Done Deals

Posted: 7/2003

Done Deals
271 Proceedings Nearly History

By Josh Long

The contentious 271 proceedings nearly
are over, leading to a government proceeding investigating how the Federal
Communications Commission should regulate the long-distance operations of the
regional Bell operating companies.

In May, the regulator opened a proceeding to
determine whether to require the phone giants to maintain separate subsidies.
The Bells are required by federal law to provide long distance through a
separate corporate affiliate. The law also requires separate books, records and
accounts, forbids cross-subsidization and prohibits discrimination against
unaffiliated companies. However, the rules expire three years after a Bell
receives long-distance authority in a state. They were set to expire in Texas in
June, and the requirements ended last December in New York.

The FCCs further notice of proposed rulemaking
also sought comment on whether independent local exchange carriers should be
subject to the affiliate rules, and whether there are alternative regulatory
approaches the commission could adopt to deter anticompetitive behavior.

To preserve regulations stipulated in the
Telecommunications Act of 1996, AT&T Corp. filed a petition requesting the
FCC extend the obligations of Southwestern Bell Telephone Company in Texas. The
public utility commission of Texas has already strongly urged the commission to
extend the section 272 requirements, an extension that is all the more necessary
given the significant evidence that SWBT has in fact discriminated against
competitors and has engaged in improper cost misallocation, AT&T wrote in
a petition.

SBC spokesman Barry Hutchison says the company
plans to file a rebuttal with the FCC.

At press time in late May, the Bells had received
long-distance approval in all but seven states: Arizona and Minnesota, the
territory of Qwest Communications International Inc.; and Illinois, Indiana,
Michigan, Ohio and Wisconsin, the region of SBC Communications Inc.

Qwest planned to file an application for
longdistance authority in Arizona early this summer.

On March 28, the company filed its application
for long-distance authority in Minnesota. The FCC had 90 days to issue a
decision from the date of the filing.

SBC, the second largest local phone company,
planned to file for long-distance authority in its Ameritech states by the end
of the year, according to Hutchison.

Verizon Communications Inc., the largest local
phone company, and BellSouth Corp., the No. 3 local phone company, are
authorized throughout their respective territories.

The Bells affiliates controlled about 15
percent of the residential long-distance market as of last year, according to
FCC data. AT&T was the leader with approximately 37 percent share, followed
by MCI and Sprint Corp.

The market is changing rapidly, however: Verizon
says in January it surpassed Sprint as the third-largest long-distance company.
Sprint says it was No. 3 based on consumer long-distance revenue.

Those competing with the Bells for local and
long-distance customers say they worry the phone giants may have less incentive
to comply with rules that require them to open their local networks to rivals on
a nondiscriminatory basis.

Jacob Farber, an attorney with Dickstein Shapiro
Morin & Oshinsky, says, The best thing any CLEC can do is carefully
catalogue every abuse it encounters. The critical thing is you have a record.

With evidence in hand, phone companies can take
their complaints to state public utility commissions, the FCC and the courts.
Lawyers advise their clients to resolve a dispute as soon as possible, an
outcome that is less probable if a complaint is before the federal government,
some people say.

Andy Klein, a senior associate with Kelley, Drye
& Warren LLP, advises his clients to participate in key state proceedings,
ensure interconnection agreements support a sound business plan, and use
remedies to achieve enforcement action quickly wherever possible.

In fiscal year 2002, the FCC levied $28.5 million
in fines and other monetary penalties, including $10 million in local
competition actions. State regulators have adopted performance assurance plans
to protect competitors after the Bells have received long distance approval.
These plans measure the wholesale performance of the Bell carrier, evaluating
such metrics as ordering, provisioning, maintenance and repair and network

Klein, the lead attorney who developed the
performance assurance plan for the New York State Public Service Commission,
says the plans must include penalties that automatically go into effect. He
advises his clients to try to get these performance assurance plans stipulated
in an interconnection agreement.


Acceris Communications Partners

Bell Canada Enterprises Inc.

Birch Telecom Inc.

CenturyTel Inc.

CityNet Telecommunications Inc.

Counsel Corp.

Florida Digital Network Inc.

I-link Inc.

InfoHighway Communications Corp.

LDMI Telecommunications

Lightyear Communications Corp.

Universal Access Global Holdings Inc.

VarTec Telecom Inc.



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