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August 1, 1999

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Lessons Learned from the State "271"Process

Posted: 08/1999

Lessons Learned from the State "271"
Process
By Andrew O. Isar

Few things are as easy as they first seem, or so the adage goes. More than three years
after the Telecommunications Act of 1996 became law, no regional Bell operating company
(RBOC) has entered the long distance market in its local territory. Although the act’s
Section 271 in-region interLATA (local access and transport area) entry process is not
working as quickly as the RBOCs, competitive telecommunications industry or regulators and
Congress might like, it is working. A key contributing factor to the success of the 271
process is the collective experience gained at the state level. Here is one perspective of
some of the lessons we have learned.

Lesson 1: "Available" and "Deliverable" Are Not Synonymous

From the beginning, the RBOCs held that service or function availability to competitors
is sufficient to meet the act’s "competitive checklist" for interLATA market
entry. It was this policy that in part led to a spate of ostensibly unused/unusable RBOC
Statements of Generally Available Terms and Conditions containing all available, but not
necessarily deliverable, services, facilities and network elements. The fallacy of the
"availability" argument lies in the act’s intent to deliver the benefits
of telecommunications competition to the public. If competitors cannot reliably obtain
needed services, facilities or network elements, or undue limitations or restrictions are
imposed, availability is meaningless in terms of delivering effective competitive
alternatives to the public.

Lesson 2: RBOC Obligations Must Be Defined

We need not review the litany of litigation that followed passage of the Telecom Act.
The seemingly endless legal wrangling has been predicated on widely divergent
interpretations of the act’s provisions. Despite the court and regulatory decisions to
date, many requirements remain undefined.

In the absence of definition, we witnessed favorable state interLATA market entry
recommendations to the Federal Communications Commission (FCC) that appeared to be based
more on RBOC claims than on the applications’ merits. Borrowing from Justice Antonin
Scalia’s January Supreme Court decision in AT&T v. Iowa Utilities Board,
"It would be a gross understatement to say that the Telecommunications Act of 1996 is
not a model of clarity."

State efforts to define process and compliance requirements with input from all parties
at the onset of 271 proceedings have proven useful, if not necessary, efforts to
mitigate protracted litigation. Such definitions also have led to development of a far
more complete and sustainable evidentiary RBOC compliance record such as is being
completed in the New York, Texas and California 271 proceedings.

Lesson 3: 271 Compliance Should Not Be a Moving Target

We already have witnessed a series of RBOC compliance update filings in several state
271 proceedings. Although these updates are seemingly intended to demonstrate resolution
of outstanding issues, they represent a piecemeal compliance approach, casting doubt as to
how complete the RBOC’s compliance record first was. Last year the Washington Utilities
and Transportation Commission (UTC) developed specific prefiling requirements for
Denver-based US WEST Inc. The commission’s intent is that when US WEST files its
application, the company will be in full compliance and that its compliance application
will be complete. In doing so, incomplete "test" filings are avoided, as are the
efforts of evaluating them. RBOCs should not be allowed to use the application process
simply to scout areas of resistance and bypass them through continual "updates."

Lesson 4: RBOC Performance Must Be Measured

RBOCs have argued that compliance commitments should be taken at face value. Promises,
particularly from an unwilling party, have a habit of being empty, as intent does not
always translate into action. The RBOCs should be required to establish a track record of
measurable performance, such as the three-month evaluation of San Antonio-based
Southwestern Bell Telephone (SWBT) performance data required by the Texas Public Utilities
Commission (PUC) to verify SWBT’s commitments. Performance must be measured against a
defined set of measures, such as the Local Competition Users Group standards that have
formed the basis for measurement in many states. These performance measures are a vital
litmus test of RBOC nondiscriminatory compliance.

Lesson 5: Collaborative Process Can Equal Compliance Record

RBOC, industry and regulatory collaborative workshops have led to more equitable
identification and resolution of RBOC compliance deficiencies, while contributing to the
development of a more complete compliance record. To effectively address RBOC compliance
issues, input is needed from those most directly impacted by 271 compliance: the RBOCs’
wholesale competitive local exchange carrier (CLEC) customers. The collaborative process
offers a less-formal venue for airing issues through open discussions unavailable under
conventional regulatory procedures. The outcome of these collaborative sessions reveals a
fuller, more-detailed picture of RBOC compliance. California, New York, Louisiana and
Texas have successfully led the way in conducting collaborative sessions with broad
industry participation.

Lesson 6: Third-Party Testing Is Imperative

Independent third-party testing of RBOC operations support systems (OSSs) has gained
favor, and with good reason. Third-party RBOC performance evaluation has proven effective
in providing more balanced accurate compliance measures. KPMG Peat Marwick third-party OSS
testing of Bell Atlantic-New York OSS, for example, has revealed deficiencies that
otherwise might have not surfaced or been given the same level of credibility if raised by
competitors.

Similar tests are being conducted in California, Texas and Georgia, and are being
considered elsewhere. Independent RBOC systems and procedures testing gives credence to
actual RBOC performance and availability claims and avoids "trust us"
compliance. With so much at stake for the RBOCs and competitors, actual RBOC performance
and support should not be left to speculation.

Development of a complete and accurate RBOC 271 compliance record is crucial to the
success of the 271 process and requires effort and time to develop. We have learned
through painful experience that development of a successful record demands clear
definition of requirements, meaningful performance measurement, joint collaboration and
independent verification. Let’s hope that these lessons and others will be put into
practice throughout the states so that RBOC interLATA entry will occur only when the RBOCs
are in full 271 compliance and their local markets are subject to meaningful competition
as the Telecom Act intended.

Andrew Isar is president of Harbor Consulting Group Inc., a Gig Harbor,
Washington-based consulting firm specializing in regulatory compliance and public policy.
Isar also serves as director of state affairs for the Telecommunications Resellers
Association (TRA). He can be reached via e-mail at [email protected]

ROUNDTABLE

On
FCC Restructuring …

"The regulatory machine of the FCC often creates barriers to entry for these small
businesses or regulations that unfairly burden them. Any reorganization of the FCC should
take into account the thousands of small businesses, over dozens of industries, that the
FCC has jurisdiction over."

–Eric Menge, assistant chief counsel for telecommunications, Office of Advocacy,
U.S. Small Business Administration

"We are concerned in this new era of moving from a heavily regulated industry to a
less-regulated environment that we don’t sacrifice consumer protection in the process,
especially as industries are converging. … We see that the commission has an important
role to play to be more nimble and active in its fraud fighting."

–Susan Grant, vice president of public policy for the National Consumers League and
director of the group’s National Fraud Information Center

"I’d like to offer four guiding principles that will help bring us to the day …
when competition is king. The first is to accelerate the pace of decision-making.
Regulatory delay isn’t good [because] it only aids those [who are] resistant to change.
… Second, take bold initiatives. The FCC is in the best position to direct the course of
competition and it should take bold actions to ensure continued progress. It’s tempting,
but perhaps futile to try and appease all parties, including members of Congress. Aim to
do the right thing for consumers and competition. Third, continue to involve consumers in
the process. And fourth … the best consumer protection we believe the commission can
offer is competition."

–Debra Berlyn, executive director of the independent, nonprofit Competition Policy
Institute

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