Petitions to Terminate the Rural Exemption

1. Petitions to Terminate the Rural Exemption Kathleen M. LaValle March 9, 2007 UT Telecom Conference Austin, Texas

2. StatutoryTrigger • Section 251 (c) obligations do not apply to a rural teleco “until such company has received a bona fide request for interconnection, service, or network elements” and State commission terminates the exemption. FTA § 251 (f)(1)(A). • “Within 120 days after the State commission receives notice of the request, the State commission shall terminate the exemption if . . .” § 251 (f)(1)(B). • Compare “Upon receiving a request for interconnection, services, or network elements . . ., an [ILEC] may negotiate and enter into . . .” § 251 (a) (1). “During the period from the 135th to the 160th day . . . after the date on which an [ILEC] receives a request . . .” either party may petition for arbitration.

3. Cart Before a Horse Named Trigger • Lack of Standing to Complain • Lack of Ripe Complaint • Distinct from Carriers Resisting Common Carrier Status • Attack on Wholesale Carrier Rights to Interconnection

4. TWC Order, March 1, 2007 • “We conclude that state commission decisions denying telecommunications service providers the right to interconnect with [ILECs] . . .are inconsistent with the Act and Commission precedent and would frustrate the development of competition and broadband deployment.” • At issue: Nebraska Commission determination that Sprint is not a “telecommunications carrier” because wholesale relationship with TWC is an “individually negotiated and tailored private business arrangement.”

5. TWC Order – cont’d • “[T]he question at issue in this proceeding is whether the relevant wholesale telecommunications ‘services’ are offered ‘directly to the public, or to such classes of users as to be effectively available directly to the public.” • “[T]he rights of telecommunications carriers under sections 251 (a) and (b) apply regardless of whether the telecommunications services are wholesale or retail, and a state decision to the contrary is inconsistent with the Act and Commission precedent.” citing Nebraska Arbitration Order at 9, paras. 25-26.

6. TWC Order – cont’d • Cited NE Order, Par. 25: “Sprint’s arrangement with Time Warner is an individually negotiated and tailored, private business arrangement shielded from public review and scrutiny” and, therefore, Sprint has not shown it is a “telecommunications carrier” • Cited NE Order, Par. 26: Not a common carrier offering because Sprint’s wholesale agreement is a “private contract” and is “treated by Sprint as confidential,” and is “individually tailored” to particular cable provider.

7. TWC Order – cont’d • “Apart from encouraging competition for wholesale service in their own right, ensuring the protection of section 251 interconnection is a critical component for the growth of facilities-based local competition.” • “We further conclude that such wholesale competition and its facilitation of the introduction of new technology holds particular promise for consumers in rural areas.”

8. Necessity to Terminate Exemption • W.D. Tx. Brazos decision that exemption must be terminated before rural ILEC duty to negotiate interconnection arises • Recognition that 251 (a)(1) imposes a universal duty on all telecom carriers to interconnect; 251 (b) (2) imposes duties on “all local exchange carriers” including number porting, dialing parity and reciprocal compensation. Exemption applies only to 251 (c) obligations.

9. Brazos – cont’d • W.D. Tex. Holding: Upheld PUC determination that no duty to negotiate before exemption was terminated. Because RLEC was exempt from duty to negotiate, and duty to negotiate is set forth in 251(c), there are no “open issues” for PUC to arbitrate under 252. • On appeal with abatement requested in light of OWTC FCC Petition.

10. 32582 Final Order • Sprint made a bona fide request for interconnection. Sprint will be acting as a common carrier. Pricing variations do not constitute failure to offer services “indifferently” • RLEC admitted request is technically feasible. Relevance of other voluntarily negotiated ICAs. • “Unduly economically burdensome” 8th Cir. Test: “whole of the economic burden the request imposes.” Take into account will be paid cost of meeting request.

11. 32582- cont’d • 251 (f)(1)(A) focus of economic burden analysis on “such request” v. overall impact • Agree with Staff assessment that “current supra-competitive profits would enable the company to withstand the economic impact of interconnection with Sprint.” • Notes RLEC testimony claiming Sprint projected line loss analysis underestimated economic impact. RLEC “prediction that it could suffer line loss of 20% after only two years” found “to be insufficient to show an undue economic burden.”

12. 32582 - continued • Consistent with 254 universal service principles • “[W]ill bring the first, or one of the first, competitive wireline voice service offerings to the areas served by Consolidated.” Consistency with goal of fostering competition and providing advanced service on par with services available to urban areas.

13. HOW RURAL?