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This is an unofficial announcement of Commission action. Release of the full text of a Commission order constitutes official action. See MCI v. FCC. 515 F 2d 385 (D.C. Circ 1974).
| Report No. CC 97-45 | COMMON CARRIER ACTION | August 19, 1997 |
COMMISSION DENIES AMERITECH'S APPLICATION TO PROVIDE LONG DISTANCE SERVICES IN MICHIGAN;
Order Provides Guidance on Long Distance Entry
In an Order released today, the Commission denied the application of
Ameritech Michigan ("Ameritech") to provide long distance services originating in the
State of Michigan. The Commission concluded that Ameritech has not met the
requirements of the Communications Act for a Bell Operating Company (BOC) to
enter the long distance market in a state within its local service region.
On May 21, 1997, Ameritech filed for authorization under section 271 of the
Communications Act to provide long distance services originating in Michigan. Under
section 271, the Commission had 90 days to issue a determination on Ameritech's
application. In making its determination, the Commission consulted with the
Michigan Public Service Commission and the Department of Justice, both of which
found that Ameritech's application did not meet all of the statutory requirements for
authorization to provide in-region long distance services.
The Order acknowledges the efforts made by both Ameritech and the State of
Michigan in opening that state's local exchange market to competition. The
Commission noted that the State of Michigan and Ameritech have been pioneers in
creating the conditions necessary for local competition to take root and flourish. In
addition, the Order provides significant guidance to Ameritech and the other BOCs on
meeting the requirements of section 271.
Section 271 of the Communications Act allows the BOCs to provide long
distance services originating in the states where they currently provide local exchange
and exchange access services once they satisfy certain statutory requirements. A BOC
applicant must demonstrate either that: A) one or more unaffiliated competing
providers of local telephone service to residential and business subscribers is
connected to the BOC's network, and that such local telephone service is being
"offered by such competing providers either exclusively over their own telephone
exchange service facilities or predominantly over their own telephone exchange
service facilities in combination with the resale of the telecommunications services of
another carrier," (commonly referred to as "Track A"); or B) if no potential competing provider has requested to connect to a BOC's
network, the BOC has a statement of generally available terms and conditions in place
demonstrating that it is ready to allow potential competitors to connect to its facilities
(commonly referred to as "Track B").
In addition, a BOC applicant must show that: 1) it has fully implemented the 14-point "competitive checklist" in section 271, which enables BOC competitors to connect with and gain access to elements of the local network; 2) its long distance services will be provided in accordance with the structural separation and nondiscrimination requirements in section 272; and 3) its entry into the long distance market is consistent with the public interest.
Ameritech filed its application under Track A. The Commission found that
Ameritech satisfied the Track A requirements by demonstrating that it is providing
access and interconnection to Brooks Fiber, an unaffiliated, facilities-based provider.
According to the information submitted to the Commission, Brooks Fiber serves
nearly 22,000 residential and business access lines in Grand Rapids and other cities in
Michigan.
The Commission concluded, however, that Ameritech failed to demonstrate that it has fully implemented three items on the competitive checklist. First, the Commission found that Ameritech failed to meet its burden of showing that it currently provides to competing carriers nondiscriminatory access to its operations support systems ("OSS"). OSS refers to a variety of systems that enable a local telephone company to provide services to its customers, such as installation, repair and maintenance, and billing. Competitors that resell a BOC's local telephone services or lease elements of the BOC's telephone network to provide local service are vitally dependent on access to a BOC's OSS to provide a level of local service to their customers comparable to that which the BOC provides. The Commission concluded that Ameritech has not demonstrated that it provides competitors access to its OSS that is equivalent to that which Ameritech provides to itself in connection with its own retail telephone services.
Second, the Commission concluded that Ameritech failed to show that it is providing nondiscriminatory interconnection to competing telephone companies. Specifically, the Commission found that Ameritech did not provide an adequate basis for the Commission to determine that the quality of the interconnection that Ameritech provides to other carriers is equivalent to that which it provides itself.
Third, the Commission concluded that Ameritech failed to show that it is providing nondiscriminatory access to its 911 and E911 services. The Commission found that Ameritech did not establish that it maintains 911 database entries for customers of competing local exchange providers with the same accuracy as it maintains entries for its own customers.
The Commission further concluded that Ameritech did not show that it would provide in-region long distance services in compliance with section 272 of the Communications Act. Section 272 requires that a BOC's in-region long distance services must be provided through a separate corporate entity and establishes requirements concerning the relationship between that entity and the BOC. The Commission concluded that Ameritech and Ameritech's long distance affiliate, Ameritech Communications, Inc. (ACI), do not have separate directors as required by section 272. It also found that Ameritech and ACI failed to fully disclose information concerning transactions between them, as required by section 272.
The Commission stated that, in light of its conclusion that Ameritech has not demonstrated that it satisfies the competitive checklist or that it would provide in-region long distance services in accordance with section 272, it has denied Ameritech's application. The Commission, however, provided guidance on how to comply with the requirements that Ameritech failed to meet, as well other requirements on the competitive checklist. It noted, for example, that a BOC's prices for interconnection and the leasing of unbundled network elements should be at levels that promote efficient competitive entry and therefore must reflect forward-looking economic costs. The Commission stated that it will apply a uniform approach when determining whether the prices that a BOC charges competitors to interconnect with the BOC's telephone network or for the use of part of its network are cost-based, as required under the competitive checklist. The Commission also addressed the statutory requirement that a BOC make available to its competitors unbundled network elements to enable competitors to use such elements on a combined basis. The Commission reiterated that when a competing carrier seeks to purchase a combination of network elements, an incumbent local exchange carrier (LEC) may not separate elements that the incumbent LEC currently combines.
In light of its conclusion that Ameritech does not satisfy other requirements of section 271, the Commission stated that it was not necessary to address the issue of whether Ameritech has demonstrated that its entry into the long distance market is consistent with the public interest. Nevertheless, in order to give Ameritech and the other BOCs guidance concerning the public interest standard that the Commission will apply in evaluating future 271 applications, the Commission set forth its views on the meaning and the scope of certain aspects of the public interest inquiry mandated by Congress.
The Commission emphasized that the statute assigns to the FCC the
responsibility for making the public interest determination. The Commission made
clear that the public interest test is an independent requirement that must be met in
addition to the other requirements of section 271, such as compliance with the
competitive checklist. The Commission noted that, historically, it has broad
discretion in making public interest determinations and that it will consider a variety
of factors in deciding whether a BOC's entry into the long distance market is
consistent with the public interest. The Commission further explained that the
presence or absence of any one factor will not dictate the outcome of its public interest
inquiry. The Commission stated that, although the primary emphasis of its public
interest review will be on determining whether a BOC's local market is in fact open to
competition and will remain so once a BOC is authorized to begin providing in-region
long distance services, the Commission will also examine the benefits to competition
and consumers that may result from a BOC's entry into the in-region long distance
market.
Finally, the Commission noted that although Ameritech's application does not
demonstrate compliance with all of section 271's requirements, that does not diminish
the efforts Ameritech has made thus far to open local markets to competition. Rather,
the Commission explained, its decision recognizes the complexity of opening
historically monopolized local markets to competition, and the clear mandate of
Congress that such markets must be open to competition before the BOCs are
permitted to provide in-region long distance services.
Action by the Commission August 19, 1997, by Memorandum Opinion and
Order (FCC 97-298). Chairman Hundt, Commissioners Quello, Ness, and Chong,
with each issuing a separate statement.
-FCC-
News media contact: Rochelle Cohen at (202) 418-0253.
Common Carrier Bureau contact: Melissa Waksman at (202) 418-1580.