Opinion ID: 786960
Heading Depth: 2
Heading Rank: 2

Heading: OSS Gateway Recurring Costs

Text: 50 On cross-appeal, Pacific challenges the CPUC's refusal to set recurring costs for the provision of OSS gateways. At the outset, we agree with Pacific that it did not have to petition the CPUC for a rehearing in order to preserve its right to appeal its decision. Under California state law, state courts do not have jurisdiction to hear appeals from a decision of the CPUC unless the party seeking review has petitioned for rehearing within 30 days of the decision. See Cal. Pub. Util.Code § 1731(b). We, however, are not bound by this procedural requirement. In AT & T Communications Systems v. Pacific Bell, 203 F.3d 1183, 1186 (9th Cir.2000), we determined that Congress did not intend that varying state procedural requirements should act as bars to judicial review of proceedings pursuant to the 1996 Act. Although that decision dealt with a different stage of proceedings, the underlying reasons for the holding of that case — speed and uniformity of interpretation — are equally applicable here. The district court therefore erred in failing to reach the merits of Pacific's claim. 51 On the merits, however, we affirm the CPUC's decision. Because the determination of what Pacific should be permitted to charge CLECs for the provision of OSS gateways is factual in nature, we review it for substantial evidence. As noted by the district court, the CPUC's determination that Pacific should not be able to recover recurring costs was a substantive decision on the merits. AT & T, 228 F.Supp.2d at 1105. The CPUC concluded that many of the recurring common costs attributed by Pacific actually supported its own retail activity. The FCC regulations and the Local Competition Order direct state commissions to exclude such retail costs when considering what rates to set for UNEs. See Local Competition Order ¶ 691 (Retailing costs ... are not attributable to the production of network elements that are offered to interconnecting carriers and must not be included in the forward-looking direct costs of an element.); see also 47 C.F.R. § 51.505(d)(3). Since Pacific did not prove that these direct costs were separate from retail costs, the CPUC felt it was not justified in including them in the rate for OSS gateways. The CPUC did note that these costs might instead be considered implementing costs, and that Pacific could present those costs to the Local Competition Proceeding that was considering such costs. However, the CPUC specified that it was not predetermining that the [recurring OSS] costs presented [in the Second Cost Decision] are eligible for recovery in that proceeding. Second Cost Decision at 46. More important, the possibility that the costs might be implementation costs does not affect the CPUC's determination that they were not recurring OSS gateway costs. 52 Pacific bears the burden of proving what direct costs should be included. See Local Competition Order ¶ 680 (We note that incumbent LECs have greater access to the cost information necessary to calculate the incremental cost of the unbundled elements of the network. Given this asymmetric access to cost data, we find that incumbent LECs must prove to the state commission the nature and magnitude of any forward-looking costs that it seeks to recover in the prices of interconnection and unbundled network elements.). Pacific, seizing on language in ¶ 695 that the ILEC shall have the burden of proof in the arbitration process argues that since the CPUC's decisionmaking process was started before the passage of the 1996 Act, it is not an arbitration process and that the Act's burden of proof requirement is therefore inapplicable. However, ¶ 695 applies to the determination of common costs, whereas ¶ 680, which lacks the limiting language of ¶ 695, applies to the determination of direct costs. Since the recurring costs are a type of direct cost, ¶ 680 applies. Moreover, even if ¶ 695 did apply, the proceeding in any event is better seen as an arbitration process. Congress anticipated that interconnection agreements would be decided either by agreement of the parties or through arbitration by a state committee. Although the OANAD proceeding did not go through the normal process by which the parties first attempted to enter an agreement, but rather was initiated by the CPUC, it closely resembles the arbitration process. To the extent they are different from the rules governing agreements between LECs, the arbitration rules should control. 53 Given the evidence before it, the CPUC acted reasonably in concluding that Pacific had not met its burden of proving that it was entitled to be reimbursed for recurring OSS gateway costs. When the CPUC made this determination, it had Pacific's cost study before it, as well as that of other ILECs. It also had a declaration filed by MCI and AT & T arguing that the costs were de minimis. On the basis of the record before the CPUC, we find that there was substantial evidence supporting its decision not to include recurring costs. Such a conclusion is well within the authority and expertise of the CPUC, which was charged by Congress and the FCC with implementing the terms of the 1996 Act. We will not disturb that determination here.