Docket No.21!J82
REVISEDAWARD
Pa@
50 Of 65
Arbitrations in view of the inclusion of more rural, less dense mas m a LATA. The AT&T
method also includes use of the tandem switch charg~.'~' "he AT&T proposal results in a
blended rate of $0.0024654 per minute.'92
The Coalition, like AT&T and ICG, contend that the SWBT IBT coat study is fbulty.
Codition wittless Mr. Montgomery supports the testimony of AT&T Witnese Mr. Rhbhart and
ICG witness Mr. Wood setting forth the flaws in the SWBT lBT cost study.193 The Codition is
also critical of the SWBT IBT's use of two usage studies. It asserts that the &st usago study
attempts to separate ISP-bound traffic and measure the number of minutes that fit crituia
established by SWBT 8s indicatots of an Interne$ dial-up call, including the number of incoming
calls and the dnration ofthose calls. With regard to the second study, which counts the minutes
of mice and data traffio for two SWBT central oftices, the coalition argues there is no scientific
or logical reason for using those qwific central offitm According to the coalition, the data
obtained fiom she two offices differ from each other sigaificantly and, consequently, catmot be
used to determine any traffic pattams.'N
(c)
com#risslon D e c i s h
All parti&?agree that the SWBT IBT cosl study should not be used to gel reciprod
compens&.on rates. fie Commission concludes that l e SX?WLBTc&t study b not a TEWUC
stu&and also cannot be used to just1B dffwentiating Isp-bowld mflcand Voice traBcfor
casting purposa. At this #me, the Commission &dines to W n & h wice fiom Isp-bound
trafz/orpurposes of set&& redprocal compensation rates.
19'
AT&T Bx. No. 7, Dire4 Testimony of Jon A. Mkue at Mtedrment 1.
AT&T Bx. NO.7, &et
Tsstimoayof Jon A, zubkur 8t 5.
Coditkm En No.CLEc.2,&butts1 Testimony of WitliamPage Montgamay at 11-12.
191
coalidonEx.No.CLEG1, Dinct Tatimony ofWilUam Page Montgomny at 53-57.
480
Docket Na 21982
a
REVBEDAWARD
Page 51 of 65
The Cornmimion has rejected AT&T's pmposed LATA-wide calling scope and also
rejects AT&Ts LATA-wide blended rate. See discurpion in DPL Lpsue No.2.
3.
13re Biju-cated Rate
During
the initial hearing on the merits, &=e was considerable discussion of the
development of a bifurcated local switching rate that would address the threeminute average
voice call length used ia the approved Mega-Arbitration i d switchiag rate and the 29-tninUta
average ISP-bound call length used in the SWBT IBT study:s
The CommisSion expressed
interest in a two-part rate that separates call set-op fwm call duration costs, which would
mitigate any over-compemation resulting h m tho rate structure adopted in the MegaArbitrations, which is predicated upon call duration only.
(a)
Parties * Positbns
After the initial hearing on the merits,AT&T witness Mr. Rhinehart initiated discussions
With SWBT witness Ms. Smith regarding the possibility of calculating a two-partlocal switching
rate consisting of a permessage set-up charge and a per-minutesf-use charge that would be
consistent with the local switchiug and recipxocal compensationrats for local switching adopted
in the Mega-Arbi(ration~.'~~
Ms. Smith and Mr. Rhinehart agreed that tho appropriato smrogato
for separating set-up and duration costs can be based on an approved SWBT local semiice basic
network hction (BNF) cost study that identified local switching investment on a &-up and
duration basis.1w Ms. Smith and Mr. mehart developed a ratio using both intmffke and
intrao5ce calling invcstments.'98 Although their calculations were performed independently,
Ms. Smith and Mr. W e h a r t both calculated rates of $0,0010887 pex call and $0.0010423 per
"See Tr. at 231-275 (April 4,2000) and 427-431 (Afl5,2OOO).
AT&T Ex.No. 11, Aflidavit of Daniel P. RhinahaR
Irn See Southwartcan Ben Tefepltons Componv's Application for &rind of W C Studksfor Baric
Network Access W m l Nons~ruimd+Wire, l)p 0, CL d,f i m n ; toPUCSvm. R 23.91, DocketNo. 16657.
SWBTEx. No.28, Midovit of B
h Smith, AT8iTEx. No. 11, Affidavit ofDiu&I P. Rhinchart.
481
Docket No. 21982
REMSEI)A
W m
Page 52 of 65
rninute for end-office
Ms. Smith indicated that she pdCipated in several
conferwe calls with AT&T and other CLEC petitionens to revise, clarify and explain the
methodology and calculations based on input fiom other CLEC cost witne6~~8.~~
SWBT, WWM,AT&T, ICG, and the coalition indicate that the bifurcated rate concept
is ao~eptable.~'Taylor C o r n opposes the bifurcated rate because its netwodt iS not limited m
function and argaas that such a rate would not compensate Taylor
Comm. for legitimate costs incurred in terminating SWBTs ISP-bound traBc?'# Level 3, KMC,
capacity by a call set-up
and Adelphia oppose implementation of the V
i rate, citing a lack of evidentiary
~ u j p r t Intermedia,
.~
Focal, Winstar, TW,"yand Megianoa ~ c p r w sconccm over
the costs associated with administrationand billing of a two-part rate?w Finally, SWBT rejecU
application ofthe bifurcated rate to EP-bound t r a f k m
@I)
CommissionDecision
mils the parties argue against the implementation of the b e c a t e d end-q@ce rat& al
this time, those parties, with one exception, nevertheiess agree that the bifircuted rate
independent& calculated hy Mr.Rhinehart and Mr.Smith is reasonable. The Commission is not
lop T
r. at 519-524 (May 18, ZOOO), The cornputadon be@ with tho approved Moga-Arbitdon local
8witChiD~18% which is a bltadcd pcr-mirmto rato based upon .oavasgo call of2.34 mkruur. The BNF studies in
Docket No. 16657 WQQ computcdwi& iadspmdmt ret-up (per cru) md durodan (pcr &u&)
compowntr. "b
ratio of the two i s used to camputa rata based upon Mega-Arbhth bpb. Jointly, SWBT witness hdr. smith
*
far this
andAT&Twitnas Mr. Rhirrthart agrao that a 75% brgc officcsl2SK ~lmdloffic~r
mix is
CompnEetlOe
SWBT Ex. No.28,Aatidavit of Barbara Smith.
20'
"I.at 241-255 (April 4,2000).
*Taylor Comm.Post-Hearing Brief at 32 (April 19,2000).
Brief at 32 (April 19,
Port Hasting Rap& Brief ofKMC 3 (April 26,2000), Level 3 Po8t H
2000) and Reply Brief of Adelphia and CCCTX,loc. W A Connect! at 8 (A@ 26,2000).
Initial Bricf of A%rt 18 (April 19,2000); Replv Briefof WinotPr
lo)initial Brief of Fowl at 13
at 5. Reply Bxiof o m at 6, NEXTLUWa &ply Wfat4, aud lntSnaediDReply Brief st 4 (AM26,2000).
SWBR supplaamtsl Rriefon "BlendedRate" luna at 8 (May 26,2000).
482
REVISEDAWARD
Docket No,21982
Page 53 of 65
persuaded that the costs of implementation. administration, and billing outweigh the benefits of
this wst-ked rate, which more sp&'dly
accomtsfir the structure of the costs Incurred.
Moreover, the Commission fin& that there h su&ient evidence in the record to support
adoption of the bifiucared end-o~cerat.. Furthermore, the Commisdonpndptfiot thb hvo-pwt
e n d - o m rate mini mu^ the debate about ayerage caIi h g t h . The Commission concludes that
the two-part ed-oflce rate, consisting of (1) a per call charge for the compensation cfsetup
costs (%0.0010887per call) and (2) a per minute charge ($0.0010423 per minute) for the
compensation of volumApensitivecosts,shall be applied to all local traflci includingIsp-bound
PUflG
The Commission redopts the inter-o&e
in the Mega-Arbitrations,
transport rmd tandsn switching rata adopted
We bzjkcated end-oflce rate, the tandem switching rate, a& the
inieraffice transport rates approved in this order shall be applied lo the rate srructures
approved under DPL Issue No.2.
(a)
The Current Billing System
SWBT and CLECs currently calculate, verify, and bill for recipmcal mmpensation using
a combination of originating records, terminating records, and factoring systems.
In some
instances, the companies are using a bill-and-kecp system. Since 1994, SWBT has used an
originathg cccofds system to bill for access compensation for LEC-Carried htraLATA ton, local,
extmded area service (EM),
and transit W C .Throughout
~
this proceeding, is system has
106 SWBT EX. No. 10, Direct TsetimMy of Joe B. Murphy at 4-5: coalition EL No. ICG-9.
Tc~timonyof William J. Warinner at 6.
483
Docket No. 21982
REVISED AWARD
Page M or65
been referred to as the "92 records" systcm, the "Primary Carrier" Systan (pcs), or the "92-99"
recorda aystem.u"
Today, if either an ILEC or a fxilities-based CLEC routes a call over SWBT facilities,
billing is processed using the 92 onftMtd9process?OB The 92prooeaa registers usaga at
the point at which the call enttrs or originates on the network and identifies the company that
receives the
The originating company then provides tbo r w & to the terminating
company, which verifies and uses the records to bill the Ocighahg company for teciprocal
If a third-party customer places a call to a CLEC customer, and SWBT
transports the call over ita network, then the originating company prWidos records to both the
ttanSiting carrier, SWBT, and tho termha@ CLEC, SWBT and the t e d d n g CLEC verify
the recurds and use them to Vi1 the originatingcompany for ncipro0alcompensationz"
Currently, SWBT and AT&T exchange reoords using the 92 Originating records process
when AT&T delivers its customer's calls to SWBT using AT&T 4E and 5B switches. Howavet,
where the 4E switch is us% AT&T and SWBT cxchanga records for verification purposes only
and use a separate process for billing, For calls traversing AT&T's 43 switch, SWBT bills
AT&T at the access rate. AT&T then applies a SWBT approved faotoring p e s s to credit the
overchargedrate on AT&T's access bill?12 For SWBT originattdcalls that travem AT&T's 4E
switoh, AT&T and SWBT exchange records and bill via the 92 o n g b t h g records process?"
Where AT&T's 5E switches am wed, AT&T and SWBT exchange fecocds for verification
~n this AWUCI, m
s origiwiq records wchpnga axxi v i system is m f ~ m dto as h a '92
origiaating rccorde prams" or &e "92 procus." Thir ward wiU I& to the orieiogting rem& usod in this
proctsrasu92ncords"
SWBT Ex. No.10, Direct Testimony of h e €3. Murphy 8t 4.
209 SWBT
'lo
Ex.No. 1, Direct Testimony of Paul L Cooper at 9-10.
SWBT Ex. No. 10, Direct Testimony of Joe E. M q h y at 7.
Id.
"'AT&T Ex.No.9, Direct Twthony of shsnnic Marin at 7.
484
Docket No.21982
REYISEDAWARD
55 Of 65
purposes to test the 92 originating records exchange process. During this period, the companies
use biU-and-keep?*4 When AT&T uses a SWBT unbundled switch element (UNE), the
companies exchange records and bill via the 92 OriginatinS records process?” In such 8tl
instance, however, SWBT sends Category 11 remrds to AT&T for purposes of verifying these
calls.*16 The 92 process is also used when AT&T operata as an unbundle?7
SWBT uses the Canier Access Billing System (CABS) to bill for access CornpenSatiOn
when calls are passed ova intexexchange d e r (IXC) facilities. This system uses “Cakgory
I 1” terminating
the CLECS’preferred a~temativc. Category I 1 t c m h t i n g records
arc call records coH&ed by the carrier that terminates the call. The two types of records contain
similar i n f o n n a t i ~ ~ ~ ~ ~ ~
The CLEGS present a number of arguments for abolishing the current 92 originating
records process. ICG identifies the incentive that occurs when originatiing carriers instruct the
terminating carriet on the amount of reciprocal compensation that the originating carrier must
pay as one problem with the current system.22oJCG believes that it should by compensated by
SWBT using a tenninating records process similar to that psed in the competitive intmLATA
WCOM opposes the collection of data needed to render the bill by the carrier
~
113
-
rd
’“Id. ai 8.
‘I’
Id.
Tr.at 646 (April 5,2000).
AT&T EX.Na 9, Direct Testimony of Shannie Marin at 6.
“*
SWBT Ex.NO.10, Direct Toatimonyof Joe E. Murphy 8t 4.
billing rystem as the ‘Yemrinatiag records
*I9 This Award mfm to the t a m i d u g &exchange
process.” It nfcrs to the tcdnathg recordswed tr thio process as “catceory 11 mxxds.’*
zD Coalition
ELL No,ICO-9, Direct Testhoxy of william I. Warinner at 16.
485
’
Docket No. 21982
that
REVISEDAWARD
Page 56 of 65
will ultimately pay the bill.= espire argues that the Commission should audit SWBT to
identify the origin and types of traffic directed onto aspire’snetwork.2p
Some CLECS note that they are unable to verify the mrds created by the 92 originating
records
Consequcnq, AT&T and SWBT use a factoring pmcess to bill for these
C d 8 ? U Since AT&T is still working to implement the process for its 5E switches, AT&T and
SWBT are ushg bill-and-keep.u6 Taylor Comm. exchanges records and bilts SWBT ushg the
92 originating records process, but is unable to verify the accuracy oftbe record^?^'
Several parties have experienced discrepancies between their own tetminatlng records
and SwBTs originatingrecords. ICG testifies that its discrepanay is signifioant, but is unable to
determine its exact cause.us ICG believes that its own texminating records are inherentlymore
reliable than originating records??9 ICG concurs that SWBT transports and tCnninates third
party traffic to ICG, and that those third parties (including Wireless carriers that do not partidpato
in the 92 records process) do not provide billing recorda to IC(3.m ICG dsa notes that
terminating companies may not have a terminating rewrdiug method that identities all third
party trafri0?3’
id. at 17.
WCOM Ex.NO.1, Dimct Testimony of Don Rice at 3 2
p,
e s p h Post Hearing Brief at 32 (April 19,2000).
AT&T Ex. No.9, Direct Tastimony of Shannit Marin at 6.
=id
fit 7.
zt6id at a.
Taylor Comm.Ex. No. 3, Dinct Testimony of Qladas D.Land at 26.
coalitfon Bx,No.ICG-7, Direct Twtlmony of Kenneth D. Davis at 4,s; CLEC Co&on
9, Dhct T d m ~ of
~ Willkm
y
J. Warinner at 9.
Ex. No. I n
Coalition fix.No. ICO-7, Direct Testimony of KennethD.Dsvb at 9.
coalition Ex.NO.ICO-9, Direct Testimonyof William 1. WarinnM at 15.
Codition EX.NO. rca-io, ~ebuttal~e~timony
OfWilliamJ. warinnet at4.
486
L
Docket No. 21982
Page 57 of 65
REVISED AWARD
AT&T prefers terminating records for calls involving unbundled switch elements (U'NEp) and local number portability (L,NI?)?32ICG notes that, when a carrier using a SWBT UNE-p
switch port, additional processing is required for the 92 records process to identify the
originating
WP fivther complicates the 92 records p r o m by making it even more
WCOM concum that
difficult for the terminating carrier to ideati@ the originating
there am shortcomings with the 92 records exchangeprocess fir UNEp and LNP calls.w
A number of parties object to the 92 originating records process in part because it i s not
an industty standard, pointing out that, the National ordering and Billing Forutn (OBF) has not
approved the 92 originating records
ICG points out, and WCOM and AT&T concur,
that while the 92 process uses some idomation that could be considered standard billing data,
mimy fields hthe 92 record are not standard and am modified from state to state within SWBT's
operating
Some CLECs believo that the 92 originating records process is a duplicative and
unnecessary financial burden. AT&T states that it already collects terminating records which, if
used for billing, would eliminate the cost of tho 92 p m c e ~ s . ~AT&T
*
asserts that it can bill for
reciprocal compensation using a terminating records process when using its own network, so
long 88 SWBT sends complete call detail with the
AT&T asserts that it can also bill
reciprocal compensation using a terminating records process for local, BAS, and intraLATA
z'
AT&T Bx. No.9, Direct Testimony of Shade Main at 8.
* Coalition Ex.No. ICO-9, D h t Testimony of William J. W
h a nt 12.
=Id.
WCOM &.No. 1, DmTwtimwy of DonPrice at 32.
ChKtion Ex.No. IcCi-9, Dhect Tsstimoay of William J. Wadnncr at 10.
s
Id. at 9; W W M EX.NO. 1, Direot Testimony of Dan Rice at 32; and AT&T Ex. NO.9, D k t
Testimoay of shsntlia Marin at 5.
AT&" Ex. No.9, Direct T e ~ u y o f S h m n i at
c 9.
~
AT&T Bx.No. IO,Rebuttal Tcatimony ofS W o Madn at 5.
487
Docket No. 21982
REVISED AWARD
Psge W
O f 65
ICG believes that the 92 originating rtcords proccss itself is complex and expensive to
implement and
The CLEO also object to the 92 originating records process in part because it was not
originally intended for use in a competitive environment. IC0 points out that SWBT originaur
designed this procsss for use in the Missouri Primary Toll CarriaPlan i m p l a d prior to the
commencement of local and intraI,ATA toll c01nfltion.'~~ The Coalition believes that the
LECs for whom SWBT designed ule system may not havo been 85 sensitive to tha syatsln
acwracy as C L E C S . ~In addition, the Codition notes that ths sptun was designed for much
sma~ervo~umaofttaffc thsn it currcntiy
experience^,^
S o v d CLECs propose alternativcs to the 92 originatingrecorda process. ICG proposc~
that reciprocal compensation settlements be based on each o d e r ' s
measurement of traffio that
tenninatcs on its own netwodc?" ICG contends that these recordings would be taken at either
the tandem or cnd office and would provide a usage record h m which to bill the on-g
carrier directly for recipod compensatictnP'6 ICG notes that Category 11 records are
Consistentwith OBF standards?47
1m Id.
"' CoalitionEn No.KO-9, Direct Testimony of William J, Warirmfet 5.
u1Zd. at
16.
usCoalidonE
k No. CLEC1, Direct Tcsti~nonyof William Pago Montgomery at 60.
a44Id.
Coalidon Bx. No. I=-8, D k t Tmtimay ofRoger L Arnold at 3; CorLibion E% No. I C 0 4 D
m
TcstimoOy ofWilliamJ. W h e r at 16.
CoalitionEx.No.iCQ-9,Direct Testimony of Witliun J. Warinner at 16.
Tr. 8t 626 (April 5,2ooo).
"
I
488
Docket No. 21982
REYISEDAWARD
Page 61 0€6S
I .
SWBT prefm to continue using the 92 originating records ~ ~ O C C S for
S
a number of
reasons, primarily becaw it is currerffy in use and it is the only process that provides the
information needed to compensate alI companies for use of their
SWBT finther
indicates that by using originating records,the 92 process avoids the problem of billing a c h a r
for third party traflio that merely ksasits its network.2a SWBT does not beliwo that this
procding is an appropriate forum for addressing billin8 and recorda exchange processes
becanso a change in any process would affect all the ILECs and facilities-bascd CLBCs in
Texas?63 SWBT nota, and ATBtT's witaess agrees, that the CLECs do not agm on an
alternative records exchange and bilIing
SWBT discusses at length tho Connecting Network Access Recording (CNAR9 and
AccaSS7@systems used on their network and their ability to make tennbtiug r e g & =
Although the AcceSS7@system does record terminatingw g e and SWBT is currently testing it
for use 88 a billing system,SWBT noactheless contends that the AcceSS7@system is not ready
for use as billing system.z66 In addition, SWBT currently has not installed the CNAR* system,
which creates a terminating recwd, on all of its switche~?~' SWBT nota that, if tho
Commission were to mandate a terminating records proccss, it could use the 92 records process
Until SWBT is able to generate
to verify bills received for reciprocal
"' SWBT EX.NO.10, Dinst Tdstiasonyof Joe B. Murplly at 5.
262 SWBT Ex.No. 11, Rebuttal Tcstfmony of Joe B. Murphr at 14.
26)
Id. at 7,
26(
Zd at 20; 'k. at 583 (Aprtl 5,2000).
lbJ Coalition Bx No.ICO-6, Dlnct Testimony of Rogff L h o l d .
7.66
Tr.at 588,590,644 (April 5,2000).
Id at 609.600.
491
Docket No. 21982
Page 62 of 65
REVISEDAWARD
tcmthating recordings, ICG notes that it can continue to give SWBT originating records for
traffic that it terminates onto SwBT's network
SWBT counters criticisms ragarding 8cou~acyby poiuting out ICG's testimony indicating
that the terminatiugrecords h m ICG switches are unable to identi@the originating party on all
recorded traffic.* SWBT also notes tbat ICG's metbod of using tho Load Excbnge Routing
Guide &ERG) to identify traffic that is originatedon SWT's aetwork does not work for calls
holVing local number portability (LNP). SWBT finther pointS out that the 92 o&$nathg
records process identifioa the originating caller for W P &Is and calls that invohre unbundled
switch 01emmts.~~
*Finally,SWBT nota that cI;Ecs,with whom ICG has not negotiated
reciprocal compensation and records exchange agreements, could be sending traffic to ICG
c.ostomers.~'
SWBT strongly opposes any altcrnati~ethat results in CLECs billing SWBT for third
party trani0 carried over SWBT's network, saserting that the CLECs are responsibla for
establishing agreements with third-party CILIZ~QB.'~ SWBT believes that CompaniCS that
tamhate traffic
should bill the originating &ea
cli~ectly.~ SWBT notes that its
interconnection agreements address this i~suo?" S W T fiuther notes that the PTA dots not
obligate SWBT to perfom a third-party billing and collection h~tion?'j
26sIdat667.
zm SWBT Ex.No. 11, Rebuttal Testimony of Joe 8. Murphy at 4.
I70 Id
Id. at 16,
272
Id. at 3.
Idat 2;SWBT Ex. No. IO, Direct TestimonyofIoe R
It 7.
"'SWBT Er.No. I 1, Rebu#ol Testimonyof Joe B. Murphy at 3.
nsId. at 15.
492
Docket NO*21982
REWEDAWARD
Page 63 of 65
SWBT points out that the tetminating records process propostd by AT&T and supported
by other parties has limitations. Category 11 terminating records require SWBT to send
complete call detail information already provided by the 92 originating mor& process.n6 In
addition, SWBT notes that Category 11 recor& do not contain tho informatinneededto identi@
all the partiea on the call path, making it diffidt for the terminating caniar to bill all the &em
involved in completing the call.m Finally, SWBT does not believe that moving to ternSinating
records will solve the data problems discussed in this proceeding Untess all companies' exchange
records.m
In)
CommissionDecision
The Commission acknowledgm that the lack of agreement sf the parties with respect to
billing ir;rUar ate& to the national level. Moreover, the Commission notes W ths common
practice in our economy is to generally rely upon the records of the party that remits a service
(eg. the terminating carrim) anti submits a bill to the rec@ient of that service (eg.. the
originating carrier). Thwqore, the Commission concludes that, where technicdyfeasible, the
terminating carrier3 mora3 shall be used to bill originating carriers (excbrding transiting
carriers) for reciprocal compensation, unless both the originating and terminating cwriers
agree to use originating mor&. me Com&swnfirriher concludes thai where a terminating
carrim Is not technically capable of bitling the originating carrier (exduding trM*tingCatYierS)
through the US8 of terminating recwdi, the terminating carrier shall we any method agreed
u p n behveen the p a r k . The Commissionfinds that the use of terminating records among the
parties to bill for rec&ocal cornpenration is a more effiient and less burdensome method to
track the exchange of traflc. Tmhating rewr& impose less cost upon the terminating
Id. at 17.
m Id at 6, 17, 19. Partics noted that Category 1I tmminathg records do not identify all of the d
m
carrier. Parties dso agraedthatwhUe 92 odghdugrecorda
wiwna call path, but canody idenrify one
can idenlify up to eight polrtica within the call path, Catcgay 11 records can only identify OIM trpnsiting pprty. See
Tr.8t 563,575-577 (April 5,2000).
SWBT &.No. 11, RcbuttalTeJtimwyof Joe B.Murphy at 19.
493
Doeket No. 21982
REVISED AWARD
Page 64 of 65
carriers than the preview regulatoryscheme that used SU?BT's 92/99 originating recora3 to bill
for recaproul compensation.
The Commission notes SWBPs concerns regarding transiting traflc and conclu&.v that
tenninating ctwrien shall be required to directly bill third partiu that originate calls and send
AWBT's network iknsiting carriers shall bill the originathg carrier using
terminating or originating records bared upon existing contract t e r n between the originating
trap
oyer
and transitingcarrier.
The Commission recognizes that there may be disagreement over the content andor
accuracy of a carrier's termination records and expects that such disp#teiv will be settled among
the part€=. llie Cbmmfssion nom, howevec that when a balance in ilre traflc betwem
originating and terminating curriers eventually occurs, a bill-and-keq H e m could be adbpted
that would eliminatethe needfor whonge of terminating records.
M&,
with rupect
for which CPN is unavailable, the
Commission adopts the solution employed in the T2A2# r f the percentage of calls passed with
CPN is greater than 9Opercent, all c a h exchanged without CPN information will be billed (IS
either local traflc or intraLAT.4 toll t r a f i in directproption to the MOUJ of Caus exchanged
with CPN information. &ht'e percentage of calls w e d wiih W N is less than 90 percent, all
callspassedwifhoutCPNwilI be billedas intraLATA toll tmflc.
to the billing of ira@
mSeeProjectNo. 16251, OtdarNo. 55,AttaChrrrmt 12dq75.
494
Docket No. 21982
REVISED AWARD
SIGNED AT AUSTIN, TEXAS the 3&day
Page 65 of65
of August, 2000.
'P
COlMMIsSION OF TEXAS
-
PAT IOOD, III, CHAIRMAN
L/
BRETT A. PERLMhf, COMMISSIONER
S t aArbitration Advlson
Jingmlng Chen, Katherine Farroba, Steve Davis, Mark Giadney, Adriana Gonzslw, Todd
Klmbrough, Anne McKiibin, Donna Nekon, Mwna Thomas, Pamela Whittington,
Patricia Zacharie, and Diana Zake.
495
DOCKET NO.21982
RFNISED ARBITRA'IIONAWARD
ATTACHMENTA
0
I Meea Arbitration InterconuwtiooRates'
I
Rate Element
Tandemswitching
I
IRate
I$ 0 . ~ 9 4 / M O U
Blended lkansport
I
--
-.-
--
Tenn.Zone 2 (Sut&ban)
Tenn. Zone 3 Iurbad
1
I so.ooM99/Mou
Iso.o0O144/Mou
-SO.O00135/MOU
(FO.0o0123MOU
Term. Zona 4 &&e)
$0.000187/MoU
$O.O00135/MOU
Tam,StatewideAverage
1P ~ Ca.
. 2one 1 (~uratj
'
I1
,
$o.ooooiom~ou
Fac. Mi.Zone 2 (Suburban)
Fac. Mi.Zone 3 (Uhan)
( Fw. Mi.Zone 4 (Tntuzone)
Sac. Mi. Statewid0 Average
$0.0000032/MOU
Rate Element
Rate
$0.0010887/call
SO.o010423/MOU
Set-up
Ihrration
'
$0.000001l/MOU'
$0.0000033MOU
$0.0000021MOU
'DocketNo. 16189*ad,Second [email protected],1997).
SWBT Ex.No. 28, Affidavit of Barbara A. Smith.
See AT&T Ex,No. 1I, Affibrvlt of D-P.
Rhincht
496
DOCKET NO.
22247
Attachment # I 2
JOE MURPHY'S
TESTIMONY
497
I
April 14,2000
Dear Ms.Murphy:
On March 29,2000 S W T coaductod a network study on tha M c bdng stus to SWBTtfom
ksph Commtmications, Inc,Texas During tbis study, SWBT reurrded mearaQeo beins pusd
across the network and this study indicated thht SWBT W(WInot madingthe appropriate CiPN
idonnation on appmxkaatdy33% of this traffic. .
As you wcawue, &e Inrercoanectiod Agreement b&weenS\YBTaud t.8pirS (sactionZS.ll)
requiresthe passage of CPN an at: loast9OW oftha traffio baing axahnngod. It is important to
note t&.thc Xntacount#ion Agmernsot also pmvida forth billing of SWBT’s gwitchcd
r a w ahodd CPN not be p
d on at fenst 90% this tr&k
P k s e investigate the messugo dsta bbiag passed to SWBT from &spire to make a d a h that Y O U
*q+mat IS passing the CPN on your o e i a t c d trnftic Onto y ~ n ~r S B i v c on
h thir ksue IS
completed, plosse w i d e me with the ouLcome of yaw lnvcsttgailpn. Plcllssprovide your
findings to mc at Om Boll C a w , 3243-01, st.Louis, MO 63101 by May IS, 2000.
%e 8. Murphy
Dlrector-Cmier Compbnsstioo
CC MaiIyn Pstterson - SWBT
BCC: Suzanne Lealia
498
Mr. MichaelJ. shortley, m
FrontierLocal
Assoc. General C o w l
Sr. Direatot-Regulrtory Wiss
I80 S,Clinton Av011w
bchastcr,NY 14646-0700
Dear Mr. Shortley:
We would like to Mng two issuor to yoor &lention Tbc firat fnvolvestbo paoage of CPN
Informationon tn;flic origindingfrom Frontier Locdl and boiag sent to SWBT. "be second
involves the exchange of Category 92 records betwon Fmutier Local ad SWBT.
On Match 29, zoo0 SWBT wadwed 8 W o r k d y OR the traffic being scdltto SWBT from
Frontier Low(. Duringtbi amdy, SV'BTreeardedmahges bel& p
J
C
d
across tho natwork
and this study lndicatai that SWBT WIIS uot wsiv&gtbr: appropriate CPN iot'ormatiori on
approxtmateiy 95% of this Mi
ASyou tw awpro, thc
& w e n t ~ ~ ~ ' S ux~
W ~rontist
B T Locsi (section
53.3) requires tbe plrmge afman at least 9#??of tho baffSc baing cxchpnged It is impottmt
Lo nOts tha! llw h h c o ~ M o Agruquat
p
also p m v i e for the billing o f SWBTs switched
~CC~S
rates
S
should CPN not be passed on dt least 90% &is traffic.
P ~ w SWBT
,
iP not roceivjng tkb app+ab
Category 92intamrnpmy c o q x t m a t h records
from Prontier Local, SWBThasbeen pmiding it0 oompeJnsationrecod Lo Frontier Local pet
our Interoonneotfon Agreemat that &lig&s both prtits to Cxchangetbesooriginatingrecords,
Plcnsc investigate the message data kin8 pad to SWBTfrom Frodex Lmal to make c&n
that your equipment is passing the CPN on yourtulghtsd traffia Once yaur ~warchon this
issue is cornpteted, please provide me witb the outcome ofyour hvestgation, SWT is again
rqutsthg that Fron!hr Local provide SWBT with the appropriateCategory 92 componsah
records as required by our I n m a a t i o n A ~ e m c n rPlease provide your findings to me at Otic
Bell Center, 32-]EOl, St, Louis, MO 63101 by b y U,2000, rogudiing pnssagc ofCPN and
advise WIM S W T wilt k i n w i v i n g Category 92 rwords from you.
CC: Sharon 'Bryrait-&k&!kech S e M c e e , Inc
.
BCC: Suaanne L4eLi.e
/ 98
499
0
e
e l
500
Docket No. 21982
REYISEDAWARD
Page 21 of 65
The FCC's LocaI Competition Order dedicates two paragraphs to this so-called "tandem
issue."66 In its discussion, the FCC found that teleco&unications c ~ e c811
m incur additional
costs when calls are tenninatcd through a tandem switch. The FCC concluded that statss may
establish transport and termination rata that vary according to whether the Wfic is muted
through a tandem switch or directly to the end-office. In setting such rates, the FCC indioated
that states must also consider whether new- technologies pedom functions similar to those
pdormed by an ILEC's tandem witch and whether some or all calls t a m h t h g on the new
entrants' network should bo priced tho same as the 6um of transport and tamidon via the
ILECs tandm switch. The FCC also concluded that where the i n t m d g c8m"d switch
servea a geographic area comparable to that of the ILEC's tandem switch, the appropriate proxy
for the additional costs incufibd is the ILEC's tandem intercomectim rate. Similarly, the
resulthg FCC rule, 47 C.F.R 51.71 l(a)(3), stat& that when the interconnectingcam'er's switch
"serves a geographic area comparable to the m"served by the EEC's switch, the itppmpnate
rate for the interconnectingd e r is tlw ILEC's tandem interconnection rate.
In addressing the tandem issue, the parties devoted considerable effort discussing the
New York Public Sedce Commission (WPSC) decision concerning reciprocal compensation
(NYPSC order)!'
The"yP~Csinquiry into reciprocal compensation grew out of the
unanticipated development of tho substantial imbalance in traffic flows and revmue streams
between II3Cs and some CLECs with B pmponderance ok customers, such as ISPs, that rcceive
far more calls than they rigi in ate.^' The NYPSC order refers to suoh trnffic as "oonvcngent".
The NYPSC order determinced that once the ratio of incoming to outgoing traffic reaches 3:1, tho
inf'ezence of predominantly convergent traffic becornea stronger and implies greater efficiency
and lower costs in the tendnation of traflic. The W S C order indicates that the inference of
I n the Matter of ImpIementatian of the l;ocrJ comprti#on Provislonr in the T e t e c o m m t m l n s Act of
I996 CC Docket No. 96-98 at plllOs0-1091 (Ang. 8,1996) (-1
CompedtlonOrder).
4
Proceeding on Morion of the Commission to Reexamine Reciprocol Compmation, &hiOn and onfsr
Gmcerning Rwptvcal Cbmperuatlon, State of Mew Yo& Public Service Comuihion Op&n and Order
COncmning ReCipmoal Compensados OpinionNo.99.10, cIu4 594-0529 (Aug. 26* 1999) (NYPSC W.
Id at 1.
l e
501
DocketNa21982
Page 22 Of 65
REVISED AWARD
lower costs cannot be disregarded if compensation is to be cost-based, but is not conclusive
enough to have a definitivo effect on rates. Consequently, the NYPSC conoludtd,in part, that
the inference of lower costs could be addressed by a rebuttablepresumption dowing a CLEC to
show that ita networlc and service are such as to warrant tandem rate Compensation for all
mc.@
In this regard, the Nypsc developed a rate structye using a 3:l
ratio of incorning to
outgoing trat€ic as the point after which end-office rates done would apply. The NYPSC
allowed CLECs wishing to collect the tandem rate for traffic above the 3 1 ratio?how eve^^ to
rebut the presumption that traftic above the ratio costs less to serve by showing that its network
and service wanant tandem-rate compensation for all h.affi0. The NYPSC identified s c v d
network design feators that may be used to make such a showing:
The number and capacity of central office switchw,
6
The number of points of intmnncction off& to other I
dexchaagbWriers;
The nmbw of collocation cagas;
The presence of SONET rings and other types of transport facilitieS; and
The presence of local distribution facilities such as coaxial cable and/or unbundled
16opa
Tha " P S C ststcd that the presence of some or all o f these network compon5ntS in substantid
quantities would demonstrate that the carrier in question was investing in a network With
tandem-like functionality,designedto both send and receivecustomerttaftic?O
(a)
SWBT's Position
SWBT cautions the Commission that customer dispersion should be a consideration
when comparing CLEC and ILEC savice areas. SWBT Witness Mr. Jayroe states that when
SWBT serves a wide area but a CLEC serves only a dense downtown area to the erxclusion of
"Zd
at59.
Id 60.61.
502
Docket No.21982
REVBEDAWARD
Page 23 of 65
customers dispersed thoughout SWB'Fs area, the CLEC fais the geographic area Comparability
test,''
SWBT witness Mr. Wynn contends that ifa CLEC saves a comparable geographic ami
and hcurs additional costs, then it may qualify for the tandem served rate. But given that 92% of
traf3ic are not using a fiber ring but instead using a loop facility, the equivalent of a lina fxility,
them arc no additional costs incurred; just as QLECS are serving an end customer?2 SWBT
deduces that since CLECs have nearly 92% of their traffic go to ISPs, their network must bc
designed to maximize that rovenue instead of d&igned efficiently to m e voice tn~t3c.7~
SWBT
report6 that Taylor states that almost 80% of ita ISP oustomcrs are collocated and 73% of
Allegiance's ISP customersare co~ocated."
SWBT urges the Commission to adopt a functionality test h~addition to the FCCs
cornpasability standard. SWBT observes that them am functional differences between a tandem
office switch and an end oiRx switch. A tandem office connects end offices to other end
offices, other ILECs, and interoxchange carxiera, while au end office oonnects to end-users.
Mmova, according to SWBT, a tandem office dots not need to record user billing infonnati04
supply electric power to the equipmeat at the end of the ho,or convert between analog and
digital signals?' Given this difference in functionality, the tandun rate paid by an originating
carrier to the terminating d e r is in addition to the eud-office rate.
SWBT attests that a CLEC can bypass paying S W " the tandem rate because SWBT
gives all carriers the option to interconnect at either a tandem office switch, end office Switch, or
both.'6 SWBT caloulatcd that approximately 58% of all CLBC tmka inttmomectcd to S'WBT
"%.at484
aad485(May5,2OOO).
Tr. at 523,524 (May 5,2000).
Tr. at 556 (May 5,2000).
" SWBT %No. 16' D K C C ~ T C Sof~Ed
I IWylm
Y
at 8.
" SWBT Ex.No. 5, Direct Testimony of Robert Jayroa at 13.
503
Docket No. 21982
are interconnected to end offices?'
R&vIsEDAWAIu)
P8ge 24 of 65
SWBT requests that CLECs provide it the aamd choice for
interconuection so that it can mtrul its own costs by bypassing the tandem rates. SWBT
contends that such choice is not possible from most CLECq which gemdly operate switches
that perform both tandem aad end offioatunctions.
As an initial step, SWBT proposed that the Commission coaduct a needs-based ttst
asoertaining whether the reveauea cucs receive from ISB rmver their appropriate costs."
SWBT also proposed various functionality tcsts: a "parity of fiurotion" t
d
;
a bility-based
reasonablenesstest based on a CLE~Si n c m c e of additional costs"; a t
a
t addressing whether
a CIJBC offers S W T the choice of delivering tramc at a poht designated as the C L W s tandem
or at a point dtsignatcd as tho CLBC's end office''; and a tegt quiring proof that the CLBC's
network architecture is designed for tho mutual exchange of local voice brafdio aad that tho
switch is serving end users in a geographic area comparabloto a SWBT tandem.=
SWBT admits that it alao opcratu switches that perform both a tandem and md o f f i ~
functions, but claims that the two functions are separated in a xnanner that the tandm portion of
the switch carries only trunk-@-trunk trafIkn SWBT Witness Mr. Jayroe state8 that while
SWBT may perform its tandem switching and end office switching fhdons in the same
building, it does not collocate with end customers. SWBT avers that fimction rather than
'*
IC0 witntss Mr. Starkey corrfkmed that CLECS have the option to intetconaca with SWBT at both
tandexn and end omce lwei, and sclmowledgcd b a t SWBT doas not have tbat tuuw option. See Tr. at 543-544
5,2000).
SWBT Ex No. 5, Direct Tertimony of Robert Jayma at 14-16.
SWBTEx No. 16, Direct Taseimony of Ed Wynn at 23.
SWBT Ex. No. 5, Direct Tcshouy of Robert Jayroc at 14 .ad IS.
M,
h.at 472,473,494 (MSY 5,2000).
" SWBTPosition Statancat at 2 (May 16,2oOo).
Id at 3.
a SWBT Ex.No.5, Dmct Twtimony of Robert Jayroe, at 14.
504
Docket No. 21982
REV'ISEDAWARD
Page 25 ef 65
Iocation is releva& even if the called customer is located across the street h m the tandem
switch, a tandem function and an end office function could still be performed forthat call.&
While asserting that the tandem rate should mer apply to BPhund trafKc,* SWBT
genmlly agrtes that all oftha factorsnoted by the " S C have at lest m e value as indicia of
tandem fimctionality vis-8-vis non-ISP-bound traf63. SWBT smglea out one of the factors as far
more significant than the othm: the number of points of interconnection offered to other local
exchange carriers.86
Finally, SWBT proposes a streamlined standard for detexminhg CLEC tandem
fimctionality that does not involve any Commission acti&y.87 As an alternative, S W T
proposes an expedited 45day qualification procedure involving &davits and certification by
the Commission.*'
ICG believes that the reciprocal compensation rate paid by the originating Carrier should
be based on the capability that the terminating canids network provides, rather than the latter's
ICG witness Mr.Starkey fiuther avers that CLEC switches
network design md
only need to be capable of serving a comparable area, but need not actually serve a comparable
area in order for a particular reciprocal compensation to apply.go IC0 asserts that this capability
should be measured by geographic servico area because the network3 of most CLECs are built to
a(
TL at 474-475 (
~ a S,ZOOO).
y
"SWRT Position Statunent 81 2 (May 16,2600).
Id
"Id at 3.
Id.
89
Codtion Bx.No.ICG-3, Dkcct Testimony ofDon Wood at 28.
Do Tr.at 444 (May 5,2OOO).
505
Docket No.21982
REVISED AWARD
h g d 26 of 65
take advantage of the decreasing costs of transport relative to switching facilities and to
efficientlyimplement new switching technologies. ICG assorts that a recipmal compensation
mechanism that focuses on the underlying equipment used, rather than fimctionality provided,
would ptnalizt netW0t.k bigus that are morc efficient than their competitor?’ Additionally,
IC0 witness Mr.Wood avm that CLECs cormbct to SWBT end offices to avoid SWBT’s high
blwking rate,* rather than to avoid paying the tandem rate.
The Coalition maintaias that, to recognize the development of various CLEC network
architectures, the Commission should not look beyond the area comparability test.93 The
Coalition believes that functiodty tests am ultimately oircuk. Coalition witness Mr.
Montgomery mainkrins ha! it is d i f l i d t for a ragulator to develop or apply a fuantionality test in
is diffiicult to take into account individual ClLaCa’
chesacteristics m formulating a gene@ d e tbat is viable. Mr, Mcmtgomry asserts that an area
comparabilitytest, on the other h d , is much clearer than any fMctionality kxLw
any non-discrixninatory fashion because it
The Coalition also criticizes SWBT’s proposal of requiting CLECs to establish multiple
points of interconnection, asserting that it is unworkable €ima network perspeCtive.” Thcr
Coalition assuts that h p l ~ ~ ~ e n t aoft such
i ~ ~ ta proposal would requirC a wasteful mongheering
ofCLEC’s networks becanseadditionalpomts of intenormection to the same switch would w&e
ports and switchingcapacity on the CLECnotwork.%
Coalitionwibess Mr.Wood contends that the NYPSCs factors related to network design
should not be applied by the Commission in this docket because they fail to identi@ the rolevmt
Ex.No.ICO-3, Dinct Tssthnonyof Doa Wood at 28.
91 Codition
D2 ~
rat.546 ~y
5,2000).
*’ Coalition a.No,CLRC-1,Direct Testimony of WilliamPage Montg~nlayPt35.36.
94 Id
at 36-38.
“Coalition’sRcplyBriefonIseutsIdentitiMlbytha(lmmish at 2 (June 1,2000).
%.See generuh’y Cditica’s Reply Brief on IsruesIdantifitd by the (hmubhn at 3 (June 1,2000).
506
e
Decket No. 21982
REVBEDAWARD
threshold for rebutting the presumption that the tandem rate is not due!
Page 29 d 65
lo
Fu~thermo%AT&T
faotors appear to be ILEC-centric. For example, the number of pinta of
interwnnection offered to other exchange carrim "suggests a tendency to look at requiring
CLECs to mirror the ILEc's tandemlend office a r ~ ~ ~ ' ' ' 'AT&T
~
belimes that it is
entitled b the full tandem rate and observes that the standard for qualification of tandem
interconnectionrata is "hComrnisSionwin h o w it when they see
AT&T believes that it
is entitled to the tandem switching elemmt because its Switches prOVide the h d o d t y and
geographic scope of SWBT's tandems.'13
argues that those
(c)
Comm&s&n Decision
In interpreting the FCCnrie, 47 W . R 51.71i(a)(3), the conUnission mustgfve meaning
to the underlying language in the FCC'J Local CompetUion order fll090, 1091)). In that
seminal order, the FCC directed state commissiorw to consider whether the technology employed
by the CLEC is pdorndng ~ndm
or tanden-likefmctiont similar to dose p e t $ o d by the
L?XC'S tandem switch in determining whether "some or aI1 calk" termwing on the curs
a
networkJouki be priced the same as the traflc terminated by the IUC'S tandem switch. Given
the FCC's discussion in the Local Competition Order, the Comrn&sion condudes that a
terminating carrier shall be compensated for any "aaVitiona1 mi&*'
innured on& when it
actucrliy uses tandem or tandern-like &ctiont to terminate traflc im a geographic ureu
comparable to the are4 served by the KEC'S tandem switch.
require on& a
with the CLEW asvertiott that the FCC
the terminating carrier's switch has the capability of serving the aams or
27ie Commission d&ashowing tJwt
'09
Tr.at 439,442(May 5, ZOOO).
AT&T E
k No.12, Direct Testimonyof Javier Rddgua at 8.
'I'
WitionBxNo. 41,SuppLamtn~TcstimoayofDonJ.Woodat8.
"* ATBtTs Supplunantal Brief 0x1Tandmr bsua at 12 - 13 (May 26,2000).
"'AT=
Bx.NO.7, Dimct Testimony of Jon A i b b b pt 7.
509
Docket Na 21982
REVBED AWARD
Page 30 of65
comparable geographic area as the U C 9 tandem switch. It rea& the FCC rule to require
somding more than a simple wmparison
sf maps of areas served
Zy the interconnecting
carrier's swltch and the I . C . 3 tandem switch. In specifiing how the interconnecting cum'er
shoJd be compensated, the NIB rdem to a CLEC switch sewinga geographic area comparable
to the arm served by the &ECs tandem switch Ths Cornmimion intsrptsfr this language to
reqtdre the CLEC'sfucili'
to actuallype@onn actual tandem or tandm-likejhctions similar
to thosspe~ormedbythe u.ECzfadliti~before the CLEC b entided to compensation based on
the LLEC'J tandem switchbg carts, To interpret the rule otJ~erwisewould contravene the
general requirement of JymmetrlcaL rates for the transport and tenrtination of local
communicationstraflc in 47 C3.R 51.71 l(a).
3.
Rate sauchve
Thr~ughout tho proceeding, parties discussed various options for reciprocal
c ~ m o nmghg
,
fiom tho adoption of bill-and-keep, rate caps, tho Mega-Arbitration rata
structure,d a staffproposal.
(a)
Stq~Proposal
Coinmission Staff proposes the adoption of
"tandem blended rato" employ& the
following rate struchne: end ofice rate + (tandem rate x % SWBT tandems used) f (bransport %
% SWBT tandems used).
a
In the proposal, the resulting rate would apply to all traflic up to a
specified cap."'
WCOM emphasizes that the relevant compo4cnts of the Mega-Arbitration rat0 structure
for kter-carrier compmsation include end office switching, tandem switching and interoffice
common tmwp~rt"~To the extent that tho Commission considers a ratio or a blended rate,
'I4 &e
'Is
OrderNOS.a md 9 may 19 and 22,2000).
WCOM Ex. Na 1, Ditsct Tcstimmyof DonPrice et4.
510
a
Docket Na 21982
REWEDAWARD
Page 31 of 65
WCOM's prefers a blended rate that rewards CLECS that utilize a high percentage of direct end
office tnmking.1'6
Taylor C o r n pmposas asymmetric per minute rates between carriers. It proposes to
pay SWBT at SWBT's cost, while SWBT would pay Taylor Comm. at Taylor Corn's cost."'
Under Taylor Comm.'sproposal, SWBT would pay Taylor Comm. rates in ace99 ofwhat Taylor
Comm.wouid pay SWBT. Additionally,Taylor C o r n equates bill-and-kep to a very efficient
brutering arrangement.that makes sense only when traffic is in balauce bctwecn the two carriers.
Taylor Comm, argues that iftraflio is not m balance, however, one carrier &?&omall the work
and the other c d e r gets a free ride ifa bill-&keep compensationschcmo is adopted."'
The Coalition maintains that the Commission should adopt the existing Mega-hbitration
*
rate E;trUcture~."~ Coalition witntss Mr.Montgomery oxplains that the bill-and-keep method was
historically an S o d process used typically between a larger ILEC and a sxnallw ILEC in a
monopoly environment. Mr.Montgomery stresses that LECS agreed to such arrangements when
they exclusively served service amas and did not compete with each other. He contends that
today, in a competitive environmentsthem is a need for an ann's-length mechanism by which
carriers compensate each other for b e termination of
The Coalition finthet states that "[it] docs not quarrel with certain of the intended results
ofthe tandem blended rate ap~rnach.'''~' The Coalition acknowledges that the tandem blended
rate is simple to administer and may eliminate many disputes, and also recognizes that such a
I''
WCOMa Brief on Xmes Raised in the May IS*Hcaring, at 2 (May26.2000).
I" Seegenemllg Taylor Comm.Bx. No. 1, Direct Tcstimomy of Augu H,Ankum and TayIor Comm. Ex
NO.5, Supplemeatal Testimony of Dr. AugustAnhua.
'I*
I19
Tr.at 167 (April 4,2000).
CoalitionEx. No.CLEC-I, Direct Testimony OfWilliampageMoatgomery at 25.
Tr. at 154-155 (A@ 4,2000).
u' CoaIition's Brlef cm Iswe8 Iddflcd by the consnisSionat 6 (May 26, ZOOO).
511
Docket No. 21982
rat0
REVISFDAWARD
Page 32 of 65
rtcogniza the CLEW legal right to receive c o m p d o n for tandem switching and
transport costs. The Coalition also appreciates that the proposal requires that symmetric ratesbe
based on U C costs. The Coalition "strongly objects", however, to the proposal, due to the
elements in its rate fcmnula and the constquencesofits impiementation.'22 It indicates that the
level of CLEC dinct trunking to SWBT end offices is not amproxy by which to
reduce SWBT's or a CLECs rates for terminating another oBIzic1's tmflic. The CoalitionM u
argues that thc hsmula mistakenly assumes that 1-
use of a tandem by a CLEC equals less
tandem functionality. Moreover, it contmds that the proposed tandem blended ratds UBC) of a
specific percentage is flawed because the use of tandm vetsus direct end-office switching is
constantly cbanging.'' Finally, the Coalition avers that the proposed tandem blended rate will
either under- or over-wmpensate most CLEQ most of the time.
The Coalition also strongly urges the Commission to avoid imposing separate rata for
hdividual CLECs." The Coalition proposes a default rate, that is, the end office switching rate
plus the taadam-switohinp rate, without the transport rate. Nevertheless, under the Coalition's
proposal, a CLEC is still giveu a choice to receive Compensation for transport if it demonstrates
that it terminates traffic beyondthe footprint of an ILEC'a end office.'"
Allegiance states that it is ad opposed to the concept of a tandem blended rate as long as
it is applied symmetrically, to all local traffic and without any ratio or cap. Allegiaace further
states that such a blended rate would hilitate billing and avoid disputes OVQ eligibility for the
Finally, Allegianca contends that the imposition of the tandem blended rate will
tandem
not encourage or require CLECs to build inef€iciant networks, given that many of the fhst
M T ' r Sypkmental Brief on the "Blended Ratc" Issue at 6 (May 26, ZOOO).
IuId. at 7.
rd. ot 8.
mrii N 11.
'%
Ahgiaaw Post S18-2OOO Heariag Brief. at 4 (May 26,3000).
512
Docket No. 21982
REVISED AWARD
Page 33 of 65
generation of mtemm~onagnements provide for use of blended reciprocal compensation
rates.'"
AT&T
compensation on a LATA-wide basis,'28
Under this LATA-wide proposal, in instances in which AT&T puFchases UNEs fiom SWBT,
AT&T proposes the use of a bill-and-keep compensation scheme.'m In support of its proposal,
AT&T concludes that nothing in the FTA prohiits a state from expanding the definition of
"local traSc" beyond "mandatory BAS" for the purposea of 0 251(b)(5).130 AT&T states that
there are 'laudable" aspects of Staffs tandem blended rate proposal, but the problems with the
proposal far outweigh ita potential benefits."' AT&" contends that the proposed tandem
blended rata will impmparly encourage network deployment based on nciprocal
~ompensation'~
Because it seeks to configure a network architecture to interconneot only at
SWBT tandem, AT&T avea that the tandem blended rata would be grossly unfair to it, given
that other CLECs may choose to intemnnect mom often at SWBT end
p~oposessymmetric rates for rccipmal
Id at 6.
S a AT&" Bx.NO.5, Direct Testimony of M m A Swia at 4;ATBCT lnitid Po~t-HSariOgBtid It 5
(Afl19,2OOO). In its pending arbifratim procacding with SWBT, Docket No. 22315, AT&T haa pmposad
hbrumxdon architcckrroi0 which AT&T is responsi%lefot dcU&ng lraffk to S%"s tradnnr snd SWB"
resporudblbfor &&wing traffic to ATWS
own switches. U ulls Interconnection architectnm is not .dopted, tbca
ATBCT will pay SWi3T lLccotdingto lwcb of rwitclhg 0fficc.aMnacctcd, while SWBT will pay AT&T the thrcb
part tandem rata. Petition of Soufhwtm Bell Telephone Companyfir Arblbvrtlon with ATBT cOm?nunfcatlonro/
TM, LP, Tco Dallas, and Telepon Contmunimtions, Inc Pursuant to Section 2S2@)(1) o/ de Fedem1
TelecommunicationsAct of1996,DockctNo. 22315 (pading).
uD AT&T
Bx. No.5, Mrea Testimony of Maureen A. Swiftat 10.
IJo Id at 9.
'I'
AT&Ta SupplaucntalBrief on Tandcm Iosuer,st 4,5 (May 26,2000).
Id at 5.
lnId at6.
513
Docket No. 21982
(c)
REVISEDAWARD
Page 34of 65
SWBFs Position
SWBT suggests two methods for minknizing what it chsractak as the CLEW overrecovery of cornparsation related to the termination of ISP-bound tmflic: (1) a cap on the total
amount of hter-cdacompensation that a
CLEC r d v c s for terminating ISP-bound trafiic,
which l i b the amount of such compensation to two times the amount of c o m ~ o the
n
CLEC pays to the ILEC, or (2) tho use of a proxy for the appropriate costs inounad by C L X s in
PIQVidhlg 8&CCS t0 IspS,”‘
Anticipating that CLECs may allege that it is mcult to track voice versua ISP-bound
traffic, SWBT proposes that the existing TELRIC-based reciprocal compensation rats would
apprY to traffic that Is relatively in balance between SWBT and the CLBC. Mora spcoifioafty,
SWBT states that these rates will apply fw traffic that is in balance at a 2 1 ttrminating-tooriginating ratio between SWBT and a CLEC.’” Under this ptoposal, if traffic “exceeds“ tbia
2 1 ratio, SWBT indicates that it is appropriate to presumo that tha excess is ISP-bound traftic.
Despite this presrrmptiOn,however, SWBT concedes that CXECs would be given the opportunity
to prove that the traffic in excess of this 2:l ratio is voice traffic and subjat to compensation
using existing TEUUC-based rate^."^ With regard to ttaffic in excess of the 2:1 ratio that the
CLEC does not demonstrate to be voice traftic, SWBT &9sBlt9 that only the tandun Switching
rat0 should apply to the termination of such trafEc.”’ SWBT declines to c h t e r i w its
praposal as effectively akin to a bill-and-kecpmethodology, Stating that ISP-bomd traftic has a
diflbrent compensationscheme due to the FCC’s ISP exemptionrelating to
SWBTELNo. 16, Ditea Testimony of Ed Wynn at 26.
I”
M.et n.
this tima
SWB“ substantiates this 2 1 ratio by a eaffic study, which spanu &om 1997 to 1999.
period, SWBT tEnninsted 1.5 billion local non-ISP minutes of ms (MoUs) to Iho CLECS parholprtine lo tbia
proccdng, whit0 thws uama CLBCS tgminsted to SWBT 1.2 billion MOUs. Based on this data, SWBT C h h thrt
~
the balmcs of t M i c that b t d y lacd would bc 1.321. SWBT recamnende usiog thie ratio II;8 e m g a b fop
&*gdshhg ISP traf€Sc. Sea SWW Ex.No. 16, Dinct Tesdmony of Ed w p a( n.
”’Id. at 28.
514
Dodret No.21982
REVISEDAWARD
Page 35 of 65
SWBT states that it does not have significant objections to the use of Staffs tandem
blended sate in certain contexts, provided that mncrete bunkingrules arc also adopted to ensnre
that CLECs move aaffio from SWBT's tandem tmnks to direct end office trunks when specific
W c volume limits arc e x c a x ~ . " ~SWBT emphasizes that if tbe Commission adopts a
ta.ndeinblended sate, then it should clarify that CLECs are limited as to the volume of traffic they
dircct trunking to end
msy deliver to S W ' s tandem beforo being required to
offices." Regardiag the imposition of a cap, SWBT states that "a two to ow ratio would work;
a threa to one would also be within the permissible.""' However, SWBT statea that any overcompensation "could be mitigated by setting an absolute cap at a two-to-one, rather tfian a threeto-oue, imbalance.'" SWBT states that, due to the adminisknttive ease in using such 8 tandem
blended rate,it could havo significant advantage ova any multi-fixtor functional test such as that
adopted by the NYFW.143
SWBT rejects the Coalition's "compromise" proposal. arguing that it will OVBT
compensate for ISP-bound traffia, violates federal law, and is administratively b~rd0nsom.'~
Also, SWBT maintains that AT&"% LATA-wide proposal gocs bcyond what is allowed under
state and federal law.i" SWBT believes that AT&I*s LATA-wide proposal in eff't
reduces
AT&T's costs of serving a concentrated base of busmess customers and ISPs Without a h
serving geographically dispersed residential customm.'46 SWBT M e r contmda that ATBCT's
proposal cannot possibly be cost-based if it sets the same rat0 for local, toll, and access &a&
In
Tr.at 102-106 (April4,2000).
SWBTs Supplemental BrieFon tbc "BlendedRate"h u o at 3 (Mey 26. ZOOO).
'*Id at 4.
"' Tr.at 619 (May 18,2000).
14*
SwBTs Suppbmtal Reply Brief on the." B l d d Rete" Issue at 6 (June I, ZOOO).
"'SwBTe SupplementalBrief
011
the "Blmded Ratc" Issue at 5-6 (May 26.2000).
IM
SWTSSuplplsmclrtalRwly Brid On tbc "Blended bb" Issua 8t 6-7 (JUW 1s 2000).
"*
SWBT Post-HearingBrief at 38-39 (April 19,2000).
rd at 39.
515
Doektt No. 21982
RlWISEDAWARD
Page 36 of 65
tamhated Within an entk LATA.I4' Because AT&T terminates less traffic than it originates,
SWBT argues that ATgiT would be overampcnsatedunder its proposal, whila a! the samo time
avoiding payment ofappropriate accws chargesrelated to interexchange traffic."*
I
As a polity matter, #he Commission pr#m
the bill-and-kep method over any
of the
oliter compensationpmposah reviewed in this proceeding. While the Conunhbn hop- that
the bill-and--&ep method will become a viable option as the markt matutas it nevertheless
recvgdzes thut w e n t volume^ oftrafic between ecvTiers do not support adoption of such a
compensation scheme as R generul rule at this t h e .
The Commission has long viewed the minute-&-a-minute approach as a goal by w M to
base compensation between carriers, AT&Ts LATA-wide proposal, however, has implicuth
for U C menus streams, such as switched access, hat have not been jidb exomhied in tlrij
proceeding. Onsequentljs the Commission dectina to a h p t AT&Ps LATA-wtds p r o p a l
becwe it aflects rates for oiher t v p e ~of calls, such as i n M T A toll calls, fiat am bgtond the
scope of thk proceeding.
With respect to u Merur&cal or tw0-W Mtch network the CommMonflndj that the
actuai use of tandem switchingfacurtlerr is eusily &cemible. If on& an end o m d c h k
employed to terminate traflc then on& the e n d - o m rate shall apply, r f a tandem W t c h LI
usedfw the termination of tram then the tandem rate ahall apply. Tlts issue of compensation
bI
m straishtf0Mtaard however, with W e c t to a network using multtple-fitnction mvitt3e.s
As
stated earlier, the inter-carrier compensation ram approved in the Mega-
Arbitrations, as refrected in Ataachment A to this Award, fonn Ihe bmi~of the inter-Carriet
1G s\KBT
Ek No.8, Rebuttal TestimWy of Randy Long at 17.
lU IG? at 19.
516
DocketNa. 21982
REVBEDAWARD
Page 37of 65
compensation rates approved in fit3 Award pursuant to FTA $252/d)(2). A %ew" rate adopted
in this proceeding is the "blended tandem rats". This blended rate is necessary h
CLEi3 have failed to demonstrate that they are entitled to the fit11 tan&
terminated by their networks employing mulffple-ficndln sw-.
e the
rate for every call
Spedficauy, the CLEG
havefailed to evidence that every call tennhated on their networb involw actual tandem or
t a n d m - l i k e ~ c i i oor
~ .that evwy such call neea3 suchfiutctions.for that matter:4g They have
failed to demonstrate the twmlnauon of such traflc in a gwgrtphical& dispemed area, as
would occur had actual tandem or tandem-likefinctbns been perfomred on every call. Rather,
the evidence S ~ Q W Sthat some calk terminated by thelr multipl#fiurdfon switck use only endoflce&ctwnsl while other3 also use tandemficnctions. Consequently,in determining "whether
some or all calls terminating on the new entrant 3 network should be pried theS a m e a.s the sum
ofthe transport and tenninatjon vka the incumbent LEC'S tadem .wit&,nlJo the CommiMon
concludes that on& some of those calk merit such'symmetrlcolwmpensation. To award C U C s
thejidl tandem ratefor every call, under these circumstances,W d o v e m m . a t e them and
e@ctive&ward them a higher ratefor end-oflce switching than what SKBT receives, contra?y
to 47 CF.R 51.71i(a). FurthermoreDto do so would be inequitable and discriminatmy.
27wefre. to roughly achieve the rats symmetry mandated un&rfederal law, the
Commission Iooh to SWBT's hkarchkal or two-tier network to calculate a blended rate that
takep into account the multiplefwrcciom~~omed
by the CLECS 'switcheswith regard to calls
terminated on their networh. As demonatrated by SWBT, appraximotely 58% of all c%Ec
t w h interconnected to SWBTare interconnected at the end-o@e switch level. Convsrsely.the
remaining 42% are interconnected at SKBT's tandem switches. For these reasons, the "tandem
blended rate" approved in this Award shall include a ratefactor that correspond8 to 42% of :he
sum of tandem switching and intwofpce transport costs. Thls ratefador is a reasonable proxy
of the percentage of traflc, in the aggregate, for which the CLECh' multfple-functionswitches
employ tandem or tandem-Ii&&ctimw in terminating tr&c on the CLECr'network. In other
109
See, eg., SWBT En 6, Rebuttal Testimony of Robert Jayroo at 5-6.
'Io
Loca~Competitionorder atg1090.
517
Docktt NO.21982
Page 38 0165
RWISEDAWARD
words,it reasonab(ypresumesthat a CLECZ network is actwl&pe&ming tandem or tandemlihfimctwnsand incurringcaptsassociated with thefinctiotu in roughly the sameproprtim
as SK?3T%network. Thsfactored amount shall be added to the bifirrcated end-ome switching
mte approved in this Award to arrive at the t d “tandem Mended mte”.
Because 4299 of the tn@c terminated by the CLEW mailtiple-&uion switches a3
prt=wmedto involve tandem or tandendikefinctionality and the pgraphic area in which JU&
functional@ occurs are genera& comparable to the ateas served by SKBYs tandem m*dej,
the tandem rate is jwt@edjb that percentage of tmfic, pursuant to 47 C.F.R. 51,71l(a)(3).
The Commission juther finds that the r d h g tandem blended rate ts reasonable and
consisteat with the FTA, given that the jidl tandem rate is not justf@?dfn
instance. In
adopting the “tandem blended rate”, the Cornmidon does not seek to h p e an aEc!network
confrguMtion upon CLICYor to discourage a d i m e intermnnected network but rather on& b
determine the appropriatecompensationfir the termination oflocal tr@c
The Commission ais0 applaudr the inrrochrcion and application of advanced
that the
technologies in the telecommunicatiolu market. 2% CommLwion fmh, how-,
merit means
& which reciprocal compensation
is accomplished
ha contributed to a
In other wort&,
significant imbalance of tmflc between originating and terminating arhm.
the cum& scheme has createdpwerse economic Incentives that m l t fn an* i
in
reyetturn between certain interconnected carriers, infavor of the terminationcam&.
Like the NYPSG the Commission concluales that the we of a thmhold traflc ratio is an
equilable device by which an originating cam’er’s cos& can be limjd& mitigated and the
@lent delivery of traflc maintained when the degree of traflic imkhnce (d*wncomitantly,
Walancsd compensation) indicates that certain compensation is no longer warranted
Thergore,for &a&
Jubiectto the “tandemblended rate”, such Q rate fr appropriate up to a 3-1
(terminatingtraflc to originating trafic) threshold imbalance.’.” When a carrier exceeds tha: 3-
518
Docket No. 21982
REYISEDAWARD
Page 39 of 65
I ralio threshold, it ;is reasonable to presume that predominate& convergent ttq& is occurring
and the "excess tr@c should be compensated using the end-o@e swiiching rate on&.
This presumption, however, is rebuttable. The ternzfirclfing cam'er may demonstrate
actual tandem or tandem-likefictwnal@tin the delivery ofthis "excm" traflc using v a h
network designf&ors that demonsrrate the exisems of a network serving mr area compor4ble
to the U C ' S geogmphic area with tandem or tandim-lih@ctions, a network &signed to both
send and receive customer traflcfor hpUrpa9e of mvhg a dispersed customer base. Merely
evidencing a capalrility to serve a comparablegeographic area will not rebut the presumption.
The network designfactors upon which a tx~rriermay make ICs case inckrde, but are not limited
to:
1. the number and capacity of central v@
switcha;
2. the number of points of interconnection offwed to other looal exchange
carriers;
3. the number of coilocation cages;
4. the presence of SONE?'rings and other t y p of transportfacilities;
5. the pwence of local dhtribution facilities such as coaxial cable andlor
unbundled h p s ; or
6. any other indicia reliably demonstrating that the uwrier is tramporting a
significant volume 0f-c
to a geographicallydbpersed area.
There factors are similar to those emplqyed by the Nypsc in adalressing the & a m
imbalance issue. Furthennore, in evaluaiing the degree to which actual tandem or iandemJtke
fUncron8 arepet$onned. the Commission shai? also take into account the extent to which, i f any,
the trafll examined requires the pwformnnce of tandem or tandem-like jhctions. &mining
the need for suchfunctions will &id
the contguration of network for thepurpose of obtaining
the tandem rate wen when tandem or tandem-lihmctlons are unnecessary.Because a carrier%
proof of actual tandem of tandem-likefinctionality will befwtdriven, it m4y demonstrate such
fictionalip, upon request, in either an arbitrationproceeding or other appropriateproceeding
519
Docket No. 21983
REVBEDAWARD
Page 40 0165
designated by the Commiwion,mch as a p o s t - i n t e i w d o n agrement &putts proceeding?’”
Upon evidencing the degree to which W@C excepding the 340-1 ratio sdlpfies the receipt of the
landem rate, the r q u d n g uanakr ir entitled, on u pmsplctive basis, to wcehsuch mte to the
extent that it has dernonrtmred that it is entitled to receivs suclr compensation. Z7ter#breI ths
rate awarded may ran@fiom 0% of the iondm rate up to 1 W o ofthe tandem raze, dqending
on the evidentiary m r d Moreover, this prmpectivehr applted rate shall apply to &
ofthe
l
b%@c that the requejttng carrier tenninatts on fts network Le.,
occlcrring before and
q f b the 3-1 ratio.
In sammaty, the Chmission ahpb the folrowig mte SaUdvG as the mechan&m fir
payment ofreciproorJ cwmpat.vafion:
1. For traflc tenninated 6y a LEC with twdisr or hiervrrchical switches, Le.,
separate swilcir~pe$ormingtandem mtd cnd o&jhc&ru:
When tandenw ure u s 4 the originatingLECS pay the tMdem rais (end o*
swiiching $. & n k witching + i n t m f i e transpd).
9
Forputpaw of tAe tmtdem served rut4 the end o+ rate ir u bi@awtd mte
(set-up per call and duration), and the tandem &t&g
mrd btmfim
transport rates are the Msga-Arbitration rates p&ourEy adopted by the
Commission.
When tandems are not wed, the originotlng LECspPy the end o&e mte on&.
2. For traflc terminated ly a LEC that does not have two-tier or h b d W
swiicha, but insteadempbys multiple-mction switchat:
A tandem blended rate (end o&e switching + % of [tandem switch +
iniero& trmpo?t]) applie.
9
For purposes of this landem blended raie, the end oflce rate B a bijicrcated
rate (.et--upper call and &atiwa); the tandem and hpnsport mi- are the
rates adopted in the Mega-Arbi~;nonS;’s3ond the % h the appraxSmate
permags of U C ha@ temhwi on SKWs network ru&grandemp
REWEDAWARD
Docket NO.21982
Page 41 of 65
(42%), which serves as the proxy for SKBT traflic terminured on the CLECS '
networks that involves the pefonnance of tandem or hndem-l~finctiom.
This tandem blended rate appiia until a 3:1 ratio (terminating to originating
tr&c) threshold ik reached
Alter the 3:1 ratio threshold Is reached on& the end ofice mte applies,
unless the terminating currier demonstmtes acntal tandem w tandem-like
finctiona Iity.
9
Upon a demomtration of aclual tandem or tandetdike@?tionautY, the
terminatbag carrier will meiw on a g o i n g f m d basis, competuation in
the range of 0% LO 100% of the tandem rote, depending on the extent lo which
ackcal tandem or tanden-likefkdility is proven to occur. This rate shall
prospective& apply to &
of
l tmflc t e n n W d on the terminaHng caurier's
network
LEC;r may demonstrate actual tandem or tandm-like&nctional&y either fn
an arbitrationproceeding or other proceeding daignated by the G m h n .
C.
-
DPL ISSUENo.3 WHATRATESSHOULDAPPLY?
All parties agree that th0 TELRIC principles drive the determination of rates in this
docket. "ELRIC requires that a cost study employed to set such rates be forward-looking in
nature, use an efficient network and engineering $amavo* and not us6 embedded costs.'"
Taylor Corn. is the only CI,BC! in this docket that presented its own cost study. The other
parties rely on cost studies previously approvedby the Commission.
I.
Taylor Comm Cost Stud'
(a)
Tuyior Comm '8 Position
Requestfir Grn.er-Sp@c Ratts, and Asymmetric Rates
Taylor Comm.contends that it should receive hi&m reciprocal compensationrates than
SWBT because its costs to terminate calls are higher. Since its business plan results in a
customer base that is disproportionately comprised of XSPs, Taylor Comm. asserts that its cost
u( See
47 CF.R 8 51 SubpartP,
52 1
Docket No. 21982
REVISED AWARD
Page 42 of 65
stxucture is different
&om that of SWBT and otha
Taylor Corn. proposas a
minutes of use (MOW rate structore to recovex its compensation h m SWBT.'"
Taylor Comm.notes that most of ita costs rn volume sensitive, and that it is capable of
-ig
its inorementalcosts very eft~cicnt~y.'~AS proof that ita costa are diffcrtnt h r n
those of other carriers, Taylor Cormn. submitted a cost study (tho QSI study) that hitially
calculated its cost fbr call tendnation as roughly $0.004431 pet &ute."*
Taylor b m m .
claims that the QSI study is consistent with TELRIC principfes. Spedfidy, Taylor Comm.
kulioates that no adjustments am needed in the study because the study assumes only effbimtly
located, state-of-the-art Mitbs. Further, Taylor Comm. avers that the most recent actuaI traSc
data repment Taylor Corn's total ~ompauy-widademand for switching.
Aooording to Taylor Comn~.,the study is designed to capture wpenses and outputs as
they may bo expected to OCCUT on an ongoing basis. Taylor Comm. hihex explains that the
study identifies all necessary W t i e s for providing switching functions and assigning costs as
either traflic d t i v e or mn-Wc sensitive, In this mgard, Taylor Comm. COafiTms that only
the traffloGBI1sitive costs of switches arc included in the study:'' The QSI study uses as inputs:
capital switching c o ~ t costs
s ~ of
~ connectio~ito end-users from Taylor Comm.'s central offices,
and trunking costs to reach SWBT switching facilities. The QSI study also assumes the
cC0r)nmio life of a Switch to be 18 years.'61
Taylor Comnr Ex. No. 4, Rsbuttal Tatlmony of Charles Land at 20.
to tcrminata a cd rr~notconsWt
h ~ g the
b d u r o t i ~Of~
' ~ 6Ts.at 356 (April 5,2000). Became the
a d , this type ofreeway*
nquinspnusslnptionabouttbaaveragadtength. TayhCOnrmharnot
disclosed b w it dotorminedtho avmgo call timd in iu cost study, or won what it ia.
TWIOI cwam BX. NO. 4, R & ~ I~sstimonyofctuulastand ~120.
See Taylor Comm.Bx. Na 1-11. Taylor SwitchingCoat Study.
Taylor Comm. Ex.No. 1, Direct Testimony of Dr.August Anhrm at 364.
All 8*g
quipmcnt in tho QSI sttidy ic Icascd &om SiaMaU. Sec Tayla Conus. Ex. No. 1-11,
Taylor Switching Cost Study at B. Thc ktise t for a fivayear paid Seulk. at 417 (April &2000).
's'TByzor Conrm BnNa 1-11. Taylor Suieohing Cost Study at 9.
522
Docket No. 21982
BEVISED AWARD
Page 43 of 65
The @I study links g a d and administrative costs to MOU based upon the demands
on labor for each element. The QSI allocates the overhead costs based on headcount so the
expenses foUow labor costs, e.g., if a person is assigned to retail related activities, then office and
supply related expensts arc proportionally assigned to retail activities. Taylor COnmL witmas
Dr.Ankum states that costs sssociated with "service to end-users have 110place in a etudy for
switching COS~S.''*~ However, when asked about a specific line of costs labeled "end-ascr T-1s"
in the Taylor Comm. cost study, Dr. h k u m states that these cormectiona were usually to Taylor
Coxnm.'s ISP customers, t h m k m deanonstrating that costs assooiatd with service to end-ussrs
arc included in the @I study.'a
Mer the initial bearing on the merits, Taylor Ccunm. mended the QSS study inputs and
revised its proposed rate from $0,004431 per minute to $0.002858 per minute, a 35%
reduction." In its ravised cost study, Taylor Comm. addressestwo issues raised in heming: fill
factorsand return to capital.'@ Dr.Ankum changed the cost study to conform the Commissionapproved rates of remused in the Mega-Arbitrations and modified tho trunk utilization factor
fhm 55% to the Commission-approved 75%. Dr. Anlcurn also increased the annual traffic
estimate to 3.2billionMOU in the revised cost
Taylor Comm Ex. No. I, Dkoct TesttnOny ofAugust H.Anhrm at 49.
Tr,at 365-366(April 5, ZOOO).
1W
Taylor C o r n Ex No, 5, Supplemmesl Tastimony of Dr. Aqmt Ankua~at 16; Post-Hexing Bricf at
29-31 (Apd 19,2000).
16J
Tr. at 320-324,361365. llrd 419427(Apd 5,2000). SWBT plea criiiciz8d Taylor Conun.''r utilization
and its inclusion of ntorn on capital in the QsI study. See SWBT Ex. No. IS, Rcbuttd Tosttnrmy of W i U h
Taylor at 5 and 17-18.
'a TaylorComm. Ex. No.5, SupplenzcntalTestimony of Dr.August Anhrm at 15.
523
Docket No. 21982
REVISED AWARD
Page 44 of 65
SWBTbelieves that the inter-carricr compensation rate should bo set symmetricallyat the
TELRXC of a filly efficient competitor.'67 SWBT declares, therefore,that different assumptions
about traffic voluxnes, depreciation lives, fill factors, or cost of capital should not matter ifthe
forward-lookingeCMl0mi0 cost of terminating traffic is measured wing the parametas of an
efiicibt fim. SWBT wams that there are efficiencyconsequences of estabIishing a rate based
on costs higher than b s a of the low-cost proddm and states that when high-cost mpplier
,
repains in the marlcot, resources are wasted.169
SWBT contends that Taylor Corn's cost study does not follow "ELRIC principles.
SWBT states the QSI cost study is a snapshot of Taylor Comm.'s current situation and iS not
necassarily indioative of ibture switch aapacity and the ability to change capital exj)en&tumJW
SWBT disagrees with Taylor witnm Dr. Ankum's assertion that CLECs expm*enca
higher costs due to Iowa switch utilization levels and lack of scale economies.17oSWBT states
that marmfacturers sell small switches and that CLECs can purchase switching capadties
according to their dunaxid. SWBT also argues that oxtra capacities can be added in the fonn of
small a number of lints and, therefore, CLEcs should not expcSienco lower Switch utilization
levels. SWBT submits that lower costs arc an important advantago r e d t h g &om economics of
scale that SWBT should be encouraged to explore. According to SWBT,customers should not
have to pay more, directly or indirectly,simply because a mnaU firm has bigher costa"'
SWBT also argucs that Taylor conUn.yscost study wrongly includes a retum on capital
for Ieased switches. SWBT contends that lease payments are expenses, not capital investments.
~
~
SWBT Taylor Diroat, at 5.
Id.
'@
SWBT Ex. No. 15, RcbWal Tertimony ofWilliamTaylor at 14-16.
Id. at 5.
524
Dockel No. 21982
P a p 45 of 65
REWEDAWARD
SWBT states that since Taylor C
o
m
m
. has no capital inveStments in the leased switches, the
opportunity costs and the normal profit &om the switches is zero.1n SWBT concludes that by
using the current lease expenses in the; QSI model, the cost study becomes ouc based OR
embedded COS&, rather than fOrwatd-lWking C Q S ~ SWBT contands that tha QSX cost study
computes switching costs with similar logic. The QSI cost study divides cnrrent lease paymats
by the cursent number of minutes to aniva at the switching costs per minute. This, by definition,
makes the QSI cost study a short-tm rather than long-run study, according to SWBT. SWBT
maintains that the lease payments also appear to be higher than the capital costs of the same
equipment, thus overstating Taylor Comm.'s costs,'73
Finally, SWBT alieges that tho QSI study does not irmcOrporate overhead expenses,
including entertainment costs and recycling fees in a proper way.'"
(c)
CommbionDedsion
The Commissionfin& that T a y b Cb?nrn,Z ccut sru6y does not follow TELRICprinclplap
an4 thmfwe. cannot be used to determine reciprocal compensation ratm. The Commission
ackncnvledga the adjustments that Taylor Comm made to the QSI s@
but notes that the
revised rate of $0.002858 per minute is still significant& higher than the end oflee rate of
$0.001507 approved in the Mega-Arbitratbas
the FCC allawa
(I
cz;EC to petition for
higher reciprocul compensation mta than those of the U C ,the CLEC must show that it is
using the most cost&iective,forward-Zooking method possible to serve cwtome~s.'~~
Taylor
Commfaired to meet th& burden,
"'Id at 6.
*''Id at 17-18.
In
Id Bt U-14.
"'h at 529-530 (May IS, 2000).
47 C.F.R. 5 1.7 1I@).
525
Docket No,21982
REWEDAWARD
Page46of65
TayIor Comm,s' inclusion of the costs of connecting irs end-use customer8 to its switchat
The C b n n t W n agrees with SKBT that
those casts s W d not be included in the calculation of reciprocal compensation The
is the most fitndamental flaw of the QSI cost ~tt&.
Commhion wnchrdes that Ta$or Comm.!v inclrcston of these cam results in a signifcant
overdmatbn of costs by the QU
cost study. The Cbmmibion surpecb that fi these elemGntj
were ddetedfim tlre srudy, Tqlor Corn. s
' rata would be much closer to those approved in
the Mega-A&i&at&w prmedhgs.
The Commission also agrees with SWBT that the QS!JWdould use switch capwi&
rather than actual demand The Commfsston conchdm that the use of achral demand violates
[email protected].
Fkrther, although Tvlor Comm. stat# that on& tr@c-switive elimenb should be
included in reci'ocal
compensation rates, it asdgnt the rnajoriry of casu assocfoted with
elements such ar rtqyclhgjii and entertainment to the trajk~mitlveportion of the QSr cost
study. me Commissionjhh that T q b r c0mm.Sfailure to su@imtly explain the reiaiiomhjp
between these elements and the number of minutea terminated in its switch fi&r undenninar
the cost study's results.
2.
Soxthwatern Bell Cost SWy amilspspecijlc Redpocal Commation Rates
(a)
SWBTPosUfon
SWBT supports the use of the Mega-Atbitratiuns' local switching UNE cost study to
determine the appropriate rates for the termination of local voicc tr&c. Tbt cost study includes
the investment necessary for call set-up, call termination, and vertical services. SWBT contends,
however, that ISP-bound traffi~does not requirc the use of all of these functions and argues that
the total costs in that study should not be attributed to ISP-bound W c . SWBT also indicates
that tho average hold times are approximately three &utea
for voicc calls as compared to 29
526
Docket No. 21982
REVBEDAWARD
Pow 47 of 65
SWBTnotes that a principal reason that it is less costly to terminate
minutes for Intemet
an ISP-bound call than a voice call is the longer average hold time. SWBT explains that a
comparison of one 29-minute ISP-bound call to the equivaleat minutes of voice calls yields nine
additional Fan set-ups for the voice calls. Moreover, SWBT states that the stable and longer ISPbound call does notreQuira as many network resources as calls that have a much shoaer average
holding h e . SWBT concludes that cacb time a cat1is &-up and tom down, additional networfc
resourcesare us4 compared to a call that is more stable.'=
SWBT relies on its ISP-bound trafiic (BT) ooat study to demonstrate that ISP-bound
traflic is lbdammtally different fkom voice traffic and should not be subject to reciprocal
compensation, albugh SWBT docs not propose that the cost study be used to set rates.'"
SWBTs IBT cost study measures costs associated only for dial-up, 56 kilobit Internet calls.
SWBT contends that the diffaenco in call durstionbetween voice and ISP-bound traffic justifies
Separating the t&Io for rate purposes, with ISP-bound trastio costing approximately 20%the
cost of voice traffic. In ddition to wing a %minute avcrage hold time for SSP-bound trafitic,
SWBT stat- that the IBT cost study ~ssmesthat the switches terminating the ISP-bound traffio
have no vertical services, which it contends am unnecessary for ISP-bound calls, and am the
absolute rnhhnurn necessary to complete the ISP conncctian.'79 SWBT explains that its voice
traffic study, however, does not make these assumptions, but d e r includts the programming of
vertical and other services into the switch, thereby increaSmg the switching costs for voice
W c , r e g d b s of the call duration. Despite these diffkencts in the Cost studies, SWBT
admitted on cross-examination #at ISP-bound traflic uses the same switches and the same
network as voicetmfiic.*w
'" SWBT Ex. No. 16, DiredTeaimony of Ed W
In
In
p at 7.
SWBT Ex.No.5, Dmct Testimony of Robat Jayroc at 6.
SWBT Ex. No. 13, Rebuttal Testimony of Berbut Smith at 6-7.
'a SWBT Ex. No. 13, Roburtsl Testimony of Barbara Smith i t 3-4 and SWBT Ex. No. 19, SWgT IBT
cost Study ai swBT2oooo5.
uo Tr.at 199-204 (Aprll4,2000).
527
Docket No. 21982
Page48 of 6!5
AWARD
0
The peak traffic hour in the SWBT IBT study is assumed to be the peak hour for ISP
traffic. SWBT Bs8eTfs that this peak hour increases costs because it requires more switching
resources to accornrnodatc increased usage at the peak hour, SWBT also oontends that the
switchea must be engineered in a manner to handle all traffic, notjust a subset of Wee.'*'
Taylor Comm. avers that the costs assodated with the tcnninationof 1
st&ic
tu8 the
m a as that for traditiod voica trsffic. Taylor Comm. contends that tho SWBT IBT cost Btudy
erroneously concludes that the costs associated with tednathg ISP-bound W f i a are a ftaction
of those applovtd in the Mega-Arbitrations. Taylor Comm. also argues that the SWBT IBT cost
study does not follow TEWC Principles and is not representative of CLEC costs.'82 According
to Taylor Comnt, SWBTs assumption of a host/tsindm architecture h not 8oouTBfo for most
Cf;ecs and underestimates CLEC costs. Taylor Comm. states that although the host/tandun
architbosure allows switchua to share functionality and, therefore, lower their costs, CUBCS do
not use this type of architecture because they have yet to achieve the size of ILEO such 8s
SWT.''
WCOM and ICG state that reciprocal c m ~ t i o n
rates should be symmetric and
should include ISP-bound traffic."' These CLECs contend that symmet& ratco promote
efficiencyand low-cost methods for terminating calls because they allow exceptionally efficient
carrim a higher profit
.'*'
'" SWBTBX No. 15, RebuttalTwlimollyof Will$m Taylor at 10-11.
Iaz Taylor Cbmm. Bn No. 1, Direct Testimony of A
4, RebuttalTestimony of Qlatlss Land at 13-14.
R Anhun at 52-53.55; Taylor Coma. EX.Na
"TaybrCwunEx.No. l,MreaTestiwmyOfAu~H.Antrumat61-63,65.
IU WCOM Ex.No. 1, Mrect T&mony of Dam Pricc at 4; Coalition Ex.No. ICG-3. Direct TastimosV Of
Don Wood at 8.
IUWCOM
En No. 1. Dircct Tesdmony of Don Prica at 4.
528
m
DOW NO. 21982
Page 49 of 65
Given that ISP-bOund trafIIc usw t&e same public switched tciephonc network as voice
is mconect to separate ISP-bound W c for Costing purposes. By
example, AT&T contends that consideration of d y ISP-bound traffic in the SWBT IBT study
misstates the peak hour usage of the network and asserts that all traf7tic should have been
consideredin making this estimation.'" AT&T fhhx argues that the SWBT IBT cost study is
an incremental cost study inconsistent with tho TELRIC framework."' In support of this
argument, AT&T cites the inability to acGurately scparata ISP trafiio &om voice traftlc, the
exclusion of tandem switching costs, and the exclusion of many compotMIts of end+ffice
switching costs, Le., Signal System 7 (SS7) capability:*' Additio~~kly,
AT&T advocates the
minute-is-a-minute approach in detednhg network casts, asSerting there should be no
Waentiation in costs by types of t r a f l i ~ : ~
traflic,
e
REyisEDAWARD
AT&T
argues it
Finally, AT&T argues that the ~ Wprocessor
O
utilization factor uscd in the SWBT IBT
cost study is too high and underestimatestrue costs. AT&T points out that the 90% rate waa
approved in the Mega-Mitrationpmceedinga for a slightly diffaent purpase, notingthat w unit
cost figures based on the 90% processor utilizstion value were used to establish looal switching
rates in those proceedings. Questioning the propriety of using the 90% processor utilization
factor, AT&T observes that the range ofresulting cost calculations can vary as much as 100-fold
when the assumptions employed vary between 0% utilization to 100%
AT&T offers a countermethod for settingreciprocal compensationrates that treat3 trafjtic
within an entire U T A as local traffic. The rates proposed by AT&T are largely based on costs
determined in the Mega-Arbitrations, with maU changes in certain assumptions. For example,
AT&T assumes that the average mileage for transpott is longer than t&at assumed in the Mega-
la6AT&TEx.No.3,Direct TeatimOny of Lec L.Selwyn at 15-17.
"'AT&T Ex. No.1. Dimct Testimony ofDaniel P.Rhincbartat 14.
Id. at 7.
'*Id. at 9.
Iwrd. 17-20.
J
/ 78
529
0
Arbitrations in view of the inclusion of more rural, less dense areas in a LATA. The AT&T
method also includes us8 of the tandem switch ~harga.'~'The AT8cT proposal results in a
blended rate of $O.OOU6Sper minute.'92
The Coalition, Iike ATBGT and ICG,contend thst the SWBT IBT cost study is thully.
Wition Witness Mr.Montgomery supportsthe testimony of AT&T witness Mr.Rhinahartand
ICG witness h4r. Wood setting forth the flaws in the SWBT IJ3T cost study.i93The coalition is
also Critical of the SWBT IBT's usaof two usqo studies. It ass& that the first usago study
attempts to separate ISP-bound traffic and measure the number of minub that fit crihia
established by SWBT aa indicatcnrr of an Interact dial-up call, including thenumber of incoming
calls and the duration of those calla. With regard to the second study, which counts the minutes
of voice and data traf60 for two SWBT central ofllces, the coalition argues them is no scientific
or logical reason for Wing those specifificcentral offices Aocording to the Coalition, the data
obtained fbmtho two offices differ from each other significantly and, consequently, CBtlIlOt bo
used to detcnnine any trafiio pattem.'04
.
(c)
Commnrisston Decision
AI1 parties agree that the SFYET IBT cost study should not be used to set reaprocat
cornpensotion rates. The Commission concludes that the SFYBT IBT cost srudy is not a TEWUC
sludy,andalso cannot be used tojustijL &rientMngISP-bound tm@ and voice tr@c for
costing purposes. At this time, the Commission declines to distinguish voice j h n isp-bound
tra& forpurposes of setting reciprocal compensation rates.
m'
AT&T Ex.No.7,Direct Testimony of Jcm k Zubknaat Attachment 1.
AT&T Ex.No.7, Dtrcot Tsstimwy of Jon A. Zubkua at 5.
~wtgemsrg
at 11-12.
19'
coalitonBX.NO. -2,
IM
Coalition BX. NO.as?,Gl,Direct Tastimonyofmiam Page Montgomay at 53-57.
khal ~tstimonyofw-pags
5'
179
530
e
m
e
t NO.21982
Page SI of 65
REVISEDAWARD
The Commission has rejected AT&T's proposed LATA-wide culling scope and also
rejects AT&Ts LATA-wide blended rate See d&wswn in DPL h u e No.2.
During the initial hear@ on the merits, there was considerable discusSioa of the
development of a bifurcated local switching rate that would address the thtee-mirte average
voice call length used in the approved Mega-Arbitration local switching rate and the 29-minute
average UP-bound call length used
in the SWBT IBT study.'"
The Cornmission expressed
interest in a two-part rata that separates call set-np ftom ~all
duration costs, which would
mitigate any ovu-compensaton resulting from the rate sbucture adopted in the MegaArbitrations,which is predicated upon call chnation only.
(a)
ParHartPosUlont
Mer the initial hearing on the merits, AT&T witness Mr. &&art
initiated discussionS
with SWBT witness Ms. Smith regarding the pcwsibility of calculating a twwpart local switching
rate consisting of a per-message set-up charge and a per-minutssfwe charge that would be
consistent with the local switching and reciprocal compensation rates for local switching adopted
in the Mega-Arbitration~.''~ Ms.Smith and MT.Rhinchart aseed that the appropriate smgate
fbr separating set-up and duration costs can be based on an approved SWBT local service basic
network function (BNF) cost study that identified local switching investment on a set-up and
duration basis.'97 Ms. Smith and Mr. Rhinehart developed a ratio using both interoffice and
intraoffice calling in~estments.'~~AMIOU~SI their caIculations were performed independently,
MS.Smith and Mr. Rhineht both calculated rates of SO.OO10887 per call and $0.0010423 per
See Tr.at 231-275 (Apd 4, ZOOO) and427431(Apd 5,2000).
'%
AT&T Ex.No. 11, Affidavit of Daniel P.Rhhhrt.
'I
See Souihmtem Bell Telephone companv's AppricanrOn for Approval o/ W C S & d h fir Bapic
NetwvrkAccw ChannelNonstandard .$-Wire, lLpr 0,et, al., Pursuant to P U C S m L 23,91, Dock4No,16657.
191
SWBT Ex. NO.28, Affidavit of Barbars Smi* AT&T Ex. No. 11, Mildavit of Daniel P. Rhtmhart.
a
531
Docket No. 21982
minute for &-office
Page 52 d 6 5
REVBEDAWARD
avitc~g.'99 MS.smith indicated
that she participated in se-
coxlference calls with AT&T and other CLEC petitioners to revise, clarify and explain the
methodology and calculations based on input from other CLEC cost Witae~ses.~
SWBT, WCOM, AT&T, ICG, and the Coalition indicate that the bifurcated rate concept
is acceptable.2d' Tayim Comm. opposes the bifurcated rate because its network is not limited in
capacity by a call set-up function and argws that such a rat0 would not compnsate Taylor
COnmL for legitimate costs incurredin terminating SWBTsISP-bound trafZc?m h e 1 3, KMC,
and Adelphia oppose implememtation of the bifbrcatd rate, citing a lack of evidentiary
t q p x t m Intermedia, Food, Winstar, TW, "&and Allogianco oxpms concan OVCT
the costs associated with administration and billing o f a twopart ratam Finally,SWBT rejects
application of the b h k d rate to ISP-bound hraaticm
while the partie argue against the implementation of the bi@wcatd end-
rate at
thh time, those parties. with one exception. neverthe1e.s~agree that the bifirroard rme
hndependently calculated @ Mr.Rhinehart and Mr.Smith fs reasonable. The Commission is not
532
Docket No. 21982
REYlSEDAWARD
Page 53 of 65
persuaded that the costs of implementation, administration,and billing outweigh the bent$& of
this cost-based rate, which more specijiially accorcnts for the structure of the costs incurred.
Moreover, the Commission fir&
that there is @cient
evidence in the record to support
adoption of the bijiu-cated end-offie rate. Furthermore, the comndsstonfinds that thk hV0-pat-t
end-a@ce rate minimizes the debate about average call length. The Commission c o d u d a that
the two-pur: end-o@Zce rate, consbting of (1) a per cull chargefor the compensation cf setup
cos& ($0.0010887 per
call) and (2) a per minute charge (80.0010423 per minute) for the
compmation of vohime-smitive costs, shall be applied to aU local @a& inclua'ing Isp-bound
tra&
The Commiwion re-adapts the inter+fike transpd and tandem swltchtng rata adopted
in the Mega-Arbikatiom. The bifircatd end-ofice rate, the tandem swizching rate., and the
inter-ofice transport r a m appm~edin this Order shall be applied to the rate structures
approved under DPL hsue No. 2.
D.
DfL ISSUE NO. 4: %'HAT
IS THE APPROPRIATE METHOD BY WHICH TO BILL FOR T H I S
TRAFRIC?
(a)
31re Current BiIlingSystem
SWBT and CLECs currently calculate, verify. and bill for reciprocal compensation Using
a combination of originating records, tminating records, and factoring systems. In somo
instances, the companies are using a bill-and-keep system. Sinca 1994, SWBT has used an
originating records system to bill for access compensation for LEC-canied intraLATAtoll, local,
extended area service @AS), and transit trat'fic?O6 Throughout this proceeding, is syse
tm has
SWBT Ex. No. 10, Direct Testimony of Joe
Testimony of Willium J. Warinaa at 6.
B. M q h y at 4-5; coalition Ex. No. ICG-9, Due&
533