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                           Before the
                Federal Communications Commission
                     Washington, D.C. 20554


In the Matter of                 )
                                )
GTE CORPORATION,                 )
Transferor,                      )
                                )
and                              )    CC Docket 98-184
                                )
BELL ATLANTIC CORPORATION,       )
Transferee,                      )    EB File No. EB-04-IH-0143
                                )
For Consent to Transfer of       )
Control of Domestic and          )
International Sections 214 and   )
310 Authorizations and           )
Application to Transfer Control  )
of a Submarine Cable Landing 
License

                              ORDER

 Adopted:  January 5, 2005            Released:  January 7, 2005

By the Commission:  

I.   INTRODUCTION

     1.   In this Order, we deny Verizon Communications, Inc.'s 
(``Verizon's'') request that we discontinue the independent 
auditor condition in Merger Condition XXII of the Bell 
Atlantic/GTE Merger Order for all periods beginning on or after 
January 1, 2005.1  

II.  BACKGROUND

     2.   In the Bell Atlantic/GTE Merger Order, the Commission 
adopted the Merger Conditions to mitigate any potential public 
interest harms of the merger of Bell Atlantic Corporation (``Bell 
Atlantic'') and GTE Corporation (``GTE'') to form Verizon.2  
These Merger Conditions, to which Verizon agreed, included 
Condition XXII, the independent auditor condition.3  This 
condition requires Verizon to engage an independent auditor to 
conduct audits on an annual basis regarding Verizon's compliance 
with the Merger Conditions and the sufficiency of Verizon's 
internal controls.4  The Merger Order specifically contemplates 
that the independent auditor condition will permit oversight of 
Verizon's compliance with all merger conditions.  For instance, 
Commission staff approves the independent auditor and reviews the 
scope and quality of the independent auditor's work, the 
independent auditor's final audit report must be publicly filed 
with the Commission, and the Commission staff has access to the 
independent auditor's working papers and supporting materials for 
two years following the submission of the final audit report.5  
As Verizon agreed when the Commission released the Merger Order, 
the independent auditor condition expires when the last of the 
remaining Merger Conditions subject to this requirement sunsets.6

     3.   On April 28, 2004, Verizon requested that the 
Commission discontinue the independent auditor condition for all 
periods beginning on or after January 1, 2005.7  Verizon filed a 
supplemental letter on June 22, 2004 providing additional 
information.8  On July 13, 2004, the Enforcement Bureau issued a 
public notice seeking comment on Verizon's request.9  AT&T 
Corporation filed comments, the Pennsylvania Public Utility 
Commission and Bridgecom International, Inc. filed reply 
comments, and various other competitive local exchange carriers 
(``LECs'') filed joint reply comments.10  These commenters 
universally oppose Verizon's request.  Verizon also filed reply 
comments on August 10, 2004.11

III.      DISCUSSION

     4.   In evaluating Verizon's request, we consider whether 
discontinuing the independent auditor condition would serve the 
public interest.12  The purpose of imposing the independent 
auditor requirement was to provide a cost-effective yet 
``thorough and systematic evaluation of Verizon's compliance with 
the conditions and the sufficiency of Verizon's internal 
controls'' to supplement the Commission's usual investigative 
authority in ensuring compliance and enforcement of the Merger 
Conditions.13  As discussed below, we find no reason to revisit 
our decision to impose the independent auditor condition as 
originally contemplated by the Merger Order. 

     5.   In support of its request, Verizon makes the general 
argument that there is no reason for the Commission or Verizon to 
continue these audits for the period under consideration.  In 
particular, Verizon contends that we should discontinue the 
independent auditor condition because ``most of the conditions 
have sunset as of January 1, 2005'' and ``there is no reason to 
believe that additional audits will disclose any failure by 
Verizon to satisfy these merger conditions while they remain in 
effect,'' in light of the content of prior audit reports.14  We 
disagree with Verizon's argument and find no reason to depart 
from the Commission's previous determinations that the audit 
condition is in the public interest.  The results of previous 
independent audit reports are not dispositive of our decision 
here.15  The Commission found that ``[o]nly a strong corporate 
compliance program, in conjunction with the independent audit and 
other enforcement mechanisms, will enable consumers to realize 
the full benefits of the conditions.''16  Thus, the Commission 
recognized from the outset the importance of the independent 
auditor condition not only as an integral component of a 
successful program to monitor Verizon's compliance with the 
operative conditions but also as a disincentive to engage in 
discrimination and other potential misbehavior.17  

     6.   Verizon also claims that, in the absence of audits, 
other compliance and enforcement mechanisms established in the 
Merger Order would provide adequate assurance of its compliance 
with the Merger Conditions.  Verizon contends that most of the 
remaining operative conditions are ``effectively self-
policing.''18  Specifically, Verizon states that most of the 
remaining operative conditions require specific discounts or 
pricing terms for competitive LECs who could be expected to bring 
to the Commission's attention any failure by Verizon to continue 
complying with those requirements.19  The Merger Conditions, 
however, placed the burden on Verizon, and not the competitive 
carriers, to take active steps to ensure compliance, including 
hiring an independent auditor to conduct audits.20  Several 
commenters observed that relying on the complaint process without 
an independent evaluation is unnecessarily burdensome to the 
harmed party. 21  They also argue that the Commission is less 
likely to discover violations through complaints than through the 
audit process because a harmed party may not have the incentive 
or resources to file a complaint.22  We agree with these 
commenters.  We see no reason to second-guess our earlier 
decision that, as a condition for approval of Bell Atlantic's and 
GTE's merger, Verizon should bear the burden of complying with 
the independent auditor condition for the entire period 
envisioned in the Commission's original order.

     7.   Verizon also contends that another operative condition, 
the nondiscriminatory rollout of digital subscriber line 
(``xDSL'') services condition, is self-policing because Verizon 
continues to file quarterly reports on its compliance with the 
xDSL deployment.23  In addition, Verizon contends that it will 
continue to file annual compliance reports ``prepared in a format 
substantially similar to the independent auditor's section of the 
audit report that will allow the Commission and others to confirm 
Verizon's compliance'' with the Merger Conditions.24  We reject 
Verizon's claim that these compliance requirements obviate the 
need for the independent auditor condition.  As previously 
stated, the Commission found that the compliance program 
protected the public interest, but only in conjunction with the 
independent auditor condition.25  A quarterly report or 
compliance report is not a substitute for an independent audit.  
Verizon's obligations to file unaudited quarterly and compliance 
reports do not provide an independent review of Verizon's 
performance.  During the audit process, the Commission staff, 
state commissions, and independent auditor have access to the 
working papers, supporting materials, and interpretations 
underlying Verizon's compliance assertions that may not be 
disclosed in the performance reports or available to third 
parties.26  Finally, when contemplating the merger, the 
Commission considered the independent auditor condition a useful 
tool to supplement its usual investigative authority.27  In view 
of the foregoing, we find no reason to alter our prior conclusion 
that the compliance mechanisms discussed in Verizon's request are 
not substitutes for the independent auditor condition.

     8.   Lastly, Verizon contends that we should discontinue the 
audit requirement because ``the audits for the years 2005 and 
beyond would cost at least one million dollars,'' and ``the 
burdens of continued audits clearly outweigh any possible 
benefits.''28  We find this contention unpersuasive.  The 
Commission specifically found that ``the audit requirement 
establishes an efficient and cost-effective mechanism for 
providing reasonable assurance of Bell Atlantic/GTE's compliance 
with the conditions.''29  Verizon has not provided substantial 
evidence to contradict this finding.  We conclude that, 
therefore, Verizon has not demonstrated that discontinuing the 
independent auditor condition would serve the public interest.

IV.  ORDERING CLAUSE

     9.   Accordingly, IT IS ORDERED, pursuant to sections 1-4, 
201-205, 214, 251, 303(r), 309, and 416(b) of the Communications 
Act of 1934, as amended, 47 U.S.C.  151-154, 201-205, 214, 251, 
303(r), 309, and 416(b) that Verizon Communications, Inc.'s 
request that the Commission discontinue requiring audits under 
Condition XXII of the Bell Atlantic/GTE Merger Order is DENIED.

                         

                         FEDERAL COMMUNICATIONS COMMISSION



                         Marlene H. Dortch                       
Secretary


_________________________

1 Application of GTE Corporation, Transferor, and Bell Atlantic 
Corporation, Transferee, For Consent to Transfer Control of 
Domestic and International Sections 214 and 310 Authorizations 
and Application to Transfer Control of a Submarine Cable Landing 
License, Memorandum Opinion and Order, 15 FCC Rcd 14032, 14190-
92,  336-38, 341 (2000) (``Bell Atlantic/GTE Merger Order'' or 
``Merger Order''), vacated in part sub nom., Ass'n of 
Communications Entrs. v. FCC, 235 F.3d 662 (D.C. Cir. 2001); id., 
15 FCC Rcd at 14327-28, Appendix D, 56; see Letter from Jeffrey 
W. Ward, Senior Vice President, Regulatory Compliance, Verizon, 
to William H. Davenport, Chief, Investigations and Hearings 
Division, Enforcement Bureau, Federal Communications Commission, 
dated April 28, 2004 (``Verizon  Request'').  
2 Bell Atlantic/GTE Merger Order, 15 FCC Rcd at 14036, 14190,  
4, 336; id., 15 FCC Rcd at 14258-331, Appendix D.  We refer to 
the market-opening conditions in Appendix D as the Merger 
Conditions.
3 Bell Atlantic/GTE Merger Order, 15 FCC Rcd at 14190-93,  336-
42.
4 Bell Atlantic/GTE Merger Order, 15 FCC Rcd at 14327-28, 
Appendix D,  56 (requiring an annual examination engagement).  
5 Bell Atlantic/GTE Merger Order, 15 FCC Rcd at 14327-28, 
Appendix D,  56; Delegation of Additional Authority to the 
Enforcement Bureau, Order, 17 FCC Rcd 4795 (2002).
6 See Bell Atlantic/GTE Merger Order, 15 FCC Rcd at 14327-28, 
Appendix D,  56.
7 See Verizon Request.  
8 See Letter from Sara Cole, Associate Director, Federal 
Regulatory Advocacy, Verizon, to William H. Davenport, 
Investigations and Hearings Division, Enforcement Bureau, Federal 
Communications Commission, dated June 22, 2004.
9 See Public Notice, ``Enforcement Bureau Seeks Comment on 
Verizon's Request to Discontinue Audit of Verizon's Compliance 
with Merger Conditions,'' DA 04-2093 (rel. July 13, 2004).  
10 See Comments of AT&T Corporation, filed on July 27, 2004 
(``AT&T Comments''); Reply Comments of the Pennsylvania Public 
Utilities Commission, filed on August 10, 2004 (``PA PUC 
Reply''); Reply Comments of BridgeCom International, Inc., filed 
on August 10, 2004; Reply Comments of ACN Communications 
Services, Inc., Adelphia Business Solutions Operations, Inc. 
d/b/a TelCove, ATX Communications, Inc., Capital 
Telecommunications, Inc., CTC Communications Corp., CTSI, LLC, 
DSLnet Communications, LLC, El Paso Networks, LLC, Focal 
Communications Corp., Gillette Global Network, Inc., d/b/a Eureka 
Networks, ICG Telecom Group, Inc., Integra Telecom, Inc., 
Lightship Telecom, LLC, LightWave Communications, LLC, McLeodUSA 
Telecommunications Services, Inc., Mpower Communications Corp., 
NTELOS Network Inc., PAETEC Communications, Inc., Pac-West 
Telecomm, Inc., RCN Telecom Services, Inc., TDS Metrocom, LLC, 
and Vycera Communications, Inc., filed August 10, 2004 (``Joint 
Reply'').
11 See Reply Comments of Verizon, filed August 10, 2004 
(``Verizon Reply'').
12 See 47 U.S.C.  416(b); Bell Atlantic/GTE Merger Order, 15 FCC 
Rcd at 14194,  345 & n.807 (providing that the Commission may 
modify the Merger Conditions); see also, e.g., Application of GTE 
Corporation, Transferor, and Bell Atlantic Corporation, 
Transferee, For Consent to Transfer Control of Domestic and 
International Section 214 and 310 Authorization and Application 
to Transfer Control of a Submarine Cable Landing License, Order, 
17 FCC Rcd 6982, 6984,  7 & n.14 (2002) (finding that a 
temporary suspension of the Bell Atlantic/GTE Merger Conditions 
would serve the public interest); Applications of Ameritech 
Corp., Transferor, and SBC Communications Inc., Transferee, For 
Consent to Transfer Control of Corporations Holding Commission 
Licenses and Lines Pursuant to Sections 214 and 310(d) of the 
Communications Act and Parts 5, 22, 24, 25, 63, 90, 95, and 101 
of the Commission's Rules, Second Memorandum Opinion and Order, 
15 FCC Rcd 17521, 17532, 21 (2000) (finding that grant of SBC's 
request to modify its Merger Condition is in the public 
interest).
13 Bell Atlantic/GTE Merger Order, 15 FCC Rcd at 14190,  336.
14 Verizon Request at 2.
15 We note that there is a dispute in the record as to the 
implications of certain disclosures by Verizon in connection with 
previous independent audit reports.  See AT&T Comments at 14 
(arguing that the past two audits found violations with 
Conditions XI and XII relating to unbundled loop and resale 
discounts); but see Verizon Reply at 3 (noting that these were 
not findings in the report but statements in its management 
assertions attached to the audit report that identified errors, 
which the independent auditor did not consider to be material 
violations); see also, e.g., Deloitte and Touche, Independent 
Account Report (on Conditions IV, VI, VII, IX-XII, XVII, XVIII, 
XXI-XXV) (March 17, 2004), Report of Management on Compliance 
with Merger Conditions, p. 6-7; Deloitte and Touche, Independent 
Accountant Report (May 1, 2003), Report of Management on 
Compliance with Merger Conditions, p. 8.   
16 Bell Atlantic/GTE Merger Order, 15 FCC Rcd at 14189,  335; 
AT&T Comments at 12; Joint Reply at 19.
17 See Bell Atlantic/GTE Merger Order, 15 FCC Rcd at 14188-93,  
332-342.
18 Verizon Request at 2.  
19 Verizon Request at 2; Verizon Reply at 5 (arguing that, in 
addition to filing a formal complaint, the harmed party may also 
file informal complaints or requests for accelerated docket 
treatment, or they could simply file a letter with the 
Enforcement Bureau asking for an investigation).
20  Bell Atlantic/GTE Merger Order, 15 FCC Rcd at 14187,  332 
(stating that the Merger Conditions place responsibility of 
taking active steps to ensure compliance on Verizon by: (1) 
establishing a compliance program; (2) requiring an independent 
compliance audit; and (3) setting voluntary payment obligations).  
The voluntary payment provisions sunset in 2004.
21 See AT&T Comments at 14-15; Joint Reply at 20-22.
22 See AT&T Comments at 14-15 (stating that the difference 
between the small discount amount available compared to the high 
cost of pursuing a complaint and the time expended in such 
complaints serves as a deterrent to filing a formal complaint); 
Joint Reply at 22.
23 See Verizon Request at 2; Bell Atlantic/GTE Merger Order, 15 
FCC Rcd at 14292-93, Appendix D,  15.
24 See Verizon Request at 2; Verizon Reply at 3-5; Bell 
Atlantic/GTE Merger Order, 15 FCC Rcd at 14188-89, 333-35 
(Appendix D, 15 FCC Rcd at 14326,  55) (Condition XXI).
25 Bell Atlantic/GTE Merger Order, 15 FCC Rcd at 14188,  332.
26 See AT&T Comments at 12-3; Joint Reply at 20; PA PUC Reply at 
1-2, 4-5.
27 Bell Atlantic/GTE Merger Order, 15 FCC Rcd at 14190,  336.  
28 Verizon Request at 2; Verizon Reply at 7. 
29 See Bell Atlantic/GTE Merger Order, 15 FCC Rcd at 14192,  
341; AT&T Comments at 19; Joint Reply at 20.