Background

On May 7, 2003, SBC filed an application to lease space in three of its central office buildings¹ to its affiliate SNET, a wholesale provider of signaling services to CLECs, NDIECs and wireless carriers. In each case, SBC represented that the proposed leases would involve small amounts of excess space for which the utility had no present or contemplated future need, and would be revocable at will. SBC further indicated that even though it was filing an application under § 851, it believed the transactions could be entered into without prior Commission approval pursuant to G.O. 69-C and requested that the Commission alternatively rule that the transactions could be consummated pursuant to G.O. 69-C.

Following a telephone conference on June 9, 2003 between SBC's outside counsel Caroline Mitchell and assigned Administrative Law Judge Karl J. Bemesderfer,² on June 10, 2003, SBC filed its motion to withdraw the application, indicating its intention to proceed under G.O. 69-C. The motion to withdraw was based on SBC's understanding that because the contemplated transactions were revocable at will they fell within the scope of G.O. 69-C.

On June 12, 2003, the Office of Ratepayer Advocates (ORA) protested the application. ORA questioned whether the proposed leases to SNET would impair SBC's ability to provide service to the public; whether the revenue from the leases would be properly accounted for; and whether the leases involved cross-subsidization or other anti-competitive effects.

On June 23, 2003, SBC filed its reply to the ORA protest. The SBC reply claimed that the proposed leases were consistent with the Commission's affiliate transaction rules and prior Commission decisions. SBC also specifically disagreed with each of the points made by ORA in the protest.

On June 24, 2003, ALJ Bemesderfer granted ORA a one-day extension of time to respond to the motion to withdraw. On June 26, ORA filed its response to the motion to withdraw. In the response, ORA pointed out that the application sought permission to lease the spaces to SNET and that leases were categorically outside the scope of G.O. 69-C.

On July 7, 2003, SBC filed a reply to ORA's response. In its reply, SBC clarified that it was prepared to restructure the transactions as licenses in order to bring them within the literal terms of G.O. 69-C and reiterated its contention that none of the substantive objections raised by ORA in its protest were meritorious. On July 30, ALJ Bemesderfer issued a ruling denying SBC's motion to withdraw the application.