00-17287. 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 Commission grants the section 271 application of Southwestern Bell (SWBT) for authority to enter the interLATA toll market in the State of Texas. 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.

DATES:

Effective date of approval of section 271 application is July 10, 2000.

FOR FURTHER INFORMATION CONTACT:

Audrey Wright or William Dever, Attorneys, Policy and Program Planning Division, Common Carrier Bureau, at [phone], or via the Internet at [e-mail] or [e-mail], respectively. 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 June 30, 2000, and released June 30, 2000. The full text also may be obtained through the World Wide Web, at http://www.fcc.gov/​ccb/​ Orders/index6.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 January 10, 2000, SWBT filed an application with the Federal Communications Commission to provide in-region, interLATA service in the State of Texas. On April 5, 2000, SWBT filed an extensive supplement to its January 2000 application. On April 6, 2000, the Commission announced that, at SWBT's request, it would consider the January 2000 application as withdrawn, and would treat the supplemental filing as a new application incorporating the record from the initial proceeding.

2. The Texas Commission's Evaluation. The Texas Commission advised the Commission that, following extensive review, testing, and process improvements, SWBT met the checklist requirements of section 271(c) and had taken the statutorily required steps to open its local markets to competition. Specifically, the Texas Commission stated that SWBT met its obligation under section 271(c)(1)(A) by entering into interconnection agreements with at least 17 competing carriers that are serving residential and business customers either exclusively or predominantly over their own facilities. The Texas Commission found that SWBT had fully complied with section 271, and voted without qualification to support the application.

3. The Department of Justice's Evaluation. The Department of Justice submitted evaluations of SWBT's application on May 12 and June 13, 2000. In its May 12 evaluation, the Department of Justice concluded that SWBT's performance with respect to interconnection trunking had sufficiently improved to alleviate its concerns with respect to that issue. In its June 13, 2000 evaluation, the Department of Justice recommended approval of SWBT's application to provide long distance service in Texas. Specifically, the Department of Justice concluded that SWBT had significantly improved the process by which it measures and reports its performance in providing unbundled loops for DSL services, and had demonstrated improvement in its ability to provision DSL-capable loops in a nondiscriminatory manner. The Department of Justice further found that SWBT had demonstrated improvement in cutting over a loop to a competing carrier, specifically through the coordinated hot cut (CHC) process, and to a lesser degree, through the frame due time (FDT) processes. Finally, the Department of Justice stated that commercial data with respect to competing carriers' ability to compete via the UNE-platform are encouraging, and noted that order volumes in this area had increased steadily over the last few months.

4. Compliance with Section 271(c)(1)(A). We conclude that SWBT demonstrates that it satisfies the requirements of section 217(c)(1)(A) based on the interconnection agreements it has implemented with competing carriers in Texas. Specifically, we find that AT&T, Birch, CoServ, ETS, Optel, Sage and KMC all provide telephone exchange service either exclusively or predominantly over their own facilities to residential subscribers and to business subscribers. The Texas Commission also concludes that SWBT has met the requirements of section 271(c)(1)(A). None of the commenting parties, including the competitors cited by SBC in support of its showing, challenges SWBT's assertion in this regard.

5. Checklist Item 1—Interconnection. We conclude that SWBT satisfies the requirements of checklist item 1. 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 all technically feasible points on its network. We likewise find that SWBT adequately demonstrates that it provides collocation in Texas 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.

6. SWBT also offers interconnection in Texas to other telecommunications carriers at just, reasonable, and nondiscriminatory rates, in compliance with checklist item 1. SWBT offers interconnection at the total element, long-run incremental cost (TELRIC)-based rates that are just, reasonable, and nondiscriminatory, pursuant to our rules. SWBT complies with our rules because it pro-rates its site preparation charges and allocates them according to our rules.

7. SWBT meets the standards for interim collocation rates set forth in our order approving Bell Atlantic's section 271 application. See Application of Bell Atlantic New York for Authorization Under Section 271 of the Communications Act, 64 Fed. Reg. 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, the state has made reasonable efforts to set interim collocation rates in accordance with the Act and the FCC's rules. Moreover, the Texas Commission based the majority of the interim rates, at least with regard to physical collocation, on a TELRIC model. The Texas Commission has set up a schedule to set permanent rates, and has indicated to the parties that the interim rates are subject to a refund or true-up.

8. Checklist Item 2—Access to Unbundled Network Elements. We conclude that SWBT satisfies the requirements of checklist item 2. For the purposes of the checklist, SWBT's obligation to provide “access to unbundled network elements,” or the individual components of the telephone network, is comprised of three aspects. First, to fulfill its nondiscrimination checklist obligation, SWBT must provide access to its operations support systems (OSS)—the term used to describe the systems, databases and personnel necessary support the network elements or services. Nondiscriminatory access 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. For each of the primary OSS functions, including pre-ordering, ordering, provisioning, maintenance and repair, and billing, as well as change management and technical assistance, SWBT must provide 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.

9. As an initial matter, SWBT demonstrates that it provides documentation and technical assistance necessary for new entrants to connect with its OSS, and a change management process that provides information necessary for competing carriers to modify their systems and procedures when SWBT changes its OSS. 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 (primarily through evidence of actual commercial usage) that it has deployed operationally ready interfaces and systems that offer nondiscriminatory access to pre-ordering OSS functions. Specifically, SWBT's pre-ordering interfaces and systems enable competing carriers to retrieve customer service records, validate addresses, select and reserve telephone numbers, assess the services and features available to customers, retrieve due date information, determine whether a loop is capable of supporting advanced services (such as DSL), and view a customer's directory listing. Also, just as SWBT's own pre-ordering systems are “integrated” with its ordering systems, competing carriers may also integrate the pre-ordering and ordering interfaces, and pass information electronically from one to the other.

10. In terms of the interfaces and systems that enable competing carriers to place an order for service, SWBT demonstrates through performance data and third-party testing that it its systems return timely order confirmation and rejection notices, provide jeopardy and order completion notification, flow through a high percentage of orders without manual handling, and are capable of handling reasonably foreseeable demand volumes. In terms of provisioning, performance data demonstrates that SWBT provisions orders for competing carriers' customers in substantially the same time and manner that it provisions orders for its own retail customers.

11. In addition, with respect to maintenance and repair, SWBT demonstrates through commercial usage that its interfaces and systems enable competing carriers to create, modify, and cancel trouble tickets, and to request that SWBT test a customer's circuit, in substantially the same time and manner as SWBT's retail operations. 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. Finally, 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.

12. 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 evidence of actual commercial usage, and upon SWBT's legal obligations under interconnection agreements offered in Texas, 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.

13. We also find that SWBT satisfies the pricing requirements of checklist item 2. In fulfilling its obligations under this checklist item, SWBT demonstrates that it provides nondiscriminatory access to unbundled network elements (UNEs) at any technically feasible point at rates, terms and conditions that are just, reasonable, and nondiscriminatory. This checklist item ensures that new entrants are not placed at a competitive disadvantage due to discriminatory prices for network elements.

14. We do not find that the SWBT's assessment of nonrecurring charges on UNE orders causes it to fail this checklist item. First, we find that the a central office access charge (COAC) is not subject to the Commission's forward-looking methodology because the Supreme Court held only that incumbent local exchange carriers (LECs) cannot separate already combined elements before providing them, not that they must combine separate UNEs. AT&T v. Iowa Utilities Board, 525 U.S. 366 (1999). Second, we have not examined the prices associated with UNE combinations that SWBT is not required to provide. Third, the Texas Commission is presently considering whether SWBT may impose the nonrecurring charges on competitive LEC orders for existing UNE combinations and whether these charges are adequately supported by cost documentation. SWBT is not presently collecting nonrecurring charges on pre-combined residential platform containing a two-wire analog loop, and thus is effectively imposing an interim charge of zero while the Texas Commission examines these charges. The Texas Commission has established a schedule to set permanent rates for all nonrecurring charges, and has indicated to the parties that the interim rates are subject to a true-up. We find that SWBT's interim solution is reasonable and meets the test set forth in prior section 271 orders.

15. We reach the same conclusion regarding SWBT's interim rates for charges relating to the installation and conditioning of xDSL-capable loops. The Texas Commission is now conducting a proceeding to set permanent xDSL rates based on cost studies that SWBT submitted at the direction of the Texas Commission arbitrator, and this interim solution is reasonable under the circumstances. We also find that SWBT's promotional discounts on unbundled loop and platform orders for telecommunications carriers serving residential customers arise out of SBC's merger with Ameritech and do not cause it to fail this checklist item. We also found that these promotional offerings are offered to all telecommunications carriers on a nondiscriminatory basis.

16. Checklist Item 3—Poles, Ducts, Conduits and Rights of Way. Based on the evidence in the record, we conclude that SWBT provides nondiscriminatory access to the poles, ducts, conduits, and rights-of-way at just and reasonable rates in compliance with our rules and satisfies the requirements of checklist item 3. The Texas Commission concludes that SWBT provides nondiscriminatory access to poles, ducts, conduits, and rights-of-way at just and reasonable rates that comply with the Act and Commission rules. No commenter raised allegations challenging SWBT's compliance with this checklist item.

17. Checklist Item 4—Unbundled Local Loops. SWBT satisfies the requirements of checklist item 4. 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.

18. 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, to competing carriers in a manner that permits efficient competitors to have a meaningful opportunity to compete. Through its CHC process, SWBT provisions 93 percent of hot cut lines within a one-hour interval, with less than five percent of hot cut lines resulting in a service disruption, and with less than two percent of hot cut lines the subject of installation trouble reports. In addition, SWBT 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. For both hot cut loops and new stand-alone loops, 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.

19. SWBT also demonstrates that it provides DSL-capable loops to competing carriers in a nondiscriminatory manner. Specifically, SWBT demonstrates that for both DSL and BRI loops used for advanced services, SWBT provides timely advanced services order processing and installation comparable to that which it provides SWBT retail advanced services customers. For both DSL and BRI loops, SWBT also 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. In addition, SWBT demonstrates that it provides high capacity loops (e.g., DS1 loops) to competing carriers in a nondiscriminatory manner.

20. Checklist Item 5—Unbundled Local Transport. Based on the evidence in the record, the Commission concludes that SWBT provides both shared and dedicated transport in compliance with the requirements of this checklist item. The Texas Commission also finds that SWBT is in compliance with this checklist item.

21. Checklist Item 6—Unbundled Local Switching. SWBT satisfies the requirements of checklist item 6. A switch connects end user lines to other end user lines, and connects end user lines to trunks used for transporting a call to another central office or to a long-distance carrier. Switches can also provide end users with “vertical features” such as call waiting, call forwarding, and caller ID, and can direct a call to a specific trunk, such as to a competing carrier's operator services. 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.

22. Checklist Item 7—911/E911/Directory Assistance/Operator Services. Based on the evidence submitted in the record, the Commission concludes that SWBT demonstrates that it is providing nondiscriminatory access to 911/E911 services, and thus satisfies the requirements of checklist item 7. We note that no commenter disputes SWBT's compliance with this portion of checklist item 7, and the Texas Commission concludes that SWBT is providing nondiscriminatory access to 911/E911. We further conclude, as the Texas Commission concluded, that SWBT provides directory assistance services and operator services in accordance with the requirements of this checklist item. We are not persuaded by commenters' allegations that SWBT violates the checklist by charging competitive LECs non-cost-based rates for access to directory assistance listings of customers that reside within its region, but outside of Texas. For purposes of this application, we consider only whether SWBT meets the requirements of section 271 in the State of Texas, not whether SWBT's out-of-state directory assistance meets this checklist item.

23. Checklist Item 8—White Pages Directory Listings. SWBT satisfies the requirements of checklist item 8. White pages are the directory listings of telephone numbers of residences and businesses in a particular area. 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.

24. Checklist Item 9—Numbering Administration. SWBT satisfies the requirements of checklist item 9. Telephone numbers are currently assigned to telecommunications carriers based on the first three digits of the local number, known as “NXX” codes. To fulfill the nondiscrimination obligation in checklist item 9, SWBT must comply with the numbering administration guidelines, plan, or rules. This checklist item ensures that other carriers have the same access to new telephone numbers as SWBT. SWBT demonstrates that it has adhered to industry guidelines and the Commission's requirements.

25. Checklist Item 10—Databases and Associated Signaling. SWBT satisfies the requirements of checklist item 10. Databases and associated signaling refer to the call-related databases and signaling systems that are used for billing and collection or the transmission, routing, or other provision of a telecommunications service. To fulfill the nondiscrimination obligation in checklist item 10, SWBT must demonstrate that it provides new entrants with the same access to these call-related databases and associated signaling that it provides itself. This checklist item ensures that other carriers have the same ability to transmit, route, complete, and bill for telephone calls as SWBT. SWBT demonstrates that it provides other carriers nondiscriminatory access to its: (i) Signaling networks, including signaling links and signaling transfer points; (ii) certain call-related databases necessary for call routing and completion or, in the alternative, a means of physical access to the signaling transfer point linked to the unbundled database; and (iii) Service Management Systems; and to design, create, test, and deploy Advanced Intelligent Network (AIN) based services at the SMS through a Service Creation Environment.

26. Checklist Item 11—Number Portability. SWBT satisfies the requirements of checklist item 11. Number portability enables consumers to take their phone number with them when they change local telephone companies. SWBT demonstrates that it provides number portability to consumers without impairment of quality, reliability, or convenience.

27. Checklist Item 12—Dialing Parity. Based on the evidence in the record, we find that SWBT demonstrates that it provides local dialing parity in accordance with the requirements of section 251(b)(3) and thus satisfies the requirements of this checklist item. Furthermore, the Texas Commission concludes that SWBT meets the requirements of this checklist obligation.

28. Checklist Item 13—Reciprocal Compensation. SWBT satisfies the requirements of checklist item 13. Pursuant to this checklist item, SWBT must compensate other carriers for the cost of transporting and terminating a local call from SWBT. Alternatively, SWBT and the other carrier may enter into an arrangement whereby neither of the two carriers charge the other for terminating local traffic that originates on the other carrier's network. This checklist item is important to ensuring that all carriers that originate calls bear the cost of terminating such calls. 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.

29. We believe that SWBT has made a concerted effort to resolve a traffic reporting dispute it has had with competing carriers, has continued to exchange traffic records with carriers during the course of this dispute, and has implemented a reasonable interim traffic reporting mechanism while industry groups work toward a permanent industry-wide solution. We also find that SWBT's Extended Area Service (EAS) additive charge meets our reciprocal compensation requirements because EAS additives are reciprocal in nature and entirely optional. We also decline to set reciprocal compensation rates for Internet-bound traffic from an end user.

30. 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. This checklist item requires SWBT to offer other carriers all of its retail services at wholesale rates without unreasonable or discriminatory conditions or limitations so that other carriers may resell those services to an end user. This checklist item ensures a mode of entry into the local market for carriers that have not deployed their own facilities. 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. SWBT provisions competitive LECs' orders for resale in substantially the same time and manner as for its retail customers.

31. 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.

32. 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.

33. 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 Bell Operating Company's (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.

34. Another factor that could be relevant to our analysis is whether we lack sufficient assurance that markets will remain open after grant of the application. We find that the performance monitoring and enforcement mechanisms developed in Texas, 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.

35. 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.

Magalie Roman Salas,

Secretary.