BEFORE THE PUBLIC UTILITIES
COMMISSION
OF THE STATE OF COLORADO
RUBY
RANCH INTERNET COOPERATIVE )
ASSOCIATION, )
)
PETITIONER, )
) ARBITRATION
v.
) DOCKET NO. 01B-493T
)
QWEST CORPORATION, )
)
RESPONDENT. )
The Ruby Ranch Internet Cooperative Association (“Coop”) opposes the Motion for Partial Summary Judgment Regarding Disputed Charges that Qwest Corporation (“Qwest”) filed on January 11, 2002. This motion demonstrates that after six years, Qwest still does not understand (or at least professes not to understand) the core requirements of the Telecommunications Act of 1996 (“1996 Act”). What is even more odd is that the position Qwest has taken with the Coop is flatly inconsistent with the position it would have Commission adopt.
The Commission established
recently in Docket No. 99A-557T certain prices that Qwest should include in its
Statement of Generally Available Terms (“SGAT”).[1] According to Qwest, these rates are based
“on the average cost of providing services to all CLECs.”[2] Qwest now asserts that the Coop “is subject
to those rates,” that these rates “must be applied” in this arbitration
proceeding and that accordingly, the “cost issues in the Arbitration should be
dismissed.”[3] In short, Qwest should have the Commission
believe that its SGAT is actually a tariff — despite the fact that the Federal
Communications Commission (“FCC”) has held, “Section 252 of the 1996 Act . . .
provides for interconnection arrangements rather than tariffs.”[4] The Coop demonstrates below that Qwest’s
position conflicts with the requirements of the Communications Act and the
FCC’s implementing rules.
In
considering this matter, the Commission should keep in mind the directive that
Congress has imposed on the Commission.
Congress specified in Section 706(a) of the 1996 Act that “each State
commission . . . shall encourage the deployment on a reasonably and timely basis
of advanced telecommunications capability to all Americans.”[5] The term “advanced telecommunications
capability” is defined as “high-speed, switched, broadband telecommunications
capability that enables users to originate and receive high-quality voice,
data, graphics, and video telecommunications using any technology.”[6] The digital subscriber line (“DSL”) services
that the Coop seeks to provide are advanced services within this statute.[7]
A. Qwest’s
SGAT Does Not Relieve Qwest of Providing Subloops Based on Its Cost of Provisioning
Subloops to the Coop
The Communications Act gives
a Bell operating company like Qwest the option to file a Statement of Generally
Available Terms (“SGAT”) specifying the terms that such company “generally offers within that State to
comply with the requirements of section 251.”[8] The Commission established in its recent
Docket 577T Order the terms under which Qwest may provide network elements
pursuant to its SGAT. Qwest argues that
the Coop “is subject to those rates,” that these rates “must be applied” in
this arbitration and that accordingly, the “cost issues in the Arbitration
should be dismissed.”[9] In short, Qwest should have the Commission
believe that its SGAT is actually a tariff and that as a result, it is forever
relieved from having to negotiate terms and prices different than those
contained in its SGAT.
The problem with Qwest’s
argument is that it is flatly inconsistent with the Communications Act. Section 252(f)(5) provides unequivocally:
The submission or approval of statement under
this subsection shall not
relieve a Bell operating company of its duty to negotiate the terms and
conditions of an agreement under section 251 of this title.[10]
The Commission similarly
noted in approving Qwest’s SGAT that the SGAT was only a “default negotiating
position” from which a competitive provider could select as opposed to
negotiating or arbitrating “individually-tailed interconnection terms and
conditions.”[11] Indeed, Qwest’s own SGAT specifies that the
SGAT is “an alternative to negotiating an individual Interconnection agreement
with Qwest”:
Individual CLECs may adopt this SGAT, in lieu of entering into an
individually negotiated interconnection agreement . . . . [N]either the submission nor approval of
this SGAT nor any provision herein shall affect Qwest’s willingness to negotiate
an individual agreement with any requesting Carrier pursuant to Section 252 of
the Telecommunications Act of 1996.[12]
Qwest suggests that it is
precluded by prohibitions on discrimination from charging to the Coop prices
that differ from those contained in its SGAT.[13] In fact, it is Qwest’s position — it
supposedly must charge identical prices to all CLECs — which would result in discrimination. As the FCC has explained in rejecting the
very argument that Qwest makes here, prices that are “uniform would itself be
discriminatory according to the economic definition of price discrimination”:
An important feature of the economic definition of price discrimination
is that it occurs not only when prices are different in the presence of similar
costs, but also when the prices are the
same and the costs of supplying customers are different. . . . If the 1996 Act is read to allow no price
distinctions between companies that impose very different interconnection costs
on LECs, competition for all competitors, including small companies, could be
impaired.[14]
Section 252(d)(1) requires
incumbent local exchange carriers (“LECs”) to base network element charges on
cost, and the FCC has squarely ruled that “[w]here costs differ, rate
differences that accurately reflect those difference are not discriminatory.”[15]
The point is perhaps best
made by use of a specific example.
Throughout its “negotiations” with the Coop, Qwest demanded that the
Coop pay a Feasibility Fee/Quote preparation fee of $1,707.09, telling the Coop
that the Commission had approved this rate (when it had not).[16] The Commission recently determined that,
based on the averaged costs submitted
by Qwest, a reasonable SGAT fee for this function should be $1,107.09. The Coop has no basis to question this
determination, because it has not seen Qwest’s underlying cost study. But a price based on Qwest’s average costs
for all CLECs does not necessarily mean that the same price in the context of a
specific CLEC is “just and reasonable” and “based on cost.” Indeed, the Coop will testify at the hearing
that it will take Qwest at most a half-hour to determine the cost of the screw
terminal needed so the Coop can connect to the subloops it leases. Obviously, a price of $1,107.09 for at most
30 minutes worth of work is not “just and reasonable” and “based on cost,” as
the Act requires.[17]
The
Coop has decided, as is its right, to pursue an individually-tailored agreement
for the lease of subloops rather than using the “off-the-shelf” prices
contained in Qwest’s SGAT. The Act
requires that Qwest’s prices “shall be based on the cost . . . of providing the
. . . network element,”[18]
meaning the cost of providing subloops to the Coop. The fact that Qwest has chosen to file a SGAT containing averaged
prices does not relieve Qwest of having to negotiate with the Coop prices based
on Qwest’s costs of provisioning subloops to the Coop.
B. Qwest’s
Reliance on Section 252(I) Is Misplaced
Qwest asserts that it may
“not charge Ruby Ranch lower rates without making those rates available to all
CLECs”:
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 CLEC seeking the
same service. . . . If Qwest were able
to discount any of the Disputed Rates for Ruby Ranch, every other CLEC that
receives or wants the same service could opt in to that discounted rate, thus
forcing Qwest to accept the lowest rate.[19]
This argument is baseless.
It is important to emphasize
at the outset that the Coop does not
seek “discounted” service. The Coop
seeks only to pay prices based on Qwest’s cost of providing subloops to the
Coop. The fact that Qwest’s costs of
provisioning subloops to the Coop are lower than its “average costs of
providing [subloops] to all
CLECs” is irrelevant,[20]
and this fact certainly does not mean that the Coop would be receiving
“discounted” service.
In fact, Section 252(i) of
the Act would require Qwest to offer to another carrier the prices paid by the
Coop only if Qwest incurred the same
costs in providing subloops to that other carrier. The FCC has confirmed that “section 252(i) permits differential
treatment based on the LEC’s cost of serving a carrier”:
We conclude that these provisions, read together, require that
publicly-filed agreements be made available only
to carriers who cause the incumbent LEC to incur no greater costs that the
carrier who originally negotiated the agreement.[21]
FCC Rule 51.809 similarly
provides:
(a) An incumbent LEC shall make available without unreasonable delay to any requesting telecommunications carrier any individual interconnection, service, or network element arrangement contained in any agreement to which it is a party that is approved by a state commission pursuant to section 252 of the Act, upon the same rates, terms, and conditions as those provided in the Agreement. . . .
(b) The obligations of paragraph (a) of his section shall not apply
where the incumbent LEC proves to the state commission that (1) the costs of
providing a particular interconnection, service, or element to the requesting
telecommunications carrier are greater than the costs of providing it to the
telecommunications carrier that originally negotiated the agreement.[22]
C. Qwest’s
Own Conduct in This Proceeding Undercuts Its Argument
Qwest’s SGAT specifies that
all CLECs must obtain a $11 million insurance policy naming Qwest as a
beneficiary:
5.6.1 Each Party shall at all
times during the term of this Agreement, at its own cost and expense, carry and
maintain the insurance coverage listed below . . . .
* * *
5.6.1.4 Umbrella/Excess
Liability insurance in an amount of $10,000,000 excess of Commercial General
Liability insurance specified above.
These limits may be obtained through any combination of primary and
excess or umbrella liability insurance so long as the total limit is
$11,000,000.[23]
According to the legal
theory Qwest espouses in its summary judgment motion, all CLECs must always
obtain an $11 million policy — regardless
of the risks they pose to Qwest. In
other words, a $11 million policy is non-negotiable in all circumstances.
Qwest’s
dealings with the Coop demonstrate that even Qwest does not believe in the legal
theory it is urging the Commission to adopt.
Qwest initially demanded that the Coop obtain an $11 million
policy. Later, it reduced its demand to
a $1 million policy.[24] The fact that Qwest lowered its insurance
demand confirms that even Qwest acknowledges that the SGAT terms when Qwest and
a carrier are negotiating an individually-tailored agreement. (The Coop will demonstrate at the hearing
that its rental of subloops poses no risk to Qwest and that as a result, even a
$1 million policy requirement is not just and reasonable.)
Qwest’s summary judgment
motion, although only nine pages in length, contains numerous misstatements of
fact. These misstatements merit
correction to ensure that the Commission does not rely on them.
A.
Qwest Assertions No. 1:
“This Arbitration seeks to replicate costs already established . . . in
the cost docket, Docket No. 99A-577T” (Motion at 1).
“[N]othing justifies a second proceeding asking the Commission to redo
what it just spent many hours and enormous resources determining in the Cost
Docket” (id.).
“Ruby Ranch is thus estopped to use this arbitration to re-open the evidence
and rate issues governed by that Docket” (Id.
at 8).
Coop’s Response: The prices the Commission established in the Docket 577T Order
were, as Qwest states, “based on the average cost of providing services to all
CLECs” (Id. at 7). The Coop seeks to pay prices based on the
costs Qwest incurs in providing subloops to the Coop. Thus, the Coop does not
seek to “replicate costs already established,” nor does it want to “re-open the
evidence” in the SGAT docket.
B. Qwest’s Assertion No.
2:
“Petitioner . . . is proposing . . . to provide its members with access
to high speed DSL services through Qwest's telecommunications network” (Motion
at 2).
Coop’s Response: The term “telecommunications network” ordinarily refers to the
“Public Switched Network,” which Qwest has defined as “all Switches and
transmission facilities, whether by wire or radio, provided by any Common
Carrier including LECs, IXCs and CMRS providers that use NANP in connection
with the provision of switched services.”[25] The Coop does not want to access Qwest’s telecommunications network. It only seeks to lease certain subloops
(from 0.25 to 1.2 miles in length). The
Coop’s equipment will not be connected to any Qwest switch or any other Qwest
telecommunications equipment.[26]
C. Qwest Assertion No.
3:
“There are several options available to Ruby Ranch to provide such
[DSL] services to its members, one of which requires Ruby Ranch to enter into
an interconnection agreement with Qwest” (Motion at 2).
Coop’s Response: It is understandable that Qwest did not recite the other options,
because there are none. Although not
relevant to this proceeding (because Qwest’s unbundling obligations exist regardless
of the availability of other options), lease of the Qwest subloops is the only
way that Coop can provide its proposed advanced services:
Option
A: In theory, the Coop could use radio to
connect member-subscribers to the Internet.
Radio is attractive because there would be no recurring costs and because
the Coop would not be dependent on a monopolist. However, radio requires line-of-sight to each residence, which is
not possible because of the hilly terrain and numerous trees on Ruby Ranch.
Option
B: Each house is connected via coaxial cable maintained by the
local cable TV company. However,
Congress decided to impose unbundling requirements only on incumbent LECs, and
not on cable companies. In addition,
the cable company has installed only one cable to each residence, this cable is
generally used for cable TV service, and there is no spare coaxial cable that
the Coop could lease (even assuming the cable company were willing to enter
into such a business arrangement).
Option
C: In theory, the Coop could purchase its
own cable to replicate the subloops that Qwest has already buried on Ruby
Ranch. The cost of this cable would exceed
$20,000 (given in size and lengths required), and the additional cost to bury
this cable along several miles of road would likely exceed $50,000. These costs are not feasible given that the
Coop expects to have only 10 to 20 member-subscribers.
Option
D: Lease subloops from Qwest. Qwest has spare subloops that it is not
using and will never use. Lease of
subloops to the Coop would thus generate revenue to Qwest that it would not
otherwise receive.
For all practical purposes,
Qwest holds a “bottleneck” over an essential facility. It bears repeating that since Qwest has
decided not to provide DSL services to Ruby Ranch, residents will have access
to such advanced telecommunications services only if the Coop provides them.
C. Qwest’s Assertions
No. 4:
“[T]here is no reason [the Coop] could not have participated in the
Cost Docket along with other interested parties” (Motion at 1).
“Ruby Ranch and its members could have participated in those [SGAT]
proceedings” (id. at 5).
“Ruby Ranch did not participate in the Cost Docket” (id. at 6).
“Ruby Ranch Could Have Participated in Docket No. 99A-577T” (id. at 8).
“Ruby Ranch could have participated in the Docket” (id.).
Coop’s Response: The Coop first learned of the SGAT during
discussions with Qwest in July or August 2001.
The Coop was formed in May 2001.
The Coop suspects (but does not know) that the time for intervention in
the cost docket had passed by this time.
According to Qwest, the SGAT
proceeding involved “thousands of pages of filed testimony, hundreds of
exhibits, two full weeks of hearing and several computer-generated models with
thousands of input variables” (Motion at 3).
The Coop’s board members are volunteers, with full-time demanding day jobs. Thus, even if the Coop knew of the SGAT
proceeding and could have intervened, it would have not been physically
possible for the Coop to have participated in the massive proceeding.
More
fundamentally, however, the Coop’s participation in the cost docket would not
have been relevant to this arbitration proceeding. According to Qwest, SGAT rates are “based on the average cost of
providing services to all
CLECs” (id. at 7; emphasis in
original). As noted above, the issue in
this arbitration proceeding is limited to Qwest’s costs of provisioning
subloops to the Coop.
III. CONCLUSION
Qwest’s spare subloops on Ruby Ranch constitute a bottleneck facility, and as the Supreme Court stated only two days ago in connection with another bottleneck facility (telephone poles), “[u]tilities, in turn, have found it convenient to charge monopoly rents.”[27] However, Congress decided that it was necessary to promote “private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition.”[28] Congress specifically required incumbent LECs like Qwest to negotiate individually-tailored contracts and it further required that ILEC prices in those contracts be based on the cost of provisioning network elements to the specific carrier involved in the negotiations.
Qwest’s position that averaged SGAT prices apply even in individual contract negotiations is not only wrong as a matter of law, but also perverse as a matter of policy. Requiring our small Coop to pay prices based on Qwest’s average costs to serve all CLECs, including huge companies like AT&T and WorldCom that demand complicated interconnection arrangements, would effectively preclude small operations like the Coop from ever entering the market. We already know the outcome if only large companies are able to participate in the market: Ruby Ranch residents would be deprived of the benefits of advanced telecommunications capability because Qwest has unilaterally decided that we are not worthy of services. Congress, however, has commanded this Commission to “encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans[29],” not to rubber stamp the business strategy of monopolists.
For all the foregoing reasons, the Coop respectfully requests the Commission to deny Qwest’s January 11, 2002 motion for partial summary judgment.
Dated this 18th
day of January 2002.
Respectfully
submitted,
ASSOCIATION
_______________________________
Carl Oppedahl, Director
c/o Oppedahl & Larson
LLP
P.O. Box 5088
Dillon, CO 80435-5088
970-468-6600
carl@rric.net
CERTIFICATE OF
SERVICE
The undersigned certified that on
this 18th day of January, 2002, a true and correct copy of the foregoing PETITIONER’S OPPOSITION TO QWEST’S MOTION
FOR PARTIAL SUMMARY JUDGMENT ON THE PRICING ISSUES was sent to the
following persons via facsimile and email:
Timothy M. Tymkovich
fax 303-592-8710
and
will be served via first-class mail prepaid on January 18, 2002:
Timothy M. Tymkovich
Hale Hackstaff Tymkovich & ErkenBrack LLP
1675 Broadway, Suite 2000
Denver, CO
80202
Kris A. Ciccolo
Qwest Services Corporation
1005 17th Street, Suite 200
Denver, CO
80202
______________________________
Carl Oppedahl
[1] See In the Matter of U S WEST Communications, Inc.’s Statement of Generally Available Terms and Conditions, Docket No. 99A-577T, Decision No. C01-1302 (Nov. 13, 2001)(“Docket 557T Order”).
[2] Qwest Motion at 7 (emphasis in original).
[3] Qwest Motion at 1 and 3.
[4] First Local Competition Order, 11 FCC Rcd 15499, 15808 ¶ 610 (1996). Accordingly, the tariff statute that Qwest cites in its motion – Section 203 of the Communications Act (see Qwest Motion at 7) – has no applicability to this arbitration proceeding.
[5] Section 706 is contained as a note to 47 U.S.C. § 157. It has been recently reported that “[b]oth President Bush and Senate Majority Leader Tom Daschle are preparing ambitious programs to give more Americans fast Web connections.” The Wall Street Journal, Tech Industry Lobbyists Seek Windfall from White House Broadband Strategy (Jan. 18, 2002).
[6] Section 706(c)(1) of the 1996 Act.
[7] The FCC has ruled that DSL services are “advanced telecommunications services” under Section 706. See, e.g., First Section 706 Report, 14 FCC Rcd 2398 (1999); Second Section 706 Report, 15 FCC Rcd 20913 (2000).
[8] 47 U.S.C. § 252(f)(1)(emphasis added).
[9] Qwest Motion at 1 and 3.
[10] 47 U.S.C. § 252(f)(5)(emphasis added).
[11] Docket 577T Order at § II.B ¶ 3.
[12] Qwest Colorado SGAT at §§ 1.4 and 1.5, p. 1 (Dec. 21, 2001).
[13] Rule 723-39 does not require Qwest to charge only the rates specified in its SGAT, as Qwest asserts. See Motion at 5. To the contrary, Rule 723-39-3.3.4(2) specifically provides than an incumbent LEC shall set rates “in accordance with the rates, terms, and conditions established by the provider pursuant to contract, arbitration, tariff or price list” (emphasis added). Besides, even if there were a rule of the sort Qwest claims exists (and the Coop is aware of none), the FCC has held that “state regulations permitting non-cost based discriminatory treatment are prohibited by the 1996 Act.” First Local Competition Order, 11 FCC Rcd 15499, 15929 ¶ 862 (1996).
[14] First Local Competition Order, 11 FCC Rcd 15499, 15928 ¶ 860 (1996)(emphasis in original).
[15] Id.
[16] See, e.g., Qwest’s Response to Arbitration Petition, Docket No. 01B-493T, at 2 (Nov. 19, 2001)(“The rates that apply to Ruby Ranch’s proposed interconnection agreement are the PUC-approved rates.”); Qwest Letter to FCC, EB-01-MDIC-0028, at 1 (Oct. 1, 2001)(“Ruby Ranch refused to accept rates for unbundled network elements that were determined by the Colorado Public Utilities Commission.”).
[17] See 47 U.S.C. §§ 251(c)(3), 252(d)(1)(A)(i).
[18] 47 U.S.C. § 252(d)(1)(A)(i).
[19] Qwest Motion at 7.
[20] See Question Motion at 7 (emphasis added).
[21] First Local Competition Order, 11 FCC Rcd at 16140 ¶ 1317 (emphasis added).
[22] 47 C.F.R. § 51.809.
[23] Qwest Colorado SGAT at §§ 5.6.1 and 5.6.1.4, pp. 33-34 (Dec. 21, 2001).
[24] See Qwest’s Response to Arbitration Petition, Docket No. 01B-493T, at 3 (Nov. 19, 2001)(“As a part of the negotiations with Ruby Ranch, Qwest agreed to waive automobile insurance and $10 million of the general liability/excess coverage and to accept general liability insurance of at least $1 million.”).
[25] Qwest Colorado SGAT at p. 23 (Dec. 21, 2001).
[26] See Qwest Colorado SGAT at p. 26 (“’Telecommunications Equipment’ means equipment, other than Customer Premises Equipment, used by a Carrier to provide Telecommunications Services, and include software integral to such equipment, including upgrades.”).
[27] National Cable & Telecommunications Ass’n v. Gulf Power, No. 00-832, slip op. at 1 (Jan. 16, 2002).
[28] H.R. Conf. Rep. No. 104-458, 104th Cong., 2d Sess. 1 (Jan. 31, 1996).
[29] Section 706(a) of the Telecommunications Act of 1996.