FEDERAL COMMUNICATIONS COMMISSION

### Washington, D.C. 20554

> Adopted: November 19, 2001
>
> Released: November 20, 2001

Mr. Jeffrey Ward

Senior Vice President -- Regulatory Compliance

Verizon Communications, Inc.

1310 North Courthouse Road -- 4^th^ Floor

Arlington, VA 22201

RE: *Bell Atlantic/GTE Merger Order*, CC Docket No. 98-184, ASD File No.
00-30

Dear Mr. Ward:

This letter addresses the progress of Verizon Communications, Inc.
("Verizon") towards meeting its commitment for the out-of-region
competition condition, as required by the *Bell Atlantic/GTE Merger
Order*.[^1] Specifically, this letter describes the understanding of the
Common Carrier Bureau ("Bureau") staff concerning Verizon's progress to
date, and the implications on certain promotional discounts required
under the *Merger Conditions*.

In the *Bell Atlantic/GTE Merger Order*, the Commission adopted a
condition that requires Verizon to spend at least \$500 million to
provide competitive local service outside of Verizon's service
territory.[^2] To encourage the growth of facilities-based competition,
the condition establishes a "Facilities Expenditure" obligation, which
requires Verizon to spend at least \$250 million "to construct, acquire,
lease, use, obtain, or provide facilities, operating support systems, or
equipment that are used to serve customers" in out-of-region
markets.[^3] The amounts included in the Facilities Expenditure must be
spent in conjunction with the provision of competitive local service,
the provision of telecommunications services offered jointly with
competitive local service, or investments in ventures that provide
competitive local service.[^4] The condition also establishes certain
deadlines to Verizon's expenditure activity.[^5]

Verizon's progress towards meeting its out-of-region competition
commitment affects the promotional discount conditions. Under the
*Merger Conditions*, Verizon must provide promotional discounts for
certain unbundled loops and resold services for the duration of a
specified "offering window."[^6] The "offering window" for the
promotional discounts closes on "the date on which \[Verizon\] has
completed 50 percent of the out-of-region commitment described in
Section XVI of \[the *Merger Conditions*\]."[^7] Verizon must therefore
spend at least \$250 million towards the provision of competitive local
service and \$125 million towards its Facilities Expenditure requirement
for the offering windows to expire.

Verizon proposes to account \$297.4 million towards its total
out-of-region competition commitment.[^8] These funds are connected to
Verizon's acquisition of a competitive carrier, OnePoint, in December
2000.[^9] Verizon further proposes to account \$113.4 million towards
its Facilities Expenditure requirement. Based on Bureau staff's review
of Verizon's submission, and absent additional information, I conclude
that Verizon has demonstrated that it spent \$297.4 million towards its
out-of-region competition expenditure requirement.[^10] Verizon
therefore appears to have met the requirement to spend at least \$100
million within twelve months of the Merger Close Date, i.e., by June 30,
2001. I further conclude that Verizon has demonstrated that it spent
\$113.4 million "to construct, acquire, lease, use, obtain, or provide
facilities, operating support systems, or equipment" used to serve
out-of-region customers, and that these funds were spent in conjunction
with the provision of competitive local service.[^11] Verizon still must
demonstrate an additional \$11.6 million of facilities-based
expenditures in order to close the offering windows for the promotional
discounts.

Please do not hesitate to contact me if I can be of further assistance.
You may also contact Anthony Dale in the Common Carrier Bureau at (202)
418-2260 for further information on this matter.

Sincerely,

Carol E. Mattey

> Deputy Chief, Common Carrier Bureau

CC:

Mr. Don Evans, Verizon Communications, Inc.

[^1]: GTE Corporation, Transferor, and Bell Atlantic Corporation,
    Transferee, For Consent to Transfer Control of Domestic and
    International Sections 214 and 310 Authorizations and Application to
    Transfer Control of a Submarine Cable Landing License, *Memorandum
    Opinion and Order*, 15 FCC Rcd 14032 (2000) *("Bell Atlantic/GTE
    Merger Order*"). The *Merger Conditions* are contained in Appendix
    D.

[^2]: *See Bell Atlantic/GTE Merger Order* at para. 319; *see id.* at
    Appendix D, paras. 43-48. Under the *Merger Conditions*,
    "competitive local service" means "services, including resale, that
    compete with traditional telecommunications services offered by
    incumbent local exchange carriers" and advanced services provided to
    the mass market. *See id.* at Appendix D, para. 43.

[^3]: *Id.* at Appendix D, para. 44.

[^4]: *Id.* at Appendix D, para. 45.

[^5]: *Id.* at Appendix D, paras. 46-48.

[^6]: *Id.* at paras. 307-15; *see id.* at Appendix D, paras. 35, 37.

[^7]: *Id.* at Appendix D, paras. 35(a), 37(c). For the resale
    promotional discount, the promotional discount rate decreases when
    the offering window closes. *See id.* at Appendix D, para. 37(c).

[^8]: *See* Letter from Gordon R. Evans, Vice President, Verizon
    Communications, Inc. to Anthony Dale, Attorney, Accounting
    Safeguards Division, CCB, FCC (Nov. 14, 2001).

[^9]: *See* In the Matter of Joint Applications of OnePoint
    Communications Corp. and Verizon Communications for Authority
    Pursuant to Section 214 of the Communications Act of 1934, as
    Amended, to Transfer Control of Authorizations to Provide Domestic
    Interstate and International Telecommunications services as a
    Non-Dominant Carrier, *Memorandum Opinion and Order*, 15 F.C.C.R.
    24165 (Com. Car. Bur. 2000).

[^10]: Verizon's progress in this area will be addressed in the annual
    independent audit.

[^11]: *Bell Atlantic/GTE Merger Order* at Appendix D, paras. 43-44.