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                         Before the
                FEDERAL COMMUNICATIONS COMMISSION
                      Washington, D.C. 20554


                                             
In the Matter of                             )         File 
No. EB-03-IH-0245
                                   )         File No. EB-03-
IH-0550
                                   )         
                                   )         Acct.       No.  
200332080014                                                
)                                       
Verizon Telephone Companies, Inc.            )         FRN 
No.  0008988438
                                                                 
                          CONSENT DECREE

INTRODUCTION

    1.  The Federal Communications Commission (the 
``Commission'' or ``FCC'') and the Verizon telephone 
companies (``Verizon'') hereby enter into this Consent 
Decree for the purpose of terminating investigations into 
whether Verizon complied with certain structural, 
transactional, and nondiscrimination safeguards of section 
272 of the Communications Act of 1934, as amended (``the 
Act''),1 and sections 32.272 and 53.2033 of the Commission's 
rules.  These provisions apply to the relationship between 
Verizon's Bell Operating Companies and its other incumbent 
local exchange carriers, on the one hand, and Verizon's 
separate long-distance affiliates, on the other.    

    2.  For purposes of this Consent Decree, the following 
definitions shall apply.

      (a) The ``Commission'' means the Federal 
         Communications Commission and all of its bureaus 
         and offices.

      (b) ``Bureau'' means the Enforcement Bureau of the 
         Federal Communications Commission.

      (c) ``Verizon BOCs'' means the former Bell Atlantic 
         Telephone Companies, and their successors and 
         assigns.

      (d) ``Verizon 272 Affiliates'' means Bell Atlantic 
         Communications, Inc. (d/b/a Verizon Long Distance), 
         NYNEX Long Distance Company (d/b/a Verizon 
         Enterprise Solutions), Verizon Global Networks, 
         Verizon Global Solutions Inc., Telecom New Zealand 
         USA Limited, Verizon Select Services, Inc., Codetel 
         International Communications Inc., TELUS 
         Communications, Inc., and TELUS Communications 
         (Quebec) Inc., and their successors and assigns 
         subject to section 272(b).

      (e) ``Parties'' means Verizon and the Bureau.

      (f) ``Order'' or ``Adopting Order'' means an order of 
         the FCC adopting the terms of this Consent Decree 
         without change, addition, or modification.

      (g) ``Final Order'' means an order that is no longer 
         subject to administrative or judicial 
         reconsideration, review, appeal, or stay.

      (h) ``Investigations'' means the investigations 
         commenced by the Commission concerning matters 
         raised in Verizon's unredacted biennial audit 
         reports filed by the independent auditor with the 
         Commission on February 6, 2002 and December 12, 
         2003.

      (i) ``Effective Date'' means the date on which the 
         Commission adopts the Adopting Order.

I.   BACKGROUND

    3.  Section 272 of the Act requires a Bell Operating 
Company (``BOC'') that has received authority to provide in-
region interLATA telecommunications service pursuant to 
section 271 of the Act4 to provide that service through a 
separate affiliate.  Section 272 also establishes certain 
structural, transactional, and nondiscrimination safeguards 
that govern the relationship between a BOC and its 272 
affiliates.  In addition, section 272 requires a BOC to 
obtain a biennial audit to determine whether the BOC and its 
affiliates have complied with the safeguards.5  

    4.  The Commission authorized Verizon to provide in-
region interLATA service in New York effective January 3, 
2000.6  Following that approval, and pursuant to section 
272, the independent auditor filed its first biennial audit 
report on June 11, 2001.7  The Bureau initiated an 
investigation into the issues raised in the First Audit 
Report.  As a result, on September 8, 2003, the Commission 
issued a Notice of Apparent Liability for Forfeiture to 
Verizon for various apparent violations of section 32.27(c) 
of the Commission's rules.8  The NAL proposed a forfeiture 
of $283,000, pursuant to section 220(d) of the Act,9 and 
admonished Verizon for apparent violations of section 
272(b)(5) of the Act10 and section 53.203(e) of the 
Commission's rules11 that had occurred outside the statute 
of limitations.12  Verizon filed its response to the NAL on 
October 8, 2003.13  

    5.  During 2001 and 2002, the Commission authorized 
Verizon to provide in-region interLATA telecommunications 
service in several additional states.14  The independent 
auditor filed its second biennial audit report on June 12, 
2003.15  The Bureau initiated an investigation into some of 
the issues raised in the Second Audit Report.   Among other 
things, the Second Audit Report disclosed the following: (1) 
Verizon's non-regulated affiliate provided certain 
operations, installation and maintenance (``OI&M'') 
functions to a Verizon 272 Affiliate, and the 272 Affiliate 
provided certain OI&M functions to a BOC affiliate;16 (2) 
the BOC obtained pre-paid calling card services from the 
Verizon 272 Affiliate without soliciting bids from other 
qualified firms;17 (3) Verizon's service representatives did 
not inform some customers of their right to choose a long-
distance carrier other than the Verizon 272 Affiliate;18 and 
(4) Verizon did not properly and/or timely post certain 
affiliate agreements on its website.19   

II.  AGREEMENT

    6.  The Parties agree and acknowledge that this Consent 
Decree shall constitute a final settlement between Verizon 
and the Commission of the Investigations.  In consideration 
for the termination of the Investigations in accordance with 
the terms of this Consent Decree, Verizon agrees to the 
terms, conditions, and procedures contained herein.

    7.  For purposes of settling the matters addressed in 
these Investigations, Verizon agrees to take the actions 
described below:

      (a) No later than 60 days after the Effective Date of 
         the Consent Decree, Verizon will send a 
         communication to all employees involved with 
         section 272 contracts instructing them on the 
         requirements of section 32.27 of the Commission's 
         rules.  Beginning not later than 60 days after the 
         Effective Date of the Consent Decree, where the 
         total aggregate annual value of a service provided 
         by a Verizon BOC to a section 272 affiliate that is 
         not required by section 272 to be made available to 
         third parties reaches the $500,000 threshold 
         contained in section 32.27, Verizon will perform a 
         comparison of fair market value to fully 
         distributed costs.  Verizon will provide the 
         results of this analysis to the independent auditor 
         in the current and all future biennial section 272 
         audits. If Verizon should contend that an estimate 
         of fair market value can not be established by 
         Verizon and/or an independent third party for any 
         services, such as certain component parts of joint 
         marketing, that are offered by the Verizon BOCs to 
         their section 272 affiliates but that are not 
         offered to third parties, Verizon will report to 
         the independent section 272 auditor the reasons and 
         provide documentation of the results of Verizon's 
         and the independent third party's analyses.

      (b) No later than 60 days after the Effective Date of 
         the Consent Decree, and annually thereafter, 
         Verizon will provide refresher instructions to 
         customer service representatives instructing them 
         on compliance with the equal access notification 
         requirements.  Notification will be distributed 
         through a service alert (electronic reference 
         system or like communication).

      (c) No later than 120 days after the Effective Date of 
         the Consent Decree, Verizon (1) will modify the 
         automated voice response unit to ensure that every 
         customer who is ordering new telephone service or 
         moving service to a new location within Verizon's 
         in-region service territory is notified before 
         being connected with a representative taking the 
         service order that the customer has a choice of 
         long distance providers and that a list of 
         providers is available; (2) will perform a sample 
         test every 180 days after the Effective Date of the 
         Consent Decree of the voice response unit to verify 
         that the equal access announcement is heard before 
         the customer is connected with a service 
         representative; and (3) will submit the results of 
         the tests to Verizon's Senior Vice President for 
         Regulatory Compliance within 15 days of the test.

      (d) No later than 60 days after the Effective Date of 
         the Consent Decree, the Verizon section 272 
         affiliates that sell prepaid calling cards will 
         adopt procedures to prevent order forms from being 
         issued that would bill charges for prepaid calling 
         cards directly or indirectly to the Verizon BOCs 
         without a contract that was executed pursuant to 
         competitive bidding in accordance with the Verizon 
         BOCs' procurement guidelines.  Verizon will inform 
         the section 272 employees responsible for filling 
         orders for prepaid calling cards that failure to 
         use the procedures required by this condition will 
         subject them to disciplinary action, with 
         increasing penalties for repeated violations.

      (e) No later than 60 days after the Effective Date of 
         the Consent Decree, Verizon will update its web 
         posting procedures to include: (1) a template for 
         verifying the content of each posting, with 
         instructions that define fully distributed cost, 
         and (2) a requirement for a second person to review 
         each posting and certify completeness and accuracy 
         when the item is posted.  No later than 90 days 
         after the Effective Date of the Consent Decree, and 
         annually thereafter, Verizon will retrain its web 
         posting teams on the revised web posting procedures 
         and implement the procedure described in clause (2) 
         of this subparagraph requiring review by a second 
         person when posting.

      (f) No later than 60 days after the Effective Date of 
         the Consent Decree, Verizon will send targeted 
         communications to employees responsible for 
         establishing services between the 272 Affiliates 
         and the Verizon local exchange carriers and their 
         affiliates instructing them on the need to execute 
         a contract before providing service.

      (g) Starting in the first full calendar year quarter 
         after the Effective Date of the Consent Decree, the 
         Verizon Section 272 contract posting teams will 
         submit a quarterly report to the Verizon Senior 
         Vice President for Regulatory Compliance describing 
         any services in the previous quarter that were 
         provided prior to the effective date of a contract.  
         This report will be completed on or before the 60th 
         day after the close of each quarter.

      (h) The requirements of the remedial actions listed 
         above will expire on a state-by-state basis upon 
         sunset of the section 272 requirements pursuant to 
         section 272(f)(1) of the Act.

      (i) The independent auditor shall review compliance 
         with the requirements herein in all future section 
         272 biennial audits.

    8.  In express reliance on the covenants and 
representations contained herein, the Commission agrees to 
rescind the NAL and terminate the Investigations.

    9.  Verizon will make a voluntary contribution to the 
United States Treasury in the amount of $300,000 within 10 
calendar days after the Commission Order adopting this 
Consent Decree becomes final.  Verizon must make this 
payment by check, wire transfer or money order drawn to the 
order of the Federal Communications Commission, and the 
check, wire transfer or money order should refer to ``Acct. 
No. 200332080014'' and ``FRN No. 0008988438.''  If Verizon 
makes this payment by check or money order, it must mail the 
check or money order to: Forfeiture Collection Section, 
Finance Branch, Federal Communications Commission, P.O. Box 
73482, Chicago, Illinois, 60673-7482.  If Verizon makes this 
payment by wire transfer, it must wire such payment in 
accordance with Commission procedures for wire transfers.

    10.   The Commission agrees that, in the absence of new 
evidence relating to incidents that Verizon has not 
disclosed to the Bureau through the Effective Date of this 
Consent Decree, the Commission will not use the facts 
developed in these Investigations, or the existence of this 
Consent Decree, to institute, on its own motion, any new 
proceedings, formal or informal, or to take any actions on 
its own motion against Verizon concerning the matters that 
were the subject of these Investigations.  The Commission 
also agrees that, in the absence of new evidence relating to 
incidents that Verizon has not disclosed to the Bureau 
through the Effective Date of this Consent Decree, it will 
not use the facts developed in the Investigations to 
institute on its own motion any proceeding, formal or 
informal, or take any action against Verizon with respect to 
its basic qualifications, including its character 
qualifications, to be a Commission licensee.  Consistent 
with the foregoing, nothing in this Consent Decree limits 
the Commission's authority to consider and adjudicate any 
formal complaint that may be filed pursuant to section 208 
of the Communications Act, as amended, and to take any 
action in response to such formal complaint.

    11.   Verizon waives any and all rights it may have to 
seek administrative or judicial reconsideration, review, 
appeal or stay, or to otherwise challenge or contest the 
validity of this Consent Decree and the Order adopting this 
Consent Decree, provided the Commission issues an Order 
adopting the Consent Decree without change, addition, or 
modification.

    12.   Verizon's decision to enter into this Consent 
Decree is expressly contingent upon issuance of an Order 
that is consistent with this Consent Decree, and which 
adopts the Consent Decree without change, addition, or 
modification.

    13.   In the event that this Consent Decree is rendered 
invalid by any court of competent jurisdiction, it shall 
become null and void and may not be used in any manner in 
any legal proceeding.

    14.   If either party (or the United States on behalf of 
the Commission), brings a judicial action to enforce the 
terms of the Adopting Order, neither Verizon nor the 
Commission shall contest the validity of the Consent Decree 
or Adopting Order, and Verizon will waive any statutory 
right to a trial de novo.

    15.   The parties agree that this Consent Decree is for 
settlement purposes only and that it does not constitute an 
admission, denial, adjudication on the merits, or a factual 
or legal determination regarding any compliance or 
noncompliance with the requirements section 272 and the 
Commission's affiliate transaction rules.

    16.   Any violation of the Consent Decree or the 
Adopting Order will constitute a separate violation of a 
Commission order, entitling the Commission to exercise any 
rights and remedies attendant to the enforcement of a 
Commission order.

    17.   The Parties also agree that if any provision of 
the Consent Decree conflicts with any subsequent rule or 
order adopted by the Commission (except an order 
specifically intended to revise the terms of this Consent 
Decree to which Verizon does not consent) that provision 
will be superseded by such Commission rule or order. 
    18.   This Consent Decree may be signed in counterparts.


     FEDERAL COMMUNICATIONS COMMISSION




     By:  __________________________________
          Marlene H. Dortch
          Secretary


     VERIZON




     By:  ___________________________________
          Jeffrey W. Ward
          Senior Vice PresidentūRegulatory Compliance
_________________________

147  U.S.C.  § 272.   Section  272  requires Bell  Operating 
Companies to provide certain  types of competitive services, 
principally   long-distance   services,   through   separate 
affiliates  and imposes  various structural,  transactional, 
and nondiscrimination safeguards in the provision thereof. 

247  C.F.R. §  32.27.  Section  32.27 governs  transactions, 
such as  the sale or  transfer of assets,  between regulated 
and  nonregulated   affiliates,  including   Bell  Operating 
Companies  and   their  separate   long-distance  affiliates 
established pursuant to section 272 of the Act.

347  C.F.R.  §  53.203.    Section  53.203  imposes  various 
requirements  for  structural and  transactional  separation 
between Bell  Operating Companies  and their  separate long-
distance affiliates.

447 U.S.C. § 271.

5The Commission rules implementing  the section 272 separate 
affiliate safeguards are at sections 53.201-13, 47 C.F.R. §§ 
53.201-13.  In addition, affiliate transactions are governed 
by the  Commission's accounting  rules at section  32.27, 47 
C.F.R. §  32.27, and are  applied to a BOC's  separate long-
distance affiliate pursuant to  section 272(c)(2) of the Act 
(requiring  a  BOC  to  account for  transactions  with  its 
separate  long-distance  affiliate according  to  principles 
designated by the Commission).

6Application  of Bell  Atlantic New  York for  Authorization 
under Section 271  of the Communications Act  to Provide In-
Region,  InterLATA Service  in  the State  of  New York,  CC 
Docket No. 99-295, Memorandum Opinion  and Order, 15 FCC Rcd 
3953, 4178, ķ 455 (1999) (``Bell Atlantic New York Order''), 
aff'd sub  nom. AT&T Corp. v.  FCC, 220 F.3d 607  (D.C. Cir. 
2000). 
7See Report of Independent Accountants on Applying Agreed-
Upon Procedures, CC Docket No. 96-150 (June 11, 2001); 
Supplemental Report (June 18, 2001)  (redacted version).  
The independent auditor released an unredacted version of 
the audit report to the public on February 6, 2002.  See 
Report of Independent Accountants on Applying Agreed-Upon 
Procedures, CC Docket No. 96-150 (February 6, 2002) (``First 
Audit Report'') (unredacted version).  The Bureau invited 
interested parties to file comments on the First Audit 
Report.  See Public Notice, Accounting Safeguards Under the 
Telecommunications Act of 1996, CC Docket No. 96-150 
(February 15, 2002); Comments of AT&T Corp on Verizon's 
Section 272 Compliance Biennial Audit Report, April 8, 2002; 
WorldCom Comments, April 8, 2002;  Response of Verizon to 
Comments on Biennial Section 272 Audit Report, June 10, 
2002. 

8See Verizon  Telephone Companies, Inc., Notice  of Apparent 
Liability for Forfeiture, 18 FCC Rcd 18796 (2003) (``NAL'').

947 U.S.C.  § 220(d).  Section 220(d)  provides, in relevant 
part, that any carrier that fails or refuses to keep certain 
accounts, records,  and memoranda  on the  books and  in the 
manner  prescribed by  the Commission  shall forfeit  to the 
United States the  sum of $7,600 (formerly  $6,600) for each 
day of the continuance of each such offense. 
1047 U.S.C. § 272(b)(5).    

1147 C.F.R. § 53.203(e).  

12Both section 272(b)(5) and section 53.203(e) require that 
transactions between a BOC  and its separate 272 affiliates 
be reduced to writing and available for public inspection.

13Verizon  Response to  Notice  of  Apparent Liability  for 
Forfeiture, October 8, 2003.

14The Commission granted additional section 271 applications 
to  Verizon  for   service  in  Massachusetts,  Connecticut,  
Pennsylvania, Rhode Island, Vermont,  Maine, New Jersey, New 
Hampshire, Delaware, and Virginia. 
15See Report of Independent Accountants on Applying Agreed-
Upon Procedures, EB Docket No. 03-200  (June 12, 2003) 
(redacted version).  The independent auditor released an 
unredacted version of the audit report to the public on 
December 12, 2003.  See Report of Independent Accountants on 
Applying Agreed-Upon Procedures, EB Docket No. 03-200 
(December 12, 2003) (``Second Audit Report'') (unredacted 
version).  The Commission invited interested parties to file 
comments on the Second Audit Report.  See Section 272(d) 
Biennial Audit of Verizon Communications, Inc.,  EB Docket 
No. 03-200, Memorandum Opinion and Order, 18 FCC Rcd 25496, 
25503 (2003); Comments of AT&T Corp. on Verizon's Second 
Section 272 Compliance Biennial Audit Report, February 10, 
2004; Response of Verizon to Comments on Second Section 272 
Biennial Audit Report, March 5, 2004. 

16Second Audit Report at A: 2, B: 3, B-1: 2.

17Id., at A: 30, B: 2. 

18Id., at A: 61-62.

19Id., at A: 31-34, A: 42, A: 45-48.