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Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
)
WorldCom, Inc., )
)
Complainant, )
)
) File No. EB-02-MD-017
v. )
)
Verizon New England Inc., Bell )
Atlantic Communications, Inc. )
(d/b/a Verizon Long Distance), )
NYNEX Long Distance Company (d/b/a )
Verizon Enterprises Solutions), and )
Verizon Global Networks, Inc., )
Defendants.
MEMORANDUM OPINION AND ORDER
Adopted: July 22, 2002 Released: July 23,
2002
By the Commission: Chairman Powell issuing a statement;
Commissioner Copps dissenting and issuing a statement.
I. INTRODUCTION
1. In this Order, we deny a formal complaint that
WorldCom, Inc. (``WorldCom'') filed against Verizon New
England Inc., Bell Atlantic Communications, Inc. (d/b/a
Verizon Long Distance), NYNEX Long Distance Company (d/b/a
Verizon Enterprises Solutions), and Verizon Global Networks,
Inc. (collectively ``Verizon'') pursuant to sections 208 and
271(d)(6) of the Communications Act of 1934, as amended
(``Act'' or ``Communications Act'').1 WorldCom alleges that
Verizon ceased to meet one of the conditions of the
Commission's approval of Verizon's application to provide
interLATA service in Massachusetts.2 In particular,
WorldCom alleges that, after January 28, 2002, Verizon's
switching rates in Massachusetts ceased to comply with
section 271(c)(2)(B)(ii) of the Act, because those rates no
longer mirrored the switching rates3 in New York, the state
to which Verizon's switching rates in Massachusetts were
``benchmarked'' in the Massachusetts 271 Order.4
We deny WorldCom's complaint, because WorldCom failed to
meet its burden of proving that, during the six month,
interim period between the issuance of the unbundled network
element (``UNE'') rate order in New York on January 28, 2002
and the setting of new UNE rates by the Massachusetts
Department of Telecommunications and Energy (``DTE'')
effective August 5, 2002, Verizon ceased to meet a condition
of its approval to provide interLATA service in
Massachusetts.5 In particular, the record in this
proceeding demonstrates that, under the specific
circumstances present, including steps Verizon took to
ensure that competitors had access to cost-based rates
during the interim period and the shortness of the interim
period in question, Verizon remained in compliance with
section 271. Our denial of this complaint, however, is
without prejudice to whatever rights that WorldCom may have
to challenge the Massachusetts UNE Rate Order.
II. BACKGROUND
II.A. The Parties
2. WorldCom provides long distance and local
telephone services in the Commonwealth of Massachusetts.6
The Verizon defendants include the incumbent local exchange
carrier providing local service in the Commonwealth of
Massachusetts, as well as affiliates that provide long-
distance telecommunications service to residential and
business customers in Massachusetts.7
II.B. Verizon's Authority to Provide InterLATA
Services In Massachusetts
3. The Act prohibits a Bell Operating Company
(``BOC'') from offering in-region interLATA services without
first obtaining authorization to do so from the Commission.8
To obtain this authorization, a BOC must demonstrate that it
satisfies the ``competitive checklist'' set forth in section
271(c)(2)(B).9 As part of this showing, a BOC must
demonstrate that the state in question has properly set non-
discriminatory and cost-based rates for UNEs, including
switches, that the BOC must provide to competitors.10 The
Commission has established rules governing how states should
set such rates.11 These rules specify that UNE rates shall
be set in accordance with a total element long run
incremental cost (``TELRIC'') methodology.12
4. On January 16, 2001, pursuant to section 271,
Verizon submitted its application (``Massachusetts 271
Application'') to provide interLATA services in
Massachusetts.13 Verizon's Massachusetts 271 Application
relied upon voluntarily adopted rates that were equivalent
to those in place at the time in New York that the
Commission previously had found were TELRIC-compliant and
satisfied section 252(d)(1) of the Act.14 Verizon argued
inter alia that ``benchmarking'' its Massachusetts switching
rates to the existing New York switching rates demonstrated
that it was TELRIC-compliant in Massachusetts because the
switching costs in Massachusetts are the same or higher than
Verizon's switching costs in New York.15
5. In evaluating Verizon's Massachusetts 271
Application, the Commission found that New York's UNE rates,
including switching rates, could properly ``be used as the
benchmark for measuring whether Verizon's UNE rates are
TELRIC-based in Massachusetts.''16 The Commission explained
that a comparison of Massachusetts and New York rates and
costs was appropriate because: (1) the same BOC serves both
states; (2) the states are adjoining; and (3) the states
have similar rate structures.17 Further, the Commission
noted that it had already found that ``the New York rates
are within a zone that is consistent with TELRIC based on
current information in the record.''18 The Commission had
declared that, in these circumstances, a state that fully
adopted another state's TELRIC-compliant rates ``would be
entitled to a presumption of compliance with TELRIC if it
... could demonstrate that its costs were at or above the
costs in that state whose rates it adopted.''19
6. The Commission found that Verizon's switching
costs in Massachusetts were the same as or slightly higher
than its switching costs in New York.20 Thus, the
Commission concluded that the Massachusetts switching rates,
like their New York counterparts, ``are at present within
the range that a reasonable application of TELRIC principles
would produce,'' and granted Verizon's application to
provide interLATA services in Massachusetts.21
7. In the Massachusetts 271 Order, the Commission
acknowledged that the New York Public Service Commission
(``NYPSC'') was actively investigating UNE rates and might
ultimately modify the switching rates as a result of that
investigation.22 Nevertheless, the prospect of future rate
reductions in New York did not dissuade this Commission from
using the existing New York rates as a TELRIC benchmark.
The Commission pointed out that it had found those rates to
be TELRIC-compliant in December 1999 notwithstanding the
pendency of the NYPSC's rate investigation,23 and the Court
of Appeals upheld the Commission's conclusion.24 In
addition, the Commission noted that there had been no
intervening ``determination that those rates are not TELRIC-
compliant'' that precluded Verizon from relying on the New
York rates merely because they were under ``challenge or
review'' in that State.25 The Commission stated, however,
that a future decision by the NYPSC to revise New York
switching rates ``may undermine Verizon's reliance on those
rates in Massachusetts and its compliance with the
requirements of section 271, depending on the New York
Commission's conclusions.''26 Nevertheless, the Commission
did not adopt a suggestion from some commenters, including
WorldCom, that the approval of Verizon's application be
conditioned on Verizon's agreement to immediately and
completely mirror in Massachusetts any subsequent rate
reductions in New York.
8. The Commission also acknowledged in the
Massachusetts 271 Order that the Massachusetts DTE was in
the process of reviewing Verizon's UNE rates (``DTE Rate
Proceeding''), having begun a scheduled, five-year review of
those rates in January of 2001.27 Although commenters
questioned whether the DTE would adopt TELRIC-compliant
rates on a going-forward basis, the Commission expressed
confidence that the DTE would set UNE rates in compliance
with the Act and the Commission's implementing rules.28 The
Commission noted that there had been significant guidance on
what constitutes TELRIC-based rates since the DTE first set
UNE rates in 1996, including proceedings in other states
that specifically addressed changes in technologies and cost
information.29 The Commission presumed that the DTE, like
other state commissions, would examine the issues relevant
to costs during the course of its ongoing rate case and set
rates within the range that a reasonable application of
TELRIC principles would produce.30 The Commission expressly
contemplated that the DTE would take into account any rate
changes implemented in New York and the basis for those
changes.31
II.C. Developments in New York and Massachusetts
After the Massachusetts 271 Order
9. On January 28, 2002, the NYPSC issued an order
concluding its UNE rate investigation and setting new UNE
rates.32 The NY UNE Order substantially reduced switching
rates from the temporary rates previously established.33 A
subsequent order of the NYPSC made the new rates effective
March 1, 2002.34
10. After the new rates became effective in New York,
WorldCom requested that Verizon immediately reduce its
Massachusetts switching rates to match the new, lower
switching rates adopted in the NY UNE Order.35 Verizon
declined.36 On April 10, 2002, however, Verizon filed a
tariff (Verizon Interim Tariff) with the Massachusetts DTE
to reduce its switching rates on an interim basis until the
DTE issued its final rate order.37 The rates Verizon
proposed were lower than its current rates (i.e., the rates
benchmarked to the ``old'' New York rates), but higher than
the new New York rates set forth in the NY UNE Order.38
Verizon proposed that these rates become immediately
effective on April 10, 2002, rather than after the normal
30-day waiting period under Massachusetts law.39 Verizon
also proposed that these rates be subject to a true-up
against the permanent rates eventually established by the
DTE.40
On May 9, 2002, the Massachusetts DTE suspended Verizon's
Interim Tariff. 41 The DTE pointed out that ``the
Department very rarely'' has allowed ``interim rates to take
effect on the very verge of issuing a dispositive final
order on the very same matter.''42 The DTE found that its
pending ``adjudicatory process for establishing new UNE
rates should be allowed to run its course, particularly (but
not only) where [the DTE is] very close to a final decision,
and should not be preempted by activities driven by federal
litigation.''43 The DTE further stated that ``[a]llowing a
rate to take effect is an implicit statement that the rate
is just and reasonable ... [and] TELRIC-compliant'' and that
the DTE was not prepared at the time to make that judgment
about Verizon's Interim Tariff particularly because ``the
setting of such rates is what its extensive effort now near
the verge of completion'' in its rate proceeding ``has been
all about.''44 In the meantime, the DTE stated that the
current Massachusetts' UNE rates, ``including switching and
transport rates,'' ``are TELRIC-compliant.''45
Within days of the DTE Interim Tariff Decision, Verizon
offered amendments to its interconnection agreements with
WorldCom and other CLECs in Massachusetts that would have
trued-up the Massachusetts switching rates then in effect to
the rates that the DTE ultimately established in its rate
order, retroactive to March 1, 2002.46 Thus, Verizon
offered to agree that the switching rates that the DTE
ultimately set in its UNE rate order would be effective
retroactively to the effective date of the new New York
rates.47 Although WorldCom declined this offer, at least
two other CLECs accepted Verizon's offer before the DTE
issued its UNE rate order.48
On July 11, 2002, the DTE issued the Massachusetts UNE Rate
Order.49 The Order was the culmination of a comprehensive
eighteen month investigation that was pending at the time
the Commission granted the Massachusetts 271 Application.
The ``primary objective'' of the proceeding was to assess
``whether Verizon ha[d] substantiated the reasonableness of
its many UNE and interconnection cost components.''50 The
proceeding involved eighteen days of evidentiary hearings
and extensive briefing by numerous parties, including
WorldCom and Verizon.51 The DTE examined ``a myriad of cost
issues bearing on the development of recurring and non-
recurring rates for UNEs and interconnection, including UNE
loops, switching, inter-office transport, collocation, and
Operation Support Systems.''52 The DTE's Order thoroughly
analyzes the competing cost arguments made by Verizon and
the CLECs, including WorldCom, and the DTE appears to have
credited and adopted many of WorldCom's arguments concerning
switching rates.53 Indeed, according to WorldCom, the
Massachusetts DTE ``rejected Verizon's position on virtually
every significant switching input'' and ``has issued an
order that appears to contemplate switching rates roughly
equivalent to those adopted in New York.''54
II.D. WorldCom's Complaint
On April 24, 2002, WorldCom filed the present complaint
against Verizon.55 WorldCom alleges that as of January 29,
2002, Verizon's Massachusetts switching rates ceased to
comply with section 271(c)(2)(B)(ii) of the Act, because
those rates no longer mirrored the switching rates in New
York, the state to which Verizon's switching rates in
Massachusetts were ``benchmarked'' in the Massachusetts 271
Order.56 WorldCom asks us to determine whether Verizon
remained in compliance with section 271 from January 29,
2002 to August 5, 2002, and intends to pursue relief in a
supplemental complaint after the liability phase of this
proceeding is completed.57
III. DISCUSSION
III.A. WorldCom Has Failed to Prove That Verizon
Ceased to Comply With Section 271 During the
Limited, Interim Period Between the New York and
Massachusetts UNE Rate Orders.
11. This is the first opportunity the Commission has
had to address how ``benchmarking'' that is used to gain
section 271 authority affects a section 271(d)(6) complaint
proceeding after the ``benchmark'' state alters its rates.58
According to WorldCom, because (1) Verizon and the
Commission based the lawfulness of Verizon's switching rates
in Massachusetts solely on a ``benchmark'' to Verizon's
switching rates in New York, and (2) Verizon's switching
rates in New York have since substantially diminished with
no immediate matching reduction in Massachusetts, we now
have no choice but to rule that Verizon was out of
compliance with section 271 from the date of the NY UNE
Order to the date new rates are set in accordance with the
Massachusetts UNE Rate Order.59 WorldCom contends that
Verizon should have made available the new New York
switching rates immediately in Massachusetts, and that
Verizon's offer to true-up rates set in the Massachusetts
UNE Rate Order retroactively to the effective date of the
new New York rates was insufficient to remain in compliance
with section 271. For the following reasons, we disagree
and conclude that Verizon implemented reasonable interim
measures to remain in compliance with section 271 pending
the setting of new rates as ordered in the Massachusetts UNE
Rate Order. 60
III.A.1. The Massachusetts 271 Order Did Not
Require Verizon Immediately to Mirror the New
Switching Rates in New York.
12. We disagree with WorldCom that the Commission
required in the Massachusetts 271 Order an immediate rate
reduction in Massachusetts once New York altered its
rates.61 The Commission stated that it would watch New York
closely to observe whether it reduced UNE rates and the
basis for any such reductions.62 The Commission also stated
that a decision by the NYPSC to revise New York switching
rates ``may undermine Verizon's reliance on those rates in
Massachusetts and its compliance with the requirements of
section 271, depending on the New York Commission's
conclusions.''63 The Commission noted that it would work
``in concert with the Massachusetts [DTE], . . . to monitor
closely Verizon's post-approval compliance for Massachusetts
to ensure that Verizon does not `cease[] to meet any of the
conditions required for [section 271] approval'''64
(emphasis added). The Commission did not mandate that
Verizon immediately reduce its Massachusetts rates to the
level of any new rates set in the New York cost
proceeding.65 In fact, the Commission did not adopt that
proposed condition, and refused to prejudge any decision by
the NYPSC to modify its UNE rates or interfere with the
pending DTE proceeding.66
13. Nevertheless, the Commission contemplated that if
the NYPSC reduced its rates before the DTE had concluded its
rate proceeding, some action would likely be required on an
interim basis in Massachusetts to protect local competitors
until the DTE concluded its rate proceeding.67 As Verizon
points out, the Commission spoke favorably in the
Massachusetts 271 Order of a true-up mechanism that would
protect CLECs until the DTE concluded its rate proceeding:
``implementation of a true-up mechanism pending the outcome
of the DTE's current UNE cost-proceeding could help to
ensure that competitive LECs pay cost-based rates.''68
Notably, the Commission did not require Verizon to implement
such a true-up mechanism in order to obtain section 271
authority.69
14. Verizon argues that its offer to true-up the rates
set by the DTE in the Massachusetts UNE Rate Order
retroactively to March 1, 2002 was precisely the kind of
reasonable interim measure that the Commission contemplated
in the Massachusetts 271 Order.70 WorldCom argues, on the
other hand, that Verizon's true-up offer was flawed, because
the true-up was without regard to whether the rates set in
the Massachusetts UNE Rate Order were later found to be
unlawful.71 Thus, WorldCom complains that Verizon did not
contractually commit to re-true-up rates back to March 1,
2002, if the DTE-set rates were challenged, found to be
unlawfully high, and then reduced. Verizon points out,
however, that its true-up offer did not prevent CLECs who
accepted the offer from challenging the DTE-set rates and
arguing that they are entitled to refunds retroactive to
March 1, 2002 or earlier, if the rates are subsequently
declared unlawful.72 In particular, Verizon makes clear
that nothing in its true-up proposal prevented any CLEC from
asserting ``any claim that Verizon is obligated to true-up
to March 1, 2002, or earlier the existing Massachusetts
switching rates to whatever rates a court, the FCC, or the
DTE (on remand from a court of the FCC) ultimately sets in
Massachusetts.''73 Accordingly, because Verizon's true-up
proposal allowed CLECs to make claims seeking a true-up to
March 1, 2002, or earlier to rates ultimately deemed lawful
by a court or commission, we do not find unreasonable
Verizon's decision not to contractually bind itself to such
a re-true-up.
15. Further, Verizon also assumed risks with its true-
up proposal. Specifically, under Verizon's true-up
proposal, it relinquished any ability to seek an upward
true-up for switching usage rates.74 Moreover, Verizon's
true-up proposal reasonably limited the administrative
problems associated with potential future multiple true-
ups.75 Accordingly, we disagree with WorldCom's criticisms
of Verizon's true-up offer and conclude that we should
consider that offer in determining whether Verizon violated
section 271 pending the setting of new rates in accordance
with the Massachusetts UNE Rate Order.76
III.A.2. Verizon's Interim Measures After the NY
UNE Order and Before the Massachusetts UNE
Rate Order Satisfied its Obligations Under
Section 271.
16. As set forth below, Verizon's interim measures and
the particular circumstances of this case lead us to
conclude that Verizon did not violate section 271 of the Act
for the limited period of time in question. The critical
facts supporting this conclusion are: (1) Verizon proposed
to agree that the DTE-set rates would be retroactive to the
effective date of rates set by the NY UNE Order; 77 (2) the
rates set by the DTE are entitled to a TELRIC presumption in
the first instance; and (3) the interim period in question
was of short duration.78 Thus, we conclude that Verizon's
actions helped ensure that the local market remained open to
competition during the short, interim period between the
effective date of the new rates in New York and
Massachusetts.
17. Our conclusion that Verizon did not violate
section 271 during this interim period is supported by
Commission orders that have found interim rates to be
satisfactory, based on the particular facts presented in a
271 application. In these cases, for example, the
Commission has cited with approval instances where the state
commissions were showing progress in issuing final rates,
the interim period in question was expected to be short in
duration, and where refunds or true-ups would be available
once the final rates are issued.79 In the instant case, the
record in the Massachusetts DTE rate proceeding had closed
and the DTE had repeatedly declared its intention to issue
its final rate order imminently, which it did on July 11,
2002.80 Further, Verizon offered CLECs a means to obtain
true-ups to the switching rates ultimately set by the DTE,
retroactive to March 1, 2002. Thus, the short-term, interim
measures implemented here resemble measures the Commission
has approved in section 271 application proceedings.
18. Further, our finding that WorldCom failed to prove
that Verizon ceased to comply with section 271 during this
limited period reflects an acknowledgement of the
flexibility built into the rate-setting process under our
TELRIC rules. The Commission has approved rates under
section 271, even while recognizing that ``the costs of
inputs [may] have changed'' since the date those rates were
initially approved by the state acting pursuant to section
252.81 The Commission also has previously concluded that
neither the Act nor its implementing rules impose an
obligation on a BOC to update cost data in one state each
time it files a newer cost study in another state.82 The
United States Court of Appeals for the District of Columbia
Circuit similarly has recognized that, while rates may often
need adjustment to reflect newly discovered information,
such new information is not necessarily a basis to reject an
existing UNE rate as non-TELRIC.83 Moreover, the Supreme
Court has found that ``TELRIC rates in practice'' routinely
experience ``lags in price adjustments'' because the UNE
rates adopted by state commissions typically remain
effective for several years.84
19. WorldCom appears to acknowledge the inherent
flexibility in the rate-setting process, because WorldCom
made its own true-up proposal to Verizon to account for the
lag between the NY UNE Order and the Massachusetts UNE Rate
Order. In particular, WorldCom proposed to withdraw this
complaint if Verizon charged the new New York rates
effective January 29, 2002, with a true-up to whatever rates
the DTE set in its UNE rate order, if those rates were not
challenged or were deemed lawful after a challenge.85 Thus,
Worldcom concedes that it was appropriate, within the TELRIC
rate-setting framework, for Verizon to offer to charge
``placeholder'' switching rates for the interim period in
question, until the DTE issued its rate order. WorldCom
contends, however, that Verizon could select only the new
New York switching rates as the placeholder rates for the
interim period in question to remain in compliance with
section 271. For the reasons explained above, we disagree
that Verizon was so constrained.
20. Finally, we are not persuaded that Verizon ceased
to comply with section 271 because its offer to true-up was
effective only to March 1, 2002, and not to January 28,
2002, the release date of the NY UNE Order. March 1, 2002
is the effective date of the new rates in New York and
Verizon was therefore reasonable in selecting that date for
its true-up offer. Accordingly, we conclude that WorldCom
has failed to prove that Verizon ceased to comply with
section 271 for the interim period in question.
21. We wish to reiterate, however, that our conclusion
here hinges largely on the short duration of the interim
period. We would be less inclined to approve of interim
measures, such as Verizon's true-up proposal, if the interim
period in question were of longer or indefinite duration.
In addition, although the facts in this case do not reflect
evidence of gamesmanship by Verizon to avoid offering cost-
based UNE rates to its competitors during the interim
period, we note that in future similar proceedings, we will
not credit a BOC's behavior where we are presented with
persuasive evidence of gamesmanship by the BOC, including
delays in taking steps to ensure that competitors have
access to interim cost-based UNE rates pending the imminent
adoption of permanent cost-based rates by a state
commission. We will continue to assess the adequacy of
interim measures in the context of 271(d)(6) complaints on a
case-by-case basis in the future. Finally, although we are
denying the instant complaint, this is without prejudice to
whatever rights WorldCom may have to challenge the
Massachusetts UNE Rate Order itself.
IV. ORDERING CLAUSE
Accordingly, IT IS ORDERED that, pursuant to sections 1,
4(i), 4(j), 201(b), 208, and 271(d)(6) of the Communications
Act of 1934, as amended, 47 U.S.C. §§ 151, 154(i), 154(j),
201(b), 208, and 271(d)(6), that the formal complaint filed
by WorldCom against Verizon is hereby DENIED.
FEDERAL COMMUNICATIONS COMMISSION
Marlene H. Dortch
Secretary
SEPARATE STATEMENT OF CHAIRMAN MICHAEL K. POWELL
Re: WorldCom, Inc., v. Verizon New England Inc., Bell
Atlantic Communications, Inc. (d/b/a Verizon Long
Distance), NYNEX Long Distance Company (d/b/a Verizon
Enterprise Solutions) And Verizon Global Networks Inc.,
File No. EB-02-MD-017
The Order we issue today, in my view, sensibly denies
WorldCom's request that we find Verizon out of compliance
with section 271 in Massachusetts solely because the
Massachusetts DTE did not immediately reduce its UNE rates
to match the rates established by another state commission.
At bottom, our denial of WorldCom's request reflects our
firm belief that we should allow states to develop and
update UNE rates without unwarranted intervention or pre-
emptive actions by this Commission where none are necessary
to prevent harm to competition or consumers. This decision
also reflects the appropriate flexibility of the TELRIC
rate-setting process that the Supreme Court recently
acknowledged in affirming our TELRIC rules.86
Were I at all concerned that either Verizon or the
Massachusetts DTE had failed to act promptly and in the
interest of competition, I would not hesitate to find
Verizon in violation and impose an appropriate remedy,
including suspension or revocation of its section 271
authority. This is simply not that case. The Massachusetts
DTE, after a thorough 18 month proceeding, has adopted a
500+ page pricing order that directs Verizon to file rates
that WorldCom believes will be roughly equivalent to the
current New York rates,87 and in any event, are presumed to
comply with TELRIC absent challenge.88 The DTE did not
conclude its rate proceeding until late March, and yet it
was able to generate a thorough, voluminous final order less
than four months later. All of this has occurred within a
few months of New York's action that raised the question of
whether the rates that we approved in the Massachusetts 271
Order continued to fall within a range of what a reasonable
application of TELRIC principles would produce.89
I would add that WorldCom's request here amounts to a
collateral attack on the sound conclusion that Congress
granted to the states the authority to set UNE rates. The
Commission granted Verizon's 271 application to provide long
distance services in Massachusetts by relying, in part, on
UNE rates that were benchmarked to rates then in effect in
New York.90 Nevertheless, I did not support a requirement
that Verizon match immediately any New York rate reductions
in Massachusetts as a condition of its 271 authorization,
because such a ``mirroring'' requirement would unduly
federalize rate-setting and impermissibly subject the
Massachusetts DTE to the regulatory actions of another
state.91 The Commission properly declined to impose such a
requirement.
In the Massachusetts 271 proceeding, I stated that, if
the New York rates went down before the Massachusetts DTE
had concluded its rate proceeding, Verizon would likely need
to take some action that would have the practical effect of
charging cost-based switching rates for a short period until
the DTE established new rates. As the Massachusetts DTE
worked to conclude its process of updating its rates to
reflect changes in technology and economic assumptions
pursuant to the Commission's TELRIC pricing methodology,
Verizon took several affirmative steps to ensure continued
compliance with the Act, including its proposed tariff and
its offer to true-up the old rates to those ultimately
established by the Massachusetts DTE. Indeed, it appears
that if WorldCom had accepted Verizon's true-up offer, as
other CLECs did, WorldCom would have obtained essentially
all of the relief it sought in its complaint: the benefit
of paying rates that WorldCom believes will now be
equivalent to the new New York rates, retroactive to March
1, 2002. In light of Verizon's actions and the laudable
efforts of the Massachusetts DTE, I believe the company did
not act unreasonably and I find no cause for criticizing my
state colleagues here. I want to express my deep
appreciation for the enormous dedication and acumen
demonstrated by the Massachusetts DTE in this matter and for
issuing its decision before the statutory deadline in this
proceeding.
Finally, I want to emphasize that our Order expressly
relies on the specific circumstances presented here,
including the shortness of the interim period in question,
Verizon's efforts to remain in compliance with section 271
during the interim period, and the DTE's swift action to
conclude its rate proceeding and establish new rates. Just
as the Commission took swift, substantial action when
problems with Verizon's OSS in New York were identified,92
we will take similarly swift and substantial action if, in
the future, BOCs or states do not act quickly to ensure
continued compliance with the market-opening requirements of
section 271. We will remain vigilant in exercising our
271(d)(6) enforcement authority in future cases to ensure
that competitors are not denied access to cost-based rates. STATEMENT OF
COMMISSIONER MICHAEL J. COPPS,
DISSENTING
Re: WorldCom, Inc., v. Verizon New England Inc., Bell
Atlantic Communications, Inc. (d/b/a Verizon Long
Distance), NYNEX Long Distance Company (d/b/a Verizon
Enterprise Solutions) And Verizon Global Networks Inc.
In the Telecommunications Act of 1996, Congress sought
to promote competition in all telecommunications markets.
One of the central tools that Congress created to achieve
this objective is section 271 of the Act. Pursuant to this
section, a Bell company may enter the long-distance market,
but only after it opens its local markets to competition.
Congress recognized, however, that the grant of a section
271 application is not the end of the road. It therefore
required Bell companies to maintain the openness of their
local markets and established a 90-day period to adjudicate
complaints that a Bell company has ceased to meet any of the
requirements in section 271.
Congress directed the Commission to establish a process
to adjudicate such complaints under section 271(d)(6). The
Commission, in its 271 orders, has continually stated that
it would not hesitate to use its authority under section
271(d)(6) to ensure continued compliance with the Act.
Today's decision is the first time that the Commission is
setting in place such a process. Notwithstanding the
significant efforts by the Massachusetts Department of
Telecommunications and Energy (DTE) to open its local
markets to competition, I dissent from today's decision
because it puts in place a framework that I fear will
preclude the Commission from effectively adjudicating
pricing complaints in the future.
In the Massachusetts Order, the Commission approved
rates based on a comparison to rates in neighboring New
York. The Commission was aware that rates in New York were
under review, but approved the application recognizing that
``a decision by the New York Commission to modify these UNE
rates may undermine Verizon's reliance on those rates in
Massachusetts and its compliance with the requirements of
section 271, depending on the conclusions of the New York
Commission.''93 Since that time, the New York Commission
not only modified its rates, but this Commission has also
concluded that it is ``inappropriate'' to evaluate
compliance with the section 271 pricing requirements ``based
on a benchmark comparison to superseded New York rates.''94
The majority makes much of the fact that the Commission did
not require Verizon to reduce immediately its rates in
Massachusetts and that a Bell company need not update its
cost studies in one state merely because it updates its cost
studies in another state. But these statements miss the
point entirely. The issue is not whether Verizon would need
to update rates in Massachusetts just because its rates in
other states were updated. The issue is whether the rates
in Massachusetts comply with TELRIC, as Congress required in
section 271.
It is clear that the only basis under which the
Commission approved rates in Massachusetts was the
comparison to superseded New York rates, and that the
Commission has since stated that Bell companies may no
longer rely on those rates.95 The majority does not dispute
that the rates in effect in Massachusetts did not comply
with TELRIC on the date the complaint was filed. The
majority further does not dispute that the rates in effect
today also do not comply with TELRIC. Although the
Massachusetts DTE issued an order in its cost proceeding on
July 11, the rates will not be set - or even known - until
Verizon submits a compliance filing on August 5. Indeed, we
do not even know if the rates that will be adopted following
the compliance filing will comply with TELRIC
Because the majority is unable to conclude that the
current rates comply with section 271, the majority must
rely on Verizon's offer of a true-up to find that there was
no violation. Although the Commission has approved section
271 applications in which rates are interim subject to a
true-up, the true -up here does not meet the conditions that
the Commission has relied on in the past. As the majority
points out, in previous section 271 applications, the
relevant state commissions had pending cost proceedings to
set permanent rates and had ordered that the interim rates
would be subject to a true-up for all carriers. In those
instances, the state commission set interim rates and
retained control of the true-up process. In contrast, the
rates in effect on day 1 and on day 90 of this complaint are
permanent rates that the Massachusetts DTE has not subjected
to a true-up. It is only the carrier that has offered a
true-up, but with substantial limitations. The true-up was
only offered to the rates adopted by the Massachusetts DTE
even if those rates were later deemed not to comply with
TELRIC. The true-up was only available to those carriers
that agreed to forego the ability to challenge the current
rates. And the true-up was not available to any carrier
that had not accepted it prior to the decision of the
Massachusetts DTE. The Commission has never accepted a
true-up offered by a carrier with the conditions that
Verizon placed on it here.
Given that Verizon does not have TELRIC-compliant rates
in effect, I find that Verizon failed to comply with a
critical provision of section 271. I do not conclude that
the true-up saves Verizon, because it is of limited scope,
is no longer available, and was offered only to those
carriers that agreed not to challenge the rates. I cannot
support the decision of the majority that there is no
violation. Additionally, I fear that such a decision
provides the ability for game-playing in the future. Under
the majority's test, a Bell company may avoid a finding of
violating section 271 by offering a limited true-up only to
those carriers that agree not to challenge the rates under
section 271(d)(6). By this reasoning, would the Commission
grant a section 271 application if a Bell company offered a
true-up only to those carriers that agreed not to contest
the rates in the application?
Although I would have found that Verizon ceased to
comply with a provision of section 271, the Act provides
several remedies including suspension of long-distance
authority, revocation of such authority, or an order to
correct the deficiency. In this instance, I would neither
have revoked nor suspended Verizon's authority. I would
instead have ordered Verizon to correct the deficiency -
something the Massachusetts DTE is now attempting to do.
Verizon had sought to reduce its rates - albeit not to the
New York rates - but was denied by the Massachusetts DTE
because it was close to completing its cost proceeding. The
Massachusetts DTE has now completed its extensive review,
and, as even WorldCom admits, appears to set rates roughly
comparable to those now in effect in New York. I commend
the Massachusetts DTE for its on-going efforts to open the
local market to competition.
By finding a violation, and ordering Verizon to correct
the deficiency, the Commission could have resolved this
complaint and maintained the integrity of its enforcement
process. I fear that the majority's resolution here may
substantially undermine our enforcement ability in future
complaints.
_________________________
1 47 U.S.C. §§ 208, 271(d)(6).
2 Formal Complaint, File No. EB-02-MD-017 (filed Apr.
24, 2002) (``Complaint'') at 1-2. See Application of
Verizon New England Inc., Bell Atlantic Communications,
Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance
Company (d/b/a Verizon Enterprises Solutions), and Verizon
Global Networks, Inc., For Authorization to Provide In-
Region InterLATA Services in Massachusetts, Memorandum
Opinion and Order, 16 FCC Rcd 8988, 8996-9006 (2001)
(Massachusetts 271 Order) at ¶¶ 16-36.
3 The parties generally agree that switching includes
the following elements: switching usage, port, transport,
and signaling. See Supplemental Joint Statement of
WorldCom and Verizon, File No. EB-02-MD-017 (filed May 13,
2002) (``Supp. Joint Statement'') at 14 and 17. This order
refers to the individual rates for these elements
collectively and generally as ``switching rates.''
4 Complaint at ¶¶ 26, 144. WorldCom intends to seek
damages and other relief in a supplemental complaint
proceeding. Complaint, ¶ 34. See 47 C.F.R. §§ 1.722(d)
and (e).
5 Investigation by the Department of Telecommunications
and Energy on its own Motion into the Appropriate Pricing,
based upon Total Element Long-Run Incremental Costs, for
Unbundled Network Elements and Combinations of Unbundled
Network Elements, and the Appropriate Avoided-Cost Discount
for Verizon New England, Inc. d/b/a Verizon Massachusetts'
Resale Services in the Commonwealth of Massachusetts,
Order, D.T.E. 01-20 (rel. July 11, 2002) (Massachusetts UNE
Rate Order). Although the DTE issued its order on July 11,
2002, the new rates will not be established until after
Verizon makes a compliance filing in accordance with the
DTE's rulings on August 5, 2002.
6 Supp. Joint Statement at 2, ¶ 2.
7 Id. at 2, ¶ 3.
8 47 U.S.C. § 271. See Massachusetts 271 Order, 16 FCC
Rcd at 8993-94, ¶¶ 10-11; Joint Application by SBC for
Provision of In-Region InterLATA Services in Kansas and
Oklahoma, Memorandum Opinion and Order, 16 FCC Rcd 6237,
6241-42, at ¶¶ 7-10 (2001) (``Kansas/Oklahoma 271 Order''),
aff'd in part and remanded in part, Sprint Communications
Co. v. FCC, 274 F.3d 549 (D.C. Cir. 2001); 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, Memorandum Opinion and
Order, 15 FCC Rcd 3953, 3958, 3961-63, at ¶¶ 8, 17-20
(1999) (New York 271 Order), aff'd, AT&T Corp. v. FCC, 220
F.3d 607, 616-18. For our purposes here, Verizon is a
``BOC'' within the meaning of section 153(4) of the Act.
47 U.S.C. § 153(4).
9 47 U.S.C. § 271(c)(2)(B).
10 47 U.S.C. § 271(c)(2)(B)(ii). Massachusetts 271
Order, 16 FCC Rcd at 8996-7, ¶¶ 16-17; Kansas/Oklahoma 271
Order, 16 FCC Rcd at 6259-61, ¶¶ 47-48; New York 271 Order,
15 FCC Rcd at 3977-79, ¶¶ 63-66. Checklist item 2 of
section 271(c)(2)(B) states that the BOC must provide
access to network elements in accordance with section
252(d)(1) of the Act. 47 U.S.C. § 271(c)(2)(B)(ii).
Section 252(d)(1) provides that the state shall set rates
that are non-discriminatory and based on costs and that may
include a reasonable profit. 47 U.S.C. § 252(d)(1).
11 Implementation of the Local Competition Provisions in
the Telecommunications Act of 1996, First Report and Order,
11 FCC Rcd 15499, 15812-929 at ¶¶ 618-862 (1996) (Local
Competition First Report and Order), aff'd in part and
vacated in part sub nom., Competitive Telecommunications
Ass'n v. FCC, 117 F.3d 1068 (8th Cir. 1997) and Iowa Utils.
Bd. v. FCC, 120 F.3d 753 (8th Cir. 1997), aff'd in part and
remanded, AT&T v. Iowa Utils. Bd., 525 U.S. 366 (1999), on
remand, Iowa Utils Bd. v. FCC, 219 F.3d 744 (8th Cir. 2000),
rev'd in part, Verizon Communications, Inc. v. FCC, 122 S.
Ct. 1646 (2002).
12 See Local Competition First Report and Order, 11 FCC
Rcd at 15844-869, ¶¶ 672-732; see also 47 C.F.R. §§ 51.501-
51.515. The Supreme Court recently upheld these rules.
Verizon Communications, Inc. v. FCC, 122 S. Ct. 1646
(2002).
13 Supp. Joint Statement at 3, ¶ 8. See Massachusetts
271 Order, 16 FCC Rcd at 8989, ¶ 1.
14 Massachusetts 271 Order, 16 FCC Rcd at 8999-9000, ¶
21. See also Supp. Joint Statement at 3, ¶ 10; Complaint
at ¶ 17. The Massachusetts DTE originally had set interim
switching rates in December 1996 that it made ``permanent''
in March 1999. Massachusetts 271 Order, 16 FCC Rcd at
8997-98, ¶ 18. On July 24, 2000, the Massachusetts DTE
subsequently lowered these ``permanent'' switching rates by
approving lower ``promotional'' switching rates as part of
an interconnection agreement that Verizon made available to
similarly situated carriers. Id. These promotional
switching rates were in effect when Verizon filed its first
section 271 application for Massachusetts. While this
first application was pending, Verizon further voluntarily
lowered its Massachusetts switching rates in October 2000
to the same level as the switching rates that were then in
effect in New York. Id. Although Verizon subsequently
withdrew this first application, its Massachusetts
switching rates remained equivalent to the New York
switching rates when it filed its second Massachusetts
application in January 2001. Id. at 8991-92, 8997-9000, ¶¶
7, 18, 21.
15 Id. at 9001-02, ¶ 26.
16 Massachusetts 271 Order, 16 FCC Rcd at 9002, ¶ 28.
17 See id. at 8999-9002, ¶¶ 21, 28 & n. 56.
18 Id. at 9002, ¶ 28.
19 Kansas/Oklahoma 271 Order, 16 FCC Rcd at 6276-77, ¶ 82
& n.244.
20 Massachusetts 271 Order, 16 FCC Rcd at 9001-02, ¶¶ 26-
27.
21 Id. at 9002, ¶ 27. The Commission determined, of
course, that Verizon had complied in Massachusetts with all
of the other requirements of section 271 as well. Id. at
8989-90, 8996-9117 ¶¶ 1, 15-231.
22 Id. at 9002, ¶ 29. The NYPSC cost proceeding was
initiated to address, inter alia, issues relating to
changes in technologies and switching costs in New York,
including a switch discount issue that was raised late in
the NYPSC's prior rate proceeding. Proceeding on Motion of
the Commission to Examine New York Telephone Company's
Rates for Unbundled Network Elements, Case Nos. 98-C-1357,
95-0657, 94-C-0095, 91-C-1174, Order Denying Motion to
Reopen Phase 1 and Instituting New Proceeding at 10-12
(N.Y.P.S.C. Sept. 30, 1998). Because of the uncertainty
regarding newly adduced evidence in its prior rate
proceeding, the NYPSC deemed the switching rates to be
temporary, subject to possible refund or reparation.
Proceeding on Motion of the Commission to Examine New York
Telephone Company's Rates for Unbundled Network Elements,
Case 98-C-1357, Order on Unbundled Network Element Rates at
42 (N.Y.P.S.C. Jan. 28, 2002) (NY UNE Order).
23 New York 271 Order, 15 FCC Rcd at 4083-86, ¶¶ 242-247.
24 AT&T v. FCC, 220 F.3d 607, 616-18 (D.C. Cir. 2000).
25 Massachusetts 271 Order, 16 FCC Rcd at 9003, ¶ 31.
26 Massachusetts 271 Order, 16 FCC Rcd at 9003-04, ¶ 30.
27 Id. at 9004-06, ¶¶ 33-36.
28 Id. at 9005, ¶ 35.
29 Id. at 9005, ¶ 35.
30 Id. at 9005, ¶ 34.
31 Id. at 9005-06, ¶¶ 35-36.
32 NY UNE Order; Joint Statement at 3, ¶ 7.
33 See Complaint at ¶ 25. The rates were reduced by
approximately 40-45%. See Supp. Joint Statement at 19 and
Exhibit C. In its order, the NYPSC did not state whether
it had erred in setting the previous switching rates, but
encouraged the parties to negotiate the issue of whether
refunds were warranted. NY UNE Order at 42-47.
34 Proceeding on Motion of the Commission to Consider
Cost Recovery by Verizon and to Investigate the Future
Regulatory Framework, Order Instituting Verizon Incentive
Plan, Case Nos. 00-C-1945, 98-C-1357 (N.Y.P.S.C. Feb. 27,
2002).
35 Complaint at ¶ 27; Answer, File No. EB-02-MD-017
(filed May 1, 2002) (``Answer'') at ¶ 27.
36 Complaint at ¶ 28; Answer at ¶ 28.
37 Letter to Mary Cottrell, Secretary, Department of
Telecommunications and Energy, from Region President-
Massachusetts/Rhode Island for Verizon (Apr. 10, 2002)
(Verizon Interim Tariff Letter).
38 Complaint at ¶ 80.
39 Verizon Interim Tariff Letter at 2. The Massachusetts
DTE had granted a similar request from Verizon in adopting
the lower UNE rates in October 2000 upon which the
Commission's grant of Verizon's section 271 authorization
in Massachusetts was based. See Massachusetts 271 Order,
16 FCC Rcd at 8998, ¶ 18.
40 Id. at 2. The true-up that Verizon proposed would
have made the rates set by the DTE in the DTE Rate
Proceeding effective retroactively to April 10. Thus, if
the DTE's new rates were lower than the rates proposed in
Verizon's Interim Tariff, then Verizon would have refunded
the difference between the amounts CLECs paid for affected
UNEs during the period between April 10 and the DTE's final
rate order, and the amount they would have paid if the new
rates had been charged during that period. Verizon Interim
Tariff Letter at 2; DTE Interim Tariff Decision at 2.
41 DTE Interim Tariff Decision at 4.
42 Id. at 6.
43 Id. Although we respect the DTE's decision to suspend
Verizon's Interim Tariff, we would ordinarily expect state
commissions to accept interim lower rates that are subject
to a true-up once the state's permanent rates are set.
44 Id.
45 Id. at 4.
46 Opening Brief of Verizon, File No. EB-02-MD-017 (filed
May 29, 2002) at 10; Supp. Joint Statement at 26-30.
47 See Letter from Catherine K. Ronis, Counsel for
Verizon, to Ms. Marlene Dortch, Secretary, FCC, File No.
EB-02-MD-017 (filed June 3, 2002) (Verizon Supplemental
Submission).
48 Motion to Supplement the Record, File No. EB-02-MD-017
(filed July 10, 2002). The offer expired once the DTE
issued the Massachusetts UNE Rate Order. See Verizon
Supplemental Submission at 2.
49 See Massachusetts UNE Rate Order.
50 See Massachusetts UNE Rate Order at 4.
51 See Massachusetts UNE Rate Order at 4-10.
52 See Massachusetts UNE Rate Order at Executive Summary.
53 See Massachusetts UNE Rate Order at 276-316.
54 Letter from Lisa B. Smith, Counsel for WorldCom, Inc.,
to Alexander P. Starr, Chief, Market Disputes Resolution
Division, FCC, File No. EB-02-MD-017 (filed July 19, 2002)
at 2.
55 See Complaint.
56 Id. at ¶¶ 26, 144.
57 Complaint at ¶¶ 34, 144. See 47 C.F.R. §§ 1.722(d)
and (e). See also Reply Brief of WorldCom, Inc., File No.
EB-02-MD-017 (filed June 6, 2002) (``WorldCom Reply
Brief'') at 17.
58 WorldCom Reply Brief at 14.
59 Complaint at ¶¶ 21-22, 25-26; Opening Brief of
WorldCom, Inc., File No. EB-02-MD-017 (filed May 29, 2002)
(``WorldCom Opening Brief'') at 25-30.
60 WorldCom filed a Motion to Strike one of Verizon's
affirmative defenses and related portions of Verizon's
briefs, arguing that Verizon improperly modified its
affirmative defenses subsequent to filing its answer.
Motion to Strike, File No. EB-02-MD-017 (filed June 6,
2002). Verizon filed an opposition to WorldCom's motion.
Opposition to Motion to Strike, File No. EB-02-MD-017
(filed June 7, 2002). We deny this motion as moot, because
our decision does not depend or rely upon the challenged
affirmative defenses.
61 Complaint at ¶ 22.
62 Massachusetts 271 Order, 16 FCC Rcd at 9002-03, ¶¶ 30-
31.
63 Id. at 9003-04, ¶ 30 (emphasis added).
64 Id. at 9125, ¶ 250; 47 U.S.C. § 271(d)(6)(A).
65 See Answer at ¶¶ 21-23.
66 See Massachusetts 271 Order, 16 FCC Rcd at 9002-03, ¶
30-31; Answer at 15-16.
67 See Massachusetts 271 Order, 16 FCC Rcd at ¶ 34.
68 Answer at 17; Massachusetts 271 Order, 16 FCC Rcd at
9005, ¶ 34.
69 Massachusetts 271 Order, 16 FCC Rcd at 9005, ¶ 34.
70 Verizon also argues that its true-up proposal comports
with what Chairman Powell envisioned in his separate
statement. Reply Brief of Verizon, File No. EB-02-MD-017
(filed June 6, 2002) (``Verizon Reply Brief'') at 25-26.
71 WorldCom Reply Brief at 13-17.
72 See Verizon Supplemental Submission at 3; Verizon
Reply Brief at 24.
73 See Verizon Supplemental Submission at 2-3 and
attached draft Agreement and Release at ¶ 2(a); Verizon
Reply Brief at 24-25. Although WorldCom complains that
Verizon conditioned the true-up offer on agreement by the
CLEC not to challenge the rates in effect during the
interim period as unlawful under section 271, that
restriction seems reasonable. Verizon was simply asking
the CLECs who accepted the proposal to refrain from filing
a complaint challenging the existing rates during this
interim period before the DTE issued its rate order. See,
e.g. Verizon Reply Brief at 25 (explaining that a CLEC ``is
eligible for Verizon's true-up offer, as long as it agrees
not to accept that offer while at the same time arguing
that Verizon's existing Massachusetts rates cause Verizon,
at this time, to be in violation of section 271 of the
Act.'') (emphasis added). Verizon's proposal did not
prevent CLECs, once the Massachusetts DTE order issued,
from filing challenges to that order and arguing that any
rates set as a result of a successful challenge be
retroactive to March 1st or earlier. See, e.g. Verizon
Reply Brief at 24 (``nothing in the proposed
interconnection agreement amendment would prohibit WorldCom
or any other CLEC from raising arguments before a court or
the DTE that any new rate set subsequent to the DTE's
decision should be applied retroactively to March.'')
74 Verizon's proposal stated that ``if the average rate
per minute of use by the CLEC during the true-up period for
an individual usage element, using the rates applicable
absent any true-up, is lower than the average rate per
minute of use by the CLEC during the true-up period for the
same usage element using the [DTE set] Rate, then the [DTE
set] Rate for that usage element will not apply
retroactively.'' Verizon Supplemental Submission at 2. In
addition, Verizon assumed the risk that if the DTE sets
rates that were, in Verizon's view, too low, the true-up
offer obligated Verizon to charge those low rates until it
successfully challenged those rates on appeal. Id. at 1.
75 Verizon Supplemental Submission at 2. By agreeing to
true-up without regard to whether the rates were
challenged, Verizon reduced the likelihood of having to
calculate true-ups multiple times.
76 See Verizon Reply Brief at 23-26; Answer at 15;
Opening Brief of Verizon, File No. EB-02-MD-017 (filed May
29, 2002) (``Verizon Opening Brief'') at 11-15. .
77 See Verizon Supplemental Submission at 1-2.
78 Massachusetts 271 Order, 16 FCC Rcd at 8999, 9006, ¶¶
20, 37. The Commission has previously held that it will
not conduct a de novo review of a state's pricing
determinations and will reject a 271 application only if
``basic TELRIC applications are violated or the state
commission makes clear errors in factual findings on
matters so substantial that the end result falls outside
the range that the reasonable application of TELRIC
principles would produce.'' Massachusetts 271 Order at ¶
20. The initial deference due the states in setting UNE
rates derives from the statutory framework, pursuant to
which states establish rates in the first instance. See,
e.g., 47 U.S.C. § 252(d)(1). WorldCom implicitly concedes
that the rates set by the DTE are presumed lawful in the
first instance. This concession is reflected in the fact
that WorldCom proposed to Verizon that it charge the new
New York switching rates effective January 29, 2002, but
with a true-up to the rates set by the DTE if no party
challenged those rates. WorldCom Reply Brief at 16 and Tab
A. Thus, WorldCom acknowledges that the DTE's rates are
lawful unless and until a party successfully challenges
those rates.
79 See Kansas/Oklahoma Order, 16 FCC Rcd at 6359-61,
¶¶ 238, 240 (the Kansas and Oklahoma Commissions had
pending cost proceedings to set permanent rates, and the
commissions had ordered the interim rates be subject to
true-up); Joint Application by SBC Communications, Inc.,
Southwestern Bell Telephone Company, and Southwestern Bell
Communications Services, Inc. d/b/a Southwestern Bell Long
Distance Pursuant to Section 271 of the Telecommunications
Act of 1996 to Provide In-Region, InterLATA Services in
Arkansas and Missouri, Memorandum Opinion and Order, 16 FCC
Rcd 20719, 20750, ¶ 64 (2001) (Missouri Commission had
scheduled hearings for the month following the 271
authorization grant to conclude the setting of permanent
rates, and made provision for refund or true-up once
permanent rates were set); Application by SBC
Communications, Inc., Southwestern Bell Telephone Company
and Southwestern Bell Communications Services, Inc. d/b/a
Southwestern Bell Long Distance Pursuant to Section 271 of
the Telecommunications Act of 1996, To Provide In-Region,
InterLATA Services In Texas, Memorandum Opinion and Order,
15 FCC Rcd 18354, 18395-96, ¶ 90 (2000) (Texas Commission
had set up a schedule to set permanent rates, with a
hearing scheduled for the same month as 271 authorization
grant, and had indicated to parties that the interim rates
were subject to refund or true-up); New York 271 Order, 15
FCC Rcd at 4090, ¶ 256 (NYPSC had an accelerated rate
proceeding underway to set permanent XDSL rates, subject to
refund).
80 See DTE Letter Submission at 2; DTE Interim Tariff
Decision at 5-6 & n 7.
81 Georgia/Louisiana 271 Order, 2002 WL 992213 at ¶ 96.
82 Vermont 271 Order, 2002 WL 598046, ¶ 22.
83 AT&T v. FCC, 220 F.3d at 617-18. Indeed, as the D.C.
Circuit noted in affirming the New York 271 Order, ``[n]ot
only are state-agency-approved rates always subject to
refinement, but we suspect that rates may often need
adjustment to reflect newly discovered information, like
that about Bell Atlantic's future discounts''; the court
specifically noted that such ``new information'' does not
make the existing rates non-TELRIC and subject to rejection
under section 271. Id. at 617.
84 Verizon Communications, Inc. v. FCC, 122 S. Ct. 1646,
1669 (2001).
85 WorldCom Reply at 16 & Tab A.
86 See Verizon Communications, Inc. v. FCC, 122 S. Ct.
1646, 1660-61, 1669-70 (2002).
87 Letter from Lisa B. Smith, counsel for WorldCom, Inc.,
to Alexander P. Starr, Chief, Market Dispute Resolution
Division, FCC, File No. EB-02-MD-017 (filed July 19, 2002)
at 2.
88 The initial deference due the states in setting UNE
rates derives from the statutory framework, pursuant to
which states establish rates in the first instance. See,
e.g., 47 U.S.C. § 252(d)(1). In the Massachusetts 271
Order, we stated ``as always, we presume that the
Massachusetts Department, like other state Commissions,
will . . . set rates within the range of what a reasonable
application of TELRIC principles would produce.''
Massachusetts 271 Order, 16 FCC Rcd at 9005-9006, ¶ 35.
89 See Proceeding on Motion of the Commission to Examine
New York Telephone Company's Rates for Unbundled Network
Elements, Case 98-C-1357, Order on Unbundled Network
Element Rates at 42 (N.Y.P.S.C. Jan. 28, 2002).
90 In doing so, the Commission acknowledged the existence
of pending rate proceedings in both New York and
Massachusetts that would result in new UNE rates. See
Application of Verizon New England Inc., Bell Atlantic
Communications, Inc. (d/b/a Verizon Long Distance), NYNEX
Long Distance Company (d/b/a Verizon Enterprises
Solutions), and Verizon Global Networks, Inc., For
Authorization to Provide In-Region InterLATA Services in
Massachusetts, Memorandum Opinion and Order, 16 FCC Rcd
8988, 8996-9006 (2001) (Massachusetts 271 Order) at ¶¶ 16-
36. The Commission also acknowledged that there might be a
time lag between the setting of new rates in New York and
in Massachusetts. Id.
91 Massachusetts 271 Order, Separate Statement of
Chairman Powell.
92 See Bell Atlantic-New York, Authorization Under
Section 271 of the Communications Act to provide In-Region,
InterLATA Service in the State of New York, File No. EB-00-
IH-0085, Order, 15 FCC Rcd 5413 (2000).
93 Application of Verizon New England Inc., Bell Atlantic
Communications, Inc. (d/b/a Verizon Long Distance), NYNEX
Long Distance Company (d/b/a Verizon Enterprise Solutions)
And Verizon Global Networks Inc., For Authorization to
Provide In-Region InterLATA Services in Massachusetts,
Memorandum Opinion and Order, 16 FCC Rcd 8988, 9002-03
(2001) (Massachusetts 271 Order).
94 Application by Verizon New England, Inc., Bell Atlantic
Communications, Inc. (d/b/a Verizon Long Distance), NYNEX
Long Distance Company (d/b/a Verizon Enterprise Solutions),
Verizon Global Networks, Inc., and Verizon Select Services
Inc., for Authorization to Provide In-Region InterLATA
Services in Rhode Island, Memorandum Opinion and Order, 17
FCC Rcd 3300, 3324 (2002).
95 Id. at 3321-24.