ORDER NO. 97-258

ENTERED JUL 03 1997

This is an electronic copy.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 823

DISPOSITION: PREAPPLICATION PROCEDURES ADOPTED

Introduction

The Commission initiated this investigation to establish a procedure for the review of U S WEST Communications, Inc.’s (USWC) expected application to the Federal Communications Commission (FCC) for authorization to provide interLATA long-distance services pursuant to Section 271 of the Telecommunications Act of 1996 (Act). The Act requires the FCC to consult with this Commission and the United States Department of Justice (DOJ) to verify USWC’s compliance with applicable provisions. 47 U.S.C §271(d)(2). The time period for consultation, however, is notably limited. The Act requires the FCC to issue a written decision on the application within 90 days of its filing. 47 U.S.C §271(d)(3). Because of this short time period, the FCC has restricted the consultation phase for state commissions to 20 days after the filing of an application. See FCC 96-469, "Procedures for BOC Applications Under New Section 271 of the Communications Act."

To help fulfill our consulting role with the FCC, we directed USWC to provide a status report regarding its compliance with applicable provisions and intended actions. We also invited comment from competitors and other interested parties. The primary purpose of the request was to help develop a thorough record on all issues relevant to a Section 271 application. We believed that the filing of such information in advance will better enable this Commission to thoroughly evaluate USWC’s compliance with Section 271(c) of the Act and to make a comprehensive recommendation to the FCC.

Based on a review of the information submitted, the Commission adopts the preapplication procedures set forth in Appendix A. The procedures, consisting of seven parts, provide filing and notice requirements, as well as a comprehensive list of issues for consideration:

(A) Section 271 – Procedural Requirements;

(B) Section 271(c)(1) – Track A or Track B;

(C) Section 271(c)(1)(A) – Presence of a Facilities-Based Competitor;

(D) Section 271(c)(2)(A) – Interconnection Agreements;

(E) Section 271(c)(2)(B) – Competitive Checklist;

(F) Section 271(d)(3)(B) – Separate Affiliate; and

(G) Section 271(d)(3)(C) – Public Interest.

As the procedures explain, USWC, as the applicant, shall have the burden of submitting relevant information addressing the outlined areas of inquiry at the time of providing notice of its intent to file with the Commission. The Commission acknowledges USWC’s concern that it may not have all the required information in its possession. Nonetheless, we expect USWC to use all resources at its disposal to obtain such data. Furthermore, in the absence of specific facts, USWC should submit any relevant information tending to provide probative value to the inquiry. For example, while USWC may not be aware of the exact number of business and residential lines served by competitors in its Oregon service territory, it may be able to provide some estimates based on its market losses.

We also acknowledge that many of the inquiries could be addressed with information contained in Commission files and other docketed proceedings. Where appropriate, USWC may provide specific cites to such information and ask the Commission to take official notice. It is not appropriate, however, for this Commission to otherwise act as a supplier of information in a docketed proceeding.

Finally, in adopting these procedures, we have identified the numerous areas of inquiry we believe to be relevant to the Commission’s evaluation of USWC’s entry into the long distance market. USWC and other parties should feel free to raise and discuss any issue they believe to be relevant in determining USWC’s compliance with Section 271(c). We also recognize that there are varying interpretations as to certain standards for review of a section 271 application. We have provided some guidance to the parties as to the Commission’s interpretation of certain requirements. With regard to other matters requiring fact-specific determinations, we have identified relevant issues for future comment and consideration.

ORDER

IT IS ORDERED that the preapplication procedures, set forth in Appendix A, are adopted for the review of U S WEST Communications, Inc.’s expected application to the Federal Communications Commission for authorization to provide interLATA long distance services pursuant to Section 271 of the Telecommunications Act of 1996.

Made, entered, and effective ______________________.

A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A request for rehearing or reconsideration must be filed with the Commission within 60 days of the date of service of this order. The request must comply with the requirements of OAR 860-014-0095. A copy of any such request must also be served on each party to the proceeding as provided by OAR 860-013-0070. A party may appeal this order pursuant to ORS 756.580.

SECTION 271 PREAPPLICATION PROCEDURES

A. Section 271 – Procedural Requirements;

1. USWC is directed to notify this Commission at least 90 days prior to submitting a Section 271 application with the FCC.

2. At the time of notification, USWC shall provide all information, data, and arguments upon which it intends to rely to prove that its application should be granted. This information should, at minimum, include written testimony or affidavits, interconnection agreements, and other supporting documents. This information should address all questions and areas of inquiry as established by the Commission.

3. USWC shall provide a working draft copy of the application it intends to file with the FCC. Following its notice and submission, USWC also shall provide updated information to the Commission regarding any subsequent change in status of its compliance with Section 271.

4. On or before the 30^th day following the filing of USWC’s notice and supporting information, interested persons are invited to submit views and comments regarding USWC’s compliance with Section 271(c), as well as the other related issues identified by the Commission. Positions of commenting parties shall be supported by factual information to the extent possible.

5. USWC may file reply comments on or before the 45^th day following the filing of its notice and supporting information.

6. All filings made by USWC and any interested person shall, in addition to being filed on paper, be made in electronic format (on 3.5 inch computer diskette in Microsoft Word 6.0 format).

7. Discovery shall be permitted in this docket pursuant to established Commission standards.

8. Treatment of any sensitive or proprietary information submitted in this docket will be governed by the Commission’s procedures for the issuance of a Standard Protective Order set forth in OAR 860-012-0035(1)(k).

B. Section 271(c)(1) – Track A or Track B

In its application to the FCC, USWC must first establish that it satisfies the requirements of either section 271(c)(1)(A) (Track A) or 271(c)(1)(B) (Track B). To satisfy Track A, USWC must demonstrate that it "is providing access and interconnection to its network facilities for the network facilities of one or more unaffiliated competing providers of telephone exchange service * * * to residential and business customers. USWC may seek entry under Track B if "no such provider has requested the access and interconnection described in [Track A]" and USWC’s statement of generally available terms and conditions has been approved by this Commission.

In its recent rejection of a section 271 application filed by Southwestern Bell, the FCC concluded that a regional Bell operating company is precluded from proceeding under Track B if it had received a "qualifying request" for access and interconnection. The FCC explained:

We conclude that a "qualifying request" under section 271(c)(1)(B) is a request for negotiation to obtain access and interconnection that, if implemented, would satisfy the requirements of section 271(c)(1)(A). We further conclude that the request for access and interconnection must be from an unaffiliated competing provider that seeks to provide the type of telephone exchange service described in section 271(c)(1)(A).

We find the FCC’s reasoning persuasive and adopt it. Thus, because USWC has received numerous requests for access and interconnection to provide the type of telephone exchange service to residential and business customers described in Section 271(c)(1)(A), the Commission assumes that USWC will utilize Track A in its application to provide interLATA services. By its terms, Track B applies only where no competing provider has requested access and interconnection under section 271(c)(1)(A) or if the competitors act in bad faith when negotiating a Section 252 agreement. To clarify the requirements of Track A, certain terms in that section are defined below in Section C.

After reviewing comments submitted by USWC and competitors in response to Order 96-314, the Commission concludes that there is no legal standing for USWC to use a combination of Track A and Track B when submitting its Section 271 application. Section 271(c)(1) plainly states that a Bell operating company (BOC) must satisfy the requirements of "subparagraph (A) or subparagraph (B)." (emphasis added.)

C. Section 271(c)(1)(A) – Presence of a Facilities-Based Competitor

Section 271(c)(1) of the Act requires the presence of a facilities-based competitor. The Commission will determine if a facilities-based competitor exists in two parts. First it will consider the material submitted below in Section D, Questions 3-13.

Second, the Commission will consider information submitted in response to the following questions:

(1) How does USWC define "facilities-based" competition pursuant to Section 271(c)(1)(A)?

(2) Can the requirements of Section 271(c)(1)(A) for facilities-based competition be satisfied if the competitor leases unbundled network elements from USWC?

(3) Does the term "predominately" require that some fixed percentage (e.g., 51 percent) of the services provided by the competitor must be over the competitor’s own facilities?

(4) How does USWC define "competing provider[] of telephone exchange service" under Section 271(c)(1)(A)? Must the competitor be providing service to a specified number or percentage of customers?

In this second-part determination, the Commission also will consider whether a facilities-based competitor provides both business and residential service, since the Act specifically requires at least one competitor to serve both types of customers.

D. Section 271(c)(2)(A) – Interconnection Agreements

To determine whether or not USWC meets the requirements of Track A, the Commission requests the following information:

(1) What entities have requested negotiations with USWC pursuant to Sections 251 and 252? Which of those entities entered into a binding agreement approved pursuant to Section 252? Which of these agreements has USWC appealed to the courts and what is the status of the appeal? What is the status of negotiations and/or arbitrations that have not yet resulted in an approved agreement? What are the unresolved issues in each of those negotiations and arbitrations?

(2) To which certified local service carriers is USWC actually providing access and interconnection in USWC’s Oregon service territory pursuant to an agreement under Section 251 and 252, or under interconnection requirements established under state law?

(3) Pursuant to these Section 251 and 252 agreements and others entered under state law, what nonaffiliated carriers are providing local exchange services, what types of local exchange service, including business exchange services and residential exchange services, is each carrier providing, and how is each carrier providing these services?

(4) On a statewide and exchange basis in USWC’s Oregon service territory, how many loops (business and residential), by type (i.e., DS0, DS1), are owned and provided to customers by USWC on a retail basis?

(5) On a statewide and exchange basis in USWC’s Oregon service territory, how many loops (business and residential), by type (i.e., DS0, DS1), are owned or leased and provided to customers by competing unaffiliated local service carriers? (Provide information for each carrier separately and totals for all of these carriers.)

(6) On a statewide and exchange basis in USWC’s Oregon service territory, how many end-office switches and line-side switch ports are owned and provided to customers by USWC?

(7) On a statewide and exchange basis in USWC’s Oregon service territory, how many end-office switches and line-side switch ports are owned or leased and provided to customers by competing unaffiliated local service carriers? (Provide information for each carrier separately and totals for all of these carriers.)

(8) On a statewide and exchange basis in USWC’s Oregon service territory, how many USWC loops (business and residential), by size (i.e., DS0, DS1), are connected to switches owned by competing unaffiliated local service carriers?

(9) On a statewide and exchange basis in USWC’s Oregon service territory, how many loops (business and residential), by size (i.e., DS0, DS1), that are owned or leased and provided by competing unaffiliated local service carriers, are connected to USWC switches? (Provide information for each carrier separately and totals for all of these carriers.)

(10) On a statewide and exchange basis in USWC’s Oregon service territory, what is the number of business and residential customer accounts obtaining local exchange service from USWC?

(11) On a statewide and exchange basis in USWC’s Oregon service territory, what is the number of business and residential customer accounts obtaining local exchange service from competing unaffiliated local service carriers? (Provide information for each carrier separately and totals for all of these carriers.)

(12) On a statewide and exchange basis in USWC’s Oregon service territory, what is the number of working telephone numbers (or a comparable measure) for which USWC is the provider of local service?

(13) On a statewide and exchange basis in USWC’s Oregon service territory, what is the number of working telephone numbers (or a comparable measure) for which any competing unaffiliated carrier is the provider of local service? (Provide information for each carrier separately and totals for all of these carriers.)

E. Section 271(C)(2)(B) – Competitive Checklist

As to each Section 271 checklist item, USWC should provide relevant, detailed information in response to the eight generic questions below, as well as the specific questions that follow. The generic and specific questions are designed to allow this Commission to determine USWC’s compliance with all checklist items.

Generic Questions: For each checklist item, answer the following:

(1) To whom is USWC presently providing, on a commercial basis, this checklist item?

(2) If USWC is not currently providing this checklist item, is USWC offering the item? If so, how is it offering the item and under what terms, conditions, and rates? Describe how the checklist item is readily available and easily obtained by competitors.

(3) If USWC is not currently offering this checklist item, is USWC capable of commercially providing it? What is USWC’s anticipated schedule in providing the item? Has any competing carrier requested the checklist item?

(4) What performance standards regarding quality, reliability, and timeliness, has USWC established for providing this item to competitors, USWC affiliates and itself?

(5) How do USWC’s performance standards compare to national industry standards?

(6) Has USWC received any written complaints from new entrants regarding provision of this checklist item? If so, what was the nature of the complaint, what is its current status and, if applicable, how was it resolved?

(7) Is USWC able to provide service for this checklist requirement in all parts of its Oregon service area?

(8) Has USWC fully implemented this checklist item as required by Section 271 of the Act?

Specific Questions:

Checklist Item 1 - Interconnection

(1) How is USWC offering interconnection in accordance with the requirements of Sections 251(c)(2) and 252(d)(1) of the Act?

(2) On what date did any nonaffiliated carriers actually interconnect with USWC?

(3) At what points does USWC provide or offer interconnection?

(4) What is the price for interconnection, including all recurring and nonrecurring charges, and is it based on cost as required by Section 252(d)(1)?

(5) Does USWC impose material limitations on interconnection (i.e., one-way trunking, use of different trunk groups for different "types" of traffic, etc.)?

Checklist Item 2 - Unbundled Network Elements

(1) How is USWC providing nondiscriminatory access to unbundled network elements at just and reasonable rates and in accordance with the requirements of Sections 251(c)(3) and 252(d)(1) of the Act?

(2) List each competitive carrier to which USWC is selling network elements, the network elements provided, and the volume of network elements provided.

(3) At current network capacity, what additional volume can USWC provide to competitive carriers for each network element?

(4) Are there any network elements required by this Commission or the FCC that USWC does not plan to unbundle?

(5) For each element USWC does not plan to unbundle, has USWC demonstrated technical infeasibility and offered any alternative?

(6) List all restrictions USWC imposes on competitive provider requests for combinations of elements.

(7) What type of recording and other data does USWC provide to allow other carriers to properly bill end users, interconnecting local carriers, and toll carriers?

(8) What is USWC’s performance record responding to competing carrier requests concerning each category of network element (i.e., provisioning intervals, repair intervals)?

(9) What operational support systems (OSS) does USWC provide to competing carriers in Oregon?

(10) What forms of OSS access are available to competing carriers for the purchase of unbundled network elements and the resale of USWC retail services?

(11) What testing has USWC performed on the OSS access it provides to demonstrate that information will be delivered to new entrants in a timely, accurate, and useful manner?

(12) Is OSS access provided to competitive carriers pursuant to uniform interfaces intended for nationwide or regionwide implementation?

(13) How have OSS interface specifications been made available to potential competitors, and how will future changes will be communicated to competitors?

(14) What is the current capacity for each of USWC’s OSS Systems (i.e., number and type of transactions that can be processed within specific time frames, the number of competitors that can be supported), and what are USWC’s plans to expand such capacity?

Checklist Item 3 - Poles, Ducts and Conduits

(1) How is USWC providing nondiscriminatory access to poles, ducts, conduits and rights-of-way at just and reasonable rates?

(2) Does USWC provide the same access to these facilities to competitive carriers as it provides itself?

(3) Does USWC make available to competitive carriers its maps, plats, and other relevant data, and what are the terms and conditions of such availability?

(4) Describe any municipal or other government franchise, grant or additional requirements that affect USWC’s access to pathways, poles, conduits, and rights-of-way differently from that of unaffiliated carriers.

Checklist Items 4 and 5 - Local Transport

(1) How is USWC providing local transport from the trunk side of a wireline local exchange carrier switch unbundled from switching or other services?

(2) How is USWC offering local transport from the central office to the customers’ premises unbundled from switching and other services?

Checklist Item 6 - Local Switching

(1) How is USWC offering local switching unbundled from transport, local loop transmission, or other services?

Checklist Item 7 - 911 and Other Services

(5) How is USWC providing nondiscriminatory access to:

(a)911 and E911 services?

(b)Directory assistance services?

(c)Operator call completion services?

Checklist Item 8 - White Pages

(1) How is USWC providing white pages directory listings for customers of the competitive carrier’s telephone exchange service?

(2) Under what terms does USWC provide white pages directory listings?

(3) Under what terms does USWC provide nondiscriminatory access to basic directory listings for business accounts (name, address, telephone number, and primary business classification)?

(4) Under what terms does USWC provide, in electronic format: (i) complete information regarding the content of white page local exchange directory; (ii) specific white page directory publication schedules and deadlines; and (iii) specific white page directory publication schedules and delivery dates/locations?

(5) Under what terms does USWC deliver white and yellow page directories to customers of new carriers? Do those terms differ from those USWC affords itself, its affiliates, and its customers?

Checklist Item 9 - Telephone Number Assignment

(1) How is USWC providing nondiscriminatory access to telephone numbers for assignment to other carriers’ telephone exchange service customers?

(2) Under what terms do carriers, including USWC and its affiliates, obtain access to telephone numbers for assignment?

(3) How is USWC managing limitations in numbering resources (e.g., NXX freezes)?

Checklist Item 10 - Databases and Signaling

(1) How is USWC providing nondiscriminatory access to databases and associated signaling necessary for call routing and completion?

(2) To which competitive carriers is USWC providing such access, and under which terms, conditions and rates?

Checklist Item 11 - Number Portability

(1) How is USWC providing interim telecommunications number portability through remote call forwarding, direct inward dialing trunks, or other comparable arrangements?

(2) Is USWC offering or providing local number portability on a permanent basis? If so, where and to whom?

(3) To which competitive carriers is USWC providing interim number portability, and under which terms, conditions and rates?

(4) Has USWC denied interim number portability arrangements requested by any competitive carriers? If so, describe the circumstances in detail.

(5) What has been USWC’s operational experience in providing each type of interim local number portability?

(6) What are the characteristics of each interim local number portability arrangement, including cost recovery and service quality implications?

(7) What steps has USWC taken toward implementing full number portability? Under what terms and conditions does USWC expect to offer full number portability?

Checklist Item 12 - Dialing Parity

(1) How is USWC providing nondiscriminatory access to such services or information, as is necessary, to allow a requesting carrier to implement local dialing parity in accordance with the requirements of Section 251(b)(3)?

(2) What percentage of USWC switches are providing dialing parity to competitors for local calls, and for intraLATA toll calls?

(3) What percentage of USWC switches, serving what percentage of access lines, have been equipped to provide dialing parity for intraLATA toll calls, and in what percentages of switches, serving what percentage of access lines, has that capability been tested?

(4) Will intraLATA toll parity be implemented in such switches using the "full 2-PIC" subscription method, and if not, what method will be used?

(5) Does USWC plan to provide dialing parity for intraLATA toll calls before, or only coincident with, its provision of in-region interLATA services?

Checklist Item 13 - Reciprocal Compensation Arrangements

(1) How is USWC providing reciprocal compensation arrangements in accordance with the requirements of Section 252(d)(2)?

(2) What are the terms and conditions of arrangements for reciprocal compensation (including bill-and-keep) for local exchange traffic currently being exchanged between USWC and competitive carriers?

Checklist Item 14 - Resale

(1) How is USWC providing telecommunications resale services in accordance with the requirements of Sections 251(c)(4) and 252(d)(3)?

(2) What services are offered for resale to other carriers and what services are not?

(3) What is the level of wholesale discount for each service offered for resale?

(4) What nonrecurring charges, if any, does USWC impose or intend to impose on resellers?

(5)Does USWC impose or intend to impose charges in addition to recurring or nonrecurring charges on resellers?

(6) What has been USWC’s operational experience in providing each service for resale?

(7) Will USWC brand resold operator call completion and directory assistance services at the reseller’s request, or are those services offered on an unbranded basis only? What limitations does USWC impose on branding?

(8) Does USWC provide all operator functions (i.e., operator billing options, rate quotes) on resold operator call completion services?

(9) Does USWC route, at a reseller’s request, operator call completion and directory assistance calls to the reseller’s own facilities?

(10) Are the services made available by USWC for resale of equal quality to that provided by USWC to itself?

(11) Does USWC process, order, provision, and maintain resale services on a level that is consistent with that offered to the customers of USWC and its affiliates?

(12) Have all retail services (including Centrex and other central-office based switching services) offered by USWC on January 1, 1996, been made available for resale? If not, describe any restrictions, including the "grandfathering" of such services.

F. Section 271(d)(3)(B) – Separate Affiliate

Section 272 of the Act outlines the standards that a BOC and its affiliates must adhere to under the Act. In addition to the questions set out below, the Commission will review the information USWC provides in response to checklist item questions to compare how it serves affiliates and non-affiliates (as required by Section 251(c)).

The Commission requests USWC to state whether it has, or intends to provide any authorized in-region interLATA services through an affiliate, and whether its affiliates meet the five structural and transactional requirements of Section 272(d)(3)(B). For each USWC affiliate noted, USWC should submit material which establishes that the affiliate:

(1) Operates independently from USWC;

(2) Maintains separate books, accounts, and records as prescribed by the Commission;

(3) Employs separate officers, directors, and employees from USWC;

(4) Has not obtained credit under any arrangement that would permit a creditor, upon the affiliate’s default, to have recourse of USWC assets; and

(5) Conducts transactions with USWC on an arms-length basis, with any transactions being reduced to writing and available for public inspection.

To adequately meet all of the requirements of Section 272, USWC should also submit material satisfying the following inquiries:

(1) How will USWC and its affiliates comply with the audit requirements of Section 272(d)?

(2) How will USWC to provide services on a non-discriminatory basis, in order to meet the requirements of Section 272(e)?

(3) How will USWC and its affiliates comply with the joint marketing provisions of Section 272(g)?

G. Section 271(d)(3)(C) – Public Interest.

The Commission will consider both the overall impact, as well as specific issues when deciding whether USWC entry into the interLATA market is in the public interest.

The Commission will consider the status of competition in the local market, as well as the status of competition in the interLATA market and how it will change after USWC’s entry. The Commission does not adopt a specific market-share test, but will review the status of checklist items, as well as any additional material that USWC may submit. The Commission will consider the number of business and residential customers served by competitors, individually and collectively, in the local market throughout the state. The Commission may also consider any expression of public opinion, including customer data polls.

The Commission will consider whether USWC’s entry into the long distance market will benefit customers. The experience of USWC’s individual customers, as well as USWC competitors, will be relevant to this discussion. First, the Commission will address whether customers will benefit from immediate USWC entry, or would receive greater benefits upon latter entry. Customers may benefit by having a choice of operators, receiving lower rates, or having access to one-stop shopping, among other options. Second, and closely associated with the first inquiry, the Commission will examine the impact of USWC entry on competitors, in both the local and long-distance markets.

Finally, the Commission will consider how USWC’s entry into the interLATA long distance market will impact the current network and its development. Whether telephone companies will have the incentive and capability to further develop their systems also is an important aspect of this public interest finding. It is important that USWC and its competitors intend to invest in new technology which will allow them to provide basic and advanced services throughout the state of Oregon. The technological status of USWC's system and its capacity to serve competitors and end-user customers now and in the future will be a factor in the discussion.