ORDER NO. 97-428

ENTERED NOV 03 1997

This is an electronic copy.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 823

DISPOSITION: APPLICATION FOR RECONSIDERATION GRANTED.

PREAPPLICATION PROCEDURES MODIFIED IN PART.

U S WEST Communications, Inc. (USWC) requests reconsideration of procedures adopted in anticipation of its application to the Federal Communications Commission (FCC) for authorization to provide in-region interLATA services. We grant the application and modify our prior order in part.

Introduction

Section 271 of the Telecommunications Act of 1996 (Act) authorizes USWC to petition the FCC for permission to provide interLATA services originating in Oregon. Once a petition is filed, the FCC must act on the application within 90 days, and among other things, consult with this Commission to verify USWC’s compliance with a 14-point competitive checklist and other related requirements.

In order to fulfill our consulting role with the FCC, we initiated this proceeding to develop a factual record concerning USWC’s compliance with the competitive checklist and the status of local competition in advance of USWC’s expected filing. Following rounds of comments from USWC, competitors, and other interested parties, we adopted a set of detailed preapplication procedures designed to allow this Commission to make a comprehensive determination of USWC’s compliance with Section 271(c). See Order No. 97-258.

On September 2, 1997, USWC requested reconsideration of several procedures contained in Order No. 97-258. USWC asserts that this Commission should reconsider several procedures because there has been a change of law since the order was issued.

On September 17, 1997, AT&T Communications of the Pacific Northwest, Inc. (AT&T) filed a response to USWC’s petition. Due to a service error in USWC’s filing of its request for reconsideration, the Commission Staff (Staff) was granted an extension of time to file a response and did so on October 17, 1997.

Discussion

USWC raises seven arguments on reconsideration. After our review, we find that good cause exists for further examination of matters essential to our prior decision. See OAR 860-014-0095(3). We grant the request for reconsideration and address each argument separately.

Draft Copy of FCC Application

USWC objects to the requirement that it provide the Commission with a working draft copy of the application it intends to file with the FCC. USWC first notes that any working draft application will be incomplete and subject to many revisions. It further asserts that such a document is privileged information under the attorney work-product doctrine.

AT&T and Staff dispute USWC’s argument. AT&T contends that USWC’s claim of attorney work-product is unfounded, noting that the Commission is not requesting the company file documents in which USWC’s attorneys are providing privileged legal advice to their client. We agree. In adopting a requirement that USWC file a draft copy of its FCC application, we merely seek the most complete and current information regarding USWC’s compliance with Section 271 and other related matters. A prior review of this information, even if subject to later changes and modification, will better enable the Commission to provide the FCC with an accurate and comprehensive recommendation.

Tentative Recommendation

USWC proposes that the Commission supplement the procedures and agree to provide the company with a tentative or proposed recommendation at least 15 days prior to the end of the 90-day preapplication period. USWC requests the Commission provide a tentative recommendation to allow the company to address any issues or concerns identified during Commission review.

AT&T does not oppose USWC’s proposal, but does not believe that a tentative recommendation should be given 15 days prior to the end of the review period. Given the short time period for the substantial examination required in any preapplication review, AT&T suggests that such a recommendation be given no more than five days prior to the end of the 90-day review period.

Staff objects to USWC’s proposal. It believes that adding the notification process would be contrary to the primary goal of the preapplication procedures; that is, to allow the Commission to issue a timely recommendation to the FCC. It further contends that such a requirement is not necessary, as USWC may be able to address the Commission’s recommendation within the FCC’s review process.

We acknowledge USWC’s desire for a tentative recommendation from this Commission. The FCC has indicated that it will give substantial weight to a state’s evaluation in reviewing a Section 271 application. A state’s assessment of Section 271 requirements, however, is not made until after an application is filed with the FCC—when no new evidence in support of the application may be submitted by USWC. Thus, by obtaining a tentative recommendation from this Commission, USWC could attempt to cure any deficiencies prior to its filing with the FCC.

At the same time, however, we cannot overlook the strict time constraints placed upon us in reviewing USWC’s application. Under procedures adopted by the FCC, this Commission has just 20 days after the application is filed to evaluate and comment on what is expected to be an enormous and complex record. In an effort to meet this expedited review process, we adopted preapplication procedures designed to develop a comprehensive record on Section 271 requirements in advance of USWC’s filing. The addition of USWC’s proposed "tentative recommendation" requirement, whether given 15 or 5 days prior to the end of the 90 day preapplication review period, would severely restrict our ability to complete a thorough examination of the application and provide a comprehensive recommendation to the FCC within the limited time period.

Accordingly, we decline USWC’s suggestion to supplement the preapplication procedures with a "tentative recommendation" requirement. In reaching this decision, however, we note that the procedures, as currently adopted, will provide USWC some advance notice of other parties’ concerns, including that of our Staff. As set forth in Appendix A, paragraph 4, any party may comment on USWC’s preapplication filing 30 days after its submission. These comments should alert USWC to possible deficiencies in its application well in advance of its formal filing with the FCC.

3. Track A or Track B

USWC objects to two conclusions reached in Order No. 97-258 regarding the use of Section 271(c)(1)(A) (Track A) or Section 271(c)(1)(B) (Track B) in its application to the FCC. First, USWC argues that the Commission should not prejudge whether the company will be required to use Track A in a future application based on the requests for access and interconnection that it has received to date. USWC misreads our order. Based on the numerous requests for access and interconnection filed with USWC, we stated:

" the Commission assumes that USWC will utilize Track A in its application to provide interLATA services. Track B applies only where no competing provider has requested access and inter-connection under Section 271(c)(1)(A) or if the competitors act in bad faith when negotiating a Section 252 agreement."

Order No. 97-258, Appendix A, page 2.

Contrary to USWC’s assertion, we did not prejudge whether the company will be required to use Track A in a future application. Rather, we merely provided our present assessment of USWC’s possible use of Track B.

Second, USWC contends that the Commission need not determine at this time whether the company may use a combination of Track A and Track B when submitting its Section 271 application. We disagree. As we stated in Order No. 97-258, there is no legal basis to support USWC’s use of a combination of Track A and Track B when submitting a Section 271 application. Section 271(c)(1) expressly states that a Bell operating company must satisfy the requirements of "subparagraph (A) or subparagraph (B)." (Emphasis added.)

4. Requirements for a Facilities-Based Competitor

USWC contends that our conclusions regarding the requirements for a "facilities-based competitor" under Section 271 are inconsistent with subsequent rulings by the FCC. USWC points out that in its recent rejection of a Section 271 application filed by Ameritech Michigan, the FCC concluded that Track A does not require a single facilities-based competitor to provide service to both business and residential customers. Rather, USWC notes that the FCC found it sufficient to satisfy Track A if multiple carriers collectively serve both classes of customers.

Furthermore, USWC states a facilities-based competitor need not provide services over facilities that it owns. USWC notes that the FCC also ruled in the Ameritech decision that Track A may be satisfied where a competitor provides service using unbundled network elements that the competitor has obtained from a Bell operating company (BOC).

We agree and modify Section C of the preapplication procedures as follows. The second question set forth at the top of page 3 of Appendix A of Order No. 97-258 is deleted. The last paragraph of Section C is modified to read:

In this second-part determination, the Commission will also consider whether: (1) a facilities-based competitor provides both business and residential services; or (2) if multiple facilities-based competitors collectively serve residential and business customers.

5. CLEC Information

USWC objects to the requirement that it provide information to the Commission regarding its competitors’ business. USWC argues that it simply does not have access to such information and that the competitive local exchange companies (CLECs) have resisted disclosing information that is competitively sensitive. USWC believes that the Commission should obtain that information directly from the CLECs or adopt procedures to allow USWC the ability to obtain the information through data requests.

AT&T and Staff disagree with USWC’s argument. AT&T contends that USWC’s customer service records for new entrants should provide all necessary information and that additional information from the CLECs is not necessary. Staff objects to the adoption of additional procedures, noting that USWC may petition the Commission for appropriate assistance if the company is unable to obtain information in certain circumstances.

In our prior order, we noted that USWC carries the burden of proof in a Section 271 filing, and must make a prima facie showing on all issues. We also acknowledged USWC’s concern that it may not have in its possession all the required information necessary to complete a Section 271 application. Nonetheless, we directed USWC to use all resources at its disposal to obtain such data, and to submit any information of probative value. On reconsideration, we adhere to our prior comments and agree with AT&T that USWC’s service records for new entrants and other data in its possession should provide the necessary information. As noted by AT&T, the FCC has indicated that:

The most probative evidence that all entry strategies are available would be that new entrants are actually offering competitive local telecommunications services to different classes of customers (residential and business) through a variety of arrangements (that is, through resale, unbundled elements, interconnection with the incumbent’s network, or some combination thereof), in different geographic regions (urban, suburban, and rural) in the relevant state, and at different scales of operation (small and large).

USWC should be able to produce information demonstrating the actual availability of entry strategies through use of its sale records from competitors’ purchases of unbundled network elements, interconnection, and resale.

6. Terms used in Section E – Competitive Checklist

USWC asks that the Commission clarify certain terms used in the preapplication procedures and delete other provisions. First, USWC requests clarification of the phrase "on a commercial basis" and the term "commercially" used in Questions 1 and 3 of Section E. USWC states that it does not understand what the Commission means by these phrases.

In its Ameritech decision, the FCC emphasized the need for evidence addressing the commercial use in verifying compliance with the competitive checklist. We agree with AT&T that the FCC’s discussion should be sufficient to adequately inform USWC of the nature of these terms and its use in the context of a Section 271 proceeding.

USWC next objects to Question 5 of Section E, which asks how the company’s performance compares to "national industry standards." USWC states that it is not aware of national performance standards on each and every checklist item. USWC asks that this requirement be clarified or eliminated.

We recognize that national industry standards may not currently exist for every checklist item. Nonetheless, we believe that the use of national benchmarks is vital in determining USWC’s compliance with the competitive checklist, and further expect the development of new industry standards with increased local competition. Accordingly, Generic Question (5) in Section E should be modified to read:

(5) How do USWC’s performance standards compare to any existing national industry standards for the checklist item?

USWC also objects to Question 7, Section E, which asks whether the company is able to provide service for the checklist requirement "in all parts of its Oregon service area." USWC contends that Section 271 does not require that checklist requirements be provided in all portions of its service area, just those areas that are competitive.

As noted above, the FCC’s examination will focus on whether a regional Bell operating company has made available all entry strategies in "urban, suburban, and rural areas." Our Question 7 is relevant to this inquiry and should not be deleted.

Finally, USWC argues that Checklist Item 2, Unbundled Network Elements, Questions 4, 5, and 6 should be clarified to incorporate the recent Eighth Circuit decision invalidating portions of the FCC rule. We do not believe any modification is necessary. We expect USWC’s response to these questions will incorporate the Eighth Circuit’s and any subsequent decision limiting or interpreting the FCC’s rules.

7. Separate Affiliate and Public Interest

USWC contends that the Commission should delete sections F and G of the preapplication procedures. Section F directs USWC to provide information regarding its affiliates and their actual or intended operations for interLATA services in Oregon. Section G seeks information pertaining to whether USWC’s entry into the interLATA market would be in the public interest. Because the FCC is not required to consult with this Commission on these matters, USWC contends that we should not spend time and resources to consider these issues.

USWC’s request ignores the FCC’s recent holdings. In its Ameritech order, the FCC stated that the states are uniquely situated to develop a factual record on all Section 271 issues and to make an assessment of the state of local competition. To fulfill these obligations, this Commission must solicit information on a wide variety of issues, including information pertaining to USWC’s affiliate activities and whether its entry into the interLATA market is in the public interest. Furthermore, as Staff notes, USWC previously agreed that this Commission should make a recommendation on the public interest issue, stating:

"[T]his Commission could bring a valuable perspective to the FCC’s deliberations in this area, and should not be reticent from doing so." USWC Opening Comments, January 7, 1997, at page 23, lines 8-9.

ORDER

IT IS ORDERED that the application for reconsideration filed by U S WEST Communications, Inc., is granted. The preapplication procedures adopted in Order No. 97-258 are modified as set forth above. Otherwise, Order No. 97-258 is unchanged.

Made, entered, and effective _________________.

A party may appeal this order to a court pursuant to ORS 756.580.