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Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
)
MCI TELECOMMUNICATIONS )
CORPORATION, ) File No. E-97-19A
)
Complainant )
)
v. )
)
ILLINOIS BELL TELEPHONE )
COMPANY, )
INDIANA BELL TELEPHONE COMPANY, )
INC., )
MICHIGAN BELL TELEPHONE )
COMPANY, )
OHIO BELL TELEPHONE COMPANY, )
WISCONSIN BELL, INC., d/b/a/ )
AMERITECH OPERATING COMPANIES )
and AMERITECH COMMUNICATIONS,
INC.,
Defendants.
MEMORANDUM OPINION AND ORDER
Adopted: October 16, 2000 Released: October 19, 2000
By the Commission:
I. INTRODUCTION
1. In this Memorandum Opinion and Order, we grant in part
a formal complaint filed by MCI Telecommunications Corporation1
against the Ameritech Operating Companies2 concerning Ameritech's
1-800-AMERITECH service (the Service). This Service permits
Ameritech's local subscribers to place local and long distance
calls originating both inside and outside of the Ameritech
service area. Section 271 of the Communications Act of 1934
(Act) generally bars each Bell Operating Company (``BOC'') --
including Ameritech -- from providing long distance
(``interLATA'') service originating in the region where it
provides local service, unless and until the Commission
determines that various conditions relating to competition in
local telephone service are satisfied.3 Ameritech has not
received Commission approval to provide long distance service in
any state in its service region. This complaint presents the
question whether the 1-800-AMERITECH service violates section
271.
2. The evidence demonstrates that Ameritech: (1) designed
and developed a combined service offering for its local service
customers that includes a long distance component; (2) relied on
its brand name in marketing the combined offering; (3) promoted
the combined offering through bill inserts to Ameritech's local
calling subscriber base; (4) served as the exclusive point of
contact for the customer for all service inquiries for the
combined offering; (5) maintained the exclusive right to market
the Service; (6) selected the long distance carrier; (7)
precluded the long distance carrier from contacting 1-800-
AMERITECH customers without Ameritech's prior consent; (8)
reserved the right to substitute its own services in place of the
contracting provider; and (9) established the prices, terms, and
conditions under which the long distance component would be
offered. Applying Commission and judicial precedent in this
area,4 we conclude, based on the totality of circumstances
presented in the record, that Ameritech's 1-800-AMERITECH
offering violates section 271. Because we find that Ameritech
violated section 271, we do not reach other claims raised by MCI
regarding other alleged violations of the Act by Ameritech.
II. BACKGROUND
3. In late November of 1996, Ameritech began offering its
1-800-AMERITECH service, which permits its subscribers to place
local, long distance and international calls from anywhere in the
country by accessing a dialing platform through the Service's
toll-free number.5 Ameritech promoted the Service as a way for
its customers to make calling-card calls from payphones without
paying excessive fees.6 Thus, the promotional materials asserted
that, by dialing 1-800-AMERITECH, customers were ``guaranteed low
rates . . . for all domestic long distance calls.''7 Similarly,
advertisements mailed to Ameritech's local-service customers
asserted that, by using the Service, callers could ensure that
they would "never be surprised by exorbitant calling card charges
again."8 Other advertisements promoted the Service as a way for
consumers to have control over which long distance company
carries their calls, and to ensure that their calls would not be
blocked by pay phone operators.9
4. In September 1996, Ameritech sent a notice of
solicitation to approximately 144 long distance carriers, seeking
in-region, interLATA transport to support the 1-800-AMERITECH
service.10 Among other things, the notice of solicitation
proposed a requirement that the IXC supporting the Service would
show its calls on the Ameritech bill associated with an
Ameritech-provided service,11 that the IXCs' contracts with
Ameritech be on a month-to-month basis, that the contracts be
terminable by Ameritech on 10 days' notice, and that cancellation
could be effected on a LATA-by-LATA basis.12 From the responses
that it received, Ameritech chose WilTel Communications Group
(WilTel), which Ameritech states was the only carrier that
submitted a qualifying response to the notice of solicitation.13
Ameritech itself is the carrier for both local and intraLATA
calls for its 1-800-AMERITECH service.14 Ameritech's interLATA
affiliate, Ameritech Communications, Inc. (ACI), carries the
interLATA calls originating outside Ameritech's region (out-of-
region interLATA traffic) pursuant to Ameritech's F.C.C. Tariff
No. 2.15 At the time MCI filed its complaint, WilTel carried the
in-region, interLATA calls.16 Subsequently, Ameritech terminated
its contract with WilTel and chose TelTrust Communications
Services (TelTrust) as the sole IXC to support the Service.17
Under the TelTrust agreement, Ameritech reserved the right not
only to contract with other IXCs, but also to utilize its own and
its affiliates' resources to provide similar services.18
5. Ameritech's name and trademark have been far more
prominently featured in advertisements promoting the Service than
the identity of the long distance carriers involved. The toll-
free number for the Service conspicuously links Ameritech's name
to the service. Similarly, the promotional materials that
Ameritech mailed to its local-service subscribers prominently
feature Ameritech's name and logo. Only in smaller type does the
mailer identify the carriers that actually transmit the calls,
stating that ``in-region intraLATA calls will be handled by
Ameritech,'' and that ``[a]ll other calls will be handled by
Ameritech Long Distance or WilTel.''19 Although the brochure to
which the calling card was attached in Ameritech's initial
mailing stated that interLATA calls would be handled by Ameritech
Long Distance or WilTel, the calling card itself did not identify
any carrier other than Ameritech.20 Other promotional materials
used to market 1-800-AMERITECH included television and radio
commercials and a print advertisement. Following the initial
launch of the Service, these ads mentioned WilTel, but they did
not identify it as the carrier for in-region, interLATA calls.21
Subsequently, the promotional materials were changed to state
that in-region carrier services are provided by the IXC
supporting the Service.22
6. When a customer accesses the platform by dialing 1-800-
AMERITECH, she hears, "Welcome to 800-AMERITECH,'' and then
receives a prompt to enter the called number, her calling card
number and a personal identification number. Once the calling
card number is verified and the customer places a call, she hears
"Thank you for using 800-AMERITECH" when placing local, intraLATA
toll, or out-of-region, interLATA calls. When placing in-region,
interLATA calls, the customer hears a thank-you message that
mentions the supporting carrier by name. In-region, interLATA
calls are routed to the supporting IXC's network in the same
manner as such calls would be routed to any other long distance
carrier's network by Ameritech.23
7. The Service is promoted, among other means, through
bill inserts sent to Ameritech's local customer base.24 The
record before us indicates that Ameritech serves as both the
initial and exclusive customer care contact for the 1-800-
AMERITECH service.25 The TelTrust agreement prohibits TelTrust
from communicating with the 1-800-AMERITECH customers without
prior written consent from Ameritech.26 The Service is billed
through the customer's Ameritech monthly service bill.27
III. DISCUSSION
I.A. Section 271 claim.
8. MCI's primary contention in this proceeding is that the
1-800-AMERITECH service violates section 271 of the Act because
it amounts to the provision of in-region interLATA service before
Ameritech has received approval from the Commission to offer such
services. Section 271(a) states ``[n]either a Bell operating
company nor any affiliate of a Bell operating company, may
provide interLATA services except as provided in this
section.''28 The statute permits a BOC to provide interLATA
service originating within its local service area on a state-by-
state basis only upon application to the Commission and approval
from the Commission pursuant to section 271(d). Section 271 thus
``both gives the BOCs an opportunity to enter the long distance
market and conditions that opportunity on the BOCs' own actions
in opening up their local markets.''29 Congress intended section
271 to create a strong incentive for the BOCs to comply with new
obligations in sections 251 and 252 of the Telecommunications Act
of 1996,30 which, in turn, were designed to facilitate
competition in local markets (including interconnection,
unbundling and resale). The statute creates this ``powerful
incentive'' by conditioning BOC entry into the in-region, long-
distance market on compliance with a checklist of local market-
opening criteria and other requirements.31
9. Ameritech has not received approval from the Commission
to provide long distance service in any state in its region.32
It is therefore subject to the general section 271(a) prohibition
on the offering of such services. MCI's claim under section 271
presents the generic issue, previously addressed by the
Commission in the Qwest Teaming Order and affirmed by the Court
of Appeals, of whether a challenged offering, for which a BOC
does not actually transmit in-region, interLATA traffic, may
nevertheless amount to the ``provision'' of interLATA service for
purposes of section 271. In that case - as in this case - the
relevant BOCs were offering a combined service that included
their own local and intraLATA toll service bundled with interLATA
transport provided by an unaffiliated long distance carrier.
10. In the Qwest Teaming Order, we stated that the
determination of whether a non-transmitting BOC violated section
271 turns on ``whether a BOC's involvement in the long distance
market enables it to obtain competitive advantages, thereby
reducing its incentive to cooperate in opening its local market
to competition.''33 Thus, the ``provision'' of interLATA
services, within the meaning of section 271(a), ``must encompass
activities that, if otherwise permitted, would undermine
Congress's method of promoting both local and long distance
competition by prohibiting BOCs from full participation pursuant
to section 271's competitive checklist.''34 In order to
determine whether a BOC's long distance-related activities ran
afoul of section 271, we found it instructive in the Qwest
Teaming Order to balance the following, non-exclusive factors:
``whether the BOC obtains material benefits (other than access
charges) uniquely associated with the ability to include a long-
distance component in'' the challenged offering; whether the BOC
is effectively holding itself out as a provider of long distance
service; and whether the BOC is performing activities and
functions that are typically performed by those who are legally
or contractually responsible for providing interLATA service to
the public.''35 In evaluating the challenged BOC actions, ``we
consider the totality of its involvement, rather than focus on
any one particular activity.''36 We apply the same fact-based
test to MCI's claim that the 1-800-AMERITECH service amounts to
the prohibited provision of in-region interLATA service.
11. In the Qwest Teaming Order, one of the principal
factors that led us to find a section 271 violation was that the
challenged offerings would have afforded the defendants a
``significant jumpstart when they do obtain 271
authorization.''37 Thus, by developing an extensive customer
base for the challenged services, the defendant carriers could
``pre-position'' those customers for a seamless transition to the
long distance services of the carriers' section 272 affiliates
once the carriers received section 271 authority to begin in-
region interLATA service.
12. As with the arrangements at issue in the Qwest Teaming
Order, we find that the 1-800-AMERITECH service permits Ameritech
to obtain material benefits uniquely associated with the ability
to include a long distance component in the 1-800-AMERITECH
service. The Service permits Ameritech to accumulate a
significant base of customers who rely on the Service. After
receiving section 271 authority, Ameritech would be well
positioned to substitute the interLATA service of its section 272
affiliate for that of the IXC currently supporting the Service.
In so doing, Ameritech could build up goodwill as a full service
provider with its local-service customers who already routinely
placed their long distance calling-card calls through the 1-800-
AMERITECH service before gaining section 271 approval from the
Commission.38 The ability of Ameritech to avail itself of a
ready base of customers that is positioned for migration to its
eventual interLATA service is a troublesome material benefit
uniquely associated with the ability to include a long-distance
component in the 1-800-AMERITECH service.
13. Our concern in this regard is heightened by the
structure of Ameritech's agreements with the IXCs that have
provided in-region interLATA transmission to the Service. The
TelTrust agreement, for example, states that Ameritech ``may at
any time and for any or no reason terminate this Agreement, in
whole or in part, by giving seventy-five (75) days prior written
notice . . .''39 In addition, Ameritech reserved the right not
only to contract with other IXCs, but it also reserved the right
to utilize its own and its affiliates' resources to provide
similar services.40 Read together, these contract provisions
give Ameritech the right to replace TelTrust's services with the
services of Ameritech's section 272 affiliate once the Commission
grants Ameritech authorization to provide long distance services
in-region.41 Thus, as in the Qwest Teaming Order, Ameritech
structured the agreement in such a way that it would be ``well-
poised to substitute the long distance service offered by [its]
section 272 affiliate, when [it] obtain[s] section 271 approval,
into the [1-800-AMERITECH] package in the future.''42
14. In the Qwest Teaming Order, we found that the
challenged offerings allowed the defendant carriers to ``enhance
[their] goodwill in the marketplace'' and to ``add value'' when
dealing with their customers in a way that further cemented their
relationships with their end users before their markets were open
to meaningful competition.43 This, in turn, makes it even more
difficult for competitors successfully to enter the market. The
TelTrust agreement flatly prohibits TelTrust from communicating
with the 1-800-AMERITECH customers in any manner without the
prior written consent of Ameritech.44 Thus, Ameritech enjoys a
significant competitive advantage in building goodwill with the
1-800-AMERITECH customers, including with regard to the provision
of long distance services. As a result, once Ameritech receives
Commission authorization to offer long distance service in-
region, the 1-800-AMERITECH customers, who receive local service
from Ameritech, may be more inclined to select Ameritech as their
presubscribed long distance carrier as well.
15. Another troubling aspect of the Service is the manner
in which Ameritech has promoted it to its local subscriber base.
In addition to advertising the offering through various media
outlets, Ameritech has availed itself of a communication channel
that is uniquely available to it as the monopoly provider of
local service within its region - bill inserts and other mailings
that draw on its subscriber list.45 Thus, Ameritech can promote
the Service to virtually every subscriber on its network, and it
can do so using a customer database that is either unavailable to
any one of its competitors in the local service market or
available only at a significant additional charge. Moreover,
through the use of bill inserts, Ameritech can effectively
promote the Service at a slight fraction of what a stand-alone
mailing would cost one of its competitors, even if those
competitors had access to Ameritech's subscriber mailing list.
16. Ameritech's participation in the long distance market
through its 1-800-AMERITECH service enables it to obtain
significant competitive advantages in a way that is similar to
what we found objectionable in the Qwest Teaming Order. We
recognize that the service offering at issue in this case may not
be as strong a disincentive to the opening of Ameritech's local
markets as were the pre-subscribed combined service offerings at
issue in the Qwest Teaming Order. Nevertheless, we believe that
this Service allows Ameritech to build up goodwill with its
local-service customers as a full-service provider prior to
receiving section 271 approval. This permits Ameritech a
significant competitive advantage that could reduce its incentive
to open its local market to competition.46 We find that the
provision of the 1-800-AMERITECH service runs counter to the
incentive structure established by Congress in section 271.
17. Under the analytical framework set forth in the Qwest
Teaming Order, we also inquire whether Ameritech is effectively
holding itself out to customers as a provider of long distance
services, and whether Ameritech is engaged in various actions
typically performed by those who resell interLATA service. In
the Qwest Teaming Order, for example, we found that, through the
challenged services, the defendant carriers were holding
themselves out in such a manner because they had ``taken several
specific steps to brand [the challenged offerings] as their
exclusive combined service offerings.''47 Thus, the defendants
held the ``exclusive right to market and sell Qwest's long
distance services in conjunction with the marketing and sale of
their own local services,'' and they served as the initial point
of contact for customers experiencing problems with the long
distance service portion of the offerings.48 In reviewing the
Qwest Teaming Order, the Court of Appeals specifically noted the
reasonableness of our conclusion that, viewed as a whole, the
challenged promotional materials could lead consumers to believe
that the BOC was providing in-region long distance service.49
18. We begin our analysis of whether Ameritech holds itself
out as providing long distance service with the toll-free number
through which subscribers reach the Service. The vanity number50
is plainly calculated to cause customers to associate Ameritech
with all of the services offered through the 1-800-AMERITECH
platform. Thus, the number allows Ameritech to link the
Service's long distance offering (as well as its other offerings)
with the carrier's accumulated customer good will and its
established reputation as a local service provider. 51
19. Examination of Ameritech's promotional materials for
the Service also informs our decision on whether Ameritech holds
itself out as providing long distance service. These materials
prominently display the Ameritech brand, creating the impression
that 1-800-AMERITECH is an offering for which the carrier
provides all components of the service offered, including long
distance.52 Other statements in the materials foster this
impression. For example, in a letter displaying only the
Ameritech logo, the carrier states that the 1-800-AMERITECH
service ensures customers will have their ``calls carried at
Ameritech's low rates every time.''53 Similarly, a mailer that
accompanies the new Ameritech calling cards explains that the
benefits of using the 1-800-AMERITECH service include "gain[ing]
control of who carries your local and long distance calls" and
"pay[ing] a GUARANTEED low rate of $0.25 per minute for all
domestic long distance calls billed to your Ameritech Calling
Card."54 The same mailer encourages calling card customers to
"dial 1-800-AMERITECH every time you make a local or long
distance calling card call" and "[start] using the Ameritech
Calling Card to save money on all your calls - local, long
distance, and international."55
20. In the promotional materials for the Service, Ameritech
directly analogizes the Service to AT&T's and MCI's calling card
offerings by comparing the rates of the three services for an
eight-minute call.56 In that regard, Ameritech admits that
customers are generally aware that they can choose their long
distance carrier on an ad hoc basis "by dialing an 800 number
associated with the customer's chosen carrier (e.g., MCI's '1-
800-ANYCALL' or AT&T's '1-800 CALLATT')."57 By dialing these
numbers, which are heavily promoted by the respective carriers,
customers reach an IXC that actually provides interLATA
transmission service regardless of where the call originates.
Ameritech asserts, however, that because of disclosures in its
promotional materials for the Service, those materials do not
hold Ameritech out as similarly providing long distance
service.58 We are not persuaded by this argument, based as it is
on the relatively inconspicuous disclaimers in Ameritech's
marketing materials. It requires too fine of a line to
distinguish between the ``holding out'' accomplished by MCI's and
AT&T's vanity-number services and the ``holding out''
accomplished by 1-800-AMERITECH.
21. Ameritech points out that several portions of its
promotional materials indicate that it handles only the calls it
is authorized to carry and that Ameritech Communications, Inc.,
or the supporting contract carrier handles all other calls.59
Thus, in their original form, Ameritech's promotional materials
stated merely that "other calls are handled by WilTel."60 The
materials have since been changed to state: "In region carrier
services provided by Teltrust. Out of region carrier services
provided by Ameritech Communications, Inc."61 We are troubled by
the proportional dissimilarity in type size between the
prominence of the Ameritech brand name, including the number of
times that the Ameritech brand name is associated with long
distance service and rates, and the in-region service disclaimer
and their proximity. The disclosures essentially are relegated
to a hidden portion of the promotional materials.
22. Ameritech further asserts that "the customer's bill
clearly indicates the carrier for each call, confirming the
distinction and eliminating any possible confusion."62 While
that much is true, when we examine the Service as a whole and the
manner in which Ameritech promotes it, we conclude that, through
its 1-800-AMERITECH offering, Ameritech holds itself out as
providing in-region long distance service. The Ameritech vanity
access number all but ensures that the offering, and all of its
components, generally will be perceived as Ameritech-provided
services. Indeed, the notice of solicitation even proposed a
requirement that all calls placed through the Service would show
up on Ameritech's bill as being associated with an Ameritech-
provided service.63 Furthermore, given the prominence of
Ameritech's brand on the promotional materials and in the
system's voice prompts,64 the fact that Ameritech does not
furnish the in-region, interLATA transmission for the Service
likely will be lost on all but a few sophisticated consumers.65
In affirming the Qwest Teaming Order, the Court of Appeals noted
that viewing the promotional materials as a whole could ``lead
consumers to link long-distance service to the BOCs, particularly
as long distance was offered only as part of a full-service
package with a BOC brand name.''66 The same is true here.
23. In addition, as with the arrangements at issue in the
Qwest Teaming Order, the record reveals that Ameritech serves as
both the initial, and apparently the only, customer care contact
for the 1-800-AMERITECH service. Our examination of the record
reveals no instance - nor has Ameritech identified any - in which
Ameritech employees are instructed to pass customer inquiries or
complaints to the IXC supporting the service. When a customer
probes for information about which carrier transmits in-region
interLATA calls, the operator scripts in the record instruct the
Ameritech employees simply to answer the question by identifying
the contract carrier.67 It does not appear that Ameritech
employees ever refer to the supporting IXC a customer complaint
about long distance rates or service. By contrast, when faced
with a question about cellular service, Ameritech operators are
instructed to refer the customer to the toll-free number for
Ameritech's cellular business unit.68 Ameritech's provision of
customer care for all aspects of the service, including the long
distance component, supports the conclusion that, in connection
with the 1-800-Ameritech service, Ameritech is performing
activities typically performed by a reseller.
24. Additionally, Ameritech controls the exclusive right to
market the 1-800-AMERITECH service. Notably, the TelTrust
agreement states that TelTrust ``can perform no advertising or
promotion of 1-800-AMERITECH without the prior written consent of
Ameritech other than in the normal course of providing the
service."69 The agreement further requires that TelTrust obtain
Ameritech's written consent before even mentioning its
arrangement with Ameritech in any promotional materials.70 As
noted above, the agreement also prohibits TelTrust from
``communicat[ing] with the 1-800-AMERITECH customers in any
manner without the prior written consent of Ameritech.''71 Taken
together, these provisions make it clear that Ameritech controls
the exclusive right to market and sell, under the 1-800-AMERITECH
name, its own local and intraLATA toll services and its contract
carrier's long distance services.
25. We also note that Ameritech appears to have had a
significant degree of involvement in the design and development
of the long distance component of its 1-800-AMERITECH service.
Ameritech chose the IXC that would carry the in-region long
distance traffic based on requirements that are very similar to
those established in the notice of solicitation. Indeed, the
final terms of the agreement related to certain pricing and usage
rates do not differ from the terms in the notice of
solicitation.72 Thus, the supporting IXC simply agreed to
participate in the offering under the pricing and usage terms and
conditions that Ameritech had already established on its own.
26. These factors bolster our conclusion that Ameritech
effectively is holding itself out to consumers as a provider of
long distance service, and that it is engaged in various actions
typically performed by a reseller. The similarities are striking
between Ameritech's activities here and its activities that were
found unlawful in the Qwest Teaming Order.
27. On balance, based on the totality of the circumstances
discussed above, we conclude that, through the 1-800-AMERITECH
service, Ameritech is "providing" in-region, interLATA service in
violation of section 271. The Service affords Ameritech material
benefits uniquely associated with the inclusion of long distance
service in the offering. It permits Ameritech to accumulate a
significant base of customers who rely on the Service; it enables
Ameritech to build up goodwill as a full service provider with
its local-service customers by prohibiting the IXC supporting the
Service from communicating with 1-800-AMERITECH customers without
Ameritech's prior written consent, and by availing itself of a
communication channel that is uniquely available to Ameritech as
the monopoly provider of local service within its region - bill
inserts and other mailings that draw on its subscriber list.
Through the Service and the many associated promotional materials
that prominently bear Ameritech's brand, the carrier essentially
holds itself out as providing long distance service. And, in
connection with the Service, Ameritech performs numerous
functions, including marketing and customer care that are
typically performed by a reseller of long distance service. All
of these factors point to the conclusion that, through the
Service, Ameritech is ``providing'' in-region, interLATA service.
I.B. Other claims.
28. MCI also argues that (1) the 1-800-AMERITECH service
amounts to an unreasonable practice in violation of section
201(b); (2) MCI was excluded from providing transport services to
support the Service in a discriminatory manner in violation of
section 202(a) and (3) the structure of the Service violates
Ameritech's equal access obligations under section 251(g).
Because we find that Ameritech violated section 271, we need not
and do not reach the claims raised by MCI regarding alleged
violations of other provisions of the Communications Act.73
IV. CONCLUSION
29. As discussed above, we find that Ameritech, through its
1-800-AMERITECH service, is providing in-region, interLATA
services without authorization in violation of section 271 of the
Act. We do not reach other statutory claims raised by MCI.
V. ORDERING CLAUSES
30. Accordingly, IT IS ORDERED, pursuant to sections 1,
4(i), 4(j), 208, and 271 of Act, as amended, 47 U.S.C. §§ 151,
154(i), 154(j), 208, 271, that the Formal Complaint filed by MCI
Telecommunications Corporation IS GRANTED to the extent that it
alleges that the 1-800-AMERITECH service violates section 271.
31. IT IS FURTHER ORDERED that MCI, pursuant to section
1.722 of the Commission's rules, 47 C.F.R. § 1.722, MAY FILE a
supplemental complaint concerning damages relating to our
findings in this Order within 60 days of the date of this
decision.
FEDERAL COMMUNICATIONS COMMISSION
Magalie Roman Salas
Secretary
_________________________
1 Effective September 14, 1998, MCI Telecommunications
Corp. merged with WorldCom, Inc. to form MCI WorldCom, Inc. All
references herein to MCI after September 14, 1998, refer to MCI
WorldCom, Inc.
2 The Ameritech Operating Companies are: Illinois Bell
Telephone Company; Indiana Bell Telephone Company, Inc.;
Michigan Bell Telephone Company; The Ohio Bell Telephone
Company; and Wisconsin Bell Inc. Ameritech Answer at 1. This
Order refers to them collectively as Ameritech. We note that
effective October 6, 1999, Ameritech Corp. merged with SBC
Communications, Inc. As a result of the merger, Ameritech is a
wholly owned subsidiary of SBC Communications, Inc.
3 47 U.S.C. § 271(a). Section 271(a) provides: ``Neither a
Bell operating company, nor any affiliate of a Bell operating
company, may provide interLATA services except as provided in
this section.'' 47 U.S.C. § 271(a). InterLATA service "means
telecommunications between a point located in a local access
transport area [LATA] and a point located outside such area."
47 U.S.C. § 153(21). LATAs are contiguous geographic areas
established by a Bell Operating Company (BOC) such that no
exchange area includes points within more than one metropolitan
statistical area or state. 47 U.S.C. § 153(25). Ameritech's in-
region states are Illinois, Indiana, Michigan, Ohio and
Wisconsin.
4 See AT&T Corp. v. Ameritech Corp., 13 FCC Rcd 21438 (1998)
(``Qwest Teaming Order''), aff'd sub nom., U S WEST
Communications, Inc. v. FCC, 177 F.3d 1057 (D.C. Cir. 1999),
cert. denied, 120 S.Ct. 1240 (2000).
5 Ameritech Answer, ¶ 4.
6 Ameritech's Answer to MCI Interrogatories, June 9, 1997,
Exh. 3 (News Release, Nov. 25, 1996).
7 Ameritech Letter to Tonya Rutherford, Jan. 15, 1999, Att. 2
at 1 (January 15, 1999 Letter). See also News Release, Nov. 25,
1996.
8 Ameritech Answer, Exh. 1.
9 Ameritech Answer, Exh. 1; see also News Release, Nov. 25,
1996.
10 Ameritech Answer, ¶ 25.
11 Notice of Solicitation at 3.
12 Notice of Solicitation at 3-4.
13 Ameritech Answer, ¶ 25.
14 Ameritech Answer, ¶ 5.
15 Ameritech Answer, ¶ 6. Section 271(b) permits a BOC, upon
passage of the Telecommunications Act of 1996, to provide
interLATA calls originating outside of its local service
territory through a structurally separate affiliate. 47 U.S.C.
§ § 271(b), 272.
16 Ameritech Answer, ¶ 11; Stipulations of Fact at 2.
17 On January 9, 1998, Ameritech again solicited bids for IXCs
to carry the in-region interLATA traffic for the 1-800-AMERITECH
service. Through this process, Ameritech ultimately chose
TelTrust. January 15, 1999 Letter, Att. 1.
18 Letter to Magalie Roman Salas, September 16, 1999, Att. at
11 (§ 2.13) (TelTrust Agreement).
19 Ameritech Answer, Exh. 1.
20 Ameritech Answer, Exh. 1.
21 The 30-second television commercial contains the following
written statement (on the screen for approximately 3 seconds in
the middle of the commercial): "Ameritech handles calls when
authorized. Other calls carried by WilTel." The radio
commercial contains the following statement (at the end of the
commercial): "Ameritech guarantees lawful calling card rates
and handles calls where authorized. Other calls carried by
WilTel." The print advertisement contains the following
statement (at the bottom of the page in six-point Times Roman
print): "Ameritech guarantees lawful calling card rates and
handles calls where authorized. Other calls handled by WilTel."
Attachments to Letter from Frank Michael Panek, Ameritech
Counsel, to Diane Griffin Harmon, FCC Counsel (July 14, 1997)
(Ameritech Factual Supplement). All three promotional materials
advertise 1-800-AMERITECH in conjunction with Ameritech's
calling card. See, e.g., Print Advertisement ("Now the card
that connects also protects. (When you dial 1-800-
AMERITECH.)"). Id.
22 January 15, 1999 Letter, Att. 2 at 9.
23 Ameritech Factual Supplement.
24 January 15, 1999 Letter, Att. 2 at 21.
25 See ¶ \* MERGEFORMAT 23 below.
26 TelTrust Agreement at 1 (§ 1.03).
27 TelTrust Agreement, Att. A at 22.
28 47 U.S.C. § 271(a).
29 U S WEST Communications, 177 F.3d at 1060.
30 The Telecommunications Act of 1996, Pub. L. No. 104-104,
110 Stat. 56, codified at 47 U.S.C. §§ 151 et. seq., amended the
Communications Act of 1934.
31 U S WEST Communications, 177 F.3d at 1060; 47 U.S.C. §
271(c). See also AT&T Corp. v. FCC, 220 F3d 607, 612 (D.C. Cir.
2000) (conditional long distance entry pursuant to section 271
is designed ``[t]o encourage
BOCs to open their markets to competition as quickly as
possible''). The Commission's decision in the Qwest Teaming
Order contains a more extensive explanation of the market-
opening incentives behind section 271. 13 FCC Rcd 21438, 21441-
47, ¶¶ 3-7 (1998).
32 Ameritech has twice applied to the Commission for section
271 authorization to provide in-region, interLATA service in
Michigan. Ameritech's first section 271 application, filed Jan.
17, 1997, was dismissed by the Commission at Ameritech's
request. Application by Ameritech Michigan Pursuant to Section
271 of the Communications Act of 1934, as Amended, to Provide
In-Region, InterLATA Services in Michigan, 12 FCC Rcd 2088 (Com.
Car. Bur. 1997). On August 19, 1997, the Commission denied
Ameritech's second application, filed May 21, 1997. Application
by Ameritech Michigan Pursuant to Section 271 of the
Communications Act of 1934, as Amended, to Provide In-Region,
InterLATA Services in Michigan, 12 FCC Rcd 20543 (1997)
(Ameritech Michigan 271 Order).
33 Qwest Teaming Order, 13 FCC Rcd at 21465, ¶ 37. The
Commission recently applied the test articulated in the Qwest
Teaming Order in the context of approving a transfer of radio
licenses associated with U S WEST's merger with Qwest. In the
Matter of Qwest Communications International, Inc. and U S WEST,
Inc., Applications for Transfer of Control of Domestic and
International Sections 214 and 310 Authorizations and
Applications to Transfer Control of a Submarine Cable Landing
License, Memorandum Opinion and Order, FCC 00-231, 2000 WL
821252 (F.C.C.) (Rel. June 26, 2000). The Commission concluded
that Qwest's proposed divestiture of interLATA customers,
services and assets in U S WEST's service region was a
legitimate, arms-length transaction, and, as a transitional
device designed to minimize disruption to customers, would allow
the merger to proceed in compliance with the requirements of
section 271. See also AT&T Corp. v. BellSouth Corp., Memorandum
Opinion and Order, DA 99-609 (Com. Car. Bur. Mar. 30, 1999)
(Com. Car. Bur. 1999) (staff-level decision holding that
BellSouth's pre-paid calling card did not violate section 271 on
the basis of findings that, inter alia, (1) the card did not
involve a continuing, presubscribed relationship that would
allow BellSouth to gain meaningful information about card
purchasers and to exploit that relationship in customer
retention or win-back efforts; and (2) the card served a segment
of the telecommunications market that is replete with similar
prepaid offerings sponsored by non-carriers, thereby reducing
the risk that consumers would perceive BellSouth as offering in-
region, interLATA services).
34 Qwest Teaming Order, at 21462, ¶ 30.
35 Id. at 21465-66, ¶ 37.
36 Id. at 21465-66, ¶ 37.
37 Id. at 21467, ¶ 41 (internal quotation omitted).
38 See U S WEST Communications, 177 F.3d at 1060 (``By
offering one-stop shopping for local and long distance under
their own brand name and with their own customer care . . . U S
WEST and Ameritech could build up goodwill as full service
providers, positioning themselves in these markets before
section 271 allows them actually to enter.''
39 TelTrust Agreement at 2 (§ 1.06).
40 TelTrust Agreement at 2 (§ 2.13).
41 Ameritech's initial notice of solicitation provides further
evidence that the Service would permit Ameritech to enjoy,
almost immediately, a considerable jumpstart for its in-region
long distance operations as it received section 271 authority in
each state. For example, the notice of solicitation proposed
that Ameritech could cancel the IXC's service with only 10 days'
notice, and it would have permitted Ameritech to effect such a
cancellation on a LATA-by-LATA basis. Notice of Solicitation at
2. Thus, the notice of solicitation envisioned that Ameritech
quickly would move, on a state-by-state basis, its 1?800-
AMERITECH customers, and the traffic they generate, to its
section 272 affiliate's network.
42 Qwest Teaming Order, 13 FCC Rcd at 21467, ¶ 41. See U S
WEST Communications, 177 F.3d at 1060. We note that, under the
totality of circumstances test, this factor alone is not
dispositive in determining whether a BOC has violated section
271 of the Act.
43 Qwest Teaming Order, 13 FCC Rcd at 21468, ¶ 42.
44 TelTrust Agreement at 1 (§ 1.03).
45 January 15, 1999 Letter, Att. 2 at 21.
46 See U S WEST Communications, 177 F.3d at 1060.
47 Qwest Teaming Order, 13 FCC Rcd at 21471, ¶ 45.
48 Id. at 21471, ¶¶ 45-46.
49 U S WEST Communications, 177 F.3d at 1061.
50 A vanity number is a telephone number for which the letters
associated with the number's digits on a telephone handset spell
a name or word of value to the number holder. In re Toll Free
Service Access Codes, Fourth Report and Order and Memorandum
Opinion and Order, 13 FCC Rcd 9058, 9058 ¶ 1 (1998) (Toll Free
Service Access Codes Order).
51 As the Commission stated in the Toll Free Service Access
Codes Order, vanity numbers "are of value to their subscribers
because they can generate high visibility and consumer
recognition when used in advertising." Id., at 9064, ¶ 11. Cf.
Complainant's Reply Brief at 4 (arguing that Ameritech name in
800 number reinforces impression that Ameritech is sole carrier
supporting Service).
52 See generally January 15, 1999 Letter, Att. 2; Ameritech
Answer, Exh. 1.
53 January 15, 1999 Letter, Att. 2 at 1. See also Ameritech
Answer, Exh. 1 ("by dialing 1-800-AMERITECH your calls will be
carried at our low rates").
54 Id. The mailer makes the following statements: ``when you
dial 1-800-AMERITECH you have control over who carries your
local and long distance calls;'' ``Just dial 1-800-AMERITECH and
you're guaranteed to get low local and long distance calls;''
and ``By dialing 1-800-AMERITECH you can enjoy great local and
long distance rates - all itemized on just one monthly bill.''
Id.
55 January 15, 1999 Letter, Att. 2 at 3.
56 See January 15, 1999 Letter, Att. 2 at 9. The comparison
indicates a 29% savings off of AT&T's calling card rates and a
27% customer savings off of MCI's calling card rates when the
customer uses the 1-800-AMERITECH service. Cf. Shared Tenant
Services, 627 F. Supp. at 1101 (MFJ Court finding that the BOCs
would be directly competing with the IXCs through rate
comparisons).
57 Ameritech Answer, ¶ 26.
58 Ameritech Supplemental Reply Brief at 6.
59 Ameritech Answer, Exh. 1; January 15, 1999 Letter, Att. 2
at 1.
60 Ameritech Answer, Exh. 1.
61 January 15, 1999 Letter, Att. 2 at 9. Even this more
complete disclosure regarding TelTrust appears in exceptionally
small print compared to the prominence of Ameritech's brand name
in the promotional materials.
62 Ameritech's Initial Brief at 5.
63 Notice of Solicitation at 3.
64 Ameritech Factual Supplement.
65 The MFJ Court similarly found that BOC advertisements for
long distance service in connection with BOC-provided calling
cards that did not indicate that the BOCs were not providing
the long distance service were misleading and inconsistent with
the MFJ's prohibitions. United States v. Western Elec. Co., 698
F. Supp. 348, 356 n.42 (D.D.C. 1988). The MFJ Court was
concerned that customers would be misled into believing the BOCs
were carrying their long distance calls. Id. at 356 n.38.
66 U S WEST Communications, 177 F.3d 1057.
67 Ameritech's Answers to MCI's Interrogatories, Exh. 1.
68 Id.
69 TelTrust Agreement at 1 (§ 1.03).
70 TelTrust Agreement at 12 (§ 2.16).
71 TelTrust Agreement at 1 (§ 1.03). In addition, the
original RFP, which resulted in Ameritech choosing WilTel as the
participating IXC, states that the service provider "must
provide, at Ameritech's request, 800
AMERITECH customer and call detail for Ameritech's marketing
efforts in support of 800 AMERITECH." Letter from Julian P.
Gehman, Attorney for Ameritech, Att. at 12.
72 Compare Notice of Solicitation at 3 (stating that the
``[s]ervice provider shall charge surcharge and usage rates that
are no more than 10% higher than the average of the surcharge
and usage rates charged by AT&T, MCI and Sprint..'') with
January 15, 1999 Letter, Att. 2 at 19 (stating that rates for
the 1-800-AMERITECH calling card result in 29% and 27% savings
compared to AT&T and MCI, respectively).
73 See, e.g., Qwest Teaming Order, 13 FCC Rcd at 21476, ¶ 53.