FEDERAL COMMUNICATIONS COMMISSION

### Washington, D.C. 20554

> Adopted: October 13, 2000
>
> Released: October 16, 2000

Ms. Cassandra Carr

Senior Executive Vice President -- External Affairs

SBC Communications, Inc.

175 E. Houston Street

San Antonio, TX 78205

RE: *SBC/Ameritech Merger Order*, CC Docket No. 98-141, ASD File No.
99-49

Dear Ms. Carr:

This letter addresses issues related to the interpretation of SBC
Communications, Inc. (SBC) regarding certain *Merger Conditions* adopted
by the Commission in the *SBC/Ameritech Merger Order*.[^1] Upon review
of correspondence and other information, I have serious concerns
regarding SBC's interpretation of the *Merger Conditions.*

One issue involves SBC's interpretation of the provision that allowed
SBC's incumbent LECs to perform network planning, engineering, design,
and assignment services on behalf of SBC's Advanced Services Affiliate
only for a limited period of time. Paragraph 3(c)(3) of the *Separate
Affiliate for Advanced Services* condition unequivocally states that,
180 days after the merger close date (*i.e.*, April 5, 2000), SBC's
incumbent LECs may no longer perform network planning and engineering
services for SBC's Advanced Services Affiliate.[^2] There are no
provisions in the *Merger Conditions* that override the express 180-day
deadline,[^3] nor are there any exceptions for the provision of ADSL
services. Therefore, SBC's incumbent LECs were not permitted to provide
any network planning and engineering services to their Advanced Services
Affiliate after April 5, 2000.

I understand that it is SBC's view that Paragraph 3(d) of the *Separate
Affiliate for Advanced Services* condition allows its incumbent LECs to
provide to its Advanced Services Affiliate, on an exclusive basis,
network planning and engineering services related to the provision of
ADSL service after April 5, 2000. SBC apparently interprets the *Merger
Conditions* to allow its incumbent LECs to perform such services for the
separate affiliate until line sharing is provided to unaffiliated
carriers within the same geographic region.[^4] This is an incorrect
interpretation of Paragraph 3(d). The condition neither expressly
permits that,[^5] nor would it be consistent with ordinary principles of
textual construction to read one provision (*i.e.*, Paragraph 3(d)) in a
fashion that nullifies another provision (*i.e.*, Paragraph 3(c)(3)).
The provisions must be construed consistent with the underlying intent
of the *Merger Conditions* to transition to full compliance with the
separate affiliate condition as quickly as possible without disrupting
service to the embedded base of customers. Accordingly, the grant of
authority in Paragraph 3(d) regarding line sharing should be construed
narrowly.

Another concern involves SBC's interpretation of the transitional
mechanism contained in the *Separate Affiliate for Advanced Services*
condition. Under the *Merger Conditions*, SBC had to provide advanced
services under certain conditions that were the "functional equivalent"
of provisioning through a fully operational separate affiliate for a
certain period of time.[^6] SBC states, however, that the functional
equivalent provisions are optional.[^7] SBC contends that it could
choose between two transitional mechanisms \-- the network planning and
engineering provisions and the functional equivalent provisions \--
during the phase-in period. SBC further construes the network planning
and engineering provision as overriding the functional equivalent
requirements and apparently empowering SBC's incumbent LECs to provide
advanced services as they did before the merger during a transition
period of unspecified duration.[^8]

Again, SBC's interpretation is incorrect. To read the *Merger
Conditions* in such a fashion would render meaningless the plain
language of provisions in the *Merger Conditions* requiring SBC to
provide advanced services in a manner that is the functional equivalent
of operating through a separate affiliate.[^9] SBC's interpretation
would allow its incumbent LECs to continue to provide advanced services
well beyond the merger close date. By reading the functional equivalent
provisions as optional,[^10] SBC's interpretation would significantly
delay realization of the benefits of the separate affiliate condition.

Please do not hesitate to contact me if you wish to further discuss
these issues. 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:

####  Marian Dyer, SBC Telecommunications, Inc.

[^1]: Applications of Ameritech Corp., Transferor, and SBC
    Communications, Inc., Transferee, For Consent to Transfer Control of
    Corporations Holding Commission Licenses and Lines Pursuant to
    Sections 214 and 310(d) of the Communications Act and Parts 5, 22,
    24, 25, 63, 90, 95, and 101 of the Commission's Rules, CC Docket
    98-141, *Memorandum Opinion and Order*, 14 FCC Rcd 14712 (1999)
    ("*SBC/Ameritech Merger Order*").

[^2]: *SBC/Ameritech Merger Order* at Appendix C, para. 3(c)(3) (stating
    that "\[a\]fter 180 days, the separate affiliate shall not obtain
    \[network planning and engineering\] services from any SBC/Ameritech
    incumbent LEC."); *see also* Applications of Ameritech Corp.,
    Transferor, and SBC Communications, Inc., Transferee, For Consent to
    Transfer Control of Corporations Holding Commission Licenses and
    Lines Pursuant to Sections 214 and 310(d) of the Communications Act
    and Parts 5, 22, 24, 25, 63, 90, 95, and 101 of the Commission's
    Rules, CC Docket 98-141, *Second Memorandum Opinion and Order*, FCC
    00-336 at paras. 26, 59 (rel. Sept. 8, 2000) ("*SBC Plug & Play
    Order*").

[^3]: SBC relies on the last sentence in paragraph 3(d) as granting
    SBC's incumbent LECs the authority to provide network planning,
    engineering, design, and assignment services for ADSL service beyond
    the 180-day deadline specified in the *Merger Conditions*. *See*
    Letter from Michael K. Kellogg, Outside Counsel for SBC
    Communications, Inc., to Carol E. Mattey, Deputy Bureau Chief,
    Common Carrier Bureau, FCC n.2 (Feb. 15, 2000) ("Kellogg Letter").

[^4]: ^?^ *See* Kellogg Letter at n.2.

[^5]: ^?^ The last sentence in Paragraph 3(d) grants permission for
    SBC's incumbent LECs to provide interim line sharing arrangements to
    their separate affiliate until line sharing is made generally
    available to all parties. *See SBC/Ameritech Merger Order* at para.
    369. To qualify for this grant of authority, SBC's incumbent LECs
    must make available to unaffiliated carriers the "Surrogate Line
    Sharing Discount," which is the economic equivalent of line sharing.
    Thus, while SBC's Advanced Services Affiliate may line share with
    SBC's incumbent LECs, unaffiliated carriers obtain a discounted
    unbundled local loop in order to provide ADSL or other advanced
    services to consumers. Nothing about the last sentence in Paragraph
    3(d) overrides the very specific provisions in Paragraphs 3 through
    6. Notably, network planning, engineering, design, and assignment
    services are not mentioned in this Paragraph.

[^6]: *See SBC/Ameritech Merger Order* at Appendix C, para. 6(g). Under
    Paragraphs 4(n)(2), 5(a), and 6 of the *Merger Conditions*, SBC was
    required to offer interstate advanced services through its separate
    Advanced Services Affiliate no later than February 5, 2000. The
    February 5, 2000 deadline is calculated from Paragraphs 4(n)(2),
    5(a), and 6 of the *Merger Conditions*. Pursuant to Paragraph 5(a),
    the *Merger Conditions* required SBC to file interconnection
    agreements between its incumbent LECs and its Advanced Services
    Affiliate no later than the Merger Close Date, i.e., October 8,
    1999, and to operate under that interconnection agreement within 90
    days of such filing. Pursuant to Paragraph 6, the *Merger
    Conditions* require SBC's Advanced Services Affiliate to service all
    new activations no later than 30 days after approval of all
    necessary agreements. As a result of this calculation, the final
    deadline by which SBC's Advanced Services Affiliate must operate in
    accordance with the "Steady-State Provisioning" requirements for new
    activations was 120 days after Merger Close Date, which was February
    5, 2000. *See SBC/Ameritech Merger Order* at Appendix C, paras.
    5(a), 6(b); *see id.* at n.37-39.

[^7]: Kellogg Letter at 2-8.

[^8]: *See* Kellogg Letter at n.2, 7 (asserting that SBC's incumbent
    LECs "may take the order, design the service, assign the equipment,
    and create and maintain all the necessary records, using its own
    systems and databases.").

[^9]: *See SBC/Ameritech Merger Order* at Appendix C, para. 6(g).

[^10]: Kellogg Letter at 3, 5, 6.