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					                                          PUC DOCKET NO. 21982

PROCEEDING TO EXAMINE                                     §
RECIPROCAL COMPENSATION                                   §         PUBLIC UTILITY COMMISSION
PURSUANT TO SECTION 252 OF THE                            §
FEDERAL TELECOMMUNICATIONS                                §                         OF TEXAS
ACT OF 1996                                               §


        ORDER APPROVING REVISED ARBITRATION AWARD, AS MODIFIED,
                AND APPROVING IMPLEMENTING LANGUAGE


         This Order approves the Revised Arbitration Award 1 (Revised Award) issued in this
proceeding on August 31, 2000, and incorporates it herein for all purposes. Further, this Order
approves the implementing language approved by the Commission at its October 4, 2000 open
meeting. The Revised Award adopted permanent rates for inter-carrier compensation relating to
the transport and termination of local traffic between Southwestern Bell Telephone Company
(SWBT) and certain competitive local exchange carriers (CLECs). The Commission determined
that a call to an Internet service provider (ISP) is subject to reciprocal compensation rates to the
extent that such a call originates and terminates to end-users within the same local calling area.


         The Commission finds the Revised Award, along with the implementing language, is
consistent with the requirements of § 252 of the federal Telecommunications Act of 1996
(FTA). 2 ` Accordingly, SWBT and any CLEC that has requested arbitration of the issue of
inter-carrier compensation in this proceeding3 pursuant to § 252 of the FTA shall incorporate the
rates approved in the Revised Award in any interconnection agreement which is subject to the
outcome of this proceeding. If the CLEC has formally notified the Commission of its election
of either the first or third option regarding reciprocal compensation for local traffic in




         1
           The Commission issued its initial Arbitration Award on July 13, 2000. The Revised Arbitration
Award supersedes the initial Arbitration Award.
         2
            Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (codified as amended in scattered
sections of 15 and 47 U.S.C.) (FTA).
         3
            Order No. 3 required CLECs to file petitions seeking arbitration of the issue of inter-carrier compensation
in this proceeding by February 3, 2000. Order No. 3 at 1 (Jan. 25, 2000).
ORDER APPROVING AWARD                      DOCKET NO. 21982                                      Page 2 of 11


Attachment 12 of the Texas 271 Agreement (T2A), 4 then a true-up of the applicable
bill-and-keep period shall be performed using the inter-carrier rates approved in the Revised
Award.5



                                               I.       Background

         On January 13, 2000, the Commission initiated this proceeding for the purpose of
consolidating requests to arbitrate the issue of reciprocal compensation for the transport and
termination of local traffic. This proceeding addressed only this single issue; other issues for
which arbitration was requested by the carriers participating in this docket will be addressed in
separate arbitration proceedings relating to specific interconnection agreements.


         The Commission limited participation in this docket to only those parties arbitrating the
issue of reciprocal compensation in this proceeding, i.e., SWBT and interconnecting CLECs, 6
consistent with P.U.C. SUBST. R. 22.305(e).7


         As provided in P.U.C. PROC. R. 22.322, the Commission sat en banc as Arbitrators in this
proceeding. The parties in this proceeding were: Adelphia Business Solutions of Texas, LLP

         4
             Investigation of Southwestern Bell Telephone Company’s Entry into the Texas InterLATA
Telecommunications Market, Project No. 16251, Order No. 55 (Oct. 13, 1999). The T2A is a standardized
interconnection agreement available from SWBT through October 13, 2003. See Project No. 16251, Order No. 55,
Attachment 12 at ¶ 4.1; Docket No. 16251, SWBT Letter Agreeing to Extend T2A (July 7, 2000). Attachment 12 to
the T2A addresses the issue of reciprocal compensation, providing an electing CLEC with three options from which
to choose. Under the first option, after January 22, 2000, SWBT and the electing CLEC shall operate under a
bill-and-keep arrangement for all wireline traffic, including ISP-bound traffic, during periods of negotiation and/or
arbitration. The second option permits the parties to operate under a bill-and-keep arrangement for the duration of
their agreement. Under the third option, commencing on the date that the CLEC opts into the T2A, SWBT and the
electing CLEC seeking to negotiate and/or arbitrate the issue of compensation shall operate under a bill-and-keep
arrangement for all wireline traffic, including ISP-bound traffic, during periods of negotiation and/or arbitration. The
bill-and-keep arrangements under both the first and third options are subject to true-up. The Commission concludes
that the true-up period under the first and third options ends upon the Commission's approval of an interconnection
agreement incorporating the inter-carrier compensation rates approved in this Award.
         5
             After a CLEC files notification of its intent to opt into the T2A, in whole or in part, the Commission
issues a letter of acknowledgement.
         6
            See generally Order No. 3 (Jan. 25, 2000). GTE Southwest, Inc. and other ILECs did not seek to
expand the scope of this proceeding to arbitrate reciprocal compensation issues for purposes of their interconnection
agreements.
         7
             This rule allows only the parties to the interconnection agreement to participate as parties in the
arbitration proceeding.
ORDER APPROVING AWARD                        DOCKET NO. 21982                                  Page 3 of 11


(Adelphia), Allegiance Telecom of Texas, Inc. (Allegiance), AT&T Communications of the
Southwest, Inc. (AT&T), CCTX, Inc. D/B/A Connect! (Connect), the CLEC Coalition 8 (the
Coalition), e.spire Communications, Inc. (e.spire), Focal Communications Corp. (Focal), Level 3
Communications (Level 3), MCI Worldcom Communications, Inc. (WCOM), Southwestern Bell
Telephone Company (SWBT), and Taylor Communications Group, Inc. (Taylor Comm.).9



                                     II.      Motions for Reconsideration


         On August 17, 2000, SWBT, WCOM, AT&T et al., Taylor Comm. and the CLEC
Coalition filed Motions for Reconsideration of the Arbitration Award.10 On August 24, 2000,
the Commission considered the parties’ motions and on August 31, 2000, the Commission issued
its Revised Award clarifying certain issues and ordering the parties to file implementing
language consistent with the Revised Award. The motions for reconsideration were denied for
want of merit unless the relief requested was expressly granted in the Revised Award.


                              III.         Approval of Implementing Language


         Following the issuance of the Revised Award, the parties requested the opportunity to
submit implementing language consistent with the Revised Award. In an effort to allow the
Commission to review all options together, the parties submitted alternative language to the
Commission in a decision-point list (DPL) format, specifying the rationale for its alternative

         8
           The CLEC Coalition includes: Time Warner Telecom, L.P. (TW), KMC Telecom, Inc. (KMC), GST
Telecom, Inc. (GST), NEXTLINK Texas, Inc. (NEXTLINK), Intermedia Communications, Inc. (Intermedia), ICG
Choicecom, L.P. (ICG), Teligent, Inc. (Teligent), Winstar Wireless of Texas, Inc. (Winstar), and Reliant Energy
(Reliant).
         9
             With the exception of WCOM and Taylor Comm., the CLECs participating in this docket filed requests
to arbitrate the reciprocal compensation issue in this proceeding. WCOM and Taylor Comm. became parties to this
proceeding by virtue of the severance of the issue of reciprocal compensation from other arbitration proceedings and
the consolidation of such severed issue into this proceeding. Petition of Southwestern Bell Telephone Company for
Arbitration with MCI Worldcom Communications, Inc., Pursuant to Section 252(b)(1) of the Federal
Telecommunications Act of 1996, Docket No. 21791, Order No. 6 (Jan. 26, 2000); Petition of Taylor
Communications Group, Inc. for Arbitration with Southwestern Bell Telephone Company Pursuant to Section
252(b)(1) of the Federal Telecommunications Act of 1996, Docket No. 21754, Order No. 7 (Jan. 24, 2000).
         10
           Taylor Comm. filed its motion for reconsideration on August 1, 2000, but then filed a letter on
August 2, 2000 requesting that its motion be considered as filed on August 17, as well, following negotiations of the
parties.
ORDER APPROVING AWARD                    DOCKET NO. 21982                          Page 4 of 11


language in the DPL. On September 21, 2000, the parties filed a Revised Attachment 12 to the
T2A, a Joint DPL identifying disputed issues between SWBT and all CLECs except Taylor
Comm., and a separate DPL identifying disputed issues between SWBT and Taylor Comm. 11
The disputed language generally fell within seven broad categories. The Commission considered
and decided these issues at the October 4, 2000, resulting in this Order.


                                   A. Classification as “Local Traffic”

       Both the CLEC Coalition and Taylor Comm. proposed to insert language taken from the
Revised Award12 into the parties’ interconnection agreements.13 The CLEC Coalition and Taylor
Comm. asserted that this language is necessary to make certain there are no disputes that calls to
ISPs are considered calls to end-users and that calls to ISPs terminate at the ISP for reciprocal
compensation purposes. 14 Both the CLEC Coalition and Taylor Comm. argued that such
language is necessary to prevent any claims of ambiguity by parties attempting to exclude
ISP-bound traffic from reciprocal compensation. On the other hand, SWBT pointed out that the
Revised Award already clarifies the issue of what type of traffic constitutes local traffic. The
Commission agrees with SWBT’s observation and declines to require the inclusion of the
language proposed by CLEC Coalition and Taylor Comm. into the parties’ interconnection
agreements.
                              B.    Definition of Foreign Exchange Traffic

       Because there is insufficient evidence regarding any industry-standard definition of
foreign exchange (FX) traffic, the Commission does not find it appropriate at this time to require
the parties to insert specific definitions of FX traffic into their interconnection agreements, other
than the general wording set forth in the Revised Award. As modifications to Attachment 12 of
the T2A, SWBT proposed §§ 1.3 and 1.4 to define the term “FX” and proposed to utilize
language contained within the Revised Award with one exception—SWBT proposed clarifying
language to address situations where an NPA-NXX rate center is different than the local


       11
          It should be noted that the foundation document for the CLECs is the T2A, Attachment 12,
Compensation, while the Taylor Comm. language is pulled from the SBC-13 State Agreement.
       12
            See generally, Revised Award at 17.
       13
          See CLEC Coalition DPL Issue No. 1 (amending T2A Att. 12 § 1.2) (Sep. 21, 2000); Taylor Comm.
DPL Issue No. 2 (amending SBC-13State § 2.2) (Sep. 21, 2000).
ORDER APPROVING AWARD                      DOCKET NO. 21982                                Page 5 of 11


exchange. 15 In response, the CLEC Coalition recommended deletion of § 1.3 in its entirety,
arguing that SWBT’s broad definition has no basis in the record, and varies, in fact, from the
definition SWBT proposed in its own testimony, expanding the term “local exchange area” by
adding the words “or rate center.” CLEC Coalition further claimed that there is no industry
standard definition of the term “FX-type traffic” and observed that the compensation
arrangements for this “FX-type traffic” are to be decided outside this docket, either in
negotiations or in a subsequent proceeding between the parties. In view of these arguments, the
Commission finds that proposed § 1.3 should be deleted and that proposed § 1.4 should be
revised to ensure consistency with the discussion in the Revised Award,16 as follows:


        § 1.4 To the extent that FX-type and 8YY traffic do not originate from and terminate to
        an end user within a mandatory local calling scope, they are not eligible for reciprocal
        compensation. This does not preclude CLECs from establishing their own local calling
        areas or prices for purposes of retail telephone service offerings.



        Similarly, as to Taylor Comm.’s SBC-13State Agreement, absent agreement of the
parties, the Commission finds that the record does not support a definitive classification of FX
traffic at this time. Taylor Comm. strongly opposed the introduction of the term FX traffic as a
separate category of traffic, pointing to at least 11 different definitions currently in the
                            17
SWBT-Texas tariffs.              Taylor Comm. also recommended the inclusion of a sentence
acknowledging that the setting of rates for FX-type traffic will remain the subject of further
negotiations. 18 The Commission does not require the inclusion of this proposed sentence in
§ 2.7, as it is already clear from the Revised Award that the parties will negotiate or arbitrate
rates for FX-type traffic. Moreover, the proper classification of FX-traffic is more appropriately
resolved after the parties have developed these issues more fully through negotiations and/or
arbitrations. Nonetheless, although the parties may not agree on a specific definition of FX
traffic at this time, the record

        14
             Id.
        15
             See CLEC Coalition DPL Issue No. 2 (adding new T2A Att. 12 §§ 1.3 and 1.4) (Sep. 21, 2000).
        16
             See Revised Award at 18, n. 59.
        17
             See Taylor Comm. DPL Issue No. 1 (amending SBC-13State §§ 2.1 and 6.4.2) (Sep. 21, 2000).
        18
             See Taylor Comm. DPL Issue No. 3 (amending SBC-13State §§ 2.7) (Sep. 21, 2000).
ORDER APPROVING AWARD                       DOCKET NO. 21982                                      Page 6 of 11


does support the concept of FX traffic as a separate, if undefined, category. Therefore, until the
parties comprehensively address the nature of FX traffic, the Commission supports retaining FX
traffic as a separately identified category in §§ 2.1 and 6.4.2 of Taylor Comm.’s interconnection
agreement.


                               C. Segregation and Tracking of FX Traffic


         Inasmuch as the parties cannot agree currently on the proper classification of FX-type
traffic, the Commission considers it reasonable to require the parties, within 90 days of the
execution of the amended interconnection agreement, to negotiate to develop a method for
identifying such traffic. SWBT proposed a method 19 for segregating and tracking FX traffic
that the CLECs considered complicated and impractical for the CLECs. Taylor preferred to
develop a method of identification in a separate proceeding. Because FX-type traffic is not
subject to reciprocal compensation, the parties will need to develop a method of segregating and
tracking FX traffic.        This does not preclude the parties from later initiating an arbitration
proceeding, if necessary. However, the Commission determines that the parties are required to
amend their interconnection agreements20 to reflect an agreement to begin negotiations within 90
days on a method of segregating and tracking FX traffic, as follows:


         Within ninety (90) calendar days of the execution of this agreement, unless the parties
         agree to an extension, both parties shall negotiate to establish a mutually agreed upon
         method of segregating and tracking FX traffic.

                                      D. Calling Party Number Billing

       Consistent with the Commission’s decision21 that terminating carriers shall be required to
directly bill third parties that originate calls and send traffic over SWBT’s network, the


         19
          See CLEC Coalition DPL Issue No. 3 (proposing new T2A Att. 12 §§ 1.4.1) (Sep. 21, 2000); see also
Taylor Comm. DPL Issue No. 4 (proposing new SBC-13State § 2.7.1) (Sep. 21, 2000).
         20
         The approved language shall be added in § 1.4.1 of the CLECs’ T2A, Att. 12, and in § 2.7.1 of Taylor
Comm.’s SBC-13State agreement.
         21
             See Revised Arbitration Award at 64: “The Commission notes SWBT’s concerns regarding transiting
traffic and concludes that terminating carriers shall be required to directly bill third parties that originate calls and
send traffic over SWBT’s network.”
ORDER APPROVING AWARD                     DOCKET NO. 21982                                  Page 7 of 11


Commission concludes that it is appropriate to clarify this issue in parties’ agreements. SWBT
recommended certain revisions22 to conform with this conclusion and to clarify that IntraLATA
toll charges upon traffic containing less than 90% Calling Party Number (CPN) would not apply
in a transiting situation in order to avoid future billing disputes. The CLECs asserted that this
issue was not addressed in the Revised Award and that the Revised Award does not suggest that
the T2A language should be changed to implement the Commission’s decision.                                   The
Commission disagrees with this assessment. In order to give meaning to the Commission’s
decision, as reflected in the Revised Award, the CLECs 23 shall revise their agreements consistent
with SWBT’s recommendation, as follows:

       § 2.2: Each party will include in the information transmitted to the other for each call
       originated by one party being terminated on the other’s network (where available), the
       originating Calling Party Number (CPN).

       §§ 10.2 and 11.7: For traffic which is originated by SWBT or CLEC and terminated on
       the other Party’s network, if the percentage of calls passed with CPN is greater than ninety
       percent (90%), all calls exchanged without CPN information will be billed as either Local
       Traffic or IntraLATA Toll Traffic in direct proportion to the MOUs of calls exchanged
       with CPN information. If the percentage of calls passed with CPN is less than 90%, all
       calls passed without CPN will be billed as IntraLATA Toll Traffic.


                                      E. Transit Third Party Billing


        On a related note, the Commission determines that clarifying language shall be added to
the parties’ agreements to further limit the possibility of future billing disputes related to carriers
that may bill the transiting provider inappropriately. SWBT recommended the inclusion of
certain language to address this issue.24 However, CLECs objected to SWBT’s wording and
recommended that language taken directly from the Revised Award be substituted for a portion
of SWBT’s proposal.25 The Commission finds the CLECs’ proposal reasonable and consistent


        22
             See CLEC Coalition DPL Issue No. 4 (amending T2A Att. 12 §§ 2.2, 10.2 and 11.7) (Sep. 21, 2000).
        23
             CLECs raised this issue in the context of §§ 2.2, 10.2 and 11.7 of the T2A, Att. 12; Taylor Comm. did
not raise this issue in the context of the SBC-13State agreement.
        24
           See CLEC Coalition DPL Issue No. 5 (proposing new T2A Att. 12 § 6.2) (Sep. 21, 2000); see also
Taylor Comm. DPL Issue Nos. 5 and 7 (proposing new SBC-13State § 3.4, and amending SBC-13State § 8.3) (Sep.
21, 2000).
        25
              Id.
ORDER APPROVING AWARD                      DOCKET NO. 21982                            Page 8 of 11


with the Revised Award. Further, in an effort to ensure a broad applicability of the subject
language, the Commission holds that specific references to SWBT’s network shall be replaced
with broader wording applicable to any transiting carrier’s network, as follows:


        Where the Transit Provider is sent CPN by the originating carrier, the Transit Provider
        will send CPN to the terminating Party. Terminating carriers shall be required to
        directly bill third parties that originate calls and send traffic over Transiting Carrier’s
        network.


                                     F. Optional EAS Switching Rate

        Based upon the record, the Commission finds it inappropriate at this time to recalculate
the optional EAS switching rate using the bifurcated end-office switching rate, as recommended
by SWBT. SWBT suggested that, because the Revised Award adopted a bifurcated end-office
switching rate, which rate is a component of the optional EAS transport and termination rate, the
optional EAS rate should be recalculated to reflect this change. 26 The CLECs argued, on the
other hand, that the choice to bifurcate the end-office switching rate to be used for local
reciprocal compensation does not necessarily apply to end-office switching rates used for all
purposes, e.g. UNE rates.27 Taylor Comm. specifically referenced the Commission’s wording in
the Revised Award, 28 which allowed the parties to negotiate and/or arbitrate appropriate
compensation related to optional EAS and FX-type traffic. As it stated at its October 4, 2000
open meeting, the Commission finds it appropriate to require the parties to negotiate and/or
arbitrate appropriate compensation related to optional EAS and, therefore, declines to adopt
SWBT’s proposed implementing language on this issue.29




        26
           See CLEC Coalition DPL Issue No. 6 (proposing new T2A Att. 12 §§ 7.1 and 7.1.1) (Sep. 21, 2000);
see also Taylor Comm. DPL Issue Nos. 8 and 9 (proposing new SBC-13State App. Pricing, line 430 and App.
Comp. § 5.3) (Sep. 21, 2000).
        27
             Id.
        28
              See Revised Award at 18, n. 59 (Aug. 31, 2000).
        29
             Open Meeting Tr. at 137 (Oct. 4, 2000).
ORDER APPROVING AWARD                     DOCKET NO. 21982                                 Page 9 of 11


                            G. Terminating Records—Technical Feasibility

        On the issue of allowing SWBT an implementation period to transition to the use of
terminating records, the Commission finds it reasonable to require SWBT to begin compensating
CLECs based on terminating records beginning December 13, 2001, or earlier if technically
feasible. SWBT proposed an 18-month transition period, while CLECs recommended30 using
the 6-month deadline established in Docket No. 22315. 31 The Commission recognizes that
system upgrades take time and agrees with CLECs that faster implementation by SWBT will
create efficient billing uniformity and likely minimize billing disputes. Given the differing
positions on SWBT’s capability to upgrade its switches, circuits and billing systems to use
terminating records, the Commission determines that upgrading should occur as soon as is
technically feasible. Based on the foregoing, the Commission requires that SWBT’s proposal in
§ 10.3 of Attachment 12 of the T2A regarding the transition to use of terminating records be
amended to include language to this effect, as follows:

        § 10.3: In those cases where it is not technically feasible for SWBT or CLEC to bill from
        terminating recordings, SWBT or CLEC may elect to compensate each other based on
        any method agreed to by the parties for usage terminated through December 12, 2001.
        Beginning December 13, 2001, or earlier if technically feasible, SWBT and CLEC agree
        to use terminating recordings when rendering bills for the transport and termination of
        local traffic to the originating carrier, unless SWBT and CLEC mutually agree to some
        other method of billing. Options that may be chosen by CLEC during the interim period
        addressed in this paragraph are: …

                                       IV.      Commission Findings

1.      The Commission’s preparation and review of the Revised Arbitration Award is required
        by FTA § 252(b). Section 252(b)(1) provides that if an incumbent local exchange carrier
        (ILEC) and CLEC cannot successfully negotiate rates, terms and conditions in an
        interconnection agreement, either of the negotiating parties “may petition a State
        commission to arbitrate any open issues.”




        30
             See CLEC Coalition DPL Issue No. 7 (proposing new T2A Att. 12 § 10.3) (Sep. 21, 2000).
        31
         Petition of Southwestern Bell Telephone Company for Arbitration With AT&T Communications of Texas,
L.P., TCG Dallas, and Teleport Communications, Inc. Pursuant to Section 252(B)(1) of the Federal
Telecommunications Act of 1996, Docket No. 22315 (pending).
ORDER APPROVING AWARD             DOCKET NO. 21982                             Page 10 of 11


2.   The Commission is the state regulatory body responsible for arbitrating interconnection
     agreements approved pursuant to the FTA.

3.   The Commission has reviewed the Revised Arbitration Award and the implementing
     language filed by the parties.

4.   The Commission finds the Revised Arbitration Award and implementing language, as set
     forth herein, are consistent with the requirements of § 252 of the FTA.

5.   The Commission finds the Revised Arbitration Award and implementing language are
     consistent with Subchapter Q of the Commission’s procedural rules.


                                V.      Ordering Paragraphs

1.   The Revised Arbitration Award and specific language in the parties’ Interconnection
     Agreements implementing the Award are approved, as modified and clarified by this
     Order.

2.   The Commission, for good cause, waives the 20 day filing requirement under P.U.C.
     PROC. R. 22.323, and orders all parties to file revised, signed interconnection agreements
     that have been modified in accordance with the rulings in this Order within ten (10) days
     from the date of this Order. Additionally, all parties shall file affidavits attesting that the
     amended agreements comply with this Order and with the Revised Arbitration Award as
     clarified and modified by the Commission.
ORDER APPROVING AWARD                  DOCKET NO. 21982                                Page 11 of 11




3.      All other requests for relief, general or specific, if not expressly granted herein, are
        denied for want of merit.




        ISSUED IN AUSTIN, TEXAS ON THE ____ DAY OF NOVEMBER 2000.


                                         PUBLIC UTILITY COMMISSION OF TEXAS



                                         _______________________________________
                                         PAT WOOD, III, CHAIRMAN


                                         _______________________________________
                                         JUDY WALSH, COMMISSIONER


                                         _______________________________________
                                         BRETT A. PERLMAN, COMMISSIONER




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