Section 271 ProceedingsState Company Status Date filed Effective date

Michigan SBC Pending 1/15/2003 due by 4/16/03NM, OR, SD Qwest Pending 1/15/2003 due by 4/15/03Nevada SBC Pending 1/14/2003 due by 4/14/03D.C., Md, W.Va. Verizon Pending 12/18/2002 due by 3/19/03CO,ID,IA,MT,NE,ND, UT,WA,WY Qwest Approved 9/30/2002 12/23/2002California SBC Pending 9/20/2002 12/19/2002Florida and TennesseeBellSouth Approved 9/20/2002 12/19/2002Virginia Verizon Approved 8/1/2002 10/30/2002MT,UT,WA,WY Qwest Withdrawn 7/12/2002 9/10/2002NH, DE Verizon Approved 6/27/2002 9/25/2002AL,KY,MS,NC.SC BellSouth Approved 6/20/2002 9/18/2002CO,ID,IA,NE,ND Qwest Withdrawn 6/13/2002 9/10/2002New Jersey Verizon Approved 3/26/2002 6/24/2002Maine Verizon Approved 3/21/2002 6/19/2002Georgia/Louisiana BellSouth Approved 2/14/2002 5/15/2002Vermont Verizon Approved 1/17/2002 4/17/2002New Jersey Verizon Withdrawn 12/20/2001 3/20/2002Rhode Island Verizon Approved 11/26/2001 2/24/2002Georgia/Louisiana BellSouth Withdrawn 10/2/2001 12/20/2001Arkansas/Missouri SBC Approved 8/20/2001 11/16/2001Pennsylvania Verizon Approved 6/21/2001 9/19/2001Connecticut Verizon Approved 4/23/2001 7/20/2001Missouri SBC Withdrawn 4/4/2001 6/7/2001Massachusetts Verizon Approved 1/6/2001 4/16/2001Kansas/Oklahoma SBC Approved 10/26/2000 1/22/2001Massachusetts Verizon Withdrawn 9/22/2000 12/18/2000Texas SBC Approved 4/5/2000 6/30/2000Texas SBC Withdrawn 1/10/2000 4/5/2000New York Verizon Approved 9/29/1999 12/22/1999Louisiana BellSouth Denied 7/9/1998 10/13/1998Louisiana BellSouth Denied 11/6/1997 2/4/1998South Carolina BellSouth Denied 9/30/1997 12/24/1997Michigan Ameritech Denied 5/21/1997 8/19/1997Oklahoma SBC Denied 4/11/1997 6/26/1997Michigan Ameritech Withdrawn 1/2/1997 2/11/1997

Section 271 Status

• 35 states approved– 9 Bell South (all)– 11Verizon states– 6 SBC states– 9 Qwest states

• Pending– 2 Verizon states + D.C– 3 Qwest– 2 SBC

• 5 applications denied• 8 applications withdrawn

Section 271 (c)

• Requirements for Providing Certain In-Region InterLATA Services– (1) Agreement or Statement

• (A) Presence of a Facilities-Based Competitor: one or more binding agreements approved under Section 252 to provide access and interconnection to one or more unaffiliated competing providers of residential and business telephone exchange service (Track A)

• (B) Failure to Request Access: if no provider requests access and there are approved terms and conditions available and approved by State commission under Section 252 (f) (Track B)

Section 251 ( c )

• (2) Interconnection– For the transmission and routing of telephone

exchange service and exchange access at any technically feasible point within the carrier’s network that is at least equal in quality to that provided by the local carrier to itself and on rates, terms, and conditions that are just, reasonable and nondiscriminatory

Section 251 ( c )

• (3) Unbundled access– Nondiscriminatory access to network elements

on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory

– Provided in such a manner that allows requesting carriers to combine such elements in order to provide telecommunications service

Section 252

• (d) Pricing standards– (1) Interconnection and Network element

charges are to be• Determined by a State commission• Just and reasonable• Based on cost of providing the interconnection or

the network element• Cost shall not refer to a rate of return or other rate-

based proceeding• May include a reasonable profit

Competitive Checklist

• Interconnection in accordance with the requirements of Sections 251(c)(2) and 252(d)(1)

• Nondiscriminatory access to network elements in accordance with Sections 251(c) (3) and 252 (d)(1)

• Nondiscriminatory access to poles, ducts, conduits, and rights-of-way owned or controlled by the Bell operating company at just and reasonable rates

Competitive Checklist (continued)

• Local loop transmission from the central office to the customer premise, unbundled from local switching

• Local transport from the trunk side of a wireline local switch unbundled from switching or other services

• Local switching unbundled from transport

• Nondiscriminatory access to – 911 and E911– Directory assistance– Operator call completion services– White pages directory listings– Compliance with guidelines and plans related to access

to telephone numbers– Nondiscriminatory access to databases and associated

signaling necessary for call routing– Full compliance with number portability– Nondiscriminatory access to services required for local

dialing parity– Reciprocal compensation arrangements– Telecommunication services available for resale

Consultation

• With Attorney General– AG to evaluate application using any standard AG

considers appropriate– Commission shall give substantial weight to evaluation,

but evaluation shall not have a preclusive effect on any Commission decision

• Views AG as “expert witness”

• With State Commission– To verify BOC compliance with 271 ( c )

• Commission has discretion to determine the amount of weight to accord the state commission’s verification

Basis for FCC determination

• 90 day window for FCC to issue written declaration, which must determine whether– BOC provides access and interconnection– BOC fully meets the competitive checklist– The requested authorization will be carried out

in accordance with Section 272– The requesting authorization is consistent with

the public interest, convenience, and necessity

Section 272, Separate Affiliate

• Structural and transactional requirements– Operate independently from BOC– Maintain separate books, records, and accounts

in manner prescribed by FCC– Have separate officers, directors, and

employees– Separate credit—can’t use the BOC’s assets – Arm’s length transactions

Section 272 continued

• Nondiscriminatory safeguards– No discrimination between affiliate and any

other entity in provision or procurement of goods, services, information or facilities

– Account for all transactions with affiliate in manner prescribed by FCC

• Biennial Federal/State audit every 2 years

Section 272 continued• Requests for telephone exchange service and exchange

access from unaffiliated entity to be filled within a period no longer than the period in which it provides such services to itself or its affiliates

• No facilities, services, or information provided to affiliate unless the same is made available to competitors on same terms and conditions

• Charge affiliate, or impute to self, the same amount charged to any unaffiliated interexchange carrier for access to its telephone exchange service or exchange access

• May provide any interLATA or intraLATA facilities or services to interLATA affiliate if same are made available to all carriers at same rates and on same terms, and so long as costs are appropriately allocated

Enforcement authority

• If FCC determines that a BOC has ceased to meet any of the conditions required, may– Issue an order to correct deficiency– Impose a penalty – Suspend or revoke approval

• Complaint procedure to be developed by FCC

Legal Standard

• If a retail analogue exists: must provide access that is equal to (substantially the same as) the level of access that the BOC provides itself, its customers, or its affiliates, in terms of quality, accuracy, and timeliness.

• If no retail analogue exists: must provide access that gives an efficient competing carrier a meaningful opportunity to compete.

Evidentiary Case

• BOC must prove it has concrete and specific legal obligation under state-approved interconnection agreement; that it is currently furnishing, or is ready to furnish, checklist items in quantities that competitors may reasonably be expected to demand and at an acceptable level of quality

• Evidence– Commercial usage most probative– Performance benchmarks set through collaborative

state proceedings

Evidentiary Case continued

• Examination of statistically significant differences to determine whether statutory nondiscrimination requirements are met– Disaggregated data– Trends in recent months– Determination whether differences have

competitive significance in marketplace– Contextual decision based on the totality of

circumstances

Overview of filings

• Significant Issues– New York: Unbundling rules in flux (used Rule 319 as

of Local Competition Order; UNE Remand Order not yet in force)—held to original list with assumption of compliance with new rules when in force

– Texas: First application supported by both DOJ and State Commission; (used Rule 319 as of UNE Remand Order effective February 2000)-- not held to demonstrating provisions of Line Sharing Order to be effective May 2000

Overview of filings

• Significant Issues (continued)– Oklahoma and Kansas: first “rural” states; first

application to deal with Line Sharing; first application for more than one state; first application to use data from another state (Texas); reductions in NRC filed on day 63 of process but didn’t restart clock, just moved effective date out 43 days

– Massachusetts: adoption of New York metrics and standards; UNE rates under 5-year review by Department of Telecom and Energy; reliance on voluntarily-adopted New York switching rates, also under review

Overview of filings

• Significant issues (continued)– Arkansas/Missouri: Arkansas adoption of UNE rates in

Kansas upheld; lack of resale offerings of DSL transport service to ISP or of Internet access service to subscribers not seen as barrier to approval

– Vermont: relatively low level of competition for residential customers not regarded as reason to deny application; price-squeeze argument rejected by Commission—standard is whether rates are cost-based, not whether market entry is profitable; Commission cannot consider a state’s retail rates

How competitive is competitive?• Notes that Congress declined to adopt a market share or

similar test – FCC won’t do so either– New York: 1,118,180 competitive lines; 651,793 (35,753) own facilities,

152,055 (137,342) UNE, 314,332 (63,547) resale– Texas: est. of 840,000-890,000 competitive lines; 302,000 (244,000)

UNE, 349,000 (191,000) resale– Kansas: competitors serve 9%-12.6% of total lines – Oklahoma: competitors serve 5.5%-9% of lines– Massachusetts: 513,000 own facilities, 93,000 UNE, 268,000 (30,000)

resale– Arkansas: 98,500 CLEC lines (40% residential), with 24,000 UNEs;

34,000 resale – Missouri: 295,000 CLEC lines (20% residential), with 76,000 UNEs;

107,000 resale– Vermont: 21,500 CLEC lines with 15,900 of them resale

TELRIC pricing standard

• Will reject an application only if basic TELRIC principles are violated or if state commission makes clear errors in factual findings on matters so substantial that the end result falls outside the range that the reasonable application of TELRIC principles would produce.

“TELRIC presumption test”• From Oklahoma/Kansas order

– A BOC’s UNE rates will be entitled to a presumption of TELRIC compliance if adopted in whole from another state whose rates were found to comply with TELRIC and if costs are demonstrated to be at or above costs in state whose rates are adopted

• Common BOC and geographic similarities• Similar, though not identical, rate structures for comparison

purposes• FCC had found the rates in that state reasonable

– Use of USF model to determine relative cost differences

Examples of Issues Examined• Access to OSS

– Pre-ordering functionality, integration, response times and availability, access to loop qualification information,

– Order confirmation notices, rejection notices, and order rejections, order flow-through rate, order completion notices

– Provisioning– Maintenance and repair---functionality, response time,

quality of work– Billing– Change management and technical assistance

Public Interest Analysis

• Benefits of competition in local exchange and long distance markets

• Removal of barriers to competitive entry

• Assurance of future compliance– Performance remedy plan– Provisions of section 271(d)(6), liquidated

damages through interconnection agreements, antitrust and other private causes of action

Key elements of enforcement• Liability dollars at risk ($289M for Texas; $269M

for New York; $155M for Massachusetts; $45M for Kansas and $44 for Oklahoma; $48M for Arkansas; $98M for Missouri)

• Performance measures and standards• Structural elements of plan that will allow detection

and sanction of poor performance• Self-executing mechanism• Data validation and audit procedures• Accounting requirements—penalties not to become

part of revenue requirement