[00:00:05] Speaker 00:
Case number 19-1164 et al.

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Comptel doing business as encompassed petitioner versus Federal Communications Commission and United States of America.

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Mr. Murray for petitioner Comptel, Mr. Gallardo for petitioner California Public Utilities Commission, Ms.

[00:00:23] Speaker 00:
Sundaresan for the respondent, Ms.

[00:00:25] Speaker 00:
Cooper for the intervener.

[00:00:28] Speaker 04:
Morning, Mr. Murray.

[00:00:29] Speaker 04:
When you're ready, please proceed.

[00:00:31] Speaker 08:
Good morning, your honors.

[00:00:32] Speaker 08:
May it please the court, David Murray for petitioner and compass and its members.

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Our challenge is limited to the commission's grant of nationwide forbearance from avoided cost resale under section two 51 C four for time division multiplexing lines or TDM purchased by government and business customers.

[00:00:50] Speaker 05:
Would you please explain something for me?

[00:00:53] Speaker 08:
Yes, sir.

[00:00:55] Speaker 05:
What is the relationship between TDM, which

[00:01:00] Speaker 05:
I'm not sure I thoroughly understand.

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And copper wires, copper loops.

[00:01:06] Speaker 08:
TDM is delivered over copper loops, your honor, and the distinct... What is TDM?

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It's a business type of line that's used, but it's a DSO line.

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It's the same line that would be used for voice in your home.

[00:01:22] Speaker 05:
It's a line.

[00:01:24] Speaker 08:
Yes, it's a physical line.

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It's a copper loop that goes to the house.

[00:01:29] Speaker 05:
But as I read the brief, it doesn't have to be copper.

[00:01:33] Speaker 08:
No, Your Honor, it can be offered over fiber.

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But the difference is that the fiber is not line powered.

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So if your VoIP service goes out in an electrical outage, you have no voice service.

[00:01:46] Speaker 05:
No, I understood that.

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I understood that.

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So TDM is a method of transmission.

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And copper wires are a medium of that transmission, not a method.

[00:02:00] Speaker 08:
That's correct, Your Honor.

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And the record showed there are 28 million of these line-powered copper lines that government and business customers are purchasing.

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And we compete with ILEX for those 28 million lines.

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Half of our customers are located in rural areas

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where the line powered copper TDM is the only available voice service.

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And they include local post offices, schools, libraries, first responders, and myriad others where there's no internet broadband and there's no VoIP.

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Where VoIP is generally available to the other half of our customers, they too purchase line powered copper lines in addition to VoIP because of that distinctive line powered feature.

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And those TDM lines, those line powered lines, your honor, are three to four times more expensive than VoIP.

[00:02:55] Speaker 05:
Well, don't say TDM lines because you're talking only about copper, aren't you?

[00:02:59] Speaker 08:
I'm talking about the line powered copper.

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So I'll try to refer to it that way.

[00:03:04] Speaker 05:
Please don't use TDM then because it's going to confuse me because that includes both copper and fiber.

[00:03:10] Speaker 08:
Yes, I will use line powered copper, your honor.

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And the customers that buy that line

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copper.

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In addition to VoIP, there's hundreds of thousands of these customers, and they range from federal and state agencies to banks and retail chains, and they demand them to ensure critical communications, especially given increasingly severe climatic events and blackouts such as in California.

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In many cases, these line-powered copper loops are mandated by law.

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For example, they're required for time synchronization of the national airspace system and as a fail safe for prescription drug fulfillment by pharmacies and even for daycare centers.

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Council, may I show you my simple minded approach to this case?

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Isn't it fair to say that the legacy LECs are going

[00:04:11] Speaker 05:
are diminishing in their role in the market rapidly?

[00:04:18] Speaker 08:
In certain areas they are, Your Honor.

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Let's talk nationally.

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I've looked at statistics and there is a dramatic decline in their position in the market as different modes have come in.

[00:04:34] Speaker 08:
That's correct, Your Honor, but where they still maintain a local monopoly is over these lines

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these copper line powered loops to business establishments and government agencies.

[00:04:46] Speaker 05:
Well, yes, that's like saying after the automobile came into existence, there is a company that built carriages, horse carriages that still had a monopoly.

[00:05:01] Speaker 08:
Well, Your Honor, just because something is old doesn't mean it's not useful.

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And there are large parts of rural America

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where the line power copper loop is the only voice service that's available.

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Are these non-price cap companies?

[00:05:19] Speaker 08:
No, these include price cap companies.

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Most are non-price cap, right?

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No, that's not the case, Your Honor.

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And in the record, we showed that half of our customers are in rural areas served

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by price cap lex.

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That's why we are able to compete with them using the avoided cost statute.

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It gives us the opportunity to go in and offer a competitive alternative.

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And we are the only alternative in those areas.

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But Mike, go back to my point.

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Nationally, the LECs are dropping like flies.

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Their business has dropped in the last

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what, five years from 80% to down to 37%.

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All the other intermodal or other modal groups are killing them, right?

[00:06:14] Speaker 08:
Yes, but what those other intermodal groups cannot offer, Your Honor, is the line powered feature of copper loops.

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And Your Honor, the ILEX have not retired those loops and they haven't retired them because there's still a very persistent and strong demand

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28 million of these lines are still being sold, and we're competing vigorously for them.

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And we are the only competitive alternative for those lines, Your Honor.

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Now, the FCC may want to start drawing different lines, but if you go back to their avoided cost resale orders, in the Terry case, for example, it was one single exchange serving 605 households in the

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Omaha order, it was 24 wire centers in the Omaha MSA.

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So the number is not necessarily this positive here, even though it's a very nationwide strong persistent demand for these line powered copper loops.

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And what has what what this commission did.

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Isn't it diminishing

[00:07:16] Speaker 08:
No, no.

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The record showed that the demand for these line powered copper loops is persistent.

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And in fact, with recent climatic events and the rolling blackouts you're seeing in California, they may become even more valuable.

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But never before this order, your honor, has the commission looked at the retirement of these copper loops as having anything to do with what they claim is the purpose for the forbearance, which is to promote next generation deployment.

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And that theory, your honor, counters 20 years of FCC precedent, starting with the local competition order in 96, all the way through to a 2015 order involving US telecom petition, where the commission has said,

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The top-down pricing methodology of avoided cost resale imposes none of the costs or burdens that would, it's neutral as to whether or not it has any effect on facilities-based deployment.

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This decision turns that on its head and it does so without acknowledging it.

[00:08:21] Speaker 05:
And your honor, the- Well, I thought the order did acknowledge who was going to force

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the CLECs to develop their own facilities and be more effective competitors.

[00:08:37] Speaker 08:
Yes, but Your Honor, first of all, it's not economically feasible, and Congress did not intend in the 96th Act for CLECs to be replicating legacy copper loops when it's wasteful.

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But secondly, even if we deploy fiber, even if we deploy our own facilities for next generation networks, there's no technology today that has the line powered feature of the copper loop.

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As I said earlier, it may be old, but it's still very useful.

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And as long as that market persists, the commission has in the past recognized that there's an importance of having a competitive alternative for that service.

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And we have been the only competitive alternative.

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And the only way we've been able to do that is through avoided cost resale.

[00:09:28] Speaker 05:
But you know, excuse me.

[00:09:33] Speaker 05:
It's okay.

[00:09:33] Speaker 05:
Go ahead.

[00:09:35] Speaker 05:
No, go ahead.

[00:09:36] Speaker 05:
David, go ahead.

[00:09:38] Speaker 05:
Sorry.

[00:09:39] Speaker 07:
Why don't you finish?

[00:09:39] Speaker 07:
I didn't mean to interrupt you, Larry.

[00:09:41] Speaker 07:
Go ahead and finish your question.

[00:09:42] Speaker 07:
I didn't mean to interrupt you.

[00:09:44] Speaker 07:
Oh, okay.

[00:09:45] Speaker 07:
So let me make sure.

[00:09:47] Speaker 07:
I have a question that's very similar to Judge Silverman's question, and I just want to make sure I understand this.

[00:09:54] Speaker 07:
Isn't it true, wine power copper loops will remain available, correct?

[00:10:00] Speaker 08:
Yes.

[00:10:01] Speaker 07:
It's a question, there's two, we'll go ahead and finish.

[00:10:07] Speaker 07:
Yeah.

[00:10:08] Speaker 08:
As you say, the commission notes, I think it's at footnote 51 or 52, that there's, that ILEX can retire the copper loops, but they haven't.

[00:10:18] Speaker 07:
Yeah, but they haven't done that yet.

[00:10:20] Speaker 07:
That's correct.

[00:10:20] Speaker 07:
As long as they don't, they remain available.

[00:10:22] Speaker 07:
So I have two questions about that.

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Number one,

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So what your concern is really about then is price, correct?

[00:10:31] Speaker 07:
Correct.

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That's what this is all about.

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And the commission says, well, price is not a concern because, you know, there's always 201 and 202 to ensure prices are reasonable.

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And we think, you know, facilities based alternatives will keep the prices down, right?

[00:10:50] Speaker 07:
That's the argument.

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So what's wrong with that argument?

[00:10:54] Speaker 08:
Well, in the areas where the ILX have the line powered copper loops, and there is no broadband.

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And these are a lot of areas in the country.

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If you look at the FCC's 2018 second wireline order issued the year before this order, the commission rejected suggestions that broadband VoIP is a substitute for line powered copper loops, precisely because there's large rural areas in the country that don't have

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broadband, they don't have access to VoIP, and Judge Tatel on the same day that this order was issued, the commission launched an initiative, a multi-billion dollar 10-year initiative to try to bring more deployment of fiber and broadband into

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rural areas of the country, and some of that money is going to U.S.

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telecom members like Verizon, like Frontier, like Consolidated, and that is because they are serving areas where our customers exist, where these loops are solely in their control, and the only means that we have to discipline price is through the ability to get avoided cost resale.

[00:12:06] Speaker 08:
And we get that either through

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invoking the discount itself, or as Congress intended under 252A1, to do it through negotiated wholesale agreements.

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But we only get those agreements if that backstop of avoided cost resale is in place.

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And Your Honor, we put into the record that, and this was a November 2018 submission, that when the ILEX filed their petition, they stopped negotiating with our petitioners

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for avoided recost contracts.

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And as a consequence of that, and they've continued to not negotiate with us through the six-month transition period.

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And because these contracts are typically only two or three years, we're out of, they're either expired or they're about to sunset.

[00:12:57] Speaker 05:
And then we'll be- If I may- You mentioned, this is the last part of this.

[00:13:06] Speaker 07:
All right, well, just the last question.

[00:13:08] Speaker 07:
In your opening comments and in your brief, you mentioned the risk of the forbearance to the air traffic control system.

[00:13:17] Speaker 07:
Yes.

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So are there air traffic control facilities in areas of the country where there is no broadband?

[00:13:27] Speaker 08:
There are.

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And also, Your Honor, it's mandated by federal law that these copper loops be maintained as fail safes for time synchronization of the national airspace.

[00:13:38] Speaker 07:
Well, did the FAA complain?

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Did they file comments on this rulemaking?

[00:13:44] Speaker 08:
I don't recall, Your Honor.

[00:13:46] Speaker 08:
I mean, we have been vigorous.

[00:13:47] Speaker 07:
I mean, I looked.

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I thought to myself when I read your brief, well, if there's a risk to air traffic control, one would expect

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the FAA to have raised its concerns with the FCC, but I couldn't find it.

[00:13:58] Speaker 08:
Well, I think, Your Honor, that the difference here is it's not that the lines won't still be available to them, but they will now have only one option for purchasing those lines.

[00:14:07] Speaker 08:
And that'll be fine.

[00:14:08] Speaker 07:
That's my point.

[00:14:08] Speaker 07:
That's my point.

[00:14:09] Speaker 07:
Wouldn't the FAA worry about that?

[00:14:11] Speaker 07:
Wouldn't that have been of concern to the FAA?

[00:14:14] Speaker 08:
Well, they are a customer, Your Honor, of our clients.

[00:14:19] Speaker 08:
And we have been representing their interests

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both before the FCC and now in this appeal.

[00:14:27] Speaker 05:
Council, may I follow up on Judge Tatel's question?

[00:14:33] Speaker 05:
If I understand your concern is the possibility that copper wires, which are diminishing in use, but they're still in existence, will be increased in price to you.

[00:14:47] Speaker 05:
That's your objection, isn't it?

[00:14:49] Speaker 08:
Well, they'll be increased to the point where we can no longer compete, Your Honor, because the critical price, and this was what the FCC noted in its Omaha order, that the 251B1 general resale option is not

[00:15:04] Speaker 08:
and adequate protection because the only way that Selex can compete for these copper loops is on the basis of price.

[00:15:13] Speaker 08:
And without a wholesale discount, you can't do that.

[00:15:16] Speaker 08:
So it will drive our petitioners out of business.

[00:15:19] Speaker 05:
Why should we care whether the price is increased to you?

[00:15:23] Speaker 05:
Isn't the concern there underlying the original statute as it's been implemented over the years?

[00:15:31] Speaker 05:
The concern is competitiveness

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vis-a-vis consumers.

[00:15:35] Speaker 05:
And the more fiber and voiceover develops as a technique, the LECs are having a decreasing percentage of the market.

[00:15:48] Speaker 05:
They're weaker and weaker and weaker.

[00:15:50] Speaker 05:
Why should we care?

[00:15:52] Speaker 05:
Why should there be any relevance to the fact that you may have to pay more for copper wire access?

[00:16:00] Speaker 08:
Well, Your Honor, I think

[00:16:02] Speaker 08:
The reason you should care is because while the FCC has been given broad discretion under the section 10 factors for forbearance, the one thing that this court has said in the Verizon VFCC 2009 order, and I believe earlier, and I think even the decision in which you were involved, Your Honor, and may have written the opinion, the one thing they can't do is change, deviate from their past decisions without explanation.

[00:16:30] Speaker 08:
And in this case, Your Honor,

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Up until this order, the commission has looked at each market.

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It has looked at avoided cost resale.

[00:16:38] Speaker 08:
It has looked at the top-down pricing of avoided cost resale, and it has said it doesn't... Is that basically your geographical market power argument?

[00:16:50] Speaker 08:
It's not just that, Your Honor.

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You will not find anywhere in this order a discussion of the top-down pricing of avoided cost resale.

[00:17:00] Speaker 08:
They lump

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avoid a cost resale and UNEs into the same analysis.

[00:17:04] Speaker 08:
And that's a critical distinction because the pricing methodology for those two requirements are fundamentally different.

[00:17:12] Speaker 05:
You're going far from removed.

[00:17:13] Speaker 05:
Let me put this in.

[00:17:14] Speaker 05:
I'm sorry.

[00:17:15] Speaker 05:
I read, I tried to read your brief carefully.

[00:17:19] Speaker 05:
What is your core legal argument?

[00:17:22] Speaker 05:
Our core, our core.

[00:17:24] Speaker 05:
Do everything kitchen sink in your brief, which is well written, but it's everything in the kitchen sink.

[00:17:30] Speaker 05:
What is your core legal argument?

[00:17:32] Speaker 08:
Our core legal argument, your honor, is that for the last 20 years, the commission has recognized that avoided cost resale does not impose the types of costs on ILEX that have any influence on their decisions to deploy next generation networks.

[00:17:48] Speaker 08:
In this decision, for the first time, the FCC has said

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that avoided cost resale does affect the incentives of ILEX and whether or not they will deploy next generation networks.

[00:18:01] Speaker 08:
And there's no explanation for that.

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And the reason in the past, your honor, that the FCC has said that this doesn't affect facilities based deployment is because of the pricing methodology.

[00:18:12] Speaker 08:
It's fundamentally different from the cost based overpricing for unis.

[00:18:16] Speaker 08:
There's no discussion of that in this order.

[00:18:19] Speaker 05:
I'm sorry.

[00:18:20] Speaker 05:
I understood.

[00:18:22] Speaker 05:
the focus of the FCC's decision to be inducing the CLECs to go into more advanced facility-based transmission mechanisms.

[00:18:36] Speaker 08:
And we are doing that, Your Honor.

[00:18:38] Speaker 05:
No, no, no.

[00:18:40] Speaker 05:
Stop for a second.

[00:18:41] Speaker 05:
Isn't it fair to say that the thrust of the order will push the CLECs

[00:18:50] Speaker 05:
into their own facility-based operations, which of course would fiber and other voiceover.

[00:19:00] Speaker 08:
I can assure you, honor, that CLEX are going into facilities-based competition.

[00:19:05] Speaker 08:
The one thing they're not doing is they're not going out and replicating copper loops that were deployed decades ago.

[00:19:12] Speaker 08:
The costs were recovered decades ago.

[00:19:14] Speaker 08:
It's not efficient.

[00:19:15] Speaker 08:
And so the question becomes from the customer perspective and from the competitive perspective, which is what Congress cared about under the 96 act, if we eliminate avoidance, avoided cost resale, are we leaving markets where there is only one game in town, the ILEC?

[00:19:32] Speaker 08:
And that is what this order does.

[00:19:34] Speaker 08:
It restores local monopoly conditions for these services in large swaths of the country.

[00:19:42] Speaker 05:
And if the isn't really this a fight between what is predicted down the line where we would really have to defer to the FCC because predictive predictions are laden with policy concerns, very difficult for courts to challenge agencies with respect to their predictions.

[00:20:09] Speaker 08:
But predictions have predictions.

[00:20:12] Speaker 05:
They're predicting the decline of copper loops.

[00:20:17] Speaker 08:
They may

[00:20:18] Speaker 08:
They may be predicting it, Your Honor, but there's nothing in the record to support that prediction.

[00:20:23] Speaker 08:
And there is contrary evidence that these 28 million copper loops have not been retired.

[00:20:31] Speaker 08:
There's nothing stopping the ILEX from retiring them.

[00:20:34] Speaker 08:
They're not going to retire them because there's still this very significant demand by these business and government customers.

[00:20:41] Speaker 08:
And if anything, this forbearance order is going to reduce the incentive for ILEX to retire those copper lines.

[00:20:50] Speaker 08:
And that is record evidence that the commission overlooked, disregarded, but whatever, you won't find it in the order.

[00:20:59] Speaker 04:
Okay.

[00:21:00] Speaker 04:
If there's no questions at this time, we'll just make sure there's not, then we will hear from you a bit on rebuttal, Mr. Murray.

[00:21:09] Speaker 04:
Thank you.

[00:21:12] Speaker 09:
Thank you.

[00:21:12] Speaker 09:
Good morning, Your Honors.

[00:21:14] Speaker 09:
May it please the court, I am Enrique Gallardo, representing Petitioner California Public Utilities Commission.

[00:21:20] Speaker 09:
I'll discuss several ways in which the FCC was arbitrary and capricious in approving forbearance for the incumbent local change carrier obligations to unbundle their network elements and to offer services at avoided cost.

[00:21:35] Speaker 09:
And to the first point regarding public safety, Your Honors, as we speak, much of the Western United States is on fire.

[00:21:43] Speaker 09:
This year, California wildfires have destroyed many more acres than in any other year in history, and we are not even done with the fire season.

[00:21:52] Speaker 09:
Other states face increasing challenges from hurricanes, storms, and other climate-related emergencies.

[00:21:59] Speaker 09:
The resiliency of communications during such emergencies is only going to grow in importance.

[00:22:06] Speaker 09:
First responder agencies depend on the resiliency of line powered time vision multiplexing service delivered over copper loops obtained through the unbundling obligation to maintain communications during emergency.

[00:22:21] Speaker 09:
Moreover, the 911 calling system in many regions currently depends on these network elements obtained through the unbundling obligation.

[00:22:30] Speaker 05:
Excuse me, council.

[00:22:32] Speaker 05:
Did I not see in the record

[00:22:34] Speaker 05:
some indication that the California authorities were no longer of the view that copper wire would be that important?

[00:22:46] Speaker 09:
No, Your Honor.

[00:22:46] Speaker 09:
That was not in the record.

[00:22:48] Speaker 09:
That was in the respondent's briefs, or it might have been the interviewee's briefs, but not in the record.

[00:22:54] Speaker 09:
And of course, we should view this case on the record.

[00:22:58] Speaker 09:
But that was not in the record.

[00:22:59] Speaker 09:
That was in the brief.

[00:23:01] Speaker 09:
Thank you, Your Honor.

[00:23:02] Speaker 07:
Council, let me just ask you a question.

[00:23:07] Speaker 07:
I thought your brief on this point was quite powerful.

[00:23:15] Speaker 07:
I'm going to ask the commission some questions about it, but let's assume we agreed with you that the commission's response in its order as opposed to its brief on this public safety question was inadequate and it has to go back.

[00:23:29] Speaker 07:
What is your position going to be on the land?

[00:23:33] Speaker 07:
I mean, as I understand it, TDM copper will remain available for public safety agencies, correct?

[00:23:45] Speaker 09:
In some cases, yes.

[00:23:47] Speaker 07:
Well, where won't it?

[00:23:50] Speaker 07:
It's required, right?

[00:23:51] Speaker 07:
There's no indication at this point that it won't be available everywhere in the country, is there?

[00:24:00] Speaker 09:
It's hard to say, Your Honor.

[00:24:02] Speaker 09:
I mean, the ILEX are free to switch from copper to retire their copper.

[00:24:11] Speaker 07:
But at this point, they haven't, right?

[00:24:12] Speaker 07:
So in this record, they haven't done that.

[00:24:14] Speaker 07:
They're offering copper TDM.

[00:24:17] Speaker 07:
And as long as they offer it, they have to offer it, right?

[00:24:23] Speaker 07:
So the same question I asked, come on, tell me.

[00:24:28] Speaker 07:
Is this basically a concern about price?

[00:24:33] Speaker 09:
Is that what it is?

[00:24:34] Speaker 09:
I think it's also a concern about availability.

[00:24:36] Speaker 09:
There's concern that it may not explain.

[00:24:40] Speaker 07:
Just explain that to me, would you please?

[00:24:42] Speaker 09:
Well, the unbundling obligation requires dialects to make this available.

[00:24:49] Speaker 09:
Without that obligation, I don't believe there's anything that would ultimately require this to be

[00:24:57] Speaker 04:
available um i mean whether just to just to be clear on this point whether it's available or not is not a byproduct of this order that's there's going to be independent decisions that determine whether it's available or not there may be legal requirements that remain available but this order itself is is goes to the market goes to the price right it doesn't it's not directly impacting availability it impacts availability in the sense that

[00:25:24] Speaker 09:
There's no obligation to offer this service without the unbundling obligation, I believe.

[00:25:30] Speaker 05:
Wait a minute, Council.

[00:25:31] Speaker 05:
I think both my colleagues are pointing out that there's a separate order that sets forth the conditions whereby LACs can abandon copper wires, right?

[00:25:46] Speaker 09:
Yes, Your Honor.

[00:25:47] Speaker 05:
And there's nothing in this order or any order that requires

[00:25:53] Speaker 05:
LECs to maintain copper wires?

[00:25:57] Speaker 09:
No, correct, your honor.

[00:25:59] Speaker 05:
So I think we're all puzzled as to why you think this order is the order that reduces the availability of copper wires.

[00:26:14] Speaker 09:
Well, again, as I mentioned, it does reduce availability in terms

[00:26:18] Speaker 09:
of eliminating the obligation to offer this, to unbundle the element.

[00:26:23] Speaker 07:
But now you just, now you completely confuse me because I thought you said that, I thought you agreed with Judge Silberman's point that there isn't anything that requires it and that this requires a provision of TDM copper and that this order doesn't deal with that issue.

[00:26:45] Speaker 07:
This order simply deals with

[00:26:48] Speaker 07:
with eliminating your unbundling requirement, not the provision of TDM copper itself, right?

[00:26:55] Speaker 09:
Yes, Your Honor.

[00:26:55] Speaker 07:
What am I missing?

[00:26:57] Speaker 07:
Yes, what?

[00:26:59] Speaker 09:
We're saying the unbundling obligation is the means by which customers, government customers, business customers that rely on the resiliency of time, of line powered copper lines, that's the medium by which they get this service.

[00:27:18] Speaker 09:
I understand what you're saying is that the lines, whether they exist or not, is another issue.

[00:27:27] Speaker 09:
But this issue is whether or not the incumbent carriers are obligated to offer the service and the elimination of the service.

[00:27:36] Speaker 05:
This gets back to both of my colleagues saying this is just an issue of price.

[00:27:44] Speaker 04:
And availability.

[00:27:45] Speaker 04:
I mean, yes.

[00:27:47] Speaker 04:
Just to be clear, when you say availability, you're talking about availability of unbundled service, not availability of copper.

[00:27:52] Speaker 04:
I mean, in other words, as I understand the situation, whether copper is available or not, and I'm just using copper loosely, I'm sure that I'm getting the actual particulars wrong, but I think everybody understands what I'm getting at.

[00:28:04] Speaker 04:
That the availability of copper is settled by something else.

[00:28:09] Speaker 04:
What you're talking about is why there there's an unbundled availability and yeah that's affected by this order, but that there's only an unbundled availability of copper if there's an availability of copper to begin with.

[00:28:21] Speaker 04:
That is that's governed by something else outside this case.

[00:28:26] Speaker 09:
Yes, your honor.

[00:28:27] Speaker 09:
I guess that is true.

[00:28:29] Speaker 04:
Okay.

[00:28:30] Speaker 07:
But I just want to make sure, your position is also, I think, as I read your brief, that the orders, as you call it, one sentence response to this whole concern was simply not responsive, correct?

[00:28:43] Speaker 07:
That it didn't even deal with price, right?

[00:28:46] Speaker 07:
It won't.

[00:28:49] Speaker 09:
Well, the order did not address public safety at all.

[00:28:54] Speaker 09:
There was one sentence that might have tangentially touched on issues of 911 service, but on wider issues of public safety, many issues of public safety that were raised by parties, the FCC simply did not provide any response.

[00:29:08] Speaker 09:
And that is, last year in the Mozilla Corporation versus FCC case, this court clearly stated that public safety was a fundamental responsibility of the FCC.

[00:29:20] Speaker 09:
And the FCC must address the impact of its orders on public safety.

[00:29:24] Speaker 09:
And the FCC did not do this here.

[00:29:27] Speaker 09:
So we believe that's arbitrary.

[00:29:35] Speaker 04:
Judd Sullivan and Judge Taylor, do you have further questions for Mr. Gallardo?

[00:29:39] Speaker 07:
No, I don't.

[00:29:41] Speaker 07:
No.

[00:29:42] Speaker 04:
Thank you, Mr. Gallardo.

[00:29:43] Speaker 04:
We'll give you a little bit of rebuttal time, too.

[00:29:45] Speaker 04:
Sure.

[00:29:47] Speaker 04:
Ms.

[00:29:47] Speaker 04:
Sundaresan?

[00:29:49] Speaker 03:
Good morning, and may it please the court.

[00:29:51] Speaker 03:
My name is Thila Sundaresan, and I represent the Federal Communications Commission and the United States.

[00:29:56] Speaker 03:
The issue before this court

[00:29:59] Speaker 07:
is whether the commission... Could you just, could you counsel, I'm sorry, but your time is limited.

[00:30:04] Speaker 07:
Could you pick up right away on this public safety question?

[00:30:06] Speaker 05:
Wait a minute, wait a minute.

[00:30:07] Speaker 05:
I just lost everything.

[00:30:11] Speaker 04:
Pardon me?

[00:30:11] Speaker 04:
Judge Sullivan, we can still hear you and now we see you.

[00:30:14] Speaker 04:
You're still there.

[00:30:16] Speaker 05:
Okay.

[00:30:19] Speaker 07:
That's because Larry, your problem is you don't have line power copper you're using.

[00:30:28] Speaker 05:
Oh, I think as soon as counsel started to talk, I lost my picture.

[00:30:34] Speaker 04:
We've got you back.

[00:30:34] Speaker 05:
It's her fault.

[00:30:36] Speaker 07:
All right.

[00:30:38] Speaker 07:
I was just asking counsel, she could just begin with the issue we just finished on with California in this question of public safety.

[00:30:46] Speaker 07:
Yes, Your Honor.

[00:30:46] Speaker 07:
And their argument, yeah, let me just say, their argument is that the commission just had one sentence in its entire order on this issue.

[00:30:59] Speaker 07:
and that it wasn't responsive.

[00:31:01] Speaker 07:
It mentioned only 911 service.

[00:31:04] Speaker 07:
It wasn't responsive to any of their other concerns.

[00:31:07] Speaker 07:
And as they point out, the commission in its brief says that it didn't have to do more because the public safety comments were redundant of other comments that the commission had considered.

[00:31:19] Speaker 07:
And as they point out, that's not an acceptable response after our decision a few years ago in Missouri.

[00:31:27] Speaker 07:
That's the argument.

[00:31:30] Speaker 03:
Your Honor, the CPC's central public safety argument is that line power TDM over copper is essential for government customers and public safety agencies.

[00:31:45] Speaker 03:
That is the availability of line power, and the line power argument was addressed by the commission in paragraph 32 of the order.

[00:31:53] Speaker 03:
And the commission was not convinced by that argument because it found that businesses that rely on continuously powered communications routinely purchase backup power and as this court hit on with our opposing counsel this order that the availability of line power is

[00:32:11] Speaker 03:
tied to the existence of copper.

[00:32:15] Speaker 03:
And incumbents increasingly are retiring their copper loops.

[00:32:18] Speaker 03:
And this order has nothing to do with that.

[00:32:21] Speaker 03:
That is a business decision that the carriers are increasingly making in response to dwindling customer demand for TDM over copper.

[00:32:31] Speaker 03:
And so the line powered argument

[00:32:34] Speaker 03:
Yes, petitioners can claim that their customers want line power.

[00:32:38] Speaker 03:
But the market has dramatically shifted over the last 25 years.

[00:32:42] Speaker 03:
And as customers are increasingly gravitating.

[00:32:45] Speaker 04:
You're relying on which paragraph?

[00:32:48] Speaker 04:
Is it 32?

[00:32:50] Speaker 03:
Yes, Your Honor.

[00:32:51] Speaker 04:
And I just want to make sure I'm looking at the right place.

[00:32:54] Speaker 04:
Is that J277?

[00:32:55] Speaker 03:
I believe that's correct, Your Honor.

[00:33:01] Speaker 04:
So that's talking about

[00:33:03] Speaker 04:
the distinctive line power feature of TDM voice service and is making the point that it's available, but it doesn't deal with public safety as such, right?

[00:33:10] Speaker 04:
It doesn't deal with public safety by terms.

[00:33:12] Speaker 04:
And so then it seems like the question would be, well, even if there is a bare availability, there could still be a public safety implication from the order.

[00:33:20] Speaker 04:
And the argument is, well, under Mozilla, you may well be able to establish that the public safety is accounted for.

[00:33:27] Speaker 04:
I'm not suggesting that you can't account for that.

[00:33:30] Speaker 04:
I'm just talking about the four corners of the order itself.

[00:33:33] Speaker 04:
It needs to treat with the question and deal with it.

[00:33:37] Speaker 03:
Your Honor, the reason that there is not a standalone public safety analysis in the order, because this order has nothing to do with the availability of TDM service, which will continue so long as incumbents have not retired their copper loops.

[00:33:54] Speaker 03:
TDM over copper will continue to remain available.

[00:33:57] Speaker 03:
This order, as the judges had hit on earlier, is about ending regulated pricing.

[00:34:03] Speaker 03:
to the analog loops and resale.

[00:34:05] Speaker 03:
And CPUC does not challenge the pricing as it relates to the commission's grant of forbearance from these requirements.

[00:34:14] Speaker 03:
So nothing in this order is ending the availability of the TDM service itself.

[00:34:20] Speaker 03:
As the record confirms, several incumbents have filed comments with the agency saying that they have strong business incentives to continue to offer TDM to those customers who want it.

[00:34:32] Speaker 03:
This order simply ends

[00:34:33] Speaker 07:
Council, Council, Council, I'm looking at, I think I'm looking at Joint Appendix 401 and 402, California's comments.

[00:34:45] Speaker 07:
They, they're raising concerns about 911 network availability and cost.

[00:34:54] Speaker 07:
They specifically mentioned cost.

[00:34:58] Speaker 03:
My recollection of their actual brief is that they're not challenging the pricing.

[00:35:03] Speaker 07:
I'm talking about their comments before the commission.

[00:35:08] Speaker 03:
Your honor, the commission did say in the order that there is no difference in the reliability between VoIP 911 service versus legacy 911 service.

[00:35:20] Speaker 07:
And in any event, as we explained in our brief, CPCC- That's inherently, that's just, that makes no sense to me in terms of reliability.

[00:35:31] Speaker 07:
I mean, the commission itself acknowledges

[00:35:34] Speaker 07:
that for VoIP and other non-copper wire services, you need either battery or generator backup.

[00:35:50] Speaker 07:
And so the reliability question turns completely on the adequacy of that backup, doesn't it?

[00:35:57] Speaker 03:
is driven in part by the backup, yes, but CPUC's argument that they're- Well, not in part, completely.

[00:36:05] Speaker 07:
It's not in part, it's completely.

[00:36:08] Speaker 07:
I mean, that's what the line power issue is all about.

[00:36:12] Speaker 07:
I mean, I'm participating in this argument here today in rural Virginia, and we're using an internet-based service.

[00:36:23] Speaker 07:
But we're getting a storm here in a few minutes.

[00:36:26] Speaker 07:
And if my power goes out, I'm gonna have to switch to the telephone.

[00:36:32] Speaker 07:
And how long I could stay on this depends on what kind of generator backup I have.

[00:36:37] Speaker 07:
So they're not separate.

[00:36:38] Speaker 07:
They're very integral to each other.

[00:36:39] Speaker 07:
It just doesn't make sense to me that the commission could say that the services are equally reliable.

[00:36:44] Speaker 07:
That can't be right.

[00:36:46] Speaker 03:
Your Honor, that argument is supported by the fact that California is currently in the process of transitioning their legacy 911 system to an IP-based 911 system in order to enhance public safety, not undermine it.

[00:37:01] Speaker 03:
The leading state agency in California that is overseeing emergency preparedness

[00:37:05] Speaker 03:
has said that an IP based 911 system is in fact more reliable has less power issues and has more monitoring capabilities than the existing legacy 911 system and it's not just California 30 plus states around the country.

[00:37:22] Speaker 03:
are also following suit.

[00:37:25] Speaker 03:
So the trend is very clear that CPUC's argument that a TDM over copper is essential for 911 is directly contradicted by what California is currently doing.

[00:37:37] Speaker 03:
And CPUC doesn't challenge the accuracy.

[00:37:40] Speaker 05:
Council, excuse me.

[00:37:42] Speaker 05:
That's the point I made earlier.

[00:37:45] Speaker 05:
The response was, although that's in the brief, it's not in the order.

[00:37:53] Speaker 03:
Your Honor, it's we did speak about the facilities based or VoIP based 911 being similar in terms of reliability as the legacy based 911 that is in the order in with respect to our argument in the brief, we raised that to essentially impeach

[00:38:11] Speaker 03:
CPUC's claim that California is so reliant on legacy TDM for their 911 system.

[00:38:19] Speaker 03:
That is absolutely not true.

[00:38:21] Speaker 03:
That is contradicted by what California is doing right at this moment.

[00:38:26] Speaker 03:
In fact, they have since targeted March 2021 only six months away as the date in which they plan to complete the implementation of

[00:38:35] Speaker 03:
IP based 911 infrastructure throughout the state of California.

[00:38:40] Speaker 03:
So California is not in the infancy stages of transitioning to an IP based 911 system.

[00:38:46] Speaker 03:
It is almost near completion.

[00:38:49] Speaker 05:
I thought that was a very important point as a matter of it.

[00:38:54] Speaker 05:
One of the things that's interesting about the FCC is you keep referring to regulations as orders.

[00:39:02] Speaker 05:
when under APA, of course, an order is an adjudication.

[00:39:07] Speaker 05:
And chennery, which is relied on constantly by the parties and by the petitioners in this case, really has a different kind of meaning in regulation than it does in adjudication.

[00:39:23] Speaker 05:
And so you're only required in regulation to respond to the most important questions, not to every question.

[00:39:32] Speaker 05:
and you can respond in your brief to issues that are more or less significant.

[00:39:40] Speaker 05:
Was this issue, do you think, a particular significant point or one that you can respond to in your brief to attack the argument made by petitioners?

[00:39:54] Speaker 03:
Yes, we are permitted to respond to it in our brief because we were essentially impeaching CPUC's claim.

[00:40:03] Speaker 03:
They are contending that the legacy TDM is so essential for 911.

[00:40:07] Speaker 03:
And that is contradicted by what the state is doing right at this moment.

[00:40:12] Speaker 05:
That's a very powerful point.

[00:40:13] Speaker 05:
Why wasn't it in the order?

[00:40:15] Speaker 05:
Or did you not have to have it in the order?

[00:40:18] Speaker 03:
The commission did talk about the VoIP 911 and Legacy 911 as being very similar.

[00:40:28] Speaker 03:
We also addressed the line power argument in paragraph 32 in footnote 116.

[00:40:35] Speaker 05:
You did say that everybody was moving to fiber away from copper, including for 911.

[00:40:45] Speaker 03:
That's right, Your Honor.

[00:40:46] Speaker 03:
Our larger point is that the market has changed dramatically.

[00:40:50] Speaker 03:
The reasons why these mandates were enacted a quarter century ago was to jumpstart competition in the local telephone market.

[00:40:58] Speaker 03:
That purpose has now been achieved.

[00:41:00] Speaker 03:
Competition in this market is flourishing.

[00:41:03] Speaker 03:
Customers are not interested in TDM over copper.

[00:41:06] Speaker 05:
Actually, I'm sort of struck by the fact that the LECs look like the weak sisters in the market now.

[00:41:14] Speaker 05:
Hardly the monopolist.

[00:41:17] Speaker 03:
Yes, that's true, Your Honor.

[00:41:19] Speaker 05:
They're being killed by various other competitors in the market that weren't even visualized in 1996.

[00:41:32] Speaker 03:
That's exactly right.

[00:41:33] Speaker 03:
Today in the voice services market there are cable providers, over the top providers, wireless providers, CLEX, incumbents.

[00:41:41] Speaker 03:
So customers have an access to any number of options, which will help discipline rates.

[00:41:47] Speaker 03:
And the fact of the matter is that these regulations were enacted to

[00:41:52] Speaker 03:
promote competition, which has been achieved at this point.

[00:41:56] Speaker 03:
And these mandates were never intended to exist in perpetuity.

[00:41:59] Speaker 03:
And we know this because Congress gave the Commission the authority to forbear from these regulations once they were no longer needed.

[00:42:06] Speaker 03:
And this order is not even taking away the availability of the TDM.

[00:42:11] Speaker 03:
I can't emphasize that enough.

[00:42:15] Speaker 03:
The record confirms that incumbents are committed to providing TDM for those customers who want it.

[00:42:21] Speaker 03:
We also said in footnote 124 of the order that we expect that carriers serving government customers will make sufficient arrangements to ensure that those customers are continuing to receive service.

[00:42:33] Speaker 03:
This order simply ends the regulated pricing.

[00:42:37] Speaker 05:
Council, you have to let me interrupt.

[00:42:40] Speaker 05:
That's part of the rules of appellate advocacy.

[00:42:46] Speaker 05:
I'm sorry, Your Honor.

[00:42:48] Speaker 05:
There is one, it seems to me, one weakness in your case.

[00:42:55] Speaker 05:
You argue and the order argues that if they didn't forbear on these regulations, both regulations, both the

[00:43:10] Speaker 05:
top-down wholesale and the, what do we call it, UNE?

[00:43:20] Speaker 05:
The continuing loop or the sale of the loop.

[00:43:27] Speaker 05:
That if you didn't forbear, that the LECs would be trapped in having to continue to operate copper loops.

[00:43:40] Speaker 05:
That's clearly wrong, isn't it?

[00:43:43] Speaker 05:
And footnote 52, in your order, acknowledges it.

[00:43:49] Speaker 05:
That's far nearer than a $4 bill.

[00:43:53] Speaker 03:
Your Honor, it is true that the incumbents can retire their copper loops.

[00:43:59] Speaker 03:
That's a decision they make and not the commission.

[00:44:01] Speaker 05:
Your question, how are they trapped by the existing regulations?

[00:44:08] Speaker 05:
when, as we pointed out in our dialogue earlier, nothing stops the LECs from retiring their crafter loop.

[00:44:18] Speaker 05:
So why are they trapped?

[00:44:19] Speaker 03:
So the way they are, I'm not sure the words they use trapped, but the reason that we said that in the order.

[00:44:27] Speaker 03:
That was your word.

[00:44:30] Speaker 05:
That was in your order.

[00:44:33] Speaker 03:
Your Honor, if it was in the order, then I misspoke.

[00:44:37] Speaker 03:
The reason why the incumbents are in the position that they are is because while it is true that they can retire their copper loops, they don't do so on a customer by customer or line by line basis.

[00:44:49] Speaker 03:
They do it in a given geographic area.

[00:44:52] Speaker 03:
And if they have existing business customers, and this order, and the petitioners are talking about business customers here, we're not talking about residential customers.

[00:45:00] Speaker 03:
They those business customers the incumbents have multi year contracts with those customers and of course business customers tend to produce or purchase larger volumes of service.

[00:45:11] Speaker 03:
So the incumbents are simply not going to just retire the copper loop and risk disrupting those customers operations.

[00:45:18] Speaker 03:
So the incumbent will, of course, do everything they can to transition those customers to IP-based voice services.

[00:45:25] Speaker 03:
But until that happens, they are still maintaining the cost of the copper.

[00:45:30] Speaker 03:
And as long as they have the copper, the CLEX can then continue to lease the analog loops at highly discounted rates.

[00:45:39] Speaker 03:
and to purchase the telecommunications services through avoided cost resale at a highly discounted wholesale price.

[00:45:49] Speaker 05:
Councilor, that doesn't mean that the LECs are trapped in any way.

[00:45:54] Speaker 05:
They can go out of the copper wire business anytime they want.

[00:46:01] Speaker 03:
Your honor, the commission also found that these regulations created a... Council, isn't that true?

[00:46:11] Speaker 05:
Your Honor... Yes or no?

[00:46:15] Speaker 05:
Yes or no?

[00:46:16] Speaker 05:
Isn't it true that you're not at all trapped by the continuation of the regulation?

[00:46:24] Speaker 05:
The LECs can go out of the copper wire business anytime they want.

[00:46:28] Speaker 05:
There's a separate regulation on that.

[00:46:31] Speaker 03:
Yes, they can retire their copper loops and lose those customers.

[00:46:36] Speaker 03:
Of course, they don't want to do that.

[00:46:38] Speaker 05:
Well, the claim was the existing regulation before forbearance trapped them.

[00:46:46] Speaker 05:
And I think that's baloney, isn't it true?

[00:46:50] Speaker 03:
Your honor, you are correct that the incumbents can retire their copper loops when they want to.

[00:46:55] Speaker 03:
The commission also pointed out, though, that these legacy regulations prolong the dependence on these legacy networks, and that the reason for that is because the CLECs... Wait a minute, not on the part of the LECs.

[00:47:09] Speaker 03:
On the part of the CLECs, your honor.

[00:47:10] Speaker 03:
So the competitive...

[00:47:13] Speaker 05:
I can understand the arguments with CLEX.

[00:47:17] Speaker 05:
I can understand the argument that the agency puts forward.

[00:47:21] Speaker 05:
We want to push the CLEX into the modern world to be more effective competitors.

[00:47:29] Speaker 05:
I don't understand, and I think it's fallacious, is the point you make in the regulation that the LECs are trapped by the existing rules because nothing traps them.

[00:47:43] Speaker 05:
They can go out of the copper wire business anytime they want.

[00:47:50] Speaker 03:
They can retire their copper loops when they want to.

[00:47:53] Speaker 05:
My explanation is that... You can see that footnote 52 eliminates the contention in the body that the LECs are trapped in some kind of way by the existing regulation.

[00:48:14] Speaker 05:
Would you concede that, Council?

[00:48:19] Speaker 03:
We would concede that the stronger argument is that the SELEX are less incentivized to deploy their own facilities.

[00:48:29] Speaker 05:
Would you concede that that's a baloney statement in the order?

[00:48:34] Speaker 03:
We can see that the incumbents are not precluded from retiring their copper and can transition to fiber.

[00:48:41] Speaker 05:
Yes.

[00:48:42] Speaker 05:
Therefore, if the FCC used the statement that the LECs are trapped by the existing regulations, that was false.

[00:48:54] Speaker 03:
Your honor, the reason we said that is just because as long as they do maintain their copper, and it's not a process that is instantaneous, right?

[00:49:06] Speaker 05:
You know what I call this argument you're trying to make?

[00:49:09] Speaker 05:
If my head wheels should be a trolley car.

[00:49:14] Speaker 05:
Did you ever hear that?

[00:49:16] Speaker 05:
Well, I'm not, that's too bold.

[00:49:18] Speaker 03:
I can't say that I have, Your Honor, but we certainly concede that the incumbents can retire their copper loops, but the- I concede that they're not trapped.

[00:49:30] Speaker 03:
They're not trapped.

[00:49:32] Speaker 03:
Thank you.

[00:49:37] Speaker 05:
Larry, you- No, go ahead.

[00:49:39] Speaker 05:
I'm sorry.

[00:49:41] Speaker 05:
When you write a long order like this, a regulation,

[00:49:46] Speaker 05:
you can make a mistake which isn't necessarily fatal.

[00:49:51] Speaker 05:
But it's important at all argument to acknowledge when you make a mistake.

[00:49:58] Speaker 05:
Yes, Your Honor.

[00:49:59] Speaker 05:
Excuse me, David, go ahead.

[00:50:00] Speaker 05:
You're older than I am.

[00:50:06] Speaker 05:
I beg your pardon.

[00:50:10] Speaker 04:
Judge Tatum, you had a question?

[00:50:11] Speaker 07:
So yeah, I have a question.

[00:50:15] Speaker 07:
It's related to, it relates to the cost question and specifically to the commission's 10A1 response on reasonable prices.

[00:50:29] Speaker 07:
So the commission gave two reasons why it thinks forbearance will not result in unreasonable prices.

[00:50:37] Speaker 07:
One was,

[00:50:40] Speaker 07:
201 and 202 and the other provisions are still in the statute, that's one.

[00:50:44] Speaker 07:
And number two, that facilities-based competition will continue to discipline prices, right?

[00:50:51] Speaker 07:
That's its answer to that, right?

[00:50:54] Speaker 07:
Yes.

[00:50:55] Speaker 07:
So I have two questions.

[00:50:57] Speaker 07:
So first of all, on the 201 and 202 point,

[00:51:02] Speaker 07:
If the commission can satisfy 10A1 by simply pointing to the existence of 201 and 202, why did Congress bother putting 10A1 into the statute?

[00:51:15] Speaker 07:
In other words, if 201 and 202 are adequate, why did Congress require the commission to affirmatively find that forbearance will not result in unreasonable rates?

[00:51:27] Speaker 03:
And perhaps as an additional statutory measure to ensure that rates remain just and reasonable.

[00:51:33] Speaker 07:
Well, Congress knows that 201 and 202 are in there, right?

[00:51:38] Speaker 07:
Right.

[00:51:39] Speaker 07:
Congress knows that, but yet it required the commission to make this affirmative finding.

[00:51:44] Speaker 07:
And so therefore, I have to find where that finding is.

[00:51:51] Speaker 07:
And the only thing I can find is the argument that the facilities-based services will discipline the market, right?

[00:52:01] Speaker 07:
That's what it is, correct?

[00:52:03] Speaker 03:
Yes, Your Honor.

[00:52:04] Speaker 07:
And the problem with that, isn't Quest Phoenix the problem with that?

[00:52:12] Speaker 07:
Because as a petitioner points out, in Quest Phoenix, the commission expressly found that

[00:52:20] Speaker 07:
expressly found that forbearance from UNE loops will not encourage the deployment of next generation services, which is the opposite of this.

[00:52:30] Speaker 02:
Your honor, it is true that... I'm sorry, go... Let me just finish.

[00:52:34] Speaker 07:
Let me just crystallize my question then, okay?

[00:52:37] Speaker 07:
So my question is to sum up is, as I understand the statute,

[00:52:45] Speaker 07:
Relying on 201 and 202 isn't enough.

[00:52:48] Speaker 07:
There has to be, as you said yourself, an affirmative finding that will not, forbearance will not result.

[00:52:55] Speaker 07:
And the affirmative finding that the commission has made seems inconsistent with Quest Phoenix, which isn't explained in the order.

[00:53:02] Speaker 07:
You do talk about it in the brief, but not in the order.

[00:53:06] Speaker 03:
Your Honor, five

[00:53:07] Speaker 03:
Yes, Your Honor.

[00:53:08] Speaker 03:
So five years after Quest Phoenix in the 2015 US telecom forbearance order, the commission actually explicitly said that these legacy regulations, in fact, decrease investments in next generation facilities.

[00:53:24] Speaker 03:
That is a far more recent decision than the Quest Phoenix order.

[00:53:28] Speaker 03:
In any event, this court has disavowed the notion that legacy regulations somehow

[00:53:36] Speaker 03:
increase investments in next generation facilities.

[00:53:38] Speaker 03:
In USTA 1, back in 2002, this court said that legacy regulations deter investments in next generation facilities because it limits the resources that the incumbents have to invest in next generation services.

[00:53:51] Speaker 03:
And it decreases the incentives for the SELEX to invest in next generation services because it's much more financially advantageous for them to simply rely on the discounted rates that they receive.

[00:54:02] Speaker 07:
I get all that, but where do I find any of this that you're now giving me in the order?

[00:54:08] Speaker 03:
The order did not explicitly acknowledge that finding in Quest feed.

[00:54:15] Speaker 07:
You could delete the word explicit.

[00:54:19] Speaker 07:
It didn't acknowledge it.

[00:54:21] Speaker 03:
The order didn't didn't acknowledge that the quest Phoenix finding that the Commission did make the larger point that the market has changed dramatically customers have switched to IP based services that the Commission, you know, under section 706 of the act.

[00:54:41] Speaker 03:
is encouraged to promote advanced telecommunications deployment and that these regulations slowed the transition to IP-based services.

[00:54:53] Speaker 05:
Council, wasn't Quest Phoenix a request for forbearance in a specific market in Phoenix?

[00:55:03] Speaker 05:
That's exactly... Whereas this rule that you've called an order

[00:55:10] Speaker 05:
As a former administrative law professor, I bridle at calling a regulation an order.

[00:55:18] Speaker 05:
But in any event, in this rule, you're dealing with nationwide rather than individual geographical markets.

[00:55:27] Speaker 05:
And you've said in the Lincoln case that you're not bound

[00:55:40] Speaker 05:
to the analysis of market power when you're dealing with these cases.

[00:55:47] Speaker 05:
And market power, as everybody uses the term, refers to local markets, not the national market, right?

[00:55:56] Speaker 03:
That's exactly right, Your Honor.

[00:55:57] Speaker 05:
Well, the distinction you want to draw, I think, in response to my colleague is that Phoenix was strictly a local question.

[00:56:07] Speaker 03:
That's right, Your Honor.

[00:56:08] Speaker 03:
In Quest Phoenix, Quest was seeking forbearance from the regulation as applied to one market, Phoenix, Arizona.

[00:56:15] Speaker 03:
Here, in contrast, US telecom is seeking forbearance from the regulations for price cap carriers nationwide.

[00:56:22] Speaker 03:
And this court, in the EarthLink decision, said that under section.

[00:56:26] Speaker 05:
That's the case that we're trying to remember.

[00:56:28] Speaker 03:
Yes.

[00:56:28] Speaker 03:
Yes, Your Honor.

[00:56:29] Speaker 03:
So under section 10 of the act, as this court recognized in EarthLink, there is no particular analytical framework that the commission is wedded to.

[00:56:38] Speaker 03:
The commission has a discretion to apply a variety of frameworks.

[00:56:42] Speaker 03:
Here, we appropriately considered whether these mandates would promote investments in next generation facilities, because as we found that the market has changed dramatically and customers are overwhelmingly asking for IP-based voice services, the commission wanted to ensure

[00:56:57] Speaker 03:
that providers would be encouraged to deploy next generation fiber networks to meet this growing demand and found that these legacy regulations in fact impeded the investment in next generation facilities.

[00:57:11] Speaker 05:
Now, Granite claims their particular business model is jeopardized because what they do is act as an intermediary sort of bundling together

[00:57:25] Speaker 05:
different services from different LECs and selling them at a discount to ultimate big business consumers.

[00:57:36] Speaker 05:
And your answer to that is, so what?

[00:57:40] Speaker 05:
There's nothing that provides in the statute

[00:57:44] Speaker 05:
and obligation to protect your business model.

[00:57:47] Speaker 05:
Isn't that correct?

[00:57:48] Speaker 03:
That's exactly right, Judge Silberman.

[00:57:50] Speaker 03:
As you had pointed out earlier, Section 10 of the Act is about protecting consumers, the public interest, and competition in general.

[00:57:57] Speaker 03:
It's not about protecting individual competitors and their business models, as this Court found in USTA 2, even if all SELECs are driven from the market.

[00:58:08] Speaker 03:
As long as there is robust intermodal competition from other providers, there's nothing in the act that prohibits that result.

[00:58:16] Speaker 03:
But in any event, the CLECs are not going to be driven from the market because as we, as the commission explained, the majority of CLECs are not even relying

[00:58:24] Speaker 03:
on these legacy regulations to provide service.

[00:58:27] Speaker 03:
They're overwhelmingly providing service through commercial agreements.

[00:58:31] Speaker 03:
And that includes Encompass's own members, Granite and Mattel.

[00:58:36] Speaker 03:
If you look at page 59 of our brief for that confidential information, you'll see that avoided cost resell constitutes an extremely small percentage of these resellers' business models.

[00:58:48] Speaker 05:
They are relying instead on- Yes, but they are, of course, your opponents argue

[00:58:54] Speaker 05:
that that regulation provides a backstop, which influences commercial agreements.

[00:59:01] Speaker 03:
Yes, but these avoided cost resale was not created to create a backstop for individual competitors.

[00:59:09] Speaker 03:
It was created to promote competition, which is now flourishing in this market nationwide.

[00:59:15] Speaker 05:
That's a good answer.

[00:59:18] Speaker 03:
Thank you, your honor.

[00:59:20] Speaker 04:
If my colleagues have no further questions for you, Mrs. Grayson, we'll

[00:59:24] Speaker 04:
We'll hear from Ms.

[00:59:26] Speaker 04:
Cooper now.

[00:59:26] Speaker 04:
Thank you.

[00:59:27] Speaker 03:
Thank you.

[00:59:38] Speaker 01:
Thank you, Your Honor, and may it please the court.

[00:59:41] Speaker 01:
I'd like to pick up with the public safety issues that were addressed earlier today.

[00:59:46] Speaker 01:
And what I'd really like to make clear is that nothing about US telecoms petition or the forbearance granted here could affect public safety.

[00:59:55] Speaker 01:
And that's why it isn't addressed at any length in the order.

[00:59:58] Speaker 01:
The order has nothing to do with the rules for retiring copper or for discontinuing TDM.

[01:00:06] Speaker 01:
And the public safety harms that are alleged to come from those events and those actions aren't germane to this order.

[01:00:13] Speaker 01:
In addition, U.S.

[01:00:15] Speaker 01:
Telecom explicitly withdrew its request for forbearance regarding 911 databases.

[01:00:21] Speaker 01:
The services that governments purchased to receive 911 calls were never within the petition at all because they've never been subject to those obligations.

[01:00:29] Speaker 01:
251C3 has never required incumbents to unbundle the facilities that connect their networks to the 911 call answering centers, and the tariff service of routing those calls has never been subject to C4.

[01:00:43] Speaker 01:
In addition, the FCC has also repeatedly concluded that 911 calling does not require copper based services.

[01:00:50] Speaker 01:
And so petitioners arguments to the contrary are really in the teeth of years and years of FCC orders that have addressed these potential harms and rejected the premise of their arguments.

[01:01:04] Speaker 01:
In addition, I know my friend at the FCC mentioned that paragraph 32 of the order addresses the line power issue that is one of the crux

[01:01:13] Speaker 01:
cruxes of the arguments that CPUC makes about the importance of the availability of TDM provided over copper to government customers.

[01:01:25] Speaker 01:
The order also does address in paragraph 33 the issue of government customers that will continue to depend on TDM service.

[01:01:35] Speaker 01:
And there the Commission stated, which is that JA278, that marketplace demand is likely to lead providers to meet the needs of customers in connection with technology, technology transitions.

[01:01:47] Speaker 01:
Really all this order is doing is saying that

[01:01:52] Speaker 01:
Incumbents no longer have to offer these services or lease these facilities at low regulated rates.

[01:01:58] Speaker 01:
But where it's economically feasible and sensible for incumbent lex to offer these services, they absolutely will do so.

[01:02:08] Speaker 01:
They have an interest in keeping these customers.

[01:02:12] Speaker 01:
Again, as has been discussed today, there's extensive intermodal competition in the marketplace that disciplines end user prices.

[01:02:20] Speaker 05:
And that your key point, the LECs are dropping like flies in terms of the market force they have and therefore the notion that they should in any way subsidize the competitive LECs makes no sense.

[01:02:42] Speaker 05:
when the market is full of competitors that are actually causing the LECs to drop their market share rapidly.

[01:02:53] Speaker 01:
Yes, that's correct.

[01:02:54] Speaker 01:
Your honor, the incumbent Lex has been was shown in the record and the order emphasize are now an ever shrinking share of a very highly competitive marketplace and right now under the obligations at issue.

[01:03:08] Speaker 01:
We're forced to create systems and maintain systems.

[01:03:14] Speaker 01:
to handle unbundling and resale that wouldn't exist but for those obligations.

[01:03:19] Speaker 01:
And that really puts a thumb on the competitive scale against us.

[01:03:23] Speaker 01:
So our more nimble new entrant competitors are able to better compete because we have these one-sided obligations that no other competitors are obligated to pay for.

[01:03:41] Speaker 04:
Thank you, Judge Taylor, Judge Silverman.

[01:03:43] Speaker 04:
If you have no further questions for... No, no questions.

[01:03:46] Speaker 07:
Thanks.

[01:03:46] Speaker 04:
Thank you, Ms.

[01:03:47] Speaker 04:
Cooper.

[01:03:48] Speaker 04:
Mr. Murray, we'll give you two minutes for rebuttal.

[01:03:51] Speaker 08:
Thank you, Your Honor.

[01:03:51] Speaker 08:
Real quickly, in the 2005 U.S.

[01:03:53] Speaker 08:
telecom order, that was a request for nationwide forbearance.

[01:03:58] Speaker 08:
and the commission denied forbearance from avoided cost resale.

[01:04:03] Speaker 08:
In paragraph 60, it emphasized that the top-down pricing methodology effectively caps the prices that ILEX can charge for wholesale voice services, end quote.

[01:04:13] Speaker 08:
We agree with U.S.

[01:04:14] Speaker 08:
telecom that it preserves CLEX ability to provide voice services to customers without building their own network facilities.

[01:04:22] Speaker 08:
And in the second wireline order in 2018, the commission rejected, I like suggestions that VoIP is an adequate substitute for TDM or copper lines.

[01:04:34] Speaker 05:
I'm sorry, I didn't hear what you said.

[01:04:36] Speaker 08:
In the second wireline order in 2018, a year before this order,

[01:04:43] Speaker 08:
The commission rejected ILEC suggestions that VOIP is an adequate substitute for copper loops, especially since VOIP is not even available in many rural areas of the country served by LEX.

[01:04:54] Speaker 08:
And here's what the key ruling there was, that forbearance would not promote competitive market conditions because it would eliminate any service alternatives.

[01:05:05] Speaker 08:
Your honor, there is a robust, significant and continuing demand for these

[01:05:10] Speaker 08:
line-powered copper loops by government and business customers, they are consumers.

[01:05:16] Speaker 05:
I don't think that's crucial.

[01:05:19] Speaker 05:
What's crucial is whether there's enormous competition in the marketplace.

[01:05:23] Speaker 05:
Why should the LECs be hampered in any way when they're a declining share?

[01:05:29] Speaker 05:
They're no longer the monopolist.

[01:05:31] Speaker 08:
Two reasons, your honor.

[01:05:33] Speaker 08:
Two reasons, your honor.

[01:05:34] Speaker 08:
Number one, the commission for 20 years has said that the top-down pricing of avoided cost resale does not hamper incumbent elects.

[01:05:44] Speaker 08:
It has no effect on their incentives.

[01:05:46] Speaker 05:
Of course it does.

[01:05:50] Speaker 08:
I'm sorry?

[01:05:51] Speaker 05:
Of course it does.

[01:05:53] Speaker 08:
No, the commission.

[01:05:56] Speaker 05:
You mean to tell me that the LECs

[01:06:00] Speaker 05:
are utterly indifferent to the regulations requiring top-down wholesale, they could charge higher prices.

[01:06:08] Speaker 05:
Why should they be

[01:06:10] Speaker 05:
put, why should they have an arm around their back?

[01:06:13] Speaker 05:
Why should their arms be right around the back when they're weakening rapidly?

[01:06:19] Speaker 08:
Well, that's my second point, Your Honor.

[01:06:21] Speaker 08:
They're not weakening rapidly where they are the sole possessor of the line powered copper loops used to provide these critical services.

[01:06:31] Speaker 08:
And the commission has found that in the quest order, for example, Your Honor,

[01:06:36] Speaker 08:
Quest got 90% of its retail rate, and that was because it avoided the marketing and the billing and the collection costs.

[01:06:44] Speaker 05:
It's not a cost that is radically different from the... Doesn't that go back to your argument of it has to be done

[01:06:54] Speaker 05:
Geographic by geographic?

[01:06:56] Speaker 08:
No, not at all.

[01:06:57] Speaker 08:
The 2015 order was a nationwide request and the Commission looked at it on a nationwide basis.

[01:07:04] Speaker 08:
So, Your Honor, the question is, this is the crux of the issue.

[01:07:08] Speaker 08:
The Commission has up until now looked at whether or not

[01:07:12] Speaker 08:
there is a demand for a service, whether the incumbent LEX have monopoly control over the facilities necessary for that service, and there are no adequate substitutes, whether the only form of competition available is avoided cost resale.

[01:07:28] Speaker 08:
And in each of those instances, for 20 years, the commission has kept avoided cost resale and forborn from UNE.

[01:07:36] Speaker 05:
How can you say they have monopoly control when they're down to 37%?

[01:07:41] Speaker 08:
Well, Your Honor, 37, we're looking at two different things.

[01:07:45] Speaker 08:
The market that we care about and that this order ignored was this significant 28 million lines that the ILEX have not retired.

[01:07:56] Speaker 08:
They could.

[01:07:57] Speaker 08:
They haven't because they don't want to.

[01:07:59] Speaker 08:
These are customers that we're competing for with them.

[01:08:02] Speaker 08:
And they are the only ones who have these copper loops.

[01:08:06] Speaker 08:
And it is not economically feasible for us to replicate them.

[01:08:09] Speaker 08:
And your honor, you know, Congress, when it enacted the 96 act, did not want entities to come in and wastefully replicate legacy facilities.

[01:08:19] Speaker 08:
It was about promoting next generation networks.

[01:08:21] Speaker 08:
And on this issue, avoided cost resale, this commission for 20 years has said, avoided cost resale has no effect.

[01:08:29] Speaker 08:
on incentives to deploy next generation networks.

[01:08:32] Speaker 08:
And that is not even discussed in this order.

[01:08:34] Speaker 08:
You will not find the top-down pricing methodology of avoided cost resell anyway.

[01:08:38] Speaker 05:
It certainly has an impact in encouraging the CLECs to be facilities-based.

[01:08:46] Speaker 08:
Not for copper loops, Your Honor.

[01:08:49] Speaker 05:
No, no.

[01:08:49] Speaker 08:
Not for copper loops.

[01:08:51] Speaker 05:
It's for alternatives.

[01:08:52] Speaker 05:
And we are.

[01:08:53] Speaker 05:
We are building alternatives.

[01:08:55] Speaker 05:
No, but this will induce, this clearly will induce the CLECs to move more rapidly into more advanced techniques.

[01:09:05] Speaker 08:
There's nothing in the record to support that, Your Honor, and I would say it won't, because if you go back and look at the Omaha order, one of the things that the court, that the commission recognized, I'm sorry, the Omaha regulations,

[01:09:15] Speaker 08:
The commission recognized that allowing avoided cost resale creates incentives.

[01:09:21] Speaker 08:
We can compete with that even where we have not yet built out our own facilities and next generation networks.

[01:09:28] Speaker 08:
And that's a good thing.

[01:09:29] Speaker 08:
It provides an alternative.

[01:09:31] Speaker 08:
This order is going to restore local monopoly conditions for these 28 million copper loop lines.

[01:09:40] Speaker 04:
Thank you, Mr. Murray.

[01:09:41] Speaker 04:
If my colleagues don't have any further questions.

[01:09:44] Speaker 04:
We'll give Mr. Gallardo his rebuttal time, two minutes.

[01:09:49] Speaker 09:
Thank you, Your Honor.

[01:09:50] Speaker 09:
Continuing on this discussion about competition, DEPTC in its order places great emphasis on the role of facilities-based competition, not just competition, but facilities-based competition.

[01:10:04] Speaker 09:
Now, the California Public Utilities Commission presented evidence in the record that in California, most of the non-cable CLEX

[01:10:13] Speaker 09:
as well as the four large mobile providers relied on the infrastructure of just one incumbent.

[01:10:20] Speaker 09:
So at least in California, there is not facilities based competition in the voice market, despite the presence of voice alternatives.

[01:10:29] Speaker 09:
And other state agencies presented similar situations in their states as well.

[01:10:33] Speaker 09:
And the SEC did not address this evidence in its order.

[01:10:38] Speaker 09:
I'd like to address some of the,

[01:10:40] Speaker 09:
discussion the FCC's council presented about California's view of the transition of 911 service.

[01:10:49] Speaker 09:
Currently as we speak, the next generation 911 system in California relies on both TDM and voice over unit protocol service.

[01:11:00] Speaker 09:
I would question some of her characterization of California's view of 911 service.

[01:11:08] Speaker 09:
But I guess the bottom line is, because this is not in the record, we can't properly consider this evidence or this information I'm hearing just today.

[01:11:20] Speaker 09:
It's not in the record, and we can't properly consider it.

[01:11:24] Speaker 09:
And finally, I would point out that the FCC relies greatly on a fundamental factual finding that maintaining incumbent carrier unbundling obligations deters investment in advanced services.

[01:11:38] Speaker 09:
Now this is contradictory to a previous factual finding where the FCC found the opposite.

[01:11:44] Speaker 09:
The FCC never discusses this previous factual finding in its order, does not even acknowledge its previous factual finding.

[01:11:51] Speaker 09:
And this also is arbitrary.

[01:11:52] Speaker 05:
No, sometimes you refer to factual findings as if they were historical facts when they're really predictions.

[01:12:01] Speaker 09:
Yes, your honor.

[01:12:02] Speaker 09:
Um, there are predictions of what would happen to actually see made one prediction previously, and then it contradicts its prediction here.

[01:12:09] Speaker 05:
And it doesn't address when you expect an agency dealing with rapid movement of technology to make mistakes and predictions and to rectify them and future produce predictions.

[01:12:24] Speaker 05:
You're not talking about historical facts.

[01:12:26] Speaker 05:
You're talking about predictions.

[01:12:28] Speaker 09:
Yes, your honor, but the agency should acknowledge the previous prediction and explain why it's changing its prediction now.

[01:12:35] Speaker 07:
Is it not sufficient?

[01:12:39] Speaker 07:
Is it not sufficient what counsel told us in an argument today that Quest Phoenix was a local market issue and this is a nationwide case?

[01:12:51] Speaker 07:
Suppose they just said that in the order, would you be complaining about it?

[01:12:55] Speaker 09:
Well, I'd have to see what they said in the order and if it properly considered that previous prediction.

[01:13:01] Speaker 09:
Now, in terms of the difference between a local market and a nationwide market, I think that's more along the lines of what forbearance test you want to use.

[01:13:12] Speaker 09:
But in terms of this prediction of what the obligations will have effect on investment and advanced services, I don't see that that distinction matters as much.

[01:13:25] Speaker 09:
I mean, whether it's local nationwide.

[01:13:27] Speaker 09:
Exactly.

[01:13:28] Speaker 09:
Yes, your honor.

[01:13:29] Speaker 09:
And if it does, then I would like to see that explanation in the order.

[01:13:35] Speaker 04:
Thank you, counsel.

[01:13:36] Speaker 04:
Let's my colleagues have further questions.

[01:13:39] Speaker 04:
We'll thank all counsel for their arguments this morning, and we'll take this case under submission.