BEFORE THE PUBLIC UTILITIES COMMISSION

OF THE STATE OF COLORADO

RUBY RANCH INTERNET )

COOPERATIVE ASSOCIATION, )

)

PETITIONER ) ARBITRATION

) DOCKET NO. 01B-493T

)

QWEST CORPORATION, )

)

RESPONDENT )

QWEST’S POSITION STATEMENT

Qwest Corporation (“Qwest”), through its counsel, files the following as its Position Statement.

INTRODUCTION AND BACKGROUND

Petitioner Ruby Ranch Internet Cooperative Association (“Ruby Ranch”), a neighborhood organization in Silverthorne, Colorado, proposes to enter into an Interconnection Agreement with Qwest so it can provide its members with access to high speed DSL services through Qwest’s telecommunications network. Ruby Ranch was formed as a non-profit association in May 2001. It has no assets, revenue or employees and is run solely by volunteers. Ruby Ranch currently has three members: it hopes eventually to have up to 20 members.

The disputes which lead to this arbitration arose after the parties were unable to agree on certain provisions of an Interconnection Agreement. As stated in the Petition for Arbitration, Ruby Ranch challenges the following three provisions:

1. The $1,107.09 quote preparation fee for the Field Connection Point;

2. The $120.67 non-recurring subloop activation fee (collectively, the two fees Ruby Ranch challenges are referred to as the “Disputed Rates”), and;

3. The requirement that Ruby Ranch carry a $1 million insurance policy with Qwest named as an additional insured.

Ruby Ranch’s challenges to the Disputed Rates have serious and fatal legal and factual flaws. Specifically, while Qwest supported each of the Disputed Rates with detailed cost studies in Docket No. 99A-577T, Ruby Ranch has never provided a single cost study to justify its arguments that the Disputed Rates are unreasonably high. In addition, Ruby Ranch ignores the detailed findings by the Colorado Public Utilities Commission (the “Commission”) in the November 13, 2001 Decision in Docket No. 99A-577T (“Decision No. C01-1302”), including the Commission’s determinations about each of the Disputed Rates.

Ruby Ranch must do more than merely argue that, because of its unique circumstances, it should not be subject to the same rates as other interconnection contractors. Instead, to meet its burden as the petitioner, and its obligation as a proposed wholesale interconnection customer challenging telecommunication rates that are at issue in a pending docket, Ruby Ranch must provide competent evidence in the form of a cost study based on Total Element Long-Run Incremental Cost (“TELRIC”). Without such evidence, there can be no grounds to require Qwest to charge lower rates than the Commission has set.

In addition, Qwest cannot discriminate among wholesale interconnection contractors in setting rates. Extensive evidence supporting the Disputed Rates was presented to and carefully considered by the Commission in Docket No. 99A-577T, which are reflected in Decision No. C01-1302. Neither Ruby Ranch or Qwest may ignore the Commission’s findings in that Docket, and Qwest may not unilaterally consent to Ruby Ranch’s demands for discounts without discriminating against other interconnection contractors that are paying the established rates.

Ruby Ranch’s argument that it should not have to carry general liability insurance has similar problems. The requirement for an interconnection contractor to carry $11 million in general liability insurance is a standard provision of Qwest’s Statement of Generally Available Terms (“SGAT”), which the Commission has approved in Docket No. 97I - 198T. Therefore, the insurance requirement is a provision in Qwest’s SGAT, and Ruby Ranch’s demand that it carry no insurance would, if granted, permit Ruby Ranch to vary the Proposed Interconnection Agreement from the standard agreement the Commission has approved.

Qwest recognizes that Ruby Ranch is not the same type of interconnection contractor as AT&T, MCI or other large companies seeking interconnection with Qwest; consequently, Qwest reduced its standard general liability coverage requirement from $11 million to $1 million. This is not only a reasonable compromise, but, despite Ruby Ranch’s vehement challenge to the insurance requirement, the evidence is largely undisputed that:

1. Ruby Ranch could obtain $1 million in general liability coverage for around $700 – $1,000 per year ($6 to $10 per month, per member, assuming 10 members) [W. Easton, Direct, at 11 and Rebuttal, at 8; C. Oppedahl, Direct, at 55];

2. Whomever Ruby Ranch uses to install and maintain its equipment could be injured or could injure a Qwest employee or third party or property belonging to Qwest or someone else while performing his or her work for Ruby Ranch [W. Easton, Direct at 8 – 11 and Rebuttal at 4 – 6; R. Hubbard, Rebuttal at 5 – 9; C. Oppedahl, Tr., at 252, 253]; and

3. Ruby Ranch’s equipment could damage Qwest’s property; e.g., if Ruby Ranch’s equipment was incompatible, defective or malfunctions [W. Easton, Direct, at 5 – 8; R. Hubbard, Rebuttal at 5 – 7].

These are precisely the kind of unpredictable accidents for which prudent businesses and people carry insurance. Ruby Ranch has no assets, can expect minimal revenues and was created as a shell entity to shield its owners from all liabilities. Therefore, it is virtually certain that, unless Ruby Ranch carries a reasonable amount of insurance, Qwest or anyone else who is injured or whose property is damaged by Ruby Ranch or anyone acting for Ruby Ranch will have no protection or hope for any compensation.

Finally, the Commission should use Qwest’s proposed interconnection agreement, and not the newly revised, last-minute proposal from Ruby Ranch, as the basis for the Commission’s order in this Docket. Ruby Ranch’s proposed agreement fails to follow the SGAT model this Commission has endorsed, raises many new issues Ruby Ranch did not state in its arbitration petition, and, with its new changes, was never submitted to Qwest’s interconnection team during the parties’ negotiations.

ARGUMENT

I. The Commission Should Reject Ruby Ranch’s Unsupported

Arguments Challenging the Rates for Two Interconnection Services

Ruby Ranch disputes the reasonableness of two of the rates for one-time charges stated in Qwest’s Proposed Interconnection Agreement. The evidence is undisputed that these rates are supported by TELRIC cost methodology and have been reviewed and approved by this Commission.

A. Federal Law Requires that Rates be Supported by TELRIC Cost Studies

The Federal Communications Commission’s First Report and Order in the Matter of Implementation of the Local Competition Provisions in the Telecommunications Act of 1996 (the “First Report and Order”), 11 F.C.C.R. 15,499, addresses the relationship between §§ 251 and 252 of the Telecommunications Act of 1996 (the “Act”, 47 U.S.C. § 252(b)). In particular, in implementing §§ 251(c)(3) and 251(d) of the Act, the First Report and Order confirms the FCC’s endorsement of TELRIC cost studies as the basis for rates such as the Disputed Rates:

The 1996 Act requires the states to set prices for interconnection and unbundled elements that are cost-based, nondiscriminatory, and may include a reasonable profit. To help the states accomplish this, the Commission concludes that the state commissions should set arbitrated rates for interconnection and access to unbundled elements pursuant a forward-looking economic cost pricing methodology. The Commission concludes that the prices that new entrants pay for interconnection and unbundled elements should be based on the local telephone companies Total Service Long Run Incremental Cost of a particular network element, which the Commission calls "Total Element Long-Run Incremental Cost" (TELRIC), plus a reasonable share of forward-looking joint and common costs. States will determine, among other things, the appropriate risk-adjusted cost of capital and depreciation rates.

FCC First Report and Order, Executive Summary at Section 6, Pricing Methodologies, ¶ 29. Later, in the body of the First Report and Order, the FCC states:

[W]e conclude here that prices for interconnection and unbundled elements pursuant to sections 251(c)(2), 251(c)(3), and 252(d)(1), should be set at forward-looking long-run economic cost. In practice, this will mean that prices are based on the TSLRIC of the network element, which we will call Total Element Long Run Incremental Cost (TELRIC), and will include a reasonable allocation of forward-looking joint and common costs. The 1996 Act encourages competition by removing barriers to entry and providing an opportunity for potential new entrants to purchase unbundled incumbent LEC network elements to compete efficiently to provide local exchange services. We believe that the prices that potential entrants pay for these elements should reflect forward- looking economic costs in order to encourage efficient levels of investment and entry.

* * *

More fundamentally, we believe that TELRIC-based pricing of discrete network elements or facilities, such as local loops and switching, is likely to be much more economically rational than TSLRIC-based pricing of conventional services, such as interstate access service and local residential or business exchange service.

* * *

We believe that our adoption of a forward-looking cost-based pricing methodology should facilitate competition on a reasonable and efficient basis by all firms in the industry by establishing prices for interconnection and unbundled elements based on costs similar to those incurred by the incumbents, which may be expected to reduce the regulatory burdens and economic impact of our decision for many parties, including both small entities seeking to enter the local exchange markets and small incumbent LECs.

FCC First Report and Order, ¶¶ 672, 678, 679.

In an arbitration context, § 252(c) requires that unbundled rates be set using the TELRIC-based pricing standards § 252(d) requires. Thus, Ruby Ranch and this Commission have clear direction on the proper costing methodology that must be applied in this arbitration.

The Commission has repeatedly confirmed its reliance on TELRIC cost studies. Specifically, in Decision No. C01-1302, the Commission considered the TELRIC data submitted by Qwest and by many other interested parties. The Commission’s decision discusses at length its findings based on those TELRIC studies, including the Commission’s establishment of the amounts Qwest may charge for the services covered by the two Disputed Rates Ruby Ranch is challenging here. As the Commission found: “Our duty is to follow the FCC’s TELRIC mandate.” Decision No. C01-1302 at 11.

The FCC’s regulations and federal law (§ 252(f)) encourage telecommunications providers to use the SGAT to establish terms and conditions that meet the requirements of §251. For purposes of this Docket, § 252(f) is quite clear: the SGAT rates must meet the TELRIC pricing standards required by § 252(d). Moreover, § 252(f)(2) allows SGAT rates to be set forth in state tariffs, precisely what this Commission decided to do in Decision No. C01-1302.

Even assuming that this arbitration is the appropriate proceeding for Ruby Ranch to submit a cost study in support of its position, Ruby Ranch has never produced TELRIC data regarding the costs associated with provisioning the subloops it seeks or the field connection point. Ruby Ranch’s only attempt to address costs was to compare the wholly unrelated charges of tariffed residential and business lines that the Commission established in other cost dockets.^[1] In short, Ruby Ranch offered nothing that could come close to meeting the evidentiary obligations required by the FCC, this Commission and Colorado courts construing the Telecommunications Act – it provided no comparable cost data, and absolutely no acceptable cost methodology. See U S WEST Communications, Inc. v Hix, No. 97-D-152, Order at 6 (D.Colo. June 23, 2000)(upholding Colorado Commission rates for unbundled network elements and requiring rates to be based on TELRIC methodology).

In contrast, the Commission is intimately familiar Qwest’s cost studies which were filed in Docket No. 99A-577T and that Qwest provided to Ruby Ranch in discovery (Hearing Ex. 33). Those costs are based on TELRIC inputs and application of the TELRIC methodology. In Decision No. C01-1302, the Commission comprehensively reviewed these costs, made appropriate adjustments, and determined just, reasonable and non-discriminatory rates for interconnection contractors such as Ruby Ranch proposes to be. Specially, the Commission reduced the quote preparation fee and subloop activation fee to the rates Qwest proposes to charge Ruby Ranch.

Instead of producing the required evidence, Ruby Ranch has merely argued that it should be given lower rates than the two rates it does not like because it must be cheaper for Qwest to provide the subject services to Ruby Ranch than to other interconnection contractors. That argument is entitled to no weight for two reasons. First, Ruby Ranch cannot ignore TELRIC methodology because to do so would violate federal law and this Commission’s findings in Decision No. C01-1302. This Docket is no substitute for the Cost Docket. Second, since Ruby Ranch has yet to order a job from Qwest, and Qwest has yet to review, design and cost a job, there is no evidentiary basis to conclude what the actual costs of the Ruby Ranch project will be. That is precisely the purpose of a quote preparation. Accordingly, since Qwest has not yet investigated the particular circumstances of the proposed Ruby Ranch project, Ruby Ranch is in no position to criticize the cost studies that support Qwest’s TELRIC-based quote preparation fee or the subloop activation fee.

For example, Qwest’s witness, Mr. Hubbard, provided the only testimony regarding the quote preparation fee. Qwest provided information to this Commission about the specific tasks required to provision purchasers of unbundled network elements, including tactical planning, travel, assessing future growth, facilities compatibility, outside plant engineering, pulling and reviewing maps, billing, and myriad other functions. (R. Hubbard, Tr., at 1177 – 1180)^[2] In contrast, Ruby Ranch offered no assessment of the system-wide efforts Qwest must make to provision Ruby Ranch’s planned project.

In the context of summary judgment motions, a proponent of a position may not meet its burden of proof through unsupported arguments of its lawyers; such unsupported assertions do not have “any significant probative evidence tending to support the complaint.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Mosier v. Maynard, 937 F.2d 1521, 1525 (10th Cir. 1991), cert. denied, 114 S. Ct. 260 (1993).

Qwest submits that the same standard applies here; i.e., Ruby Ranch was required to submit evidence, not mere argument. The only competent evidence through which Ruby Ranch could properly challenge the Disputed Rates would be through a TELRIC cost study. Ruby Ranch failed to provide any cost study evidence at all. Therefore, there is no factual or legal support for Ruby Ranch’s attack on the Disputed Rates, and that challenge should be denied.

B. The Commission has Set the Rates Ruby Ranch Disputes

By law, the Commission is vested with the power and duty to: “adopt all necessary rates, charges, and regulations to govern and regulate all rates, charges, and tariffs of every public utility of this state.” § 40-3-102, C.R.S. Consistent with its powers and duties, in Decision No. C01-1302, the Commission carefully reviewed all the evidence submitted by Qwest and many other interested parties about Qwest’s costs associated with interconnection agreements for interconnection contractors. As considered in the next section, Ruby Ranch (or its members before Ruby Ranch was formed) were free to participate in those proceedings and to offer any evidence they may have regarding costs or other facts relevant to the Disputed Rates. After making findings about the reasonableness of Qwest’s costs, the Commission established the rates Qwest may charge interconnection contractors for many of the services Qwest provides as part of interconnection agreements.

The Commission has specifically determined each of the Disputed Rates in Decision No. C01-1302. Under 3 CCR § 723-39, Qwest is required to comply with all rates the Commission establishes “consistent with the Commission's Rules Prescribing Principles for Costing and Pricing of Regulated Services of Telecommunications Service Providers (4 CCR 723-30).”

Therefore, the Commission’s rates are binding on the parties. The Commission’s decisions about regulated entities are presumed to be valid. Regular Route Common Carrier Conference v. Public Utilities Comm'n, 761 P.2d 737 (Colo.1988). Under the Colorado Administrative Procedure Act, a court could set aside the Commission’s findings and rates only if there was proof that the Commission’s decision was “arbitrary or capricious, ... in excess of statutory jurisdiction, authority, purposes, or limitations, ... based upon findings of fact that are clearly erroneous on the whole record, [or] unsupported by substantial evidence when the record is considered as a whole....” § 24-4-106(7), 7 C.R.S. (1998).

Thus, a party such as Ruby Ranch, which is in effect challenging the Commission’s decisions about the Disputed Rates, has the burden of proving those decisions are invalid. U S WEST Communications, Inc. v. Colorado Public Utilities Comm'n 978 P.2d 671, 675 – 676 (Colo. 1999)) (confirms the principle of giving due “deference to administrative expertise” of the Commission because the General Assembly specifically assigned rate-setting for regulated public utilities to the Commission; citing Augustin v. Barnes, 626 P.2d 625 (Colo.1981)); Amax, Inc. v. Water Quality Control Comm'n, 790 P.2d 879 (Colo.App.1989). Ruby Ranch did not participate in the Cost Docket, and an arbitration about a proposed interconnection agreement is not the appropriate vehicle to challenge rates the Commission has established.

The principle of deferring to the Commission applies directly to this arbitration. The Commission’s findings in Decision No. C01-1302 establish the two Disputed Rates. Therefore, as a matter of law, those rates are valid, are binding on Ruby Ranch and Qwest, and may not be challenged by Ruby Ranch in this proceeding.

C. Ruby Ranch Could Have Participated in Docket No. 99A-577T and May Not Use this Arbitration to Make Arguments that are Governed by that Docket.

As the Commission confirms in its opening discussion of the procedural history in Decision No. C01-1302, that proceeding went forward after notice, and numerous interested parties as well as the Colorado Office of Consumer Counsel, gave evidence and participated in hearings concerning Qwest’s costs supporting the Disputed Rates (and all the other rates at issue in that Docket). The proceeding “involve[d] thousands of pages of filed testimony, hundreds of exhibits, two full weeks of hearings and several computer-generated models.” Decision No. C01-1302 at 4. Ruby Ranch’s challenge to the Disputed Rates through this arbitration is an attempt to reopen the issues the Commission decided in Decision No. C01-1302. Thus, Ruby Ranch is attempting to end-run that proceeding and to second-guess the Commission’s findings.

Ruby Ranch and its members had a full and fair opportunity to present their opinions to the Commission in Docket No. 99A-577T. Ruby Ranch is thus estopped to use this arbitration to re-open the evidence and rate issues governed by Decision No. C01-1302.

D. Qwest May Not Discriminate Among Contractors by Charging Ruby Ranch Lower Rates

Qwest is a regulated public utility subject to the Telecommunications Act of 1996 and state law and regulation. Under §§ 251 and 252 of the Act, as well as state regulation 3 CCR § 723-39, interconnection agreements for unbundled access to network elements offered by telecommunications carriers such as Qwest must provide for “rates, terms, and conditions that are just, reasonable, and nondiscriminatory.” Section 203(c) of the Act and 3 CCR § 723-39 of the state regulations prohibit telecommunications carriers from discriminating among customers by charging different customers different rates for the same services or from discriminating among customers by charging different rates than the carriers’ states’ Commissions have approved.

By seeking to obtain lower rates than the Disputed Rates, Ruby Ranch is demanding that Qwest violate its obligation to comply with the rates the Commission has set and to discriminate against other interconnection contractors by giving Ruby Ranch lower rates. Ruby Ranch has cited ¶ 860 of the FCC’s First Report and Order in an attempt to characterize Qwest’s required uniformity of rates as per se “price discrimination.” Ruby Ranch bases its argument on the assumption that it will be easy (cheap) to provide Ruby Ranch with the services it wants, so Qwest is “discriminating” by using the average costs reflected in the Disputed Rates. Yet, Ruby Ranch provided no cost evidence to support its challenge to the Disputed Rates. Moreover, Ruby Ranch’s arguments would result in price discrimination since it fails to use a comparable TELRIC study to establish its preferred rates. Under the FCC’s opt-in provision, discussed next, to accept Ruby Ranch’s discounted rates would not only establish discriminatory rates, but would also allow other interconnection contractors to take advantage of those lower rates.

E. Qwest May Not Charge Ruby Ranch Lower Rates Without Making Those Rates Available to All Interconnection Contractors

If Ruby Ranch were to be given discounts, all other interconnection contractors could opt-in to those rates, thus destroying the careful balance between anticipated future costs and Qwest’s right to a reasonable return which the Commission struck when it set the Disputed Rates.

Under § 252(i) of the Act, known as the “opt-in” provision, any rate Qwest offers Ruby Ranch must also be available to any other interconnection contractor seeking the same service. Section 252(i) states:

47 U.S.C. § 252(i). Availability to other telecommunications carriers

A local exchange carrier shall make available any interconnection, service, or network element provided under an agreement approved under this section to which it is a party to any other requesting telecommunications carrier upon the same terms and conditions as those provided in the agreement.

[emphasis added]. Read together with the Act’s prohibitions against discrimination, the opt-in provision confirms the problems with Ruby Ranch’s argument that Qwest should charge Ruby Ranch lower rates because it may be cheaper for Qwest to implement certain services for Ruby Ranch than for other interconnection contractors.

Qwest’s rates are based on the average projected cost of providing services to all interconnection contractors. If Qwest were able to reduce the Disputed Rates for Ruby Ranch, every other interconnection contractor that receives or wants the same service could opt-in to that discounted rate, thus forcing Qwest to accept the lowest rate. That would destroy Qwest’s right to realize a reasonable return on its costs to provide that service to all interconnection contractors because it would disregard both Qwest’s average costs in providing those services and its costs to provide those services in the most expensive circumstances. The Act expressly recognizes that providers such as Qwest are entitled to a reasonable return on the considerable investments they have made in the infrastructure to which Ruby Ranch is seeking to connect. 47 U.S.C. § 252(c)(2)( interconnection and network element charges “shall be ... based on the cost ... of providing the interconnection or network element, and ... nondiscriminatory, and ... may include a reasonable profit.”).

In summary, the Commission should reject Ruby Ranch’s challenges to the Disputed Rates. Ruby Ranch’s unsupported arguments and speculations cannot overcome the detailed TELRIC evidence with which Qwest supported each of the Disputed Rates in Docket No. 99A-577T. Ruby Ranch also cannot ignore the Commission’s detailed findings in Decision No. C01-1302, including the Commission’s determinations about each of the Disputed Rates.

II. The Commission Should Deny Ruby Ranch’s

Position it Should Not Have to Carry Any Liability Insurance

A. Qwest’s SGAT Provides for Interconnection Contractors to carry General Liability Insurance

The requirement that interconnection contractors carry general liability insurance is a standard provision of Qwest’s SGAT, which the Commission has approved in Docket No. 97I - 198T. Therefore, the insurance requirement is recognized as a standard provision in Qwest’s SGAT, and Ruby Ranch’s demand that it be permitted to interconnect without any liability insurance coverage would, if granted, permit Ruby Ranch to vary the Proposed Interconnection Agreement from the standard agreement the Commission has approved.

B. Ruby Ranch Can Readily Obtain Insurance Coverage, and Its Activities Could Lead to Personal Injury or Property Damage; therefore, Unless it has Liability Insurance, Those Whom Ruby Ranch Injures or Harms will have No Protection

Ruby Ranch has admitted that it could obtain $1 million in general liability coverage for around $700 – $900 per year. Ruby Ranch has also could not deny that whomever it uses to install and maintain its equipment could be injured or could injure a Qwest employee or third party or damage Qwest’s or someone else’s property while performing his or her work for Ruby Ranch. Finally, the evidence is largely undisputed that Ruby Ranch’s equipment could damage Qwest’s property; e.g., if Ruby Ranch’s equipment was incompatible, defective or malfunctioned. (C. Oppedahl, Tr., at 250 – 251)

Notwithstanding the above, Qwest recognized that Ruby Ranch is not the same type of interconnection contractor as AT&T, MCI or other large companies seeking interconnection, Qwest reduced its standard general liability coverage requirement from $11 million to $1 million. (W. Easton, Direct, at 4) The $1 million policy was the minimum level that Qwest believed would meet the business risks associated with Ruby Ranch. (W. Easton, Tr., at 147)

Ruby Ranch has no assets, can expect minimal, if any, revenues and was created in a form to shield its owners from all liabilities. (C. Oppedahl, Tr., at 13) Its members and facilities are all within a high-end, gated mountain subdivision, in which some of the homes already have up to 5 phone lines. (W. Easton, Tr., at 139; R. Hubbard, Tr., at 186; Ex. 34, Qwest Interrogatory #2) There was no evidence that any member could not afford to pay a share of the minimal premium for general liability insurance. Therefore, the level of insurance coverage Qwest is requesting is not an unreasonable business requirement. A complete waiver of any liability insurance would not be a wise business decision because it would leave Qwest and any third party who may be injured or whose property may be damaged by Ruby Ranch or its agents with no protection or hope for compensation.

Ruby Ranch claims it will have no employees and, instead, plans to use “volunteers” to do the installation of microwave equipment, cable trenching, cable installation, DSLAM installation, and grounding. (C. Oppedahl, Tr., at 13) Ruby Ranch’s evidence in this arbitration made it abundantly clear that the potential risks associated with Ruby Ranch’s operations would be totally uncovered if Ruby Ranch were permitted to proceed with no insurance.

Qwest, in contrast, showed that insurance was both “available and affordable” to Ruby Ranch or its members from Farmers Insurance in Denver. Qwest witness Mr. Easton testified that he was able to get a quote for insurance for less than $1,000 per year: “My point here was that I was able to pick up the phone and make a couple of phone calls and find that this insurance is available.” (W. Easton, Tr., at 139, 142, 166).

In any event, the evidence is undisputed, and Ruby Ranch has admitted, that $1 million in general liability insurance is available for between $700 and $1,000 each year, which works out to about $3 to $5 per member per month, assuming Ruby Ranch achieves its hoped-for 20 members. (W. Easton, Direct, at 3, and Tr., at 140; C. Oppedahl, Direct at 3).

Ruby Ranch has attempted to support its position it should not have any insurance coverage by comparing itself with the Willow Brook Metropolitan District (“Willow Brook”), a water district serving the Ruby Ranch subdivision. Willow Brook is a retail customer using ordinary telephone service. (C. Oppedahl, Rebuttal, at 11; W. Easton, Rebuttal, at 7 – 8) Willow Brook does carry insurance for its activities in providing services to the Ruby Ranch neighborhood. (Ruby Ranch Response to Qwest’s Second Interrogatory #1) More important, because Willow Brook is a retail customer, it does not interconnect with Qwest’s network. Qwest provides all the services and equipment associated with Qwest’s network, and Qwest insures itself against the risks created by the services Willow Brook receives by including an insurance component in the retail rates charged to Willow Brook for its LADS service. As Qwest’s witness, W. Easton, testified in his Rebuttal:

Qwest is responsible for all the insurable risks associated with its POTS and LADS-related services, and Qwest covers these risks by purchasing insurance. The cost of the equipment, services and insurance are all built into the retail rates POTS and LADS customers pay. That means there is no reason for those retail customers to carry their own insurance covering Qwest. Further, the fact that insurance is not required of POTS or LADS customers does not in any way imply that there is no risk associated with providing this service. Rather, because they are receiving finished services from Qwest, the insurance related to these services is included in the price of the service charged to the end user.

(W. Easton, Rebuttal, at 6 – 7).

In contrast, as an interconnection contractor, Ruby Ranch would be paying wholesale rates that have no insurance component associated with its equipment, facilities and labor activities. Ruby Ranch would be providing the equipment that connects to Qwest’s network, and Ruby Ranch employees, volunteers or contractors would be doing all the work associated with installation and maintenance.

Ruby Ranch has argued that it will be careful in performing installations and will only use compatible equipment. Qwest hopes and expects interconnection contractors to use due care and to install compatible equipment to the Qwest network. Insurance is not about intention – it is about foreseeable risk, accidents and negligence. The record in this Docket illustrates the quite common risks that arise from Ruby Ranch’s plans, and the reasonable business judgment behind Qwest’s insurance requirement.

Ruby Ranch’s argument boils down to this: “just trust us.” The reality of the construction, maintenance and repair obligations that Ruby Ranch expects to undertake raises real liability concerns. Qwest’s direct and rebuttal testimony illustrates a number of those risks:

1. improper installation and maintenance

2. power surges or lightening strikes

3. third party liability or injury during installation and maintenance

At the hearing, those risks were even more developed. Ruby Ranch acknowledges that its volunteers would have access to Qwest’s cross connect boxes and Ruby Ranch’s witness acknowledged that he had entered the cross connect box to take a photograph during January without having a Qwest technician present. (R. Hubbard, Tr., at 226 - 228) Qwest witness R. Hubbard described the risk of tearing wires associated with unaccompanied persons entering Qwest’s cross connect box by themselves, ranging from disabling voice service (including 9-1-1) to harming Willow Brook’s water regulatory system (R. Hubbard, Tr., at 234).[3] “[Y]ou could have accidentally torn down some cross-connects. You could have put Qwest customers at risk. You could have put the metropolitan district at risk by tearing down some of their cross-connects that operate their pumps. So, you did put the network in jeopardy, is my opinion.” (R. Hubbard, Tr., at 228).

In addition to the risks associated with Ruby Ranch volunteers accessing or troubleshooting on Qwest’s premises, there are risks associated with the construction process. While Ruby Ranch dismisses even the possibility that something could go wrong, the testimony of Qwest’s experienced and trained technician tells a different story. Ruby Ranch proposes to bury its cable lines using heavy equipment to do trenching. Even the most experienced tech can make mistakes: “I have seen hundreds of times where contractors or people digging have cut cable. They are responsible. I have done it myself when out in the field.” (R. Hubbard, Tr., at 218). Indeed, Qwest’s most recent experience confirms that accidents happen: “Intentions and reality are often different things. Despite Qwest’s extensive training and safety awareness programs, accidents do occur and field technicians do get injured. Qwest’s Local Network Organization had nearly 1200 OSHA recordable injuries in 2001.” (W. Easton, Rebuttal, at 5, lines 18 - 20).

It is a simple fact that construction accidents happen in the best of circumstances – insurance is designed to cover liability when something goes wrong. Even frivolous claims would have to be defended by Qwest. Unless Ruby Ranch carries liability insurance, Qwest would have no hope of recovering its expenses from defending against the most baseless claim arising out of the conduct of Ruby Ranch or its volunteers. (W. Easton, Tr., at 164; R. Hubbard, Tr., at 217).

Finally, Qwest’s testimony highlighted the potential risks associated with the equipment itself, from power surges, to improper grounding, to equipment malfunction. (R. Hubbard, Rebuttal, at 5 – 8, and Tr., at 211, 236 – 238; W. Easton, Direct, at 9, and Tr., at 123). For example, Qwest’s technical expert testified that Ruby Ranch’s proposed design could create system interference:

[O]ne of the things that I could envision is your, whatever service you're going to be feeding the DSLAM with, could have a spectral interference with your own SDSL, so it could be -- one of the problems could be your own spectral interference, because I am assuming you would have to come in through your microwave tower, access the subloop, back feed a T1 line through our cable into the barn area, and then you will be feeding SDSL out of there. And if you are running T1 AMI, you will interfere with yourself. So I do see some problems there.

(R. Hubbard, Tr., at 211 – 212)

Ruby Ranch, in contrast, submitted no expert testimony to rebut the potential for damage to the Qwest network or other users on the system such as Willow Brook. While Ruby Ranch promises that no such occurrences will happen, insurance is a business necessity in the event that accidents or unforeseen events happen.

Ruby Ranch disputes the need for any insurance by citing to the testimony in the SGAT Docket of one of Qwest’s witnesses, Mr. Brotherson (C. Oppedahl, Rebuttal at 19). It is quite plain, however, that the question in the SGAT Docket was the need for $11 million for certain types of collocation customers, not whether insurance should be completely eliminated as proposed by Ruby Ranch. For interconnection contractors such as Ruby Ranch, Qwest’s witness in this arbitration showed that, since Ruby Ranch is “accessing Qwest’s network,” some level of insurance is necessary. (W. Easton, Tr., at 132: “[N]owhere in Mr. Brotherson’s comments does he indicate that no insurance is required” for customers accessing Qwest’s network).

It is thus prudent for Qwest to require Ruby Ranch to have general liability insurance and, on the other hand, it is irresponsible and reckless for Ruby Ranch to insist it does not need any insurance coverage. By seeking an interconnection agreement, Ruby Ranch is asking for the right to operate a business as a interconnection contractor. While the risks of injury or property damage associated with installing telecommunications equipment, interconnecting to Qwest’s network, making installations in members’ homes and then maintaining that equipment may be low (provided Ruby Ranch always has qualified and careful volunteers, personnel or contractors), there are still undeniable risks. No responsible business would view the relatively inexpensive insurance Ruby Ranch can readily obtain as unacceptably high cost of doing business, in comparison with the kinds of liabilities that arise when someone is injured or a telecommunications network is damaged.

Again, Ruby Ranch has argued that it is just too expensive for it to obtain insurance, and yet Ruby Ranch has not produced any evidence that dispels the fact that its activities involve real risks and that it has no means to compensate Qwest or anyone else Ruby Ranch injures or whose property Ruby Ranch damages.

III. The Commission’s Order Should be Based on

Qwest’s Proposed Interconnection Agreement

Finally, the Commission should use Qwest’s Proposed Interconnection Agreement, and not the new proposal from Ruby Ranch, as the basis for the Commission’s order in this Docket. Qwest submitted as Exhibit WRE-1 its Proposed Interconnection Agreement for Ruby Ranch, subject to modification of the three issues before the Commission in this arbitration. Qwest’s proposal follows the SGAT model that has been reviewed by the Commission in Docket 97I-198T. The SGAT was developed pursuant to § 252 of the Telecommunications Act and is designed to create and promote certainty and regularity for interconnection contractors. This is especially important in light of the FCC “pick and choose” requirement contained in §252(i).

Ruby Ranch submitted a new proposed agreement as a part of its rebuttal testimony. Ruby Ranch had never previously provided this version of its proposed agreement to Qwest during the negotiation process. The new proposal significantly varies from the SGAT framework. As such, the Commission should not use Ruby Ranch’s last-minute proposed agreement as a model for an ongoing contractual relationship between Qwest and Ruby Ranch.

More significantly, Ruby Ranch’s new proposal would inject a host of new issues in this arbitration that Ruby Ranch did not identify in its Petition for Arbitration. These issues include new claims regarding the cost of the field connection point, new claims regarding timing of the provisioning process already set forth in the SGAT, and new proposed deletions. (C. Oppedahl, rebuttal, at 26-33).

Therefore, Qwest requests the Commission to use Qwest’s Proposed Interconnection Agreement, set forth at WRE-1, as the basis for the Commission’s order in this arbitration, subject to any modification the Commission orders regarding the three issues actually arbitrated. Any other issue that the Commission believes should be addressed should be resubmitted to the parties for negotiation, subject to mediation pursuant to 47 U.S.C. §252(a)(2).

CONCLUSION

For the reasons considered above, the Commission should reject Ruby Ranch’s challenges to the Disputed Rates and the SGAT”s provision that Ruby Ranch carry general liability insurance with Qwest as an additional insured. Even if this arbitration were the proper place for Ruby Ranch to attack the two Disputed Rates, Ruby Ranch’s arguments about those rates do not meet its burden of proof, cannot overcome the detailed TELRIC cost study evidence with which Qwest has supported the rates, and do not provide any basis to ignore the rates the Commission set in the Cost Docket. Ruby Ranch’s demand that it carry no insurance would, if granted, permit Ruby Ranch to vary the Proposed Interconnection Agreement from the standard agreement the Commission has approved and would unfairly impose on Qwest and third parties the risks of injuries and property damage arising from Ruby Ranch’s negligence. Finally, the Commission should use Qwest’s Proposed Interconnection Agreement, and not Ruby Ranch’s new proposal, as the basis for its decision in this arbitration.

Dated this 11^th day of February 2002.

QWEST CORPORATION

By:______________________________________

Timothy M. Tymkovich, Esq.

John R. Paddock, Jr., Esq.

Hale Hackstaff Tymkovich, LLP

1675 Broadway, Suite 2000

Denver, Colorado 80202

303-592-8700

Winslow Bouscaren, Esq.

Qwest Services Corporation

1005 17^th Street, Suite 200

Denver, Colorado 80202

303-896-5675

^[1]The Commission observed in its 577T decision that comparisons to other rates, which Ruby Ranch attempts to do by comparing the wholesale rates it seeks with the rates paid by retail customers, is improper: “Straight rate comparisons are of little analytical value.” 577T at p. 33.

^[2]This testimony came during a confidential portion of the proceedings. Since Qwest does not cite to cost information, the portions referenced above are not set forth as confidential under Rule 16.

^[3]While Ruby Ranch asserted it had permission to enter the cross connect box, it could not give assurances that its volunteers would seek or obtain permission in all circumstances, thus the very need for insurance. (C. Oppedahl, Tr., at 250) Even if Ruby Ranch had permission to enter the box to take a photograph, it failed to follow the rules applicable to interconnection contractors: “To gain access to a Qwest premise like that in the cross box you are still supposed to have a joint meet with a technician out there. You were in the cross box. You could have caused problems…. If you are going to be a wholesaler and CLEC, I guess you would know the rules to play by.” (R. Hubbard, Tr., at 227)