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If you need the complete document, download the WordPerfect version or Adobe Acrobat version, if available. ***************************************************************** Before the Federal Communications Commission Washington, D.C. 20554 ) In the Matter of ) ) Southwestern Bell Telephone Company ) Petition for Limited Modification of LATA ) Boundaries to Provide Integrated Services ) Digital Network (ISDN) at Hearne, Texas ) File No. NSD-LM-97-26 ) MEMORANDUM OPINION AND ORDER Adopted: May 18, 1998 Released: May 18, 1998 By the Chief, Common Carrier Bureau: I. INTRODUCTION 1. Southwestern Bell Telephone Company (SWBT) has filed a petition with the Commission requesting relief from the effects of certain local access and transport area (LATA) boundaries. This petition was filed pursuant to Section 3(25) of the Communications Act of 1934, as amended, which permits modification of LATA boundaries by Bell Operating Companies (BOCs), if such modifications are approved by the Commission. SWBT requests LATA relief in order to provide integrated services digital network (ISDN) in the Hearne, Texas LATA through facilities in the Austin LATA. The petition was placed on public notice and comments and replies were filed. For the reasons discussed below, we grant SWBT's request for a limited modification of LATA boundaries for the specific purpose of providing ISDN in Hearne, Texas. II. BACKGROUND 2. On August 24, 1982, the United States District Court for the District of Columbia (Court) entered an order that required AT&T to divest its ownership of the BOCs. The Court divided all BOC territory in the continental United States into geographic areas called LATAs. Under the Consent Decree, the BOCs were permitted to provide telephone service within a LATA (intraLATA service), but were not permitted to carry traffic across LATA boundaries (interLATA service). InterLATA traffic was required to be carried by interexchange carriers. 3. The LATAs did not cover territory served by independent telephone companies (ITCs). The Court, however, did classify some independent exchanges as "associated" with a particular LATA. Traffic between a LATA and an associated exchange was treated as intraLATA, and could be carried by the BOC, while traffic between a LATA and an unassociated exchange was treated as interLATA, and could not be carried by the BOC. The ITCs were not subject to the restrictions imposed by the Consent Decree, and could carry traffic regardless of whether that traffic crossed LATA boundaries. 4. In establishing the LATAs, the Court recognized that existing local calling areas would cross the newly created LATA boundaries. The Court granted exceptions to permit BOCs to carry interLATA traffic where necessary to preserve these arrangements. Subsequently, the Court received numerous requests for waivers of the Consent Decree to permit additional local calling areas. In evaluating such requests, the Department of Justice and the Court considered relevant data, including the number of customers or access lines involved. The Court was willing to grant waivers when the competitive effects were minimal and a sufficient community of interest across LATA boundaries was shown. The Court similarly received many requests for changes in LATA association, which it granted where the changes in association would avoid the need for expensive network configuration and would not endanger competition. The Court sometimes allowed BOCs to provide interLATA communications service in other than traditional ELCS or association circumstances if the dangers to fair competition were determined to be de minimis. 5. On February 8, 1996, the Telecommunications Act of 1996 (1996 Act) became law, amending the Communications Act of 1934 (Act). Pursuant to the 1996 Act, matters previously subject to the Consent Decree are now governed by the Act. Section 271(b)(1) of the Act prohibits a BOC from providing "interLATA services originating in any of its 'in-region' States" until the BOC takes certain steps to open its own market to competition and the Commission approves the BOC's application to provide interLATA service. While the Commission may forbear from applying certain provisions of the Act, the Commission may not forbear from the requirements of Section 271. Section 3(25)(B) of the Act, however, provides that BOCs may modify LATA boundaries, if such modifications are approved by the Commission. 6. On July 15, 1997, the Commission released a decision granting 23 requests for boundary modification to permit calls between the ELCS exchanges to be treated as intraLATA. The Commission indicated that it would grant requests for such limited modifications where the ELCS was flat-rate and non-optional and where community need and a lack of anticompetitive harm were demonstrated. 7. Similarly, on August 6, 1997, the Commission released a decision granting requests to modify LATA boundaries to permit three ITC exchanges in Texas to change LATA association. The Commission indicated that in considering future requests for change in LATA association, it would weigh the need for modification against the potential harm from anticompetitive BOC activity. III. Positions of Parties 8. In its petition, SWBT states that the Texas PUC requires that it make ISDN available to all customers in Texas. To comply with Texas law, SWBT requests a modification of LATA boundaries in order to provide ISDN service in the Hearne, Texas LATA through facilities in the Austin LATA. SWBT states that the Hearne LATA comprises a rural area with 4,430 access lines, of which approximately only 20 or fewer are expected to require ISDN service. To fulfill its ISDN requirement, SWBT proposes that it be allowed to provide ISDN service via an ISDN link extension between Hearne and Austin, a method that has been used by SWBT in other parts of Texas. Although the link extension crosses LATA boundaries, SWBT's request is not a request for ELCS. Rather, it is a request to modify a LATA boundary for the specific purpose of providing ISDN in Hearne, Texas. 9. According to SWBT, the existing facilities in the Hearne LATA are incapable of providing ISDN because the host switch cannot be retrofitted or modified to provide the required digital capability. SWBT estimates that to replace the host switch would cost $2,166,000, an exorbitant amount given the small number of lines expected for ISDN service. SWBT contends that its other intraLATA alternatives -- redrawing the Hearne LATA to incorporate it into the Austin LATA or opening a new NXX code in the Austin ISDN serving switch and dedicating the NXX code exclusively to Hearne ISDN service -- are equally inefficient. 10. AT&T contends that the Commission lacks authority to authorize LATA boundary modifications. Both AT&T and Intelcom argue, generally, that such modifications could have anticompetitive effects. The comments of AT&T and Intelcom applied generally to all of the requests for LATA boundary modifications, and not specifically to the Hearne application. IV. DISCUSSION 11. Section 3(25) of the Act defines LATAs as those areas established prior to enactment of the 1996 Act, or "established or modified by a Bell operating company after such date of enactment and approved by the Commission." By enacting Section 3(25), Congress acknowledged the possibility that LATA boundaries might need adjustment, and nothing in the statute or legislative history indicates that a LATA may not be modified for a limited purpose. As in the ELCS Order and Association Order, we weigh the community's need for the modification against the potential harm from BOC anticompetitive activity. SWBT's request is granted for the limited purpose of providing ISDN service in the Hearne, Texas LATA. 12. SWBT's request does not involve ELCS or a change in LATA association as did the requests routinely granted by the Court as well as the requests granted by the Commission in the ELCS Order and Association Order. Nevertheless, the request satisfies the same broad criteria as did these other requests, including accommodation of a demonstrated need and little, if any, competitive impact. 13. Section 271 of the Act clearly restricts a BOC from providing interLATA services prior to receiving authorization. Contrary, however, to AT&T and Intelcom the Commission does have the authority to approve LATA boundary modifications that are not anti-competitive. Under the above facts, we believe that it is uneconomical for SWBT to provide ISDN service on an intraLATA basis, and that a LATA modification is in the public interest. We believe that the potential for harm is minimal due to the limited scope of SWBT's request. Other methods of providing ISDN service do not appear to be as practical. SWBT estimates the cost of replacing the switch to be $2,166,000, a large sum given the number of estimated customers. Incorporating the Hearne LATA into the Austin LATA would appear to have a greater impact on competition than the limited modification requested because under that arrangement all calls between Hearne and Austin would become intraLATA. Nor would it be an efficient use of limited numbering resources to assign a new NXX code. Additionally, the estimated 20 Hearne LATA ISDN customers represents a small number of Hearne LATA customers and an even smaller number of SWBT's total lines. Finally, the Texas PUC states that for communities of a certain size ISDN may be provided by "means of a circuit connecting a customer's station to a primary serving office of another exchange." While not definitive, the Texas PUC statement does suggest that for small communities the means selected by SWBT to provide ISDN service is the most practical. Accordingly, we grant SWBT's petition. V. ORDERING CLAUSE 14. Accordingly, IT IS ORDERED, pursuant to Sections 3(25) and 4(i) of the Communications Act of 1934, as amended, 47 U.S.C.  153(25), 154(i), that Southwestern Bell Telephone Company's (SWBT's) request for approval of a LATA modification solely for the purpose of providing ISDN service in the Hearne, Texas LATA through facilities in the Austin LATA IS GRANTED. The LATA boundary for all other services shall remain unchanged. FEDERAL COMMUNICATIONS COMMISSION Lawrence E. Strickling Deputy Chief, Common Carrier Bureau