Before the Public Utilities Commission of the State of California s2

ALJ/VDR/MOD-POD/jt2 DRAFT Agenda ID# 7553

Adjudicatory

4/24/2008 Item 19

Decision ______

BEFORE THE PUBLIC UTILITIES COMMISSION OF THE STATE OF CALIFORNIA

Pacific Bell Telephone Company, dba AT&T California (U1001C),
Complainant,
vs.
Cbeyond Communications, LLC (U6446C),
Covad Communications Company (U5752C),
and Arrival Communications, Inc. (U5248C),
Defendants. / Case 06-03-023
(Filed March 22, 2006)

Ed Kolto, Attorney at Law, for AT&T California; and Kellogg, Huber, Hausen, Todd, Evans & Figel, by Colin Stretch, Attorney at Law, complainant.

Mediasportscom P.C., by Kimberly Kirby, Attorney at Law, and WilliamH.Weber, Attorney at Law, for Cbeyond Communications, LLC; Law Offices of Anita Taff-Rice, by Anita Taff-Rice, Attorney at Law, and Katherine K. Mudge, Attorney at Law, for Covad Communications Company, defendants.

Marilyn H. Ash, Attorney at Law, Mpower Communications Corp, and U.S. TelePacific Corp.; Law Offices of Earl Nicholas Selby, by EarlNicholas Selby, Attorney at Law, for XO Communications Services, Inc., intervenors.

MODIFIED PRESIDING OFFICER’S DECISION ON PACIFIC BELL TELEPHONE COMPANY’S AMENDED COMPLAINT FOR DISPUTE RESOLUTION AGAINST CBEYOND COMMUNICATIONS, LLC, COVAD COMMUNICATIONS COMPANY, AND ARRIVAL COMMUNICATIONS, INC., REGARDING WIRE CENTER UNBUNDLED NETWORK ELEMENT DECLASSIFICATION

TABLE OF CONTENTS

Title Page

MODIFIED PRESIDING OFFICER’S DECISION ON PACIFIC BELL TELEPHONE COMPANY’S AMENDED COMPLAINT FOR DISPUTE RESOLUTION AGAINST CBEYOND COMMUNICATIONS, LLC,
COVAD COMMUNICATIONS COMPANY, AND ARRIVAL COMMUNICATIONS, INC., REGARDING WIRE CENTER
UNBUNDLED NETWORK ELEMENT DECLASSIFICATION 2

1. Introduction and Summary of Decision 2

2. Background and History of the Dispute 4

2.1. History of AT&T’s Complaint 7

2.2. Issues 9

3. Procedural History 11

4. Discussion 12

4.1. Data Vintage and the Date of NonImpairment Designations 12

4.2. Methodology of Data Development 15

4.2.1. FBC Count 15

4.2.2. Business Line Count 20

4.3. Accuracy of the Data Count and the Necessity for Adjustments 22

5. Appeal 24

6. Assignment of Proceeding 24

Findings of Fact 24

Conclusions of Law 28

ORDER 31

C.06-03-023 ALJ/VDR/MOD-POD/jt2 DRAFT

1. Introduction and Summary of Decision

The federal Telecommunication Act of 1996 (1996 Act) (47 U.S.C. §251 etseq. ) was enacted to promote competition in the telecommunications industry. The 1996 Act specifies regulatory roles for both the federal government and the states. Its established a framework requiring incumbent telecommunications carriers to lease to competitive local exchange carriers certain wire center network elements necessary for competitors to enter the telecommunications market. Initially this included many of the components necessary to serve customers, including high capacity loops and dedicated transport. Pricing of these elements was based upon costs determined under a federally established methodology.

In subsequent rulings the Federal Communications Commission (FCC) determined that provision of certain network elements was no longer essential for network operation. For others the FCC determined that it may be necessary to continue to furnish these to competitors, or else they would be “impaired” in their ability to offer service competitively. If provision of these facilities on a cost basis was determined not to be necessary, based on criteria developed by the FCC, a determination was made that competitive carriers were “unimpaired” in providing service. And that they were not entitled to obtain them for cost-based rates. The FCC created a process to determine which wire centers were impaired and which were unimpaired.

Pacific Bell Telephone Company, doing business as AT&T California (AT&T) filed this complaint against Cbeyond Communications, LLC (Cbeyond), Covad Communications Company (Covad), and Arrival Communications (Arrival) to seek relief in the nature of a declaratory order that certain wire centers AT&T has delisted (i.e.,removed from its list of impaired facilities) are non-impaired as AT&T claims, pursuant to guidelines adopted by the FCC in its Triennial Review Remand Order (TRRO)[1] and in 47C.F.R part51.319(a)(4) and(a)(5).

AT&T is an incumbent local exchange carrier (ILEC) providing local and intra-local access and transport area (intraLATA) toll services in California. Cbeyond, Covad, and Arrival are competitive local exchange carriers (CLECs) certificated to provide local service in California. Resolution of the central issue in this matter affects not only the defendants, but all other CLECs that are collocated in AT&T’s wire centers in California.

We affirm AT&T’s determination that a California wire center is nonimpaired and delisted under the TRRO and criteria in 47 CFR § 51.319 (a)(4) and (a)(5), effective as of March 11, 2005, where that determination has not been challenged by the self-certifications of the defendants. We deny AT&T’s request for a declaration that non-impairment designations challenged by the defendants are non-impaired, but we grant leave for AT&T to restudy and redesignate those wire centers in accordance with our order. Case(C.)06-03-023 is closed.

2. Background and History of the Dispute

The Telecommunications Act of 1934 (47 U. S.C. § 151 et seq.) establishes a system of dual state and federal regulation of telecommunication services, and confers federal jurisdiction on the FCC. This Commission has regulatory jurisdiction in California. The 1996 Act amended the Telecommunications Act of 1934 to promote competition and reduce regulation in the telecommunications industry in order to secure lower prices and high quality services for American telecommunications consumers, and in order to encourage the rapid deployment of new telecommunications technology.

The 1996 Act established interconnection obligations for telecommunications carriers. Section 251(c) imposes the duty upon each ILEC to interconnect with other carriers, and in most instances to provide any carrier with nondiscriminatory access to ILECs’ network elements at wire centers on an unbundled basis. Under regulatory principles, the FCC has developed to implement this requirement, Section 251 has, until recently, generally entitled CLECs to lease from ILECs high-capacity loops and dedicated transport needed to provide local service at unbundled network element (UNE) rates, which are based upon Total Element Long-Run Incremental Costs.[2]

In certain geographical markets, the evolution of an environment with the potential to sustain competition between carriers has eliminated the need for CLECs to receive favorable terms in obtaining facilities from ILECs, and thus for CLECs to pay cost-based UNE rates in order to carry out the purposes of the 1996 Act. The FCC accordingly adopted a procedure to relieve ILECs of the obligation to furnish high capacity loop and transport facilities for CLECs at UNE rates in the corresponding wire centers. Where this procedure identifies a wire center that has the requisite competitive potential, CLECs collocated in that wire center must either obtain high capacity loop and transport from the ILEC at more costly Special Access rates, or make arrangements to obtain those network elements from third parties. The underlying concept is that in order to foster competition CLECs must be able to obtain high capacity loops and transport at cost-based rates, but once the revenue potential at a wire center reaches a level at which CLECs can be self-sustaining, they should provide these network elements without assistance.

The FCC has selected certain indicators (“proxies”) to measure the competitive potential of a wire center. A wire center that meets or exceeds the FCC’s threshold criteria is designated “non-impaired,” and a wire center that does not is designated “impaired,” a reference to whether or not competition is impaired in that environment or, conversely, whether the environment would support competition. An “impaired” designation signifies that the level of revenue at a wire center, as measured by the proxies, is presumptively insufficient to support unassisted competition by interconnecting CLECs. The host ILEC may remove nonimpaired wire centers from its list of facilities where it must offer highcapacity loops and transport to CLECs at UNE rates, a process known as “delisting.”

Under the TRRO the proxies are stated in terms of total numbers of fiber-based collocators and business access lines present in a specific wire center. If the numbers equal or exceed the specified thresholds, or “triggers,” the wire center is deemed to be non-impaired, a presumption based upon the FCC’s finding that there is a “correlation between the number of business lines and/or fiber collocations in a wire center and a revenue opportunity sufficient to lead to facilities duplication in the geographic area served by that wire center.”[3] This presumption is coupled with the FCC’s determination that CLECs can most economically deploy dedicated transport facilities and high-capacity loops in geographic markets where revenue opportunities are highest, as confirmed by evidence of actual deployment.[4]

The triggers established by the FCC to identify non-impaired wire centers are the following:

• DS1 transport on routes connecting a pair of wire centers that both have at least four fiber-based collocators (FBCs) or at least 38,000 business access lines;

• DS3 or dark fiber transport on routes connecting a pair of wire centers that both contain at least three FBCs or at least 24,000 business access lines;

• DS1 capacity loops on any building within the service area of a wire center containing four or more fiber-based collocators or at least 60,000 business lines; and

• DS3 capacity loops in any building within the service area of a wire center containing four or more FBCs and at least 38,000 business lines.

The FCC has also defined the following key terms that are used in these criteria:[5]

• Business line. A business line is an incumbent LEC-owned switched access line used to serve a business customer, whether by the incumbent LEC itself or by a competitive LEC that leases the line from the incumbent LEC. The number of business lines in a wire center is deemed to be equal to the sum of all incumbent LEC business switched access lines, plus the sum of all UNE loops connected to that wire center, including UNE loops provisioned in combination with other unbundled elements. Among these requirements, business line tallies:

(1) Include only those access lines connecting end-user customers with incumbent LEC end-offices for switched services;

(2) Do not include non-switched special access lines; and

(3) Account for ISDN and other digital access lines by counting each 64 kbps-equivalent as one line. (The TRRO provides the example that a DS1 line corresponds to 24 64kbps-equivalents, and therefore to 24 “business lines.”)

• FBC. An FBC is any carrier, unaffiliated with the ILEC, that maintains a collocation arrangement in an ILEC wire center, with active electrical power supply, and that operates a fiber-optic cable or comparable transmission facility that:

(1) Terminates at a collocation arrangement within the wire center;

(2) Leaves the ILEC wire center premises; and

(3) Is owned by a party other than the ILEC or any affiliate of the ILEC, with the exception that dark fiber obtained from an ILEC on an indefeasible right of use basis is treated as nonILEC fiber-optic cable. Two or more affiliated FBCs in a single wire center are collectively counted as a single fiber-based collocator.

2.1. History of AT&T’s Complaint

The TRRO and the associated amendments to C.F.R. Part 51 took effect on March 11, 2005.[6] Previously, on February 4, 2005, the FCC’s Wireline Competition Bureau had asked each ILEC to submit a list identifying the wire centers in the company’s operating areas that satisfied the non-impairment thresholds for high-capacity UNE loops and interoffice transport.[7] On February18, 2005, SBC Communications Inc. (SBC) [predecessor parent of complainant AT&T], filed its responsive lists of non-impaired wire centers with the FCC, including non-impaired wire centers located in California.[8] On February 22, 2005, the complainant issued Accessible Letters CLECALL05-027 and CLECALL05-031 notifying CLECs that the lists had been filed and were publicly available on complainant’s CLEC OnLine website.

On December 16, 2005, following a merger with AT&T Corporation in which SBC Communications Corp. became the merged entity and subsequently changed its name to AT&T, AT&T revised its nonimpaired wire center list to exclude duplicative FBC counts resulting from the merger, and filed a revised list with the FCC showing its putative non-impaired wire centers in California as of March 11, 2005, the effective date of the TRRO.

After AT&T revised its list, CLECs Covad, XO Communications Services, Inc. (XO), and Arrival self-certified, on the basis of a “reasonably diligent inquiry,” that AT&T’s wire center designations in California were inaccurate.[9] These self-certifications contradicted AT&T’s designations of non-impaired wire centers in California, and the CLECs are consequently entitled to continue to obtain access to DS1 and DS3 loops and transport at UNE rates at the affected wire centers unless AT&T disproves their claims. In response to their selfcertifications, AT&T filed this complaint against Cbeyond, Covad, and Arrival pursuant to dispute resolution procedures specified in the carriers’ interconnection agreements.[10] Three additional CLECs, XO, Mpower Communications Corp. and U.S. TelePacific Corp., were subsequently granted leave to intervene in this proceeding.[11] AT&T seeks an order declaring that the wire centers it designated to be delisted are nonimpaired under the TRRO guidelines and the criteria set forth in 47C.F.R.part 51.319(a)(4) and (a)(5) to confirm its position.

2.2. Issues

At the outset of this proceeding the parties furnished the following list of issues concerning whether AT&T had properly implemented the FCC criteria, and thus had accurately designated its wire centers:[12]

1. FBCs: How should FBCs be counted under the FCC’s definition of “Fiber-based collocator” in 47 C.F.R. part 51.5 and applicable orders?

a. Are there instances in which the Commission should count as an FBC a connecting carrier [that] uses a collocation-to-collocation cross-connect to access fiber capacity from the second collocator as a separate FBC (i.e., in addition to the collocation of the second collocator)? If so, what are the circumstances in which such connecting carriers should be counted as an FBC?

b. What constitutes a “comparable transmission facility” under the FCC’s definition of a “fiber-based collocator”?

c. What data should be used to identify FBCs in the disputed wire centers?

i. Should affiliate relationships (other than the affiliation between AT&T and SBC Communications Inc.) be examined based on the carrier’s affiliate status at the time that the wire center is designated as non-impaired or should more recent data be considered? Should the affiliate relationship between Verizon and MCI affect the FBC count (regardless of the date of affiliation)?