morning your honor may it please the court my name is maureen scott and i'm representing the arizona corporation commission in this matter i will be sharing my time today with mr jeff oxley who represents mountain telecommunications i will the arizona commission and is appealing an adverse ruling by the arizona federal district court involving an appeal by qwest corporation one of the commission's orders in a generic wholesale pricing docket conducted under section two fifty two of the federal telecom act the district court vacated part of the commission's order on the grounds that it violated the retroactive rate making rule and based upon the court's belief which was in error that's the parties but that there was a unilateral mistake on the part of the steve acts and not a mutual mistake as the record supported a mutual mistake that was shared by all parties the commission therefore asked the court to overturn the district court's ruling and also that given the circumstances in this case the retroactive rate making rule should not apply particularly issue or network elements at issue in this case were set in phase two of the commission's proceeding they are dedicated transport and entrance facilities face to address the other rates as well as the commissions face to order became effective in june two thousand and two qwest however did not implement that order until approximately january two thousand and three despite the fact that the order became effective immediately yes your honor there was a separate docket that was commands to investigate the reasons why they did not commence billing sooner and it was determined that there was no good reason for the delay in the commission find them approximately one hundred ninety thousand dollars that just does that take care of the delay or do you contend that it was some other significance we should apply to that to learn it yes your honor that's an excellent question that docket won't did not take care of the issue with respect to what happened in this pricing packet because of qwest delay in implementing the billing it was impossible for company quest will file a compliance filing and the compliance filing will set forth the new price is right now i understand they wouldn't understand they would know the precise impact of that and maybe that's significant but they would have to know they're going to pay more for there be separate charges right yes your honor the average increase that was calculated for carriers that took both entrance facilities and direct direct trunks transport was only seventy percent yes because of the mistaken assumption on the part of all parties we have here your search is empty i don't take or use the entrance facilities and their bills went up seventy eight percent i ask a more fundamental question i don't quite generally the commission has set junie rates for qwest in a separate docket because it serves the bulk of the territory in arizona to kind of get down to the hear  qualities of both commission and setting rates that is more or less a legislative function but under the section two fifty two of the t challenge to the face to write in january of two thousand and three is that right it could have taken a month or a crip taken a year or two just type that the retroactivity issue was being posed as running from when if there's an effective date from when the challenge is there any argument that occurs at that occurs here your honor i think it would be my opinion that it would be retroactive or that it should go back to the date was not in this case and i believe primarily because of the misconduct on quest part of winning implementation you know that's after this i'm asking you i think from january two thousand and three when people did know the impact right this it's the commission's position that the facts and circumstances of this case put it outside of the retroactive rate making principle completely that they were not receiving at all this goes far beyond a mistake in projections which will even out over time in addition when the commission stepped through rate it presumed or found that the rate was just and reasonable under the telecom act only for carriers that truck entrance facilities and dedicate or direct trunk transport together no where in the order is there a finding that that combined rate would be just and reasonable for carriers that only took direct train fare you said that there is something in the order that says that there's a combined rate worse tha  i believe your honor that there is a discussion on page six of the order or where you i'm sorry  does that not toss you out of the ballgame and second point about whether the decision to combine the rates was a mistake or not as to the first point the act doesn't require that companies at that time yes and that would have brought me to the issue of what should be transport rates if quest and i couldn't agree on them then we do an arbitration and i would be as the small company required to bring in cost and expert are interconnection agreements provides that when the commission changes their rate the rate in our connection agreement will change to the corresponding to the committee just because of your cut your contract with qwest that you're bound by well i guess i would distinguish in two ways one in the arizona grocery case there wasn't an explicit description of the rules for establishing these rates that the rates didn't come up until there was a recommended order from the a l j and we were discussing exceptions to that order mt i wasn't there at that time but you had the recommended order and qwest comes in and says well even though we've proposed separated rate s we think you should combine rates and they give a couple of reasons for combining rates but i think this is the reason that the court went with below the compelling reasons for adopting the ha i model for transport it is that it is the only model that does combine direct trunk transport with entrance facilities these are two types of facilities that i have mentioned earlier that have distinct cost features and it's a significant benefit of the transport model eighteen t's model that it combines both in the rate that it produces well that was from qwest attorney to the commission and that left the commission with the idea that it's a good idea to combine these rates how could it possibly be good well everybody buys both of them at the same time couldn't say that it's a good idea to combine rates for two things when most people only bought one buy shorter nobody on the whole record said anything that some people don't buy entrance facilities at all they built their own that's what we did is a skill that we invested in building our own networks who still it is like we're supposed to do we're not  expect us to go in and do battle with these other folks in a prolonged proceeding i don't think so the arizona law here you competition the x that there are lots of ways to enter the local market we know that some companies will be able to do these arbitrations but we also know that others won't and under two thirty two i can adopt in opt into agreements that state commissions have arbitrated and have established terms and conditions and reach the concerns me as this problem not yours not everybody does everything the same way can't be unique to th terms of it by not showing up to your honor that is a great problem facing the sea like industry right now we've lost eighteen to an m c i they've become the i lax again so there are companies like mine here today arguing with you we do participate now in cost cases but it's a tough world out there and we were in line on the on the commission here how many scum bodies are similarly situated to you with respect to the entrance facility issue now is there any way at all you can get that made up to you that you you're facing having to pay a million dollars for something never is there any way you can get that made up somewhere we thought if we went to the arizona commission and complained about the rate that that would do it and it looked pretty good hasn't done it so far is there anything else i know of nothing else but basically the stranded cost is that what you're saying you can't pass it on your consumers are not it's a very competitive marketplace the telecommunications marketplace i see i mean you could but it would affect your competitive r some way between the two of you will your honor let me first address if i could implicit question that it's wrong for us to collect these charges may i just that's wrong to want for us to collect these charges from n p r and i don't have the mixed if i could just explain not the order and you've got one are that seems to be on your side that says we cannot go back and do anything about it everybody is just stuck with it but it looks to me like you're getting your million dollar windfall that you shouldn't get well there are two points on the why is that not right two points that i'll make in response first when origin of this rate is that the commission decided to s when the commission decided to use the ha i model for most network elements as it found consistency require that it uses h e i for transport because if you didn't use it for transport then quest would not be able to recover  well we didn't sponsor the model eighteen to sponsor the model and they did not break it out into two different but you really aren't in control of their model but i gather you're if if i understand where you're heading with this what you're saying is if we're going to turn back the clock elements were combined into one rate i want to point out the compliance filing that quest made following these two proceedings not only identified direct from transport and since those being combined but it's set forth the price t moreover during the hearing itself and i was qwest counsel in that very lengthy evidentiary hearing these cost model for presented and they were debated it was knowing that one model combined interest still isn't drawn direct from transport and one did not there was a subsequent oral argument on this precise in of transport after the evidence you're hearing and then there was a compliance filing that set out the rates i understand n t i is resource concerns but they didn't have to be the day in and day out presenting their own witnesses their own cost models they could have been there just to monitor the proceeding which many see us doing these costs so i understand the resource constraints but it's not an excuse for not keeping a prize of what parties are on notice the rate might change and therefore should be able to rely on it there's an exception to the rule against retroactive the rate making if there is fraud in development of the rate sort of an injustice done to the commission so why weren't you i they can come into rate they can issue a rate right that's correct and in fact the only way man is involved in this is because of their separate contract with you not because of the inherent any rate making authority by the arizona commission right flee and that's what we had and it was incorporated into the interconnection agree that it did take place in june in adjudicatory proceeding but it's a prescription of prospect of future rate only because you couldn't agree by contract that i mean the odd thing about i mean i take your point i understand it looks a lot like rate making animated the right making because it applies to everybody because of the connection agreements are in that seems to know about but i'm part of the record but at its core the commission of the power to set rights at all except by failure of the parties to contract and so so it's in different from for me it's a little bit different it seems that different from that the what i would do i and it's very clearly set forth in two thousand to one i believe that if the parties cannot reach agreement on terms and conditions including rates then yes at that point a commission should step in and arbitrate on resolve issues nobody understood it and nobody was going to talk about it it was in the end the next proceeding in which people were now focused on it that we that we have a hearing about whether people understood it earlier well again i go back to quest presented a cost model that broke it out separately never been teed up so yes there was not testimony from qwest that this is why we're doing it but i think it's somewhat implicit that if you're presenting to the elements they're available for purchase separately and moreover as you  the act as you know this court has held that interconnection agreements have the binding force of law and the effect of the commission's ruling in this case is to retroactively apply rates that were unique connection agreement to transactions that had already taken place and that violates in our view the binding effect of interconnection agreements of the changes going to be made certainly can be made prospectively but to retroactively change terms of an in the discussion that you had asked me to identify in the order earlier begins on page seventy eight of the face to order i'd like to just answer another of your questions that you post earlier to  know what they want to do what it does is it has a per mile mile charge rather than an overall price is what they want it so where does it say that it combines entry and transport after looking at this discussion your honor i don't believe it does involved that only purchase transport and transfer yes that's my understanding based upon the record ok therefore this court has the  power under equity to remedy what is a wrong here and we believe this case again false outside of the retroactive rate making principle discussed in arizona grocery honor because there was a lot of discussion in the face to perceiving regarding the fact that the c likes really didn't receive notice of the impact of these rates until they process i have to concede though the facts in most cases are not identical to the facts in this case but in addition to that quest here is advocating the use of the retroactive rate making rule to charge for a service it doesn't provide at all and this was never intended the intent of the retroactive rate making rule part part of the i think the problem components of this and i believe that that would be appropriate that the components both the entrance facility and the debt direct trunk transport piece the separate rate commission did that they did make those charges retroactive to the effective date of that order so some people are going to pay more if we agree with you is that right some carriers some celiacs the average increase in the rates force to you x was about seven percent if the combined weight was applied to carriers that used both with them broken apart the way the commission did it with the one nine hundred ninety eight rates back into a fact because the parties argued in the face to a mental case that it was too difficult to make an adjustment to the combined rate and therefore it was