[Congressional Record Volume 147, Number 112 (Friday, August 3, 2001)]
[Senate]
[Pages S8933-S8939]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mr. HOLLINGS (for himself, Mr. Inouye, and Mr. Stevens):
  S. 1364. A bill to ensure full and expeditious enforcement of the 
provisions of the Communications Act of 1934 that seek to bring about 
the competition in local telecommunications markets, and for other 
purposes; to the Committee on Commerce, Science, and Transportation.
  Mr. HOLLINGS. Mr. President, I rise to introduce, S. 1364, the 
Telecommunications competition Enforcement Act of 2001.
  I introduce this bill to affirm and enforce the competitive tenants 
of the Telecommunications Act of 1996. Some want to deregulate the Bell 
companies and mistakenly assert that deregulation will lead to 
increased deployment of broadband services. I disagree. The evidence 
simply does not support such a conclusion. It is only through 
strengthening and enforcing the competitive provisions of the 1996 Act 
that local phone markets will become open to competition and the 
delivery of advanced services will be enhanced.
  Congress in conjunction with members of the industry worked to pass 
the 1996 Act. I should note that at that time, everyone realized the 
impending innovations in technology and the potential for new and 
advanced services. These technological changes were expected to allow 
phone companies to provide high speed data and video services over 
their facilities, while also allowing cable companies to provide high 
speed data and phone services over their facilities. It was 
unquestionably understood by everyone involved that competition would 
be the driving force for incumbent companies to provide new services. 
And was this the right way to proceed? Of course it was. A wall street 
analysis with Montgomery Securities stated that ``RBOCs have finally 
begun to feel the competitive pressure from both CLECs and cable modem 
providers and are now planning to . . . accelerate/expand deployment of 
ADSL in order to counter the threat.'' Another wall street analyst with 
Prudential Securities noted that with respect to RBOC deployment of 
broadband service an ``important motivating factor is the threat of 
competition [and] [o]ther players are taking dead aim at the high-speed 
Internet access market.''
  Let us not forget the context in which the 1996 Act was passed. When 
Judge Greene in the 1990s broke-up Ma Bell, the agreement limited the 
service areas that the Regional Bell Operating Companies could enter. 
Judge Greene understood the significant market power of the Bell 
companies who had no competitors in their local markets and had 
complete access to the customer. Clearly, under such conditions, if 
Bells were allowed to enter new markets, they could quickly decimate 
their competitors by leveraging their monopolies in their local 
markets. Consequently, in an effort to protect competition in other 
areas, Judge Greene restricted their access to other markets. For these 
reasons, the Bell companies came to Congress for a solution that would 
eliminate their service restrictions. After many years of hard work, 
numerous hearings, and tons of analyses, Congress in an agreement

[[Page S8934]]

with all the relevant parties including the Bells, long distance 
service providers, cable companies, and consumer organizations put 
together a framework that met the needs and requests of all involved 
parties and one that gave the Bells what they most coveted, entrance 
into all markets. In doing so, however, Congress also put in place 
provisions to preserve competition.
  Under these conditions, the Bell companies worked with Congress to 
draft and pass the 1996 Act, and when the Act was finally passed, the 
Bell companies stated that they would quickly and aggressively open 
their local markets to competition. On March 5, 1996, Bell South-
Alabama President, Neal Travis, stated that ``We are going full speed 
ahead . . . and within a year or so we can offer [long distance] to our 
residential and business wireline customers.'' Ameritech's chief 
executive officer, Richard Notebaert on February 1, 1996, indicated his 
support of the 1996 Act by stating that, ``[T]his bill will rank as one 
of the most important and far-reaching pieces of federal legislation 
passed this decade. . . . It offers a comprehensive communications 
policy, solidly grounded in the principles of the competitive 
marketplace. It's truly a framework for the information age.'' On 
February 8, 1996, US West's President of Long Distance, Richard 
Coleman, predicted that USWest would meet the 14 point checklist in a 
majority of its states within 12-18 months. Unfortunately, the Bell 
companies have not kept their promises. Instead of getting down to the 
business of competing, the Bell companies chose a strategy of delay. In 
doing so, they have litigated, they have complained, and they have 
combined. In other words they have done everything except work to 
ensure competition in local markets.

  When the Bells first filed applications with the Federal 
Communications Commission, FCC, to enter the long distance market, 
contrary to their assertions, the FCC and the Department of Justice, 
DOJ, found that the local markets were not open to competition, and on 
that basis denied the companies entry into the long distance market. 
Once the Bells realized that they were not going to get into the long 
distance market before complying with the 1996 Act, they began a 
strategy of litigation which had two effects: 1. to delay competition 
into their local markets and 2. to hold on to their monopoly structure 
as they entered new markets in order to demolish their competitors. 
They appealed a series of the FCC's decisions to the courts and 
challenged the constitutionality of the 1996 Act even taking the case 
to the Supreme Court.
  Having lost in the courts, the Bells have now returned to Congress 
complaining about the 1996 Act, the very Act that they had previously 
championed. Many of the Bell companies have been meeting with Senators 
and Representatives, often accompanied by the same lawyers who helped 
write the 1996 Act. But this time their message is different. Instead 
of embracing competition, the once laudable goal they had proclaimed to 
be seeking, they now want to change the rules of the game and move in 
the opposite direction. Specifically, they now want to offer lucrative 
high-speed data services to long distance customers without first 
opening their local markets to competition, and they want to block 
their competitors from using their networks to provide high speed data 
service. As a result of these efforts, the Bells have successfully 
convinced some members of Congress to introduce bills that in essence 
allow them to offer such service while protecting the Bells against 
competition and slowing the delivery of affordable advanced service to 
consumers by gutting the 1996 Act.
  Bell companies claim that because no one contemplated the growth of 
data services that they should be permitted to continue their hold on 
the local customer as they provide broadband services. To state it 
plainly, they are wrong. The technology to provide broadband data 
services over the Bell network has been around since the early 1980s, 
but the Bells were slow to deploy service until competition prompted 
them to do so. Furthermore, recognizing the great potential of 
broadband services, Richard McCormick, then CEO and Chairman of USWest, 
in 1994 testifying before the Senate Commerce Committee stated the 
following:

       I want to touch briefly on USWest's business plan. We have 
     embarked on an aggressive program both within our 14-state 
     region and outside to deploy broadband. We want to be the 
     leader in providing interactive, that is, two-way multimedia 
     services, voice, data, video.

  In addition to the Bells realizing the importance of broadband 
service, Congress recognized the importance of broadband services when 
it passed the 1996 Act and included section 706 which is dedicated to 
promoting the development and deployment of advanced services. To quote 
the Act, ``advanced telecommunications capability'' is defined as 
``high-speed switched, broadband telecommunications capability that 
enables users to originate and receive high-quality voice, data, 
graphics, and video telecommunications using any technology.'' Also a 
search of the legislative debate on the 1996 Act reveals that the word 
``Internet'' appears 273 times. Even the preamble to the 1996 Act 
refers to ``advanced telecommunications and information technologies 
and services.'' With this evidence before it, the FCC also concluded 
that the competitive provisions of the 1996 Act included high-speed, 
advanced data and voice services.
  Today, all Bell companies are providing DSL service to customers. In 
fact, in October of 1999, SBC announced it would spend $6 billion over 
3 years on ``project Pronto'' which is the company's initiative to 
become the largest single provider of advanced broadband services in 
America. And on that point, I certainly commend SBC on its efforts. 
Through 2000, the four Bell companies invested 3.3. billion in DSL 
deployment and are expected to spend $10.3 billion through 2003. This 
investment is expected to payoff as earnings from their DSL investments 
are expected to be positive by late 2002 as market penetration hits 10 
percent. By the end of the first quarter of this year, SBC and 
BellSouth reached about 50 percent of their customer base while Verizon 
reached abut 42 percent with DSL service offerings.
  Additionally, reports indicate that broadband service is being 
effectively deployed. In an August 2000 report, the FCC concluded that 
overall, broadband service is being deployed on a reasonable and timely 
basis. It also found that there has been ample national deployment of 
backbone and other fiber facilities that provide backbone 
functionality. In October of 2000, the FCC issued another report in 
which it determined that high speed lines connecting homes and small 
businesses to the Internet increased by 57 percent during the first 
half of 2000. These developments effectively demonstrate why there is 
no justification for further deregulation of the Bells at least not 
until competition in the local markets is acheived.
  A major issue in this debate is how to serve rural and underserved 
ares. However, there it is no demonstrated commitment by the Bells to 
serve the rural markets. In fact, there behavior would lead you to the 
opposite conclusion. Qwest/USWest has sold nearly 600 smaller exchanges 
representing about 500,000 access lines and GTE has sold $1.6 milion 
access lines. Joe Nacchio, Chief Executive Officer of Qwest stated, ``I 
would have not qualms selling seeral million access lines if [I] could 
find the real deal.'' He also noted that ``we have about 17.5 million 
access line--we really like 11 [million].''

  While expending a great deal of resources litigating and complaining, 
Bell companies also have expended a fair amount of their energies in 
another area, that is merging and combining. In August of 1997, Verizon 
acquired NYNEX and in June of 2000 acquired GTE. First, SBC acquired 
Pac Bell, and in October of 1999, acquired Ameritech. The combined 
company now controls one-third of all access lines in the United 
States. In March of 2000, Qwest acquired USWest. At the same time, Bell 
Atlantic acquired Vodafone. In September of 2000, Bell-South Wireless 
and SBC Wireless entered into a joint venture, Cingular. Yet the local 
phone markets remain largely closed to competition.
  Even though there are many companies working to build a business in 
the local market, the Bells have met the 271 checklist in only six 
States, New York, Texas, Oklahoma, Kansas, Massachusetts, and 
Connecticut. Undoubtedly, if they cannot obtain real access

[[Page S8935]]

to the local phone markets, competitive companies will not be able to 
make a go of their businesses. My grave concern is that they will not 
be able to survive the Bell strategy of delay. Today, CLECs are 
struggling to survive. Of the 300 CLECs that began providing service 
since 1996, several have declared bankruptcy or are on the verge of 
failing and several others have scaled back their buildout plans. CLECs 
are faced with a significant downturn in the marketplace, tremendous 
difficulty in raising capital, and local markets that remain largely 
closed to competition. From the standpoint of capital, CLECs are 
particularly sensitive to the financial market since the vast majority 
of them are not profitable and rely on the capital markets for funding. 
Relying on the marketplace, CLECs have raised and spent $56 billion in 
their attempts to compete in the local market. Of the publicly traded 
CLECs in 2000, only 4 CLECs made a profit. Additionally, as a result of 
the market downturn, the market capitalization of CLECs fell from a 
high of $86.4 billion in 1999 to $32.1 billion in 2000.
  In Congress, we hear about the continued problems faced by 
competitive carriers trying to obtain access to the Bell network. 
Between December 1999 and April 2001, both the FCC and state regulators 
have imposed fines on several Bell companies for violations of their 
market opening and service quality requirements and other rules. For 
BellSouth, these fines totaled $804,750, for Qwest, $78.6 million, for 
SBC, $175 million, and for Verizon, $233 million. However, while these 
fines may be substantial to most businesses, many in the industry 
believe that they simply represent the cost of doing business for the 
Bell companies which over the past year had annual revenues in the 
range of tens of billions of dollars. Specifically, BellSouth's total 
revenues were $25.6 billion, Qwest, $18.3 billion, SBC, $50.1 billion, 
and Verizon, $66.4 billion. Chairman Powell has stated that in order to 
make fines a more effective tool, Congress should increase the FCC's 
current fine authority against a common carrier for a single continuing 
violation from $1.2 million to at least $10 million and extend the 
statute of limitations for violations which currently stands at 1 year.
  In order to get local competition going, the Pennsylvania PUC 
mandated the functional separation of the retail and wholesale 
functions of Verizon. Petitions have been filed to impose structural 
separation in, Alabama, Florida, Georgia, Indiana, Kentucky, Louisiana, 
Mississippi, New Jersey, North Carolina, South Carolina, Tennessee, and 
Virginia. Legislation has also been introduced in the State 
legislatures of Maryland, Michigan, Minnesota, and New Jersey on the 
issue of structural separation. In September of last year, Chairpersons 
of the Commissions in Illinois, Indiana, Michigan, Ohio, and Wisconsin, 
issued a joint statement asserting that although the Commissions had 
taken repeated and sustained actions over the past months to address 
operating deficiencies with respect to SBC-Ameritech, CLEC customers 
had experienced a marked decline in service quality in purchasing 
network elements from SBC-Ameritech.

  In addition to these actions by regulators, the courts also have 
taken action. In California in 1997, Caltech International Telecom 
Corporation sued SBC-Pacific Bell claiming that SBC was violating 
antitrust laws by acting anticompetitively and blocking competitors 
from their local phone market. Last year, a Federal district court 
ruled in favor of Caltech. Covad has sued SBC, Verizon, and BellSouth 
and already has obtained a $24 million arbitration ruling against SBC. 
Consumers have filed suit in the Superior Court of D.C. alleging that 
Verizon signed up over 3,000 new customers per day knowing that the 
company would be unable to provide high-speed service as promised and 
that its customers would experience significant disruptions and 
significant delays in obtaining technical support.
  Regrettably, as Bells seek to block their competitors from entering 
their markets, many consumers are suffering through poor quality of 
Bell service. In New York, the Communications Workers of America issued 
a service quality report in which it stated that ``Verizon has 
systematically misled state regulators and the public by falsifying 
service quality data submitted to the PSC'' and ``60 percent of workers 
have been ordered to report troubles as fixed when problems remained.'' 
91 percent of field technicians surveyed reported that they were 
dispatched on repairs of recent installations only to find that dial 
tone had never been provided. Additionally, consumers with inside 
wiring maintenance plans were not receiving the services for which they 
were paying.
  Concerned about competition and service quality, the FCC as well as 
state Commissions have opposed legislative efforts to further 
deregulate the Bell companies. In response to such measures, former 
Chairman of the FCC, William Kennard, stated that such legislation 
would only upset the balance struck by the 1996 Act, . . . [and] would 
reverse the progress attained by the Act.'' Mr. Kennard went on to 
state that ``the Telecommunications Act of 1996 is working. Because of 
years of litigation, competition did not take hold as quickly as some 
had hoped. The fact that it is now working, however, is undeniable. 
Local markets are being opened, broadband services are being deployed, 
and competition, including broadband competition is taking root.'' More 
recently at a hearing before Congress in March, Chairman Powell of the 
FCC counseled against reopening the Telecommunications Act of 1996. He 
stated that ``any wholesale rewrite of the Telecom Act would be ill-
advised.'' The Former Assistant Secretary for Communications and 
Information, Greg Rhode also stated that ``[d]espite the progress being 
made under the procompetitive approach of the Telecommunications Act of 
1996, some in Congress are talking about changing directions. Under the 
veil of `de-regulation for data services' some are talking about 
stopping the progress of competition . . . competition, structured 
under the 1996 Act, is the model that will best deliver advanced 
telecommunications and information services, such as high speed 
Internet access. Walking away from the Act's pro-competitive provisions 
at this point would be a serious mistake.'' Recognizing the importance 
of the 1996 Act, the National Association of Regulatory Utilities 
Commissioners adopted a resolution opposing federal legislation that 
would deregulate the Bells and restrict the ability of State public 
utility commissions from fulfilling their obligations to regulate core 
telecommunications facilities that are used to provide both voice and 
data services and to promote deployment of advanced telecommunications 
capabilities.

  Given the lack of competition in the local markets, the intransigent 
behavior of the Bell companies, and concerns about poor service 
quality, we are left with no choice but to adopt measures that will 
ensure Bell compliance with the 1996 Act. This will have to include not 
only fines, but also the separation of a Bell's retail operations 
responsible for marketing services to consumers from its wholesale 
operations responsible for operating and selling capacity on the 
network. Bell companies continue to have substantial profit margins and 
revenues in the billions of dollars. In contrast, Bear Stearns has 
stated that it expects half of the CLECs to disappear because of 
bankruptcy and consolidation. Unquestionably, I do anticipate that 
competition will weed out poor competitors. However, it does not serve 
consumers well for competitors to be weeded out because monopolies are 
not playing fair.
  I strongly believe that the power that the Bell companies have 
wielded to block their competitors from the local markets must be 
curbed. That's why I rise to introduce legislation today. Under my bill 
within one year after passage of the legislation, a Bell company is 
required to provide retail service through a separate division. If a 
Bell company has to resell or provide portions of its network to its 
division on the same terms and conditions that it provides to its 
competitors, then it will quickly and affordably make its network 
available to competitors.
  Requiring a company to separate functions or divest property is not a 
novel concept. In 1980, the court decided that the only way to 
introduced competition into the long distance market was to require Ma 
Bell to divest the Baby Bells. This has worked well and now the long 
distance market is competitive. More recently, the Pennsylvania PSC has 
required Verizon

[[Page S8936]]

to separate its retail operations from its wholesale operations. These 
decisions are all based on concerns about the ability of a company to 
distort competition because the company has significant market power.
  Also, my bill clarifies that a carrier may bring an action against a 
Bell company to comply with the competition provisions of the 1996 Act 
at the FCC or at a State commission, and has the option of entering an 
alternative dispute resolution, ADR, process to enforce an 
interconnection agreement. The FCC is required to resolve such a 
complaint in 90 days and issue an interim order to correct the dispute 
within 30 days upon a proper showing by the carrier bringing the 
dispute.
  My bill requires the FCC to impose a penalty of $10 million for each 
violation and $2 million for each day of each violation. The FCC can 
treble the damages if the Bell company repeatedly violates competitive 
provisions of the 1996 Act. I have chosen to include hefty 
fines, because the fines at the FCC are too small to have any real 
effect. I am also struck by the fact that for the Bells, fines seem to 
be just a cost of doing business and not a punishment that deters or 
positively affects their behavior. As Chairman Powell has stated, the 
FCC's ``fines are trivial and the cost of doing business to many of 
these companies.'' My bill would also require the FCC to establish 
performance guidelines detailing what Bell companies must do in order 
to allow CLEC's to interconnect with the Bell network.

  Today, our communications network remains the envy of the world and 
the development of innovative advanced services is accelerating 
rapidly. Last year in a discussion about the lead America has over 
Europe with respect to the technology revolution, Thomas Middlehof, 
chief executive of Bertlemann, which is Europe's largest media 
conglomerate stated that ``Europe just doesn't get the message . . . 
[g]overnments are still trying to protect the old industrial 
structure.'' The article also noted that ``many [European] leaders now 
acknowledge a basic policy failure of the past decade [was] subsidizing 
dying industries.'' With that said, it is unfortunate that the rollout 
of local and broadband services on a competitive basis to all Americans 
is being thwarted by the failure of Bell companies to open their 
markets to competition. These same monopolists told us their markets 
would be open years ago. This legislation seeks to hold them to their 
word.
  I ask unanimous consent that the text of the bill be printed in the 
Record.
  There being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1364

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. SHORT TITLE.

       This Act may be cited as the ``Telecommunications Fair 
     Competition Enforcement Act of 2001''.

     SEC. 2. FINDINGS.

       The Congress finds:
       (1) The Telecommunications Act of 1996 put in place the 
     proper framework to achieve competition in local 
     telecommunications markets.
       (2) The Telecommunications Act of 1996 recognized that 
     local exchange facilities are essential facilities and 
     required that all incumbent local exchange carriers open 
     their markets to competition by interconnecting with and 
     providing network access to new entrants, a process to be 
     overseen by Federal and State regulators.
       (3) To increase the incentives of the Bell operating 
     companies to open their local networks to competition, the 
     Telecommunications Act of 1996 allows the Bell operating 
     companies to provide interLATA voice and data services in 
     their service region only after opening their local networks 
     to competition.
       (4) While some progress has been made in opening local 
     telecommunications markets, the Federal Communications 
     Commission has determined that, 6 years after passage of the 
     Telecommunications Act of 1996, the Bell operating companies 
     have met the market opening requirements of that Act in only 
     5 States.
       (5) It is apparent that the incumbent local exchange 
     carriers do not have adequate incentives to cooperate in this 
     process and that regulators have not exercised their 
     enforcement authority to require compliance.
       (6) By improving mandatory penalties on Bell operating 
     companies and their affiliates that have not opened their 
     network to competition, there will be greater assurance that 
     local telecommunications markets will be opened more 
     expeditiously and, as a result, American consumers will 
     obtain the full benefits of competition.
       (7) Competitive carriers continue to experience great 
     difficulty in gaining access to the Bell network, and, 5 
     years after enactment of the Telecommunications Act of 1996, 
     Bell operating companies continue to control over 92 percent 
     of all access lines nationwide.

     SEC. 3. PURPOSES.

       The purposes of this Act are--
       (1) to improve and strengthen the enforcement of the 
     Telecommunications Act of 1996, in order to ensure that local 
     telecommunications markets are opened more rapidly to full, 
     robust, and sustainable competition; and
       (2) to provide an alternative dispute resolution process 
     for expeditious resolution of disputes concerning 
     interconnection agreements.

     SEC. 4. ENFORCEMENT OF COMPETITION.

       Title II of the Communications Act of 1934 (47 U.S.C. 201 
     et seq.) is amended by adding at the end the following:

                         ``PART IV--ENFORCEMENT

     ``SEC. 291. SHARED JURISDICTION OVER CERTAIN DISPUTES.

       ``(a) Violations of Sections 251, 252, 271, and 272.--A 
     complaint under section 208 alleging that a specific act or 
     practice or failure to act, of a Bell operating company or 
     its affiliate, constitutes a violation of section 251, 252, 
     271, or 272 may be filed at the Commission or at a State 
     commission.
       ``(b) Enforcement of Interconnection Agreements.--An action 
     to enforce compliance by a Bell operating company or its 
     affiliate with an interconnection agreement entered into 
     under section 252 may be initiated at the Commission or at a 
     State Commission.
       ``(c) Initiating Party.--A complaint described in 
     subsection (a) or an enforcement action described in 
     subsection (b) may be brought by a telecommunications carrier 
     or by the Commission or a State commission on its own motion.

     ``SEC. 292. EXPEDITED CONSIDERATION OF INTERCONNECTION, 
                   INTERLATA, AND SEPARATE AFFILIATE COMPLAINTS 
                   AND ENFORCEMENT ACTIONS.

       ``(a) In General.--The Commission shall make a final 
     determination with respect to any complaint described in 
     section 291(a) or an enforcement action described in section 
     291(b) within 90 days after the date on which the complaint, 
     or the filing initiating the action, is received by the 
     Commission.
       ``(b) Interim Relief.--
       ``(1) Violations of act.--Within 30 days after a complaint 
     described in section 291(a) has been filed with the 
     Commission, the Commission shall issue an order to the Bell 
     operating company or its affiliate named in the complaint 
     directing it to cease the act or practice that constitutes 
     the alleged violation, or initiate an act or practice to 
     correct the alleged violation, pending a final determination 
     by the Commission if--
       ``(A) the complaint contains a prima facie showing that the 
     alleged violation occurred or is occurring;
       ``(B) the complaint describes with specificity the act or 
     practice, or failure to act, that constitutes the alleged 
     violation; and
       ``(C) it appears from specific facts shown by the complaint 
     or an accompanying affidavit that substantial injury, loss, 
     or damage will result to the complainant before the 90-day 
     period in subsection (a) expires if the order is not issued.
       ``(2) Interconnection agreements.--Within 30 days after an 
     enforcement action described in section 291(b) has been 
     initiated at the Commission by a telecommunications carrier, 
     the Commission shall issue an order to the Bell operating 
     company or its affiliate named in the action directing it to 
     cease the act or practice that constitutes the alleged 
     noncompliance with the interconnection agreement, or initiate 
     an act or practice to correct the alleged noncompliance, 
     pending a final determination by the Commission if--
       ``(A) the filing initiating the action contains a prima 
     facie showing that the alleged noncompliance occurred or is 
     occurring;
       ``(B) the filing describes with specificity the act or 
     practice, or failure to act, that constitutes the alleged 
     noncompliance; and
       ``(C) it appears from specific facts shown by the filing or 
     an accompanying affidavit that substantial injury, loss, or 
     damage will result to the telecommunications carrier before 
     the 90-day period in subsection (a) expires if the order is 
     not issued.
       ``(c) Burden of Proof.--In any proceeding under this part 
     with respect to a complaint described in section 291(a), or 
     an enforcement action described in section 291(b), by a 
     telecommunications carrier against a Bell operating company 
     or its affiliate, and upon a prima facie showing by a carrier 
     that there are reasonable grounds to believe that there is a 
     violation or noncompliance, the burden of proof shall be on 
     such Bell operating company or its affiliate to demonstrate 
     its compliance with the section allegedly violated, or with 
     the terms of such agreement, as the case may be.

     ``SEC. 293. ALTERNATIVE DISPUTE RESOLUTION OF INTERCONNECTION 
                   COMPLAINTS.

       ``(a) Interconnection Agreements.--A party to an 
     interconnection agreement entered into under section 252 may 
     submit a dispute under the agreement to the alternative 
     dispute resolution process established by subsection (b). An 
     action brought under

[[Page S8937]]

     this section may be brought in lieu of an action described in 
     section 291(b) at the Commission or at a State commission.
       ``(b) Alternative Dispute Resolution Process.--
       ``(1) Commission to prescribe process.--Within 180 days 
     after the date of enactment of the Telecommunications Fair 
     Competition Enforcement Act of 2001, the Commission shall, 
     after notice and opportunity for public comment, issue a 
     final rule implementing an alternative dispute resolution 
     process for the resolution of disputes under interconnection 
     agreements entered into under section 252. The process shall 
     be available to any party to such an agreement, including 
     agreements entered into prior to the date of enactment of 
     that Act, unless such prior agreement specifically precludes 
     the use of alternative dispute resolution.
       ``(2) Process requirements.--In carrying out paragraph (1), 
     the Commission shall prescribe a process that--
       ``(A) provides for binding private commercial arbitration 
     of disputes in an open, nondiscriminatory, and unbiased 
     forum;
       ``(B) ensures that a dispute submitted to the process can 
     be resolved within 45 days after the date on which the 
     dispute is filed; and
       ``(C) requires any decision reached under the process to be 
     in writing, available to the public, and posted on the 
     Internet.
       ``(3) Requests for information.--Any person or panel 
     conducting an arbitration under this subsection may require 
     any party to the dispute to provide such information as may 
     be necessary to enable that person or panel to reach a 
     decision with respect to the dispute. If the party that 
     receives such a request for information fails to comply with 
     such a request for information within 7 business days after 
     the date on which the request was made, then, unless that 
     party shows that the failure to comply was due to extenuating 
     circumstances, the person or panel conducting the arbitration 
     shall render a decision or award in favor of the other party 
     to the arbitration within 14 business days after the date on 
     which the request was made. The decision or award in favor of 
     a party shall not apply if the party in whose favor a 
     decision or award would be rendered under the preceding 
     sentence is not in compliance with a request for information 
     from the person or panel conducting the arbitration.
       ``(4) Remedies and authority of arbitrator.--Any person or 
     panel conducting an arbitration under this subsection may 
     grant to the prevailing party any relief available in law or 
     equity, including remedies available under this Act, 
     injunctive relief, specific performance, monetary awards, and 
     direct, consequential, and compensatory damages.
       ``(5) Arbitration award and enforcement.--A final decision 
     or award made by a person or panel conducting an arbitration 
     under this subsection shall be binding upon the parties and 
     is not subject to appeal by the parties or review by the 
     Commission, a State commission, or any Federal or State 
     court. A decision or award under the process may be enforced 
     in any district court of the United States having 
     jurisdiction under sections 9 through 13 of title 9, United 
     States Code.

     ``SEC. 294. ENFORCEMENT OF PERFORMANCE STANDARDS.

       ``(a) Commission To Prescribe Performance Standards for 
     Compliance with Interconnection Agreements.--Not later than 
     180 days after the date of enactment of the 
     Telecommunications Fair Competition Enforcement Act of 2001 
     the Commission shall, after notice and opportunity for public 
     comment, issue final rules for performance standards, data 
     validation procedures, and audit requirements to ensure 
     prompt and verifiable implementation of interconnection 
     agreements entered into under section 252 and for the 
     purposes of sections 251, 252, 271, and 272. At a minimum, 
     the rules shall include the most rigorous performance 
     standards, data validation procedures, and audit requirements 
     for such agreements adopted by the Commission or any State 
     commission before the date of enactment of the 
     Telecommunications Fair Competition Enforcement Act of 2001, 
     as well as any new performance standards, data validation 
     procedures, and audit requirements needed to ensure full 
     compliance with the requirements of this Act for the opening 
     of local telecommunications markets to competition. In 
     establishing performance standards, data validation 
     procedures, and audit requirements under this section, the 
     Commission shall ensure that such standards, procedures, and 
     requirements are quantifiable and sufficient to determine 
     ongoing compliance by incumbent local exchange carriers with 
     the requirements of their interconnection agreements, 
     including the provision of operating support systems, special 
     access, and retail and wholesale customer service standards, 
     and for the purposes of enforcing sections 251, 252, 271, and 
     272.
       ``(b) Specific Requirement for Provision of Local Loops.--A 
     Bell operating company or its affiliate which has not been 
     granted an exemption, suspension, or modification under 
     section 251(f) of the requirement to provide access to local 
     loops (including subloop elements to the extent required 
     under section 251(d)(2)) as an unbundled network element 
     under section 251(c)(3) shall provide any such local loop to 
     a requesting telecommunications carrier with which such Bell 
     operating company or affiliate has an interconnection 
     agreement entered into under section 252 within 5 business 
     days after receiving a request for a specific local loop.
       ``(c) Enforcement of Performance Metrics.--Any violation of 
     this section, or the rules adopted hereunder, shall be a 
     violation of section 251.

     ``SEC. 295. FORFEITURES; DAMAGES; ATTORNEYS FEES.

       ``(a) In General.--The forfeitures provided in this section 
     are in addition to any other requirements, forfeitures, and 
     penalties that may be imposed under any other provision of 
     this Act, any other law, or by a State commission or court.
       ``(b) Forfeitures for Violation of Sections 251, 252, 271, 
     or 272.--
       ``(1) In general.--The Commission shall impose a forfeiture 
     of $10,000,000 for each violation by a Bell operating company 
     or any affiliate of such company of section 251, 252, 271, or 
     272, and a forfeiture of $2,000,000 for each day on which the 
     violation continues.
       ``(2) Forfeiture increased threefold for repeat 
     violations.--The forfeiture under paragraph (1) shall be 
     increased threefold for a repeated violation of any such 
     section by a Bell operating company or its affiliate.
       ``(c) Compensatory and Punitive Damages; Costs and 
     Attorney's Fees.--
       ``(1) In general.--In any civil action brought by a 
     telecommunications carrier against a Bell operating company 
     or any affiliate of such company for damages for a violation 
     of section 251, 252, 271, or 272, or violation of any 
     interconnection agreement entered into under section 252 by a 
     Bell operating company, the carrier may be awarded--
       ``(A) both compensatory and punitive damages; and
       ``(B) reasonable attorney fees and costs incurred in 
     bringing the action.
       ``(2) Treble damages.--In any such action, the 
     telecommunications carrier may be awarded treble damages for 
     a repeated violation of any such section or interconnection 
     agreement by a Bell operating company or its affiliate.
       ``(d) Forfeiture for Failure to Comply with Order Granting 
     Interim Relief.--If the Bell operating company or its 
     affiliate to which an order is issued under section 292(b) 
     does not comply with the order within 7 days after the date 
     on which the Commission releases the order, and the 
     Commission makes a final determination that the Bell 
     operating company or affiliate is in violation of section 
     251, 252, 271, or 272, or violation of an interconnection 
     agreement entered into under section 252, then the Commission 
     shall impose a forfeiture of $10,000,000 for each such 
     violation, and a forfeiture of $2,000,000 for each day on 
     which the violation continued after issuance of the order.
       ``(e) Attorneys Fees.--The Commission, a State commission, 
     a court, or person conducting an arbitration under section 
     293 may award reasonable attorney fees and costs to the 
     prevailing party in an action commenced by a complaint 
     described in section 291(a), an enforcement action described 
     in section 291(b), or an alternative dispute resolution 
     proceeding under section 293, respectively.
       ``(f) Forfeitures Divided Between Complainants and 
     Commission.--Any forfeiture imposed under subsection (b) or 
     (d) shall be paid to the Commission and divided equally 
     between--
       ``(1) either--
       ``(A) the party whose complaint commenced the action that 
     resulted in the determination by the Commission, if the 
     Commission's determination was made in response to a 
     complaint; or
       ``(B) the party against which the violation was committed, 
     if the action that resulted in the determination by the 
     Commission was commenced by the Commission or a State 
     commission; and
       ``(2) the Commission for use by its Enforcement Bureau for 
     the purpose of enforcing parts II and III of title II of the 
     Communications Act of 1934 (47 U.S.C. 251 et seq. and 271 et 
     seq.) and carrying out part IV of title II of that Act.
       ``(g) Adjustment for Inflation.--The amount of each 
     forfeiture provided for under subsections (b) and (d) shall 
     be increased for violations during each calendar year 
     beginning with 2004 by a percentage amount equal to the 
     percentage increase (if any) in the CPI for the preceding 
     year over the CPI for 2001. For purposes of this subsection, 
     the CPI for any year is the average for the 12 months of the 
     year of the Consumer Price Index for all-urban consumers 
     published by the Department of Labor.

     ``SEC. 296. SAVINGS CLAUSES.

       ``(a) Other Remedies Under Act.--The remedies in this part 
     are in addition to any other requirements or penalties 
     available under this Act or any other law.
       ``(b) Antitrust Laws.--Nothing in this part modifies, 
     impairs, or supersedes the applicability of any antitrust 
     law, except that a violation by an incumbent local exchange 
     carrier of section 251 or 252 shall also be a violation of 
     the Act of July 2, 1890, commonly known as the Sherman Anti-
     Trust Act (15 U.S.C. 1 et seq.).''.

     SEC. 5. RATEPAYER PROTECTION.

       The Commission shall not forbear from, or modify, any cost 
     allocation rules, accounting safeguards, or other 
     requirements in a manner that reduces its ability to enforce 
     the provisions of this Act.

     SEC. 6. STATUTE OF LIMITATIONS EXTENDED TO 3 YEARS.

       Section 503(b)(6) of the Communications Act of 1934 (47 
     U.S.C. 503(b)(6)) is amended by striking ``1 year'' each 
     place it appears and inserting ``5 years''.

[[Page S8938]]

     SEC. 7. STATE COMMISSIONS MAY USE FEDERAL FORFEITURES.

       In any action brought before a State commission to enforce 
     compliance with section 251, 252, 271, or 272 of the 
     Communications Act of 1934 (47 U.S.C. 251, 252, 271, or 272) 
     or an interconnection agreement entered into under section 
     252, the State commission may apply to the Federal 
     Communications Commission requesting that the Commission 
     impose a forfeiture under section 295 of that Act in addition 
     to any relief granted by the State commission in that action. 
     The Federal Communications Commission may impose a forfeiture 
     under section 295 of that Act upon application by a State 
     commission under this section if it determines that the State 
     commission proceeding was conducted in accordance with the 
     requirements of State law.

     SEC. 8. SEPARATION OF RETAIL AND WHOLESALE FUNCTIONS.

       (a) In General.--Title II of the Communications Act of 1934 
     (47 U.S.C. 201 et seq.) is amended by adding at the end the 
     following:

     ``SEC. 277. FUNCTIONAL SEPARATION OF RETAIL SERVICES.

       ``(a) In General.--A Bell operating company may only 
     provide retail service--
       ``(1) through a division that is legally separate from the 
     part of the Bell operating company that provides wholesale 
     services; and
       ``(2) in a manner that is consistent with the Code of 
     Conduct described in subsection (b).
       ``(b) Code of Conduct.--The Code of Conduct for the 
     provision of retail service by a Bell operating company is as 
     follows:
       ``(1) A Bell operating company shall transfer to its retail 
     division all relationships with retail customers, including 
     customer interfaces and retail billing and all development, 
     marketing, and pricing of retail services.
       ``(2) A Bell operating company shall transfer to its retail 
     division all accounts for retail services and all assets, 
     systems, and personnel used by the Bell operating company to 
     carry out the business functions described in paragraph (1).
       ``(3) The retail division required by this section--
       ``(A) shall be operated independently from the wholesale 
     services and functions of the Bell operating company of which 
     it is a division;
       ``(B) shall maintain books, records, and accounts separate 
     from those maintained by other departments, divisions, 
     sections, affiliates, or units of the Bell operating company 
     of which it is a division;
       ``(C) shall have separate employees and office space from 
     the wholesale services and functions of the Bell operating 
     company of which it is a division;
       ``(D) shall tie its management compensation only to the 
     performance of the retail division;
       ``(E) may not own any telecommunications facilities or 
     equipment jointly with the Bell operating company of which it 
     is a division;
       ``(F) shall not engage in any joint marketing with the 
     wholesale services department, division, section, affiliate, 
     or unit of the Bell operating company of which it is a 
     division;
       ``(G) shall conduct all wholesale transactions with the 
     Bell operating company of which it is a division on a fully 
     compensatory, arms-length basis, in accordance with part 32 
     of the Commission's rules (part 32 of title 47, Code of 
     Federal Regulations);
       ``(H) shall offer retail telecommunications service solely 
     at rates set by tariff; and
       ``(I) shall also offer all of its retail telecommunications 
     services to telecommunications carriers for wholesale 
     purchase at the avoided cost discount as established pursuant 
     to sections 251(c)(4) and 252(d)(3).
       ``(4) A Bell operating company shall provide services, 
     facilities, and network elements to any requesting carrier, 
     including its retail division solely at rates, terms, and 
     conditions set by tariff; shall offer physical and virtual 
     collocation pursuant to tariffs; shall not provide any retail 
     service except through its retail division; and shall not 
     grant its retail division any preferential intellectual 
     property rights. The Bell operating company shall conduct any 
     business with unaffiliated persons in the same manner as it 
     conducts business with its retail division, and shall not 
     prefer, or discriminate in favor of, such retail division in 
     the rates, terms, or conditions offered to the retail 
     division, including--
       ``(A) fulfilling any requests from unaffiliated persons for 
     ordering, maintenance, and repair of unbundled network 
     elements and services provided for resale, within a period no 
     longer than that in which it fulfills such requests from its 
     retail division;
       ``(B) utilizing the same operating support systems for 
     dealings with unaffiliated persons providing 
     telecommunications service as it uses with its retail 
     division;
       ``(C) providing any customer or network information to 
     unaffiliated persons providing retail services on the same 
     terms and conditions as it provides such information to its 
     retail division;
       ``(D) fulfilling any requests from an unaffiliated person 
     for exchange access within a period no longer than that in 
     which it fulfills requests for exchange access from its 
     retail division; and
       ``(E) fulfilling any such requests in subparagraph (D) with 
     service of a quality that meets or exceeds the quality of 
     exchange access it provides to its retail division.
       ``(c) Biennial Audit.--
       ``(1) General requirement.--A Bell operating company shall 
     obtain and pay for a joint Federal/State audit every 2 years 
     which shall be conducted by an independent auditor to 
     determine whether such company has complied with this section 
     and the regulations promulgated to implement this section.
       ``(2) Results submitted to Commission; State Commissions.--
     The auditor described in paragraph (1) shall submit the 
     results of the audit to the Commission and to the State 
     commission of each State in which the company audited 
     provides service, and the Commission shall make such results 
     available for public inspection. Any party may submit 
     comments on the final audit report.
       ``(3) Access to documents.--For purposes of conducting 
     audits and reviews under this subsection--
       ``(A) the independent auditor, the Commission, and the 
     State commission shall have access to the financial books, 
     records, and accounts of each Bell operating company and its 
     retail division necessary to verify transactions conducted 
     with that company that are relevant to the specific 
     activities permitted under this section and that are 
     necessary for the regulation of rates;
       ``(B) the Commission and the State commission shall have 
     access to the working papers and supporting materials of any 
     auditor who performs an audit under this section; and
       ``(C) the State commission shall implement appropriate 
     procedures to ensure the protection of any proprietary 
     information submitted to it under this section.
       ``(d) Transition.--
       ``(1) A Bell operating company shall have one year from the 
     date of enactment of the Telecommunications Fair Competition 
     Enforcement Act of 2001 to comply with subsections (a) and 
     (b).
       ``(2) Until such time as the Bell operating company 
     complies with the requirements of subsection (a), it shall 
     file quarterly reports demonstrating how it is implementing 
     compliance with the nondiscrimination requirements of 
     subsection (b)(4).
       ``(e) Ratepayer Protection.--The Commission shall not relax 
     any cost allocation rules, accounting safeguards, or other 
     requirements in a manner that reduces its ability to enforce 
     the provisions of this section.
       ``(f) Definitions.--In this section:
       ``(1) Bell operating company.--Notwithstanding section 
     3(4)(C), the term `Bell operating company' includes any 
     affiliate of such company other than its retail division.
       ``(2) Retail devision.--The term `retail division' means 
     the division required by this section.
       ``(3) Retail service.--The term `retail service' means any 
     telecommunications or information service offered to a person 
     other than a common carrier or other provider of 
     telecommunications.
       ``(g) Report on Violations.--Until December 31, 2010, the 
     Commission shall report to Congress annually on the amount 
     and nature of any violations of sections 251, 252, 271, and 
     272 by each Bell Operating Company.
       ``(h) Preservation of Existing Authority.--Nothing in this 
     section shall be construed to limit the authority of the 
     Commission under any other section of this Act to prescribe 
     additional safeguards consistent with the public interest, 
     convenience, and necessity.

     ``SEC. 278. SEPARATE RETAIL AFFILIATE.

       ``(a) Repeated Violations.--If, beginning 2 years after 
     enactment of the Telecommunications Fair Competition 
     Enforcement Act of 2001, the Commission finds that a Bell 
     operating company willfully or knowingly violated the 
     requirements of sections 251, 252, 271, or 272 of this Act, 
     the Commission may require the Bell Operating Company to 
     implement structural separation under this section.
       ``(b) In General.--If the Commission requires a Bell 
     operating company to implement structural separation under 
     this section, then that Bell operating company may provide 
     retail services only through a separate affiliate. A Bell 
     operating company and a separate affiliate established under 
     this section shall not engage in any joint marketing of 
     retail services, notwithstanding section 272(g).
       ``(c) Structural Separation of Business.--A Bell operating 
     company shall comply with subsection (b) by transferring the 
     following business functions to its retail affiliate, at the 
     higher of book value or market value:
       ``(1) all relationships with retail customers, including 
     customer interfaces and retail billing; and
       ``(2) all development, marketing, and pricing of retail 
     services.
       ``(d) Structural Separation of Assets.--
       ``(1) A Bell operating company shall comply with subsection 
     (b) by transferring the following assets to its retail 
     affiliate at the higher of book or market value:
       ``(A) all accounts for retail services, subject to the 
     requirements of subsection (j); and
       ``(B) all assets, systems, and personnel used by the Bell 
     operating company to carry out the business functions 
     described in subsection (c).
       ``(2) The price, terms, and conditions of the transfer of 
     assets required by paragraph (1) shall be made publicly 
     available.
       ``(e) Separate Subsidiary Safeguards.--The separate 
     affiliate required by this section--
       ``(1) shall operate independently from the Bell operating 
     company;

[[Page S8939]]

       ``(2) shall maintain books, records, and accounts separate 
     from those maintained by the Bell operating company of which 
     it is an affiliate;
       ``(3) shall have separate officers and directors from the 
     Bell operating company of which it is an affiliate;
       ``(4) shall have separate capital stock, the outstanding 
     shares of which may not be held by the Bell operating company 
     in any amount exceeding four times the amount of shares held 
     by unaffiliated persons;
       ``(5) shall have separate employees and separate employee 
     benefit plans from the Bell operating company of which it is 
     an affiliate;
       ``(6) may not obtain credit under any arrangement that 
     would permit a creditor, upon default, to have recourse to 
     the assets of the Bell operating company;
       ``(7) may not own any telecommunications facilities or 
     equipment;
       ``(8) shall conduct all transactions with the Bell 
     operating company of which it is an affiliate on an arms' 
     length basis, with any such transactions reduced to writing 
     and available for public inspection;
       ``(9) shall offer retail telecommunications service solely 
     at rates set by tariff;
       ``(10) shall offer all of its retail telecommunications 
     services for wholesale purchase at the avoided cost discount 
     as established pursuant to sections 251(c)(4) and 252(d)(3);
       ``(11) shall have separate office space from the wholesale 
     services and functions of the Bell operating company of which 
     it is an affiliate;
       ``(12) shall tie its management compensation only to the 
     performance of the retail affiliate; and
       ``(13) shall conduct all wholesale transactions with the 
     Bell operating company of which it is an affiliate on a fully 
     compensatory basis, in accordance with part 32 of the 
     Commission's rules (part 32 of title 47, Code of Federal 
     Regulations).
       ``(f) Nondiscrimination Safeguards.--A Bell operating 
     company--
       ``(1) shall provide services, facilities and network 
     elements to any requesting carrier, including its retail 
     affiliate, solely at rates set by tariff;
       ``(2) shall conduct any business with unaffiliated entities 
     in the same manner as it conducts business with its retail 
     affiliate, and shall not prefer, or discriminate in favor of, 
     such retail affiliate in the rates, terms, or conditions 
     offered to the retail affiliate, including--
       ``(A) fulfilling any requests from an unaffiliated entity 
     for exchange access service within a period no longer than 
     that in which it fulfills requests for exchange access 
     service from its retail affiliate;
       ``(B) fulfilling any such requests with service of a 
     quality that meets or exceeds the quality of exchange access 
     services it provides to its retail affiliate;
       ``(C) fulfilling any requests from an unaffiliated entity 
     for ordering, maintenance and repair of unbundled network 
     elements and services provided for resale, within a period no 
     longer than that in which it fulfills such requests from its 
     retail affiliate;
       ``(D) utilizing the same operating support systems for 
     dealings with unaffiliated entities providing 
     telecommunications service as it uses with its retail 
     affiliate; and
       ``(E) providing any customer or network information to 
     unaffiliated entities providing telecommunications services 
     on the same terms and conditions as it provides such 
     information to its retail affiliate;
       ``(3) shall not offer physical and virtual collocation 
     other than pursuant to generally available tariffs;
       ``(4) shall not grant its retail affiliate any preferential 
     intellectual property rights; and
       ``(5) shall not provide any retail service for its own use, 
     but shall procure such services from a carrier other than its 
     retail affiliate.
       ``(g) Biennial Audit.--
       ``(1) General requirement.--A Bell operating company shall 
     obtain and pay for a joint Federal/State audit every 2 years 
     conducted by an independent auditor to determine whether such 
     company has complied with this section and the regulations 
     promulgated under this section.
       ``(2) Results submitted to commission; state commissions.--
     The auditor described in paragraph (1) shall submit the 
     results of the audit to the Commission and to the State 
     commission of each State in which the company audited 
     provides service, which shall make such results available for 
     public inspection. Any party may submit comments on the final 
     audit report.
       ``(3) Access to documents.--For purposes of conducting 
     audits and reviews under this subsection--
       ``(A) the independent auditor, the Commission, and the 
     State commission shall have access to the financial books, 
     records, and accounts of each Bell operating company and of 
     its affiliates necessary to verify transactions conducted 
     with that company that are relevant to the specific 
     activities permitted under this section and that are 
     necessary for the regulation of rates;
       ``(B) the Commission and the State commission shall have 
     access to the working papers and supporting materials of any 
     auditor who performs an audit under this section; and
       ``(C) the State commission shall implement appropriate 
     procedures to ensure the protection of any proprietary 
     information submitted to it under this section.
       ``(h) Preservation of Existing Authority.--Nothing in this 
     section shall be construed to limit the authority of the 
     Commission under any other section of this Act to prescribe 
     safeguards consistent with the public interest, convenience, 
     and necessity.
       ``(i) Presubscription.--Concurrent with the establishment 
     of the separate retail affiliate required by this section, in 
     any local calling area served by a Bell operating company, 
     consumers shall have the opportunity to select their provider 
     of telephone exchange service by means of a balloting process 
     established by rule by the Commission.
       ``(j) Ratepayer Protection.--The Commission shall not relax 
     any cost allocation rules, accounting safeguards, or other 
     requirements in a manner that reduces its ability to enforce 
     the provisions of this section.
       ``(k) Definitions.--In this section:
       ``(1) Bell operating company.--Notwithstanding section 
     3(4)(C), the term `Bell operating company' includes any 
     affiliate of such company other than its retail affiliate.
       ``(2) Retail affiliate.--The term `retail affiliate' means 
     the affiliate required by this section.
       ``(3) Retail service.--The term `retail service' means any 
     telecommunications or information service offered to a person 
     other than a common carrier or other provider of 
     telecommunications.''.
                                 ______