CASE NO, 96- IU09-T-PC +

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1 @b-:>bj -7F comall1504.wpd PUBJJC SERVICE COMMISSION OF WEST VIRGINIA ORIGINAL At a session of the PUBLIC SERVICE COMMISSION OF WEST VIRGINIA in the City of Charleston on the 15~' day of November, CASE NO T-PC // II BELL ATLANTIC-WEST VIRGINIA, INC. Petition to establish a proceeding to review the Statement of Generally Available Terms and Conditions offered by Bell Atlantic in accordance with Sections 25 1,252, and 271 of the Telecommunications Act of CASE NO T-PC AT&T COMMUNICATIONS OF WEST VIRGINIA, INC. Petition for arbitration of unresolved issues fi-om the interconnection negotiations between AT&T and Bell Atlantic. CASE NO, 96- IU09-T-PC + MCI TELECOMMUNICATIONS CORPORATlON Petition for initiation of proceeding pursuant to Section 27 1 of the Telecommunications Act of COMMISSION ORDER In these proceedings (collectively, the Consolidated Telecom Proceedings), the Commission entered a series of orders -- on April 24, May 16, and June 26, which ruled on issues relevant to implementation of the local competition provisions of the Telecommunications Act of 1996 (TA96), codified at 47 U.S.C. 5151, et seq. Among other things, the Commission relied upon the provisions of TA94, as well as substantial portions of the Federal Communications Commission's (FCC) "First Report and Order," In the Matter of Implementation of the Local Competition Provisions of the Telecommunications Act of 1996, CC Docket No , FCC (Rel. Aug. 8, 1996) (1st Local Competition Order), and rules promulgated therein. A number of the Commission's rulings were I' PUBLIC SE COMMISSION

2 influenced by the Eighth Circuit Court of Appeals' ruling which invalidated a number of the FCC's rules. See, Iowa Utilities Board v. FCC, 120 F.3d 753 (8th Cir. 1997), rev'd U.S., 1999 WL (1999).!. -. The primary issue in the case became an analysis of the impact of the U.S. Supreme Court's January 15, 1999, Decision On Appeal of the Eighth Circuit's Decision on the Commission's past rulings. On January 25, 1999, the U.S. Supreme Court ruled on a number of petitions for certiorari challenging the Eighth Circuit's decision. AT&T Corporation v. Iowa Utilities -YBoard U.S WL (1999). The Supreme Court reversed in part, and affirmed in part, a number of rulings by the Eighth Circuit. The Court reversed the following rulings of the Eighth Circuit: * The conclusion that the FCC exceeded its authority in requiring states to follow FCC total element long run incremental cost (TELRIC) pricing guidelines; * The decision vacating the FCC's "pick and choose" rule which allowed requesting carriers to pick terms and conditions fi-om any approved interconnection agreement to be applicable to their own interconnection agreement (the Eighth Circuit required requesting carriers to take an agreement in whole); * The decision that the FCC had no jurisdiction to promulgate rules regarding state commission review of pre-ta96 interconnection agreements, as well as rules regarding rural telephone company exemptions and diahg Parity; * The decision disallowing "sham rebundling," Le., the ability of requesting carriers to obtain unbundled network elements -- priced at cost -- to provide a frnished service - subject to a wholesale discount -- in order to avoid potentially higher costs of providing the service via resale; * The decision upholding the FCC's interpretation of the "necessary and impair" standards which essentially gives requesting carriers blanket access to those network elements identified by the FCC. [See, Case No T-PC (April 16, 1999).] The Commission issued an order on April 16, 1999, wherein the Commission noted 2 PUBLIC SER OMMISSION

3 the following: With respect to the U.S. Supreme Court s decision reversing in part, and affirming in part, the Eighth Circuit s 1997 decision, the Commission concludes that it is appropriate to issue an order directing the parties in the Consolidated Telecom Proceedings to file briefs addressing the Supreme Court s January 25, 1999, decision and its impact on the Commission s previous rulings. The parties should identify all rulings of the Commission which they believe are inconsistent with the Supreme Court s decision and state what course of action they believe the Commission should take with respect to those rulings. The Commission received briefs from Bell-Atlantic-West Virginia, Inc. (BA-WV), the Consumer Advocate Division (CAD), AT&T Communications of West Virginia, Inc., (AT&T), Sprint Communications Company L.P (Sprint), and Commission Staff (Staff). A brief review of the respective fmal positions of the parties follows. AT&T s Filinns AT&T filed its Initial Brief on May 14, Therein, AT&T argued: As a consequence of the Supreme Court s decision, there are a number of rulings by this Commission that either have been overruled or that require a m e r Commission action as a direct result of the Supreme Court decision. First, as the Commission itself has already recognized, the Supreme Court decision has invalidated the Commission s ruling to permit BA-WV to break up combinations of unbundled network elements ( UNEs ) into component parts before providing them to competing carriers. By the same token, the Commission s conclusion that the UNE platform ( UNE-P ) should be priced at a non-cost based resale rate level can no longer stand. Second, the application of the FCC pricing rules will require the Commission to revisit its pricing of the switching UNE with vertical features, and the non-recurring charges ( NRCs ) contained in BA-WV s Statement of Generally Available Terms ( SGAT ), to assure their compliance with the 1 Bell Atlantic-West Virginia, Inc., is now Verizon Inc. However, for the purpose of consistency the Commission shall continue to refer to Verizon Inc., by its prior name within this document.

4 total element long-run incremental cos ( TELRIC ) pricing methodology required by the FCC s rules. Third, after the Supreme Court s reinstitution of the FCC sjurisdiction to adopt national rules governing competition in the local exchange marketplace, the FCC adopted further rules on collocation and primary carrier selection that render the provisions of BA-WV s current SGAT not consistent with the FCC s new rules in these regards. The Commission should direct BA-WV to amend the SGAT so that it reflects the latest FCC rules on collocation and primary carrier selection. Finally, the Co~n~nission s rulings on operation support systems ( OSS) and performance measurements and remedies is inconsistent with the Supreme Court decision and with the results of new development in other jurisdictions. Proceedings in New York, New Jersey, and Pennsylvania have demonstrated that even after lengthy, exhaustive collaborative workshops designed to resolve the many issues pertinent to achieving workable OSS, Bell Atlantic is still far from being able to deliver nondmriminatory access to its oss. [AT&T Initial Brief, p. 2 and 3.1 AT&T filed its Reply Brief on June 11, 1999, and therein argued: The Supreme Court s reliance on the non-discrimination provisions of the Act to reach ths result would also support reinstatement of the FCC rule that requires an ILEC to combine network elements on request if it is technically feasible to do so (Rules 3 15(c) through (9). But at a minimum, this Commission should hold that, under the Supreme Court s decision, Bell Atlantic is now required to offer new entrants combinations of UNEs that exist in its network, including the platform that Bell Atlantic has previously agreed to provide, and without any requirement to collocate at BA-WV premises. [AT&T Reply Brief, p. 1 and 2.1 Sprint Filings Sprint filed its Initial Brief on May 14, Therein Sprint argued that the U.S. Supreme Court s decision left no doubt that Congress intended the Federal courts to ensure, - inter -7 alia that the FCC s rules and policy decisions are properly applied by the state 4 PUBLIC SER I

5 commissions. To that end Sprint argued: Consistent with these principals, the Supreme Court dfirmedthe FCC s jurisdiction to prescribe the general pricing rules and methodologies that state commissions must follow in establishing rates for resale, UNEs, and interconnections. Id. at Most relevant here, the Supreme Court reinstated the FCC s rules that require UNE rates to be (1) based on forwardlooking economic costs (i.e., TELRIC) and (2) calculated across different geographc zones to reflect cost differences (i.e., geographically deaveraged). The West Virginia Commission should reverse its previous ruling to the extent that it did not require BA-WV to arrive at UNE rates based on the FCC s definition of TELRIC pricing methodologies and geographically deaveraged zones. [Sprint Initial Brief, p. 4.1 Regarding UNEs Sprint argued: The language of the Supreme Court decision is clear that ILECs, like BA-WV, are precluded from separating already combined UNEs and must offer these UNE combinations, including the UNE platform, to CLECs, upon request. Consistent with the Supreme Court decision, the Commission should issue an order in this proceeding directing BA-WV to immediately begin offering combined UNEs to CLECs. [Sprint Initial Brief, p. 8.1 Finally, Sprint argued that the US. Supreme Court decision afliirmed the FCC s rules interpreting section 252(i), the Act s most favorite nation provision. Section 252(i) requires LECs to make the terms and conditions of approved interconnection agreements available to any requesting carriers. Sprint additionally argued that BA-WV s SGAT should be fairly modified to incorporate the availability of XDSL technology and spectrum unbundling. Finally, Sprint argued: For the following reasons, in light of the Supreme Court decision in IUB overturning many of the rulings made by the Eighth Circuit on which thrs Commission relied, Sprint respecthlly requests that the Commission reconsider its decisions rendered in these joint Telecom Proceedings to fully 5 PUBLIC SE COMMISSION I ~ 2-_ A

6 comport with the Supreme Court s Order. If the Commission finds further review is necessary, it should implement a full procedural schedule including an opportunity for further hearings. Sprint filed its Reply Brief on June 11, Therein, Sprint argued: Neither this Commission nor the CLECs should be forced to wait on the FCC s list of required UNEs. BA-WV s suggestion to wait is simply a ruse to delay the inevitable. The Supreme Court decision in IUB empowers this Commission to order BA-WV to provide UNEs, provide the UNE platform and any other combinations of UNEs it finds suitable to give local market competition a fighting chance in West Virginia. Sprint also agrees wholeheartedly with the conclusions made by AT&T in its Initial Brief that this Commission should bring BA-WV s SGAT in line with current requirements for collocation pricing and practices, primary carrier selection and access to OSS. If the Commission finds further review is necessary, it should implement a full procedural schedule including an opportunity for further hearings. [Sprint Reply Brief, p. 5 and 6.1 CAD Filings The CAD filed its Initial Brief on May 14, Therein, the CAD argued: The Consumer Advocate Division [CAD] respectfully submits this short initial brief to point out that the Commission s prior ruling concerning combinations of unbundled network elements ( UNEs ) and the pricing of UNEs, can no longer be given effect in light of the Supreme Court s holdmg in Iowa Utilities. As the CAD argued in its initial briefing in this case, allowing BAWV to break up combinations of UNEs into component parts before providing them to competing carriers is contrary to section 25 1 (c)(3) of the Telecommunications Act of (See Brief of the Consumer Advocate Division dated March 17, 1997, p. 12.) The Supreme Court s decision in Iowa Utilities removes any doubt concerning this issue: CLECs are entitled to combine unbundled elements to provide a substitute for wholesale service in any form and combination which they choose. Further, any prohibition on rebundling should be removed from BAWV s [ SGAT]. Finally, the pricing of combined network elements must be the sum of the prices for each separate element, and not the wholesale rate as provided in Section 11.1 of the SGAT. 6

7 [CAD Initial Brief, p. 1 and 2.1 The CAD fded its Reply Brief on June 11, Therein the CAD argued: As noted in the CAD S initial brief, the Commission s earlier rulings concerning combinations of WEs], and the pricing of UNEs, can no longer be given effect in light of the Supreme Court s ruling. Iowa Board III removes any doubt concerning this core issue: competitive local exchange carriers ( CLECs ) are entitled to combine unbundled elements to provide a substitute for wholesale service in any form and combination which they choose. Moreover, [BA-WVI may not break up combinations of the UNEs into component parts before providing then to competing carriers. Any prohibition on rebundling should be removed from BAWV s [SGAT]. Finally, the pricing of combined network elements must be the sum of the prices for each separate element, and not the wholesale rate as provided in Section of the SGAT. [CAD, Reply Brief, p. 1 and 2.1 BA- WV Filings BA-WV filed its Initial Brief on May 14, 1999, and concluded as follows: The Supreme Court s decision invalidating the FCC s Rule 319 will have far reaching and, from a competitive standpoint, beneficial consequences. Although the Court has given the FCC clear guidance concerning proper application of the Act s necessary and impair standards, the ultimate impact of the Court s decision cannot be known until the FCC completes its remand proceedings. For that reason, and because BA-WV has agreed to continue to provide unbundled network elements in the meantime, BA-WV respectfully suggests that the Commission take no action Until the FCC issues its final decision. Such modifications to BA-WV s SGAT as are made necessary by that final decision can be made at that time. [BA-WV Initial Brief, p. 5 and 6.1 BA-WV s Reply Brief, filed June 11, 1999, argued as follows: Despite the clarity of the Commission s directive, however, more than half of AT&T s Initial Brief deals with matters--collocation, primary carrier selection procedures, and OSS accessability- that are wholly unrelated to or affected by the Supreme Court s decision. Those comments, as well as the 7 PUBLIC SER

8 comments of Sprint that, by Sprint s own admission, address the competitive shortcomings of BA-WV s SGAT, should be dismissed out of hand. The remainder of the CLECs initial comment concerning (1) the court'^ reinstatement of the FCC s TELRIC costing methodology and (2) its remand of the network element issue to the FCC, while at least falling within the scope of the Commission s directive, are clearly the product of a serious misreading of the Supreme Court s decision. The decision of the Court reinstating the FCC s pricing rules has no impact whatsoever on any of the Commission s SGAT pricing decisions, because, contrary to the allegations of AT&T and Sprint, the Commission s pricing decisions were already explicitly based on the FCC s TELRIC methodology. AT&T s and Sprint s further argument that the network elements that the FCC prescribed under the now- vacated Rule 3 19 must somehow continue to be offered by the ILECs, on both an individual and combined basis, is clearly contrary to the plain language of the Court s decision. Their stated expectation that the list of required network elements will actually be expanded by the FCC, moreover, is in light of the limited standard imposed by the Court, little more than wishful thinking. The comments of AT&T and Sprint on these matters thus do not require any further action by the Commission. [BA-WV Reply Brief, p. 1 and 2.1 Staff Filing Staff did not file an Initial Brief. Staff filed a reply brief on June 11, Regarding UNEs Staff argued: Staff is, however, concerned about the implications of the Supreme Court s decision when considered in conjunction with universal service. Since CLECs are now able to provide local telephone service relying solely on the elements in an [Incumbent Local Exchange Carrierl s network, Staff is concerned that CLECs will be able to obtain and provide fully bundled service in low cost exchanges in West Virginia with no contribution accruing to universal service. While this concern has always been present, Staff believes that the likelihood of cream skimming -- CLECs targeting only low cost exchanges at rates that do not provide any contribution to help cover costs on hgher priced exchanges -- is greatly magnified. Consequently, Staff believes that the Commission should consider restarting its long dormant universal service proceeding Case No T-P, so that the implication of the Supreme Court s decision concerning UNEs can be examined simultaneously with the aforementioned universal service proceeding. [Staff Reply Brief, p PUBLIC SER 0 M M I S S IO N 5;

9 Regarding the Switching Rate, Staff argued: Staff is certainly not adverse to a reexamination of h s issue. Indeed, the entire basis for the Commission s SGAT rates start with AT&T s Hatfield Model, which is in a constant state of modification and refinement. Staff has always expected that there would be a M e r review by the Commission of the cost based rates adopted in this SGAT proceeding. If AT&T or any other party to h s proceeding is ready to proceed with a more reliable cost model or methodology for arriving at the switching rate for vertical features, Staff would encourage that party to present its information so that this issue can be reopened and reexamined by the Commission. Until that time, however, Staff believes that the $ per MOU rate for switching with vertical features is appropriate and should be retained by the Commission. [Staff Reply Brief, p. 3.1 Regarding collocation Staff argued that it had no objection to a revision of BA-WV s SGAT in order to come into compliance with appropriate FCC rules. Staff stated: In StafYs opinion, the Commission fully intends to revisit the issue of collocation, when appropriate, on a prospective basis when changes effectuated on the federal level necessitated such action. Thus to the extent that the FCC s recent rulemakings on collocation warrant the implementation of associated changes to BAWV s SGAT, Staff is in agreement With AT&T s position that BAWV s SGAT should be amended to reflect these changes. (AT&T Brief, pp ). Staff would adopt the same position with respect to AT&T s statement relating to primary carrier selection. [Staff Reply Brief, p. 3 and 4.1 Regarding the Operations Support System Staff argued: With those acknowledgments, StafT believes that this Commission has recognized the overall importance of OSS as it relates to the development of meaningful local competition in West Virginia. In fact, the Commission, in Case No T-PC, has committed to a further examination of the functionality of BAWV s OSS in West Virgma following the completion of the testing now ongoing in the State of New York. Staff is confident that any 9 OMMISSION - I

10 questions regarding the adequacy and availability of BAWV s OSS in West Virgmia will be answered at that time. [Staff Reply Brief, p. 4.1 BA-WV filed a responsive letter on June 18, 1999, to a claim made by AT&T: AT&T claims that BA-WV s current position [that BA-WV need not provide combined UNEs] also abrogates commitments to deliver UNE combinations that BA-WV has made in its interconnection agreements with a number of CLECs, including AT&T. AT&T s claim is wholly untrue. Section 2.2 of BA-WV s interconnection agreement with AT&T (attached), whch AT&T agreed to and signed but does not mention in its Reply Brief, expressly provides that...ba-wv shall not provide Combinations to AT&T under this agreement except as required by Applicable Law. It is thus completely baseless for AT&T to accuse BA-WV of attempting to back away from a commitment it made or that BA-WV is somehow engaging in lawless unilateralism. AT&T Reply Brief at 3. DISCUSSION Given the time that has lapsed since the above positions were filed in 1999, combined with the numerous changes in the industry over that period, the Commission considers the possibility that the issues in these cases may now be resolved or otherwise moot. As such, the Commission seeks the recommendations of the parties regarding final disposition of this matter. The Commission shall provide the parties with ten (10) days to provide brief recommendations as to whether this proceeding may be dismissed without the need for further action. ORDER IT IS THEREFORE ORDERED that the parties to this action file, withm ten (10) days of the date of this order, written recommendations for disposition of this matter. 10 PUBLIC SER OMMISSION

11 IT IS FURTHER ORDERED that the Commission s Executive Secretary serve a copy of ths order upon all parties of record by United States First Class Mail and upon Commission Staff by hand delivery. JJW/jlh ca.wpd 11 PUBLIC SE OMMlSSlON