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                         Before the
              Federal Communications Commission
                   Washington, D.C.  20554

In the Matter of                        )    
                              )    EB Docket No. 03-200
Section 272(d) Biennial Audit of        )    EB File No. EB-
03-IH-0341
Verizon Communications, Inc.            )


                MEMORANDUM OPINION AND ORDER


     Adopted:  December 2, 2003                   Released:  
     December 5, 2003

By the Commission:


                 I.INTRODUCTION AND BACKGROUND

     1.   In this Order, we deny an Application for Review 
filed on behalf of Verizon Communications, Inc. 
(``Verizon'').  Verizon challenges a decision by the 
Enforcement Bureau (``Bureau'')1 denying Verizon's request 
for confidential treatment of information contained in its 
audit report filed under section 272(d) of the 
Communications Act of 1934, as amended (the ``Act'').2

     2.   Section 272 of the Act requires Bell Operating 
Companies (``BOCs'') offering in-region, interLATA service 
to do so through a separate affiliate.3  Section 272(d) 
requires a BOC, after receiving section 271 authorization, 
to obtain a joint Federal/State audit conducted by an 
independent auditor to determine the BOC's compliance with 
section 272 and the Commission's rules.4  On June 11, 2001, 
Verizon submitted its first section 272(d) biennial audit 
report, which contained facts concerning the compliance of 
Verizon affiliates that were providing in-region, interLATA 
service in New York.  Verizon sought confidential treatment 
of financial and accounting data, including performance 
measurements; the Commission denied the request.5  On June 
12, 2003, Verizon submitted its second section 272(d) audit 
report.6  By letter dated June 12, 2003, attached to the 
audit report, Verizon requested confidential treatment of 
the performance data, specifically the volumes of special 
access services purchased by Verizon's affiliates and non-
affiliates, as well as the number of presubscribed 
interexchange carrier (``PIC'') changes submitted by 
Verizon's long distance affiliates and other carriers.7  In 
the Section 272(d) Audit Order, the Bureau denied Verizon's 
request, based on the Commission's previous determinations 
regarding requests for confidential treatment of section 
272(d) audit reports in the Verizon Confidentiality Order 
and the SBC Confidentiality Order. 8  On August 14, 2003, 
Verizon filed an Application for Review.9      

                        II.  DISCUSSION

     3.   In this Application for Review, Verizon seeks 
confidential treatment of information relevant to its 
compliance with section 272 of the Act.  Verizon contends 
that the Bureau's denial of its confidentiality request is 
``inconsistent with the Commission's previous decisions 
regarding the confidentiality of section 272 audit 
reports.''10  As explained below, we find the Bureau's 
decision entirely consistent with Commission precedent.  As 
we stated in previous section 272 orders addressing 
confidentiality, section 272(d)(2) mandates public 
disclosure of the section 272 audit results.11  Indeed, 
section 272(d)(2)'s mandate reflects Congress's conclusion 
that the value of publicly available audit results outweighs 
any potential competitive harm resulting from such 
disclosure.  We also conclude, as we have in the previous 
orders,12 that disclosure is necessary to promote meaningful 
comment pursuant to section 272(d)(2) and will thereby help 
the Commission determine whether Verizon has complied with 
section 272 and the Commission's rules.13  

     4.   We also agree with the Bureau that disclosure of 
information at issue is not likely to cause Verizon 
substantial competitive harm.  The information at issue is 
not raw data, but aggregated information that summarizes and 
reformats more detailed findings on a state-wide basis.14  
Moreover, the information in the audit report is from 2001 
and 2002, which further mitigates the likelihood of 
substantial competitive harm. 15  In addition, Verizon's 
claim is conclusory and does not explain how the specific 
information at issue could cause likely competitive harm.16  
Finally, we find that the public interest will be served by 
disclosure of the audit results.  

   A.   Public Disclosure Requirement of Section 272(d)(2)

     5.   Verizon's first argument is that the Bureau erred 
in concluding that the plain language of section 272(d)(2) 
mandates public disclosure of the results in the audit 
report.17  Verizon contends that in the SBC Confidentiality 
Order, the Commission allowed SBC to redact the names of 
certain customers and vendors from the audit report, which 
contradicts the Bureau's conclusion that section 272(d)(2) 
mandates public disclosure.18  We do not agree with 
Verizon's interpretation.  In the SBC Confidentiality Order, 
the Commission denied SBC's request for confidential 
treatment of the audit report.  While it is true that the 
Commission allowed SBC to redact a very limited amount of 
information from its audit report (i.e., company and vendor 
names), we based that determination on the fact that the 
information was irrelevant to SBC's compliance with section 
272 (not that disclosure posed substantial competitive harm) 
and the Commission's rules and therefore was not properly 
section 272 audit results in the first place. 19  As a 
result, this finding did not disturb the Commission's 
earlier conclusion in the Verizon Confidentiality Order that 
section 272(d)(2) requires public disclosure of the audit 
results.  

   B.   Freedom of Information Act Exemption 4 and 
        Commission Rules

     6.   Verizon next argues that the information 
identified as proprietary is exempt from disclosure under 
Exemption 4 of the Freedom of Information Act (``FOIA'').20  
In light of our prior conclusion that section 272(d)(2) 
mandates public disclosure, we need not address these 
issues.  Nevertheless, to provide a full response to Verizon 
and to make clear that our application of section 272(d)(2) 
here is consistent with our traditional confidentiality/FOIA 
analysis in other contexts, we will do so.  

     7.   Under Exemption 4, commercial or financial 
materials are held to be confidential when disclosure would 
likely substantially harm the competitive position of the 
submitter.21  For the reasons set forth below, we find that 
the Bureau correctly concluded that Verizon failed to 
demonstrate with specificity how disclosure of these data 
would likely substantially harm Verizon's competitive 
position.22  

     8.   Verizon argues that if competitors were provided 
the ``volumes'' information, they would gain insight into 
Verizon's success in the exchange access market in each 
state and obtain data on the growth rates for specific 
services and in specific areas.23   We disagree.  The audit 
report does not provide specific information about 
individual orders; the ``volumes'' data in the audit report 
are aggregated state-wide on a monthly basis.  As the 
Commission explained in the Verizon Confidentiality Order, 
the information in the audit report is not raw data, but 
aggregated information that summarizes and reformats 
detailed findings.24  Competitors could not derive from this 
aggregated data the specific information alleged by Verizon.

     9.   Verizon contends that the volumes data ``would 
help [competitors] in targeting their competitive services 
to services and areas where Verizon is experiencing the 
greatest growth and to use their resources to present the 
strongest competitive challenge to Verizon.''25  Verizon 
does not explain precisely how competitors might use this 
information to accomplish these goals.  Presumably, Verizon 
would argue that the volumes data for Verizon's 272 
affiliate, reviewed over time, could show the states in 
which the affiliate was increasing its market share in 2001 
and 2002.  Verizon has not shown how this information, 
aggregated state-wide on a monthly basis for 2001 and 2002, 
would likely substantially harm its competitive position.  
As we concluded in the SBC Confidentiality Order, a 
competitor cannot use aggregated performance data to target 
specific customers in specific markets or to provide 
interLATA telecommunications service more efficiently.26  We 
therefore conclude that Verizon's allegation that the 2001 
and 2002 data could provide information about the section 
272 affiliate's growth to competitors is insufficient to 
demonstrate that such data would likely substantially harm 
its competitive position.  

     10.  Verizon next argues that ``[i]n some instances, 
the data is so granular as to provide information to 
competitors regarding success with specific customers or 
bids.  Knowledge of the long distance affiliates' success in 
attracting long distance customers and in processing orders 
for those customers would help competitors develop marketing 
strategies and plans.''27  The Commission rejected this 
argument in the Verizon Confidentiality Order, concluding 
that none of the information contained in the audit report 
described Verizon's long distance marketing plans, its 
advertising program, or its pricing strategies.28  The data 
at issue here similarly do not identify these facts.

     11.  Verizon further contends that ``in some months the 
order volumes for non-affiliates for a specific product in a 
small state such as Vermont or Maine only show one 
order.''29  Thus, competitors ``could easily deduce which 
carrier ordered service.''30  The volumes data at issue are 
aggregated by state and month and by class of carrier; the 
audit report does not identify customers, specific markets, 
or details about the services.31  Even if we assume that 
Verizon's contention -- that if there is one order by a non-
affiliate in one state, competitors could deduce which 
carrier ordered service -- is correct, Verizon has not shown 
how this event in 2001 or 2002 would likely substantially 
harm its competitive position today.  

     12.  Verizon also contends that ``the information about 
services obtained by Verizon's long distance affiliates 
would allow competitors to evaluate the present and future 
business plans of those affiliates, giving them insight into 
the affiliate's financial status, market plans, growth 
potential, and technical capabilities.''32  Verizon does 
not, however, explain how the performance data aggregated by 
state would provide this level of detailed information to 
competitors.  In the Verizon Confidentiality Order, the 
Commission rejected the same argument, noting that Verizon 
did not explain how the specific information at issue would 
cause competitive harm.33  Verizon's contentions, without 
more, do not demonstrate how this aggregated information 
from 2001 and 2002 would likely give competitors insight 
into the affiliate's financial status, market plans, growth 
potential, and technical capabilities and substantially harm 
Verizon's competitive position.

     13.  As the Bureau observed, the purpose of the section 
272(d) audit report is to assist the Commission, the state 
commissions, and the public in determining whether a BOC and 
its affiliates are complying with the section 272 
requirements. 34  To offer meaningful comments on the audit 
report, the public must have access to sufficient 
information.  Ensuring public disclosure of the information 
contained in the audit report is fully consistent with the 
underlying purpose of section 272(d) of the Act.  Verizon's 
attempt to redact the volumes information from the audit 
report would thwart this purpose.

   C.   Other Issues 

     14.  Verizon also contends that it does not have 
similar order volume information about other carriers, 
putting it at a disadvantage. 35  The Commission addressed 
this argument in the Verizon Confidentiality Order, and 
noted that Verizon and its affiliates will obtain the same 
information from other BOCs and their section 272 
affiliates, although not from long distance competitors 
without dominant carrier affiliates. 36  The Commission 
observed that Congress required the publicly available audit 
report disclosing the results of the section 272(d) audit 
and also required public disclosure of transactions between 
the BOC and its section 272 affiliate. 37  The Commission 
concluded that the section 272 requirements are intended to 
deter misuse of the BOCs' dominant position in local markets 
and therefore it would not grant confidential treatment of 
the information in the section 272(d) audit report on the 
ground that Verizon and its affiliates do not have the same 
information about other long distance providers. 38  For the 
same reasons, we agree that the Bureau properly rejected 
Verizon's argument.

     15.  With respect to PIC change orders, Verizon argues 
that these data are highly sensitive due to the intensely 
competitive market for local exchange services and long 
distance services.39  Verizon contends, and we agree, that 
the long distance market is highly competitive and consumers 
frequently change long distance providers. 40  Any potential 
harm from the disclosure of aggregated information regarding 
PIC change orders would be eliminated, however, because of 
the dated nature of the information in the audit report.41

     16.  Verizon claims that in prior decisions, the 
Commission has protected carrier demand data and traffic 
volume data from disclosure.42  The cases cited by Verizon 
do not, however, arise from section 272(d) audits, which, 
pursuant to the Act, must be made available for public 
inspection and comment.43   First, Verizon contends that 
because number utilization and forecast data submitted by 
carriers is exempt from public disclosure, the performance 
measures in the section 272(d) audit should also be exempt. 
44  Verizon has not shown how aggregated performance 
measures from 2001 and 2002 in a section 272(d) audit report 
should be treated in the same manner as disaggregated 
carrier-specific number utilization and forecast data 
reported by carriers to allow the Commission to monitor 
nationwide numbering resources.45  These data are very 
different and serve completely different purposes.  For 
example, the audit report contains the volume of DS1 orders 
by Verizon's section 272 affiliates on a state-wide basis; 
the number utilization and forecast data reported by 
carriers are highly disaggregated and identify the quantity 
of assigned, intermediate, reserved, aging, and 
administrative numbers.46  The information in the audit 
report is made public in order to allow meaningful third-
party comments regarding the carrier's compliance with 
section 272 of the Act.  The numbering data, on the other 
hand, is filed by carriers in order to allow the Commission 
to monitor nationwide number usage.  

     17.  Verizon also contends that in the merger context, 
traffic volume data is deemed confidential. 47  In the cases 
cited by Verizon, the Cable Services and Common Carrier 
Bureaus adopted protective orders because they anticipated 
receiving additional filings that would contain confidential 
information such as future business plans, customer names, 
usage patterns, locations, and traffic volumes.  The 
confidential nature of the data was not discussed in the 
Bureaus' orders; however, the information was obviously far 
more extensive and detailed than the data at issue here.  
Verizon has not shown that the data in the section 272(d) 
audit report is disaggregated to the same extent as the 
confidential data in the merger orders.  Next, Verizon 
contends that in tariff-related proceedings, the Commission 
has found that disaggregated demand data are competitively 
sensitive.48  In the GCI FOIA case cited by Verizon, the 
Commission found that the documents sought contained 
``specific cost and demand data that is highly detailed and 
disaggregated.''49  Verizon has not shown that the data it 
seeks to redact is as detailed or disaggregated as the 
Alascom data at issue in the GCI FOIA case.  We conclude 
that Verizon has failed to show that the information it 
seeks to protect merits the same treatment as the data in 
the merger cases, numbering resources case, or the FOIA case 
cited.    

     18.  Finally, we agree with the Bureau's rejection of 
Verizon's request to limit access to the audit information 
with a protective agreement.  In the Verizon Reconsideration 
Order and the SBC Confidentiality Order, the Commission 
rejected this same approach.50  As the Commission explained, 
a protective order would run contrary to the statutory 
requirement to make the audit results available for public 
inspection and to allow any party to comment on the report. 
51

     19.  For the foregoing reasons, we find that the Bureau 
correctly denied Verizon's request for confidential 
treatment of the information contained in the section 272(d) 
audit report.

                   III.  ORDERING CLAUSES

     20.  ACCORDINGLY, IT IS ORDERED , pursuant to sections 
4(i), 220, and 272(d) of the Communications Act of 1934, as 
amended, 47 U.S.C. §§ 154(i), 220, and 272(d), and section 
1.115(g) of the Commission's rules, 47 C.F.R. § 1.115(g), 
the Application for Review filed on behalf of Verizon 
Communications, Inc. in the above-captioned proceeding is 
DENIED.

     21.  IT IS FURTHER ORDERED THAT, pursuant to sections 
4(i), 220, and 272(d) of the Act, 47 U.S.C. §§ 154(i), 220, 
and 272(d), that the unredacted version of the final section 
272(d) audit report be filed in this docket within ten days 
of the release of this Memorandum Opinion and Order.  
Interested parties will have 60 days from that date to file 
comments.


                         FEDERAL COMMUNICATIONS COMMISSION


                         Marlene H. Dortch
                         Secretary
_________________________

1  Section 272(d) Biennial Audit of Verizon Communications, 
Inc., EB File No. EB-03-IH-0341, Memorandum Opinion and 
Order, DA 03-2619 (rel. Aug. 8, 2003) (``Section 272(d) 
Audit Order'').

2  47 U.S.C. § 272(d).

3  47 U.S.C. § 272.

4  47 U.S.C. § 272(d).

5  See Accounting Safeguards under the Telecommunications 
Act of 1996:  Section 272(d) Biennial Audit Procedures, 
Memorandum Opinion and Order, 17 FCC Rcd 1374 (``Verizon 
Confidentiality Order''), recon. denied, Order on 
Reconsideration, 17 FCC Rcd 6955 (``Verizon Reconsideration 
Order'') (2002).

6  The period of time covered by the audit was January 3, 
2001 through January 2, 2003.

7  See Letter from Joseph DiBella, Regulatory Counsel, 
Verizon to Marlene H. Dortch, Secretary, Federal 
Communications Commission (June 12, 2003). These data in the 
audit report for which Verizon seeks confidential treatment 
are the volumes contained in the performance measure results 
in Attachment A, pages A-3 through A-79 and the PIC changes 
data in Appendix A, pages 80 and 81.

8  See Accounting Safeguards under the Telecommunications 
Act of 1996:  Section 272(d) Biennial Audit Procedures, 
Memorandum Opinion and Order, 17 FCC Rcd 17012 (2002) (``SBC 
Confidentiality Order'').  

9  Section 272(d) Biennial Audit of Verizon Communications, 
Inc., EB File No. EB-03-IH-0341, Application for Review 
(filed Aug. 14, 2003) (``Verizon Application for Review'').

10 Verizon Application for Review at 1.  Under section 
1.115(b)(2) of the Commission's rules, applicants must 
demonstrate one of the following:  that the action taken 
pursuant to delegated authority is in conflict with statute, 
regulation, case precedent, or established Commission 
policy; that the action involves a question of law or policy 
which has not previously been resolved by the Commission; 
that the action involves application of a precedent or 
policy which should be overturned or revised; an erroneous 
finding as to an important or material question of fact; or 
prejudicial procedural error.  See 47 C.F.R. § 1.115(b)(2).  

11   Verizon Confidentiality Order, 17 FCC Rcd at 1376, ¶ 5; 
Verizon Reconsideration Order, 17 FCC Rcd at 6956, ¶ 3.

12   Verizon Confidentiality Order, 17 FCC Rcd at 1377-78, ¶ 
8; SBC Confidentiality Order, 17 FCC Rcd at 17023, ¶ 33.

13 See SBC Confidentiality Order, 17 FCC Rcd at 17023, ¶ 33.

14 See Verizon Confidentiality Order, 17 FCC Rcd at 1377, ¶ 
8.

15 See Verizon Confidentiality Order, 17 FCC Rcd at 1382, ¶ 
19; SBC Confidentiality Order, 17 FCC Rcd at 17017, ¶ 15.

16 See Verizon Confidentiality Order, 17 FCC Rcd at 1381, ¶ 
15; SBC Confidentiality Order, 17 FCC Rcd at 17018-19, ¶ 19.

17 Verizon Application for Review at 3.

18 Id. at 3-4, citing SBC Confidentiality Order, 17 FCC Rcd 
at 17022-23, ¶ 32.

19 SBC Confidentiality Order, 17 FCC Rcd at 17022-23, ¶ 32.  

20 Verizon Application for Review at 7-10.

21 See 47 C.F.R. § 0.459; see also Verizon Confidentiality 
Order, 17 FCC Rcd at 1380, ¶ 13. For a comprehensive 
discussion of the Commission's confidentiality rules, see 
SBC Confidentiality Order, 17 FCC Rcd at 17015-16, ¶¶ 10-11.

22 It is the submitter's responsibility to explain the 
degree to which information is commercially sensitive (or 
contains trade secrets) and the manner in which the subject 
area could be used by competitors to inflict substantial 
competitive harm. 47 C.F.R. §§ 0.459(b)(3), 0.459(b)(5).

23 Verizon Application for Review at 5.

24 Verizon Confidentiality Order, 17 FCC Rcd at 1377-78, ¶ 
8.  For example, the audit report shows, by state, the 
number of DS1 orders by ``272 affiliate,'' ``non-272 
affiliate,'' and ``non-affiliated carriers,'' aggregated on 
a monthly basis for 2001 and 2002.

25 Verizon Application for Review at 5.

26 See SBC Confidentiality Order, 17 FCC Rcd at 17021, ¶ 26.

27 Verizon Application for Review at 5.

28 Verizon Confidentiality Order, 17 FCC Rcd at 1382, ¶ 17.

29 Verizon Application for Review at 6.

30 Id.

31   The services are:  DS0, DS1, DS3, and OCn.

32 Verizon Application for Review at 6.

33 Verizon Confidentiality Order, 17 FCC Rcd at 1381, ¶ 15.  

34 Verizon Confidentiality Order, 17 FCC Rcd at 1377-78, ¶ 7 
(citing Accounting Safeguards under the Telecommunications 
Act of 1996, CC Docket No. 96-150, Report and Order, 11 FCC 
Rcd 17539, 17628-29, ¶ 197 (1996) (``Accounting Safeguards 
Order''), Second Order on Reconsideration, 15 FCC Rcd 1161 
(2000)).

35 Verizon Application for Review at 6.

36 Verizon Confidentiality Order, 17 FCC Rcd at 1382, ¶ 18.  

37 Id.  

38 Id.  

39 Verizon Application for Review at 6.

40 Id.  The Commission also made this observation in the 
Verizon Confidentiality Order, 17 FCC Rcd at 1382, ¶ 19.  

41 See SBC Confidentiality Order, 17 FCC Rcd at 17017 & n.51 
(rejecting SBC's confidentiality claims in light of dated 
nature of the information).

42 Verizon Application for Review at 9.

43 47 U.S.C. § 272(d)(2).

44 Verizon Application for Review at 9, citing Numbering 
Resource Optimization, Report and Order and Further Notice 
of Proposed Rulemaking, 15 FCC Rcd 7574, 7607, ¶ 78 (2000) 
(``Numbering Report and Order'').

45 In the Numbering Report and Order, the Commission 
codified six primary categories of number usage:  assigned, 
intermediate, reserved, aging, administrative, and 
available.  The Commission found that monitoring individual 
carrier's use of numbering resources was necessary to ensure 
that numbering resources are efficiently used and that the 
North American Numbering Plan (``NANP'') is not prematurely 
exhausted.  Numbering Report and Order, 15 FCC Rcd at 7593, 
¶ 37.  

46 Aggregated data, such as carrier's Numbering Plan Area 
(``NPA'')-wide utilization rate and number of NXXs (or 
central office codes) assigned, do not require confidential 
treatment.  Id. at 7607-08, ¶ 79.

47 Verizon Application for Review at 9, citing Applications 
of America Online, Inc. and Time Warner, Inc. for Transfers 
of Control, Order Adopting Protective Order, 15 FCC Rcd 6117 
(Cab. Serv. Bur. 2000) and Application of WorldCom, Inc. and 
MCI Communications Corporation for Transfer of Control of 
MCI Communications Corporation to WorldCom, Inc., Order 
Adopting Protective Order, 13 FCC Rcd 11166 (Com. Car. Bur. 
1998); Verizon Application for Review at 10, citing 
Applications for Consent to the Transfer of Control of 
Licenses and Section 214 Authorizations from MediaOne Group, 
Inc. Transferor, to AT&T Corp., Transferee, Order Adopting 
Protective Order, 14 FCC Rcd 12286 (Cab. Serv. Bur. 1999).

48 Verizon cites General Communications, Inc., FOIA Control 
Nos. 95-355, 95-403, 11 FCC Rcd 5373 (1996) (``GCI FOIA'').

49 GCI FOIA, 11 FCC Rcd at 5374-75, ¶ 11.  For example, the 
information would reveal the costs and demand for various 
sites within the non-Bush area where GCI competes with 
Alascom, as well as profit margins.  Id.

50 Verizon Reconsideration Order, 17 FCC Rcd at 6956, ¶ 3; 
SBC Confidentiality Order, 17 FCC Rcd at 17024, ¶ 35.

51 Verizon Reconsideration Order, 17 FCC Rcd at 6956, ¶ 3.