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February 25, 1999


Re: Bell Atlantic (North) Telephone Companies' Continuing Property Records Audit et al.

In this combined statement, I write separately to explain the bases upon which I dissent in part from each of the referenced Orders releasing continuing property record (CPR) Audit Reports for the Bell Companies.

I fully agree that the information contained in the Audit Reports should have been released in some manner, primarily to ensure its factual accuracy, methodological validity and to determine whether, if the Reports' conclusions are valid, there has been a detrimental impact on ratepayers. Such an impact, if proven, would be serious. And I would willingly support addressing such an impact right now were I persuaded that we have enough information to prove it. Accordingly, I support these Orders to the extent they stand for the proposition that the kind of information in these Audit Reports should, as a general matter, find its way into the public domain so that its validity may be properly and thoroughly tested, and so that the Commission can take whatever actions are appropriate based on the conclusions it reaches in light of such thorough testing.

I am reluctant, however, to level accusations as grave as are implied by these Reports without first subjecting the underlying facts and analysis to outside scrutiny, which we have yet to do. The Reports' recommendations of writeoffs, accounting corrections and complete inventories strongly suggest that we have concluded that these are more than mere technical violations and that they must be remedied. Thus, I feel I must dissent in part from these Orders.

As the Orders' indication that we will initiate a proceeding appears to suggest, we simply do not have enough information to endorse fully and take action on the Reports' conclusions at this time. Specifically, the intention to start a future proceeding suggests we lack sufficient confidence in the Reports to proceed to enforcement without first subjecting their facts and analysis to public scrutiny. Yet today we push these Reports and their conclusions into the public domain without such scrutiny. This action might be troubling even if the Reports did not, in essence, allege misdeeds as potentially significant as these. But the allegations here are, indeed, very significant. By releasing the audit information as we do today, I fear we will subject the Companies to premature and prejudicial criticism and adverse market impact.

The Orders indicate that, by releasing the Reports in this manner, the Commission does not endorse the recommendations and conclusions of our Common Carrier Bureau's auditors. Such a distinction is too fine to my mind in light of the seriousness of the allegations and the fact that the Commission -- not the Bureau -- is ordering release of the Reports. I do not doubt the integrity of our auditors' work or even necessarily the validity of their analyses and conclusions. I simply am unprepared to place what seems to be the Commission's imprimatur on those analyses and conclusions before they are tested in the fire of vigorous debate by other interested parties.

Under these exceptional circumstances,(1)

I believe we should have erred on the side of giving the Companies more process than may normally be due before hinting at conclusions and implications. We had already begun to provide such extra process by, for example, sharing with the Companies the results of their respective audits and allowing them to comment on them. By releasing the Audit Reports in the manner we do today, however, I believe we have short-changed the process of gathering additional information in as neutral a manner as possible.(2)

In closing, I would underscore that my partial dissent from these Orders in no way reflects serious doubt on my part that the Commission's auditors worked diligently and carefully to perform these audits. I have every expectation that they endeavored to do so under the circumstances. My concern is primarily with the manner in which the information contained in the Reports is being released today, and with the manner in which we will build on that information to reach final conclusions. I thank our Common Carrier Bureau staff and my colleagues for their patience and hard work in this matter, and I look forward to working with everyone as we take the next step of seeking and considering outside comment on this important issue.

1. It is my understanding, for example, that the Commission has never (even in a rate of return environment) enforced these long-standing rules in so sweeping a manner. The Companies also have apparently raised some important arguments regarding whether, even if the Reports are valid, the Companies' alleged misconduct would result in significant impact on ratepayers or other public policy detriments.

2. I think the ideal approach would have been to release the Reports without specific recommendations and conclusions and neutrally solicit comments on both the statistical methodology and policy implications (e.g., ratepayer impact) of any plant deemed missing. I recognize that some are concerned that releasing the Reports without recommendations and conclusions would somehow interfere with Commission auditors' autonomy. I am unpersuaded by this concern, for I believe reserving judgment on the appropriate recommendations and remedies in no way undermines the integrity of auditors' findings or their work, nor would such an approach require substitution of the auditors' conclusions with those of other individuals. I should add, however, that I also would have been willing to issue these Reports simultaneously with a Aneutral overlay@ document, such as a Notice of Inquiry, that would have sought comment without interpreting the factual findings or making tentative conclusions as to the impact on ratepayers, etc. I think this could (and should) have been done in a way that would not impugn the performance and integrity of the Commission's auditors, but that would have merely reserved judgment until we have an opportunity to hear from other interested parties.