D n Voice Data Internet Wireless Entertainment VIA HAND DELIVERY James J. McNulty, Secretary Pennsylvania Public Utility Commission Commonwealth Keystone Building 400 North Street, 2 nd Floor Harrisburg, PA 17120 Re: September 20, 2007 DOCUMENT FOLDER Embarq Corporation 240 N. 3rd Street. Suite 201 Harrisburg. PA 17101 EMBARQ.com RECEIVED SEP 2 0 2007 PA PUBIJC UTIUTY COMMJSSJON' Petition of Core Communications, Inc. for Arbitration of Interconnection Rates, Terms And Conditions with The United Telephone Company of Pennsylvania d/b/a Embarq Pennsylvania Pursuant to 47 U.S.C. 252(b) - Docket No. A-310922F70002 Dear Secretary McNulty, On behalf of The United Telephone Company of Pennsylvania d/b/a Embarq Pennsylvania ("Embarq PA") enclosed please find an original and nine (9) copies each of Embarq PA's Reply Brief, Proprietary and Public versions. Should you have any questions, please do not hesitate to contact me. Sincerely, Sue Benedek Attorney ID No. 60451 ZEB/jh enclosures cc: The Honorable David A. Salapa (via electronic mail and hand delivery) Michael A. Gruin, Esquire (via electronic mail and hand delivery) Zsuzsanna E. Benedek SENIOR COUNSEL EMAIL- SUE.E.8ENE0EK@lEMBflR0.C0M Voice.- (717 245-6346 Fax: 717] 236-1389 {{fo
D n n SEP 2 0 2007 PA PUBLIC UTILITY COMMISSlSN BEFORE THE SEeRETARY'S BUHEA9 PENNSYLVANIA PUBLIC UTILITY COMMISSION Petition of Core Communications, Inc. for Arbitration oflnterconnection Rates, Terms and Conditions with The United Telephone Company Of Pennsylvania d/b/a Embarq Pennsylvania Pursuant to 47 U.S.C. 252(b) Docket No. A-310922F70002 REPLY BRIEF OF THE UNITED TELEPHONE COMPANY OF PENNSYLVANIA d/b/a EMBARQ PENNSYLVANIA DOCUMENT OLDER s p % 4 2007 Zsuzsanna E. Benedek, Esquire (Attorney ID 60451) Kevin K. Zarling, Esquire (Admittedpro hac) The United Telephone Company of Pennsylvania d/b/a Embarq Pennsylvania 240 North Third Street, Suite 201 Hamsburg, PA 17101 Phone: (717) 245-6346 Fax: (717) 236-1389 e-mail: sue.e.benedek(a),embarq.com Dated: September 20, 2007 ** PUBLIC VERSION ** i
TABLE OF CONTENTS Page TABLE OF CONTENTS TABLE OF AUTHORITIES i iv Issue 1: Definition - "Local Traffic" versus "Section 251 (b)(5) Traffic" 1 Issue 2: Point oflnterconnection ("POI") 3 A. Section 251 (c)(2) requires a POI to be within the ILECs network and Core's conflating of the FCC's interconnection and compensation rules cannot avoid this requirement 3 Issue 3: Interconnection Methods Collocation 12 Issue 4: Loop Interconnection 14 Issue 5: Tandem Switching Rates v. End Office Switching Rates for Transport and Termination 15 Issue 6: Reciprocal Compensation for "Section 251(b)(5) Traffic" 18 Issue 7: Intercarrier Compensation for ISP-Bound Traffic 21 Issue 8: VNXX Traffic and Other Rating Issues (VOIP) 23 A. VNXX-Enabled, ISP-Bound Traffic 23 1. Core's 100% one-directional terminating traffic is neither "voice" nor is it "local" 23 2. Record demonstrates that Core terminating traffic is overwhelmingly exchange access 24 3. Core's attempt to downplay Embarq PA's traffic study remains futile and without merit 28
4. Core erroneously claims that the FCC mandated NPA-NXX rating as "the established compensation mechanism" and that "industry practice" exists for rating of VNXX-enabled, ISPbound calls based upon a comparison of NPA-NXXs of traffic 30 5. Core's bald assertion that the ISP Remand Order "on its face applies to all ISP-bound traffic" is blatantly wrong... 36 6. Core erroneously holds the view that the Commission essentially prejudged intercarrier compensation issues in the RTC Certification Order 38 7. Core's "public interest" arguments do not trump applicable law 39 B. Voice over Internet Protocol - VoIP Traffic 44 C. Impose originating access, or alternatively, impose bill & keep 47 Issue 9: Indirect Traffic - Volume Limit 51 Issue 10: Pricing 54 A. Core's backdoor request that Embarq PA provide cost-based or TELRIC-based rates for "interconnection" under Section 251(c)(2) is flawed and creates perverse results 54 B. Core incorrectly seeks to mandate TELRIC pricing for delisted entrance facilities 57 a. TELRIC rates are not required for entrance facilities 57 b. Core's request for a generic investigation to develop rates that meet "the TELRIC standard" is not supported by law or substantial evidence 58 C. Core's proposal to use Verizon proxy rates must be rejected 61
D. Core's "concerns" and proposed adjustments to Embarq PA's entrance facility cost study must be rejected 63 E. Conclusion 68 111
TABLE OF AUTHORITIES Page CASES Federal Atlas Tel. Co. v. Oklahoma Corp. Comm'n, 400 F.3d 1256 (10th Cir, 2005) 6,52 Global NAPs. Inc. v. Verizon New England. Inc., 444 F.3d 59, 2006 U.S. App. LEXIS 8805 (1st Cir. Mass. 2006) 23, 34 Level 3 Communications, LLC v. Public Utilities Commission of Colorado. 300 F.Supp. 2nd 1069 (Dec. 9, 2003) 7 MCI v. Bell Atlantic Pennsylvania Inc.. 271 F.3d 491(3rd Cir. 2001) 4,8 Qwest Corp. v. Washington State Utilities and Transp. Commission. 484 F. Supp. 2d 1160, 2007 U.S.App. LEXIS 26194 (2006) 2, 23, 34, 37 Verizon California. Inc. v. Peevev, 462 F.3d 1142 (9th Cir. Cal. 2006) 1, 11 ADMINISTRATIVE DECISIONS & ORDERS & POLICY STATEMENTS Pennsylvania Administrative Generic Investigation Re Verizon Pennsylvania Inc.'s Unbundled Network Element Rates, Docket No. R-00016683, 2003 Pa. PUC LEXIS 72 (Order entered December 11, 2003) 31 Generic Investigation Re Verizon Pennsylvania Inc.'s Unbundled Network Element Rates. Docket No. R-00016683, 2004 Pa.PUC LEXIS 64, (Order entered July 16, 2004) 60 Generic Investigation Regarding Virtual NXX Codes, Docket No. 1-0002093 (Policy Statement entered October 14, 2005) 36-37 in the Matter of Application of Verizon Pennsylvania. Inc. et al.. for Authorization Under Section 271 of the Communications Act to Provide In-Region. InterLATA Service in the Commonwealth of Pennsylvania, CC Docket No. 01-138, Consultative Report of the Pennsylvania Public Utility Commission, dated June 25,2001 27 IV
Level 3 Communications, LLC v, Marianna and Scenery Hill Telephone Company, 98 PA PUC 1 (2003) 33 Pennsylvania Public Utilitv Commission v. Verizon Pennsylvania Inc. Tariff No. 216 Discontinue CLEC Access to Unbundled Entrance Facilities. Docket No. R-00050800 (Order entered February 10, 2006) 57 Petition of Cellco Partnership d/b/a Verizon Wireless for Arbitration Pursuant To Section 252 of the Telecommunications Act to Establish an Interconnection Agreement with ALLTEL Pennsylvania, Inc., Docket No. A-310489F7004 (Orders entered December 5, 2005 and January 18, 2006) passim Petition of Global NAPs South, Inc. For Arbitration pursuant to 47 U.S.C. 252(b) oflnterconnection Rates, Term and Conditions with Verizon Pennsylvania Inc.. Docket No. A-310771F7000 (Order entered April 21, 2003) 36 Petition of Sprint Communications Company, L.P. for an Arbitration Award of Interconnection Rates. Terms and Conditions Pursuant to 47 U.S.C. 252(b1 and Related Arrangements With Verizon Pennsylvania Inc, Docket No. A-310183F0002, Opinion and Order, entered October 12, 2001 9, 27 Petition of US LEC of Pennsylvania. Inc. for Arbitration with Verizon Pennsylvania Inc. Pursuant to Section 252(b) of the Telecommunications Act of 1996, Docket No. A-310814F7000 (Order January 18, 2006) 9, 36 Petition of Verizon Pennsylvania Inc. and Verizon North Inc. for Arbitration of Interconnection Agreements with CLECs and CMRS Providers In Pennsylvania Pursuant to Section 252 fo the Communications Act fo 1934, as Amended, and the Triennial Review Order. Docket No. P-00042092 (Order entered February 21, 2006) 56-58 Federal Administrative Developing a Unified Intercarrier Compensation Regime. CC Docket No. 01-92, Further Notice of Proposed Rulemaking (Rel. March 3, 2005) 34-36, 50 First Report and Order, Implementation of the Local Competition Provisions in the Telecommunications Act of 1996, 11 FCC Red 15499 (1996) passim
In the Matter of the Implementation of the Local Competition Provisions in the Telecommunications Act of 1996. Intercarrier Compensation for ISP-Bound Traffic. CC Docket No. 99-68, Order on Remand and Report and Order, 16 FCC Red 9151 ( 2001) passim In re Unbundled Access to Network Elements, et al., WC Docket No. 04-313, CC Docket No. 01-338 (FCC Rel. Feb. 4, 2005) Order on Remand, FCC 04-290 (TRRO) 55 Petition of Core Communications. Inc.. for Forbearance Under 47 U.S.C. SI 60(c) from Application of the ISP Remand Order, CC Docket No. 03-171, Order, 19 FCC Red 20179 (2004) 22-23, 50 Starpower Communications. LLC v. Verizon South Inc., EB-00-MD-19, Memorandum Opinion and Order, 18 FCC Red 23625 \\ 1 (2003) 33-34 Petition of WorldCom. Inc. Pursuant to Section 252(e)(5) of the Communications Act for Preemption of the Jurisdiction of the Virginia State Corporation Commission Regarding Interconnection Disputes with Verizon Virginia Inc.. and for Expedited Arbitration, Memorandum Opinion and Order, Wireline Competition Bureau, 17 FCC Red. 27039 (2002) 31 STATUTES & REGULATIONS: Pennsylvania 66 Pa. C.S. 332(a) 2,30 66 Pa. C.S. 3011(4) 11-12,41, 43 66 Pa. C.S. 3017 passim Federal 47 U.S.C. 251(b)(5) passim 47 U.S.C. 251(c) passim 47 U.S.C. 251(g) 25 47 C.F.R. 9,1 45 47 C.F.R. 9,3 45-46 vi
47 C.F.R. 51.5 8, 10 47 C.F.R. 51.100(b) 6 47 C.F.R. 51.305 8 47 C.F.R. 51.701(b) 1,5-7 47 C.F.R. 51.703 3-7,52 47 C.F.R. 51.711 18,21 47 C.F.R. 51.713 50 vu
Issue 1: Definition - "Local Traffic" versus "Section 251(b)(5) Traffic". Core proposes defining a key term in this contract by simply parroting "down to the exact word and punctuation" Section 51.701(b) of the FCC's rules. 1 Core's sole support for this position is its view that the FCC "rejected... the term 'local' and the entire 'local/non-local' paradigm." 2 Core's view is misguided. While the FCC did reevaluate its use of the term local in Section 51.701 (b) of its rules, the FCC did not reject "the local/non-local paradigm" as Core wrongly asserts. Indeed, the FCC did not eliminate the distinction between local and interexchange traffic and certainly did not eliminate the compensation regimes that apply to each J as thoroughly addressed in Embarq PA's Main Brief. 3 Use of Core's definition overlooking the local/non-local distinction to traffic would greatly exacerbate and take to new heights the very arbitrage that the FCC in the ISP Remand Order attempted to eliminate. Core further claims that the type of traffic subject to reciprocal compensation under Section 251(b)(5) Traffic "is now more expansive, covering not only 'local' traffic, but all telecommunications that is not excluded by virtue of section 251 (g)." 4 Core asserts that the burden of proof and persuasion rests on the party seeking to exclude traffic from the "broad ambit of 'telecommunications' under section 251 (b)(5)." Again, Core's views are woefully misguided. First, the FCC in the ISP Remand Order concluded that ISP-bound traffic was, at the very least, an information access service within the scope of Section 251 (g) as "traffic 1 2 3 4 CorcM.B. at 14. Id. See also, Core M.B. at 15 ("The FCC created a new definition... "). See, e.g., EQ PA M.B. at 52-56,72-75, 5-11. See also, e.g., ISP Remand Order, at ^ 39. Core M.B. at 16 (emphasis in original).
destined for an information service provider." 5 The record shows that virtually all of Embarq PA originated and Core terminated traffic is destined for information service providers. 6 Second, as the United States District Court for the Western District of Washington succinctly noted. ISP-bound traffic "is unequivocally excluded from the dictates of 251(b)(5)." 7 In a classic sandbagging move. Core in its Main Brief never addresses the United States District Court for the Western District of Washington or the other federal Court cases on this key point. Core has the burden of proof and persuasion to demonstrate a right to the reciprocal compensation relief it seeks of Embarq PA. 8 Core has failed in this regard. The record, including the traffic study prepared by Embarq PA witness Hart, demonstrates that the traffic terminating at Core's Intemet-bound gateways is all one directional, high volume and is virtually all VNXX-enabled, ISP-bound traffic. Core's language fails to exclude ISP-bound traffic and fails to distinguish between local and non-local traffic. Core's language would sweep in reciprocal compensation for all ISP-bound traffic and non-local traffic contrary to applicable law. An interconnection agreement is an operational tool. Embarq PA's proposed definition enables the resulting agreement to be just that - a tool for implementing the agreement. Embarq PA's proposed language should be adopted. 5 ISP Remand Order, al 1fl 12-13. At the heart of the compensation issues in this case (Issues 1, 5, 6, 7 and 8) is the question of whether non-local ISP-bound traffic (which in Core's instance is undertaken via VNXX arrangements) is "exchange access." See. e.g., EQ PA M.B. at 56-62. 6 See, e.g., EQ PA M.B. at 8 } citing EQ PA St. 2.0 at 18. 7 Qwest Corporation v. Washington State Utilities and Transportation Commission, 484 F. Supp. 2d 1160, 2007 U.S. Dist. LEXIS 26194 (2007) {"Qwest 2007 Order"). s 66 Pa.C.S. 332(a).
Issue 2: Point of Interconnection ("POI"). A. Section 251(c)(2) requires a POI to be within the ILECs network and Core's conflating of the FCCs interconnection and compensation rules cannot avoid this requirement. Under Core's proposed language, each party designates an interconnection point ("IP") "on its own network." 9 Core exclaims: "Accordingly, the parties' duties to provide an IP, and transport originating traffic to the other party's IP. are exactly symmetrical." 10 Because Core's language does not require a point of interconnection ("POI") within Embarq PA's network. Core would be able to designate IPs far outside Embarq PA's territory (such as at or near the Verizon tandems where Core is currently situated). All "operational and financial responsibility" 11 for transport to the designated POI under Core's proposed language is thereby shouldered by the originating carrier. Since Core does not originate any traffic (i.e., 100% of the traffic at issue is Embarq PA originated), Core's proposed language would allow Core to avoid 100% of the "operational and financial responsibility" for transport facilities. Clearly, Core's language only creates fictional duties that are "exactly symmetrical" given the lack of any Core originating traffic and Core's improper rendering of interconnection reciprocal via its dual POI proposal. The FCC rule relied upon by Core is 47 C.F.R. 51.703(b). 12 The concept is Core's belief of an originating "calling-party-network-pays approach to compensation." 13 Core's position that no effort, no responsibility, and no investment are required by it to provision transport to Embarq PA's network is contrary to law and is unsupported by the ; Core M.B. at 19. Id. ("[T]his issue concerns operational andfinancialresponsibility for the facilities... "). 12 Id, at 20. 13 Core M.B. at 21. Core claims, without any citation or legal support, that the FCC codified Section 51,703(b) it recognized "that the financial responsibilities for interconnection for the exchange of traffic should be bome solely by each carrier with respect to its own originating traffic." 13 Id., at 20.
evidentiary record.' 4 First, Core continues to conftise interconnection requirements by conflating interconnection with reciprocal compensation requirements.' 5 Section 51.703 of the FCC's implementation rules is situated in Subpart H governing "Reciprocal Compensation for Transport and Termination of Telecommunications Traffic." Reciprocal compensation is a Section 251(b)(5) matter. All Local Exchange Carriers ("LECs") - including Core - have a duty under Section 251 (b)(5) of the Act to route and terminate telecommunications traffic and to establish reciprocal compensation arrangements for such routing and termination of telecommunications traffic. To the extent that Section 51.703(b) applies, this FCC rule requires the originating carrier to deliver its originating local voice traffic to the POI and then to pay the terminating carrier for the "transport and termination" of that traffic on the terminating carrier's network. 16 Section 51.703 does not address location of the POI. 17 First and foremost under Section 251 (c)(2), Core must establish a POI within Embarq PA's network at a technically feasible point.' 8 First and foremost under Section 251(c)(2), Embarq PA must provide the "facilities and equipment" to allow "interconnection" with Embarq PA's network. Under the FCC's implementing rules, interconnection is defined as the "linking of two networks for the mutual exchange of traffic. This term does not include the transport and termination of traffic." 19 Because Core is opposing the placement of the POI within Embarq PA's network. Core's reference to Section 51.703 of the FCC's rules conflates and violates the 14 Per Core. Embarq PA must provide all transport "free" of charge. Core M.B. at 21. This position flies in the face of Section 251(b)(5) of the Act. 15 See generally, EQ PA M.B. at 16-19, 12-13. 16 47 C.F.R.!}251(b)(5). 17 EQ PA M.B. at 17. citing EQ PA St. 1.1 at 17. 18 47 U.S.C. 251(c)(2)(B). MCI v. Bell Atlantic Pennsylvania Inc., 271 F,3d491 (3rd Cir. 2001). 19 47 C.F.R. 51.5.
Act's requirement that Core in the first place must establish a POI within Embarq PA's network. 20 Second, Section 51.703 cannot render interconnection reciprocal under Section 251 (c)(2) through a dual POI as Core suggested. The Act requires incumbent LECs to share their networks and services with competitors seeking entry into the local service market. 21 Section 251 (c)(2)(b) of the Act obligates Embarq PA to allow Core to establish a POI within Embarq PA's network." Core does not have a similar statutory obligation to share its network and thus does not have the right to insist that its network, which is outside of Embarq PA's territory, constitute an IP/ POI. Third, Core has provided no analysis or support demonstrating that Section 51.703(b) or the originating "calling-party-network-pays approach to compensation" applies to the record facts. The record facts are compelling and undeniable: Core originates no traffic and thus there is no "mutual exchange" of traffic; virtually all the traffic is non-local VNXX-enabled, ISP-bound traffic; voice capability to the traffic is lacking given no Core-provided dial tone. As Mr. Hart noted, "Typically, a local exchange carrier will have its own customers that actually originate traffic. 24 In light of these facts, Embarq PA questions whether it is required to interconnect at all with Core." Core's citation to the Summary Judgment order is not persuasive on a 20 Embarq PA's network can, by definition, only extend within the Commission-approved local exchanges served by Embarq PA per its certificate of public convenience. Embarq PA's local calling exchanges as set forth in Embarq PA's tariffs define the geographic extent of Embarq PA's obligations and rights. 21 EQ PA M.B. at 18. 32 The only facilities explicitly mentioned in Section 251(c)(2) are CLEC facilities. 23 EQ PA M.B. at 2, citing Core St. 2.0 at 25. 24 EQ PA St. 2.0 at 22. 25 If the only traffic exchanged with Core is information service, Sections 51.703(b) and 51.701(b)(1) do not apply as these reciprocal compensation rules only apply to telecommunications service. The FCC has clearly defined ISP-bound traffic as information access or information service. Information services do not magically become telecommunications services when they are purchased by Core's end users. As the FCC
jurisdictional question 2 6 Assuming Embarq PA's interconnection obligations are triggered under the Act, the FCC in the ISP Remand Order found that local ISP-bound traffic is information access 2 7 As best, 3.3% of the Embarq PA originated traffic terminating to Core's Intemet-bound gateways is information access and Section 51.703(b) by its express terms cannot apply. 28 As for non-local VNXX-enabled ISP-bound traffic. 96.7%o of the Embarq PA originating traffic terminating to Core's Intemet-bound gateways is exchange access. 29 The FCC expressly excluded interexchange traffic (exchange access) observed in the ISP Remand Order at *\ 11 and the footnotes therein {See also ^ 55), ISPs may purchase access to the local network through LEC's local tariffs, but the ISPs are "users of interstate access services." Obtaining access to the local network via local tariffs simply facilitates the switched access exemption that the FCC granted ISPs (an exemption that only applies to the ISP's access to the network, not to a LEC that exchanges traffic with other LECs and not to end user calls made to an ISP), but it does not change the nature of the traffic. Accordingly, the fact that ISPs access the network via local telecommunications tariffs does not negate the fact that what Core is offering ISPs is information access. As the FCC declared in the ISP Remand Order at 30, "the service provided by LECs to deliver traffic to an ISP constitutes, at a minimum, 'information access'." {See also, ^[ 38 and 39, where the FCC describes the information access at issue to involve access to an ISP provided by either an individual LEC or jointly by two LECs who iare interconnected.) Finally, in 44 of the ISP Remand Order, the FCC makes crystal clear that ISPs purchase information access from LECs and that "information access" means "all access traffic... routed by a LEC to or from" an ISP: Consequently, to the extent that Core provides nothing but access to ISPs, then Core only offers information service. As a result, pursuant to 47 C.F.R. 51.100(b), Core is not entitled to interconnection with Embarq PA because the record does not demonstrate that Core offers telecommunications services, and a carrier is not entitled to interconnection if it only provides information services. 26 Core M.B. at 28. That Summary Judgment Order did not give Core judgment as a matter of law on this POI issue. See, Summary Judgment Order at pages 24-26. Moreover, whether Core's traffic is information access and exchange access - a question which necessarily raises jurisdictional issues - implicates the local / non-local nature of traffic proposed to be subject to Section 251 (b)(5) under applicable law and the scope of the ISP Remand Order. The Summary Judgment Order denied judgment on this issue. See, Summary Judgment Order at 23-24 and 26-28. 27 See, e.g., EQ PA M.B. at 5-6, 9-10, 53-55. 28 The term "telecommunications traffic" in Section 51.703(b) is defined at Section 51.701 of the FCCs rules and Section 51.701(b)(1) in relevant part provides: (b) Telecommunications traffic. For purposes of this subpart, telecommunications traffic means: (1) Telecommunications traffic exchanged between a LEC and a telecommunications carrier other than a CMRS provider, except for telecommunications traffic that is interstate or intrastate exchange access, information access, or exchange services for such access....". 47 C.F.R. 51.701(b)(1) Courts reviewing the distinction between 51.701(b)(1) versus 51.701(b)(2) have noted that FCC in 51.701(b)(1) excluded from reciprocal compensation requirements certain types of traffic exchanged between a LEC and a non-cmrs carriers. However, the FCC did not carry forward that same exception into 51.701(b)(2). Atlas Tel. Co. v. Oklahoma Corp. Comm'n, 400 F.3d 1256 (10th Cir, 2005). 29 See, e.g., EQ PA M.B. at 55-56, 70-71.
from the reach of Section 51.703(b) because Section 51.701(b)(1) provides that Section 51.703(b) does not apply to "telecommunications traffic that is interstate or intrastate exchange access, information access, or exchange services for such access." 30 Federal courts have correctly found that non-local VNXX-enabled ISP-bound traffic is properly classified as interexchange and subject to originating access charges. 31 In at least one such case, the CLEC had argued that the reciprocal compensation rule of Section 51.703(b) prohibited collection of originating access charges for VNXX traffic, both ISP-bound and non-isp bound. 32 The Ninth Circuit disagreed, finding that Section 51.703(b) by virtue of Section 51.701(b)(1), as applicable to landline carriers, failed to support the CLECs argument. 33 Similarly, Core's position that Embarq PA as the originating carrier must provide all transport to Core's designated IP "free" of charge under Section 51.703(b) and that the "calling-party-network-pays approach to compensation" applies must fail. Core's positions violate Section 251(c)(2)'s requirement for establishing a POI within the ILECs network and fail to recognize undeniable record facts that the traffic terminating at Core's gateways is ISP-bound and non-local VNXX-enabled traffic. Moreover, neither the Act nor the FCCs rules "unduly favor" (Core M.B. at 19-20) either party to an interconnection arrangement when both parties are engaged in the mutual 30 47 C.F.R. 51.701(b)(l). 31 See, e.g., EQ PA M.B. at 52-54, 72-74. 32 Verizon California, Inc. v. Peevey, 462 F.3d 1142, 1157 (9th Cir. Cal. 2006) ("Peevey") ("Pac-West's crossappeal also involves VNXX traffic, both non-isp bound and ISP-bound."). See also, Level 3 Communications, LLC v. Public Utilities Commission of Colorado, 300 F.Supp. 2nd 1069 (Dec. 9, 2003). 33 The California Commission in Peevey had allowed reciprocal compensation on VNXX traffic determining that reciprocal compensation turns on whether the traffic is local. The determination of whether traffic is local depended upon the NPA-NXXs of the calling and called parties. Peevey at 1155. However, the California Commission also determined that VNXX traffic is interexchange traffic and that Verizon California, Inc. (the ILEC) can impose call originating charges {i.e., originating access). Verizon California, Inc. appealed that part of the California Commission's decision allowing reciprocal compensation based upon the NXX rating of the call, whereas Pac-West appealed the Commission's determination as to the imposition of originating charges on VNXX-enabled calls. The District Court and to the Ninth Circuit Court of Appeals affirmed the California Commission's decision as to both issues.
exchange of telecommunications traffic. In this case, Core seeks interconnection under the Act for the sole purpose of "exchanging" 100% one-way ISP-bound traffic. The FCC's interconnection rules envision the mutual exchange of traffic. The FCC's rules define interconnection in relevant part as the "linking of two networks for the mutual exchange of traffic." 34 Core's chosen business strategy creates a 100% one directional, high volume traffic pattern. It is Core that seeks to unlawfully impose interconnection obligations on Embarq PA. It is Core that seeks preferential treatment under the law and undertakes a non-harmonious, non-contextual interpretation of the FCC's rules. In further support of its position that originating party pays, Core cites to the Verizon Wireless/ALLTEL Order and claims that the Commission "relied upon the FCC's rules in approving a 'dual POI' interconnection arrangement that exactly mirrors Core's proposal in this arbitration." 35 Embarq PA disagrees. The Verizon Wireless/ALLTEL Order cannot be interpreted in anyway to require Embarq PA to interconnect with Core at any point Core chooses as this result would violate the Act and applicable law. The POI must be on Embarq PA's network. 36 Core can choose where within Embarq PA's network to establish a POI as is technically feasible, but Core is not permitted to designate a POI not within Embarq PA's network. 37 Indeed, after the Verizon Wireless/ALLTEL Order, the Commission in a January 2006 order reiterated the requirement that the FCC's binding regulation at 47 C.F.R. 51.305(a) requires that a POI 34 47 C.F.R. 51.5. 35 Core M.B. at 22. 36 47 U.S.C. 251(c)(2). 37 See, e.g., MCI v. Bel! Atlantic Pennsylvania Inc., 271 F.3d491, 517 (3rd Cir. 2001) ("Generally, these provisions have been interpreted to permit a CLEC to have access at any point on the incumbent network where connection is technically feasible."). The Third Circuit also recognized that a state commission "may have discretion in determining whether there will be one or more POIs within a LATA, being mindful of the whether the cost of interconnecting at multiple points will be prohibitive and creating a bar to competition. Id. at 517.
must be "within the incumbent LEC's network." 38 The requirement that a POI must be within the ILECs network is required, unless parties to an agreement can mutually agree to another arrangement. For this reason, Core's referencing of various interconnection agreements as "industry practice" remain inapplicable. 39 Actually, what the two Corereferenced agreements do show is that should Core prevail on Issue 2 in this arbitration, Embarq PA would be in a worse position than Verizon Pennsylvania Inc. because Core has established POIs within Verizon's network and territory. Moreover, the Verizon Wireless/ALLTEL Order is ambiguous from the standpoint of binding Commission precedent. The January 18, 2005 Order to which Core cites was subject to a Petition for Reconsideration, Clarification and Modification {"ALLTEL Petition,, ) filed by ALLTEL. 40 In the ALLTEL Petition, among other issues, ALLTEL argued that the January 18, 2005 Order erroneously relied upon a belief that ALLTEL was 38 Petition of US LEC of Pennsylvania, Inc. for Arbitration with Verizon Pennsylvania Inc. pursuant to Section 252(b) of the Telecommunications Act of 1996. Docket No. A-310814F7000, Opinion and Order entered January 18, 2006, at page 5. In this case, the Commission found that Verizon PA's former agreement to an arrangement on the CLECs network "should not be construed that it has waived its right to discontinue a practice which is contrary to federal regulations." Id. 39 Core M.B. at 26. Moreover, the first two agreements cited by Core, Hyperion and the Sprint/Veri zon agreement, did not involve the factual context of all one-way ISP-bound traffic. Core witness Webber did not know if the 1999 Hyperion agreement was still effective. Tr. at 82-83. Had he checked, Mr. Webber would have discovered that the Hyperion successor agreement included a DS 1 threshold trigger (which Core is contesting in this proceeding at Issue 9). Tr. at 84. The Verizon/Sprint agreement, while subject to arbitration, concerned location of points of interconnection within Verizon PA's network. The Commission adopted a limited holding relative to a transport sharing proposal made by the CLEC, Sprint, given the facts in that case. Petition of Sprint Commimications Company, L.P. for an Arbitration Award of Interconnection Rates, Terms and Conditions Pursuant to 47 U.S.C 252(b) and Related Arrangements with Verizon Pennsylvania Inc, Docket No. A-310I83F0002, Opinion and Order, entered October 12, 2001. The two other Core-related agreements referenced at page 26 of Core's Main Brief regard Verizon agreements which Core opted into, one for the state of Maryland and one for Pennsylvania. Tr. at 86. There has been no demonstration by Core that the underlying agreements addressed an entity like Core with 100% one-way, ISP-bound traffic and included POIs not within the ILECs (Verizon's) network. Moreover, Core is apparently currently involved in an arbitration in Maryland to replace the Verizon Maryland agreement cited by Core in its Main Brief. Tr. at 87-90. These interconnection agreements do not circumvent the law and simply cannot be relied upon as any "consistent with industry standard practice" relative to 100% one-way, high-volume non-local ISP-bound traffic. 40 Petition for Reconsideration, Clarification and Modification of ALLTEL Pennsylvania, Inc., Docket No. A-3104S9F7004, filed on or about Febmary 1,2005 {"ALLTEL Petition,, ).
of the position that the FCC's rules required ALLTEL to transport its originated traffic. 41 The matter settled with the Commission adopting the settlement and with ALLTEL withdrawing the ALLTEL Petition. Thus, the Commission never addressed the merits of the evidentiary record issue as raised in the ALLTEL Petition. Nonetheless, the Verizon Wireless/ALLTEL Order is inapplicable because Core has not demonstrated any similarity in facts to merit a finding to extend the Verizon Wireless/ALLTEL Order to the case at hand. The Verizon Wireless/ALLTEL Order appears to have addressed a factual circumstance in which the parties exchanged traffic. 42 Core, however, does not originate any traffic. All traffic is Embarq PA originated traffic and. therefore, Embarq PA submits there is no "mutual exchange" of traffic. 43 Applicability of Verizon Wireless/ALLTEL Order given this record remains highly questionable. Core also cites to a Maryland decision involving AT&T and Verizon Maryland as support for Core's position that "each party to an interconnection is responsible for the cost of transporting its own originating trafflc.,,44 Core provides no analysis as to whether the facts regarding the nature, type of traffic, and directional quality of the traffic addressed in that Maryland case are similar to the facts in this case so that the legal conclusion and holding can be deemed relevant and applicable. Moreover, Core fails to mention that it is presently before the Maryland Commission in an arbitration in which the Maryland 41 ALLTEL Petition at para. 12. 42 See, e.g., Verizon Wireless/ALLTEL Order at 2 ("A majority of the unresolved issues in this arbitration involve disputes related to the compensation for local traffic that is exchanged between Verizon Wireless and ALLTEL where such traffic transit for termination on their respective networks through the facilities of Verizon Pennsylvania."). 43 47 C.F.R. 51.5. 44 Core M.B. at 24-25. 10
Commission may be reevaluating its prior ruling in the Maryland AT&T order(s) cited by Core 45 Finally, Core attempts to deny that there is a financial impact associated with Issue 2 and attempts to discredit Embarq PA's claims regarding the financial impact to Embarq PA. 46 If financial consequences of Core's dual POI proposal did not exist, then Issue 2 would not be subject to litigation. The undeniable fact is that Core's dual POI proposal does foist onto Embarq PA all financial and operational risks and costs (estimated to be $800,000 annually associated with Core only) 47 if Embarq PA had to lease facilities to haul Core's 100% one-way, high volume traffic out of Embarq PA's local calling areas. As the Ninth Circuit in Peevey recognized: [I]t [the ILEC, Verizon California, Inc.] incurs an uncompensated cost to "long haul" VNXX traffic to a distant point of interconnection between the carriers that distorts marketplace investments by CLECs like Pac-West and forces ILECs such as Verizon to provide an unwarranted subsidy. 48 There are undeniable costs associated with any facilities that Embarq PA would have to provide to accommodate Core's dual POI proposal. Act 183 sets forth as policy of the Commonwealth that rates for protected services (such as Embarq PA's rates) do not subsidize the competitive ventures of telecommunications carriers (such as Core). 49 No matter what the Cost to Embarq PA would be if Core prevails, the costs foisted onto 45 See, In the Matter of the Petition for Arbitration of Interconnection Rates, Terms and Conditions with Core Communications, Inc. Pursuant to 47 U.S.C. Section 252 (b) at Docket No. 9013. See, Maryland Public Service Commission's docket/cast track at: }Htp://webaDD.DSc.state.mdMs/Intranet/CaseNum/CaseAction.cfm?ReauestTimeout=500. Item 67 for the Arbitrator's proposed order. See also, Tr. at 89 (notice of Maryland case). 46 Core M.B. at 26-28. 47 The $800,000 estimate is based upon what a carrier might pay to lease the transport, as calculated based upon publicly available interstate tariff rates of Embarq PA and Verizon. Tr. at 284-285. This amount, effectively, constitutes what Core avoids paying through its dual POI proposal. Conversely, unlike Core, Embarq PA hasfinancialexposure beyond the $800,000 given the MFN potential of the agreement. 4i Peevey at 1157. 49 66 Pa.C.S. 3011(4). 11
Embarq PA (which only increase when considering MFN exposure) by virtue of Core's dual POI proposal contravene Section 3011(4). Issue 3: Interconnection Methods/Collocation. Core and Embarq PA already have agreed-upon language making "available" options to interconnect with Embarq PA. This language, not deleted bv Core, is set forth in Joint Exhibit 2 (Part L, Collocation, 77-100). 50 Part L of Joint Exhibit 2 consists of over 30 plus pages of terms and conditions for Core to interconnect with Embarq PA through collocation arrangements. Part L gives Core the option of collocating with Embarq PA for all three "methods of collocation" claimed by Core, as consistent with the law. 51 As set forth in Part L, Core can establish collocation facilities on Embarq PA's premises, including at Embarq PA central offices or tandems. 52 This is the first "interconnection method" proposed by Core at Section 54.4. 53 Moreover, as set forth in Part L, Core can utilize collocation arrangements with a third party, which is Core's second "method of interconnection.' 04 Core may share collocation space with another carrier whose ICA allows similar language that is found in Part L, Section 79.3. Core's third claimed "method of interconnection" regards interconnection via entrance facilities (Issue 10). Embarq PA has proposed language at Sections 54.2.1.5 and 50 See, Embarq PA Main Brief at 27-28, citing both Joint Exhibit 2 and Embarq PA's Final Offer. 51 Section 77.1, which was not deleted by Core, provides: Sprint will provide Collocation to CLEC in accordance with this Agreement for the purposes oflnterconnection to Sprint pursuant to the Act (including 47 U.S.C. 251(c)(2)) and for obtaining access to Sprint's UNEs pursuant to the Act (including 47 U.S.C. 251(c)(3)). Collocation shall be provided on a nondiscriminatory basis, on a "first-come, first-served" basis, and otherwise in accordance with the requirements of the Act (including 47 U.S.C. 251(c)(6)). (Emphasis added.) 52 See, e.g., Sections 79.4 (adjacent collocation if premise exhaust), Section 79.5 (contiguous space for subsequent physical collocation requests), and 79.6 (virtual collocation) of Joint Exhibit 2. 53 Core M.B. at 29. 54 Section 79.3. 12
54.2.1.6. to which Core objects. 55 This third form of interconnection demonstrates that Issue 3 remains unresolved because Issues 2 and 10 remain unresolved. Core deleted Sections 54.2.1.5 and 54.2.1.6. along with meaningful portions of Section 54.2 regarding points of interconnection, because Core has a dual POI proposal (Issue 2). 56 Clearly. Core's statement that Issue 3 "stands independent" from Core's dual POI proposal at Issue 2 is blatantly incorrect. 57 Core seeks to avoid interconnection within Embarq PA's network. Even though the Act and the FCC's rules only impose interconnection obligations and collocation requirements on ILECs, Core's proposed language for Issue 3 would require Embarq PA to establish a POI on Core's network and would enable Core to remain behind Verizon's tandems in Verizon's territory purchasing "entrance facilities." As addressed at Issue 10, Core can make the business decision to stay in Verizon's territory, but if it seeks to interconnect with Embarq PA from Verizon's territory then it can purchase interconnection facilities from Embarq PA's access tariff. Similarly, if Core decides to make the business decision to stay in Verizon's territory, Embarq PA cannot be forced to interconnect and collocate on Core's network (Issue 2) at these distant points outside Embarq PA's network. Core's proposed language at Section 54.4 is unnecessary 55 Embarq PA proposed language is as follows: 54.2.1.5 CLEC may order Entrance Facilities and Dedicated Transport links from Sprint that are wholly within Sprint's serving territory from the rates found in Table One. 54.2.1.6 CLEC may order interconnection facilities from Sprint that are wholly within Sprint's serving territory from Sprint's access tariff. 56 EQ PA M.B. at 29-30. 57 Core M.B. at 30. Core's proposed Section 54.4 requires each party to specify "interconnection points." a concept and position that Core advances at Issue 2. 13
and improper. The agreed-upon language in Part L, along with Embarq PA proposed Sections 54.2.1.5 and 54.2.1.6 afford ample, legally permissible "interconnection methods." Issue 4: Loop Interconnection. As addressed above, Core must interconnect within Embarq PA's network. Any "loop interconnection" proposal that does not comply with this requirement is legally defective. 58 As addressed in Embarq PA's Main Brief, moreover, technically feasibility comes into play if there is a right to interconnection in the first place. 59 The Presiding Judge and the Commission should first make clear that Core's request for "loop interconnection" is only applicable in the situation where Core is within Embarq PA's network and territory. Assuming Core interconnects within Embarq PA's network and territory, the question then is whether Core can expand collocation options at Issue 4 by allowing Core to collocate at a retail loop location within Embarq PA network. Core claims that Embarq PA has offered no evidence that Core's "loop interconnection" proposal is not technically feasible, citing to other jurisdictions in which Core claims loop interconnection with RBOCs has occurred. 60 Per Section 251(c)(6) of the Act, Embarq PA is required to provide "for physical collocation of equipment necessary for interconnection or access to UNEs at the premises of the LEC." 61 The FCC rules in relevant part define "premises" as: [A]n incumbent LEC's central offices and serving wire centers; all buildings or similar structures owned, leased, or otherwise controlled by an incumbent LEC that house its network facilities; 58 59 60 61 See, discussion above at Issue 2. See also, EQ PA M.B. at 11-25. EQ PA M.B. at 30-31. Core M.B. at 34. 47 U.S.C. 251(c)(6). 14
all structures that house incumbent LEC facilities on public rightsof-way, including but not limited to vaults containing loop concentrators or similar structures; and all land owned, leased, or otherwise controlled by an incumbent LEC that is adjacent to these central offices, wire centers, buildings, and structures. 62 Typically, buildings are customer owned and do not fit within the ambit of the definition of premises, as set forth above. Meanwhile, Core's "loop interconnecton" proposal would enable Core to interconnect at any outside plant location. 63 Thus, the real issue is what to charge for the fiber facility from that outside plant location to Embarq PA's switch. Core apparently is trying to secure UNE loop pricing in lieu of entrance facilities or transport facilities. it remains Embarq PA's position that Core can either buy entrance facilities or provision its own transport from an outside plant location to Embarq PA's switch, but Core is not entitled to "loop interconnection" if that entails UNE loop pricing for the fiber facility from that outside plant location to Embarq PA's switch or if Embarq PA otherwise under some construction of Core's proposed language must provide those facilities. The POI remains at the Embarq PA switch location and each party isfinanciallyand operationally responsible for getting traffic to or receiving traffic at the POI. Issue 5: Tandem Switching Rates v. End Office Switching Rates for Transport and Termination. Core states that this issue may be settled. 64 Issue 5 has settled to the extent that Core receives tandem switching rates for call completion if Core's switch serves a geographically comparable area to Embarq PA's tandem. 65 Moreover, Issue 5 has settled to the extent that that Core rejects Embarq PA's opt-in offer, and if there is any non-isp- 62 63 64 65 47 C.F.R. 51.5. EQ PA M.B. at 30. Core M.B. at 38. EQ PA M.B. at 33. 15
bound traffic below a 3:1 ratio, then Core can interconnect at either Embarq PA's tandem or end office and still receive the tandem switching rate for call completion provided Core's switch serves a comparable geographic area. Thus, assuming Core terminates telecommunications traffic and assuming that Core originates traffic terminating to Embarq PA so as to have a basis upon which to base the ISP Remand Order's 3:1 ratio, Issue 5 appears to have settled. 66 It is Core's traffic terminating to Embarq PA that is the basis for calculating the 3:1 ratio. If "settled" means that Core need not originate traffic, yet Core can receive tandem switching rates for call completion and/or Core can interconnect at either Embarq PA's tandem or end office and still receive the tandem switching rate for call completion as addressed above, then Issue 5 has not settled. Issue 5 is not settled so long as Core believes it has a right to receive compensation as addressed herein for traffic that is neither local voice nor non-vnxx-enabled ISP-bound traffic. 67 As addressed in Embarq PA's Main Brief, there are two possible outcomes 68 First, if Core accepts Embarq PA's opt-in offer, all local voice and non-vnxx-enabled ISPbound traffic exchanged by the carriers will be subject to the ISP Remand Order's $.0007/MOU rate. This tandem rate issue then becomes a moot issue. 69 If Core does not accept Embarq PA's opt-in offer, then the only traffic that Issue 5 impacts is any Embarq 66 The remaining question is language to be adopted for the resulting agreement. If Core's belief that Issue 5 has settled because it accepts Embarq PA's modified language at Sections 55.1.1.2, 55.1.1.3 and 55.1.1.5, then Embarq PA agrees that the language for Issue 5 is also settled. 67 In Core's Main Brief. Core asserts that it "is entitled to charge" all three rate elements and thereby receive reciprocal compensation merely because it "accepts" terminating traffic. Core M.B. at 37. The end office switching, tandem switching, and shared transport rates identified by Core at page 36 of its Main Brief are not reciprocally paid by each party, but rather are charged by Core and paid by Embarq PA given that Core originates no traffic for those terminating rates to apply. Moreover, Embarq PA would pay compensation based on these rates notwithstanding that the traffic terminating to Core is neither local voice nor non-vnxxenabled ISP-bound traffic. Core has not demonstrated any right or entitlement to reciprocal compensation for traffic that is neither local voice traffic nor non-vnxx-enabled ISP-bound traffic. 68 See, EQ PA M.B. at 35. 69 EQPA St. 1.0 at 23. 16
PA-originated local voice traffic that falls below the ISP Remand Order's 3:1 ratio. Even in the scenario of Core not accepting Embarq PA's opt-in offer. Issue 5 is relatively moot given that Core does not originate any traffic at all. Second, the Commission can maintain the status quo and require that the parties in the resulting agreement implement a bill and keep arrangement for compensation governing the agreement. The language proposed by Embarq PA. as modified in this proceeding, is set forth at page 34, with bill and keep language set forth at page 36 of Embarq PA's Main Brief. Both parties have proposed virtually identical language at Section 55.1.1.2. 70 appear to agree upon Embarq PA's proposed language for Section 55.1.1.3. Both parties Embarq PA has also proposed Section 55.1.1.5, which does not appear in Core's proposed language. 72 If bill and keep is not adopted, then this additional provision at Section 55.1.1.5 ensures that Core pays Embarq PA on the same basis as Embarq PA pays Core and thereby ensuring that the end office switching, tandem switching, and shared transport rates are applied symmetrically to both parties. If the Presiding Judge and the Commission do not adopt bill and keep, then Embarq PA's proposed language at Sections 55.1.1.1, 55.1.1.2 and 55.1.1.5 should be adopted. 70 Embarq PA uses the term "POI" whereas Core uses the term "IP' based upon the parties' respective positions at Issue 2. 71 Embarq PA uses the phrase "Local Traffic" whereas Core uses the phrase "Section 251(b)(5) Traffic consistent with the parties' respective positions at Issue 1. 72 Embarq PA-proposed Section 55.1.1.5 is as follows: Where direct end office trunks are established, for CLEC-originated calls, CLEC shall pay Embarq PA end-office termination. For Embarq PA originated traffic terminating to CLEC at that end office, compensation payable by Embarq PA shall be the same as that detailed in Section 55.1.1.3 above. 17
Issue 6: Reciprocal Compensation for "Section 251(b)(5) Traffic." Core claims that its language at Section 55.3 simply requires the originating carrier, in this case Embarq PA, to compensate the terminating carrier for Section 251(b)(5) Traffic. 73 Core declares that compensation "rates are symmetrical." 74 Core does not originate any "Section 251(b)(5) Traffic." Core's chosen business plan - VNXX-enabled, ISP-bound traffic - means Core is never "[t]he Party originating Section 251(b)(5) Traffic." Indeed. Core does not originate any traffic at all that terminates to Embarq PA. Embarq PA - and Embarq PA only - would be "bound to pay reciprocal compensation" to Core under Core-proposed Section 55.3. Thus, the rates underlying reciprocal compensation paid by Embarq PA to Core are not "symmetrical" under Core's view, but rather are unilateral. Transport and termination rates cannot be "symmetrical" so long as Core does not pay transport and termination rates. There is no symmetry; there is only the very arbitrage that the FCC in the ISP Remand Order sought to eliminate. At pages 41-43 of its Main Brief, Core presents its view of the FCC's mirroring rule. Embarq PA in its Main Brief fully addressed Core's position as to the FCC's mirroring rule. 75 A few responses to Core's Main Brief, however, are appropriate. Core compares the FCC's S.0007/MOU rate to a S.01/MOU rate that Core claims would otherwise apply and then claims it is undisputed that Embarq PA would "realize huge cost savings by capping the compensation." 76 Of course, charging the FCC's 73 Core M.B. at 39. 74 Core M.B. at 40. Core's unconvincing and erroneous reliance upon Section 51.711 was addressed in Embarq PA's Main Brief. EQ PA M.B. at 44-45. 75 EQ PA M.B. at 36-51. 76 Core M.B. at 41-42.