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In the Matter of the Application of Southwestern Bell Telephone Company to Provide Notice of Intent to File an Application for Authorization to Provide In-region InterLATA Services Originating in Missouri Pursuant to Section 271 of the Telecommunications Act of 1996. Case No. TO-99-227 TO SOUTHWESTERN BELL TELEPHONE COMPANY’S UPDATED RECORD The Association of Communications Enterprises (“ASCENT, f/k/a the Telecommunications Resellers Association), on behalf of its members, and pursuant to the Missouri Public Service Commission’s (“Commission”) August 1, 2000 Order Granting Motions to Update Record, Setting Response Time, Setting Partial Procedural Schedule, and Granting Interventions in the above-captioned proceeding, submits its reply to the materials submitted by Southwestern Bell Telephone, Inc. (“SWBT”) with its June 28, 2000 Motion of Southwestern Bell Telephone Company to Update the Record and for Approval of the Missouri 271 Interconnection Agreement. ASCENT maintains that in Missouri SWBT remains in non-compliance with the “competitive checklist” for in-region, interLATA market entry, pursuant to section 271 of the Telecommunications Act of 1996 (the “Act”), and that any favorable recommendation as to SWBT’s compliance with section 271 in Missouri would be entirely premature. SWBT’s “cookie cutter” approach to section 271 compliance, through a virtually exclusive reliance on its Texas compliance record and M2A, demonstrates little in so far as SWBT’s actual compliance in Missouri. SWBT can be found to have met its obligations under section 271 of the Act for in-region interLATA market entry only upon a factual, Missouri- specific demonstration that its operations and systems meet the Act’s non-discriminatory and parity standards, and that the Missouri local market is irreversibly open to competition. SWBT continues to fail in meeting these obligations. I. INTRODUCTION SWBT has yet to open its local markets to meaningful and irreversible competition as required by the Act. The record in this case makes it clear that SWBT has not demonstrated actual performance relative to service to CLECs in Missouri, necessary if it is to be found in compliance with section 271 of the Act and to allow for real competition in the local telecommunications market in Missouri. SWBT's supplemental filing fails to meet any reasonable burden of showing that SWBT meets the requirements for long distance market entry in Missouri, as set forth in the FCC's decisions for SBC's section 271 application in Texas or Bell Atlantic’s section 271 application in New York. SWBT ostensibly asks this Commission to reach a presumptive finding that it has met its section 271 obligations based primarily on the purported similarity between the systems and operations it employs in Missouri, and those in Texas. This Commission has a clearly established obligation to base its findings and recommendations on a state-specific record. A presumptive finding such as that sought by SWBT cannot withstand federal scrutiny nor adequately fulfill the Commission’s responsibilities. SWBT has failed to provide the Commission with the conclusive compliance record necessary for the Commission to fulfill its statutory responsibilities. With regard to SWBT’s proposed M2A, ASCENT maintains that the M2A may offer some value as an “off the shelf” interconnection agreement, particularly for entities who seek expedited market entry and those who are not in a position to engage in protracted negotiations with SWBT. To the extent that the M2A promotes competition by providing competitive local exchange carriers (“CLECs”) with a viable option to begin offering service quickly, the M2A, if properly crafted, may serve a useful purpose. Yet the M2A, as proposed, is by no means a ready-to-use document. The proposed M2A requires extensive amendment if it is to maintain any semblance of an equitable, usable agreement. Moreover, the M2A cannot serve as a foundation for a factually supportable Commission recommendation for approval of SWBT’s 271 application in Missouri in lieu of a state- specific Commission evaluation of SWBT Operations Support System (“OSS”) access and demonstrable sustained performance, measured by Missouri-specific performance measures, contrary to SWBT’s claims. SWBT’s exaggerated reliance on its Texas record and M2A does not satisfy the requirements of section 271, and crumbles under the weight of state- specific 271 compliance obligations. II. THE APPLICABLE STANDARDS FOR STATE-SPECIFIC REVIEW OF 271 COMPLIANCE ARE FIRMLY ESTABLISHED IN THE TEXAS AND NEW YORK 271 RECORDS AND IN THE SUBSEQUENT FCC 271 ORDERS. It is clear that the Commission should strongly consider the reports generated in the section 271 review proceedings conducted by the New York Public Service and Texas Public Utility Commissions, and the subsequent Federal Communications Commission (“FCC”) orders on those reports, in this proceeding as SWBT suggests. However, it is equally clear that the Commission must also conduct its own state-specific review to evaluate SWBT’s section 271 compliance and the status of Missouri’s local telecommunications market. SWBT's performance in Texas, much less its preliminary activities in Missouri that have not yet created an open local market, is no more proper support for a section 271 grant than is evidence of SWBT’s discriminatory action in other states proper grounds for denial. The Act requires, and the FCC has stressed, that each state commission must conduct a review that specifically focuses on the ILEC's performance in that state in any section 271 review. Although other state 271 proceedings may set forth factors to be considered in assessing whether a local market is irreversibly open to competition and determining whether the incumbent Bell operating company serves competitors at parity, the Commission cannot rely on SWBT's bare assertions that a certain system, level of performance or collaborative efforts in Texas demonstrate that those same systems or performance levels in Missouri satisfy the relevant standards under the Act. a. If Reliance on the Texas 271 Record in Missouri is a Proper Approach, Why Have This Proceeding at All? In developing its recommendation to the FCC, this Commission (along with commissions in Kansas, Oklahoma, Arkansas, or other states in SWBT’s operating territory) cannot simply take administrative notice of the Texas Report and the FCC approval rather than conduct its own proceeding. The Commission cannot simply obtain statements from SWBT that it operates in the same manner in Missouri as it does in Texas, and make a favorable report to the FCC. This, in essence, is what SWBT's is asking this Commission to do. Unfortunately, SWBT’s approach is neither consistent with governing law and FCC orders, nor is likely to allow for the development of a truly competitive local market. b. Evaluation of SWBT’s Missouri Processes and Systems is Essential. SWBT’s Texas statistics do not tell the whole story. In fact, statistics may be used in a manner that seems to show wholesale performance at parity with SWBT's retail performance, while actual market conditions show insufficient opportunities for open competition and even anti-competitive behavior by SWBT. Certainly, statistics of an ILEC's performance on a broad level have been relied upon by the New York and Texas Commissions and the FCC. However, the Commission must also take very seriously any evidence of anti-competitive actions by SWBT, and must not disregard such evidence due to its often anecdotal nature. The Commission must look carefully at any performance statistics and consider how they are developed, including the underlying definitions and calculations used to develop such statistics. A 95% or better level of performance is meaningless, for example, if SWBT defines the statistical universe in a manner that excludes extensive failed CLEC efforts to obtain the necessary wholesale or interconnection performance necessary to establish meaningful competitive inroads on SWBT's local market monopoly. SWBT could cite a “hot cut on time” completion rate of 100%, but 100% is not 100% of all scheduled hot cuts. Where postponements occur, SWBT's statistics likely do not consider them. Nevertheless, performance statistics are not yet even available in Missouri, much less can any Missouri- specific data be analyzed. It is this absence of state-specific data that gives rise to ASCENT’s concerns and the need for a thorough Commission evaluation of SWBT’s Missouri procedures and systems. Additionally, independent third party testing should be conducted at real commercial levels in the state being tested. Such an approach will better be able to ensure that SWBT's OSS will work properly once numerous carriers are all using such OSS in an increasingly competitive market. Testing at commercial levels was a critical and integral part of the Texas review (and grant) of the SWBT Section 271 bid. Had such testing been part of the New York review of the Bell Atlantic Section 271 application there, New York (and Bell Atlantic) would have avoided the terrible problems of poor post-section 271 service that harmed many CLECs, their subscribers, and the competitive marketplace in New York. Instead of granting a Section 271 approval prematurely as was apparently the case in New York, and having to rely on the after-the-fact performance penalties, the Commission should require a three-month testing period at commercial levels as a demonstration of sustained performance. Clearly, the Commission cannot simply take SWBT’s reliance on its Texas compliance record as gospel. As discussed more extensively below, the Commission must conduct its own evaluation of SWBT’s Missouri operations and OSS, analyze Missouri-specific, independently verified, performance data, and draw its final recommendation from the outcome of those efforts. This is the process the Commission has engaged in since SWBT first sought 271 authority. The granting of SWBT’s Texas 271 authority should not now change the appropriate direction of this Commission’s thorough evaluation of SWBT’s Missouri compliance record. III. COMMENTS ON SWBT'S SUPPLEMENTAL FILING On June 28, 2000, SWBT filed a motion to update the compliance record in this proceeding and for approval of its proposed M2A. SWBT introduced its Motion by describing the recently concluded Texas 271 proceeding and the Texas Public Utilities Commission’s (“TPUC”) adoption of SWBT’s Texas 271 Interconnection Agreement, or “T2A”, on which the proposed M2A is modeled. SWBT’s Application stresses, “The TPUC concluded that the T2A satisfied the 14-point checklist of section 271(c) of the Act”. Only as a seeming afterthought, does SWBT concede that the TPUC’s approval “was conditioned on SWBT’s successful completion of Docket 20000, the testing of SWBT’s Operations Support Systems, and review of performance measurement data [emphasis supplied].” This condition is crucial in revealing the specious thread of logic on which SWBT’s M2A, if not its entire Missouri 271 application, rests, and underscores the very reason why the Commission should conclude that the submission of the M2A and reliance on the Texas 271 process is in no way by itself dispositive of the question whether SWBT has met its section 271(c) obligations in Missouri. While SWBT’s M2A presents an option for CLECs to avail themselves of a standard interconnection agreement, which could obviate the need for protracted negotiation, the M2A is rife with competitive land mines, poised to harm competitors at every turn. Moreover, the M2A can hardly 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 ultimately approved by the Commission, the M2A is no more than one piece in a body of evidence that SWBT must produce to demonstrate that it has met the fourteen point “competitive checklist” for interLATA market entry, and that its local markets have been irreversibly open to competition. a. The Results of One State 271 Evaluation Cannot be Superimposed on Another SWBT’s Motion and M2A are SWBT’s de facto Missouri 271 case. Stripped to its bare essentials, SWBT asks the Commission to support its interLATA market entry through tacit approval of its M2A, using the Texas 271 record as a backdrop. The glaring deficiency of SWBT’s argument lies in its virtually unilateral reliance on the Texas 271 process, on the basis that SWBT has been found to have met its 271 obligations in Texas. SWBT’s 271 process in Missouri must necessarily be founded on the Commission’s own evaluation as the FCC has stressed, Indeed, we view the state’s and the Commission of Justice’s role [in evaluating 271 applications] to be one similar to that of an “expert witness.” Given the 90-day statutory deadline to reach a decision on a section 271 application, the Commission does not have the time or the resources to resolve the enormous number of factual disputes that inevitably arise from the technical details and data involved in such a complex endeavor. Accordingly … where the state has conducted an exhaustive and rigorous investigation into the BOC’s compliance with the checklist, we may give evidence submitted by the state substantial weight in making our decision [footnote in original omitted, emphasis supplied]. More to the point, We recognize that metric definitions and incumbent LEC operating systems will likely vary among states, and that individual states may set standards at a particular level that would not apply in other states and that may constitute more or less than the checklist requires. Therefore, it is unlikely that we will see uniform standards that measure precisely the same BOC conduct across states. A wholesale adoption of SWBT’s Texas 271 record and M2A in Missouri would be inconsistent with the FCC’s reliance on the Commission to conduct a state-specific evaluation. When faced by a analogous Bell Atlantic – Massachusetts (“BA-MA”) request to link the Massachusetts OSS test results to those already produced in New York, the Massachusetts Department of Telecommunications and Energy (“DTE”) in its 271 proceeding, nevertheless ordered independent third party testing of BA-MA’s OSS, despite the purported similarity in SWBT OSS between New York and Missouri. The DTE made clear its desire for state- specific data, stating The Commission expects that KPMG will not rely on data from New York or Pennsylvania to draw its conclusions about current and future BA-MA performance in these two domains, but will conduct a full-scale test in Missouri in the spirit of the relevant sections of the CCB [Common Carrier Bureau] OSS Policy Letter. The Commission should reach a similar conclusion. SWBT ostensibly asks the Commission to abdicate its role in conducting a state-specific evaluation in favor of a virtual wholesale adoption of the Texas Commission’s findings. The Commission should not be so persuaded to support SWBT’s 271 application on the broad, unsubstantiated presumption that its Missouri and Texas operations are interchangeable. To do so would result in a tacit approval void of specific evidence on which such approval must necessarily rest. Given the FCC’s reliance on the states as “expert witnesses” and on the need for substantial state-specific evidence on which Commission approval must be based, one can only speculate as to whether one state’s adoption of another state’s findings could ultimately support section 271 approval. b. SWBT’s Demonstrated Performance in Missouri Is the Sole True Determinant of Compliance With the Act. SWBT’s reliance on its Texas performance and M2A as evidence of its section 271 fulfillment further ignores that a single document cannot demonstrate or replace actual performance in Missouri, even if placed before a backdrop of purported compliance in another state. Nowhere is this more evident than in this spring’s New York Public Service Commission post Bell Atlantic – New York (“BA-NY”) 271 approval Order directing BA-NY to improve its wholesale service performance. In that Order, the New York Commission concluded The resolution of BA-NY’s OSS problems is essential to enable competitive telephone companies to offer local access services to customers. Delayed implementation will delay competitive service offerings to customers to the determent of the general welfare [emphasis supplied]. A T2A or M2A are simply standardized agreements which do not demonstrate performance or system parity, much less compliance with the Act. The M2A does not reveal SWBT missed appointments, delayed provisioning, missing orders, untrained representatives, or a myriad of other problems that plague new competitive entrants and adversely affect their ability to serve the public. Certainly the TPUC did not approve SWBT’s Texas 271 application exclusively on its T2A, but relied upon SWBT’s demonstration of sustained performance with established performance metrics and thorough OSS testing. As the BA-NY performance penalty action quickly revealed, 271 approval is no guarantee of sustained or sustainable performance. SWBT performance can be demonstrated solely through a state-specific evaluation, not a wholesale adoption of another state’s performance record, as SWBT now seeks. SWBT’s Texas 271 record and M2A are fraught with serious problems, which must be first remedied before any consideration of importing that record to Missouri or elsewhere merits consideration. If SWBT’s Texas compliance record is considered in Missouri, it should be considered solely as the foundation for Missouri-specific OSS testing and performance measures as are now being pursued by the Commission. Without hard evidence to support its claims, SWBT’s M2A becomes an empty document of promises bringing Missouri no closer to realizing meaningful local competition. IV. THE M2A, AS PROPOSED, DEMONSTRATES SWBT’S COMPLETE CONTROL OVER THE RELATIONSHIP BETWEEN PARTIES AND REQUIRES AMENDMENT OR CLARIFICATION BEFORE IT CAN BE CONSIDERED USABLE BY COMPETITORS. Beyond the matter of whether the M2A may serve as stand alone evidence of SWBT 271 compliance, numerous M2A provisions require amendment or clarification before the agreement should even considered suitable for competitors. Nevertheless, the M2A in its totality, like the T2A, demonstrates SWBT’s virtual unilateral control over the agreement’s provisions and CLEC parties. The M2A is a decidedly inequitable, one- sided “take it or leave it” agreement which severely limits the other parties’ rights, unlike virtually any other commercial agreement. A. Finality of Provisions The M2A accords SWBT unrestricted opportunities to appeal unfavorable decisions which could impact the M2A’s provisions, while forcing competitors to waive their rights to challenge the terms of the M2A. SWBT conditions the M2A on its reservation of right to continue any present appeals, to challenge any order requiring payment of reciprocal compensation, and to appeal agreement terms resulting from any Missouri arbitration proceedings. Yet competitive local exchange carriers are to waive their right to challenge any term of the M2A. These provisions open the door to future M2A amendments based on the potential success of SWBT’s numerous challenges, rendering the M2A of dubious value to competitors who are attempting to build business plans, which necessarily require a stable agreement. The M2A thus becomes a potential “moving target,” offering competitors virtually no certainty that the M2A’s terms will in fact remain enforceable against SWBT. When coupled with SWBT’s requirement that CLECs waive their right to challenge M2A provisions, the net effect is a total inability of Missouri CLECs to protect their business from material changes in contractual terms and conditions that may be incorporated into the agreement as a result of subsequent SWBT appeals or arbitrations. SWBT, however, appears to reserve for itself almost complete freedom to unilaterally modify the M2A at will. Provisions which maintain SWBT’s right to challenge and appeal, coupled with the severe restrictions that prevent similar challenges and appeals by competitors, accord SWBT virtually complete and unfettered control over the M2A. And although the CLECs’ right to question interpretation of certain M2A provisions remains, the potential need for such challenges undermines the very benefit of maintaining the M2A in the first place; to enter into a local service agreement with SWBT quickly and with a minimum of negotiation and delay. Given the implications of SWBT’s ongoing ability to challenge any M2A provision, the M2A’s value to CLECs, and to smaller entities in particular, is dubious at best. B. Deposit Requirements In Section 3.2. of the M2A General Terms and Conditions SWBT would impose significant deposit requirements on Missouri CLECs who provide local service on a resold or unbundled network element basis and who have “not established a minimum of twelve (12) consecutive months good credit history with all telephone company affiliates of SBC … where CLEC is doing or has done business as a local service provider.” CLECs who are already operating would be subject to a deposit amount equal to the average of two months billing by SWBT to the CLEC. SWBT has set the deposit amount for new CLECs at $17,000.00. Yet no justification is provided for the significant flat deposit amount applicable to companies who have not yet established credit. The MCA does not substantiate the deposit obligation, so one can only speculate as to how this amount was determined. A flat $17,000 deposit would appear excessive to smaller companies and those with limited Missouri operations because the deposit amount - unlike the deposit amount requirements for companies having an established credit history with SWBT - bears no relationship to the level of services being purchased by the CLEC from SWBT. A high state-specific deposit could be particularly onerous for entities having to make similar deposits in other SWBT states. The cash deposit requirement in the M2A is sufficiently large to discourage new competitors from entering the Missouri market, or any other SBC market where such an agreement is allowed. As such, a high, unsubstantiated deposit amount has anti- competitive implications. Any proposed deposit amount should reflect SWBT’s demonstrated risks, costs, and the level of services used by the CLEC, subject to further negotiation between the parties. C. Specific Offerings Voice Mail Resale. It is unclear from Attachment 1: Resale that SWBT will offer voice mail and digital subscriber line (xDSL) services for resale. As telecommunications services offered to subscribers at retail, SWBT is obligated to make both voice mail services available for resale to competitive local exchange carriers (CLECs) without restriction. Nowhere in Attachment 1 does voice mail service explicitly appear. SWBT only makes vague references to the uninterrupted continuation of voice mail services when SWBT subscribers with voice mail service elect the services of a competitor. Beyond a broad, ambiguous statement appearing at section 3.1 of Appendix Services/Pricing, page 2, the M2A does not make clear that SWBT’s voice mail service will be available for new CLEC subscribers. xDSL Resale. The M2A is entirely silent on the issue of xDSL availability on a resold basis. TRA members have already reported extreme difficulty in obtaining advanced services from SWBT, even when attempting to obtain xDSL capable loops and other unbundled network elements. The absence of specific language governing xDSL availability raises concern over whether SWBT’s advanced services will be available for resale under the M2A, if at all. SWBT should make explicit in its M2A Resale attachments that xDSL services are available for resale at the Commission-ordered discount, pursuant to SWBT’s statutory obligations under sections 251 and 252 of the Act. See Section IV.F. infra. CSA Resale. SWBT has stricken the Texas 271 Agreement (“T2A”) customer-specific arrangement (“CSA”) resale provisions from its M2A altogether. CSAs have historically proven an effective method for incumbents to lock in small and medium-sized users and preclude competitive in roads to these subscribers. The Commission authorized resale of CSAs in the AT&T/SWBT arbitration, and CSAs are available for resale under the AT&T agreement which has been adopted by numerous CLECs. The elimination of CSAs from those services which may be resold by competitors is not only violative of sections 251 and 252 of the Act, but underscores the very anti-competitive behavior SWBT purports not to engage in. That SWBT refuses to make CSAs available for resale under the M2A, despite the fact that CSA resale was available under the T2A, raises considerable concern over SWBT’s unilateral interpretation of the law, and underscores the questionable value of the M2A as dispositive of SWBT’s section 271 compliance, let alone its value as a standard agreement. D. Operations Support Systems (OSS) i. OSS Access. SWBT’s M2A, like the T2A, offers CLECs no clear web-based OSS access solutions. In other states, Regional Bell Operating Companies (“RBOCs”) have developed web-based OSS access through a Graphical User Interface (“GUI”). Bell Atlantic in particular has made great strides in creating web-based GUI access solutions. Small CLECs often have neither the capital nor volumes to justify the cost of acquiring specific software to access OSS. Yet they are ostensibly penalized for their failure to invest tens of thousands of dollars to implement RBOC directed systems. SWBT should clarify its efforts in making OSS accessible through the Internet, as a lower cost OSS access solution for smaller companies and those with limited local service offerings. ii. Change Management. When actual changes occur in SWBT’s procedures or systems, SWBT’s wholesale customers (i.e., CLECs) should be immediately notified through regular or electronic mail. The onus should not be on the affected customer to discover changes in procedures. While ASCENT understands that the change management process appears to be working in Texas in practice, SWBT’s change management practices should be clearly documented in the M2A. As proposed, the M2A is silent on SWBT commitments to inform wholesale customers of system and process changes. iii. Timely Billing Corrections. Proper and timely treatment of billing and billing credits is a vital aspect of OSS, particularly to small CLECs. The M2A does not specifically address SWBT’s commitments for timely resolution of billing disputes and application of credits, although the M2A makes ample references to the CLEC’s obligations for timely payment of bills. Although section 9.4.1 of the M2A’s General Terms and Conditions suggests that interest will be paid to the prevailing party on disputed billing amounts, no specific reference is made regarding how soon after a billing dispute is resolved by SWBT in favor of the CLEC will SWBT apply credits and interest to the CLEC. SWBT should clarify that any dispute will be addressed immediately and that any resulting refunds or credits, whether stemming from double billing or other error, will be paid to the CLEC within 30 days following resolution, subject to accrued interest. Credits not so issued should also be deemed past due, with interest accruing accordingly. The M2A should further specify that any disputed billed amounts that remain unpaid and are subsequently found to be in error will be promptly removed from the CLEC’s bill, along with any interest and penalties that may have accrued due to nonpayment, and that such non payment will not adversely affect the CLEC’s credit standing in any way. Small CLECs are particularly financially vulnerable when billing errors result in withheld credits. CLECs should not bear the financial burden of waiting until SWBT is willing to refund or credit amounts due. SWBT should be held to the same conditions for refund or credit that CLECs are held to in the timely payment of services. E. Restrictions On Unbundled Network Elements SWBT offers no support for the inclusion of several conditions governing the provision of unbundled network elements (“UNE”) in its “Attachment UNE”. These seemingly arbitrary positions, which also reside in the T2A, further reveal that the purported availability of interconnection and services under the M2A is decidedly one-sided, and under SWBT’s full control: Although SWBT commits to continue combining UNEs in section 14.3.3, SWBT qualifies that commitment when there are four or more CLECs collocated in a central office. SWBT’s policies expose the fifth and subsequent CLECs to demand forecasts and additional administrative obligations which could potentially subject CLECs to added cost and effort, if not a create a significant disincentive to provide service altogether. Smaller CLECs would again be disproportionately impacted as they would typically not be within the group of the first four CLECs to collocate. In section 14.3.1 (and 14.4.1), SWBT indicates that, if it is no longer obligated to provide a certain UNE, then SWBT may price that UNE “at a market level for the applicable areas.” The market price will “not be subject to review, approval or disapproval by the Missouri PSC.” Notwithstanding the significant risk that M2A CLECs would face under such an arrangement, the provision enables SWBT to potentially engage in anti-competitive behavior by imposing “market” prices on UNEs deemed no longer needed under section 251(c) (3) of the Act, however SWBT may determine market price. This provision represents one more “loophole” that frees SWBT to change M2A provisions at will. Under section 14.7.3, a CLEC is obligated to pay SWBT for unused capacity of a secured frame if the CLEC fails to meet 50% of its forecast. An exacting forecast of future growth at this point in the telecommunications industry is extremely difficult, if not impossible, to judge. By imposing such a financial risk on the CLEC, SWBT jeopardizes the CLEC’s financial viability. Yet SWBT bears no risk as a supplier, any more so than when its own retail forecasts may prove inaccurate. The ability of SWBT to recover “reasonable” costs for inaccurate CLEC forecasts is a form of indemnification which forces M2A CLECs to take significant risks for being able to predict demand with certainty, while SWBT risks nothing. Section 14.8 M2A obligates the CLEC to accept the UNE provisions in their entirety, without modification, and to waive its rights to “pick and choose” UNE provisions from other agreements. A CLEC should not be required to waive one of its statutory rights (i.e., to pick and choose under section 252(i) of the Act) in return for accepting the only interconnection agreement that SWBT is willing to offer. SWBT demands that CLECs who elect the M2A waive such rights – again reflective of SWBT’s intent to tightly control CLECs under the M2A. F. Obligations of SBC Data Affiliates It is generally unclear what obligations, if any, a SWBT data affiliate will assume to provide xDSL services for resale or through UNEs, as required by the Act, under the M2A. In Section 160(d) of the Act, Congress ensured that xDSL retail services, network elements and physical network interconnections would remain available to competitors until section 251(c) had been fully implemented and the Commission could determine that such availability was no longer necessary to ensure that services were offered on just, reasonable and nondiscriminatory terms, to protect consumers, serve the public interest, and promote competitive market conditions. The obligations of the incumbent must be assumed by the affiliate in instances where the affiliate becomes the sole provider of services formerly provided by the incumbent, as is the case with the provision of advanced services. When such an affiliate becomes the sole source provider of a service offering within the incumbent’s corporate family, it clearly takes on the mantle of the incumbent. In such a circumstance, a customer desiring to purchase services from the incumbent that has been transferred to the incumbent’s wholly owned and controlled affiliate, would have no choice but to deal with the affiliate. The incumbent would have effectively transferred to its affiliate its right to provide certain services, with respect to which the affiliate would occupy the position of the incumbent in the market, having replaced its parent as the incumbent provider of these services. Indeed, with respect to any services provisioned solely through the affiliate on behalf of the incumbent, the incumbent would have exited the market. Further, if Missouri incumbents were permitted to offer certain services exclusively through a separate affiliate and that affiliate were not deemed to be an incumbent pursuant to Section 251(h), there would be no incumbent for those services in Missouri , and the M2A would serve little purpose with respect to the provision of advanced services. The carefully crafted Congressional construct providing for resale at wholesale rates, unbundled network access and physical network interconnection would, accordingly, be eliminated for these services. And the Congressional mandate that Section 251(c) obligations remain intact until Section 251(c) had been fully implemented would be ignored. The structural separation requirements were intended, in particular, to reduce the opportunity for RBOCs to favor themselves over competitors in the provision of advanced services. SWBT may argue, however, that it need not provide to its advanced services competitors access to network elements necessary for advanced services because it does not own or control them. And it may argue at the same time that a wholly-owned subsidiary, which acquired those elements from its parent along with its parent’s advanced services customers, name, logo, service marks and good will and which will engage in joint marketing and other joint efforts with its parent, is not obligated to provide competitors with access to those same elements because it is not a local exchange company or a successor to a local exchange company. The Commission has the authority to require SWBT to provide nondiscriminatory access at just and reasonable rates to splitters and all other network elements needed in the competitive provision of advanced services under sections 251 (d) and 253 (b) of the 1996 Act. The Commission should exercise its authority to the full extent necessary or appropriate to assure that the opportunity for competition in advanced services remains open and unimpeded through the M2A and otherwise. G. Performance Measures Once SWBT is allowed to provide interLATA toll service within Missouri, the performance measures incorporated in the M2A, and applicable to SWBT performance will be among the CLECs’ last opportunities to hold SWBT’s corporate feet to the fire, as the recent Bell Atlantic – New York decision has demonstrated. Not surprisingly, SWBT has surrounded the actual performance measures with terms and conditions aimed at diluting and delaying their effectiveness. Some of the more egregious terms and conditions include: i. Yearly Cap on Damages and Assessments. Section 7.3 of M2A Attachment 17, imposes an overall aggregated initial cap of $98 million per year, significantly below the $289 million pledged in Texas, on SWBT’s liability for damages and assessments. To aggravate concerns over the SWBT’s performance penalty cap, a monthly cap is established which would limit the amount of non-performance penalties to one twelfth of the $98 million penalty cap, or $8.17 million per month during the first year. No matter how egregious SWBT’s non-performance might be in any given month, SWBT would initially have no more than $8.17 million at risk per month. There is no basis for allowing SWBT to arbitrarily limit its liability concerning the only enforcement tools that CLECs have left. SWBT should not be held to damages that bear no relation to the gravity of its non- performance or that can be seen by SWBT as little more than the cost of doing business; payments that are preferable to meeting obligations which enable CLECs to compete. The aggregated nature of this cap is also problematic. Were the monthly and/or annual caps reached in any given month/year, any further SWBT non-performance could be accomplished with impunity, to the sole detriment of SWBT’s competitors, regardless of any immediate or direct impact on their operations. SWBT further protects its interests by demanding that CLECs waive any right to use the payment of assessments and damages as an indication of non-performance (admission of liability) in violation of sections 251 or 252 of the Act. This provision would mitigate any risk that SWBT non-performance could somehow be used as evidence of the Company’s non-compliance with the “competitive checklist.” Monetary damages are intended to induce, if not compel, performance. The severe performance remedies limitations proposed by SWBT offers little incentive for SWBT to meet its obligations. ii. General Terms And Conditions. Under the M2A’s General Terms and Conditions, a CLEC’s legal avenues to challenge the M2A are seemingly extinguished. Section 18.3 of the General Terms and Conditions provides that by entering into the M2A, whether “in whole or in part,” a CLEC waives its rights to challenge the terms of the M2A. This provision constitutes a de facto “take it or leave it” proposition. ASCENT recognizes the value of a standardized agreement that does not require further negotiation. Yet the provisions of section 18.3 appear so heavy handed as to prevent CLECs from addressing any of the M2A’s provisions, including unforeseen events, which may arise following execution of the agreement. At a minimum SWBT must clarify whether this waiver applies to CLECs that adopt, through the MFN policy, a part of the M2A and the scope of that waiver. For example, if a CLEC wishes to negotiate and modify some of the language in the M2A, does that constitute a “challenge” to the M2A? Section 4.2.1. of the General Terms and Conditions also prohibits a CLEC from challenging “the lawfulness” of any provision of the M2A. Should a CLEC nevertheless challenge any provision of the M2A, then SWBT may terminate the agreement immediately, leaving the CLEC and its customers at SWBT’s mercy. And CLECs who executed the M2A cannot even benefit from the successful challenge to a provision of the agreement by a non- party. Once a CLEC executes the M2A, the agreement remains effective as to that CLEC, regardless of subsequent decisions, despite the fact that SWBT is free to change M2A provisions following the outcome of its appeals. A CLEC’s ability to challenge M2A provisions is at its own peril. SWBT should clarify how these limitations on CLECs’ rights are consistent with SWBT’s continuing obligation to negotiate interconnection agreements in good faith. The M2A imposes a straight jacket on CLECs that need to interconnect with SWBT and fuels CLECs’ concerns that the M2A is an all or nothing proposal, fully under SWBT’s control. V. SWBT SHOULD DEMONSTRATE SUSTAINED PERFORMANCE BY MEETING A MISSOURI-SPECIFIC PERFORMANCE EVALUATION. Enactment of the Act was not intended simply as a vehicle to enable regional Bell operating companies into the interLATA market, but rather as a means of promoting the development of meaningful competition in both interLATA and local exchange markets, for the direct benefit of the public. One of the most critical indicators of whether SWBT has met its section 271 obligations – that it has in fact opened its markets to local competition - lies in a qualitative/quantitative evaluation of how SWBT serves its competitors. A demonstration of sustained performance, measured against state-specific performance measures, has been a key to section 271 application approval. The FCC has been emphatic in its recognition of the importance of rigorous performance measures as an indication that regional Bell operating companies have met their obligations under the Act when evaluating Bell Atlantic – New York’s 271 compliance record. According to the FCC, The section 271 process in New York exemplifies the way in which rigorous state proceedings can contribute to the success of a section 271 application. There are a number of elements that were particularly important to the success of this process in opening local markets to competition consistent with the terms of the 1996 Act. These include: (1) full and open participation by all interested parties; (2) extensive independent third party testing of Bell Atlantic’s operations support systems (OSS) offering; (3) development of clearly defined performance measures and standards; and (4) adoption of performance assurance measures that create a strong financial incentive for post-entry compliance with the section 271checklist by Bell Atlantic. While we accord applicants flexibility in demonstrating compliance with section 271, these elements played a vital role in the success of this application [footnote in original omitted]. The FCC– New York 271 Order is replete with examples, which underscore the FCC’s reliance on New York-specific performance measures as dispositive of Bell Atlantic – New York’s ability to serve competitors at parity with its own retail analogs. The FCC’s subsequent action against Bell Atlantic – New York’s “backsliding” was predicated on the company’s measured performance and lead to the creation of three new performance measures. More to the immediate issue of SWBT performance, the Department of Justice has been critical of SWBT’s Texas measured performance in its evaluation of SWBT’s compliance with section 271. In its February 14, 2000 evaluation of SBC Corporation’s 271 record, Justice noted Finally, and perhaps most importantly with respect to future applications, uncertainty remains regarding the validity of some of SBC’s performance reports because Telcordia [Technologies, Inc.] reviewed only a subset of the performance measures on which SBC reports. In evaluating the actual commercial experience of SBC’s competitors, the Commission and the Commission place great weight on the reported performance data; the reliability of the reported data is critical. To properly validate metrics, one must verify that they are meaningful, accurate and reproducible [emphasis supplied]. The FCC and Justice have established the need for state-specific measures rather than a wholesale adoption of SWBT’s Texas performance through their expressed intent to evaluate commercial performance. This cannot be accomplished as a “cut and paste” of SWBT’s Texas performance on to Missouri, and is possible only through state-specific performance measures. While the Texas performance measurements may serve as a useful model for development Missouri-specific measures, as the Commission has considered, the Commission cannot rely solely on SWBT’s Texas performance results as an indication of SWBT’s ability to provide non-discriminatory interconnection, services, and support to Missouri CLECs. To do so will result in a largely factually unsupported conclusion that SWBT’s Missouri performance necessarily meets its Texas performance. Not only is this a dangerous conclusion, but the failure to perform a Missouri-specific evaluation will result in a recommendation based largely on conjecture that is unlikely to withstand the weight of federal review as discussed supra. VI. CONCLUSION SWBT's June 28, 2000 supplemental filing still falls far short of demonstrating that the local telecommunications market in Missouri to be irreversibly open to competition and that CLECs are receiving parity treatment. Though the Commission may be properly guided by the New York and Texas 271 records, the Commission cannot find that SWBT met its burden of proof by its extensive reliance on its processes in Texas. If that were a proper approach, the Commission could have skipped all the efforts of the past nearly three years and relied almost exclusively on the Texas Commission’s decision. Serious problems exist that significantly hinder achievement of an open and competitive telecommunications market. The Commission must require full and final solutions to such problems, along with a showing that processes are in place to avoid recurrence of such problems. The Commission must require sustained performance at a level consistent with an irreversibly competitive market in Missouri. As to the M2A, the agreement represents little more than an amalgam of contradictory and confusing provisions, which are freely subject to SWBT challenge, but otherwise bind CLECs into submission. At most, the M2A offers a “stock” agreement that may be a starting point for negotiations with CLECs that seek to interconnect with SWBT. More than a stock agreement, however, the M2A epitomizes SWBT’s market dominance and ability to unilaterally control competitors. In no way is the M2A “evidence” of SWBT’s compliance with the “competitive checklist” for interLATA market entry. The M2A should be considered a work in progress; its current form cannot satisfy SWBT’s obligation to provide interconnection according to rates, terms, and conditions that are just, reasonable, and non-discriminatory nor does it meet the requirement under section 271 (c) of a negotiated or arbitrated interconnection agreement. The true determinant of SWBT’s compliance with section 271 will fall on in how SWBT serves competitors, demonstrated through sustained performance in meeting Missouri-specific performance measures and through rigorous state-specific OSS testing. The Commission should not accept SWBT’s thinly supported contention that 271 compliance is transferable from state to state. The FCC’s expectations, the recent New York backsliding experience, and SWBT’s own need to supplement the Texas 271 record, reveal the folly of such a presumption. ASCENT urges the Commission to find that the M2A does not meet SWBT’s obligations under section 271 of the Act, that SWBT should clarify and amend M2A provisions consistent with ASCENT’s comments herein, and that SWBT should be subject to state-specific performance measures and OSS testing before any conclusion regarding whether SWBT has met its obligations under the Act can be reached. Respectfully submitted, CURTIS, OETTING, HEINZ, GARRETT & SOULE, P.C. _____________________________________ Carl J. Lumley, #32869 Leland B. Curtis, #20550 130 S. Bemiston, Suite 200 St. Louis, Missouri 63105 (314) 725-8788 (314) 725-8789 (FAX) clumley@cohgs.com lcurtis@coghs.com Attorneys for Association of Communications Enterprises Of Counsel Andrew O. Isar Director – State Affairs 3220 Uddenberg Lane, Suite 4 Gig Harbor, WA 98335 253.851.6700 aisar@millerisar.com August 28, 2000 CERTIFICATE OF SERVICE A true and correct copy of the foregoing was mailed this ________ day of ____________, 2000, to the persons listed on the attached list, by placing same in the U.S. Mail, postage paid. ___________________________________ General Counsel Missouri Public Service Commission P.O. Box 360 Jefferson City, Missouri 65102 Paul G. Lane, Leo J. Bub, Anthony K. Conroy, Katherine C. Swaller Southwestern Bell Telephone Co. One Bell Center, Room 3520 St. Louis, Missouri 63101 Richard S. Brownlee, III Patricia D. Perkins Hendren and Andrae, LLC 221 Bolivar Street P.O. Box 1069 Jefferson City, Missouri 65102 Stephen F. Morris MCI WorldCom 701 Brazos, Suite 600 Austin, TX 78701 James M. Fischer James M. Fischer P.C. 101 Madison Street, Suite 400 Jefferson City, MO 65101 Karl Zobrist, Christine Egbarts Blackwell, Sanders, Peper, Martin LLP 2300 Main Street, Suite 1100 Kansas City, MO 64108 Mark W. Comley Newman, Comley & Ruth, P.C. 601 Monroe Street, Suite 301 Jeferson City, MO 65102 Jeremiah W. Nixon, Mark E. Long Ronald Molteni Attorney General-State of Missouri P.O. Box 899 Jefferson City, MO 65102-0899 Wendy E. DeBoer, Peter Mirakian, III Michael McCann Spencer, Fane, Britt & Brown, LLP 1000 Walnut Street, Suite 1400 Kansas City, MO 64106-2140 Office of Public Counsel P.O. Box 7800 Jefferson City, MO 65102 Paul S. DeFord Lathrop & Gage 2345 Grand Boulevard, Suite 2500 Kansas City, MO 64108-2684 Linda K. Gardner Sprint 5454 W. 110th Street Overland Park, KS 66211 Mary Ann Young William D. Steinmeier, P.C. 2031 Tower Drive Jefferson City, MO 65110 Charles Brent Stewart, Jeffrey Keevil Stewart & Keevil, L.L.C. 1001 Cherry Street, Suite 302 Columbia, MO 65201 Michael Ferry Gateway Legal Services 4232 Forest Park Ave., Suite 1800 St. Louis, MO 63108 W.R. England, III Sondra B. Morgan Brydon, Swearengen & England, P.C. 312 E. Capitol Avenue P.O. Box 456 Jefferson City, MO 65102 Craig Johnson Andereck, Evans, Milne, Peace, Baumhoer 700 East Capitol Jefferson City, MO 65102-1438 Christopher L. Rasmussen Southwestern Bell Communications 5850 W. LasPositas Pleasanton, CA 94588 Carol Keith Gabriel Communications, Inc. 16090 Swingley Ridge Road, Suite 500 Chesterfield, MO 63017 Bradley R. Kruse McLeodUSa Telecommunications Services 6400 C. Street S.W. P.O. Box 3177 Cedar Rapids, IA 52406-3177 Kathleen M. Lavalle Patrick R. Cowlishaw Cohan, Simpson, Cowlishaw & Wulff 2700 One Dallas Center 350 N. St. Paul Dallas, TX 75201 Kevin Zarling Michelle Sloane Bourianof AT&T Communications 919 Congress, Suite 1500 Austin, TX 78701 Michael C. Sloan Swidler, Berlin, Sheroff, Friedman, LLP 3000 K Street, N.W., Suite 300 Washington, D.C. 20007-5116 |