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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 ) FOIA Control Nos. ) 94-310, 325, 328 on Requests for ) Inspection of Records ) MEMORANDUM OPINION AND ORDER Adopted: May 23, 1997; Released: June 4, 1997 By the Commission: 1. Before the Commission is an application for review filed by Southwestern Bell Telephone Company (SWB) on November 16, 1994. SWB seeks review of a November 1, 1994 decision by the Chief, Common Carrier Bureau (Bureau), which acted on requests by MFS Communications (MFS), MCI Telecommunications Corporation (MCI) and the Association for Local Telecommunications Systems (ALTS) pursuant to the Freedom of Information Act (FOIA), 5 U.S.C.  552. The requesters sought access to cost support data filed by SWB in connection with its virtual collocation tariff for expanded interconnection, and the Bureau concluded that the information should be provided to them under the terms of a Protective Order. MCI, MFS and ALTS filed oppositions to the application for review . For the reasons discussed below, SWB's application for review is granted in part and is otherwise denied. I. BACKGROUND 2. The records at issue consist of the prices that SWB individually negotiated with manufacturers of interconnection equipment, and SWB's overhead costs, from which it is possible to calculate equipment costs. The Bureau determined that disclosure of the equipment costs would likely result in significant competitive harm to the vendors of the equipment and, therefore, that the records were exempt from mandatory public disclosure under the FOIA. Nevertheless, the Bureau found that there was a substantial public interest in affording parties an opportunity to assess the lawfulness of common carrier rates. The Bureau concluded that making the materials available for inspection pursuant to the terms of a Protective Order would best strike a balance between these competing interests. 3. In its application for review, SWB argues that cost support containing SWB's confidentially negotiated equipment prices, as well as its overhead costs for DS-1 and DS-3 services, should not be released under any circumstances. It argues that a Protective Order is inadequate to guard against competitive harm and that the vendors' interests can be protected only by complete nondisclosure. It also argues that disclosure is barred by the Trade Secrets Act, 18 U.S.C.  1905. II. DISCUSSION A. Public Interest in Disclosure 4. At the outset, we agree with SWB that the information is exempt from mandatory public disclosure under Exemption 4 of the FOIA, which protects "confidential" commercial and financial information. Because this information may be used in conjunction with other publicly available rates to calculate equipment costs, release could cause substantial competitive harm to the vendors. As such, the information qualifies as "confidential" information under the "competitive harm" prong of Exemption 4. We do not agree, however, that the Commission lacks authority to make the materials available pursuantto a Protective Order. It is well established that the FOIA does not bar the disclosure of information even when material falls within the scope of a particular FOIA exemption. Nor is disclosure barred by the Trade Secrets Act, which prohibits disclosure of certain commercial data unless "authorized by law." As the Bureau explained, the Commission's rules, which permit disclosure of Exemption 4 data upon a "persuasive showing," constitute the requisite authorization by law to disclose the records. 5. In considering the public interest in disclosure here, we note that cost support materials filed with tariffs are routinely available for public inspection and the Commission has rarely departed from this practice. Moreover, the tariff at issue has been set for investigation, and disclosure of the detailed costing information in this proceeding will assist the Commission in exercising its responsibility under Section 204 of the Communications Act, 47 U.S.C.  204, to assess the reasonableness of the expanded interconnection rates. On balance, therefore, we agree that the public interest is best served by establishing a disclosure procedure that allows maximum participation by the interested parties, while providing adequate protection of proprietary material. We believe that a Protective Order is the appropriate vehicle for achieving this result. 6. SWB claims that disclosure through a Protective Order is inconsistent with our prior decision in the SCIS/ONA proceeding. However, the Commission based its decision in that case on facts and circumstances that are not present here. The Commission determined in the SCIS/ONA proceeding that disclosure of certain elements of the SCIS computer model could harm switch manufacturers by revealing switch design information or negotiated switch prices. The switch vendors had threatened to stop providing the information to Bellcore if it were disclosed. Because the carriers needed proprietary data to develop and update the engineering models used to allocate costs, when the switch manufacturers threatened to stop providing it, we concluded that the public interest in maintaining the integrity of the ONA process justified a decision to keep the information confidential. 7. SWB claims that the circumstances here are like those in the SCIS/ONA proceeding because the equipment vendors have threatened no longer to negotiate individual prices should the data be disclosed. The switch manufacturers in SCIS/ONA had no independent incentive to provide Bellcore with the critical switch data. Therefore, their threats to discontinue providing the data appeared to be genuine. In contrast, the equipment vendors here have market based incentives to continue to negotiate individual prices. As a consequence, we believe there is little likelihood that their threats will be implemented, particularly since we believe the modified Protective Order, discussed below, will adequately protect their interests. In these circumstances, we believe the public interest in allowing disclosure to the parties during the investigation outweighs any concerns that manufacturers will refuse to negotiate individual prices. 8. SWB also maintains there is no longer a reason to disclose the information because the time for commenting on the expanded interconnection tariffs has expired. At a minimum, however, because the matter is still under investigation, the parties would be able to file ex parte comments on the data. Moreover, the Bureau may wish to establish a supplemental comment period. Similarly, SWB maintains that release of the materials would be "futile" because the Commission could not force SWB to renegotiate lower equipment prices. While it is correct that the Commission does not have control over the price SWB pays for its equipment, we can prevent SWB from passing on that cost to customers if we find that the price is unjust and unreasonable. Further, we can assess whether the price of the equipment is correctly reflected in SWB's interconnection rates. Evaluations of the data submitted by interested parties could significantly aid the Commission in making these determinations. 9. Furthermore, we reject the argument by SWB that, because it voluntarily submitted the data to the Commission, we should return it. In support, SWB cites section 0.459(e) of the Commission's rules, which provides that voluntarily submitted materials may be returned to the submitter in the event the submitter's request for confidentiality is denied. However, even if we agreed that the material was submitted "voluntarily," we have never construed section 0.459(3) as permitting us to return records once a FOIA request has been filed. The FOIA affords a requester a statutory right to obtain agency records except to the extent that such records are protected from disclosure pursuant to certain enumerated exceptions. Because the documents in question were in the possession of the Commission at the time MCI and ALTS filed the FOIA requests, they are clearly "agency records" subject to the FOIA requester's rights to obtain them or to pursue available remedies in the event its FOIA request is denied. As a consequence, although section 0.459(e) applies generally to requests for confidentiality, it was not intended to, nor could it, operate in a manner that defeats the statutory rights of FOIA requesters. 10. Finally, we disagree with SWB's contention that, in accordance with the Bureau decision setting the tariff for investigation, SWB should be allowed to submit "list" prices for the equipment rather than the actual prices. The order cited by SWB, however, merely notes that, unlike SWB, other LECs had based virtual collocation equipment rates on list prices or nonproprietary data. See Southwestern Bell Telephone Company Tariff FCC No. 73 Memorandum Opinion and Order and Order to Show Cause, DA 94-1221, n.16 (Com. Car. Bur., November 2, 1994). The Bureau Order did not suggest that SWB could submit list prices in lieu of its lowest actual prices. B. The Protective Order 11. We believe that the Bureau's Protective Order can be modified to address SWB's concerns more fully. In its application for review, SWB objects to the provision in the Bureau's Protective Order that allows an unlimited number of individuals to have access to the cost support data and places no limit on the number of copies that may be made. The revised Protective Order (attached hereto as Attachment A) addresses this concern by greatly restricting the class of individuals authorized to have access to the materials and the manner in which the materials may be reviewed. The most significant revision is the addition of a provision prohibiting review of the data by persons engaged in the purchase of equipment identical, or similar, to the equipment whose prices are contained in the cost support data. Further, the revised Protective Order provides that only parties to the expanded interconnection proceeding may become signatories to the agreement. It also restricts the number of copies and the manner of distribution of copies. 12. Moreover, the Protective Order has been modified in response to SWB's arguments that the provisions governing notice to equipment vendors are deficient. The revised order addresses with specificity the manner in which notice to equipment vendors is to be given and includes a ten day notice provision. 13. SWB also argues that the Bureau's Protective Order is not as effective as it could be because it does not include an enforcement mechanism or identify sanctions for violation of the Protective Order. We agree. We find that such a mechanism would further protect the data from improper disclosure without reducing the availability of the information to the parties. Thus, we have amended the Protective Order to provide that failure to abide by its terms may result in the imposition of sanctions, including debarment of the attorneys involved. See 47 C.F.R.  1.24(a). We also note that SWB may pursue a private cause of action in the event a violation of the Protective Order results in monetary damages. 14. The revised Protective Order resolves SWB's specific concerns concerning the Bureau's Protective Order. Moreover, we find it strikes a fair balance among the interests of the parties to the expanded interconnection proceeding. III. ORDERING CLAUSES 15. In view of the foregoing, the Application for Review filed by Southwestern Bell Telephone Company IS DENIED IN PART AND GRANTED IN PART. 16. IT IS FURTHER ORDERED, that the Motion to Accept Late Service filed by MCI Telecommunications Corporation, IS GRANTED. 17. Pursuant to section 0.461(h)(4) of the Commission's rules, 47 C.F.R. 0.461(h)(4), SWB will be afforded ten (10) working days in order to seek a judicial stay of this decision. 18. The officials responsible for this decision are the following Commissioners: Reed E. Hundt, Chairman; James H. Quello, Rachelle B. Chong, and Susan Ness. FEDERAL COMMUNICATIONS COMMISSION William F. Caton Acting Secretary FCC 97-184 ATTACHMENT A PROTECTIVE ORDER i. On November 1, 1994, the Chief, Common Carrier Bureau issued a letter ruling and protective order regarding disclosure of the cost support data filed by Southwestern Bell Telephone Company (SWBT) in connection with its virtual collocation service. SeeLetter from Kathleen M. H. Wallman to Jonathan E. Canis, et al., FOIA Control Nos. 94-310, 324 and 328, 9 FCC Rcd 6493 (Com. Car. Bur., 1994). On this date, the Commission is adopting both this protective order and an order upon application for review of the Bureau's letter ruling. In that order disposing of the application for review, the Commission is granting conditionally several Freedom of Information Act (FOIA) requests seeking access to itemized equipment and overhead costs included in SWBT's virtual collocation tariff review plan. While denying the requests for public release under the FOIA, the Commission is ruling that the cost support data must be disclosed to all parties to the virtual collocation tariff review proceeding for the sole purpose of permitting participation in that proceeding. The limitations on disclosure incorporated herein are intended to protect the competitive interests of the parties in this proceeding. Definitions ii. The term "party" as used in this Protective Order means any entity that is participating in Federal Communications Commission (Commission) CC Docket No. 94-97 and is seeking access to confidential information, as defined below. iii. For purposes of this Order, "Confidential Information" shall include: (i) information submitted to the Commission by the producing party that has been so designated by the producing party and that the producing party has determined in good faith constitutes trade secrets and commercial or financial information that is privileged or confidential within the meaning of Exemption 4 of the Freedom of Information Act, 5 U.S.C.  552(b)(4), and (ii) information submitted to the Commission by the producing party that has been so designated by the producing party and that the producing party has determined in good faith falls within the terms of Commission orders in this proceeding designating items for treatment as confidential. Confidential Information shall also include information specifically designated by the Commission in this proceeding as confidential. The Commission may, sua sponteor upon petition, determine that all or part of the information claimed by the producing party as "Confidential Information" is not entitled to such treatment. Procedure iv. In filings made in this docket, SWBT, the producing party, may designate certain documents and information it produces as "Confidential Information" consistent with the definition of that term in this Protective Order. All such documents and information shall be clearly labeled by SWBT to show that the documents are considered "Confidential." v. Personnel. (a) Counsel. All Confidential Information produced pursuant to this Protective Order shall be made available to parties solely through counsel for the parties, including in-house counsel, or persons working under the supervision of counsel within the following categories: (1) Attorneys, including in-house counsel, actively engaged in the conduct of this proceeding, secretaries, paralegal assistants, and employees of such an attorney to the extent reasonably necessary to assist in the review of tariff support materials and the preparation of documents in the proceeding, and (2) Any persons requested by counsel of record to furnish technical or other expert services, or otherwise to prepare material for the proceeding, except: (a) Disclosure shall be prohibited, subject to the limited exception set out in paragraph 5(b) below for deposition witnesses and outside consultants and experts, to persons now engaged, or who reasonably expect they will be engaged, in the purchase of similar or identical equipment, or equipment substitutable in whole or in part for the equipment the prices of which are contained in the cost support data. (b) For any such person who is in a position to use the information for competitive, commercial, or business purposes, other than those governed by subparagraph (a), disclosure shall be limited to the minimum extent necessary to obtain analysis and management guidelines for participation in this proceeding. In addition, disclosure shall be permitted only upon sworn certification by counsel requesting such disclosure that he or she has used his or her best efforts to obtain personnel who are not in a position to use the information for competitive, commercial or business purposes, and that such personnel do not exist. (b) Depositions. In the event the Commission orders that depositions may be taken, disclosure is permitted to persons noticed for depositions or designated as witnesses to the extent reasonably necessary to prepare testimony or to outside consultants or experts retained for the purpose of assisting counsel prepare testimony for such depositions. If such persons include those described in paragraph 5(a)(2)(a) above, then disclosure is permitted only upon sworn certification by counsel requesting such disclosure that he or she has used his or her best efforts to identify personnel with the same or substantially similar knowledge who are not now engaged, or who reasonably expect they will not be engaged, in the purchase of similar or identical equipment, or equipment substitutable in whole or in part for the equipment the prices of which are contained in the cost support data and that such personnel do not exist. (c) Personnel eligible to have access to Confidential Information pursuant to paragraphs 5(a) or (b) shall not be entitled to review any Confidential Information unless and until they sign Attachment A which states that they shall abide by the terms of the Protective Order. vi. Before a party, through counsel, discloses SWBT's virtual collocation cost support data to any person listed in subparts (a) and (b) of paragraph 5(a)(2) who is a competitor (or any employee of, or consultant to, a competitor) of any equipment vendor the prices of which are contained in SWBT's virtual collocation cost support data, the party shall give at least ten working days' advance notice in writing (initially via facsimile followed by first class mail, postage prepaid) to counsel for any equipment vendor the data of which are to be disclosed, stating the name and address of the person[s] to whom disclosure is to be made and stating the purpose of such disclosure. The facsimile numbers and addresses to be used for notice to the counsel for the equipment vendors are listed in Attachment B. Copies of the notice should be served on the Commission and all parties of record. If, within the ten-day period, a motion is filed objecting to the proposed disclosure, disclosure may not occur until the Commission has denied such motion and all appeals of the Commission denial of such motion are exhausted. vii. Prior to giving access to Confidential Information, as contemplated in Paragraphs 4-6 above, to any person authorized to be given access pursuant to this Order, counsel for the party seeking review of the Confidential Information shall deliver a copy of this Protective Order to such persons, and prior to disclosure, each such person shall agree in writing to comply with and be bound by this Protective Order in the form of Exhibit A, attached hereto. Said counsel shall, at the time of the review of such Confidential Information, or as soon thereafter as practical, deliver to counsel for the party producing the Confidential Information a copy of Attachment A as executed, which shall show each signatory's full name, permanent address and employer, and the party with whom the signatory is associated. viii. Any party producing Confidential Information pursuant to this Order shall designate a Washington, D.C. location at which all parties shall be permitted access to and review of requested Confidential Information pursuant to the other terms of this Order. Any such access and review shall be limited to regular business hours after reasonable notice by the requesting party. ix. After reasonable request, two copies of information designated by the producing party as Confidential Information will be delivered to the party that requested the information, unless that information is voluminous. Unless otherwise ordered, voluminous information shall mean information of 300 pages or more. The two copies of the Confidential Information shall be provided to the requesting party's counsel of record who has agreed in writing to be bound by this Protective Order. Voluminous information designated as Confidential Information may be reviewed at the producing party's designated Washington, D.C. location. In addition, for voluminous information, the viewing party may request that two copies of some or all of the information be made at its expense, and be removed from the producing party's premises subject to all the other conditions in this Protective Order. x. The copies are to be made by, or under the supervision of, the personnel of the party who produced such document, who will affix a stamp to each item to be copied denoting the Confidential designation of the item. The stamp shall be affixed in such a manner that the text of the Confidential Information is not obscured on either the original or any copies thereof. xi. The information produced shall be organized in a manner that clearly identifies each document or portion thereof that is claimed to be Confidential. SWBT, the producing party, shall be responsible for producing the Confidential Information in a sealed envelope that is clearly marked on the outside as containing Confidential Information and that clearly specifies the numbers of pages contained therein. xii. Counsel of record for the party authorized hereunder who requested the copies shall sign a statement in the form of Attachment C attached hereto verifying that the sealed envelope clearly marked as containing Confidential Information has been received and designating the name and address of the individual into whose custody the copies shall be delivered. The designated representative of the producing party shall also sign Attachment C and verify to whom the sealed envelope was delivered. Access to said copies shall be limited to those persons defined in Paragraph 5 of this Order. No additional copies shall be made, unless the parties agree otherwise, or upon a showing of a good cause the Commission directs otherwise. xiii. Persons that have agreed in writing to be bound by this Protective Order and are therefore permitted access to Confidential Information by this Order may take notes regarding such information as may be necessary in connection with this proceeding. Such notes shall be treated in the same manner as the Confidential Information from which the notes were taken. Storage at the Commission xiv. Confidential Information, including that portion of testimony containing references thereto, if filed with the Commission, shall clearly be labeled as Confidential and filed under seal, and shall be segregated in the files of the Commission, and shall be withheld from inspection by any person not bound by the terms of this Protective Order, unless such Confidential Information is released from the restrictions of this Order either through agreement of the parties, or, after notice to the parties and hearing, pursuant to the order of the Commission Staff, the Commission, or a court. Good Faith Use of Material xv. All persons having access to the confidential data shall use their best efforts to keep the Confidential Information secure in accordance with the purposes and intent of this Protective Order. To this end, persons having custody of any Confidential Information shall keep the documents properly secured during all times when the documents are not being reviewed by a person authorized to do so. xvi. As obtained pursuant to this Order, Confidential Information shall be used exclusively for purposes of participating in this proceeding, including any appeals, and shall not be used or disclosed for any other purpose. The limitation on the use or disclosure of Confidential Information shall be construed to prohibit disclosure orally or in writing or through reproduction or by any other means to anyone not designated under paragraph 5 of all information contained therein. The limitation shall also be construed to prohibit making decisions, participating in any decision making process or rendering advice, legal or otherwise, wherein any information or knowledge derived from said information is used in any manner other than for purposes of this proceeding. xvii. Persons obtaining access to Confidential Information under the terms of this order may disclose, describe, or discuss the Confidential Information in any pleading filed in CC Docket No. 94-97, but only if they file both a confidential version and a public version of the pleading under the following procedures: (a) Confidential Version. (i) Any pleading that includes Confidential Information shall be filed under seal and clearly marked "Contains Confidential Information Subject to Protective Order, CC Docket No. 94-97" and covered by a separate letter citing this Order. (ii) Subject to exceptions noted in (iii) below, any pleading containing Confidential Information shall be served only upon the Commission, the producing party, and any vendor the confidential equipment prices of which are reflected in the pleading. (iii) The Confidential Version will not be served on vendors if it contains the confidential equipment prices of more than one vendor. Other parties to this Protective Order may view the Confidential Version under the terms of this Protective Order. (b) Public Version. Any party filing a pleading that contains Confidential Information shall also prepare a separate public version in which all Confidential Information has been redacted. (i) On the same date that the Confidential Version is filed with the Commission, the party shall hand deliver the Public Version to the producing party and any vendors the equipment prices of which are included in Confidential Information and reflected in the Confidential Version. (ii) The producing party and vendors have five working days following receipt to object in writing to the filing of the Public Version. (iii) If no objections are filed, on the sixth working day following the delivery of the Public Version, the Public Version will be filed with the Commission for inclusion in the public record and will be served on all parties to the virtual collocation tariff review proceeding. (c) Computation of time. The time for filing responses to both the public and confidential versions of the pleading shall be computed from the day after the filing of the Public Version. See 47 C.F.R.  1.4(b) of the Commission's rules. Returning Material to Producing Party xviii. Within thirty (30) days after completion of this proceeding and judicial review, the producing party may request the return of all Confidential Information furnished under the terms of this Protective Order. The Confidential Information must be returned within thirty (30) days after the request. Notes taken with regard to Confidential Information shall be destroyed at the time that Confidential Information is returned, in the presence of the party who produced the Confidential Information if that party so requests. Confidential Information made part of the record in any proceeding shall remain in the possession of the Commission, and, unless otherwise agreed by the party that produced the information or as provided by future order, shall continue to be subject to the protective requirements of this Protective Order. Other Rights Preserved xix. The signing of the Protective Order shall in no way constitute any waiver of the rights of any party to this protective order to contest any assertion of confidentiality or to appeal any finding that specific information is Confidential Information or should be subject to the protective requirements of this Order. The designation of any information as Confidential Information may be challenged before the Commission, or a court having jurisdiction to review a Commission determination, that said material should be so classified. xx. Disclosure of Confidential Information under this Protective Order shall not be deemed a waiver by either the producing party or the vendors the data of which are contained therein, in any other proceeding, agency, or court, of any privilege or entitlement to confidential treatment. Any parties receiving access to Confidential Information under this Order: (a) agree not to assert any such waiver; (b) agree not to use information derived from Confidential Information in any proceeding other than this one or for any purpose unrelated to other than this proceeding; and (c) agree that accidental disclosure of privileged information shall not be deemed a waiver of the privilege. xxi. Nothing contained herein shall limit any party's right to judicial review of any decisions rendered hereunder. xxii. Any failure to abide by the terms of this Protective Order may result in the imposition of sanctions, including dismissal of a party's petitions, or censure, suspension, or disbarment of the attorneys involved. See 47 C.F.R. 1.24. xxiii. Authority. This Protective Order is issued pursuant to Sections 4(i) and 4(j) of the Communications Act as amended, 47 U.S.C.  154(i), (j) and 47 C.F.R.  0.457(d). ATTACHMENT A DECLARATION In the Matter of [Name of Proceeding] ) Docket No. I, ______________________________, hereby declare under penalty of perjury that I have read the Protective Order that has been entered by the Commission in this proceeding, and that I agree to be bound by its terms pertaining to the treatment of Confidential Information submitted by parties to this proceeding. I understand that the Confidential Information shall not be disclosed to anyone except in accordance with the terms of the Protective Order and shall be used only for purposes of the proceedings in this matter. I acknowledge that a violation of the Protective Order is a violation of an order of the Federal Communications Commission. I acknowledge that this Protective Order is also a binding agreement with the Submitting Party. (signed) _______________________________ (printed name) __________________________ (representing) ___________________________ (title) __________________________________ (employer) _____________________________ (address) _______________________________ _______________________________ (phone) ________________________________ (date) __________________________________ ATTACHMENT B NOTIFICATION TO EQUIPMENT VENDORS Pursuant to the terms of the Protective Order entered in CC Docket No. 94-97, notice is hereby given to counsel or designated representative of an equipment vendor(s), pursuant to paragraph 6 of the Protective Order to CC Docket No. 94-97, that copies of its equipment prices contained in SWBT's confidential virtual collocation cost support data have been disclosed to the person listed below pursuant to paragraph 5(a)(2) or 5(b). STATEMENT OF RECEIPT I, ___________________________________________, as (COUNSEL OF RECORD) OR (DESIGNATED REPRESENTATIVE)of ____________ (insert name of equipment vendor ) have received notice that its equipment prices, as contained in SWBT's confidential virtual collocation cost support data, have been disclosed to: Name: __________________________________ Title: __________________________________ Representing: ________________________________ Address: _______________________________ _______________________________ Facsimile No:___________________________ Signed on this ________ day of ________, 1996 _______________________ Signature ATTACHMENT C STATEMENT OF RECEIPT I, ___________________________________________, as (COUNSEL OF RECORD) OR (DESIGNATED REPRESENTATIVE)of ____________ (insert name of party) have received the sealed envelope marked "Confidential Information" for the purpose of making copies of said confidential information, pursuant to paragraph 12 of the Protective Order. These copies are to remain in the custody of: Name: __________________________________ Title: __________________________________ Address: _______________________________ Signed on this ________ day of ________, 1996 _______________________ Name:_________________