[Federal Register Volume 67, Number 249 (Friday, December 27, 2002)]
[Notices]
[Pages 79095-79098]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 02-32650]


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FEDERAL COMMUNICATIONS COMMISSION

[WC Docket No. 02-306; FCC 02-330]


Application by SBC Communications Inc., Pacific Bell Telephone 
Company, and Southwestern Bell Communications Services, Inc., for 
Authorization To Provide In-Region, InterLATA Services in California

AGENCY: Federal Communications Commission.

ACTION: Notice.

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SUMMARY: In the document, the Federal Communications Commission 
(Commission) grants the section 271

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application of SBC Communications Inc., Pacific Bell Telephone Company, 
and Southwestern Bell Communications Services, Inc., (Pacific Bell) for 
authority to enter the interLATA telecommunications market in the state 
of California. The Commission grants Pacific Bell's application based 
on its conclusion that Pacific Bell has satisfied all of the statutory 
requirements for entry, and opened its local exchange markets to full 
competition.

DATES: Effective December 30, 2002.

FOR FURTHER INFORMATION CONTACT: Renee R. Crittendon, Senior Attorney 
Advisor, Wireline Competition Bureau, at (202) 418-2352 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 in WC Docket No. 02-306, FCC 02-330, 
adopted December 19, 2002, and released December 19, 2002. The full 
text of this order 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 Web site at http://www.fcc.gov/Bureaus/Common_Carrier/in-region_applications/sbc_ca/welcome.html.

Synopsis of the Order

    1. History of the Application. On September 20, 2002, Pacific filed 
an application, pursuant to section 271 of the Telecommunications Act 
of 1996, with the Commission to provide in-region, interLATA service in 
the state of California.
    2. The California Public Utilities Commission Order. The California 
Public Utilities Commission (California Commission) determined that 
Pacific Bell had successfully complied with 12 of the 14 checklist 
items. The California Commission also emphasized that Pacific Bell had 
successfully passed the independent third party test of its operations 
support systems (OSS) and noted the strong performance results Pacific 
Bell has achieved across many service categories. The California 
Commission withheld approval of checklist item 11 (number portability) 
and checklist item 14 (resale). According to the California Commission, 
Pacific Bell did not demonstrate its compliance with the number 
portability requirements for failure to implement a mechanized Number 
Portability Administration Center (NPAC) check process in time to 
review its efficacy. With regard to the resale requirements of 
checklist item 14, the California Commission concluded that Pacific 
Bell did not comply with its resale obligation with respect to its 
advanced services. Finally, based on its analysis of section 709.2 of 
the California Public Utilities Code, the California Commission 
determined that, although Pacific Bell met most of the technical 
requirements under section 271, it could not support Pacific's entry 
into the long distance market as beneficial to the public interest. On 
December 12, 2002, the California Commission issued a draft Final 
Decision on the Public Utilities Code Section 709.2(c) inquiry, in 
which it granted Pacific Bell authority to operate and provide 
intrastate interexchange telecommunications services upon receipt of 
full authorization from the FCC pursuant to section 271.
    3. The Department of Justice's Evaluation. The Department of 
Justice filed its evaluation of Pacific Bell's application on October 
29, 2002 in which it recommended approval of the application. The 
Department of Justice noted that the California Commission's decision 
regarding checklist items 11 and 14 did not appear to preclude approval 
of Pacific Bell's application. The Department also expressed concern 
regarding TELRIC pricing and the true-up mechanism that Pacific Bell 
proposed for use in California. While the Department of Justice 
supported approval of Pacific Bell's application, based on the current 
record, it noted its conclusions were subject to the Commission's 
review of certain concerns expressed in its evaluation.

Primary Issues in Dispute

    4. Checklist Item 2--Unbundled Network Elements. Based on the 
record, the Commission finds that Pacific Bell has provided 
``nondiscriminatory access to network elements in accordance with the 
requirements of sections 251(c)(3) and 252(d)(1)'' of the Act in 
compliance with checklist item 2.
    5. The Commission finds that Pacific Bell's UNE rates in California 
are just, reasonable, and nondiscriminatory, and are based on cost plus 
a reasonable profit as required by section 252(d)(1). Thus, Pacific 
Bell's UNE rates in California satisfy checklist item 2. The Commission 
has previously held that it will not conduct a de novo review of a 
state's pricing determinations and will reject an application only if 
either ``basic TELRIC principles are violated or the state commission 
makes clear errors in factual findings on matters so substantial that 
the end result falls outside the range that a reasonable application of 
TELRIC principles would produce.'' The California Commission concluded 
that Pacific Bell's UNE rates satisfy checklist item 2. While the 
Commission has not conducted a de novo review of the California 
Commission's pricing determinations, the Commission has followed the 
urging of the Department of Justice to examine commenters' complaints 
regarding UNE pricing.
    6. The Commission reviewed commenters' criticism of issues 
including rates for switching, loops and non-loops, vertical features, 
dedicated transport, and DS1 and DS3 loops, as well as nonrecurring 
charges. The Commission also investigated issues regarding the interim 
nature of switching and loop rates, Pacific Bell's true-up commitment, 
and the comparison of Pacific Bell's UNE rates in California to SBC's 
rates in Texas as part of our benchmark analysis. After carefully 
reviewing these complaints, the Commission concludes that the 
California Commission followed basic TELRIC principles and the 
complaints do not support a finding that the California Commission 
committed clear error. Thus, the Commission concludes that Pacific 
Bell's UNE rates in California satisfy the requirements of checklist 
item 2.
    7. The Commission also concludes that Pacific Bell meets it 
obligation to provide access to its OSS--the systems, databases, and 
personnel necessary to support the network elements or services. 
Nondiscriminatory access to OSS ensures that new entrants have the 
ability to order service for their customers and communicate 
effectively with Pacific Bell regarding basic activities such as 
placing orders and providing maintenance and repair services for 
customers. The Commission finds that, for each of the primary OSS 
functions (pre-ordering, ordering, provisioning, maintenance and 
repair, and billing, as well as change management and technical 
assistance), Pacific Bell provides access that enables competing 
carriers to perform the functions in substantially the same time and 
manner as Pacific Bell or, if there is not an appropriate retail 
analogue in Pacific Bell's systems, in a manner that

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permits an efficient competitor a meaningful opportunity to compete.
    8. Pursuant to this checklist item, Pacific Bell must also provide 
nondiscriminatory access to network elements in a manner that allows 
other carriers to combine such elements, and demonstrate that it does 
not separate already combined elements, except at the specific request 
of a competing carrier. Based on the evidence in the record, and upon 
Pacific Bell's legal obligations under interconnection agreements, 
Pacific Bell demonstrates that it provides to competitors combinations 
of already-combined network elements as well as nondiscriminatory 
access to unbundled network elements in a manner that allows competing 
carriers to combine those elements themselves.
    9. Checklist Item 11--Local Number Portability. Based on the 
record, the Commission finds, notwithstanding the California 
Commission's determination that Pacific Bell failed to comply with 
checklist item 11 for failing to implement a mechanized Number 
Portability Administration Center check process, that Pacific Bell 
meets its requirement to provide, to the extent technically feasible, 
number portability in accordance with requirements prescribed by the 
Commission. Pacific Bell demonstrates that it makes local number 
portability available to competitive LECs through interconnection 
agreements and in conformance with the Commission's rules.
    10. Checklist Item 14--Resale. Based on the evidence in the record, 
the Commission concludes that Pacific Bell demonstrates that it makes 
telecommunications services including DSL resale, available in 
California for resale, in accordance with sections 251(c)(4) and 
section 252(d)(3) and, thus, satisfies the requirements for checklist 
item 14. Although we note that the California Commission concluded that 
Pacific Bell had erected unreasonable barriers to entry in California's 
DSL market by not complying with its resale obligations with respect to 
advanced services and by offering certain restrictive conditions, based 
on a full review of the record, we conclude that Pacific Bell 
demonstrates compliance with checklist item 14.

Other Checklist Items

    11. Checklist Item 1--Interconnection. Based on the evidence in the 
record, the Commission finds that PacBell 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.
    12. Pacific Bell also demonstrates that its collocation offerings 
in California satisfy the requirements of sections 251 and 271 of the 
Act. Pacific Bell demonstrates that it offers interconnection in 
California to other telecommunications carriers at just, reasonable, 
and nondiscriminatory rates, in compliance with checklist item 1.
    13. Checklist Item 4--Unbundled Local Loops. The Commission 
concludes that Pacific Bell provides unbundled local loops in 
accordance with the requirements of section 271 and our rules. Our 
conclusion is based on our review of Pacific Bell's performance for all 
loop types, which include voice-grade loops, xDSL-capable loops, 
digital loops, high-capacity loops, as well as our review of Pacific 
Bell's processes for hot cut provisioning, and line sharing and line 
splitting.
    14. Checklist Item 5--Unbundled Transport. Section 271(c)(2)(B)(v) 
of the competitive checklist requires a BOC to provide ``local 
transport from the trunk side of a wireline local exchange carrier 
switch unbundled from switching or other services.'' The Commission 
concludes, based upon the evidence in the record, that Pacific Bell 
demonstrates that it provides unbundled local transport, in compliance 
with the requirements of checklist item 5.
    15. Checklist Item 13--Reciprocal Compensation. Section 271 
(c)(2)(B)(iii) of the Act requires that a BOC enter into ``[r]eciprocal 
compensation arrangements in accordance with the requirements of 
section 252(d)(2).'' In turn, section 252(d)(2)(A) specifies when a 
state commission may consider the terms and conditions for reciprocal 
compensation to be just and reasonable. Based on the record, we 
conclude that Pacific Bell demonstrates that it provides reciprocal 
compensation as required by the Act.
    16. Checklist Items 3, 6, 7, 8, 9, 10 and 12. An applicant under 
section 271 must demonstrate that it complies with checklist item 3 
(poles, ducts, and conduits), item 6 (unbundled local switching), item 
7 (911/E911 access and directory assistance/operator services), item 8 
(white pages), item 9 (numbering administration), item 10 (databases 
and signaling), and item 12 (dialing parity). Based on the evidence in 
the record, and in accordance with Commission rules and orders 
concerning compliance with section 271 of the Act, the Commission 
concludes that Pacific Bell demonstrates that it is in compliance with 
checklist items 3, 6, 7, 8, 9, 10, and 12 in California. The California 
Commission also concluded that Pacific Bell complies with the 
requirements of each of these checklist items.

Other Statutory Requirements

    17. Compliance with Section 271(c)(1)(A). The Commission concludes 
that Pacific Bell demonstrates that it satisfies the requirements of 
section 271(c)(1)(A) based on the interconnection agreements it has 
implemented with competing carriers in the state of California. The 
record demonstrates that competitive LECs serve some business and 
residential customers, either exclusively or predominantly over their 
own facilities.
    18. Section 272 Compliance. Pacific Bell provides evidence that it 
maintains the same structural separation and nondiscrimination 
safeguards in California as it does in Texas, Missouri, Arkansas, 
Kansas, and Oklahoma where SBC has already received section 271 
authority. Based on the record before us, we conclude that Pacific Bell 
has demonstrated that it will comply with the requirements of section 
272.
    19. Public Interest Analysis. The Commission concludes that 
approval of this application is consistent with the public interest. It 
views the public interest requirement as an opportunity to review the 
circumstances presented by the applications to ensure that no other 
relevant factors exist that would frustrate the congressional intent 
that markets be open, as required by the competitive checklist, and 
that entry will therefore serve the public interest as Congress 
expected. While no one factor is dispositive in this analysis, the 
Commission's overriding goal is to ensure that nothing undermines its 
conclusion that markets are open to competition.
    20. The Commission finds that, consistent with its extensive review 
of the competitive checklist, barriers to competitive entry in the 
local market have been removed and the local exchange market today is 
open to competition. We note that the California Commission determined 
that it could not support Pacific Bell's entry in the long distance 
market as beneficial to the public interest under its state public 
interest inquiry, under section 709.2 of the California Public 
Utilities Code. However, we conclude that, while the state retains 
authority to enforce obligations and safeguards relating to a BOC's 
provision of intrastate interLATA services, the relevant standard 
applied is a federal one, as set forth in the Act. Nevertheless, having 
fully considered the facts and circumstances identified

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by the California Commission (to the extent they could independently 
establish a public interest concern cognizable by this Commission), we 
conclude that Pacific Bell's entry into the long distance market will 
benefit consumers and competition.
    21. We also note that commenters urge the Commission to perform a 
price squeeze analysis regarding rates for DS1 and DS3 loops, DSL 
transport, and payphone lines. The Commission has reviewed the 
commenters' evidence of a price squeeze, however, and determined that, 
even if the Commission accepted their assertions that a price squeeze 
analysis is mandated by section 271's public interest requirement, no 
price squeeze is present here. The commenters' price squeeze claims are 
insufficient to demonstrate the existence of a price squeeze that dooms 
them to failure under the standard articulated by the D.C. Circuit in 
Sprint v. FCC. Therefore, the Commission concludes that there is no 
evidence in the record that warrants disapproval of this application 
based on allegations of a price squeeze, whether couched as 
discrimination under checklist item 2 or a violation of the public 
interest standard.
    22. The Commission also finds that the performance monitoring and 
enforcement mechanisms developed in California, in combination with 
other factors, provide meaningful assurance that Pacific Bell continue 
to satisfy the requirements of section 271 after entering the long 
distance market.
    23. The Commission concludes that approval of this application is 
consistent with the public interest. From our extensive review of the 
competitive checklist, which embodies the critical elements of market 
entry under the Act, we find that barriers to competitive entry in 
California's local exchange market have been removed, and that the 
local exchange market is open to competition.
    24. Section 271(d)(6) Enforcement Authority. The Commission 
concludes that, working with the California Commission, we will closely 
monitor Pacific Bell's post-approval compliance to ensure that Pacific 
Bell does not ``cease[] to meet the conditions required for [section 
271] approval.'' We stand ready to exercise our various statutory 
enforcement powers quickly and decisively if there is evidence that 
market opening conditions have not been sustained.
Federal Communications Commission.

William F. Caton,
Deputy Secretary.
[FR Doc. 02-32650 Filed 12-26-02; 8:45 am]
BILLING CODE 6712-01-P