[Federal Register Volume 67, Number 128 (Wednesday, July 3, 2002)]
[Notices]
[Pages 44599-44605]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-16739]


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FEDERAL COMMUNICATIONS COMMISSION

[WC Docket No. 02-67; FCC 02-189]


Application by Verizon New Jersey Inc., Bell Atlantic 
Communications, Inc., (d/b/a Verizon Long Distance), NYNEX Long 
Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global 
Networks Inc., and Verizon Select Services Inc., Pursuant to Section 
271 of the Telecommunications Act of 1996, for Provision of In-Region, 
InterLATA Services in the State of New Jersey

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: In the document, the Federal Communications Commission grants 
the section 271 application of Verizon New Jersey Inc., et al. 
(Verizon) for authority to enter the interLATA telecommunications 
market in the state of New Jersey. The Commission grants Verizon's 
application based on its conclusion that Verizon has satisfied all of 
the statutory requirements for entry, and opened its local exchange 
markets to full competition.

DATES: Effective July 3, 2002.

FOR FURTHER INFORMATION CONTACT: Alexis Johns, Attorney Advisor, 
Wireline Competition Bureau, at (202) 418-1580, or via the Internet at 
[email protected]. The complete text of this Memorandum Opinion and Order 
is available for inspection and copying during normal business hours in 
the FCC Reference Information Center, Portals II, 445 12th Street, SW, 
Room CY-A257, Washington, DC 20554. Further information may also be 
obtained by calling the Wireline Competition Bureau's TTY number: (202) 
418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 
Memorandum Opinion and Order (MO&O) in WC Docket No. 02-67, FCC 02-189, 
adopted June 24, 2002 and released June 24, 2002. This full text may be 
purchased from the Commission's duplicating contractor, Qualex 
International, Portals II, 445 12th Street, SW, Room CY-B402, 
Washington, DC 20554, telephone 202-863-2893, facsimile 202-863-2898, 
or via e-mail [email protected]. It is also available on the 
Commission's website at http://www.fcc.gov/Bureaus/Wireline_Competition/in-region_applications.

[[Page 44600]]

Synopsis of the Order

    1. History of the Application. On March 26, 2002, Verizon New 
Jersey Inc., et al., filed its second application with the Commission 
to provide in-region, interLATA service in New Jersey (NJ II). Although 
Verizon initially filed a section 271 application for New Jersey with 
this Commission on December 20, 2001 (NJ I), that application was 
withdrawn on March 19, 2002 , as a result of ``process concerns'' that 
were raised with respect to certain pricing matters.
    2. The New Jersey Board of Public Utilities' (New Jersey Board) 
Evaluation. The New Jersey Board conducted an extensive proceeding to 
facilitate competition in local exchange markets in which it approved 
and finalized a new Incentive Plan and conducted a lengthy pricing 
proceeding. Consequently, it recommended that the Commission grant 
Verizon's section 271 application for New Jersey.
    3. The Department of Justice's Evaluation. The Department of 
Justice filed its evaluation of Verizon's New Jersey Application on 
April 15, 2002. It recommended approval of the application subject to 
the Commission's review of Verizon's checklist compliance for certain 
pricing and operation support systems (OSS) issues.

Primary Issues in Dispute

    4. Compliance with Section 271(c)(1)(A). Section 271(c)(1)(A) 
(Track A) requires the presence of facilities-based competitors serving 
both residential and business customers. The Commission concludes that 
Verizon satisfies the requirements of Track A in New Jersey. Verizon 
relies on interconnection agreements with MetTel, eLEC, and Broadview 
in support of its Track A showing, and the Commission finds that each 
of these carriers serves more than a de minimis number of end users 
predominantly over its own facilities and represents an ``actual 
commercial alternative'' to Verizon in New Jersey. Verizon notes that 
each of these carriers has increased the number of residential lines it 
serves since the time Verizon filed its NJ I application. Also, the New 
Jersey Board has stated its intention to take additional measures to 
further encourage local entry by competitors of Verizon New Jersey, if 
necessary.
    5. Checklist Item 2--Unbundled Network Elements: Pricing and OSS. 
Based on the evidence in the record before us for this application, the 
Commission finds that Verizon's UNE rates in New Jersey are just, 
reasonable, and nondiscriminatory, and are based on cost plus a 
reasonable profit as required by section 252(d)(1). Thus, Verizon's UNE 
rates in New Jersey satisfy checklist item two.
    6. Pricing. Verizon filed its first application to provide 
interLATA service in New Jersey before the New Jersey Board had issued 
its final order on rates for unbundled network elements (UNEs). On day 
76 of the NJ I proceeding, the New Jersey Board released its Final UNE 
Rate Order. On day 89 of the NJ I proceeding, Verizon notified the 
Commission that it was withdrawing its application as a result of 
``process concerns'' that were raised with respect to the non-recurring 
charge for performing a hot cut. The next day, Verizon informed the New 
Jersey Board that, effective immediately, it would reduce the effective 
hot cut rate in New Jersey to the same level --$35-- that was recently 
made effective in New York. On March 26, 2002, Verizon filed its second 
application to provide interLATA service in New Jersey. Both the 
Department of Justice and the New Jersey Board recommended approval of 
the NJ II application, although commenters reiterated pricing concerns 
from the NJ I application and also raised new pricing issues.
    7. WorldCom contends that the New Jersey Board incorrectly approved 
Verizon's fiber/copper feeder and fill factor percentages. WorldCom 
disagrees with Verizon's assumption that 60 percent of feeder will be 
served on fiber cable with integrated digital loop carrier (IDLC) and 
that the remaining 40 percent served on copper feeder. The New Jersey 
Board considered this very issue and approved Verizon's 60/40 split 
between fiber and copper feeder. WorldCom presents no arguments or 
evidence that would cause us to find that these assumptions are 
inconsistent with TELRIC principles as applied to Verizon in New 
Jersey. WorldCom also claims that the New Jersey Board approved 
unreasonably low fill factors for fiber and copper cable, which 
allegedly results in overstated loop costs. The Board-approved fill 
factors are not inconsistent with those that the Commission has 
approved in prior section 271 orders, and the Commission finds no 
TELRIC errors in the New Jersey Board's analysis of Verizon's fill 
factors.
    8. The NJDRA and WorldCom allege that Verizon improperly ``double 
charges'' for calls that both originate and terminate on the same 
switch. The commenters claim that Verizon should be allowed to charge 
only once for such intra-switch calls. Verizon's methodology is not 
inconsistent with our handling of this issue in prior applications. No 
commenter argues that the manner in which Verizon developed its 
switching rates is inconsistent with the manner in which Verizon 
imposes these rates. The Commission therefore rejects commenters' 
claims that charging both an originating and a terminating rate for 
every call, regardless of the number of switches involved, is by itself 
inappropriate or a violation of TELRIC.
    9. WorldCom and AT&T also challenge Verizon's inclusion of vertical 
features in the switching rate. They argue that non-usage-sensitive 
elements, such as vertical features, should be included with the port 
charge and not charged on a per-minute basis. no commenter has stated 
that vertical features are provided over wholly dedicated facilities, 
nor have they provided evidence that the per-minute charge is 
inconsistent with the manner in which costs are incurred. Under our 
rules, the New Jersey Board could have properly directed Verizon to 
recover the costs of vertical features as part of flat-rated port 
charges, split the costs between the flat and per-minute switch 
elements, or recover the costs through the per-minute charge. The New 
Jersey Board's decision to allow the recovery of such costs in the per-
minute switching rate fully complies with our rate structure rules. The 
Commission finds no TELRIC error in the New Jersey Board's handling of 
the vertical features costs issue.
    10. WorldCom also claims that Verizon has overstated its switching 
costs by using an inappropriate switch vendor discount. The New Jersey 
Board directed Verizon to compute its switching costs as if 79.4 
percent of the switches would receive the discount for purchases of new 
switches and 20.6 percent would receive the discount for purchases of 
growth switches. The Commission concludes that this issue is a fact-
specific inquiry amenable in the first instance to determination by the 
state commissions; it is not a bright-line rule. The Commission has 
been presented with no evidence or rationale, beyond bare assertions, 
that would persuade us that the split chosen by the New Jersey Board 
amounts to a TELRIC error. It is satisfied that the New Jersey Board 
carefully evaluated this issue, properly rejected Verizon's proposed 
use of 100 percent growth switches, and validly established what it 
considered to be more appropriate and state-specific switching 
discounts.
    11. WorldCom contends that Verizon improperly calculates its 
switching cost by dividing by minutes associated with only 251 business 
days in a calendar year. In our view, provided that an incumbent LEC's 
methodology is

[[Page 44601]]

reasonable and consistent, TELRIC does not by itself dictate the use of 
a particular number of days, whether 308, 251, or some other number. 
Even if the New Jersey Board erred in approving Verizon's use of 251 
days together with other inputs, Verizon's non-loop rates in New Jersey 
pass a benchmark comparison to Verizon's non-loop rates in New York and 
therefore fall within the range that reasonable application of TELRIC 
principles would produce.
    12. In this application, Verizon chooses to rely on a benchmark 
comparison of its rates in New Jersey to those in New York. The 
Commission agrees that New York is similar to New Jersey in terms of 
both geography and rate structure. Having found that New York is an 
appropriate benchmark state, the Commission finds that New Jersey's 
non-loop rates are roughly six percent lower than New York non-loop 
rates. The Commission also finds that New Jersey non-loop costs are 
roughly one percent higher than New York non-loop costs, after taking a 
weighted average of New Jersey and New York costs derived from the 
Commission's Synthesis Model. Therefore, it concludes that New Jersey's 
non-loop rates pass a benchmark comparison to New York's non-loop rates 
and that they therefore satisfy our benchmark analysis and the 
requirements of checklist item two.
    13. AT&T argues that Verizon's DUF rates are inflated and do not 
comply with TELRIC. AT&T did not raise these issues before the New 
Jersey Board, and it has only recently challenged Verizon's DUF rates 
in a motion for reconsideration of the Final UNE Rate Order. AT&T's 
motion is presently pending before the New Jersey Board. The New Jersey 
Board should have the opportunity to evaluate AT&T's evidence and make 
any adjustments it finds appropriate. The Commission commends the New 
Jersey Board's commitment to TELRIC principles, defers to the New 
Jersey Board's forthcoming resolution of the DUF rate, and finds no 
TELRIC error on the record before us on this issue.
    14. AT&T, ASCENT, the NJDRA, and XO challenge Verizon's ``hot cut'' 
charges. A hot cut is the process of converting a customer from one 
network, usually a UNE-platform served by an incumbent LEC's switch, to 
a UNE-loop served by another carrier's switch. Commenters argue that 
the $35 hot cut rate is not TELRIC-compliant. They contend generally 
that the hot cut rate is merely a temporary credit that does not 
comport with TELRIC principles. During the NJ I proceeding, Verizon's 
$159.76 hot cut rate generated considerable controversy. Although 
Verizon continues to argue in NJ II that this rate is Board-approved 
and TELRIC-complaint, it voluntarily agreed to reduce the effective 
rates for six hot cut charges to $35.00. The $35.00 hot cut rate is a 
rate selected by Verizon and that has gone into effect in New Jersey. 
The $35.00 hot cut rate, which mirrors the effective rate in New York, 
bears the imprimatur of the New York PSC as well as the numerous 
competitive LECs who joined that settlement. The New Jersey Board is 
presently considering AT&T's motion for reconsideration of the hot cut 
rate and will have an opportunity to weigh AT&T's evidence of the 
appropriate rate level. We note that the $35 hot cut charge reflects a 
reduction of over 75 percent from the charge adopted by the New Jersey 
Board. The Commission also takes comfort that the $35 hot cut rate will 
remain in effect until at least March 1, 2004. Accordingly, it defers 
to the New Jersey Board's anticipated resolution of this matter and 
find no TELRIC error on the record before it in Verizon's $35 hot cut 
rate.
    15. AT&T asserts that the $7.71 service order charge Verizon 
assesses on a competitive LEC whenever it adds or deletes a telephone 
feature service, such as caller identification, does not comply with 
TELRIC. A feature change service order charge is imposed only if a 
customer is already taking service from a competitive LEC. Even then, 
not all such customers request changes to their feature services. There 
is no evidence in the record that a feature change service order charge 
constitutes a barrier to market entry in the same way that a non-TELRIC 
hot cut charge could. The Commission notes that AT&T has filed a motion 
for reconsideration of this issue with the New Jersey Board. It 
believes that the New Jersey Board should have the opportunity to 
evaluate the evidence itself and make adjustments it regards as 
appropriate.
    16. OSS. The Commission finds, as did the New Jersey Board, that 
Verizon provides non-discriminatory access to its OSS. In addition to 
New Jersey performance data, Verizon certifies that it provides 
competitive LECs in New Jersey with interfaces and gateways to the OSS 
common to those serving the rest of the former Bell Atlantic service 
area. Verizon engaged KPMG Consulting (KPMG) to test the interfaces and 
OSS serving New Jersey. In addition, Verizon engaged 
PricewaterhouseCoopers (PwC) to conduct two attestation reviews of 
Verizon's BOS BDT formatted bills in New Jersey in September 2001.
    17. KPMG's testing included end-to-end testing and evaluation of 
integrated operations, including examination at a projected ``normal'' 
volume equivalent to the submission of 1.3 million orders per month 
into the New Jersey SOP. With regard to performance data, KPMG 
undertook a comprehensive review of Verizon's systems and procedures to 
measure and report its performance under the Carrier-to-Carrier 
Guidelines, and KMPG found that Verizon satisfied all 164 test points. 
The Commission finds, as did the New Jersey Board, that we can rely on 
the KPMG test results as significant evidence that Verizon provides 
nondiscriminatory access to its OSS. The Commission's reliance on the 
KPMG test results is warranted because of the thoroughness and 
rigorousness with which KMPG conducted its military-style test, which 
covered 536 transactions and included volume testing. Thus, it sees no 
need to question the reliability of the data Verizon submitted in its 
application and, in fact, we are encouraged by Verizon's efforts in 
coordination with the New Jersey Board, to ensure that its data are 
accurate, reliable, and widely disclosed.
    18. Competitors in New Jersey raise several issues regarding 
notifier timeliness and accuracy, and the Department of Justice 
comments that the Commission should satisfy itself that Verizon returns 
BCNs on an accurate and timely basis. For example, MetTel raises a 
threshold accusation that Verizon issues ``false'' order completion 
notifiers. In contrast to more anecdotal-based challenges made by 
competitors in previous section 271 proceedings, MetTel has extensively 
documented and inventoried its submissions of orders and receipt of 
notifiers. We commend MetTel on its efforts to compile and submit 
independent evidence and construct an affirmative case for its 
position. Nevertheless, we continue to place primary reliance on the 
notifier data that Verizon has submitted with its application. At the 
same time, the Commission recognizes that, although the issues raised 
by MetTel do not generally demonstrate checklist noncompliance, Verizon 
has an affirmative obligation to continue to engage MetTel and attempt 
to reconcile its disagreements with MetTel through a carrier-to-carrier 
dispute resolution process. In this regard, it is noted that Verizon 
has begun a data reconciliation process with MetTel during the course 
of this proceeding that, although incomplete, has focused the number of 
issues in dispute and led to a more precise identification of the 
underlying data in dispute. As a result, it appears that much of the 
remaining gap between the performance results reported by Verizon and 
the performance results

[[Page 44602]]

generated by MetTel arise from an apparent disagreement over the 
application of various aspects of the Carrier-to-Carrier Guidelines. 
Although the record reveals that this reconciliation process has been 
contentious and adversarial, at this time we do not believe that 
Verizon is not engaged in a good-faith effort to resolve these issues. 
The Commission fully expects Verizon to continue these efforts at 
reconciliation as part of its nondiscrimination obligations and to 
continue to make efforts to improve its OSS performance. It also 
expects the New Jersey Board will make every effort to facilitate this 
reconciliation effort either formally through its dispute resolution 
process or through other administrative measures.
    19. For purposes of checklist compliance, the Commission is 
convinced by the thoroughness and rigorousness of KPMG's independent 
audit that Verizon's performance data, including its data related to 
notifiers specifically, is sufficiently accurate. The fact that no 
other company questions whether Verizon's performance data related to 
the timeliness and accuracy of Verizon's notifier data gives us 
additional assurance that such data are reliable. Further, MetTel's 
attempts to introduce certain usage proxies as indicators of system 
events and reliance on measures not adopted by the New Jersey Board do 
not persuade us to abandon the more objective and industry standard 
performance measures approved by the Board. The Commission concludes 
that Verizon has demonstrated that it provides notifiers in a 
nondiscriminatory manner that allows efficient competitors a meaningful 
opportunity to compete. In reaching this determination, it recognizes 
that the processes for notifying competitors of the status of their 
orders, the set of metrics to measure notification, and the 
corresponding process to record notifier performance, are all evolving 
and will continue to do so. Accordingly, the Commission expects Verizon 
to continue to work with MetTel and other competitors in enabling them 
to understand the business rules and address carrier-specific problems.
    20. Billing. The Commission finds that Verizon complies with its 
obligation to provide nondiscriminatory access to its billing functions 
on the basis of its provision of: (1) Timely and accurate service usage 
data to competitive LECs; and (2) wholesale billing in a manner that 
provides competing carriers with a meaningful opportunity to compete. 
No party raises any issues with Verizon's provision of service usage 
data to competitive LECs; and based on the evidence in the record, we 
find that Verizon's provision of the DUF meets its obligations in this 
regard. Several parties, however, raise issues with Verizon's provision 
of wholesale billing. Specifically, a number of parties dispute the 
accuracy of the wholesale bill, based on both the BOS BDT format and 
the retail format.
    21. Verizon employs the same billing systems in New Jersey as it 
does in Pennsylvania, where our evidentiary finding that Verizon's 
wholesale bills were checklist compliant was a ``close call,'' and many 
of the issues commenters raise in New Jersey are similar to the issues 
raised in Pennsylvania. Accordingly, the Commission agrees with the 
Department of Justice that the competitive experience in New Jersey is 
informed by that of Pennsylvania. It recognizes, however, that while 
the billing systems in New Jersey and Pennsylvania are identical, the 
overall billing processes differ. The Commission cannot, therefore, 
merely rely on our previous review of Verizon's billing system in 
Pennsylvania to make our finding here. It finds that Verizon has made a 
sufficient showing that both its retail-formatted and BOS BDT bills are 
accurate, and we reject assertions by AT&T that KPMG's failure to test 
the BOS BDT bill format fatally undermines Verizon's showing.
    22. The Commission finds that Verizon demonstrates the accuracy of 
the BOS BDT bill format based on the limited commercial performance 
data available from its use in New Jersey, and consistent with our 
findings in the Verizon Pennsylvania Order, the PwC attestation that 
Verizon's BOS BDT bills are consistent with the retail format. Our 
concerns are satisfied by the recent performance data, by the low and 
decreasing number of discrepancies between the electronic and paper 
bills, and by PwC's attestation that the BOS BDT bills in September 
contained a de minimis amount of erroneous charges. Further, we find 
that Verizon has adequately demonstrated the accuracy of the BOS BDT 
bill by having PwC attest that it is reconcilable against the retail-
formatted bill, which KPMG had previously found reconcilable with the 
DUF. Since the retail-formatted bill has been tested for accuracy by 
KPMG, and PwC has reconciled the BOS BDT bill against the retail-
formatted bill, it is reasonable to assume that the BOS BDT bill is 
also reconcilable with the DUF. As with all OSS functions, although we 
must judge Verizon's wholesale billing at the time of its application, 
we recognize that access to OSS is an evolutionary process and we 
expect that Verizon continue its efforts to improve its wholesale 
billing as industry standards evolve.
    23. Several competitive LECs assert that their commercial 
experience shows that Verizon's systems produce recurring or 
``systemic'' inaccuracies in its wholesale bills. We note that no 
commenter has put forth the type of detailed analysis of its wholesale 
billing dispute with Verizon that was present in our review of 
Verizon's application for section 271 authority in Pennsylvania As we 
stated in the Verizon Pennsylvania Order, ``we recognize, as a 
practical matter, that high-volume, carrier-to-carrier commercial 
billing cannot always be perfectly accurate.'' The Commission cannot, 
without further evidence, find that the parties have demonstrated 
systemic inaccuracies in Verizon's wholesale bills that would require a 
finding of checklist noncompliance.
    24. Finally, the Commission addresses AT&T's allegations that 
Verizon's BOS BDT bill does not comply with industry standards. Verizon 
explains that the issues raised by AT&T are in fact deviations that are 
allowed under the industry standard and for which Verizon has provided 
clear documentation. AT&T also acknowledges that Verizon has made 
attempts to comply with AT&T's specific requests regarding the BOS BDT 
bill. It finds that Verizon complies with its obligation to provide 
clear documentation and assistance to AT&T regarding the BOS BDT bill, 
and that AT&T provides insufficient evidence to support its claim that 
Verizon does not offer a ``readable and auditable'' electronic bill 
format or that Verizon's BOS BDT bill impermissibly deviates from 
accepted industry standards. Moreover, AT&T's assertions regarding 
Verizon's implementation of the BOS BDT bill format are a fact-
specific, carrier-to-carrier dispute concerning AT&T's use of Verizon's 
BOS BDT bill. As the Commission has stated in prior proceedings, given 
the statutory period for our review, the section 271 process simply 
could not function if we were required to resolve every individual 
factual dispute between a BOC and each competitive LEC regarding the 
precise content of the BOC's obligations to each competitor. The 
Commission takes added comfort in the special measures that the New 
Jersey Board announced to ensure nondiscriminatory access to electronic 
billing.
    25. Flow Through. The Commission concludes, as did the New Jersey 
Board, that Verizon's electronic processing of orders is sufficient to 
provide carriers

[[Page 44603]]

with a meaningful opportunity to compete. Flow-through measures the 
number of orders that are electronically processed by an incumbent 
LEC's OSS without the need for manual intervention. In New Jersey, 
while Verizon's achieved flow-through rate for UNEs has been below the 
95 percent standard set by the New Jersey Board, there nevertheless, 
has been a consistent, upward trend in the rate, reaching 85.34 percent 
in January, 89.82 percent in February and 90.50 percent in March 2002. 
Even if the Commission looks beyond achieved flow-through to total 
flow-through rates and order reject rates, it notes that Verizon's 
performance appears to show an improving trend. Moreover, it notes that 
KPMG's OSS test included an examination of Verizon's ability to 
electronically process service orders in varying mixes of order types 
at reasonably foreseeable commercial volumes and that KPMG and the New 
Jersey Board found Verizon's performance satisfactory. The Commission 
finds that the positive trends in both Verizon's flow-through and order 
reject rates, along with Verizon's overall performance in providing 
service order information in a timely and accurate manner and KPMG's 
findings regarding the scalability of Verizon's OSS are sufficient to 
demonstrate checklist compliance.
    26. Checklist Item 4--Unbundled Local Loops. Verizon has adequately 
demonstrated that it provides unbundled local loops as required by 
section 271 and the Commission's rules. Specifically, the Commission's 
conclusion is based on its review of Verizon's performance for all loop 
types, which include, as in past section 271 orders, voice grade loops, 
hot cut provisioning, xDSL-capable loops, digital loops, and high 
capacity loops, and its review of Verizon's processes for line sharing 
and line splitting. As of February 2002, competitors in New Jersey have 
acquired from Verizon and placed into use approximately 59,000 stand-
alone loops (including DSL loops), and about 51,000 loops provided as 
part of network element platforms that include switching and transport 
elements.
    27. Voice Grade Loops. The Commission finds that Verizon provisions 
voice grade loops in a nondiscriminatory manner. It notes that voice 
grade loops comprise the overwhelming majority of loops ordered by 
competitive LECs in New Jersey. Verizon's performance in provisioning 
voice grade loops has met the relevant parity standard throughout the 
November-March period with respect to timeliness and quality. 
Furthermore, Verizon's performance for repair and maintenance 
timeliness under the mean time to repair metric also demonstrates 
parity during the November-March period.
    28. Hot Cut Activity. Verizon is providing voice grade loops 
through hot cuts in New Jersey in a nondiscriminatory manner. Verizon 
has satisfied its benchmark for on time performance for hot cuts for 
each month of the relevant November-March period. Although Verizon's 
installation quality performance for hot cuts is not reported in the 
New Jersey Carrier-to-Carrier Performance Reports, Verizon does provide 
a calculation of its performance under the New York guidelines. Verizon 
states that its installation quality performance has consistently been 
better than the two percent New York benchmark for trouble reports 
received within seven days of installation.
    29. xDSL-Capable Loops. Verizon demonstrates that it provides 
stand-alone xDSL-capable loops in a nondiscriminatory manner. Verizon 
makes xDSL-capable loops available in New Jersey under approved 
interconnection agreements, and provides timely order confirmation 
notices to competitors. Verizon's performance for all relevant months 
under the missed appointment metric indicates that Verizon provisions 
xDSL loops in a timely manner. With respect to installation quality, 
Verizon also maintained parity during the relevant months under the 
installation quality measure. For almost every month during the 
relevant period, Verizon also maintained parity for measures of repair 
and maintenance timeliness and quality.
    30. Digital Loops. Verizon provisions digital loops to competitors 
in a nondiscriminatory fashion in New Jersey. As an initial matter, we 
note that digital loops only represent a small number of the total 
loops provided by Verizon in New Jersey. Verizon provided digital loops 
to competitors in a timely manner throughout the relevant period. 
Verizon also achieves parity from November through March with respect 
to the measure of installation quality we have traditionally relied on, 
which measures the percent of installation troubles reported within 30 
days. In addition, Verizon achieved parity performance throughout the 
relevant period with respect to maintenance and repair timeliness under 
the mean time to repair metric. Verizon also maintained parity 
performance during the relevant period for every month except February 
with respect to a measure of maintenance and repair quality `` the 
percentage of repeat trouble reports within 30 days. Verizon's 
performance under this measure indicates a large disparity in February 
with respect to the percentage of repeat reports observed for 
competitive LECs and Verizon retail. Verizon explains, however, that 
the small sample size of competitive LEC trouble reports observed in 
February contributed to the wide fluctuation in performance under this 
measure. Moreover, this one month disparity is not competitively 
significant and does not warrant a finding of checklist noncompliance, 
given that Verizon returns to parity performance under this measure in 
March.
    31. High Capacity Loops. Given the totality of the evidence, the 
Commission finds that Verizon's performance with respect to high 
capacity loops does not result in a finding of noncompliance for 
checklist item 4. Verizon states that, as of February 2002, competitive 
LECs have in service in New Jersey approximately 400 high capacity DS-1 
loops, and no high capacity DS-3 loops, provided by Verizon. According 
to Verizon, high capacity loops represent only about 0.4 percent of all 
unbundled loops provisioned to competitors in New Jersey. Verizon's 
performance under the missed installation appointment metric suggests 
that Verizon has generally been timely in the provisioning of high 
capacity loops. Verizon achieved parity for repair and maintenance 
timeliness under the mean time to repair metric for three of the five 
relevant months. Verizon's performance with respect to repair and 
maintenance quality also indicates parity for four of the five months 
during the relevant period. The Commission recognizes, however, that 
Verizon does not achieve parity during the relevant period other than 
in February with respect to the installation quality metric, the 
percentage of installation troubles reported within 30 days. Verizon 
contends that this measure may not be an accurate indicator of its 
performance because the retail group for this metric (Verizon retail) 
does not provide a meaningful comparison. Verizon also argues that the 
small number of installation trouble reports received during the 
relevant period for high capacity loops, interoffice facilities, and 
loop/transport combinations are too few to provide meaningful 
performance results, and are ``not as reliable an indicator of 
checklist compliance.'' The Commission does not find that Verizon's 
performance with respect to troubles reported within thirty days 
warrants a finding of checklist

[[Page 44604]]

noncompliance, given that high capacity loops represent less than one 
percent of the unbundled loops that Verizon provides to competitors in 
New Jersey, and in light of Verizon's generally good performance under 
the other measures of high capacity loop provisioning, maintenance, and 
repair discussed above.
    32. Line Sharing and Line Splitting. Verizon demonstrates that it 
provides nondiscriminatory access to the high frequency portion of the 
loop, and access to network elements necessary for competing carriers 
to provide line splitting. Verizon generally has met the relevant 
performance standards for provisioning, maintaining and repairing line-
shared loops for competitors in New Jersey. Commenters in this 
proceeding do not criticize Verizon's performance with regard to the 
provisioning, maintenance and repair of line shared loops. Verizon also 
provides nondiscriminatory access to line-splitting in accordance with 
our rules. Verizon provides carriers that purchase line splitting with 
access to the same pre-ordering capabilities as carriers that purchase 
unbundled DSL loops or line sharing. In addition, working with 
competitive LECs through the New York DSL Collaborative, Verizon 
implemented a permanent OSS process for line splitting on October 20, 
2001, throughout the Verizon East territory, including New Jersey. We 
note that AT&T raises challenges to Verizon's ordering process for line 
splitting, but we find that this process allows competitors a 
meaningful opportunity to compete. Accordingly, the Commission finds 
that Verizon complies with the requirements of this checklist item with 
respect to its line sharing and line splitting processes.

Other Checklist Items.

    33. Checklist Item 1--Interconnection. Based on the evidence in the 
record, the Commission concludes that Verizon demonstrates that it 
provides interconnection in accordance with the requirements of section 
251(c)(2) and as specified in section 271 and applied in the 
Commission's prior orders. Pursuant to this checklist item, Verizon 
must provide equal-in-quality interconnection on terms and conditions 
that are just, reasonable, and nondiscriminatory. Based on the 
Commission's review of the record, it concludes, as did the New Jersey 
Board, that Verizon complies with the requirements of this checklist 
item. In reaching this conclusion, the Commission examined Verizon's 
performance in providing collocation and interconnection trunks to 
competing carriers, as it has done in prior section 271 proceedings. It 
notes that no commenter faults Verizon's interconnection quality or 
timeliness, and that the New Jersey Board found that Verizon provides 
equal-in-quality interconnection on terms and conditions that are just 
and reasonable and in accordance with the section 271.
    34. Checklist Item 8--White Pages Directory Listings. Based on the 
record, the Commission finds that Verizon provides white page directory 
listings for customers of the other carrier's telephone exchange 
service and permits competitive providers of telephone exchange service 
and toll service to have access to directory listings in compliance 
with checklist item 8.
    35. Checklist Item 13--Reciprocal Compensation. The Commission 
finds that Verizon demonstrates that it provides reciprocal 
compensation as required by checklist item 13.
    36. Checklist Item 14--Resale. Based on the evidence in the record, 
the Commission concludes that Verizon satisfies the requirements of 
this checklist item in New Jersey in that it makes telecommunications 
services available for resale in accordance with the requirements of 
sections 251(c)(4) and 252(d)(3).
    37. Checklist Items 3, 5, 6, 7, 9, 10, 11 and 12. An applicant 
under section 271 must demonstrate that it complies with checklist item 
3 (poles, ducts, conduits, and rights of way), item 5 (transport), item 
6 (switching), item 7 (911/E911, directory assistance, and operator 
services), item 9 (numbering administration), item 10 (databases and 
associated signaling), item 11 (number portability), and item 12 (local 
dialing parity). Based on the evidence in the record, the Commission 
concludes that Verizon demonstrates that it is in compliance with 
checklist items 3, 5, 6, 7, 9, 10, 11, and 12 in New Jersey. The New 
Jersey Board also concludes that Verizon complies with the requirements 
of each of these checklist items.
    38. Section 272 Compliance. Verizon provides evidence that it 
maintains the same structural separation and nondiscrimination 
safeguards in accordance with the requirements of section 272.
    39. Public Interest Analysis. The Commission concludes that 
approval of this application is consistent with the public interest. 
From the Commission's extensive review of the competitive checklist, 
which embodies the critical elements of market entry under the Act, it 
finds that barriers to competitive entry in New Jersey's local exchange 
market have been removed, and that the local exchange market is open to 
competition. It further finds that the record confirms the Commission's 
view that BOC 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.
    40. Price Squeeze Analysis. Commenters allege the existence of a 
price squeeze in New Jersey that, they assert, compels a finding that 
the grant of Verizon's NJ II application is not in the public interest. 
While no commenter argues that the $35 hot cut rate in New Jersey 
effects a price squeeze on competitors, XO contends that the Commission 
must determine whether Verizon's previous hot cut rates of $159.76 and 
$233.13 constitute a price squeeze. XO specifically alleges that the 
$35 rate in New Jersey, unlike that in New York, is merely a temporary 
credit. There is no evidence that the specific hot cut terms in New 
York differ significantly from those in New Jersey. We therefore reject 
commenters' argument that that there are material differences between 
the New Jersey and New York hot cut rates that would warrant 
disapproval of the NJ II application, and we also decline to conduct a 
price squeeze analysis using Verizon's previous hot cut rates of 
$159.76 and $233.13.
    41. The Commission also rejects the UNE price squeeze arguments of 
AT&T and WorldCom from NJ I, which they incorporate by reference in NJ 
II. Both commenters make related arguments concerning the allegedly 
insufficient profit margin available to them in the residential 
telephone market in New Jersey. Significantly, neither commenter claims 
that it cannot earn a positive gross margin in New Jersey. As it has 
noted previously, conducting a price squeeze analysis requires a 
determination of what a ``sufficient'' profit margin is. Resolving that 
issue requires more than simply determining what is sufficient for a 
particular carrier. The evidence before us demonstrates that 
competitive LECs in New Jersey can realize positive margins in 100 
percent of the state and that the statewide average gross margin is 
$5.62. There is no record evidence before us that these profit margins 
are inadequate for an efficient competitor. The Commission also notes 
that the New Jersey Board itself considered allegations of a price 
squeeze in the New Jersey residential market. During a November 20, 
2001 state hearing, staff of the New Jersey Board presented evidence 
that the average residential customer generates approximately $30.00 in 
monthly revenue. New Jersey Board staff noted that local competitors 
such as AT&T

[[Page 44605]]

who are also long distance carriers would receive net access savings or 
revenues. After subtracting UNE-platform costs from estimated monthly 
residential rates, staff of the New Jersey Board determined that 
competitors could expect to earn a monthly gross profit of 
approximately $6.50. The Commission commends the New Jersey Board's 
independent analysis of the price squeeze issue and finds that it 
provides additional support for our conclusion that commenters have not 
established the existence of a price squeeze in New Jersey. It rejects 
commenters' allegations of a price squeeze and conclude that there is 
no evidence in the record that warrants disapproval of this application 
based on such contentions, whether couched as a violation of the public 
interest standard or as discrimination in violation of checklist item 
two.
    42. Section 271(d)(6) Enforcement Authority. Working with the New 
Jersey Board, the Commission intends to monitor closely post-entry 
compliance and to enforce the provisions of section 271 using the 
various enforcement tools Congress provided us in the Communications 
Act.

Federal Communications Commission.
William F. Caton,
Deputy Secretary.
[FR Doc. 02-16739 Filed 7-2-02; 8:45 am]
BILLING CODE 6712-01-P