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January 19, 2001


Re: Joint Application by SBC Communications Inc., Southwestern Bell Telephone Company, and Southwestern Bell Communications Services, Inc., d/b/a/ Southwestern Bell Long Distance for Provision of In-Region InterLATA Services in Kansas and Oklahoma

I commend SBC for its substantial efforts to open the local market to competition in Oklahoma and Kansas, and the Kansas and Oklahoma Commissions for working hard to jumpstart competition in their respective markets. The order is particularly significant because it demonstrates that citizens of rural states can reap the benefits of increased competition. Although I have concurred in the decision to grant SBC authority to provide long distance services originating in these states, I disagree with certain aspects of the reasoning of the order. In particular, this order grants a waiver of our rules and accepts new rates filed by SBC on December 28th - day 63 of the 90-day statutory period. I believe this is ill-advised.

Section 271 requires the Commission to assess whether the local market is open to competition as a pre-condition for authorizing a Bell company to provide long-distance services. Prior to the filing of any 271 applications, we established the rule that an application must be complete on the date it is filed. We have consistently reiterated the importance of this rule.1 Resolving an adjudicatory proceeding involving a massive record and innumerable issues within 90 days is difficult, if not impossible, if parties are able to modify their prima facie case while the application is pending. Such waivers give parties an incentive to "game" the system by withholding evidence until late in the 90- day process. A moving target also prejudices the ability of the state commissions and the Department of Justice to advise us - an opportunity guaranteed by the statute. As a matter of fundamental fairness, parties ought to be able to rely on the Commission's rules and I am troubled by this decision to change the Commission's rules mid-stream.

I am equally troubled by the remedy which is to delay the effective date of the order for 43 days. Instead of the approach adopted in today's decision, I would have restarted the clock on the day that SBC requested us to examine its new rates. If this route had been followed, the Commission in all likelihood would have been able to consider the new application in an expedited fashion and issue a clean decision that would have taken effect in the same timeframe as the date contemplated by this order. Indeed, by granting a waiver, but delaying the effective date, that is in essence what the order achieves.

In addition to the timing issue, I am uncomfortable with the manner in which prices for unbundled network elements were set. Appropriate pricing is at the heart of the statute. If prices are not based on costs, the enduring competition envisioned by Congress will be thwarted. I support today's decision insofar as it recognizes the Commission's role in evaluating the rates a Bell company charges its competitors. As the order makes clear, the Commission has an obligation in each section 271 application to examine the methodology used to arrive at the rates and ensure that those rates are based on forward-looking costs.

Although the order concludes that the state commissions did not adhere to forward-looking pricing principles in all respects, the late-filed rates appear to be within a range of prices that would be consistent with such principles, while the original rates were not. We must recognize that a forward-looking cost methodology gives some latitude to state commissions in setting rates. I encourage state commissions to follow assiduously forward-looking cost methodologies so that the Commission may avoid the need to second-guess rates in future applications. I urge the Commission to engage in further dialogue with our state colleagues on all 271 issues -- and in particular to identify best practices on pricing -- before a Bell company files its application. I am confident that future 271 applications will reflect the benefits of these discussions, and I expect that future applicants will have in place rates based on forward-looking costs prior to filing an application.

1. See, e.g., Ameritech Michigan Order, 12 FCC Rcd 20543, 20570-76 (1997); BellSouth South Carolina Order, 13 FCC Rcd 539, 560-61 (1997); Bell Atlantic New York Order, 15 FCC Rcd 3953, 3968-69 (1999); SBC Texas Order, 15 FCC Rcd 18354, 18370-72 (2000).