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Before the
Federal Communications Commission
Washington, D.C. 20554
NON-PUBLIC
FOR INTERNAL USE ONLY
In the Matters of
GTE Corporation, Transferor,
And
Bell Atlantic Corporation, Transferee, For Consent to
Transfer Control of Domestic and International
Sections 214 and 310 Authorization and 310
Authorizations and Application to Transfer Control
of a Submarine Cable Landing License
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CC Docket No. 98-184
ORDER ON RECONSIDERATION
Adopted: November 25, 2003 Released: November
26, 2003
By the Chief, Enforcement Bureau:
I. INTRODUCTION
In this Order, we deny Verizon Communications, Inc.'s
(``Verizon'') Petition for Reconsideration (``Petition'') of
our Memorandum Opinion and Order (``Order'')1 regarding the
calculation of certain voluntary payments under the Carrier-
to-Carrier Performance Plan in the Bell Atlantic/GTE Merger
Order.2 Specifically, we reject Verizon's claim that it is
entitled to calculate its payments in the same manner as SBC
Communications, Inc. (``SBC'') under its merger performance
plan.
II. BACKGROUND
In the Bell Atlantic/GTE Merger Order, the Commission
adopted, with modifications, certain voluntary conditions
submitted by Bell Atlantic and GTE intended to mitigate any
public interest harms that might otherwise arise from the
merger, including poor wholesale service quality to
competitive local exchange carriers (``CLECs''). 3 These
merger conditions include a Carrier-to-Carrier Performance
Plan consisting of two parts. First, the merged company,
now Verizon, must report to the Commission monthly
performance measurement data showing the quality of service
elements that it provides to CLECs, computed according to
detailed instructions for each service element. Second, if
Verizon fails to meet certain performance goals, it must
make voluntary, self-executing payments to the U.S.
Treasury, again computed according to detailed
instructions.4
The Verizon merger performance plan (``Verizon Merger
Plan'') was generally modeled on two performance plans
originally developed in collaborative proceedings before the
state public utility commissions of New York and California
(``State Plans''). These State Plans concerned agreements
or terms and conditions for interconnection of incumbent
local exchange carriers with CLECs, pursuant to sections 251
and 252 of the Communications Act of 1934, as amended (``the
Act''), 47 U.S.C. §§ 251, 252.5 The Verizon Merger Plan for
the post-merger Bell Atlantic legacy states, i.e., the pre-
merger state operating companies of the Bell Atlantic
Corporation, was largely based on the New York State Plan,
and the Verizon Merger Plan for the post-merger GTE legacy
states was similarly based on the California State Plan.6
In correspondence with the Bureau from April to October,
2002, Verizon and the independent auditor for Verizon's
compliance with the Merger Plan addressed Verizon's existing
practice regarding performance measurements using averages
or means (e.g., Trouble Duration Interval, OSS Response
Time).7 Verizon was imposing a certain cap on one factor in
the calculation midway through the process, in addition to
other caps explicitly provided by the calculation rules.8
Verizon contended on various substantive grounds that the
voluntary payment formula for this type of metrics permitted
the use of this additional cap. Verizon also argued that
the Bureau should allow it to use the cap because the Common
Carrier Bureau (``CCB'') had previously approved a similar
cap for the merger performance plan of SBC mandated by the
SBC/Ameritech Merger Order.9 Verizon noted that the Verizon
Merger Plan for the Bell Atlantic legacy states was based in
some respects on the SBC merger conditions for the legacy
states of the former Southwestern Bell Telephone Company and
the former Ameritech Corporation (``SWBT/Ameritech'').10 In
the Order, we rejected Verizon's claims on both the merits
of the proposed cap and the alleged parallel with the SBC
Merger Plan. Verizon seeks reconsideration of the Order on
both grounds. As discussed below, we deny Verizon's
Petition.
III. DISCUSSION
Pursuant to section 1.106 of our rules, parties may petition
for reconsideration of final Commission actions.11
Reconsideration is appropriate only where the petitioner
either shows a material error or omission in the original
order or raises additional facts not known or existing until
after the petitioner's last opportunity to present such
matters.12 We will deny any petition that merely repeats
arguments previously considered and rejected.13
Verizon's Petition briefly reiterates its arguments for the
additional cap on the merits.14 Because we have already
addressed those arguments in the Order, 15 we will confine
our discussion here to the argument based on the asserted
analogy with the SBC Merger Plan. We emphasize, however,
that our conclusions in the Order¾that Verizon's self-
imposed cap is inconsistent with both the terms and purpose
of the payment rule¾substantially inform our discussion of
whether a cap is justified under an asserted analogy to the
SBC Merger Plan.
As noted above, the former Common Carrier Bureau permitted
such a cap under the SBC/Ameritech Merger Order in a letter
dated February 6, 2002, responding to an SBC proposal
originating the cap methodology.16 The Common Carrier
Bureau first concluded that the language and logic of the
existing payment formula did not support such
modification.17 The Common Carrier Bureau further decided,
however, that it would allow the cap for the SWBT/Ameritech
legacy states because the Texas commission had previously
done so for its own state plan. The letter stated that
``administrative efficiency would be served if SBC were
permitted to apply this payment calculation in a fashion
that mirrors the Texas performance plan,'' because parts of
the SBC Merger Plan for the SWBT/Ameritech legacy states
were expressly modeled after the Texas State Plan.18
The Verizon Merger Plan for the Bell Atlantic legacy states
is similar to the SBC Merger Plan for the SWBT/Ameritech
legacy states regarding this payment calculation because
Verizon explicitly borrowed many features of the SBC Merger
Plan. Verizon argues in its Petition, as it did in its
previous correspondence, that it is similarly situated to
SBC in terms of comity and administrative efficiency.19
Accordingly, Verizon concludes, if the cap is not allowed in
the Verizon Merger Plan for all of the Bell Atlantic legacy
states in the same way as it is allowed in the SBC Merger
Plan for all of the SWBT/Ameritech legacy states (other than
Texas itself), then Verizon would be subject to an arbitrary
distinction between similarly situated parties.20
In the Order, we rejected this argument. We noted that the
Verizon Merger Plan already provides that changes in
``performance measurement plans and procedures'' adopted by
the New York or California state commissions may, through
certain semi-automatic procedures, be extended to the
Verizon Merger Plan as it applies to one or the other of the
two subsets of legacy states. We also observed that a
parallel mechanism applies to state changes in performance
measurements for SBC and its subsets of legacy states.21 We
then stated:
We are not aware of any modifications allowing an
additional cap midway through the payment formula
in the New York or California state plans, and
Verizon has not argued that these state
commissions have made such modifications to their
states plans. . . . Accordingly, the
considerations of comity and administrative
efficiency on which Verizon relies are not in fact
applicable to Verizon, and, therefore, SBC and
Verizon are not similarly situated in the relevant
sense. We note that, to the extent the New York
or California state commissions modify the payment
formula, Verizon remains free to request
comparable treatment at the federal level in
accordance with the process that the Commission
established in the merger conditions.22
Verizon now petitions for reconsideration on the ground that
the Order is based on a factual mistake that assumes the
merger conditions payment calculations¾as opposed to the
performance metrics¾for the Bell Atlantic legacy states were
modeled on the New York State Plan.23 Verizon claims that
in fact it took its payment calculation methodology solely
from the Texas State Plan, as part of its wide-ranging
adoption of provisions from the SBC/Ameritech merger
conditions. Verizon further states that the New York State
Plan payment calculation is based on an entirely different
approach than the methodology that Verizon borrowed from the
SBC/Ameritech Merger conditions.24 In other words, the
Verizon Merger Plan for the Bell Atlantic legacy states is a
hybrid, according to Verizon, with metrics drawn from the
New York State Plan, but with a payment calculation drawn
from the Texas State Plan. On this basis, Verizon argues in
effect that it could not turn to the New York state
commission, as the Order assumed, in the same way that SBC
turned to the Texas state commission. Accordingly, Verizon
concludes, its Bell Atlantic legacy states are in exactly
the same situation as the SWBT/Ameritech legacy states other
than Texas relative to the Texas commission's cap
methodology, and are equally entitled to adopt that
methodology.25 Verizon notes that an agency may not make
arbitrary distinctions that have the effect of treating
similarly situated parties differently, and argues that the
Commission is interpreting the same payment provision from
the same source in the SBC merger conditions with no basis
for differentiation between them.26
Verizon ignores the paramount fact that the SBC Merger Plan
and the Verizon Merger Plan, although resembling each other
in some ways, involve fundamentally different and
independent carriers, transactions, jurisdictions, and
proceedings. As a result, Verizon misconstrues how the
considerations of comity and administrative efficiency
stated or implied in the CCB SBC Letter bear on whether
Verizon's Bell Atlantic legacy states are similarly situated
to SBC's SWBT/Ameritech legacy states. There are two
significant differences between SBC and Verizon with respect
to the performance metrics and payment computations at issue
here.
Our review of the New York State Plan indeed confirms
Verizon's present claim that its payment provisions, as
opposed to its performance measurements, are substantially
different than those of the Texas State Plan, and that
Verizon might have difficulty in obtaining the specific cap
remedy from the New York state commission.27 This means
that the practical parallel in payment computations between
the Texas State Plan and the SBC Merger Plan in the
SWBT/Ameritech legacy states cited by the Common Carrier
Bureau is virtually non-existent between the New York State
Plan and the Verizon Merger Plan in the Bell Atlantic legacy
states. The Common Carrier Bureau decision gave SBC
administrative efficiency because SBC was using the same
calculation and the same cap at the state level, i.e., it
only had to make one calculation for federal and state
payments. In contrast, Verizon uses a different calculation
that does not cap at the state level and thus could not
receive any administrative efficiency from a federal cap.
Moreover, the comity in SBC's case concerned only the
relationship between the Texas Commission and this
Commission. Such comity is entirely absent here because
Verizon has no jurisdictional relationship with Texas
whatsoever, despite any claimed parallels in the content of
the plans.
Both of these differences show that Verizon is not, in fact,
similarly situated to SBC in the relevant sense of the CCB
SBC Letter. If the difference between SBC and Verizon
regarding the payment calculation is so great that there is
no practical analogue to the Texas cap remedy for Verizon
available from the New York state commission, that is the
risk inherent in Verizon's voluntary decision to tie its
methodology to a completely foreign state commission.
In view of all the considerations discussed above, we deny
Verizon's Petition.
IV. ORDERING CLAUSES
For the reasons stated above, IT IS ORDERED that, pursuant
to sections 1, 4(i), 4(j), and 405 of the Communications Act
of 1934, as amended, 47 U.S.C. §§ 151, 154(i), 154(j), 405,
and Section 1.106 of the Commission's rules, 47 C.F.R. §
1.106, the Petition for Reconsideration of Verizon
Communications, Inc. IS DENIED. IT IS FURTHER ORDERED that
a copy of this Order shall be sent by Certified Mail/Return
Receipt Requested to Verizon Communications, Inc., Joseph
DiBella, Regulatory Counsel, 1515 North Courthouse Road,
Suit 500, Arlington, Virginia 22201.
FEDERAL COMMUNICATIONS COMMISSION
David H. Solomon
Chief, Enforcement Bureau
_________________________
1 Applications of GTE Corporation, Transferor, and Bell
Atlantic Corporation, Transferee, For Consent to Transfer
Control of Domestic and International Sections 214 and 310
Authorizations and Application to Transfer Control of a
Submarine Cable Landing License, Memorandum Opinion and
Order, 18 FCC Rcd 10481 (Enf.Bur. 2003).
2 Applications of GTE Corporation, Transferor, and Bell
Atlantic Corporation, Transferee, For Consent to Transfer
Control of Domestic and International Sections 214 and 310
Authorizations and Application to Transfer Control of a
Submarine Cable Landing License, Memorandum Opinion and
Order, 15 FCC Rcd 14032 (2000) (``Bell Atlantic/GTE Merger
Order'').
3 Id., 15 FCC Rcd at 14086, para. 96. The merger
conditions are contained primarily in Appendix D of the
Merger Order.
4 Id., 15 FCC Rcd at 14159-62, paras. 279-82; id., Appendix
D, 15 FCC Rcd at 15293-94, paras. 16-17; id., Attachs. A-3,
A-4, A-5, 15 FCC Rcd at 14406-31. Verizon's voluntary
payment amounts are also subject to specific caps identified
in the merger conditions and labeled as such. See id.,
Appendix D, Attach. A-4, 15 FCC Rcd at 14411-12.
5 In both the Order and the Petition, the Verizon Merger
Plan is also referred to as the ``federal plan,''
reflecting its development before this Commission in the
merger proceeding, as distinguished from State Plans
developed before the state commissions in the
interconnection proceedings. See, e.g., Order at paras.
10-12; Petition at 5.
6 Bell Atlantic/GTE Merger Order, 15 FCC Rcd at 14161,
para. 281.
7 See, e.g., Letter from Joseph DiBella, Regulatory
Counsel, Verizon, to David Solomon, Chief, Enforcement
Bureau, FCC (October 3, 2002) (``Verizon October 3, 2002
Letter'').
8 See Order at para. 3. See also note 15, infra
(describing the cap methodology).
9 See 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'').
10 See Order at para. 3. See also SBC/Ameritech Merger
Order, 14 FCC Rcd at 14868, para. 379. The SBC Merger Plan
for the Pacific Telesis Group legacy states was based on
the California State Plan. See id., Appendix C, Attach. A,
14 FCC Rcd at 14041, para. 4
11 47 C.F.R. § 1.106. Section 1.429 of our rules governs
reconsideration of Commission actions in notice and comment
rulemaking proceedings. 47 C.F.R. § 1.429. See also 47
U.S.C. § 405.
12 Applications of WWIZ, Inc. et al., Memorandum Opinion
and Order, 37 FCC 685, 686 (1964), aff'd sub nom. Lorain
Journal Co. v. FCC, 351 F.2d 824 (D.C. Cir. 1965), cert.
denied, 383 U.S. 967 (1966); 47 C.F.R. § 1.106(b)(2).
13 Applications of Bennett Gilbert Gaines et al.,
Memorandum Opinion and Order, 8 FCC Rcd 3986, 3987 (Rev.
Bd. 1993). See, e.g., Metrocall, Inc. v. Southwestern Bell
Tel. Co. et al., Order on Reconsideration, 17 FCC Rcd 4781,
4782-83, para. 5 (2002).
14 Petition at 8-10.
15 See Order at paras. 5-9. The original four-step
computation in the Verizon Merger Plan, similar to that in
the pre-modification SBC Merger Plan, consists of: (1)
calculation of the average or mean for the measurement that
would yield a minimum acceptable level of service (i.e.,
that would result in no payment at all); (2) calculation of
the difference between the actual average service to CLECs
and the calculated average in forgoing step 1; (3)
multiplication by the volume or number of occurrences of the
service provided to the CLECs; and (4) multiplication by
certain fixed dollar amounts for different service
components. See Bell Atlantic/GTE Merger Order at para. 280;
see id. at Appendix D, para. 16. The second step clearly
does not include an explicit limitation. For performance
measurements using averages or means, however, Verizon had
begun applying a 100% cap in that step, which it now claims
is necessary to ensure that it will not pay for what would
amount to more occurrences of poor performance than the
number that actually occurred. We concluded in the Order,
however, that neither the plain language, the structure, nor
the policy rationale of the rule supported Verizon's
methodology. See Order at paras. 5-9; Petition at 8-10.
16 Letter from Carol Mattey, Deputy Chief, Common Carrier
Bureau, FCC to Caryn Moir, Vice President - Federal
Regulatory, SBC Telecommunications, Inc. (Feb. 6, 2002)
(``CCB SBC Letter'').
17 Id., at 3.
18 Id., at 3-4. The CCB SBC Letter used only the phrase
``administrative efficiency,'' whereas Verizon added the
word ``comity'' in its correspondence and in the present
Petition. Compare CCB SBC Letter at 3 with Verizon October
3, 2002 Letter at 2.
19 Verizon states that each of the SWBT/Ameritech legacy
states other than Texas may have a similar state plan as
Texas, a different plan than Texas, or no plan at all, but
that all of them still receive the same benefit of the cap
as adopted from the modified Texas State Plan into the SBC
Merger Plan for those legacy states. Verizon then reasons
that all of its Bell Atlantic legacy states are in the same
position as the SWBT/Ameritech states other than Texas,
because: (1) they have the same calculation methodology as
the pre-modified Texas State Plan; and (2) they likewise
may have a similar state plan to Texas, a different plan
than Texas, or no plan at all. Petition at 6-7.
20 Petition at 7-8.
21 See Bell Atlantic/GTE Merger Order, Appendix D, Attach.
A, 15 FCC Rcd at 14333, para. 4 (allowing changes in
measurements adopted in the New York State Plan or the
California State Plan to be imported into the Verizon
Merger Plan for the remaining legacy states pursuant to
semi-annual meetings with Verizon and Commission staff ;
such state changes may be may be imported into the Merger
Plan for the states of New York and California themselves
automatically upon five days notice); SBC/Ameritech Merger
Order, Appendix C, Attach. A, 14 FCC Rcd at 15041, para. 4
(similarly allowing importation of state commission
measurement changes into the SBC Performance Plan).
22 Order at para. 13.
23 Petition at 6-8.
24 Id.
25 Id. at 6-7. Verizon also states that there is no payment
plan at all applicable to GTE in the California State Plan.
See id. at 5, n. 3; Attachs. C & D (orders from the
California commission). Based on our review of these
materials, we conclude that there is no cap issue similar to
the one here for the Pacific Telesis Group legacy states.
26 Id. at 7, citing Petroleum Communications, Inc, v. FCC,
22 F.3d 1164, 1172 (D.C. Cir. 1994); McElroy Electronics v.
FCC, 990 F.2d 1351, 1365 (D.C. Cir. 1993). The Petition
implies that these decisions relied on the ``similarly
situated'' principle. Neither case does so. Rather, both
cases merely restate¾in connection with arguments not
reached by the court¾the general principle that an agency
must treat similarly situated parties alike or provide an
adequate justification for disparate treatment.
27 Even if the payment calculation in the Bell Atlantic/GTE
Merger Order originated with the Texas State Plan, rather
than the New York State Plan, this does not change our
ultimate conclusion reached in the Order. The New York
methodology calls for payments to CLECs (rather than to the
U.S. Treasury), with total possible payments ``at risk,''
in amounts exceeding $300 million for failure to maintain
quality in major subgroups of service. See Petition filed
by Bell Atlantic-New York for Approval of a Performance
Assurance Plan and Change Control Assurance Plan, New York
Public Service Commission, NYPSC Cases 97-C-0217, 99-C-0940
(November 3, 1999) (included by the Verizon Petition at
Attach. B). There are, however, other mechanisms in the
New York payment plan that apply proportionately greater
payments to greater deficiencies in service, in a manner
broadly analogous to the problem the cap in the Texas State
Plan is designed to resolve. See Bell Atlantic Compliance
Filing NYPSC Cases 97-C-0217, 99-C-0940 (April 17, 2000),
at Appendix A.