1. Section 271 Proceedings

2. Section 271 Status 35 states approved –9 Bell South (all) –11Verizon states –6 SBC states –9 Qwest states Pending –2 Verizon states + D.C –3 Qwest –2 SBC 5 applications denied 8 applications withdrawn

3. Section 271 (c) Requirements for Providing Certain In-Region InterLATA Services –(1) Agreement or Statement (A) Presence of a Facilities-Based Competitor: one or more binding agreements approved under Section 252 to provide access and interconnection to one or more unaffiliated competing providers of residential and business telephone exchange service (Track A) (B) Failure to Request Access: if no provider requests access and there are approved terms and conditions available and approved by State commission under Section 252 (f) (Track B)

4. Section 251 ( c ) (2) Interconnection –For the transmission and routing of telephone exchange service and exchange access at any technically feasible point within the carrier’s network that is at least equal in quality to that provided by the local carrier to itself and on rates, terms, and conditions that are just, reasonable and nondiscriminatory

5. Section 251 ( c ) (3) Unbundled access –Nondiscriminatory access to network elements on an unbundled basis at any technically feasible point on rates, terms, and conditions that are just, reasonable, and nondiscriminatory –Provided in such a manner that allows requesting carriers to combine such elements in order to provide telecommunications service

6. Section 252 (d) Pricing standards –(1) Interconnection and Network element charges are to be Determined by a State commission Just and reasonable Based on cost of providing the interconnection or the network element Cost shall not refer to a rate of return or other rate- based proceeding May include a reasonable profit

7. Competitive Checklist Interconnection in accordance with the requirements of Sections 251(c)(2) and 252(d)(1) Nondiscriminatory access to network elements in accordance with Sections 251(c) (3) and 252 (d)(1) Nondiscriminatory access to poles, ducts, conduits, and rights-of-way owned or controlled by the Bell operating company at just and reasonable rates

8. Competitive Checklist (continued) Local loop transmission from the central office to the customer premise, unbundled from local switching Local transport from the trunk side of a wireline local switch unbundled from switching or other services Local switching unbundled from transport

9. Nondiscriminatory access to –911 and E911 –Directory assistance –Operator call completion services –White pages directory listings –Compliance with guidelines and plans related to access to telephone numbers –Nondiscriminatory access to databases and associated signaling necessary for call routing –Full compliance with number portability –Nondiscriminatory access to services required for local dialing parity –Reciprocal compensation arrangements –Telecommunication services available for resale

10. Consultation With Attorney General –AG to evaluate application using any standard AG considers appropriate –Commission shall give substantial weight to evaluation, but evaluation shall not have a preclusive effect on any Commission decision Views AG as “expert witness” With State Commission –To verify BOC compliance with 271 ( c ) Commission has discretion to determine the amount of weight to accord the state commission’s verification

11. Basis for FCC determination 90 day window for FCC to issue written declaration, which must determine whether –BOC provides access and interconnection –BOC fully meets the competitive checklist –The requested authorization will be carried out in accordance with Section 272 –The requesting authorization is consistent with the public interest, convenience, and necessity

12. Section 272, Separate Affiliate Structural and transactional requirements –Operate independently from BOC –Maintain separate books, records, and accounts in manner prescribed by FCC –Have separate officers, directors, and employees –Separate credit—can’t use the BOC’s assets –Arm’s length transactions

13. Section 272 continued Nondiscriminatory safeguards –No discrimination between affiliate and any other entity in provision or procurement of goods, services, information or facilities –Account for all transactions with affiliate in manner prescribed by FCC Biennial Federal/State audit every 2 years

14. Section 272 continued Requests for telephone exchange service and exchange access from unaffiliated entity to be filled within a period no longer than the period in which it provides such services to itself or its affiliates No facilities, services, or information provided to affiliate unless the same is made available to competitors on same terms and conditions Charge affiliate, or impute to self, the same amount charged to any unaffiliated interexchange carrier for access to its telephone exchange service or exchange access May provide any interLATA or intraLATA facilities or services to interLATA affiliate if same are made available to all carriers at same rates and on same terms, and so long as costs are appropriately allocated

15. Enforcement authority If FCC determines that a BOC has ceased to meet any of the conditions required, may –Issue an order to correct deficiency –Impose a penalty –Suspend or revoke approval Complaint procedure to be developed by FCC

16. Legal Standard If a retail analogue exists: must provide access that is equal to (substantially the same as) the level of access that the BOC provides itself, its customers, or its affiliates, in terms of quality, accuracy, and timeliness. If no retail analogue exists: must provide access that gives an efficient competing carrier a meaningful opportunity to compete.

17. Evidentiary Case BOC must prove it has concrete and specific legal obligation under state-approved interconnection agreement; that it is currently furnishing, or is ready to furnish, checklist items in quantities that competitors may reasonably be expected to demand and at an acceptable level of quality Evidence –Commercial usage most probative –Performance benchmarks set through collaborative state proceedings

18. Evidentiary Case continued Examination of statistically significant differences to determine whether statutory nondiscrimination requirements are met –Disaggregated data –Trends in recent months –Determination whether differences have competitive significance in marketplace –Contextual decision based on the totality of circumstances

19. Overview of filings Significant Issues –New York: Unbundling rules in flux (used Rule 319 as of Local Competition Order; UNE Remand Order not yet in force)—held to original list with assumption of compliance with new rules when in force –Texas: First application supported by both DOJ and State Commission; (used Rule 319 as of UNE Remand Order effective February 2000)-- not held to demonstrating provisions of Line Sharing Order to be effective May 2000

20. Overview of filings Significant Issues (continued) –Oklahoma and Kansas: first “rural” states; first application to deal with Line Sharing; first application for more than one state; first application to use data from another state (Texas); reductions in NRC filed on day 63 of process but didn’t restart clock, just moved effective date out 43 days –Massachusetts: adoption of New York metrics and standards; UNE rates under 5-year review by Department of Telecom and Energy; reliance on voluntarily-adopted New York switching rates, also under review

21. Overview of filings Significant issues (continued) –Arkansas/Missouri: Arkansas adoption of UNE rates in Kansas upheld; lack of resale offerings of DSL transport service to ISP or of Internet access service to subscribers not seen as barrier to approval –Vermont: relatively low level of competition for residential customers not regarded as reason to deny application; price-squeeze argument rejected by Commission—standard is whether rates are cost-based, not whether market entry is profitable; Commission cannot consider a state’s retail rates

22. How competitive is competitive? Notes that Congress declined to adopt a market share or similar test – FCC won’t do so either –New York: 1,118,180 competitive lines; 651,793 (35,753) own facilities, 152,055 (137,342) UNE, 314,332 (63,547) resale –Texas: est. of 840,000-890,000 competitive lines; 302,000 (244,000) UNE, 349,000 (191,000) resale –Kansas: competitors serve 9%-12.6% of total lines –Oklahoma: competitors serve 5.5%-9% of lines –Massachusetts: 513,000 own facilities, 93,000 UNE, 268,000 (30,000) resale –Arkansas: 98,500 CLEC lines (40% residential), with 24,000 UNEs; 34,000 resale –Missouri: 295,000 CLEC lines (20% residential), with 76,000 UNEs; 107,000 resale –Vermont: 21,500 CLEC lines with 15,900 of them resale

23. TELRIC pricing standard Will reject an application only if basic TELRIC principles are violated or if state commission makes clear errors in factual findings on matters so substantial that the end result falls outside the range that the reasonable application of TELRIC principles would produce.

24. “TELRIC presumption test” From Oklahoma/Kansas order –A BOC’s UNE rates will be entitled to a presumption of TELRIC compliance if adopted in whole from another state whose rates were found to comply with TELRIC and if costs are demonstrated to be at or above costs in state whose rates are adopted Common BOC and geographic similarities Similar, though not identical, rate structures for comparison purposes FCC had found the rates in that state reasonable –Use of USF model to determine relative cost differences

25. Examples of Issues Examined Access to OSS –Pre-ordering functionality, integration, response times and availability, access to loop qualification information, –Order confirmation notices, rejection notices, and order rejections, order flow-through rate, order completion notices –Provisioning –Maintenance and repair---functionality, response time, quality of work –Billing –Change management and technical assistance

26. Public Interest Analysis Benefits of competition in local exchange and long distance markets Removal of barriers to competitive entry Assurance of future compliance –Performance remedy plan –Provisions of section 271(d)(6), liquidated damages through interconnection agreements, antitrust and other private causes of action

27. Key elements of enforcement Liability dollars at risk ($289M for Texas; $269M for New York; $155M for Massachusetts; $45M for Kansas and $44 for Oklahoma; $48M for Arkansas; $98M for Missouri) Performance measures and standards Structural elements of plan that will allow detection and sanction of poor performance Self-executing mechanism Data validation and audit procedures Accounting requirements—penalties not to become part of revenue requirement