In the Matter of: ) ) IMPLEMENTATION OF THE LOCAL ) CC DOCKET NO. 96-98 COMPETITION PROVISIONS OF THE ) TELECOMMUNICATIONS ACT OF 1996) WORLDCOM, INC. PETITION FOR ) DA 00-2131 WAIVER OF THE SUPPLEMENTAL ) ORDER CLARIFICATION REGARDING ) UNE COMBINATIONS ) REVISED AND CORRECTED COPY Volume: 1 Pages: 1 through 68 Place: Washington, D.C. Date: November 16, 2000 Before the FEDERAL COMMUNICATIONS COMMISSION Washington, D.C. 20554 In the Matter of: ) ) IMPLEMENTATION OF THE LOCAL ) CC DOCKET NO. 96-98 COMPETITION PROVISIONS OF THE ) TELECOMMUNICATIONS ACT OF 1996) WORLDCOM, INC. PETITION FOR ) DA 00-2131 WAIVER OF THE SUPPLEMENTAL ) ORDER CLARIFICATION REGARDING ) UNE COMBINATIONS ) Room 5-B254 FCC Building 445 Twelfth Street, S.W. Washington, D.C. Thursday, November 16, 2000 The parties met, pursuant to the notice of the Commission, at 1:39 p.m. APPEARANCES: On behalf of the FCC: DOROTHY ATTWOOD MICHELLE CAREY JODIE DONOVAN-MAY TOM NAVIN GLENN REYNOLDS RICHARD LERNER On behalf of WorldCom: BRAD STILLMAN DON GRIECO CHUCK GOLDFARB HANK HULTQUIST On Behalf of Verizon: SCOTT RANDOLPH FRANK GUMPER ED SHAKIN P R O C E E D I N G S (1:39 p.m.) MS. ATTWOOD: Okay. Thanks everybody for coming. I am Dorothy Attwood, Chief of the Common Carrier Bureau, identifying myself for the record. It would be useful I think if we talked to you all, for purposes of the record, if you could identify yourselves. MR. STILLMAN: I am Brad Stillman with WorldCom. MR. GRIECO: Don Grieco with WorldCom. MR. GOLDFARB: Chuck Goldfarb, WorldCom. MR. HULTQUIST: Hank Hultquist, WorldCom. MR. RANDOLPH: Scott Randolph, Verizon. MR. GUMPER: Frank Gumper, Verizon. MR. SHAKIN: Ed Shakin, Verizon. MS. CAREY: Michelle Carey, FCC. MS. DONOVAN-MAY: Jodie Donovan-May, FCC. MR. NAVIN: Tom Navin, FCC. MR. REYNOLDS: Glenn Reynolds, FCC. MS. ATTWOOD: Great. Well, thanks for coming. The reason we wanted to have you both here was because we have been hearing from both of you separately. And, obviously, there have been a lot of pleadings in the matter and thought it would ease our own purposes in trying to resolve some of these issues if we could have you together and have you explain to us I guess a little bit more your positions. We thought it would be useful initially if you could just spend a few minutes each side in a nutshell trying to making clear kind of what your view is, the requested relief. And then we will dive into how we think the questions we still have outstanding in light of looking at the exhibits. MR. STILLMAN: From WorldCom's perspective, what we had done is taken a look at the supplement order and tried to identify what we felt would be the least controversial group of circuits that we wanted to identify for purposes of getting a waiver of the rule because as we saw the objective of the FCC, it came down to trying to make certain that there was not an effort by any carrier to take what is dedicated services and switch them to UNEs under the terms of this order. And the proposal that was reached by several CLECs and some of the ILECs was quite limited in its scope and unfortunately for our purposes based on the design of our network did not permit us to convert what are wholly local services to UNEs. And we thought that the goal of the FCC was to allow local services to be converted to UNEs, but to do so in a way that would not risk the wholesale switching of dedicated services to UNEs which the FCC did not want to permit at this point under that particular order. So in going back and looking at our network, we identified -- there is a variety of services that we think should be able to be converted. But we limited our waiver to only those circuits that are providing 100 percent local service. In other words, we are selling as a local service. And so our goal here was to make this the easy question for purposes of a Commission review. And while we understood that the simple fact that these circuits were connected to our classified switch was something that the FCC was not willing to sort of apply as a general matter across the industry. We then focused on identifying from our engineers what made that fact, the connection for a classified switch, determinative for purposes of the FCC in the case of WorldCom specifically. And that is what we have been trying to do with the waiver. MS. ATTWOOD: Okay. Do you have a response? MR. SHAKIN: Yes, I guess the way Verizon looks at the petition, we look at it in two ways. One is with respect to the relief that they are seeking, it really goes through three or four of the fundamental points of the supplemental clarification order. Really, what the supplemental clarification order was about was developing a safe harbor. And rather than waive it for some specific circumstance or something that they didn't suggest is now is possible, what they have done is taken every -- almost every, single point that the Commission addressed in the order and asked for a waiver of that point. And all of these issues were raised by MCI and rejected in the context of the order. So it is not as if there is something new. But even more troubling is the way they get there, we are concerned, is a pre-judgement of the next proceeding which the Commission has said they are going to do at some point next year which is rapidly approaching. What the Commission did in the supplemental order is put in a safe harbor as a temporary measure until it fully considers the question of the interrelationship between special access and locally. Particularly, the Commission said that, "The exchange access market occupies a different legal category from the market for telephone exchange service. And unless we find that these markets are inextricably interrelated in these other respects, it is unlikely that Congress intended to compel us once we determined the network element meets the impair standard for local exchange market, to grant competitors access for that reason alone without further inquiry to the same market element solely or primarily for use in the exchange access market." And that is exactly what MCI is trying to get here. MS. ATTWOOD: And where are you quoting that from? MR. SHAKIN: That is paragraph 14 of the supplemental clarification order. And that is exactly what they have done. The way they get to 100 percent local is -- and then I am just quoting from page 8 of their petition -- is they define local switched as "local exchange and switched access." So what they are really saying is that we are 100 percent local if you count switched access as local. And, indeed, if they were truly 100 percent local, they would qualify for one of the options under the existing rule. The reason they don't qualify for one of the options under the existing rule is because they are not 100 percent local. They have a certain amount of switched access and they've said they don't want to measure that. And so I guess the bottom line is we think that the rules under the bright line test, the safe harbor rules give them the opportunity to do what they want to do if they truly are predominantly local. And if they are not, they shouldn't qualify. MR. HULTQUIST: May I respond to that? MS. ATTWOOD: Yes. Well, I would like to actually ask you to respond to the definitional issue that he has raised. MR. HULTQUIST: Yes. The first one is that the language cited in paragraph 14 goes on to say that "Before we can determine the extent to which denial of access" -- this is actually in paragraph 16 -- "denial of access to network elements would impair carrier's ability to provide special access services." The other market that the Commission was referring to in the supplemental order clarification where they are saying we haven't yet determined impairment isn't the market for switched access. It is the market for dedicated access services. And that is the thing that the Commission intended in the supplement order clarification, not to conclude. The supplemental order clarification nowhere says that there is a different impairment analysis for switched access services than there is for local exchange services. And it could not because switched access services are a necessary byproduct of local exchange service. Right now, we have, you know, thousands of UNE-P customers that we are providing service to. We admit, those customers make and receive long distance calls just as customers who have dedicated T-1 connections to our local switches also make and receive long distance calls. MS. ATTWOOD: Well, but I just need to clarify because I think both of you are fundamentally opposed to in one -- it seems to us when we were reviewing the record on one point, you guys are describing switched access as local. Right? And you are saying that is an unresolved question. Is that correct? MR. SHAKIN: I would even go further that switched access is not local. The unresolved question is, is the UNE treatment. But switched access by definition is not local. MS. ATTWOOD: And where do you find support for that conclusion other than this order? I -- I mean, other than that paragraph 14, is there any time where the Commission previous to this has indicated that switched access is not local? And by the same token, while you are thinking -- MR. GUMPER: Well, let me say, when we went through this debate both in terms of the first clarification and then the second clarification and the three different versions we came up with here, the intent was that you wanted to make sure that people -- CLECs were providing local exchange service were in effect going to be able to use the UNE combinations instead of having to purchase switched access. MS. ATTWOOD: Right. MR. GUMPER: And the criteria were based upon things like local voice traffic, that people were using these services not as means to bypass switched access in order because, you know, the class of services we are talking about here that you would put on a T-1 really are long distance calling from a large volume business customer. That becomes dedicated because that business customer has traffic volumes that make it cheaper to go out and purchase a direct pipe to the POP instead of paying us the switched access rates. That is basically what the traffic is we are talking about here. And when we were looking at these definitional issues, the one requirement that we were trying to come to was to say, okay, we wanted to make sure that people weren't gaining this process and using EELs primarily to transport long distance traffic to POPs. So that is why we had these definitions as to what was local exchange and local exchange traffic was that traffic which was within the local exchange where switched access is an inter-exchange traffic. MS. ATTWOOD: And can I just -- can I ask you guys now from your perspective, have we ever said switched access or -- is a long distance or local service? MR. HULTQUIST: In the original first local competition order, the Commission found that switched access was a byproduct of local exchange service. MS. ATTWOOD: Do you know where we said that? MR. HULTQUIST: I don't have that paragraph. MS. ATTWOOD: Could you -- MR. HULTQUIST: Sure. MS. ATTWOOD: Because there is some suggestion I think that when we went back to look at this question, that maybe it was left as an open question. So I just -- MR. SHAKIN: In this order itself, just to give you one more cite to work from, in paragraph 7, when you are talking about the reasons why we may want to have these kinds of limitations, you specifically do refer to switched access. And the context that you refer to it -- and I am going to give you the quote because that's -- "For example, in the absence of completed implementation of access charge reform, allowing the use of combinations of unbundled network elements for special access could undercut universal service by inducing IXCs to abandon switched access for unbundled network element-based special access on an enormous scale." So that is exactly what we are talking about here which is using special access as a vehicle to remove your switched access traffic. MS. ATTWOOD: But that goes -- I just want to dissect one point, okay, because I know that we will get to the policy question which is the ramification. But I just want to make sure that I understand because I think there is a definitional difference here. And that is something that to the extent we have spoken to this question it would be useful to know. We have been looking at this. But the definitional question is is switched access local or long distance and what have we said about that. Now, then we go have we said something about that. And then we move into, okay, what does that mean for what we intended to do in this order. MR. STILLMAN: Can I raise one point -- MS. ATTWOOD: Yes. MR. STILLMAN: -- about in the context of universal service when the Commission defined what universal service was, one of those things included the ability to receive and make long distance calls. And as far as I am aware, universal service applies to the division of local at least historically. So to whatever extent, looking at the universal service docket may help you in that question. It might be worth it. MS. ATTWOOD: It might be there, okay. MR. REYNOLDS: Could I ask as a real -- maybe this is a simple question. But, okay, we have local and then we have exchange access. If you include exchange access as local in these -- for purposes of this evaluation, what is left? MR. HULTQUIST: Our point is that the dedicated access market is very -- is a separate market from the local market. It may turn out that things you need to provide dedicated access are the same things that go into local. But the market for dedicated access is a separate market. The market for switched access is not. Switched access is part and parcel of local service. It can't be separated from local service. The suggestion that all dedicated access is is customers with a high volume, in WorldCom's case, that is not true. When a customer purchases dedicated service from us, the product they get is not the same as the product they get when they purchase switched. They have the dedicated -- products on our dedicated network have capabilities far beyond what is available on our local -- MR. GUMPER: Excuse me. I did not say that that was the sole purpose. I said a significant portion -- when you get to the large volume customers who have large amounts of long distance calling, instead of going through our switches and paying switched access, traditionally the long distance carriers -- and I don't care whether it is AT&T, MCI or anybody else -- you know, have gone out and purchased dedicated access to take those long distance calls. Now, there are other uses of dedicated access besides carrying long distance voice trapping. But that is a primary use of the large business customers. MR. HULTQUIST: But the suggestion is that when we provide switched access, it works the same way as when we provide a dedicated toll product. And that is simply not the case. MS. ATTWOOD: Well, that -- can you go to the diagram for a second because -- MR. HULTQUIST: Sure. MR. NAVIN: Can I try to clarify -- MS. ATTWOOD: Yes, please. MR. NAVIN: -- an issue. Let me see if this is right. You are talking about an exchange access market. MS. DONOVAN-MAY: Tom, he can't hear you. MR. NAVIN: I'm sorry. You are talking about the exchange access market. Is that right? I am going to try to understand where you guys diverge. And does this -- this breaks down into special and switched. You guys agree on that so far? Is that right? UNIDENTIFIED VOICE: Then there is a separate thing for local. MR. NAVIN: Yes, okay. I'm talking about the exchange access market. Okay? So now what you are arguing about is down here. Is that -- you get dedicated and what I hear you saying is then you have switched. Now, if this isn't the right diagram, can you explain to me -- MR. HULTQUIST: Yes, I think it's -- MR. NAVIN: -- because this switched, we are talking about the ILECs network, right? MR. HULTQUIST: I think it is not the right diagram because CLECs offer local service and switched access service, the exact same products that the ILECs offer. The products -- the two markets -- the exchange market separates into special and switched in that some customers want a product -- an access product that only provides them with access to toll services. Other customers, they receive their exchange access over the exact same line that they receive their local exchange service. They don't order a special access for their -- for switched access. They just get one line. And that one line they use to make local calls, to receive local calls, to make inter-exchange calls and to receive inter-exchange calls. MR. NAVIN: So far, I mean, the language that I am seeing in the orders negotiates between exchange access and then local exchange. So I am trying to understand given these two markets where you guys diverge. MR. GUMPER: Well, let me -- okay, I think it goes to the question when in the order we were seeking clarification of what was meant by a significant amount of local exchange service. And we had these three different kinds of things. I think the difference is we were differentiating between local exchange and exchange access and basically saying that in order to use the EELs prior to a further proceeding, that one had to be providing local exchange -- a significant portion of local exchange. And I think the debate here is whether or not exchange access, switched access becomes part of local exchange in that definition. MS. ATTWOOD: I think -- I mean, that is my question. Isn't that the -- isn't that really the issue here? MR. HULTQUIST: Well, if it is, it is an issue that is only coming up now that we filed our waiver position because if you remember back to the underlying proceedings, and this goes all the way back to last year, the only thing that was raised constantly was the idea that if the Commission allows the use of EELs for -- without a use restriction, then what the IXCs will do is they will take this and they will convert all these dedicated access circuits to EELs. That was the concern that was raised prior to the filing of this waiver. There was never a concern raised -- MS. ATTWOOD: That's right. MR. HULTQUIST: -- that we would use EELs to provide switched access. MR. GUMPER: That's not true at all. MS. ATTWOOD: Isn't it the same -- MS. DONOVAN-MAY: Has the issue of -- has the issue of whether or not you can use UNEs to carry switched access been teed up on front of the Commission prior to this point? MR. HULTQUIST: The Commission has repeatedly affirmed in the access reform docket -- the Commission has said, yes, one of the benefits of UNEs is that carriers will be able to use UNEs to provide switched access services. MS. DONOVAN-MAY: Then what is the issue as you guys see it in the third order on recon. and the local -- the shared transport order? MR. HULTQUIST: The issue of further notice? MS. DONOVAN-MAY: No, the shared transfer order, the third order on recon. that we said there is an issue of whether or not you can use shared or dedicated transport facilities to provide solely exchange access service. MR. HULTQUIST: Yes, that would be to provide exchange access service to a customer to whom you are not providing local exchange service. MS. DONOVAN-MAY: Did that -- did we mean there either special or switched? MR. HULTQUIST: In that context, that was switched. MR. GUMPER: And that would have been the trans- point from our central office to the -- MR. HULTQUIST: That is for a customer to whom you are not providing local service. MS. DONOVAN-MAY: You are not providing any local service at all. MR. GUMPER: The thing -- and again, I will get back -- when we were debating this, the issue was not whether or not you provided a local service to the customer, but whether or not the local service that you were provided represented a significant portion of the service -- MS. ATTWOOD: You see, I think that that -- I think that's why to some degree both of you are right. And that is what has been so vexing in listening to your arguments. Because the Commission was concerned about making sure that those providing local services were able to obtain UNEs. The Commission was also concerned about not permitting bypass of special access and dedicated facilities. And so the question becomes what we were trying to do definitionally is it seemed like your argument hinged on calling exchange access "local exchange" because you couldn't establish a local service on your -- and I want to get into exactly how you could do that. But -- MR. HULTQUIST: Yes, maybe we should go into a little more detail. MS. ATTWOOD: But there was -- in a sense, it was definitionally, you had to assume exchange access was local exchange in order for us to accept that this was 100 percent local. MR. GUMPER: Yes, let me just -- MS. ATTWOOD: Do you follow? I mean -- MR. GUMPER: Yes, I am following. MR. SHAKIN: That's the right one -- issue. MR. GUMPER: And I think the issue that we came to because we had these discussions -- in fact, the issue as to whether or not the defining definition of providing local should be the attachment to a Class 5 switch was something that actually Jake raised initially before we got into the first clarification that came out in November. He said instead of going into significant local exchange, could we use just, you know, connecting to a Class 5 switch as the defining definition. And after a lot of discussion and debate, we came back and basically we all agreed with him that you couldn't because a provider could, in fact, use that definition to in effect have on that circuit predominantly switched access traffic which would not be local exchange or it is significantly local. MS. ATTWOOD: Well, and that goes to some of the network issues. MR. HULTQUIST: Yes, and what we said is regardless of what other carriers could, might, would do, our filing is intended to show that we do not do that. We - - and that it would not be practically feasible for us to reconfigure our network. Again, the products we sell, our dedicated access products that we sell which far out-number the T-1s we use to provide local service are not products that can be sold off of our local switches. MR. GUMPER: Yes, let me -- yes, a maybe a little factoid would be useful though because, you know, it is being presented like all conscious to not convert things because of the way they design them at market to EELs. Now, throughout the Atlantic footprint, we have already had requests to convert, you know, somewhere in the neighborhood -- let's -- I don't want to get into exact numbers because of having two carriers here. But let's say it is over 1,000 TS-1 circuits. The bulk of those circuits come from the largest IXCs that is requested. MS. ATTWOOD: Well, but the question still remains though did those categories not capture what would be significant local traffic. I mean, that's -- and that is really -- you know, the fact that they were able to take advantage of some of those categories to provide the local service, you know, that shows that those categories had some -- that they are -- that the Commission was right, they were good proxies. The question remains, however, is this, in fact -- is there a way in which they can show that they are -- we didn't capture everything because of the unique configuration. And that -- I mean, the order says a lot of things. It didn't rule out the possibility of a waiver. I mean, it said in the order -- MR. GUMPER: Oh, no. And we agree that you can have a waiver as long as it is -- MR. HULTQUIST: Why don't I get into this diagram? MS. ATTWOOD: Yes. I would like -- because I don't know -- I have a question as to why you can't measure why this is -- why you can't measure this as 100 percent -- MR. HULTQUIST: Yes. So far we have been focusing on the measurement of the use. And we haven't even talked about -- which is the most significant problem for us -- which is the co-mingling prohibition. This is considered as just one type -- one example of how our network is. It is not -- there are variations. But basically in this situation, there is an end- user customer who has today a T-1, it is called a channel termination, to his nearest central office. Then from there, we order T-1 interoffice mileage to another service central office which in this case is our serving wire center. In that central office, we have a co-location where there is a three-to-one MUX. This T-1 is not the only T-1 coming in here. It happens to be this customer is using this T-1 just to get access to our switched local product. There will be lots of other T-1s out here of people who were doing different things with, in some cases, access to our toll products, in some cases, access to data products. In any case, all of those T-1s are hitting this three-to-one MUX. They are being handed off into our collo. Then there is a TS-3. Now, this TS-3 has some local T-1s, some non-local T-1s. It goes to the WorldCom ring and these services go off to the appropriate switch that they need to go to. All we have said is that we can trace this particular T-1 from our switch back to this customer; that this T-1 is used only to provide local service. The fact that it is co-mingled on a multiplexor and a DS-3 is irrelevant to the fact that we are providing only local service to that customer. MS. ATTWOOD: And your DS-3, you are going to continue to pay through access? MR. HULTQUIST: Yes, we are not -- and here, as they are proceeding, we are not asking to make any change in what that multiplexor or that DS-3 -- how that is paid for. All we are seeking is to get UNE pricing on the T-1 portion. MS. ATTWOOD: And you can't measure usage -- MR. HULTQUIST: No. MS. ATTWOOD: -- at the collo? MR. HULTQUIST: No. You have to look at the options. The first option says that you have to be the customer's sole provider of local exchange. Well, we don't know when we are the customer's sole provider of local exchange service. We haven't asked our customers. We don't know if even they would know. So we haven't done that. The second one says that you have to be providing at least a third of your customer's local exchange. Well, again, we don't have that information. Maybe you could send people out and you can hear that out. The third one says -- MS. ATTWOOD: You can't ask your customer if you are providing them a third? MR. STILLMAN: Well, you have to understand that - - MR. HULTQUIST: How do we measure that? Is that dollars? Is that minutes? MR. GUMPER: By law, it says rate. MR. STILLMAN: But you have to understand that we may be serving a customer that is an enormous customer with outposts in lots of different places. MS. ATTWOOD: But they say -- it is also the third option is the -- MR. HULTQUIST: Yes, the third option is the one - - MS. ATTWOOD: -- 50 percent in the one location. MR. HULTQUIST: -- that is most feasible. The third option is the one that is most feasible because under the third option, you don't necessarily have to be providing any. You have got the co-mingling prohibition which for us, all of our circuits are on common multiplexors that provide, you know, our commingling. But -- MS. ATTWOOD: Well, now, can I ask -- MR. HULTQUIST: -- now the usage, the third option says that it has to be at least 50 percent local voice traffic. Now, potentially, yes, we could go out and measure and say, okay, these circuits we can and these circuits we can't. What we have said in our waiver is that the fact that a circuit is connected to our local switch is a better showing of whether or not the customer is getting local because the only thing we sell on this local switch is -- MS. ATTWOOD: Can I just back you up because I think I heard you say, yes, we could go out and measure whether or not there is -- MR. HULTQUIST: After the fact. Before the fact, we don't know how the customer is going to use it. But if we converted circuits and we were audited, we could say, okay, here is the usage. MS. ATTWOOD: Well, but -- I'm sorry. But if you -- so you could, in fact, go to the collo location and -- the reason I ask this -- let me just put it in a larger question. If you can measure at the co-location point that it would -- where it is co-located before it gets multiplexed -- you can't. MR. STILLMAN: We are not measuring. We are just peeling off an entire circuit. MR. HULTQUIST: The measurements would be out of the local -- the switch record -- MS. ATTWOOD: I know. But I am asking can you measure? MR. HULTQUIST: No. The switch records are on the local switch. That is where the usage records are generated. The collo -- there is nothing -- there is nothing -- there is no intelligence in here. MS. DONOVAN-MAY: So you are measuring at the switch. MR. HULTQUIST: Yes. That's it. If we were audited and somebody said show us how many local minutes you have, we would, you know, say, okay, here is our switch records. MS. DONOVAN-MAY: Would they be pure local minutes like local exchange minutes -- MR. STILLMAN: It would include switched access. MR. DONOVAN-MAY: -- you are calling across the street? MR. HULTQUIST: Presumably, it would include local INTRALADA toll and INTRALADA toll. MR. GUMPER: That is the difference, right? MR. HULTQUIST: Yes. So you could measure how much is real local as opposed to access. First of all, we dispute this idea that there is this -- MR. GUMPER: Okay. But -- MS. ATTWOOD: But for the purposes of this argument. MR. GUMPER: But for the purpose of this argument I don't know how to say it other than that. I mean but local exchange versus exchange, I -- MR. HULTQUIST: Yes, we acknowledge -- we acknowledge that our switch generates records that could be audited. We believe that the proposal we have made that when a circuit terminates on a WorldCom classified switch since the only product we sell is local, that that should show that it is local. But, yes, we can measure usage on our switch. MR. GUMPER: Well, see, I think that was the whole purpose of the debate, was, now, you keep wanting to define local sa the combination of local exchange and exchange access. And the debate was how much local exchange traffic you would have to have. Because under your definition, you could have 100 percent exchange access. And you are saying, well, it is hooked up to a Class 5 switch and it is all long distance traffic. But it doesn't hand off to my Class 4 switch in the POP. That qualifies as local service. MR. NAVIN: Is that economically feasible for them to do that? Would they be directing it to the Class 5 switch? MR. GUMPER: My engineers tell me, you know, you could if you wanted to, if you -- well -- MR. STILLMAN: But coming to -- but can I come back to what Dorothy raised? Because, Dorothy, when you described what you were trying to do, you did not distinguish switched access. You distinguished special -- MS. ATTWOOD: All right. Well, can I live in the world of my own engineering? If you were able to measure somehow and if you are paying special access rates for this piece anyway because you have acknowledged you continue with the special access rates, then I was going to ask Verizon why are you -- how are you harmed if they are able to -- if they are able to -- because they are still going to pay their special access for this. All they are saying is for this line where it is - - I can show that it is a majority of local traffic, how would your -- how would you be harmed with that. Now -- MR. GUMPER: Well, first of all, I guess what I am trying to understand is I didn't -- MS. ATTWOOD: So that was my main -- MR. GUMPER: -- maybe appreciate this. So you are taking the circuits into your co-location cage and you are doing the MUXing? MR. HULTQUIST: No, no. We are buying out of your access tier of multiplexing. MR. GUMPER: Well, then you are not in the co- location cage at all. MR. HULTQUIST: No, no. No, at our collos, we take a DS-3 hand-off. MR. GUMPER: When you say at your collos, what do you mean by collos then? MR. HULTQUIST: You -- there is a multiplex service performed in that central office. And then it is cross connected to our collo at the DS-3 level. MR. GUMPER: And that is your DS-3 then? MR. HULTQUIST: It may or may not be. It may be your DS-3. It may be ours depending on if it is -- MR. GUMPER: Well, then I don't understand why you are doing co-location cage if you are buying all your services from us. MR. HULTQUIST: We have both -- MR. GUMPER: It loops the MUXing can be -- MR. HULTQUIST: We have both on-net and off-net collos. The majority are on-net, but it could be off-net. MR. GUMPER: What do you mean by on-net? MR. HULTQUIST: An on-net collo is as collo that our ring goes through. Off-net collo -- MS. ATTWOOD: I'm glad he is asking these questions. That's all I can say. MR. GUMPER: No. I am trying to understand what service they are offering because, you know, obviously, for the purpose of the co-location is if you are buying the T-1s from us and the multiplexes from us, then -- MR. HULTQUIST: Assume it is our ring. Assume that out of that office, it is our transport. We are still buying multiplexing out of your access tier. MS. DONOVAN-MAY: You are going to keep paying for the multiplexing. MR. HULTQUIST: Yes. But because the options that are on the table all prohibit what they call commingling, the -- we cannot possibly even think about those options. MR. NAVIN: So if you were self-provisioning that DS-3 or if you were buying that DS-3 from another party, there would be -- and you could meet the measurement requirements, there would be no problem under -- MR. HULTQUIST: Well, because currently that MUX is an access MUX. So even where we are self-provisioning the transport out of that central office, all of our different T-1s are being multiplexed before being handed off to us. MS. ATTWOOD: And ergo the -- MR. HULTQUIST: Ergo their commingling. MS. DONOVAN-MAY: So at a minimum, you need to get rid of the commingling -- MR. HULTQUIST: Yes. MS. DONOVAN-MAY: -- in order to convert any of these -- MR. HULTQUIST: Yes, and it doesn't -- and the important point is it doesn't serve any of the goals that the supplemental order with clarification was intended to promote. In our case, the fact that they are commingled is not relevant to whether or not we are providing local exchange service. MR. GUMPER: Well, the issue of the commingling is a policy issue that, you know, again, when we were doing this, we were told the Commission did not want to pre-judge the whole issue of commingling because that is a policy decision. MS. ATTWOOD: Well, it is and it isn't. But the - - it is -- I mean, you know, it is and it isn't. I mean, it is a policy call overall. The question is in a unique situation where you are talking about this kind of commingling where you arguably are still getting the revenue for access, arguably or are -- I mean, are. You are saying you are still going to get the revenue for access in the commingling situation, the DS-3 and the MUXing. Then the question -- the policy discussion that we had was that we were concerned that commingling, you remove the commingling and you end up with a bypass of access. Here you are saying we are not bypassing access because you are, in fact, paying access for the piece of the DS-3 and the commingling -- or the MUXing. It is just the only thing you are in effect not getting access revenues for is the T-1s which are they are claiming purely local which is consistent -- MR. GUMPER: But under their definition. MS. ATTWOOD: Well, no, I know. Well, let's explore that a little because the one -- I mean, the question -- I think that is what you are arguing, right? MR. HULTQUIST: Yes. MS. ATTWOOD: Okay. The question though is how do you do that and not end up bypassing access? MR. HULTQUIST: Because, again, these local circuits that we are talking about are really a minority of the T-1s in our network. We have got five times -- four to five times as many T-1s that are not providing local service. We are not going to seek to convert any of those circuits. We have done this in Florida, in a state where under our contract they ordered the exact thing that we are looking for here. And we ended up converting about 20 percent of our circuit, only the ones that are used to provide local service. MS. DONOVAN-MAY: They allowed the commingling in Florida? MR. HULTQUIST: Yes. MR. GOLDFARB: They -- the order -- the decision was made that they had to provide that and Bell South has not indicated and has not made any claims that there has been any abuse of that to try to convert what is special access. MS. ATTWOOD: Well, Bell South is not here either. So -- MR. HULTQUIST: Yes, well -- MS. ATTWOOD: I never take silence for -- I've learned that. So I -- but understood. Okay. MR. GOLDFARB: The other market reality is that we would not -- it would not be sensible given what our special access offerings are to be using this to be trying to provide effectively, you know -- to provide switched access and use this to give us switched access offering as an alternative to the special access offering. It just -- I mean -- MS. ATTWOOD: Why not? MR. HULTQUIST: The most important reason is because of the products and the platforms are completely different. I don't know, Don, if you can describe what things are toll switches that have connectivity to that our local switches do not. MR. GRIECO: Well, I mean, we have -- they are really separate networks or separate entities for the most part. I mean, we have Class 3 switches and all the networks have their own billing platforms, their own provisioning systems, their own database applications, none of which are used in our local networks that out classified switches are connected to. This classified network is -- it has their own billing systems, their own provisioning systems, their own network, two totally different software switch loads that would require all be modified, upgraded at I would assume a fairly sizeable expense to -- MS. ATTWOOD: Well, but if the sizeable expense was less than what it was to not -- no longer get access, I mean, wouldn't you do that? MR. GUMPER: Well, you do connect your Class 5 switches to your toll network, right? MR. GRIECO: Sure, through featured or detailed trunks. We can do trunking the same way you do. MR. GUMPER: So basically, you know, if a customer who you are saying is providing local, if that customer has 95 percent of their traffic on that local DS-1, you are going to be switching it over to toll network, right? MR. HULTQUIST: But the difference is -- yes, the thing is that a customer who has dedicated access to our toll network has access to products like VNET which is a virtual private network. That customer can dial unique seven-digit numbers to reach people anywhere in the world. Just pick up their phone and dial. The customer who has -- who is connected to our switch local network can't do that. If the circuit terminates at the switched local network, they cannot have access to a product like that. MR. GUMPER: Yes, but they are still going to get access to worldwide calling. And they do, presumably, to provide them local access. But most of those customers, you are providing them long distance service, too. MR. HULTQUIST: Our customers -- the customers who buy our dedicated products would not substitute an inferior product for a superior product. And the products -- if all you do is make long distance calls, the products on our toll network are superior to switched access which means dialing one plus a long distance number. MS. DONOVAN-MAY: Can I -- may I just ask a -- I'm sorry to be confused. But I definitely understand that if the customer is connected to the Class 5 switch, they have the ability to make local calls. Where if it was a customer using your other products, they wouldn't have that ability. Is it enough, you know, under the context of the order that the ability to make local calls, is that enough -- MS. ATTWOOD: Right. And that is actually key because -- MS. DONOVAN-MAY: -- to -- MS. ATTWOOD: -- one of the things the Commission is concerned -- MS. DONOVAN-MAY: -- overcome the restrictions? MS. ATTWOOD: Yes. One of the things the Commission clearly was concerned about was the idea that there was -- one could market a product as a backup local product. But you are really selling INTERLADA toll. MR. HULTQUIST: The first thing is, remember here, what we are talking about is the conversion of existing circuits. So to assume that that would happen, you would have to assume that we knew that this sort of wacky rule would rise up where you could convert to a special pricing a circuit that was used in a special way. So we would have been now for the past several years marketing to our customers, hey, sign up for our local product; it is not really local; you are going to be able to use -- you know, we know you are going to use this to do something else. And somewhere down the line, we think we are going to be able to get a good price break. I mean, that is not credible. What we have been doing is we have been outselling local service. And if the customer wants to buy a toll product, we will sell them that, too. It is just a product on a different network. MS. ATTWOOD: Well, but that is not really true. You don't have to have a diabolical plan to be able to in the future -- I mean, we have made it fairly -- you know, fairly okay -- I'm not going to say easy -- but okay to purchase an EEL and then convert that now. And so if you were to decide -- I mean, it is a legitimate concern as a policy matter that excess capacity doesn't equal significant local. And that's -- MR. HULTQUIST: Agreed, agreed. And if -- we do not object to if the Commission agrees that, you know, in the case of our network significant hardship is created by the commingling prohibition and the Commission agrees that the commingling prohibition should be waived in the case of our network, that later audits could be allowed. And if it turned out that it was a sham and we were not providing local service to our customers, we would pay. MR. NAVIN: Let's talk about how those audits would occur. How are you going to -- how are you going to meet the burden of proof of showing that -- how did you do the conversion? MR. HULTQUIST: As I said, we will share the switch records. We will share the usage. MR. GUMPER: And what kind of percentage usage would you suggest? Because we had very specific things that were laid out. And if you go to, you know, number three which probably most closely approximates this, you know, if you are not serving a third of the local exchange lines, you know, you are serving somewhat less than that, you are saying, okay, a third of the traffic has to be local exchange. Do you think that is a reasonable number? Because I know in your waiver, you have said you don't want to have any percentage -- MR. HULTQUIST: I do -- I believe that there is a stronger showing in our network that we are providing local service by the fact that we have connected the circuit to our local switch. However, if, you know, it is deemed necessary that in order to maintain the good faith that some number should be found, we could talk about that. I mean, I -- you know -- MR. SHAKIN: At that point though, you are in -- putting aside the commingling for a second, then what you are saying is we can measure. And it may be that there is a number here that is reasonable. Well, this number is the number that the Commission has already looked at. There is nothing in the waiver that suggests there is a reason why you should have a different number than everyone else. So then the question is do you measure before -- which we don't get to look, you do -- just measure before to make sure. When you say we wouldn't know until after the fact, this is all pre-existing. MS. ATTWOOD: Well, and more importantly, I would say you can't. I mean, at least I -- you have been arguing that you have 100 percent. Well -- MR. HULTQUIST: We believe that these products that are sold on our network are 100 percent local. And the fact that the customer makes and receives long distance calls doesn't seem relevant to that inquiry to me. But the suggestion -- the suggestion that we could -- that we would act in bad faith and we would, in fact, start selling a product to customers saying -- MS. ATTWOOD: No. It's not -- it's really not a bad faith question. It is more of a question of the concept of what the Commission -- while it was going to ultimately take a look at the larger question, you know, whatever six weeks until the end of the year, whatever -- next year, the beginning of next year, we were going to start to look and we were going to refresh the record and see how this would work and look at the issue. The question was we needed to make -- to carve out those that were providing significant local service, not -- and that's -- I mean, it is -- MR. HULTQUIST: The supplemental order clarification though does not define -- does not say here is the definition of significant local service. What it specifically says is that, "The ILECs and CLECs" -- this is in paragraph 21 -- "have presented a reasonable compromise proposal under which it may determined that a requesting carrier has taken affirmative steps to provide local exchange service to a particular end-user and is not seeking to use unbundled loop transport combinations solely to bypass tariffed special access service." It nowhere says here is what we think is the definition of providing local service, this balance of traffic. It says this -- if we see that someone has this balance of traffic, to us that is a sign, a signal that they have taken affirmative steps to provide local exchange service. MR. STILLMAN: Can I raise one thing? MS. ATTWOOD: Yes. MR. STILLMAN: When we sell a UNE customer, a residential customer in Texas or New York or Pennsylvania, if in theory there were a customer who was making only long distance calls, the LEC would not be entitled to access revenues from that. We bought the platform. We are offering them local service which includes the ability to place and receive long distance calls. And they are being paid because we are paying them for the UNE. And then we get the revenues for access and we get the revenues -- the retail revenues from that customer. MR. GUMPER: And basically, if you were to be the sole local telephone company of that customer, option one would say, you know, you can use your UNEs. MR. HULTQUIST: But we are not even necessarily the sole local company. MR. GUMPER: Oh, I understand you are not because you described -- MR. HULTQUIST: Even in the situation Brad has described. MR. STILLMAN: No, no. But even if it is a -- I have two lines. And if I have one with MCI and one with Bell Atlantic, it is irrelevant to whether I have to pay you for access. I still don't have to pay you for access even if I am just using my second line purely for faxes and long distance. MR. SHAKIN: And you are exactly right. And that is why the Commission was concerned that when you made the leap from selling a loop as a UNE to a combination that you didn't supplant special access with what was supposed to be at least in terms of the competition that they looked at really for local. And you could have that ability. You are exactly right. That's the problem. The Commission said we have tho limit this because we haven't made that decision yet. MR. STILLMAN: But I am buying a platform. I am not buying a UNE. MR. SHAKIN: Well, but that is the entire point, is that the Commission said we recognize that once you have this, you can use it for whatever purpose you want. And so, therefore, we want to make sure that at least until we have made the determination that it makes sense to allow these combinations as a substitute for special access, a proceeding that they haven't had yet, that we are going to limit it so that you are only using it when you have got a significant amount of local. MS. ATTWOOD: Which is 50 percent in the platform. MR. SHAKIN: Exactly. MR. STILLMAN: But what we are not doing is we are not asking to convert what we would call special access customers. We are looking at an existing base of customers who have previously been sold a product, a local product just the same as we would sell a residential customer a local product. MR. SHAKIN: These are our special access customers. It doesn't -- MR. HULTQUIST: No, we are your special access customer. MR. SHAKIN: Right. MR. GUMPER: They are our customer. MR. SHAKIN: Right. But they are converting to special access. MR. HULTQUIST: No, it is customer provided. MR. SHAKIN: I mean, but the point is you are converting special access to -- MR. HULTQUIST: It is only special access -- MR. STILLMAN: It's only special access because at the time we bought it, there was no way to buy anything other than special access to serve these customers for local. And essentially -- MS. ATTWOOD: But to some degree, doesn't this boil down to, I mean, beyond the other things that it boiled down to, the question here is that you are -- you say when you purchase -- during -- in this configuration, the -- there is the potential ln this switched access configuration, there is the potential that 99.9 percent is used for long distance. And you are saying in this configuration, the potential is that 100 percent is used for local with some residual long distance. And the question is if we all can agree that they could be used for both to some degree, the order presumes in at least option three that there has to be a -- an initial showing that says, okay, 50 percent is local. It doesn't say 100 percent local in option three. It says 50 percent is local. And if we were to say, okay, in this limited circumstances, since the commingling piece you are still getting revenue for access in the way in which they have described this limited commingling of bringing in a substantially local circuit and putting it in the same pipe as others but we will still pay for the pipe being a special access pipe, it doesn't seem like you lose any revenue under that. But you are not willing -- at least I am not hearing, you guys aren't willing to say as an initial matter, yes, I could live -- I would start with the presumption of 50 percent. MR. GUMPER: Well, actually, it's -- MS. ATTWOOD: It's more than that? Okay. MR. GUMPER: No. It is 50 percent of the channels have to be. They are saying 100 percent of their channels are activated for dial tone. But the -- what it was, it was overall, it was one-third should be local exchange traffic, local voice traffic. That is where I think -- MS. DONOVAN-MAY: Can you measure local voice traffic? MR. HULTQUIST: If we were audited, we would have records and those records would say for every minutes, you know, what -- MS. ATTWOOD: Well, can you do it above -- MR. HULTQUIST: Yes. Let me say -- MS. DONOVAN-MAY: Would you know it is voice? MR. HULTQUIST: -- if the Commission determined that our waiver petition did present a case that the commingling prohibition should be waived in the case of WorldCom, we would then go back and make an evaluation of our circuits so that we could then go ahead and request conversion under the options that we thought applied with the commingling ban. But in our petition, we make the point that we believe that on our network, there is a stronger showing that local service is being provided than those options have. And that is the fact that -- MR. STILLMAN: But Jodie asked a question that didn't get answered which is can we tell what is local voice by looking at the minutes? MS. DONOVAN-MAY: Yes, because I know that one of the problems with these is that it is hard to measure. You know, and if we are talking about you guys being able to meet option three, it says you have to show that 50 percent of the traffic on each of the local dial tone channels is local voice traffic and that the entire loop facility has at least 33 percent local voice traffic. MR. HULTQUIST: We don't know if the customer is sending faxes. I mean, the question -- MR. STILLMAN: Or dialing the internet. MR. HULTQUIST: Yes. I mean, what we can tell is whether the customer is making and receiving local calls, INTRALADA toll calls or INTERLADA toll calls. MR. NAVIN: Is it even technologically possible to measure -- MR. HULTQUIST: No. MR. NAVIN: -- the amount of voice traffic at your -- MS. ATTWOOD: Well, how did the other CLECs do it? they have data -- MR. HULTQUIST: If all a customer does -- let's say all a customer does with their line is they have an office. They have their -- another office. And they send faxes back and forth. We have no way of -- MS. ATTWOOD: Well, that's local traffic. I mean -- MR. HULTQUIST: Yes, but we have no way -- that looks exactly like a local call to us. MR. SHAKIN: But just to be clear, you can measure what is local versus toll. MR. HULTQUIST: Yes. MR. SHAKIN: And you can do that on the existing thing before you convert it as if that is no different from what you are doing there. MR. HULTQUIST: As I said -- as I said, if the commingling prohibition were not there, we would make an evaluation about our circuits. Again, we believe that the showing we have proposed is a stronger showing that a significant amount of -- MS. ATTWOOD: Can I ask you guys on -- if -- on the commingling piece because I have been asserting that you don't lose money. Can you explain to me if I am wrong on that in the way that you have described it? MR. GUMPER: Well, I think that the issue on the commingling -- and quite frankly, it is an issue that is not only we are concerned about, but several of the facilities places are quite concerned about -- and that is if you allow the commingling UNEs and access services or published services, then the question is, is how do you prevent the commingling of things like, well -- the ultimate debate, and I must admit, you know, Jake and I had this discussion several times and I know what his view was. His view was, was that in the UNE remand order where they took switch -- the switching element of the platform off the table so you didn't have to provide switch -- unbundled switching -- MS. ATTWOOD: We are up to that. MR. GUMPER: -- that in his view -- MS. ATTWOOD: You are talking about four lines and above. MR. GUMPER: Yes, right. MS. ATTWOOD: Tab 50M. MR. GUMPER: In his view, because there is a long discussion there about how the RBOCs still have a 271 obligation to provide unbundled switching as a service. But since it is not a UNE, they don't have to price it at tel. rate, that someone could actually order the platform and just he will have a potential to price it differently. But if you allow commingling, basically, and someone could say to us after you take unbundled switching as a UNE off the table, well, I want the unbundled UNEs that I need to make up the platform except for unbundled switching. And now often unbundled switching as a service is meeting the 271 obligation and put them all together through commingling. MR. HULTQUIST: As fantastical as that sounds, that is not raised here because we are not asking the Commission to make a general finding as a matter of policy that commingling should be generally allowed. We are asking the Commission to waive the prohibition on commingling in this limited set of circumstances where our T-1 is connected to three-to-one multiplexing and DS-3 transport. So -- MS. ATTWOOD: Does that answer though that concern? MR. GUMPER: Well, no, because if someone comes to me with a T-1 group and says I want to multiplex it up and give me a UNE group rate for that group -- and then all it is is a CHAN term of loop, you know, because the Commission has already decided that you can have millions of restrictions on the UNE loop. MR. HULTQUIST: Yes. MR. GUMPER: So another area of the commingling is if you allow a UNE -- you know, if you allow a UNE look to be connected to a multiplex, what is to prevent the wholesale conversion of all the CHAN terms to the UNE price? MR. HULTQUIST: And we were aware of this concern. And the terms of the waiver we requested, we specifically asked -- stated that, "Channel terminations that are converted to unbundled loops may not be combined with interoffice transport under the terms of this waiver unless the circuits established thereby terminate ultimately on a WorldCom classified switch and they are used to provide exclusively local exchange and switched access services." So I believe we have addressed this concern that we could -- MR. LERNER: Who is it switched by? MR. HULTQUIST: Pardon? MS. ATTWOOD: The voice from the back. MR. LERNER: When you say local exchange is switched back to our service center, who is switching it? MR. HULTQUIST: We are. We are switching it. MR. LERNER: That classifies switching. MR. HULTQUIST: Yes. So I understand this concern that we would thereby since there is no restriction on UNE loops completely avoid the use restriction. I think we have addressed that. MR. GUMPER: Now, let me -- in terms of losing money, yes, I think we do lose money on this more than just that because at least from what my engineers have told me, there is nothing technically to prevent -- you know, if you were to grant this waiver, for them to go and say to their customer who they are currently providing this local service to, oh, by the way, why don't you take your long distance traffic that probably now is only special access pipe going to their POP and putting that traffic on those circuits and disconnecting the special access. MS. ATTWOOD: And why isn't he right on that? MR. HULTQUIST: First, again, the point we keep making, that the products that the customer gets from our LD switches are not available first of all on our local switches. MS. ATTWOOD: But aren't you -- well, aren't you incented though? Are you incented to make those products just as good because you can probably lower the price because you are going to avoid special access -- MR. HULTQUIST: I think as Don started describing, before you do it, first of all, we would have to change the software loads on our local switches if the toll switches have access to specialized routing instruments, databases. Then we would also have to put sufficient transport capacity in the network to do it. Again, our toll network has grown over the course of 20 years or more. The capacity that exists into those toll switches is far greater than the capacity that exists into our local switches. So to effectively make the conversion to take advantage of a situation that is as far as we know interim that the Commission is going to revisit is not practical. MR. STILLMAN: Plus we would have to strand all the -- if we were to do that, we would be stranding all of that long distance capacity in our long distance network. MR. GUMPER: Well, you would still be using it. You would just be connecting to the cross-connects between your classified switching of your toll groups. MR. HULTQUIST: Yes, and the customer would have a degraded service because instead of being able to have access to a product like virtual private network, they would now have to have two stage dialing where they would dial one number through the classified switch to get access to the toll network. And then they get access to the priority -- MR. GUMPER: But presumably these people who you started on local service to -- if they are doing any long distance, that is how they are doing it today, through that -- MR. HULTQUIST: No. Many of these -- MR. GUMPER: Well, you are saying that you have switched -- MR. HULTQUIST: -- many of these customers have connections both through our local network and to our toll network. MR. SHAKIN: It may well be that there are customers that wouldn't find it economical to switch because they need the features that you say you exclusively offer over your dedicated versus through our special access and through your switched access service. But that doesn't mean there is not going to be a significant number who you could say, hey -- and that it is cheaper. MR. HULTQUIST: And that is why I have said that if, you know, the waiver of the commingling prohibition were granted and any time we were audited to show that, in fact, it was sham, that these customers were not actually getting local service, that all they were doing was making and receiving toll calls, we would be willing to participate in -- MS. ATTWOOD: But if there is such a vast majority of the customers that you have are, in fact, not shamming, you are making -- you want to us to adopt a presumption here. Why is it so hard for you to take the burden and affirmatively assert that these customers are, in fact, consistent with an appropriate commingling obligation? MR. HULTQUIST: Dorothy, I think I have been clear. If only the commingling prohibition were waived, that is our biggest barrier. If only that were waived, if the waiver were only granted for that, we would go back and we would make a re-evaluation. We believe that the showing on our network, that a circuit is connected to a classified switch, i stronger than the showing in the three options that local service is being provided since the only thing we provide is local. But we would go back and re-evaluate. MR. SHAKIN: And if you could make that showing, then why couldn't -- and you've got so many of these customers that are predominantly local, then couldn't you MUX them up onto a DS-3 with predominantly local on a DS-3? MR. HULTQUIST: To do the re-grooming you are suggesting could only be done during maintenance windows. We would need the cooperation of you guys. It would take years. It is far -- there is no reason to impose that hardship of outages on our customers when there is no reason to take them off their current DS-3. MR. SHAKIN: But most of them are local. That is what -- MS. ATTWOOD: No, no. But he is saying in any given configuration, you may have one that is the T-1 -- MR. HULTQUIST: There may be only one local T-1 on that MUX. MS. ATTWOOD: Right. And so they have to go through and figure out how they would MUX it. I mean, I hear that. I mean, you can't -- MR. HULTQUIST: To suggest that it would be in any way practical to re-groom our network to segregate the local T-1s from the non-local T-1s is not that -- could not happen in a practical manner. MS. ATTWOOD: You guys ask questions. MS. DONOVAN-MAY: Okay. Is there -- just going back to the harm question on the commingling. I mean, I understand you are asking for a limited waiver until we figure out for further notice. You know, is there any way to make -- is there anyway to make the commingling waiver narrow enough so that the precedent that Verizon -- MR. HULTQUIST: Sure. MS. DONOVAN-MAY: -- is worried about doesn't happen? MR. HULTQUIST: Sure. All you have to -- the way that -- the only thing that we are waiving is the prohibition on commingling that is contained in the third supplemental -- I mean, the supplemental order clarification. In so far as the Commission as any other prohibitions on commingling, I am not aware that the Commission has any other. In fact, we believe that -- and Brad keeps talking about our UNE platform customers. Those UNE platform customers are connected to feature group D-trunks that we order as access services today. They are fully commingled as far as we know. But maybe the Commission does have other prohibitions on commingling. We are only asking that this particular prohibition on commingling -- MS. DONOVAN-MAY: Where is the prohibitions besides for this order? MR. HULTQUIST: It appears in each -- MS. DONOVAN-MAY: Does Verizon have it in their access tabs? MR. HULTQUIST: I have no idea. MR. GUMPER: No. The Commission hasn't addressed it because we basically don't -- you know, if someone were to come to us and say I have some UNE loops and we want to connect them up to a special access circuit, we would say, no, we don't allow commingling. MS. DONOVAN-MAY: But is that -- I mean, if we waived it, is there someplace else where you can say commingling -- there is a commingling prohibition? I mean, it is not in your tariffs? It is not in your interconnection agreement? MR. GUMPER: No. It's just that -- it's just that, basically, the issue came up in this. MS. ATTWOOD: Well, we would have to make clear that this extended only to this. MS. DONOVAN-MAY: Right. MS. ATTWOOD: Can you tell me more though, I mean, you said -- and hate issue isn't whether it cost you money, but the question -- because we are really -- the issue really is whether -- I just wanted to understand on the commingling piece of it why that is critically important. And the two reasons you have given, just so I understand and make sure I get it is, one, that you have concerns about the fact that a -- in those areas where a platform isn't available, a platform could be recreated in effect where you have some concerns about that. The second is the concern that as an engineering matter, removing commingling would permit access bypass. And there you are saying -- there you guys have said, no, we recognize that and we are trying to limit this as -- to just the commingling piece of the DS-3, in effect, right? I mean, you are not -- MR. HULTQUIST: Yes. I mean, there is language -- MR. GUMPER: Well, I think the issue was that also since the Commission doesn't have any prohibitions on UNE loops, there was always the concern that if you were allowed to connect a UNE loop to, you know, a multiplex circuit, then it would be pretty hard to tell a customer that they -- why they couldn't convert their CHAN terms into UNE loops and connect them to a multiplex circuit -- an access multiplex circuit. MR. HULTQUIST: And the terms of our waiver, specifically subsection B on page 3 of the waiver petition, are meant to remove that concern from the table. MS. ATTWOOD: Then I guess I just -- not necessarily now, but if you guys could look at that and tell me whether that removes the concern that you have from your perspective, obviously. MS. DONOVAN-MAY: In channel terms at least. MS. ATTWOOD: More questions? MS. DONOVAN-MAY: You are also asking for a waiver of the co-location requirements? MR. HULTQUIST: There are a limited number of circumstances where the hand -- we do not take the hand-off at our co-location. It is multiplexed onto a -- MS. DONOVAN-MAY: So there isn't always a co- location of that. MR. HULTQUIST: Yes. It is not the majority of the circumstances. But it is indistinguishable. The T-1 comes to our classified the same as if we were co-located. The fact that we were co-located or not does not affect the service that is being provided to the customer. That is why -- MS. DONOVAN-MAY: But you couldn't meet option three because it still requires -- option three doesn't have a -- MR. HULTQUIST: No, actually -- MS. DONOVAN-MAY: -- co-location requirement. MR. HULTQUIST: -- option three doesn't require co-location. MS. DONOVAN-MAY: Right. So that is what I -- so you could at least meet option three in those circumstances. MR. HULTQUIST: Yes, the -- we asked for the co- location to be removed if the -- in case the Commission accepted our suggestion, our argument that there is a stronger showing that local is being provided when it is connected to our Class 5 switch. In that case, we would want also to make sure that then we wouldn't have some circuits where it would come back and we hear, well, sorry, you are not co-located. MR. SHAKIN: So if you are okay with meeting -- and I understand you wouldn't say you are okay, but basically said if that the Commission felt that was appropriate, you would meet the option three requirements for traffic usage, then you don't really need a co-location waiver. MR. HULTQUIST: We -- in that circumstance, if that were done, we at least would have something we could do. Our biggest problem with the supplemental order clarification is it seems to say on the one hand that it is intended to allow carriers that provide local service to convert special access to UNEs. But when we go and look at it, we can't find a single circuit that it allows us to do that for. MR. GUMPER: Well, that's not a completely true efficient count. A few thousand, several thousand of them, at least in our territory. MR. HULTQUIST: Well, out of our base, there is a small minority with the local service network provider. So, obviously, if things were changed and we could look at it differently, we would. I still don't believe that the options that are in the supplemental order clarification are more indicative of providing local service than what we have suggested. MR. GUMPER: Well, but I -- again, you keep saying that. But, again, the intent was that exchange access was not to be considered equivalent to local exchange. MR. HULTQUIST: And prior to the supplemental order clarification, it was always clear that what you were concerned about was special access. It is only in the wake of our waiver that all of a sudden this concern about switched access -- MS. ATTWOOD: I know, but we have indicated -- MR. GUMPER: No, that's not true because the order talks about significant local exchange and it differentiates that from exchanged access. It doesn't say significant local exchange includes exchange access. MR. HULTQUIST: The order never says that local exchange service does not include switched access, that switched access -- that somehow there is a different impairment analysis for switched access than there is for local exchange in order to -- MR. GUMPER: But the order basically says, "We find the requested carrier is providing a significant amount of local exchange service", then it goes to meet the criteria. In the second one, it talks about requesting -- "The carrier certifies that it provides local exchange and exchange access to the end-user", and then goes on and talks about how much has to be local dial tone and how much has to be local voice. MR. HULTQUIST: But the suggestion -- but the suggestion that there is -- MR. GUMPER: Local voice is not toll. MR. HULTQUIST: The suggestion that there is a different impairment analysis for exchange access than there is for local clearly is intended to get to a different impairment analysis for special access service than there is for local, not a different impairment analysis for switched access service. MR. SHAKIN: But this is our switched access service that you are converting. And one of the fears that we had -- and this has been part of the debate since the beginning of this -- is that once you make UNEs which make special access -- a cheap alternative to special access you are not only going to be deviating customers from special access. You are going to be deviating customers from special access -- MR. HULTQUIST: That only happens if there is no use restriction. The use restriction removes that concern. MR. SHAKIN: But -- and that is right. And that is why the use restriction has to be based on local, not switched access. MR. HULTQUIST: And the only product we sell off our classified switches is local. MS. CAREY: I have a question for you, Hank. Does the Commission need to find in ruling on your waiver if it were to approve what you wanted, does it need to find that switched access is included as part of local? MR. HULTQUIST: I certainly hope not. I think the Commission has already found that in other places. And I will send the information from the first report and order where the Commission specifically noted that the provision of switched access was a byproduct of the provision of local service. I think they have already found that. I don't think it has to be addressed here. I think that the Commission could treat our concerns -- you know, as I have said, the minimal thing that we -- that we would need waived to get conversion of our circuits is the commingling prohibition. We have also suggested that because of the way our network is set up, because we cannot provide our toll products over our local switches, that the fact that a circuit terminates at one of our local switches is a better showing that local service is being provided than what is in the current options. So -- but the Commission -- you know, maybe the Commission will decide that, you know, for whatever reason, it can't accept that at this time. MS. CAREY: But would you be able to meet the usage requirements? MR. HULTQUIST: As I said, we will go back and -- MS. ATTWOOD: He is going to start telling us that he has been clear. MR. HULTQUIST: We will go back and re-evaluate. MS. CAREY: Yes. MR. SHAKIN: I'll tell you what I heard and then - - I heard that they can measure it, that they may not know sitting here how many qualify. But that they believe that they could qualify after the fact. So presumably, they could -- they could measure before the fact -- they could measure before the fact, but they could meet option three in terms of co-location. So that is not really an issue because once you take away the measurement issue, you have taken away the co-location issue. And that what they are fundamentally asking, you still have a fundamental disagreement. And you might not even disagree with it all this time -- is the commingling. MR. HULTQUIST: Yes, i agree with that. MS. ATTWOOD: And what would be useful for me, and I know you have done a lot of paper on this, but if on that issue, if you can just summarize in the ex parte that you do for this what you view to be the greatest problem with the commingling -- or what it is -- what it is intended to serve, understanding what you have heard today which is an attempt in this order to narrow and address the ability to circumvent the -- their service -- their access -- circumvent -- you know what I am saying. MR. SHAKIN: I know where you are going. We may not do it, if that is okay, as the ex parte for this -- MS. ATTWOOD: No, fine you can do it separately. MR. SHAKIN: -- because that is the end of it. And it is not going to be tomorrow. MS. ATTWOOD: It would be helpful I think just again to put it down because I think this has been very useful for us to try to identify the rough points. And I don't -- do we have other questions? MS. DONOVAN-MAY: Can I -- MS. ATTWOOD: Yes. Yes, you can. MS. DONOVAN-MAY: At the risk of repeating, if we don't find affirmatively that switched access is local exchange service for purposes of option three in this order and you guys go back and re-evaluate and find you can meet option three and we get rid of the commingling restriction so that you can actually do it, what happens if Verizon comes back and audits you? Are they going to then say you don't meet option three because you are using switched access? MR. HULTQUIST: It would be the same as the audit of anybody else I presume. MS. DONOVAN-MAY: I mean, are you going to be back in the same position where -- MR. HULTQUIST: No, no. MR. GUMPER: I assume -- what I heard them say was that they can differentiate between local, INTRALADA toll and INTERLADA toll. And under option three, if they went back and they said, okay, here is a customer over a period of, you know, a few months. They are averaging 40 percent local traffic and 60 percent toll traffic. Then presumably if you eliminated, you know, the commingling requirement, that would -- the customer qualified. MS. DONOVAN-MAY: Okay. MR. GUMPER: So that is really if you went back and audited and found that the customer only had ten percent local traffic and 90 percent toll traffic, then that wouldn't qualify. MS. CAREY: But I think what Jodie is getting at is that there is a fundamental disagreement over the definition of local. MS. DONOVAN-MAY: No. I think -- MR. SHAKIN: I think we are past that. I think we are past that. I mean, yes, we disagree. But I think what they are saying -- and, again, you can tell me if this isn't what you are saying -- but my translation is we don't like it. We think we have got a better definition. But if you say that you want to go that way, we can meet option three and we do meet option three. We just can't live out -- MR. HULTQUIST: Only the extent to which we meet option three and we will order accordingly. MR. GUMPER: But we are clear that local voice doesn't include toll. MR. HULTQUIST: Right. If -- when we talk about option three, we are talking about -- MR. STILLMAN: Right, but that's -- that was my question as far as option three. MS. DONOVAN-MAY: That's why I asked about measuring voice. MR. STILLMAN: We can't distinguish between voice and other local traffic. Local is local. That is what our records are going to show. MR. SHAKIN: Yes. And my guess is if we ordered you, there is nothing that we could do to find otherwise. MR. STILLMAN: We can't distinguish -- MR. HULTQUIST: You can't hear if there is a modem on the line. MR. SHAKIN: Right. Yes, no, I understand that. I think that -- MS. ATTWOOD: You've got it pretty well down on recip. comp. Okay. MR. REYNOLDS: Let me -- as long as we are assigning homework, to the extent that MCI is going to go back and give us some of the background on the first report and order and the discussion of how exchange access is a byproduct of local, could you also -- while you are doing that, I think you need to put it in context of what we have said in the clarification order and particularly looking at paragraph 14 and how those two things jib because there is - - I mean, there is language in paragraph 14 that talks -- it appears to create a distinction, how -- MR. GUMPER: Well, but let's be clear. In the first report and order, the debate at the time was whether or not one could use UNEs for exchange access in order for the long distance carriers to come in and basically say I don't want to pay you access services anymore. I want to buy UNEs. And what happened, if you go back and take a look at that, the reality was when the Commission talked about exchange access and local exchange, they were really using a model of a single-line customer because they basically said, well, if you win the customer and you are providing the local dial tone, then you are providing the toll service, too. And that is why it was really in relationship to - - you won the local customer. They really never discussed during that whole -- you know, at least in the record, they never really got to the point of what happens if the customer is so big that, in fact, they use the special access and local dial tone lines because, you know -- then the exchange access quite often is dumped on a special access line. MR. HULTQUIST: No, what we have been saying is in WorldCom's network what happens is for their special access lines, they go to these switches, for their local switch service, they go to these switches. And that is really -- MR. SHAKIN: In which case you shouldn't have any problem meeting the usage requirements because presumably the customers for their long distance calls are using those other special access circuits. So you shouldn't have -- MR. HULTQUIST: Well, we do not have that information at this time. MR. SHAKIN: I know you don't now. But just based on the way you describe it, one would assume that you would have a higher proportion of local -- MR. HULTQUIST: Maybe you guys -- maybe you guys have information about your customers' usage patterns that you could put in the record. MR. SHAKIN: That's irrelevant, but -- MR. HULTQUIST: No. MR. STILLMAN: It's not really irrelevant. MR. HULTQUIST: We are working with you. I mean, if your T-1 local customers have a certain usage pattern -- MR. STILLMAN: If theirs is 90/10, making us show 30 percent local calls is -- would put us at a competitive disadvantage then, wouldn't it? MS. ATTWOOD: Well, that's not -- I think that that wasn't the intent of the supplemental order and the concept of putting -- MR. GUMPER: The local -- yes, the local -- you know, if we are talking about PBX customers that we are providing dial tone to, number one, we don't really have a lot of toll on that because that usually goes directly to a POP where there is INTRALADA or INTERLATA toll. So our percentages of local usage on those lines probably is very high, a lot higher than for -- MR. SHAKIN: Yes, and I would assume -- MR. HULTQUIST: We would intend the same thing. We don't know. MR. SHAKIN: You should find the same thing based on your description of the network. MR. HULTQUIST: We don't know, but -- we don't know what your percentages are. And I would love to know. MR. SHAKIN: But, I mean, given your description of the network, a third should be easy. I mean, I would just -- and I understand, it is your network and you don't know and I am just guessing. But it just makes sense if you are siphoning off the long distance traffic, what is left should just be the local. MS. ATTWOOD: Well, let's take this back and think it through. Do you guys have more questions or anybody have anything else? Okay. Well, thank you very much. It was really helpful. And before we devolve, I think that it clarified a lot of points for us. And we may have further questions that we discuss. Okay? Thanks a lot. MR. HULTQUIST: Thanks, guys. MS. DONOVAN-MAY: Thank you. (Whereupon, at 2:54 p.m. on Thursday, November 16, 2000, the hearing in the above-entitled matter.) // // // // // // // // // // // // // // // // // REPORTER'S CERTIFICATE CASE TITLE: EELs Debate On Waiver Request, WorldCom versus Verizon HEARING DATE: November 16, 2000 LOCATION: Washington, D.C. I hereby certify that the proceedings and evidence are contained fully and accurately on the tapes and notes reported by me at the hearing in the above case before the Federal Communications Commission. Date: 11/16/00 John DelPino Official Reporter Heritage Reporting Corporation 1220 L Street, N.W., Suite 600 Washington, D.C. 20005-4018 TRANSCRIBER'S CERTIFICATE I hereby certify that the proceedings and evidence were fully and accurately transcribed from the tapes and notes provided by the above named reporter in the above case before the Federal Communications Commission. Date: 11/24/00 Bonnie J. Niemann Official Transcriber Heritage Reporting Corporation PROOFREADER'S CERTIFICATE I hereby certify that the transcript of the proceedings and evidence in the above referenced case that was held before the Federal Communications Commission was proofread on the date specified below. Date: 11/28/00 Lorenzo Jones Official Proofreader Heritage Reporting Corporation UNITED STATES FEDERAL COMMUNICATIONS COMMISSION HERITAGE REPORTING CORPORATION Official Reporters 1220 L Street, N.W., Suite 600 Washington, D.C. 20005-4018 (202) 628-4888 hrc@concentric.net 3 Heritage Reporting Corporation (202) 628-4888 Heritage Reporting Corporation (202) 628-4888