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OF THE STATE OF KANSAS IN THE MATTER OF SOUTHWESTERN BELL TELEPHONE COMPANY – KANSAS’ COMPLIANCE WITH SECTION 271 OF THE FEDERAL TELECOMMUNICATIONS ACT OF 1996 Docket No. 97-SWBT-411-GIT Association of Communications Enterprises On Staff’s Recommendation The Association of Communications Enterprises (“ASCENT” f/k/a the Telecommunications Resellers Association), on behalf of its members, and pursuant to the Kansas Corporation Commission’s (“Commission”) May 9, 2000 Order on Procedural Schedule and Intervention, as modified by the Commission’s July 18, 2000 Order Granting Motion and Amending Schedule in the above-captioned proceeding, comments on Staff’s Recommendation on Southwestern Bell Telephone Company’s Kansas 271 Application, submitted August 21, 2000 (“Staff Recommendations”). ASCENT maintains that despite Staff’s extensive analysis and commendable efforts in reviewing Southwestern Bell Telephone’s (“SWBT”) compliance with the “competitive checklist” for in region interLATA market entry, and SWBT’s Kansas 271 interconnection agreement (“K2A”), Staff’s conclusions appear to be based on several key underlying presumptions and SWBT promises, which rely more on anticipated future compliance and the K2A than on SWBT’s factually supported demonstration of actual compliance with the Act in Kansas. Until SWBT, and not its competitors, conclusively demonstrates that it has complied with the Act through a factual compliance record in Kansas, SWBT should not receive a favorable recommendation for in region interLATA market entry. I. INTRODUCTION. Staff’s Recommendations represent a commendable effort to thoroughly analyze SWBT’s supplemental 271 filing and proposed K2A. Regrettably, Staff’s conclusions tend to support many of the positions proffered by SWBT; positions which conveniently enable SWBT to sidestep its statutory obligation to conclusively demonstrate actual compliance with section 271(c)(2)(B) of the Act at the time it files its application. Staff’s conclusions are seemingly based on a number of key underlying presumptions, which, in some instances, are only thinly supported by factual evidence. Among them, that: 1) the similarity between SWBT’s Kansas and Texas operations and systems (and those in other SWBT states) adequately supports a favorable 271 compliance recommendation in Kansas in light of Texas 271 approval, despite limited performance data; 2) problems encountered by competitors are not indicative of SWBT’s actual compliance; 3) competitors are able to negotiate separate interconnection agreements with SWBT if K2A provisions are unacceptable; and 4) the offering of a service through the K2A and promises of future collaboration and compliance are sufficient for the Commission to determine that SWBT has complied with the competitive checklist for in-region interLATA market entry. These apparent presumptions, however deceptive in their logic and appeal, do not represent the strong foundation that ASCENT and others have argued necessary for a final Commission recommendation that SWBT has met its compliance burden, or moreover, the FCC’s expressed expectations for a factually supported state recommendation. Even if no such presumptions underlie Staff’s recommendations, Staff’s significant reliance on SWBT’s Texas record, SWBT’s K2A, and SWBT’s prospective commitments appear insufficient to conclusively support a favorable Commission recommendation. In its initial comments, ASCENT argued that SWBT’s K2A and reliance on its Texas 271 compliance record are insufficient to form the foundation on which the Commission can render a factually supportable recommendation to the FCC. ASCENT stressed that the logic of relying on SWBT’s Texas’ findings due principally to the similarity of SWBT’s Texas and Kansas systems and operations may be seductively appealing but is entirely misplaced. ASCENT also argued that the K2A was decidedly a one sided agreement which favored SWBT while severely limiting the rights of CLECs. Finally, ASCENT raised several issues of concern over SWBT’s K2A, concluding that despite the availability of its K2A to competitors, SWBT must demonstrate sustained performance by meeting a Kansas-Specific performance evaluation. Staff correctly recognizes the importance of evaluating SWBT’s ongoing performance. It does not, however, condition its recommendation on the favorable results of such evaluations, nor on SWBT’s successful delivery of speculative assurance on operations support system (“OSS”) scalability, and the provision of advanced services, among others. Despite its many caveats, Staff recommends that SWBT be found in compliance. Staff’s proposed post recommendation monitoring and enforcement, coupled with its reliance on SWBT’s Texas record, its K2A, and promises of future compliance are insufficient “evidence” to conclusively demonstrate SWBT’s 271 compliance and meriting of a favorable Commission recommendation as Staff proposes. II. A FINDING THAT SWBT’s KANSAS OPERATIONS AND SUPPORT SYSTEMS COMPLY BECAUSE THEY ARE USED IN TEXAS AND OTHER SWBT STATES, IS A DANGEROUS CONCLUSION IN THE ABSENCE OF SPECIFIC SUPPORTING DATA. Staff concludes that because the majority of OSS functions are performed by the same system throughout SWBT’s five-state region, several key aspects of SWBT’s OSS should be presumed in compliance. For example, Staff notes that the ability of OSS to handle commercial order volumes in any or all of SWBT’s five-state region is sufficient to be relied upon to demonstrate OSS readiness in Kansas. Staff’s logic follows that because SWBT relies on a region-wide OSS, issues such as system scalability in Missouri may be presumed without further testing, given the performance results of SWBT’s OSS in Texas. According to Staff, In addition to the need for Kansas-specific OSS testing, Staff was concerned about the scalability of SWBT's system and SWBT's ability to increase its ability to process additional volumes of orders for the five-state region through the one OSS. Staff requested additional information from SWBT regarding the scalability of SWBT's system. In addition, Staff notes that Telcordia recently filed a report on the scalability of SWBT's OSS…Staff has reviewed the recent Texas report. The information in Telcordia's report is consistent with the information SWBT provided Staff in response to DR # 00-5, which described the process for increasing the electronic capacities and manual handling to process increased volumes of orders…Thus, Staff does not believe that OSS testing to determine whether SWBT's system can process increased volumes is necessary. In addition, SWBT's experience in responding to increased volumes without a significant degradation in performance supports the determination that SWBT's processes are adequate. Staff proposes a leap of faith that SWBT’s OSS will be able to support sustained growth and demands in Kansas, in the absence of Kansas-specific stress testing. Staff’s findings are based on a determination that SWBT’s OSS and related support functions are the same OSS throughout SWBT’s region, and on assurances made by a less than impartial SWBT and its data. This is a dangerous presumption lacking in concrete factual support. ASCENT reiterates the need for state-specific testing of all aspects of SWBT’s OSS, including its ability to process commercial order volumes in Kansas. Staff’s recommendations place entirely too much credence on prospective compliance that is insufficiently supported by actual test results to withstand further FCC scrutiny. III. THE K2A AND SWBT’S PROMISES OF FUTURE COLLABORATION AND COMPLIANCE CANNOT REPLACE ACTUAL DEMONSTRATED COMPLIANCE WITH SECTION 271 OF THE ACT. Perhaps the most troublesome aspect of Staff’s findings is its broad conclusion that the K2A demonstrates compliance with the Act. According to Staff, Overall, Staff believes the K2A provides a viable interconnection agreement that, along with the optional attachments, satisfies SWBT's obligations under section 271. Staff findings support SWBT’s contention that the availability of services, network elements, interconnection, and support functions established through the K2A alone satisfy the Act’s fourteen-point checklist. ASCENT has argued that the K2A cannot be relied upon as conclusive evidence that SWBT has met its obligations under section 271 of the Act for in-region interLATA market entry. Even if approved, the K2A by itself cannot carry SWBT’s compliance record nor demonstrate that SWBT’s local markets have been irreversibly open to competition, even with the backdrop SWBT’s Texas record. Although Staff’s findings on individual checklist items are, in many instances, based on the results of limited performance data, Staff’s findings also rest on the mere availability of services, network elements, and interconnection through a less than equitable K2A and ongoing monitoring through SWBT’s yet to be adopted performance monitoring plan. Notwithstanding that Staff predicates its recommendations on several caveats, Staff’s recognition of open issues does not alter Staff’s conclusion that SWBT has nevertheless met its compliance obligations. To the extent that such caveats exist, SWBT’s evidence of compliance remains incomplete, and SWBT has failed to meet its obligations to demonstrate compliance with the Act in Kansas. Promises of future collaboration, compliance, and the existence of a PAP, should not constitute actual compliance, as Staff suggests. IV. THE LIMITED PERFORMANCE DATA ON WHICH STAFF’S RECOMMENDATIONS RELY, LEAVE TOO MUCH TO PROSPECTIVE TESTING, EVALUATION, AND SUBSEQUENT ENFORCEMENT AFTER A FAVORABLE RECOMMENDATION WOULD BE GRANTED. In instances where Staff acknowledges the need for further performance measures and testing of SWBT’s systems and operations, Staff would have such tests serve more as a means to verify current presumptions over certain aspects of SWBT’s compliance, than as a basis for evaluating SWBT’s compliance in the first place. Such an approach places the proverbial cart before the horse. And the threat of “backsliding” penalties and revocation of 271 authority cannot replace a factually supportable compliance record. With regard to the provision of advanced services, Staff concedes that it is difficult to establish SWBT’s compliance with line-sharing obligations because of a lack of commercial volumes and OSS testing for these functions. Staff does not, however, place particular significance on the absence of performance data here. Instead Staff suggests simply that the Commission should look for “updated” information from SWBT when the company files its formal application with the FCC. Staff concludes that based on evidence provided by SWBT, SWBT will be in compliance with the line sharing obligations when data is available. Staff’s conclusion here appears diametrically opposed to the Texas Public Utility Commission’s 271 order provisions cited by Staff wherein the Texas Commission finds, “In order to gain in-region,interLATA entry, a BOC must support its application with actual evidence demonstrating its present compliance with the statutory conditions for entry, instead of prospective evidence that is contingent on future behavior.” Thus, in terms of satisfying the FCC's requirements, promises about the future ring hollow. SWBT’s “prospective evidence” is woefully insufficient to demonstrate compliance. When addressing issues raised by Adelphia Business Solutions Inc. of Kansas, KMC Telecom II, Inc., and Birch Telecom of Kansas, over potential errors in performance data, Staff again suggests a post recommendation reevaluation of SWBT’s compliance if such errors prove correct. Should errors indeed be revealed, the primary incentive for SWBT to comply – receipt of a favorable Commission recommendation – will be gone. Uncovered errors following a 271 recommendation will no longer cast doubts over SWBT’s actual compliance, but will rather become an issue for resolution that will not keep SWBT from providing the interLATA services it is currently prohibited from providing. Consistent with Staff’s emphasis on post 271 recommendation compliance review philosophy, Staff seems to place considerable attention to SWBT’s performance assurance plan (“PAP”) and the Commission’s enforcement role in preventing backsliding. ASCENT supports the need for an effective PAP to ensure that a repetition of the post 271 authority backsliding in which Bell Atlantic – New York was determined to have engaged, is not repeated. Clearly, a PAP is needed to provide incentives designed to ensure that SWBT “maintain[s] a high level of wholesale performance” and does not “engage in anti-competitive behavior after section 271 relief is granted” as Staff notes in citing to the Texas 271 order. Yet the mere existence of a PAP, particularly a PAP which has been proposed by SWBT with virtually no CLEC input and that contains numerous qualifications enabling SWBT to escape significant financial liabilities for failed performance, cannot replace a conclusive compliance record. To presume otherwise would be akin to an expectation that an insurance policy could erase the tragic effects of a serious accident. The Commission’s emphasis should be first and foremost in ensuring a factually supportable SWBT compliance before a 271 recommendation is issued rather than through subsequent PAP reviews, FCC enforcement action, and the potential threat of 271 revocation. V. SIGNIFICANT WEIGHT SHOULD BE GIVEN TO COMPETITORS’ CONCERNS THAT DEMONSTRATE SWBT’S FAILURE TO COMPLY WITH THE COMPETITIVE CHECKLIST. Staff explicitly recognizes the importance of addressing competitive local exchange carriers (“CLECs”) complaints with SWBT. According to its recommendations, Staff urges the Commission to be sensitive to CLEC complaints of SWBT providing discriminatory service even when the test statistics show otherwise. It would be inappropriate for the Commission to routinely dismiss complaints or rule against the complainant based strictly upon a showing by SWBT that the test statistics show compliant performance. In view of the possibility of Type II errors, both Staff and the Commission may need to dig deeper when processing CLEC complaints. It may be useful for the Commission to signal its intent in this regard. Staff’s sensitivity to CLEC complaints, however, again follows a post 271 compliance approach. Staff suggests that CLEC concerns, like subsequent post compliance performance measurements, would confirm SWBT’s departure from compliance instead of serving as an indicator of SWBT’s non-compliance. In comments filed by ASCENT and others since the inception of this proceeding, the competitive industry has identified numerous areas of concern which decidedly point to SWBT’s continuing failures to provide non-discriminatory services, unbundled network elements, facilities and related support functions to CLECs. Staff’s recommendations appear to dismiss the implications of CLEC concerns as a whole, acknowledging the seriousness of CLEC issues, while maintaining that SWBT nevertheless has complied. Referring to concerns raised by CLECs, Staff states that it has reviewed numerous CLEC concerns, and found that SWBT has “proposed and in some cases commenced implementation of a corrective action.” Staff also notes that in instances where problems are not easily resolved, CLECs are encouraged to seek Commission assistance in seeking resolution. Staff suggests that SWBT’s proposed fixes may, in and of themselves, be sufficient to resolve individual issues. Staff seemingly favors approaching CLEC issues as ad hoc concerns rather than considering the ramifications of such issues on SWBT’s compliance as a whole, before a 271 recommendation is granted. It should be clear through the record in this proceeding that no CLEC has escaped an inability to obtain access to services, network elements, facilities, OSS, and a myriad of support functions without problems, delays, and the allocation of extensive resources to “fix” problems, that have prevented CLECs from serving their subscribers at parity with SWBT. The issues raised by the CLECs – not to mention the problems experienced by dozens of CLECs who are not parties to this proceeding--paint a picture of non-compliance that goes beyond the seriousness and immediacy of each individual issue. As argued supra, SWBT’s promises of corrective action and compliance alone, do not equate to compliance. The numerous unresolved issues raised by CLECs tell a far more compelling story of non-compliance than the limited Kansas-specific performance measures now before the Commission. CLEC concerns should be accorded substantial weight before any favorable recommendation is given by the Commission. VI. BECAUSE SMALLER CLECS LACK THE LEVERAGE TO MENINGFULLY NEGOTIATE WITH SWBT, THEIR LIMITED ABILITY TO NEGOTIATE WILL NOT GUARANTEE EQUITABLE TERMS AND CONDITIONS AS STAFF SUGGESTS. Another underlying theme in Staff’s recommendation is that if K2A (or other agreement) provisions are unacceptable, CLECs may negotiate more favorable terms with SWBT. Although this position is conceptually (and legally) accurate, the reality is that smaller CLECs, such as many of the Association’s members, simply lack the leverage to negotiate favorable terms and conditions, much less engage in protracted negotiations or arbitrations with SWBT. SWBT’s extensive control of the K2A and the terms and conditions of interconnection agreements in general, results in self-serving agreements that severely limit a CLEC’s ability to compete, while demonstrating little of SWBT’s actual compliance with the Act. In a conventional business relationship, vendors have a vested interest in satisfying client needs by negotiating an agreement enabling the vendor to win the client’s business from a competitor, while allowing the vendor to realize a benefit. As a vendor without rival and retail competitor, SWBT has no such vested interest. SWBT would rather not serve companies it views as competitors rather than find ways to meet its own business interests through satisfying the needs of its wholesale customers. Staff’s agreement with SWBT’s representations that CLECs always have the option to negotiate an interconnection agreement and is not required to adopt the K2A or may obtain only those provisions of the K2A which meet their individualized business requirements, provided that all legitimately related provisions are also taken does not take into account the negligible ability that many CLECs posses to negotiate a usable agreement rather than accept a “take it or leave it” agreement. ASCENT and others have addressed in initial comments several provisions of the K2A which reveal the control that SWBT exerts over the provisions offered to competitors. Save for a competitor’s ability to take advantage of “pick and choose” provisions, a competitor’s power to meaningfully negotiate favorable terms is illusory for all but the very largest Kansas CLECs. SWBT’s K2A, therefore, is not representative of SWBT’s meaningful delivery of services and interconnection in a manner that enables CLECs to effectively compete. The K2A glosses over the challenges which CLECs face daily in putting the K2A into effect, and the impact that those challenges have on delivering competitive services to the public at parity with SWBT. VII. CONCLUSION. Staff’s recommendations appear to based on certain crucial presumptions: that the similarity of SWBT’s Kansas and Texas operations are sufficient to rely heavily on SWBT’s Texas compliance record, that the availability of services, and interconnection in the K2A demonstrates compliance with the Act, and that SWBT’s promises of future collaboration and compliance, backed by a PAP and limited performance measures further demonstrate SWBT’s actual compliance with the Act. Yet none of these conclusions, however deceptively reasonable in their appeal, demonstrate that SWBT today complies with section 271 of the Act in Kansas. These conclusions have the effect of filling significant gaps in SWBT’s compliance record, without an factually based demonstration by SWBT that it has already met its compliance obligations. There is ample discussion by the Texas Commission and FCC cited in this proceeding, which establish the standards that SWBT alone – and not its competitors – must meet to be found in compliance with the Act. The FCC’s Texas and New York 271 decisions have established a high bar for SWBT that Staff’s findings do not ultimately reflect. Until SWBT can rely on a fully factual supportable compliance record, before a 271 recommendation is granted, SWBT’s “compliance” should be viewed as a work in process, and its filings probative only of its efforts to bring itself into compliance. Otherwise, its 271 application should be rejected. Respectfully submitted, Association of Communications Enterprises By: Andrew O. Isar Director – State Affairs 3220 Uddenberg Lane, Suite 4 Gig Harbor, WA 98335 Tel.: 253.851.6700 E-mail: aisar@millerisar.com August 30, 2000 |