01-2748. Joint Application by SBC Communications Inc., Southwestern Bell Telephone Company, and Southwestern Bell Communications Services, Inc. d/b/a Southwestern Bell Long Distance, Pursuant to Section 271 of the Telecommunications Act of 1996 To ...

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 Kansas and Oklahoma. The Commission grants SWBT's application based on our conclusion that SWBT has satisfied all of the statutory requirements for entry, and opened its local exchange markets to full competition. This document represents the first time that the Commission has approved a section 271 application for a more rural state, and the first time we have ruled on a section 271 application for a second state within a Bell Operating Company (BOC) region.

DATES:

Date of approval of section 271 application is: March 7, 2001.

FOR FURTHER INFORMATION CONTACT:

John Stanley, Attorney, Policy and Program Planning Division, 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, 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 January 19, 2001, and released January 22, 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, International Transcription Service Inc. (ITS), CY B-400, 445 12th Street, SW., Washington, DC.

Synopsis of the Memorandum Opinion and Order

1. History of the application. On October 26, 2000, 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 Kansas and Oklahoma.

2. The State Commissions' evaluations. The Kansas Corporation Commission and Oklahoma Corporation 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 December 4, 2000. In its evaluation, the Department of Justice focused on the prices at which SWBT provides interconnection and unbundled network elements (UNEs) in Kansas and Oklahoma. The Department of Justice recommended that the Commission undertake an independent determination of recurring and nonrecurring UNE rates in Oklahoma, and nonrecurring UNE rates in Kansas. The Department of Justice also questioned the sufficiency of SWBT's evidence in support of its operations support systems (OSS) in Kansas and Oklahoma. The Department of Justice urged the Commission to establish the kind of evidentiary showing that will be expected of future applicants who seek to rely on findings from prior section 271 proceedings.

4. Compliance with section 271(c)(1)(A). We conclude that SWBT demonstrates that it satisfies the requirements of section 271(c)(1)(A) based on the interconnection agreements it has implemented with competing carriers in Kansas and Oklahoma. Specifically, we find that a sufficient number of residential and business customers are being served by competing LECs through the use of their own facilities in both Kansas and Oklahoma. The Kansas and Oklahoma Commissions also conclude that SWBT has met the requirements of section 271(c)(1)(A).

5. Checklist item 2—Access to unbundled network elements. We conclude that SWBT satisfies the requirements of checklist item 2 in both Kansas and Oklahoma. For the 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, 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 rely on detailed evidence provided by SWBT in this proceeding and, in certain circumstances, on our findings from the SWBT Texas section 271 Order. See Application of SWBT Texas for Authorization Under Section 271 of the Communications Act, 65 FR 42361 (2000)

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, SWBT demonstrates that it is provides nondiscriminatory access to its pre-ordering functions. Specifically, we find that SWBT demonstrates that: (i) SWBT offers nondiscriminatory access to OSS pre-ordering functions associated with determining whether a loop is capable of supporting xDSL advanced technologies; (ii) competing carriers successfully have built and are using application-to-application interfaces to perform pre-ordering functions and are able to integrate pre-ordering and ordering interfaces; and (iii) its pre-ordering systems provide reasonably prompt response times and are consistently available in a manner that affords competitors a meaningful opportunity to compete.

7. In terms of the interfaces and systems that enable competing carriers to place an order for service, SWBT demonstrates that its systems return timely order confirmation, rejection notices, jeopardy and order completion notifications, and are capable of achieving high overall levels of order flow-through. We also find that SWBT makes available sufficiently detailed interface design specifications for EDI that enable competing carriers to modify or design their own systems in a manner that will allow them to communicate with SWBT's systems and interfaces. In terms of provisioning, we find that SWBT provisions competing carriers' orders for resale and UNE-P services in substantially the same time and manner that it provisions orders for its own retail customers.

8. In addition, with respect to maintenance and repair, we find that SWBT offers maintenance and repair interfaces and systems that enable a requesting carrier to access all the same functions that are available to SWBT's representatives. SWBT provides competing carriers with several options for requesting maintenance and reporting troubles. Similarly, SWBT resolves problems associated with customers of competing carriers in substantially the same time and manner and at the same level of quality that it performs repair work for its own customers. 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 Kansas and Oklahoma.

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 Kansas and Oklahoma, 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, we find that SWBT satisfies the pricing requirements of checklist item 2 in both Kansas and Oklahoma. 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 Kansas' recurring UNE rates fall within the reasonable range of total long run incremental cost (TELRIC) prices, and that Kansas' nonrecurring charges for UNE rates were guided by basic TELRIC principles. In Oklahoma, we find that both the recurring and nonrecurring charges for UNEs provide competitive carriers with rates that are within the range that a reasonable application of TELRIC principles would produce. We base our approval on SWBT's permanent UNE rates in Kansas and Oklahoma, as well as discounts SWBT made to some of those rates in December 2000. We waive our procedural requirements that an application be complete when filed in order to consider SWBT's voluntary rate reductions filed December 28, 2000. We find that special circumstances warrant this waiver, notably the limited nature of the rate reductions and the Commission's and commenters' ability to fully evaluate the impact of the rate reductions.

11. Checklist item 4—Unbundled local loops. SWBT satisfies the requirements of checklist item 4 in both Kansas and Oklahoma. 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 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. SWBT's performance in Kansas and Oklahoma on hot cut timeliness appears consistent with its current performance in Texas, where SWBT uses the same CHC process. Moreover, upon review of the evidence in the record regarding hot cut installation quality, and specifically the outage rate associated with failed SWBT CHCs, and the trouble rate following CHC installation, we find that SWBT demonstrates that it provisions CHCs in a manner that meets the requirements of this checklist.

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 Kansas and Oklahoma. 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. We find that SWBT demonstrates that it provides interconnection at any technically feasible point, including the option to interconnect at only one technically feasible point within a LATA, within its network. We likewise find that SWBT adequately demonstrates that it provides collocation in Kansas and Oklahoma in accordance with the Commission's rules. 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.

15. SWBT also offers interconnection in Kansas and Oklahoma 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). The mere presence of interim rates will not generally threaten a section 271 application so long as an interim solution to a particular rate dispute is reasonable under the circumstances, the state commission has demonstrated its commitment to our pricing rules, and provision is made for refunds or true-ups once permanent rates are set. Here, we find that the interim solutions adopted by the Kansas and Oklahoma Commissions are reasonable under the circumstances. The Oklahoma Commission rates, which are the Texas collocation rates based on a TELRIC model, are reasonable starting points for interim rates for the same carrier in an adjoining state. The Kansas Commission also made a reasonable attempt to set an interim TELRIC-based rate pending its final determination. The Kansas and Oklahoma Commissions have pending cost proceedings to set permanent rates for collocation, and each has ordered that the interim rates be subject to a true-up.

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 Kansas and Oklahoma. We find that SWBT satisfies the requirements of checklist item 6, because SWBT demonstrates that it provides competing carriers all of the features, functions, and capabilities of the switch. With regard to the provision of unbundled packed switching, SWBT demonstrates that it has a legal obligation in Kansas and Oklahoma to provide packet switching according to the rules set forth in the UNE Remand Order. See Revision of the Commission's Rules Specifying the Portions of the Nation's Local Telephone Networks That Incumbent Local Telephone Companies Must Make Available to Competitors, 65 FR 2542 (2000).

17. Checklist item 8—White pages directory listings. SWBT satisfies the requirements of checklist item 8 in both Kansas and Oklahoma. This checklist item ensures that white pages listings for customers of different carriers are comparable, in terms of accuracy and reliability, notwithstanding the identity of the customer's telephone service provider. SWBT demonstrates that its provision of white pages listings to customers of competitive LECs is nondiscriminatory in terms of their appearance and integration, and that it provides white pages listings for competing carriers' customers with the same accuracy and reliability that it provides to its own customers.

18. Checklist item 13—Reciprocal compensation. SWBT satisfies the requirements of checklist item 13 in both Kansas and Oklahoma. SWBT demonstrates that it has reciprocal compensation arrangements in accordance with section 252(d)(2), and that it is making all required payments in a timely manner. Given that the Commission had not yet determined the status of ISP-bound traffic, refusing to pay reciprocal compensation does not violate the requirements of checklist item 13 at the present time.

19. 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 Kansas and Oklahoma. SWBT also makes its retail telecommunications services available for resale without unreasonable or discriminatory conditions or limitations. We also find that SWBT satisfies the provisioning requirements of checklist item 14 in both Kansas and Oklahoma because SWBT provisions competitive LECs' orders for resale in substantially the same time and manner as for its retail customers.

20. Checklist items 3, 5, 7, 9, 10, 11 and 12. 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 9 (numbering administration), item 10 (databases and associated signaling), item 11 (number portability), and item 12 (local dialing parity). Based upon the evidence in the record, we conclude that SWBT demonstrates that it is in compliance with checklist items 3, 5, 7, 9, 10, 11 and 12 in both Kansas and Oklahoma. The Kansas and Oklahoma Commissions also conclude that SWBT complies with the requirements of each of these checklist items.

21. 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.

22. 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.

23. 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.

24. We also find that the performance monitoring and enforcement mechanisms developed in Kansas and Oklahoma, 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.

25. 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.

Shirley Suggs,

Chief, Publications Group.