| FEDERAL REPORT
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| RE: FEDERAL REGULATORY REPORT DATE: OCTOBER 26, 1999 ______________________________________________________________________________ Set forth below is the Federal Regulatory Report for the November 2, 1999, meeting of the Board of Directors of the Telecommunications Resellers Association: Major Occurrences: • SBC/Ameritech Merger: Over a year after it was filed, the FCC finally granted the application of SBC to acquire Ameritech, subject to a variety of conditions negotiated by the applicants with the Commission staff. The FCC concluded that the proposed merger would produce substantial “public interest harms,” finding that it (i) would eliminate a significant source of potential competition in the SBC and Ameritech local service areas, (ii) hinder the ability of the Commission and various state regulatory authorities to enforce local competition mandates through “benchmarking,” and (iii) increase the incentives and ability of the merged entity to discriminate against competitors, particularly with respect to the provision of advanced telecommunications services. Moreover, the FCC concluded that the purported benefits of the proposed merger did not outweigh these harms, finding that (i) the applicants had failed to demonstrate that the merger was necessary to obtain the local competition benefits allegedly associated with their so-called “National-Local Strategy,” (ii) claimed cost savings were neither “likely” nor “verifiable,” and (iii) asserted merger benefits involving product markets other than the local telephone market were “speculative” and “small.” Nonetheless, the FCC sanctioned the merger based on its conclusion that the conditions agreed to by the applicants would (i) promote advanced services deployment, (ii) ensure that the applicants’ respective local markets are opened to competition, (iii) foster out-of-region competition, (iv) improve residential telephone service, and (v) facilitate enforcement of the merger conditions. While the majority of the merger conditions will likely have some – albeit limited -- pro-competitive impact, many represent little more than slightly enhanced restatements of existing obligations or obligations which could be imposed by the Commission either unilaterally or on the basis of existing records in ongoing Commission proceedings. Others are subject to so many restrictions as to be of extremely limited competitive value. Critically, however, one condition affords the merged SBC/Ameritech the means with which to avoid altogether its statutory obligation to make xDSL-based advanced services available at wholesale rates for resale. • Bell Atlantic has finally filed its long awaited application for authority to provide interLATA service within the State of New York. The application is supported by 250,000 pages of affidavits and exhibits, including the entirety of the record compiled by the New York Public Service Commission. Bell Atlantic argues in its application that it has “irreversibly” opened its markets to competition, asserting that it has satisfied 800 of the 855 elements of the KPMG test mandated by the NYPSC and noting that competitors are serving 650,000, 300,000 and 160,000 lines, respectively, through their own facilities, resale and unbundled network elements. TRA, while acknowledging that Bell Atlantic fares far better under most competitive measurements than the other remaining Bell Operating Companies, nonetheless opposed the Bell Atlantic application as premature. In contrast, the NYPSC enthusiastically endorsed Bell Atlantic’s bid. The U.S. Department of Justice’s comments will be filed on Monday, November 1. The FCC must act on the Bell Atlantic application before year’s end. • The FCC has modified its universal service contribution requirements as mandated by the U.S. Court of Appeals for the Fifth Circuit, amending its rules to provide for a single contribution base for funding all universal service support mechanisms. Intrastate revenues have been removed from the universal service assessment base, leaving universal service contributions to be assessed solely on the basis of interstate and international revenues. However, providers of international services will no longer be required to contribute to the universal service fund based on their international revenues unless their interstate revenues constitute 8 percent or more of total revenues. The revamped universal service contribution factor for November and December, 1999, is 0.058995, which represents roughly a 50 percent increase for carriers with limited intrastate revenues. The Commission has also more than doubled subsidies paid to “non-rural” – i.e., the largest -- local exchange carriers that serve rural and other high cost service areas. Key components of the FCC’s new high support mechanism are the use of a complex cost model to estimate local service costs across the nation, the identification of 135 percent of the national average per line cost as a benchmark for determining eligibility for “high- cost” support, and a “hold harmless” provision which ensures that no local carrier will be worse off under the new regime than it was under the old, at least for an interim period. With a nod towards competition, the Commission has declared these subsidies to be portable, ensuring that competitors (to the extent that they are “eligible telecommunications carriers,” a category that does not include resale providers) are entitled to receive support payments associated with new customer’s “high cost” lines. The Commission also lifted the stay of its requirement that States establish at least three geographically-defined sets of rates for unbundled network elements in order to reflect geographic cost differences. Finally, the Commission has directed incumbent LECs which elect to recover their universal service contributions through interstate end-user charges to make corresponding reductions in interstate access charges to the extent that they had incorporated their contributions into their access charges. Following the last Board Meeting, TRA made the following filings with the FCC: • Comments, filed with the FCC on October 29, 1999, in which TRA addressed proposals to regulate access charges assessed by competitive local exchange carriers, as well as a variety of issues arising out of the Commission’s recent decision affording incumbent LECs additional pricing flexibility for access services, Access Charge Reform, CC Docket No. 96- 262. • Reply Comments, filed with the FCC on October 21, 1999, in which TRA opposed proposals to limit the ability and manner in which carriers may recover PICCs and USF contributions and to require non-facilities-based carriers to pass through access charge reductions to end users on a dollar-for-dollar basis, Low-Volume Long-Distance Usage, CC Docket No. 99- 249. • Opposition, filed with the FCC on October 19, 1999, in which TRA opposed as premature Bell Atlantic’s petition for authority to originate interLATA calls from its in-region State of New York, Application of New York Telephone Company (d/b/a Bell Atlantic - New York, Bell Atlantic Communications, Inc., NYNEX Long Distance Company, and Bell Atlantic Global Networks, Inc. for Authorization to Provide In-region, InterLATA Services in New York, CC Docket No. 99-295. • Reply Comments, filed with the FCC on October 4, 1999, in which TRA countered incumbent local exchange carrier arguments that Section 251(c)(4) resale obligations do not extend to xDSL-based advanced services, In the Matter of Deployment of Wireline Services Offering Advanced Telecommunications Capability, CC Docket No. 98-147. • Comments, filed with the FCC on September 24, 1999, in which TRA argued that xDSL- based advanced services must be made available at wholesale rates by incumbent local exchange carriers for resale, In the Matter of Deployment of Wireline Services Offering Advanced Telecommunications Capability, CC Docket No. 98-147. Following the last Board Meeting, TRA made the following filings with the Federal Appellate Courts: • Joint Briefs of Intervenors supporting Respondent, to be filed with the U.S. Court of Appeals for the District of Columbia Circuit on November 1, 1999, in the multiple pending incumbent local exchange carrier appeals of the expanded collocation opportunities the FCC provided competitive local exchange carriers, GTE Service Corp. v. FCC, Case No. 99-1176. • Motion for Leave to Intervene, filed with the U.S. Court of Appeals for the District of Columbia Circuit on October 21, 1999, in the pending appeal of the FCC grant of additional access charge pricing flexibility to price cap incumbent local exchange carriers, MCI WorldCom, Inc. v. FCC, Case No. 99-1395. Upcoming (in October/November) TRA Filings with the FCC: • Reply Comments, to be filed with the FCC on November 8, 1999, in which TRA will address the comments of other parties on Bell Atlantic’s petition for authority to originate interLATA calls from its in-region State of New York, Application of New York Telephone Company (d/b/a Bell Atlantic - New York, Bell Atlantic Communications, Inc., NYNEX Long Distance Company, and Bell Atlantic Global Networks, Inc. for Authorization to Provide In- region, InterLATA Services in New York, CC Docket No. 99-295. • Comments, to be filed with the FCC on November 12, 1999, in which TRA will address an integrated package of interstate access charge reforms jointly proposed by AT&T, Sprint and a number of incumbent local exchange carriers, Access Charge Reform, CC Docket No. 96- 262. • Comments, to be filed with the FCC on November 15, 1999, in which TRA will respond to FCC inquiry concerning the application of Section 255 of the Telecommunications Act to Internet Telephony, Implementation of Section 255 and 251(a)(2) of the Communications Act of 1934, as Enacted by the Telecommunications Act of 1996, Access to Telecommunications Service, Telecommunications Equipment and Customer Premises Equipment by Persons with Disabilities, WT Docket No. 96-198. • Reply Comments, to be filed with the FCC on November 29, 1999, in which TRA will reespond to comments of other parties addressing proposals to regulate access charges assessed by competitive local exchange carriers, as well as a variety of issues arising out of the Commission’s recent decision affording incumbent LECs additional pricing flexibility for access services, Access Charge Reform, CC Docket No. 96-262. • Comments, to be filed with the FCC on November 30, 1999, in which TRA will address issues raised in the North Carolina Payphone Association’s Petition for Expedited Review and/or Declaratory Ruling on Basic Pay Phone Service Tariffs of North Carolina Local Exchange Companies, CCB/CPD 99-27. • Comments, to be filed with the FCC in November, in which TRA will address Commission proposals relating to the collection of data concerning the state of local competition and advanced telecommunications capabilities, Local Competition and Broadband Reporting, CC Docket No. 99-301. • Comments, to be filed with the FCC in November, in which TRA will respond to petitions for clarification/reconsideration of the Commission’s order affording price cap incumbent local exchange carriers additional flexibility in pricing exchange access services, Access Charge Reform, CC Docket No. 96-262. • Comments, to be filed with the FCC in late November, 1999, in which TRA will address petitions for reconsideration of the Commission’s approval of the SBC Communications/Ameritech merger, Ameritech Corporation, Transferor, and SBC Communications Inc., Transferee, for Consent to Transfer Control of Corporations Holding Commission Licenses and Authorizations Pursuant to Sections 214 and 310(d) of the Communications Act and Parts 5, 22, 24 25, 63, 90, 95, and 101 of the Commission’s Rules, CC Docket No. 98- 141. Upcoming (in November) TRA Federal Appellate Court Filings: • Appeal of the Telecommunications Resellers Association, to be filed with the U.S. Court of Appeals for the District of Columbia Circuit on November 5, 1999, in the matter of the Memorandum Opinion and Order of the Federal Communications Commission consenting to the transfer of control of licenses and lines of Ameritech Corporation to SBC Communications, Inc., Ameritech Corp., Transferor, and SBC Communications Inc., Transferee, For Consent to Transfer Control of Corporations Holding Commission Licenses and Lines Pursuant to Sections 214 and 310(d) of the Communications Act and Parts 5, 22, 24, 25, 63, 90, 95 and 101 of the Commission’s Rules, CC Docket No. 98-141. * * * * * * * * * Please feel free to call if you have any questions or would like to discuss any of the above-referenced matters. |