Coop Exhibit P
Ruby Ranch Internet Cooperative Association c/o Oppedahl & Larson LLP P.O. Box 5088 Dillon, CO 80435-5088 970-468-6600 carl@rric.net
August 20, 2001
Via Email — ndonahu@qwest.com and Federal Express 7916-4001-5132 Nancy J. Donahue, Lead Negotiator Qwest Corporation 1801 California Street, Room 2410 Denver, CO 80202
Re: Lease of Subloops
Summary of Third (August 15) Conference
Dear Ms. Donahue:
Part I of this letter discharges my commitment to you to summarize our third, August 15, 2001, telephonic conference. A review of these issues confirms that we have made virtually no progress on any of several important subjects. The lack of progress is due to the fact that Qwest cannot answer any of the questions we pose. Qwest’s negotiating team obviously does not understand its own network and pricing structure, and it has been unable (or unwilling) to obtain information from personnel that are informed on these subjects. It appears to us that we have completely wasted two months of valuable time.
We have lost our patience. Given the experience of the past two months, we are confident that our Coop will not be operational by October when the snow arrives if we were to rely exclusively on continued discussions with Qwest. It is clear to use that our deadlines will not be achieved without regulatory intervention. Accordingly, Part II is a notice of our intent to file a complaint against Qwest. We attach a copy of the complaint, and we identify the terms that would convince us not to pursue this course of action..
I. Summary of the Third (August 15) Conference
I below summarize our third telephonic conference conducted last Wednesday, on August 15, 2001.
A. Insurance. After two months, Qwest continues to demand that we obtain insurance even though it cannot identify the risk it believes the Coop poses.
Qwest proposed in its initial contract document that the Coop obtain an insurance policy for $11 million — even though our Coop may serve 20 or so subscribers. Our lease of subloops will pose no risk to Qwest, since the subloops we seek are not connected to any Qwest switching equipment and are not used in the provision of any Qwest services. In our July 2 letter we proposed that Qwest’s requirement for liability insurance be imposed “only at such time as RRICA seeks”:
(a) collocation other than adjacent remote collocation or cross-connect collocation that is within the Willowbrook Metropolitan District or (b) access to Qwest facilities other than subloops or shared loops that are within the Willowbrook Metropolitan District. (“July 2 Insurance Language.”)
During our first, July 26 conference call, you informed us that our proposed language was unacceptable to Qwest (although you chose not to explain your reasons). It was agreed that for our second, August 1 conference call, Mr. Willard would “draft insurance language intended to address our concern about the eleven million dollars.” The August 1 conference came and Mr. Willard had not done this. In fact, we learned that Mr. Willard was instructed not to make any changes, despite his previous representations to us that he would draft changes.
In our letter of August 2, we reiterated questions that we had asked before:
During our third, August 15 conference, you offered a partial answer to the second question, pointing out that a POTS customer is separated from the Qwest network by a “protector,” meaning the carbon-gap protector located at the home of the POTS customer. (As discussed below, when we asked follow-up questions about the technical impact of the carbon-gap protectors on the alleged risk requiring a million-dollar insurance policy, no one at Qwest admitted any ability to answer such questions.) You gave no answer to the first or third questions.
During our conference, I asked if it would be acceptable to Qwest if the insurance were to be required:
only at such time as CLEC collocates within Qwest facilities (other than by a Field Connection Point) or at such time as CLEC has metallic connections with Qwest switchgear. (“August 15 Insurance Language.”)
You said the answer was “no.” The only change Qwest was willing to make was a reduction of the required insurance coverage from $11 million to $1 million — the equivalent of a $50,000 policy for each Coop subscriber (or $100,000 per subscriber if we have only ten subscribers).
I pointed out that the DSLAM we propose to use is an SDSL DSLAM of a make and model that many companies use, and that we would use subloops (and not line sharing) so that none of our equipment would have metallic connections with Qwest switchgear. I asked if this would make any difference to Qwest’s position about the requirement for an insurance policy. You said you had no reason to think this would make any difference.
I further pointed out that without knowing the technical risks for which Qwest wished protection, it would be impossible for us to obtain insurance against those risks. I asked you to specify the technical risks, and you declined to do so. The sole reason you gave for refusing to relax the requirement that insurance be provided was a concern that others with different business plans from those of the Coop might “opt in” to our insurance language and thus avoid the need to provide insurance. (We question whether this factor is legitimate, since you are negotiating with us, not others. We also note that since such an insurance requirement is unreasonable when applied to the Coop, it could well be unreasonable when applied to others similarly situated, in which case “opting in” is precisely what should be able to happen. In any event, our two compromise proposals were designed specifically to address Qwest’s stated concerns, making sure that no one could opt in who was not similarly situated to the Coop.)
As I have mentioned repeatedly, if Qwest cannot say what technical risk it feels the Coop presents, then the Coop cannot insure against that risk. In that case, the Coop cannot provide an insurance policy to Qwest, and Qwest has said that without an insurance policy, it will not rent subloops to the Coop. Is this not, “Catch 22”?
B. Subloop Pricing. We began our negotiations under the assumption that the monthly rates for a subloop would be $8.33. This is the rate contained in Exhibit A of Qwest’s Statement of Generally Available Terms (SGAT) on file with the Colorado Commission for a “base rate area.” It seemed clear to us that no higher rate could possibly be correct, given that entire loops cost $17-20 and we were using at most about one-fourth of a loop, in most cases much less than one-fourth of a loop. In our first, July 26 conference, you surprised us with the news that Qwest’s view is that the subloops we wish to rent are in “Zone 3,” meaning a monthly rate of $21.32. In your August 14 letter, you indicated a shift in Qwest’s position to the view that the subloops which we wish to rent are in “Zone 1,” meaning a monthly rate of $15.12.
In our July 26 conference, we asked for some objectively confirmable source for your position that the subloops we wish to rent were in zone Zone 3. You did not provide it. During our August 15 conference, we asked for some objectively confirmable source for your position that the subloops we wish to rent were in Zone 1. You did not provide that. As of now we have only Qwest’s unsubstantiated say-so that our subloops are in one zone or another. As you may appreciate, this is quite unsatisfactory from our point of view.
In your August 14 letter, you stated that the authority for the subloop monthly prices of your Exhibit A was a certain July 16, 1997 Colorado PUC decision. Your Exhibit C sets forth four prices, depending on whether the subloops to be rented are in one of the four zones called “base rate area,” “Zone 1,” “Zone 2,” or “Zone 3.” I pointed out that the PUC decision only discussed only three zones, 1, 2, or 3, and did not seem to discuss a “base rate area.” I asked you to explain why your Exhibit A has four zones and the PUC decision you cited had only three zones. You declined to answer, stating that I would have to ask the PUC to get an answer to that question. With all due respect, neither we volunteers nor the Colorado Commission should have to assume responsibility for discerning Qwest’s own pricing structure.
C. Non-negotiable, “take-it-or-leave-it” terms. Your position throughout the negotiations has been that some of the terms and prices are non-negotiable, “take-it-or-leave-it” items. These include the Feasibility Fee/Quote Preparation Fee of $1,707 as well as the subloop installation fee of $126.49. In your August 14 letter you maintained this position, and in our August 15 conference you reiterated this position. You have provided no justification for these rates other than to state (without support) that they are “TELRIC” figures. The Qwest people who could answer our questions about the supposed justification for these rates have never been made available during our conferences. You have repeatedly stated that the prices are non-negotiable, and you have rebuffed all of our attempts to offer justifications for the rates that we feel would be reasonable. Is it your view that Qwest’s actions in this regard constitute good faith negotiations?
D. Interim agreement. Our Coop wants to commence services immediately. We have the equipment already and Ranch residents have a strong interest right now in obtaining high-speed internet access — the same service that your company has chosen not to provide to us itself. During the August 15 conference, I asked whether Qwest would be willing to enter into an interim agreement for rental of subloops for a fixed period of time, such as nine months, pending negotiation of a permanent agreement, using either the July 2 Insurance Language or the August 15 Insurance Language. You refused. As you fully understand, we cannot commence service without Qwest’s cooperation. In this instance, and in antitrust parlance, Qwest possesses “bottleneck” facilities.
E. Missing decisionmakers. Throughout the negotiations, I have expressed frustration at the extreme asymmetry in the status of the parties to this negotiation. On the Coop’s side, we have consistently provided persons with actual negotiating authority, capable of making decisions on behalf of the Coop. We have likewise provided persons with substantial technical knowledge regarding the technology of telephone networks generally and DSL networks in particular. We have provided persons who are capable of answering any and all questions that Qwest may have about our needs, our service area, our network facilities, and our business plans. We have provided persons who are able to spell out exactly what our justification is for any price or rate that we propose.
On the other side of the table, as for several extremely important topics that are central to our negotiations, Qwest has failed to provide persons with actual negotiating authority. For example, in the July 26 conference, it was agreed that for the August 1 conference, Mr. Willard would draft proposed language regarding insurance. When the August 1 conference came, it developed that some unnamed “risk planner” had instructed Mr. Willard not to draft such language. Mr. Willard’s negotiating authority on this issue, if it ever existed, had been taken away by some unnamed Qwest employee who was not present to negotiate in our conference.
Likewise, in an effort to probe whether there was any justification for Qwest’s requirement that an insurance policy be provided, we have repeatedly asked Qwest to explain what technical risk to the Qwest network is supposedly presented by the Coop’s planned activities, that differs from risks presented by LADS and alarm customers (who do not need to provide an insurance policy to rent loops). Time and again it has become clear that if anyone at Qwest has an answer to these questions, it is someone not present in our conferences.
As for several extremely important topics that are central to our negotiations, Qwest has failed to provide persons with any technical knowledge whatsoever. For example, in our efforts to help Qwest understand why our proposed insurance language referring to “no metallic contact” does protect Qwest from “opt in” CLECs presenting risks to Qwest’s network, we tried again and again to discuss the nature of our proposed connections to Qwest’s network with the Qwest people in the conference calls, and the Qwest people claimed not to know the details of Qwest’s network and could not agree to even extremely simple and uncontroversial statements about Qwest’s network. On our side of the negotiating table was a person with technical knowledge.
As another example, in an effort to explain why the Coop’s proposed activities are supposedly riskier to Qwest’s network than the activities of (uninsured) POTS or LADS or alarm line customers, Qwest people have sometimes referred to the “protectors” located in network interface devices at customers’ homes. We have technical knowledge about these protectors and we know which categories of risks these protectors protect against and which categories of risks are unaffected by the presence of these protectors. But this doesn’t help in the negotiations unless Qwest people in the negotiations are similarly technically knowledgeable (or choose to educate themselves in the intervals between our conferences). Again and again, however, the Qwest people in these conferences somehow had it both ways – someone not present in the conference told them to use the word “protector” when trying to silence our questions about the insurance requirement, yet the Qwest people in the conferences professed not to be technically knowledgeable about them.
Yet again, we have repeatedly made clear that unless Qwest can explain exactly what technical risk it fears from our proposed activities, it is impossible for us to obtain an insurance policy with respect to such risk. In each conference, however, the Qwest people present in the telephone conference professed not to be able to answer this question.
It is painfully clear that the real Qwest subject matter experts are absent from the conferences and merely pass along buzzwords such as “protector” to the negotiators, leaving the Coop unable to engage in any meaningful or substantive discussion of these technical issues that are crucial to the question of whether Qwest’s insistence on a million-dollar insurance policy is reasonable on the one hand or discriminatory on the other hand.
Similarly, as for several extremely important topics that are central to our negotiations, Qwest has failed to provide persons capable of offering any justification at all for any price or rate that Qwest has proposed. For example, Qwest had known since receiving our “to-do” list on July 26th that it was important to know what justification (if any) Qwest would be able to offer for its position as to which of four zones from Exhibit A apply to the subloops which we wish to rent. Yet in the August 1 conference, scheduled to last two hours, we lost more than half of that time sitting “on hold” while you placed separate telephone calls to unnamed Qwest people to try to find such justification. It was clear that Qwest’s Zone 3 position of July 26, and Qwest’s Zone 1 position of August 14, were being “fed” to you by persons who were never present in our negotiations. To this day we have never gotten to speak with the Qwest people who actually come up with these negotiating positions.
As another example, Qwest’s proposed Exhibit A places each rented subloop into one of four zones, thus setting Qwest’s proposed monthly rental rate. Qwest’s position is that a July 16, 1997 PUC decision somehow justifies the four Exhibit A zones as well as the monthly rates associated with the respective zones. But the PUC decision, so far as we can see, only defines three zones. It is difficult to see how a PUC decision defining three zones could possibly justify the Qwest proposed Exhibit A which uses four zones. Yet, despite our repeated inquiries in writing and during the conferences, no Qwest person present during the conference has been able to answer even the simplest questions about this, such as the difference in the number of zones. Likewise we have repeatedly asked what Qwest’s position is as to how it decides whether a particular subloop is in one or another of the four Exhibit A zones, and no one present during the conference has been able to answer, other than the most vague mention of “distance between the subloop and the central office.” Again, it is painfully clear that some persons who are missing from the conferences are “feeding” buzzwords to the Qwest negotiators and that those with actual knowledge of Qwest’s justification (if any) for its supposedly reasonable rates are absent.
Qwest is obligated under the Communications Act and rules adopted by regulatory commissions to negotiate in good faith. In fact, FCC Rule 51.301(c) specifically states that “the following actions or practices, among others, violate the duty to negotiate in good faith”:
Given these myriad ways in which Qwest has failed to answer any of our legitimate questions or to provide the right people for the telephone conferences, we have grave concern as to whether Qwest has ever been negotiating with us in good faith.
F. Our equipment. Our DSLAM is a Copper Mountain CopperEdge 150 DSLAM, using a Copper Mountain 24-port SDSL line card. This is standard DSL equipment used by many major DSL service providers including incumbent local exchange carriers. (I think it is quite likely that if you make inquiry within Qwest, you will find that Qwest has personnel with close familiarity with this very equipment, and it would not be at all unexpected to learn that Qwest uses this very make of DSL equipment.) The FCC has approved this equipment under Title 47, Part 68 for connection to the telephone network. Millions of Qwest customers connect telephones, answering machines, and caller ID boxes to Qwest’s network that are likewise FCC-approved under Part 68, and they are not required to have million-dollar insurance policies. I do hope you will confer with Qwest people who are actual decisionmakers and see whether they might agree to the August 15 Insurance Language along with a specification of the DSLAM that is to be used, so as to permit us to launch service without the need of the million-dollar insurance policy.
Each passing day during which Qwest fails to rent otherwise unused subloops to the Coop on reasonable terms causes economic harm to the Coop. The Coop is a nonprofit organization, and some time ago we purchased our DSLAM and other equipment (such as SDSL modems) needed to launch service. Our inability to place this equipment into service via the subloops deprives our Coop of operating revenue which it could be earning. We have invested in this equipment and we don’t get to use it for its intended purpose while Qwest drags its feet. The Coop cannot pay its lenders if it generates no revenues because Qwest precludes us from commencing service.
More importantly, given that Qwest itself has failed to offer DSL service in our area, each passing day harms our members, who do not get to have the benefits of high-speed, always-on Internet access and who must instead labor under slow 26 kilobit-per-second analog modem connections due to the poor quality of the POTS service provided by Qwest to our neighborhood.
Our next (fourth) telephone conference is scheduled for August 27. After reviewing this weekend what has transpired, we have determined that there is no value in meeting with Qwest again. Given the time constraints under which we are operating, we need to escalate the matter to a new level where, hopefully, Qwest will be more responsive than it has been to us.
Attached is a copy of a letter we intend to submit on August 27 to the FCC and the Colorado Commission (although we reserve the right to revise the draft). We will agree not to send the letter if you agree to the following terms within the next five business days (before 5 p.m. Colorado time on Friday, August 24, 2001):
You must further agree to the following: (a) our lease contract will be no longer than 20 pages; (b) you agree to execute the contract by September 14, 2001; and (c) the initial set of orders will be activated by October 1, 2001. In addition, you must provide us in writing a firm date when Qwest will install additional capacity to the Ranch so that Ranch residents, existing or new, can continue to receive timely basic voice services.
We are reasonable people. We are therefore willing to accept any reasonable proposal to minimize the risk that others not similarly situated will expose Qwest to “opt-in” claims.
However, we cannot and will not entertain any request to extend the five-day review period. We have already wasted months in “negotiations” with Qwest, and we need to move expeditiously with winter approaching.
Sincerely,
Carl Oppedahl, Board Member Ruby Ranch Internet Cooperative Ass’n
cc: Martin Willard, Perkins Coie by email, willm@perkinscoie.com by Federal Express 7924-3644-8096 Sharon J. Devine, Qwest attorney – FCC Regulatory by email sjdevin@qwest.com by Federal Express 7916-4018-2555 Paul R. McDaniel, Qwest – Colorado Regulatory by email prmcdan@qwest.com by Federal Express 7901-3603-2349
Attachment – Draft Letter to FCC and Colorado Commission