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February 25, 1999

Separate Statement
Commissioner Susan Ness

Re: Orders Releasing Continuing Property Records (CPR) Audit Reports of Ameritech; Bell Atlantic (North); Bell Atlantic (South); BellSouth; Pacific Bell; Southwestern Bell; U S West

I support releasing the results of the staff audits so that we can discuss their findings, extrapolations, and ramifications with all stakeholders -- including state public utility commissions, in particular, as well as purchasers of interstate services and incumbent local exchange carriers.

It is important, however, that our decision to release the results of the staff audits not be misunderstood. While it is plain that there are material discrepancies between the carriers' continuing property records and the physical plant actually found during site visits by the Common Carrier Bureau's audit teams, the Commission has reached no decisions concerning these audit results. The reasonableness of the audit methodology, findings, and extrapolations, the relevance of our continuing property rules to the current telecommunications environment, the ramifications of the audit results for interstate rates, the need for remedial measures, and similar issues are all open for discussion.

Until now, it has been appropriate for the discussions between the agency and the audited carriers to be bilateral and confidential. When reputations are at stake, due process requires an extra measure of fairness and opportunity to be heard. That's why release of these reports has been delayed, to allow for additional give-and-take between the Bureau and the audited carriers and inclusion of carrier responses to Bureau findings and conclusions. Now, however, the discussion needs to be broadened, so that all interested parties have an opportunity to participate.

I know, from discussions held already, that incumbent local exchange carriers believe the property record discrepancies have no significance for (1) the reasonableness of "going-in" price cap rates, (2) the computations under price caps of (a) low-end adjustments, (b) sharing, and (c) total factor productivity, (3) calculations under the Telecommunications Act of 1996 relating to (a) universal service support and (b) pricing of unbundled network elements, and (4) the merits of "takings" claims and "stranded cost" recovery issues. These arguments merit full discussion on the part of all stakeholders before I am willing to render a decision on the merits.

With today's decision, a full and open dialogue can begin.