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This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).

Report No. CC 98-34 COMMON CARRIER ACTION October 13, 1998

FCC Finds That BellSouth's Application to Provide Long Distance Service in Louisiana Satisfies More Than 6 Items on the 14-point Checklist; Commission Denies Application and Provides Detailed Blueprint on Long Distance Entry
(CC Docket No. 98-121)

Noting that it is encouraged that BellSouth meets more than 6 items on the 14-point "competitive checklist," the Commission today denied BellSouth's second application to provide long distance service in Louisiana and provided further guidance as to what the company must do to comply with the statute in areas where the application fell short. In addition, the Commission ruled that BellSouth need only certify in any future application for Louisiana that it still satisfies the requirements of the checklist items that it has met in this application, thus streamlining the authorization process. Also in today's decision, the Commission concluded that competition from broadband Personal Communications Services (PCS) providers could form the basis for a successful application to provide in-region long distance service. Today's decision should assist BellSouth and the other Bell Operating Companies (BOCs) in complying with the market-opening measures outlined by Congress as a prerequisite to the BOCs providing long distance service to their local customers.

On July 9, 1998, BellSouth filed its second application for authorization under section 271 of the Communications Act of 1934, as amended, to provide long distance service in Louisiana. Under that section, a BOC must show that (1) it has fully implemented a 14-point checklist, which enables competing local telephone companies to connect with and gain access to elements of the local network, (2) its long distance service would be provided in accordance with the structural separation and nondiscrimination requirements in section 272, and (3) its entry into the long distance market is consistent with the public interest. A BOC must also demonstrate that it either faces competition from a facilities-based competitor (commonly referred to as "Track A") or has created the conditions where competition may develop ("Track B"). The Commission has 90 days in which to evaluate a 271 application.

In an Order released today, the Commission reviewed all aspects of BellSouth's application and found that BellSouth demonstrates that it meets the requirements of six checklist items and part of a seventh. The Commission concluded that, in any future application to provide long distance service in Louisiana, BellSouth may incorporate by reference its showing on the checklist items deemed satisfied. The Commission expects that, with respect to these items, commenters in a future application will direct their arguments to any new information that BellSouth fails to satisfy the checklist.

The Commission's findings are as follows:

Fourteen-Point Competitive Checklist

Checklist items that BellSouth meets in full:

Item 3 -- Access to Poles, Ducts, Conduits, and Rights-of-Way. In order to serve customers, telephone company wires must be attached to, or pass through, poles, ducts, conduits, and rights-of-way. BellSouth demonstrates that other carriers can obtain access to its poles, ducts, conduits, and rights-of-way within reasonable time frames and on reasonable terms and conditions, with a minimum of administrative costs, and consistent with fair and efficient practices.

Item 8 -- White Pages Directory Listings. These are the listings of customers' telephone numbers in a particular area. BellSouth demonstrates that its provision of white pages listings to its competitors' customers is nondiscriminatory in terms of appearance and integration, and that it provides listings for competing carriers' customers with the same accuracy and reliability that it provides to its own customers.

Item 9 -- Numbering Administration. BellSouth demonstrates that it is in compliance with industry guidelines and FCC requirements to ensure that its competitors have the same access to new telephone numbers in a given area code that BellSouth enjoys.

Item 10 -- Databases and Associated Signaling. New entrants must have the same access as BellSouth to these databases and signaling systems in order to have the same ability as BellSouth to transmit, route, complete, and bill for telephone calls. BellSouth demonstrates that it provides competitors with nondiscriminatory access to these functions.

Item 12 -- Local Dialing Parity. BellSouth demonstrates that its competitors' customers do not need to dial extra digits to make a local call nor do they experience inferior quality, such as unreasonable dialing delays, compared to BellSouth customers. Local dialing parity ensures that consumers are not inconvenienced simply because they subscribe to a new entrant for local telephone service.

Item 13 -- Reciprocal Compensation. BellSouth must compensate other carriers for the cost of transporting and terminating its local calls unless it agrees with the terminating carrier to another arrangement. BellSouth demonstrates that it has such reciprocal compensation arrangements in place, and that it is making all required payments in a timely fashion. The Louisiana Commission, however, has not made a final determination regarding BellSouth's obligation to pay reciprocal compensation for traffic delivered to Internet service providers (ISPs). In addition, the Commission did not consider BellSouth's unwillingness to pay reciprocal compensation for traffic that is delivered to local ISPs in assessing whether BellSouth satisfies this checklist item. Noting that this issue is pending in other proceedings, the Commission said that any future grant of a 271 application will be conditioned on compliance with any decisions relating to Internet traffic.

Checklist item that BellSouth meets in part:

Item 7 -- 911 and E911 Services, Operator Services, and Directory Assistance. It is critical that BellSouth provide competing carriers with accurate and nondiscriminatory access to 911/E911 services so that these carriers' customers are able to reach emergency assistance. BellSouth satisfies this requirement. BellSouth does not demonstrate, however, that it provides other carriers with the same access to directory assistance and operator services that it provides itself.

Checklist items that BellSouth does not meet:

Item 1 -- Interconnection. BellSouth must allow other carriers to link their networks to its network for the mutual exchange of traffic. To do so, BellSouth must permit carriers to use any available method of interconnection at any available point in BellSouth's network. For the reasons stated in the BellSouth South Carolina Order, the Commission found BellSouth's showing on its collocation offering to be insufficient. Furthermore, interconnection between networks must be equal in quality whether the interconnection is between BellSouth and an affiliate, or between BellSouth and another carrier. BellSouth does not show that it provides interconnection that meets this standard.

Item 2 -- Access to Unbundled Network Elements. The telephone network is comprised of individual network elements. In order to provide "access" to an unbundled network element, BellSouth must provide a connection to the network element at any technically feasible point under rates, terms, and conditions that are just, reasonable, and nondiscriminatory. To do so, BellSouth must provide access to its operations support systems (OSS), meaning the information, systems, and personnel necessary to support the elements and services. This is important because access to BellSouth's OSS provides new entrants with the ability to order service for their customers and to communicate effectively with BellSouth regarding such basic activities as placing orders and providing repair and maintenance service for customers.

BellSouth does not demonstrate that its OSS enables other carriers to integrate electronically its pre-ordering and ordering functions, thus placing those carriers at a competitive disadvantage relative to BellSouth's own retail operation. For example, BellSouth processes orders without delay for more than 96% of its own residential customers and more than 82% of its own business customers, but BellSouth processes orders without delay for only 35% of its competitors' residential and business customers combined. Although BellSouth has made some progress in addressing deficiencies in its OSS, it has failed to address successfully other problems that the Commission specifically identified in previous 271 decisions.

In addition, BellSouth must provide nondiscriminatory access to network elements in a manner that allows other carriers to combine such elements. Other carriers are entitled to request any "technically feasible" method for combining network elements. As the Commission held in the BellSouth South Carolina Order, BellSouth fails to demonstrate that it can provide nondiscriminatory access to unbundled network elements through the only method it identified for such access, collocation.

Item 4 -- Unbundled Local Loops. Local loops are the wires, poles, and conduits that connect the telephone company end office to the customer's home or business. Nondiscriminatory access to unbundled local loops ensures that new entrants can provide quality telephone service promptly to new customers without constructing new loops to each customer's home or business. BellSouth failed to demonstrate that it can efficiently furnish unbundled loops to other carriers within a reasonable time frame, with a minimum level of service disruption, and at the same level of service quality it provides to its own customers.

Item 5 -- Unbundled Local Transport. Nondiscriminatory access to BellSouth's transport facilities ensures that calls carried over competitors' lines are completed properly. Although BellSouth demonstrates that it provides transport on terms and conditions consistent with FCC regulations, it does not provide evidence, such as meaningful performance data, that it provides nondiscriminatory access to OSS for the purpose of providing transport facilities. Adequate OSS is necessary so that carriers may order transport. But for deficiencies in its OSS, BellSouth would satisfy this item.

Item 6 -- Unbundled Local Switching. A switch connects end user lines to each other and to trunks used for transporting calls. Switches can also provide customers with features such as call waiting, call forwarding, and caller ID, and can direct a call to a specific trunk, such as to a competitor's operator services. BellSouth did not show that it provides competitors with all of the features, functions, and capabilities of the switch.

Item 11 -- Number Portability. Number portability enables consumers to take their phone number with them when they change local telephone companies. BellSouth does not sufficiently demonstrate that it provides number portability to competitors in a reasonable timeframe, which may prevent a customer from receiving incoming calls for a period of time after switching from BellSouth to a competitor.

Item 14 -- Resale. BellSouth must offer other carriers all of its retail services at wholesale rates without unreasonable or discriminatory conditions or limitations so that other carriers may resell those services to customers. BellSouth demonstrates that it offers all of its retail services for resale at wholesale rates without unreasonable or discriminatory conditions or limitations. It does not show, however, that it provides nondiscriminatory access to OSS for the resale of its retail telecommunications services. Carriers need adequate OSS in order to resell BellSouth's services.

Section 272's Structural Separation and Nondiscrimination Requirements

Although BellSouth has undertaken significant efforts to institute policies and procedures to ensure compliance with section 272, it does not meet all of that provision's requirements. In particular, it does not demonstrate adequately that it discloses all transactions with its long distance affiliate, which means its affiliate has superior access to information about these transactions compared with unaffiliated competitors. As a result, unaffiliated entities lack the information necessary to take advantage of the same rates, terms, and conditions enjoyed by BellSouth's affiliate. In addition, BellSouth does not provide nondiscriminatory access to its OSS, and thereby fails to provide the same information to unaffiliated entities that it provides to its affiliate.

The Public Interest

Because BellSouth does not meet the other requirements of the statute, it was unnecessary for the Commission to conduct an analysis of whether BellSouth's entry into the Louisiana long distance market would be in the public interest. The Commission nevertheless took the opportunity to reaffirm its prior conclusion that it has discretion to identify and weigh relevant factors in determining whether BOC entry into a particular in-region long distance market is consistent with the public interest. For example, the Commission would consider whether a BOC has agreed to performance monitoring (including performance standards and reporting requirements) and whether the BOC has agreed to enforcement mechanisms. The Commission also reaffirmed that it will consider as part of its public interest inquiry whether approval of a section 271 application will foster competition in all relevant markets, including the local market, not just the in-region, long distance market.

Track A

BellSouth cited competition from broadband PCS providers to satisfy the Track A requirement that there be a facilities-based competitor in the state for which a BOC applies to provide long distance service. Though the statute precludes a BOC from relying on the presence of cellular providers to meet Track A, the Commission concluded that the PCS services cited by BellSouth could serve as the basis for a qualifying application. Based on the facts presented in this application, however, BellSouth has not shown that broadband PCS is a substitute for the wireline telephone service offered by BellSouth in Louisiana. The Commission also discussed, but did not decide, whether BellSouth demonstrates compliance with Track A based on its agreements with wireline providers in Louisiana.

In reaching today's decision, the Commission consulted with the Louisiana Commission and the Department of Justice. Though the Louisiana Commission recommended approval of BellSouth's application, the Department of Justice found that BellSouth did not meet the market-opening requirements of the statute.

While the Commission commended BellSouth for making significant improvements over the past eight months since the First BellSouth Louisiana Order, the Commission noted that BellSouth filed a second application for Louisiana without fully addressing problems the FCC previously identified. This situation is particularly evident with regard to BellSouth's provision of OSS. The Commission cautioned that it expects future applicants to remedy deficiencies identified in prior orders before filing a new section 271 application or face the possibility of summary denial.

Action by the Commission, October 13, 1998, by Memorandum Opinion and Order (FCC 98-271). Chairman Kennard, Commissioners Ness, Powell, and Tristani, with Commissioner Ness concurring in part, Commissioner Furchtgott-Roth concurring, and each issuing a separate statement.


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