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  Federal Communications Commission FCC 99-404

December 22, 1999


Re: Application by 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)

For two years, critics within the industry and elsewhere have complained that the Commission has not provided sufficient guidance to enable Bell Operating Companies (BOCs) to present a successful application to provide interLATA service within their regions. I have leveled some of those criticisms myself.1 Some also said, cynically, that the Commission would know a meritorious application only when we saw one. Well, we have seen one now, and thus we have seen fit to approve Bell Atlanticís section 271 application for New York.

Contrary to some punditsí speculations, our eyes were not suddenly opened by political pressure, industry coercion, or impatience but by the relentless efforts of the applicant and the New York Public Service Commission to identify and resolve the myriad issues involved in demonstrating compliance with the statutory requirements. We have had to make some very difficult decisions here, but that is not surprising given the complexity and novelty of the issues, as well as our limited experience in reviewing applications of this high caliber. Having worked closely with my colleagues and our staff to untangle these issues, I can say without reservation that we analyzed each concern as thoroughly and rigorously as the statutory timeframe allows. Some may not like how we have resolved each issue in this mammoth proceeding, but in doing so we have unquestionably relied on our best, well-reasoned judgment.

Many competitors wanted much more out of Bell Atlantic before granting it approval to enter long distance markets. Understandably, they have pushed for things that would allow them to carry out their business plans more easily. Although these competitors may not have gotten everything they wanted in their stockings as prerequisites to Bell entry, they have obtained what is required under section 271 of the statute. It is important to note, however, that this provision is only one of a number of market-opening measures adopted by Congress. Particularly, sections 251 and 252 (and our accompanying rules) spell out the obligations of incumbents and provide a means for enforcing those obligations.

I am especially pleased that review of this meritorious application has enabled us to lay out the path to section 271 approval more completely than ever before. Consistent with our precedent, moreover, we have done so in a manner that carefully strikes the balance between providing precise guidance and leaving other states and applicants the flexibility they will need to deal with facts and circumstances that may vary widely among states.2

I would like to highlight a few of the broad lessons for future applicants embodied in this Order:

Section 271 Review Requires a Static Snapshot of a Truly Dynamic Process

If this three-month exercise has taught us anything, it is that opening local exchange markets pursuant to the competitive checklist is a constantly evolving process. It does not begin, nor does it end, with a successful section 271 application. Local telephone competitors will ultimately succeed or fail based on their own dogged determination and, in important respects, on the extent to which incumbents live up to their legal obligations and commitments. Competitorsí success also will depend on vigilant state and federal regulatory oversight to prevent backsliding and ensure compliance with future market opening rules. As we have learned from our review of the state proceedings that led to this application, competitors, incumbents and regulators will need to pinpoint and resolve technical issues on a rolling basis, as use of the network changes and grows. This process lends itself to unending exploration of new problems and applicable solutions. Section 271. However, requires us to assess whether the checklist is satisfied, not during some long period, but during the pendency of an application Ė a snapshot in time. Thus, although section 271 is one of the most important market-opening provisions, given the ongoing nature of opening local markets, it should not be seen as the sole tool for effectuating Congressí wishes.

Moreover, given the dynamic evolution of local markets, the section 271 snapshot inevitably will catch glimpses of uses of the incumbentís network that have not fully developed, both in terms of what competitors want from the incumbent and in terms of what the incumbent wants for itself. This immaturity may manifest itself in the carriersí business models, service needs and systems. With respect to these nascent uses of the network, we will find it particularly difficult to evaluate whether the checklist is satisfied.

This phenomenon partially affected the Commissionís review of xDSL service provisioning in New York. Despite the fact that the New York Commission has been considering section 271 issues since early 1997, competitive xDSL providers did not know enough about their own business plans to make their concerns regarding Bell Atlanticís xDSL loop provisioning widely and concretely known until a year or two later. Further, even after competitors raised these concerns, they continued to request relatively small volumes of xDSL loops until August 1999.3 Ultimately, in response to concerns raised by competing carriers, the New York Commission initiated a collaborative proceeding to address those concerns, and New York continues to work diligently with the applicant and its competitors to address such issues as timely installation and performance standards. As part of this collaborative, the New York Commission will need to decipher whether potential problems are the result of discrimination by Bell Atlantic or other, benign factors, such as errors by competitive carriers or misunderstandings among the parties regarding how metrics are defined.

I applaud our decision not to hold these efforts against either Bell Atlantic or the New York Commission in reviewing this application. Given the tension between the static nature of section 271 review and constantly evolving uses of the incumbentís network, there may never be a time in which there are no outstanding issues for the applicant to address, no matter how hard the applicant tries prior to filing an application. Thus, because we cannot foreclose the viability of section 271 altogether, I believe we must allow at the margins for the possibility that some limited number of these newer unresolved issues will not undermine an overall strong showing of checklist compliance, such as we have here.

On this record, Bell Atlantic has demonstrated its ability and commitment to provide loops and other checklist items in a timely and effective manner even as the number of requests for these items has grown rapidly. There is substantial room for improvement, however. The New York Commission has put in place and will continue to expand a framework of performance standards and penalties that will further encourage Bell Atlantic to resolve loop issues quickly. This process will enable regulators and the industry to agree on what problems exist and how they can be fixed in the xDSL context. In light of these initiatives, I am reasonably confident that Bell Atlanticís success in providing loops on a nondiscriminatory basis generally will be reflected more clearly in the small, but burgeoning, xDSL context, and that xDSL competitors will flourish in the New York market.

State Commission Review is Vital to FCC Implementation of Section 271

Under the statute, the Commission is commanded to consult with both the Department of Justice (DOJ) and the state commission before deciding a section 271 application. The statute requires that we give DOJís views substantial, though not preclusive, weight and is silent as to the deference to be accorded the state.4 Although I recognize that many states will be unable to match the level of resources that the New York Commission has invested in promoting checklist compliance, state commissions do have an intimate understanding of the applicant, the local market and the various technical and economic issues surrounding checklist compliance. States also have the luxury of time, which the FCC is denied by virtue of the ninety-day statutory timeframe. This application reveals sharply that the federal authorities cannot possibly duplicate the exhaustive collection and examination of facts that states can conduct. Nor could we possibly develop the performance metrics and undertake the technical evaluations that a state commission can. This case illustrates the point. New York spent two and half years on the components of this application, conducted more than 5 separate proceedings and 2 collaboratives, and oversaw third-party testing that included evaluation of 855 individual metrics.

Thus, as a practical matter, the Commission must, as it has done here, accord significant weight to the findings of the state commission when it properly and thoroughly conducts a collaborative proceeding. In this application, I personally found the analysis of both DOJ and the New York Commission excellent and invaluable. Although we did in a very few areas side with the New York Commissionís judgment over that of DOJ, I believe we did so where the New York Commissionís intimate familiarity with the facts, informed by our own review, warranted the choice.

Collaboration Among the Stakeholders is Vital

Collaboration is vital to achieving a successful application. The determined effort in New York to keep all the stakeholders involved, collaboratively developing processes and metrics, was instrumental to building a successful application. For many years, Bell Atlantic has been criticized by some of its Bell siblings for participating so openly in this collaborative process. Yet its determination to see the process steadily through has resulted in it crossing the finishing line first, ahead of those who were quick to challenge the process or test our resolve. But as Aesop teaches us in the fable of the tortoise and the hare, often it is the slow and steady that win the race. To obtain section 271 approval, a BOC must be willing to stay with its state commission and work through all the major issues before it brings its game to the show.

Performance Counts Most

Somewhere in the swirl of statistics and metrics we tend to lose sight of the fact that the checklist simply requires that the BOC get the job done. The checklist does not purport to say how, or detail what system or what method to use. And if the job gets done, a competitive local exchange carrier (CLEC) cannot be heard to complain, simply because the CLEC preferred that the job had been done in some other way. In this application, we saw that actual performance can be quite high even where the sub-metrics that measure things such as order flow-through are modest. The metrics are important tools, but they are only tools. Automated systems are vital to efficient ordering and provisioning for CLECs. We continue to believe that fully automated systems are desirable, for they offer efficient ordering with fewer errors, generally. Yet the evolving nature of system development means that we will frequently encounter manual processes mixed with automated systems. Low flow-through with automated systems is an indicator of possible poor performance, but where the BOC continues to perform well despite the metric I believe we must credit that performance as long as we judge it to be sustainable at reasonably foreseeable volumes. If what we measure is actual performance, a BOC is free to choose the mix of manual process and automation, if and only if, it can sustain the level of performance that we sanction in its application. If it subsequently fails to sustain those levels it risks sanctions, including revocation of authority to offer long distance service under section 271(d)(6). The BOC, then, likely has an incentive to automate, for it probably will be less expensive to use automation to achieve high performance levels than to throw human resources at the problem. That said, if a BOC can sustain high performance with substantial manual intervention, then the checklist and statute are nonetheless satisfied.

Our review of this application was productive largely because it has expanded our understanding of the standards and issues for section 271 approval, and it has allowed us to lay out comprehensive guidance to state commissions and future applicants. We now move from the realm of theory to that of actual practice. We will plainly see the extent of the touted benefits of BOC entry into long distance, and we will observe whether our actions today are adequate to facilitate the development of local competition. By being first, Bell Atlantic bears the weight (that all leaders do) of demonstrating that it was a wise public policy choice to free it from historic market prohibitions. We will see if their present adequate performance truly demonstrates a meaningful opportunity for others to compete, as they have represented. I sincerely hope Bell Atlantic does not disappoint.

In closing, I wish to commend the staff of our Common Carrier and Enforcement Bureaus for their extraordinary investment of time, talent and energy in bringing this difficult and hotly-contested proceeding to closure. Without their efforts, what we do today would have been, quite simply, impossible.

1. For example, I expressed my dissatisfaction with the then-existing section 271 process soon after I took office in 1997, and called for a new approach, in the South Carolina application proceeding. See Application of BellSouth Corporation et al. Pursuant to Section 271 of the Communications Act of 1934, as amended, to Provide In-Region, InterLATA Services in South Carolina, CC Docket No. 97-208, Memorandum Opinion and Order, FCC 97-418 (rel. Dec. 24, 1997) ("South Carolina Order") ("[W]e could have done much more [to offer clear guidance with respect to this application] if we had had the time and resources to work more cooperatively with BellSouth to reach agreement on many of the checklist items . . . I believe we must do more or adopt a new approach to this process if we hope to provide the clarity that BOCs and new entrants need to open up local markets.") (Sep. Statement of Commissioner Powell). See also White Paper, "FCC Commissioner Michael K. Powell Calls For Multifaceted Collaboration In Wake Of District Court Decision Declaring Section 271 Unconstitutional," rel. Jan. 15, 1998.

2. Our standard for evaluating checklist compliance gives BOC applicants substantial leeway with respect to how they will demonstrate compliance with section 271. See Application of BellSouth Corporation for Provision of In-Region, InterLATA Services in Louisiana, Memorandum Opinion and Order, 13 FCC Rcd 20599, 20638 (1998) ("While this and prior orders identify certain types of information we would find helpful in our review of section 271 applications, we reiterate that we remain open to approving an application based on other types of evidence if a BOC can persuade us that such evidence demonstrates nondiscriminatory treatment and other aspects of the statutory requirements.").

3. According to Bell Atlantic, it provisioned only 7 xDSL loops in June and 56 in July of 1999. In contrast, Bell Atlantic provisioned 449 xDSL loops in August and 653 in September.

4. See generally 47 U.S.C. ß 271(d)(2).