February 19, 1998

Re:	Telecommunications Carriers' Use of Customer Proprietary Network Information and Other Customer Information

I agree with most elements of this order but not with the decision to overturn a portion of the Commission's prior ruling in the "Non-Accounting Safeguards" order. I believe it is possible to implement Section 222 in a manner that is fully consistent with Section 272. But the approach taken by the majority creates an unnecessary conflict between the two sections and then resolves that conflict in a manner that undermines the structural separation safeguards crafted by Congress.

Section 272 spells out in detail the relationship between a Bell operating company and any structurally separate affiliate that is created to provide interLATA telecommunications services and interLATA information services. The key rules can be summarized succinctly. Under Section 272(a)(1)(A), the interLATA affiliate is required to be "separate of any operating company entity . . . ." Under Section 272(b)(1)&(5), the affiliate is required to "operate independently" of the operating company and to conduct all transactions with the operating company "on an arm's length basis . . . ." Under Section 272(c)(1), the operating company "may not discriminate" in favor of the affiliate "in the provision or procurement of goods, services, facilities, or information."

The sole exception to the nondiscrimination requirement is in Section 272(g)(2). It specifies that the operating company may "market and sell" the interLATA services provided by the interLATA affiliate.⁽¹⁾ This exception addresses a single setting in which the relationship between the operating company and the separate affiliate is free from the nondiscrimination requirement of Section 272(c); it does not alter Section 272(a)&(b)'s requirements for a separate entity which operates independently and on an arm's length basis. Yet, despite the care Congress took to fashion a narrow exception to the general principles of structural separation, the majority's decision today irretrievably blurs the lines between the two entities.⁽²⁾

Under today's decision, the Bell operating company and its interLATA affiliate are treated as separate carriers for purposes of CPNI. Fine so far. But, if the operating company successfully sells the interLATA services of its affiliate to a customer, or even if the separate affiliate independently sells a customer on its long distance services, the order treats both carriers as having collapsed into one. Both carriers will be deemed to have a "total service relationship" with the customer that encompasses local and interLATA service. Both may access the entire range of information available through the customer's account records -- information about the destination of the customer's calls, their duration, and their time of day. Both may use this information to devise any offer encompassing either or both services.

This approach does not square with the statutory scheme in which the Bell operating company and its separate affiliate are deemed to be separate and independent entities. If MCI, AT&T, or any one of a hundred other long distance companies successfully wins the interLATA business of a customer, it does not automatically acquire the right and the opportunity to access the customer's local service information. Yet, under the approach adopted by the majority today, if the structurally separated affiliate of a Bell operating company wins the interLATA business of a customer, it does automatically acquire the right and the opportunity to access the customer's local service information.⁽³⁾ I don't think this discrepancy is what Congress intended.

Consider another example. Under Section 272(g)(1), the structurally separate affiliate may market the local service offerings of its affiliated operating company, provided that other entities may also do so. So, if a Bell operating company's structurally separated affiliate successfully markets a local service offering of the operating company (say, in selling the customer a second line), the majority's approach would say that the separate affiliate now has the right automatically to access the operating company's entire record on the customer for the purpose of marketing additional services. But if an unaffiliated entity, exercising the same right to sell the same service on behalf of the same operating company, successfully sells the operating company's local service, it does not acquire the same rights. Again, the result is anomalous.

It bears emphasis that the issue here concerns solely the rights that the Bell operating companies and their structurally separated affiliates will have without customer approval. Under Section 222(c)(2), those customers who wish to empower any carrier to access any of their private information may make arrangements to that effect. But, absent an affirmative decision by the customer, I read Section 272 as precluding the kind of preferred relationship between a Bell operating company and its structurally separated affiliate that is created by today's decision.

1. By virtue of Section 272(g)(3), Section 272(g)(1) also is exempt from the nondiscrimination requirement of Section 272(c)(1). But Section 272(g)(1) only permits the interLATA affiliate to market and sell the telephone exchange services of the operating company so long as nonaffiliated may do so as well. Thus, this particular paragraph has its own nondiscrimination requirement.

2. It is telling that the majority does not read Section 222 as being the comprehensive and exclusive provision pertaining to the use to which a Bell operating company may put one narrow category of CPNI -- that relating to calls to alarm monitoring service providers. In this context, the majority acknowledges the need to comply with a distinct statutory safeguard: Section 275(d). I find it difficult to understand why Section 222 should be construed in a manner that respects Section 275 but ignores Section 272.

3. The operating company and the structurally separated affiliate will apparently share access to a common computer system, at least for certain customers' records. This of course gives rise to issues of discrimination and cost allocation that can be avoided by maintaining the structural separation Congress specified.