August 19, 1997

SEPARATE STATEMENT OF CHAIRMAN REED HUNDT

Re: Application of Ameritech Michigan Pursuant to Section 271 of the Communications Act of 1934, as Amended, To Provide In-Region, InterLATA Services in Michigan

In today's decision, we provide a detailed, comprehensive roadmap that makes clear what Bell Operating Companies (BOCs) must do in order to satisfy the open market checklist enacted by Congress in the Telecommunications Act of 1996. I applaud the work of our talented and dedicated Common Carrier Bureau, which, working within the tight time limits mandated by Congress, has drafted the clearest, most comprehensive roadmap that any pro-competition cartographer has ever produced within 90 days.

This Order describes in great detail the steps the BOCs must take to satisfy Congress' checklist. The Order reaffirms that where a Bell Operating Company has the will, there is a way. Any BOC that wishes to take the steps necessary to follow the roadmap will have the opportunity to enter the long distance market. This is the bargain Congress struck in the Telecom Act: when a BOC has reliably, practically, and fully opened its local market to competition and permanently allowed competitors fair access to the economies of scale and scope it generated during the previous monopoly era, it should be permitted to enter the long distance market.

When a BOC is supplying network elements or services to competitors, it must make available those elements and services on the same nondiscriminatory basis it provides to itself. Because incumbents characteristically use these elements in combination, incumbents must therefore offer the elements in combination to their competitors in order to meet the requirements of section 271.

The standard for evaluating the incumbents' offerings is parity, not perfection. A BOC cannot merely announce, moreover, that it is capable of selling or leasing its network services and elements. The BOC must demonstrate that it has the operations support systems actually to deliver those services and elements to competitors. The prices that a BOC charges its competitors for interconnection, unbundled elements, and resale are also extremely relevant. We believe that in order to promote efficient, competitive entry and comply with section 271, a BOC must offer its competitors prices that are set on the basis of forward-looking economic costs, using TELRIC (total element long run incremental cost) principles.

Moreover, a uniform national reading of section 271, of course, is necessary. This necessitates having a single national pricing methodology (which would generate different specific prices within states and within regions inside states), as is set forth in our Order. A uniform pricing methodology has flexibility to accommodate local issues, such as varying costs of capital and other parameters. But the statute cannot be fairly read to permit different states to use different pricing methodologies for the purpose of compliance with section 271. Such an approach would be an insupportable reading of the statute.

Interpreting section 271 to encompass different and conflicting pricing methodologies would generate inequities among the different BOCs, in that some might enter long distance only when a pro-competition pricing methodology for unbundled elements and interconnection truly and effectively opened that BOC's local market. By contrast, other BOCs would be able to enter when their local markets were less open to new entry as a result of a state's election of a pricing methodology that was more inimical to new entry (such as a methodology that sought to recover historic cost from new entrants, instead of in some competitively neutral manner). Such a result would be bad policy as well as a bad reading of the law.

I recognize and applaud the steps that Ameritech and the state of Michigan have taken to open the local market in Michigan to competition, and I welcome the competition that BOC entry into long distance should promote in that market. It also is possible that the anticipation of BOC entry into long distance in a particular market could create a greater incentive for the long distance companies to respond by entering the local market in that state.

It should also be noted that today's roadmap plainly extends to Ameritech and the other BOCs the opportunity to enter the long distance market well before the three-year "date certain" deadline (which would have been February 1999, given the date the law was signed) that the BOCs lobbied Congress to adopt -- and which Congress in fact rejected.