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CONSENT DECREE
I. Introduction
1. The Enforcement Bureau (the ``Bureau'') of the
Federal Communications Commission (the ``Commission'' or the
``FCC'') and SBC Communications, Inc. (``SBC'') hereby enter
into this Consent Decree for the purpose of terminating an
informal Bureau investigation into SBC's compliance with the
Merger Conditions imposed by the Commission in 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, CC Docket No, 98-141, Memorandum Opinion and Order,
14 FCC Rcd 14712 (1999) (``SBC-Ameritech Merger Order'').
II. Background
2. On October 8, 1999, the Commission approved,
subject to explicit conditions, the transfer of licenses and
lines from Ameritech Corp. (``Ameritech'') to SBC in
connection with the merger of the two companies. To offset
the potential harms arising out of the merger, SBC proposed,
and the Commission adopted, a series of conditions intended
to enhance local competition and to strengthen the
incentives of SBC to expand competition outside its
territories (the ``Merger Conditions'').
3. Specifically, Condition VII of the SBC-Ameritech
Merger Order requires SBC to file publicly monthly
performance measurement data under a Carrier-to-Carrier
Performance Assurance Plan (``Performance Plan'').1 The
Performance Plan requires SBC to report, on a monthly basis,
its performance in 20 different categories or metrics that
are broken down into sub-metrics and that address functions
that can affect SBC's local competitors and their customers.
These categories cover key aspects of pre-ordering,
ordering, provisioning, maintenance and repair, and billing
associated with unbundled network elements (``UNEs''),
interconnection, and resold services. Under the Performance
Plan, SBC must make voluntary payments to the U.S. Treasury
if it fails to meet the performance standards established in
the Plan. SBC is subject to voluntary payments of up to
$1.125 billion over three years for continued poor
performance.2 Such payments are voluntary performance
measurements payments and are not fines, penalties, or
forfeitures.
4. In addition, Condition XXVII of the SBC-Ameritech
Merger Order requires SBC to engage annually an independent
auditor to examine SBC's compliance with the Merger
Conditions. The annual audit is intended to provide a
thorough and systematic evaluation of SBC's compliance with
the Merger Conditions and the sufficiency of SBC's internal
controls.
5. On March 15, 2001, the Bureau issued an Order of
Forfeiture for SBC's failure to report certain performance
data in its monthly performance reports in accordance with
published business rules in the Performance Plan.3 The
Bureau ordered SBC to forfeit $88,000 for data inaccuracies
submitted by SBC for the period from January through
November 2000.
6. On August 30, 2002, Ernst & Young (``E&Y'')
completed its audit report addressing SBC's compliance from
January 1, 2001, through December 31, 2001, with certain of
the merger conditions (``E&Y Audit Report''). The Audit
Report stated that certain of the data in SBC's monthly
performance filings contained performance reporting errors.4
The Audit Report noted a variety of causes of such errors,
primarily involving programming and data entry errors,
incorrect classification of data, and improper inclusion and
omission of certain data from calculations. Errors in
performance reports can affect the amount of SBC's voluntary
payments for failing to meet performance levels specified in
the Performance Plan. SBC has reported to the Commission
similar performance reporting errors and restatements in
reports filed for the January 2002 through February 2003
time period.
7. SBC asserts that, despite its best efforts, some
material and immaterial data discrepancies are inevitable,
primarily as a result of the sheer volume and complexity of
the data that must be collected, reviewed and reported and
the short timeframe in which the monthly performance reports
must be prepared. The Bureau's view is that SBC has not
taken sufficient measures to minimize discrepancies in its
reported data.
8. In the spring of 2002, the Bureau initiated an
Investigation into SBC's potential non-compliance with the
SBC-Ameritech Merger Order during the time period covered by
the 2001 E&Y Audit Report and continuing through 2002. In
particular, the Bureau's Investigation focused on SBC's
compliance with the Performance Plan requirements in
Condition VII of the SBC-Ameritech Order.
III. Definitions
9. For the purposes of this Consent Decree the
following definitions shall apply:
(a) ``Commission'' or ``FCC'' means the Federal
Communications Commission.
(b) ``Bureau'' means the Enforcement Bureau of
the Federal Communications Commission.
(c) ``SBC'' means SBC Communications Inc. and any
subsidiaries.
(d) ``Parties'' means SBC and the Bureau.
(e) ``Adopting Order'' means an Order of the
Bureau adopting the terms and conditions of
this Consent Decree.
(f) ``Effective Date'' means the date on which
the Bureau releases the Adopting Order.
(g) ``Investigation'' means the investigation
initiated by the Bureau regarding the matters
discussed in paragraph 6 above, concerning
SBC's conduct for performance reports filed
for the months January 2001 through February
2003.
IV. Agreement
10. SBC agrees and the Bureau warrants that it has
jurisdiction over the matters contained in this Consent
Decree and the authority to enter into and adopt this
Consent Decree and any Order adopting the Consent Decree.
11. The Parties agree and acknowledge that this
Consent Decree shall constitute a final settlement between
SBC and the Bureau of the Bureau's Investigation. In
consideration for the termination of the Bureau's
Investigation in accordance with the terms of this Consent
Decree, SBC agrees to the terms, conditions and procedures
contained herein and in the accompanying Compliance Plan.
To help ensure SBC's future compliance with the Act, the
Commission's rules, and the SBC-Ameritech Merger Order, SBC
agrees to implement the specific measures contained in the
Compliance Plan attached hereto and incorporated by
reference, effective 45 days after the release of the Order.
12. SBC and the Bureau agree that this Consent Decree
does not constitute either an adjudication of the merits, or
any factual or legal finding or determination of
noncompliance by SBC with the requirements of the Act, as
amended, with the Commission's rules, or with the
requirements of the SBC-Ameritech Merger Order. The parties
agree that this Consent Decree is for settlement purposes
only and that by agreeing to this Consent Decree, SBC does
not admit or deny any noncompliance, violation, or liability
associated with or arising from any alleged actions or
failures, or in any informal complaints, ex partes, or other
information the Commission received on or before the
Effective Date of this Consent Decree.
13. SBC agrees that it shall make a voluntary
contribution to the United States Treasury in the amount of
$250,000 (two hundred fifty thousand dollars) in connection
with its compliance with the Performance Plan from January
2001 through February 2003. This amount shall be paid
within 30 days of the date on which the order adopting this
Consent Decree becomes final. Such contribution shall be
made, without further protest or recourse, by certified
check, cashiers check, wire transfer, or money order drawn
to the order of the Federal Communications Commission, and
shall be mailed to the Forfeiture Collection Section,
Finance Branch, Federal Communications Commission, P.O. Box
73482, Chicago, Illinois 60673-7482, or be submitted by wire
transfer according to instructions provided by the Bureau.
Reference should be made on the check or money order to
``Acct. No. 200332080011.''
14. In express reliance upon the covenants and
representations contained in this Consent Decree, the Bureau
agrees to terminate the Investigation.
15. The Bureau agrees that, based on the facts
developed in this Investigation and in the absence of
material new evidence related to this matter, it will not
use the facts developed in this Investigation through the
Effective Date of the Consent Decree or the existence of
this Consent Decree to institute, on its own motion, any new
proceeding, formal or informal, or take any action on its
own motion against SBC concerning its compliance with the
Performance Plan required by the merger conditions. The
Bureau also agrees that, based on the facts developed in the
Investigation, and in the absence of material new evidence
related to this matter, it will not use the facts developed
in this Investigation through the Effective Date of this
Consent Decree or the existence of this Consent Decree to
institute on its own motion any proceeding, formal or
informal, or take any action on its own motion against SBC
with respect to its basic qualifications, including its
character qualifications, to be a Commission licensee or
with respect to compliance with the Commission's rules and
policies.
16. Nothing in this Consent Decree shall prevent the
Commission from adjudicating complaints filed pursuant to
section 208 of the Communications Act, as amended, 47 U.S.C.
§ 208, against SBC or its affiliates for alleged violations
of the SBC-Ameritech Merger Order, or for any other type of
alleged misconduct, regardless of when such misconduct took
place. If any such complaint is made, the Commission's
adjudication of that complaint will be based solely on the
record developed in that proceeding. Nothing in this
Consent Decree shall prevent the Commission from instituting
new investigations or enforcement proceedings against SBC
pursuant to sections 4(i), 403 and 503 of the Communications
Act in the event of any alleged future misconduct.
17. In the event that SBC is found by the Bureau to
have engaged in a violation of the SBC-Ameritech Merger
Order subsequent to the release of the Adopting Order, the
Bureau reserves the right to consider the conduct described
in paragraph 6 above in determining an appropriate sanction.
If such conduct is considered by the Bureau in determining
an appropriate sanction, SBC will not be estopped from
litigating the issues of whether such conduct or the facts
involved in such conduct actually violated the Act or the
Commission's rules, the merits of SBC's conduct, or the
relevance or weight to be given such conduct under section
1.80 of the Commission's rules.
18. SBC's decision to enter into this Consent Decree
is expressly contingent upon issuance of an Order that is
consistent with this Consent Decree, and which adopts the
Consent Decree without change, addition or modification.
19. SBC waives any and all rights it may have to
seek administrative or judicial reconsideration, review,
appeal or stay, or to otherwise challenge or contest the
validity of this Consent Decree and the Adopting Order,
provided the Order adopts the Consent Decree without change,
addition, or modification.
20. SBC waives any rights it may have under any
provision of the Equal Access to Justice Act, 5 U.S.C. §
504.
21. In the event that this Consent Decree is
rendered invalid by any court of competent jurisdiction,
this Consent Decree shall become null and void and may not
be used in any manner in any legal proceeding.
22. If either Party (or the United States on
behalf of the Commission) brings a judicial action to
enforce the terms of the Adopting Order, neither SBC nor the
Commission shall contest the validity of the Consent Decree
or the Adopting Order, and SBC and the Commission will waive
any statutory right to a trial de novo with respect to any
matter upon which the Adopting Order is based, and shall
consent to a judgment incorporating the terms of this
Consent Decree.
23. SBC agrees that any violation of the Consent
Decree or the Adopting Order will constitute a separate
violation of a Commission order, entitling the Commission to
exercise any rights or remedies attendant to the enforcement
of a Commission order.
24. This Consent Decree may be signed in
counterparts.
For the Enforcement Bureau For SBC
Communications Inc.
Federal Communications Commission
________________________________
________________________________
David H. Solomon James Smith
Chief Senior Vice President-
Federal Regulatory SBC
Telecommunications, Inc.
_______________________________
________________________________
Date Date
COMPLIANCE PLAN OF
SBC COMMUNICATIONS INC.
Pursuant to the foregoing Consent Decree, SBC
Communications Inc. (``SBC'') will establish a formal
compliance program, which will consist of the following
remedial actions:
25. Implementation of Control Process
SBC will implement the following enhancements to the
controls and processes for managing the integrity of the
data it reports monthly to the FCC pursuant to the
Performance Plan adopted in the SBC/Ameritech Merger Order :
(1) review data at key stages of production to facilitate
data continuity; (2) validate data and perform trend
analysis to identify and investigate material outlying
results; (3) review results to assess implementation of new
or changed requirements; and (4) maintain data files as
required for document retention purposes.
The performance of SBC data providers and data reporters
will be reviewed to assess their ability to deliver
performance data pursuant to the Performance Plan adopted in
the SBC/Ameritech Merger Order in a timely and accurate
manner, and their errors will be identified and analyzed for
error prevention activities in order to reduce their
recurrence.
SBC will have implemented these controls and processes
within 45 days of the Effective Date of the foregoing
Consent Decree.
26. Regulatory Compliance Group Oversight.
SBC's Regulatory Compliance Group and a designated steering
committee will review the performance reporting conducted by
SBC pursuant to the Merger Conditions set forth in the
SBC/Ameritech Merger Order and the processes and controls
implemented pursuant to this Compliance Plan. The steering
committee will be comprised of SBC senior management
personnel from across applicable SBC regions. The primary
goals of the steering committees will be to ensure that
there are reasonable assurances that the performance as
measured and reported by SBC pursuant to the Performance
Plan adopted in the SBC/Ameritech Merger Order is materially
equivalent to the performance that SBC has actually
delivered. The steering committee will oversee the
processes and controls implemented pursuant to this
Compliance Plan. The steering committee will oversee the
following principal efforts:
· Examine SBC's processes for reviewing
reporting accuracy and assessing whether SBC
appropriately captures, processes and reports
performance information in accordance with
the applicable business rules pursuant to the
Performance Plan adopted in the SBC/Ameritech
Merger Order.
· Conduct analysis of sample metrics data sets
and change controls between data providers
and data reporters to assess metric accuracy
and business rule compliance pursuant to the
Performance Plan adopted in the SBC/Ameritech
Merger Order.
· Review monthly performance and data accuracy
and identify issues and appropriate
corrective actions pursuant to the
Performance Plan adopted in the SBC/Ameritech
Merger Order.
SBC will have implemented these activities within 45 days of
the Effective Date of this Consent Decree.
27. True-Up Process
SBC will establish a process for performing a true-up of any
errors in the calculation of any voluntary payments required
under the Performance Plan no later than 90 days after the
Effective Date of this Consent Decree. No later than 180
days after the Effective Date of this Consent Decree, SBC
will apply its true-up process to any errors for the
performance measurement reports filed in the twelve-month
period immediately preceding the date of this Consent
Decree.
28. Submission to the Enforcement Bureau
SBC will include in its Annual Compliance Report submitted
pursuant to Merger Condition XXVI of the SBC/Ameritech
Merger Order, a report on the implementation of the controls
and processes set forth in this Compliance Plan.
29. Compliance audit
An assessment of whether the Company has implemented the
controls and processes set forth in this Compliance Plan,
and performed any necessary true-ups to any voluntary
payments as set forth in the True-up Process, will be
included in the annual independent audit conducted pursuant
to Merger Condition XXVII of the SBC/Ameritech Merger Order.
30. Term of Consent Decree
The terms of this Compliance Plan will expire when the
related Merger Conditions expire in accordance with the
terms of the SBC/Ameritech Merger Order, or subsequent
orders by the Commission or its delegated authority
concerning the merger. The terms of the Compliance Plan
shall no longer apply to SBC performance data for a state
once performance reports for that state are no longer
required under the terms of the SBC/Ameritech Merger Order.
To the extent any state is removed from the Performance Plan
within 45 days of the Effective Date of this Consent Decree,
the terms of this Compliance Plan shall not apply to SBC
performance data for such state.
_________________________
1 SBC-Ameritech Merger Order at Appendix C, ¶¶ 23-24 and
Attachment A.
2 Id. at Appendix C, ¶ 23.
3 SBC Communications, Inc. Apparent Liability for
Forfeiture, Order of Forfeiture, 16 FCC Rcd 5535 (Enf. Bur.
2001), aff'd, Order on Review, 16 FCC Rcd 12306 (2001).
4 Audit Report at 6 and Attachment A.