01-29501. Joint Application by SBC Communications Inc., Southwestern Bell Telephone Company, and Southwestern Bell Communications Services, Inc. d/b/a Southwestern Bell Long Distance To Provide In-Region, InterLATA Service in the States of Arkansas ...

AGENCY:

Federal Communications Commission.

ACTION:

Notice.

SUMMARY:

In this document, the Federal Communications Commission (Commission) grants the section 271 application of Southwestern Bell Telephone Company (SWBT) for authority to enter the interLATA telecommunications market in the States of Arkansas and Missouri. The Commission grants SWBT's application based on our conclusion that Southwestern Bell satisfies all of the statutory requirements established by Congress in section 271 of the Communications Act.

DATES:

Effective November 26, 2001.

FOR FURTHER INFORMATION CONTACT:

Scott Bergmann, Legal Counsel, Common Carrier Bureau, at [phone], or via the Internet at [e-mail]. The full text of the Order is available for inspection and copying during normal business hours in the FCC Reference Information Center, CY-A257, 445 12th Street, SW., Washington, DC 20554. Further information may also be obtained by calling the Common Carrier Bureau's TTY number: [phone].

SUPPLEMENTARY INFORMATION:

This document is a brief description of the Commission's Memorandum Opinion and Order adopted November 16, 2001, and released November 16, 2001. The full text also may be obtained through the World Wide Web, at <<http://www.fcc.gov/​Bureaus/​Common_​Carrier/​in-region_​applications/​sbcksok/​welcome.html>>,;, or may be purchased from the Commission's copy contractor, Qualex International Transcription Service Inc. (ITS), CY B-402, 445 12th Street, SW., Washington, DC.

Synopsis of the Memorandum Opinion and Order

1. History of the Application. On August 20, 2001, SWBT filed a joint application, pursuant to section 271 of the Telecommunications Act of 1996 with the Commission to provide in-region, interLATA service in the States of Arkansas and Missouri.

2. The State Commissions' Evaluations. The Arkansas Public Service Commission and Missouri Public Service Commission both advised the Commission that, following more than two years of extensive review, SWBT met the checklist requirements of section 271(c) and had taken the statutorily required steps to open its local markets to competition. Specifically, both commissions stated that SWBT met its obligation under “Track A” (or section 271(c)(1)(A)) by entering into interconnection agreements with competing carriers that are serving residential and business customers either exclusively or predominantly over their own facilities. Both state commissions found that SWBT had fully complied with section 271, and each voted to support the application.

3. The Department of Justice's Evaluation. The Department of Justice submitted its evaluation of SWBT's application on September 24, 2001. In its evaluation, the Department of Justice raised concerns about pricing of interconnection and unbundled network elements (UNEs) in Missouri. Second, the Department of Justice raised concerns about SWBT's ability to provide non-discriminatory access to its maintenance and repair functions and finally suggests that performance problems may occur in after section 271 approval in Arkansas because of the limited enforcement authority of the Arkansas Commission. The Department of Justice recognized that the Commission may gather additional information on these issues during the pendency of the application, and “may therefore be able to assure itself that the remaining questions have been answered and may be in a position to approve SBC's [SWBT's] joint application.”

4. Compliance with Section 271(c)(1)(A). In order for the Commission to approve a BOC's application to provide in-region InterLATA services a BOC must first demonstrate that it satisfies the requirements of either section 271(c)(1)(A) (Track A) or section 271(c)(1)(B) (Track B). To qualify for Track A, a BOC must have interconnection agreements with one or more competing providers of “telephone exchange service * * * to residential and business subscribers.” We conclude that SWBT demonstrates that it satisfies Track A in Arkansas based on the interconnection agreements it has implemented with ALLTEL. Although commenters dispute the exact number of residential and business subscribers in Arkansas, the Commission concludes that a sufficient number of customers are being served by ALLTEL through the use of their own facilities. No commenter has challenged SWBT's claim regarding the number of customers served by ALLTEL. With respect to Missouri, the Commission concludes that SWBT demonstrates that it satisfies the requirements of Track A based upon interconnection agreements it has implemented with AT&T and WorldCom. No commenter has challenged SWBT's assertion that it qualifies for Track A in Missouri.

5. Checklist Item 2—Access to Unbundled Network Elements. We conclude that SWBT satisfies the requirements of checklist item 2 in both Arkansas and Missouri. For purposes of the checklist, SWBT's obligation to provide “access to unbundled network elements,” or the individual components of the telephone network, includes access to its OSS—the term used to describe the systems, databases and personnel necessary to support the network elements or services. Nondiscriminatory access to OSS ensures that new entrants have the ability to order service for their customers and communicate effectively with SWBT regarding basic activities such as placing orders, and providing maintenance and repair service for customers. We find that, for each of the primary OSS functions (pre-ordering, ordering, provisioning, maintenance and repair, and billing, as well as change management and technical assistance), SWBT provides access that enables competing carriers to perform the function in substantially the same time and manner as SWBT or, if there is not an appropriate retail analogue in SWBT's systems, in a manner that permits an efficient competitor a meaningful opportunity to compete. In reaching this conclusion, we find that SWBT provides non-discriminatory access to its OSS in Arkansas and Missouri.

6. With respect to pre-ordering, or the activities that a competing carrier undertakes to gather and verify the information necessary to place an order, the Commission finds that SWBT provides carriers in Arkansas and Missouri nondiscriminatory access to all pre-ordering functions and enables carriers to integrate pre-order and pre-ordering functions through DataGate and VeriGate. Navigator, nevertheless suggests that it experiences a variety of problems when attempting to reserve a telephone number using VeriGate. We find that Navigator's claims do not overcome the detailed affidavit and performance data evidence submitted by SWBT that indicates that VeriGate and other SWBT systems operate properly.

7. In addition, with respect to maintenance and repair, the Commission finds that SWBT demonstrates that it provides nondiscriminatory access to the maintenance and repair OSS functions. While commenters raise questions about the functioning of the SWBT's maintenance and repair databases, we find that those potential deficiencies have not had a significant effect on competitive entry in Arkansas and Missouri and as such do not warrant a finding of noncompliance with checklist item 2.

8. With respect to billing, SWBT demonstrates that it provides complete and accurate reports on the service usage of competing carriers' customers in the same manner that SWBT provides such information to itself. SWBT also demonstrates that it provides the documentation and support necessary to provide competitive carriers nondiscriminatory access to its OSS by showing that it has an adequate change management process in its five-state region, which includes Arkansas and Missouri. The Commission finds that SWBT provides carriers with nondiscriminatory access to functionality of it billing systems.

9. Pursuant to this checklist item, SWBT must also provide nondiscriminatory access to network elements in a manner that allows other carriers to combine such elements. Based on the evidence in the record, and upon SWBT's legal obligations under interconnection agreements offered in Arkansas and Missouri, SWBT demonstrates that it provides to competitors combinations of already-combined network elements as well as nondiscriminatory access to unbundled network elements in a manner that allows competing carriers to combine those elements themselves.

10. Finally, the Commission finds that SWBT satisfies the pricing requirements of checklist item 2 in both Arkansas and Missouri. In fulfilling its obligation under this checklist item, SWBT demonstrates that it provides nondiscriminatory access to UNEs at any technically feasible point at rates, terms and conditions that are just, reasonable, and nondiscriminatory. We find that SWBT's recurring charges for UNEs made available in both Arkansas and Missouri are just and reasonable and nondiscriminatory in compliance with checklist item 2. The Commission finds that SWBT's voluntarily-reduced rates in Missouri fall within a reasonable range of what TELRIC based ratemaking would produce, based upon comparisons between SWBT's rates in Missouri and SWBT's previously approved rates in Texas. We also find that SWBT passes this checklist item in Arkansas by adopting in whole the Kansas rates, which we previously reviewed and accepted in SWBT's Kansas 271 proceeding, and by showing that Arkansas costs are the same or higher than costs in Kansas. The Missouri and Arkansas Commissions concluded separately that SWBT satisfies this checklist item. The Department of Justice originally expressed concerns about SWBT's recurring rates in SWBT's first Missouri 271 application and urged the Commission to independently determine whether the prices were appropriately cost-based, but the Department of Justice did not specifically recommend denial based upon pricing. In its evaluation of SWBT's second Missouri application filed jointly with Arkansas, the Department of Justice stated that its original concerns would be moot if the Commission determines that the current rates are set within a reasonable total element long run incremental cost (TELRIC) range.

11. Checklist Item 4 “ Unbundled Local Loops. SWBT satisfies the requirements of checklist item 4 in both Arkansas and Missouri. Local loops are the wires that connect the telephone company end office to the customer's home or business. To satisfy the nondiscrimination requirement under checklist item 4, SWBT must demonstrate that it can efficiently furnish unbundled local loops to other carriers within a reasonable time frame, with a minimum level of service disruption, and of a quality similar to that which it provides for its own retail customers. Nondiscriminatory access to unbundled local loops ensures that new entrants can provide quality telephone service promptly to new customers without constructing new loops to each customer's home or business.

12. SWBT provides evidence and performance data establishing that it can efficiently furnish unbundled loops, for the provision of both traditional voice services and various advanced services, to other carriers in a nondiscriminatory manner. More specifically, SWBT demonstrates that it provides unbundled local loops in accordance with the requirements of section 271 and our rules. The Commission's conclusion is based upon our review of SWBT's performance for all loop types, which include, as in past section 271 orders, voice grade loops, hot cuts, xDSL-capable loops, digital loops, high capacity loops and our review of SWBT's process for line sharing and line splitting. SWBT establishes that it provides coordinated cutovers of voice grade loops, i.e., hot cuts, in a manner that permits competing carriers a meaningful opportunity to compete.

13. SWBT also establishes that it provides competing carriers with voice grade unbundled loops through new stand-alone loops in substantially the same time and manner as SWBT does for its own retail services. Moreover, SWBT demonstrates that it provides maintenance and repair functions for competing carriers in substantially the same time and manner as it provides for SWBT retail customers for both hot cut loops and new stand-alone loops. SWBT also demonstrates that it provides xDSL-capable loops to competing carriers in a nondiscriminatory manner, providing timely order processing and installation that provides an efficient competitor a meaningful opportunity to compete. Furthermore, SWBT demonstrates that it provides maintenance and repair functions for competing carriers in substantially the same time and manner that it provides such services for SWBT retail customers.

14. Checklist Item 1 “Interconnection. Based on the evidence in the record, we conclude that SWBT satisfies the requirements of checklist item 1 in both Arkansas and Missouri. Pursuant to this checklist item, SWBT must allow other carriers to interconnect their networks to its network for the mutual exchange of traffic, using any available method of interconnection at any available point in SWBT's network. The Commission has concluded that SWBT demonstrates that it is in compliance with the requirement of this checklist item. SWBT provides interconnection at any technically feasible point, including the option to interconnect at only one technically feasible point within a LATA, within its network. Furthermore, interconnection between networks must be equal in quality whether the interconnection is between SWBT and an affiliate, or between SWBT and another carrier. SWBT demonstrates that it provides interconnection that meets this standard. We reject arguments raised in the initial Missouri proceeding that SWBT does not meet this checklist item due to interconnection installation performance. We find that these allegations are not substantiated in the current performance measures, which indicate that SWBT is providing installation of interconnection trunks to CLECs with far fewer missed due dates than it provides to itself.

15. SWBT also offers interconnection in Arkansas and Missouri to other telecommunications carriers at just, reasonable, and nondiscriminatory rates, in compliance with checklist item 1. SWBT's collocation rates meet the standards for interim rates set forth in our order approving SWBT's Texas section 271 application and Bell Atlantic's New York section 271 application. See Application of SWBT Texas for Authorization Under Section 271 of the Communications Act, 65 FR 42361 (2000); Application of Bell Atlantic New York for Authorization Under Section 271 of the Communications Act, 64 FR 73555 (1999).

16. Checklist Item 6 “ Unbundled Local Switching. Based on the evidence in the record, we find that SWBT satisfies the requirements of checklist item 6 in both Arkansas and Missouri. The Commission finds that SWBT satisfies the requirements of checklist item 6, and note that the Arkansas and Missouri Commissions found that SWBT satisfies this checklist item. SWBT demonstrates that it provides competing carriers all of the features, functions, and capabilities of the switch. We reject Sage's arguments that the Commission should deny SWBT's 271 application for Missouri because SWBT refuses to allow access to the line class codes and/or other features of the SWBT switch that are used to provide extended calling area scopes, such as SWBT's Local Calling Plus service. Based on the record before us, it appears that there is a factual dispute between Sage and SWBT that would be better resolved in another proceeding.

17. Checklist Item 14—Resale. SWBT demonstrates that it makes telecommunications services available for resale in accordance with sections 251(c)(4) and 252(d)(3), and thus satisfies the requirements of checklist item 14 in both Missouri and Arkansas. SWBT also makes its retail telecommunications services available for resale without unreasonable or discriminatory conditions or limitations.

18. Checklist Items 3, 5, 7, 8, 9, 10, 11, 12 and 13. An applicant under section 271 must also demonstrate that it complies with checklist item 3 (poles, ducts, conduits and rights of way), item 5 (unbundled local transport), item 7 (911/E911 access and directory assistance/operator services), item 8 (White Page Directory Listing), item 9 (numbering administration), item 10 (databases and associated signaling), item 11 (number portability), item 12 (local dialing parity), and item 13 (reciprocal compensation). Based upon the evidence in the record, we conclude that SWBT demonstrates that it is in compliance with checklist items 3, 5, 7,8, 9, 10, 11, 12 and 13 in both Arkansas and Missouri. The Arkansas and Missouri Commissions also conclude that SWBT complies with the requirements of each of these checklist items.

19. Section 272 Compliance. SWBT demonstrates that it will comply with the requirements of section 272. Pursuant to section 271(d)(3), SWBT must demonstrate that it will comply with the structural, transitional, and nondiscriminatory requirements of section 272, as well as certain requirements governing its marketing arrangements. SWBT shows that it will provide interLATA telecommunications through structurally separate affiliates, and that it will operate in a nondiscriminatory manner with respect to these affiliates and unaffiliated third parties. In addition, SWBT demonstrates that it will comply with public disclosure requirements of section 272, which requires SWBT to post on the Internet certain information about transactions with its affiliates. Finally, SWBT demonstrates compliance with the joint marketing requirements of section 272.

20. Public Interest Standard. We conclude that approval of this application is consistent with the public interest, convenience, and necessity. While no single factor is dispositive in our public interest analysis, our overriding goal is to ensure that nothing undermines our conclusion, based on our analysis of checklist compliance, that markets are open to competition. We note that a strong public interest showing cannot overcome failure to demonstrate compliance with one or more checklist items.

21. Among other factors, we may review the local and long distance markets to ensure that there are not unusual circumstances that would make entry contrary to the public interest under the particular circumstances of this Application. We find that, consistent with our extensive review of the competitive checklist, barriers to competitive entry in the local market have been removed and the local exchange market today is open to competition. We also find that the record confirms our view that a BOC's entry into the long distance market will benefit consumers and competition if the relevant local exchange market is open to competition consistent with the competitive checklist.

22. We also find that the performance monitoring and enforcement mechanisms developed in Arkansas and Missouri, in combination with other factors, provide meaningful assurance that SWBT will continue to satisfy the requirements of section 271 after entering the long distance market. Where, as here, a BOC relies on performance monitoring and enforcement mechanisms to provide such assurance, we review the mechanisms involved to ensure that they are likely to perform as promised. We conclude that these mechanisms have a reasonable design and are likely to provide incentives sufficient to foster post-entry checklist compliance.

23. Section 271(d)(6) Enforcement Authority. Congress sought to create incentives for BOCs to cooperate with competitors by withholding long distance authorization until they satisfy various conditions related to local competition. We note that these incentives may diminish with respect to a given state once a BOC receives authorization to provide interLATA service in that state. The statute nonetheless mandates that a BOC comply fully with section 271's requirements both before and after it receives approval from the Commission and competes in the interLATA market. Working in concert with state commissions, we intend to monitor closely post-entry compliance and to enforce vigorously the provisions of section 271 using the various enforcement tools Congress provided us in the Communications Act. Swift and effective post-approval enforcement of section 271's requirements is essential to Congress' goal of achieving last competition in local markets.

Federal Communications Commission.

William F. Caton,

Deputy Secretary.