Nondiscriminatory Access by Competitors
WorldCom/AT&T allege that transferring support services for Pacific's operations support systems (OSS) to SBC Services is a ruse to permit Pacific's parent to discriminate against competitive carriers like WorldCom and AT&T in California. Witness Terri McMillon, OSS project manager for WorldCom, testified that because SBC Services will not be subject to Commission regulation, it will be able to provide inferior service to Pacific, which in turn will provide inferior OSS to competitive carriers in California. Meanwhile, she stated, SBC Services is free to provide more comprehensive OSS support to SBC companies in other states where there may be less competition for local exchange service.
ORA witness Victoria Kolakowski, regulatory analyst, testified that transfer of the OSS support personnel to a non-regulated affiliate is likely to reduce the ability of the Commission and other carriers to monitor the support being provided to Pacific and other SBC local exchange carriers. She testified that Pacific has spent $100 million to develop OSS software and personnel expertise, an amount that Pacific is seeking to recover in another proceeding,26 and yet will transfer much of this personnel expertise to benefit SBC operations in other states. ORA asserts that Pacific has failed to provide any enforceable commitments that the transfer of billing support, one of the five key OSS functions, and OSS interface functions to a non-regulated entity will not impair competition in California.
Pacific responds that its OSS is not being transferred to SBC Services. Ownership of the software used to provide OSS remains with Pacific, and Pacific personnel responsible for providing OSS to competitive local exchange carriers are not among the employees who are being transferred. Pacific witness Glen Sirles, vice president, OSS, for SBC Services, testified that his staff, operating across subsidiary lines, will continue to provide OSS support in the same manner that was in effect prior to the transfer considered here.
Pacific witness Kathleen Larkin, director-regulatory issues for Southwestern Bell Telephone Company, testified that SBC Services, as an administrative affiliate to Bell operating companies, will be subject to an FCC biennial audit under Section 272(d) of the Telecommunications Act of 1996 (Act). Pacific also represented that if it had provided a support function to a Section 272 affiliate, and if that function subsequently was transferred to SBC Services, Pacific would post that transaction on the Internet and make the service available to others for one year after the transfer takes place.
On brief, Pacific argues that it continues to be subject to the nondiscrimination requirements of the Act in providing access to its OSS. Moreover, it states that it will have to prove that it has met its OSS obligations as part of the "competitive checklist" requirements of the Act,27 and this Commission's Section 271 "roadmap"28 before Pacific can be authorized to provide long distance service. As part of the roadmap, Pacific states that it and other carriers, along with the Commission's staff, have developed and are implementing formal OSS Performance Measures, an OSS
Master Test Plan and an OSS Change Management Process, which provide the means by which the Commission ensures that Pacific is meeting OSS obligations. Pacific states that nothing in this application changes those requirements.
Much of the concern of WorldCom/AT&T centered on an SBC Services slide presented to the SBC board of directors in 1999 as part of a presentation justifying Project 2000. The slide, first produced by TURN as part of its discovery, states that the transfer of support functions to the new entity will:
"Allow SBC Services to offer services to 272 affiliate on a discriminatory basis."29
The witness for WorldCom/AT&T alleged that this entry "documents that one of the purposes behind the transfer of OSS to SBC Services is to allow SBC Services to discriminate in favor of its affiliate...."30 Pacific's witness Webb, the author of the statement, acknowledged that the statement "was poorly worded,"31 but he defended it as simply stating that the Section 272(c) nondiscrimination requirements for Bell operating companies do not apply to a
shared services affiliate. Accordingly, he said, if SBC Services provided programming support for a long-distance affiliate, it would not be required by the Act to provide that same development service for any other SBC affiliate. On the other hand, he added, services available to Pacific and to Pacific's long distance affiliate would have to be available to competitors through Pacific on a nondiscriminatory basis.
WorldCom/AT&T urge that the Commission, if it approves this application, impose conditions on the transfer that would require SBC Services to stipulate that, in effect, it would be subject to the same OSS disclosure requirements that are required for Pacific. ORA joins in those recommendations, urging also that a means be devised to test OSS services before and after the consolidation.
The record demonstrates that Pacific will continue to own its OSS, and the use of an administrative affiliate to provide support services will not change Pacific's legal obligation to provide access to its OSS to competing carriers. Further, Pacific through its witnesses has shown that the application before us will not change the method of access, the system application or any functionality available in the OSS interfaces for competitive local exchange carriers to use, nor the way that they utilize OSS interfaces to request and process orders. Pacific will continue, as before, to be subject to the OSS Performance Measurements, the OSS Master Test Plan and the OSS Change Management Process, and, of course, the entry of Pacific's long distance affiliate into the long distance market is dependent on Pacific's meeting its OSS obligations.
The concerns of WorldCom/AT&T and ORA with respect to OSS are speculative, and there is no evidence that the consolidation of the support functions - which has been in place since January - has disadvantaged competitive carriers in California. However, we understand the potential for inherent abuse. For that reason, we will require as a condition of approval the commitment that Pacific has voluntarily made. That commitment is that, if Pacific has provided a support service to a Section 272 affiliate, and that support service has been transferred to SBC Services, Pacific will continue to make the service available to competitive local exchange carriers on a nondiscriminatory basis for a period of one year beyond the expiration of the term of the agreement under which Pacific provided the service to its Section 272 affiliate.
26 Local Competition Implementation Cost Recovery, R.95-04-043/I.95-04-044.
27 See 47 USC § 271(c)(2)(B), requiring that a Bell operating company like Pacific must provide nondiscriminatory access to its network elements in accordance with the requirements of Sections 251(c)(3) and 252(d)(1).
28 Rulemaking on the Commission's Own Motion to Govern Open Access to Bottleneck Services and Establish a Framework for Network Architecture Development of Dominant Carrier Networks and Related Matters, D.98-12-069 (December 17, 1998).
29 Exhibit 22, p. 12. The slide, part of a seven-page package, is entitled "Address Regulatory Issues." In addition to the "discriminatory basis" statement, the slide contains two other assertions: "Eliminate affiliate billing requirements" and "Eliminate regulatory complexity and confusion (along with the accompanying overhead)."
30 McMillion testimony, Exhibit 22, p. 12.
31 Transcript, p. 140.
