Regulatory News – FCC’s Section 271 Approval Stands on Appeal

Posted:  09/2000

FCC’s Section 271 Approval Stands on Appeal
By Kim Sunderland

A federal appeals court ruled the FCC
(www.fcc.gov) acted within the confines of the Telecommunications Act of 
1996 when it approved in December the nation’s first in-region long-distance application of a
BOC.

The United States Court of Appeals for the District of Columbia Circuit (www.cadc.uscourts.gov) found the FCC followed the Telecom Act’s guidelines when it approved the Section 271 bid of Verizon
Communications (www.verizon.com), formed by the merger of Bell Atlantic Corp. and GTE Corp. The ruling rejects claims by AT&T Corp.
(www.att.com) and Covad Communications Co. (www.covad.com) that Verizon failed to implement two elements within Section 271’s 14-point competitive checklist.

“Given the evidence of growing competition in the New York local telephone market … we find no basis for faulting the commission’s conclusion that Bell Atlantic satisfied the statute’s requirements for entry into the long-distance telephone market,” Judge David Tatel wrote in the court’s opinion. “Finding no defect in the commission’s analysis, we affirm in all respects.”

The court also stated, “Approving a Section 271 application requires a delicate judgment about the current state of competition in local markets, as well as how best to foster future competition. The FCC must ensure … that BOCs failing to comply with the 1996 Act’s local competition provisions are not allowed to provide long-distance service.

“The commission must be equally careful to ensure–as it has in this case–that BOCs that satisfy the statute’s requirements are not barred from long-distance markets.

“We believe that the commission set the bar at a reasonable height,” the court ruled.

A pleased FCC Chairman William E. Kennard says, “This decision is a great victory. The court clearly affirmed the FCC’s framework for deciding long-distance applications from the Bell companies–the heart and soul of the Telecommunications Act of 1996.”

Kennard adds the decision “marks an important milestone in our efforts to move competition out of the courtroom and into the marketplace, where it belongs.”

Whether the applicant had met each of the competitive checklist requirements of Section 271, and whether it was able to demonstrate that it had systems in place which opened its network to competitors are complex technical questions upon which the FCC compiled an extensive record, explains telecom attorney Mitchell F.
Brecher, partner with Greenberg Traurig (www.gtlaw.com).

“I did not expect the reviewing court to second-guess the FCC on those types of questions,” Brecher says.

AT&T’s challenge was based on four points:

(1) Bell Atlantic’s prices for certain network elements do not conform to the total element long-run incremental cost (TELRIC) pricing methodology;

(2) Contrary to the FCC’s conclusion, Bell Atlantic fails to provide competitors nondiscriminatory access to two types of unbundled loops–DSL-capable loops and hot-cut loops;

(3) The company imposes use restrictions on combinations of network elements that violate the Telecom Act; and

(4) The company’s proposed script for handling calls requesting new service or changes to existing service conflicts with Section 272’s nondiscrimination safeguards.

Supported by intervenors including the New York State Public Service Commission
(www.dps.state.ny.us), Qwest Communications International Inc.
(www.qwest.com, formerly US WEST Inc.) and
Verizon, the FCC argues that the company has satisfied both the competitive checklist and Section 272’s nondiscrimination safeguards.

Covad joined the challenge of AT&T’s first two claims.

“AT&T believes our case raised valid concerns of substantial importance to consumers and local competition,” says Gary Morgenstern, AT&T’s media relations director for the Northeast. “We further believe that in its decision, the court gave the FCC considerable deference in its interpretation and application of the Telecom Act’s local competition requirements.”

On the other hand, Verizon’s senior vice president Edward Young said the court’s decision creates a “road map” for future Section 271 applications. The company’s senior vice president and deputy general counsel Michael Glover added the ruling “rejects AT&T’s ceaseless efforts to seek government protection for its long-distance market.”

Indeed, courts will see more challenges. AT&T already has asked the same court to review the FCC’s approval in June of SBC Communications Inc.’s
(www.sbc.com) application to sell long-distance service in Texas.

Similar challenges also may be filed in Nevada and Arkansas, where SBC recently filed with state regulators to offer long-distance service in those states. Verizon plans to file by the end of the year long-distance applications in Massachusetts and New Jersey, and possibly Pennsylvania.

The court’s decision can be found at
www.fcc.gov/ogc/documents/opinions/2000/99-1538.html.