20060222Gates errata rebuttal.pdf

McDevitt & Miller LLP
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Lawyers
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O. Box 2564-83701 Chas. F. McDevitt
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February 22, 2006
Via Hand Delivery
Ms. Jean Jewell, Secretary
Idaho Public Utilities Commission
472 W. Washington
Boise, Idaho 83702
Re: Case No. QWE~ T ~O5~ 11
Dear Ms. Jewell:
Enclosed for filing in the above matter are (9) nine copies of the Errata Rebuttal Testimony of
Timothy 1- Gates with one copy designated as the "Reporter s Copy. A computer disc of the
testimony is also enclosed.
This testimony is identical to the version of testimony previously filed, except that line numbers
are added, as required by Commission rules. Please substitute this Errata version for the version
originally filed.
Very Truly Yours
\\CD
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MIIllR liP
DJMllc
John Antonok
Parties of Record
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Dean J. Miller
McDEVITT &; MILLER LLP
420 West Bannock Street
O. Box 2564~8370l
Boise, ID 83702
Tel: [phone]
Fax: [phone]
i oe(g)mcdevitt -miller. com
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Attorneys for Level 3 Communications, LLC ORIGINAL
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
IN THE MATTER OF LEVEL
COMMUNICATIONS, liC'S PETITION FOR
ARBITRATION PURSUANT TO SECTION
252(B) OF THE COMMUNICATIONS ACT
OF 1934, AS AMENDED BY THE
TELECOMMUNICATIONS ACT OF 1996
AND THE APPLICABLE STATE LAWS FOR
RATE, TERMS, AND CONDITIONS OF
INTERCONNECTION WITH QWEST
CORPORATION
Case N o. QWE~ T ~O5~ II
REBUTTAL TESTIMONY OF TIMOTHY J GATES
ON BEHALF OF LEVEL 3 COMMUNICATIONS, LLC
(Errata)
TABLE OF CONTENTS
INTRODUCTION .................................................................................................................................................
DISPUTED ISSUE 1: COSTS OF INTERCONNECTION ........................................................................
Issue IA Interconnection Responsibilities ...................................................................................... 4
Single POI..................................................................................................................................................
Issue ID Transport Facilities ...................................,..........................................................................
Level 3 Is Not the Cost Causer...........................................................................................................
Issue IG Dispute Over Traffic Types................................................................................................
Issue IH Relative Use Formula ......................................................................................""""""""'" 26
Issue IJ NRCs for LIS Trunking........................................................................................................
DISPUTED ISSUE 2: ALL TRAFFIC ON INTERCONNECTION TRUNKS .................................
ESP EXEMPTION ................................................................................................................................
VNXX TRAFFIC................................................................................................................................... 36
Gates, Rebuttal Testimony
Level 3 Communications LLC
Page 2 of 45
INTRODUCTION
PLEASE STATE YOUR NAME, OCCUPATION AND BUSINESS ADDRESS.
My name is Timothy J Gates. My business address is QSI Consulting, 819
Huntington Drive, Highlands Ranch, Colorado 80126.
ARE YOU THE SAME TIMOTHY J GATES WHO FILED DIRECT
TESTIMONY ON BEHALF OF LEVEL3 IN THIS PROCEEDING?
Yes, I am.
WHAT IS THE PURPOSE OF YOUR REBUTTAL TESTIMONY?
The purpose of my testimony is to respond to the testimony of Qwest witnesses
William R. Easton, Larry B. Brotherson and Philip Linse
HOW IS YOUR TESTIMONY ORGANIZED?
My testimony is organized by issue and by Qwest witness being rebutted.
DISPUTED ISSUE 1: COSTS OF INTERCONNECTION
PLEASE YOUR REBUTT ALPROVIDESOMECONTEXTFOR
TESTIMONY.
Level 3 and Qwest disagree on the network architecture for interconnection. The
parties also disagree on who is responsible for the costs on each side of the POI.
What Level 3 is requesting, however, is the same architecture that is in place in at
least 36 other states. Level3's proposed language was acceptable to SBC, Verizon
and BellSouth. As such, Qwest's unwillingness to accept Level 3's contact
language has nothing to do with technology or an unreasonable request from
Level 3. Instead, Qwest simply refuses to agree to arrangements that the industry
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 3 of 45
has put in place all around the country. Qwest s language and positions should
be rejected because they have no basis in engineering, economics or public policy.
Level 3's language and positions should be adopted because they are workable
and fair.
Issue IA Interconnection Responsibilities
PLEASE ADDRESS THE DIRECT TESTIMONY OF MR. WILLIAM
EASTON.
At various points in Mr. Easton s testimony he states that "Qwest is allowed to
recover costs that are just and reasonable and based on the cost of providing
interconnection." (See, for example, Direct of Easton at 5) This statement is part
of Qwest's position on Issue 1: Costs of Interconnection. As Mr. Easton correctly
points out
, "
There is presently no dispute as to where the interconnection occurs
or how many points of interconnection there will be.(Direct of Easton at 3)
The dispute relates primarily to who pays for interconnection costs on each side
of the POI.
CAN QWEST CHARGE LEVEL 3 FOR COSTS OF GETTING QWEST
ORIGINATED TRAFFIC TO THE POI FOR EXCHANGE WITH LEVEL
No. The financial responsibilities for interconnection for the exchange of traffic
should be borne solely by each carrier on its side of the POI. Carriers should not
be allowed to shift their costs of transporting traffic originating on their networks
to their competitors. In other words, sound economics dictate that each carrier
should be responsible for the costs of delivering its traffic to interconnecting
carriers for termination at a single point of interconnection per LA T A. Several
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 4 of 45
Federal Circuit Courts of Appeal have specifically affinned this. For example, as
the Fourth Circuit stated in a dispute between SBC and MCI on this very point
In sum, we are left with an unambiguous rule, the legality of
which is unchallenged, that prohibits the charge that SBC seeks
to impose. Rule 703(b) is unequivocal in prohibiting LECs from
levying charges for traffic originating on their own networks
and, by its own terms, admits of no exceptions. Although we
find some surface appeal in SBCs suggestion that the charge
here is not reciprocal compensation, but rather the permissible
shifting of costs attending interconnection, the FCC, as noted
above, has endorsed cost~shifting related to interconnection only
as it relates to the one-time costs of physical linkage, and in
doing so, expressly declined the invitation to extend the
definition of "interconnection" to include the transport and
termination of traffic.
These decisions flow from the simple technical reality that interconnection simply
means linking up networks. It is also consistent with the accepted economic
expedient of cost-causation. Cost shifting is unnecessary, uneconomic and anti-
competitive. This point is recognized by the FCC and by the federal circuit courts
of appeal that have addressed the issue in the context of interconnection
agreements, to wit: each carrier pays its own costs of exchanging traffic.
AT PAGE FIVE OF MR. EASTON'S DIRECT, HE STATES, "IT MAKES
SENSE THAT THE COST CAUSER COMPENSATE QWEST FOR
INTERCONNECTION AND TRANSPORT COSTS.IF THE COST
CAUSER (LEVEL 3) DOES NOT PAY THEN QWEST END USERS
WOULD HAVE TO BEAR THE COST." PLEASE COMMENT.
First of all, Mr. Easton is completely wrong to suggest that Level 3 is the cost
causer. Never in the history of telecommunications regulation has a regulator
MCImetro Access Transmission Services Inc. v. SBC Telecommunications, Inc.No. O3~1238 2003 US App.
LEXIS 25782
, *
24~5 (4th Cir. Dee 18, 2003).
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 5 of 45
detennined that the tenninating party is the cost causer. If Mr. Easton s upside
down view of regulatory law and economics were accepted, Qwest would never
pay a thing for calls its customers make to customers connected to other networks.
Mr. Easton s suggestion that Level 3 is the cost causer because Level 3 seeks
interconnection, and as such must pay for Qwest's costs on its side of the POI, is
completely wrong.
THE CALLS THAT QWEST ROUTES TO LEVEL 3'S POI ARE
ORIGINATED BY QWEST CUSTOMERS, CORRECT?
Yes. These are calls originated by Qwest's local subscribers. Again, since it is
the Qwest subscriber who originates the call, that subscriber is the cost causer, not
Level 3. The Qwest customer pays Qwest for local service and that customer has
the ability to dial an unlimited amount of local calls. One such call might be to an
ISP who purchases local service from Level 3. Qwest is compensated by its
customers for originating the call and getting the call to the POI. On the other
side of the POI, Level 3 is responsible for tenninating that call for Qwest to
wherever Leve13's customer may be. Naturally, Qwest should compensate Level
3 for tenninating the call.
MR. EASTON STATES AT PAGE FIVE OF HIS DIRECT THAT
QWEST'S END USERS SHOULD NOT HAVE TO BEAR THE BURDEN
OF PAYING FOR LEVEL 3'S ISP SERVICE.DO YOU AGREE?
Yes. Qwest end users do not pay for "Level 3' s ISP service" and would not pay
for any aspect of Level 3 service under the Level 3 proposal. First of all, Level 3
is not providing ISP service; it is providing local connectivity for an ISP so that
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 6 of 45
Qwest's customers can dial-up the ISP on a local basis.Second, Qwest's
proposal would deny Level 3 any compensation for tenninating calls originated
by Qwest customers. As such, Qwest would get a free ride on Level 3's network
for terminating these calls. Finally, in a complete reversal of sound principles of
economics, FCC Rules and common carrier regulation generally, Qwest wants to
impose access charges on the tenninating carrier for calls originated by Qwest'
customers.
Unlike traditional "interexchange services" Qwest's customers are not
Level customers for purposes providing interexchange
telecommunications service. To the extent a Qwest customer places a locally
dialed call that Qwest is statutorily required to hand off to Level 3 at the POI
Level 3 imposes no additional per minute of use charges for these calls.
Accordingly, under no regulatory authority - save Qwest's self-serving attempt to
create access charges where none could logically exist - may one carrier charge
an interconnecting carrier switched access charges for calls that are not made to
an IXC, and do not involve additional per minute of use charges. There is no
economic relationship between the Qwest customer and Level 3 for the provision
of an interexchange service, and the call is locally dialed and handed off between
the parties at the POI. Moreover, it is interesting to note that prior to the FCC's
ISP-Remand Order the vast majority of state commissions examining ISP-bound
traffic detennined that it was local. Thus Qwest's cost shifting is an entirely
transparent grab at intercarrier compensation; it is prima facie anticompetitive and
certainly not consistent with the principle of cost causation.
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 7 of 45
SO QWEST'S PROPOSAL WOULD NOT COMPENSATE LEVEL 3 FOR
TERMATING THE CALLS ORIGINATED BY QWEST CUSTOMERS
AND ALSO CHARGE LEVEL 3 ORGINA TING ACCESS FOR THOSE
CALLS?
Yes. Qwest would be compensated by its own customers for the local service, but
would charge Level 3 originating switched access charges for the same locally
dialed calls.
DOES QWEST AT LEAST AGREE TO PAY LEVEL 3 FOR
TERMINATING CALLS ORIGINATED BY ITS CUSTOMERS?
No. As such, Level 3 would pay Qwest for calls originated by Qwest customers
and receive no compensation for tenninating Qwest originated traffic. This is
completely unfair.
DO LOCAL RATES COVER THE COST OF CARRYING THIS TRAFFIC TO
THE POI OR DESIGNATED TRANSIT POINT?
Yes, but this does not refer just to Qwest s basic local rates. Local rates and
revenues include not only the basic local rate, but other revenues from subscriber
line charges, vertical services (i.e., call waiting, call forwarding, anonymous call
rejection and other star code features), universal service surcharges, extended
area service charges and the subsidies remaining in Qwest s access charges for
intra LATA and interLATA toll. Average local revenues tend to be $40 to $50 per
line per month.
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 8 of 45
IF LEVEL 3 PAID QWEST TO TRANSPORT QWEST'S ORIGINATED
TRAFFIC TO THE STATUTORILY REQUIRED SINGLE POI, WOULD
QWEST BE DOUBLE RECOVERING ITS COSTS?
Yes. Qwest would be paid twice for the local traffic - once by its local
subscribers and again through access charges paid by Level 3. Another benefit to
Qwest would be that Level 3 would be denied compensation for terminating the
calls handed off at the POI. Any reasonable person would recognize Qwest's
proposal as being fundamentally unfair.
DO QWEST'S LOCAL RATES (BASIC RATES, VERTICAL SERVICES
ETc.) COMPENSATE QWEST FOR ITS CUSTOMERS' USE OF THE
LOCAL TELEPHONE NETWORK?
Yes.
IS QWEST DEREGULATED IN IDAHO?
Yes it is. In the 2005 legislative session the Idaho Legislature enacted HB 224
which gives local exchange the option to remove its retail services from price
regulation by the Commission, subject to some limitations during a transition
period. On July 1, 2005 Qwest filed with the Commission its notice of election
removing most or all of its retail services from price regulation. The notice
became effective 30 days later, on August 1, 2005.
ARE THERE OTHER ORDERS THAT SUPPORT YOUR POSITION ON
WHICH PROVIDER GETTINGRESPONSIBLEFOR ILEC
ORIGINATED TRAFFIC TO THE POI?
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 9 of 45
Yes. I am sure there are many, but I will provide an example. In the FCC's Order
in the Kansas/Oklahoma 271 proceeding, the FCC again referred to its rules for
the proposition that an ILEC may not charge CLECs for traffic that originates on
the ILEC network. Specifically, that order states:
235. Finally, we caution SWBT from taking what appears to be an
expansive and out of context interpretation of findings we made in
our SWBT Texas Order concerning its obligation to deliver traffic to
a competitive LECs point of interconnection. (Note 695) In our
SWBT Texas Order we cited to SWBT's interconnection agreement
with MCI~WorldCom to support the proposition that SWBT
provided carriers the option of a single point of interconnection.
(Note 696) We did not, however, consider the issue of how that
choice of interconnection would affect inter~carrier compensation
arrangements. Nor did our decision to allow a single point of
interconnection change an incumbent LECs reciprocal
compensation obligations under our current rules. (Note 697) For
example, these rules preclude an incumbent LEC from charging
carriers for local traffic that originates on the incumbent LECs
network. (Note 698) These rules also require that an incumbent
LEC compensate the other carrier for transport (Note 699) and
termination (Note 700) for local traffic that originates on the
network facilities of such other carrier. (Note 701l
Note 698 in the above quote is a specific reference to Rule 51.703 (b). It is clear
from this and other rulings, that the originating carrier may not charge a
terminating carrier for the cost of transport, or for the facilities used to transport
that traffic to the POI. By extension, it is clear that simply because a POI might
be outside a local calling area, Qwest has no right to charge Level 3 for the cost of
transport, or for the facilities used to transport the traffic from the local calling
area to the POI.
In the Matter of Joint Application by SBC Communications Inc., Southwestern Bell Telephone Company, and
Southwestern Bell Communications Services Inc. d/b/a Southwestern Bell Long Distance for Provision of In-Region,
InterLATA Services in Kansas and Oklahoma CC Docket No. 00-217, FEDERAL COMMUNICATIONS
COMMISSION, 16 FCC Rcd 6237; 2001 FCC LEXIS 1202; 23 Comm. Reg. (P &; F) 299, RELEASE~
NUMBER: FCC 01-, January 22 2001 Released; * AdoptedJanuary 19 2001. (footnotes omitted)
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 10 of 45
IF THE TRAFFIC WERE ALL ISP~ BOUND, WOULD THAT CHANGE
QWEST'S INTERCONNECTION OBLIGATIONS?
No. Regardless of the type of traffic Qwest s customers originate, the rates that
Qwest charges those customers compensate Qwest for delivering the traffic to
the POI.
Single POI
THUS FAR YOU HAVE DISCUSSED THE PROPOSALS OF QWEST AND
LEVEL 3 FOR COST RESPONSIBILITY ASSOCIATED WITH GETTING
THE TRAFFIC TO THE POL HOW MANY POlS MUST LEVEL 3
ESTABLISH IN EACH LATA?
CLECs are only required to have a single POI in each LATA where they offer
service. I discussed this at some length in my direct testimony. An example of
the rulings on this important issue is found In SBC's Texas 271 proceeding,
wherein the FCC stated in pertinent part
Section 251, and our implementing rules, require an incumbent
LEC to allow a competitive LEC to interconnect at any technically
feasible point. This means that a competitive LEG has the
option to interconnect at only one technically feasible point in
each LATA.(emphasis added)
A similar finding was made in the Virginia WorldCom proceeding wherein that
order reads in pertinent part
Under the Commission s rules, competitive LECs may request
interconnection at any technically feasible point. This includes
the right to request a single point of interconnection in a
LATA.(emphasis added)
Texas SBC 271 Proceeding; CC Docket No. OO~65; Released June 30, 2000; at 9 78.
FCC Memorandum Opinion and Order, CC Docket Nos. 00~218, 00~249, OO~251;
Released: July 17, 2002; at 952.
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 11 of 45
There is nothing in the Act or in the FCC orders that support Qwest s position
that it may charge CLECs more for interconnection (through additional transport
or facilities charges) if they choose to have only one POI per LATA. Indeed, the
Act and FCC orders (such as the one cited above) conclude just the opposite.
DOES QWEST AGREE THAT ONLY A SINGLE POI IS REQUIRED?
Not really. While Qwest claims to support the idea, their contract language
belies their true intent because it entirely subverts the economic effect of a single
POI. Qwest would have Level 3 pay access from every Qwest "local" calling area.
Viewed in the light of the law, policy and economics behind this very simple rule
Qwest s language must be rejected.
WHAT IS LEVEL 3'S PROPOSAL WITH RESPECT TO SINGLE POI
LANGUAGE IN THE AGREEMENT?
Level 3's proposed language is as follows:Ll This Section describes the Interconnection of Qwest
network and CLECs network for the purpose of exchanging
Telecommunications Including Telephone Exchange Service and
Exchange Access traffic. Qwest will provide Interconnection at any
Technically Feasible point within its network.
1.Ll Establishment of SPOI: Qwest agrees to provide CLEC a Single
Point of Interconnection (SPOI) in each Local Access Transport Area
(LATA) for the exchange of all telecommunications traffic. The SPOI may
be established at any mutually agreeable location within the LATA, or, at
Level3's sole option, at any technically feasible point on Qwest s network.
Technically feasible points include but are not limited to Qwest s end
offices, access tandem, and local tandem offices.
1.1.2 Cost Responsibility. Each Party is responsible for constructing,
maintaining, and operating all facilities on its side of the SPOI, subject
only to the payment of intercarrier compensation in accordance with
Applicable Law. In accordance with FCC Rule 51.703 (b), neither Party
may assess any charges on the other Party for the origination of any
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 12 of 45
telecommunications delivered to the other Party at the SPOI, except for
Telephone Toll Service traffic outbound from one Party to the other when
the other Party is acting in the capacity of a provider of Telephone Toll
Service, to which originating access charges properly apply.
1.1.3 Facilities included/transmission rates. Each SPOI to
established under the terms of this Attachment shall be deemed to include
any and all facilities necessary for the exchange of traffic between Qwest's
and Level3's respective networks within a LATA. Each Party may use an
Entrance Facility (EF), Expanded Interconnect Channel Termination
(EICT), or Mid Span Meet Point of Interconnection (POI) and/or Direct
Trunked Transport (DTT) at DS1, DS3 , OC3 or higher transmission rates
, in that Party s reasonable judgment, is appropriate in light of the actual
and anticipated volume of traffic to be exchanged. If one Party seeks to
establish a higher transmission rate facility than the other Party would
establish, the other Party shall nonetheless reasonably accommodate the
Party's decision to use higher transmission rate facilities.
1.1.4 Each Party Shall Charge Reciprocal Compensation for the
Termination of Traffic to be carried. All telecommunications of all types
shall be exchanged between the Parties by means of from the physical
facilities established at Single Point of Interconnection Per LATA onto its
Network Consistent With Section 51.703 of the FCC's Rules:
1.1.4.1 Level 3 may interconnect with Qwest at any technically feasible
point on Qwest's network for the exchange of telecommunications traffic.
Such technically feasible points include but are not limited to Qwest
access tandems or Qwest local tandems. When CLEC is interconnected
at the SPOI. separate trunk groups for separate types of traffic may be
established in accordance with the terms hereof. No separate physical
interconnection facilities, as opposed to separate trunk groups within
SPOI facilities, shall be established except upon express mutual
agreement of the Parties.
As you can see from the language above, Level 3 clearly addresses the single POI
entitlement and the associated cost responsibility on each side of the POI.
Qwest's language, however, completely ignores the single POI issue, and instead
discussed trunking on its side of the POI.
WHAT IS QWEST'S PROPOSED LANGUAGE FOR THIS SECTION
THE AGREEMENT?
The Qwest proposal is as follows:
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 13 of 45
Ll This Section describes the Interconnection of Qwest s network
and CLECs network for the purpose of exchanging Exchange Service
(EAS/Local traffic), IntraLA TAT oll carried solely by local exchange
carriers and not by an IXC (IntraLATA LEC toll), ISP~Bound traffic, and
Jointly Provided Switched Access (InterLATA and IntraLATA) traffic.
Qwest will provide Interconnection at any Technically Feasible point
within its network. Interconnection, which Qwest currently names
Local Interconnection Service" (LIS), is provided for the purpose of
connecting End Office Switches to End Office Switches or End Office
Switches to local or Access Tandem Switches for the exchange of
Exchange Service (EAS/Local traffic); or End Office Switches to Access
Tandem Switches for the exchange of IntraLATA LEC Toll or Jointly
Provided Switched Access traffic. Qwest Tandem Switch to CLEC
Tandem Switch connections will be provided where Technically Feasible.
New or continued Qwest local Tandem Switch to Qwest Access Tandem
Switch and Qwest Access Tandem Switch to Qwest Access Tandem
Switch connections are not required where Qwest can demonstrate that
such connections present a risk of Switch exhaust and that Qwest does
not make similar use of its network to transport the local calls of its own
or any Affiliate s End User Customers.
By requiring Level 3 to pay for facilities on the Qwest side of the POI, Qwest
completely eliminates the purpose and benefits of the single POI entitlement.
The single POI allows CLECs to enter the market without having to duplicate
the ILEC legacy network technology or structure. Of course, this does not
preclude the parties from voluntarily agreeing to establish whatever additional
POls they may choose in particular situations.
DOES THE SINGLE POI CHANGEENTITLEMENT YOUR
UNDERSTANDING OF THE FCC'S MEANING OF LOCAL CALLING
AREA?
Yes. By only requiring a single POI per LATA, the FCC has effectively defined the
local calling area for interconnecting CLECs to be a LATA. From a competitive
perspective this makes sense because it ensures that the incumbent cannot force
upon the competitor costs that would make retail competition impossible. For
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 14 of 45
CMRS providers, the local calling area is an MTA (major trading area) which in
some cases is larger than a state. For instance, in Idaho we have two LATAs and
two MT As (MT A 42 and MT A 36) although they are not coterminous. This is
not to say that the single POI entitlement has changed the local calling areas
established by the Commission, which are set for purposes of retail services ~ to
the extent those services are still regulated. To constrain a competitor to retail
service areas prescribed during a period of monopoly regulation of a single
technology incumbent when the competitor wishes to offer larger local calling
areas ensures that Iowa consumers will continue to pay higher, not lower rates
for the telecommunications services they purchase.
Issue ID Transport Facilities
AT PAGE 12 OF HIS TESTIMONY, MR. EASTON STATES THAT LEVEL 3
...
HAS AN OBLIGATION TO COMPENSATE QWEST FOR PROVIDING
SERVICES WHICH ALLOW LEVEL 3 TO SERVE ITS ISP END USERS.
PLEASE COMMENT.
Mr. Easton is wrong to suggest that Level 3 is responsible for Qwest s network on
the Qwest side of the POI. This seems to be a recurring theme throughout
Qwest s testimony. It is true that carriers share the cost of interconnection by
bringing their originated traffic to the POI. It is not Level 3's responsibility,
however, to pay Qwest for getting its originated traffic from Qwest end users to
the POI. That is Qwest's responsibility. As the FCC has repeatedly stated and as
affirmed by federal courts nationwide Rule 51.703(b) requires that each carrier
bear its costs on its side of the POI:
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 15 of 45
(b) A LEC may not assess charges on any other
telecommunications carrier for telecommunications traffic that
originates on the LEe's network.
This language is very straight forward.We are talking about traffic that
originates on Qwest s network. Qwest may not charge Level 3 for getting this
traffic to the PO
DOES LEVEL 3'S PROPOSED LANGUAGE REFER TO RULES 703(B) AND
709?
Yes. Level3's proposed language is as follows:
7.2.2.1.2.2. CLEC may order transport services from Qwest or from a
third-party, including a third party that has leased the private line transport
service facility from Qwest for purposes of network management and
routing of traffic to/from the POI~ Such transport provides a transmission
path for the LIS trunk to deliver the originating Party s Exchange Service
EAS/Local traffic to the tenninating Party s End Office Switch or Tandem
Switch for call tennination. This Section is not intended to alter either
Party s obligation under Section 251(a) of the Act or under Section 51.703
or 51.709 of the FCC's Rules.
As noted above, Mr. Easton suggests that this language indicates that "Level 3
refuses to acknowledge is that it has an obligation to compensate Qwest for
providing the services which allow Level 3 to serve its ISP end users." Mr. Easton
further complains about Level 3 language because "Compensation issues do not
belong in this section ...." but Qwest's language specifically refers to the CLEC
purchasing" transport services from Qwest. Qwest s attempts to misconstrue
economic principles and sound public policy simply belie their pecuniary
motives.
Each of Qwest's propositions regarding single POI simply amount to
requesting that the Commission protect Qwest from competition by forcing
Qwest s competitors to mimic Qwest s network designs and costs. Qwest's
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 16 of 45
positions are especially ironic when considered in light of the fact that the FCC
relieved Qwest (and other ILECs) of the obligation to unbundle local switching
because of the availability and use of newer more efficient technologies, such as
that deployed by Level 3. To wit:
As the Commission found in the Triennial Review Order, there has
been a significant increase in competitive LEC circuit switch
deployment over time, growing approximately 71 percent from 700
switches in 1999 to approximately 1,200 switches in 2003.
Incumbent LEC data indicate that competitive carriers are serving
over 3 million mass market lines with those switches. Further
pursuant to our "reasonably efficient competitor" standard, we
consider competitive LECs' deployment of newer , more efficient
switching technologies, such as packet switches. Incumbent
LECs cite evidence that, in the time following the Triennial
Review Order competitive LECs have focused on deploying
softswitch technology and packet switches. These switches
are less expensive than traditional circuit switches and are
more scalable. This evidence indicates that competitive LECs are
not impaired in the deployment of competitive switches. As
discussed below, we also find that competitive LECs are able to
use switches, once deployed, to serve the mass market. (206)
In addition, pursuant to the "reasonably efficient competitor
standard discussed above, we evaluate impairment based on the
technology a reasonably efficient competitive LEC would deploy.
Competitive LECs can rely on newer, more efficient technology
than incumbent LECs (whose networks have been deployed
over decades), such as packet switches. Further, the ability of
competitive circuit switches to serve wider geograpmc regions
reduces the direct, fixed cost of purchasing circuit switcmng
capability and allows competitive carriers to create their own
switching efficiencies. (207)
224.We also conclude that an absence of sufficient collocation
space does not hinder competitive LECs' ability to deploy
competitive switches to a degree that gives rise to operationalimpairment. With respect to packet switches, the Commission
found in the Triennial Review Order "that any collocation costs
and delays incurred by requesting carriers to provide packet
switched services do not rise to a level" of demonstrating
impairment because such disadvantages are likely outweighed
by (competitive LECs') advantage in relying solely on newer,
more efficient technology.Similarly, we note that a reasonably
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 17 of 45
efficient competitor does not have to be collocated in every
incumbent LEC central office in order to serve customers in that
wire center reducing the likelihood that lack of collocation space
will truly result in impairment in the absence of unbundled
switching.s (emphasis added)
To think that the FCC relieved ILECs of significant unbundling requirements
based upon those competitor abilities to deploy newer, more efficient
technology, only to turn around and require those very same competitors to
mimic as an architectural or monetary matter the network architecture of their
incumbent competitors strains credulity.There can be no intermodal
competition of any sort if the Commission allows this sort of ILEC protectionism.
IS RULE 51.703(B) CONSISTENT WITH ECONOMIC THEORY?
Yes. This rule is the embodiment of the "cost causer" economic principle - cost
causers should pay the cost they impose on society. In this case, when a Qwest
subscriber makes a call to a Level 3 customer, Qwest is responsible for the cost of
getting that traffic to the POI. As such, the language to "order" transport facilities
is correct since there is no requirement to "purchase" facilities for the transport of
Qwest originated traffic on the Qwest side of the POI.
Level 3 Is Not the Cost Causer
WHY DOES QWEST RAISE THE ISSUE OF "COST CAUSER" WHEN THE
RULES REQUIRE EACH PARTY TO BEAR ITS COSTS OF ORIGINATING
AND TRANSPORTING TRAFFIC ON ITS NETWORK TO THE POI?
In the Matter of Unbundled Access to Network Elements Review of the Section 251
Unbundling Obligations of Incumbent Local Exchange Carriers), WC Docket No. 04~313, CC
Docket No. Ol~ 338; Order On Reman;, '1'1206 207, and 224 (Released: February. 4, 2005).
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 18 of 45
It appears that Qwest's approach is largely characterized by imposing upon Level
3 classifications that have more to do with their retail classifications than with the
exchange of traffic between interconnecting LECs. In this sense, Qwest uses the
term "VNXX" or "FX" to create a false distinction between FX terminated by
ILECs and FX provided by incumbent LECS.
so YOU DISAGREE WITH MR. EASTON'S SUGGESTION THAT LEVEL 3
IS THE COST CAUSER FOR ALL ISP~ BOUND AND VNXX TRAFFIC?
Absolutely. As I stated earlier, Qwest's customers - who are subscribers to
Qwest's local service plans - are originating these calls to Level 3 customers. It is
their choice to employ the Qwest service to contact a Level 3 customer. Qwest
customers are paying Qwest to complete those calls and to get that traffic to Level
3. Level 3 is not the cost causer, and should not have to pay the cost of getting this
traffic to the POI.
DO YOU AGREE WITH QWEST'S POSITION ON FX!VNXX TRAFFIC?
No. Simply because a call may terminate in a different or adjacent exchange does
not mean that it should be treated differently than other locally dialed calls. As I
noted in my direct testimony, Qwest s responsibilities and costs are absolutely
identical regardless of the location of the Level 3 customer. In each case, a locally
dialed call is routed to the POI for termination. All that Qwest does is determine
that the dialed telephone number is a Level 3 number and route the call to Level 3
on an appropriate trunk group. What Level 3 does is the same in both cases: it
recognizes the incoming traffic as bound for one of its customers and sends the
traffic on to that customer. The only difference is whether the ISP's gear
receiving the call is at the end of a short circuit (close to Level 3's switch, and
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 19 of 45
thus often not in the calling party's retail local calling area) or a long circuit (far
away from Level 3's switch, and thus, possibly, in the calling party s retail local
calling area). Regardless of the distance, it is Level 3's responsibility to complete
the call. It makes no economic sense whatsoever to make any distinction in
Qwest's financial or operational obligations depending on whether Level 3 uses a
long or short circuit to connect its customers to its switch.
FXNNXX traffic is simply a competitive response to traditional foreign
exchange service which Qwest stated in discovery it has been providing in Iowa
since 1954.6 That functionality is now being used by ISPs to efficiently provision
service throughout the United States. Qwest's foreign exchange, Wholesale Dial
and OneFlexTM services provide a similar functionality.
ARE THERE CIRCUMSTANCES UNDER WHICH LEVEL 3 HAS AGREED
TO PAY FOR FACILITIES ON THE QWEST SIDE OF THE POI?
Yes. As Mr. Ducloo explains, Level 3 typically adds direct trunks when traffic
volumes reach 512 BHCCS. There may, however, be circumstances when traffic
should be allowed to increase beyond this point for a period of time. This
consistent with Level 3's practices with Qwest as well as with every other major
ILEc. In fact, Mr. Linse noted in his testimony that "Level 3 has historically been
very cooperative when working with Qwest's trunk administration group.
(Direct of Linse at 28)Level 3 has historically been very proactive in its
relationships with Qwest and other ILECs to ensure that traffic is properly
engineered to avoid tandem exhaust and blocking that might impact service
Qwest has yet to provide a response to Level 3 Request No. 25; however, it has stated
that in other states including Iowa and Colorado that it has offered such services from 1954 or so
I would expect their AZ response to be the same.
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 20 of 45
quality. Parenthetically, as Mr. Ducloo has noted, Qwest's insistence upon a
duplicative FGD architecture is somewhat confusing as this requirement would
accelerate tandem exhaust throughout Qwest's network.
Issue IG Dispute Over Traffic Types
AT PAGE 16 OF HIS TESTIMONY, MR. EASTON DISCUSSES LANGUAGE
FOR SECTION 7.3.1.1.1 (ENTRANCE FACILITIES). QWEST PROPOSES
LANGUAGE THAT WOULD HAVE THE "TERMINATING" CARRIER
RESPONSIBLE FOR THE ISP~BOUND AND VNXX TRAFFIc. IS THIS
CONSISTENT WITH COST CAUSATION?
Absolutely not. As discussed above, the originating carrier is responsible for
getting traffic to the POI for termination by the interconnected provider. Qwest
turns this economic principle on its head by suggesting that the "terminating
carrier is responsible for ISP-bound traffic and for VNXX traffic.
WHAT LANGUAGE HAS QWEST PROPOSED?
Qwest's proposed language for Section 7.3.1.1.3 is as follows:
1.1.3 If the Parties elect to establish LIS two-way trunks, for
reciprocal exchange of Exchange Service (EAS/Local) traffic, the cost of
the LIS two-way facilities shall be shared among the Parties by reducing
the LIS two-way entrance facility (EF) rate element charges as follows:
1.1.3.Entrance Facilities - The provider of the LIS two-way
Entrance Facility (EF) will initially share the cost of the LIS two-way EF
by assuming an initial relative use factor (RUF) of fifty percent (50%) for
a minimum of one (1) quarter ifthe Parties have not exchanged LIS traffic
previously. The nominal charge to the other Party for the use of the EF, as
described in Exhibit A, shall be reduced by this initial relative use factor.
Payments by the other Party will be according to this initial relative use
factor for a minimum of one (1) quarter. The initial relative use factor will
continue for both bill reduction and payments until the Parties agree to a
new factor, based upon actual minutes of use data for non-ISP-bound
traffic to substantiate a change in that factor. If a CLEC's End User
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 21 of 45
Customers are assigned NPA-NXXs associated with a rate center
different from the rate center where the Customer is physically located,
trafflc that does not originate and terminate within the same Qwest local
calling area (as approved by the Commission), regardless of the called
and calling NPA-NXXs, involving those Customers is referred to
VNXX trafflc . For purposes of determining the RUF, the terminating
carrier is responsible for ISP-bound trafflc and for VNXX trafflc.
either Party demonstrates with non-ISP-bound traffic data that actual
minutes of use during the first quarter justify a new relative use factor, that
Party will send a notice to the other Party. Once the Parties finalize a new
factor, the bill reductions and payments will apply going forward, from the
date the original notice was sent. ISP-bound traffic or traffic delivered to
Enhanced Service providers is interstate in nature. Qwest has never
agreed to exchange VNXX Traffic with CLEC. (emphasis added)
WHAT LANGUAGE DOES LEVEL 3 PROPOSE?
Level 3 proposes the following:1.3 Each party is solely responsible for any and all costs arising
from or related to establishing and maintaining the interconnection trunks
and facilities it uses to connect to the POI. Thus, neither party shall
require the other to bear any additional costs for the establishment and
operation of interconnection facilities that connect its network to its side
ofthe POI.
Intercarrier compensation. Intercarrier compensation for
traffic exchanged at the SPOI shall be in accordance with FCC Rule
51.703 and associated FCC rulings. For avoidance of doubt, any traffic
that constitutes "telecommunications" and that is not subject to switched
access charges, including without limitation so-called "infonnation
access" traffic, shall be subject to compensation from the originating
carrier to the terminating carrier at the FCC-mandated capped rate (as of
the effective date hereof) of $0.0007 per minute. Any dispute about the
appropriate intercarrier compensation applicable to any particular traffic
shall be resolved by reference to the FCC's rule and associated orders.
Level 3's language is simple and consistent with the FCC rules regarding who
bears responsibility on each side of the POI. Qwest's language, on the other
hand, creates an artificial and unconventional distinction for traffic based on the
physical location of customers.
ARE THE VNXX AND ISP-BOUND CALLS ORIGINATED BY QWEST
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 22 of 45
CUSTOMERS, AND DIALED ON A LOCAL BASIS?
Yes.
QWEST REFERS TO RULE 51.709(B) TO SUPPORT ITS POSITION ON
THE RUF CALCULATION.SPECIFICALLY, MR. EASTON SUGGESTS
THAT LEVEL 3 MUST BE RESPONSIBLE FOR THE ISP~BOUND AND
VNXX TRAFFIc. (DIRECT OF EASTON AT 19~20) IS THAT A CORRECT
INTERPRETATION OF RULE 51.709(B)?
No. Rule 51.709(b) states:
(b) The rate of a carrier providing transmission facilities dedicated
to the transmission of traffic between two carriers' networks shall
recover only the costs of the proportion of that trunk capacity
used by an interconnecting carrier to send traffic that will
terminate on the providing carrier s network. Such proportion
may be measured during peak periods.
This rule is again consistent with the economic principle of cost~causation in that
it calculates the proportion to be paid based on the originating traffic as a
proportion of total traffic. That proportion is then used to allocate the cost of
the facilities between the two providers. The ISP~bound and VNXX traffic is
originated by Qwest subscribers and assuming a relative use factor is appropriate
for calculating costs, then the ISP~bound and VNXX traffic must be included in
Qwest's proportion of the cost , and not in Level3's proportion of the cost.
IS THERE ANY COST BASIS FOR TREATING THE ISP~BOUND AND
VNXX TRAFFIC ANY D IFFERENTL Y THAN OTHER LOCAL TRAFFIC?
No. In Level 3 Request No. 20, Level 3 asked the following question:
Does Qwest contend that the costs it incurs in originating a call to
a Level 3 customer differ in any respect whatsoever based upon the
physical location of the Level 3 customer? If Qwest responds to
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 23 of 45
the above question with anything other than an unequivocal "
please provide a detailed explanation of how the location of Level
s customer on Level3's side of the POI could affect Qwest s costs.
Include in that explanation all cost studies and any other
documentation in your possession that you believe provides
support for your position.
Qwest's response in pertinent part was
, "
The costs Qwest incurs do not vary
based upon the physical location of the Level 3 customer.
AT PAGE 20 OF HIS TESTIMONY, MR. EASTON ARGUES THAT RULE
51.703(B) REFERS TO TELECOMMUNICATIONS TRAFFIC AND NOT
ISP~ BOUND TRAFFIc. PLEASE COMMENT.
Subpart H of the FCC Rules does refer to telecommunications traffic and Section
51.703(b) refers to reciprocal compensation obligations. The FCC - in its ISP
Remand Order - carved out federal authority to set intercarrier compensation rates
for ISP~bound traffic, under one particular subsection of Section 251. But the
FCC was crystal clear in stating that it was not changing the scope of how ISP~
bound traffic is exchanged between carriers under the other subsections of
Section 251, or to limit the state commissions' jurisdiction beyond the issue of
setting intercarrier compensation rates. Specifically, the FCC emphasized in
footnote 149 of its ISP Remand Order that its establishment of the interim regime
affects only the intercarrier compensation (i.e., the rates) applicable to the delivery
of ISP~bound traffic. It does not alter carriers' other obligations under our Part
rules, 47 CF.R. Part 51, or existing interconnection agreements, such as
obligations to transport traffic to points of interconnection.(emphasis in
original)Thus, the ISP Remand Order does not relieve Qwest of its
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 24 of 45
interconnection obligations under rule 51.703 (b). Finally, no matter what the
Commission rules on compensation for ISP~bound traffic, such traffic will be
going over the interconnection trunks and facilities and therefore should be
included in determining relative use of the trunks and facilities to originate
traffic.
ARE THE CALLS ORIGINATED BY QWEST CUSTOMERS THAT ARE
ULTIMATELY DETERMINED TO BE ISP~BOUND OR VNXX, IMPOSING
ANY ADDITIONAL COSTS ON QWEST?
No. As noted above, Qwest has admitted that these calls do not increase its
costs. The calls are dialed and routed like any other local call and Qwest cannot
distinguish the ISP~bound or VNXX calls from other local calls. As such, Qwest's
responsibilities and costs for delivering this traffic to the POI are the same as for
any other local call. Contrary to Mr. Easton s suggestion, Rule 51.703(b) does
apply to the exchange of ISP-bound and VNXX traffic. The only difference is that
Level 3 will receive the lower FCC mandated rate of $0.0007 per minute instead
of the standard reciprocal compensation rate for terminating the traffic.
ARE THERE ANY FEDERAL ORDERS THAT ADDRESS THE COST OF
ISP~BOUND TRAFFIC AS OPPOSED TO OTHER LOCALLY DIALED
TRAFFIC?
Yes. Paragraph 90 of the ISP Remand Order addresses the cost of ISP~bound and
voice traffic:
This is the correct policy result because we see no reason to
impose different rates for ISP~bound and voice traffic. The record
developed in response to the lntercarrier Compensation NPRM and the
Public Notice fails to establish any inherent differences between the
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 25 of 45
costs of anyone network of delivering a voice call to a local end~
user and a data call to an ISP. Assuming the two calls have
otherwise identical characteristics (e., duration and time of day),
a LEC generally will incur the same costs when delivering a call to
a local end~user as it does delivering a call to an ISP. We therefore
are unwilling to take any action that results in the establishment
of separate intercarrier compensation rates, terms and conditions
for local voice and ISP~bound traffic. To the extent that the record
indicates that per minute reciprocal compensation rate levels and
rate structures produce inefficient results, we conclude that the
problems lie with this recovery mechanism in general and are not
limited to any particular type of traffic. (emphasis in original)
It is clear from Qwest's admissions and the FCC's findings that there is no
difference in cost for delivering a local voice call or an ISP~bound call to the POI.
Since these calls are dialed in the same manner, handled in the same manner from
a network perspective, and - not surprisingly - have the same cost, there is no
justification for treating these calls differently from all other locally dialed calls.
Indeed, this is precisely what the FCC found in paragraph 92 of the ISP Remand
Order Nor does the record demonstrate that CLECs and ILECs incur different
costs in delivering traffic that would justify disparate treatment of ISP~bound
traffic and local voice traffic under section 251(b )(5).
Issue IH Relative Use Formula
AT PAGES 21 AND 22 OF MR. EASTON'S TESTIMONY HE DISCUSSES
THE PROPOSED LANGUAGE OF THE TWO PARTIES WITH RESPECT
TO DIRECT TRUNKED TRANSPORT. QWEST AGAIN DEFINES VNXX
TRAFFIC AND STATES THAT "FOR PURPOSES OF DETERMINING THE
RUF, THE TERMINATING CARRIER IS RESPONSIBLE FOR ISP~BOUND
TRAFFIC AND FOR VNXX TRAFFIc." PLEASE COMMENT.
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 26 of 45
For all the economic reasons stated above, ISP~bound and VNXX traffic must be
included in the RUF calculation. These locally dialed calls are originated by
Qwest local service subscribers who pay Qwest to complete the calls.
IN THAT SAME SECTION REGARDING ISSUE NO., QWEST STATES
ISP~BOUND TRAFFIC IS INTERSTATE IN NATURE.QWEST HAS
NEVER AGREED TO EXCHANGE VNXX TRAFFIC WITH CLEc."
THAT CONSISTENT WITH ITS OTHER POSITIONS?
No. In this instance Qwest again attempts to apply its retail calling area
distinctions to locally dialed traffic exchanged between interconnected LECs.
In testimony and other statements, Qwest misconstrues the ESP exemption to
apply only when the calling and called parties are in the same local calling area.
This is completely inconsistent with the FCC's treatment of this traffic. The
FCC has pre-empted the Commission on intercarrier compensation for this
traffic, but Qwest is still required to route this traffic to the POI per the state
approved interconnection agreement.
Issue IJ NRCs for LIS T runking
AT PAGES 23 OF HIS TESTIMONY MR. EASTON STATES THAT LEVEL
S LANGUAGE FOR SECTION 7.3.3.1 DENIES QWEST COMPENSATION
FOR WORK PERFORMED ON BEHALF OF LEVEL 3. DO YOU AGREE?
No. Level 3's language is consistent with economic principles in that "neither
party may charge for trunking on its side of the POI. This is consistent with the
FCC mandate that each party pays for the facilities on its side of the POI.
Qwest's language would have Level 3 pay for facilities on both sides of the POI.
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 27 of 45
Qwest s proposal is anticompetitive, unreasonable, internally contradictory when
viewed in light of unbundling relief granted to them, and against sound public
policy in light of the fact that local rates in Iowa are going up, not down. Qwest
is trying to change the rules and that is unfair.
DISPUTED ISSUE 2: ALL TRAFFIC ON INTERCONNECTION TRUNKS
PLEASE INTRODUCE THIS ISSUE.
This issue is a dispute as to whether Level 3 should be allowed to combine all
types of traffic on a single interconnection trunk group. Qwest wants Level 3 to
use different trunk groups for different types of traffic ostensibly for billing
purposes.
FROM AN ECONOMIC PERSPECTIVE, WHAT IS THE IDEAL SOLUTION
TO THIS DISPUTE?
The correct solution would be to route all traffic over a single interconnection
trunk group. This solution is the most efficient solution from an engineering
perspective as discussed by Mr. DuCloo, but it is also the most efficient solution
from an economic perspective. By not allowing Level 3 to route all traffic on its
interconnection trunks it is denying Level 3 the efficiencies that it could obtain
otherwise. In other words, Qwest is forcing Level 3 to purchase additional
trunks and facilities that are not necessary given the level of traffic. Artificially
increasing the cost of an incumbent's competitors is a common tactic, but is not
in the public interest.
MR. EASTON STATES AT PAGE 28 THAT "QWEST HAS NO
OBLIGATION TO PERMIT LEVEL 3 TO COMMINGLE SWITCHED
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 28 of 45
ACCESS TRAFFIC WITH OTHER TYPES OF TRAFFIC ON THE
INTERCONNECTION TRUNKS CREATED UNDER THE AGREEMENT.
DO YOU AGREE?
No.Qwest should allow Level 3 to interconnect in the most efficient manner
possible so long as it is technically feasible. Though Qwest refuses to admit in
Idaho that there is no technical reason that would prohibit Qwest from
combining all types of traffic on interconnection trunks (Level 3's Motion to
Compel is pending), Qwest did admit to this in other states (such as Iowa) and I
would expect the same answer in Idaho.
DOES QWEST COMBINE ALL TRAFFIC TYPES ON FGD TRUNK
GROUPS FOR OTHER CLECS?
Yes. Qwest allows CLECs, who have a preponderance of FGD traffic, to combine
all other types of traffic on those trunks as well? Level 3 has a preponderance of
local traffic, and should be allowed to combine what little FGD traffic it might
have on its interconnection trunks. This solution is workable and fair.
WHAT THEN IS QWEST'S OBJECTION TO COMBINING ALL TRAFFIC
ON A SINGLE INTERCONNECTION TRUNK GROUP?
Qwest is willing to combine all traffic on a single trunk group, as long as it is a
FGD trunk group. Indeed, Qwest will allow all traffic types, with the exception
of switched access traffic, to be carrier over interconnection trunks. (Easton
Direct at 25) The impact of Qwest s proposals is to increase Level 3's costs. For
instance, Qwest says that it is willing to allow the exchange of differently rated
See Qwest Response to Level 3 Request No.3. (Exhibit 112)
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 29 of 45
traffic over FGD trunk groups, but Qwest s proposal again is nothing more than
an attempt to obtain more money wrapped in the enigma of contradictory
requirements. Mr. Ducloo speaks to those issues at length. The economics of the
situation, however, are clear: Qwest imposes unnecessary costs upon its
competitor - Level 3 - for no other reason than to force upon Level 3 billing
solutions" that already are unworkable in the real world. Instead, as Level 3
already does with Verizon, BellSouth and SBC, the parties should exchange
traffic over a single set of interconnection trunks and apply factors - which
Qwest itself already applies to both the interconnection trunks (to allocate
billing for "locally" rated traffic and "intraLATA Toll" traffic) and on the FGD
trunks (to allocate billing for "InterLATA interstate" and "InterLATA
intrastate
WHY DOES QWEST OPPOSE LEVEL 3'S PROPOSAL TO USE BILLING
FACTORS?
Mr. Easton argues that Level 3's proposal to use billing factors would not result
in accurate bills.His argument lacks rational foundation as the
telecommunications industry - and as I note above Qwest itself not only has
used billing factors for decades. Requiring separate trunk groups, as suggested
by Qwest, results in a deadweight economic loss to society.
IF BILILNG ACCURACY IS AN ISSUE IN THIS PROCEEDING, WOULD
THAT SAME ISSUE BE PERTINENT FOR THE COMBINED TRAFFIC ON
FGD TRUNKS?
Yes. Qwest is apparently concerned about incentives to misreport traffic since
different traffic is subject to different rates. If that were truly a concern, then
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 30 of 45
Qwest would not have allowed other CLECs to combine all traffic on FGD
trunks. Qwest allows other CLECs to combine all traffic on FGD trunks, so it is
only fair to allow Level 3 to combine all traffic on interconnection trunks.
WHAT IS LEVEL 3'S PROPOSAL FOR THE USE OF BILLING FACTORS?
The billing factors would be based on actual traffic data and adjusted as new data
becomes available. Level 3 would provide updates for the factors quarterly or
perhaps more often. Level 3's proposal is certainly preferable to forcing a carrier
to use FGD trunks in addition to interconnection trunks.
PLEASE SUMMARIZE YOUR POSITION ON COMBINING TRAFFIC
TRUNK GROUPS.
Qwest and Level 3 agree that there is no technical reason that would prohibit
Qwest from combining all types of traffic on interconnection trunks. So the only
issue to resolve is whether it is more efficient to use billing factors or to force
Level 3 to incur the additional and unnecessary costs of the FGD trunks. Unless
and until Qwest can show that billing factors are not appropriate, there is no
economic justification for forcing these additional costs on Level 3. As such, the
Commission should order Qwest to route all traffic to the interconnection trunks
and allow Level 3 to provide billing factors that allow for the appropriate pricing
of the traffic.
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 31 of 45
ESP EXEMPTION
MR. BROTHERSON ADDRESSES THE ESP EXEMPTION IN HIS
TESTIMONY AT PAGES 15-17.DO YOU AGREE WITH HIS
DISCUSSION?
No. Mr. Brotherson is correct that the exemption has a long history, but his
interpretation of the exemption assumes that it was created solely for the benefit
of Qwest and that it applies solely according to a pre~Act view of the world.
Qwest's interpretation would force ISPs to purchase services only from ILECs
since they would be the only provider with facilities in every local calling area.
This is completely inconsistent with the wording of the exemption and with the
pro~competitive intent of the Act.
HAS THE PURPOSE OF THE EXEMPTION CHANGED SINCE ITS
INCEPTION?
No. The ESP exemption is the cornerstone of the policy of the United States "
promote the continued development of the Internet and other interactive
computer services and interactive media... ( and) to preserve the vibrant and
competitive free market that presently exists for the Internet and other
interactive computer services, unfettered by Federal or State regulation." 47
U.s.e. ~ 230(b )(1)~(2).
WHAT IS MR. BROTHERSON'S POSITION ON THIS EXEMPTION?
Mr. Brotherson says the effect of the exemption is to allow ESPs to avoid access
charges when making calls within a local calling area. (Brotherson Direct at 22)
This makes no sense. If the ESP is making local calls, then access charges would
not apply in any case. In fact, the FCC has noted that access charges do not apply
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 32 of 45
to ISPs providing what appear to be long distance calls. As the FCC noted there
are exceptions
, "...
(e., long~distance calls handled by ISPs using IP telephony are
generally exempt from access charges under the enhanced service provider (ESP)
exemption)." 8 Using Qwest s application of the exemption, ESPs would be
exempt from access charges for local calls and would pay access charges for calls
outside the local calling area; in effect, Qwest s application of the exemption
renders it useless.
WHAT IS YOUR INTERPRETATION OF THE ESP EXEMPTION?
ESPs - including ISPs - are treated as end users, rather than carriers, for purposes
of the FCC's interstate access charges. ISPs are allowed to purchase their
services from local tariffs and are not subject to access charges. As such, ESPs are
exempt" from access charges, and obtain service from their local telephone
companies under intrastate local tariffs.
MR. BROTHERSON STATES THAT QWEST'S LANGUAGE IS ESSENTIAL
TO AVOID ESPS FROM PROVIDING CALLS "
...
TO ANOTHER LCA IN
THE LATA TO ANOTHER LATA TO ANOTHER STATE OR TO
8 See
, In the Matter of Developing a Unified Intercarrier Compensation Regime CC Docket No. 01~
92; Notice of Proposed Rulemaking; Released April 27, 2001; at para. 6. See, also, the ISP Remand
Order at para. 60.
See MTS and W A TS Marker Structure Order 97 FCC 2d at 715 (ESPs have been paying local
business service rates for their interstate access and would experience rate shock that could
affect their viability if full access charges were instead applied); see also Amendments of Part 69 of the
Commission s Rules Relating to Enhanced Service Providers CC Docket 87 ~ 215, Order, 3 FCC Rcd 2631
2633 (1988) (ESP Exemption Order) the imposition of access charges at this time is not
appropriate and could cause such disruption in this industry segment that provision of enhanced
services to the public might be impaired"
);
Access Charge Reform CC Docket No. 96~ 262, First
Report and Order, 12 FCC Rcd 15982, 16133 (1997) (1997 Access Charge Reform Order), aff'd,
Southwestern Bell Telephone Co. v. FCC 153 F.3d 523 (8th Cir. 1998 ("(m)aintaining the existing
pricing structure ... avoids disrupting the still~evolving information services industry.
)).
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 33 of 45
ANOTHER COUNTRY..." (BROTHERSON DIRECT AT 22) IS THAT A
RELEV ANT CONCERN?
No. It is commonly recognized that ESPs and ISPs provide services that cross
local calling boundaries, LATA boundaries and even state boundaries. The FCC
has recognized that since the inception of the ESP exemption. For instance, the
FCC stated in 1997 that
, "
ISPs may pay business line rates and the appropriate
subscriber line charge, rather than interstate access rates, even for calls that
appear to traverse state boundaries.
AT PAGE 22 OF HIS TESTIMONY MR. BROTHERSON STATES THAT
LEVEL 3'S INTERPRETATION OF THE ESP EXEMPTION WOULD
...
GIVE IT ACCESS TO QWEST'S ENTIRE NETWORK ESSENTIALLY
FREE OF CHARGE TO TERMINATE IXC TRAFFIc."IS THAT A
CORRECT STATEMENT?
No. Qwest s only responsibility is to route Qwest originated traffic to the POI for
termination by Level 3. Level 3 has agreements with IXCs such that they do pay
access charges for IXC traffic. As it has stated repeatedly, Level 3 is willing to pay
access charges for IXC traffic.
FROM AN ECONOMIC PERSPECTIVE WHAT WOULD BE THE
IMP ACT OF QWEST'S INTERPRETATION OF THE ESP EXEMPTION?
Qwest s interpretation would not only eliminate the intended benefits of the
exemption, but would actually force ESPs to deploy facilities in every local calling
area in the nation. As with the single POI discussed above, forcing competitors to
Id. at para. 342.
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 34 of 45
duplicate decades~old network architectures according to the retail designs of
the incumbent (which retail regulation the incumbent is only partially subjected
to) is ridiculous where a state seeks promotion of effective competition. The
FCC never intended this result nor should any state commission. Instead, ESPs
should be able to purchase local services from LECs without paying access
charges and without placing equipment (a VoIP POP per Brotherson s LBB1) in
every local calling area. Qwest's proposal disadvantages Level 3 and ESPs, and
provides a distinct advantage to Qwest s affiliates who provide similar services.
HOW WOULD QWEST'S POSITION BENEFIT QWEST AND ITS
AFFILIATES?
Under Qwest's proposed language , there would have to be a VoIP POP in every
local calling area where a call was originated; or, the called and called parties
would have to be physically located within the same local calling area. Assuming
Qwest could make such a determination, the only party that could comply with
this proposal would be Qwest. Other parties would have to essentially duplicate
Qwest s network by placing facilities in every Qwest local calling area. What
this means in simplest terms is that only an ILEC would benefit from the ESP
exemption and all other providers would not only have to forfeit intercarrier
compensation, but would have to pay access charges as well. Not only would
such a result be contrary to the Act's goal of creating competition, but it would
be contrary to the fundamental purpose of the ESP exemption. If Qwest's
language were adopted, ISPs would only purchase services from ILECs - since
CLEC service would have access charges on top of the actual cost of providing
Gates, Rebuttal Testimony
Level 3 Communications, LLC
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service.Qwest s position is unreasonable, anticompetitive and should be
rejected.
VNXX TRAFFIC
MR. BROTHERSON SPENDS CONSIDERABLE TIME IN HIS TESTMONY
ADDRESSING VNXX TRAFFIc. PLEASE COMMENT.
Qwest evidently considers VNXX traffic to be an improper scheme to convert toll
calls to local calls. (Brotherson Direct at 51) Bur this service has been around for
decades and it provides an important service to consumers and especially to the
ISP industry. Qwest is offering services that provide the very same functionality,
so it must recognize the demand and benefits of such an offering. In response to
Level 3 Request No. 01~025, Qwest indicated that it does offer FX service in Iowa.
AT PAGE 45 OF HIS TESTIMONY MR. BROTHERSON STATES THAT
...
VNXX ARRANGEMENT THAT PROVIDES THE
FUNCTIONALITY OF TOLL OF 8XX SERVICE, BUT AT NO EXTRA
CHARGE." IS THAT CORRECT?
No. From the consumer s perspective VNXX, FX and 800 services offer similar
results - dial~up access to the Internet without the imposition of additional per
minute of use charges. But the similarity ends there. Mr. Brotherson is wrong to
suggest that Level 3 is providing toll or 8XX functionality. Toil calls and 8XX
calls use the familiar 1+ dialing pattern and consumers expect the calls to be
routed to an IXC of their choosing for completion. They also know, because of
the 1+ dialing, that they will pay toll charges for the call. VNXX calls are locally
dialed calls, without the use of the 1+ dialing pattern and without the services of
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Level 3 Communications, LLC
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an IXc. In other words, the so called "VNXX" which is nothing more than
ILEC invented term that attempts to pull competitors back into the ILEC cost
structures and retail offerings, makes no use of the interexchange carrier access
network. Mr. Ducloo explains in great detail why 8XX services are not similar to
VNXX calls in his rebuttal.
AT PAGE 56 OF HIS TESTMONY, MR. BROTHERSON STATES THAT
LEVEL 3 WANTS THE CALL ROUTED OVER THE PSTN, BUT FEELS NO
RESPONSIBILITY FOR PROVIDING THE TRANSPORT TO THE
DISTANT LOCATION." IS THAT A CORRECT STATEMENT?
No. Level 3 is completely responsible for the termination of the call regardless of
the location of the Level 3 subscriber. All Qwest is required to do is to deliver the
call to the POI. Mr. Brotherson s statement completely misstates the way these
calls are routed. He suggests that Level 3 uses Qwest s "toll network", and that is
likewise incorrect. It is Level 3 - not Qwest - that is transporting these "Qwest
originated" calls to their destination.
MR. BROTHERSON SAYS THERE IS NO EXTRA CHARGE FOR THE
VNXXCALL ISTHATCORRECT?
No. From the perspective of the Qwest customer, the "VNXX" call is no different
from any other locally dialed call and no per minute of use charges are imposed
upon the Qwest end user, unlike a 1+ call to an IXC or 8XX service. From the
perspective of Qwest, the VNXX call imposes no additional costs. From Level3'
perspective, the call is picked up at the POI and delivered over Level3's network
to its customers. Level 3 imposes no additional charge to Level 3's customers for
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these calls, but even if it did, such fact would not convert the call to a "toll' call
nor would it impose any additional costs upon Qwest.
AT PAGES 45 THROUGH 47, MR. BROTHERSON DISCUSSES HIS
UNDERSTANDING OF VNXX AND THE USE OF NUMBERING CODES.
AT PAGE 47 HE STATES THAT THIS ".IS AN UNINTENDED AND
INAPPROPRIATE USE OF THE ASSIGNED NXX." DO YOU AGREE?
No.Nor is Mr. Brotherson able to cite to any rules which support his
proposition.Rather, he mixes retail regulation with interconnection
requirements in ways that are enormously beneficial to Qwest resulting
windfall profits, but cites to nothing that would require interconnecting carriers
to mimic ILEC architecture for purposes of routing locally dialed calls to the
parties' single point of interconnection within the LATA. Moreover , based upon
my review of carrier offerings throughout the industry, the use of VNXX codes is
not only common but intended, as previously indicated. To find otherwise would
impose the exact kinds of regulatory and economic constraints upon competitors
that the FCC and state commissions nationwide intend to lift. Thus the issue of
physical location of the end user" is a red herring developed by an incumbent
wireline provider seeking desperately to protect toll revenues in an age where
intermodal competition means competing upon the basis of the best technology
without the constraints of economic regulation common in a period of single
technology monopoly regulation.
DO THE CODE ASSIGNMENT GUIDELINES ALLOW FOR VNXX OR FX
NUMBERS TO BE ASSIGNED?
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Level 3 Communications, LLC
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Yes. In fact Section 2.14 of the Numbering Guidelines specifically identifies
foreign exchange services as being eligible for number assignment:
It is assumed from a wireline perspective that CO Codeslblocks
allocated to a Wireline Service Provider are to be utilized to
provide service to a customer s premise physically located in the
same rate center that the CO Codeslblocks are assigned.
Exceptions exist, for example tariffed services such as foreign
exchange service. II (emphasis added)
If it were improper or a violation of the guidelines to use virtual NXX codes then
all ILECs currently providing FX and FX~type services would be in violation
today.
MR. BROTHERSON STATES THAT "
...
LEVEL 3 WANTS TO SHIFT ALL
OF THE COSTS OF THIS ARRANGEMENT TO QWEST.(BROTHERSON
DIRECT AT 51) IS THAT A CORRECT STATEMENT?
No. There is no additional cost for VNXX calls over and above the cost for a
traditional local call. Qwest s obligations and costs are the same in delivering a
call originated by one of its customers, regardless of whether the call terminates
at a so-called "virtual" or "physical" NXX behind the CLEC switch. Qwest
systems and network route these calls in exactly the same way they route other
local calls. In response to Level 3 Request No. 01~024, Qwest stated in pertinent
part
, "
The costs Qwest incurs do not vary based upon the physical location of the
Level 3 customer.
It is clear that Level 3 is providing a service to Qwest in terminating the
traffic originated by Qwest customers. If Level 3 or some other provider did not
II Alliance for Telecommunications Industry Solutions; Sponsor of Industry Numbering
Committee; Central Code (NXX) Assignment Guidelines; Released May 28, 2004; hereinafter
referred to as "Numbering Guidelines
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terminate those calls, Qwest would need to deploy facilities and capacity
sufficient to terminate those calls. As such, Qwest should be economically
indifferent as to whether it pays Level 3 for terminating those calls, or whether it
transports and terminates the traffic itself.
DOES QWEST OFFER SERVICES OTHER THAN FX AND WHOLESALE
DIAL THAT WOULD ENABLE A CUSTOMER PHYSICALLY LOCATED IN
THE BOISE LOCAL CALLING AREA TO HAVE A TELEPHONE NUMBER
IN A DISTANT QWEST EXCHANGE, SO THAT CALLS TO AND FROM
THAT PERSON BY LOCAL SUBSCRIBERS IN THE DISTANT EXCHANGE
WOULD BE TREATED AS LOCAL CALLS.? (BROTHERSON DIRECT AT
55~57)
Yes. In my direct, I noted that Qwest offers a service called OneFlexTM which
permits subscribers to have as many as five virtual numbers. (See Gates Direct at
48-49) I called Qwest's customer service number (1~866- 283-004 3) to discuss the
characteristics and capabilities of this service.The customer service
representative (Lisa) was quick to tell me that a subscriber can get up to five
virtual numbers of his or her choice so friends and relatives can call without toll
charges. I asked her if I could get a local number in Bend, Oregon, and I was told
that I could. When I asked how the system works, she said I would be assigned a
local number for Bend, Oregon and when my Mother in Bend dials that number
she will be connected to me in Denver on a local basis with no toll charges.
Qwest s website, it describes the virtual numbers as follows:
Virtual Numbers are alias phone numbers that can be associated
with your OnePlexTM phone number. Your friends and family can
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Level 3 Communications, LLC
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dial your Virtual phone number and avoid incurring long-distance
charges.
For example, if you live in Denver and your primary # is
303.xxx.xxxx and your family lives in Omaha, your family has to
call long-distance. With OneFlex, you can get a virtual phone
number assigned to your account with an Omaha area code, so
your family doesn t have to pay long-distance charges.
You can have up to 5 Virtual Phone Numbers attached to one primary
OneFlex phone number.
As such, Qwest is selling a service that does exactly what Level 3's service
accomplishes - provides a virtual presence for a customer that does not have a
physical presence in the exchange. It is disingenuous for Qwest to object to Level
s service when it offers the same capability to its customers.
ONEFLEXTM IS A VOIP PRODUCT, CORRECT?
Yes. But the point is the same; whether it s an FX service, VNXX service or a
VoIP service, the consumer is able to purchase a virtual presence in an exchange
where he or she has no physical presence. This is the purpose of Level 3'
proposed language regarding geographically independent telephone numbers.
Mr. Brotherson s statement that "ISP, VoIP or circuit based VNXX calls do not
change a toll call into a local call" evidently only applies to Level 3 services and
not to Qwest services. (Brotherson Direct at 53)
DOES QWEST HAVE FACILITIES IN EVERY LOCAL CALLING AREA
WHERE THEY OFFER VIRTUAL NUMBERS?
I don t know. But even if it did, it would be because of its historical network
development, not because of a technical necessity.Any ruling by this
Commission on VNXX and ISP~bound traffic should be technologically and
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Level 3 Communications, LLC
Page 41 of 45
competitively neutral. A ruling requiring physical facilities in every local calling
area is not technologically or competitively neutral in that it reflects only Qwest
network topology.
DOES QWEST'S WHOLESALE DIAL SERVICE PROVIDE LOCAL
NUMBERS FOR ACCESSING THE INTERNET ON A DIAL~UP BASIS?
Yes, it does. Further, one of the benefits Qwest identifies for its Wholesale Dial
customers is that the customer "Incurs no cost of building and maintaining a dial
network" and "Can reduce substantial costs associated with network build~out
operations, maintenance and monitoring.
IS MR. BROTHERSON CORRECT TO STATE THAT LEVEL 3'
LANGUAGE WOULD CHANGE THE COMMISSION'S DEFINED LOCAL
CALLING AREAS?
No. Nothing in Level 3's proposed language would change the Commission
defined local calling areas. Level 3 assigns numbers associated with local calling
areas for its customers. That assignment process does nothing to change the
established boundaries of the local calling areas. If that were true, then Qwest's
foreign exchange service has been guilty of changing Commission defined local
calling areas since at least 1954.
MR.BROTHERSON RAISES ABOUTCONCERNS NUMBERIN G
RESOURCES. DOES VNXX IMP ACT THE NUMBERING RESOURCES
ANY DIFFERENTLY THAN OTHER SERVICES?
12 See Qwest's Website for Large Business Internet
http://www.qwest.comJpcat/large business/product/l,l016,2098- 4 - 28 00.html
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Solutions;
No. The Commission has given Level 3 authority to get numbers for its VoIP
services, and those same number blocks can be used to offer VNXX services.
Offering additional services allows Level 3 to make even more efficient use of the
number blocks.
MR. BROTHERSON SUGGESTS THAT LEVEL 3'S USE OF NUMBERS
THAT ARE NOT ASSOCIATED WITH A PHYSICAL LOCATION OF A
CUSTOMER IS SOMEHOW IMPROPER. DO YOU AGREE?
No. As noted above, this type of number assignment is common and accepted.
The FCC's Number Utilization Report states
, "
Carriers use other types of non-
geographic numbering resources as well: millions of numbers are used to provide
toll~free services using non~geographic area codes such as 800, 888, 877 and
866.',13 Other non geographic numbers include 500 and 900 area codes. Area
code 500 is used for "follow me" service and area code 900 is used for information
services. Millions of wireless numbers are also assigned without reference to
geographic location. The fact that a few numbers are also used for VNXX
applications should not be of concern to NANP A or the Commission.
ARE CARRIERS RETURNING NUMBERS TO THE ADMINISTRATOR?
Yes. In the first half of 2004, carriers returned 5.1 million telephone numbers to
the numbering administrator. In the second half of 2004, carriers returned 4.
million telephone numbers to the NANPA14
. at page 5.
. at page 3.
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PLEASE SUMMARIZE YOUR POSITION ON THE ECONOMIC IMP ACT
OF QWEST'S POSITIONS ON VNXX AND OTHER IP~ENABLED
SERVICES?
Qwest s positions that require a physical presence (Le., VoIP POP) or a call
definition that is based on the physical location of the calling and called parties
are a fabrication designed to accommodate it's deployed network, not an efficient
forward looking network. The physical presence requirement would result in
uneconomic duplication of the Qwest network design. The requirement for
physical locations of the calling and called parties has never been an industry
standard and is being used by Qwest to redefine local calling, for the single
purpose of denying competitors compensation for terminating calls originated by
Qwest customers. Not only do these positions deny compensation, but they
impose unwarranted costs on Qwest's competitors and harm the efficient
operation of the market. Qwest's positions should be rejected.
DOES THIS CONCLUDE YOUR TESTIMONY?
Yes, it does.
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CERTIFICATE OF SERVICE
I hereby certify that on the Jt..cday of February 2006, I caused to be served, via
the methodes) indicated below, true and correct copies of the foregoing document, upon:
JeanJewell, Secretary
Idaho Public Utilities Commission
472 West Washington Street
P.o. Box 83720
Boise, ID 83720~007 4
jj ewell (fYpuc.sta te.id. us
Mary S. Hobson
STOEL RIVES liP
101 S Capitol Boulevard - Suite 1900
Boise, ID 83702~5958
Telephone: (208) 389~9000
Facsimile: (208) 389~9040
mshobson(fYstoel.com
Thomas M. Dethlefs
Senior Attorney
Qwest Services Corporation
1801 California Street ~ 10th Floor
Denver, CO 80202
Telephone: (303) 383~6646
Facsimile: (303) 298~8197
Thomas. Dethlefs(fYqw es t. com
Hand Delivered
S. Mail
Fax
Fed. Express
Email
Hand Delivered
S. Mail
Fax
Fed. Express
Email
Hand Delivered
S. Mail
Fax
Fed. Express
Email
Gates, Rebuttal Testimony
Level 3 Communications, LLC
Page 45 of 45
Idaho
Case No. QWE-OS-ll
L3C 01-003A
INTERVENOR:Level 3 Communications, LLC
REQUEST NO:0O3A
Qwest currently has interconnection agreements with one or more CLECs in
Idaho under which those CLECs are permitted to carry mixed intraLATA
interexchange, and interLATA interexchange traffic on the same trunk groups.
RESPONSE:
Admitted. Qwest currently has interconnection agreements with one or more
CLECs in Idaho under which those CLECs are permitted to carry mixed intraLATAinterexchange, and interLATA interexchange traff ic. That traffic, however,is transported on the same Feature Group D trunk groups, and not on LocalInterconnection Service (LIS) trunks.
Exhibit 112
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