20070817Deanhardt direct, exhibits 1-8.pdf

~~-BS~JNr ~ 0J~v.PW;ATTORNEYS AT LAW RECEIVE6
Molly 0' Leary
znli1 t\UG t b 5: 01Tel: [phone] Fax: [phone]
moll yl1!' rich ards 0 na ndoleary. com
O. Box 7218 Boise, ID 83707 - 515 N. 27th St. Boise, lD 83702
UTI tS'fi~~'j~t 'rM ~:l s to N
16 August 2007
Ms. Jean Jewell
Commission Secretary
Idaho Public Utilities Commission
POBox 83720
Boise ID 83720-0074
Via HAND DELIVERY
RE: Case No. QWE-06-
Dear Ms. Jewell:
Enclosed please fmd an original and eight (8) copies of the following:
DIRECT TESTIMONY OF CLAY DEANHARDT GREGORY W.
NAGROSST AND ELLYCE BRENNER ON BEHALF OF AT&T
COMMUNICATIONS OF THE MOUNTAIN STATES, INC.
One of the above copies is to be considered the "Reporter " Copy, and
I have. also enclosed an extra copy of each of the foregoing to be date-
stamped and retumed to us for our files. Thank you.
encl.
Molly O'Leary (ISB No. 4996)
RICHARDSON & O'LEARY PLLC
515 North 2ih Street
O. Box 7218
Boise, Idaho 83707
Telephone: [phone]
Fax: [phone]
Mail: mollY(fYxichardsonandoleary.com
Theodore A. Livingston
Dennis G. Friedman
MA YER, BROWN, ROWE & MAW LLP
71 South Wacker Drive
Chicago, IL 60606-4637
Telephone: [phone]
Fax: [phone]
Mail: dfriedman~mayerbrown. com
Dan Foley
General Attorney & Assistant General Counsel
AT&T WEST
P. O. Box 11010; 645 E. Plumb Lane, B132
Reno, Nevada 89520
Telephone: [phone]
Fax: [phone]
Mail: df6929~att.com
RECEIVED
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Attorneys for Complainant AT&T Communications of the Mountain States, Inc.
BEFORE THE IDAHO PUBLIC UTILITIES COMMISSION
AT&T COMMUNICATIONS OF THE MOUNTAIN )
STATES, INC.
Complainant
vs.
QWEST CORPORATION
Respondent.
August 16, 2007
CASE NO. QWE-06-
DIRECT TESTIMONY OF
CLAY DEANHARDT ON
BEHALF OF AT&T
COMMUNICATIONS OF THE
MOUNTAIN STATES, INC.
INTRODUCTION
Please state your name, address and employer.
My name is Clay Deanhardt. My business address is 21-C Orinda Way, #374
Orinda, California, 94563. I am self-employed, and have been hired by AT&T
Communications of the Mountain States, Inc. ("AT&T") to testify regarding my
investigation into agreements that Qwest entered into with Eschelon Telecom, Inc.
Esche Ion ) and McLeod USA ("McLeod") that provided for significant discounts
on purchases of telecommunications products and services by those companies from
Qwest.
What is the purpose of your testimony?
In late 2000, Qwest entered into agreements with Eschelon and McLeod to
provide them with discounts of up to 10% on every product and service purchased by
those companies from Qwest between that point and the end of either 2003 (McLeod)
or 2005 (Eschelon). In both cases Qwest deliberately concealed the agreements to
prevent companies like AT&T from taking advantage of the same discounts. The
primary purpose of my testimony is to: (a) describe these contracts and discounts, (b)
explain how we came to discover that the agreements existed despite Qwest'
ongoing efforts to conceal or deny them; and (c) describe the AT&T contract with
Qwest that entitled it to the same discounts as Eschelon and McLeod.
What are your qualifications to provide this testimony?
In 2001 and 2002, I conducted the original investigation and analysis on
behalf of the Minnesota Department of Commerce (the "Department") into the
Deanhardt, Di-
AT &T Communications of
the Mountain States, Inc.
existence and terms of more than a dozen undisclosed, secret agreements between
Qwest and several Competitive Local Exchange Companies ("CLECs ), including
Eschelon and McLeod. Later the Arizona Residential Utility Consumer Office ("
RUCO") hired me to assist in their investigation of the same agreements.
In the course of those investigations, as detailed below, I reviewed thousands
of pages of documents, drafted discovery questions for Qwest and read their
responses, interviewed the people who negotiated the agreements, witnessed the
depositions of Qwest and McLeod witnesses regarding the agreements and reviewed
the transcripts of those depositions. I testified about my investigation and my
findings before an ALl in Minnesota Public Utilities Commission ("MPUC") Docket
No. P-421/C-02-197 (the "197 Docket"), again in Docket No. P-421/CI-01-1371 (the
1371 Docket"), and before the Arizona Corporation Commission ("ACC") in Docket
No. RT-00000F-02-0271. I also sat through every day ofthe hearings in the 197
Docket, read all of the testimony of witnesses for Qwest and the Department and
attended the cross-examinations of those witnesses. Both the MPUC and the ACC
agreed with my analyses and conclusions.
In addition, I have reviewed the main body (i., not the attachments) of the
AT&T interconnection agreement with Qwest in Idaho.
Are there other aspects of your background that are relevant to your
testimony?
Yes. My resume is attached as Exhibit Deanhardt-l to this testimony. I have
been an attorney and a business person since graduating from law school in 1992. I
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
have extensive experience negotiating telecommunications contracts, including
interconnection agreements. I have been a business executive in a start up company
and served both as a member of and legal advisor to different boards of directors.
Currently, I have my own solo law firm serving a variety of clients including
technology companies for which I help draft and negotiate a variety of complex
business agreements.
From January 1999 through September 2000 I was Senior Counsel for Covad
Communications Company ("Covad") and responsible for Covad's legal relationship
with Qwest (at the time, U S WEST). While at Covad, I led the operational and
business team that determined, for the first time, how to implement DSL line sharing
across telephone lines carrying Qwest voice services. As part of that work, I helped
design the network architecture for line sharing over copper loops. I also helped
design the processes that CLECs and ILECs use for ordering, provisioning and
repairing line-shared lines.
After the completion of the line sharing trial ordered by the Minnesota PUC , I
also led a group of CLECs in negotiating the interim line-sharing agreement and the
first ever line-sharing interconnection agreement in the telecommunications industry.
The negotiations for both the interim line-sharing agreement and the line-
sharing interconnection agreement included the negotiation of pricing for unbundled
network elements (UNEs), OSS enhancements and related services that were required
for line sharing. As part of my preparation for those negotiations, I prepared (and
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
helped others prepare) business case studies on the impact ofline sharing on Covad'
business and its ability to compete for residential broadband customers.
From September 2000 through July 2001 , I served as COO, General Counsel
and, eventually, President of Epidemic Networks, a start-up company designing
communications and workflow software. In September, 2001 , I created Deanhardt
Consulting - a sole proprietorship - to offer consulting services for business plan
reviews, telecommunications and regulatory issues. I subsequently assisted the
Department in its investigation of Qwest related to Qwest's Section 271 application
and Qwest's failure to file a number of interconnection agreements with the MPUC
giving testimony regarding the agreements, OSS checklist items, non-OSS checklist
items and Section 271 public interest issues in the 197 Docket, the 1371 Docket and
MPUC Docket Nos. P-421/CI-01-1370 and P-421/CI-01-1373. AZ RUCO
subsequently asked me to assist in their investigation of interconnection agreements
Qwest failed to file in Arizona, resulting in my testimony in Arizona Docket No. RT-
OOOOOF -02-0271
Through Deanhardt Consulting, I worked under contract to AT&T of
California, prior to its merger with SBC, as a regulatory attorney responsible for cost
dockets, UNE issues and interconnection arbitrations. I returned to Covad as an
Assistant General Counsel in May, 2005 to integrate its litigation group with its
business and regulatory units. Having accomplished that task, I left again to start my
own practice in May, 2006. My current practice focuses primarily on general
business and intellectual property law, including corporate formation, the drafting and
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
negotiating of business agreements and IP licenses, alternative dispute resolution and
other matters on an as-needed basis.
What other involvement have you had with agreements between
telecommunications companies?
As I already noted, I was responsible for Covad's interconnection relationship
with Qwest. That work required me to be intimately familiar with our agreements
with Qwest, interpret them, and enforce them. I also was charged with negotiating
amendments with Qwest when necessary, and with knowing when such agreements
were not necessary (generally because the matter was already addressed in our
interconnection agreement).
In addition, I participated in interconnection negotiations with Southwestern
Bell Corporation ("SBC") and interconnection arbitrations with Southwestern Bell
Telephone ("SWBT") (in Texas and Kansas) and Ameritech (in Illinois). I also
testified in Illinois ' consideration ofthe SBC / Ameritech merger regarding SWBT's
conduct in interconnection negotiations and Covad's interconnection arbitration with
SWBT in Texas.
While working under contract for AT&T, I also advised the company on
interconnection negotiations with SBC and prepared for interconnection arbitrations
with SBC in Nevada and California.
Can you please tell us about your investigation for the Minnesota
Department of Commerce?
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
In the summer of 200 1 , the Department began an investigation into whether
Qwest was providing adequate wholesale service in Minnesota. In November 2001
the Department asked me to assist in that investigation.
Among other things, the Department asked me to investigate whether Qwest
had entered into agreements with CLECs that should have been filed for approval by
the Commission but were not. The Department also asked me to help it investigate
Qwest's compliance with the checklist items set out in 47 US.C. ~271(c)(2)(B).
At the beginning of my investigation, I reviewed more than 75 written
agreements between Qwest and a variety of CLECs. These agreements had been
produced by Qwest to the Department but had never been publicly disclosed or filed
with the MPUC. Among those agreements was Qwest's written agreement to provide
Eschelon with a 10% discount on all purchases made by Eschelon between October
2000 and December 31 , 2005.
I followed up my review of these agreements by helping the Department draft
a series of discovery requests to Qwest regarding the various agreements. I then
reviewed all of the documents and written responses provided by Qwest in response
to those requests. I also conducted a series of interviews with CLEC witnesses
including those involved in the negotiation of the several undisclosed Eschelon
agreements.
Based on my initial findings, the Department filed a complaint against Qwest
for failing to file 11 written agreements with the MPUC. That complaint resulted in
the 197 Docket.
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
After the hearing related to the initial 11 agreements concluded, the
Department learned that Qwest might have entered into an oral agreement with
McLeod to provide it with a discount similar to the one Qwest provided Eschelon.
On behalf of the Department, I began a new investigation into those allegations.
This second investigation began with interviews of McLeod officers
employees and representatives who had knowledge of and confirmed the existence of
the oral agreement. I continued the investigation by drafting new requests for the
Department to provide to Qwest seeking the information necessary to determine
whether the oral agreement identified by the McLeod witnesses did, in fact, exist. I
then reviewed all of the written responses and documents provided by Qwest to the
Department in response to those requests.
In addition, as noted above, I reviewed all of the written testimony and
exhibits I submitted by Qwest in both phases of the hearings in the 197 Docket. I also
sat through all of the hearings and cross-examinations of witnesses in that docket.
What materials from your original investigation did you review again
prior to filing this testimony?
I reviewed my Minnesota testimony in the 197 Docket and the 1371 Docket
including all of the exhibits attached to it. Those exhibits included Qwest discovery
I Throughout my testimony, I refer to documents that I originally collected and
reviewed for the Department in 2002. These documents were all included as exhibits
to testimony I submitted in one or more MPUC dockets related to these agreements.
In response to AT&T data request No. 25 in this Docket, Qwest agreed that AT&T
could have access to these documents and treat them as if they had been produced by
Qwest in this proceeding. It also is my understanding that these documents, many of
which were originally designated as trade secret, have now been designated as public.
Deanhardt, Di - 7
AT&T Communications of
The Mountain States, Inc.
responses, documents provided by Qwest and McLeod, the transcript of the
deposition of McLeod officer Blake Fisher, and the affidavits signed by Mr. Fisher
and McLeod employee Lori Deutmeyer. I also reviewed the transcripts of the
hearings in the 197 Docket and the transcript of the deposition of Audrey McKenney,
a primary negotiator of the agreements at issue. I also briefly scanned my Minnesota
testimony in the other two dockets referenced above.
Based on your investigations, what did you conclude that is relevant to
this proceeding?
As discussed in more detail below, I concluded that Qwest entered into
agreements to provide discounts of 10% to Eschelon and up to 10% to McLeod on all
purchases made by those companies from Qwest over agreed-upon time frames
including purchases in Idaho and even purchases outside of Qwest's ILEC territory.
It may be more accurate to describe these agreements as rebate agreements, since the
discount was provided via rebate payments to both carriers.
Qwest and Eschelon entered into a written agreement for the Eschelon
discount and tried to conceal it with a sham consulting arrangement. The discount
agreement between Qwest and McLeod was an oral agreement because Qwest
refused requests by McLeod to put it in writing. In both cases, however, there are
documents demonstrating that Qwest did, in fact, make the required rebate payments
to each carrier and calculated the rebate amount by applying a 10% discount to all
purchases made by those carriers from Qwest.
II.THE DISCOUNT AGREEMENTS
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
THE ESCHELON AGREEMENT
Can you put the Eschelon agreement at issue here into its historical
context?
Certainly. In the course of the Minnesota investigation, we found six
agreements between Eschelon and Qwest that contained rates, terms or conditions
that should have been made available to other CLECs. One of those agreements
provided that Eschelon would receive a 10% discount on every purchase it made from
Qwest so long as Eschelon met certain minimal purchase commitments from Qwest.
In Minnesota, we referred to it as Eschelon Agreement IV because it was the fourth in
the series of undisclosed agreements entered into between the two companies. That is
the agreement at issue in this proceeding and is referred to in my testimony as the
Eschelon Agreement. A copy of the Eschelon Agreement is attached as Exhibit
Deanhardt -2 to my testimony.
Have you read the Eschelon Agreement?
Yes. I read it many times during my initial investigation, again for the
Arizona proceedings and again recently to refresh my recollection.
Please describe the Eschelon Agreement.
The Eschelon Agreement is a written agreement entitled "Confidential
Amendment to Confidential/Trade Secret Stipulation" and is dated November 15
2000.
The agreement holds itself out as a settlement of disputes between Eschelon
and Qwest regarding Eschelon s ability to provide services to its customers using
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
UNE-P beginning in March, 2000. It is characterized as an amendment / addition to
an agreement dated February 28, 2000 that was referred to in Minnesota as Eschelon
Agreement I.
The Eschelon Agreement memorializes obligations of Eschelon and Qwest
including (a) that Eschelon purchase at least $15 million of telecommunications
services and products from Qwest between October 1 2000 and September 30 2001;
and (b) that Qwest make a $10 million payment to Eschelon by November 17, 2000.
What does the Eschelon Agreement do that is pertinent here?
Under Paragraph 3 of the Eschelon Agreement, Qwest was required to pay
Eschelon a 10% discount on all "aggregate billed charges for all purchases made by
Eschelon from Qwest from November 15 2000 through December 31 , 2005" so long
as Eschelon met its take-or-pay purchase commitments from an agreement attached to
my testimony as Exhibit Deanhard -3. In other words, Paragraph 3 created a concrete
and specific legal obligation for Qwest to provide Eschelon with a 10% discount
every purchase Eschelon made from Qwest between November 15,2000 and
December 31, 2005 . That discount applied to all purchases, including access charges
interconnection rates (including UNEs) and items Eschelon purchased from Qwest's
tariffs.
Paragraph 3 of the Eschelon Agreement purports to tie the 10% discount
to a consulting arrangement with Eschelon. Did that change your
opinion regarding the intent and effect of Paragraph 3?
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
Not in the slightest. My investigation determined that the consulting
agreement was a sham agreement designed to help hide the 10% discount that Qwest
had already agreed to provide Eschelon prior to Eschelon ever suggesting that it could
provide consulting services to Qwest. I concluded, and the Minnesota ALJ, the
MPUC and the ACC all agreed, that the entire "consulting" arrangement was a sham.
Why do you suggest that the work Qwest claims Eschelon did under the
agreement was not the legitimate quid pro quo for the 10% refund?
Several reasons. First, the fact that the consulting arrangement was intended
to hide a straightforward discount is evidenced by Exhibit Deanhardt-4 to my
testimony, a November 5 , 2000 letter (sent by attached e-mail) from Richard Smith
President and COO of Eschelon, to Jim Gallegos, Judy Tinkham and Audrey
McKenney at Qwest. According to numbered paragraph 1 in that letter, Qwest
agreed on October 21 2000 to provide Eschelon with a volume discount equal to
10% of its purchases from Qwest. Mr. Smith notes that the Qwest had not put the
agreement in writing, and states in Paragraph 10 that he has an idea how to enter into
the agreement with a "mechanism that makes it more difficult for any party to opt
into our agreements." Qwest adopted Mr. Smith's idea when, ten days later, it
entered into the Eschelon Agreement containing Qwest's agreement to give Eschelon
a 10% refund on all of its purchases from Qwest in exchange for "consulting
servIces.
Second, the purported payment for these alleged consulting services had no
rational relationship to the "consulting" services to be provided by Eschelon. Instead
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
from Covad performing that work. No company was paid for that work, nor would
they have expected to be paid.
Finally, there was no evidence from the time period contemporaneous with the
agreement or my investigation to suggest that Qwest ever really wanted or used the
consulting services" described in Paragraph 3. Qwest never produced any documents
suggesting that it was in the market for such consulting services or that it had
discussed the possibility of receiving such consulting services from any entity other
than Eschelon. Moreover, Exhibits Deanhardt -5 and Deanhardt -6 to my testimony
show that the list of purported Eschelon "consulting" teams that Qwest provided to
the Department in response to discovery requests was actually a list of teams intended
to work on an entirely different issue - an implementation plan that was the subject of
another Eschelon / Qwest agreement described in a letter dated November 15 2000.
(See Exhibit Deanhardt -7).In fact, the phrase "consulting teams" did not appear on
the list for the first time until after the Department issued discovery requests to Qwest
regarding the Eschelon Agreement on November 27 2001.
What else, if anything, led you to conclude that the "consulting
agreement" was a sham?
In Minnesota, as discussed above, Qwest produced a list of the "consulting
teams purportedly established by Eschelon under the Eschelon Agreement. 4 I
reviewed that list carefully, and based on my experience working with Qwest to
design its line-sharing product, I can say that these teams were really focused on
4 A true copy of Qwest's response to DOC 067 in MPUC Docket No. P4211DI-Ol-
814 is included as part of Exhibit Deanhardt -8 to my testimony.
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
helping Qwest provide better service to Eschelon. Working with an ILEC to get your
company better service was not a bad thing for Eschelon to do - quite the opposite
but it was not something a CLEC ever got paid to do.
After 1996, CLECs worked with Qwest every day, in face-to-face meetings, at
change management meetings, and in regulatory forums to try to get Qwest systems
and processes to work better. When I was at Covad, for example, we helped Qwest
solve technical problems that were preventing Covad and other CLECs from being
able to provision DSL under certain circumstances. Covad, not Qwest, funded the
resources necessary to solve those problems.
CLECs did this work for free because the business of CLECs was, and is
serving end-users -- not consulting for ILECs. In fact, when I was at Covad, we were
begging for the type of access and input that Qwest claims to have paid Eschelon for
under this agreement, and usually we could not get Qwest to take it for free.
Ultimately, a telecom company lives or dies based on its ability to provide
services to its customers at a price that is higher than the cost to provide that service.
If you are a CLEC, helping Qwest provide you with better service so that you can
provide your customers with better service is just good for your business. It is not a
consulting business.
Did Qwest actually make any payments to Eschelon under Paragraph 3
of the Eschelon Agreement?
Yes. In its supplemental response to data request 67 made by the Department
in Docket No. P421/DI-01-814, Qwest admitted that it refunded $2 540 017 to
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
Eschelon for the time period between November 15, 2000 and August 31 , 2001. A
copy of Qwest' s response is attached as Exhibit Deanhardt -8 to my testimony.
What did the Minnesota and Arizona commissions determine about the
consulting agreement" in Paragraph 3 of the Eschelon Agreement?
In its 197 Docket, the MPUC affirmed the findings of its ALJ that Paragraph 3
of the Eschelon Agreement contained a discount agreement and not a consulting
services contract. Specifically, the MPUC found that the alleged "consulting
agreement with Eschelon was "a sham designed to conceal the discount that Qwest
agreed to provide Eschelon.In the matter of the Complaint of the Minnesota
Department of Commerce Against Qwest Corporation Regarding Unjiled
Agreements ALJ Findings of Fact, Conclusions, Recommendation and
Memorandum, 'il126 (MPUC Sept. 20 , 2002) Minn. ALJ 197 Order (adopted by
MPUC id.Order Adopting ALl's Report and Establishing a Comment Period
Regarding Remedies, 2002 Minn. PUC LEXIS 90 (MPUC Nov. 1 2002.
The Arizona Corporation Commission similarly found that the Eschelon
Agreement was a discount agreement, finding "(tJhe evidence shows that the (QwestJ
agreements with Eschelon for consulting services and with McLeod for purchases
which Qwest claims were not subject to Section 252 requirements, were shams
designed to hide the true nature ofthe agreements. In the matter of Qwest
Compliance with Section 252(e) of the Telecommunications Act of 1996, Opinion and
Order (Decision No. 66949), at 38 (Apr. 30, 2004).
THE MCLEOD AGREEMENT
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
Please describe again how you conducted your investigation into the oral
discount agreement between Qwest and McLeod.
After the Department learned that there might be an oral discount agreement
between McLeod and Qwest, I drafted discovery requests that the Department sent to
both Qwest and McLeod. Those requests included interrogatories, document requests
and requests that Qwest admit or deny certain facts related to the Department'
allegations. I then reviewed all of Qwest' s responses, including every document
produced by Qwest to the Department. When appropriate, I drafted follow-up
requests to clarify the facts or to collect new information based on Qwest's responses.
I also interviewed witnesses from McLeod regarding the alleged agreement. In
addition, I was present at the depositions of Qwest's Audrey McKenney, McLeod'
Lori Deutmeyer and Blake Fisher, a retired senior executive from McLeod.
Who did you interview?
On May 23, 2002 I interviewed David Conn, a lawyer from McLeod. Mr.
Conn gave me an overview of the relationship between McLeod and Qwest and he
confirmed that Qwest had agreed orally to provide McLeod with a volume discount
on all purchases made by McLeod from Qwest. Mr. Conn, however, was not directly
involved in negotiating the agreements.
Therefore, on June 3 and 4, 2002 I interviewed Stacey Stewart, Lori
Deutmeyer, and Todd McNally, all of whom worked for McLeod. Mr. Stewart was
involved in negotiating the many agreements that Qwest and McLeod entered into on
October 26, 2000, including the discount agreement. He confirmed that the discount
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
agreement existed. He also informed me that Blake Fisher was the lead negotiator for
McLeod during the negotiations that resulted in the agreement.
Ms. Deutmeyer was the person at McLeod responsible for verifying that
Qwest paid McLeod the full amount of the discount owed to it. She explained how
the discount was calculated. At my request, she also provided the Department and me
with documents reflecting those calculations.
I interviewed Mr. McNally because of his knowledge of issues related to
aspects of the investigation I was conducting for the Department that were unrelated
to the discount agreement. Mr. McNally had no information related to the discount
agreement.
On June 6, 2002 I interviewed Blake Fisher, who had retired from McLeod in
May 2002. Mr. Fisher confirmed that he was McLeod's lead negotiator with Qwest
for the various agreements that the parties entered on October 26, 2000. He also
confirmed that Qwest had agreed to provide McLeod with a discount based on the
volume of purchases made by McLeod from Qwest.
How did you follow up on those interviews?
To memorialize the witnesses' statements , I prepared draft affidavits for Ms.
Deutmeyer and Mr. Fisher based on my interview notes. I provided those affidavits to
McLeod's in-house counsel, and Ms. Deutmeyer and Mr. Fisher reviewed their
respective affidavits for accuracy. Both made changes / edits to their affidavits and
then executed them. Mr. Fisher s affidavit and its exhibits are attached as Exhibits 3
and 4 to the transcript of his deposition taken on June 27, 2002. A true copy of that
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
transcript is attached to my testimony as Exhibit Deanhardt -9. A true copy of Ms.
Deutmeyer s affidavit is attached as Exhibit Deanhardt -10 to my testimony.
What conclusions, if any, did you reach based on your investigation?
I concluded that on or about October 26, 2000 Qwest and McLeod entered
into an oral agreement whereby Qwest agreed to provide discounts to McLeod for all
purchases made by McLeod from Qwest. The discount ranged from 6.5% to 10%
depending on the volume of purchases made by McLeod from Qwest over the course
of a year. The discount applied to all purchases McLeod made from Qwest, not just
purchases of the wholesale services Qwest is required to provide under the
Telecommunications Act of 1996 (the "Act"). So, for example, the discount applied
both to McLeod's purchase of unbundled network elements ("UNEs ) under the Act
as well as to its payments for switched access, wholesale long distance and tariffed
retail services (including private line transport services). The discount applied to all
purchases made by McLeod both within Qwest's 14-state ILEC territory and outside
of that region. The discount was available to McLeod if it met minimum purchase
volume commitments to Qwest.
Upon what was your conclusion based?
My conclusion is based on my review of documents provided by Qwest and
McLeod; their written responses to information requests from the Department; the
interviews I conducted on behalf of the Department; the depositions of Ms.
McKenney, Ms. Deutmeyer and Mr. Fisher; affidavits signed by Ms. Deutmeyer and
Mr. Fisher recounting the details ofthe discount agreement, and my participation in
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
the hearings regarding this agreement in Minnesota. My conclusion is also based on
my own business experience, detailed above.
Has your conclusion changed based on your subsequent experience or
your most recent review of the material you collected during your
investigation?
No.
Is there a single document that explains the discount?
Yes. Exhibit Deanhardt -35 to my testimony, discussed in more detail below
defines the level of discount Qwest agreed to provide McLeod and the purchase
requirements McLeod had to meet to get those discounts. Exhibit 3 to the Affidavit
of Blake Fisher, which is included as part of Exhibit Deanhardt -9 to my testimony, is
substantively identical to Exhibit Deanhardt -35 and was confirmed by Mr. Fisher as
containing the terms of the oral discount agreement.
Please explain the context in which Qwest and McLeod entered into the
discount agreement.
Based on my interviews and the documents produced by Qwest and McLeod
it became clear that two things happened in 2000 to precipitate this agreement.
The first was that it became certain that ILECs were required to provide
CLECs with access to some UNEs, including local switching, in a combined form.
One combination of UNEs which included the local loop and local switching was
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
referred to as "UNE-P" or "UNE-.Platform.s Before UNE-P came along, McLeod'
relationship with U S WEST / Qwest was primarily that of a reseller. That is, McLeod
purchased services from US WEST / Qwest and resold them to McLeod's customers.
Most of the services resold by McLeod were CENTREX services. McLeod
recognized, however, that it could reduce its costs (and thereby increase net revenues)
by immediately converting its resold lines to UNE-P lines and later moving as much
traffic as possible off of U S WEST's network altogether.
The second thing to happen was that Qwest purchased and merged with U S
WEST, and the newly merged Qwest made overtures to McLeod that it wanted to
establish a better business relationship with McLeod and treat it more like a customer
than a competitor. 6 So McLeod and Qwest entered into negotiations in the late
summer / early fall of 2000 to create a new business relationship that would be
beneficial to both. The new Qwest, according to its representatives, wanted to keep
and even increase McLeod's traffic on its network. McLeod, on the other hand
wanted to reduce costs and increase service quality.
The leading persons involved in these negotiations from Qwest were Greg
Casey, Executive Vice President for Wholesale Markets at the time; Audrey
McKenney, then Sr. Vice President of Wholesale Markets; and Arturro Ibarra, then
Director of Business Development. (See Exhibit Deanhardt -, Fisher Affidavit, ~ 4).
5 In 2004, the FCC eliminated the obligation for ILECs to provide access to
unbundled switching - and thus to UNE-P. But in 2000 the obligation was real, and
ILECs and CLECs were still trying to figure out how to implement it.6 See Exhibit Deanhardt -72 to my testimony, which is a true copy of an e-mail
produced by McLeod to the Department.
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
From McLeod, the lead negotiators were Blake Fisher, then the Group Vice
President and Chief Planning and Development Officer; Jim Balvanz, McLeod'
Vice President of Finance at the time; and Stacey Stewart, then Vice President of
ILEC Relations. (See Exhibit Deanhardt -, Fisher Affidavit, ~ 5).
The negotiations resulted in six written agreements that the parties entered
into on October 26 2000. The key component of those agreements was the creation
of a new product called UNE Star (or UNE- M when purchased by McLeod). The
UNE Star product was a flat-rated UNE platform product that, in essence, converted
McLeod resold CENTREX lines directly to UNE-P. One of the six agreements
McLeod and Qwest entered into on October 26 was the Eighth Amendment to their
interconnection agreement, which publicly disclosed some ofthe terms and
conditions for the UNE Star product.
Two of the other written agreements were the purchase agreements between
McLeod and Qwest that I discuss in more detail later in my testimony. Another of the
six agreements was the document identified as McLeod Agreement II in the
Department's complaint in the 197 Docket in Minnesota. The final two agreements
were billing settlement agreements that moved substantial sums of money back and
forth between McLeod and Qwest.
In addition to the six written agreements, Qwest and McLeod also entered into
two oral agreements. The first was the discount agreement at issue in this proceeding
and was tied to McLeod's purchase agreement with Qwest. The second was
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
McLeod's agreement not to participate in proceedings considering Qwest's Section
271 applications.
What did Mr. Fisher explain to you about the discount agreement?
According to Mr. Fisher, McLeod approached U S WEST before its merger
with Qwest about converting McLeod's resold lines to UNE-P. At that point, the
parties began negotiations to create a new product that would leave McLeod'
customers on the same physical telephone lines they already had but give McLeod the
benefit of better pricing across US WEST's region. The parties , however, did not
agree on acceptable pricing before the merger.
Mr. Fisher explained that, once the merger happened, Qwest indicated that it
wanted to improve its relationship with McLeod as a customer. McLeod and the new
Qwest subsequently restarted their conversations about converting McLeod's resold
CENTREX lines into UNE-Platform lines and, as I described earlier reached an
agreement on implementation and pricing for a UNE-P product called UNE Star.
According to Mr. Fisher, however, McLeod was not satisfied that the pricing
was low enough for McLeod to keep its traffic on Qwest's network (as compared to
installing its own switches and going off-network). Qwest and McLeod therefore
negotiated an additional discount agreement whereby McLeod committed to
purchasing specified volumes of Qwest products under a take-or-pay agreement, and
Qwest agreed to provide McLeod with discounts if McLeod exceeded its take-or-pay
commitments. A true copy ofthe McLeod take-or-pay agreement is attached as
Exhibit Deanhardt -11.
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
I documented everything Mr. Fisher told me in his affidavit, attached as part
of Exhibit Deanhardt -
What is a take-or-pay agreement?
It is an agreement that Company A (in this case, McLeod) will purchase a
specified quantity of goods and/or services from Company B (in this case, Qwest)
over a specified period of time. If Company A does not meet its purchase
commitment, then Company A pays Company B the difference between the
commitment amount and the amount actually purchased by Company A. Thus
Company A will either "take" the goods or "pay" the difference. Take-or-pay
agreements are used by sellers to secure a revenue stream / commitment. Buyers
typically enter into them because they are getting something in return - generally a
discount as compared to purchasing the same amount of goods and services without
the commitment.
What were the terms of the discount agreement?
Qwest agreed to provide McLeod with discounts of either 6., 8.0% or
10.0% on all purchases made by McLeod from Qwest. The amount of the discount
was determined by the aggregate dollar amount of purchases made by McLeod from
Qwest within a given year. The table below shows, generally, how the discount
worked. All dollar amounts are in millions.
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
October 2000 through 2002 2003
December 2001
Aggregate Percentage Aggregate Percentage Aggregate Percentage
Purchases Discount Purchases Discount Purchases Discount
$178 -$199 -$199 -
$188m $230m $250m
$189 -
$199m
?$199m 10.?$230m 10.? $250m 10.
Mr. Fisher attested to the parameters ofthe discount reflected in the table
above in paragraph 19 of his affidavit. These terms are also found in the document
attached as Exhibit 3 to his affidavit, which is part of the document attached as
Exhibit Deanhardt -9 to this testimony. As Mr. Fisher explained, the discount applied
to all telecommunications products and services purchased by McLeod from Qwest
inside and outside of Qwest' s 14-state ILEC territory. See Exhibit Deanhardt -
34:24 - 35:12; see also Exhibit 1 to the Deutmeyer Affidavit (Exhibit Deanhardt -10)
and Exhibits Deanhardt -12 through Deanhardt -16 (discussed in more detail below).
Why was the discount agreement not in writing?
When I interviewed him, Mr. Fisher said that he had asked Greg Casey and
Audrey McKenney from Qwest to put the discount agreement in writing, but they
would not do so. Mr. Fisher confirmed this under oath in his deposition (Exhibit
Deanhardt -9) at page 58 line 6 through page 59 line 9.
Why would Ms. McKenney and Mr. Casey not put the agreement in
writing?
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
According to Mr. Fisher, they were concerned that other CLECs might feel
entitled to the same discount if the agreement were written and made public. Mr.
Fisher also confirmed this in his deposition at page 59 lines 10 - 24.
Did Qwest propose an alternative to putting the agreement in writing?
Yes. Mr. Fisher expressed concern over the enforceability ofthe oral
agreement for the discount. Qwest suggested that it would enter into its own take-or-
pay agreement to purchases products from McLeod. According to Mr. Fisher
affidavit, the amount of the Qwest take-or-pay commitment was calculated by
applying the 8% discount factor contained in the oral agreement to a projected
amount of purchases by McLeod from Qwest. A true copy of the Qwest take-or-pay
agreement provided to the Department by Qwest is attached as Exhibit Deanhardt -
17.
After October 2000, did Qwest honor the oral discount agreement?
Yes, it did. As Ms. Deutmeyer s affidavit explains, Qwest made payments to
McLeod for what Qwest called the "Preferred Vendor Plan" for October 2000
through September 2001. According to Ms. Deutmeyer s affidavit, Qwest calculated
the amount of the payment by applying the 10% discount factors to all purchases
made by McLeod from Qwest during the relevant time period. One of the
spreadsheets Qwest used to calculate the discount amount is attached as Exhibit 1 to
Ms. Deutmeyer s affidavit. As Ms. Deutmeyer s affidavit indicates, Qwest created
this spreadsheet. Qwest confirmed this in its 2002 response to Department data
request DOC 209, which is attached as Exhibit Deanhardt -18 to my testimony.
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
I should also point out that there was another set of regular payments made by
Qwest to McLeod in addition to those related to the discount agreement. These
additional payments refunded to McLeod the difference between the amount it
actually paid Qwest for UNE-Star and the amount it was supposed to pay under the
Eighth Amendment to its interconnection agreement. These separate payments were
necessary because Qwest's billing system was not able to bill McLeod the correct
amount for UNE-Star. I refer to them in this testimony only because I will later
distinguish the evidence of those payments from the evidence of the discount
payments.
Does the spreadsheet attached to Ms. Deutmeyer s affidavit contain any
other information to indicate Qwest's understanding that it was
providing McLeod with a discount?
Yes. The spreadsheet is in Excel format, which I am familiar with and have
used on many occasions. The file name and the worksheet name are printed in the
bottom right-hand corner of each printed page of the Exhibit. Here, the file name is
vendor credit Q2 (2).xls" and the worksheet page is titled "MOl 10% refund." In
addition, the heading on the "Resale" chart reads "MOl 10% True-Up Calculation
and the first column on nearly every chart is titled either "10%" or "Sum of 10%.
Many other documents I reviewed demonstrated that "MO 1" was Qwest's way of
referring to McLeod.
Did you confirm that the numbers on this spreadsheet were calculated by
applying the 10% discount to McLeod's purchases?
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
Yes. Qwest confirmed this in its responses to a series of requests for
admissions I drafted for the Department in 2002. Qwest was asked to confirm that the
numbers associated with Minnesota were calculated by applying the 10% factor to the
amount Qwest billed McLeod for the product or service indicated on the spreadsheet
during the month indicated on the spreadsheet. In each case, Qwest admitted that the
number was calculated in the way I just described. Qwest's responses to those
requests for admissions, numbered DOC 257 - 292, are attached as Exhibit
Deanhardt -19 to my testimony.
Are there any other documents that confirm your conclusions and the
statements in Ms. Deutmeyer s affidavit regarding this spreadsheet?
Yes. Attached as Exhibit Deanhardt -12 to my testimony is a true copy of a
spreadsheet titled McLeodUSA Monthly Summary that Qwest produced to the
Department in response to DOC 210. That request asked Qwest to produce all of
Anthony Washington s files regarding McLeod. At the time, Mr. Washington worked
for Ms. McKenney and was one of two persons that Ms. Deutmeyer dealt with
primarily when obtaining McLeod's discount payment from Qwest. In 2002, I
compared each of the figures found in the "Current Charges" column of the
spreadsheet to the amounts in the "Resale" chart on Exhibit 1 to Ms. Deutmeyer
affidavit and found that the numbers in the "Resale" chart are 10% of the numbers in
the "Current Charges" column for October 2000 through March 2001 , rounded off to
the nearest dollar.
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
Did you find any other spreadsheets similar to the one attached to Ms.
Deutmeyer s affidavit?
Yes. Attached as Exhibit Deanhardt -13 to my testimony is a true copy of the
spreadsheet I found that calculates the discount for October 2000 through March
2001. Attached as Exhibit Deanhardt -14 is a true copy of the spreadsheet calculating
the discount for April 2001 through June 2001. Attached as Exhibit Deanhardt -15 is
a true copy of the spreadsheet calculating the discount for July 200 I through
September 2001. Attached as Exhibit Deanhardt -16 is a true copy of the spreadsheet
calculating the discount for October 2001 through December 2001. Qwest produced
all of these documents to the Department in response to requests either for the
specific spreadsheet or for Anthony Washington s or Arturro Ibarra s files related to
McLeod. Mr. Ibarra also worked for Ms. McKenney and was Mr. Washington
direct supervisor.
Were these files originally sent by Qwest to McLeod?
Yes. As Ms. Deutmeyer s affidavit indicates, Qwest sent these files to
McLeod as part of the process of finalizing the discount payment to McLeod. In
addition, I was able to tie Exhibits Deanhardt -14 through Deanhardt -16 to
transmittal e-mails produced by Qwest that show those files being delivered to
McLeod.
Did Qwest pay the amounts indicated on these spreadsheets to McLeod?
It did for all the discounts due through September 2001. As Ms. Deutmeyer
affidavit indicates, she would compare the amount on the spreadsheet she received
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
from Qwest to her own calculation of the discount amount owed and, if the numbers
were close, she would create and send an invoice to Qwest for the amount indicated
on the spreadsheets. The invoices for October 2000 through March 2001 , April 2001
through June 2001 and July 2001 through September 2001 are attached to her
affidavit as Exhibit 2. Qwest paid each of these invoices as evidenced by the wire
transfer confirmations attached as Exhibits 3 - 5 to Ms. Deutmeyer s affidavit.
Did you uncover records from Qwest indicating that they made these
payments?
Yes. Qwest admitted to making the wire transfers referred to by Ms.
Deutmeyer s affidavit in its responses to Department data requests DOC 171 , 173 and
175, all of which are attached as Exhibit Deanhardt -20 to my testimony. In addition
Attached as Exhibit Deanhardt -21 to my testimony are three Vendor Payment
Authorizations used by Qwest to authorize the payments to McLeod in response to
invoices sent by McLeod to Qwest. Qwest produced these documents to the
Department in its supplemental response to Department data request DOC No. 2220
in MPUC Docket No. P-4211CI-01-1371. Ms. McKenney confirmed her signature on
the first two documents in Exhibit Deanhardt -21 during her deposition on June 11
2002.
Is there anything else about these records about which the Court should
take note?
Yes. In the "Business Purpose" section of the authorization for the $10.
million payment for October 2000 through March 2001 - which was signed by
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
Audrey McKenney - someone at Qwest wrote "Refund per Vendor Agreement."
This was authorization serial no. 501126547.
What about the discount payments after September 2001?
E-mails produced by Qwest show that Qwest provided McLeod with Exhibit
Deanhardt -16 calculating the amount due for the fourth quarter of2001 (that is
October through December 2001) in March 2002. As Ms. Deutmeyer s affidavit
explains, her calculation of the amount due for that quarter differed from Qwest's. As
a result, McLeod and Qwest exchanged several e-mails trying to reconcile the
differences to come up with a final amount that was due. They were still working on
that task when the Department began making inquiries about the discount agreement.
Subsequently, at an April 30, 2002 meeting, Qwest put the payment of the fourth
quarter discount on hold for what Mr. Ibarra referred to as "undisclosed reasons" in
an e-mail attached as Exhibit 6 to Ms. Deutmeyer s affidavit (Exhibit Deanhardt -10).
I was unable to ever confirm what those "undisclosed reasons" were, although
there are indications in notes that Qwest provided that Stephen Davis had become
involved in handling this matter for Qwest.7 At the time, Mr. Davis was Qwest's
Senior Vice President of Public Policy and Law, which suggests that Qwest
recognized in the beginning of 2002 that continued payment of the discount had
become a regulatory concern. To my knowledge, Qwest never made another discount
payment to McLeod after the Department began its investigation.
7 See pages 13 an~ 14 of Exhibit Deanhardt -68 to this testimony.
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
What other evidence demonstrates that Qwest agreed to provide this
discount to McLeod?
There are three categories of documents that further evidence the discount
agreement. The first category is documents showing how the agreement was
negotiated. The second is documents from Qwest's files where Qwest refers to the
discount. The third category is post-agreement documents from McLeod that refer to
the discount.
Please describe the documents from the negotiation of the agreement that
show the existence of the discount.
These are the negotiation documents that I found, discussed in chronological
order (to the extent possible): Exhibit Deanhardt -22 to my testimony is a set of
documents created by Qwest that were stapled together when produced to the
Department in 2002. The dated documents in the Exhibit show that they were created
in the early stages of Qwest's discussions with McLeod in July and August 2000.
Most ofthese documents show Qwest's consideration of the financial impacts to it of
McLeod staying on a resale platform as compared to McLeod converting to UNE-
The 15th page in the Exhibit, dated August 28, 2000, compares the two
options from what Qwest positions as McLeod's perspective. According to the
banner, the document was created by or for "Worldwide Wholesale Markets" for
Qwest. It is titled "McLeod Resale/UNE-P Pricing Proposal."
In this document, Option 1 for McLeod, the option to "Remain on Resale
Platform , shows Qwest was already considering "Pricing points reductions to
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
TOTAL RESALE Billing" of between 10% and 20%. It also notes that the reductions
would only be implemented if McLeod hit revenue targets for the time periods
reflected for each discount, and that "Price reductions to be flowed back to McLeod
as wire-transfer or quarterly or semi-annual basis based on actual billing for prior
period. "
The discounts finally agreed to by Qwest ended up being substantially lower
but they also ended up applying to all products and services, not just resale. But the
significant point is that these two concepts from this very early document were
incorporated into the final agreement.
Exhibit Deanhardt -23 to my testimony is a true copy of a letter from Mr.
Fisher to Mr. Casey dated August 15 2000. In the "Overview of Proposed Deal
Structure" in this letter, Mr. Fisher included the following bullet point: "Revenue
commitment for a period of 24 or 36 months with percentage discount breaks above
minimums.
Exhibit 2 to Mr. Fisher s affidavit (part of Exhibit Deanhardt -9 to my
testimony) is a true copy of a September 19 2000 term sheet that, according to Mr.
Fisher, the parties created together. Attached as Exhibit Deanhardt -24 to my
testimony is another copy of the same document that came from Ms. McKenney
files. Item number 6 reads: "Based on the proposed commitment by M, within 5
business days, Q will propose volume and term discounts based on quarterly revenue
targets, to be paid back to Mby Q on a quarterly basis.
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
Exhibit Deanhardt -25 to my testimony contains three different documents
that Qwest created during the negotiations (and produced to the Department in 2002
stapled together). The first is a presentation titled "McLeodUSA Discussion 9/29/00"
and says that it was prepared by Freddie Pennington at Qwest. On the second page of
the document, titled "Overview " there is a bullet point for the McLeod UNE
Platform that contains a sub-point for "Additional Resale Revenue discount" of 12%
in year 1 , 14% in year and 16% in year 3. Another sub-point is "Out of Region
Revenue discount TBD." The fourth page of the presentation touts "deeper discounts
for long-term relationship," and the fifth page shows financial calculations that
included the proposed discount.
The second document in Exhibit Deanhardt -25 is an e-mail from Ms.
Pennington to Ms. McKenney and Mr. Ibarra attaching a second presentation. This
presentation is titled "McLeodUSA Meeting Discuss New Resale Pricing Plan" and
subtitled "Resale Revenue Commitment Incentive Plan." The overview on page two
begins with "Incentive discount plan for Resale finished services (lFR, 1FB
Centrex)" and goes into further detail on how the discount would work. The fifth
page of the presentation also touts "deeper discounts for long-term relationship,
while the sixth page contains financials that show a five-year commitment proposal
with discounts to increase over every year as revenue increases for Qwest.
The final document in Exhibit Deanhardt -25 is another PowerPoint
presentation attached to an e-mail sent to Ms. McKenney and Mr. Ibarra on
September 18, 2000. This presentation contains a "Revenue Volume Term
Commitment Unbundled Network Element Regional Year Plan." A handwritten note
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
on the second copy ofthe presentation reads "Global Volume Discount" in what
Qwest has admitted is Ms. McKenney s handwriting.
Attached as Exhibit Deanhardt -27 is a true copy of an e-mail that James
Balvanz at McLeod sent to Audrey McKenney on October 18 2000 with McLeod'
proposal for the discount. The McLeod proposal was based on quarterly revenues and
contained finer gradations of discounts ranging from 5% to 20%.
Exhibit Deanhardt -28 is a true copy of an October 20, 2000 e-mail from Mr.
Ibarra at Qwest to Mr. Balvanz at McLeod attaching a file called "SummaryOfOffer
00.xls." The third page of the attached spreadsheet file is a worksheet titled
DiscountSmmryForM01" in the bottom right hand corner. The tables on that
worksheet are labeled "McLeod Growth & Discount Scenarios" and show Qwest's
proposals for discount levels based on revenue generated by McLeod for Qwest.
Later that day, Mr. Ibarra sent Mr. Balvanz a second e-mail attaching a
revised version of the "SummaryOfOffer 10 00.xls" file. The subject of the e-
mail was "Revised Summary." The e-mail says among other things "2. I added a
not( e J on the "McLeod Growth & Discount" page to note that the discount will not
exceed 10%." A true copy of the e-mail is attached as Exhibit Deanhardt -29. The
hardcopy produced to the Department in 2002 did not contain the attached file.
Exhibit Deanhardt -30 to my testimony is what appears to be McLeod'
counterproposal to the October 20 , 2000 offer just described. Item number four says
The discount schedule will be as previously offered by McLeodUSA except that it
8 See Qwest's response to Department data request DOC 343 , attached as Exhibit
Deanhardt -26.
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
will be capped at 15%. In addition, the discount will begin 4th Quarter, 2000. It is our
expectation that the discount schedule as well as certain other items will be reviewed
on an annual basis.
Exhibit Deanhardt -31 to my testimony is another group of documents that
were stapled together when Qwest produced them to the Department. Based on the
dates that appear on most of the documents, they were created between October 17
and 20, 2000.
The first 17 pages of Exhibit Deanhardt -31 show different pricing scenarios
Qwest considered for the UNE Star product. Pages 18 - 20 39 and 40
show Qwest's consideration of different potential discount rates in various documents
titled "McLeod Growth and Discount Scenarios." Pages 26 and 29 are copies of the
McLeod Growth and Discount Scenario" worksheet that contains the "Discount will
not exceed 10% in any year" language referred to in Exhibit Deanhardt -29. The
following legend appears in the bottom right-hand corner of pages 26 and 29:
SmmryOfOffer 10 00 DiscountSmmryForMOl." Page 30 is another version of
the same document, printed later in the day.
Page 38 of Exhibit Deanhardt -31 is another version of the "McLeod Growth
and Discount Scenarios" document. This one, however, contains charts identified as
the "gCasey Proposal." In my review of the documents and investigation into this
matter, the only person to whom that reference could apply is Greg Casey.
The final document in Exhibit Deanhardt -31 is titled "McLeod Growth and
Discount Scenarios - Saturday, 10/21/00, 12:10 p.m. Counter Proposal." It contains a
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
three-tiered proposal with discounts running between 8% and 10%, although the
breakpoints are not the same as in the final agreement between Qwest and McLeod.
Exhibit Deanhardt -32 to my testimony is another e-mail from Mr. Ibarra to
Mr. Balvanz. This one is dated October 21 2000 and contains the subject line "Qwest
Counterproposal." The counterproposal attached to the e-mail sets out a three-tiered
range of discounts for McLeod based on the revenue it generates for Qwest.
Exhibit Deanhardt -33 to my testimony is yet another e-mail from Mr. Ibarra
dated October 21 2000. The subject of this one is "Counter Proposal." The e-mail
header shows it was sent at 12:38 p.m. to Mr. Fisher, Mr. Balvanz and Randy Rings, a
McLeod attorney. It contains a two-tiered discount proposal that differs slightly from
the one attached as Exhibit Deanhardt -32.
Exhibit 3 to Mr. Fisher s affidavit is a true copy of an October 21 , 2000 e-mail
sent to him by Ms. McKenney with an attachment that laid out what became Qwest's
final discount counterproposal to McLeod. It contains a three-tier discount structure
tied to the amount of revenue generated by McLeod for Qwest.
At roughly the same time Qwest and McLeod were trading the proposals and
counterproposals described above, Qwest was working internally to determine what
its counterproposals should be. Attached as Exhibit Deanhardt -34 to my testimony is
a group of documents showing Qwest's internal deliberations over the amount ofthe
discount to provide McLeod. Qwest produced these documents stapled together. The
first document in the exhibit is an e-mail showing that the documents following it are
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
the business case associated with the McLeod negotiations." The e-mail is dated
October 21 2000.
The business case compares the results of various revenue projections under
the "New UNE-P" (UNE-Star) against projections for McLeod purchases of regulated
UNE-P products. The spreadsheets for "New UNE-P" show "Vendor Plan" as a
COGS or "Cost of Goods Sold" for providing the new UNE-P to McLeod. The
second and third spreadsheets show the amount of the Vendor Plan COGS equals
10% of the revenue for the year in which it appears, rounded to the nearest million.
The Regulated UNE-P plan has no Vendor Plan COGS.
Are you familiar with the acronym COGS?
Yes. I have a businessperson s understanding of financial statements and
business case analyses. In addition, when I was working to start up Epidemic
Networks I created the financial plan that was part ofthe business plan. Based on that
experience, I understand that COGS means the cost of goods sold - the costs directly
associated with producing goods for sale.
What else did you find in Exhibit Deanhardt -34?
The seventh page of Exhibit Deanhardt -34 is a handwritten note from Audrey
McKenney to Greg Casey. It appears to be the coversheet for a fax Ms. McKenney
sent to Mr. Casey who, at the time, was her direct supervisor. Ms. McKenney wrote
that "Attached is the proposed internal McLeod Summary that Arturro , Dan, Freddie
& I put together. - I could not go to 12% for YR 2001 or any 4 Q'OO discount. (We
end up with negative revenues year to year)." (Emphasis in document).
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
Another note from Ms. McKenney appears on the tenth page of Exhibit
Deanhardt -34. Here, she again writes to Mr. Casey, "PIs call me on McLeod. Their
take or pay" level & Discount plan were unacceptable to us. Attached is their
proposal and our counter!" (Emphasis in document.)9 The next document behind this
note is a "Qwest Counterproposal" that proposes discounts for 2001 through 2003
that range from 6.5% to 10% depending on the revenue generated by McLeod for
Qwest.
The next three documents in Exhibit Deanhardt -34 are worksheets from a file
named "mcleodunedealsummary" that was printed on September 21 2000. Page 3 of
the file again shows the proposed discount schedule and, under the heading "Key
Settlement Points , says "Structure: - Mutual "Take or Pay" correlated to growth-
Required growth levels must be met before discounts apply.
The next document in Exhibit Deanhardt -34 is another copy of the "Qwest
Counterproposal" that is attached as Exhibit 3 to Mr. Fisher s affidavit (Exhibit
Deanhardt -9). Handwriting in the top right hand corner of the document that appears
to be Ms. McKenney s says "final Saturday 2:47 p." This is the same document
that Ms. McKenney sent to Mr. Fisher at 2:46 p.m. on October 21 , as demonstrated
by Exhibit 3 to Mr. Fisher s affidavit.
The next three pages of documents in Exhibit Deanhardt -34 are labeled
ResalelUNE Settlement Impacts Summary McLeod." The footer indicates that the
9 Qwest admitted in its responses to Department data requests DOC 338 and 340
attached as Exhibit Deanhardt -, that the handwriting on the seventh and tenth
pages of Exhibit Deanhardt -34 is Ms. McKenney
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
file was created at 4:07 p.m. on October 21. These three pages analyze the impact of
the overall deal agreed to by McLeod and Qwest, including the flat rate UNE-
pricing and the overall discount given by Qwest to McLeod. The third page addresses
the "Mutual Preferred Vendor Plan" and shows the application of the discount to
revenues generated by McLeod. Under "Structure" there is a bullet point for
Required growth levels must be met before discounts apply." In addition, a box in
the financial calculations shows the final take-or-pay commitments that appear in the
McLeod take-or-pay agreement (Exhibit Deanhardt-11), attributing them to "per
Casey & Fisher.
What other negotiation documents did you find that led you to conclude
that Qwest agreed to provide McLeod with this discount?
Exhibit Deanhardt -35 to this testimony is an October 22 2000 document
titled "Qwest Counterproposal" that contains the tiered discount structure to which
Qwest and McLeod finally agreed. I determined this by comparing it to paragraphs
26-27 and Exhibit 3 to Mr. Fisher s affidavit (Exhibit Deanhardt -9) and the
discount contained on several post-agreement documents I discuss later in my
testimony.
Exhibit Deanhardt -36 is a set of undated, handwritten notes that appear from
their content to have been written during the negotiation of the October agreements.
The second page of the notes start with the underlined heading "Discount Structure.
Number 2 under that heading says "All products contribute (Globals). $lm =)0 10%
overall commitment By product mix." At the bottom of the page are notes for "Key
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
points w/ Joe (1) Bus to Bus (anchor client) (2) Bus. Important to Q." Qwest
admitted in response to Department requests DOC 332 and 334 that the handwriting
on these notes is that of Ms. McKenney and that the "Joe" to whom they refer is Joe
Nacchio, Qwest's CEO when the notes were taken. True copies of those responses are
attached as Exhibit Deanhardt -37.
Finally, Exhibit Deanhardt -38 is a true copy of an undated e-mail and a
document Qwest produced to the Department on July 23 , 2002. The document
appears to be an early draft of the various agreements that the parties entered into on
October 26, 2000, all combined into one agreement by Randy Rings at McLeod. This
document is fashioned as "Interconnection Agreement Amendment Terms" and
contains at paragraph 1.3 - 1.5 the same business escalation procedures that appear
in what was identified in the 197 Docket as McLeod Agreement II.
The following note appears at paragraph 1.8.2: "Jim - this is intended to
address the price squeeze concern we have raised. Attachment 1.8.2 will be the rates
and discount." Then, at paragraph 3.2, the following appears in reference to Qwest'
commitment to supply McLeod with products: "I need help from some biz folks to do
these attachments, but the concept is the same as suggested in your note. Consider
whether the discount on the total can be in a side letter." Ultimately, the various
agreements in this draft - including the discount agreement - were broken apart and
entered into as separate agreements on October 26, 2000.
Where were these negotiation documents located?
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AT&T Communications of
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The two documents attached to Mr. Fisher s affidavit were produced to the
Department by McLeod. Exhibit Deanhardt -38 came from Stephen Davis' files
according to Qwest. Otherwise, the documents all came from Ms. McKenney s files
and were produced by Qwest in 2002 response to Department information request
DOC 212 for Ms. McKenney s files related to McLeod.
What did you conclude from reading these documents?
I have negotiated many different business and legal agreements, both inside
and outside the telecom industry. The documents I reviewed are consistent with the
kind of documents I would expect to find for any heavily negotiated agreement.
Based on the documents I reviewed, I concluded that, between July and October
2000, Qwest and McLeod entered into substantial negotiations over the scope of a
discount that would apply to all purchases made by McLeod from Qwest once
McLeod reached negotiated minimum revenue commitments. These negotiations
were part ofthose that resulted in the series of written agreements and the oral
discount agreement that Qwest and McLeod entered into on October 26, 2000.
What documents did you find from your second category - documents
from Qwest's files created after the agreement that refer to the discount?
The first document is an October 31 , 2000 document Qwest apparently
created to internally explain the complete deal it had struck with McLeod. A true
copy is attached as Exhibit Deanhardt -39 to my testimony. The document consists of
six pages of spreadsheets. The first is titled "ResalelUNE Settlement Impacts
Summary McLeod." It shows revenue projections based on whether McLeod hits
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AT&T Communications of
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High" or "Low" revenue targets and shows the "Vendor Plan - High" as a COGS.
The numbers in the "Vendor Plan - High" row are calculated by multiplying high
revenues by 10% and rounding to the nearest million. The "Low" revenue projections
do not have a "Vendor Plan" correlation because the numbers are too low for Qwest
to apply the discount. This is consistent with the deal that Qwest and McLeod struck.
The "Mutual Preferred Vendor Plan" also appears on page 3 of the
presentation. Except for the title, page 3 is the same document that Qwest originally
called the "Qwest Counterproposal" on October 22, 2000. You can see this by
comparing this document to Exhibit Deanhardt -35. Other pages in this set of
spreadsheets also refer to amounts associated with the "Vendor Plan " which can
always be calculated by multiplying revenues by 1 0%.
I also found a set of handwritten notes that is undated but appears from its
content to have been taken in a meeting held shortly after Qwest agreed to provide the
purchase volume discount to McLeod. The notes, attached as Exhibit Deanhardt -
to my testimony, address the "Implementation Plan with McLeod.lo The second
page contains the following notations: "(5) Reconciliation process 1 0% vendor
payment " and "Discount 10% offtop." Qwest admitted in its response to DOC 345
attached as Exhibit Deanhardt -41 that Ms. McKenney wrote these notes.
In addition, two sets of Qwest accounting documents that show Qwest
understood both the McLeod and Eschelon agreements to be discounts. Exhibit
10 Qwest and McLeod agreed in another undisclosed agreement, dated October 26
2000 and referred to in the 197 Docket as McLeod Agreement II, to create an
implementation plan.
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AT&T Communications of
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Deanhardt -42 is a true copy of a printout of a file named "UNE DEAL
REFUNDS.xls." The ninth page of Exhibit Deanhardt -42 is an April 3 , 2001 memo
from Mr. Ibarra to Suzy Francis that reads "This is to reduce UNE-Star revenues for
10% discount that will be issued to Eschelon and McLeod should they meet they
(sic) revenue/volume commitments per the UNE-Star contract." That same note
appears on a March 5 , 2001 memo to Ms. Francis from Mr. Ibarra that is the 12th
page of Exhibit Deanhardt -42.
The same April and March memoranda are also part of Exhibit Deanhardt -
which is a true copy of the printout of"UNE DEAL REFUNDS 2.xls." They appear
as the 22nd and 25th pages of Exhibit Deanhardt -43 and differ only in that the dollar
amounts missing from the April 3 printout in Exhibit Deanhardt -42 appear in the
printout attached as Exhibit Deanhardt -43.
Another accounting spreadsheet produced by Qwest is attached as Exhibit
Deanhardt -44. This sheet is undated, but appears to have been created in March
2001. The file name is "MOl UNE M details.xls." The following legend appears at
the top of the spreadsheet: "THIS SHEET WAS USED TO CALC MO 1 10%
DISCOUNT THROUGH MARCH." (Capitalization in original). As I previously
noted
, "
MO 1" is McLeod.
II As I discussed earlier in my testimony, Qwest also made payments to McLeod
equal to the difference between the resale price McLeod paid for UNE-Star and the
UNE-Star contract price. The documents in Exhibit Deanhardt -42 to which I refer in
the text clearly do not relate to those true-up payments, however, because accruals for
the true-up payments are addressed in separate memos included in Exhibit Deanhardt
42 that follow the ones to which I refer.
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Exhibit Deanhardt-45 to my testimony is a true copy of an e-mail sent
internally within Qwest containing the agenda for a meeting between Qwest and
McLeod scheduled to take place on May 1 , 2001.' A handwritten note attached to the
agenda says
, "
We have an agreement that they get add'110% off of billing by Q.
This document comes from Ms. McKenney s files, and Qwest admitted that the
handwriting is hers in its response to Department data request DOC 336, attached as
Exhibit Deanhardt-46.
Exhibit Deanhardt-47 to my testimony is a May 25 2001 e-mail from Stacey
Stewart at McLeod to Ms. McKenney and others at Qwest. The e-mail contains an
attachment of "the issue list we discussed yesterday." The third item on the issue list
is the "Mutual Preferred Vendor Plan." Under the heading "Description " Mr. Stewart
writes "As part of our UNE-M agreement, McLeodUSA is eligible for a customer
specific quarterly override of 10% based on total expenditures with Qwest for the
applicable quarter.
Attached as Exhibit Deanhardt-48 are several e-mails exchanged between Ms.
Deutmeyer at McLeod and Mr. Washington at Qwest addressing when Qwest will
make its Preferred Vendor Plan payment for the third quarter of 2001. These e-mails
are significant because both Qwest and McLeod refer to the plan payments as a
discount. Thus, in a November 27 2001 e-mail, Ms. Deutmeyer writes to Mr.
Washington "I figured out the $5.6 credit and you are right that was 2nd quarters
preferred vendor discount. I am still researching the Sept. #'s. Do you know when
you will have the 3rd quarter preferred vendor discount calculated?" Following up on
November 30, Ms. Deutmeyer writes "Can you also tell me when you will have info
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pulled together for the preferred vendor discount?" Mr. Washington replies on
December 3: "as for the vendor discount we want to get this done before the end of
the month - we ll see.
I also found an e-mail exchange in which Mr. Fisher writes to Ms. McKenney
that "Our people have not received information concerning the third quarter payment
of the preferred vendor discount. Could you please check on the status?" Ms.
McKenney responds on December 14 , 2001 as follows: "will do - I am not sure if it
got caught up in a new wire transfer process that Robin, our CFO implemented." A
true copy of this e-mail exchange is attached as Exhibit Deanhardt-49.
The remaining documents in this category come primarily from two sets of
related negotiations between Qwest and McLeod that took place in the spring and
summer of 200 1.
The first set of negotiations grew out of an e-mail exchange between Mr.
Fisher and Mr. Casey on April 25, 2001. A true copy of those e-mails is attached as
Exhibit Deanhardt-50 to my testimony. In his initial e-mail to Mr. Casey, Mr. Fisher
proposes that a meeting be scheduled to outline a new deal. One of the points Mr.
Fisher suggests for discussion in the new deal is to "Revisit our override discount.
Two of the issues that Mr. Fisher s e-mail also addressed were rates for DSL
and Voice Messaging Services (VMS). On April 25, 2001 , Freddie Pennington at
Qwest sent Ms. McKenney an e-mail with a file named "VMS DSL
Chronology.doc." A true copy ofthat e-mail and its attachment are attached as
Exhibit Deanhardt-51 to my testimony. Under the date 2/16/2001 , the chronology
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states: "Lowest rates available are ... 1 FB UNE-ST AR (10% discount applied all
states).
The negotiations that began thereafter centered on a term sheet and other
documents that McLeod sent to Qwest on May 21 , 2001. A true copy of the e-mail
and the proposal created by McLeod is attached as Exhibit Deanhardt-52. The
Proposed Term Sheet" contains item 3 , which reads: "In recognition ofthe
preceding, McLeodUSA will provide to Qwest an increased commitment off revenue
and term which includes an additional discount tier." The next attachment to the e-
mail is the proposed "additional discount tier" which shows a higher level of discount
and an additional year being added to the agreement Qwest and McLeod struck in
October. On that document, the Tier 1-3 rows for the 2001 - 2003 columns accurately
reflect the discount deal Qwest and McLeod actually entered into in October.
Exhibit Deanhardt-53 to my testimony is a true copy of another copy of
Exhibit Deanhardt-, but without the transmittal e-mail. This exhibit, however
contains handwritten notes made by Audrey McKenney. 12 Beside item 3 on the Term
Sheet, Ms. McKenney wrote "give a counter proposal." The second page of the
exhibit is the new discount proposal by McLeod. Beside the Tier 3 row, Ms.
McKenney wrote
, "
Today s contract" with arrows pointing to proposed Tier 4 that
say, "New level given M&As." Again, the Tier 3 row to which Ms. McKenney refers
accurately reflects the discount deal Qwest and McLeod actually entered into in
October 2000.
12 See Qwest's response to Department request DOC 349, attached as Exhibit
Deanhardt -54.
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AT&T Communications of
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Qwest and McLeod met to discuss McLeod's new proposal on May 31 , 2001.
Exhibit Deanhardt-55 is a June 2 2001 e-mail that Stacey Stewart of McLeod sent to
Ms. McKenney and Mr. Casey, among others, summarizing the discussions. Item on
the initial e-mail is "Qwest to provide a response to McLeod's tiered discount sheet
by 6/11."
Arturo Ibarra at Qwest responded to Mr. Stewart's e-mail on June 13. A true
copy of the response is attached as Exhibit Deanhardt-56. In paragraph 9 of the e-
mail, Mr. Ibarra responds to the tiered discount sheet by saying, "On the tiered
discount (Item #3), based on the documentation on our 10/22/00 weekend proposals
we understood that both parties had agreed to negotiate final rates based on market
conditions and for the integration of Split Rock and other acquisitions. If you would
like a copy of this document, let me know and I will fax it to you." Mr. Ibarra goes on
to discuss how Qwest was already accounting for companies merged into McLeod
when it calculated the "Preferred Vendor Plan.
The document to which Mr. Ibarra refers to in Exhibit Deanhardt-56 is the
October 22 2000 Qwest Counter Proposal attached as Exhibit Deanhardt-35. Qwest
confirmed this in its response to Department request DOC 320 , which is attached as
Exhibit Deanhardt-57.
The language from Exhibit Deanhardt-35 to which Mr. Ibarra refers in Exhibit
Deanhardt-56 is located within the 3- Tier discount proposal that was accepted by
McLeod. It says "The above level is an interim default level. Both Parties agree to
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negotiate final rates based on market conditions on an annual basis and for the
integration of Split Rock / other acquisitions.
The second set of new negotiations related to McLeod's desire to reduce the
price of ISDN/PRI lines it purchased from Qwest. Gary Dupler, at the time a Vice
President of Network Planning at McLeod, and Jim Shearburn, a Vice President of
Sales for Qwest's Central Region, are the two individuals who appear to have done
most of the negotiating on this issue.
In the course of these negotiations, Qwest prepared a letter to Mr. Dupler
setting out its proposed new ISDN/PRI pricing, which would reduce McLeod's cost
to $667 per circuit resulting in approximately $1.27 million per month in savings to
McLeod.
On June 11 , 2001 Mr. Shearbum sent Ms. McKenney and several other people
at Qwest an e-mail regarding the drafting of that letter. The e-mail asks "Has the 10%
across the board discount been negated by the reference that no additional discounts
apply? Are we still required to discount this price component by an additional 10% in
a monthly rebate per the B2B deal?" A true copy of the e-mail is attached as Exhibit
Deanhardt-58.
Later that same day, Mr. Shearburn sent the Qwest proposal to Mr. Dupler. A
true copy of the transmittal e-mail, with the proposal letter, is attached as Exhibit
Deanhardt-59 to my testimony. Page three of the proposal letter says the following
under "Approved Rates
: "
4) Please note 'NO' Additional Reseller Discounts Apply
to the $667 price. The rate for McLeod's ISDN/PRI services stated in this contract
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does not apply to any other discounts and specifically, that the 10% Business to
Business reduction does not apply to the services addressed in this Contract."
The June 11 proposal letter subsequently went through further revisions at
Qwest (even though it had already been sent to McLeod). On June 13 2001 , Mr.
Shearburn sent an e-mail to Ms. McKenney stating "As to the discount issue. What is
not clear to OMR or product is that this 10% across the board applies to all products. I
asked that the ' carve out' language be inserted in order to set the expectation that this
is the best and final price, candidly I do not think we need to go any lower, he is
pretty happy with this, I think." A true copy ofthis e-mail is attached as Exhibit
Deanhardt-60.
Then, on June 18, Mr. Shearburn writes in another e-mail addressing the
ISDN/PRI proposal to McLeod: "Audrey needs to come up with alternate language
dealing with the 10% B2B deal. We should not use the language we have in the
proposal, too specific. We either use the alternate language, or reprice all components
at a rate 10% higher, and remove the paragraph entirely." A true copy of this e-mail is
attached as Exhibit Deanhardt-61.
What did you conclude from these documents?
Based on my experience conducting business negotiations in a variety of
settings and working with Qwest / U S WEST when I was employed by Covad, these
documents are consistent with negotiation, deal evaluation and daily business
communications. These documents indicate that Qwest understood that it had agreed
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AT&T Communications of
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to give McLeod a 10% discount on all purchases and that Qwest considered how to
account for that fact when negotiating new deals with McLeod.
I also noted that Qwest never responded to any of the communications from
McLeod about the discount by stating that the discount did not exist. I would
certainly expect to see that kind of disclaimer if Qwest had not agreed to the discount.
Did Qwest and McLeod enter into any new agreements based on the
follow on negotiations you just discussed?
Not any of which I am aware.
Where did you find these documents?
Qwest produced Exhibit Deanhardt-39 in response to the Department's
request for all of Arturro Ibarra s files related to McLeod. It produced Exhibits
Deanhardt-42 and Deanhardt-43 in response to the Department's request for all of
Anthony Washington s files related to McLeod. Qwest produced Exhibit Deanhardt-
48 in response to Department request DOC 188, which asked Qwest to produce all e-
mails exchanged between Anthony Washington and Lori Deutmeyer. It produced
Exhibit Deanhardt-57 in response to Department request DOC 320. The remainder of
these documents came from Ms. McKenney s files, and Qwest produced them in its
response to Department request DOC 212 , which asked for Ms. McKenney s files
related to McLeod.
Please describe the documents from your third category - those created
by McLeod after Qwest agreed to provide it with the discount.
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
The first is the document that is Exhibit 4 to Mr. Fisher s affidavit (Exhibit
Deanhardt-9). This is a printout of a March 1 , 2001 e-mail from Mr. Dupler to Mr.
Balvanz in McLeod. Mr. Dupler asks Mr. Balvanz a series of questions about the
discount agreement after opening his e-mail by saying "As I understand it there is a
10% additional discount on the prices we pay for all qwest services." Mr. Fisher
affidavit confirms the accuracy ofMr. Balvanz s handwritten responses to Mr.
Dupler s questions. Those responses include Mr. Balvanz setting out the conditions
under which the discount applies. Those conditions are consistent with the October
2000 "Qwest Counterproposal" that is attached as Exhibit Deanhardt-35.
The second document is a March 28 2001 e-mail that Mr. Fisher sent to
Stephen Gray, McLeod's President. Mr. Fisher s e-mail sets out "the beginning of a
concept of a term sheet with Qwest on the next possible business deal." Item number
six is "M gets revised discount plan (probably in a form of amended take or pay)." A
true copy of this e-mail is attached as Exhibit Deanhardt-62.
Finally, the third document is a May 18 2001 draft version ofthe term sheet
that ultimately went to Qwest on May 21 , 2001 (Exhibit Deanhardt-52). Item 11
states "In recognition of the proceeding, McLeodUSA will provide to Qwest an
increased commitment in revenue and term." Handwritten notes on the side say
Extend one yr, 180 take or pay for 2% more discount." A true copy ofthis document
is attached as Exhibit Deanhardt-63 to my testimony.
McLeod produced all three of these documents to the Department in its
response to Department Information Request No. 1224 in 2002.
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What did you conclude from these documents?
Again, these are the kinds of documents created in the course of conducting
business and preparing for business negotiations with a significant vendor. The
documents show that McLeod was operating under the belief that it had a discount
from Qwest on all of its purchases
Has Qwest made any effort to try to explain this discount?
My understanding is that, to date, Qwest continues to claim that it did not
enter into a discount agreement with McLeod that its only agreements with
McLeod are the written agreements, including the Qwest take-or-pay agreement.
How does Qwest explain the Preferred Vendor Plan payments?
In 2002 responses to Department discovery requests on that question Qwest
claimed that the three payments were for "a calculated shortfall in purchases made by
Qwest from McLeod and associated with" Qwest's written take-or-pay agreement to
purchase products and services from McLeod (Exhibit Deanhardt-17). Qwest'
responses in this regard are attached as Exhibit Deanhardt-64 to my testimony.
Is this explanation consistent with the results of your investigation?
No. To begin with, Mr. Fisher, Mr. Conn and Mr. Stewart all confirmed that
the oral discount agreement existed. In addition, Ms. Deutmeyer confirmed that
Qwest made payments under the oral agreement, the amounts of which were
calculated by applying 10% to the amount billed by Qwest to McLeod.
Deanhardt, Di-
AT &T Communications of
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Moreover, as discussed throughout most of my testimony, I found a large
number of documents showing that both Qwest and McLeod understood that Qwest
had agreed to provide McLeod with a purchase volume discount.
Just as importantly, Qwest has acknowledged in discovery responses that it
made additional payments to McLeod during 2001 for the telecommunications
services it actually purchased from McLeod. These payments were separate from
those made by Qwest to McLeod under the Preferred Vendor Plan / discount
agreement. Exhibit Deanhardt-65 to my testimony is a true copy of a spreadsheet
created by Qwest showing payments of$5 504 690 made by Qwest to McLeod for
usage and private line services in 2001. The spreadsheets behind the summary page
show the dates and check numbers for the various checks sent by Qwest to McLeod
for these purchases.13 In its response to DOC 358 attached as Exhibit Deanhardt-
Qwest admitted that the summary sheet at the beginning of Exhibit Deanhardt-
shows payments actually made by Qwest to McLeod.
The purchases reflected on Exhibit Deanhardt-65 are the types of purchases
that would be covered by the Qwest take-or-pay agreement attached as Exhibit
Deanhardt -17. If Qwest' s explanation for the Preferred Vendor Plan payments were
correct, then I would have expected to see the payments Qwest made calculated by
subtracting the total actually spent by Qwest from the amounts owed under the take-
13 On July 22, 2002 Qwest produced a supplemental response to DOC that included a
spreadsheet in the same format as Exhibit Deanhardt-65 showing payments made by
Qwest to McLeod for October through December 2000. A true copy of the document
produced by Qwest is attached as Exhibit Deanhardt-66.
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or-pay agreement. I did not see any documents reflecting that kind of calculation in
any of the documents produced by Qwest to the Department in 2002.
To the contrary, the spreadsheets Qwest used to calculate the Preferred
Vendor Plan payments (See Exhibits Deanhardt-13 through Deanhardt-16) show that
the payments were actually calculated by applying a 10% factor to revenues
generated in various categories including "Resale
, "
Collocation" and "Unbundled
Loops." In 2002 , Qwest did not purchase those kinds of services from McLeod, but
McLeod did purchase those services from Qwest.
In fact, as I discussed previously, Qwest has admitted that the amount of the
Preferred Vendor Plan payments were calculated by multiplying the amounts Qwest
billed to McLeod by 10%. That calculation is consistent with the discount agreement
confirmed by Mr. Fisher and described in the many documents I have discussed. It is
completely inconsistent with the claim in Exhibit Deanhardt-64 that Qwest was
calculating a shortfall in purchases it was supposed to make from McLeod.
Are there any other documents that led you to conclude that Qwest'
explanation is not accurate?
Yes. As I already discussed, Qwest created several business case documents
that it used internally to evaluate various aspects ofthe McLeod deal as it negotiated
with McLeod in the fall of 2000 (Exhibit Deanhardt-34). In those documents, Qwest
referred to the Vendor Plan as a COGS, or cost of providing goods to McLeod. The
Vendor Plan COGS for each year substantially exceed the take or pay amount set out
in Exhibit Deanhardt-, the Qwest take-or-pay agreement. In 2001 , for example, the
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written agreement called for a $15.84 million take or pay commitment by Qwest. The
Vendor Payment COGS for the second and third spreadsheet for the same time period
was $20 million. In 2002, the numbers were $18.32 million for the take-or-pay and
$25 million for the spreadsheet COGS , and in 2003 the numbers were $19.92 million
and $29 million, respectively. If Qwest were only obligated to meet its take-or-pay
commitment, then the maximum it should have projected as a cost of providing goods
to McLeod would have been the full value of the commitment for the given year.
Did you find any documents supporting Qwest's explanation?
I found only three Qwest documents (out of approximately eight boxes of
documents produced by Qwest) that were consistent with Qwest's explanation. Two
of them, however, were created only after the Department began investigating the
discount agreement. The third was created by a person not involved in the
negotiations and reflects a lack of understanding about the deal. All three documents
are attached as Exhibit Deanhardt-68 to my testimony.
The first document is an e-mail and spreadsheet sent by Mr. Ibarra to Anne
Richardson and Ms. McKenney on May 31 , 2002. The spreadsheet, titled "McLeod
Vendor Plan Summary" seems to compare the sum of the Preferred Vendor Plan
payments and Qwest's actual purchases from McLeod to the amount that would have
been due under the Qwest take-or-pay contract (Exhibit Deanhardt-17), finding an
overpayment of $12 million.
The second document is a set of handwritten notes from the April 30, 2002
meeting between McLeod and Qwest. The seventh page of the notes contains the
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AT&T Communications of
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following "Will Q be making 4Q payment? In legal today. Will resolve in face-to-
face mtg. $5m pymt in June 01 included 4Q2000 & s/n/h/been. Offset amount issue &
substantially overpaid in error. McLeod booked this in 4Q. Randy had conversation
with Steve Davis on this.
The third document - and the only one created before the Department began
its investigation into the McLeod discount agreement - is a January 16, 2002 e-mail
from Steve Hansen at Qwest to Robin Szeglia, Qwest's CFO at the time , attempting
to explain the request for the $5.9 million Preferred Vendor Plan payment to McLeod.
Mr. Hansen refers to the payment as "a result of a take or pay commitment." Mr.
Hansen, however, goes on to say that "We enlisted there (sic) support on regulatory,
legal, 271 and other matters of consulting for a $48M take or payment commitment
over the same period. ... We have a similar deal with Eschelon.
Did you consider these documents before you reached the conclusions
about which you have testified?
Yes, I did. They did not change those conclusions, though. Both Mr. Ibarra
spreadsheet and the April 30, 2002 meeting notes were created only after the
Department had filed its complaint in the 197 Docket and propounded substantial
discovery requests to McLeod and Qwest designed to determine whether they had a
discount agreement. Thus they may have been created in response to the
Department's ongoing investigation of Qwest' s unfilled agreements. All the day-to-
day business documents created before then, on the other hand, consistently reflect
the companies ' j oint understanding that the discount agreement existed.
Deanhardt, Di-
AT&T Communications of
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I similarly gave less consideration to Mr. Hansen s e-mail because it is
factually inconsistent with Qwest's own description of its agreements with McLeod.
Mr. Hansen, who was not involved in the negotiation or execution of the October
2000 agreements, describes the Preferred Vendor Plan payment as if Qwest had
entered into the same "consulting" agreement with McLeod that Qwest claims it did
with Eschelon. That is not correct, and Qwest never produced to the Department any
agreement with McLeod that suggested there was a consulting arrangement similar to
the one Qwest claims in Eschelon Agreement.
Did you find any other documents suggesting Qwest's explanation may be
correct?
The evening before Ms. Deutmeyer s deposition, McLeod produced a
document, attached as Exhibit Deanhardt-, entitled "Summary of Qwest agreement
package." That document states that "Under a highly confidential agreement, we also
received a revenue / purchase commitment from Qwest based on the following." The
document goes on to layout commitments that correspond with Exhibit
DEANHARDT-, the Qwest Counterproposal of October 22 2000.
Did you consider this document before you reached the conclusions about
which you testified here?
Yes. Again, however, it doesn t change my conclusions. Ms. Deutmeyer
explained at her deposition that this document was given to her by Joe Terfler. It does
not appear that Mr. Terfler was involved in the negotiation of the October 2000
agreements. Also, the "purchase commitment" described in the document is not
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AT&T Communications of
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consistent with the Qwest take-or-pay commitment set out in Exhibit Deanhardt-
but it is consistent with the discount agreement set out in Exhibit Deanhardt-35.
Moreover, Qwest has asserted on numerous occasions that it has no oral
agreements with McLeod, suggesting that Exhibit Deanhardt-69 is not referring to a
modified oral version of Exhibit Deanhardt-17. It would also be an odd "purchase
commitment" since Qwest's commitment to McLeod is potentially unlimited and
fluctuates based on McLeod's expenditures with Qwest. An agreement of that type
would not be good business practice for Qwest because it commits Qwest to
purchases for which it has no forecasted need. Therefore, this document reinforces the
conclusion (also supported by Mr. Fisher s deposition), that the take-or-pay
commitment by Qwest was intended to mask the discount agreement.
If Qwest's explanation of its payments is correct, would that change your
conclusion that the Preferred Vendor Plan payments were actually
discount payments?
Possibly, but not necessarily. The mere fact that Qwest made take-or-pay
payments would not resolve the question of whether those payments were a disguised
discount. Here, for example, we know that Qwest only spent $5.5 million with
McLeod in 2001. Qwest's take-or-pay commitment, however, was $15.84 million-
14 I should also note that Qwest produced, on July 24, 2002, a new document it said
came from Audrey McKenney s files that appears to be a draft agreement from
October 23 2000 - the day after Qwest and McLeod reached the discount agreement.
A true copy of the document is attached as Exhibit Deanhardt- 70. Attachment 3.2 to
the document is a draft purchase commitment that mirrors the description in Exhibit
Deanhardt-69. The parties never entered into this written agreement, however, further
suggesting that Mr. Terfler s description ofthe discount as a "purchase commitment"
is not accurate.
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
or almost three times Qwest's actual expenditures. Those numbers are too far apart to
be simply a miscalculation by Qwest of its need to purchase products and services
from McLeod.
Moreover, Qwest never provided the Department with any documents
showing its projections of what it might buy from McLeod in response to the
Department's requests for such documents. I would expect to see those kinds of
projections from a company asa matter of course before it commits to a take-or-pay
contract. Based on the lack of documents and the enormous real-life difference
between Qwest's actual expenditures and the commitment amount , I would conclude
(absent additional evidence) that Qwest's commitment was a sham intended to
disguise a discount to McLeod.
In fact, Mr. Fisher confirmed in both my interview of him and his deposition
that Qwest and McLeod created the take-or-pay commitment only to insure that
McLeod would at least receive a portion of the discount agreed to by Qwest. See
Exhibit Deanhardt-, 34:17 - 39:5 and Fisher Affidavit ,-r,-r 21-23.
If the Qwest take-or-pay agreement was a legitimate agreement for Qwest
to buy needed goods and services from McLeod, would that change your
conclusion regarding the existence of the oral discount agreement?
No. There are simply too many documents created by both McLeod and
Qwest referring to the discount for it not to exist. There is simply no way to explain
all of these discount references absent a discount. Moreover, Qwest did actually
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
purchase needed services from Qwest, as reflected on Exhibit Deanhardt-65. It simply
paid for those services separately from the discount payments it made to McLeod.
Assuming that you are correct about this agreement, why did Qwest give
McLeod this discount?
The documents suggest two reasons. First, as Mr. Fisher explains, the new
Qwest wanted to keep McLeod's traffic on Qwest's network , thereby insuring a
revenue stream for assets that might otherwise go unused. Without the discount
McLeod would have proceeded with its plans to move as much traffic off of Qwest'
network as possible as quickly as possible. Many of the documents discussed earlier
in my testimony contain references to this reason.
Second, Qwest's acquiescence to the October 2000 agreements , including the
discount agreement, was expressly contingent on McLeod's oral agreement not to
oppose Qwest's Section 271 application. One ofthe most important things Qwest
could do to improve and grow its business was to obtain the authority to provide
interLATA services again in the areas where Qwest had to stop providing such
services after the merger. The importance of McLeod's agreement on this point was
noted in the September 19 2000 term sheet attached as Exhibit 2 to Mr. Fisher
affidavit. The Section 271 agreement is also discussed in several other exhibits to my
testimony, including the documents reflecting Qwest's internal consideration of the
deal with McLeod.
OTHER FACTORS
Deanhardt, Di -
AT &T Communications of
The Mountain States, Inc.
Did Qwest and Eschelon take any action with respect to the Eschelon
Agreement in response to the Department's investigation?
Yes. On March 1 , 2002 - just two weeks after the Department filed its
complaint in the 197 Docket - Qwest and Eschelon entered into a "Settlement
Agreement" terminating nearly all of the undisclosed agreements between them
including the take-or-pay agreement and the Eschelon Agreement containing the
discount agreement. A copy of the agreement is attached as Exhibit Deanhardt- 71.
In exchange for agreeing to terminate these agreements, Esche10n received a
payment, in the form of a credit against amounts it owed Qwest, for $7 912 000.00.
Given that Eschelon had only earned a $2.54 million discount on ten months of
purchases between November 2000 and August 2001 , this $7.9 million immediate
payment seems like quite a benefit to Eschelon in exchange for foregoing future
potential discounts.
Did Qwest and McLeod also terminate the McLeod agreement before it
expired on its own terms?
No. Even in its responses to AT&T's data requests in this docket , Qwest still
denies that the McLeod discount agreement ever existed. It would be impossible for
Qwest to terminate an agreement that it says never existed.
Are there any other factors that this Commission should be aware of that
led you to conclude that Qwest agreed to provide the discounts you
described to both Eschelon and McLeod?
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
Yes. There are simply too many similarities between the structure and timing
of the McLeod discount agreement and the Eschelon discount agreement for Qwest to
deny the existence of either agreement. In sum, those similarities are:
The McLeod discount agreement and the Eschelon discount agreement
were negotiated and entered into by Qwest concurrently, in October, 2000.
The McLeod oral discount agreement was reached the weekend of October
, 2000, and the written agreements were signed on October 26 , 2000. The
Eschelon discount agreement was reached on October 21 2000 and the
documents reflecting it were signed on November 15 2000.
In both cases, the parties entered into a series of interrelated
agreements, including take-or-pay agreements with purchase volume
commitments.
In both cases, one of the interrelated agreements was filed as an
interconnection agreement amendment that gave the CLEC access to UNE-
Star. The two UNE-Star amendments are substantially similar to each other in
form and content.
In both cases, one of the agreements extracted from the CLEC was an
agreement not to participate in the consideration of Qwest' s various Section
271 applications.
The same person at Qwest - Audrey McKenney - was intricately
involved in the negotiation of both the Eschelon agreement and the McLeod
agreement.
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
In both cases, Qwest has attempted to hide the discount behind a sham
agreement to prevent other CLECs from taking advantage of it.
In short, there are simply too many similarities for this to constitute a mere
coincidence in the real business world.
What did the Minnesota and Arizona commissions conclude about the
McLeod oral discount agreement?
In its 197 Docket, the MPUC affirmed the findings of its ALJ that the
McLeod oral discount agreement existed and constituted an interconnection
agreement. Specifically, the MPUC found that the McLeod Agreement existed and
discounts were paid and that Qwest's testimony to the contrary was not credible.
Minn. ALJ 197 Order ,-r,-r 320-338. As noted above, the ACC similarly found that
(tJhe evidence shows that the (QwestJ agreements with Eschelon for consulting
services and with McLeod for purchases which Qwest claims were not subject to
Section 252 requirements, were shams designed to hide the true nature of the
agreements. In the matter ofQwest's Compliance with Section 252(e) of the
Telecommunications Act of 1996, Opinion and Order (Decision No. 66949), at 38
(Apr. 30, 2004).
III.THE FAILURE TO DISCLOSE THE DISCOUNT AGREEMENTS
Did Qwest have any obligation to file or otherwise make the terms and
conditions of the Eschelon and McLeod discount agreements available to
AT&T and other carriers?
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
Yes. When Qwest entered into and tried to conceal its agreements with
Eschelon and McLeod, Qwest had a statutory obligation under 47 U.C. ~ 252(e) to
disclose and file with this and other state commissions the terms and conditions of
any agreement for interconnection or access to unbundled network elements
including specifically rates. Discounts, of course, are a part of calculating any final
rate.
What are the practical effects of Qwest concealing the discount
agreements?
By concealing the discount agreements, Qwest prevented AT&T and other
companies from taking advantage of the "most favored nations" clauses in its
interconnection agreements with Qwest to obtain the same discount. Thus, the legal
and contractual obligation to disclose the discount agreements had a practical
business purpose as well.
As discussed below, AT&T had "most favored nations" (or MFN) clauses in
its agreements with Qwest. These MFN clauses required Qwest to make available to
AT&T the same terms and conditions that Qwest made available to other carriers.
The only way to check Qwest's compliance with that provision is either by Qwest
notifying AT&T of the agreements or, more commonly, through review of publicly
disclosed agreements. By concealing the Eschelon and McLeod discount agreements
Qwest intentionally deprived AT&T of the ability to take advantage of the same
discount.
Should Qwest have filed the Eschelon and McLeod Agreements in Idaho?
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
Yes. There is no doubt that agreements that affect rates for interconnection
and unbundled network elements must be filed with state commissions. By this
failure and the lack of any other notice to AT&T, Qwest prevented AT&T from
obtaining the same discounts as Eschelon and McLeod.
IV.AT &T INTERCONNECTION AGREEMENTS
What is AT&T Communications of the Mountain States, Inc.
The Idaho CLEC affiliate of AT&T, Inc.
Do you know whether it had an interconnection agreement with Qwest in
Idaho at the time Qwest entered into the Eschelon and McLeod deals?
Yes, it did.
Have you reviewed AT&T's interconnection agreement with Qwest in
Idaho?
Yes.
Do the agreements contain "most favored nation" type clauses?
Yes. It can be found in Section 2.1 of the main body of the agreement, which
contains the "Terms and Conditions." A true copy of the main body ofthe AT&T
interconnection agreement is attached as Exhibit Deanhardt- 75. Section 2.1 provides
that:
Most Favored Nation Terms and Treatment
Until such time as there is a final court determination
interpreting Section 252(i) of the Act, U S WEST shall make
available to AT&T the terms and conditions of any other
agreement for interconnection, unbundled Network Elements
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
and resale services approved by the Commission under Section
252 of the Act, in that agreement's entirety. After there is a
final court determination interpreting Section 252(i) of the Act
the Parties agree to revise this Section 2.1 to reflect such
interpretati on.
What is the purpose of an MFN clause?
In general, MFN clauses guarantee one party (Party A) to an agreement that
no other entity doing business with the second party (Party B) will get a better deal
that the first party (Party A). If a third party (Party C) does get better terms, then the
first party is allowed to also incorporate the better terms into its own agreement.
In this case, the purpose of the MFN clauses at issue was to permit AT&T to
opt into agreements Qwest had with other carriers that might be beneficial to AT&T.
Here, the MFN clause would have allowed AT&T to opt into the Eschelon and
McLeod discount agreements such that AT&T could have received the same
discounts. AT&T's other witness here indicates that AT&T would have taken
advantage of those discounts, which is not surprising given the substantial amount of
money that AT&T could have saved.
Are there any other provisions of AT&T's interconnection agreement
states:
that affect AT&T's ability to opt into the Eschelon and McLeod discount
agreements?
Yes. Section B of the part of the agreement labeled "Scope of Agreement"
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
In the performance of their obligations under this Agreement
the Parties shall act in good faith and consistently with the
intent of the Act. Where notice, approval or similar action by a
Party is permitted or required by any provision of this
Agreement (including, without limitation, the obligation of the
parties to further negotiate the resolution of new or open issues
under this Agreement) such action shall not be unreasonably
delayed, withheld or conditioned.
This language imposes two obligations on Qwest that, had Qwest lived up to
them, would have given AT&T the opportunity to take advantage of the Eschelon and
McLeod discounts. The first is the obligation to "act in good faith and consistently
with the intent of the Act." There is no doubt that a primary intent ofthe act was that
ILECs (like Qwest) not discriminate against CLECS (like AT&T) by offering
favorable terms to some, but not others. Had Qwest followed this principle, it would
have made the discount agreements available to AT&T.
Second, in a situation where notice is required - for example, to effect the
requirement that Qwest "shall" make available to AT&T the terms of other
interconnection agreements - then Qwest must provide such notice without
unreasonable delay or conditions.
Instead of living up to these two obligations, Qwest actively concealed the
existence of the discount agreements.
Agreement Section 24.1 contains more language that required Qwest to make
the discount agreements available to AT&T. It reads: "Each Party shall comply with
all applicable federal, state and local laws, rules and regulations applicable to its
performance under this Agreement." As I previously discussed, federal laws and
regulations in 2000 and 2001 required Qwest (a) to disclose the terms of the discount
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
agreements by filing those terms with this Commission, and (b) to make the discount
agreements available to AT&T. Again, instead of following the contract, Qwest
actively concealed the discount agreements and prevented AT&T from being able to
take advantage of them.
Does this conclude your direct testimony?
Yes, it does.
Deanhardt, Di-
AT&T Communications of
The Mountain States, Inc.
Q',:rf=/VEDr" ,,- \.J 0-' '
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Deanhardt, C. - Exhibit
Case No. Q WE- T -06-
AT&T
Clay Deanhardt
21 'C' Orinda Way, #374
Orinda, CA 94563
[phone]
clay(Qjdeanha rdtlaw .com
EDUCATION
1989 -1992 Harvard Law School
Graduated cum laude with JD.
1985 -1989
Cambridge, /o.1A
East Carolina University Greenville, NC
Graduated summa cum laude from Honors Program with BA in Philosophy and English, with a
concentration in writing. GPA 3.9/4.0. Completed first year s requirements for MA in English.
WORK HISTORY
2006 Present Law Office of Clay Deanhardt
Principal/Owner
2005 2006
2001-2005
2000-2001
Orinda, CA
Provide outside general counsel services to small and emerging companies, including
corporate formation, securities compliance, IP review and dispute resolution services.
Draft and negotiate inbound and outbound commercial agreements including technology
licenses and Internet service agreements.
Draft and negotiate finance and purchase 1 sale agreements.
Covad Communications Company
Assistant General Counsel
San Jose, CA
Led vendor negotiations that eliminated a potential $30+ million software licensing liability in
favor of a new license that reduced company expenses.
Participated in inbound and outbound service and license agreement negotiation and drafting.
Integrated Covad's litigation department with its business and regulatory goals.
Managed legal support for labor and employment issues, including legal issues surrounding a
national reduction in force (resulting in no claims being filed against the company).
Managed customer relationships that had escalated to potential litigation threats.
Directed all of the company s litigation matters, including antitrust and IP litigation, using
both internal resources and outside counsel and achieving successful results in a wide variety
of matters.
Provided ongoing advice regarding SOX compliance and corporate communications.
Deanhardt Consulting
Principal/Owner
San Francisco, CA
Provided business and legal services to clients including AT&T, the Minnesota Department of
Commerce and the Arizona Residential Utility Consumer Office.
Epidemic Networks
President General Counsel, member of Board of Directors
Santa Barbara, CA
Managed a start-up peer-to-peer software company financed by the Santa Barbara Technology
Incubator, first as COOIGC and later as PresidentlGC and a member of the Board of
Directors.
Transfonned Epidemic Networks from a consumer Internet company with no revenue model
into a business software company with a Fortune 500 pilot customer and three-year plan to
profitability.
Wrote the business, marketing and financial plans.
Prepared and delivered business plan presentation for potential A-round investors.
Recruited executive team including VP of Engineering and VP of Marketing.
1999- 2000
1996-1999
1993-1996
1992-1993
2/91-5/91
Managed software development team located in Santa Barbara and New Zealand.
Covad Communications Company
Senior Counsel
Santa Clara, CA
Led the cross-functional team that designed a new method for deploying DSL broadband
services that opened the residential market to Covad, leading to wholesale relationships with
major Internet service providers and profitability for Covad's DSL products.
Negotiated and drafted agreements with incumbent local exchange carriers that allowed
Covad to provide service across the United States.
Managed Covad's legal and business relationship with US WEST (now Qwest).
Developed the company s legal and regulatory strategy for western United States and
contributed to the development of national legal strategies.
Advised Covad on a variety of securities law compliance and human resource legal issues.
Reviewed corporate communications for disclosure issues and compliance with securities
regulations.
Retained and managed outside counsel on regulatory and litigation matters.
Graham & James, LLP (now Squire, Sanders & Dempsey LLP)
Associate
Palo Alto, CA
Practiced intellectual property and general commercial litigation.
Conducted all aspects of litigation and trial preparation for cases including patent
infringement actions, software licensing disputes, copyright infringement actions, and
commercial transaction disputes.
Advised clients on intellectual property and general business issues.
Brown & Wood, LLP (now Sidley Austin LLP)
Associate
Practiced securities, general commercial and banking litigation.
Helped prepare a $40 million public financing as part of legal settlement in favor of my client.
San Francisco, CA
Dinkelspiel, Donovan and Reder
Associate
San Francisco, CA
Practiced general commercial litigation, securities litigation and telecommunications law.
Harvard University Cambridge, !vIA
Teaching assistant for "Thinking About Thinking" taught by Alan Dershowitz, Robert Nozick and
Stephen Jay Gould.
BAR ADMISSIONS
State of California; 9th Circuit Court of Appeals; Northern, Central, Southern and Eastern
Districts of California.
Idaho Pu~lic Utilities Commiss
OffIce of the Secreta Ion
RECEIVED
AUG f 6 2007
Boise, Idaho
Deanhardt, C. - Exhibit 2
Case No. Q WE- T -06-
AT&T
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4
Idaho Public Utilities Commission
Office of the Secretary
RECEIVED
AUG 1 6 2007
Boise, Idaho
Deanhardt, C. - Exhibit 3
Case No. QWE- T -06-
AT&T
SUBJECT TO RULE OF EVIDENCE 408 \N~D-15
Confidential Purchase Afreement
This Purchase Agreement ("PA") is made and entered into by and between Es:he1c::Telecom, Inc. and its subsidiaries and affiliates C"Eschelon ) and Qwest Corporation and itssubsidiaries C"Qwest ) (collectively, the "Parties ) effective on the 1 st day of October 2000,
The Parties have entered in to enter into this P A to facilitate and improve their businessand operational acti\rities, agreements and relationships. In consideration of the covenantsagreements and promises contained belo\\" the Parties agree to the following:1. This PA is entered into between the Parties based on the
foI1owing conditions , which area material part of this agreement:
This P A shall be binding on Qwest and Eschelon and each of their respectivesubsidiaries, affiliated corporations, successors and assigns.
1.2 This PA may be amended or altered only by written instrument executed by anauthorized representative of both Parties.
The Parties, intending to be legally bound, have executed this PA effective as October I 2000 in multiple counterparts, each of which is deemed an original, but all of whichshall constitllte one and the sam: instrument.
1.4 Unless terminated as provided in this section, the initial term of this PAis fromOctober 1 2000 until December 31 2005 ("Initial Term ) and this PA shall thereafterautomatically continue until either Party gives at least six (6) months advance written notice of
termination. This is A can only be terminated during the t;rm of the agreement in the event
a material breach of the terms of this Amendment which remains unresolved and uncompensated
folIowing application of the dispUte resolution provisions of this agreement.
All- factual preconditions and duties set forth in this PA are intended to be, and areconsidered by the Parties to be, reasonably related to, and dependent upon each other.
1.6 Ifeitm:r Party s performance of this PA or any obligation under this PA prevented, restricted or interfered with by causes beyond such Parties' reasonable controlincluding but not limited to acts of God, fire, explosion, vandalism which reasonable precautionscould not protect against, storm or other similar occurrence, any law, order, regulation, direction,action or request of any unit of federal, state or local govemme:'H, or of any civil or militaryauthority, or by national emergencies, insurrections, riots, wars, strike or work stoppage ormaterial vendor failures, or cable cuts, then such Party shall be excused from such performanceon a day-to-day basis to the extent of such prevention, restriction or interference (a "Force:Majeure
1.7 The Parties agree: that they will keep the substance of the negotiations and/orconditions of this PA and the terms or substance of this PA strictly confidential. The Parties
further agree that they will not communicate (orally or in writing) ar in any way disclose the
--- ------- \-.--.---- -.-----.--.- -
Qwest
_.____
ibjj;.lI._
SUDJECT TO RULE OF EVIDENCE 40S
substance of the negotiations and/or conditions of this s~ttl::ment and the terms or sllbsranc:: ofthis PA to any person , judicial or administrative agency or body,- business, entity or association
or anyone else for any reason '\.vhatsoever, without th~ prior express written consent of the other
Party unless compelled to do so by law or unless Eschelon pursues an initial pubiic ofI~ring, and
then only to the extent that disclosure by Eschelon is necessary to comply with th~ requirementsof the Securities Act of 1933 or the Securities Exchange Act of 1934. In the evem Eschelon
pursues an initial public offering, it will: (1) first notify Qwest of any obligation to disclose
some o-r all of this FA; (2) provide Qwest ",'ith an opportunity to review and comment
Eschelon s proposed disclosure of some or all of this P A; and (3) -apply for confidential
treatment of the P A. It is expressly agreed that this confidentiality provision is an essentialelement of this P A and negotiations, and all matters related to these matters, shall be subject toRule 408 of the Rules of Evidence, at the federal and state level.
In the event either Party initiates arbitration or litigation regarding the terms of this
agreement or has a legal obligation which requires disclosure of the tenus and conditions of this
, the Party having the obligation shall immediately notify the other Party in writing of the
nature, scope and source of such obligation so as to enable the other Party, at its option, to take
such action as may be legally permissible so as to protect the confidentiality provided in this P
1.8 Neither Party wi11 present itselfas representing or jointly marketing services withthe other or market its servic::s using the name of the other Party, without the prior written
consent of the other Pany.
: 1.9 Any claim, controversy or dispUte between the Panies in connection with this PA
shall be resolved by private and confidential arbitration conducted by a single arbitrator engagedin the practice of law under the then cum:nt mles of the American Arbitration Association. The
arbitration shall be conducted in D::nv::r, Colorado, Each Pany shall have the right to seek from
a coun of appropriate jurisdiction equitable or provisional remedies (such as temporary
restraining orders, temporary injunctions and the lik::) before arbitration proceedings have beencommenced and an arbitrator has been selected. Once an arbitrator has been selected and the
_. - -
-- arbitration proceedings are continuing, thereafter the sole jurisdiction with respect to equitable or
provisional remedies shall be remanded to the arbitrator. Any arbitrator shall be a retired judge
or an attorney who has been licensed to practice fo. at least ten
(10) years and is currently
licensed to practice in the state of Colorado. The arbitrator shaH be selected by the parties within
fifteen (15) business days after a request for arbitration has been made by one of the Partieshereto. If the Parties are unable to agree among themselves, the Parties shaH ask for a panel of
arbitrators to be selected by the American Arbitration Association. If the: parties are unable to
select a sale arbitrator from the panel supplied by the American Arbitration Association within
ten (10) business days after such submission. the American Arbitration Association shall select
the sole arbitrator. The Federal Arbitration Act, 9 U.c. ~~ 1-16, not state law, shaH govern the
arbitrability of all disputes. The arbitrator shall only have the authority to detennine breach
this Agreement and award appropriate damages, bUt the arbitrator shall not have the authority
award punitive damages. The arbitrator s decision shall be final and binding and may be entered
in any court having jurisdiction thereof. Each pany shaH bear its 0\\11 costs and attorneys' feesand shall share equally in the fees and expens::s ofth~ arbitrator, except that the arbitrator shall
have the disc:::tion to award r:asonabl:: attorneys' fees and costs in favor of a Pany if, in the
----.. u
--_.-----------~-_.__...- .------.-------.-----.----.-----.-.--------
SUBJECT TO RULE OF EVIDENCE 40S
opinion of th~ arbItrator, th~ displlt~ arose because the other Party was no~ actjilg in good fait?:.
10 This P A shall be int~rpreted and construed in accordance with tn: laws of the
State of Colorado , and shall not be interpreted in favor or against any Party to this Agreement.
11 This PA constitutes an agre~m~nt between the Parties and can o::ly be chamred ina writing or ...vritings executed by both Parties. Each of the Parties forever \\'a1\.:s all riS!hi: to
assert that this agreement was th~ result of a mistake in law or in fact.
1.12 This P A may be executed in counterparts and by facsimile.2. In consideration of the agreem~nts and covcnants set forth above and the entire group covenants provided in section 3, Eschelon agrees to purchase from Qwest, or one of itS affiliates
during the Initial T~ml of this PA, at least $150 million worth oftelecommuni::ations, enhanced
or information services, network elements, interconnection or collocation services or elements
capacity, termination or origination s~rvices, switching or fiber rights (th~ "Products
).
EscheIon fails to meet this purchase commitment, this agreement is temlinated and Eschelon will
be required to pay Qwest a $10 million penalty.
Subject to the provisions of this section 2, from January 1 2001 to Dec~mber 31200 1, Eschelon will purchase, under this agreement or any other agreement b:"ve:n the parties
a minimum of 5 16 million of Products and in the event purchases by Eschelon do not meet this
minimum, Eschelon agrees to make a pa)ment to Q\'est, no later than January 15 2002, in anamount equal to the di ffen:nce between actual purchases and the minimum. If Eschelon fails tome~t this purchase commitment, this agreement is terminated Clnd Eschdon \\'ili be required to
pay Qwest a penalty of510 million which is the equivalent of63% of its 2001 annual revenuecommitment to Qwest.
Subject to the provisions of this section 2, from January 1 2001 through
D::cember 31 2002, Eschelon will purchase a minimum of 524 million of Products, and in theevent purchases by Eschelon do not m::et this minimum, Eschei"on agoe:::; to make a payment to
Qwest, no later than January 15, 2003 , in an amount equal to the difference bc:~ween actualpurchase~ and the minimum. IfEschelon fails to me::t this purchase: coiilmitm~:lt, this agre::mentis terminated and Eschelon will be requin:d to pay Qw~st a penalty of S 1 a million which is the
equivalent of 42% of its 2002 ,,-nnual r::venu:: commitment to Qw~SI.
Subject to the provisions of this section 2 , from January 1 2003 through
December 31 2003, Eschelon will purchase a minimum of 531 million ofProaucts , and in the
eVent purchases by Eschelon do not meet this minimum, Eschelon agrees to make a payment to
Qwest, no later than January 15, 2004 in an amount equal to the di fference be0veen actual
purchases and the minimum. IfEschelon fails to meet this purchase commitm~nt, this agreement
is terminated and EscheJon will be required to pay Qw:st a penalty of S 1 0 million which is theequi\'alent of32% of its 2003 annual revenue commitment to Qwcst,
2.4 Subject to the provisions of this s:::tion 2, fro:T1 Janua:y 1 200~ ihrough
December 31 2004 , Eschelon will purchase a minimum ofS37 :nillion ofProaucts, and in the
--~
._--__~__m --
------ ___"_
- 3-
-~------------ - --------_..-----------._--------.-------
Sl7B1ECT TO RULE OF EVIDENCE 405
~v:nt purchases by Eschelon do not meet this minimum, Eschelon agrees to make a payment to
Qwest, no later than January 15, 2005 , in an amount equal to the differenc~ between actual
purchases and the mirJimum, IfEschelon fails to me:t this purchase commitment, this agr:em:n~is t~rminated and Eschelon will be required to pay Qwest a penalty ofS 1 a million which is theequivalent of27% of its 2004 al1I1ual revenue commitment ofQwest.
Subject to the provisions of this section 2, from January 1 2005 throughDecember 31 2005. Eschelon will purchase a minimum ofS42 mimon of Products, ;nd in theevent purchases by Eschelon do not me~t this minimum, Eschelon agrees to make a payment to
Qwest, no later than January 15,2006. in an amount equal to the difference between actual
- purchases and the minimum. IfEsche:lon fails to meet this purchase commitment. this agre~mentis t~rminated and Eschelon will be n:quired to pay Qwest a penalty of S 1 0 million which is theequivalent of24% of its 2005 annual revenue commitment to Qwest.
Eschelon s arumal and contract term purchase commitments will be reducedproportionally in the event Qwest sells any exchanges where it is currently the incumbent local
exchange service provider, but only to the extent thc:lt any such sale materially impactsEschelons purchases from Qwest.
Eschelon s annual and contract term purchase commitments will be adjusted
proportionally and/or appropriately in the event Eschelon acquires, or merges with, or divests to,another company where such acquisition, merger or divestiture materially changes Eschelon
market capitalization. size, markets or other similar measure, as mutually agreed.
The Parties wil1 resolve any disputes pursuant to Escalation Procedures to be
developed by the Parties.
3. In consideration of the agreements and cov~nants s~t forth above and the entir~ group ofcovenants provided in section 2, al1 taken as a whole, with such consideration only being
adequate if all such agreements and co\'enants are made and are enforceable, Qwest agrees tomak: the Products available for purchase: by Esch~lon at such rates and on such tenns and
conditions as agr~ed.
(R~m2inde:i of page intentionally blank)
---------------------------------- --- - ------------------- - -------
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SUBJECT TO RULE OF EVIDEl'\C~ 408
Made and entered into on th: c::ffe:::ti\":: date: writt-on :1bo\': by Es~h:lon and Qwcst.
EscheJon Telecom, Inc.Qwest Corporation
Authorized SignatUre d:Ji
Name Printed/Typed Name PrintedIT)pcd
Title E. V
Title
Date . Da.t:
n-lS" '
.I'
H;~OPJO2S00
- -~---.._----,----,------,-----,---,---.. ------,,-- ,,-'---.-. ---....--------------. ..---...._--
SUBJECT TO RULE OF EVIDENCE 408
. .
Made and entered into on the effective date written above by Eschelon and Qwest.
Eschelon Telecom, Ine.Qwest Corporation
Authorized Signature
(1...~~Ao(\ 4. S._
Name Printedffyped Name PrimedfTyped
2K!.~~~
~...~ -
c..r-.o
Title Title
,\ / \ ...~;,.........
Date Date
H:Q"'~sIlMTOPIO2500
.. -"-"--'---'--'--=--y-;-----'---------.-..---...
Idaho Pu~lic Utilltl
OffIce of the :s CommIssIonR E eEl V ~~tary
AUG 1 6 2007
Boise Idaho
Deanhardt, C. - Exhibit 4
Case No. QWE-O6-
AT&T
\f\JU)
, -...
To:Jim Gallegos (Owest)'. ~jhga"e(2)uswest.com;:'
, .'
Judy Tinkham'. ~jtinkha(g)uswest,com;:'
- .'
Audrey McKenney (Owest)" ~axmcken(2)uswest.com;:'
, "'
Laurie Komeffel'.~lkornef(2)uswest.com;:'
, .'
Judith Rixe'. ~jrixe(2)uswest.com;:' Ox!ey, J. Jeffery" ~jjoxley(2)eschelon.com;:' -cc:
Subject: letter frol'!' Richard A, Smith - _Subject to Federal Rule of Evidenc 408 (Confidential)
See attached letter -from Richard A. Smith on Subject to Federal Rule ofEvidence 408.
~cQwest Agreement - 11-S-00.doc~~
Original copy of the letter will be mailed to you:Jim Gallegos, Laurie Korneffel and Audrey McKenney (Fedx overnight)Judy Tinkham and Judy Rixe (U.S. mail)
If you do not receive the original letters, please notify Richard Smith at(612) 436-6626.
Thank you.
Lori Wagner
Eschelon Telecom, Inc.Business No. [phone]E-mail: lmwagner~eschelon. com
- Owest Agreement - 11-00,doc
--.--------------------------. _______.
h________n
_.._.- ----. ----
November 5, 2000
Mr, Jim GaIl egos
Corporate Counsel
Qwest
1801 California Street, Room 3800
Denver, CO 80202
Ms. Audrey McKenney
Vice President - Wholesale Markets Finance
Qwest
1801 California Street, Room 2350Denver, CO 80202
Ms. Judy Tinkham
Vice President - Wholesale and Diversified Markets
Qwest
200 South 51h Street, Room 2400
Minneapolis, MN 55402
Confidential- Subject to Federal Rule of Evidence 408
Dear Mr. Gallegos, Ms. McKenney, and Ms. Tinkham:
(Trade Secret Data Begins
The purpose of this letter is to communicate the key business issues associated with our work on the business tobusiness relationship that Eschelon/Qwest are attempting to construct on UNE-
P and operating performance.
We have reviewed the documents that Ms. Korneffel/Mr, Gallegos forwarded to us over the past two (2) weeks
and there are numerous revisions that our respective legal teams can bring to conclusion
, but the followingbusiness issues wiU take some discussion which I would like to conclude over the next two
(2) business days(by EOD on Tuesday, November 7 2000):
I. The volume discount of 10% that we agreed to on Saturday, October 21 SI, has not been explicitly statedin the purchase agreement.
2. The $ 13.00 per month per resale line payment that Qwest was to make to Eschelon effective October 1
2000 if accurate switched access records are not .delivered each month has not. been included as weagreed to on Saturday, October 21 , 2000. Sub issueS/questions are provided as follows:
a) Can Qwest provide these records to Eschelon in the industry standard format? Our redline of theinterconnection agreement amendment contemplates that by January I
, 2001 , Qwest will.be able todo this.
b) Does Eschelon have to provide dai1~ ~esale line telephone number data to Qwest .given th~t
Q..~estalready has this infonnation?
NONPUBLIC DOCUMENT
CONTAINS TRADE SECRET DATA
- ----.-----.-- ------ ---------.--.--....- - --.---..-------------.- -------------- -------..-.- -- ------.- - .-----------------
Qwest'RicharcJ Smirh
November 5, 200(;
c) Would Qwest be willing to bill the interexchange carriers for switched access for resalelUNE-
p linesand remit their payments to Eschelon instead of delivering
the raw records? This may be simplerfor both parties.
3. Because our interconnection agreements start to expire soon, and because they are becoming datedEschelon requires the ability to continue to negotiate new agreements or to opt into the interconnectionagreements of others.
4, We need to confirm that Qwest will make DSL available to Eschelon at the wholesale aiscount
, contraryto the language in the interconnection agreement amendment we received. We also need to confirm thatwe will be able to provide voice mail to our platform customers. We understand that we will not receivethe wholesale discount for voice mail.
5. Qwest needs to provide a list offeatures and Qwest's proposed TELRIC pricing of those features thatare not included in Attachment 3.2 of the proposed Interconnection Agreement Amendment Terms.
6. Eschelon will give up regulatory dispute remedies only if We can continue to have all legal remediesavailable to us as agreed to on Saturday, October 21 , 2000. Binding arbitration is acceptable as long as
both parties agree.
7. The operating agreement/implementation plan is critical to establishing a solid business to businessrelationship with Qwest as "good economics" represent only part of a positive relationship. Without animproved level of service from Qwest - the economics do not matter. To accomplish this - we need tohave a date certain (April 30, 2001) in which we wiII have an operating agreement/implementation plan
agreed to including any necessary arbitration of issues. Ifwe do not have this agreement, both partiesshould revert back to any/aU legal remedies or regulatory remedies,
Regarding the last issue noted above (Item #7), we have ongoing ,concerns about Qwests ability toimprove service levels given the recent analysis completed by our Provisioning team for the period of
October 17, 2000 to November 1 , 2000. During this time, 42.7% of the migrationslhot cuts completedby Qwest had customer effecting problems. I understand and appreciate the recent activity and resourcethat Qwest has recently put on these issues, but they are not fixed and without a solidoperating/implementation plan agreed to by both parties by April 30, 2001 , the only effectivealternative for Eschelon is to retain our regulatory remedies. If this plan is in place
, Eschelon will be avocal proponent of Qwests Section 271 filings in aU your jurisdictions.
The best and most enduring partnerships are those in which both sides help each
other. So far we haveconcentrated on setting out how Qwest helps Eschelon
economicaUy and how Eschelon assists Qwest inachieving its 271 goals. I think we need to consider how we might help each other become moreproductive. Eschelon has a solid provisioning staff. Recently, in the context of preparing for 271
ve been using our best peoples ' efforts to document problems with Qwest's wholesale service. Whatwe would really like to do is use these people to analyze, document, and team with Qwest employees toimprove our joint provisioning processesj I feel there is an opportunity to partner o~ prpcess;improvements. Ifwe can develop. this ldb, put some teeth into it and incorporate it ifitO ourinterconnection agreement and/or purchase agreement, We may also have a mechanism that makes itmore difficult for any party to opt into our agreements,
NON PUBLIC DOCUMENT
CONTAINS TRADE SECRET DATA
-. d__... ,._u, ..
. -.----...---.-- -.-
-___.__n
'________...
h._._.
QwestlRicbard Smith
Novembc:r 5, 2000
At our meeting on Thursday, October 12 2000, in Denver, we agreed to complete negotiations and havedefinitive agreements signed by EOD Sunday, October 22
2000. We did not meet that commitment - wouldsuggest that we set another one for EOD Sunday, November 12
2000 and make that one e. have definitiveagreements executed by both parties. Once again, suggest that we sit face to face for one (I) day -believe thatwe can drive this to conclusion if we completed that session. WiU
caU you tomorrow morning to establish. another negotiating session. .
xc:
. xc:
xc:
xc:
Very truly yours
Richard A. Smith
President and Chief Operating Officer
RAS:lw
1. Komeffel - Qwest
J. Rixe - Qwest
J. Oxley - Eschelon
File - Qwest
Trade Secret Data ~Ddsl
NONPUBLIC DOCUMENT
CONTAINS TRADE SECRET DATA
J I
. .
0_-0_' un. .
Idaho p
Ite Utilitie
Oft/f t~e s ~n;iSSion
I V E 0 ..,
AUG
UI)
Boise, Idaho
Deanhardt, C. - Exhibit 5
Case No. Q WE- T -06-
AT&T
0:D) -
Original Message-From: Clauson. Karen L.Sent: Friday, December 08, 2000 4:35 PMTo: 'jrixe(Q;)uswestcom
; '
Kevin SavilleSubject: Escheton Implementation Teamsllssues
T~-~
Endosed is a revised version of the list that you requested of Eschelon s team members
with their titles and departments. All of the teams have met internally and are preparing for tneir
first meetings with Owest If we find that some issues are not being covered by any team, wecould add teams later, But. this appears to be a good start. It would be great if you could provide
to us, at our meeting at 9am on Dec, 12th, a list of team members for Owest's corresponding
teams,
Also, in addition to the titles/departments, I have listed below some of the issues that the
teams may address. While these are just examples, the issues should give you an idea of the
expertise needed for the various teams, With the right people, the teams can reach business
solutions to problems that can then be translated to an Implementation Plan and, ultimately,
interconnection agreements,
When reading the issues below, a few themes re-occur as to Eschelon s needs:
issues.
Vendor-customer relationship. with Owest explaining and supporting its products fully.
Better access to more knowledgeable contacts for obtaining information and resolving
Regular communication between both companies,
Common sense, practical solutions,
Streamlined, known, and reliable processes and procedures.
Timeliness and accuracy.
Project management for resolving large or one-time issues,
ISSUES:
Examples of issues that we would anticipate that the teams (including appropriate subject
matter experts from both companies) address would include, for example:
BILLING (CONNECTIVITY BILLING)
DISCONTINUING CERTAIN BILLING: Our understanding of the agreement is thatOwest is not going to bill us for recip comp (focal termination usage on UNE Jines) and
termination liability as of October 1 , 2000, Has, or will, Owest simply tum off the recip comp andtermination liability so that we no longer get bills? This seems like a simple thing that could bedone immediately. eveQ.,before our first meetings, (For example, Sill Markert has already asked
his group to tum off CABs billing for this usage.) Please confirm if that is your understanding aswell and if this has/will be done,
CREDIT: With rescect to the credit back to October 1 , does Owest have a plan as to
how it will do this, If so, when will this payment show up and in what form? 0Ne hope to receive
it soon and by BAN , etc,), Are there issues we need to discuss about how this will work beforewe will see a credit?
SYSTEM .& PROCESS CHANGES: The issues raised by. Bill Markert in CICMP need tobe resolved, Can the companies address those issues here (or can Owest do so more quickly in
CICMP)? The change requests are on Qwest's CICMP web site. at
http://www uswestcom/whoiesale/cicmo/chanoereouesthtml, and include:
CR#5043134 Populate all Billmate fields/columns
CR#5043176 Better explanations of OCCs on invoices
CR#5043187 Payment history information on invoices
-- . -.----.--.-
CR;:S043197 Identification of PIC code in BillmateCR;:SO43226 UNE invoice detail
CR;:S11 04 7 4 Provide calculation descriiJtion of each termination penalty levied
CR# S043086 Treatment of administrative hnes/featureslvolcemail
CR;:S043149 Bi/lmate unifonnity
CR;:S043233 Continuing changes to rules
CR# 5043204 Rate change notification
CR# 5043162 Calling Plans
CR#5043209 Single billing platform
CR#5043125 Knowledge of bill inquiry staff
000140
SUPPORT: We would like to estaolish a better process for using knowledgea:Jle
contacts at Owest Currently, the billing points of contact do not even have access to, vr not
familiar with. Eschelon-specific infonnation (e,g.. tariffs, bills). We need dedicated,
knowledgeable Owest contactslreps for. (1) daily usage feeds from Owest (that we use to bill our
customer); and (2) monthly bills from Owest (that we pay to Owest). For the first category, there
is currently no Owest rep. Eschelon must call a help desk, at which the people are unfamiliar with
the issues and Eschelon-specific information. For the second category. Owest has designated
rep(s), but they are not knowledgeable and do not have access to, or not familiar with. Eschelon-
specific information (e,g., invoices). The Owest reps who deal with us need to be able to access
Eschelon-specific information and understand it.
ADJUSTMENTS: Improved process for billing adjustments
TERMINATION LIABILITY: We want to go over the agreement reach and confirm thatour understanding is the same as Owest's. With respect to customer termination liability
penalties. they are too high.
SERVICE LEVELS. REMEDIES: In our last meeting with Perry Hooks. we proposedthat, at least until other service level guarantees and remedies are available post-Owest'
interLATA entry, at least the metrics and remedies relating to provisioning, billing, and repair that
we agreed to in the MN merger case should apply in all states. After Owest's interLA T A entry,
other metrics and remedies may be available, perhaps on an opt-in basis. At that time, Owest
could not agree to this proposal. We would like to re-visit this issue, We need guarantees
relating to service in all of our states in the interim, as well as after Owest enters the interLA T A
market.
COLLOCATION
TIME INTERVALS/AUGMENTS: We have signed an amendment for 3D-day intervals for
augments, and Owest .bas Indicated It will adopt the 90-day intervals for collocation (though il is
asking for some exceptions). We are willing to work on reasonable exceptions. In many routine
cases, however, collocations are taking too long. This is particularly true with respect to
augments. Owest is requiring a 4S-day feasibility period and has forecasting requirements even
for the simplest of augments. We need shaner time intervals (upon which we can depend).
Perhaps the teams can identify different kinds of augments that do not require the longer time
frames (or, conversely. shonen the time intervals and identify exceptions). Either way. simple
augments should not take 45 + 30 days or more,
EXAMPLE: We would like 10 bring more reality/practicality/flexibility 10 the
collocation process. (If 45 days isn t needed. don t take 4S days,etc,) For example, we asked
Owest to apply the 3D-day augment interval to 4 applications that were submitted on 10/19, after
we signed the 30-day amendment but before Owest signed it. (The applications are for Seattle
Mutual for APOT; Seattle Mutual for cage; Tacoma Fawcett for power and APOT; and Vancouver
North for power.) We ve been told that this augment will take 120 days. even though Owest then
signed the amendment. Given that everyone recognizes that an augment can be done in 30 days
.---.---.- ---. - .
or less. why can t these applications be processed earlier? If it is a forecasting Issue. we can Sl!
down and talk about needs and priorities.
PROJECT MANAGEMENT: After a time. the 30-day interval process should
work better (because some of the pre-requisites will be met. e!c,). Once it is working more
smoothly, some of the concems about delay should be reduced. Escneion cannot afford to wait,
however, until then for existing collocation requests. Pemaps the issue of existing collocatIons
can be taken aside and assigned to a knowledgeable Owest project manager to worK on these
issues, Eschelon would sit down with the project manager with a list of existing projects, their
status, and priorities, and work through the best way to address these collocations. Then, the
teams could work out any adjustments to the process that may be needed on a going-forward
basis (without bogging down the teams in the specifics of each collocation). Bill Fellman is
helpfd, but we are unclear whether he has the decision making authority to o.:t as a project
manager in this sense. He has also indicated that his job responsibilities ma~' cnange after the
first of the year.
CLEC-T0-CLEC: For CLEC-to-CLEC collocations, we understand (from the
presentations in Denver) that Owest has a new .product: We would like Owest to explain this
option (how it works, what it costs, etc.), In the meantime. Owest had indicated that we had to
order channel terminations on the ICDF instead of doing a CLEC-ta-CLEC colla or ordering less
expensive cross connections. Bill Markert has been following up on getting a bill adjustment for
this. Going forward, we need to know the best, most cost effective method for these types of
collocations. For that, we need an understanding of the different products/options that Owest
offers, The information on the website is inadequate, Other vendors give us presentations and
work with/train us on using their products. We would like to work toward that kind of vendor-customer relationship with Owest.
ICDF/AL TERNATIVES: More generally, we would like Owest to explain use of the ICDF
and other alternatives to the ICDF, such as going to the MDF or COSMIC, We understand thatuse of the ICDF is optional and would like to better understand Owest's other offerings (including
cost),
QUALITY: Quality issues (wiring problems. etc.): Improve the process to avoid, or better
respond to, quality issues.
SERVICE LEVELS, REMEDIES: see above
CUTOVERS
TRIAUPROCESS: Owest and Eschelon are conducting a trial to address several issues
raised by Escheton that generally fall into five categories: 1) Loop problems (e.g" no dial tone at
customer premise after cut); 2) Cuts appear successful on the day of cut. but troubles occur the
next day or two; 3) Cuts are scheduled, but Owest cancels them on the scheduled date (often
without notice to Eschelon); 4) Cuts are held by Owest for facilities, but Qwest performs the
translations disconnect anyway and customer goes out of service, Much time and effort is
wasted restoring service; 5) Repairs are not performed or not performed adequately or in a timely
manner, The teams will need to monitor the cutover trial and adjust, if needed, to issues that may
arise, Initially, we need to resolve the issue that we have been discussing relating to our ability to
contact the Implementer directly (for the trial). We agreed to accept the orders at a certain point
based on the understanding that we could call the Implementer directly. Rather than re-visiting
whether we should accept the orders, perhaps we can work something out with respect to
Owest's need for a ticket while still contacting the Implementer. The normal process isn
working, and we ve had serious problems again this week. So , we hope to resolve this issue
soon. Ultimately, we need to assess whether the trial was successful and should be Incorporated
into the Implementation Plan (and interconnection agreements). If not, we ll need to develop
altemative processes.
_u_
------- - ------------
0OOl~1.
000142
NON-TRIAL: The trial focuses, in many respects. on the day of cut. Therefore. it may
not capture some of the problems that actually occur before the day of cut. If prOblems are
occurring that are not being captured by the trial. they need to be Icentified and addressed.
INTERVALS/OBJECTIVE: Although improving the process is critical, it is not an enc In
itself. We need to agree upon achievable objectives, such as no more than 5 minutes per line of
service disruption (including not only lack of dial tone but also an inability to receive inbound
calls); on-time performance at rates at or above 90 percent: fewer than five percent of hot cuts
resulting in service outages: and fewer than two percent of lines with reported installation
troubles, Whatever the process, such goals need to be met so that we can rely on the process
when dealing with our own customers,
SERVICE LEVELS, REMEDIES: see above
DSL
UNE-E WITH DSL: Eschelon and Owest have started discussions of specific issues that
will allow Eschelon to evaluate Owest's UNE-E product (essentially the same as UNE-, except
for price and availability of DSL and voice mail with the platform) (as a potential alternative to
caVAD). As with any vendor attempting to market its product to a customer, Owest should
provide enough information and training so that Escheton can properly evaluate, order, and use
this product. The list of issues from yesterday's meeting is enclosed, (Although the title refers to
Resale DSL: the references to resale should be references to .UNE-E. or .Platform: because
we would be ordering per the agreement.) These are the types of issues that the teams will need
to work through with respect to use of platform with DSL.
PROJECT MANAGEMENT: Platform with DSL may be another area for which a
project manager would be useful to assist with actually transitioning to using Owest as a provider.
The teams could work on the higher-level process issues for going forward, and the project
manager could work through the day-to-day issues of the transition.
ON NET: Eschelon will continue to provide on-net DSL (with Eschelon providing its own
switching). Issues include better training for ordering and provisioning. When a loop is installed
and the Owest tester and technician are on the line, they often do not seem to know what
information needs to be communicated. We need to know what information is required for a
basic install with performance testing, Owest should provide methods and procedures that all
can follow consistentJy, including procedures for when test results are provided and which tests
should be performed, One area of inconsistency is verbal acceptance, Some reps require it and
others do not. This can affect whether Eschelon receives test results or not. Escheton also
needs loop make up information. These are the types of issues that the teams will need to work
through with respect to use of DSL for on-net customers.
OTHER PRODUCTS: Eschelon would like procuct information training as to other Owest
products, such as IDSL and SDSL. If Esche/on is interested in other products, processes would
be needed to order them , etc,
SERVICE LEVELS, REMEDIES: see above
HELD ORDERS (LACK OR RE-USE OF FACILITIES)
PROCESS: Eschelon and Owest have been discussing held order issues. including
issues relating to lack or re-use of facilities, for some time. A copy of a letter discussing these
issues in enclosed. Also. Escheton has recently submitted four Change Requests under the new
process. segment of CICMP relating to this subject. Can the companies address those issues
here (or can Owest do so more quickly in CICMP)? Please identify the decision maker with
respect to these issues.
0001. 43
The four CRs (which may not yet have been assigned CR numbers), plus one to be
submitted for next month, are:
CLEC-to-CLEC:
Owest should change its process so that Owest will re-use facilities for CLEC-to-CLEC
carrier changes. When an end-user customer changes carriers from one CLEC to another
Owest has indicated to Eschelon that CLECs must order new facilities, because Owest does
not allow a CLEC to request re-use of the same facilities used by the other CLEC to serve
the same customer. In one situation, for example, Eschelon placed an order to change an
end-user customer from the on-net facilities of another CLEC to the on-net facilities of
Escheton. Owest indicated that E:;chelo:1 must orcsr !iew facilities and, whsn Escheten did
so. Owest placed the order in held status. The other CLEC provid2c its paNs !o E:;chelon
for that CLEC's disconnect of its toops, Eschelon re-submitted the order, identified the
PONs, and requested re-use of those facilities. Owest responded that C:;LECs are not
allowed to request re-use of CLEC facilities. Escheton cancelled the oreer and resubmitted it
later. The order again went in held status. The order is still in held status. (Eschelon has
provided the specific information for this and other situations to its account manager.
Ordering new facilities. instead of re-using facilities. can result in delay, additional costs. and
service disruption or downtime. Please modify Owest's processes so that Owest will re-use
facilities for CLEC-te-CLEC carrier changes,
LOOP RECLAMATION:
Perform loop reclamation for CLECs and provide prior notice of Owest's loop reclamation,
Owest has indicated that it will not perform loop reclamation to prevent a CLEC order from
going into held status, In contrast, when Owest "winsback" a customer from a CLEC, Owest
will perform loop reclamation and will do so without prior notice to the CLEC. For example,
as shown in the example below, when Eschelon has placed a disconnect order on a UNE
loop, Eschelon has received a rejection notice from Owest indicating that Owest has already
disconnected the loop as a result of loop reclamation, Owest disconnected the loop without
prior notice to Eschelon. Because of this practice. an order will be processed (and not go
into held status) for a Owest retail customer, whereas a GLEC order would go into held
status, The CLEC end-user customer would experience a delay (and possibly additional
costs and service disruption), whereas the Owest end-user would not. Please modify
Qwest's processes to perform loop reclamation for CLECs and provide prior notice of
Owest's loop reclamation,
INSTALLATION OF ADEOUATE FACILITIES AND REDUCTION IN NUMBER OF HELD
ORDERS:
Modify Owest's processes to ensure installation of adequate facilities and reduction in the
number of held orders. Through recurring rates, Owest IS being compensated for expanding
its network to account for new growth. Owest will build facilities for Its own retail customers,
(In Arizona arbitrations, for example, Owest reported that it installs 3 lines per customer to
anticipate growth.) However. Owestwill not do so for CLECs in similar situations. Owest
has rejected orders from Eschelon for the stated reason that "no jobs planned in the near
future for this area." (Examples of such rejections were provided to Eschelon s account team
on August 30. 2000.) The orders are placed in held status indefinitely, with no date for
completion. When asked about these rejections, Owest indicated that it believes it has no
obligation to build. (This policy was confirmed by Owest at the last CICMP meeting.) As
indicated. however. Owest is being compensated for such growth and would build for its own
retail customer in the same situation. Please modify Owest's practices to build in these
situations and to provide notice to GLECs as to when held orders will be completed. In the
meantime, until such processes are in place, please Institute a process to provide to CLECs
(perhaps through a website) a list of those areas for whlcn Owest has jobs planned , a list of
000:144
areas for which no jobs are planned. and a description of the nature of the jobs planned.
Because Owest has access to this information for its planning purposes. panty reQUIres tna:
CLECs also have access to the same Information for their planning purposes.
FACILITIES AND PROCESS WHEN OWEST USES IDLC:
Modify Owest's processes to provide facilities, despite Owest's use of integrated pair
gain (IDLC). Currently, Owest's IRRG states:
Unbundled Loops can only be established on copper or Universal Dicital
Loop Carrier (UDLC). Integrated Digital Loop Carrier (IDLC) cannot be
used for an Unbundled Loop service at this time, Owest has chosen
not to unbundle IDLC because of the expense of providing
equipment to -groom the DSO lines. During the Unbundled Loop
facility assignment, an attempt will be made to Line and Station Transfer
(LST) the IDLC loop to UDLC or copper. If there are no facilities
available to complete the LST, the Co-Provider will be notified that the
order has been placed into a held status. (Emphasis added,
The FCC has said that .(t)he BOe must provide competitors with access to unbundled
loops regardless of whether the BOe uses (IDLe) technology. . .. (BellSouth Second
Louisiana 271 Order, ~187 and SBC Texas 271 Order, ~248.) The processes outlined in
Owest's IRRG are not consistent with this requirement In some cases, Owest does not
identify that IDLC is being used until the day of cut. When the discovery is made, Owest
may not dispatch a technician. Instead, Owest delays the order or places it in held
status. Owest does so for all lines, even though facilities may be available for some of
the lines. Please modify Owest's processes to be consistent with the FCC's order. Also,
please modify Owest's processes to identify earlier (before the day of cut) that IDLC is
being used. If use of IDLC is not identified until the day of cut, ensure that a technician is
available to resolve the issue that day (rather than delaying the order). If Owest
indicates that it does not have facilities for all lines, change Owest's processes so that
the lines for which facilities are available may be installed (when the line configuration
supports doing so),
UNIVERSAL DIGITAL CHANNELS C-UDCs ) (to be submitted):
Eschelon will submit a process CR to CICMP asking Qwest to establish and distribute a
process for UDC. including a process for using UDS as an alternative when Owest
asserts lack of facilities, Eschelon will ask that Owest ensure that. if UDC is used, the
customer will not experience a degradation in quality of service. If degradation in Quality
does occur, a.J)rocess for removing the UDC and installing facilities is neeDed.
SERVICE LEVELS, REMEDIES: see above
INTERCONNECTION TRUNKING/NEnVORK:
CAPACITY SHORTAGES
ORDERING: Owest cancels an order if the order form contains a minor problem instead
of working out this issue,
SUPPORT: The Owest network planner is spread too thin and appears insufficiently
knowledgeable about the network, Website information is often out-dated and incorrect. A
website can be a helpful tool but it cannot replace product trainIng and support, Owest needs to
provide sufficient informatIon to allow Eschelon to make Informed purchasing decisions.
000145
SPOP: Eschelon and Owest are attemptIng to resolve an issue in Bellevue. If resolved
satisfactorily, the teams may be able to work out procedures to avoid this issue going forward.
SERVICE LEVELS, REMEDIES: see above
OPERATIONS SUPPORT SYSTEMS (055)
The teams may need to discuss whether some OSS issues can not be dealt with on a
company-to-company basis because. for example. region-wide system changes are neeDed, In
such cases, perhaps interim solutions can be worked out. OSS issues include. for exampie:
IMA-GUI UPTIME: Unplanned system outages and IMA downtime need to De
addressed.
IMA-GUI TRAINING: Training has been inadequate, Perhaps training tailored for
Eschelon s needs could be arranged.
IMA-GUI FUNCTIONALITY: Some of these issues have been raised in CICMP. They
are listed in the CICMP Change Request log at
htto :lIwww. u swest. com/wh ales a e/cicm etch a no ere ouest. html.
EDI: Some of these issues have been raised in CICMP, They are listed in the CICMP
Change Request log at htte:llwww.uswestcom/whoiesale/cicme/chanoereouesthtml.Also, theprocess is too manual. even when an EDI system will be in place,
OTHER OWEST SYSTEMS: These indude issues relating to unplanned system outages(such as of LSMS) and access to information in Owest's systems.
TROUBLE ADMINISTRATION/REPAIR: Database accuracy is a concern.
LOOP DATABASE: Better loop make up information is needed (and needed in bulkform. not line-by-line).
SERVICE LEVELS, REMEDIES: see above
REPAIR
CONVERSIONS/MIGRATIONS: Many repair issues carry over from
conversions/migrations (e,. conversions to Eschelon on-net), If these problems are resolvedearlier. they should not reach repair.
POST-CUT: Post-cut issues include problems dealing with issues such as pair gain orthe distribution frame. Some post-cut issues are related to mOdems, fax machines, or credit
cards. Eschelon needs to know the cause of these problems, For example, have pair gain levels
not been adjusted or was the testing improper?
SUPPORT: In addition to physical troubles, issues can relate to communication gaps.
Eschelon needs access to knowledgeable contacts. If Owest has a large project (such as a bigswitch conversion). Owest should notify Eschelon and provide a special point of contact for that
project. We need to know who to call and how to escalate issues.
TOO MANUAL: Please provide information about electronic tools for repair. Forexample. if Eschelon could access information electronically, some calls and communication
gaps could be avoided. If other CLECs are using less manual processes, please provideEschelon information about such options.
------------------------_--
000146
TIMELINESS: Timeliness is a critical issue in re~air
, -
and improvement IS needed.
SERVICE LEVELS. REMEDIES: see above
UNE-P (NOW UNE-
AGREEMENT: Because the companies have only recently reached agreement.
Escheton believes it would be useful to get together and confirm our understanding of how the
agreement works, For example, will we be assigned a different usee for ordering, or willorderil1g be the same as for resale, etc. We are developing and rolling out products based on our
understanding of the agreement. and we need Owest to .inform us if it has a different View, Anearly meeting should be scheduled to walk through the specifics of the agreemen~ (vrdering,
pricing, billing, etc.), wittt subject matter people who can address the nuts and bolts of Ordering,provisioning, and billing UNE-
AIN: At that meeting, Owest could address AIN features under the new agreement. For
the AIN features that Eschelon orders now with resale (such as Remote Access Forwarding), will
Owest make them available with UNE.E and at what price. If not, how will AIN features be
addressed for existing orders and on a going forward basis?
SERVICE LEVELS, REMEDIES: see above
SUMMARY: These are just examples of issues. They should give you a better idea, however, ofthe types of expertise needed for the various teams. See you on Tuesday morning.
In'OIemenla.....-
IIsLGac
CSI.Quu.ons.GOC I'IeIGcra.Gac
Karen L. Clauson
Director of Interconnection
Eschelon Telecom, Inc.
730 2nd Ave. South, Suite 1200
Minneapolis, MN 55402
Phone: [phone]
Fax: [phone]
--------- ---------------
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Idaho PUblic Utilities COmmisSion
Office of the Secretary
RfECfElVEO
AUG 1 6 2aO?
Boise, Idaho
Deanhardt, C. - Exhibit 8
Case No. QWE-O6-
AT&T
DOC 036
state Of Minnesota
Department of Commerce
INFORMATION REQUEST
E'421/DI-OI-B14
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due~
Ferguson, Sharon
06/20/2001
07/02/2001
REQUEST:
a. E'rovide aunderstanding
the last five
the Minnesotaentered into,
list of every written contract, agreement or letter of
between Qwest and a CLEC that operates or has operated inyears. However, do not include any agreement, etc. filed
E'ublic Utilities Commission. Include each agreement, etc.
whether or not it is still in effect.
MN inwith
E'rovide a copy of the items listed in part
RESPONSE:
Qwest obj ects to this IR because it is overly broad, unduly burdensome, not
reasonably calculated to lead to the discovery of relevant information, and
seeks - the disclosure of confidential agreements. Qwest resolves numerousissues - wi th CLECs on a daily basis and to provide every written
memorialization of such agreements would require a review of all company
interactions with each CLEC in the last five years. Furthermore, requiring
Qwe st to disclose this information would discourage resolution of disputes on
an informal basis and would be, therefore, contrary to public- policy. To the
extent agreements have been reached that impact interconnection terms, those
agreements have been fiied with the MPUC. Further answering, Qwest objects
that the request is beyond the scope of the investigation the DOC explained
to the Commission it was engaging: "there were five issues that were set out
that we I re concerned about. I think it's page 10 of the staff briefingpapers. That I s the direction we re going. We I re not asking for this to be a
general fishing expedition, we re looking at those five issues, we think that
that sets it out.(VOL II p. 35-36)
Responden t :Legal
DOC 04451
State Of Minnesota
Department of Commerce
INFORMATION REQOEST
P421/DI-01-814
Inrormation Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Fergus~n, Sharon
11/27/2001
12/17/2001
REQOEST:
In paragraph of the "0 S WEST Service Level Agreement with CovadCornmunicationsCompany" (Q11010S - Q110107), 0 S WEST agrees to provide
percent of Cavad's Firm Order Confirmation (FOC) dates within 48 hours
receipt of a properly completed service request for POTS unbundled loop
services. Please identify a~ least one rCA approved by the MPOC between 0 S
WEST/Qwest and a CLEC in which Qwest agrees to provide 90 percent of the
CLEC's FOC dates within 48 hours of receipt of a properly completed service
reques~ for POTS unbundled loop services. Please provide a copy of the
relevant page (s) from the identified ICA,
RES?ONSE:
As stated in the agreement that is the subject of this Request, Qwest'
predecessor, U S WEST Co~~unications, and Covad Co~~unications Company agreed
t~ a settlement of Covad's intervention and adversarial position to the
Qwest/U S WEST merger in 2000. (See page QI10107: "ased on () S WEST'
ccmmit~ent to meet these service ?erformance standards, Covad commits to
withdrawing its opposition to the U S WEST IQwest merger.
).
This agreement
therefore stands as a settlement and business compromise of pre-existing
disputes and of pending litigated actions. Sections 251 and 252 do notinclude wi thin their scope agreements in which a settlement of pre-existing
litigated positions is the primary bargained-for term or condition. Further,
the provision that is the subject of this Request is integrated with all
its other terms and conditions, including the withdrawal of Covad's opposition
of the merger. And, due to the integrated nature of and all of the agreement'
s covenan~s, the agree~e~~ is u~ique to Covad and Qwes~.
Wi~hout waiving any of its posi~icns, including ~hose addressed above, Qwest
states in Response to this Reques~ No. 44 that the Eschelon and FirstCom
interconnection agreements filed wi ~h and approved by the Minnesota Commission
contain the following' provisions:
Eschelon - approved by ~he Minnesota Commission on June 26, 2000:
U S WEST will provide FOCs (?irm Order Commitments) to CLECs within a
reasonable time, no later than 48 hours after receipt of complete and accurate
orders. The ?OC assumes that there is sufficient network capacity to meet the
request in the s~andard i~terval. The FOC interval for all other complex
orders will be within a reasonable time, no later than 8 business days from
receipt of complete and accurate orders. The FOC for ICE orders will reflect
an ICE FOC date.
FirstCom - approved by the Minnesota Commission on April 20, 2001:
~ ~ ~--~----- ~~---~---~--- ----------~--------~~ _--_
~m~_u___--
-------.._---- ..--
4 Qwest will provide FOCs to CLECs wi thin a reasonable
48 hou~s after receipt of complete and accurate orde~s forSimple Business end-use~s. !he fOC inte~val for all other
be within a reasonable time, no later than 8 business days
complete and accurate orders. The FOC for ICB orders willdate.
time, no later tha~
Regular POTS or
complex orders wil~
from receipt of
reflect an ICE fOC
DOC 04551
State Of Minnesota
Depar~ment of Commerce
INFORMATION REQUEST
P421/DI-Ol-814
Information Requested From:Qwest Corporation
Information Requested By:
. Date Requested:
Date Response Due:
Ferguson, Sharon.
11/27/2001
12/17/2001
REQUEST:
In paragraph 1 of the "OS WEST Service Level Agreement with Covad
Communications Company " (QlIOlO5 - Ql10l07), 0 S WEST agrees to notify Covad
of any facilities shortage issues for DSL capable, ISDN capable and DSl
capable services within 48 hours. Please identify - at least one rCA approved
by the MPOC between U S WEST /Qwest and a CLEC in which Qwest agrees to notify
the CLEC of any facilities shortage issues for DSL capable, ISDN capable andDS1 capable services wi thin 48 hours. Please provide a copy of the relevant
page (s) from the identified ICA
RESPONSE:
Please See Response to Reques~ No. 44.
DOC 04651
State Of Minnesota
Department of Commerce
INFORMATION REQUEST
P42l/DI-01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson; Sharon
11/27/200112/17/2001
REQUEST:
In paragraph 1 of the "0 S WEST Service Level Agreement withCovadCo~~unications Company" (Q110105 - Q110107), U S WEST agrees to provide 90percent of Covad's FOC dates within 72 hours of receipt of a properly
completed service request for DSL capable, ISDN capable and DSl capable
unbundled loop se~vices. Please identify at least one ICA approved by the
MPUC between U S WEST /Qwest and a CLEC in which Qwest agrees to provide 90
percent of the CLEC's FOC dates within 72 hours of receipt of a properly
completed service request for DSL capable, ISDN capable and DSl capable
unbundled loop services. Please provide a copy of the relevant page (s) fromthe identified ICA.
RESPONSE:
Please See Response to Reques~ Nc. 44.
Dce 047:3:
State Of Minnesota
Depar~ment of Commerce
INFORMATION REQUEST
P421/DI-01-814
Information Requested From:Qwesi Corporation
Information Requested By:
Date Requested:Date Response Due:
Ferguson, Sharon
11/27/2001
12/17/2001
REQUEST:
In paragraph 1 of the "U S WEST Service Level Agreement with CovadCommunications Company~' (Q110105 - Q110107), U S WEST agrees, as part of the72 hour FOC commitment referred to in the previous RFI, to dispatch atechnician to verify the existence of sui table facilities prior to providing
Covad with an FOC date, Please identify at least one ICA approved by ~he MPUC
between U S WEST!Qwest and a CLEC in which Qwest agrees to dispatch atechnician to verify the existence of sui table facilities prior to providing
~he CL~C with an FOC date. Please provide a copy of the relevan~ page (s) fromthe identified ICA.
RESPONSE:
Please See Response to Request No.4 4.
In addition, the Fourth .:rnen9.rn.en:: ~O the interconnection agreement with New
2dge Networks, filed wi~~ the ~i~~esota Commission on November 20, 2000 and
app"roved on December 22, 2000, s:a~es the following:
Section I, part C, para. 6. As part of the FOC process for 2-wire non loaded
unbundled loop service where CLEC indicates tha~ they intend to use the 2-wire
non loaded unbundled loop for the provision of SDSL service, ISDN-, OS 1- orDSL-capable (excluding ADSL-capable) unbundled loop services, when requested
to do so by CLEC, Qwest wil! dispatch a technician to verify the existence of
suitable facilities prior to providing CLEC an FOC date.
CLEC is willing to limit the above provision to the following market areas: Vancouver, WA: Tucson; Omaha;
Cedar Rapids; Albuquerque; Colorado Springs; Minneapolis; Boise; Salt Lake City (Ogden); Eugene; Salem;
Spokane, and Des Moines.
DOC 0485:
State Of Minnesota
Department of Commerce
INFORMATION REQUEST
P421/DI-01-8l4
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson, Sharon
11/27/2001
12/17/2001
REQUEST:
In paragraph 3 of the "0 S WEST Service Level Agreement with Covad
Communications Company" (QI1O1OS - QllOl07), 0 S WEST agrees to reduce theincidence of. failure on new Covad circuits to less than 10 percent failure
wi thin the first 30 calendaraays following installati~n~ Please identify at
least one ICA approved by the MPUC between U S WEST /Qwest and a CLEC in whichQwest agrees to reduce the incidence of failure on new CLEC circuits to lessthan 10 percent failure within the first 30 calendar days following
installation, Please provide a copy of the relevant page (s) from theidentified rCA.
RES PONS E :
Please See Response to Reques: Nc. 44.
DOC 0493:
State Of Minnesota
Department of Commerce
INFORMATION REQUEST
P421/DI-01-B14
Information Requested From:Qwest Corporation
Information. Requested By:
Date Requested:
Date Response Due:
Ferguson, Sharon
11/27/2001
12/17/2001
. REQUEST:
In paragraph 4 of the "0 S WEST Service Level Agreement with Covad
Communications Company " (Q110105 - 0110107), U S WEST agrees to complete line
conditioning paid for by Covad within 24 days or less 90 pe~cent of the time.
Please identify at least one ICA approved by the MPOC between U S WEST/Qwest
and a CLEC in which Qwest agrees to complete line conditioning paid for by
the CLEC within 24 days or less 90 percent of the time. Please provide a copy
of the relevant page (s) from the identified ICA.
RESPONSE:
Please See Response to Reques~ Nc. 44.
DOC 050S2.
State Of Minnesota
Department of Commerce
INfORMATION REQUEST
P421/DI-01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
ferguson, Sharon
11/27/2001
12/17 /2001
REQUEST:
In paragraph 4 of the N U S WEST Service Level Agreement with Covad
Communications Company" (Q11010S - Q110107), U S WEST agrees, in thosesi tuations where the end-user customer is served by digital loop carrier or
pair gain, to notify Covad and provide it with the option of submitting aservice request for an ISDN capable loop compliant with TR-393 standards and
U S WEST Technical Publication 77399. ?lease identify at least one rCA
approved by the MPUC between U S WEST/Qwest and a CLEC in which Qwest agrees,in those situations where the CLEC's end-user cust9mer is served by digitalloop carrier or pair gain, to notify the CLEC and provide it with the option
of submitting a service reques~ for an ISDN capable loop compliant with
TR-393 s~andards and U S WEST Te~hni~al ?ublication 17399. Please provide a
copy of the relevant page (s) from :he identified'rCA.
RESPONSE:
Please See Response ~o ~eques: No. ~~.
In addition, the Fourth ;~en~~e~~ :0 the interconnec~ion agreement with New
Edge Ne':works, filed witt, the 1~ir::1eso:a Cor:unission on November 20, 2000 andapproved on December 22, 2000, s~a:es the following:
Section I, part C , para.5. In :hcse situations where. the end user customer is
served by digital loop carrier or by pair gain, Qwes~ will notify CLEC of thatsituation and provide it the option 0: submitting a service request for an
ISDN capable loop compliant wi:h :R-303 standards and Qwest TechnicalPublication 77399. Qwes: will, where technically feasible, either install anappropriate ISDN card for those e~d user Customers served by digital loop
carrier, or provide another 15D~ o~:ion for those served off of pai~ gain.Where it would not impact a cUr~~~: :~s:cme~, Qwest will perform a line
station transfer in order to ~r~~:~:o~ a CLEC service request.
;Joe os l.3:
State Of Minnesota
Departme~t of Comme~ce
INFORMATION REQUEST
1?421/iJI-01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:Date Response Due:
Ferguson, Sharon
11/27/2001
12/17/2001
REQUEST:
In paragraph 4 of the U S WEST Service Level Agreement with Covad
Communications Companyrt (QllOlOS - Q110107) , U S WEST agrees, in those
situations where the end-user cus~omer is served by digit~l loop carrier or
pair gain, and where it is technically feasible, to either install an
appropriate ISDN card for those end-user customers served by digi tal loop
carrier or provide another IDSN option for those served off pair gain in
days or less 90 percent of the time . Please identify at least one ICA
approved by the MPUC between U S WEST/Qwest and a CLEC in which Qwest agrees,
in those situations where the end-user customer is served by digital loop
carrier or pair gain, and where it is technically feasible, to either instal:
an appropriate ISDN card for those end-user customers served by digital loep
carrier or provide another IDSN option for those ~erved off pair gain in
days or less 90 percent of the time, Please provide a copy of the relevant
page (s) from the identified ICA.
RESPONSE:
Please See Response to Request No. 44.
DOC 0523:
State Of Mi~~esQta
Department of Commerce
INFORMATION REQUEST
P421/DI-Ol-S14
Infor~ation Requested From:Qwest Corporation
Information Requested By:Date Requested:
Date Response Due:
Ferguson, . Sharon
11/27/2001
12/17/2001
REQUEST:
In paragraph 4 of the "
0 S WEST Service Level Agreement with CovadCommunications Company" (QI1010S - QllOl07), 0 S WEST
agrees, ~here it wouldnot impact a current end-user Customer, to perform a line and stationtrans fer in order to provision a
Covad service request in 10 days or less 90percent of the time. Please identify at least
one ICA approved by the
MPUC
between U S WEST
/Qwest and a CLEC in which Qwest agrees, where it would notimpact a current end-user customer, to. perform a line and station transfer inorder to provision a CLEC'
s service request in 10 days or less 90 percent the ti~e. Please provide a copy of the
relevant page (s) from the identifiedrCA.
RES?ONSE:
?lease See Response to Request No.
4 4.
Dce J~JSl
5ta~e Of Mi~~esota
Department of Cc~~erce
rNFO~~TION REQUEST
P421/DI-01-3 14
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson, Sharon
11/27/2001
12/17/2001
R:::QU:::ST:
In paragraph 7 of the "Confide~tial/Trade Secret S~ipulation Between ATI a~dU S WEST" (QIIO035), U S W2ST /Qwest agrees that reciprocal compensation for
terminating internet traffic shall be paid at the most favorable rates and
terms contained in an agreement executed by USWC as of the date of tha~
agreement. Please identify at least cne ICA approved by the M?UC between U S
WEST /Qwest ad a CL~C in which Qwest agrees ~hat reciprocal ccmpe~satic~ fot
terminating Internet traffic shall be paid at the most favorable rates and
terms contained in an agreement executed by U S WEST/Qwest. Please provide a
copy of the relevant pages (s) from the identified rCA.
?E:SPONS::': :
The entire provision refere~ced in ~his =ata re~uests is as follows:
Cady has asserted ~ha~ USWC must ~ay reciprocal compe~saticn for ln~e=ne~
related ~erminating traffic under its Interconnection Agreeme~ts and under
a~plicable s~ate and federal law wSWC has asserted that it has no legalcbl~ga~iQn to pay reciprocal =~~?e~sat~Qn for s~ch ~=affi=. ~otwithstand~~;
these differences a~d wi~hou~ waiv~~g their positio~s, ~he ?ar~ies a~ree fer
se~tlement ?urpcses that reciprocal co~pensa~ie~ for ~er~i~a~~~g i~ter~et
traffic shall be caid a~ ~he ~os~ favereb:e rates a~~ terms c=~~ai~ec i~ a~agreement executed to date by USWC. The pa~ties will develop a f~ll
i~plementation plan of =~ese recipr=ca: ccmpe~satic~ issues by ~a=ch 31,2000. =ur~her; the pa=~ies agree that for purposes 0: applyi~; ~~ese ra:esand terms and conditions they will work cooperatively ~o devalop a ~eans 0:by which IS? traffic will be broken cut i~ the least costly ~annerpracticable.
Thus, the provision referenced i~ :~e Req~es~ is ane dependent ~ar:
several compromises of legiti~a:e legal and fac:~al dispuces =e:~een :hepartie
:,
i"cl'..lc::.ing - ~is?l!tes re:ere!"..::ed t::r:;ugnout ~he a.;r-ee::ent. !t is a:'5:part 0:: a sett~ement of pas: disp~:es re:a:i~g :0 :he celi7ery 0: i~:er~e:
related traffic, and Qwest submits :ha: i: is not within the scope 0:
sections 251 and 252 of the ~eleccmm~n.ica~ions Ac~, as addressed i~ Gwes:' 5Respo~ses :o ~equest No.4 a and 44.
wi~hout waiving Qwest' 5 positions en :~~5 matter as stated above i~ :~~s
~esponds, Qwest answers this ~e~uest ~y s~a~i~g tha~ A~! a~d US West ~eve=
reached agreement regarding the ?er=e~~ i~terne~ usage discussed in :~is
agreeme~t and ~herefore did net =eso17e :::is issue ~n:il a full
implementation plan and intercon~ect~cn agreement amen~~e~t ~ere reac~ed ~n
~jcvemb"'-r 1.S, 2000.
DOC 059S1
State Of Mi~~esota
De~artment of Commerce
INFO~ATION REQUEST
?421/DI-01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson, Sharon
11/27/2001
12/17/2001
REQUEST:
In paragraphs 11 and 12 of the "Confidential/Trade Secret Stipulation Between
ATI and U S WEST" (Q110029 - QI10035), U S WEST/Qwest agrees to provide ATI
with a dedicated provisioning team, located at ATI, to assist in solving
provisioning problems. Please identify at least one ICA approved by the MPUC
between U S WEST /Qwest and a CLEC in which Qwest agrees to provide a
dedicated provisioning team to the CLEC under the same terms. Please provide
a copy of the relevant page (s) from the identified ICA.
RESPONSE:
The dedica~ed provisioning team clause is integrated with the other covenants
contained in this settlement agreement. Thus, please see Response to ~equests54 and 55.
Without waiving Qwest' s positic~s o~ these matters as addressed above, Qwest
responds to this Request by referencing the Minnesota DOC to the Esche1on
amendment dated November 15, 2000 (Attachment a to Information Request No.
56), which states:
10 For at least a one-year period, Eschelon agrees ~o pay Qwest for the
services of a Qwest dedicated provisioning team to work on Escheionpremises.
DOC 060S1
S~ate Of Minnesota
Department of Commerce
INFO~~TION REQUEST
P421/DI-01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson, Sharon
11/27/2001
12/17/2001
REQUEST:
In paragraph 14 of the "Confidential/Trade Secret Stipulation Between AT! andU S WEST" (Q110035), U S WEST/Qwest agrees to dispute resolution terms thatare "in addition to the dispute resolution mechanism provided under the
Interconnection Agreement." Please identify at least one ICA approved by the
MPUC between U S WEST /Qwes~ and a CLEC in which Qwest agrees to the same
dispute resolution mechanism as set forth in paragraph 14, Please provide a
copy of the relevant page (s) from the identified ICA.
RESPONSE:
The dispute resolution prov:sio~s 0: the ATI/Qwest settlement agreement apply
~o non-25l or 252 business dispu~es that arise between the parties. ~~d, this
dispute resrilution procedure is "i~ addition to the one that applies under the
Interconnection Agreeme~t.Accor=i~gly, this provision is not applicable tointerconnection ser'rices a:-.d ne~wcrk elements, because the Interconnection
Agreement applies to suc~ =ispu:es.
This dispute resolution provisic:1 :s tailored to the specific corporate
struc~ures and business interests 0: AT! and Qwest.. That is, the procedures
match the corporate struc~u=es a~~ ~ie=a=chies of the companies and the
methods by which they wish to resolve disputes among themselves.
Further, a dispute resolution clause ~s not the provision of interconnection
services or network elements. I: necessarily follows that this clause is not
subject to Sections 251 and 252 0: the federal Communications Act ("Act
And, Qwest has not submitted this agreement to the MPUC, because the
Telecommunications Act does not require Qwest to do so.
Section 252 of the Act, by its :er~s, requires the submission of agreements to
state commissions for approval c~:y wi~h respect to agreements relating to
interconnec~ion, services, or ne:~ork elements pursuant to section 251.
C. ~ 252(a) (1); see also ~ 252(0) and (e) (1). Consistently, the FCC
recognized that parties could simultaneously negotiate matters subject to
sections 251 and 252 as well as no~-251 or 252 matters, and that such an
approach to negotiations is co~s:s:ent wi~h the duty under section 251 tonegotiate in good faith.Implementation of the Local Competition Provisions
in the Telecommunications Act of 1996, 11 FCC Rcd 15499, ~ 153 (1996),
subsequent history omi t ted.
Qwest suggests that any regulatory obligation to file this agreement and allow
carriers who are not party to Qwest's and ATI's unique business relationship
to opt-into provisions o~ the agreement would be contrari to public policy.
Such obligations would preclude, or at the very least provide an enormousdisincentive and barrier to, .the ability of ILECs and CLECs alike to reach
satisfactory and beneficial business resolution of disputes that are unique
the settling parties. Qwest, as shown by this agreement, is commi ~ted to
working collaboratively with its wholesale carrier customers to satisfy the~=needs. And, CLECs should have the ability to determine whe~hEr such a~
agreement would be of greater benefit to their business interes~s. Qwest
suggests that the Minnesota DOC should encourage, not discourage, the use of
such agreements to allow Qwest to resolve such matters amicably and
cooperatively with its wholesale customers.
DOC 06251
State Of Minnesota
Department of Commerce
INFO~~TION REQUEST
P421/DI-01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
ferguson, Sharon
11/27/20
12/17/2001
REQUEST:
In Section 2 of th€ "Confidential Agreement" set forth in a November IS, 2000
letter from Greg Casey at Qwest to Richard Smith at Eschelon Telecom, Inc.
(QII0038), Qwest and Eschelon agree to hold quarterly executive meetings to
be attended by representatives at the Vice-President or above levels. Please
identify at least one rCA approved by the MPUC between Qwest and a CtEC in
which Qwest agrees to hold quarterly executive meetings, to be attended by
representative at the Vice-2resident or above levels, with the CLEC. Please
provide a copy of the relevan~ pages from the identified ICA.
RESPONSE:
The November 15, 2000 letcer from Greg Casey to Richard Smith was creaeed in
the context of addressing "numerous proposals intended to better the partiesbusiness relacionship.These in=lude "implementation plan by which to
mutually improve the ccmpanies ' business relations.
The clause that is the subj ec~ of this Request, an agreement to arrange
quarterly meetings to be ateendec by representatives at the Vice President or
above levels, applies to business dispute that arise between the parties.
This dispute resolution provision is tailored to the . specific corporate
structures and business intereses of AT! and Qwest. That is, the procedures
parallel the corporate structures and hierarchies of the companies and the
methods by which they wish to resolve disputes among themselves.
Further, a dispute resolution clause is not the provision of interconnectionservices or network elements. :: necessarily follows that this clause is not
subject to Sections 251 and 252 of :he federal Communications Act ("Act
And, Qwest has not submi teed t~is agreement to the MPUC, because the
Telecommunications Act does no: require Qwest to do so.
Section 252 of the Act, by les ~e=ms, requires the submission of agreements to
state commissions for a~proval o~ly with respect to agreements relati~g to
interconnection, services, or network, elements pursuant to section 251.
C. ~ 252(a) (1); see also ~ 252(0) and (e) (1). Consistently, the FCC
recognized that parties could simul:a~eously negotiate matters subject to
sections 251 and 252 as well as Gon-251 or 252 matters, and that such an
approach to negotiations is co~s:s~ent with the duty under section 251 tonegotiate in good faith.Implementation of the Local Competition Provisions
in the Telecommunications Act cf 1996, 11 FCC Rcd 15499, ~ 153 (1996),
subsequent history omitted.
Qwest suggests that any regulatory obligation to file this agreement and allow
carriers who are not ~arty to Qwest' s and Eschelon s unique business
relationship to cpt-into provisio~s of the agreement would be contrary to
public policy. Such obligations would preclude, or at the very least provide
an enormous disincentive and barrier to, th~ ability of ILECs and CLECs aliketo reach satis factory and beneficial business resolution of dispu~es that are
unique to the parties. curther, an inability to resolve matters that
frequently arise and that are far removed from sections 251 and 252, such asdispute resolution provisions for non-251 items, would lead to unnecessary and
voluminous litigation before the federal or state courts or before the MPUC.
Qwest, as shown by this agreement, is committed to working collaboratively
with its wholesale carrier customers to satisfy their needs rather than
proceeding to litigation. Qwest suggests that the Minnesota DOC should
encourage, not discourage, the use of such . settlements to allow Qwest to
resolve such disputes amicably and cooperatively with its wholesale customers~
In any event, the November 15, 2000 letter agreement arose in the context of
interconnection amendments that were filed for approval with the MinnesotaCommission. The interconnection amendments allowed for combinations of
network elements that were new Qwest wholesale products. Qwest agreed to
develop a new UNE platform product, referred to as UNE Star, in order to
provide an alternative to Eschelon, The terms and conditions of that new
product were set forth in an amendment to the interconnection agreement signed
on November 15 and filed with the Commission on December 6, 2000.
Importantly, Section 1.3 of the amendment filed with the Commission set forth
an understanding that the companies would work together on a
business-to-business basis and develop escalation procedures.
DOC 063S1
State Of Minnesota
Department of Commerce
INFORMATION REQUEST
P421/DI-01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson, Sharon
11/27/2001
12/17/2001
REQUEST:
In Section 3 of the "Confidential Agreement" set forth in a November 15, 2000
letter from Greg Casey at Qwest to Richard Smith at Eschelon Telecom, Inc.
(Q110036 - Q1l0038), Qwest and Eschelon agree to new, six-level escalation
~rot~dures to resolve any and ~ll issues between them. Please identify at
least one rCA approved by the MPUC between. Qwest and a CLEC in which Qwest
agrees to the same, six-level escalation procedures to resolve any and all
issues between it and the CLEC. ? lease provide a copy of the relevant pag~s
from the identified rCA.
RESPONSE:
Please See Response to Request 62.
COC 064S~
State Of Minnesota
Depar~ment of Commerce
INFORMATION REQUEST
P421/DI-01-8l4
Information Requested from:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson, Sharon
11/27/2001
12/17/2001
REQUEST:
In Section 3 of the "Confidential Agreement" set forth in a November ' 15, 2000
letter from Greg Ca~ey at Qwest to Richard Smith at Eschelon Telecom, Inc.
(QllOO38), Qwest and Eschelon agree, as part of Level 6 of new escalationprocedures, to waive "any tariff limitations on damages or any other
limitation on actual damages." Please identify at least one ICA approved by
the MPUC between Qwest and a CLEC in which Qwest agrees to waive " any tariff
limitations on damages or any other limitatio~ on actual damages." Please
provide a copy of the relevant pages from the identified rCA.
i1.E:SPONS2:
Please See ~esponse' ~o Request 62.
Farther, the clause referenced in the Reque~t, a waiver of tariff limitations
as part of Level 6 of the escalation procedures, reflects the specific
corporate structures and business in~erests of ~schelon and Qwest. That is,
the procedures match the corporate struct~res and hierarchies or the companies
and the methods by which they wish to resolve disputes among themselves.
DOC 06752
State Of Mi~~esota
Depar~~ent of COIT~erce
INFO~ATION R~QUEST
P421/DI-01-8l4
Information Requested From:Qwest Corporation
Information Requested 3y;
Date" Requested:
Date Response Due:
Ferguson, Sh~ron11/27/2001
12/17/2001
REQUEST:
In agreement paragraph 3 of the "Confidential ~~endment to Confidential/Trade
Secret Stipulation " between Eschelon and Qwest (Q110041 - Q110048), Eschelonagrees to provide "consulting and network services " to Qwest in exchange foi
an amount that is te~ percent (10 percent) of the aggregated billed charges
for all purchases made by ~schelon form Qwest from November :5, 2000 throughDece~ber 31,2005." ?lease answer the following with respect to thisagreement:a. Describe in detail :ne na:~=e of the consulting services ac:uallyprovided oy Eschelon, including whether those services relate to issues
outside of the provisionin~ of telecommunication services to Eschelon.b. Identify any other C~EC to which Qwest has offered the opportunity to
provide ~onsulting services i~ exchange for bill in; refunds in Minnesota.c. Identify, by name ~nd tit:e, the consultants Eschelon has provided for
Qwest.d. Identify, by name a~c ~~:~e, tne ;erson at Qwest charged with
respcnsibili~y for the ~sc~elo~ c~nsul:ing relationship.e. Identify the amount 0: ~Q~ey paid ~a ~s~helon by Qwes~ :0 date under t~e
terms of this agreemen:.f. Identify at least one rCA approved by the M?OC between Qwest and a CL~C
in which Qwest agrees :0 provide ~he CL~C 1i~h billing refunds i~ exchange
for services provided by the CL~C to Qwest. ?lease provide a copy or the
relevant page (s) from the ide~ti:ied rCA.
RESPONSE:
?lease see Response to " Request 66. :n addition and in response :0 the
particular questions of Reques: 67:a. Es~helon has provided wide =angin~ cons~l~i~g services with respect to
the creation of a UNE Star ;rcd~ct reflected in its interconnection amendment
dated November 15, 2001. Development of this product involved substantial
effort by Qwest, and Qwest has used consulting services from Eschelon in an
effort to make this product useful to CLEC customers and to improve Qwest'
delivery of this product. UNE Star is something that is included in Qwest'
interconnection agreement wi th ~schelon and is available to any CLEC wishing
to opt-in to all of its terms. Attached as 7rade Secret Attachment C is a
list of consulting teams from ~schelon" that performed work from Qwest. Those. teams include:
1. OSS Team -- ~:sponsible fer :valuating and suggesting modific:~io~to operational . s~PPQr~ systems in connection with UN~ Star.2. UNE-P Team - Assisted and made reco~~endations for deli very anddetermining USOCs for features associated with UNE Star.3. Billing Team - Assists and makes reco~~endations to Qwest
regarding appropriate billing for ONE Star products given applicableCommission orders and decisions in multiple states and assisting in resolvingissues associated with billing for ONE Star.4. Collocation Team - Assists and suggests modifications forprocesses for addressing collocation issues in order to improve thoseprocesses.5. Cutover Team Studied and suggested changes to customer processesin 6rder to decrease Qwest cutover times.6. DSL Team - Assists Qwest in developing processes and methods forproviding re-sale of OSLo7. Held Order Team - Worked with Qwest in an effort to evaluate Qwestprocesses to reduce held orders. 8. Network/Interconnec~icn Tracking Team - Assisted in working withQwest on issues regarding how (ra:fie is routed in the Seattle and Portlandmarkets.
See the McLeod Agreement.
Please see At tachment C.
Kevin Saville and S::ve Shea~ane. Qwest is gatherinq this informa~ion and will provide it as soon as it isavailable.f. The consul ting arrangemen~ w::~ ~schelon uses bill refunds as asurrogate for hourly or ether pay~en~s ~hat migh~ otherwise be paid to aconsultant entering in~o an arra~gemen: wi~h Qwest. Accordingly, thisagreement is not an exchange of a billing refund for services provided by theCL~C. Because this invol ves cons~: :ing services as opposed to aninterconnection arrangemen:, :his agreement ~erm has no~ been included in aninterconnection agreemen: amen~men~ for ~he reasons set forth in response toRequest 66.
SUPPLEMENTAL RESPONSE 12/20/01:
For the period of 11/15/00 :hrough 03/31/01, the amount due to Eschelen is$2,540,017.
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DOC 074S:
State Of Minnesota
Departmen~ of Commerce
INfORMATION REQUEST
P421/DI-01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson, Sharon
11/27/2001
12/17/2001
REQUEST:
In a letter dated July 3, 2001 from Audrey McKenn~y (Qwest) to Richard Smith(Eschelon) (QllO150 - QIIO152), Qwest and Eschelon agree to an audit of theswitched access minutes reported by Qwest and Eschelon to determine whether
Qwest accurately recorded switched access minutes on UNE~P lines leased by
Eschelon. Please answer the following wi th respect to this agreement:a. Identify at least one rCA approved by the MPUC between Qwest and a CLEC
that permits the CLEC to request the same type of audit. Please provide a
copy of the relevant page (s) from the identified rCA.b. According to the letter, the parties agreed to use the results of the
audit to negotiate the terms and condi~ions of any subsequent analysis or
procedures to be followed and for resolution of future discrepancies in theswitched access minutes reported ~y Qwest. Please provide copies of any termsand conditions negotiated by the parties in acrod (sic) with this agreement.c. Identify at least one rCA approved by the MPUC between Qwest and a CLEC
that contains the same terms and conditions, if any, as agreed to by Qwest
and Eschelon for resolution 0: discrepancies in the switched access minutesreported by Qwest. Please provide a copy of the relevant page (s) from theidentified ICIL
RE:SPONS=:: :
a. The contractua~ provision ~hat is ~he subject of this data request is one
of the integrated covenants of an agreement the purpose of which was to settle
potential litigation over alleged measuring discrepancies and underpayments,and similar matters that are not subject to Sections" 251 and 252 of thefederal Communications Act (n ct"
;.
The provision for an audit of switched
access minutes arose because 0: a dispute ~etween the parties to deter~ine the
accuracy of recorded switched access minutes.
The agreement is integrated; in o~her words, all of the terms of ~he
agreement, such as the audit and Qwest ' S agreement to pay an interim amount,were necessary and inextricable ~arts of ~he bargained-for exchange. The
agreement is unique to Eschelon and Qwes~ given their business relationship
und~r the particular circumstances existing at the time of the agreemen~.. Further, the agreement, including the contractual provisions containing the
audit commitment, represents compromises of legitimate legal and factualdisputes and a resolution of the partie"' respective negotiating positions
regarding those billing disputes.
This is a settlement of the calculation of switched acceS$ minutes, which
relates to interexchange services, not local exchange services. Also, a
compromise of the pa=ties ' posi~ions or a past billing c~spute in the con~ex:
of a unique business relationship does ~ot consti~ute te=ms 0= conditions fo=
the provisioning of an interconnection service or networK eiement within ~he
scope of sections 251 and 252. It necessarily follows that the audit
provisions and the agreement as a whole are not subj ect ~o Sections 251 and
252 of the Telecommunications Act. Qwest has not submitted this agreement to
the MPUC, because the Telecommunications Act does not require Qwest to do so.
Section 252 of the Act, by its terms, requires the submission of agreemen~s to
state commissions for approval only with respect to agreements relating to
interconnection, services, or network elements pursuant to section 251.
S:C. S 252 (a) (1); see ~lso S 252 (b) and (e)" (1). Consistently, the FCC
recognized that parties could simultaneously negotiate matters subject to
sections 251 and 252 as well as non-251 or 252 matters, and that such an
approach to negotiations is consistent with the duty under" section 251 negotiate in good raith.Implementation of the Local Competition Provisions
in the Telecommunications Act of 1996, 11 FCC Red 15499, S 153 (1996),
subsequent history omitted.
Qwest suggests that any regulatory obligation to file this agreement and allow
carriers who are not party to Qwest's and Eschelon s unique business
relationship to opt-into provisions of the agreement would be contrary to
public policy. Such obligations would preclude, or at the very least provide
an enormous disincentive and barrier to, the ability of ILECs and CLECs alike
to reach satisfactory and beneficial business resolution of disputes that are
unique to the settling parties. Further, an inability to resolve disputes
that frequently arise and that are far removed from sections 251 and 252, such
as audits of a pending dispute, would lead to unnecessary and voluminous
litigation before the federal or sta~e courts or before the MPUC. Qwest, as
shown by this agreement, is co~~itted to working collaboratively with its
wholesale carrier customers to satisfy their needs rather than proceeding tolitigation. And, CLECs should have the ability to de~ermine whether an
expeditious settlement would be 0: greater benefit to their business interests
than a potentially lengthy litigation before a judicial or regulatorytribunal. Qwest suggests that the Minnesota DOC should encourage, not
discourage, the use of such settlements to allow Qwest to r~solve such
disputes amicably and cooperatively with its wholesale customers.b. Qwest and Eschelon have not reached a final =esolu~ion or the issue
addressed by this agreement.
~.
See Response to
DOC 07551
State Of Minnesota
Department of Commerce
INFORMATION REQUEST
P421/DI-01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson; Sharon
11/27/2001
12/17/2001
REQUEST:
In a letter dated July 3, 2001 from Audrey McKenney (Qwest) to ~ichard Smith(Eschelon) (Ql101S0 - Ql10152, Qwest states that it has . been paying Eschelon
an interim amount equal to the difference between $13.00 per line per month
and the amount Eschelon was able to bill IXCs for switched access, per line,based upon the switched access minutes reported to Eschelon by Qwest. Please
identify at least one ICA approved by the MPUC between Qwest and a CLEC
which Qwes~ agrees to make payments of the same kind and amount to the CLEC.
Please provide a copy of the relevant page(s) form the identified ICA.
RESPONSE:
Please See Response ~o Request 74.
In addition, this agreeme~~ was a ~empo=ary resolution of a billing issue, notan interconnection agreement term, and it was subject to a true-up once the
audit was completed. Therefore, :he Request's characterization or thisprovision is not complete or accura~e. This provision has not been included
in an interconnection agreemen~ amendment for the reasons set forth inresponseto Request 74 (A) .
DOC 076S:
State Of Minnesota
Department of Commerce
INFORMATION REQUEST
P421/DI-01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Da te Response Due:
Ferguson, Sharon
11/27/2001
12/17/2001
REQUEST:
In a letter dated July 3, 2001 from Audrey McKenney (Qwest) to Richard Smith
(Eschelon) (Q110150 - Q110152), Qwest agrees to increase the amount it will
pay Esth~lon to the difference between 516.00 per line ~er month ~nd the
amount ~schelon was able to bill IXCs for switched access, per line, based
upon the switched access minutes reported to Eschelon by Qwest. Please
identify at least one ICA aporoved by the MPUC between Qwest and a CLEC in. which Qwest agrees to make p~ymencs of the same kind and amount to the CLEC.
Please provide a copy of the relevant page (s) from the identified ICA.
RESPONSE:
See Responses to Reques~s 74 and 75.
DOC 07751
State Of Minnesota
Department of Commerce
INFORMATION REQUEST
P421/DI-01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson, Sharon
11/27/200112/17/2001
REQUEST:
In a letter dated July 3, 2001 from Audrey McKenney (Qwest) to Richard Smith(Eschelon) (QII0150 - QII0152), Qwest identifies an issue relating to access
records for Qwest 's intraLATA toll traffic terminating to customers served by. an Eschelon switch and agrees tha~, until the issue is resolved, Qwest willpay Eschelon $2.00 per line per month for such traffic. Please identi:y at
least one ICA approved by the MPUC between Qwest and a CLEC. Please provide acopy of the relevant page (s) from the identified ICA.
RESPONSE:
See Responses to Requests 74 and 75.
Further, this letter is a temporary resolution of a dispute that is ongoing
between the parties regarding swi~ched access billing. The parties arecontinuing to negotiate i~ an attempt to resolve this issue. The temporary
agreement has not been f:~ed for ~he reasons set forth in response to 74 (a) .
DOC 082S:
State Of MinnesotaDepartment of Co~erce
INFORMATION REQUEST
P421/DI-01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson, Sharon
11/27/2001
12/17/2001
REQUEST:
Please identify at least one ICA approved by the MPUC between Qwest and a
CLEC containing the same terms as the Trial Agreement between Qwest and
Eschelon (QI10153 - QII0166). Please provide a copy of the relevant page (s)
from the identified ICA.
RESPONSE:
See Section 2.10 of the In~erconnec~ion Agreement Amendment signed on November
15, 2000 and filed with the Co~~ission on December 6, 2000.
DOC 0865:"
State Of Minnesota
Department of Commerce
INFORMATION REQUEST
P421/DI-OI-B14
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:Date Response Due:
Ferguson, Sharon"
11/27/2001
12117/2001
REQUEST:
In paragraph 2.1 of the" "Qwest/Eschelon Implementation Plan " (Q110339 -Q1l0353), Qwest agrees to establish a service account team for Eschelon.Please identify at least one ICA approved by the MPUC between Qwest and CLECin which Qwest agrees to provide a service account team with the sameobligations described .in paragraph 2.1. Please provide a copy or the relevantpage (s) from the identified ICA.
RESPONSE:
The agreement referenced in this data request includes the impleme~tation of
service account teams for a wholesale customer. This agreement reflects theindividual business practices of Eschelon and Qwest and is unique to their
cooperate s~ructures and their business relationships. It is standardoperating procedure for Qwest to establish some form of a service account teamfor customers. An agreement to provide a service account team is not a term
or condition for the provisioni~g of an in~erconnection service or a network
element - It necessarily follows that the agreement is not subjec~ to Sections251 and 252 of the Teleco:!\ll1unica:ions P-.Ct. Qwest has not submitted thisagreement to the MPUC, because the Teleco~~unications Act does not require
Qwest to do so.
Section 252 of the Act, by its :er~s, requires the submission of agreements :6
state commissions for approval on:"y with respect to agreements for theprovision of "interconnection, services, or network elemen~s pursuant tosection 251." 47 U.C. ~ 252(a)(1)i see also ~ 252(0) and (e)(l).Consistently, the FCC recognized that parties could simultaneously negotiatematters subject to sections 251 and 252 as well as non-251 or 252 matters, andthat such an approach to negotia~ions " is consistent with the duty undersection 251 to "negotiate i~ good fai:h.!mplemen~ation of" the LocalCom!Jetition Provisions. in the Telecor:1.'TIunications P.ct of 1996, 11 E'CC i\cd15499, ~ 153 (1996), s~bsequen: ~istory omitted.
Qwest suggests that it is in the public interest to allow companies such as
Qwest and Eschelon to confer and agree on establishing business relationships
that suit the particular needs and structures of their respective companies.Any regulatory obligation to file this agreement and allow carriers who arenot party to Qwest's and Eschelon s unique business relationship to opt-intoprovisions of the agreement would" be contrary to public policy. Suchobligations would preclude, or at the very least provide an enormousdisincentive and barrier to, the ability of ILECs and CLECs alike to reachsatisfactory and beneficial business resolu:ion of matters that are unique tothe parties. Qwest, as shown by this agreement, is cornrni tted to workingcollaboratively with its wholesale carrier customers to satisfy their needs.Qwest suggests that the Minneso~a DOC should encourage, not discourage, the
use of such arrangements to allow Qwest ~O work coo~eratively with i~s
wholesale customers.
DOC 0875l
State Of Minnesota
Department of Commerce
INFORMATION REQUEST
P4 211 DI -01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Respo~se Due:
Ferguson, Sharon
11/27/2001
12/17/2001
REQUEST:
Paragraph 2.2 of the "Qwest/Eschelon Implementation Plan" (Q110339 - Q110353)refers to ,, escalation chart and escalation process set forth in Attachment
2 to the Implementation Plan. Please Identify at least one ICA approved by
the MPUC between Qwest and a CLEC in which Qwest provides the same escalationchart and process to a CLEC. Please provide a copy of the relevant page(s)from the identified ICA.
RESPONSE:
Section 1.3 of the amen~~e~t to :he interconnection agreement executed on
November 15, 2000 and submitted for approval by the Minnesota Commission
provides for the parties to develop an escalation process. It says:
The Parties wish to establish a business-to-business relationship and
have agreed that they will a~te~pt to resolve all differences or issues that
may arise under the Agreemen~s or this ~~endrnent under an escalation process
to be established betwee~ :ne ?ar:ies.
The letter that is the subject o~ this ~equest letter sets forth the specificsassociated with that process.
State Of Mi~~esota
De~a=t~ent of Co8me=ce
INFO~~TION ~EQU~ST
2421/0:;:-0:'-814
Info=mation Requested From:Qwest Co~~o=atio~
Information Requested By:
Date Requested:
Date Response Cue:
fe~guson, . Sha~on
11/27/2001
12117/2001
~EQOEST :
21ease identify . Dana filio (referred to in pa~acr2Dh 2.
of theQwest/Esche!o ~ Implement~ticn Plan " (QII03~9 -QliO353)).
R.ES?ONSE::
Dana Filip is a Senior Vice President a~
Qwes~.
'-..
J-S?:::..
DOC 09051
State Of Minnesota
Department of Commerce
INFORMATION REQUEST
P421/DI-O1-B14
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson, Sharon
11/27 /2001
12/17/2001
REQUEST:
In paragraph 2.3 of the "Qwest/Eschelon Implementation Plan" (Qll0339 -
Q110353), Qwest agrees that Dana Filip and/or her designee will meet with
Rick Smith of Eschelon on a Quarterly basis to review the status of
Eschelon I s service-r~lated issues. Please identify at least one rCA approved
by the MPUC between Qwest and a CLEC in which Qwest agrees to provide a
person of equal or greater title ~o meet with the CLEC on a quarterly basis
to review the status if service-related issues. Please provide a copy of the
relevant page (s) from .the. identified ICA.
RESPONSE:
This provision xefers to an agreement to meet on a regular basis with the
customer to confer about se=vi=e-rela~edissues. It serves the same purposes
and is subj ect to the same analysis as the meetings addressed in Qwest' sResponse to Request 62. T~ere:~=e, ?lease see .Request 62.
DOC 091S1
S~ate Of Minnesota
Departmen t of Comme rce
INfORMATION REQUEST
2421/01-01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson; Sharon
11/27/2001
12/17/2001
REQUEST:
In paragraph 3.1 of the "Qwest/Eschelon Implementation Plan " (Qll0339 -Ql10353), Qwest agrees to calculate local usage charges associated with UNE-P
switching in accordance with the procedures set forth in Attachment 3 to the
Implementation Plan. Please provide a copy of the relevant page (s) from theidentified rCA.
RESPONSE:
The contractual provision that is the subject of this data request is one of
the integrated covenants of an agreement ~he purpose of which was to settle
potential litigation over possible billing discrepancies. Furthermore,Attachment 3 constitutes a formula for implementing a process for measuringswitched access minutes based on ~schelon I s particular trafficcharacteristics. Such a calculation is unique to the business interests 0:Eschelon.
Qwest has not submitted this agreemen~ ~o the MPOC because the
Telecommunications Act does not require Qwest to do so. Section 252 of the
Act, by its terms, requires the submission of agreements to state commissions
for approval only with respect ~o agreements for the provision of
interconnection, services, or network elements pursuant to section 251.
f).C. ~ 252(a) (1); see also S; 252(b) and (e) (1). In contrast, F.ttachment 3~o this agreement address the procedures for calculation of access services,no~ local exchange services. The FCC recognized that parties could
simultaneously negotia~e matters subject to sections 251 and 252 as well as
non-251 or 252 matters, and tha: such an approach to negotiations
consistent with the duty under section 251 to "negotiate in good faith.
Implementation of the Local Competition Provisions in the TelecommunicationsZl.ct of 1996, 11 FCC Rcd 15499, ~ 153 (1996), subsequent history omitted.
Not only is there no statutory requirement that Qwest submit. such settlement
agreements for the MPUC's approval and make them available to other carriers,bu~ imposing such a requirement would be contrary to public policy. Such arequirement would make it difficult or impossible for Qwest to reach
settlements of such matters and would lead to unnecessary litigation before
the federal or state courts or before the MPUC. Qwest is comrni tted to workingcollaboratively with its wholesale carrier customers to satisfy their needs
rather than proceeding to litigation. Qwest suggests that the Minnesota DOC
should encourage, not discourage, the use of such agreements to resolve
disputes amicably and to address the CLEC's specific and unique businessinterests.
DOC 092S:
S~ate Of Minnesota
Department of Commerce
INfORMATION REQUEST
P421/DI-01-8l4
Information Requested From:Qwest Corporation
Informaiion Requested By:.
Date Requested:
Date Response Due:
Ferguson, Sharon
11/27/2001
12/17/2001
REQUEST:
In paragraphs 4.1 through 4.3 of the "Qwest/Eschelon Implementation Plan
(QII0339 - QII0353), Qwest and Eschelon agree to track and report performancemeasures designed to monitor Qwest' s levels of service; hold monthly meetings
to review and discuss the measurements; and develoD a j oint action plan tofacilitate improvements in service. Please identify at least one ICA approved
by the MPUC between Qwest and a CLEC in which Qwest agrees to provide the
same level of performance measu~ement-related services to a CLEC. Please
provide a copy of the relevant page (s) for the identified rCA.
RESPONSE:
Qwest provides ~he same perfo~~ance measurement related services to CLECs in
connection with the perfc~~ance :ndicator definitions it has developed throughthe Regional Oversight Corr:rnittee ~~ocess. Those materials are available byweb and available for anyone.
Qwest is willing to meet with an~ c~stomer regarding performance measu~ements
and to facilitate irnprove:nen::s :n ser:vice. Such willingness is not a term or
condition of interconnection a~d has not been included in an interconnectionagreement amendment. See genera2.1y, Response. to Request 62.
Information Requested From:
Inrormation Requested By:
Date Requested:
Date Response Due:
REQUEST:
State Of Minneso~a
Department of Commerce
INFORMATION REQUEST
P421/DI-01-814
Qwest Corporation
Ferguson, Sharon
11/27/2001
12/17/2001
DOC 094Sl
Please identify at least one ICA approved by the MPUC between Qwes~ a~d a
CLEC in which Qwest agrees to track the same performance measurements thatwere developed as described in paragraph 4.1 of the "Qwest/Eschelon
Implementation Plan " (Q110339 - Q110353). Please provide a copy of the
relevant page(s) from the ide~tified ICA.
RESPONSE:
See Response to Request 92.
Joe 09iS~
S~ate 0: Minnesota
De9artment of Commerce
INFOR~.TION REQUEST
P421/0I-01-814
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Res90nse Due:
Ferguson, Sharon
11/27/2001
12/1712001
REQUEST:
In paragraph 8 of the "Qwest/Eschelon Implementation Plan " (Q110339 -
Q110353), Qwest agrees to coordinate UNE-P conversions with Eschelon. Please
identify at least one ICA approved by the MPUC between Qwest and a" CLEC in
which Qwest agrees to provide the CLEC with the same services for
coordination of UNE-P conversions. Please provide a copy of the relevantpage(s) from the identified rCA.
RESPONSE:
The agreement referenced i~ this data request includes Qwest' s practice to
coordinate UNE-P conversions with CLEC customers. It is a coordinated plan in
acc:::rdance with the specifi-= needs of the CLEC. This p-rocedure is not a termor condition for the provisionin; 0: an interconnection service or a networkelement. "Qwest has not s~bmitted this agreement to the MPUC, because the
Telecommunications Act does ~c: re~~ire Qwest to do so.
Section 252 of the Act, by its :er~s, requires the submission of agreements to
state commissions for aFproval only with respect to agreements for the
provision of interconnection, ser,ices, or network elements pursuant ~osection 251." 47 U.C. ~ 252 (a) (~); see also 5 252 (b) and (e) (1).
Consistently, the FCC recogni=ed that parties could simultaneously negotiate
matters subject to sections 251 and 252 as well as non-251 or 252 matters, and
that such an approach to negotiations is consistent with the duty undersection 251 to "negotiate in good faith.Implementation of the Local
Competition Provisions in the Telecommunications Act of 1996, 11 fCC Rcd
15499, ~ 153 (1996), subsequent ~istory omitted.
Qwest suggests that it is in the public in~erest to allow companies such as
Qwest and Eschelon to coordinate :,\;siness relationships that sui 1: the
particular needs and strUctures c: :~eir respective companies. Any regulatory
obliga~ion to file this agreeme~: and allow carriers who are nO1: party to
Qwest's and Eschelon s unique busi~ess relationship to opt-into provisions
the agreement would be contrary :0 public policy. Such obliga1:ions would
preclude, or at the very least prc.ide an enormous disincentive and barrier
to, the ability of ILECs -and CL~~s alike to reach satisfactory and beneficial
business resolution of matters that are unique to the parties. Qwest, as
shown by this agreement, is" commi:i:ed to working collaboratively with its
wholesale carrier customers to satisfy their ~eeds. Qwest suggests that the
Minnesota DOC should encourage, not discourage, the use of such arrangements
to allow Qwest to work coopera~ively with its wholesale customers.
- ---------
DC':0395:
. State Of Minnesota
DeparLment of Co~~erce
INFORMJI.TION REQUEST
P421/DI-OI-B14
Information Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson, Sharon
11/27/2001
12/17/2001
REQUEST:
In paragraphs 3, 3.a, 3.b, 3.c, and 3.d of the "Confidential Stipulation
Between Small CLECs and U S WEST" (Q110022 - Q110027), Qwest sets forth terms
and conditions pursuant to which lL will permit the small CLEC parties to opt
into the terms of any effective ICAs that were voluntarily negotiated and
entered into by U S WEST and CLECs in any other state in U S WEST's operating
territory. Qwest and the small CLECs further agree to implement these terms in
ICA amendments to be filed on March 17, 2002. Please answer the following with
respect to this agreement:a. Why do the terms of these ?aragraphs not become effective until ~arch
, 2002?b. ~ave any ICAs between Qwes: a~d any of the small CLECs that are ~arties
to this agreement been amended :0 :~=or?orate these pick and choose ter~s todate?c. Id~ntify any rCA approved t~ the MPUC between Qwest and a CLEC in which
Qwest agrees to provide the CLEC wi:h the same pick and choose provisions as
set forth in this agreement. ?lease provide a copy of the relevant page(s)
from the identified ICA.d. Please produce any docume~ts in which Qwest agrees to provide, to a CLEC
operating in Minnesota (other tha~ the small CLECs that. are party to this
agreement), immediately 0= in Lhe :ut~re, ~he same pick and choose ~rovisions
as set forth in this agreemen:.
RESPONSE:
a. The terms of this ?arag=ap~ b~=~~e e:fec:ive on March 17 , 2002, be~ause
that is the date that ~he c~rre~: ~7&: interconnection agreement will expire.
No.
c. Please see Responses to Req~es: 99 (A) and (3). Pursuant to agree~ent of
the small CLECs and Qwest, such a~endmen:s will be effective on March 17
2002, and will be filed with the Minnesota Commission on March 17 , 2002.
Further, this is. a settlemenL agreement arising out of the partie.
adversarial positions rela:i~g ;:0 ;:he Qwest/U S WEST merger. Provisi0ns
agreeing to enter into an inte=~onnection agreement on a future date ~nd to
settle pre-existing li;:iga:ion are not terms or conditions for the provision
of an interconnection service or network element and therefore not subj ect to
sections 251 and 252 of the Telecommunications Act. Qwest has not sub~itted
this agreement to the MPUC, because the Telecommunications Act does nOL
require Qwest to do so.
Sec~ion 252 of the ~c~, by i ~S ~erffiS, req~~res the submissio~ 0: agree~e~:s
~C sta~e commissions for a~~roval only wit~ respec: to agree~e~~s rela~i~g :~
interconnec;:ion, services, or network elemen':s pursuan~;:o section 25.
:;~
C. 5 252(a) (1); see. also 5 252(b) and (e) (1). Consis;:en;:ly, the :CC
recognized that parties could simultaneously negotiate matters subject to
sections 251 and 252 as well as non-251 or 252 matters, and that such an
approach to negotiations is consistent with the duty under sec;:ion 251 tonegotiate in good faith.Implementation of the Local Competi;:ionProvisions in the Telecommunications Act of 1996, 11 FCC Red 15499, ~ 153(1996), subsequent history omitted.
Qwest sugg~sts that any regulatory obligation to file this agreemen;: andallow carriers who are not party to Qwest' s and the small CL2Cs unique
business relationship to opt-into provisions of the agreement would be
contrary to public policy. Such obligations would preclude, or at the very
least provide an enormous disincentive and barrier to, the ability of ILECs
and CLECs alike to reach satisfactory and beneficial. business resolution of
disputes that are unique to the settling parties. further, an inability to
resolve disputes that frequently arise and that are far removed from sections251 and 252 would lead to unnecessary and voluminous litigation before the
federal or state courts or before the M?OC. Qwest, as shown by thisagreement, is committed to working collaboratively with its wholesale carriercustomers to satisfy their needs rather than proceeding t.o litigation. And,CLECs should have the ability to determine whether an expeditious settlementwould be of greater benefi~ co their business interests than a poten~ially
lengthy litigation before a judicial or regulatory tribunal. Qwest suggeststhat the Minnesota DOC sho~ld encourage, not discourage, the use of suchsettlements to allow Qwes;: to resolve such disputes amicably andcooperati vely with its wholesale customers.
None.
DOC 121S1
State Of Minnesota
Depa~tment of Cornrne~ceINcO~~TrON REQUEST
P4211DI-01-814
Info~mation Requested From:Qwest Corporation
Information Requested By:
Date Requested:
Date Response Due:
Ferguson, Sharon
12/03/2001
12/14/2001
REQUEST:
rn paragraph 1. d of the "Confidential Settlement Document" dated Ap:dl 25,2000 between US WEST and McLeodUSA (Q1l0100-QllOl04), US WEST and McLeodUSAagree that all interim rates, except reciprocal compensation rates, will be
treated as finali that any final commission orders will be applied
prospectively and not retroactively, and that neither party will not billeach other for any true-ups between interim prices and those ordered as finalby a commission. Please identify at least one rCA approved by the MPUC
between US WEST /Qwest and a CLEC in which Qwest agrees that all interim
rates, except reciprocal compensation rates, will be treated as final; thatany final commission orders will be applied prospectively and not
retroactively, and that neither party will not bill each other for anytrue-ups between interim prices and those ordered as final by a commission,Please provide a copy of the relevant page (s) from the identified rCA.
RESPONSE:
As stated in the agreement that is the sub ject of this Request, Qwest'predecessor, U S WEST Communications, and McLeod USA agreed to a settlement of
a myriad of billing disputes as well as McLeod's intervention and adversarialposi tion to the Qwest/U S WEST merger in 2000.
This agreement therefore stands as a settlement and business compromise ofpre-existing disputes and of pending litigated actions. Sections 251 and 252do not include within their scope agreements in which a settlement ofpre-existing litigated positions is the primary b argained-fo~ te~m or
" condition. Further,. the provision that is the sub j ect of this Request isintegrated with all of its othe~ terms and conditions, including thewithdrawal of McLeod's opposition 0: the merge~. And, due to the integrated. nature of and all of the agreeme~t' s covenants, the agreement is unique toMcLeod and Qwest.
Additionally, the agreement is unique to McLeod and U S WEST given theirbusiness relationship under the particular circumstances existing at the timeof the agreement. Further, the agreement represents compromises of legitimate
legal and factual disputes and a resolution of the parties' respective
negotiating positions regarding various billing disputes.
Qwest has not sub mi tted this ag=eement to the MPUC, b ecause theTelecommunications Act does not require Qwest to do so. Section 252 of the
Act, by its terms, requires the submission of agreements to state co~~issions
for approval only with respect to agreements relating to "interconnection,services, or network elements pursuant to section 251." 47 U.C. S 252(a) (l)isee also S 252 (b) and (e) (1). Consistently, the FCC recognized that partiescould simultanecusly negotiate matters subject to sections 251 and 252 as well
as non-251 or 252 matters, and that such an approach to negotiations is
consistent with the duty under section 251 to "negotiate in good faith.
Implementation of the Local Competition Provisions in the Teleco~~unicaticns
Act of 1996, 11 FCC Red 15499, ~ 153 (1996), subsequent history omitted.
Qwest suggests that any regulatory obligation to file this agreement and allow
carriers who are not party to Qwest' s and McLeod's unique b usinessrelationship to opt-into provisions of the agreement would be contrary to
public policy. Such obligations would preclude, or at the very least provide
an enormous disincentive and barrier to, the ability of ILECs and CLECs alike
to reach satisfactory and beneficial business resolution of dispu~es that are
unique .to the settling parties. Further, an inability to resolve disp utes thatfrequently arise and that are far removed from sections 251 and 252, such asbilling disputes, would lead to unnecessary and vol~~inous litigation beforethe federal or state courts or before the MPUC.. Qwest, as. shown b y thisagreement, is committed to working collaboratively with its wholesale carrier
customers to satisfy their needs rather than proceeding to litigation. And,CLECs should have the ability to determine whether an expeditious settlement
would be of greater benefit to their business interests than a potentiallylengthy Ii tigat~on before a judicial or regulatory trib unal. Qwest suggests
that the Minnesota DOC should encourage, not discourage, -the use of suchsettlements to allow Qwest to resolve such disputes amicably and cooperatively
wi th its wholesale customers.
Without waiving its ob jection~, Qwest states the parties filed the first
amendment to their ICA on June 30, 2000 and the MPUC approved the amendment on
September 13, 2000.
BEFORE THE Mlj\NESOT A PCBLIC UTILITIES COf\;IMISSION
Gregory Scott
Edward A. Gafvl=Y
Jrle! Jacub!--
Marshall JohnsclIl
eRo) KoppendraYt r
Chair
C()mmis~ ioner
Commis.,mner
Cl.1mmis~lI)ner
(\)l1lmi~:-.jl)ner
In the Matter of the Merger (If' th,~ Parent
Corporations of Qv..'est Communications
Corporation . LCI International Tdecom
Corp., USLD Communications. t nc , PhC1emx
Network , Inc, and US WEST
Communications, 1m;:';'
ISSUE DATE: April 28. 2000
DOCKET NO, P 30()Q , 3052 , 5096,421.
301 7/PA-C)9-J 192
.',,
ORDER AFTER RECONSIDERATION
\VlTHDRA WING REFERRAL FOR
CONTESTED CASE PROCEEDTNGS
ROCEDURAL HISTORY
March 7, 2000, (he CorIul1isSIOJl Issued a Norit:e and Order for Hearing referring (his merger
petitit")n to the Office of Adminislracive Hearings f(lf contested case proceedings.
The parrie~, at (hat lime were (he petilionns (t' S WEST!Qwest). the Minnesota Department (\f
Commerce (the Denarrment).rhe Re:-;idcntial ;-lQd Small Busint:ss l"tilitjes Division of rh~ Office
or.the AtrPmey General (RUn OAG), th..:. Northwestern BeiliU S WEST Retiree Assi)(;iation
(the Retiree Asso(;iatinn), AT&T Communications ofrhe Mid\vest (AT&T), Rhythm" links,hK" CnvCiJ Clmmunicariom C(Hnran:," (Covad). Cady Tdemanagemenl. 111(- (Cad\;
McLenclli"iA Telecoll1l11unic;:!Jon Sc-I'"ic~. file, (Melt.: J(IL and tCJlu1:lIpeli:I-e !t)L ,1 ,:I);J(i~l:l:arriers arnearing ,oinUy as SHull ('LF':'
On March 17. 200t) , tf S WEST Q""est filed a rec!uest for recunsideraljon, ilrguing (lrat theissues in rhe case could be re5l)lvcd wi(hl1ut evidentiary hearings. Reconsideration \\'\S iJPIwsetihy rhe Deparlmcnt rhe Sma\! CI.EC,. Ih~ Retiree Ass\)ciation, McLec'(\; (\:\'ad. AT,l , ,till! (hi.'
RUD-OA(
On March 22, April 5, and J\prii 11. :201)0, the Administrative Law Judge js~,ued scheduling and
rrehearin!! orders :iening filil1g ueadline~, hearing date~-. and disccvery prlKeJures.
Bemieen March 2. 2000 and April 25. 200(), U S WEST!Qwest reached settlement agreements
with alJ parties tl) the case except tile Retiree As~ociation. The Department, rhe- RUD-OAG. and
lhepetitiooers reached a comprehensive joint settlement agreement.
On April 25, 2000. U S WESl /Q\vest"s petition for reconsideration caffit~ before theCommission, At thar time the 'JI1I~ party sliJl opposing reconsideration was the Retirel'
A~.sociation The other parties urged the Commission to reconsider and rever'it' its de(:J~,illn:;ending the .:ase to the Office d A,jministntive Hearings for evidemiar~ pnKeedings,
J'INDI\GS AND CONCLUSIONS
The Commission finds that there b no Gun en( need for e',juentiary hearings on the issue
outJined in tile March 7 Notice am! Order "or Hearing.
As the record 01 this case has lIevlloped , ,!IllS intervening telecl)mmunicatilJTl~ carrier, 11;;1.'
found common t!rouJld with U S V.ESTiQ'vesc. They ha\e stipulated to the facts rele\;mt to
thl~jr claims and havt-neg:otiateJ olltcomes acceptablL: both to themselves and
U S WESTiQ\Vl'SI. One of the ma in purpl'ses l'f the evicentiary hearings - to probe rl1t':';L"
panics' claims ti1at the merger ll1if~hl impa!r thelr anility to compete - is therefore gone
Even more ~ignincaIltly, the tWI! puhlic agcncie~; charged with representing the public imerest
and consumers ' interests in utility matter1' t1ave negobated a comprehensive setllement with
U S WEST/Qwl:st. The agem:ies ;tate that this settlement adequately prote(:t~ and affirmatively"
promotes th,;: puhlic ITIt~rest. CI)I1SI,mers . interesl:s , and the interests of the cl)lllpetitive l1ark~!.
These agenl"ie~, (00, have stiplilatld (with US WEST/Qwest) tlJ the facls relev:lI1\ (0 '!,,~ir
chirns.
Finally, at hearing the Retiree Association clarified that its claims, although Imked with the
proposed merger in '-\ practical sense , d(l n,Jt depend upon the merger for their validity I)r
enforceabililY. ShoL.ld Commissil-n jurisdiction over the.;e claims be eslablished , it is possible
that an indepemlem .nquiry WCiuld be a bener procedural vehicle for resolving them thail this
docker. That i's,;ue 'v ill he examined after the lIo.a1 comment period referred (0 below
Fe))" all thes'~: reasom. the Conlmis-;il 1n rec msiders and n:scinds its March 7 . 2000 OI'(I:r
referring this case fe,l' L:Ontested C,ISt: proc.:edings. Bdole deciding the lIlefil~; df this JlH:rgl;r
application. the Commission will,oiicil. \-y serarate noL Ct:, a finai rouml of '~ommel1l:-, fn,lTIl
parties and interested persons,
The Commission will ~~) orueJ .
QRDER
The Commission herehy reconsIder' its Order of March 7 , 2000, witlldr~lws its rdc:rral
of this case to the Office of Admini~,trari\'e Hearings for contested case: rroceeding!-. illlJ
rescinds its No)tice and ()rdcr fer f-karin~.
By separate nt)tice the ( omJ11is~i(lIl will establish ,\ final comment peni!(\ on the I11cril~ or
the mergt:r application.
This Order sf,all Qecl1ITlG efi'ective j,nmecJiatcly
BY ORt)):R OF THE COMtvllSSION
--.....,' ".. / . ,:")
h. ../i' ,.,z,.J/4- ' I.. II r.
,- , '
un'"lV, Haar
Executive Secretary
(~ E A L)
This document can be made availahle m alternative formats (i.e., large prim IJr audi\) tape) by
::al1ing [phone] (voice), (6511297-1200 (TTY). or 1-800-627-3529 iTTY relav service).