20030131Complainants Post Hearing Brief.pdf

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January 2003
VIA HAND DELIVERY
Jean Jewell
Idaho Public Utilities Commission
472 W. Washington
O. Box 83720
Boise, ID 83720-0074
Re:
Our File:
Case No. QWE-02-
1233-160
Dear Jean:
Franklin G. Lee
David R. Lombardi
D. David Lorello, Jr.
Kimberiy D. Maloney
John M. Marshall
Kenneth R. McClure
Kelly Greene McConnell
Cynthia A. Melillo
Christopher H. Meyer
Kendall L Miller
L Edward Miller
Patrick J. Miller
Judson B. Montgomery
Angela K. Nelson
W. Hugh O'Rlordan
/9~
Michael C. Ore .
Kenneth L Pursley
Bradley V. Sneed
Conley E. Ward
Robert B. White
Raymond D. Givens
James A. McClure
Stephanie C. Westermeier
O'COUNSEl
John A. Miller, LLM. ..
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Enclosed for filing, please find the original and eight copies of COMPLAINANTS'
POST HEARING BRIEF in the above referenced case. I will also email you a copy for
electronic filing.
If you have any questions, please contact me.
ma Smith
Assistant to Conley Ward
Enclosure
S:\CLlENTS\1233\160\Tina to puc re post hearing brief DOC
Conley Ward ISB #1683
GIVENS PURSLEY LLP
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Morgan W. Richards
MOFFAT THOMAS
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Boise, ID 83701
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Thomas J. Moorman
KRASKIN, LESSE & COSSON, LLC
2120 L Street, N., Suite 520
Washington D.C. 20037
[phone]
[phone] (fax)
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UTILITIES Cm'H"t!SSION
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BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IDAHO TELEPHONE ASSOCIATION
CITIZENS TELECOMMUNICATIONS
COMPANY OF IDAHO , CENTURYTEL OF
IDAHO, CENTURYTEL OF THE GEM STATE
, )
POTLATCH TELEPHONE COMPANY and
ILLUMINET, INC.
Complainants
QWEST CORPORATION
Respondent.
CASE NO QWE-02-
COMPLAINANTS' POST HEARING BRIEF
TABLE OF CONTENTS
SUMMARY OF COMPLAINANTS' POSITION..........................................................................
STATEMENT OF THE CASE........................................................................................................
ISSUES PRESENTED.....................................................................................................................
COMMISSION JURISDICTION ................................... ................................. .................... ............
ARGUMENT ...................................................................................................................................
1. Inter-carrier compensation for intrastate SS7 messages
should follow the same rules that govern inter-carrier compensation
for the underlying end user traffic such SS7 messages support...........................................
A. Rule 1 - A telecommunications carrier is never allowed to
charge other companies for the costs associated with the
origination or termination ofthat carrier s own intrastate end user traffic ...................
B. Rule 2 -- Pursuant to long standing Commission policies, EAS traffic is exchanged
between LECs on a "bill and keep" basis.............................. ................................... ...1 0
C. Rule 3 -- Inter-carrier compensation for interchanged local
traffic is governed by the interconnection agreements required
by the 1996 revisions to the Communications Act of 1934, as amended ....................
D. Rule 4 -- Meet Point Billing compensation is
determined by inter-company agreements """""""""""""""""""""""""""............
II. Qwest has not presented any logical or persuasive reason why the
general rules governing intrastate inter-carrier compensation should not
apply to SS 7 message signaling..
""""""""""""""""""""""""""""""""""""""""""" .
A. Qwest'~ Implementation of the Catalog s SS7 message
charges demonstrates that an improper unbundling of SS7 message
charges has occurred, and it does not mirror Qwest's interstate tariff.........................
B. The SS7 Message is an integral component of the end user
traffic and is not in any sense a component of a separate network..............................16
C. Illuminet is the transport agent for its carrier/customers and is
not Qwest's customer for SS7 Messages. ....................................................................19
Table of Contents - i
D. Qwest's inability to properly implement its Catalog s SS7
message rates does not justify granting Qwest an unlawful windfall..........................
III. The Supplement Proposal is fundamentally flawed and would allow
Qwest to continue to profit from an unreasonable practice. ..............................................24
IV. The relief requested by the complainants is necessary to preserve
a rational pricing system for inter-carrier compensation. ..................................................
V. The relief requested by the complainants is necessary to remedy
the anti-competitive effects of Qwest's actions. ................................................................
VI. Refund and credit of all unlawfully assessed SS7 signaling charges to the complainants
and withdrawal of the catalog s SS7 message rate structure is required to serve the public
interest......................... ...................................................................................................... .
CONCLUSION ..... ................................................. ......
.... ....................................... .......................
Table of Contents - ii
SUMMARY OF COMPLAINANTS' POSITION
As the record demonstrates, Qwest Corporation ("Qwest") has implemented its intrastate
Southern Idaho Access Service Catalog ("Catalog ) rate structure for the provision of Signaling
System No.7 ("SS7") services in a manner that cannot be reconciled with applicable law
rational public policy and common sense. Qwest relies upon a number of mistaken premises in
its effort to convince the Idaho Public Utilities Commission ("Commission ) to ignore the
unreasonable and unlawful nature of Qwest's application of its SS7 message charges and the
perverse results arising from Qwest's actions.
The supplemental proposal offered by Qwest - whereby it would assess, among other
charges, SS7 message charges under its Catalog rate structure to the intrastate toll originated by
an end user presubscribed to Qwest and to "Meet Point Billing" arrangements (the
Supplemental Proposal") does not cure these ills. The Supplemental Proposal relies upon the
same illogical basis as Qwest's ill advised theories-in-chief. The Supplemental Proposal would
do nothing more than reduce the level of the injustice on a going forward basis, and it would
reward Qwest by not requiring any further relief to the Complainants for improperly assessed
past charges.
Unlike Qwest, the Complainants are not asking the Commission to ignore common sense
nor are the Complainants asking the Commission to stretch the regulatory definition of end-user
traffic properly subject to the Catalog, nor are the Complainants suggesting that the Commission
ignore the anti-competitive consequences of Qwest' actions. Rather , the framework the
Complainants are requesting the Commission to adopt, and the relief the Complainants seek, is
grounded in common sense and is fully supported by applicable law and policy. The
Complainants simply seek Commission confirmation that the terms and conditions governing the
provision of the end user traffic between telecommunications carriers should equally govern the
treatment of whether and how SS7 message charges should be assessed by and between those
carriers. Accordingly, for the reasons stated herein, the Complainants respectfully request that
the Commission grant the full extent of the relief they request.
STATEMENT OF THE CASE
Although SS7 is a relatively recent addition to the Public Switched Telephone Network
PSTN"), its operation and integration with the voice/data end user traffic is not a "mystery," as
Qwest witness McIntyre contends. See Tr. 519, L.20. SS7 enables telecommunications carriers
to transmit call setup and teardown instructions out of bandwidth, thus freeing up additional
capacity on the voice/data transmission path. See
g.,
Tr. 206, L.9-14; Tr. 303, L.14-17. The
system is comprised of several discrete technological components.
The first SS7 component is the "Service Switching Point" ("SSP"), which is part of the
switch ofthe Local Exchange Carrier ("LEC"
).
See e.Tr. 27, L.l- 7. The SSP generates the
SS7 signaling messages which are required to set-up and tear down a call. See e.Tr. 308, L.8-
11. The second network component is the "Signal Transfer Point" or "STP" which, acting like a
traffic cop," routes the SS7 message generated by a LEC's SSP (and routed via redundant, bi-
directional facilities called "links ) to other STPs, and ultimately to the SSP operated by the
carrier providing service to the called end user party (in the case of a local call, for example) or
another carrier that serves the called end user (such as in the case of a presubscribed intraLA T A
toll call for an entity other than that which owns the SSP). See e.
g.,
Exhibits 401 500 501; Tr.
307, L.14-22.
The third component of the SS7 network is the bi-directional facilities that connect STPs
to other STPs (which are called "links ) and their associated physical connection to an STP
(called a "port"
).
See e.
g,
Tr. 208, L.7-10; Tr. 226, L.13-14. Along with the SSP connections to
the STPs (via the A-links), the physical connection established between the STPs through the B-
links and ports is that used to transport various SS7 messages exchanged by the carriers
providing end user services.
A variety ofIdaho telecommunications carriers, including competitive LECs ("CLECs
incumbent LECs ("ILECs ) Commercial Mobile Radio Service ("CMRS") providers, and
Interexchange Carriers ("IXCs ), utilize third party SS7 providers, such as Illuminet, Inc.
Illuminet") and Syringa Networks LLC ("Syringa ), to transport their SS7 messages to other
telecommunications carriers. See Tr. 203 , L.3-9; 32, LII-13. Although commonly
characterized as SS7 "providers " the fact is that third party SS7 providers, such as Illuminet and
Syringa, do not originate any of the SS7 messages at issue in this proceeding. See e.
g.,
Tr. 208
L.17-22.Rather, these third party SS7 providers enable their telecommunications
carrier/customers ("carrier/customers ) to transport their SS7 signals on the third party
provider s SS7 systems, thereby allowing the carrier/customers to avoid the cost of deploying
their own STPs, B-links and ports to all other SS7 networks, including that of Qwest. See e.
Exhibit 401. The resulting efficiencies and economies of scale benefit Qwest as well as the
companies who utilize third party SS7 providers for the transport of their SS7 messages. See
Tr. 209, L.9-Tr. 212, L.2.
On May 17, 2001 , Qwest filed with the Commission a number of revisions to its Catalog.
These revisions purported to "mirror" Qwest's interstate tariff by introducing five new rate
1 The B-link and port charges are not at issue in this proceeding. Illuminet and Syringa have paid and continue to
pay these charges to Qwest. See. Tr. 226, L.23-26; Tr. 175, L.3- 7.
2 Even Qwest acknowledges the value of the economy of scale and scope that a third party SS7 network provider
such as Illuminet brings to carriers that elect to limit their direct SS7 network investment and deployment See Tr.
478, L. 1-19; Exhibit 410, Qwest also benefits from such arrangements through minimization of the maintenance
elements designed to recover the cost of usage of Qwest's SS7 network on a per-call basis rather
than as part of the per-minute switched access charges. See e.Tr. 396, L.13-18. Qwest has
not, however, confined the application of these charges to the intrastate access traffic governed
by its Catalog. Instead, Qwest effectively has invoked the Catalog filing as authority to levy SS7
message charges on all intrastate calls exchanged with other telecommunications carriers
utilizing third party SS7 providers, even when a Qwest end user customer originates the call on
Qwest's network. See Exhibit 403; Tr. 429, L.I0-15.
Complainants, as evidenced by correspondence provided to Qwest by Illuminet in
November, 2000, have consistently maintained that the arrangements in place between the
carriers of the "end user" traffic should likewise govern when and how SS7 message charges
should be assessed see Tr. 220, L.14-, just as it was prior to Qwest's purported unbundling.
Complainants contend that this position is consistent with traditional "cost causation" principles
Commission-prescribed inter-carrier compensation rules, and other applicable law and policies.
Accordingly, Complainants contend that the application by Qwest of the Catalog s SS7 message
charges to all intrastate end user traffic types is unreasonable, unlawful, and contrary to long
established regulatory policies. Complainants seek the fullest extent of relief possible to redress
both past unlawful charges and the potential for any future unlawful charges associated with the
manner in which Qwest has elected to implement its Catalog s SS7 message rate structure.
As the Commission is undoubtedly aware, a proceeding similar to this one was pending
before the Nebraska Public Service Commission ("Nebraska Commission ) while hearings were
held in this case. In Alltel Nebraska, Inc., et al. v. Qwest Corporation Formal Complaint Nos.
FC-1296 and FC-1297 (Dec. 17 2002), the Nebraska Commission entered its decision on a
monitoring and actual number of facilities required to interconnect its SS7 network to other carriers via such third
party SS7 providers. See e.
g.,
Tr. 333, L.3-
complaint against Qwest raising substantially identical issues to those raised by the
Complainants in this case. The Nebraska Commission held for the complainants on all counts
and granted the complainants the full measure of the relief requested in that case, which mirrors
the relief requested in this case. Rather than salt this brief with numerous excerpts from, and
citations to, the Nebraska decision the entire order has been attached as Exhibit A. Complainants
submit the Nebraska decision both for its value as precedent, and as a proposed order that should
with appropriate modifications, be entered in this proceeding.
ISSUES PRESENTED
1. Should Qwest be allowed to charge other telecommunications/carriers utilizing third
party SS7 providers for Qwest's SS7 message costs for any intrastate SS7 message that
touches Qwest's SS7 network?
2. Should Qwest be required to refund sums collected and to credit outstanding charges
arising directly from its improper implementation of its Catalog?
3. Should Qwest be required to withdraw its Access Catalog s SS7 message revisions until
such time it can prove that it can properly implement such SS7 message rate structure?
COMMISSION JURISDICTION
Although the Idaho legislature has authorized telephone companies such as Qwest to opt
out of traditional Commission rate regulation, the legislature was quite careful to preserve the
Commission s authority to resolve industry disputes and determine the terms and conditions of
traffic exchanged between the companies. Section 62-614, Idaho Code, expressly grants the
Commission jurisdiction to hear and resolve the type of controversy presented in this case:
(1)If a telephone corporation providing basic local exchange service which
has exercised the election provided in section 62-604(2), Idaho Code, and
any other telephone corporation subject to title 61 , Idaho Code, or any
mutual, nonprofit or cooperative telephone corporation, are unable to
agree on any matter relating to telecommunication issues between such
companies, then either telephone corporation may apply to the
commission for determination of the matter.
(2)Upon receipt of the application, the commission shall have jurisdiction to
conduct an investigation, and upon request of either party, to conduct a
hearing and, based upon evidence presented to the commission to issue its
findings and order determining such dispute in accordance with applicable
provisions of law and in a manner which shall best serve the public
interest.
Similarly, title 62 also provides the basis for establishing the Commission s jurisdiction
over industry practices and policies. For example, Section 62-605(5), Idaho Code, provides as
follows:
For any telecommunication service which was subject, on the
effective date (July 1 , 1988) of this act, to title 61 , Idaho Code, and
which at the election ofthe telephone corporation became subject
to this chapter, the commission shall have continuing authority to
review the quality of such service, its general availability, and
terms and conditions under which it is offered. Upon complaint to
the commission and after notice to the telephone corporation
providing such service and hearing, the commission finds that the
quality, general availability or terms and conditions for such
service are adverse to the public interest, the commission shall
have authority to negotiate or require changes in how such
telecommunication services are provided. In addition, if the
commission finds that such corrective action is inadequate, it shall
have the authority to require that such telecommunication services
be subj ect to the requirements of title 61 , Idaho Code, rather than
the provisions of this chapter.
These statutes leave no doubt that the Commission has jurisdiction and ample authority to
entertain this Complaint and grant the relief requested by the Complainants.
ARGUMENT
Inter-carrier compensation for intrastate SS7 messages should follow the same rules
that govern inter-carrier compensation for the underlying end user traffic such SS7
messages support.
Qwest's basic position is that it should be allowed to recover its SS7 message costs from
other third party SS7 providers and their carrier/customers for any and all interchanged SS7
messages that utilize Qwest's system, without regard to the type of the intrastate end user call or
the manner in which such call is originated. See Tr. 429, L.I0-15. This proposition simply
cannot be reconciled with applicable law, rational public policy or common sense.
The fundamental defect in Qwest's position is that it attempts to separate the inseparable.
SS7 messaging has always been deemed an indispensable and integral component of the public
switched network.
(T)elephone calls. . . consist of two components: (1) the actual communications
voice and data, and (2) network control signaling, which directs the operation of
the public switched network.The signaling indicates that a receiver has been
picked up, what digits were dialed, whether the called line is ringing or busy,
when the telephone is hung up, and so forth.
Elkhart Telephone Company, Inc. v. Southwestern Bell Telephone Company, Memorandum
Opinion and Order, 11 FCC Red. 1051 (para. 3) (1995) (emphasis added) (hereafter Elkhart
Absent the exchange of such SS7 messaging (where, as in this proceeding, SS7 functionality has
been deployed) virtually no calls would be completed. Consequently, as an indispensable
component of the end user traffic, simple logic and common sense dictate that existing
Commission and other regulatory directives should apply to inter-carrier compensation for SS7
signaling costs.
Prior to Qwest's purported "unbundling" of SS7 charges, this was in fact the case. Under
traditional ratemaking principles
Rates to recover all prudent investment and expenses allocated to the state
jurisdiction, including a portion of SS7 facilities and costs, were established by
the state regulatory agency. Intrastate cost recovery for any specific item, such as
the SS7 network, would have been traditionally spread over any number of
services including basic local rates.
Tr. 35 , L.14-18. Because SS7 cost recovery was embedded in all LEC rates, LECs could recover
their SS7 costs from other carriers only where there were otherwise applicable rates that
authorized inter-carrier charges for the origination or termination of the distinct types of
intrastate inter-exchange end user traffic (e., local, Extended Area Service ("EAS"), intraMTA
and toll).
Complainants contend that these general principles should continue to govern inter-
carrier compensation for all end user traffic types and their related costs, including the costs
associated with the indispensable SS7 message components of such traffic. Thus, the terms and
conditions governing inter-carrier compensation for end user traffic should equally govern
whether and how SS7 message charges should be assessed by and between the end user service
providers. These general rules of inter-carrier compensation for the various categories of
intrastate end-user traffic are not seriously contested in this proceeding, and are, in fact, very
straightforward.
A. Rule 1 - A telecommunications carrier is never allowed to charge other
companies for the costs associated with the origination or termination of that
carrier s own intrastate end user traffic.
For decades, the rules in Idaho governing inter-company compensation for intrastate
public switched network traffic have followed a few very simple, common sense principles. One
of the most important of those principles is that
prices should be set to recover the costs of a service (or any element of a service)
from the actual cost causer. . . . The cost causer for a specific telephone call is the
carrier originating the call (and its customer).
Tr.73 , L.7-12. Thus, traditional pricing principles dictate that the carrier whose retail end user
customer originates a call collects the revenue for that call from the end user customer and then
compensates any other carriers involved for their costs of transporting or terminating that end
user traffic.
Qwest has ignored this basic tenet of Idaho telephone industry pricing in its
implementation of the Catalog s SS7 rate structure. Qwest is invoking its Catalog to charge third
party SS7 providers (and their carrier/customers) for Qwest's SS7 costs associated with any and
all Qwest-originated inter-carrier end user calls , notwithstanding the fact that Qwest and its end
user customer cause the costs associated with the SS7 message. Likewise, Qwest has made clear
that a third party SS7 provider would also be assessed for Qwest's SS7 costs related to an IXC'
toll traffic (i., in a Meet Point Billing scenario where Qwest and the Illuminet carrier/customer
are providing "exchange access" to the IXC), again regardless of the fact that the IXC and its end
user customer (and not the third party SS7 provider) cause the costs associated with the SS7
message. See Tr. 76, L.I0-16.
Qwest has provided no rational basis for this perverse disregard of "cost causation
principles. When challenged on cross examination to cite any other instance in which an
originating carrier can charge another carrier for any portion of the cost of originating the call
Qwest's witness Mr. McIntyre was unable to cite a single instance. See Tr. 465, L.7 through 469
L.4.3 The obvious reason for this failure is that no such practice exists anywhere in the telephone
industry. As Mr. Lafferty pointed out in his testimony, where intrastate inter-company charges
are authorized, it is always the originating carrier that pays the terminating carrier, and the
originating carrier is never allowed to charge other transporters of the call. See generally Tr. 39
L.12 through 43 , L.5.
Under state law, this rule is so thoroughly understood and established by historical
3 Mr. McIntyre suggested that Meet Point Billing arrangements might constitute such an example, This is clearly
incorrect. In the typical Meet Point Billing arrangement, the IXC is the cost causing company because its end user
customer initiates the call. The IXC pays both LECs involved in completing the call according to those LECs
respective exchange access tariff rates. The LEC that provides originating access does not bill the LEC that
provides terminating exchange access.
practice that it is not codified, except in LEC tariffs that clearly restrict inter-carrier
compensation to payments by the originating carrier to the terminating carrier. See Tr. 41 , LA-
10. The Federal Communications Commission ("FCC"), however, has enacted such rule in the
context of the exchange of "local" traffic between CLECs that are competing with ILECs, by
providing that "A LEC may not assess charges on any other telecommunication carrier for local
telecommunications traffic that originates on the LEC's network.47 c.F.R. ~ 51.703(b)
(emphasis added).
B. Rule 2 -- Pursuant to long standing Commission policies, EAS traffic is
exchanged between LECs on a "bill and keep" basis.
The Commission is well aware of its history regarding the establishment ofEAS calling
areas. These decisions uniformly establish "bill and keep" regimes for interchanged EAS traffic
, each LEC bears its own costs associated with its provision of the service (local switching
and transport) of the EAS service to an agreed-to meet point. See Tr. 41 , LII-13; Tr. 42, L. 4-
Nowhere in these decisions does the Commission envision one LEC - Qwest - being able to
unilaterally alter these compensation arrangements. Qwest's application of its Catalog SS7
charges to third party SS7 providers such as Illuminet, regardless of the intrastate end user traffic
involved, effectively "sabotages the Commission s efforts" regarding EAS by reintroducing
message sensitive pricing for EAS calls. Tr. 74, L18.
The consequences of Qwest's action are not just limited to reversing Commission EAS
policy, however. Permitting Qwest's conduct would also enable Qwest to shift its SS7 message
costs improperly to other LECs, amounting to a double recovery of Qwest's SS7 message costs
associated with EAS. The Commission permitted Qwest and the other LECs involved in EAS
proceedings to design their local exchange service rates to recover all costs associated with EAS
traffic, including the components thereof (e., the associated SS7 messages). See In the Matter
of the Investigation into the Methodology for Determining US West Communications, Inc.' s
Cost of Extended Area Service, Case No. USW-98-, Order No. 27789 (July 17, 1998).
Therefore, as Commissioner Smith observed, SS7 "costs were already included in the rates that
are being paid by customers today for the service that includes EAS calling." Tr. 523 , LI2-14.
To permit Qwest to recover those costs yet again from other carriers is clearly an umeasonable
double recovery.
C. Rule 3 -- Inter-carrier compensation for interchanged local traffic is governed
by the interconnection agreements required by the 1996 revisions to the
Communications Act of 1934, as amended.
Sections 251 and 252 of the 1996 revisions to the Communications Act of 1934, as
amended (the "Federal Act") mandate that the Commission-approved interconnection
agreements ("ICA"), not Qwest's Catalog, govern inter-carrier compensation for the exchange of
local" end user traffic between carriers such as CLECs and Qwest.4 Thus, all affected Illuminet
carrier/customers (e., CLECs and CMRS providers) have contracts in place with Qwest that
address the inter-carrier compensation arrangements for the exchange of such "local" traffic.
These ICAs between Illuminet's carrier/customers and Qwest do not permit separate SS7
message charges to be assessed by Qwest. Yet Qwest has implemented its Catalog s SS7
message rate structure to impose them nonetheless.
The ELI-Qwest ICA provides a typical example of the rule governing SS7 signaling for
local traffic. The agreement mandates that, where possible, trunks used for transport and
termination by both parties will be equipped with SS7. See Section (C) 2.2.5 of the ELI-Qwest
4 I\1uminet's carrier/customers include CMRS providers. For purposes of this discussion, intraMTA CMRS traffic
has been deemed by the FCC to be "local" for purposes of applying the terminating compensation requirements,
See 47 CF.R. ~ 51.701(b)(2).
ICA, Exhibit 205. The ICA further indicates that SS7 will be provided as part ofthe standard
terms of the interconnection arrangement for the transport and termination facilities. Therefore
SS7 is clearly considered an inseparable part of the traffic on the interconnection trunks, Tr. 69
L.9-, and it is only reasonable to assume that the ICA's reciprocal compensation rate covers
each party s cost for SS7 signaling, without which the end-user call could not be completed. Tr.
, L.11-17.
Further, the ELI-Qwest ICA makes clear that any additional local compensation would
require the ICA be renegotiated and approved by the Commission, Tr. 41 , L.5-8 and L.14-
and Qwest has clearly not chosen such path. At no relevant time did Qwest provide ELI with an
opportunity to negotiate the new SS7 message charges prior to Qwest filing the changes to the
Catalog. ELI first learned about the changes and application of the Catalog to local calls after it
had been implemented. Tr. 45 , L.4- 7.
Not only does Qwest's assessment ofSS7 message charges to ELI, through its SS7
signaling transport agent, Illuminet, violate the ICA, but it also violates the FCC's reciprocal
compensation rules which do not permit carriers to recover the costs of originating traffic from
the terminating carrier. See 47 C.R. 951.703(b) ("A LEC may not assess charges on any other
telecommunications carrier for local telecommunications traffic that originates on the LEC's
network.
5 Contrary to Qwest's assertion that SS7 message signaling is only included as an Unbundled
Network Element ("UNE"), common sense dictates that no carrier offers a rate that does not
recover all components of the service being provided. In any event, while ELI could have
chosen to purchase SS7 message elements as unbundled network elements under the ICA, such
UNEs were not required since compensation for the costs associated with the exchange of the
necessary SS7 messages was included in the ICA's reciprocal compensation provisions.
See Tr. 124 18.
Accordingly, just as in the case with EAS, Qwest's chosen method of implementing its
new SS7 message signaling charges is, in effect, an attempt to shift its SS7 message signaling
costs associated with local traffic originated by a Qwest end user to other companies, including
some of its competitors, in violation of current regulations and its ICA. Tr. 44-45. There is no
conceivable basis upon which Qwest can justify this result. CLECs, including ELI, have
properly relied upon their ICAs, and Qwest should not be allowed to simply abridge them by the
unilateral filing of a tariff or its Catalog. Tr. 43 , L.11-17.
D. Rule 4 -- Meet Point Billing compensation is determined by inter-company
agreements.
Identical concerns are also raised with respect to Meet Point Billing. In their ICA, ELI
and Qwest have agreed to a Meet Point Billing arrangement whereby each separately bills the
appropriate tariffed switched access rates for its portion of the access service jointly provided to
IXCs. See Sections (C) 2.1.1 , (C) 2.2.3., (C) 2., (C) 3., and (C) 3.3 of the ELI-Qwest ICA
Exhibit 205. The ELI-Qwest ICA provisions regarding Meet Point Billing are clear that charges
by Qwest to ELI are not permitted for SS7 message signaling associated with the termination of
third party IXC calls. Tr. 48, L.14-17 and Tr. 49. Thus, Qwest may not bill ELI (or ELI's agent
Illuminet) other than in accordance with the ELI-Qwest ICA.
These ICA provisions follow the industry standard Meet Point Billing guidelines for all
charges associated with toll calls originated and terminated by third-party IXCs. See generally
Elkhart. These Meet Point Billing arrangements are applicable to, and used by, all LECs such as
the Complainant ITA members. See Tr. 216, L.3-16; Tr. 47, L.6 through 48, L.I0. Therefore
any SS7 message charge assessed by Qwest to a Complainant IT A member or any other LEC
that is an Illuminet carrier/customer (and thus has Qwest's SS7 message charges passed through
to it by Illuminet without mark-up) is also unlawful and contrary to industry Meet Point Billing
practices. Tr. 78, L.7-19.
II.Qwest has not presented any logical or persuasive reason why the general rules
governing intrastate inter-carrier compensation should not apply to SS7 message
signaling.
Qwest does not seriously dispute Complainants' contention that its recovery of SS7
message costs is incompatible with the general rules regarding inter-carrier compensation for the
types of intrastate end-user traffic noted above. Qwest argues instead that SS7 message costs are
somehow unique, and it should therefore be allowed to recover these costs in a manner that is
patently at odds with the laws and regulations governing the recovery of all other end user
traffic-related costs. None of Qwest's contentions on this score can withstand even a cursory
examination, let alone critical analysis. Without exception, Qwest's arguments are ill founded
mutually contradictory, and illogical.
A. Qwest's Implementation of the Catalog s SS7 message charges demonstrates
that an improper unbundling of SS7 message charges has occurred, and it does
not mirror Qwest's interstate tariff.
Qwest claims that its implementation of its intrastate SS7 message structure is proper
because it is consistent with the FCC orders permitting unbundling of Qwest's interstate access
tariff. See e.Tr. 392, L.l 0-11. Qwest's position is inconsistent with the facts and refuted by
the very FCC order on which it relies.
At the outset, the Complainants note that the FCC's decisions regarding interstate
exchange access are not binding precedents for the Commission s oversight of the proper
implementation of an intrastate tariff structure. Interstate telecommunications end user traffic is
unique in that it consists almost entirely of toll traffic carried by IXCs. See Tr. 224, L.5-8; Tr.
, L.1-5. Consequently, the FCC administers only one significant inter-carrier compensation
system, in which IXCs pay LECs access charges as compensation for costs incurred in
originating and terminating the IXCs' end user traffic. Intrastate end-user traffic, on the other
hand, contains several subdivisions (local, EAS, Meet Point Billed, etc), each of which has
different inter-carrier compensation arrangements as indicated above. Id. These jurisdictional
differences are crucial in the present case because they explain why Qwest's argument that it is
simply "unbundling" its intrastate SS7 message charges is patently false.
In the interstate jurisdiction, Qwest's FCC SS7 tariff revisions actually broke down
charges that had previously been billed in a single per-minute switched access charge into per-
minute and per-message billing components. On the intrastate side, Qwest has allegedly
attempted to break a pre-existing charge into new components, but the record makes clear that
Qwest is in fact using its Access Catalog to levy new SS7 message charges on intrastate traffic
such as local and EAS, that were previously not subject to access charges or any other
intercarrier charges.
Although the FCC's decision is not binding, the FCC's decision regarding proper
unbundling" is instructive. To this end, Qwest's mislabeled "unbundling" of intrastate SS7
. charges is precisely the type of unreasonable overreaching the FCC sought to prevent with the
conditions attached to its order. The FCC decision allowing carriers to elect to implement an
unbundled SS7 signaling message structure requires those carriers to "acquire the appropriate
measuring equipment as needed to implement such a plan" in order to insure that the unbundled
6 Q. (Mr. Ward) I appreciate all that, Mr. McIntyre, but can we shorten that up a little bit? Would you agree with
me that, basically "unbundling" means rates are disaggregated for whatever reason, an existing rate has been
disaggregated into component parts, for efficiency reasons or because the industry desires it?
A, (Mr. McIntyre) Yes.
Q, All right. Now in the case of an EAS call from, again, let's take Qwest to Citizens exchanges , what rate is being
unbundled when you impose SS7 charges for that call?
A. Well, there s no rate in the EAS charge that was unbundled. It was the switched access rates which were
unbundled.
Tr. 474, L. 9-23.
charges are confined to their appropriate scope. Access Charge Reform First Report and Order
12 FCC Rcd 15982, 16090 (para. 253) (1997). Moreover, the FCC required LECs that exercised
this election to "evaluate how the implementation of these plans will affect their prospective
customers." 12 FCC Rcd. at 16090 (para. 253). Qwest has ignored these crucial aspects of the
FCC decision in its purported "mirroring" of its FCC rate structure. Qwest admits that it filed its
Idaho SS7 signaling message structure prior to deploying the proper measurement equipment
notwithstanding the fact that such measurement capability exists. See Tr. 223 , L.1-16. It did so
because, in Qwest's view, installing the appropriate measuring equipment "would be inefficient
and lead to additional costs that would require increased rates." Tr. 436, L.11-13. Thus, Qwest
cannot seriously contend that it followed the FCC's guidance. Rather, Qwest's improper
application of the Idaho SS7 message structure has resulted in Illuminet being incorrectly billed
in excess of $1.0 million through September, 2002. See Tr. 206, L.1-
In summary, the Complainants respectfully submit that Qwest cannot justify its failure to
break down the SS7 message by type of intrastate end user traffic (e., local, EAS, jointly
provide toll, etc) simply because it would cost too much, when the result is incorrect charges to
third party SS7 providers and their carrier/customers. Qwest elected to file the tariff structure
and therefore undertook the responsibility to properly implement it (which it has not done).
Qwest consciously chose to implement intrastate SS7 message rates which it knew, or should
have known, could not be properly billed. Neither of these results can be reconciled with either
the FCC's directives or Qwest's obligations under Idaho law.
B. The SS7 message is an integral component of the end user traffic and is not in
any sense a component of a separate network.
Qwest's false premise that the SS7 network is separate and apart from the voice or data
components that the SS7 network controls can and should be readily rejected by the
Commission. The initial problem with Qwest's argument is that it is specifically in conflict with
Idaho law. Section 62-603(13), Idaho Code, states:
Telecommunication service" means the transmission of two-way interactive
switched signs signals, writing, images, sound messages data or other
information of any nature by wire, radio, light-waves, or other electromagnetic
means.. ..
(Emphasis added). This language clearly memorializes the legislature s sensible view that
signaling is an inseparable part of telecommunication service.
Qwest's separate network theory is also incompatible with simple logic.
Complainants' witnesses repeatedly pointed out, SS7 signaling has no independent purpose
other than the control over the PSTN components used to carry end users' voice and data traffic.
See e.Tr. 212, L. 27 through 213 L.2. As Mr. Creason explained
We can test the truth of this observation by asking another question. If the public
switched network did not exist, would anyone construct an SS7 "network"? The
answer is of course not because SS7 has no inherent or intrinsic value at all other
than its ability to make the switched network more efficient.
Tr. 178 , L. 2-6. While the SS7 network does not, by itself, provide exchange service, exchange
access, or long distance service, the SS7 messages are nonetheless an indispensable component
to each and everyone of those services. In those instances where SS7 has been implemented
(such as here)? and no in-band MF signaling backup is available, no end user traffic could be
completed without SS7 signaling.
Qwest's suggestion that SS7 message signaling is part of some separate network has also
been squarely repudiated by the FCc. See Elkhart 11 FCC Rcd at 1051 (para. 3). The FCC has
7 While Qwest witness Craig suggested that calls could be completed if back-up MF signaling was used, Qwest
presented no facts demonstrating that the Illuminet carrier/customers and Qwest have implemented such back-
and, in fact, the ELI interconnection agreement specifically states that no such back-up will be employed, See
ELl/Qwest ICA, Section (c) 2,
made clear that regulated LECs, including Qwest, are to treat SS7 costs as a "general network
upgrade.Accessfor 800 Service Report and Order, 4 FCC Rcd 2824 2832 (1989) (emphasis
added) 800 Access Decision
) ("
CCS7 (the FCC's term for SS7) represents a general network
upgrade the core costs of which should be borne by all network users ) The FCC also found
that SS7 costs "will be used for a wide variety of both intrastate and interstate services.. at
2833. Each of these statements would be rendered meaningless if Qwest were correct that the
SS7 network is a "separate" network. Thus if, as Qwest contends, the costs of SS7 were truly
incurred as a separate network, there would be no reason for the FCC to require that these be
spread across the "wide variety of both intrastate and interstate services
" (
) that rely upon the
functions that the SS7 network components provide. Accordingly, it is only logical that SS7
signaling message costs should be recovered in the same manner as other costs associated with
the underlying end user traffic. Tr. 235, L.I0-14.
Qwest's suggestion that the 'jurisdiction" ofthe SS7 message is irrelevant is also
baseless. Such a contention is inconsistent with its own Catalog that relies upon the jurisdiction
of the voice traffic to determine the jurisdiction of the SS7 signaling messages vis-a.-vis the voice
traffic they support. See Southern Idaho Access Service Catalog Section 2, Page 19, Release 2
and 2.3.10 B.5 (Jurisdictional Reports Requirements). Qwest's own FCC filing, which
unbundled SS7 signaling message charges from its interstate access rates, necessarily implies
that it allocated its SS7 message costs between the intrastate and interstate jurisdictions. Tr. 235
L.17 through 236, L.3. Moreover, Qwest admits that these signaling messages are necessary to
establish and tear down every type of end user call. See Tr. 412, L.17 through 413, LA. Finally,
if (as Qwest claims) the jurisdiction of the SS7 signaling messages is irrelevant, there would
have been no reason for Congress to allow, in Section 271(g)(5) of the Federal Act, Qwest (and
other BOCs) to transport signaling information used in connection with both local services
(which the Federal Act refers to as "telephone exchange services ) and access services (which
the Federal Act refers to as "exchange access.) Tr. 236, L.5-12.
C. Illuminet is the transport agent for its carrier/customers and is not Qwest'
customer for SS7 Messages.
Confronted with the obvious problems with its "separate network" theory, Qwest
suggests that its assessment to Illuminet of charges for all intrastate SS7 messages is proper
because Illuminet is the "customer" and, according to Qwest, Qwest's compensation
arrangements with Illuminet's carrier/customers are therefore irrelevant. Qwest is wrong on both
accounts.
Contrary to Qwest's suggestion , Illuminet is not Qwest's "customer" under its Catalog
for SS7 message charges. While it is true that Illuminet has made arrangements to access
Qwest's SS7 network through the purchase of "links and ports " it is the SS7 message that
requires any "utilization" of the network, and the record is clear that Illuminet does not generate
any SS7 signaling messages.8 Rather, it is the Illuminet carrier/customers who initiated the SS7
messages at issue in this proceeding and those messages are generated in order to exchange end
user traffic with Qwest or to jointly provide exchange access to IXCs. Accordingly, to suggest
that Illuminet somehow "utilizes" Qwest' s SS 7 network for purposes of SS 7 messages and thus
is a customer of Qwest for SS7 messages is without merit and has no basis in fact.
Rather, the record reflects that Illuminet is an agent for its carrier/customers for the
transport of SS7 messages, and Qwest is fully aware of the nature of this agency relationship.
For example, ELI has authorized Illuminet "to conduct all negotiations and issue orders for ISUP
The fact that Illuminet purchases B-links and ports for its own account, and thus acts as a principal in order
to configure its network does not, under agency or any other law, preclude Illuminet from being the agent of its
carrier/customers for the transport of SS7 signaling messages, An entity can be both a principal and an agent.
services for the (ELI) point codes" and stated the "letter of Agency will remain in effect until
rescinded in writing by" ELI. Exhibit 201. Qwest understands this agency relationship because
Qwest requires such Letters of Agency to open the SSP "point codes" necessary for its SSP to
exchange SS7 signaling messages with the SSPs of the carrier/customers ofthe third party
providers.9 Moreover, Qwest conducts its activities consistent with this agency relationship.
Qwest requires the disclosure ofthe SS7 provider on the Access Service Requests for the
necessary voice trunks and, as Qwest witness Craig recognized, when network problems arise
Qwest interacts with both Illuminet and its carrier/customers to resolve the issues. Thus
Qwest's suggestion it has no SS7 relationship with the Illuminet carrier/customers is baseless.
The record is also clear that when Qwest sends SS7 signaling messages to an Illuminet
carrier/customer by way of Illuminet's network, Qwest does not pay Illuminet for the transport
of those signaling messages. If Qwest truly believes Illuminet is the "customer" that is liable for
payment for SS7 messages sent to Qwest, it would logically follow that, unless Qwest is seeking
a "free" ride, Qwest would have to acknowledge an obligation to pay Illuminet for messages sent
to it by Qwest. This is not the case, of course, because Illuminet neither originates nor
terminates SS7 signaling messages, it merely transports such messages back and forth between
Qwest and the Illuminet carrier/customers. Therefore, the determination of what charges are due
for origination or termination of such SS7 messages is properly made only by application of the
underlying end user arrangements Qwest has with such carrier/customers.
Qwest's witnesses attempted to argue that the LOAs are insufficient to establish a proper agency, but are
required only for Qwest's own internal network security purposes, SeeTr. 316, L. 19-21 and Tr. 318, L.22-23. That
argument is both factually and legally wrong. It is factually wrong because Qwest's undertaking to recognize
Illuminet's carrier/customer point codes is tantamount to Qwest's undertaking to exchange SS7 signaling messages
with the carrier/customers over Illuminet's network. It is legally wrong because the scope of the authority of an
LOA is established by the grant of the principle to the agent and cannot be limited by a third party who merely
requires proof of agency, See Landvik by Landvik v. Herbert, 130 Idaho 54, 936 P .2d 697 (Ida. App, 1997),
Accordingly, application of traditional agency concepts to the facts of this proceeding
leads to the unremarkable proposition that carriers (such as Illuminet's carrier/customers) lose
none of their rights to insist upon application of existing agreements when they choose to
interconnect using a third party agent (such as Illuminet) instead of deploying their own
complete SS7 network. This general rule is uniformly followed in other third party transport
situations. Syringa, for example, provides high-speed fiber optic transport for its member
companies. Tr. 170, L. 22 through 171 , L.l. But the fact that an ITA company such as Albion
Telephone uses Syringa as a third party transporter does not make the underlying traffic any less
Albion , nor does it terminate the inter-carrier compensation relationship between Qwest and
Albion. If the rule were otherwise, the existing inter-carrier compensation system would utterly
collapse because the use by telephone companies of leased capacity and other third party
transport arrangements is quite common.
The general rule that inter-carrier obligations are not affected by the use of agents or
intermediaries is followed in the federal jurisdiction as well. In an analogous situation, the FCC
has held that such non-carrier has the same right to nondiscriminatory access to directory
assistance ("DA") database information as that provided to its principal IXC or CLEC, subject to
the terms and conditions established in the underlying interconnection agreement between the
principal and a LEC.
(WJhen a CLEC or an IXC (having entered an interconnection agreement with the
relevant LEC) designates a DA provider to act as their agent, that competing DA
provider is entitled to nondiscriminatory access to the providing LECs' local DA
database. Naturally, the DA provider s database access will be consistent with the
terms of the relevant interconnection agreement and with the terms of the DA
providers ' separate agreements with its carrier principal.
Provision of Directory Listing Information under the Telecommunications Act of 1934
Amended First Report and Order, 16 FCC Rcd 2736, 2748 (2001). While Illuminet is not a DA
provider, and DA access is not at issue in this case, the policy basis nonetheless applies - the
agent (Illuminet) is subject to the interconnection agreement for purposes of asserting the rights
of its principals (including its carrier/customers).
The Complainants also submit that there are compelling public policy reasons why the
Complainants' choice of an intermediary to transport SS7 message signals between themselves
and Qwest should produce no different result than if Qwest and Complainants directly connected
their own SS7 networks. The cost saving efficiencies that Illuminet SS7 message transport
provides to its carrier/customers, and its associated benefits to Qwest, should not be denied to the
rate paying public. Carriers, including Qwest, should encourage network efficiencies, not create
roadblocks with no apparent purpose other than to enhance their own revenues and/or
disadvantage their competitors. If Qwest's arguments were to prevail, the only way other carriers
could ensure that Qwest honored the different compensation arrangements applicable to different
categories of end user traffic would be for each of them to construct dedicated facilities to
connect with Qwest. Such a result would merely permit Qwest to reap additional improper
windfall from the facilities charges - the A-links, the B-links and ports - required for such
connectivity solely because Qwest cannot properly implement the intrastate SS7 message rate
structure it filed. In any event, as each carrier duplicated Illuminet's SS7 network, the loss of
economies of scale provided by Illuminet to its carrier/customers would substantially increase
costs to the ratepaying public and Qwest's competitors.
D. Qwest's inability to properly implement its Catalog s SS7 message rates does not
justify granting Qwest an unlawful windfall.
The record is clear that Qwest is gaining an unlawful windfall under the SS7 message
charges it currently assesses to Illuminet. The improper charges relate to end-user traffic
addressed in other agreements in place between Qwest and the Illuminet carrier/customers
agreements that already include compensation for traffic exchange costs, including SS7 signaling
message costs. Further, Qwest's windfall also arises from the double recovery associated with
Qwest's rates assessed to its own end users. No rational interpretation of the Catalog supports
let alone justifies, this result. The Commission should, therefore, insure that this unlawful
windfall is returned as well as eliminated on a going-forward basis.
The Complainants have already demonstrated above the "double recovery" associated
with existing intercarrier compensation arrangements and need not repeat those reasons here.
However, that is not the only unlawful windfall Qwest is enjoying.
Consistent with applicable regulatory requirements and the FCC's decision that SS7 costs
should be treated as "general network upgrades " 800 Access Decision, 7 FEC Record at 2832
most states, including Idaho, follow traditional rate of return rate making where Qwest (or any
other ILEC) files a general rate case to establish its rates for local services, enhanced services
(e., calling features) and intrastate toll and access rates. Tr. 35, L. 11 through 36, L. 3. In a
rate case, rates to recover all prudent investment and expenses allocated to the state jurisdiction
including a portion ofSS7 facilities and signaling costs, were established by the Commission. Tr.
, L. 22-23. Since SS7 messages are a critical component of a local call, the LEC was required
consistent with FCC directives to apportion its SS7 related costs to its provision of each class of
intrastate services (such as basic service or intrastate exchange access). See 800 Access Decision
10 The testimony of Mr, Lafferty reveals that Qwest' s billings represent additional annualized revenues substantially
greater than the total additional revenue that Qwest claims to result from the unbundling of SS7 signaling.
Mr. Lafferty's testimony, which cannot be discussed in the brief because of its proprietary nature, proved that as a
consequence of Qwest's application of its amendment to the Catalog to non-access SS7 messages , Complainants
have experienced a substantial cost increase and Qwest has experienced a revenue windfall, Qwest's incremental
revenue from the new SS7 message elements in its Catalog appears to exceed the allegedly revenue neutral
reductions to various traditional switched access elements, See Tr. 110-112.
4 FCC Rcd at 2833 (SS7 "will be used for a wide variety of both intrastate and interstate
services.). Thus, as Commissioner Smith pointed out, absent specific rate design decisions to
the contrary, Qwest was required to recover its SS7 costs from its own retail end users and its
exchange access customers. See generally, Tr. 519, L. 1 through 520, L. 12. But now it is clear
that Qwest is recovering these costs yet again by charging other LECs for them, either directly or
via the LECs' SS7 provider. This clearly is a double recovery because there was no
corresponding local rate decrease by Qwest when the new SS7 rates were implemented. Tr. 38
L. 2-
The record, logic and common sense support the conclusion that Qwest is receiving
windfall gains. No basis has been provided by Qwest to justify such a result, and no rationale
exists to permit this windfall in the first instance. Accordingly, Complainants respectfully
submit the public interest demands this windfall be returned and, on a prospective basis, be
eliminated. Absent this action, the Commission would be permitting Qwest to engage in conduct
that simply defies common sense, let alone running afoul of proper rate design and cost recovery
principles.
III.The Supplement Proposal is fundamentally flawed and would allow Qwest to
continue to profit from an unreasonable practice.
Qwest's Supplemental Proposal does not cure the ills arising from its implementation of
the Catalog s SS7 rate structure. Nor does the Supplemental Proposal resolve the issue ofthe
unlawful past and future windfalls Qwest has received and would continue to receive. Rather
through its Supplemental Proposal, Qwest is effectively seeking Commission approval to
preserve portions of its ill-gotten gains arising from improper implementation of its intrastate
SS7 message rate structure. No reasonable basis has been or can be provided for such a result.
The continuation of Catalog charges for SS7 messages associated with Qwest-originated toll
traffic and Meet Point Billing traffic is wrong and should be specifically rejected by the
Commission.
Notwithstanding the protestations from Qwest's witness that the Supplemental Proposal
is not a concession of its baseless position, it is clearly that. By proposing that the Catalog s SS7
message charges should not apply to the local and EAS traffic, Qwest has, at it should, properly
conceded that: (1) the SS7 message is an integral component of the end user traffic; (2) Illuminet
is the transport agent of the Illuminet carrier/customer s SS7 messages; and (3) there are
categories of SS7 messages associated with intrastate end user traffic that should never have
been billed SS7 message charges under the Catalog. These concessions are telling, particularly
since there is no basis to conclude (and Qwest had provided none) that the same analytical
construct should not also apply to the omitted end user traffic types - Qwest-originated toll and
Meet Point Billing traffic - to which the Catalog s SS7 message rates would still apply.
In addition, Qwest fails to acknowledge that continuing to assess Catalog SS7 message
charges to both Meet Point Billing and Qwest-originated toll divorces those charges from
traditional cost causation principles. If the Supplemental Proposal is approved, Illuminet and its
carrier/customers would still be assessed SS7 message charges for Qwest's SS7 costs caused by
either a Qwest end user (for Qwest-originated toll) or an IXC's end user. The record is devoid of
any rational explanation why this result is justified. Similarly, with regard to the Supplemental
Proposal to continue to assess SS7 Catalog rates on Qwest-originated toll, Qwest offers no
explanation why it should be permitted to shift its costs to the Illuminet carrier/customer, thereby
lowering the level of the access rates Qwest is required to impute to its own toll services. See
Section 62-609(1), Idaho Code. Nor is there any justification for the Commission permitting
Qwest this inappropriate advantage vis-a.-vis other Idaho toll providers, particularly at a time
when, as Commission Kjellander noted, Qwest was seeking, and has since received, Section 271
authority to provide interLATA toll services. See Tr. 537-540
The omission of Meet Point Billing traffic within the Supplemental Proposal is equally
problematic. As indicated above, the FCC has already rejected Qwest's contention that SS7 is
not subject to Meet Point Billing principles. See generally Elkhart. Since Qwest's cost
causation theory has no merit, the record is devoid of any explanation, other than an apparent
effort by Qwest to ensure a means of producing an unlawful gain, for continuing to assess
Illuminet and its carrier/customers Catalog SS7 message rates on Meet Point Billing traffic.
Finally, the Supplemental Proposal would allow Qwest to receive the past benefits from
its improper application of its SS7 message rate structure. Application of the law and policy to
this situation makes clear that such a result is unwarranted. Qwest cannot expect to be rewarded
for its unreasonable practices. But a reward for its improper actions is, in effect, what Qwest
seeks. Thus, adoption of the Supplemental Proposal would not only be unlawful, but would be
inconsistent with rational public policy.
In short, therefore, Qwest's Supplemental Proposal would simply continue its
unreasonable practice at a reduced level and reward it for prior improper actions. Accordingly,
Qwest's Supplemental Proposal should be rejected outright by the Commission and the
Complainants' requested relief granted in full.
IV.The relief requested by the complainants is necessary to preserve a rational pricing
system for inter-carrier compensation.
As the previous sections of this Brief unequivocally demonstrate, Qwest's application of
its SS7 message signaling charges from the inception of its Access Catalog revisions and under
its Supplemental Proposal is intrinsically unjust and umeasonable. But the pernicious effect of
applying these charges extends far beyond their direct economic impact on the Complainants.
allowed to stand, Qwest's SS7 message charges will undermine the industry s traditional method
of recovering the cost of public switched network end-user traffic handled by two or more
telecommunications carriers. The predictable result will be a chaotic and inequitable pricing
structure that will spawn years of litigation and an unnecessary and unproductive increase in
costs for all industry participants.
Qwest's method of applying its Catalog SS7 message rate structure insures that Qwest
will recover and recover again its SS7 message cost from other carriers for any inter-company
SS7 message "that touches its system " even when Qwest's retail end user customer initiated the
call and Qwest is the only company that receives any revenue from that call. This result
contradicts not only common sense but rewrites the concept of "cost causation" to allow Qwest
to foist its costs on other carriers.
If the Commission accepts Qwest's position as a new "rule" of inter-company
compensation, the result will be utter chaos. Should the Commission permit Qwest to continue
to improperly export its SS7 message costs to other companies, it is inevitable that all industry
participants will attempt to do the same, either by filing tariffs or by attempting to amend
existing interconnection agreements. Qwest's strategy for dealing with these attempts is
transparently obvious from its testimony and its vociferous objections to questions about the
industry wide impact of its position. See Tr. 479-486. Qwest will argue that LECs who use a
third party SS7 provider are not entitled to file a tariff or amend their ICAs because the LECs are
not the actual provider of the SS7 service. If third party SS7 providers attempt to recover SS7
costs on behalf oftheir carrier/customers, Qwest will simply refuse to pay, claiming the third
party SS7 provider is not a recognized telecommunications carrier. In either event, the SS7
providers and their carrier/customers will have, at best, a difficult time enforcing payment.
Regardless of how the Commission deals with these issues, it will certainly lead to lengthy and
expensive litigation, with any and all delays benefiting only Qwest. These potential results are
clearly improper and contrary to rational and prudent public policy.
The relief requested by the complainants is necessary to remedy the anti-
competitive effects of Qwest's actions.
Complainants also submit that it would be imprudent public policy for the Commission to
disregard the clear anti-competitive effects arising from Qwest's current behavior. Common
sense dictates that the costs of doing business by a carrier are recovered through the rates that
carrier charges for its services. Common sense also dictates that the charges that are received by
that carrier are a component of that carrier s cost of doing business. To the extent that Qwest is
allowed to improperly impose SS7 message charges upon the third party SS7 providers
carrier/customers (which results from the pass-though of such charges to the customers), those
charges, wrongly imposed as they are, become a part of the carrier/customer s costs of doing
business and the rates they charge.
Thus, where an Illuminet carrier/customer is a direct competitor to Qwest for end user
traffic, such as in the case of ELI, such charges decrease the competitive viability of the rates
ELI must charge to continue to provide its competitive end user services. Even where such
charges are incurred by a non-direct competitor of Qwest, such as an Illuminet carrier/customer
which has an EAS arrangement with Qwest, those costs are still borne by the Illuminet
carrier/customer. Either that carrier/customer will need to increase its charges to its retail end
users, or the carrier/customer may simply have to bear those costs. Such a result is anti-
competitive as it will result in higher rates (inflated by Qwest's SS7 message charges) or will
result in artificially suppressed earnings for that carrier/customer. In each of these instances, the
business operations ofthe entity have been negatively and dramatically affected, creating market
aberrations due solely to the conduct of Qwest.
Moreover, a decision that allows Qwest to shift its costs to other entities effectively
lowers Qwest's cost of doing business and, provides Qwest a "cushion" within which it can
adjust rates in response to competition. If that is permitted to occur, Qwest benefits through the
abuse of the regulatory process to the detriment of all other entities. That result not only
contradicts principles of fundamental fairness, but it also is contrary to prudent public policy.
These pernicious effects are not limited to Illuminet's carrier/customers. Illuminet is
equally harmed by such activity. For any third party SS7 provider, the ability to compete for
carrier/customers is jeopardized where it is unable to ensure its current and prospective
customers that the flow-through charges ITom other carriers are proper and accurate. Further
Qwest has shown that it can engage in undetected and selective discrimination in the application
of its SS7 charges based, as Commissioner Smith's questions point out, on "who you are." Tr.
523 , L.22. For example, Qwest provided an "option" to Syringa to avoid Qwest's Catalog
charges that was never offered to Illuminet. Similarly, Qwest suggests that ILECs, but not
CLECs, could escape Qwest's SS 7 charges by executing infrastructure sharing agreements. Ir.
491 , L.ll through 493 , L.3. These are clear cases of unreasonable and anti-competitive
discrimination that is expressly forbidden by Section 62-609(2), Idaho Code.
Finally, while Qwest contends that "options" are available to LECs and other carriers, Tr.
400, L. 4-, those so-called "options" have the same anti-competitive effect. Each of the
options" requires a LEC to make an unpalatable choice -- rely upon the Qwest SS7 network to
the exclusion of third party SS7 providers at a time of financial strain for Qwest or either (1) pay
for functionalities that the carrier does not need since the SS7 functionality required for the
carrier s initiation of SS7 messages is already resident in its SSPs with transport provided by, in
the instant case, its SS7 message transport agent Illuminet or (2) pay SS7 message charges
pursuant to Qwest's Catalog regardless of whether that carrier s end user generated the SS7
message with respect to a service that carrier offers. When placed in context, therefore, Qwest's
purported "options" offer no choice at all, other than choosing the method by which Qwest
benefits from its inability to properly implement an intrastate SS7 message rate structure.
VI.Refund and credit of all unlawfully assessed SS7 signaling charges to the
complainants and withdrawal of the catalog s SS7 message rate structure is
required to serve the public interest.
As the record confirms, Qwest has filed an intrastate "unbundled" SS7 message rate
structure that Qwest cannot implement properly, and clearly has not implemented properly. The
Supplemental Proposal does nothing to cure the unlawfulness of Qwest' s misapplication of its
intrastate SS7 message structure.
Qwest's implementation of the Catalog s SS7 message rate structure is the very type of
unreasonable and anti-competitive practice Idaho law forbids. Accordingly, the Complainants
respectfully request that the Commission take specific action to redress these claims. First, the
Complainants request that the Commission direct Qwest to refund and credit as soon as possible,
all unlawfully assessed SS7 message charges since the inception of the Catalog revisions at
issue. As part of this relief, and to ensure no imposition of unlawful charges in the future, the
Commission should also direct Qwest to withdraw the SS7 rate structure in its entirety. Such
actions will ensure that Qwest is not unjustly enriched at the expense of Illuminet and all of its
carrier/customers. Second, the Complainants also respectfully request that the Commission
direct Qwest not to refile any SS7 rate or rate structure changes until and unless Qwest first
coordinates such filing in advance with the affected third party SS7 providers and their
carrier/customers. Absent a substantial demonstration that Qwest can properly implement any
revised intrastate SS7 message structure, the Complainants would likely be before the
Commission again raising the same issues as those currently being addressed. Accordingly, the
Complainants respectfully submit that public interest benefits associated with the efficient use of
Commission and party resources specifically supports this aspect of the relief they seek.
CONCLUSION
The record demonstrates that Qwest has not implemented, and cannot implement, its
Catalog SS7 message rate structure in a manner that comports with applicable law, rational
public policy, and common sense. Qwest's action cannot and should not be condoned by the
Commission nor should Qwest be rewarded in any manner. Accordingly, the Complainants
respectfully request that their Complaint be granted in full.
Respectfully submitted this 31 st day January, 2003.
Con ey
Morgan W. Richards
Thomas J. Moorman
Attorneys for Complainants
CERTIFICATE OF SERVICE
I HEREBY CERTIFY that on the 31 st day of January 2003 , I caused to be served a true
and correct copy of the foregoing by the method indicated below, and addressed to the following:
Jean Jewell
Idaho Public Utilities Secretary
472 W. Washington Street
O. Box 83720
Boise, ID 83720-0074
u.S. Mail - Fax --L By Hand
Mary S. Hobson, Esq.
Stoel Rives LLP
101 S. Capitol Blvd., Suite 1900
Boise, ID 83702-5958
u.S. Mail - Fax --L By Hand
Thomas J. Moorman
KRASKIN, LESSE & COSSON, LLP
2120 L Street, N., Suite 520
Washington, D.C. 20037
.2L u.S. Mail - Fax - By Hand
F. Wayne Lafferty
LKAM Services Inc.
2940 Cedar Ridge Drive
McKinney, TX 75070
.2L u.S. Mail - Fax - By Hand
Ms. Gail Long
Manager, External Relations
TDS Telecom
O. Box 1566
Oregon City, OR 97045-1566
.2L u.S. Mail - Fax - By Hand
Mr. Ted Hankins
Century Telephone Enterprises, Inc.
O. Box 4065
Monroe, LA 71211-4065
.2L u.S. Mail - Fax - By Hand
Mr. Lance Tade
Citizens Telecommunications
4 Triad Center, Suite 200
Salt Lake City, UT 84180
-X- US. Mail - Fax - By Hand
Morgan W. Richards
Moffatt Thomas
101 South Capitol Blvd 10th Floor
Boise, ID 83701
-X- U.S. Mail - Fax - By Hand
Clay Sturgis
Moss Adams LLP
601 West Riverside, Suite 1800
Spokane, WA 99201-0663
-X- US. Mail - Fax - By Hand
Richard Wolf
Illuminet, Inc.
4501 Inte1co Loop SE
O. Box 2909
Olympia, W A 98507
-X- US. Mail - Fax - By Hand
\Jfi. ~/Y11J1i
Tina Smith
SECR~ JARY'S kcCOI-CD NEBRASKA PUBLIC SERVICt cOMMISSION
BEFORE THE NEB~.SKA PUBLIC SERVICE COMMISSION
Cox Nebraska Teleom, LLC
and Illuminet
Complainants,
Qwest Communications, Inc.
Respondent.
ALLTEL Nebraska, Inc., ALLTEL
Communications of NebraskaIne, and Illuminet, Inc.
Complainants,
Qwest Corporation,
Respondent.
APPEARANCES:
For the Complainants:
Illuminet, Inc. Inc.
Thomas J. Moorman
Kraskin, Lesse & Cosson , LLP
2120 L Street, N.W" Suite 520
Washington D.C. 20037
ALLTEL Nebraska, Ine,
ALLTEL CommunicationsPaul M. Schudel
Woods & Aitken LLC
301 South 13th Street,
Lincolnj NE 6850
Formal Complaint
No. FC-1296
Formal Complaint
No. FC-1297
ORDER G~~TING RELIEF
Entered: December 17 , 2002
Cox Nebraska Teleom, LLCJon C. Bruning
Bruning Law Office
2425 S HAth Ave., Ste. 201
Omaha, NE 68144
and
of Nebraska , Inc.
Suite 500
For the Respondent Qwest Corporation:
Jill A. Vinjamuri
Kutak Rock LLP
1650 Farnam Street
Suite 4700
Omaha, NE 6 B 1 0 2 - 2 18 6
Stephanie Boyett-Colgan"
Qwest Corporation
1801 California Street,
Denver , CO 80202
Case No. QWE- 1'-02-
Clainumts
' )'
0"1 Hem"illt': Brief'
Exhibit A
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SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297 Page 2
For: The Nebraska Public Service Commission
Chris A. Post
300 The Atrium
1200 N Street
Lincoln , NE 68508
BY THE COMMISSION:
In troduction
1. The Nebraska Public Service Commission (Commission)has before it for resolution two formal complaints, combinedfor record purposes and resolution. As discussed in moredetail below , the Complainants are Cox Nebraska Telcom, LLC(Cox) i Illuminet, Inc. (Illuminet) i ALLTEL Nebraska, Inc. iand ALLTEL Communications of Nebraska Inc. (together ALL-TEL) .
2. Generally, the Complainants allege that Qwest Corpora-tion (Qwest) ha~ improperly implemented the restructuring Qwest'intrastate Signaling System No.(SS7) services pur-suant to a revision in Qwest' s Nebraska Access Catalog thatbecame effective June 6, 2001 (the Access Catalog). Morespecifically, the Complainants allege that Qwest , in its effortto establish separate charges for transport of SS7 signaling(which the parties have referred to as efforts to "unbundleSS? message charges, i . e., SS7 charges have been unbundled'from the local swi tching and tandem switching rate elementsassociated with exchange access traffic), has implemented itsAccess Catalog structure. in manner that assesses SS?message charges for all end-user traffic regardless of whether
that end-user traffic is properly subj ect to the access charges.
Accordingly, the Complainants requested this Commission to order
Qwest to refund any improper charges assessed by Qwest under itsunbundled SS7 rate structure, and that Qwest be ordered towithdraw this unbundled SS? message rate structure unless anduntil Qwest properly implements it. Proper implementation ofthe unbundled SS? rate structure at issue, according to theComplainants, would require Qwest to disaggregate billing of thevarious SS7 messages that it delivers and receives, andthereafter, to implement a billing mechanism (including billdetail) to ensure that the Access Catalog'SS7 message rates
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Formal Complaint Nos. FC-1296 and FC-1297 Page 3
are assessed only upon those 557 messages associated with the
intrastate end-user toll calls for which access charges are
properly applied pursuant to the Access Catalog.
3. Qwest denies the allegations raised by the Com-plainants. In doing so, Qwest also denies that any relief iswarranted.
4. For the reasons stated herein , we grant the relief
Complainants request. As more fully described below , we direct
Qwest to withdraw the Access Catalog terms that are at issue in
this proceeding wi thin five business days of the entry of this
order, and within 10 days of this order, refund or credit all
applicable intrastate 587 message charges billed to date to the
Complainants that are in dispute. Until such time as it canproperly implement an intrastate unbundled 557. message ratestructure, Qwest shall not file any other Access Catalog
revisions regarding 557 rate structures or rates. To ensure
this specific directive is achieved, and as more fully explained
herein, we also direct Qwest to work with the Complainants in
order to coordinate Qwest' s election between the two optionsprovided herein as to how it elects to implement properly ' its
intrastate 557 message rate structure within the Access Catalog.
Procedural Summary
5. . On March 5, 2002, Cox and Illuminet initiated FormalComplaint No. FC-1296 by the filing of formal complaintwith the Commission. On March 26, 2002, ALLTEL initiatedFormal Complaint No. FC-1297 by filing formal complaint
wi th the Commission.
6. The Commission held a pre-hearing conference on May
14, 2002, after due notice to the interested parties. On May
22, 2002 the Commission "entered a pre-hearing conferenceorder consolidating these complaints for hearing and dis-position. In addition , such order established a schedule for
this mat ter, set hearing procedures and established a brief-
ing schedule.
7. On May 24 , 2002 ALLTEL and Illuminet filed
Amended Formal Complaint in Formal Complaint No. FC-12 97.
Qwest filed its Amended Answer in response thereto on June 52002. Previously, Qwest had filed its Answer to the Formal
Complaint in Formal Complaint No. FC-1296 on March 20 , 2002.
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SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297 Page 4
8. On June 14 , 2002 , the Complainants jointly filed aMotion to Cease and Desist, requesting that the Commissionenter an order requiring Qwest to discontinue any and allactivity associated wi th its threats to suspend all serviceorder act i vi ty and/or di sconnect Complainants' connections toQwest's SS7 signaling network. On July 12 , 2002, and on July2002, respectively, the Complainants and Qwest filedseparate Motions for Protective Order. The Commission heldoral arguments relating to the aforementioned motions on July22, 2002 , and on July 23 , 2002 , the Commission entered Pro-gression Order No.' 1 in these dockets granting Complainants'Motion to Cease and Desist, and granting Complainants ' Motionfor Protective Order with modifications. -In addition , theCommission modified the schedule establi~bed in the pre-hearing conference order. Subsequently,' on September 112002, pursuant to the agreement of the parties, the Commis-sion entered Progression Order No.2 that further revised theschedule pertaining to these dockets.9. The public hearing on these dockets was held onOctober 22 and 23 , 2002. At the outset of the public hearingin these dockets, legal counsel for ALLTEL made a motion toexclude evidence that might be offered by Qwest on the issueof the revenue neutrality of Qwest's unbundling of its SS7services pursuant to the Access Catalog amendments thatbecame effective June 6 , 2001 (Exhibit 12). In support ofsuch motion , ALLTEL offered Exhibits 1 through 11 which wererec~ived into evidence by the Commission and which describedALLTEL's efforts to obtain complete and timely responsesALLTEL Discovery Request Nos. 2 3, and '41, among otherdiscovery requests. Such discovery requests sought demandcalculations and rate and revenue reduction data in con-nection with Qwest' s unbundling of its SS7 services.After
The Commission notes that in Qwest' s Supplemental Answers and Ob-j ections (Exhibit 7), "Response to Interrogatory No.5" on page thereof, Qwest states: "Confidential attachment A (Exhibit 2) is thedocuments (sic) Qwest used to reduce its access revenues and containsthese demand calculations and the rate and revenue reductions. No otherdocuments were used in this calculation.We further note that in theSurrebuttal Testimony of Scott A. McIntyre filed with the Commission onOctober 15, 2002 , Mr. McIntyre states at page 18 . Qwest disclosedto the Complainants all demand data regarding SS7 in its response toALLTEL Request No. 41." However , at 4:14 p.m. on October 21, 2002 , theafternoon before this hearing began , Qwest transmitted a facsimile toComplainants containing demand and revenue data (Exhibit 10) without anyexplanation for the untimely submission of this data.
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Formal Complaint Nos. FC-1296 and FC-1297 Page 5
brief recess of the October 22 hearing, the Commission
granted the motion made by ALLTEL , directing that the record
be expunged of any evidence that Qwest would propose offering
regarding whether the unbundled SS7 rate structure filed inthe Access Catalog was revenue neutral to Qwest. We now
affirm that ruling and provide our reasoning for it.
10. In granting the relief requested by ALLTEL, the Com-mission is mindful of the guidance from the Supreme Court ofNebraska that it "will not permit litigants to impede anopponent'legi timate discovery efforts through unfoundedrecalcitrance
, "
and further that "playing games with thecourt will not be tolerated.Stanko v. Chal-oupka, 239 Neb.101 , 103, 474 N.2d 470 (1991). Similarly," in Schindler v.
Walker, 256 Neb. 767 . 778, 592 N. W. 2d 912 ' (1999) the SupremeCourt stated that " (w) hile there is no applicable rule or
statute governing a trial court'exclusion of evidence , a
trial court'exclusion of evidence can be sustained as an
exercise of a trial court's inherent powers.
11. As the parties to this proceeding are aware , Com-mission Rule of Procedure 016.11 makes the Nebraska SupremeCourt's Rules of Discovery for Civil Cases applicable to pro-
ceedings before this Commission. Supreme Court Rule 26 (e) (2)
requires a party to seasonably amend a prior discoveryresponse in certain circumstances as enumerated therein.
Supreme Court Rule 37 (b) (2) (C) provides for the imposition of
sanctions in certain circumstances. In light of the direc-ti ves and discretion granted triers of - fact by the SupremeCourt, we find that, based on the specific circumstances
presented to us, Qwest failed to comply wi th Rule 26 (e) (2) ,
and that the parties resolution of the discovery dispute
concerning the ALLTEL Discovery Requests in question pursuant
to the letter to the Hearing Officer (Exhibit 4) brings this
matter within the ambit of Rule 37 (b) (2) (C) The record
demonstrates Qwest'failure to fulfill its obligations
pursuant to appl icable Commission rules. Accordingly, any
evidence that might have been offered by Qwest on the issueof the revenue neutrality of Qwest's unbundling of its SS7should be and hereby is excluded from the record that the
Commission considers in deciding the meri ts of theseComplaints.
12. We also had three additional procedural matters left
unresolved at the hearing. The first matter concerns whether
the Commission should entertain evidence by Qwest with respect
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SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297 Page 6
to the proper interpretation of its interconnection agreement
(ICA) with ALLTEL. As indicated in the transcript of thismatter, ALLTEL obj ected to this evidence provided by Qwestwi tness McIntyre on the basis of the lack of foundation. TheCommission overrules the objection. While the Commissionacknowledges that such testimony appears to be hearsay andspeculati ve in nature, no party invoked. the rules of evidenceapplicable in district court. Furthermore, the Commission hashistorically accepted such testimony from individuals withgeneral corporate knowledge and oversight of the circumstancesbeing described in an effort to eliminate the need for amultitude of witnesses. Had ALLTEL , or for that matter anyother party, 'chosen to part from the Commission'normalpractice in a:Ilowing such testimony, they should have invokedthe rules of evidence pursuant to Neb. Rev. Stat. 84-914.Therefore while the Commission recognizes ALLTEL'concernregarding the inabili ty for ALLTEL to cross-examine thoseindividuals from Qwest actively involved in the ICA drafting andnegotiation process, the Commission will admit the testimony butgive it the appropriate weight it deserves.
13. The second matter addresses a dispute regardingQwest's efforts to submit certain testimony and a cost study,labeled for identification purpose as Exhibits 37 and 38,purportedly demonstrating the costs of Local InterconnectionService ("LIS"trunks. In essence, the issue before theCommission is whether Qwest should be able to introduce thisevidence at the hearing. Our Progression Order #1 , page made clear that all exhibits except for rebuttal exhibitswere required to be exchanged by the parties at the time offiling pre-filed testimony. Thus , Qwest was on notice thatit would be required to exchange any exhibi ts with theComplainants at the time it exchanged its pre-filedtestimony. The record indicates it did not. The onlyadditional explanation provided was that the proffer was torebut ALLTEL witness Fuller's responses to cross-examinationquestions that purportedly indicated her belief regarding SS7
allocated costs in LIS trunks. As to this Qwest assertionwe have reviewed the transcript of her cross-examination andwe can find no specific reference to support Qwest' salternative theory.We also note that, if Qwest's profferof Exhibits 37 and 38 was to rebut Ms. Fuller's responsesthere has been no explanation as to why Qwest did not proffer
Tr.328:22-329:5.
Tr. 162:3-220:14.
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Formal Complaint Nos. FC-1296 and FC-1297 Page 7
Exhibits 37 and 38 at the time of the questioning of Ms.Fuller , or at least to offer some indication at that timethat Qwest believed it possessed evidence rebutting Ms.Fuller response. Accordingly, to ensure the integrity
the Commission processes and to ensure that parties canproperly rely upon the procedural directives of the
Commission , we find that Exhibits 37 and 38 will be excluded
from the record in this proceeding.
14. The final procedural matter relates to Illuminet' sOctober 31, 2002 request for acceptance of late-filed
Exhibi t 42. This request was made to correct inadvertentfactual inaccuracies regarding Illuminet witness Florack' s
response to his recollection of a meeting he, and others held
wi th Qwest regarding issues similar to th6se raised in theComplaints. We note that no party has obj ected to thisrequest, and we find that acceptance of this late-filed
exhibi t will ensure the integri ty and accuracy of the recordbefore us. Accordingly, Illuminet's Late-Filed Exhibit
will be accepted and made part of the record.
Commission Jurisdiction Over these Dockets
15. It is clear that the Commission ' s jurisdiction to
resolve the issues raised in the Complaints is derived from theauthority we have been granted by the Legislature. Based on our
governing statutes, we find that the procedures created and theauthority specifically granted to the Commission by the
Legislature to receive, hear -and dispose of complaints by
persons, including carriers, pursuant to Sections -75-131, 75-132, 75-132~01, 75-118.01, 75-119 and 86-803 (7), confer juris-diction on the Commission to adj udicate Complainants ' propertyrights described in the Complaints in accordance with due
process requirements of such statutes. We also find that this
grant of jurisdiction and authority by the Legislature includes
our ability to receive, hear and dispose of complaints such as
are presented herein.
16. In Neb. Rev. Stat. Sec. 75-131 (Reissue 1996), theLegislature provides that \\ (aJ ny person who complains of
Neb. Const, Art. IV, Sec. 20 provides: "The powers and duties of such
commission shall include the regulation of rates, service and general control
of common carriers as the Legislature may provide by law.
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SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297
Page 8
anything done or omitted to be done by any common or contractcarrier may request that the commission investigate and imposesanctions on such carrier by filing a petition which brieflystates the facts constituting the complaint. /I Neb. Rev. Stat.Sec. 75-132 (Reissue 1996) directs that . the commissionshall convene a hearing on the matters complained of pursuant to
its rules of procedure and shall give the parties written notice
of the time and place for such hearing. /I Section 75-132 furtherdirects that following such hearing, "the commission shall makesuch order with respect to the complaint as it deems just andreasonable. /I Rule 005 of the Commission Rules of Procedure setsforth the specific procedures governing the filing" and dis-position of formal complaints before the Commission.
17. Similar to the foregoing grant of authority, theLegislature, through Neb. Rev. Stat. Sec. 75-132.01 (2001Supp. ), specified that the commission shall , haveexclusive original jurisdiction over any action concerning aviolation of any provision of (a) Section 75-109, ,,75-604 , 75-609, 75-609.01, or 86-801 to 86-810 by a telecommunicationscompany. "To this end, we note that Complainants haveasserted that Section 75-609 (2) is" a basis for the Commission'jurisdiction of these matters, and as discussed in furtherdetail below Section 75-109 (2) is also relevant to theresolution of the disputes in these formal complaints.
18. In addition to the foregoing Legislative directives,Neb. Rev. Stat. Sec. 75-118.01 (Reissue 1996) provides inpertinent part that
\\
. the " commission shall have originalexclusive jurisdiction to determine the scope or meaningof a tariff" and Neb. Rev. Stat. Sec. 75-119 (Reissue1996) provides in pertinent part that . (wJ hen any commoncarrier peti tions the commission alleging that existing rate is unreasonably high or low , unj ust, ordiscriminatory, notice shall be given to the common carriersaffected in accordance with the commission rules for notice
and hearing. /I We also note that Section 75-119 requires, thatif the matter in question is disputed, that matter shall proceedto hearing and the Commission shall issue an order granting ordenying the petition.
19. With respect to Section 75-118.01, we note thatupon complaint by any common carrier to
determine the validity scope or meaning of a tariff (we believe that the Access Catalogis a substantive equivalent of a tariff) the Commission shallgive notice of such complaint , hear evidence and argument on the
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Formal Complaint Nos. FC-1296 and FC-1297 Page 9
complaint and thereafter render its decision on the matter. Our
ability to do so has been confirmed by the Supreme Court. See
Nebco, Inc. v. Burlington Northern, Inc., 212 Neb. 804 , 808, 3262d 167 (1982) (The Nebraska Legislature has provided the
Commission with the authority to review tariffs pursuant to
Section 75:-118.01.and Nebraska Public Service Commission
I Ambassador Limousine, Inc., 264 Neb. 298, 308, 646 N.650 (2001) (Section 75-118.01 provides ' the Commission with
authori ty to determine the scope and meaning of a tariff.
) .
20. Also applicable to the Commission jurisdiction ofthese formal complaints is Neb. Rev. Stat. Sec. 75-109 (2) (2000
Cum. Supp.) that specifies: "The commission is authorized to do
all things reasonably necessary and appropriate to implement thefederal Telecommunications Act of 1996 (the"'Act), Public Law
104-104, including Section 252 of the Act which establishesspecific procedures for negotiation and arbitration interconnection agreements between telecommunications com-panies.As alleged by Cox and ALLTEL , the Commission approved
the ICAs at issue, and Qwest is attempting to unilate rally altertheir terms through Qwest' s implementation of the SS7 message
charge revisions to the Access Catalog. While we will address
the merits of this claim later, we note that our ability
oversee the ICAs at issue is subj ect to the express grant of
authority to the Commission pursuant to Section 75-109 (2) and
C. Section 252.
21. We further. note that Neb. Rev. Stat. Sec. 86-803 (1)(2000 Cum. Supp.is certainly relevant to this proceeding.This section provides that, subj ect to certain exceptions,
telecommunications companies are not subject to rate regulation,
and that telecommunications companies shall file rate lists,
which for all telecommunications service except for basic local
exchange rates, shall be effective after ten days' notice to thecommission. While the consti tutionali ty of tl:1is restriction in
the Commission rate regulation authority was sustained in
State, ex rel. Spire v. Northwestern Bell Tel. Co., 233 Neb.
262, 445 N.2d 284 (1989), the Supreme Court also found that
the Commission's jurisdiction continued to extend to quality ofservice regulatiQn, and Section 86-803 (7) provides for acomplaint procedure. Moreover, in Spire, the Supreme Court heldthat "a ratepayer s right to a fair and reasonable rate, a right
which has emerged from the decisions of this court, is properlyclassified as a "property entitlement protected by the due
process clauses of the U. S. and Nebraska Constitutions.Id. 283. In order to protect this property entitlement, it is cri-
P,in'.. wilh 10' 'nk on '.cy".. p.o.' ~
SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-129?Page
tical that this Commission exercise its jurisdiction to receive,hear and dispose of complaints such as the Complaints filedherein.
22. Based upon the foregoing constitutional, statutory andcase law authorities , the Commission finds that it has juris-diction over each of the Complaints. Moreover, we find that wepossess ali necessary and requisite authority to make thesefindings and conclusions and those required to adjudicate theproperty rights of the parties raised in the Complaints.
A Primer on 55? Signaling
23. Due to the importance of the -issues raised Complainants, we also take this opportunity to provide a briefdescription of the components of the 55? network relevant to theissues vis-a.-vis the traffic that is carried over the voicenetwork. We note at the outset that there is little disagree-ment between the parties regarding the configuration of thevarious 55? components , or the prerequisite for the 55? messagegenerated by certain of those components (the charges for whichare at issue in this case) to allow the establishment of callsbetween end users.
24. As the record reflects, the components that comprisethe 55? network allow for the setting up and tearing down of the
voice network connections required for end-user traffic to becompleted. Prior to "out -of -band" signaling, the networkfunctions required to establish end-user .calls were done throughin-band" signaling such as multi-frequency' signaling thatactually used the same facilities to set up and transmit theend-user call.By establishing "out-of-band" signaling th~oughthe 55? network components , B the facilities required to carry thevoice traffic are not put .into service unless and until it is
For purposes of our discussion and findings , we make reference at timesto the "voice network" and "voice traffic" although we recognize that data is
likewise carried such as in the case of Internet connections. Similarly, use the terms "end-user traffic" and "end-user calls" interchangeably as theyboth reflect the exchange of communications between customers such as through
local or intrastate toll calls.
See ~, O'Neal Testimony, Exhibit 27 , 4:2; O'Neal Rebuttal, Exhibit28, 3:14-18; McIntyre Rebuttal, Exhibit 34 , 5:21-6:2; Craig Rebuttal Testi-mony, Exhibit 40 7:21-8:5; Tr. 114:2-5.
See Lafferty Testimony, Exhibit 24 , 6:3-5; Florack Testimony, Exhibit31, 6:20-22; Tr. 377:13-17.
See ~, O'Neal Testimony, Exhibit 27 , 3:7-10; Lafferty Testimony,Exhibit 24 , 5:18-20; Florack Testimony, Exhibit 31 , 6:20-22.
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Formal Complaint Nos. FC-1296 and FC-1297 Page 11
clear that those facilities are available to carry the call.
Moreover, the record reflects that this set-up and tear down of
calls is faster than , and otherwise provides for features and
functions that are not available with, "in-band" signaling.
Accordingly, all parties seem to agree that the use of the SS7
signaling network is more efficient than in-band signaling, and
the Commission likewise agrees with this conclusion.
25. Attached to the testimonies in this proceeding were
various diagrams that depict how the typical SS7 components areconfigured. 11 For purposes of our decision , we need only addressthose elements required to set-up and tear down calls, since
those are the functions for which Qwest has established discreteSS7 message charges.
26. The first SS7 component is the "Service SwitchingPoint" (SSP). As described by the various witnesses, the SSP is
part of the local switch of a Local Exchange Carrier (LEC). 12 In
the SS7 environment, the SSP generates the signaling messages
that are transported through the remaining components, of the SS7network. 13 It is these SS7 messages that establish the end-usercall, i. e., the process required to set-up or tear down a call.Each SSP has a unique address in " the SS7 network identifiedthrough a
- "
point code assignment. The SS7 network, in turn,
ensures that the SS7 messages are properly routed to the SSP
that is associated with a given point code. 15 For our purposes,
we also note that Illuminet owns no SSPSj its carrier/customers
dO.
27. SSPs are connected to "Signal Transfer Points (STPs)through redundant, bi-directional facilities called "links. ,,
See
~,
Tr. 381:10-20.
10 Accord,Neal Testimony, Exbibit 27, 3:15-22; Florack Testimony,Exhibit 31, 8:3-9.
11 See Neal Testimony, Exhibit 27, Attachment; Florack Testimony,Exhibit 31, Exhibit A; Craig Rebuttal, Exhibit 40, attached Exhibit
12 See ~, O'Neal Testimony, Exhibit 27 , Attachment; Florack Testimony,Exhibit 31, 7:15-18; Tr. 114:25 to Tr. 115:6; Tr. 127:14-17; Tr. 132:19-23.13 Tr.379:21-25.
14 See ~, O'Neal Testimony, Exhibit 27 , 4:17-19, 5:9 through 6:10;
Florack Testimony, Exhibit 31, 7:20-24; Craig Rebuttal, Exhibit 40, 9:20-
10: 17.
15 See,Tr. 141:21-142:6; Tr. 379:6-20; Tr. 381:2-9, See also , Florack
Testimony, Exhibit 31, 6:22-26.
16 Accord , Florack Testimony, Exhibit 31 7:24-27; Craig Rebuttal, Exhibit
40,15:13-16.
17 See , Florack Testimony, Exhibit 31,7:18-22.
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SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297 Page 12
STPs act like "traffic cbps," routing (in conjunction with otherSTPs) the SS7 messages to the SSP operated by the carrier whoprovides service to the called party (in the case of localcall, for example), or another carrier that serves the end user
(such as in the case of a pre- subscribed intra local access andtransport area (LATA) toll call for an entity other than thatwhich owns the SSP) .
28. The third and fourth components of the SS7 networkthat are relevant to these complaints are the bi-directionalfacilities that connect STPs , which ' are called "inks, " andthe physical connection of those B-links to an STP " called port 0 "19 These specific links and ports and the charges forthem are not at issue in this proceeding because Illuminet , theSS7 network provider for Cox and ALLTEL , has paid and continuesto pay these charges to Qwest. 20
Nonetheless, the discussion these facilities and connections is important because theyprovide the physical connection of the Cox and ALLTEL SSPs tothe various SSPs of Qwest, over which the various ~S7 messagesare exchanged between Cox and Qwest and between Qwest andALLTEL.
29. The record reflects two ways in which carriers deployan SS7 network. Like Qwest, a carrier can deploy its own SS7. network (the SSPs and STPs as well as the A-links and B-links)necessary to connect directly to other SS7 networks. 22 ALLTELhas d~ployed its own SS7 network that creates call setupsignaling and exchanges messages with Qwest. 23 Alternatively,
carrier can utilize a third party SS7 network . provider such asIlluminet to provide certain portions of the S~7" network (suchas the STPs and B-links and ports) required to connect thatcarriers SSPs to other SS7 networks, or to connect its STPs to
the STPs of III uminet 0 24 Regardless of the method of deploymenthowever, when examining the" SS7 networks for purposes of callset-up and tear down , the SS7 networks have no independent func-
19 Tr. 114:10-115:15; Tr. 380:18-381:l.19 See
~,
Florack Testimony, Exhibit 31 , 7:11-13 and 25:21-22; Tr.240:2-6.
20 See
~,
Florack Testimony, Exhibit 31, 25: 2-4 and 21-23; Tr. 337:
21 See Lafferty Testimony, Exhibit 24 , 13:7-12; O'Neal Testimony,Exhibit 27 5:9 through 6:10; Tr. 379:10-17.22 See generally , Craig Rebuttal, E~hibit 40 attached Exhibit 1.23 See
~,
Tr. 116:12-20.
24 See generally , O'Neal Testimony, Exhibit 27 , Attachment; FlorackTestimony, Exhibit 31, attached Ex. A.
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SECKt: IAKY'~ KtCURU, NEjjRASKA PUjjLlC ~tKV1CE COMMI~~IUN
Formal Complaint Nos. FC-1296 and FC-1297 Page 13
tion other than to provide a method to transport the variouscarrier 88P- ini tiated 887 messages required for end-user calls
to be completed.
30. With respect to Illuminet, it purchases 887 connec-
tions with Qwest via the links and ports available in Qwest' sAccess Catalog. 26 These connections, as the record confirms
provide a valuable consolidation of 887 "network capability tosmaller carriers. 27 Even Qwest acknowledges the value of the
economy of scale and scope that a third party 887 networkprovider such as Illuminet brings to carriers that elect tolimit their direct 887 network investment and deployment. 28 The
record is also clear that Qwest benefits from such arrangementsthrough minimization of the maintenance, monitoring and actual
number of facilities required to interconnect its 887 network toother carriers. 29 Ultimately, however, it is clear that in those
instances where 887 has been implemented (such as here), no end-user traffic would be completed without the 887 messages beinggenerated. 30 Therefore, all carriers operating 88Ps, that either
receive or generate the 887 messages, do benefit since the end
users served can complete and receive calls. 31
Posi tions of the Parties
31. Mr. Wayne Lafferty submitted pre-filed testimony. and
testified at the hearing on behalf of Cox. At the outset, we
note that Cox is a certificated competitive local exchange car-rier (CLEC) and provides as a common carrier, a variety offacili ties-based end-user services in areas of Nebraska. 32 Mr.
Lafferty described six issue areas that Cox believes define itscomplaint. First, Cox contends that an 887 message is an in-separable component of a call.33 Mr. Lafferty pointed out that
2S See
~,
Lafferty Testimony, Exhibit 24 , 18: 1-2; 0' Neal Rebuttal,Exhibit 28, 3:14-18; Tr. 116:5-11.
26 See , Florack Testimony, Exhibit 31, 25 :21-23.
27 See,Lafferty Testimony, Exhibit 24 , 10:10-13; O'Neal Testimony,
Exhibit 27 , 5:1-6; Florack Testimony, Exhibit 31, 8:12-10:21.
2B See,McIntyre Rebuttal, Exhibit 34, 11:10-12.
29 See,Tr. 382:8 to 383:17; See also Neal Testimony, Exhibit 27 , 6:20-
7:3; Florack Testimony, Exhibit 31,10:25-11:7.
30 See,Tr. 116:5-7; Tr. 315:10-17; See also Florack Rebuttal, Exhibit 33
2: 6-8.
31 Accord,Tr. 335:19 to Tr. 336:2; Florack Rebuttal, Exhibit 33, 22:20-
23:6.
32 See , Cox Complaint, Para. 4, Exhibit 22.33 Lafferty Rebuttal, Exhibit 25, 11:16-22; Tr. 48:11-15. Mr. Lafferty
also filed Direct Testimony in this matter (Ex. 24) on Aug. 30, 2002.
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SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-129?Page 14
while SS? is a unique technology, it is a critical function forset up, deli very and take down of calls. Second, Cox arguedthat Qwest was misapplying the SS? message charges so as to vio-late existing regulatory policies by ignoring existing intercon-nection agreements between the companies. 34 Third, Mr. Laffertycontended on behalf of Cox that Illuminet was clearly authorizedto act as the agent for Cox for SS?, network services, anddiscussed a "letter of agency (LOA) that verifies that fact. Fourth , Cox asserts that there is not and has not been a pricing
arbitrage opportunity as contended by Qwest due to the "bill andkeep" ~echanism that exists in the companies ' ICA to account forthe transport and termination of local traffic. 36 Fifth , Coxcontends the misapplied SS? message charges provide a subsidy toQwest .37 Finally, Cox disagrees with Qwest
, .
allegation in itsAnswer to the Cox Complaint that the SS? message chargerevisions in Qwest' s Access Catalog are revenue neutral inNebraska. 38
32. We further note that ALLTEL Nebraska , Inc.is an in-cumbent local exchange carrier (ILEC) certificated to providefacilities-based local exchange, extended area service (EAS) ,enhanced local calling area service (ELCA) , intraLATA , andinterLATA telecommunications services in this state. 39 ALLTELCommunications of Nebraska, Inc. is a provider of wirelesstelecommunications services in this state. 40 Mr. George 0' Neal,Staff Manager, SS?for ALLTEL also submitted pre-filedtestimony and testified at the hearing. 41 ALLTEL agrees with Coxthat voice and SS? networks must rely upon each other for thecompletion of ' messages for end-user customers. 42. ALLTEL furtherpointed out that, in almost all cases, the SS? network isrequired to transport the call set up or teardown messagesbetween the called and calling party local switches. 43 Mr.0' Neal also described how carrier billing systems and theapplication of compensation " mechanisms , such as bill-and-keep,are dependent on the jurisdiction of call since the
Tr. 48:16-20.
Tr.48:21-23.
Tr.48:24-49:3.
Tr.49:4-7.
Tr.49:8-21.
Amended Complaint , Paras. 3 and 4 , Exhibit 23.Id.
Neal Testimony, Exhibit 27 and O'Neal Rebuttal, Exhibit 28.
Neal Rebuttal, Exhibit 28 , 3:7-22; Tr. 115:8 through 116:16.Tr. 115:5-16.
3 B
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~tL.Kt lAKY'S KtLOKD Nt~RASKA I-'LJI:KIC SERViCE CONIMISSiON
Formal Complaint Nos. FC-1296 and FC-1297 Page 15
jurisdiction dictates how much compensation is applied.44
fact , Mr. 0' Neal stated that Qwest could measure SS7 messages by
jurisdiction and call type if it chose to do SO,45 or it couldutilize a percent interstate usage (PIU) factor, and either a
percentage local usage (PLU) factor or a percent non-chargeableusage (PNU) factor46 to allocate SS7 message charges in
proportion to the category of the underlying end-user traffic.
ALLTEL also noted that it, too, had designated Illuminet as its
agent to establish connectivity with Qwest'SS7 signalingnetwork.
33. The final witness for ALLTEL was Ms. Pamela S. Fuller,Staff Manager, State Government Affairs. "As was done by Messrs.
Lafferty and O'Neal, Ms. Fuller also submitted pre-filed testi-
mony and testified at the hearing. 48 ALLTEL ar'gues that existingICAs continue to apply to wireless traffic within a MajorTrading Area (intraMTA) and ILEC extended area service (EAS) andlocal traffic. 49 Ms. Fuller described details of the ICA between
ALLTEL and Qwest that demonstrated that Qwest and ALLTEL had
agreed to include the exchange of SS7 signaling messages withinthe reciprocal compensation terms and rates of the ICAs. 50 Ms.
Fuller also expressed ALLTEL's view that Qwest' s Access Catalog
SS7 message rates do not apply to wireless intraMTA traffic 51 and
ILEC EAS/ELCA SS7 messages and calls. 52 Ms. Fuller indicated
that the only way Qwest may unbundle SS7 rates, as contemplatedby the Federal Communications Commission (FCC), would be properly measure and then properly bill pursuant to theapplicable agreement covering the end-user traffic associatedwith the SS7 message, which ALLTEL contends Qwest is unwillingto do. 53 Finally, ALLTEL noted that it does not" actually
purchase intraMTA local or EAS SS7 message signaling from
Illuminet, nor does it purchase any call setup from Illuminet.
ALLTEL, through its own SS7 network, - creates its own 9all setup
Neal Rebuttal, Exhibit 28, 6:15-7:12; Tr. 117:4-9.
Neal Rebuttal, Exhibit 28,7:13-22; Tr. 117:10-19.
Tr. 118:13-20.47 0' Neal Rebuttal', Exhibit 2848 Fuller Testimony, Exhibit 2949 Fuller Rebuttal , Exhibit 3D,
50 Id.51 IntraMTA CMRS traffic has been deemed by the FCC to be "local" for
purposes of applying terminating compensation requirements. See , 47 C. F. R. 51.701(b) (2).52 Fuller Rebuttal, Exhibit 3D, 6:20-7:14.53 Tr. 159:14-160:6. See also Access Charge Reform, Report and Order, CC
Docket No. 96-262, (12 FCC Rcd 15982, 16046 (para. 147) 1997).
8:4-9:5.
and Fuller Rebuttal , Exhibit 30.
4:19-6:5; Tr. 155:9-156:6.
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SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297 Page 16
signal ing, and purchasesIlluminet.transport of those SS7 messages from
34. Mr. Paul Florack submitted pre-filed testimony andtestified on behalf of Illuminet. 55 Mr. Florack is Vice Presi-
dent for Network Services in Product Management and Developmentat Illuminet. As indicated by the other Complainant witnesses,Illuminet agrees that without S87 signaling messages , no end-user traffic would be completed. As such, according to Mr.Florack , the 887 signaling is an integral and essential part voice traffic. 56 Moreover , Illuminet notes that only Illuminetcarrier/customers carry end-user traffic and only thosecustomers generate S87 message signals for which Qwest has beenassessing access charges under its Access Catalog. 57 Illuminet
like Cox and ALLTEL, asserts that Qwest has not properly imple-mented the Access Catalog because of Qwest' s unwillingness toproperly measure the type and jurisdiction of S8? messagecharges, capabilities that are in fact available, and to provide
the detail necessary to verify that billings are correct. ThusIlluminet requests that the Commission direct Qwest to withdrawits Access Catalog amendment that took effect June 6, 2001(Exhibit 12).
35. Illuminet also went into significant detail describe Qwest' s recovery of 887 costs from all services usingthe S87 network in accordance with FCC directives. 59 Mr.Florack described how the jurisdiction of the SS7 message isrelevant because it naturally follows the voice traffic supports.6o Finally, Mr. Florack agreed with Cox and ALLTEL that
the LOAs provided by each company to Illuminet authorize Illumi-
net as their agent for purposes of 887 message transport. Mr.Florack pointed out that "while Qwest may rely upon that LOA forQwest's own internal network security purposes I that limited usedoes not limit the scope of the authority Illuminet has been
given ~s the agent of its carrier/customers.
Fuller Rebuttal, Exhibit 30, 8:16-9:10; Tr. 157:17-158:10.Florack Testimony, Exhibits 31 and ,,32, and Florack Rebuttal, Exhibit33.56 Florack Rebuttal , Exhibit 34, 2:5-12.57 Id.58 Florack Rebuttal, Exhibit 34, 3:16-4:3.59 Florack Rebuttal, Exhibit 34, 6:5-7:12. See also Provision of Accessfor 800 Service Report and Order , CC Docket No. 86-10, 4 FCC Rcd 2824, 2832(1989) (core costs of SS7 should be borne by all network users) .60 Florack Rebuttal, Exhibit 34 , 7:18-10:4.61 Florack Rebuttal, Exhibit 34 , 13:7-14:14.
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Formal Complaint Nos. FC-1296 and FC-1297 Page 1
36. Mr. Scott A. McIntyre, Director of Product and Market
Issues for Qwest, also submitted pre-filed testimony and testi-
fied at the hearing. 62 According to Mr. McIntyre, Qwest hasmerely unbundled the S87 message price out of the switchingcost, lowered the switching rates and created a separatesignaling rate. 63 Qwest also contends that the Complainants have
the choice to purchase signaling through their ICAs, through the
Qwest catalog, or through a third-party provider. 64 In the past,
Qwest believes Complainants had a competitive advantage .overother carriers who did not use third-party providers. 65 Now,
however, with Qwest' s new 887 message rates in the Access
Catalog, Qwest contends costs are more aligned with the cost
causer.66 Mr. McIntyre asserts that the rate structure is proper
because it was modeled after that approved"" by the FCC and
establishes rates for the 887 network that is separate from the
voice network.
37. Qwest also asserts that the ICAs between the companies
are irrelevant in this case as Illuminet, not Cox or ALLTEL, is
Qwest's customer for S87 services. 68 Qwest further asserts that
the LOAs discussed by the Complainants were only created to al-
low Qwest to open point codes in ' its switches, and that Com-
plainants were attempting to expand the authority granted by the
LOAs .
38 . The sixth and final wi tness in the case, Mr. Joseph Craig, Director of Technical Regulatory in the Local Network
Organization for Qwest, also submitted pre-filed testimony and
testified at the hearing. 70 Through Mr. Craig's" testimony,' Qwestdescribed how the S87 network is an out-of-band signaling
network, separate from the network that carries voice calls ortraffic.71 Qwest also claimed that the distinction between localand exchange access calls is not applicable to 887 messages.
Finally, Mr. Craig opined that the Cox and ALLTEL LOAs are only
62 McIntyre Rebuttal, Exhibit 34, McIntyre Surrebuttal, Exhibit 36,
Erratum Testimony, Exhibit 35.63 Tr.301:11-302:1.64 Tr. 303: 11-18.65 McIntyre Rebuttal, Exhibit 34 10:8-12.66 McIntyre Rebuttal, Exhibit 34, 11:14-18.67 McIntyre Rebuttal, Exhibit 34, 6:16-7:5.68 McIntyre Rebuttal, Exhibit 34, 31:5-20.69 McIntyre Rebuttal, Exhibit 34 , 32:4-36:7; Tr. 306:1-307:20.70
Craig Rebuttal, Exhibit 40, and Erratum Testimony, Exhibit 41.71 Craig Rebuttal, Exhibit 40, 3:3-18; Tr. 366:16-22.72 Craig Rebuttal, Exhibit 40, 9:4~16.
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SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297 Page 18
valid to open Qwest, point codes, not to allow Illuminet to actas either Cox agent or ALLTEL'agent for purposes of pur-chasing SS7 signaling services. 73 Mr. Craig agrees with Mr.McIntyre that the SS7 network is separate from the voice net-work , going so far as to state that the SS7 network is "com-pletely separate " from the voice network.
55? is an Integral Component of End-user Traffic
39. At the outset, one of the fundamental policy issuesfor us to resolve is whether, as Qwest contends , the Commissionshould treat the SS7 messages and the network that carry themindependently of the voice traffic. 75 If we were to agree withthis contention , we would also, by necessity~nd logic , need toconclude that the regulatory treatment of the voice traffic hasno relevance to the application of the SS7 message charges atissue in this proceeding. Complainants , however, offer a fardifferent position. Complainants allege that the SS7 message isan integral component of the end-user traffic it supports andaccordingly, the interconnection agreements in place between thecarriers of end-user traffic (such as those between Cox andQwest and those between Qwest and ALLTEL) determine whether andhow SS7 message charges should be assessed. We accept thelatter conclusion as not only being supported in the record, butalso being consistent with common sense and other regulatorydecisions.
40. First, although we recognize the attractive simplicityof the "separate " network theory raised by Qwest 76 we find thattheory sorely lacking in fact and substance. While it is truethat the SS7 network includes components different from thoseused to carry voice traffic the record is abundantly clear
that where SS7 has been implemented (as in the case) therewould be no voice traffic if the SS7 messages at issue were notexchanged between SSPs or if the SS7 network were notoperating. 77 The record also confirms that the SSP thatgenerates the SS7 message is part of the local switch , and theSSP effectively communicates with that switch to establish and73 Craig Rebuttal, Exhibit 40 , 14:13-16:4; Tr.371:20-372:12.74 Craig Rebuttal , Exhibit 40 , 3: 4.75 See
~,
Craig Rebuttal, Exhibit 40, 16:9-12; Tr. 315:10-17.76 See , Craig Rebuttal , Exhibit 40 , 8:21-22, 9:6-9; Tr. 51:16-18; Tr.381:10-382:7.
77 See
~,
Fuller Rebuttal, Exhibit 30 , 12:12-15; O'Neal Rebuttal,Exhibit 28, at 3:14-18,5:13-15 6:7-11; Florack Testimony, Exhibit 31,12:13-16; Florack Rebuttal, Exhibit 33 , 2:6-9; Tr. 116:5-11; Tr. 370:10-16.
:,tLKfIAkY'S Rt::CORD, NI:l:3RASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297 Page 19
release the voice path so that the call can be set up and
subsequently completed. 78 Further, the record reflects that for
purposes of the charges at issue in this proceeding, the 887
network has no independent purpose but to transport the 887
messages, 79 and, again that those messages must be sent and
received by the 88Ps (which are at least a part of the local
switch owned by the LEC or CMR8 provider) in order for the end-
user call to be completed. Functionally,' therefore, we see no
basis for suggesting, as Qwest witness Craig did in his writtentestimony summary, that the 887 network is separate from thevoice network, let alone "completely separate' from the voice
network.8O ' Rather , the record is clear that the voice network
must rely upon the 8S7 network to initiate the SS7 messages
required for any end-user traffic to be compl~t:d.
41. Second, we find no rational basis to suggest, as Qwest
does,81 that the
jurisdiction of the voice traffic associated
with SS7 messages is irrelevant to our inquiry. We find this
suggestion to be interesting since it is clearly contradicted by
the fact that Qwest "jurisdictionalizes " its S87 message traffic
(albeit not to the level Complainants seek), 82 and it relied uponits interstate message traffic in establishing the interstate8S7 message rates filed with the FCC. 83 Qwest' s interstate
tariff and Qwest' s arguments here also establish that Qwestagrees with the principle that, at least for purposes
separating interstate S87 messages from intrastate SS7 messagesit is appropriate for regulators and customers to look to the
underlying voice or data message. 84 We note that Qwest' s SS?
charges are an unbundling of the rate elements associated with
voice traffic the SS? rate elements have not been divorced
from the traffic, they ve simply been unbundled from the local
78 See ~, O'Neal Testimony, Exhibit 27, 4:17-19, 5:9-6:10; Florack
Testimony, Exhibit 31, 7:20-24; Craig Rebuttal, Exhibit 40, 9:20-10:17.
79 See ~, O'Neal Rebuttal, Exhibit 28, 3:18-21; Florack Testimony,Exhibit 31, 12:3-16; Florack Rebuttal , Exhibit 33, 19:2-10.
80 See , Craig Rebuttal , Exhibit 40,3:4.
81 See
~,
McIntyre Rebuttal , Exhibit 34, 29:22-30:2; Craig Rebuttal
Exhibit 40, 12:22-23.
82 See , McIntyre Surrebuttal, Exhibit 36,19:8-10.
83 See , McIntyre Rebuttal, Exhibit 34, 6:17-20; See also Lafferty
Testimony, Exhibit 24 , 27:8-17; O'Neal Rebuttal, Exhibit 28, 6:22-7:2;
Florack Rebuttal, Exhibit 33, 9:14-16.84 We agree with the Complainants that the FCC'decision regarding
Qwest'interstate tariff structure does not preempt this commission
authority to decide the matter pursuant to Nebraska law and the record
evidence in this proceeding See
, ~,
Lafferty Testimony, Exhibit 24,
11:21-12:9), and we do not read Qwest's testimony to suggest otherwise.
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SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296" and FC-1297 Page 20
switching and tandem switching rate elements associated withthat traffic. Accordingly, we find no plausible reason (andQwest has provided none) as to why the jurisdiction of the SS7messages was proper in the context of the federal tarifffiling,8s but not relevant in the context of the variousintrastate end-user traffic types (such as local and EAS/ELCA)to which the Complainants allege that Qwest is improperlyapplying the Access Catalog rates. While Qwest may be correctthat the SS7 network does not differentiate between thejurisdiction of the SS7 messages that are transported across theSS7 network 86 Qwest' position would effectively negate theCommission's duty to take into account the d~stinct categoriesof intrastate end-user traffic (and its component parts), eventhough the determination of the proper category is one of ourfundamental considerations in establishing the proper ratedesign and rate structure to be applied. 87 Finally, Qwest hasnot contested the fact that, in some situations,
jurisdictionalizes SS7 messages based on the jurisdiction of theassociatedvoice traffic. For example, pursuant to itsStatement of Generally Available Terms and Conditions ("SGAT"
) ,
Qwest's compensation arrangement for SS7 messages is driven bythe compensation arrangement for the messages associatedtraffic.
42. Third, we find persuasive Complainants ' position that,if the SS7 network were truly separate and apart from the voicenetwork, there would have been no reason for the FCC to findthat its costs should be treated as a "general network upgrade"by Qwest for cost recovery purposes. 89 In an earlier decision,the FCC addrel3sed the regulatory treatment of SS7 capability"
tha t was then beginning to be deployed. The FCC determinedthat:
SS7 represents a new network infrastructure that will
not only support a number of new interstate and state
services, but will also increase the efficiency withwhich LECs provide existing services, basic and non-basic. As such, CCS7 represents a general networkupgrade, the core costs of which should be borne by
Tr.316:16-317:5.
B6 See , Craig Rebuttal, Exhibit 40, 9:13-14.B7 Accord , O'Neal Rebuttal, Exhibit 28 , 4 :9-18; Fuller Testimony, Exhibit29,5:19-6:2; Florack Rebuttal, Exhibit 33,7:22-8:5.BB See , Lafferty Rebuttal, Exhibit 25 12:16-18 13:1-6 and footnote 5.B9 Accord , Lafferty Rebuttal , Exhibit 25 , 14:22-26 and 21:8-19; FlorackRebuttal, Exhibit 33, 6:14-7:4.
~tCKI:: IARY'S RtCOKLJ NE~KA~KA I-'Ui)L!L ~tt(VILt LUMMI~SIUN
Formal Complaint Nos. FC-1296 and FC-1297 Page 21
all network users
components that will beshould be apportionedrules for' other network
The costs of CCS7
used to support other servicesin accordance with existingservices.
We need not determine whether the FCC's decision regarding the
accounting and cost allocation of SS7 costs is binding on this
Commission or on Qwest' s intrastate services, but we do agreewith the FCC's principle that regulated carriers must allocate
their SS7 costs among the services supported by SS7. Given
that cost allocation , the normal and expected practice would bethat cost recovery should follow cost allocation, with the
result that SS7 costs should be recovered from ~he users of theservices supported by SS7. 91 Indeed, Qwest attempts (albeit
improperly as discussed below) to justify its"unbundling of SS7
charges on this "cost causation" principle.
43. Finally, we note that the Access Catalog itself
exposes the infirmities of Qwest' s suggestion that the voice
traffic and jurisdiction are irrelevant. As indicated in Il-
luminet'testimony, Qwest has used the voice traffic as " a
surrogate for applicability of the SS7 charges at issue whereactual measurement by Qwest of " the SS7 messages is notavailable.93 Since Qwest has chosen not to implement actual
measurement, 94 the voice traffic (and the necessity of itsjurisdiction) becomes relevant based on Qwest' s chosenimplementation methodology. As such, we find unpersuasi ve
Qwest'suggestion that Illuminet, as the customer, must be
charged for all SS7 messages since it purchased the links andports through the FCC tariff. 95 . The record is clear that
Illuminet carries no voice traffic; its carrier/customers do.
And , as found earlier, it is the voice traffic that requires the
SS7 messages to be generated, and those messages are generatedby the SSPs owned by the Illuminet carrier/customer and notIlluminet. Accordingly, it:: would not only be proper from a
policy perspective but also based on the record before us, thatthe implementation of the Access Catalog revisions take into
account the various and distinct intrastate end-user traffic
Provision of Access for 800 Service, Report and Order, CC Doc. No. 86-
FCC Rc I d 2824, 2832 (1989) (internal citations omitted) .
Accord , Florack Rebuttal, Exhibit 33, 8:14-19.
See , McIntyre Rebuttal, Exhibit 34, 6:6-14.
See , Florack Rebuttal , Exhibit 33, 9:6-10.
See , McIntyre Rebuttal, Exhibit 34 , 23:16-18.
See
~,
Id. at 9:1-4, 22:20-22, 31:7-10, 35:16-17 and 38:10-12.
See , Florack Testimony, Exhibit 31, 7:24-25, 8:22-27.
, 4
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SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 . and FC-129?Page 22
types when considering whether the 88? message charges asso-ciated with those traffic types are properly chargeable underthe Access Catalog.
Proper Construction of the Access Catalog Should Avoid Windfalls
to Qwes
44. Two final matters bear discussion. We are mindful ofthe facts presented by the Complainants with respect to theirposi tion that Qwest is receiving a windfall under the AccessCatalog, and we are troubled by the casual approach that Qwestapparently believes the Commission should take with respect to
Qwest implementation of the Access Catalog: We agree withComplainants that Qwest interpretation of its Access Catalogto apply to all 58? messages is improper since Qwest cannotapply the Access Catalog unilaterally to non-exchange accesstraffic for which compensation arrangements are included inpreexisting agreements. Absent this approach Qwest wouldcontinue to gain a windfall under the 88? message "charges itcurrently assesses to Illuminet (which then passes through the
charges without mark-up to its carrier/customers ) because thosecharges relate to end-user traffic addressed in other agreements
in place between Qwest and the Illuminet carrier/customers which
included compensation for the entire exchange of traffic between
Qwest and those carrier/customers.
45. 8imilarly we also cannot ignore regardless of
Qwest s assertions to ' the contrary, the anti-competitive effectsarising from Qwest' s implementation of its intrastate 88? Access
Catalog revisions. The testimony of Mr. Lafferty and Mr. 01 Nealreveals that Qwest billings to Cox and ALLTEL representadditional annualized revenues nearly double the totaladditional revenue that Qwest claims to result from theunbundling of 88? signaling. The Cox witness, Mr. Lafferty,testified that as a consequence of Qwest s application of itsamendment to the Access Catalog to Cox l s non-access 58?
messages Cox has experienced an increase to Cox s net cost ofoperations of $90 000 per month or over $1 million annuallyarising from the pass -through of Qwest I S 88? message charges byIlluminet.1oo The ALLTEL witness
Mr. Neal testified that the
97 Accord , O'Neal Rebuttal, Exhibit ~8, 7:3-12.99 See , Florack Testimony, Exhibit 31 , 26:13-18.99 See
~,
Lafferty Testimony, Exhibit 24 14:1-16:3, 20:2-21:2 , and22:7-24:25; Fuller Testimony, Exhibit 29,9:1-5 and Exhibit A.100 See
~,
Tr. 63:13-25 and 104:24-105:1.
:,i:LKt lAKY':' Ki:LUKU NttSKA~KA rUbLiL :,i:KVICi: L0MMI:':,IUJ'
Formal Complaint Nos. FC-1296 and FC-1297 Page 23
data contained in Exhibit 10 confirmed Qwest' s discovery
response that approximately $1,081,000 was Qwest'calculated
amount of the reduction in local and tandem switching revenuesand the increase in 887 revenues due to unbundling. 101 Mr.0' Neal further testified that for the past 12 months, ALLTELalone had received billings (passed through by Illuminet) of
$939,738 for charges by Qwest under the revised Access Catalog,
and that while ALLTEL only handles a small portion of the total887 messages that would be subj ect to charges under Qwest' s
revised Access Catalog, ALLTEL's billing increase equaled nearly
90 percent of the annual revenue increase that Qwest states willresult from its unbundling of 887 charges in Nebraska. 102
Illurninet'witness, Mr. Florack, testified that Illuminet has
been billed approximately $2.million by Qwest since theeffective date of Qwest' s amendment to the Access Catalog
pertaining to 887 signaling which , as noted above ,are passed
through to its carrier/customers without charge. Additional
billings to other carriers for 887 message charges are unknown.
46. These charges are, in our view, signi~icant anddirectly arise from Qwest' s improper implementation of its
intrastate 887 message rate structure. That implementation, in
turn, has the effect of unilaterally increasing the costs of Cox
and ALLTEL (which will be recovered through rates they assess totheir ratepayers and other carriers) from those costs ~hat Cox
and ALLTEL agreed to pay pursuant to their negotiated agreementswith Qwest. When viewed in this light, we must conclude thatthe effect of Qwest' s intrastate 887 message rate structure is
to deter competition by an improper increase of the costs to a
competitor or at least a shift of Qwest' s costs to other
carriers, thus providing Qwest an improper competitive advantagevis-a-vis those carriers with which it does compete. In either
instance , we will not allow that result to occur.
47. Further, we rej ect Qwest' s contention that this resultis somehow permissible because Qwest has properly implementedits intrastate 887 structure pursuant to applicable FCC direc-
tives .103 Even though the FCC's directives are not necessarilycontrolling on our implementation of the intrastate 887 message
structure at issue, Qwest has failed to comply with them.Specifically, the underlying FCC decision upon which Qwestrelies, in part, for justifying its intrastate implementation of
101
102
103
Tr. 118:21-120:2.
Tr. 120:3-22.
See
~,
McIntyre Surrebuttal, Exhibit 36, 5:5-6:12.
.g;y P"n'ea WI'" '0, In' on ""o'eo pap.' ~
SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297 Page 24
the SS7 message structure required Qwest to "acquire theappropriate measuring equipment as needed to implement such aplan, ,,104 but only where a carrier has elected to implement thatstructure.105 Since it is clear that Qwest elected to make therevisions at issue, the only remaining question is whether themeasuring equipment" has been put in place to "implement" thatelection. The record is clear that Qwest has not, 106 as
confirmed by the lack of the billing detail required to properlyidentify (and thus measure) the SS7 messages associated withvarious intrastate end-user traffic types .107 Therefore , Qwestcannot rely upon the FCC's SS7 rate unbundling pronouncements to
support its efforts to cause this Commission to ignore theeffects of the improper implementation of its intrastate SS7message rate structure. 108
48. ALLTEL and Cox, as common carriers, have challengedQwest's application of its unbundling of SS7 message signalingcharges as set forth in the amendment to Qwest' s Access Catalogas improper and unjust. Pursuant to Section 75-119, it is theduty of the Commission to make a determination of such claimsand pursuant to Section 75-118. aI , the Commission has the dutyto determine the scope or meaning of a tariff. The Commissionfinds that the lack of revenue neutrality in Qwest' s unbundlingof SS7 signaling warrants a finding tha~ the revisions toQwest's "Access Catalog (Exhibit 12) are not fair, just andreasonable and that such Catalog provisions should be .declared
104 Access Charge Reform First Report and Order, 12 FCC RC' d 15982, 15090(para. 253) (1997) ("Access Charge Reform Order"105 See,id. (Para. 252).
106 See , McIntyre Rebuttal, Exhibit 34, 23:16-19.107 See , Florack Testimony, Exhibit 31 , 13 :26-29 citing to ConfidentialExhibit B. loa We also note that Qwest relies, in part on the FCC's decision thatpermitted Qwest to unbundle its interstate SS7 costs. See
~,
McIntyre. Rebuttal , Exhibit 34 , 6:16-7:8; see also US West Petition to Establish Part69 Rate Elements for SS? Signaling, Order CCB/CPD 99-37 , DA 99-1474released December 23, 1999 ("Order
).
That decision, however, notes Qwest'ability "to assess rate elements on each switched access originating terminating call attempt Order at para. 6 (emphasis added). agree with the Complainants, however, that in the interstate jurisdiction the
calls" are typically interstate toll carried by IXCs, which is confirmed bythe FCC's reference to a "switched access .. call attempt,and the factthat switched access is exchange access. See
~,
Lafferty Testimony,Exhibit 24 , 6:21-7:1 citing to Access Charge Reform Order , 12 FCC Rc'd at16042 (para. 138); Florack Rebuttal, Exhibit 33, 11:7-10. In the intrastatejurisdiction, however , there are more discrete "call types" that must beaccounted for in any proper SS7 unbundling efforts. See FlorackTestimony, Exhibit 31, 23:9-21.
'" -
SECRE1ARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297 Page 25
null and void. Further , pursuant to the Commission s authority
pursuant to Section 75-109 (2), the Commission finds that the
implementation of Qwest' s Access Catalog is inconsistent with
the policies of the Telecommunications Act of 1996 because Qwesthas implemented its intrastate SS7 message rate structure in a
manner that permits Qwest to assess such charges for traffic
that is otherwise subject to its ICAs with Cox and with ALLTELand does so for end-user traffic that Qwest initiates violation of applicable reciprocal compensation rules and
policies as noted by Mr. Lafferty). 109
49. Lastly, we are also concerned by Qwest' s unilateral
efforts to alter the concept of "cost causation. ,,110 ' As the
record reflects, no changes occurred in the exchange of SS7messages between Cox and Qwest and between ' ALLTEL and Qwestexcept for the new rate structure imposed by Qwest' s revisions
to the Access Catalog. 111 However, the undeniable fact is that,as a result of these revisions, Qwest is assessing (albeit
though Illuminet) charges to Cox and ALLTEL for 887 messages
associated with calls made by another carrier
' $
end~users (such
as in the case of originating and terminating pre-subscribedtoll calls of an interexchange ca~rier (IXC) carried by Qwest
and Cox or ALLTEL in a 'meet point billed' arrangement) or all
calls where Qwest is the initiating carrier. Thus, the "causer
of the 887 " messages in these instances is not ALLTEL or Cox, and
therefore, no 587 message charges should be assessed by Qwest. 112
Accordingly, we rej ect in its entirety Qwest' s overly broad
construction of cost causation espoused in this proceeding and
we specifically rej ect Qwest' s suggestions that the Complainantshave taken advantage of some pricing "loophole or have beensubsidized by other carriers. 113 Nothing changed in the cost
causation principles in place prior to the unbundling of 887
message charges by Qwest , and Qwest has shown no rational basisas to why it should be a~lowed to unilaterally change suchprinciples. This is particularly true where as here, any
109 See , Lafferty Rebuttal , Exhibit 25, 6:10-7:18.
110 See , Lafferty Testimony, Exhibit 24, 17:16-19; Lafferty Rebuttal,Exhibit 25, 18:15-19:12. 111 Tr. 149:17-21
112 Accord , Lafferty Rebuttal, Exhibit 25, 6:13-16; Florack Rebuttal,Exhibit 33, 4:7-15.
113 See
~,
McIntyre Rebuttal , Exhibit 34 , iii, 9:9-17. Contrary toQwest I s suggestion this case is not about "options regarding the SS7connectivity (see McIntyre Surrebuttal, Exhibit 36, 8:9-9:4) in that eachoption" either requires a carrier to rely upon Qwest for the provision of
SS7 network, or requires that carrier to be subject to an intrastate SS7
message rate structure that has not been properly implemented by Qwest.
Q;;J e"nt.o ",II. ,ny ;nk nn '.e,o;oo ...., €I
SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297"Page 26
additional costs shifted to another provider will be reflectedin that provider cost of providing service via its end-userrates. Increasing a competitor s costs of providing service byan improper application of cost causation principles or, here , an improper construction and application of the AccessCatalog is the antithesis of rational public policy.
50. Accordingly, for purposes of our remaining analysis,
we agree wi th the Complainants that our decisions can and shouldbe governed by the simple, common sense principle they havearticulated that no carrier should implement a revision in itstariff or pricing catalog such that its inappropriate billing of
other carriers resul ts in a revenue windfall to such carrier.This principle is particularly appropriate where the application
of such tariff or pricing catalog has the effect of unilaterallyaltering the compensation arrangements included in negotiatedpre-existing agreements. Specifically, we agree with theComplainants that the SS7 message is an integral component ofthe end-user traffic it supports ,114 and the arrangements that
govern the compensation of the end-user traffic equally govern
the treatment of the SS7 signaling messages associated with thattraffic. l1S Thus", if SS7 signaling messages are associated 'withintrastate toll end-user traffic , and intrastate toll is subj ectto the Access Catalog, the Access Catalog applies. If SS7signaling messages are associated with intrastate toll end-usertraffic and the exchange access associated with such intrastatetoll is subj ect to some arrangement other than the AccessCatalog, the terms of that arrangement should apply. Similarly,if SS7 signaling messages are associated with local end-usertraffic, CMRS intraMTA traffic, Qwest -originated toll or jointly
provided exchange access, and such traffic is subject to an ICAor other contract, the agreement or contract applies to the SS7
signaling messages for such traffic. As applied here, the fact
that Cox and ALLTEL have chosen an intermediary to transport SS7
message signals between themselves and Qwest should produce nodifferent result than if Qwest and Cox and/or Qwest and ALLTELdirectly connected their own SS7 networks. The cost savingefficiencies that the Illuminet transport provides and itsassociated benef i ts to Qwest ,116 should not be denied to the rate
paying public. This is especially true where, as here, the
114 See Lafferty Rebuttal, Exhibit 25, 11:19-22.l1S Accord , Florack Testimony, Exhibit 31 , 19:20-20:3.116 See , Lafferty Testimony, Exhibit 24 10:10-13; Neal Testimony,Exhibit 27 , 5:1-6; Florack Testimony, Exhibit 31, 8:12-10:21; McIntyre
Rebuttal Testimony, Exhibit 34, 11:10-12; Tr. 382:8-383:17
m- ,,
~tLKt lAKY' ~ KtLUKU, Nt.tlRASKA fJUtlllL ~tKVILt LUMMISSION
Formal Complaint Nos. FC-1296 and FC-1297 Page 27
facts demonstrate that the arrangement between llluminet and itscarrier/ customers is well known to Qwest, 117 and as discussed
below , proper agency authorizations have been provided regarding
the point codes to which SS7 message signals are transported.
We expect Qwest and all carriers subj ect to our jurisdiction toencourage network efficiencies, not create roadblocks with no
apparent purpose other than to enhance their own revenues and/ordisadvantage their competitors.
Illuminet
Servi ces
the en Cox and ALLTEL for SS?Trans ort
51. As indicated above, our analytical construct requires
that we examine the arrangements in place between the carriers
for the handling of end-user traffic. Although the applicationof this construct is made somewhat more difficul t becausellluminet offers no end-user services ,118 the record is clearthat llluminet' s carrier/customers do offer such services.
Accordingly, we must address whether, in fact, llluminet "stands
in the shoes " of its carrier/customers for purposes . of the SS7
messages that are components of its carrier/customers ' end-user
and exchange access service offerings, i. e., that llluminet isthe agent for its carrier/customers with respect to the SS7
messages llluminet transports for them.
52. Under Nebraska law , whether agency exists depends onthe facts underlying the relationship of the parties,
irrespective of words or terminology used by the parties to
characterize or describe their relationship. See, e.g., Kime "
Hobbs, 252 Neb. 298, 562 N.2d 705 (1997). Using this as our
guidepost, the record reflects that a LOA provided by Cox and
dated July 2, 2001, was sent to Qwest indicating that "Cox
Communications is authorizing llluminet to conduct allnegotiations and issue orders for (all services) point codes
listed below for all US West " LATAsi OOl-218-140.(Exhibit 15).
The very language of the LOA reveals that Cox made a general
grant of agency authority to llluminet relative to SS7 servicesin Qwest (formerly US West) LATAs, and that the agency
relationship would continue until "rescinded in writing by Cox.
Furthermore, as Mr. Lafferty testified for Cox, agency is a
117 See
~.
Florack Testimony, Exhibit 31, attached Ex. E.
specifically find that, at least as of November 2000 , Qwest was on notice of
the specific relationship that Illuminet had with its carrier/customers, and
that Qwest presumably ignored that relationship and the consequences arising
there from when it elected to file its intrastate SS7 message rate structure.118 Tr. 233:10-13; Tr. 239:13-18.
~ ""nl." w"" soy 'nk nn ,.,y,'.. P'p" ~
SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297 Page 28
common method of transacting business by telephone companies.For example, Cox hires agents to help with coll,?cation and"Qwest allows those agents, who are not Cox employees, access toCox's collocation cage .119
53. Similarly, a LOA provided by ALLTEL dated April2001, was sent to US West stating:
. "
ALLTEL is authorizingIlluminet to conduct all negotiations and issue orders for allservices for the point codes listed below for all US WestLATAs . " (Exhibit 14). This LOA also provided that it "willremain in effect until rescinded in writing by ALLTEL.Mr.0' Neal, testified that the ALLTEL LOA "is authorizing" Illuminetto conduct all negotiations and to issue an order for all
services for the point codes listed below." 12 Consistent withthe Cox LOA the language used by ALLTEL demonstrates thatIlluminet was designated by ALLTEL to act as their agent withregard to SS7 services in Qwest (formerly US West)LATAs.
54. Accordingly, under the test in Kime, we find that theLOAs do , in fact, establish Illuminet as the agent of Cox and. ALLTEL generally, and, therefore, Illuminet stands in the shoesof Cox and ALLTEL with regard to the SS7 message charges atissue. In addition to this clear grant of agency, our findingis also independently supported by the record evidence thatQwest has been fully aware of the relationship between Illuminet
and its carrier/customers (including the issues associated withthe instant dispute) ,121 and
the fact that the concept ofagency" is not a novel idea. For example, the Cox/Qwest Ic:Aapproved by this Commission in Application No. C-1473, mentionsthe word "agent" 33 times, testament to the fact that Qwest knewCox would, like many new entrants, use agents to handle many ofits needs. Mr. Lafferty s pre-filed testimony discussed thisconcept in depth contending that only through third partyvendors could a new entrant. manage all the tasks required of itas it grows a business while also quoting from two of the provisions in the Qwest/Cox ICA that discuss agency. 122 Simi-larly, the ALLTEL ICAs (Exhibits 16 and 17) contain numerousreferences to agents and agency. Based on the above-quoted LOAsand the evidence in the record the Commission finds thatIlluminet is the agent of Cox and of
ALLTEL for SS7 messages atissues here wi thin the Qwest LATAs.
119
120 Tr.56:20-57:2.
Tr. 145: 14 -17.
Florack Testimony, Exhibit 31, 9:8-15, 13:18-26 , and 26:21-25.Id.Lafferty Rebuttal, Exhibit 25, 26: 11-28: 15.
121
122
~tL..~t iAKY' ~ Kt:l..UKU , NeI:H\ASKA r'UollL ~t:K VICe COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297 Page 29
55. In making this finding, we specifically rej ect Qwest' s
contention that its use of the LOA somehow limits the specific
agency relationship established between Cox and Illuminet and
between ALLTEL and Illuminet. 123 The record demonstrates factsthat specifically identify the scope of and activities encom-
passed within the agency relationship established between Cox
and Illuminet and between ALLTEL and Illuffiinet. 124 Similarly, we
rej ect Qwest' s inference that, regardless of the LOA, III uminet
would be a "third party " beneficiary of the ICAs that Qwest has
with the Illuminet Co-Complainants. 125 We recognize that under
Nebraska case law, a third party beneficiary rights depend
upon , and are measured by, the terms of the contract between the
promisor and promisee, see, Marten v. Staab 249 Neb. 299, 304,
543 N. W. 2d 436 (1996), and the ICAs have provisions stating thatthere shall be no third party beneficiaries to the ICAs.
However, just as Marten recogni zes the distinction between agen-
cy and third party beneficiaries in the context of the facts inthat case, see id., so also in the instant matters, the LOAsconstitute Illuminet as the agent for Cox and ALLTEL
respectively, and Illuminet' s rights flow from the agency status
and not from third party beneficiary status. Moreover, Qwest has
provided no facts that would establish that Illuminet is seeking
a benefit under the ICAs in question. Rather , the charges at
issue are flowed through to Cox and ALLTEL without mark-up, asthe record demonstrates. Accordingly, we specifically rej ect
Qwest's theory that third party beneficiary rights are at issue
in this proceeding.
56. We also rej ect Qwest' s suggestion that the concept of
agency" as established between Cox and Illuminet and between
ALLTEL and Illuminet is inconsistent with the Communications Actof 1934, as amended. Far from violating such Act, the FCC has
embraced the very basis for its application established here.
Provided that an agent acts in a manner consistent with theterms and conditions established in the underlying interconnec-
tion agreement between its carrier principal and a LEC, the FCC
has found that:
(W) hen a CLEC or an IXC (having entered an intercon-
nection agreement with the relevant LEC) designates a
DA provider to act as their agent, that competing DA
123
124
See
~,
McIntyre Rebuttal, Exhibit 34, 32:19-21.
See
~,
Florack Testimony, Exhibit 31, 8:12-10:11.
See
~,
McIntyre Surrebuttal, Exhibit 36, 16:9-17:12.125
.g;;, Pn"". w'O" oov ;nk on ,.cvcl.. ...., €I
SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297 Page 30
provider is entitled to nondiscriminatory access to
the providing LECs' local DA database. Naturally, theDA provider's database access will be consistent withthe terms of the relevant interconnection agreementand with the terms of the DA providers separateagreements with its carrier principal.126
57. While the above-quoted decision does not directly ad-dress the facts and circumstances presented in the instantcomplaints (which is acknowledged by Illuminet 127
) ,
the FCC'decision nonetheless recognizes that the Communications Act of1934 supports the same policies that the record demonstrates arepresent herein. For example , the FCC made clear that inter-exchange carriers and competing LECs may not,have the economiesof scale to construct and maintain directory assistance plat-forms of their own," 128 and that "the presence of such DA pro-viders allows many carriers to offer a competitive directoryassistance product without being forced either to go to the sub-
stantial expense of maintaining their own database , or to pur-chase the service from the incumbent LECs." 129 These same FCC-recognized concepts are equally applicable herein.
58. The record reflects that Illuminet provides economiesof scale and scope to its Co-Complainants , 130 which is at leastacknowledged by Qwest .131 Likewise, and as is the case withCLECs and IXCs vis-a-vis the provision of directory assistance,Illuminet'carrier/customers utilize Illuminet because of theexpense and effort involved in acquiring and deploying all ofthe" components required to provide connectivity to the SS7networks. It is likewise clear that Qwest is the dominantprovider of local exchange service and the associated SS7signaling.
59. Finally, we rej ect Qwest'assertion that it has "direct relationship" with Cox and with ALLTEL regarding SS7. 132The interconnection agreements between Qwest and Cox and between
Qwest and ALLTEL require that" SS7 connectivity be implemented
126 Provision of Directory Listing Information, 16 FCC Rc I d 2736, 2748(para. 27) (2001) .
127 See , Florack Rebuttal, Exhibit 33 , 15:13-14.128 16 FCC Re'd. at 2748 (para. 26) (footnote omitted).129 Id. (para. 27).
130 See , Lafferty Testimony, Exhibit 24 10:10-13; Neal Testimony,Exhibit 27 , 5:1-6; Florack Testimony, Exhibit 31, 8:12-10:21.131 See , McIntyre Rebuttal, Exhibit 34, 11:10-12.132 Id. at 35: 19.
"'-" " ,
;)tLk..: lAKY":' KtLUKI.J, I"ICDKr\':'tV\ r Ub...IL ,:,tKVILt '......JlVdvll::":'IV.
Formal Complaint Nos. FC-1296 and FC-1297 Page 31
and the LOAs establish that Cox and ALLTEL have each separately
designated llluminet as their agent for this connectivity with
Qwest. As confirmed by the fact that call set-up and teardown
is being accomplished, there has been no allegation that the
actions of llluminet on behalf of either Cox or ALLTEL are
inconsistent with the terms . and conditions required for their
respective SS7 connectivity with Qwest.
60. Accordingly, based on the entire record before us, weare confident that our decision regarding the existence and
application of the agency relationship between llluminet and Cox
and between llluminet and ALLTEL complies with the proper legal
mandates and is otherwise consistent with the underlying
policies of the Communications Act of 1934 as interpreted by the
FCC.
The ICAs at Issue Do Not Fermi t Separate SS7 Message Charges
be Assessed By Qwest
61. Having found that llluminet is acting as the agent for
its respective Co-Complainants , we next turn to whether the SS7
message charges being assessed that relate to the various
intrastate voice traffic types are proper under the two lCAs
before us. Both Cox and ALLTEL provided their un~erstanding
whether SS7 message charges are proper under their respective
lCAs for such traffic types. 133 We note, however, that each the Complainants agree that only the SS7 message charges
assessed by Qwest for terminating both intraLATA tol1 originated
by an end user pre-subscribed to Cox and that originated py an
end user pre-subscribed to ALLTEL are proper.134 Therefore, we
need not address this type of end-user traffic.
62. Cox and ALLTEL maintain that the terms of their
respective lCAs with Qwest include SS7 signaling as a part
the services that the parties agreed to provide reciprocally to
one another. 135 A determination of the validity of this position
turns on certain key provisions of the ICAs. In the Cox/Qwest
lCA (Exhibit 26), those key provisions are section 6.4, which
states that where available, all interconnection trunks will be
133 See , Lafferty Rebuttal, Exhibit 25, 4:4-15, 5:13-18, 6:21-7:3; Fuller
Testimony, Exhibit 29,5:1-6:6,7:4-8:12.
134 See , Laf erty Test1mony, Ex 1 1t 24 , 14: 1-5; Fu er Testimony, Exhib1t
29, 10:8-10; Florack Testimony, Exhibit 31, 25:4-7.
135 See
~,
Tr. 47: 21-25 and 155: 9-19.
.g;, Punted w;,h so, ink on tee,ele. pep.. 0
SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297 Page 32
equipped wi th SS7 capabilities, 136 Section 5.13, which discussesMeet Point Billing (MPB) 137 , and Section 5.2, which mandatesa "Bill-and-Keep arrangement for the termination of localtraffic.138 Cox has testified that no attempt has been made byQwest to amend the terms of the Cox/Qwest ICA in order to changethe compensation arrangement for SS7 messages. 139 In theALLTEL/Qwest Reciprocal Compensation Agreement for Extended AreaService (Exhibit 17), those key provisions are Section 4.2 thatprovides that the parties will use SS7 signaling in theinterconnection of their networks , 140 and Section 3.thatdiscusses reciprocal compensation for transport and terminationof EAS traffic .141 In the ALLTEL/Qwest Wireless ICA (Exhibit16), those key provisions are Article V.5 that provides thatthe parties will provide common channel signaling to one another
(defined in Article III. as SS7 signaling protocol) , 142 and
Article IV.1 that discusses reciprocal compensation for localtraffic exchanged between the parties. 143 ALLTEL has established
136 Section 6.? . 4 states: "The parties will provide Common ChannelSignaling (CCS) to one another, where available , in conjunction with allLocal/EAS Trunk Circuits. All CCS signaling parameters will be providedincluding calling 'party number (CPN), originating line information (OLI),calling party category, charge number , etc. All privacy indicators will behonored. " CCS is another term for SS? signaling.137 Meet Point Billing (MPB) is a revenue-sharing agreement where Cox and
Qwest have agreed to jointly provide access service to IXCs under separate
access tariffs.138 Section 5.2 states: "If the exchange of local/BAS traffic between the
Parties is within +/ 5% of the balance, the Parties agree that theirrespective call terminating charges will offset one another and no compensationwill be paid.
" "
139 See , Lafferty Rebuttal, Exhibit 25, 4:22-23.140 Section 4.states: "To the extent available, the parties willinterconnect their networks using SS? signaling where technically feasibleand available as defined in FR 905 Bellcore Standards including ISDN userpart ("ISUP") for trunk signaling and transaction capabilities applicationpart
( "
TCAP"for common channel signaling based features in theinterconnection of their networks.141 Exhibit 1 to the ALLTEL/Qwest ICA provides the rates for this
reciprocal compensation, and Exhibit 2 to the ALLTEL/Qwest ICA provides theexchanges subj ect to the reciprocal compensation arrangement. 142 Article V. G. 5 states: "The Parties will provide Common ChannelSignaling (CCS) to one another , where available, in conjunction with all
Local/EAS Trunk Circuits. All CCS signaling parameters will be provided
including calling party number (CPN), originating line information (OLI)calling party category, charge number, etc. All privacy indicators will behonored. "143 Article IV.1 states in pertinent part: "Reciprocal traffic exchangeaddresses the exchange of traffic between Carrier subscribers and USMC endusers. If such traffic is local, the provisions of this Agreement shall
.f":/.."nln" w"h .nv In' nn '.,vnln" n....t!\
;,tLKi: 'AKY'S KtCUKU, Ntl:H;:'A:'1V\ PUbliC SEKVILt CUMMI~:'IUN
Formal Complaint Nos. FC-1296 and FC-129?Page 33
that neither ALLTEL nor Qwest have amended the terms of the
ALLTEL/Qwest ICAs in order" to alter the compensation for 88?messages.144 It is fundamental that these ICAs are not subj ect
to unilateral amendment by only one party. Thus the compensa-
tion terms of each ICA remain in effect.
63. Based on our review of the record and the ICAs at
issue, the conclusion must be made that recovery of the costs ofthe 88? message charges are included within the reciprocal
compensation rates or bill-and-keep arrangements included in theICAs. Consistent with our finding that the 88? message is an
integral component of the end-user traffic, the ICAs reflect no
separate charges for 88? messages associated with the treatment
of the end-user traffic types addressed in the ICAs. Any other
conclusion would allow a party to unilaterally alter the terms
and conditions of an ICA, which we will not allow a party to do.
Since Qwest has purportedly unbundled its 88? rate in the 8GAT
and such separate rates have not been included in the ICAs I wefurther find that it is more plausible that the compensation
arrangements for 887 messages were included in the" reciprocal
compensation rates or bill and keep construct. This latte'
finding is further supported by our expectation that carriers
negotiate contracts in an effort to recover their costs and thefact that Qwest has not sought to renegotiate the ICAs. If
however, Qwest neglected to account for these 887 costs when it
negotiated the ICAs, it is not free to simply impose these costsby unilateral changes in its Access Catalog, but rather, mustfollow .the existing procedures and schedules to obtain revision
of the ICAs.
Grant of Relief to the Complainants
64. Based on the record before this Commission , we find
that a grant of the relief requested in the Co~plaints is neces-
sary to ensure that the Acce ss Catalog is applied in a fair andreasonable manner. We find this action is not only consistentwith applicable state law and the underlying policies estab-
lished therein , but also' the Act and prudent public policy.
Accordingly, for the specific reasons stated herein and the spe-cific opinions and findings of facts made herein, we grant the
Complainants the relief they seek and direct Qwest to take such
action necessary to implement the following three directives.
apply. Reciprocal traffic exchange covered by this Agreement is for Wireless
interconnection for CMRS carriers only in association with CMRS services.144 See Tr. 155:21-156:1; Tr. 208:23- 209:4.
,g;y P"ntoO ..ilh so, inM on toe,CI,O ,aD" €I
SECRETARY'S RECORD NEBRASKA PUBLIC SERVICE COMMISSION
Formal Complaint Nos. FC-1296 and FC-1297.Page 34
65. Within five business days of the entry of this orderthe Commission di~ects Qwest to withdraw the Access Catalogrevisions that are the subj ect to these Complaints and re-institute the SS7 rates, terms and conditions that had been ineffect prior to June 2001 (including, should Qwest so wish,filing revised intrastate switched access rates), and not to re-file any "unbundled" SS7 rate structure within the AccessCatalog until it can comply with the third directive below. make clear that we do not expect Qwest to alter any SS7 facilitycharges (the links and port charges) since those charges are notthe subj ect of the Complaints. We specifically note that anyefforts by Qwest to modify such charges would call into questionQwest'effort to properly implement the directives of thisorder.
66. We direct that within 10 days of the issuance of thisorderQwest refund or credit all SS7 message charges andassociated late charges or penalties, if any, that have beenassessed under the June 6, 2001 , Access Catalog revisions to Il-luminet, both on the disputed non-access traffic of its Co-Complainants, Cox and ALLTEL, and on similar non-access trafficof Illuminet' s other Nebraska carrier/customers. Subject to theComplainants' discretion, this refund may take the form ofeither a direct payment from Qwest or credits to be applied inmanner determined by the Complainants.
67. Finally, we direct Qwest not to file any f.urtherAccess Catalog SS7 rate structure revisions .that attempt toimplement separate facilities and SS7 message charges without asubstantial demonstration to this Commission t~at Qwest canproperly segregate, identify and properly bill, and refrain fromimproperly billing, the SS7 message charges associated with thedistinct types of intrastate end-user traffic its networkcurrently carries (i. e., local, EAS/ELCA, intraMTA CMRS, Qwest-originated toll and Qwest-terminated toll), and jointly-providedexchange access (that service required for third-party IXCs tooriginate and terminate their respective end-user intrastatetoll traffic via multiple LECs). This demonstration must bemade prior to ' any effort to implement such structure within theAccess Catalog, and must include , at a minimum, a demonstrationthat the implementation of such structure has been coordinatedwith the Complainants in this proceeding. The Commission findsthat Qwest may fulfill this directive either though direct mea-
surement or the adoption of one or more factors within Qwest' sAccess Catalog, the latter of which would exclude the S~7
"'.. .. '
St::CRE JARV'S RECORD, NEBKASKA i'U~LiL StKVICE COMMISSION
Page 35Formal Complaint Nos. FC-1296 and FC-1297
messages related to intrastate traffic for which the Access
Catalog does not apply (i. e., local, EAS , ELCA, intraMTA CMRS,
Qwest-originated toll and jointly-provided exchange access).
also direct that Qwest apply its chosen methodology in a manner
that Qwest' s billing properly disaggregates and segregates those
messages that are not subject to the charges included within the
Access Catalog. Should any issues regarding proper implementa-
tion of such unbundled SS7 rate structure remain, Qwest shall
provide a list of those issues and shall address efforts it has
taken to resolve those concerns. With respect to this specific
directive, we find that coordination among the parties to these
Complaints will assist the Commission in determining good faith
compliance by Qwest as well as avoid any unnecessary expenditure
of resources by the Commission and the parties.
68. For ' the reasons stated herein , we find that each of
these three directives is not only required to ensure a fair and
reasonable application of the Access Catalog by Qwest, but
necessary to ensure that the public interest associated with
competitive end-user service provisioning within the state of
Nebraska is served.
0 R D E
IT IS THEREFORE ORDERED by the Nebraska Public Service
Commission that the foregoing Opinion and Findings are
hereby, adopted.
MADE AND ENTERED in Lincoln,
of December, 2002.
Nebraska on this 17th day
~/+
~C'-
I 151 I Anne C. Boyl e
I/sl/Frank E. Landis
Z::U
' S V I ~
Chair
COMMISSION
ATTEST:
Executive Director
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