STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS
PUBLIC UTILITIES COMMISSION
IN RE: ARBITRATION OF INTERCONNECTION
AGREEMENT BETWEEN NYNEX AND
COX RHODE ISLAND TELCOM, INC.
DOCKET NO. 2614
WHEREAS, On August 22, 1997, Cox Rhode Island Telcom, Inc. ("Cox") filed with the Rhode Island Public Utilities Commission ("Commission") a petition for arbitration of an Interconnection Agreement ("ICA") with NYNEX, [1 NYNEX merged with the Bell Atlantic Corporation in August, 1997. Since the merger, the company is doing business as Bell Atlantic.] pursuant to Section 252 of the Telecommunications Act of 1996 ("Act"). [2 47 U.S.C. Section 251, et seq.] These parties began negotiating on March 17, 1997 when Cox requested interconnection pursuant to Section 251 of the Act. In accordance with the time frame mandated by the Act, Cox's petition was filed with the Commission on the 160th day following the request for interconnection; and
WHEREAS, Upon receiving Cox's petition, the Commission appointed John Spirito, Jr., Esq. as arbitrator, to consider the interconnection issues raised by the parties and to issue a decision which is consistent with the Act; and
WHEREAS, The recommended decision was due to be issued on or before November 17, 1997, and was actually issued on November 4, 1997; and
WHEREAS, Pursuant to the Commission's Regulations Governing the Arbitration, Mediation, Review and Approval of Interconnection Agreements, the deadline for filing intervention was November 25, 1997. No requests to intervene were filed; and
WHEREAS, On November 28, 1997, Cox and Bell Atlantic agreed not to challenge Arbitrator Spirito's recommendations; [3 The text of the Arbitration Recommendation is attached as Appendix A, and incorporated herein by reference.] and
WHEREAS, Pursuant to public notice, a hearing was conducted by the Commission on December 2, 1997. Appearances were entered by John B. Messenger, Esq. for Bell Atlantic; Paul J. Roberti, Esq. for the Division of Public Utilities and Carriers ("Division"); and Brian T. Fitzgerald, Esq. and Jennifer Johns, Esq. for Cox; and
WHEREAS, During the hearing, the Division noted that it accepted the Arbitration Recommendation, as well; and
WHEREAS, At any open meeting on December 10, 1997, the Commission considered the standards outlined in Section 252(c) of the Act, and the determination by Cox, Bell Atlantic and the Division to accept the Arbitration Recommendation, and unanimously adopted the Arbitration Recommendation;
Accordingly, it is:
1. The Arbitration Recommendation is hereby adopted as an Order of the Commission.
2. The parties are directed to file their Interconnection Agreement with the Commission for approval, pursuant to Section 252(e) of the Act.
EFFECTIVE AT PROVIDENCE, RHODE ISLAND, ON DECEMBER 10, 1997, PURSUANT TO AN OPEN MEETING DECISION. WRITTEN ORDER ISSUED JANUARY 30, 1998.
PUBLIC UTILITIES COMMISSION
James J. Malachowski, Chairman
Kate F. Racine, Commissioner
Brenda K. Gaynor, Commissioner
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STATE OF RHODE ISLAND AND PROVIDENCE PLANTATIONS
PUBLIC UTILITIES COMMISSION
IN RE: ARBITRATION OF INTERCONNECTION
AGREEMENT BETWEEN NEW ENGLAND TELEPHONE
AND TELEGRAPH COMPANY AND COX
RHODE ISLAND TELECOM, INC.
DOCKET NO: 2614
On August 22, 1997, Cox Rhode Island Telecom, Inc. ("Cox") filed with the Rhode Island Public Utilities Commission ("Commission") a petition for arbitration of an Interconnection Agreement ("ICA") with the New England Telephone & Telegraph Company ("NET") [1 The New England Telephone & Telegraph Company's ("NET") parent corporation ("NYNEX") merged with the Bell Atlantic Corporation in August of 1997. Since the merger, NET has changed its "D/B/A" in Rhode Island to reflect the change in its ownership structure. However, for purposes of this arbitration proceeding the local corporate name of NET will continue to be used.], pursuant to the Telecommunications Act of 1996 [2 47 U.S.C. Section 251, et. seq.] (the "Act"), specifically Section 252 of the Act.
Cox's and NET's negotiations of the ICA commenced on March 17, 1997, the date NET received Cox's formal request to initiate negotiations, pursuant to Section 251 of the Act. In accordance with the timeframe mandated by the Act, Cox's petition was filed with the Commission on the 160th day following the request for interconnection.
Pursuant to the Act, NET could have filed a response to Cox's petition for arbitration. The deadline for such a filing was September 16, 1997, or 25 days after the instant petition filing. [3 Section 252 (b) (3)] However, NET opted to not file such a response. Instead, NET decided to identify relevant issues and propound its positions through the process established by the undersigned arbitrator, infra.
Upon receiving Cox's petition, the Commission appointed the undersigned arbitrator to consider the interconnection issues raised and to issue an arbitration recommendation to the Commission which is consistent with the Act, and the Commission's "Regulations Governing Arbitration, Mediation, Review and Approval of Interconnection Agreements" ("Rules"). [4 Effective on May 12, 1997] Pursuant to the timeframes mandated under the Commission's Rules, the instant arbitration recommendation was due to the Commission on or before November 17, 1997 (Commission Rule 6(i)). The Commission is required under the Act to issue a final arbitration decision by December 17, 1997. [5 Section 252 (b) (4) (c).]
In its August 22, 1997 petition filing, Cox identified a large number of interconnection issues which remained unresolved between NET and Cox. As the arbitration process progressed this original number of unresolved issues was pared down through negotiations between the parties.
The arbitration process formally began on September 10, 1997. The undersigned arbitrator conducted the initial pre-hearing (arbitration) conference on that date. At that time counsel for the parties entered their appearances. Counsel were identified as follows:
FOR COX: Brian T. Fitzgerald, Esq. and Jennifer Johns, Esq.
FOR NET: John B. Messenger, Esq.
Predicated upon a procedural schedule adopted during the September 10th pre-hearing conference, the parties proffered a Joint Statement of Issues on September 19, 1997 (Joint Exh. 1). In this joint statement, the parties narrowed the unresolved issues down to fourteen. [6 Cox's original petition identified a total of twenty-four unresolved issues. Many of these issues also contained sub-issues.] The fourteen issues were delineated as follows:
1. Provisioning and Service Quality Issues:
1.1 Intervals for provisioning, installation, maintenance, testing and repair of unbundled links and ports and other network elements;
1.2 Hot Cut Interval (60 minute v. 30 minute window);
1.3 Cancellation interval (30 days versus 10 days);
1.4 Minimum orders for links and ports;
1.5 Testing each link and port before cutover;
1.6 BFR process; and
1.7 Provisioning of NIU and NID.
2. Monetary remedies:
2.1 Liquidated Damages;
2.2 Expedite Charges (reimbursement of Cox's make-ready costs); and
2.3 Not Ready Charges (reciprocal reimbursement).
3. Price Issues:
3.1 Interim Prices;
3.2 Reciprocal Compensation where Cox uses an unbundled port or other unbundled network elements to terminate traffic;
3.3 Internet traffic and reciprocal compensation; and
3.4 Price for unbundled NID.
In addition to the aforementioned fourteen issues, the parties did explain that nine additional issues remained unresolved as of the date the parties' Joint Statement of Issues was filed [7 September 19, 1997.]. Albeit unresolved, the parties both agreed that "settlement short of arbitration may occur" (Joint Exh. 1, p. 2). These additional nine potential issues were identified as follows:
1. Collocation interval;
2. Two-way trunking;
3. NDR Process;
4. Carrier to Carrier Service Standards -- Reporting requirements;
5. Which national technical standards should apply;
6. Joint Grooming Plan -- date certain;
7. OSS Systems;
8. Term of Agreement; and
9. Environmental Hazard. (Joint Exh. 1).
On October 1, 1997, the parties filed an amended joint statement of issues (Joint Exh. 2). The amended issues reflected further negotiation efforts made by the parties. The parties indicated that their continued negotiations resulted in a resolution to several of the previously outstanding issues. Specifically, the following issues were retracted from the arbitration process:
- "1.1 Intervals for provisioning, installation, maintenance, testing and repair of unbundled links and ports and other network elements", (supra);
- "1.2 Hot Cut Interval (60 minute v. 30 minute window)", (supra);
- "3.4 Price for unbundled NID", (supra);
- "2. Two-way trunking", (supra);
- "3. NDR Process", (supra);
- "5. Which national technical standards should apply", (supra);
- "6. Joint Grooming Plan -- date certain", (supra);
- "7. OSS Systems", (supra); and
- "8. Terms of Agreement" (supra).
The parties additionally amended their original joint statement of issues by including a new issue for arbitration. The new issue was given the designation "3.5 Related Price Issue" by the parties (Joint Exh. 2).
The parties further pared down their joint statement of issues on October 3, 1997, the first day of hearings on the instant arbitration proceeding. At the outset of the October 3 hearing, the parties indicated that the following two issues could also be retracted from the arbitration process:
- "3.1 Interim Prices", (supra); and
- "4. Carrier to Carrier Service Standards -- Reporting requirements", (supra).
Subsequently, at the outset of an October 7, 1997 hearing, the parties jointly agreed to retract three more issues from the arbitration process. The following issues were identified:
- "1.5 Testing each link and port before cutover", (supra);
- "1. Collocation interval", (supra); and
- "9. Environmental hazard", (supra).
The final retraction, of two additional issues, was communicated to the undersigned arbitrator through the parties' post-hearing briefs, received on October 14, 1997. The issue designations are reflected below:
- "1.3 Cancellation interval (30 days versus 10 days)", supra, and
- "3.3 Internet traffic and reciprocal compensation", supra.
Predicated on the several amendments to the parties' original Joint Statement of Issues, the following eight issues are now ripe for arbitration:
- 1.4 Minimum orders for links and ports;
- 1.6 BFR process;
- 1.7 Provisioning of NIU and NID;
- 2.1 Liquidated Damages;
- 2.2 Expedite Charges (reimbursement of Cox's make-ready costs);
- 2.3 Not Ready Charges (reciprocal reimbursement);
- 3.2 Reciprocal Compensation where Cox uses an unbundled port or other unbundled network elements to terminate traffic; and
- 3.5 Related Price Issue.
The first seven of the above eight issues were delineated in the parties' Joint Statement of Issues filing on September 19, 1997. Both Cox and NET proffered written positions on each of the first seven issues, as reflected in their respective position statement filings, submitted on September 26, 1997. The parties also buttressed their respective positions, on several of the seven issues, with prefiled direct witness testimony. Each party proffered one witness. The eighth issue, described as "3.5 Related Price Issue", was not on the original list, but added by Cox in its position statement. NET, due to the simultaneous filing requirements for the parties' position statements, was unable to address this issue in its position statement. Nevertheless, NET did not object to the inclusion of this issue. NET did address the issue in its brief.
The undersigned arbitrator conducted two hearings on the unresolved issues. The hearings were conducted on October 3 and 7, 1997, at the Commission's hearing room located at 100 Orange Street in Providence. The counsel previously identified appeared on behalf of their clients.
During the hearings the parties were afforded an opportunity to cross-examine each other's witness. Cox's witness was identified as Dr. Francis R. Collins, Ph.D, president of CCL Corporation, P.O. Box 272, Newton, Massachusetts. NET's witness was identified as Ms. Jo-Anna Ghadban, an NET operations manager.
The remainder of this arbitration recommendation presents a summary of the parties' positions relative to the aforementioned eight outstanding issues, and my findings and recommendations thereon.
a. Cox's position
Cox relates that it is expending considerable capital to upgrade its existing cable facilities to enable it to provide telephone service. Despite the pervasiveness of its facilities, Cox states that its upgraded broadband network will not reach every area of Rhode Island in the immediate future. Consequently, Cox explains that it may need to purchase links, ports, and other unbundled elements from NET in order to service all of Rhode Island. To meet this potential need Cox wants NET to provide it with an assurance that the minimum number of facilities that Cox will need to enter the market in a ubiquitous manner will be available when and where Cox will need them (Cox Exh. 3, pp. 13-14).
Cox further contends that this assurance is far more critical to a facilities-based new entrant (like Cox) than to a reseller. Cox relates that if facilities are not available to a reseller, "it has no investment loss, but only a potential profit loss" (Id., p. 14). Unlike a facilities-based provider, whom Cox maintains:
"stands to lose not only future profit, but also its investment in its existing facilities that have been upgraded and are already in place" (Id.).
b. NET's position
NET states that although it has sufficient links and ports to meet current State demand, it believes that:
"there will no doubt be occasion in the new multi-provider environment where...[NET] lacks sufficient capacity in its plant and equipment to fill all pending orders for unbundled network elements at a given location" (NET Exh. 1, p. 7).
In anticipation of this potentiality, NET asserts that it must be permitted to have clear and uniform procedures in place that will allow it to ensure that "scarce resources" are allocated in an equitable manner across all providers, including NET's own retail service (Id.).
According to NET, its current procedure works as a two-tiered system. The first tier requires that carriers submit non-binding forecasts of their demand, which NET in turn uses in budgeting and planning for network growth. In the second tier, the carrier may submit a binding forecast that commits the carrier to purchase, and commits NET to provide, the specified volume of unbundled elements. NET relates that in the absence of a binding forecast (Tier 2), actual service orders are filled on a "first-come, first served basis" (Id., p. 8).
NET opposes Cox's position on this issue because it would require NET to commit to make specified quantities of network elements available to Cox without an assumption of liability by Cox. NET relates that if facilities are available at the time Cox places an order, those facilities will go to Cox. However, without a binding forecast, NET opines that giving priority to Cox over other carriers would give Cox an unfair advantage over its competitors, and place NET in an untenable position (Id.).
c. findings and recommendation
The Act requires that NET not prohibit, or impose unreasonable or discriminatory conditions or limitations on, the resale of its telecommunications services (Sec 251 (b)(1)). Similarly, NET has a duty to provide, to any requesting telecommunications carrier, nondiscriminatory access to its unbundled network elements (Sec. 251 (c)(3)).
Based on the record before me, I find that the adoption of Cox's position on the instant issue would adversely impact NET's ability to carry out these duties. The Act obligates incumbent local exchange carriers to provide access in a nondiscriminatory manner. Cox contends that it ought to receive preferential access to unbundled network elements, irrespective of the needs of other categories of telecommunications service providers (i.e. resellers). I believe that this request, if implemented, would violate the nondiscrimination axiom of the Act.
Under NET's proposal, Cox would be able to execute a binding contract which would commit NET to provide the unbundled network elements needed by Cox. Contracts of this nature would be available to all carriers, without preference. To the extent Cox needs to purchase links, ports, or other unbundled elements from NET, this procedure would obligate both carriers to perform. Cox will receive its network elements in the location and at the time of its choice. NET will know that it will be compensated for the production of the additional network elements. NET's proposal is reasonable, equitable and consistent with the Act.
Predicated on the above findings and conclusions, I will recommend that the Commission adopt NET's position on this issue.
a. Cox's position
Cox opines that as the competitive marketplace develops, it is likely that new telecommunications products and services will be introduced into the market. Cox predicts that these new products and services will require unique interactions between NET's and Cox's networks. The "Bona Fide Request" ("BFR") process represents the mechanism which will allow Cox to work out the feasibility and provisioning of new elements by NET.
The primary issue remaining between the parties on this subject matter relates to the time intervals for processing BFR's. Cox contends that NET should be able to acknowledge receipt and respond to a BFR request within 48 hours. NET proposes ten business days instead. Cox further contends that NET should be able to complete a preliminary analysis, absent extraordinary circumstances, of any BFR request within 15 business days. NET proposes 30 business days instead.
As an ancillary issue, Cox proposes that the initial BFR development costs that Cox is required to pay be charged on a prorated basis to the next nine carriers that seek the same new unbundled element or service from NET. Cox asserts that it should then receive a refund from NET of that portion of its BFR development costs. Cox reasons that the development costs refund is appropriate in order to keep Cox's competitors from using the new services or network elements, which Cox has paid for, from getting a competitive advantage. Cox explains that its competitors' prices can be lower than those of Cox because they would be able to avoid the need to recover development costs from customers (Cox Exh. 4, p. 10).
As an additional ancillary issue, Cox also proposes BFR language which protects any intellectual property rights that Cox may have or acquire in a new product or service.
As a final addition to its BFR proposal, Cox includes a provision which: "makes the charges that apply if one party backs out of a BFR request after the other party has incurred costs mutual" (Cox Exh. 3, p. 18). Under Cox's BFR, if Cox cancels after NET has performed the entire analysis, Cox would be required to pay for the reasonable costs that it caused NET to incur. Cox's BFR similarly provides that if Cox incurred development or other costs in reliance on NET's promise to provide a new element, a promise given only after extensive NET analysis, and then NET subsequently determines that it cannot provide the network element to Cox, NET should be required to refund Cox's reasonably incurred costs (Id.).
b. NET's position
NET relates that BFR procedures are currently included in most of the interconnection agreements it shares with other carriers. NET contends that it is important for it to have a relatively uniform process for evaluating these requests so that it can be administered effectively and so that all carriers get a comparable level of attention and resources (NET Exh. 1, p. 10). NET provided a proposed uniform BFR form with its position statement (Id., exhibit D).
c. findings and recommendation
Upon a careful examination of the record, I can find little substance in NET's opposition to Cox's Bona Fide Request proposal. Consequently, in considering this issue I relied in large measure on the reasonableness of the terms and language contained in Cox's proffered "Bona Fide Request Process" (Cox Exh. 4, exhibit 3).
Cox's proposal for an acknowledgment of BFR receipt from NET within 48 hours appears reasonable. Similarly, Cox's request for a preliminary analysis within 15 days appears reasonable. Under Cox's proposed BFR process, both of these time frames are measured by a "best efforts" standard, and therefore, flexible with regard to unforeseen events. Indeed, the Cox interval proposal relative to a preliminary analysis includes NET safeguards for "extraordinary circumstances" (Id.). Furthermore, as the Cox proposal contains no penalties for a breach of the recommended timeframes, NET's failure to meet these standards would at most precipitate a complaint to the Commission. NET would then have a forum and opportunity to explain the reason(s) for the delay(s).
Cox's proposal to have NET prorate Cox's initial development costs among the next nine carriers also appears reasonable. NET itself has indicated that:
"To the extent that a particular bona fide request actually involves the incursion of one-time common 'development costs',...[NET] is not opposed to spreading those costs over all requesting carriers in a fair and equitable manner, and would consider doing so on a case by case basis should the occasion arise" (NET Brief, p. 5).
In order to keep Cox and its competitors on a level playing field, I agree that this prorating of development costs is reasonable and appropriate.
Relative to the issue of intellectual property rights, when applicable, Cox should be entitled to appropriate protection. However, the likely infrequency of this situation does not necessitate that the details be addressed here and now. Instead, the parties should negotiate the terms of such an agreement on a case-by-case basis.
Finally, with respect to Cox's reciprocal "make-ready" costs proposal, I also find this request reasonable and appropriate. In the unlikely event that NET commits to provide a new service or element and then subsequently reneges on the promise, Cox should be entitled to collect reasonable compensatory damages. This breach of contract matter could be significantly costly to Cox and should be as actionable before the Commission as it would be before the Courts. Cox should therefore be able to collect its reasonable "make-ready" costs or proceed to a complaint filing before the Commission.
In conclusion, I have considered Cox's proffered BFR process and find it reasonable. I will recommend that the Commission adopt Cox's position on this issue.
a. Cox's position
Cox relates that this issue is important to it since it involves the mechanics of how Cox will physically interconnect its customers with NET's network.
Cox offered the following descriptions for an "NID" and an "NIU", which NET did not dispute:
"The Network Interface Device ('NID') is the physical point in a telephone subscriber's home or place of business where the telephone device and/or inside wiring of the subscriber are connected to the transmission lines of a local telephone company. A modern NID is divided into two separate chambers, a 'carrier chamber' that the customer may not access and a 'customer chamber' that the customer may freely access.
A Network Interface Unit ('NIU') is a cable device that performs a function similar to that of the NID. It is a highly sophisticated electronic interface unit that bridges the carrier's broadband network to the customer's inside wire" (Cox Exh. 3, p. 19).
The primary issue outstanding between the parties is whether Cox should be permitted to connect an unbundled NET loop directly to Cox's NIU, or whether an NID ought to be used between an NET loop and a Cox NIU? A related issue also remains outstanding. Specifically, to the extent that ?? connection is required, does an NET technician need to do the ?? Cox technician do the work alone? If an NET technician is requi?? be responsible for this cost. Cox contends that NET's position ?? the unnecessary expenditure of technician time and requires Cox to incur the expense of installing an additional cross-connection between the NIU and NID that "adversely affects reliability" (Cox Exh. 4, p. 12).
b. NET's position
NET explains that one of the principal functions of the NID is to provide protection and grounding, to prevent electrical surges from traveling between the customer's premises and the rest of the telephone network (NET Exh. 1, p. 1). NET maintains that it cannot take on the risk of potential liability that would flow from having non-NET technicians terminating its loops in non-NET equipment (Id.).
c. findings and recommendation
After a thorough review of the record, I am convinced that an NIU offers comparable protection and grounding functions to an NID. So the only issue of real contention is one of liability for a failed or improperly installed NIU. If a Cox technician terminates an NET loop with a Cox NIU, and surge damage occurs, should Net or Cox be responsible?
I find that two remedies to this issue are available and dispositive. First, if Cox wants to terminate an NET loop without an NID, Cox should be compelled to execute a "hold harmless" agreement wherein it releases NET from any liability resulting from damages or injuries caused by surges through a failed or improperly installed NIU. Such agreement would also include language making Cox responsible for any damages to NET's network resulting from surge damage caused by a failed or improperly installed NIU. If Cox is unwilling to execute such an agreement then NET ought to be permitted to terminate its loop with an NID, using its own technician, and charge reasonable rates for this service.
Secondly, if NET is unwilling to accept Cox's acceptance of full liability for its NIU, then NET ought to absorb the full costs it incurs for installing an NID at the end of an unbundled loop purchased by Cox. NET may opt, of course, to permit Cox technicians to install NID's, which NET will provide at no cost to Cox.
I believe that this solution constitutes an equitable remedy to this issue. Accordingly, I will make such recommendation to the Commission.
a. Cox's position
Cox contends, that notwithstanding what the Commission has decided in other interconnection arbitrations, the ICA between Cox and NET should include provisions for liquidated damages "triggered by NET's failure to meet agreed upon performance quality standards" (Cox Exh. 3, p. 21).
Cox argues that performance quality standards backed by liquidated damages for non-compliance are necessary to protect Rhode Island consumers, particularly as competition expands in the telecommunications market (Id., p. 22). Cox relates that even though the parties have agreed upon ?? measurement and reporting requirements, [8 10/3/97 Tr. 93; Cox's Brief, p. 15; and NET's brief, p. 10.] liquidated damages ?? outstanding issue which is important if Cox is to receive service q?? from NET. Cox proffered an exhibit which fully described the liquidated damages provisions it seeks (Cox Exh. 3, attached exhibit E).
b. NET's position
NET asserts that the Act does not require that an ICA contain any provision for liquidated damages (NET Exh. 1, p. 11). NET also notes that the Commission has adopted this conclusion and rejected liquidated damages in prior arbitrations. [9 See AT&T/NYNEX arbitration, Docket No. 2458; Brooks Fiber/NYNEX arbitration, Docket No. 2449; and TCG/NYNEX arbitration, Docket No. 2448.]
NET relates that the issue of remedies for poor service among carriers is best addressed, if at all, in the context of a generic proceeding under the Commission's plenary authority. NET maintains that in the meantime, if Cox feels that NET is not providing service in accordance with the Act's parity standard, Cox is free to file a complaint with this Commission (NET Exh. 1, p. 11).
c. findings and recommendation
In prior ICA arbitrations before the Commission, competitive local exchange carriers have argued for penalties or liquidated damages in order to protect them from breaches of service quality parity. The arguments raised by Cox in the instant docket closely parallel the arguments raised by TCG Rhode Island in an ICA arbitration in which I participated in last year. [10 Docket No. 2448]
In both the TCG arbitration and other arbitration matters before the Commission, it was determined that so long as performance standards and reporting requirements are firmly in place, there is no need to adopt specific penalties. In the TCG arbitration, I concluded that neither the Act nor the FCC had established any performance penalties. [11 Docket No. 2448 arbitration decision, p. 28, issued on November 7, 1996.] I further concluded that the FCC had established a mechanism through which new entrants can file performance-related complaints with the FCC regarding the actions of incumbent local exchange carriers. [12 Id.] A competitive local exchange carrier can similarly file service complaints with the Commission.
In this arbitration proceeding, I must agree with NET in its contention that:
"Cox has not shown why it should have any greater entitlement to liquidated damages than TCG, AT&T, or any other local competitor in the state" (NET Brief, p. 11).
The parties have reached an accord on detailed service quality measurement and reporting requirements during their negotiations in this docket. Further, the complaint forums that existed last year at the State and federal levels still exist today. For these reasons, I must find for NET on this issue.
Accordingly, I will recommend to the Commission that a liquidated damages provision not be included in the instant ICA.
a. Cox's position
Cox identifies two components to this issue. First, Cox seeks reciprocal reimbursement for the costs it would incur resulting from NET's failure to provide the expedited services it has agreed to. Cox argued as follows:
"If Cox incurred costs as a result of NET's failure to meet the expedited time frame that NET agreed to, and that Cox paid for in advance, then Cox should receive back from NET not only the expedite fee it paid (NET's proposal), but also any make-ready or other related costs that NET induced Cox to incur in anticipation of NET meeting the expedited deadline" (Cox Exh. 3, p. 25).
Cox contends that NET's refusal to compensate Cox for its "make-ready" costs, after NET's failure to perform promised expedited services, is unfair as NET expects these costs when Cox is at fault (Id., p. 25).
The second component of this issue raised by Cox, relates to the installation fees which NET charges even after a failure to act expeditiously. According to the record, there are two fees which apply when a competitive local exchange carrier seeks expedited services from NET, the "expedite fee" and the "installation fee" (NET Exh. 2, p. 2). The installation fee covers the actual work performed by NET technicians. The expedite fee represents the costs associated with processing the service request in an expedited fashion, or "completing the order in less than the standard interval" (NET Brief, p. 12). NET has stated that when expedited services are arranged for, and NET ultimately fails to perform the services expeditiously, NET will waive the expedite fee. However, NET asserts that the installation fee, for late services, would still apply. Cox takes exception to the applicability of an installation fee for late services.
Cox likens the scenario to a party host seeking catering services. Cox contends that a caterer would not be entitled to any food preparation costs if he or she appeared the day after the party (10/7/97, T. 17-18; and Cox Brief, pp. 19-20). Cox similarly argues that NET should not be entitled to an installation fee after it has missed the deadline for performance.
b. NET's position
NET maintains that "waiving the installation charge is unacceptable" (NET Exh. 2, p. 3). NET reasons that even if its services are late, NET must still perform the dispatch and still incur the expense associated with processing the service order and dispatching a technician (Id.). NET further opines that if installation charges are dropped on "missed expedites,...Cox could attempt to request all expedites and consequently not pay the installation charges on a substantial amount of orders" (Id.).
NET characterized Cox's request for "make-ready" costs as "a claim for damages" (NET Brief, p. 12). NET, borrowing from Cox's caterer analogy, also queried whether the caterer would agree to reimburse the party host for the costs the party host may have incurred, in addition to not charging for the food (Id., p. 13). NET further queried whether Cox would agree to reimburse its customer for his or her lost time if a Cox technician is unable to make a due date (Id.).
c. findings and recommendation
Albeit the record is silent on the reason why NET provides expedited services at all, the most plausible reason is simply that NET derives additional revenues from this service. Clearly, there is no requirement that NET provide such expedited services. Therefore, if NET agrees to provide expedited services, at a premium rate, it should take its commitment to provide these services seriously. By seriously, I mean on time.
NET has testified that it is limiting the amount of expedites to less than 10 percent of the order base for all telecommunications carriers (NYNEX Exh. 2, p. 3). It is relatively certain that only a fraction of these expedites will be untimely. For these reasons, I find that one way to keep expedite volumes down to a workable level, which in turn ought to minimize late services, and logically minimize make-ready costs, is to adopt Cox's installation charge waiver proposal. I find that the cost potential to NET for waiving these installation charges, is significantly outweighed by the cost potential to Cox resulting from broken time commitments and make-ready efforts.
On the issue of reciprocal reimbursement for make-ready costs, I find for NET. Predicated on my decision to adopt Cox's installation charge waiver proposal, I believe the likelihood of Cox incurring make-ready costs has been greatly reduced. Further, because quantifying these costs would be problematic at best, and invariably amounting to relatively small sums, the Commission's task to adjudicate such damage claims would be unnecessarily costly and of little value to ratepayers.
Accordingly, I will recommend to the Commission that Cox's proposed waiver of installation charges be adopted for inclusion in the instant ICA. Conversely, I will recommend that Cox's request for make-ready costs be rejected.
(RECIPROCAL REIMBURSEMENT)
a. Cox's position
Cox relates that NET proposes to charge Cox a "service order charge" and a "premises visit charge" when NET's technician reaches the work site and cannot complete the requested work because Cox's customer is not ready (Cox Exh. 3, p. 25). Cox states that it is not challenging NET's rights to these charges. However, Cox objects to NET's refusal to reimburse Cox "when the shoe is on the other foot" (Id.).
Cox explained that if NET's technician fails to meet a scheduled dispatch and service performance time, "NET will not agree to later perform the service at no charge to Cox or the end-user, despite the inconvenience and cost to Cox and the customer" (Id., pp. 25-26). Cox also relates that in those situations where Cox's technician was left waiting at the site for an NET technician who failed to show up, NET has refused to reimburse Cox for Cox's wasted technician time (Id., p. 26).
b. NET's position
NET testified that it would charge Cox a "customer not ready" charge "because Cox is responsible for arranging access to the customers premises on the due date" (NET Exh. 2, p. 4). Ms. Ghadban explained that Cox receives a pricing discount for unbundled network elements and resold lines because NET does not have to perform the customer contact functions (Id.). She added that if Cox performs this function poorly, NET incurs the expense of dispatching a technician without being able to complete the work. She related that NET must then re-dispatch a technician to complete the service order. Ms. Ghadban reasoned that since Cox does not dispatch a technician to the end user's premises at any time to install the service, "they do not incur any expense" (Id.).
Ms. Ghadban also testified that by requiring NET to waive the service order charge "Cox would ensure they were receiving better than parity service" (Id.). She related that if NET had to waive charges on a missed service order by Cox, NET would attempt to dispatch on all the Cox orders on the due date. She opined that this would penalize other customers because NET "would be forced to miss their orders rather than miss a Cox order resulting in waived charges" (Id.).
c. findings and recommendation
Although this issue seems similar to the prior issue, it appears that the distinguishing difference is the element of expeditiousness. Here, Cox seeks reciprocal reimbursement when an NET technician is simply late for a routine scheduled dispatch.
The record does reflect that a Cox customer may be inconvenienced by a missed appointment by NET. However, the record does not reflect that Cox would be sharing any of the requested "reciprocal reimbursement" with its customer. The record is also not clear on when, if ever, and to what extent a Cox technician would actually be impacted by NET missing such an appointment.
For the reasons identified previously in the last issue, relative to makeready costs, and based on the observations noted above, I must find for NET on this issue. Consequently, I will recommend to the Commission that NET's position on this issue be adopted.
a. Cox's position
Cox asserts that once it purchases an unbundled network port, link, or other unbundled element from NET, that network element is under Cox's exclusive control. As such, Cox believes that it is entitled to receive reciprocal compensation from NET when Cox's network, whether comprised of Cox's own facilities or facilities that it leases from NET, is used to terminate traffic from an NET customer (Cox Exh. 3, p. 28).
Therefore, where traffic originates or terminates at an unbundled NET port that Cox has included in its network, the traffic is considered by Cox to be traffic subject to reciprocal compensation. In the case of toll traffic terminating at the unbundled port, Cox opines that appropriate access charge revenue or payments from NET to Cox should also apply (Id., pp. 28 and 29).
b. NET's position
NET contends that according to the pricing standards of the Act, the rate for reciprocal compensation should be based on "a reasonable approximation of the additional costs" of terminating the call. NET stated that the FCC interpreted "additional costs" to mean only those costs that are actually caused by the termination of local traffic. NET argues that this would not include the cost of local loops or line ports, because that cost does not vary with the amount of traffic terminated through the switch. According to NET, it would include only the usage-sensitive cost of end office switching used in terminating a call (NET Exh. 1, p. 14).
NET relates that the narrow issue here involves whether and to what extent reciprocal compensation should be payable where Cox terminates traffic through unbundled local switching obtained from NET rather than through its own switch. NET opines that Cox is entitled to reciprocal compensation only when Cox incurs the type of costs for which reciprocal compensation is payable namely, costs that vary with the amount of traffic terminated. Net proffered the following example:
"where the call terminates thorough NET's switch and Cox provides only the loop for the terminating line, no reciprocal compensation should be payable because Cox incurs no 'additional cost' to terminate the call. Where the call is delivered to Cox's switch for termination, Cox incurs the cost of switching the call and is entitled to compensation" (NET Exh. 1, p. 14).
NET explains that the decision of whether Cox should be entitled to reciprocal compensation where Cox terminates a call through unbundled local switching provided by NET is determined by the way in which NET charges for that switching functionality. NET related that it provides local switching in two basic components: a port, provided at a fixed monthly charge, and a perminute usage charge for the local switching itself. NET states that it only charges the usage charge for calls that originate on Cox's network. For calls that originate on NET's network and terminate on Cox's network, NET relates that the cost of the local switching is included in the rate billed to the originating NET customer and is not billed to Cox. NET concluded that a call that terminates through unbundled switchings onto Cox's network does not cause any incremental cost to Cox. NET reasoned that because there is no "additional cost" to Cox of terminating the call, no reciprocal compensation should be payable (Id., p. 15).
c. findings and recommendation
Section 251(b)(5) of the Act provides that all local exchange carriers, including incumbent local exchange carriers, have the duty to "establish reciprocal compensation for the transport and termination of telecommunications." Section 252(d)(2) of the Act provides the underlying foundation for addressing this issue. The relevant provisions are reproduced below:
(2) Charges for Transport and Termination of Traffic
(A) IN GENERAL -- Four the purposes of compliance by an incumbent local exchange carrier with section 251(b)(5), a State commission shall not consider the terms and conditions for reciprocal compensation to be just and reasonable unless --
(i) such terms and conditions provide for the mutual and reciprocal recovery by each carrier of costs associated with the transport and termination on each carrier's network facilities of calls that originate on the network facilities of the other carriers; and
(ii) such terms and conditions determine such costs on the basis of a reasonable approximation of the additional costs of terminating such calls.
In this arbitration proceeding, the parties have indicated that they have agreed to compensate one another for termination of local traffic at a blended reciprocal rate reflecting both end office and tandem office termination. One associated issue remains however. NET does not believe that Cox is entitled to reciprocal compensation when it terminates traffic through unbundled local switching obtained from NET rather than through its own switch. The basis for NET's argument rests with the meaning of the term "additional costs", as reflected above in Section 252(d)(2)(A)(ii). In short, NET asserts that only "usage-sensitive" costs qualify as additional costs within the meaning of the Act; and to the extent Cox uses unbundled local switching from NET to terminate a local call, Cox does not incur any incremental usage-sensitive costs and is therefore not entitled to reciprocal compensation.
Cox on the other hand, argues that its costs for terminating NET's calls, even when using unbundled switches provided by NET, constitute usage-sensitive costs. Dr. Collins testified that:
"... if those network elements are required as the traffic increases, then in the aggregate those network elements are indeed traffic sensitive" (10/3/97, Tr. 39-40).
Dr. Collins further testified that:
"in the aggregate a loop that is composed of these piece parts when there is concentration, multiplexing, analog subscriber loop carriers, digital subscriber loop carriers are in fact traffic sensitive" (10/3/97, Tr. 42).
Dr. Collins also explained as follows:
"Cox's network is different than the network that has grown up historically that Bell Atlantic Rhode Island [NET] uses. There's a different architecture, the technology is different, what is traffic sensitive and what is traffic insensitive is entirely different. And all that Cox is indicating by accepting mutual compensation for terminating traffic is that it is willing to complete traffic on its network for so many tenths of a cent per minute, nothing beyond that" (10/3/97, Tr. 57-58).
After a careful examination of the record, the Act, and relevant FCC decisions on this subject matter, I must find for NET. Cox is exclusively purchasing unbundled local switching from NET for the purpose of establishing a ubiquitous telecommunications network in Rhode Island. This goal will allow Cox to become a truly viable and competitive local exchange carrier. As a secondary function, this unbundled switching will enable Cox to terminate local calls to Cox customers originating from NET customers.
The local unbundled switching which Cox requires and purchases allows Cox to compete with NET by being able to augment its own customer base. As its customer base grows Cox will undoubtedly terminate more and more local calls originating from NET customers. The cost for this local switching will be fixed, as quantified by the tariff rate which Cox must pay to NET for the unbundled elements. This cost will not fluctuate as Cox terminates more and more local calls from NET customers. Yes it is true that costs will increase to the extent more unbundled switching becomes necessary, but the need for additional switching will be primarily driven by the growth to Cox's increasing customer base, and not the calls it will be terminating for NET customers.
In conclusion, I must conclude that the termination costs which Cox contends it will incur when terminating local calls from NET customers over unbundled elements purchased from NET, do not constitute the "additional costs" contemplated under the Act. Accordingly, I will recommend to the Commission that NET's position on this issue be adopted.
a. Cox's position
This issue results from a dispute between the parties regarding the question of which prices will be fixed for the term of the ICA and which will vary based on subsequent NET tariff filings.
Cox requests that the ICA's prices, terms, and conditions, unless expressly indicated as interim by the parties, be fixed for the term of the ICA (Cox Exh. 3, p. 39). Cox argues that the ICA alone must control, otherwise, NET will be able to bind Cox for the life of the ICA, "while retaining for itself the flexibility to void key portions of the contract via subsequent and unilateral tariff filings" (Id.).
In the alternative, Cox proposes that NET be required to provide Cox with notification of any proposed tariff change that will be sufficient to allow Cox a reasonable opportunity to oppose the filing, should Cox determine that it is in its best interest to do so (Cox Brief, p. 32).
b. NET's position
NET denies Cox's assertion that "NET has insisted on being able to contravene the Agreement by superseding parts of it with future tariff filings made at...[NET's] sole discretion" (NET Brief, p. 17). [13 Citing language from Cox Exh. 1, p. 39.] NET maintains that it has negotiated in good faith with Cox and intends to be bound by the provisions of their ICA throughout its term (NET Brief, p. 17).
NET did however contend that it would voice opposition to an arbitration decision which would prevent the Commission from considering a tariff of general applicability that might by its terms govern Cox and supersede any part of this agreement. NET indicated that if in the future it does file such a tariff in Rhode Island, and if NET takes the position that the tariff would supersede the interconnection agreement in whole or in part, Cox will be free at that time to raise any legal or policy objections it may have before the Commission. According to NET, "it would be premature and unnecessary for the Arbitrator to address this issue at this time, and unwise for the Commission to thus tie its hands" (Id., p. 18).
c. findings and recommendation
I have considered the arguments raised by the parties concerning this issue, and must adopt NET's position. It would be wholly inappropriate for me to recommend to the Commission that it restrict or limit in any way its jurisdiction over the rates, terms or conditions of any telecommunications carrier. The Commission is legally bound both under the Act and especially under Title 39 of the Rhode Island General Laws, to effectuate just and reasonable utility rates without unjust discrimination, undue preferences or advantages, or unfair or destructive competitive practices. When NET submits a general application rate filing, all individuals may make comment or request to intervene. To the extent that a future NET filing may have potential consequences relative to the instant ICA, Cox may fully participate in that proceeding in order to protect its rights or business interests.
Indeed, Cox offers this scenario as an alternative proposition. The only variation from normal procedure appears to be a matter of "direct" notice from NET to Cox upon the filing of general application tariffs. Although a direct notice in such case would be unconventional, I find that under the circumstances, it would not be unreasonable or unduly burdensome to NET. Therefore, I will adopt Cox's requested direct notice language for inclusion in the instant ICA.
Accordingly, I will recommend to the Commission that it adopt NET's position on this issue, but with special notice to Cox.
B. RECOMMENDATIONS TO COMMISSION
That for purposes of the instant ICA arbitration, this arbitrator offers the following summary of the recommendations contained herein:
1. Issue - 1.4 Minimum Orders for Links and Ports
Recommendation: Adopt NET position in full.
2. Issue - 1.6 BFR Process
Recommendation: Adopt Cox position in full.
3. Issue - 1.7 Provisioning of NIU and NID
Recommendation: Adopt Cox position if Cox is willing to accept full responsibility for eliminating NID, and NET agrees. If NET does not agree, NET must install NID at no cost to Cox.
4. Issue - 2.1 Liquidated Damages
Recommendation: Adopt NET position in full
5. Issue - 2.2 Expedite Charges (Reimbursement of Cox's make-ready costs.
Recommendation: Adopt Cox position on installation charges. Adopt NET position on make-ready costs.
6. Issue - 2.3 Not Ready Charges (Reciprocal Reimbursement).
Recommendation: Adopt NET position in full.
7. Issue - 3.2 Reciprocal Compensation Where Cox uses an Unbundled Port or Other Unbundled Network Elements to Terminate Traffic.
Recommendation: Adopt NET position in full.
8. Issue - 3.5 Related Price Issue
Recommendation: Adopt NET position in full. Require NET to provide direct notice to Cox when NET files tariffs which may impact ICA.
The above summary is offered as a brief outline of the recommendations contained herein. For the related findings and conclusions associated with each issue, please refer to the full text of this arbitration recommendation.
DATED AND EFFECTIVE ON NOVEMBER 4, 1997.
John Spirito, Jr., Esq.
Arbitrator
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