20040210Level 3 Communications.pdf

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In the Matter of the Petition for Approval
of an Amendment to an Interconnection
Agreement Between Verizon Northwest Inc.
f/kJa GTE Northwest Incorporated and
respectively MCI WORLDCOM
Communications, Inc. and MCImetro Access
Transmission Services, LLC
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dT\L \TIES COi'H'iISSION
VZN-03-06 (MCI WORLDCOM)
VZN-03-07 (MClmetro Access)
COMMENTS OF LEVEL 3 COMMUNICATIONS. LLC
Level 3 Communications, LLC ("Level(3)"), by its undersigned counsel, respectfully
submits the following comments in response to the Petitions for Approval of an Amendment to
the Interconnection Agreements filed with the Idaho Public Utilities Commission (the
Commission ) on January 26 , 2004 by Verizon Northwest, Inc. f/kJa GTE Northwest
Incorporated ("Verizon ) and respectively, MCI WORLDCOM Communications Inc.
Worldcom ) and MCImetro Access Transmissions, LLC ("MCImetro ) (collectively "MCI"). I
Introduction and Statement of Interest
The issue before the Commission is whether to approve or reject the proposed
amendment to the Interconnection Agreement submitted by V erizon and MCI, under the
standards of 47 USC ~ 252( e)( 1) and (2). Unlike most interconnection agreements submitted to
this Commission for approval, the instant amendment is not a stand-alone document, but is only
part of a broader settlement of disputes between the respective parent companies of MCI and
Verizon, in the context of the MCI bankruptcy reorganization.
I The two amendments to the interconnection agreements between Verizon and respectively,
Worldcom and MClmetro are substantively identical. The amendments were filed in separate dockets
identified in the caption above.
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On or about December 19, 2003, MCr asked the Bankruptcy Court overseeing its
reorganization to approve a comprehensive settlement of intercarrier compensation disputes
between itself and Verizon.2 According to that filing, MCI and Verizon settled a series of long-
standing reciprocal compensation disputes covering at least twelve different jurisdictions.
Among the elements of the settlement, Verizon agreed to make a cash payment to MCr of$169
million; both parties dismissed all outstanding litigation relating to reciprocal compensation
issues; and both parties agreed to file interconnection agreement amendments (including the one
pending before this Commission) implementing "a three-year rate regime between MCr and
Verizon for local traffic, including VNXX, UNE-, and rSP-bound traffic(.)"3 The Bankruptcy
Court approved the settlement agreement on December 29, 2003, and the parties subsequently
tiled the agreed-upon amendments with this Commission and the regulatory agencies in each of
the other jurisdictions identified in Exhibit A to the amendment.
Since the amendment was negotiated voluntarily by the two applicants, the applicable
standard is set forth in 9 252(e)(2)(A), which provides that a State commission
may only reject-
(A) an agreement (or any portion thereof) adopted by negotiation
under subsection (a) of this section if it finds that-
(i) the agreement (or portion thereof) discriminates against
a telecommunications carrier not a party to the agreement;
(ii) the implementation of such agreement or portion is not
consistent with the public interest, convenience, and
necessity(.
In re WorldCom, Inc.Chapter II Case No. 02-13533(AJG), Motion for Entry of an Order
Pursuant to Rule 9019 of the Federal Rules of Bankruptcy Procedure Seeking Approval of a Settlement
Agreement with Verizon Communications, Inc. (Bankr.S.Y. filed Dec. 19 2003).
Jd. at 5.
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For the reasons discussed in the following sections, Level(3) does not suggest that the
amendment should be rejected pursuant to this statutory standard. Because the amendment
represents a private settlement of disputed issues between two parties, it may be consistent with
the public interest even though, as will be shown, its terms are quite different from those that
would be appropriate in an arbitrated agreement implementing the requirements of Federal law.
however, the Commission finds that the amendment can be approved, it nonetheless should
make clear that its approval is limited to the unique circumstances relating to the negotiated
settlement between Verizon and MCI, and does not create a precedent for any other carriers.
Level(3) is a competitive telecommunications carrier, authorized by this Commission to
provide local exchange and interexchange communications services within North Carolina, and
is a party to its own Interconnection Agreement with Verizon. Level(3) therefore has an interest
in assuring that the terms of V erizon' s agreements with other carriers are not discriminatory, and
are in compliance with applicable legal requirements, including the public interest standard of
9 252( e )(2)(A)(ii).
Certain Terms of the Proposed Amendment arc Inconsistent with ReQuirements of
Federal Law
The proposed amendment would significantly change the arrangements for inter-carrier
compensation between Verizon and MC!. As Level(3) will show, several of the amended terms
would be inconsistent with the regulations adopted by the FCC to implement 47 USC 9
25 I (b)(5) and other statutory provisions relevant to the amendment. Level(3) recognizes that 47
USC ~ 252(a)(1) specifically permits carriers to negotiate voluntary interconnection agreements
without regard to the standards set forth in subsections (b) and (c) of section 251." Thus, the
fact that the amendment is inconsistent with ~ 251 standards is not per se grounds for rejecting it.
Nonetheless, the Commission must reject the amendment if it is not "consistent with the public
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interest, convenience, and necessity," ~ 252(e)(2)(A)(ii), and therefore may consider whether the
adoption of non-conforming compensation terms violates that standard.
First, the amendment is inconsistent with the FCC's rules governing compensation for
delivery of dial-up Internet traffic, by providing for a "blended" rate of compensation that may
allow MCI to collect a higher rate of compensation than other carriers for that traffic. The actual
computation of the blended rate relies upon data (not available to the Commission or any third
party) about the traffic exchanged between MCI and Verizon on a nationwide basis in December
2003, so that the actual blended rate is unknown, but it may be as high as $.00165 per minute
until June 14 , 2004, and as high as $.00120 during the following year. (Amendment at 2 and
Exhibit B.) This blended rate will apply to both local voice traf1jc and dial-up rnternet traffic
among other things. Under the FCC's rules, however, the compensation rate for dial-up Internet
traffic has been capped at $.0007 per minute since June 2003.4 The amendment therefore
potentially permits MCI to collect a higher rate of compensation on dial-up Internet traffic than
is available to other carriers under the FCC rules.
Second the amendment provides that all Voice Over Internet Protocol ("VOIP") traffic
will be defined as "Telecommunications Services" for purposes of the amendment, and treated as
telecommunications traffic for inter-carrier compensation (including access charge) purposes.
Implementation of the Local Competition Provisions in the Telecommunications Act of 1996;
lntercarrier Compensation for ISP-Bound Traffic Order on Remand and Report and Order, 16 FCC Rcd
9151 (2001) ("IS? Order on Remand"
),
remanded, WorldCom v. FCC 288 FJd 429 (D.C. Cir. 2002)
("WoridCom
5 When the FCC adopted its rate cap on dial-up Internet traffic, it specifically held that this traffic
was outside the scope of 9 251 (b)(5), and therefore that compensation for this traffic could not be the
subject of interconnection agreements, negotiated or otherwise. ISP Order on Remand para. 82. On
appeal, however, the U.S. Court of Appeals for the District of Columbia Circuit specifically repudiated
the FCC's legal theory excluding dial-up Internet traffic ITom the scope of 9 251 (b)(5), but left the
compensation rules in place during remand proceedings. WorldCom. It is therefore unclear, in light of
the remand, whether parties even have the legal right to negotiate agreements that deviate from the rate
levels prescribed by the fCc.
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(Amendment at 6-, 12.It specifically calls for the billing of access charges on VOIP traffic
that originates or terminates outside the applicable Verizon local calling area.(ld. at 7.
Although the FCC admittedly has left the regulatory status of VOIP traffic quite unclear, it has
stated expressly that at least some forms of VOIP do not appear to be telecommunications
services.6 The definition of this traffic as "telecommunications" for purposes of the amendment
therefore contradicts another provision of the amendment stating that "Telecommunications
Services" has the same meaning in the amendment as in the Telecom Act. (Amendment at 10.
This contradiction renders the amendment ambiguous, and potentially unenforceable. Further, if
an entity that transmits VOIP is not providing telecommunications service, then it is not a
carrier" and is not subject to the payment of access charges under the FCC's interpretation of its
access charge rules even if the VOIP traffic has an interstate origin or destination.The
amendment, therefore, would appear to allow Verizon or MCI to collect switched access charges
on some traffic that is not subject to those charges under FCC rules.
Further, the issue of classification ofVOIP services and the application of access charges
is currently pending before the FCC.s Even if the Commission finds it appropriate for MCI and
Verizon to agree on how VOIP traffic will be treated as between these two parties in advance of
an FCC ruling, the Commission should declare expressly that this private agreement will not
serve as a precedent to bind any other party.
Federal-State Joint Board on Universal Service CC Docket No. 96-, Report to Congress, FCC
98-, at 44-45 (reI. April 10, 1998).
MTS and WArs Market Structure 97 FCC 2d 682, 711-22 (1983), ajf'd in principal part and
remanded in part, National Ass 'n of Regulatory Uti!. Comm rs v. FCC, 737 F.2d 1095 (D.C. Cir. 1984);
Amendments of Part 69 of the Commission s Rules Relating to Enhanced Service Providers CC Docket
87-215 3 FCC Rcd. 2631 , 2633 (1988); Access Charge R~form First Report and Order, 12 FCC Rcd.
15982, at paras. 342-344 (1997), ajf'd, Southwestern Bell Tel. Co. v. FCC 153 F.3d 523 (8th Cir. 1998).
Pleading Cycle Established For Petition Of Level For Forbearance From Assessment Of
Access Charges On Voice-Embedded IP Communications WC Docket No. 03-266, Public Notice, DA
04-1 (Wireline Compo Bur. released Jan. 2 2004).
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Other Factors Affectine: Approval or Rejection of the Amendment
As noted above, the mere fact that the amendment is inconsistent with provisions of the
federal Telecommunications Act is not per se grounds for rejection. The Commission may reject
the amendment only if it discriminates against third parties, or if it is contrary to the public
interest.
Because Level(3) is not PrIvy to all the facts and circumstances surrounding the
amendment, it is not in a position to suggest that approval would be consistent with the public
interest. As a general matter, settlement of lawsuits is in the public interest, because it conserves
both judicial and private resources.9 The Commission must determine whether the benefits
arising from settlement of the litigation between Verizon and MCI outweigh any potential harms
resulting from the parties ' deviation from the requirements of federal law in their agreement.
What is clear, though, is that the amended agreement between Verizon and MCI arises
out of circumstances unique to those parties , and cannot be a model for interconnection
arrangements for any other carrier. If the Commission does approve the amendment, it should
make clear that its approval is limited to those unique circumstances, and is not a precedent for
any future interconnection arbitration that it may conduct. As a general matter, Commission
approval of a negotiated interconnection agreement is not a finding that the terms of the
agreement comply with federal law (since, as noted above, the Telecom Act specifically permits
parties to deviate from Section 251 requirements in negotiated agreements). In this particular
case, that is even more strongly true, because the instant amendment is so closely tied to the
settlement of litigation in this and other jurisdictions, and because the amendment's terms so
clearly diverge from the provisions of Section 251.
See, e.g., Bank of America Nat. Trust and Say. Ass v. Us.23 F.3d 380, 383 (Fed. Cir. 1994).
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Conclusion
F or the foregoing reasons, if the Commission finds it appropriate to approve the
amendment submitted by Verizon and MCr, it should expressly state that the terms negotiated by
these two parties are not necessarily in compliance with Section 25l and cannot serve as a
precedent for any future arbitration conducted under that provision of federal law.
Respectfully submitted
Richard E. Thayer
Director-Interconnection Policy
Level 3 Communications, LLC
1025 Eldorado Blvd.
Broomfield, CO 80021
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Russell M. Blau
Tamar E. Finn
Swidler Berlin Shereff Friedman, LLP
3000 K Street, N., Suite 300
Washington, D.C. 20007
[phone]
Fax [phone]
Attorneys for Level 3 Communications, LLC
February 5, 2004
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