding issues between the parties. GTE has nonetheless continued to negotiate in good faith with USWNV to reach an agreement. GTE participates in this mediation willingly. 3. Summary of Disputed Issues. The following summary addresses the 11 outstanding issues between USWNV and GTE. Only 7 issues were included in the USWNV mediation request, which arises from the fact that USWNV has attempted to take advantage of compromises offered by GTE, without accepting the other elements of that offer. Specifically, after extensive negotiations between the parties, there were still 11 issues in dispute. GTE's last offer to USWNV was a comprehensive package, addressing all 11 issues. (Copy attached as Exhibit A). In an attempt to resolve this matter, GTE offered compromises on many of these issues. Some of these compromises were, apparently, more acceptable to USWNV than others. USWNV, in its mediation request, inappropriately selected certain items from GTE's comprehensive proposal for resolution. GTE's proposal was not intended as a menu of proposals from which USWNV could pick and choose. Issue 1: Tariff v. Contract (Article 1, Second Paragraph) Statement of the Issue: In Article I of the proposed interconnection agreement (Exhibit B), GTE identifies that it may provide certain services from its tariff in satisfaction of its obligations under this agreement. The best example would be special access facilities that USWNV might elect to obtain for use as interconnection facilities. Since these facilities are provided pursuant to tariff and not pursuant to this agreement, the language in Article I explains that if the tariff prices change during the course of this agreement, those price changes will apply to USWNV, i.e., the price will not remain constant during the term of this agreement. Explanation: This issue arises from GTE’s legacy as a fully regulated telephone company. Generally, GTE is required to offer its services by tariff. Tariffed services are available to any eligible customer. Thus, GTE must assure that a contract such as this does not permit arbitrage of tariffed services. The language in the initial GTE proposal was modeled on the GTE model agreement for competitive telecommunications providers which provides, among other things, for the resale of services. This language was originally intended to apply to resale services to ensure that a change in a price of a retail service would flow through to the other provider. GTE has proposed modified language to USWNV attempting to clarify that only rates related to service provided under tariff are subject to modification, not services specifically provided under this agreement. Issue 2: 911 Access (Article V, Section 2) Statement of the Issue: There are two levels of 911 access to consider. Basic 911 access allows USWNV to complete calls to the 911 answering agency through a connection with GTE that provides the same type of dialing as is provided to any GTE end user customer. This basic 911 access does not provide Enhanced 911 (E911) capabilities, such as calling number ID. Basic 911 access has historically been provided by GTE to mobile telecommunications carriers and it will continue to be offered under this 251/252 interconnection agreement. The next level of 911 access would be for E911. This service would be provided by GTE in accordance with the requirements of a recent FCC proceeding, CC Docket 94-102. Since the nature of mobile telephone service is so fundamentally different from landline service, it was necessary to establish unique requirements for the mobile telecommunications industry. The FCC has two sets of requirements in its order, some of which were to be made available within 18 months of the order and others to be made available within a longer time frame. There are obligations which apply to USWNV and others that apply to GTE. Explanation: The FCC rules dealing with E911 access were issued independent of and predate its rules implementing the Telecommunications Act of 1996. GTE stands ready to provision E911 access under a separate agreement designed to incorporate the FCC requirements. It must be noted that USWNV is not obligated to use GTE to obtain access to E911 service. But, GTE is required to provide such access if requested by USWNV. The obligation of GTE to provide E911 access is not at issue here. The issue is whether or not E911 access is to be offered as part of the interconnection agreement negotiated under the Act. Issue 3: Assignment (Article III, Section 4) Statement of the Issue: The initial proposal by GTE provided for the assignment of the agreement by either party to an affiliate with nothing more than written notification to the other party. USWNV sought two basic modifications to this language. First, USWNV sought language that would specifically allow for assignment of the agreement by USWNV to AirTouch in anticipation of the expected transfer of USWNV to AirTouch. Second, USWNV sought language that would have allowed AirTouch to renegotiate this agreement, at their option, after such assignment. Explanation: GTE agreed to incorporate language that would specifically allow for assignment of the agreement by USWNV to AirTouch but did not agree to grant AirTouch the option to renegotiate the agreement. There are three basic reasons in support of GTE’s position. First, this approach would fly in the face of the reason for a contract in the first place - to reduce business risks by binding both parties to a known set of rates, terms and conditions for a known period of time. To provide one party with a reduced obligation is inappropriate. It is also interesting to note how the position taken by USWNV on this issue differs from its position on the ability of tariff rates to change (Issue 1). A second reason is simply the practical matter of timing. The initial term of this agreement is only 12 months, and USWNV has not indicated that the AirTouch transfer will be taking place within that period. Given the time requirements of such corporate/legal restructures, it is very likely that AirTouch would have the opportunity to renegotiate the agreement on a timely basis by simply waiting until the initial term expires. Finally, the third reason supporting GTE’s position is the impact that a change of this sort could have on agreements that GTE will be negotiating with other carriers. This is a common concern of GTE on many issues. While carriers may not “pick and chose” individual sections of a contract, nonetheless agreement to such a provision in one contract opens the door for others. Issue 4: Advertising (Article III, Section 28) Statement of the Issue: The language in question would not allow either party to issue any press releases, etc. related to the agreement without the prior written approval of the other party. USWNV thought that this language was too broad and proposed language that it considered more narrow in scope. Explanation: The language proposed by GTE is comprehensive and intended to stop either party from mischaracterizing (either intentionally or unintentionally) the terms of the agreement, what it does or does not provide, or how it was developed. Issue 5: Effective Date (Article III, Section 31) Statement of the Issue: In the GTE proposal, the effective date of the agreement would depend, in part, upon how it was reached. In general, it was proposed that the agreement become effective a set number of days following approval by the state commission. The interim period would provide the parties time to prepare for contract implementation, such as entering new rates into billing systems, and would also allow either party time to prepare any legal challenge it might deem necessary against the commission order. Since it would be more likely that a party might seek to file a legal challenge against an agreement ordered as a result of an arbitration, it seemed appropriate to make the time period longer than would be the case where the agreement was reached through negotiation between the parties. Explanation: GTE does not believe that this should even be an issue where an agreement is reached through negotiation between the parties. If such agreement is reached, GTE would agree to eliminate the language establishing a longer period for arbitrated agreements. This language should, however, remain in the agreement until a comprehensive agreement was reached through negotiation. Issue 6: Environmental Compliance (Article III, Section 42) Statement of the Issue: The GTE proposal contains an extensive section in Article III dealing with compliance with environmental laws. This language was developed by GTE during the course of its negotiations with large numbers of new carriers over the past 12 months. USWNV sought to replace the entire section with a brief, single paragraph addressing environmental compliance taken from the agreement between GTE and U S West Communications, in its capacity as an incumbent local telephone company. Explanation: GTE’s proposed language is more comprehensive. When dealing with such an evolving and complex topic such as compliance with environmental regulations, a comprehensive approach is likely more appropriate than a simplistic approach. Item 7: Expanded Interconnection Service (Collocation) (Article IV, Sections 4.1.1. & 4.1.2) Statement of the Issue: The GTE proposal identifies that one method by which USWNV may elect to interconnect with GTE is Expanded Interconnection (EIS), also known as collocation. The proposed agreement states that collocation is provided by GTE as a tariffed service, similar to special access service mentioned in item 1. These tariffs have been in existence for a number of years and, of course, were approved by the FCC. USWNV sought to have GTE provide collocation pursuant to FCC rules rather than the GTE collocation tariff. Explanation: GTE can only provide collocation pursuant to its approved tariffs. To do otherwise would be to have GTE violate its own tariffs. The purpose of the tariff is to incorporate relevant regulatory rules into a service offering that can be provided to all customers on a nondiscriminatory basis. The fact that the GTE tariffs have been approved by the FCC is evidence that the tariffs are in compliance with FCC rules. If it was ever determined that some element of a GTE collocation tariff was not in compliance with an FCC rule, GTE would have no choice but to modify its tariff to bring it into compliance with the rule. For these reasons, it is clearly appropriate for GTE to offer to provide collocation pursuant to its tariffs. Moreover, GTE’s FCC-approved federal collocation tariff has been adopted by the Washington Commission in interconnection contracts which have gone to arbitration. Issue 8: Interconnection Mileage Limitations (Article IV, Sections 4.2.1 & 4.2.2) Statement of the Issue: The GTE proposed agreement includes certain limits on the number of miles of transport for which GTE would be willing to provide compensation. Under the Telecommunications Act and FCC rules implementing the Act, GTE is obligated to share in the cost of facilities used to interconnect its network with the USWNV network. The method by which such cost sharing would occur depends upon the nature of the interconnection, but basically each party would pay for a share of the interconnection facility in proportion to the amount of traffic that it originates. The cost of the facility to be shared depends upon the type of facility, but it is mileage sensitive, i.e., the cost of the facility varies by its mileage. Explanation: GTE agrees that it should share in the cost of facilities to interconnect its network with that of USWNV. The language in question only seeks to place a reasonable limit on the number of miles for which GTE could be responsible. The limits included in the proposal are not arbitrary. They are based upon telecommunications network configurations that have developed over many years. Mobile carriers are still relatively new service providers and have not yet developed a customer base comparable to that of a traditional telephone company. Partly because of this, a mobile carrier like USWNV does not require as many switching centers as does a landline telephone company like GTE. Instead, USWNV can cover a relatively large geographic area with a single switch. However, relatively fewer switches leads to proportionately higher transport mileages - not only between USWNV switches, but between USWNV and the GTE switches with which USWNV seeks to interconnect. GTE certainly does not deny USWNV its right to configure its network as it sees fit. GTE does, however, seek to protect itself against having to incur unreasonably high costs of interconnection. GTE believes that it has proposed reasonable limits and points out that these same limits are included in every interconnection agreement between GTE and a mobile carrier in the state of Washington. Issue 9: Intertandem Transport (Article IV, Section 5) Statement of the Issues: This issue has to do with identifying the proper segments of the landline network that may be used for carrying local traffic. USWNV wants to have its local traffic carried on intertandem toll facilities - it does not want to interconnect at each GTE tandem. GTE does not believe that it is appropriate for local traffic to be carried on intertandem facilities that are designed and intended to carry toll traffic. Explanation: Per the FCC rules, traffic between GTE and USWNV is to be considered local for compensation purposes if it both originates and terminates within the same Major Trading Area (MTA). Note that the FCC rules do not define how either USWNV or GTE are to charge their respective end user customers. The FCC rules apply for purposes of compensation between the parties. The GTE proposal provides that local traffic can be carried over direct facilities between GTE and USWNV and can also be carried over common transport facilities between a GTE access tandem and a GTE end office or between an access tandem of another LEC (such as USW) and a GTE end office if the GTE end office subtends that access tandem. GTE does not believe it is reasonable to require direct interconnection to a GTE end office just because it happens to subtend a non-GTE access tandem. The GTE proposal does not allow for local traffic to be carried in facilities between access tandems, however, since these are toll facilities. The only traffic carried on these facilities is toll traffic, originated by GTE, another ILEC or a CLEC. Not even switched access traffic to or from interexchange carriers is carried on these facilities - only toll traffic to and from end user customers of GTE and other ILEC and CLEC providers of toll services. These facilities are not designed to carry the substantially higher levels of local traffic. (As a rule of thumb, local traffic volume is 10 times higher than toll traffic). Another problem related to intertandem calling has to do with the ability to record the traffic for billing between carriers. Call identity is lost once a call leaves the first tandem, so it is not possible for the terminating party, either GTE or USWNV, to record intertandem usage for compensation purposes. To add some perspective, consider the access compensation arrangement that was recently established between ILECs in Washington. For compensation between ILECs just for toll traffic, it was necessary to establish an entirely new record exchange mechanism. Development and implementation of the toll/access compensation plan between ILECs in Washington took three years - and that was dealing with established, industry-standard call records. Prior to the Act, GTE did provide intertandem transport of traffic of USWNV and of other mobile carriers. This was during a time when mobile carriers were treated more as customers than as carriers. With USWNV seeking an agreement with GTE under sections of the Act, GTE is obligated to treat USWNV as a carrier, not as a customer. GTE is further obligated to treat all carriers in a non-discriminatory fashion. There is no precedent for carrying local traffic between tandems. GTE has no agreements with any carriers -- of any type -- that allows for local traffic to be carried over intertandem facilities. To do so in an agreement with USWNV under the Act would effectively make this type of network arrangement available to all carriers. As explained in Issue 3, GTE has little opportunity to differentiate between carriers with which it is negotiating agreements under the Act. Issue 10: Transition and Implementation (Article IV, Section 12) Statement of the Issues: The proposed agreement places obligations on both parties. The section in question requires that USWNV bring its interconnection arrangements into compliance with the requirements of the agreement before it is eligible for compensation under the rates contained in the agreement. This section appears in all GTE interconnection agreements with mobile carriers, but only has application to mobile carriers like USWNV that had previous interconnections with GTE under agreements that predated the Telecommunications Act of 1996. Interconnection arrangements that were provided prior to the Act are not necessarily acceptable forms of interconnection under an interconnection agreements established under the Act. Where such unacceptable interconnection arrangements exist, this language would require that USWNV reconfigure its interconnection before it is eligible for compensation rates in the agreement. Explanation: GTE has had interconnections with a number of mobile carriers prior to the Act. In some cases, the mobile carriers view the older types of interconnections as more advantageous than the types of interconnections made available in an interconnection agreement under the Act, mostly because the mobile carrier will likely have to incur some costs to reconfigure its network. There would, therefore, be an incentive to the mobile carrier to leave the older network arrangements alone. Without this language, the only option GTE would have to deal with network noncompliance situations would be the dispute resolution process described in Article III, Section 12. While GTE does not necessarily have any reason to believe that USWNV would fail to comply with its network obligations under the agreement, it does seem prudent to include in the agreement a clause that would provide an incentive to comply. Where a possibility of noncompliance is easy to identify, it seems better to attempt to deal with the issue in advance rather than trying to fix a problem after the fact. GTE would also note that it believes that this clause is actually a generous provision. In this clause, GTE sites FCC rule 51.717 and agrees to allow this interim compensation rule to continue in force past the effective date of the agreement. The rule itself only applies to traffic exchanged between the date of the bona fide request of USWNV to GTE and the date the new interconnection agreement becomes effective. Without this contract language, there would be nothing to directly govern compensation in cases where the network arrangement does not comply with the contract requirements. Conceivably this could lead to a contract dispute immediately upon the effectiveness of the agreement. It should also be noted that this language has been included in all interconnection agreements established with mobile carriers in the state of Washington. Issue 11: Interim Compensation (No contract reference) Statement of the Issues: The FCC rules (51.717) provide for interim compensation to be paid by GTE to USWNV for the period between the date of the bona fide request for interconnection by USWNV (or November 1, 1996, whichever is later) and the date that the new interconnection agreement becomes effective. During this time, USWNV is entitled to compensation per minute of use (“MOU”) terminated from GTE at the same rate that GTE was billing to USWNV. There is no disagreement between the parties that such compensation is appropriate. What is in question is the method by which USWNV might quantify this traffic for billing to GTE. Explanation: GTE has provided three options to USWNV for billing of interim traffic. The first option would be for USWNV to render GTE a bill for terminating traffic recorded by USWNV as having originated by GTE. Since USWNV does not have such usage records, GTE would be agreeable to receiving a bill based upon a set of agreed-upon factors. These factors would appear in Appendix C of the interconnection agreement and are identified as Terminating Traffic Factors. Such factors are intended for use in sharing the cost of interconnection facilities and may be used, where needed, for traffic billing purposes. The factors are to represent an approximation of the levels of traffic exchanged between the parties. The next two options deal with what set of factors would be appropriate for interim billing. GTE would be willing to allow USWNV to bill GTE on the basis of the factors that are included in the interconnection agreement, but only after the agreement becomes effective. If USWNV is not willing to wait until the agreement becomes effective, then GTE would be willing to accept billing using a default factor of 90/10. CONCLUSION GTE has worked hard to negotiate in good faith a reasonable interconnection agreement with USWNV. As the attached proposed contract (Exhibit B) makes clear, GTE has been able to resolve the vast majority of the issues necessary to complete such a relationship. GTE’s willingness to be flexible on so many issues should not, however, suggest that USWNV can accept the favorable parts of a compromise, and ignore the remainder. If USWNV remains interested in the good faith give-and-take of negotiations, GTE remains hopeful that a successful agreement can be reached. GTE looks forward to working with the mediator. Dated this day of October, 1997. GTE NORTHWEST INCORPORATED Timothy J. O’Connell Its Attorney