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Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554
In the Matter of ) File No. EB-01-IH-0030
)
SBC Communications, Inc. ) NAL/Acct. No.
200232080004
)
Apparent Liability for Forfeiture ) FRN 0004-3051-24,
0004-3335-71,
) 0005-1937-01
NOTICE OF APPARENT LIABILITY FOR FORFEITURE
Adopted: January 16, 2002 Released: January 18,
2002
By the Commission:
I. INTRODUCTION
1. In this Notice of Apparent Liability for
Forfeiture (``NAL''), we find that SBC Communications, Inc.
(``SBC'') has apparently willfully and repeatedly violated one of
the conditions that the Commission imposed pursuant to its
approval of the merger application of Ameritech Corp.
(``Ameritech'') and SBC.1 In particular, it appears that SBC2
failed to offer shared transport in the former Ameritech states3
under terms and conditions substantially similar to those that it
offered in Texas as of August 27, 1999, in violation of the
SBC/Ameritech Merger Order. Based upon our review of the facts
and circumstances surrounding this matter, we find that SBC is
apparently liable for a forfeiture in the amount of six million
dollars ($6,000,000.00).
II. BACKGROUND
2. SBC is an incumbent local exchange carrier (ILEC)
that provides local telephone service in 13 states, including
Arkansas, Kansas, Missouri, Oklahoma, Texas, California, Nevada,
Illinois, Michigan, Indiana, Ohio, Wisconsin, and Connecticut.
At the end of 1999, SBC served nearly 60 million local exchange
access lines in its 13-state region, and served customers in 23
countries.4 SBC also provides in-region interLATA, wireless,
Internet access, out-of-region interLATA, cable and wireless
television, and directory publishing services.5 In 2000, SBC had
total operating revenues of more than $51 billion.6
3. In the SBC/Ameritech Merger Order, the Commission
approved license transfers to SBC subject to several conditions
that were first proffered by the applicants and then incorporated
into the Merger Order as an express condition of the grant of
approval.7 One condition related to SBC's provision of shared
transport in the former Ameritech states. Paragraph 56 of the
merger conditions states that:
Within 12 months of the Merger Closing Date (but
subject to state commission approval and the terms
of any future Commission orders regarding the
obligation to provide unbundled local switching
and shared transport), SBC/Ameritech shall offer
shared transport in the SBC/Ameritech Service Area
within the Ameritech States under terms and
conditions, other than rate structure and price,
that are substantially similar to (or more
favorable than) the most favorable terms
SBC/Ameritech offers to telecommunications
carriers in Texas as of August 27, 1999.8
4. On April 12, 2001, the Enforcement Bureau directed
SBC to submit a sworn written response to a series of questions
relating to SBC's compliance with paragraph 56 of the merger
conditions.9 SBC filed its responses on May 2, May 14, and July
23, 2001.10 Based on SBC's responses, we conclude below that SBC
apparently violated this condition in each of the five former
Ameritech states by refusing to offer shared transport to be used
to provide intraLATA toll. III. DISCUSSION
5. Under section 503(b) of the Act, any person who is
determined by the Commission to have willfully or repeatedly
failed to comply substantially with the terms and conditions of
any license, permit, certificate, or other instrument of
authorization issued by the Commission, shall be liable for a
forfeiture penalty.11 In order to impose such a forfeiture
penalty, the Commission must issue a notice of apparent
liability, the notice must be received, and the person against
whom the notice has been issued must have an opportunity to show,
in writing, why no such forfeiture penalty should be imposed.12
The Commission will then issue a forfeiture if it finds by a
preponderance of the evidence that the person has violated the
Act or a Commission rule.13 As set forth in more detail below,
we conclude under this standard that SBC is apparently liable for
a forfeiture for its apparent violations of the Merger Order.
6. The fundamental issue in this investigation is
whether SBC, as required by paragraph 56 of the merger
conditions, has offered shared transport in the Ameritech states
on terms ``substantially similar to (or more favorable than)''
the most favorable terms it offered in Texas as of August 27,
1999. Based on the facts set forth below, we find that it
apparently has not. We find that in each of the five former
Ameritech states, SBC has apparently violated its obligations
under the paragraph 56 condition, and that this apparent failure
to comply is apparently willful and repeated.14 We propose a
forfeiture in the amount of six million dollars.
A. Apparent Violations of the Merger Conditions
7. This investigation has focused on SBC's compliance
with paragraph 56 of the merger conditions with respect to one
particular aspect of SBC's shared transport offerings - the use
of the shared transport UNE to route intraLATA toll calls. As
described more fully below, subsequent to the effective date of
the merger conditions, SBC apparently attempted to restrict or
prohibit the use of shared transport for routing intraLATA toll
calls in the Ameritech states. SBC asserts that the restrictions
it sought to impose are not less favorable than its August 27,
1999 offering in Texas. We disagree. On August 27, 1999, SBC
had at least two interconnection agreements in Texas pursuant to
which it offered CLECs the option of using shared transport to
route intraLATA toll calls, without restriction, between their
end user customers and customers served by SBC. In the Ameritech
states, by contrast, SBC has opposed carriers' requests for
agreements that would permit them to use shared transport for
intraLATA toll traffic.15 Thus, it appears that SBC has violated
paragraph 56 of the merger conditions.
8. SBC disputes that it was offering shared transport
for routing intraLATA calls pursuant to the agreements that were
in place in Texas on August 27, 1999.16 Thus, we review here the
facts about SBC's Texas offering.
9. At the beginning of 1999, at least two CLECs in
Texas, Sage Telecom, Inc. (Sage) and Birch Telecom of Texas, Ltd.
(Birch), were using shared transport purchased from SBC to route
intraLATA toll calls between their end user customers and
customers served by SBC.17 In April 1999, however, SBC notified
CLECs that it intended to put an end to such use of shared
transport once intraLATA dialing parity was implemented.18 SBC
informed CLECs that in the future, intraLATA toll calls would be
routed off the SBC network to a non-SBC tandem switch, and then
back again to the SBC network.19 In other words, once dialing
parity was implemented, shared transport could no longer be used
to route intraLATA toll calls end-to-end between CLEC and SBC
customers.
10. Sage and Birch objected to this new plan, and
filed complaints with the Public Utility Commission of Texas
alleging that SBC's plan would violate their interconnection
agreements.20 SBC asserted that, to the contrary, the
interconnection agreements provided that shared transport could
be used for end-to-end routing of intraLATA toll calls only until
the implementation of intraLATA dialing parity, and that SBC's
proposed routing change therefore did not conflict with the
agreements.21 SBC's obligations under paragraph 56 of the merger
conditions hinge on which of these parties is correct about the
scope of SBC's Texas offering, as established by its
interconnection agreements. In considering this issue, we have
the benefit of the fact that the Texas PUC has already resolved
this dispute between the parties.
11. In November 1999, an arbitration panel of the
Texas PUC issued an order rejecting SBC's arguments and ruling
that SBC's agreements with Sage and Birch require SBC to provide
shared transport for routing intraLATA toll traffic regardless of
whether dialing parity has been implemented.22 The full PUC
shortly thereafter approved the Texas Arbitration Award.23 Thus,
the Texas PUC has interpreted agreements that were in place on
August 27, 1999 as offering CLECs the ability to use the shared
transport UNE to route intraLATA toll calls end-to-end, without
the restrictions that SBC sought to impose in the Ameritech
states.24
12. While admitting that the Texas Arbitration Award
has not been modified, reversed, or overruled,25 SBC apparently
disagrees with the Texas PUC's decision, as it raises arguments
in its response to the Bureau's LOI that were already expressly
considered and rejected by the Texas PUC.26 Given the special
expert position of the Texas Commission in interpreting Texas
interconnection agreements, we accept the interpretation set
forth in the Texas Arbitration Award, and reject SBC's attempt to
persuade us to take a different view.27
13. SBC also argues that it has not violated the
merger conditions because (1) the Texas Arbitration Award imposed
a new obligation that was not in place on August 27, 1999, and
thus is not relevant to SBC's obligations under the merger
conditions,28 and (2) SBC was not ``offering'' shared transport
for intraLATA toll on August 27, 1999, because it allowed Birch
and Sage to use shared transport on that date only because the
PUC had temporarily enjoined it from implementing the routing
changes it proposed in April. We find no merit in either of
these contentions. It is quite clear that the Texas Arbitration
Award constitutes a review of SBC's obligations under its
existing agreements, and not a policy decision to impose new
requirements. The arbitrators set forth the issues in terms of
what the interconnection agreements require, and engaged in an
analysis of specific language from the agreements to determine
what SBC's obligations were.29 Moreover, SBC seems to have
understood contemporaneously that the Texas proceeding was
interpreting an existing agreement, as it apparently made
arguments about the proper interpretation of that agreement.30
Thus, although the Texas Arbitration Award was not issued until
November 1999, it describes obligations that were in effect in
August. Moreover, SBC's argument that the arbitrators'
injunction demonstrates that it did not ``offer'' shared
transport for routing intraLATA toll calls has no persuasive
force in light of the Texas PUC's ultimate conclusion that SBC's
agreements already obligated it to do so.31
14. SBC also argues that the way in which CLECs have
requested to route intraLATA traffic does not constitute ``shared
transport'' within the meaning of paragraph 56 of the Merger
Conditions. First, SBC asserts that:
the facilities that SBC's ILECs use to complete
intraLATA toll calls are distinct from the `shared
transport' that SBC is required to unbundle under the
Commission's rules. Paragraph 56 of the Merger
Conditions, which by its terms has to do with the terms
and conditions on which Ameritech would offer the
shared transport UNE, therefore has nothing whatsoever
to do [with the issue under investigation].32
We disagree. The Merger Conditions define ``shared
transport'' as that term is defined in the Third Order on
Reconsideration and Further Notice of Proposed Rulemaking,
Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996, 12 FCC Rcd 12460 (1997).
That order defines shared transport as ``transmission
facilities shared by more than one carrier, including the
incumbent LEC, between end office switches, between end
office switches and tandem switches, and between tandem
switches, in the incumbent LEC's network.''33 The intraLATA
toll arrangements that CLECs in the Ameritech states have
requested (and that the Texas Commission found to be
required in Texas) consist of routing between end office
switches and tandem switches.34 Therefore, we reject SBC's
contention that the facilities that would be used to route
intraLATA traffic do not fit within the definition of shared
transport.
15. In addition, SBC argues that the Merger Order's
shared transport obligation is restricted to the use of shared
transport for purely local service, and does not extend to
intraLATA toll routing.35 We disagree with SBC's assertion that
the definition of shared transport encompasses such a use
restriction. The definition contained in the Local Competition
Third Order on Reconsideration does not distinguish between
purely local services and long distance services. Moreover, we
note that when both the Merger Order and the Local Competition
Third Order on Reconsideration were adopted, the Commission had
in place a rule prohibiting use restrictions on UNEs.36 Thus, we
are unpersuaded by SBC's attempt to read such a use restriction
into its obligations under the merger conditions.
16. SBC's responses indicate that in all five of the
Ameritech states, it has refused to offer shared transport for
end-to-end routing of intraLATA toll calls, and indeed has
affirmatively opposed requests for such service before the state
commissions. It continued to do so even after the Texas
Arbitration Award made undeniably clear its obligations in Texas.
Thus, we find that SBC has apparently violated paragraph 56 of
the merger conditions, in each of the Ameritech states.
17. In addition to arguing that it has complied with
the merger conditions, SBC argues that the paragraph 56 condition
is no longer applicable. In its more recent responses to the
Bureau's inquiry letter, SBC argues that the requirement that it
provide shared transport in the former Ameritech states on
``terms and conditions ... substantially similar to (or more
favorable than) the most favorable terms SBC/Ameritech offer[ed]
to telecommunications carriers in Texas as of August 27, 1999''
was terminated by the Commission's UNE Remand Order.37 By its
terms, paragraph 56 was ``[s]ubject to state commission approval
and the terms of any future Commission orders regarding the
obligation to provide unbundled local switching and shared
transport.''38 SBC asserts that because the UNE Remand Order
addressed the obligation of an incumbent LEC to make shared
transport available to CLECs,39 any obligation to provide shared
transport pursuant to paragraph 56 of the Merger Conditions
terminated upon release of the UNE Remand Order.40 We disagree.
The UNE Remand Order was adopted on September 15, 1999, three
weeks before the SBC/Ameritech Merger Order was adopted on
October 6, 1999.41 Thus, the UNE Remand Order cannot plausibly
be considered a ``future Commission order'' under paragraph 56 of
the Merger Conditions. We reject the suggestion that the
Commission would have imposed a merger condition that had already
been superseded by other events that were obviously well-known to
the Commission at the time the SBC/Ameritech Merger Order was
adopted.
18. Even if it were a ``future Commission order,''
nothing in the UNE Remand Order appears to supersede the
requirements imposed by paragraph 56. Here, again, SBC argues
that the obligation to provide shared transport extends only to
the use of that UNE in connection with purely local service, not
intraLATA toll.42 As noted above, however, the definition of
shared transport in the UNE Remand Order (i.e., the Local
Competition Third Order on Reconsideration) contains no such
express restriction, and the Commission's rules generally
prohibit ILECs from imposing use restrictions on UNEs. Moreover,
we note that in a decision that post-dates the UNE Remand Order,
the Commission treated an allegation that SBC had unlawfully
precluded competitors from using UNEs to provide intraLATA toll
service as a section 271 checklist compliance issue. Thus, by
implication, the Commission treated the matter as an issue of
compliance with the Commission's UNE unbundling rules.43
19. Finally, SBC argues that the Bureau (and
presumably, the Commission) lacks authority to adjudicate this
matter based on the merger conditions.44 SBC notes that
paragraph 56 states that its requirements are ``subject to state
commission approval.'' Thus, SBC asserts that enforcement of
that paragraph ``requires resort to state commission arbitration
procedures.'' We find SBC's interpretation to be unsupported by
the SBC/Ameritech Merger Order, and reject SBC's attempt to
persuade us not to enforce our own order. The cited clause
merely refers to the requirement that the interconnection
agreements be approved by the state regulatory body.
B. Forfeiture Amount
20. In light of SBC's apparent willful and repeated
failure to comply with the SBC/Ameritech Merger Order, we find
that a substantial proposed forfeiture is warranted. Section
503(b)(1) of the Act states that any person that willfully or
repeatedly fails to comply substantially with the terms and
conditions of any license, permit, certificate, or other
instrument or authorization issued by the Commission, shall be
liable to the United States for a forfeiture penalty.45 Section
503(b)(2)(B) of the Act authorizes the Commission to assess a
forfeiture of up to $120,000 for each violation, or each day of a
continuing violation, up to a statutory maximum of $1,200,000 for
a single act or failure to act.46 In determining the appropriate
forfeiture amount, we consider the factors enumerated in section
503(b)(2)(D) of the Act, including ``the nature, circumstances,
extent and gravity of the violation, and, with respect to the
violator, the degree of culpability, any history of prior
offenses, ability to pay, and such other matters as justice may
require.''47
21. In response to the Bureau's letter, SBC has stated
that the issue of SBC's obligation to allow intraLATA toll
traffic to be routed over shared transport facilities was
currently before the state commissions or state arbitrators in
proceedings in each of the five Ameritech states. In each of
those states, SBC failed to offer shared transport on the
required terms and conditions, and affirmatively objected to
requests for such service.48 Thus, SBC has apparently violated
the requirements of the Merger Order in at least five instances,
one in each state. Each of these is a continuing violation,
beginning on October 8, 2000 (12 months after the close of the
merger), and continuing at least until the date of SBC's May 14,
2001 response to the Bureau's letter of inquiry in four of the
five Ameritech states (i.e., Ohio, Indiana, Illinois, and
Wisconsin), and until March 2001 in Michigan.49 Each continuing
violation is potentially subject to the statutory maximum
forfeiture of $1,200,000.
22. Considering all the circumstances before us, we
find SBC apparently liable for a forfeiture in the amount of
$6,000,000, the statutory maximum for five continuing violations
lasting at least ten (10) days each during the one-year period
prior to this Notice of Apparent Liability. First, the
Commission emphasized in the Merger Order that it would hold SBC
to a high standard of compliance, stating that ``[w]e expect that
SBC/Ameritech will implement each of these conditions in full, in
good faith and in a reasonable manner to ensure that all
telecommunications carriers and the public are able to obtain the
full benefits of these conditions.''50 Second, we find it
particularly egregious that SBC refused to make shared transport
available on the same terms available in Texas, even after the
Texas Arbitration Award made not only ``ascertainably
certain,''51 but abundantly clear, what SBC's obligations under
its interconnection agreements were. Instead, SBC has continued
to argue to state commissions, and to this Commission, that the
Texas Arbitration Award imposed only new obligations, despite the
fact that the order states clearly that it was interpreting
existing obligations. SBC's apparent violations have forced
other carriers to expend time and resources in state proceedings
trying to obtain what SBC was already obligated to provide.
Third, the Commission has made clear that it will take into
account a violator's ability to pay in determining the amount of
a forfeiture so that forfeitures against ``large or highly
profitable entities are not considered merely an affordable cost
of doing business.''52 These factors together persuade us that
we should propose the statutory maximum forfeiture.
IV. ORDERING CLAUSES
23. ACCORDINGLY, IT IS ORDERED THAT, pursuant to
section 503(b) of the Act,53 and section 1.80 of the Commission's
Rules,54 SBC Communications is HEREBY NOTIFIED of its APPARENT
LIABILITY FOR FORFEITURE in the amount of six million dollars
($6,000,000.00) for willfully and repeatedly violating the
Commission's merger conditions in the SBC/Ameritech Merger Order.
24. IT IS FURTHER ORDERED THAT, pursuant to section
1.80 of the Commission's Rules, within thirty (30) days of the
release date of this NOTICE OF APPARENT LIABILITY, SBC
Communications SHALL PAY to the United States the full amount of
the proposed forfeiture OR SHALL FILE a written statement showing
why the proposed forfeiture should not be imposed or should be
reduced.
25. Payment of the forfeiture amount may be made by
mailing a check or similar instrument payable to the order of the
Federal Communications Commission, to the Forfeiture Collection
Section, Finance Branch, Federal Communications Commission, P.O.
Box 73482, Chicago, Illinois 60673-7482. The payment should note
the ``NAL/ Acct. No.'' referenced above.
26. The response, if any, must be mailed to Charles W.
Kelley, Chief, Investigations and Hearing Division, Enforcement
Bureau, Federal Communications Commission, 445 12th Street S.W.,
Room 5-C814, Washington, D.C., 20554, and must include the
``NAL/Acct. No.'' referenced above.
27. The Commission will not consider reducing or
canceling a forfeiture in response to a claim of inability to pay
unless the respondent submits: (1) federal tax returns for the
most recent three-year period; (2) financial statements prepared
according to generally accepted accounting practices (``GAAP'');
or (3) some other reliable and objective documentation that
accurately reflects the respondent's current financial status.
Any claim of inability to pay must specifically identify the
basis for the claim by reference to the financial documentation
provided.
28. IT IS FURTHER ORDERED that a copy of this Notice
of Apparent Liability shall be sent by Certified Mail/Return
Receipt Requested to SBC Communications, c/o Caryn D. Moir, Vice
President-Federal Regulatory, 1401 I Street, N.W., Suite 1100,
Washington, D.C. 20005.
FEDERAL COMMUNICATIONS COMMISSION
Magalie Roman Salas
Secretary
_________________________
1 Applications of Ameritech Corp., Transferor, and SBC
Communications, Inc., Transferee, For Consent to Transfer Control
of Corporations Holding Commission Licenses and Lines Pursuant to
Sections 214 and 310(d) of the Communications Act and Parts 5,
22, 24, 25, 63, 90, 95, and 101 of the Commission's Rules,
Memorandum Opinion and Order, 14 FCC Rcd 14712 (1999)
(``SBC/Ameritech Merger Order''), reversed in part on other
grounds, Association of Communications Enterprises v. FCC, 235
F.3d 662 (D.C.Cir. 2001).
2 SBC refers to SBC Communications, Inc. and all its
affiliates, including its incumbent LECs.
3 Throughout this NAL, we refer to the states located in
Ameritech's territory prior to Ameritech's merger with SBC as
``the former Ameritech states.'' These states are: Illinois,
Indiana, Michigan, Ohio, and Wisconsin. See SBC/Ameritech Merger
Order, 14 FCC Rcd at 14719, ¶ 6.
4 SBC Communications Inc. 1999 Annual Report at 6 (``SBC
1999 Annual Report''). In its 2000 Annual Report, SBC reported
that its total access lines increased by approximately 1% from
the previous year. SBC Communications Inc. 2000 Annual Report at
7 (``SBC 2000 Annual Report'').
5 SBC 1999 Annual Report at 4. See also SBC 2000 Annual
Report at 33-34.
6 SBC 2000 Annual Report at 4.
7 SBC/Ameritech Merger Order, 14 FCC Rcd at 14954, ¶ 584.
8 SBC/Ameritech Merger Order, 14 FCC Rcd at 15023-24,
Appendix C, ¶ 56.
9 Letter from David H. Solomon, Chief, Enforcement
Bureau, FCC, to Cassandra Carr and Sandra L. Wagner, SBC
Telecommunications, Inc., dated April 12, 2001.
10 Letter from Sandra L. Wagner, SBC Telecommunications,
Inc., to Warren Firschein, Attorney, Market Disputes Resolution
Division, Enforcement Bureau, FCC, dated May 2, 2001 (``May 2
Response''); Letter from Sandra L. Wagner, SBC
Telecommunications, Inc., to Warren Firschein, Attorney, Market
Disputes Resolution Division, Enforcement Bureau, FCC, dated May
14, 2001 (``May 14 Response''); Letter from Christopher M.
Heimann, SBC Telecommunications, Inc., to Suzanne Tetreault,
Assistant Chief, Enforcement Bureau, FCC, dated July 23, 2001
(``July 23 Response''). See also Letter from Sandra L. Wagner,
SBC Telecommunications, Inc., to David H. Solomon, Chief,
Enforcement Bureau, FCC, dated October 10, 2001 (``October 10
Letter''), which includes an attachment that ``summarizes the
evidence presented'' in prior submissions and meetings.
11 47 U.S.C. § 503(b); 47 C.F.R. § 1.80(a).
12 47 U.S.C. § 503(b)(4); 47 C.F.R. § 1.80(f).
13 See, e.g. Tuscola Broadcasting Co., Memorandum Opinion
and Order, 76 FCC 2d 367, 371 (1980) (applying preponderance of
the evidence standard in reviewing Bureau level forfeiture
order). Cf. 47 U.S.C. § 312(d) (assigning burden of proof in
hearings to Commission).
14 The term ``willful'' means that the violator knew
it was taking the action in question, irrespective of any intent
to violate the Commission's rules, and repeated means more than
once. See Southern California Broadcasting Co., Licensee, Radio
Station KIEV(AM) Glendale, California, Memorandum Opinion and
Order, 6 FCC Rcd 4387, 4387-88, ¶ 5 (1991); see also Liability of
Hale Broadcasting Corp. Licensee of Radio Station WMTS
Murfreesboro, Tennessee, Memorandum Opinion and Order, 79 FCC 2d
169, 171, ¶ 5 (1980). Furthermore, a continuing violation is
``repeated'' if it lasts more than one day. Southern California
Broadcasting Co., 6 FCC Rcd at 4388, ¶ 5.
15 See May 2 Response, Sworn Statement of Deborah A.
Golden at 1 and Exhibit 1.
16 See, e.g., May 2 Response, Sworn Statement of
Michael C. Auinbauh, response to question 4.
17 See Complaint of Birch Telecom of Texas, LTD.,
L.L.P. and Alt Communications, L.L.C. Against Southwestern Bell
Telephone Company For Refusal to Provide IntraLATA Equal Access
Functionality, and Complaint of Sage Telecom, Inc. Against
Southwestern Bell Telephone Company For Violating Unbundled
Network Elements Provisions of the Interconnection Agreement,
Arbitration Award, Docket Nos. 20745 and 20755 (Pub. Util. Comm'n
of Texas, Nov. 4, 1999) (``Texas Arbitration Award'') at 9; see
also Complaint Of Sage Telecom, Inc. Against Southwestern Bell
Telephone Company For Violating Unbundled Network Elements
Provisions Of The Interconnection Agreement, Complaint, Docket
20755 at 3 (Pub. Util. Comm'n of Texas, filed Apr. 16, 1999); and
Complaint Of Birch Telecom Of Texas, Ltd., L.L.P. And ALT
Communications, L.L.C. Against Southwestern Bell Telephone
Company For Refusal To Provide IntraLATA Equal Access
Functionality, Complaint, Docket No. 20745 at 3 (Pub. Util.
Comm'n of Texas, filed Apr. 15, 1999). Those carriers used
shared transport to provide all of the necessary transmission and
routing between the two customers' end offices. We refer to this
arrangement in this order as ``end-to-end'' routing of intraLATA
toll calls.
18 May 2 Response, Sworn Statement of Michael C.
Auinbauh at Exhibit A (``Accessible Letter,'' dated April 6,
1999).
19 See Texas Arbitration Award at 9. This would have
resulted in intraLATA toll calls being routed in the same way as
interLATA calls.
20 Complaint Of Sage Telecom, Inc. Against
Southwestern Bell Telephone Company For Violating Unbundled
Network Elements Provisions Of The Interconnection Agreement,
Complaint, Docket No. 20755 (Pub. Util. Comm'n of Texas, filed
Apr. 16, 1999); and ?????Complaint Of Birch Telecom Of Texas,
Ltd., L.L.P. And ALT Communications, L.L.C. Against Southwestern
Bell Telephone Company For Refusal To Provide IntraLATA Equal
Access Functionality, Complaint, Docket 20745 (Pub. Util. Comm'n
of Texas, filed Apr. 15, 1999).
21 Texas Arbitration Award at ??5-6; see also May 2
Response, Sworn Statement of Michael C. Auinbauh, Response to
Question 4.
22 Texas Arbitration Award, supra n.19. We note that
the Texas Arbitration Order phrased the issue in terms of whether
the interconnection agreements allowed SBC, post-dialing parity,
to route intraLATA toll calls in the same way as interLATA toll
calls. This is equivalent, however, to the question of whether
SBC could, as it proposed, stop providing shared transport end-
to-end and instead route intraLATA toll calls off the SBC network
to a non-SBC tandem switch, and then back again to the SBC
network. See note 21, supra.
23 Complaint Of Sage Telecom, Inc. Against
Southwestern Bell Telephone Company For Violating Unbundled
Network Elements Provisions Of The Interconnection Agreement,
Docket No. 20755, and Complaint Of Birch Telecom Of Texas, Ltd.,
L.L.P. And ALT Communications, L.L.C. Against Southwestern Bell
Telephone Company For Refusal To Provide IntraLATA Equal Access
Functionality, Order, Docket 20745 (Pub. Util. Comm'n of Texas,
Dec. 1, 1999).
24 Notably, the Texas PUC found that the interconnection
agreement ``provides that the UNE common transport permits a CLEC
to utilize [SBC's] common network between a [SBC] tandem and a
[SBC] end office [and it] neither differentiates between the
originating and terminating side of the routing scheme nor makes
a distinction between pre- and post-dialing parity
environments.'' Texas Arbitration Award at 31.
25 May 2, 2001 Response, Sworn Statement of Michael
C. Auinbauh at 4.
26 SBC asserts that it need not allow the use of
shared transport to route intraLATA toll calls in a post-dialing
parity environment because its agreements with Sage and Birch say
that ``[a]fter implementation of intraLATA Dialing Parity,
intraLATA toll calls from [CLEC][unbundled local switching ports]
will be routed ... [to] the end user intraLATA Primary
Interexchange Carrier (PIC) choice.'' May 2 Response, Sworn
Statement of Michael C. Auinbauh, Response to Question 4, citing
Interconnection Agreement Between Southwestern Bell Tel. Co. and
Sage Telecom, Inc., App. Pricing-UNE § 5.2.2.2.1.2;
Interconnection Agreement Between Southwestern Bell Tel. Co. and
Birch Telecom of Texas, Ltd., App. Pricing-UNE § 5.2.2.2.1.2.
The Texas Arbitration Award explains, however, that SBC based its
argument in Texas on this same language, and concludes that
``[t]he Arbitrators reject SWBT's position.'' Texas Arbitration
Award at 12-13.
27 We note that SBC's responses indicate that, in all five
of the Ameritech states, it has affirmatively opposed requests
for such service before the state commissions. See, e.g.,
Investigation Into Tariff Providing Unbundled Local Switching
With Shared Transport, Order, Case No. 00-0700 (Ill. Commerce
Comm., Nov. 1, 2000), Exhibit 1(v) to Sworn Statement of Deborah
A. Golden (Golden Exhibit), submitted with SBC May 2 response
(investigating an Illinois Bell Telephone Company tariff on the
issue of whether Ameritech's restrictions on the shared transport
offering are appropriate, and specifically whether shared
transport should be available for use by CLECs in transporting
their intraLATA toll traffic); AT&T Communications of Indiana,
Inc. TCG Indianapolis Petition for Arbitration of Interconnection
Rates, Terms and Conditions and Related Arrangements with Indiana
Bell Telephone Company, Inc. d/b/a Ameritech Indiana Pursuant to
Section 252(b) of the Telecommunications Act of 1996, Ameritech
Indiana's Submission of Proposed Order, Cause No. 40571-INT-03 at
69-71 (Ind. Util. Reg. Comm'n, filed Oct. 10, 2000), Golden
Exhibit 1(b) (proposed ruling that Ameritech should be permitted
to prohibit AT&T's use of shared transport for intraLATA toll
traffic); AT&T Communications, Inc.'s Petition for Arbitration of
Interconnection Rates, Terms, and Conditions, and Related
Arrangements with Ameritech Ohio, Ameritech Ohio's Response to
AT&T's Petition for Arbitration, Case No. 00-1188-TP-ARB at 19
(Pub. Util. Comm'n of Ohio, filed July 25, 2000), Golden Exhibit
1(k) (arguing that AT&T should not be permitted to use shared
transport for intraLATA toll traffic; Application of Ameritech
Michigan for Approval of a Shared Transport Cost Study and
Resolution of Disputed Issues Related to Shared Transport,
Ameritech Michigan's Reply Brief, Case No. U-12622 (Mich. Pub.
Serv. Comm'n, filed December 28, 2000) (defending a tariff filing
that prohibited use of shared transport for intraLATA toll
service); Ameritech Michigan's Exceptions to the Proposal for
Decision at 4-8 (filed February 12, 2001), Golden Exhibit 1(h)
(arguing that the Merger Order does not require Ameritech to
allow the use of shared transport for intraLATA toll service);
Petition for Arbitration to Establish an Interconnection
Agreement Between Two AT&T Subsidiaries, AT&T Communications of
Wisconsin, Inc. and TCG Milwaukee, and Wisconsin Bell, Inc.
(d/b/a Ameritech Wisconsin), Ameritech Wisconsin's Initial Post-
Hearing Brief, Docket No. 05-MA-120 at 74 (Pub. Serv. Comm'n of
Wisconsin, filed September 22, 2000), Golden Exhibit 1(o)
(arguing that Ameritech may prohibit AT&T's use of shared
transport for intraLATA toll traffic).
28 In essence, SBC argues that ``[i]t was not until
November 4, 1999¾more than two months after the relevant date for
purposes of the Merger Conditions¾that the Texas PUC issued its
arbitration order forcing Southwestern Bell to accept such a
request.'' See May 2 Response, Exhibit C at 4. Thus (according
to SBC), it was not until that later date that there were ``terms
[Southwestern Bell] offer[ed] to telecommunications carriers in
Texas'' that allowed them to use Southwestern Bell's
interexchange network to complete intraLATA toll calls. Id. We
note, however, that prior to August 27, 1999, the Texas PUC
issued an interim order requiring SBC to offer shared transport
to Birch and Sage for the routing of CLEC-originated intraLATA
toll traffic. See May 2 Response, Sworn Statement of Michael C.
Auinbauh, Response to Question 4, citing Birch Telecom of Texas,
Ltd., LLP v. Southwestern Bell Tel. Co., Order Issuing Interim
Ruling Pending Dispute Resolution, Docket Nos. 20745 & 20755 at 3
(Pub. Util. Comm'n of Texas, Apr. 26, 1999).
29 For instance, as discussed above, the arbitrators
specifically considered the significance of section 5.2.2.2.1.2
of the pricing appendix.
30 See Texas Arbitration Award at 9 (``according to
[SBC], in a post-dialing parity environment, the interconnection
agreement requires CLECs to route their intraLATA traffic in a
different manner.''). In another context, SBC also seems to
recognize that the Texas Arbitration Award did not create new
obligations, but interpreted an existing agreement. See Ex Parte
Presentation from Edwardo Rodriguez Jr., Director - Federal
Regulatory, SBC, filed December 22, 2000 in CC Docket No. 00-217,
Application by SBC Communications Inc. for Authorization Under
Section 271 of the Communications Act to provide in-region
interLATA service in the States of Kansas and Oklahoma
(committing to ``interpret ... sections of [Kansas and Oklahoma
interconnection agreements] in exactly the same fashion that it
was ordered to'' interpret identical provisions in Texas
agreement in the Texas Arbitration Award).
31 Moreover, we note that the language of paragraph 56 of
the merger conditions made no exception for this issue, even
though the issue was being litigated in Texas at the same time
that the Commission was reviewing and finalizing the text of the
conditions.
32 May 2 Response at Exhibit C, page 4.
33 Implementation of the Local Competition Provisions
in the Telecommunications Act of 1996, Interconnection between
Local Exchange Carriers and Commercial Mobile Radio Service
Providers, Third Order on Reconsideration and Further Notice of
Proposed Rulemaking, 12 FCC Rcd 12460 at Appendix A, rule 51.319
(1997) (emphasis added). See 47 C.F.R. § 51.319.
34 The Texas Arbitration Award makes clear that the
routing being requested there by CLECs does in fact meet this
definition. See Texas Arbitration Award at 7-9 and Appendix A,
which contains diagrams showing explaining that intraLATA calls
would be routed using ``option 2'' as set forth at those pages,
which consists of routing between end offices and tandems.
35 October 10 Letter at 5-9.
36 See 47 C.F.R. § 51.309(a), which provides that ``[a]n
incumbent LEC shall not impose limitations, restrictions, or
requirements on requests for, or the use of, unbundled network
elements that would impair the ability of a requesting
telecommunications carrier to offer a telecommunications service
in the manner the requesting telecommunications carrier
intends.''
37 July 23 Response at 7-12. See Implementation of the
Local Competition Provisions of the Telecommunications Act of
1996, Third Report and Order and Fourth Further Notice of
Proposed Rulemaking, 15 FCC Rcd 3696 (1999) (``UNE Remand
Order'').
38 SBC/Ameritech Merger Order, 14 FCC Rcd at 15023-24,
Appendix C, ¶ 56.
39 UNE Remand Order, 15 FCC Rcd at 3862-66, ¶¶ 369-79.
40 July 23 Response at 7-12.
41 SBC/Ameritech Merger Order, 14 FCC Rcd at 14712; UNE
Remand Order, 15 FCC Rcd at 3696.
42 October 10 Letter at 10.
43 See 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, Memorandum Opinion and Order, 16 FCC Rcd 6237,
6322-23, ¶ 174 (2001), remanded on other grounds, Sprint
Communications Co. v. FCC, __ F.3d __ (D.C.Cir. 2001), 2001 WL
1657297 (D.C.Cir).
44 SBC also argues that the Commission lacks enforcement
jurisdiction under section 251 of the Act. May 2 Response,
Exhibit C at 5-6. Because we base this violation on the merger
conditions, and not section 251, we need not address this issue.
45 47 U.S.C. §503(b)(1)(A); see also 47 C.F.R. §
1.80(a)(1).
46 47 U.S.C. § 503(b)(2)(B); see also 47 C.F.R §
1.80(b)(2). In September 2000, the Commission increased the
maximum forfeiture amount from $1,100,000 to $1,200,000 per
violation to account for inflation. See Amendment of Section
1.80(B) of the Commission's Rules, Adjustment of Forfeiture
Maxima to Reflect Inflation, Order, 15 FCC Rcd 18221 (2000).
That change became effective November 13, 2000. See 65 FR 60868
(October 13, 2000).
47 47 U.S.C. § 503(b)(2)(D); see also The Commission's
Forfeiture Policy Statement and Amendment of Section 1.80 of the
Commission's Rules, Report and Order, 12 FCC Rcd 17087, 17100
(1997) (``Forfeiture Policy Statement''); recon. denied 15 FCC
Rcd 303 (1999); 47 C.F.R. § 1.80(b)(4).
48 See note 27, supra.
49 The Michigan Public Service Commission has required
Ameritech to file tariffs in Michigan that would permit CLECs to
use Ameritech's shared transport to provide intraLATA toll.
Application of Ameritech Michigan for Approval of a Shared
Transport Cost Study and Resolution of Disputed Issues Related to
Shared Transport, Opinion and Order, Case No. U-12622 at 6-16
(Mich. Pub. Serv. Comm'n, March 19, 2001). Ameritech filed a
tariff offering this capability, which became effective March 30,
2001. See CoreComm Communications, Inc. and Z-Tel
Communications, Inc. v. SBC Communications, Inc. et al., Joint
Statement, File No. EB-01-MD-017 (filed Oct. 23, 2001).
50 SBC/Ameritech Merger Order, 14 FCC Rcd at 14858, ¶ 360
(citations omitted).
51 Due process requires that parties receive fair notice
before being deprived of property. In the absence of notice, the
courts ask whether ``by reviewing the regulations and other
public statements issued by the agency, a regulated party acting
in good faith would be able to identify, with ascertainable
certainty, the standards with which the agency expects parties to
conform.'' See Trinity Broadcasting of Florida, Inc. v. FCC, 211
F.3d 618, 628 (D.C. Cir.2000), quoting General Elec. Co. v. EPA,
53 F.3d 1324, 1329 (D.C. Cir.1995).
52 The Commission's Forfeiture Policy Statement and
Amendment of Section 1.80 to Incorporate the Forfeiture
Guidelines, Report and Order, 12 FCC Rcd 17087, 17099-100, ¶ 24
(1997). With revenues of more than $51 billion in the year 2000,
SBC plainly falls into the category of companies to which the
Commission was referring.
53 47 U.S.C. § 503(b).
54 47 C.F.R. § 1.80.