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April 16, 2001


Re: Application of Verizon New England Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions) and Verizon Global Networks Inc., for Authorization to Provide In-Region, InterLATA Services in Massachusetts (CC Docket No. 01-9)

I write separately to explain the bases upon which I support this Order, which approves an application by Verizon to provide in-region, interLATA service in Massachusetts, pursuant to section 271 of the Telecommunications Act of 1996.

There was a time when the Commission’s interpretation of section 271 was so fluid that it was difficult to ascertain precisely what was required of a Bell Company to enable it to attain approval to enter the long distance market. The Commission was criticized for “hiding the ball” in that, in the face of undeniably weak applications, we declined to provide guidance regarding what we would find to be a persuasive showing of compliance with the statutory “competitive checklist.”

Under the stewardship of the previous Chairman, however, the Commission concertedly labored to provide more detailed guidance, notwithstanding the strict limitations imposed on our deliberations by the 90-day statutory deadline for approving or rejecting section 271 applications. The fruits of this effort have been that, of the more than five years in which we have been responsible for implementing section 271, we have adopted all five approval orders only in the last 16 months. This cluster of recent approvals (which were supported by all of my present colleagues) is, in my view, the result of simple logic: without a clear explanation of what they needed to do to gain section 271 approval, Bell Companies lacked adequate incentives and ability to do what this provision intended, namely, open local markets in exchange for entry into the in-region, interLATA telecommunications market.

But future applicants and other interested parties are admonished that, even after more than a year of applying a standard that provides section 271 applicants the guidance they need to succeed, the Commission will continue to apply the same rigor it always has to these questions. It is not overstating matters to point out that the legal and policy questions encompassed by these proceedings are extraordinarily complex and, most often, close questions must be resolved. As such, there still will be times when the Commission receives an application that either fails to meet the demanding standard outlined in our precedent, or fails based on questions that surface for the first time.

With respect to the application before us, though it has some weaknesses, I believe it is consistent with our precedent and merits approval. The central concern with this application is the rate Verizon offers for switching. It is clearly higher than those we have seen in some other states. Our task under the checklist, however, is to ensure that whatever rates are offered are “cost-based” and the product of a forward-looking methodology (i.e., TELRIC). In evaluating section 271 applications, the Commission does not conduct completely independent rate proceedings. Thus, we are left to examine whether a state commission demonstrates intent and some ability to use the appropriate methodology, and whether the rates ultimately relied on in the application are within the range that a reasonable application of TELRIC principles would produce.

Here, Verizon relies on a switching rate lower than that set by the Massachusetts Department, recognizing the Commission’s concern that the state-set rate might not be appropriately cost-based. Verizon chose simply to offer a switching rate similar to that we approved in New York. In the Bell Atlantic New York Order, we found this rate to be consistent with the cost-based methods we require. Given that, I believe we are constrained to approve the rate unless we find it unquestionably clear that the rate is not built on the proper TELRIC foundation. In contrast, opponents of this application argue that we should not rely on the New York rate, because the New York Commission is on the verge of revising it, having found an arguable input error in its previous methodology. It is alleged that this revision will result in a substantially lower rate and thus we should not endorse the current rate for Massachusetts.

This is not an idle concern, for we recognize the importance of cost-based rates to new entrants hoping to enter the incumbent’s local market. I must conclude, however, that we cannot properly reject an application from one state that is consistent with precedent, on the basis of speculation regarding the outcome of another state’s future rate proceeding. We cannot know with sufficient certainty what will be the full impact on the rates of that future proceeding, even if it is generally accepted that the rate is likely to be lower. Nor can we, on this record and within the constraints of this 90-day proceeding, conduct our own de novo evaluation of these switching rates, so as to revise our prior decision. Moreover, I cannot agree that we should, as a prior condition of approving this application, compel Verizon (through formal or informal means) to mirror its Massachusetts rates with any revisions that occur in New York. Taking such action now, as a condition of approval, would impermissibly subject the Massachusetts Department to the regulatory actions of another state and might well interfere with the Department’s ongoing ratemaking proceedings.

That said, approval today does not forever insulate the switching rate Verizon has successfully proferred in this application. If New York in fact revises its rates downward after concluding that its prior determinations were not soundly cost-based, neither Verizon nor anyone else could properly rely in future applications on the rates we approved in the Bell Atlantic New York Order without new substantiation. Furthermore, depending on the scope of the New York Commission’s upcoming decision on rates, this Commission might determine that Verizon has subsequently “ceased to meet [one] of the conditions required for [section 271] approval,” thereby empowering us to take remedial action under section 271(d)(6). Thus, there may be situations after the New York Commission rules in which I would support taking action that would have the practical effect of requiring Verizon to find a new cost-based rate for switching for a few months until the Massachusetts Department resets its rates. I have full confidence that the Massachusetts Department will take account of New York’s experience, as well as carefully ensure that any rates it chooses are based on sound TELRIC methodology, as described in this and prior Commission orders.

For these reasons and with these caveats, I support adoption of this section 271 application. I wish to thank, in particular, the Massachusetts Department, the Department of Justice and our tireless Common Carrier Bureau staff for their exemplary skill, drive and stamina in bringing this Order to fruition.