SEPARATE STATEMENT OF COMMISSIONER MICHAEL K. POWELL

> *Re:* *Petition for Forbearance of the Independent Telephone and
> Telecommunications Alliance* (AAD File No. 98-43)*, and related
> proceedings* (CC Docket No. 97-11, CC Docket No. 98-81, CC Docket No.
> 96-150, CC Docket No. 98-117, WT Docket No. 96-162, CC Docket No.
> 96-149, CC Docket No. 96-61)

I am pleased to join my colleagues in granting some of the regulatory
relief requested in the forbearance petition filed by the Independent
Telephone and Telecommunications Alliance (ITTA) on behalf of mid-sized
local exchange carriers. Although I concur in the results of most of
these items (especially where regulatory relief is granted), I am,
however, compelled to dissent in part to three of the decisions, and I
continue to be concerned about the Commission's handling and analysis of
forbearance requests under section 10 of the Communications Act.

In these various items (some concern other ongoing rulemaking
proceedings), we address nine regulatory requirements from which ITTA,
on behalf of mid-sized LECs, requested forbearance. We adopted seven
different Orders in response to the petition (and other petitions or
notices). In looking at these Orders as a package and individually,
while some relief is granted, I continue to be concerned that, where
forbearance is denied, these petitions are not being treated in a manner
fully consistent with the intent and spirit of section 10 of the Act.
While I concur with the outcome of most of these items \-- since I
believe we are reaching the correct result \-- I do continue to question
(along lines similar to those I have expressed elsewhere) our means and
methods for handling forbearance petitions.

I must respectfully dissent, however, from the continued application of
separate affiliate requirements for the provision of in-region
interexchange services and commercial mobile radio services (CMRS) by
mid-sized LECs. My reasons are twofold. First, I continue to be uneasy
with the degree to which reliance on this and similar regulatory devices
is based on speculation about anticompetitive behavior. I fully
understand that any analysis about potentially harmful future conduct
entails some assessment of likely conduct. Historically, the agency has
stewarded the basic principle of nondiscrimination, resulting in
regulatory protections against cost misallocation and anticompetitive
behavior flowing from control of a \"bottleneck\" facility. Our
precedents, such as separate affiliate requirements, were rightly
premised on the existence of a true monopolist (sanctioned by the state)
and the associated risks. In that environment, not only did the
incumbent have monopoly power, there was no prospect of competition nor
any watchful present or future competitors. These safeguards were
designed to protect consumers from the potential ill effects of such
accumulated power.

I believe, however, that much has changed. The movement toward a
competitive environment means that we must take into fuller
consideration the necessity, viability, and the potentially distorting
competitive consequences of old familiar regulatory devices. Thus, to
the extent we must speculate about potential harm (to competition and
consumers) we must, too, factor in more fully the potential disciplining
effects of both real competition and potential competition. I see a
continued tendency to invoke the ancient mantra \"to protect against
discriminatory this or that\" as glib justification for continued
regulatory constraints. I believe we must work harder and press more
heavily on the traditional rationales. I do not believe we did so in
this case. Moreover, to do so will take time and resources, which we do
not have when forbearance petitions are presented for deliberation with
only a second or two left on the statutory shot-clock, as was the case
here.

My second concern rests with the extent that the Commission expresses a
tendency to justify certain regulatory restrictions in the name of
promoting or advancing competition. That alone, of course, may be
worthy, but we are not free to do so in a manner that involves
intermediate judgements that differ from those reached by Congress. Let
me explain more fully.

Prior to the 1996 Act, I believe both Judge Greene and the FCC did seek
to create limited competitive markets out of the monopoly provider's
control and, concomitantly, impose safeguards designed to keep the
monopolist from thwarting fledgling competitors as well as ensuring that
core regulatory goals were not compromised by such competitive forays.
These competitive excursions were limited and usually merely incremental
voyages into competitive service markets. But, we must be reminded that
the fundamental paradigm remained regulation and central control over
the most prized services. The key point is that Judge Greene and the
Commission had a fairly wide birth to develop the conditions of their
market-opening efforts.

The 1996 Act, however, altered the paradigm and structured the basic
terms of competition. Competitive services were to become the rule, and
regulated services the limited exceptions. By its act, Congress crafted
a comprehensive competitive model, designed specifically to supplant the
MFJ. In weaving this fabric, Congress made a number of significant
judgements. The one most relevant here is that it concluded that, rather
than restrict the ILECs to regulated wholesale service, it allowed ILECs
to compete at the retail level as well. This judgement may prove unwise
or unworkable, but it is the one that Congress chose.

Congress was not oblivious to the challenges or perils of allowing the
ILECs to compete, however, in long distance and other services while
they still controlled many of the necessary facilities and inputs that
other competitors would need. It addressed this problem by crafting an
access and interconnection regime (sections 251 and 252) that placed
unique duties and obligations on ILECs. In addition, Congress recognized
that different classes of LECs required different levels of safeguards
and incentives. Bell Operating Companies (BOCs), and they alone, are
subject to sections 271 and 272. ILECs have more duties and obligations
than CLECs, and so on. Thus, whether one likes it or not, *Congress*
substantially addressed the dangers of "bottleneck control" and
discriminatory incentives in the Act.

As a consequence, I believe, the Commission is not as free (as it
perhaps was prior to the Act) to steward a transition to a competition
regime different than that of the one chosen by Congress. Specifically,
as it relates to the question of separate affiliates, we must be careful
not to impose regulatory requirements that in practical effect amount to
wholesale/retail separations, where Congress intended none. (I note that
in contrast to the carriers petitioning here, BOCs are expressly subject
to separate affiliates for some services). For this reason, I am
uncomfortable with the analysis proffered to support continued separate
affiliate requirements. We cite "bottlenecks" and "incentives" in what
subtly (though perhaps unintentionally) seems to me a preference for
wholesale separation in a competitive market. By way of illustration,
the Orders often speak of the importance of separate affiliates to
ensure that they obtain facilities on an \"arm's length basis\" and to
ensure that all competing in-region providers and other carriers have
the same access (*i.e.*, wholesale).

Though Congress made judgements about the competitive ground-rules, it
did not endeavor to sweep through our regulations and apply those
judgments to each and every structural requirement on the books.
Instead, it directed us to search out such rules and apply the new
paradigm. To do so, it gave the Commission the twin engines of the
biennial review and forbearance. This is one reason I believe that
section 10 is important in evaluating the continued validity of separate
affiliate requirements, not otherwise mandated by law, where competitive
conditions and/or other regulatory or enforcement mechanisms are already
in place.

I believe that the petition before us raised substantial questions with
regard to the need for structural separation in light of present
conditions. Accordingly, I believe that in response to ITTA\'s
forbearance petition, we should have examined more carefully alternative
methods of enforcing core ILEC responsibilities to see if there wasn\'t
a more rational, limited approach. For example, we should have explored
including a sunset of the structural separation requirement for
in-region interexchange services like that available to BOCs in section
272 and treating mid-sized LECs more like rural carriers under the CMRS
separate affiliate requirement.

For these reasons, I respectfully dissent in part from these particular
decisions.