August 6, 1998

Re:	In the Matters of Petitions Relating to Section 706, Memorandum Opinion and Order and Notice of Proposed Rulemaking

I support today's action to provide incentives for all wireline carriers to deploy high bandwidth services more quickly than they would otherwise. That is what Congress directed us to do in section 706, and I hope the proceedings we open today will allow us to fulfill this obligation expeditiously.

I wish to indicate my preliminary support for the basic idea of separate affiliates as a way for incumbent LECs to provide high speed data service with minimal regulation. The separate affiliate model would properly align incentives for incumbent LECs to take pro- competitive, pro-consumer, actions in the area of advanced services. I am well aware that separate affiliates impose costs on incumbent LECs, and that absent those costs, incumbent LECs could be more efficient providers of advanced data service. But at what price to competition? If we have learned one lesson in the 30 months since the Act passed, it is that pro-competitive regulations work best when incumbents have an incentive to make them work. Using separate affiliates would encourage incumbent LECs to improve their ordering and provisioning methods for competitors because their affiliates won't tap into the lucrative high bandwidth market unless they can obtain critical inputs to its product, such as efficient collocation and DSL-capable loops, in a timely and efficient fashion. In return, incumbent LECs' affiliates would be freed of the unbundling obligations for data equipment that will apply if DSL service is provided on an integrated basis.

Section 706 makes states and the FCC partners in encouraging carriers to deploy advanced telecommunications capabilities. It is clear that states will play a major role in this effort, just as Congress intended. The FCC can do its part by establishing, in close consultation with states, a pro-competitive framework for data services that will bring consumers the bandwidth services they want. State commissions, in turn, set the rates competitors pay for DSL-capable loops and collocation. Without fair and efficient access to these building blocks, DSL service will remain a niche service rather than a mass market phenomenon. In the coming months, the FCC will do its best to write effective loop and collocation rules. After that, it will be up to state commissions to make high bandwidth services a reality for their citizens.

Since the rapid deployment of advanced services will be greatly affected by both federal and state policies, it is important that the Commission work closely with state commissions in designing an advanced services framework that serves our needs and their needs. My recent participation in NARUC's summer meeting afforded me the opportunity to hear first hand the views of state commissioners. What I learned is that state commissions have not had a full opportunity to evaluate the idea of separate affiliates and to advise us of their views. Our decision to adopt only a tentative framework for separate affiliates reflects this Commission's desire to work cooperatively with state commissions in this critical area of communications policy. In response to the NPRM adopted today, I expect state commissions will furnish us with valuable advice and guidance. I hope the specific proposals in the NPRM will encourage focused discussion on the key issues surrounding separate affiliates and allow us to move forward expeditiously with final rules.

The Order portion of today's item rejects Bell Company requests for wholesale waivers of section 271. I believe that is the correct decision as a matter of policy. Some say the elegant design of section 271 has been weakened because increased competition has made the long distance market less attractive than it once was for Bell Companies, and hence, no longer a sufficient incentive to comply with Congress's plan for local competition. Assuming for the moment that is true, it may well be that the booming market for data communications, including interLATA connections, will pick up where standard long distance has left off. If that is correct, this Commission's denial of wholesale LATA relief is entirely consistent with Congress's vision for section 271.

That does not mean all LATA relief for Bell Companies should be off the table. At least in the near term, Bell Companies may well be the most likely supplier of advanced services in parts of their territories. I think there are potentially significant actions we could take regarding LATA modifications for Bell Companies to reach under-served parts of their territories. Targeted LATA modifications could allow Bell Companies to configure their data networks in ways that makes advanced service feasible in areas that otherwise would be ignored by the free market.

I also wish to register my particular interest in two matters related to separate affiliates for data services. The first is my interest in seeing that Internet service providers unaffiliated with incumbent LECs can compete fairly in the world of DSL-delivered Internet access service with ISPs affiliated with incumbent LECs. An incumbent LEC's data affiliate presumably has an incentive to favor its affiliated ISP over unaffiliated ISPs. I will be particularly interested in parties' views on whether the creation of advanced services affiliates is truly a risk to the high-speed Internet access market, or whether this danger is too speculative for immediate Commission action.

The second issue is collocation space at incumbent LECs' remote terminals. Collocation of all types is a threshold issue for competitors to provide DSL service. No collocation means no competition. And with collocation space apparently quite limited not only in many central offices but also in remote terminals, I will be particularly interested in learning how we can level the playing field regarding access to collocation space. It is important to me that, beginning today, there be no opportunity for incumbent LECs to foreclose DSL competition in certain areas by gaming the collocation process.

Finally, I would acknowledge the efforts of the incumbent and competitive local carriers in pressing their case at the FCC. They understood better than us that telecommunications technology was advancing at light speed, and that our regulations needed to better accommodate carriers' needs in responding to the explosive demand for high speed data communications. Rather than waiting for the FCC to open its inquiry under section 706, the carriers sought faster resolution of their concerns through petitions relating to sections 251 and 271 of the 1996 Act. Today's actions by the Commission moves us closer to policies that reflect what consumers are demanding and what carriers want to provide.