Haran C. Rashes T T F F November 7, 2013.

Transcription

1 Haran C. Rashes T T F F hrashes@clarkhill.com Clark Hill PLC 212 East Grand River Avenue Lansing, Michigan clarkhill.com November 7, 2013 Ms. Mary Jo Kunkle Executive Secretary Michigan Public Service Commission PO Box Lansing, MI Re: In the matter of the Petition of Sprint Spectrum L.P. for Arbitration Pursuant to Section 252(b) of the Telecommunications Act of 1996 to Establish Interconnection Agreements With Michigan Bell Telephone Company d/b/a AT&T Michigan MPSC Case No. U Dear Ms. Kunkle: Enclosed for filing please find Sprint Spectrum L.P. s Objections to the Decision of the Arbitration Panel in the above-captioned proceeding. Proof of Service upon the Parties of Record is also enclosed. Very truly yours, CLARK HILL PLC :hcr Enclosures Haran C. Rashes cc: Parties of Record /163579

2 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * * In the matter of the Petition of Sprint Spectrum) L.P. for Arbitration pursuant to Section 252(b) ) of the Telecommunications Act of 1996 to) establish Interconnection Agreements with) Michigan Bell Telephone Company d/b/a) AT&T Michigan. ) Case No. U SPRINT SPECTRUM L.P. S OBJECTIONS TO DECISION OF THE ARBITRATION PANEL Kenneth A. Schifman Director, Government Affairs 6450 Sprint Parkway Mailstop: KSOPHN0314-3A753 Overland Park, Kansas (913) (913) (fax) Kenneth.schifman@sprint.com Joseph M. Chiarelli Jeffrey M. Pfaff Senior Counsel 6450 Sprint Parkway Mailstop: KSOPHN0312-3A321 Overland Park, Kansas (913) (913) (fax) jeff.m.pfaff@sprint.com Joe.M.Chiarelli@sprint.com Roderick S. Coy (P12290) Haran C. Rashes (P54883) 212 East Grand River Avenue Lansing, Michigan (517) (517) Fax rcoy@clarkhill.com hrashes@clarkhill.com Dated: November 7, 2013

3 STATE OF MICHIGAN BEFORE THE MICHIGAN PUBLIC SERVICE COMMISSION * * * * * In the matter of the Petition of Sprint Spectrum) L.P. for Arbitration pursuant to Section 252(b) ) of the Telecommunications Act of 1996 to) establish Interconnection Agreements with) Michigan Bell Telephone Company d/b/a) AT&T Michigan. ) Case No. U SPRINT SPECTRUM L.P. S OBJECTIONS TO THE DECISION OF THE ARBITRATION PANEL Sprint Spectrum L. P. ( Sprint ), by and through its attorneys, pursuant to Section 252(b) of the Federal Communications Act of 1996 (the Act ), 1 Commission Rule 341, and the schedule established by the Arbitration Panel ( Panel ), respectfully submits its Objections to the Decision of the Arbitration Panel ( DAP ). I. INTRODUCTION AND OBJECTIONS Sprint appreciates the Panel s hard work and analysis on the issues in this arbitration. The Panel resolved many issues correctly, recognizing that Sprint has the right to design its network as best suited for its business, and not as dictated by AT&T. DAP at 22. On Issues 7 and 8, the Panel correctly held that Sprint should be able to decommission POIs as it sees fit, and refused to require additional POIs that Sprint deems inefficient. In addition, the Panel appropriately addressed the type of traffic that can be carried on Interconnection Facilities between Sprint and AT&T, taking guidance from a Second Circuit Court of Appeals Decision in which [t]he Court found that the FTA (Federal Telecommunications Act) was intended to foster competition in the telecommunications market and, as such, its decision should be consistent 1 Pub L No , 110 Stat 56 (1996), codified at 47 USC 151, et seq.

4 with that intent. DAP at 30 (citing S New England Tel Co v Comcast Phone of Conn, Inc, 2013 WL (2d Cir 2013)) ( SNET v. Comcast ). Accordingly, the Panel found that Section 251 is not limited to traffic between parties end users and recommended that the Commission adopt the proposal most consistent with the 1996 Act s pro-competitive goals. DAP at Sprint applauds the Panel for advancing efficiency in network interconnection and in deciding issues in a manner consistent with the 1996 Act s pro-competitive goals. The Panel fell short, however, in applying these principles to Issue 1, Internet Protocol ( IP ) Interconnection. The Panel recognized the Commission s ability and jurisdiction to order IP Interconnection (DAP at 8) and that the adoption of IP Interconnection would provide efficiencies and cost savings to all providers (DAP at 9), yet its recommendation paves the way for AT&T to forever insulate itself from Commission involvement in this issue. The Panel s decision to defer to some future FCC decision on IP Interconnection contradicts this Commission s comments to the FCC in July 2013 that state commissions can and should arbitrate IP interconnection issues. 2 The Commission should apply the principles that the Panel cites, exercise the jurisdiction it has as stated in its FCC comments, and adopt the language proposed by Sprint to implement IP Interconnection and promote network efficiency and competition. II. PROCEDURAL HISTORY On July 22, 2013, Sprint filed a Petition for Arbitration to establish certain Interconnection Rates, Terms, Conditions, and Related Arrangements with AT&T (the Petition ). The Petition was filed pursuant to Section 252(b) of the Act of 1934, Sections 201, 2 Comments of MPSC, In the Matter of Potential Trials Relating to the Ongoing Transitions from Copper to Fiber, From Wireline to Wireless, and from Time-Division Multiplexing(TDM) to IP, FCC, GN Docket No. 13-5, (July 8, 2013) at p. 3. 2

5 203, and 204 of the Michigan Telecommunications Act ( MTA ), 3 and the Procedures for Telecommunications Arbitrations and Mediations established by the Commission. 4 With one exception, the DAP accurately recounts the procedural history of this proceeding. DAP at 1-3. That exception relates to Issue 1, Sprint s request for IP Interconnection. With its Petition, Sprint also requested that the Panel order the production of additional information from AT&T necessary to fully evaluate Sprint s request for IP Interconnection. Sprint argued that this discovery was necessary because AT&T uses an affiliate s IP equipment to provide telephone exchange service in Michigan, and claims its ownership structure shields IP Interconnection from 47 USC 251 and the Commission s jurisdiction. The Panel denied Sprint s request on August 9, 2013, stating that should the Panel find the need for additional information from either party, it will request that information on an as needed basis (and shall determine, at that time, whether an electronic, teleconference, or inperson response will best suit its purposes). On October 17, just before the DAP was to be released, it became clear that discovery would have been beneficial. AT&T submitted a letter purporting to change the facts on which it relied on the IP Interconnection issue. It turns out (apparently) that AT&T misinformed the Commission in testimony as to which of its myriad of affiliates claims ownership of the IP equipment used to provide telephone exchange services to AT&T Michigan s customers. Sprint responded on October 23, showing (among other things) that AT&T s inability to understand its own internal ownership structure provided further reason for the Commission to focus on the 3 MCL , 2203, and MAC R , et seq. 3

6 assets used to provide telephone exchange service in Michigan, not on the where those assets are housed, at any moment in time, under the AT&T corporate umbrella. On October 28, the Panel issued its DAP. Sprint now objects to various statements and recommendations stated therein. III. OBJECTIONS OBJECTION 1: THE COMMISSION SHOULD REVERSE THE DAP ON ISSUE 1 AND ADOPT SPRINT S PROPOSED IP INTERCONNECTION LANGUAGE ISSUE 1: WHAT PROVISIONS SHOULD BE INCLUDED IN THE ICA REGARDING THE EXCHANGE OF TRAFFIC IN IP FORMAT? Related Agreement Provisions: 5 GTCs , , , ; Attachment 2, , , Sprint objects to the Panel's proposed resolution of Issue 1. Going forward, carriers will increasingly interconnect with each other in IP, and the importance and prevalence of Time Division Multiplexing ( TDM )-based switching equipment will decline. AT&T wants this change to occur outside the regulatory construct of the Act so AT&T can dictate the terms and prices of IP interconnection without Commission review. While the Panel properly recognized that the Commission has latitude to implement IP Interconnection (DAP at 8), and that IP Interconnection "is the future of the telecommunications industry" (DAP at 9), the Panel erred by proposing to allow AT&T to insulate IP Interconnection from Section simply because an affiliate of AT&T owns the IP equipment AT&T, as an ILEC, uses to provide telephone exchange service to Michigan consumers. This result is contrary to federal law and will impose unnecessary increased interconnection costs upon Sprint (Burt Direct at 28), thereby harming 5 GTCs refers to the ICA s General Terms and Conditions. Attachment 2 refers to the ICA s Attachment 02. 4

7 Michigan consumers. The Commission should reverse the DAP and order that Sprint's proposed contract language be accepted. A. Sprint's Proposed Contract Language The DAP does not discuss the details of Sprint's proposed IP Interconnection contract terms. Sprint s proposed contract language provides that the parties will interconnect their IP equipment, identifies three possible points for IP Interconnection to occur, and establishes appropriate technical specifications. Sprint offers that, within 45 days of the effective date, the parties will create a written project plan ( ). IP Interconnection will occur in one of three ways: (1) by the parties meeting at a third-party carrier hotel ( ), (2) by Sprint provisioning a direct Interconnection Facility to the AT&T Softswitch(es) serving the applicable tandems ( ), or (3) by Sprint provisioning a direct Interconnection Facility to a single mutually agreed upon point in Michigan on the AT&T Network ( ). If the parties hit roadblocks in preparing this plan, Sprint can seek resolution by the Commission ( ). And, once established, the parties would migrate all voice traffic to that connection ( ). B. Sprint's Proposal is Technically Feasible Technical feasibility is the touchstone consideration under 47 U.S.C. 251(c). Sprint s proposal is technically feasible. Burt Direct at 65. AT&T refused to engage in meaningful negotiations, but identified no technical impediments to Sprint's proposal. Instead, it simply took the position that, because the IP Softswitch that switches the calls is owned by an affiliate, there is no place for Sprint to Interconnect in IP with AT&T. The Panel found no technical impediments to Sprint s IP Interconnection proposal, but still denied Sprint s request because AT&T Michigan does not own the IP Softswitch, which, as discussed below, is without legal significance. 5

8 IP Interconnection will change very little about how calls are delivered between Sprint and AT&T s IP voice customers. When AT&T Michigan provides its IP voice services in Michigan, it has to utilize IP equipment. So, today, such calls from Sprint pass through an AT&T TDM switch and are routed via the Softswitch to the IP voice customer. IP Interconnection will eliminate the need for TDM switching in that example; this will make routing to the Softswitch more efficient for AT&T, and will not change the routing from the Softswitch to the IP voice customer. This routing is shown in the diagram that follows. The single line on top shows today s routing, while the double line below shows routing with IP Interconnection: 6 IP interconnection eliminates the need for AT&T to transport this call from its TDM switch to its IP switch, and the final leg of the call is the same. This technically feasible interconnection should be available to Sprint. C. AT&T Michigan Operates an Integrated Network with its Affiliates To Provide Telephone Exchange Service As reflected in the diagram above, AT&T Michigan and AT&T Corp. operate an integrated IP network that serves Michigan consumers. 7 In fact, AT&T is technically incapable 6 This diagram assumes interconnection at the AT&T IP softswitch, one of the three options Sprint proposed. 7 As noted supra at 3-4, AT&T now claims that it misinformed the Commission about the ownership of certain equipment. Given the confusion, and that it appears that AT&T Corp. still owns some of the relevant equipment, Sprint still refers to the AT&T affiliate as AT&T Corp. 6

9 of providing telephone exchange service to its TDM customers, and exchange access to IXCs, without use of the AT&T Corp. assets and functions. Burt Direct at AT&T has not disputed that a local exchange call from an AT&T TDM customer to his or her neighbor who subscribes to AT&T s U-verse service must be routed through the AT&T Corp. Softswitch and IP equipment. Burt Direct at and Exhibit JRB-1.8. The same is true in the opposite direction. Id. If a call is destined to another carrier interconnected with AT&T Corp. in IP, the Softswitch routes it to that other IP provider. Id. And, finally, if a call is destined to a carrier connected with AT&T Michigan in TDM, AT&T Corp. converts the call to TDM for delivery back to AT&T Michigan to be delivered over TDM facilities. Id. Thus, AT&T and its affiliate operate an integrated IP-TDM network that provides TDM-based service to TDM subscribers, IP-based services to U-verse subscribers, as well as any necessary IP-TDM conversion. On these facts, the Commission should find that the AT&T Corp. Softswitch has effectively been incorporated into AT&T s ILEC network. D. IP Interconnection is Efficient and is Supported by Policy Considerations The Panel was correct to recognize that IP-based technology is the future of the telecommunications industry, and that its adoption on a broad scale would provide both efficiencies and cost savings to all providers. DAP at 9. Efficiently designed IP Interconnection involves fewer points of interconnection and more efficient use of interconnection trunks. Therefore, IP Interconnection will substantially reduce Sprint s facility costs as compared to today s TDM interconnection configuration, enabling Sprint to better compete. Burt Direct at 28. AT&T agrees that IP technology has these benefits. In comments filed on July 8, 2013, AT&T stated: 7

10 IP networks are far more versatile and efficient than single-purpose networks like the TDM-based PSTN. And IP-based technological convergence also will intensify competition at all layers of the communications ecosystem, both among facilities-based providers of rival broadband platforms and among independent providers of higher-layer IP services. See Burt Direct at 61. Despite recognizing these benefits, the Panel inexplicably proposes to wait to order IP Interconnection, finding it would not be fruitful to rule on the issue while it is pending before the FCC. DAP at 7. Much the contrary, the fruit of a Commission decision on this issue would be the efficiencies and cost savings to all providers that all recognize will come with IP interconnection. DAP at 9. The Commission should be active, not passive, so that these benefits are accelerated. E. The Commission Has Jurisdiction to Order IP Interconnection Despite the Panel s reluctance to order IP Interconnection, the ALJs volunteered their belief that the Commission very likely has jurisdiction to strike out on its own path when it chooses to do so. DAP at 8. The Panel is correct. States are not paralyzed on issues that may not be completely settled by FCC orders. Instead, the Act protects state experimentation with interconnection obligations. SNET v Comcast, 2013 WL , at *8. To that end, The [Act], then, permits state commissions to regulate interconnection obligations so long as they do not violate federal law and until the FCC rules otherwise. SNET v Comcast, 2013 WL , at *4. The Panel claims that the key legal question, pending at the FCC, is whether IP Interconnection is within the parameters of Sections 251 and 252. DAP at 7. Yet the CAF Order s statement that the interconnection requirements under the Communications Act [do] not depend upon the network technology underlying the interconnection, whether TDM, IP, or otherwise is independent of the FNPRM, and currently the law. In the Matter of Connect Am 8

11 Fund, 26 FCC Rcd 17663, Report & Order & Further Notice of Proposed Rulemaking, 1011 (2011) ( CAF Order ). During this comment period, the Act s interconnection requirements are technology neutral (id 1342), and all carriers [must] negotiate in good faith in response to request for IP-to-IP Interconnection for the exchange of voice traffic. Id In fact, the FCC cautioned that the FNPRM should not be misinterpreted to suggest any deviation from the Commission s longstanding view regarding the essential importance of interconnection of voice networks. Id The FCC also emphasized that nothing in the language of section 251 limits the applicability of a carrier s statutory interconnection obligations to circuit-switched voice traffic. Id Thus, the FCC has neither directed nor permitted state commissions to abstain from deciding IP Interconnection issues in Section 252 arbitrations. To the contrary, it is this Commission s duty to implement in a Section 252 arbitration the current technology neutral interconnection requirements imposed upon ILECs by section 251 of the Act. As a supplement to federal law, the Commission s rules (like the FCC s Rules) define Interconnection in a way that does not depend on the type of equipment used: Interconnection means the technical arrangements and other elements necessary to permit the connection between the switched networks of 2 or more providers to enable a telecommunication service originating on the network of 1 provider to terminate on the network of another provider. MCL (l). Moreover, Michigan law contains a reservation of authority over wholesale interconnection that supports the Commission s exercise of jurisdiction over IP Interconnection. MCL (3)(a). The Commission should exercise the right suggested by the Panel to order IP interconnection as that path is one already taken by the Commission in comments it filed at the FCC. The Commission could not have been more clear as to its intent to accept jurisdiction over 9

12 IP Interconnection when it stated that [t]he MPSC also supports the application of Sections 251 and 252 of the Act regardless of the technology used to interconnect carriers networks, and that extension of the obligations under Sections 251/252 for voice traffic would allow state commissions to arbitrate any disputes occurring during the process of negotiation. 8 Moreover, based upon involvement of industry, state commission staff and commissioners around the country, NARUC has adopted several relevant principles that should fortify the analysis: (1) Communications networks must remain interconnected on a non-discriminatory basis regardless of technology; (2) Interconnection is necessary to ensure ubiquitous service and enhance competition among providers; (3) The States are well positioned to continue to oversee the interconnection process as provided in Sections 251 and 252 of the Telecommunications Act of 1996; and (4) Sections 251 and 252 of the Act are technology neutral. The rules for interconnection do not and should not depend on the technology used by the interconnecting providers. NARUC Federalism Task Force Report: Cooperative Federalism and Telecom in the 21 st Century dated September, Two commissions have already decided that IP Interconnection is within the scope of Section 251(c). In 2012, the Puerto Rico Telecommunications Regulatory Board ( PRTRB ) arbitrated a demand by a competitive carrier (Liberty Cablevision) to obtain IP Interconnection from an ILEC pursuant to the authority in Section 251(c). The PRTRB found that Liberty s request is reasonable, not prohibited by federal law, consistent with the FCC s guidance regarding promotion of IP broadband networks, and consistent with the Board s duty to promote competition, investment, and interconnection in Puerto Rico. Exhibit JRB-1.2, page 15. Similarly, the Ohio Commission adopted rules allowing it to arbitrate demands for IP Interconnection after determining that federal law is technology neutral, and that no federal 8 Comments of MPSC, supra fn. 2, at 3. 10

13 law prohibited the commission from implementing the FCC s expectation that parties will negotiate in good faith for IP Interconnection. Exhibit JRB-1.3, page 5. These decisions should give the Commission confidence that it can order IP Interconnection in compliance with federal law. 9 In sum, the Commission has ample authority to strike out on its own path and accept the IP interconnection language proposed by Sprint. The Commission will be on firm legal ground, as such a ruling will be consistent with FCC statements in the CAF Order, in line with other state commission decisions, and in furtherance of policy points advocated by the Commission and NARUC. F. Case No. U Established No Precedent on this Issue The Panel suggests that Sprint s request for IP Interconnection is identical to the request made, and rejected, in Case No. U DAP at 7. Not so. First, the Panel has relied on its faulty belief that the Commission agreed with a panel recommendation on that issue. Id. To the contrary, the Arbitrators decision on that issue was not appealed to the Commission, and so the order on exceptions never addressed IP Interconnection. See In the Matter of the Petition of ACD Telecom, Inc et al for Arbitration of Interconnection Rates, Terms, Conditions, and Related Arrangements with Mich Bell Tel Co d/b/a AT&T Mich, MPSC Case No. U-16906, Order issued Feb. 15, Moreover, the CLECs in that case had not taken even the first step to negotiate IP Interconnection, and did not ask the Commission to decide the threshold jurisdictional question. The CLECs did not ask the Commission to evaluate whether IP Interconnection falls within the scope of Section 251/252 and, instead, proposed that the parties be ordered to negotiate only 9 The Staff of the Kentucky Public Service Commission recently issued an advice letter stating that 47 U.S.C. 251 allows a carrier to file a petition for arbitration under 47 U.S.C. 252 and seek interconnection regardless of the underlying technology. Kentucky law does not prohibit this result, nor does the current state of the FCC or federal law. Kentucky PSC Opinion at 5. 11

14 upon such a finding. The panel rejected the CLECs proposed language, finding the proposal should not be considered until the FCC acts, and that, once that occurs, the ICA s change of law clause would provide a mechanism for amending the contract. Id at 26. The change of law clause already provided what the CLECs requested. Id. On those facts, the panel s conclusion was sound, as the CLECs gave the Commission nothing to decide. The CLECs did not ask the Commission to speak to the scope of Section 251/252, and so it would have been improper for the panel to do so. See, e.g., 47 USC 252(b)(4)(C) (a state commission can resolve only issues set forth in the petition and the response). Moreover, the LECs already had what they wanted by virtue of the change of law clause. The panel was right not to add language that would have no meaningful impact on the parties relationship. Here, Sprint is asking the Commission directly to decide that IP Interconnection is within the scope of Section 251/252. Sprint does not concede that the Commission can or should await any FCC action. Sprint also asked the Commission to decide that the AT&T Corp. network is part of the ILEC network for the purpose of determining whether IP Interconnection is technically feasible. Since Sprint has raised these issues, the Commission must decide them. 47 USC 252(b)(4)(C). In addition, Sprint attempted to negotiate the specifics of IP Interconnection, including the location of the IP POI(s), submitted evidence and testimony, and asked for discovery on those issues. These actions distinguish the instant case from the Case No. U-16906, and should prompt the Commission to disregard the DAP in Case No. U as it considers Sprint s objections. 12

15 G. The Panel Erred in Its Interpretation of ASCENT The Panel also erred by finding that AT&T can avoid Section 251(c) obligations so long as the equipment that would be used for interconnection is technically owned by an affiliate. This recommendation misconstrues federal law. See Ass n of Commc ns Enters v FCC, 235 F3d 662, 668 (DC Cir), amended by Ass n of Commc ns Enters v FCC (DC Cir Jan. 18, 2001) ( ASCENT ). The ASCENT case was an appeal of an FCC decision that authorized the 1998 merger of Ameritech and SBC. ASCENT, 235 F3d at 663. There, the FCC approved the merger and permitted the new company to offer advanced services through a separate affiliate, and thereby avoid the resale obligations it would otherwise have under Section 251(c). ASCENT, 235 F3d at 665. The FCC decided that Section 251(c) obligations applied to ILECs and their successors and assigns, but not to separate affiliates. Id at 665. According to the FCC s reasoning, any ILEC would be entitled to set up a similar affiliate and thereby avoid 251(c) s resale obligations. Id at 665. The D.C. Circuit reversed the FCC, holding that ILECs affiliates are within the definition of ILEC in Section 251(h) and, thus, subject to Section 251(c) obligations. The court analyzed the structure of the Act, including Sections 251, 271, and 252, and concluded that Congress specified [in Section 271] when an ILEC may avoid the Act s burdens by providing telecommunications service through a separate affiliate. Id at 668. With no such affiliate structure within Section 251(c), we must assume that Congress did not intend for 251(c) s obligations to be avoided by the use of such an affiliate. Id at 668. Shortly after the ASCENT decision, the FCC applied the court s ruling in a case involving Verizon. In the Matter of Application of Verizon New York Inc, Verizon Long Distance, Verizon Enter Solutions, Verizon Global Networks Inc, and Verizon Select Servs Inc, for Authorization to 13

16 Provide In-Region, InterLATA Servs in Connecticut, 16 FCC Rcd 14147, Memorandum Opinion & Order (2001) ( FCC Verizon 271 Decision ). The FCC noted: In January 2001, the United States Court of Appeals for the District of Columbia Circuit held, in ASCENT v. FCC, that data affiliates of incumbent LECs are subject to all obligations of section 251(c) of the Act. Id 28. Then, the FCC concluded that, pursuant to ASCENT, Verizon is required to allow a competitive LEC to resell DSL service (a Section 251(c) obligation) over lines on which the competitive LEC resells Verizon s voice service even though the DSL service is provided exclusively by Verizon s advanced services affiliate. Id 28. ASCENT and the subsequent FCC Verizon 271 Decision have been good law for over ten years. In fact, in the CAF Order, the FCC invoked the ASCENT case again, this time to address industry concerns on IP Interconnection and ILECs attempting to avoid their section 251(c) obligations by using affiliates to offer certain services: In addition, the record reveals that today, some incumbent LECs are offering IP services through affiliates. Some commenters contend that incumbent LECs are doing so simply in an effort to evade the application of incumbent LEC-specific legal requirements on those facilities and services, and we would be concerned if that were the case. We note that the D.C. Circuit has held that the Commission may not permit an ILEC to avoid 251(c) obligations as applied to advanced services by setting up a wholly owned affiliate to offer those services. CAF Order, 1388 (quoting ASCENT). Of course, that is exactly what AT&T is doing in Michigan. The Panel found ASCENT inapplicable for two reasons. First, the Panel found that ASCENT dealt solely with the issue of resale, as opposed to interconnection between two providers. DAP at 8. This presumes that application of the court s legal ruling would be different for a Section 251(c)(4) resale obligation as compared to a Section 251(c)(2) interconnection obligation. To the contrary, the court s discussion focused generally on ILEC obligations under Section 251(c), not only the portion of Section 251(c) that imposes resale 14

17 obligations. For example, the court stated that to allow an ILEC to sideslip 251(c) s requirements by simply offering telecommunications services through a wholly owned affiliate seems to us a circumvention of the statutory scheme. ASCENT, 235 F3d at 666. The court construed the term ILEC a term that applies equally to both resale and interconnection. See, e.g., id at 668 ( Congress thus has specified when conditions justify allowing an ILEC to provide telecommunications services without 251(c)'s duties. ). That the court s decision applies broadly to Section 251(c) is cemented by the FCC s invocation of ASCENT in the CAF Order on IP Interconnection, which has nothing to do with resale obligations under Section 251(c)(4). CAF Order, 1388 (noting that ASCENT does not permit an ILEC to avoid 251(c) obligations when discussion issue of IP interconnection). Thus, the Panel s recommendation that the Commission distinguish ASCENT because it addressed resale is legally erroneous. Second, the Panel attempted to distinguish ASCENT on the basis that the Softswitch to which Sprint wants to connect have never been owned by AT&T Michigan, and that there was no proof that AT&T established this ownership arrangement with the intent to circumvent Section 251(c)(2) obligations. DAP at 8. The FCC disagrees with the Panel on this point. When the FCC applied the ASCENT ruling in its 2001 FCC Verizon 271 Decision, it did so without once discussing ILEC intent. Instead, it stated broadly that data affiliates of incumbent LECs are subject to all obligations of section 251(c) of the Act. In the Matter of Verizon, 16 FCC Rcd 14147, 28. The FCC declined to ascribe any significance to the manner in which Verizon s affiliate, VADI, is structured as an affiliate or as an entity. The FCC stated: Second, Verizon's argument rests on precisely the conduct ruled unlawful by the court - the use of an affiliate to avoid section 251(c) resale obligations. The ASCENT decision made clear that Verizon's resale obligations extend to VADI, whether it continues to exist as a separate entity or whether it is integrated into Verizon, and regardless of the way Verizon structures VADI's access to the high frequency portion of the loop. Accordingly, we conclude that to the extent 15

18 Verizon's attempt to justify a restriction on resale of DSL turns on the existence of VADI as a separate corporate entity (or even a separate division), it is not consistent with the ASCENT decision. Id 32 (emphasis added). Accordingly, it makes no difference of how AT&T s affiliate came to own assets used in the provision of AT&T Michigan s telephone exchange service by law, an affiliate structure cannot be used to avoid Section 251(c) interconnection obligations. Moreover, a close read of ASCENT shows that, while such intent was present in that case, it was unnecessary for the result. The court recognized that Section 272 of the act evidences Congress considered judgment as to when an ILEC may legally provide telecommunications services through an affiliate. ASCENT, 235 F3d at 667. Because Section 272 obligations do not overlap with Section 251 obligations, an ILEC affiliate s provision of Section 251(c) services must be subject to Section 251. Id at It is not possible for a question of intent to drive that issue of statutory interpretation. And, while it is true the court wished to discourage intentionally bad conduct, it never suggested that unintended bad conduct would be ratified. To the contrary, there is no policy reason to require one carrier to allow interconnection, but relieve another carrier of the exact obligation based on its internal state of mind. This would lead to discrimination and differential treatment, and make it easier for ILECs to use existing affiliates to avoid interconnection obligations and stand behind a difficult-to-prove intent standard. 10 The Commission should correct the DAP s analysis of ASCENT and find that IP equipment owned by AT&T s affiliate and used by AT&T to provide telephone exchange service is available to be used by Sprint under Section 251. This will pave the way for the Commission to accept Sprint s proposed language on Issue It is difficult to see how Sprint could have been provided due process if it were denied discovery and then required to meet a fact intensive intent standard. 16

19 OBJECTION 2: THE COMMISSION SHOULD REVERSE THE DAP ON ISSUE 3 AND ACCEPT SPRINT S PROPOSED DEFINITIONS RELATED TO INTERMTA TRAFFIC ISSUE 3: WHAT ARE THE APPROPRIATE DEFINITIONS RELATED TO INTERMTA TRAFFIC? Related Agreement Provisions: GTCs 2.65, , , Issue 3 relates to several terms that define InterMTA Traffic. As the panel notes, these definitions must track the Commission s resolution of Issues 20 and 21, which relate to the compensation obligations imposed on InterMTA calls. DAP at 12. The Panel proposes to resolve Issue 3 for AT&T because it decided, on Issues 20 and 21, that there is no compensation distinction between toll and non-toll InterMTA Traffic. DAP at 9. Yet, the Commission has long recognized that whether a call is subject to local compensation depends on whether a separate charge is assessed to subscribers. See In re Petition for Arbitration to Establish an Interconnection Agreement Between TDS Metrocom, Inc, and Ameritech Mich, MPSC Case No. U-12952, Opinion and Order issued Sept. 7, 2001, p. 25 (non- ISP foreign exchange (FX) traffic is within the scope of reciprocal compensation requirements because there is no separate charge assessed to the calling party and so the call is not telephone toll service ); Mich Bell Tel Co v Climax Tel Co, 121 FSupp 2d 1104, (WD Mich 2000) (upholding a Commission decision that a CLEC is not obligated to pay access termination charges to Ameritech Michigan on calls between Ameritech s local calling areas so long as the calls are classified as local under the CLEC s tariff and not subject to toll charges). This same distinction is drawn in Sprint s proposed GTCs and AT&T s proposed definitions ignore not only the above-discussed precedent, but also the express language contained in the applicable Title 47 statutory definitions and new FCC implementing rules regarding intercarrier compensation. 17

20 Because the Commission should reverse the DAP on Issues 21 and 22 (as argued, infra), it should reverse the DAP on Issue 3. OBJECTION 3: THE COMMISSION SHOULD REVERSE THE DAP ON ISSUE 4 AND ACCEPT SPRINT S PROPOSED DEFINITION OF SWITCHED ACCESS SERVICE. ISSUE 4: WHAT IS THE APPROPRIATE DEFINITION OF SWITCHED ACCESS SERVICE? Related Agreement Provisions: GTCs On Issue 4, the Panel accepts AT&T s definition of Exchange Access Service, purportedly because of its resolution of Issues 20 and 21. DAP at 13. If the Commission reverses on either Issue 20 or 21, it should also reverse on Issue 4. But there is a deeper point that the Panel misses, which is that AT&T s definition would effectively designate Sprint as an interexchange carrier ( IXC ), despite the agreed-upon language in the ICA that Sprint, as a wireless service provider ( WSP ), is not an IXC. See GTCs 2.63 ( Interexchange carrier (IXC) means a carrier (other than a WSP or a LEC) that provides, directly or indirectly, interlata or IntraLATA Telephone Toll Service. ) (emphasis added). The Commission should not create this internal inconsistency. AT&T s proposal would also re-define Switched Access Service without reference to any statute or FCC rule, instead using the un-capitalized and undefined term access. See AT&T s Proposed GTCs This cannot be accepted because it is vague and could be read to expand the term beyond what constitutes switched access service under federal law. The Commission should reverse the Panel s proposed resolution of Issue 4. 18

21 OBJECTION 4: THE COMMISSION SHOULD REVERSE THE DAP ON ISSUE 20 SO THAT ONLY TOLL INTERMTA CALLS ARE SUBJECT TO ACCESS CHARGE COMPENSATION. ISSUE 20: WHAT TERMS SHOULD BE INCLUDED IN THE ICA GOVERNING COMPENSATION FOR TERMINATING INTERMTA TRAFFIC? Related Agreement Provisions: Sprint s proposed Attachment 2, ; AT&T proposed Attachment 2, ; Pricing Sheets Lines 311 and 312 A. Sprint s Argument is Supported by Federal and State Law Issue 20 is the compensation applicable to calls that originate and terminate in different MTAs, and whether access compensation applies only on calls subject to an additional toll charge. Sprint proposed InterMTA compensation terms that implement the amended transitional compensation rules announced by the FCC in the CAF Order. Under FCC Rule (b), only interstate or intrastate exchange access is subject to the imposition of access charges. Exchange access is a statutory term that means access to telephone exchange access services for the purpose of originating or terminating telephone toll services. 47 USC 153(16). Telephone toll service is a statutory term that means service for which there is made a separate charge not included in contracts with subscribers for exchange service. 47 USC 153(55). Accordingly, the FCC s intercarrier compensation rules do not authorize the application of access charges based solely upon the geographic end points of a call. Rather, the FCC s rules are structured such that the imposition of access charges is appropriate only when there is a separate toll charge with respect to a given call. As such, Sprint proposes language that (1) defines Non-Toll InterMTA Traffic and Toll InterMTA Traffic, (2) excludes the Non- Toll InterMTA Traffic from access charge compensation, and (3) provides that the amount of Toll InterMTA Traffic is de minimis and will be treated as Non-Toll InterMTA Traffic. 19

22 The Commission has long held that calls dialed on a non-toll basis are not subject to access charges. In Case No. U-11340, the Commission decided that the CLEC should not pay access charges to deliver calls that its customers dialed on a non-toll basis. In the matter of the petition of Climax Telephone Co, d/b/a CTS Telecom, Inc, for arbitration of interconnection rates, terms, conditions, and related arrangements with Mich Bell Tel Co, d/b/a/ Ameritech Mich, MPSC Case No. U-11340, Order Adopting Arbitration agreement issued June 25, 1997, pp. 3. This decision was affirmed by the federal district court. Mich Bell Tel Co v Climax Tel Co, 121 FSupp 2d 1104, (WD Mich 2000). Later, in 2004, the Commission reaffirmed that the retail rating of a call, whether a call involves a separate toll charge assessed by the originating carrier, determines whether access charges can apply. MPSC Case No. U-13931, Opinion and Order issued Oct. 14, 2004, p The foregoing demonstrates that this Commission correctly follows the federal statutory structure that requires a separate toll charge assessed in order for access charges to apply. It is undisputed that only a de minimis number of InterMTA calls involve a separate toll charge. For Sprint customers, InterMTA mobile-to-land calls are part of their nationwide local calling plans. Felton Direct at Under these calling plans, Sprint customers pay a monthly charge for calls made nationwide, and are not separately charged a toll on a per-call basis for calls that go across the state, or even across the country. Felton Direct at In only rare instances is a customer today assessed a separate charge for making what has historically been thought of as a long-distance toll call. Felton Direct at 80. For calls in the other direction, land-to-mobile InterMTA calls occur when the AT&T ILEC network is used to originate a local land-to-mobile call to a Sprint customer who has traveled to another MTA. 20

23 Even these calls, however, are dialed on a non-toll basis because the wireless called number is within the wireline customer s originating local calling area. B. The Panel s Analysis is Erroneous The Panel proposed adopting AT&T s proposal that access charges apply to all intermta calls based on the Panel s perception of current business practices. DAP at 50. This would improperly designate all Sprint InterMTA Traffic exchanged under the ICA as telephone toll traffic, despite the undisputed fact that all but a de minimis number of Sprint s InterMTA calls are originated under nationwide non-toll plans, without any separate toll charge imposed. It would also designate AT&T s own local calls as toll calls. Current business practices are no substitute for the law in an arbitration under the Act. The Panel s DAP does not, in any material way, address the statutory terms and new FCC Rule that drive Sprint s argument. Rather than discuss or explain those provisions, the Panel sidestepped that analysis, stating the FCC has clearly determined in its Intercarrier Compensation rules that InterMTA traffic is switched access traffic. DAP at 51. However, rather than citing a rule, the DAP cites a 22-paragraph span of the CAF Order, which simply does not say what the DAP claims. 11 Instead, while the FCC clearly said that IntraMTA calls were not subject to access charges, it never said that non-toll InterMTA calls were. This leaves the Commission with the obligation to determine whether toll InterMTA calls are access calls under the statute and the rules. And, as argued, a fair application of those provisions to the facts supports Sprint s position on Issue 20. Sprint also disputes the DAP s attempt to distinguish prior Commission precedent in Case No. U and U-12952, and the federal court s affirmance of Case No. U DAP at 50. Those cases establish that non-toll calls are excluded from access based on the very 11 The word InterMTA does not even appear in the cited paragraphs. 21

24 statutory analysis Sprint supports. In Case No. U-12952, for example, the Commission construed the terms exchange access and telephone toll service as dependent on whether end users are assessed a separate charge : FX is not intrastate exchange access service as argued by Ameritech Michigan. Exchange access service is defined by 47 USC 153(16) as the offering of access to telephone exchange services or facilities for the purpose of the origination or termination of telephone toll services. Telephone toll service is defined in 47 USC 153(48) as service between stations in different exchange areas for which there is made a separate charge not included in contracts with subscribers for exchange service. When an end-user dials a number that belongs to an FX customer, there is no separate charge made. Therefore, by definition, FX service is not a toll service and is not included within the exemption from reciprocal compensation. In re Petition for Arbitration to Establish an Interconnection Agreement Between TDS Metrocom, Inc, and Ameritech Mich, MPSC Case No. U-12952, Opinion and Order issued Sept. 7, 2001, p. 25 (emphasis added). To apply this Commission precedent to this case, the Commission need only modify the emphasized sentence as follows: When an end-user of Sprint dials a number that belongs to an FX AT&T customer, there is no separate charge made. Therefore, by definition, FX Sprint s service is not a toll service and is not included within the exemption from reciprocal compensation. That those cases involved landline calls, and that this case involves wireless calls, is of no matter. The definitions of access and Telephone Toll Service do not distinguish between landline and wireless calls. Thus, in both cases, once the Commission held that the calls were locally dialed (i.e., non-toll), access could not be due. And from a policy perspective, wireless carriers establish their local calling areas based on customer demand, and customers demand nationwide plans. The Commission should support these consumer preferences. For these reasons, the Commission should reverse the Panel on Issue 20. In the event that the Commission does not reverse on Issue 20, the Panel noted that it did not intend to accept AT&T s proposed routing language that was embedded in its Issue 20 22

25 language, and which conflicts with the Panel s recommendation on Issue 17. DAP at 52. The Panel directed the parties to submit new language making the sections consistent with each other. Id. Sprint proposes the following modifications to AT&T s Issue 20 language in order to make that language consistent with the resolution of Issue 17: 6.5 Compensation for InterMTA Traffic: Terminating InterMTA Traffic: All Sprint Terminating InterMTA Traffic is subject to the rates, terms and conditions set forth in AT&T MICHIGAN s federal and/or state access service tariffs and is owed and payable to AT&T MICHIGAN. All Sprint Terminating InterMTA Traffic must be routed over Switched Access Services Trunks and facilities purchased by Sprint from AT&T MICHIGAN s federal and/or state access service tariffs INTENTIONALLY LEFT BLANK. Sprint Terminating InterMTA Traffic shall not be routed over Type 2A/Type 2B Trunks, Type 2A Combined Trunks or Type 2A Equal Access Trunks; however, the Parties agree that for any Terminating InterMTA Traffic that is improperly routed over such Trunks, based on data from traffic studies, AT&T MICHIGAN is authorized to charge, and Sprint will pay to AT&T MICHIGAN for such traffic, the Terminating InterMTA Traffic rate set forth in the applicable intrastate and/or interstate Switched Access tariff(s). If Sprint routes more than a de minimis amount of Terminating InterMTA Traffic over Type 2A/Type 2B Trunks, Type 2A Combined Trunks, and /or Equal Access Trunks, Sprint will work cooperatively with AT&T MICHIGAN to identify and reroute this traffic to Switched Access Services Trunks and facilities in accordance with section Sprint has provided this proposed language to AT&T, but has not received confirmation that AT&T agrees this language accomplishes consistency as directed by the Panel. 23

26 OBJECTION 5: THE COMMISSION SHOULD REVERSE THE DAP ON ISSUE 21 AND DENY AT&T S ATTEMPT TO CHARGE SPRINT FOR AT&T S ORIGINATING TRAFFIC. ISSUE 21: WHAT TERMS SHOULD BE INCLUDED IN THE ICA GOVERNING COMPENSATION FOR ORIGINATING INTERMTA TRAFFIC? Related Agreement Provisions: Sprint s proposed Attachment 2, 6.2, 6.5.2, , ; AT&T s proposed 6.5.2, , ; Pricing Sheets Lines 313 and 314 The Panel erred in its proposed resolution of Issue 21. At issue are calls dialed by an AT&T end user to a Sprint end user with a phone number assigned from the landline local calling area. An example would be a call from an AT&T customer in Detroit to a Sprint customer who lives in Detroit and has a Detroit phone number. The call would originate on AT&T s network and be delivered over the Interconnection Facilities like every other AT&T locally dialed call. The fact that the Sprint end user may not be located in another MTA at the time of the call is immaterial. Sprint is not converted into an IXC when it delivers calls to its end users. There is no basis for AT&T to charge Sprint in that instance. AT&T is not providing exchange access when it hands those calls to Sprint. Instead, it is providing its own customer with telephone exchange service. Felton Direct at 86. Again, this is just like calls the Commission exempted from access in Case Nos. U and U because the called party was within the landline local calling area. Yet, here, on Issue 21, the Panel proposes to allow AT&T to charge Sprint to receive these local calls. That erroneous conclusion must be corrected. In addition, the Panel incorrectly relies on a 1996 FCC footnote that refers to roaming traffic that transits incumbent LECs switching facilities, which is subject to interstate access charges. First Report & Order, This clause does not apply because the InterMTA land- 24

27 to-mobile at issue in this case does not transit AT&T s switch. Transit means to pass through. For the InterMTA Traffic within the scope of Issue 21, it is undisputed that AT&T is an originating carrier, not a transit carrier. Moreover, in 1996, wireless carriers did impose extra charges on InterMTA calls, as nationwide calling plans were not introduced until the late 1990s. Felton Direct at 78. The Commission should reject the Panel s reliance on paragraph 1043 of the First Report & Order. OBJECTION 6: THE COMMISSION SHOULD REVERSE THE DAP ON ISSUE 22 AND ALLOW SPRINT TO USE HIGH CAPACITY TRUNKS FOR BOTH INTERCONNECTION AND BACKHAUL. ISSUE 22: SHOULD THE INTERCONNECTION FACILITIES PRICES BE APPLIED ON A DS1/DS1 EQUIVALENTS BASIS AS DESCRIBED IN SPRINT S PROPOSED ATTACHMENT 2, SECTION ? Related Agreement Provisions: Attachment 2, 3.8.2, On Issue 22, Sprint wishes to use high-capacity circuits for both Interconnection and Backhaul, while paying a blended rate that fully compensates AT&T. This ensures more efficient interconnection, allowing for a smaller number of facilities with higher fill factors, instead of a greater number of underutilized facilities. The Panel criticizes Sprint s proposal for two main reasons, neither of which justifies less-efficient interconnection. First, the DAP suggests that Sprint s contract language does not give direction as to how the proposal would be implemented. DAP at 56. Sprint submits that that its contract language is clear it allows combined trunks, while ensuring pro-rata pricing based on state-wide circuit counts. AT&T did not criticize Sprint s proposal on this basis, and neither should the Commission. Second, the Panel suggests this would require AT&T to provide facilities at below TELRIC rates. DAP at 56. This is simply not true Sprint s proposal would ensure AT&T is paid a TELRIC rate for the portion used for Interconnection, and special access for the portion 25