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 Federal  Communications  Commission  DA  01-  418 
 Before  the 
 Federal  Communications  Commission 
 Washington,  D.  C.  20554 


 In  the  Matter  of 
 AT&  T  CORP., 
 Complainant, 
 v. 
 U  S  WEST  COMMUNICATIONS,  INC., 
 Defendant. 


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 File  No.  E-  97-  28 


 In  the  Matter  of 
 MCI  TELECOMMUNICATIONS 
 CORPORATION, 


 Complainant, 
 v. 
 U  S  WEST  COMMUNICATIONS,  INC., 
 Defendant. 


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 File  No.  E-  97-  40A 


 MEMORANDUM  OPINION  AND  ORDER 
 Adopted:  February  14,  2001  Released:  February  16,  2001 
 By  the  Chief,  Enforcement  Bureau: 
 I.  INTRODUCTION 
 1.  In  this  Memorandum  Opinion  and  Order,  we  grant  in  part  two  formal  complaints, 
 one  filed  by  MCI  Telecommunications  Corporation  (  MCI)  1  and  one  by  AT&  T  Corp. 


 1  Effective  September  14,  1998,  MCI  Telecommunications  Corp.  merged  with  WorldCom,  Inc.  to  form 
 MCI  WorldCom,  Inc.  This  Order  uses  MCI  to  refer  to  the  complainant  in  File  No.  E-  97-  40A. 
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 (  AT&  T),  against  U  S  WEST  Communications,  Inc.  (  U  S  WEST)  2  concerning  U  S  WESTs 
 1-  800-  4USWEST  service  (the  Service).  3  The  Service  provides  a  calling  platform  that  permits 
 U  S  WESTs  local  subscribers  to  place  local  and  long  distance  calls  originating  inside  and  outside 
 the  U  S  WEST  service  area.  Section  271  of  the  Communications  Act  of  1934,  as  amended 
 (  Act),  prohibits  any  Bell  Operating  Company  (  BOC)  --  including  U  S  WEST  --  from 
 providing  long  distance  (  interLATA)  service  originating  in  the  region  where  it  provides  local 
 service,  unless  and  until  the  Commission  determines  that  various  conditions  relating  to 
 competition  in  local  telephone  service  are  satisfied.  4  U  S  WEST  has  not  received  Commission 
 approval  to  provide  long  distance  service  in  any  state  in  its  service  region,  and  therefore  is  subject 
 to  the  general  section  271  prohibition. 


 2.  The  Commission  recently  addressed  the  legality  of  a  similar  calling  platform 
 service  offered  by  another  BOC,  the  Ameritech  Operating  Companies  (  Ameritech).  In  the  1- 
 800-  AMERITECH  Order,  the  Commission  determined  that  Ameritechs  service  violated  section 
 271  of  the  Act.  5  The  Commission  relied  upon  its  earlier  Qwest  Teaming  Order  to  reach  this 
 conclusion.  6 


 3.  The  evidence  in  this  case  demonstrates  that  U  S  WESTs  Service  is,  in  all  material 
 respects,  the  same  as  Ameritechs  unlawful  service.  Specifically,  like  Ameritech,  U  S  WEST:  (1) 
 designed  and  developed  a  combined  service  offering  for  its  local  service  customers  that  includes  a 
 long  distance  component;  (2)  relied  on  its  brand  name  in  marketing  the  combined  offering;  (3) 
 used  bill  inserts  and  other  mailings  to  promote  the  combined  offering  to  its  local  calling  subscriber 
 base;  (4)  maintained  control  and  ownership  of  the  customer  relationship  in  connection  with  the 
 combined  service  offering;  (5)  exercised  exclusive  control  over  the  marketing  of  the  Service;  (6) 


 2  On  June  30,  2000,  U  S  WEST  merged  with  Qwest  Corporation  (  Qwest),  and  Qwest  is  now  the  legal 
 successor  to  U  S  WEST.  This  Order  refers  to  the  defendant  company  in  the  two  proceedings  as  U  S  WEST. 
 3  Pursuant  to  section  1.735(  a)  of  the  Commissions  formal  complaint  rules  (47  C.  F.  R.    1.735(  a)),  we 


 have  consolidated  AT&  Ts  and  MCIs  actions  against  U  S  WEST,  because  the  U  S  WEST  Service  challenged  in 
 both  actions  is  identical. 


 4  47  U.  S.  C.    271(  a)  (  Neither  a  Bell  operating  company,  nor  any  affiliate  of  a  Bell  operating  company, 


 may  provide  interLATA  services  except  as  provided  in  this  section.).  InterLATA  service  means 
 telecommunications  between  a  point  located  in  a  local  access  transport  area  [LATA]  and  a  point  located  outside 
 such  area.  47  U.  S.  C.    153(  21).  LATAs  are  contiguous  geographic  areas  established  by  a  BOC  such  that  no 
 exchange  area  includes  points  within  more  than  one  metropolitan  statistical  area  or  state.  47  U.  S.  C.    153(  25). 


 5  See  MCI  Telecommunications  Corp.  v.  Illinois  Bell  Tel.  Co.,  et  al.,  Memorandum  Opinion  and  Order, 


 15  FCC  Rcd  23184  (2000)  (  1-  800-  AMERITECH  Order). 
 6  See  AT&  T  Corp.  v.  U  S  WEST  Corp.,  13  FCC  Rcd  21438  (1998)  (  Qwest  Teaming  Order),  affd  sub 


 nom.,  U  S  WEST  Communications,  Inc.  v.  FCC,  177  F.  3d  1057  (D.  C.  Cir.  1999),  cert.  denied,  120  S.  Ct.  1240 
 (2000).  In  the  Qwest  Teaming  Order,  the  Commission  found  that  a  self-  described  teaming  arrangement 
 between  U  S  WEST  and  Qwest  (and  a  similar  arrangement  between  Ameritech  and  Qwest)  violated  section  271. 
 U  S  WEST  combined  Qwests  long  distance  service  with  its  own  local  services  and  offered  the  resulting  package 
 to  U  S  WEST  customers  under  a  U  S  WEST  brand,  with  U  S  WEST  customer  support.  As  noted  above,  U  S 
 WEST  subsequently  merged  into  Qwest. 
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 selected  the  long  distance  provider  that  would  carry  in-  region,  interLATA  calls  and  dictated 
 certain  of  the  terms  and  conditions  of  the  Service;  and  (7)  reserved  the  right  to  substitute  its  own 
 services  in  place  of  the  long  distance  providers  service  as  U  S  WEST  obtained  authority  under 
 section  271  to  provide  long  distance  service  in  various  states.  Accordingly,  we  conclude,  based 
 on  the  totality  of  circumstances,  that  U  S  WESTs  1-  800-  4USWEST  Service  violates  section  271. 
 Because  we  find  that  U  S  WESTs  Service  violates  section  271,  we  do  not  reach  the  remaining 
 claims  raised  by  AT&  T  and  MCI  regarding  other  alleged  violations  of  the  Act.  7 


 II.  BACKGROUND 
 4.  In  April  1997,  U  S  WEST  began  offering  its  1-  800-  4USWEST  Service,  which 
 permits  its  subscribers  to  place  local,  long  distance,  and  international  calls  from  anywhere  in  the 
 country  by  accessing  a  dialing  platform  through  the  Services  toll-  free  number.  8  U  S  WEST 
 promoted  the  Service  as  a  way  for  its  customers  to  make  calling  card  calls  from  payphones 
 without  paying  excessive  fees.  9  Thus,  the  promotional  materials  mailed  to  U  S  WESTs  local-service 
 customers  asserted  that,  by  dialing  1-  800-  4USWEST,  customers  could  bypass  unknown 
 pay  phone  companies  that  can  charge  .  .  .  exorbitant  rates  and  instead  obtain  a  single  great  low 
 rate  for  calling  card  calls,  including  domestic  long  distance  calls.  10  Similarly,  U  S  WESTs 
 advertisements  for  the  Service  stated  that,  by  using  the  Service,  callers  could  ensure  that  they 
 would  avoid  having  their  calls  blocked  from  completion.  11 


 5.  A  year  earlier,  U  S  WEST  sent  a  Request  for  Proposal  (  RFP)  to  long  distance 
 carriers,  seeking  in-  region,  interLATA  transport  to  support  its  new  1-  800-  4USWEST  Service.  12 
 Among  other  things,  the  RFP  required  the  long  distance  carrier  to  allow  its  calls  to  be  listed  on 
 the  bill  that  U  S  WEST  sent  to  its  customers  for  U  S  WEST-  provided  services,  and  provided  that 
 portions  of  the  long  distance  providers  contract  with  U  S  WEST  would  be  terminable  on  a  state-by- 
 state  basis  on  60  days  notice,  as  U  S  WEST  became  eligible  in  each  state  to  offer  in-  region 
 interLATA  service  under  section  271.  13  From  the  responses  that  U  S  WEST  received,  it  chose 


 7  In  addition  to  section  271,  AT&  T  contends  that  U  S  WESTs  Service  violates  sections  202,  251(  g),  and 
 272  of  the  Act.  Complaint  of  AT&  T  Corp.,  File  No.  E-  97-  28  (May  22,  1997)  (  AT&  T  Complaint)  at  9-  10 
 (citing  47  U.  S.  C.    202,  251(  g),  and  272).  MCI  argues  that  U  S  WESTs  Service  violates  section  201(  b),  as 
 well  as  section  271.  Complaint  of  MCI  Telecommunications,  Inc.,  File  No.  E-  97-  40  (July  21,  1997)  (  MCI 
 Complaint)  at  7-  10  (citing  47  U.  S.  C.    201(  b)). 


 8  See  Answer  of  U  S  WEST  Communications,  Inc.,  File  No.  E-  97-  28  (June  23,  1997)  (  U  S  WEST 


 Answer  in  AT&  T  Case)  at  12-  13,    49-  50,  and  Attachment  9. 
 9  MCI  Complaint,  Exhibit  B. 


 10  Id. 
 11  Id.;  see  Letter  dated  Jan.  25,  1999  from  Robert  B.  McKenna  (counsel  for  U  S  WEST)  to  Tonya 
 Rutherford  (Attorney-  Advisor,  FCC),  File  Nos.  E  97-  28  and  E-  97-  40  (  U  S  WEST  January  25,  1999  Letter), 
 Attachments. 


 12  U  S  WEST  Answer  in  AT&  T  Case,  Attachment  11. 


 13  Id.  (RFP  at  9). 
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 Frontier  Communications  Services,  Inc.  (  Frontier)  14  to  carry  the  in-  region,  interLATA  calls.  15 
 The  RFP  specifically  contemplated  that  U  S  WEST  could  contract  with  other  long  distance 
 providers,  and  could  utilize  its  own  or  its  affiliates  resources  to  provide  similar  services.  16 


 6.  U  S  WESTs  name  and  trademark  have  been  far  more  prominently  featured  in 
 advertisements  promoting  the  Service  than  Frontiers.  The  toll-  free  number  for  the  Service 
 conspicuously  links  U  S  WESTs  name  to  the  Service.  Similarly,  the  promotional  materials  that  U 
 S  WEST  mailed  to  its  local-  service  subscribers  highlight  U  S  WESTs  name  and  logo.  17  Only  in 
 smaller  type  do  the  materials  identify  the  carriers  that  actually  transmit  the  calls,  and,  in  many 
 cases,  the  materials  are  not  specific  as  to  which  carrier  handles  which  calls.  18  Subsequently,  U  S 
 WEST  changed  the  promotional  materials  to  state,  usually  in  small  print,  that  Frontier  provides 
 in-  region,  long  distance  services.  19 


 7.  When  a  customer  accesses  the  platform  by  dialing  1-  800-  4USWEST,  he  or  she 
 hears  a  greeting  referencing  the  U  S  WEST  name,  and  then  receives  a  prompt  to  enter  the  called 
 number,  the  calling  card  number,  and  a  personal  identification  number.  Once  the  calling  card 
 number  is  verified,  a  customer  placing  a  local,  intraLATA  toll,  or  out-  of-  region  interLATA  call 


 14  Frontier  has  since  merged  with  Global  Crossing  Ltd.  This  Order  refers  to  the  company  as  Frontier. 
 15  U  S  WEST  Answer  in  AT&  T  Case  at  19,    69.  U  S  WEST  itself  is  the  carrier  for  both  local  and 
 intraLATA  calls  for  its  1-  800-  4USWEST  Service.  Id.  at  13-  15,    51.  U  S  WESTs  interLATA  affiliate,  U  S 
 WEST  Long  Distance,  Inc.,  carries  the  interLATA  calls  originating  outside  U  S  WESTs  region  (out-  of-  region 
 interLATA  traffic).  Id.  Section  271(  b)  permits  a  BOC,  upon  passage  of  the  Telecommunications  Act  of  1996,  to 
 provide  interLATA  calls  originating  outside  of  its  local  service  territory  through  a  structurally  separate  affiliate. 
 47  U.  S.  C.    271(  b),  272. 


 16  U  S  WEST  Answer  in  AT&  T  Case,  Attachment  11  (RFP  at  9). 


 17  MCI  Complaint,  Exhibit  B.  Thus,  the  materials  emphasize  the  U  S  WEST  brand  as  the  source  for  the 
 services  provided  with  the  calling  card:  use  the  1-  800-  4USWEST  Calling  Card  to  make  local  calls,  long 
 distance  calls,  international  calls.  .  .  .  MCI  Complaint  at  Exhibit  B;  Introducing  1-  800-  4USWEST.  All  your 
 calls  with  just  one  card.  U  S  WEST  Answer  in  AT&  T  Case,  Attachment  9;  U  S  WEST  has  introduced  the  U  S 
 WEST  Express  Calling  Card,  which  allows  users  to  place  domestic  long  distance  calls  anytime  from  anywhere  in 
 the  United  States  for  just  20  cents  a  minute.  AT&  T  Complaint,  Exhibit  K;  Because  1-  800-  4USWEST  gives 
 you  a  low  20-  cents-  per-  minute  rate  on  every  call  you  make  when  youre  away  from  home.  Its  a  better  rate  than 
 those  charged  by  our  long  distance  competitors.  U  S  WEST  Answer  in  AT&  T  Case,  Attachment  8  (emphasis 
 added). 


 18  See,  e.  g.,  MCI  Complaint,  Exhibit  B  ([  C]  alls  made  via  1-  800-  4USWEST  will  be  handled  by  U  S 


 WEST  Communications,  U  S  WEST  Long  Distance  or  Frontier.  Call  Customer  Service  for  more  details.). 
 Moreover,  in  some  instances,  no  mention  is  made  of  Frontier  at  all.  See,  e.  g.,  Letter  dated  Sept.  30,  1997  from 
 Peter  H.  Jacoby  (counsel  for  AT&  T)  to  Deena  M.  Shetler  (Attorney-  Advisor,  FCC),  File  No.  E-  97-  28,  attaching 
 U  S  WEST  brochure  entitled  Small  Business  Guide  to  Communications  Services.  On  a  page  entitled  U  S 
 WEST  Complementary  Long  Distance  Services,  the  1-  800-  4USWEST  card  is  described  as  the  simple  way  to 
 make  long  distance  calls  when  youre  away  from  the  office.  Id.  at  23.  The  brochure  fails  to  mention  Frontier  or 
 its  role  in  providing  long  distance  service. 


 19  U  S  WEST  January  25,  1999  Letter,  Attachments. 
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 hears  [  t]  hank  you  for  using  U  S  WEST.  20  A  customer  placing  an  in-  region,  interLATA  call 
 hears  a  thank-  you  message  that  mentions  Frontier  by  name.  21 


 8.  The  Service  is  promoted  through,  among  other  means,  bill  inserts  and  other 
 mailings  sent  to  U  S  WESTs  local  customer  base.  22  U  S  WEST  serves  as  the  initial  sales  and 
 customer  care  contact  for  the  1-  800-  4USWEST  Service,  and  exercises  exclusive  control  over  the 
 marketing  and  promotion  of  the  Service.  23  U  S  WESTs  agreement  with  Frontier  provides  that  U 
 S  WEST  owns  and  creates  all  marketing  communications  (card  creation,  creation  design, 
 collateral,  fulfillment,  messages,  etc.)  as  well  as  the  caller  relationship.  24  The  Service  is  billed 
 through  the  customers  U  S  WEST  monthly  service  bill.  25 


 III.  DISCUSSION 
 A.  U  S  WESTs  Service  Violates  Section  271. 
 9.  Complainants  primary  contention  is  that  the  1-  800-  4USWEST  Service  violates 
 section  271  of  the  Act,  because  it  amounts  to  the  provision  of  in-  region,  interLATA  service 
 before  U  S  WEST  has  received  approval  from  the  Commission  to  offer  such  service.  Section 
 271(  a)  states  that  [  n]  either  a  Bell  operating  company  nor  any  affiliate  of  a  Bell  operating 
 company,  may  provide  interLATA  services  except  as  provided  in  this  section.  26  The  statute 
 permits  a  BOC  to  provide  interLATA  service  originating  within  its  local  service  area  on  a  state-by- 
 state  basis  only  upon  application  to  and  approval  from  the  Commission  pursuant  to  section 
 271(  d).  27  Section  271  thus  both  gives  the  BOCs  an  opportunity  to  enter  the  long  distance 
 market  and  conditions  that  opportunity  on  the  BOCs  own  actions  in  opening  up  their  local 
 markets.  28  Congress  intended  section  271  to  create  a  strong  incentive  for  the  BOCs  to  comply 


 20  U  S  WEST  Responses  to  MCIs  First  and  Further  Set  of  Interrogatories,  File  No.  E-  97-  40  (Oct.  3,  1997) 
 (  U  S  WEST  October  3,  1997  Interrogatory  Responses)  at  20-  21. 
 21  Id. 


 22  Id.  at  3-  6. 
 23  See  Supplemental  Responses  of  U  S  WEST  to  AT&  Ts  First  Set  of  Interrogatories,  File  No.  E-  97-  28 
 (Aug.  22,  1997)  (  U  S  WEST  August  22,  1997  Supplemental  Interrogatory  Responses)  at  22,  28. 
 24  U  S  WEST  August  22,  1997  Supplemental  Interrogatory  Responses  at  28.  U  S  WEST  identified  several 


 related  agreements  involving  its  Service  that  U  S  WEST,  U  S  WESTs  affiliate  (U  S  WEST  Long  Distance), 
 Frontier,  and  Frontiers  affiliate  (LinkUSA  Corporation  (  LinkUSA))  executed.  Id.  at  3-  28.  This  Order  refers 
 to  these  agreements  collectively  as  one  agreement  between  U  S  WEST  and  Frontier. 


 25  Stipulation  of  Undisputed  Facts,  File  No.  E-  97-  28  (Sept.  9,  1997)  (  Stipulation  of  Undisputed  Facts)  at 


 1,    1. 
 26  47  U.  S.  C.    271(  a). 


 27  47  U.  S.  C.    271(  d). 
 28  U  S  WEST  Communications,  177  F.  3d  at  1060. 
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 with  new  obligations  in  sections  251  and  252  of  the  Telecommunications  Act  of  1996,  29  which,  in 
 turn,  were  designed  to  facilitate  competition  in  local  markets  (including  interconnection, 
 unbundling,  and  resale).  The  statute  creates  this  powerful  incentive  by  conditioning  BOC  entry 
 into  the  in-  region,  long-  distance  market  on  compliance  with  a  checklist  of  local  market-  opening 
 criteria  and  other  requirements.  30 


 10.  U  S  WEST  has  not  received  approval  from  the  Commission  to  provide  long 
 distance  service  in  any  state  in  its  region.  31  It  is  therefore  subject  to  section  271(  a)  s  general 
 prohibition  against  offering  such  services.  Complainants  section  271  claim  presents  the  generic 
 issue,  previously  addressed  by  the  Commission  in  the  Qwest  Teaming  Order  (affirmed  by  the 
 Court  of  Appeals)  and  the  1-  800-  AMERITECH  Order,  of  whether  a  challenged  offering  for  which 
 a  BOC  does  not  actually  transmit  in-  region,  interLATA  traffic  may  nevertheless  amount  to  the 
 provision  of  interLATA  service.  In  the  Qwest  Teaming  Order  and  the  1-  800-  AMERITECH 
 Order    as  in  this  case    the  relevant  BOCs  were  offering  a  combined  service  that  included  their 
 own  local  and  intraLATA  toll  service  bundled  with  in-  region,  interLATA  transport  provided  by  an 
 unaffiliated  long  distance  carrier. 


 11.  The  Qwest  Teaming  Order  sets  forth  the  issue  that  the  Commission  considers  in 
 deciding  whether  an  offering  violates  section  271:  whether  a  BOCs  involvement  in  the  long 
 distance  market  enables  it  to  obtain  competitive  advantages,  thereby  reducing  its  incentive  to 
 cooperate  in  opening  its  local  market  to  competition.  32  Thus,  the  provision  of  interLATA 
 services,  within  the  meaning  of  section  271(  a),  must  encompass  activities  that,  if  otherwise 
 permitted,  would  undermine  Congresss  method  of  promoting  both  local  and  long  distance 
 competition  by  prohibiting  BOCs  from  full  participation  pursuant  to  section  271s  competitive 
 checklist.  33  In  order  to  determine  whether  a  BOCs  long  distance-  related  activities  run  afoul  of 
 this  standard,  the  Commission  balances  the  following  non-  exclusive  factors:  whether  the  BOC 
 obtains  material  benefits  (other  than  access  charges)  uniquely  associated  with  the  ability  to  include 
 a  long-  distance  component  in  [the  challenged  offering],  whether  the  BOC  is  effectively  holding 
 itself  out  as  a  provider  of  long  distance  service,  and  whether  the  BOC  is  performing  activities  and 
 functions  that  are  typically  performed  by  those  who  are  legally  or  contractually  responsible  for 


 29  See  47  U.  S.  C.    251,  252.  The  Telecommunications  Act  of  1996,  Pub.  L.  No.  104-  104,  110  Stat.  56, 
 codified  at  47  U.  S.  C.    151  et  seq.,  amended  the  Communications  Act  of  1934. 


 30  U  S  WEST  Communications,  177  F.  3d  at  1060;  47  U.  S.  C.    271(  c).  See  also  AT&  T  Corp.  v.  FCC,  220 
 F.  3d  607,  612  (D.  C.  Cir.  2000)  (conditional  long  distance  entry  pursuant  to  section  271  is  designed  [  t]  o 
 encourage  BOCs  to  open  their  markets  to  competition  as  quickly  as  possible).  The  Commissions  decision  in 
 the  Qwest  Teaming  Order  contains  a  more  extensive  explanation  of  the  market-  opening  incentives  behind  section 
 271.  13  FCC  Rcd  at  21441-  47,    3-  7. 


 31  Supplemental  Brief  of  WorldCom,  Inc.,  File  No.  E-  97-  40A  (Dec.  8,  2000)  at  5;  Stipulation  of 
 Undisputed  Facts  at  2,    4.  U  S  WEST  has  not  requested  authorization  from  the  Commission  to  provide  long 
 distance  service  in  any  state  in  its  region. 


 32  Qwest  Teaming  Order,  13  FCC  Rcd  at  21465,    37. 


 33  Id.  at  21462,    30. 
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 providing  interLATA  service  to  the  public.  34  In  evaluating  the  challenged  BOC  actions,  the 
 Commission  considers  the  totality  of  [the  BOCs]  involvement,  rather  than  focus[  ing]  on  any  one 
 particular  activity.  35 


 12.  The  Commission  applied  this  fact-  based  test  in  the  1-  800-  AMERITECH  Order  and 
 concluded  that  Ameritechs  service  violated  section  271.  The  U  S  WEST  Service  at  issue  in  this 
 case  is  substantially  the  same  as  Ameritechs  unlawful  service.  Accordingly,  as  described  below, 
 application  of  the  Qwest  Teaming  Orders  fact-  based  test  and  the  Commissions  1-  800- 
 AMERITECH  Order  similarly  leads  us  to  conclude  that  the  U  S  WEST  Service  violates  section 
 271.  36 


 1.  U  S  WEST  Obtains  Material  Benefits  Uniquely  Associated  With  Its 
 Ability  to  Include  a  Long-  Distance  Component  in  the  Service. 


 13.  One  of  the  principal  factors  that  led  the  Commission  to  find  section  271  violations 
 in  the  Qwest  Teaming  Order  and  the  1-  800-  AMERITECH  Order  was  that  the  challenged  offerings 
 would  have  afforded  the  defendants  a  significant  jumpstart  when  they  do  obtain  271 
 authorization.  37  Thus,  by  developing  an  extensive  customer  base  for  the  challenged  services,  the 
 defendant  carriers  could  pre-  position  those  customers  for  a  seamless  transition  to  the  long 
 distance  services  of  the  carriers  section  272  affiliates,  once  the  carriers  received  section  271 
 authority  to  begin  providing  in-  region,  interLATA  service. 


 34  Id.  at  21465-  66,    37. 
 35  Id. 
 36  U  S  WEST  argues  that  the  1-  800-  AMERITECH  Order  is  not  relevant  precedent,  and  encourages  the 
 Commission  to  rely  instead  upon  the  Common  Carrier  Bureaus  decision  involving  BellSouths  pre-  paid  calling 
 card.  See  AT&  T  Corp.  v.  BellSouth  Corp.,  Memorandum  Opinion  and  Order,  14  FCC  Rcd  8515  (Com.  Car.  Bur. 
 Mar.  30,  1999).  We  decline  to  do  so;  reliance  on  the  staff-  level  pre-  paid  calling  card  decision  would  be 
 misplaced  in  these  circumstances.  The  BellSouth  pre-  paid  calling  card  is  meaningfully  different  than  the 
 offerings  at  issue  in  the  1-  800-  AMERITECH  Order  and  in  this  case.  As  the  Commission  pointed  out  in  the  1- 
 800-  AMERITECH  Order,  the  Common  Carrier  Bureau  determined  that  BellSouths  pre-  paid  card  offering  did 
 not  violate  section  271  because,  inter  alia,  (1)  the  card  did  not  involve  a  continuing,  presubscribed  relationship 
 that  would  allow  BellSouth  to  gain  meaningful  information  about  card  purchasers  and  to  exploit  that  relationship 
 in  customer  retention  or  win-  back  efforts;  and  (2)  the  card  served  a  segment  of  the  telecommunications  market 
 that  is  replete  with  similar  prepaid  offerings  sponsored  by  non-  carriers,  thereby  reducing  the  risk  that  consumers 
 would  perceive  BellSouth  as  offering  in-  region,  interLATA  services.  Id.  at  8525-  28,    19-  27.  In  light  of  these 
 differences,  the  BellSouth  pre-  paid  card  case  does  not  support  a  conclusion  in  this  case  that  U  S  WESTs  Service 
 passes  muster  under  section  271.  Rather,  as  explained  below,  this  case  is  controlled  by  the  Commissions  1-  800- 
 AMERITECH  Order.  Similarly,  we  reject  U  S  WESTs  contention  that  its  Service  is  not  meaningfully  different 
 than  calling  card  offerings  that  were  lawful  under  the  Modified  Final  Judgment.  QWEST  Corporation 
 Supplemental  Opening  Brief  on  the  Relevance  of  the  AMERITECH  Calling  Card  Order,  File  No.  E-  97-  28  (Dec. 
 8,  2000)  (  U  S  WEST  Brief  re  Applicability  of  Ameritech  in  AT&  T  Case)  at  2-  4,  12-  14.  The  Commission 
 addressed  and  rejected  this  same  contention  in  the  1-  800-  AMERITECH  Order.  1-  800-  AMERITECH  Order,  15 
 FCC  Rcd  at  __,    22. 


 37  Qwest  Teaming  Order,  13  FCC  Rcd.  at  21467,    41  (internal  quotation  omitted). 
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 14.  As  with  the  arrangements  in  the  Qwest  Teaming  Order  and  the  1-  800- 
 AMERITECH  Order,  we  find  that  the  1-  800-  4USWEST  Service  permits  U  S  WEST  to  obtain 
 material  benefits  uniquely  associated  with  the  ability  to  include  a  long  distance  component  in  the 
 Service.  Specifically,  the  Service  allows  U  S  WEST,  prior  to  gaining  section  271  approval,  to 
 build  up  goodwill  as  a  full  service  provider  with  its  local-  service  customers,  who  can  place  their 
 long  distance  calling-  card  calls  through  the  Service.  38  Upon  receiving  section  271  authority,  U  S 
 WEST  would  be  well  positioned  to  substitute  the  interLATA  service  of  its  section  272  affiliate  for 
 that  of  Frontier,  thereby  capturing  a  ready  base  of  customers. 


 15.  The  opportunity  to  amass  goodwill  as  a  full  service  provider  appears  to  be  a 
 significant  reason  why  U  S  WEST  developed  the  Service  in  the  first  place.  In  announcing  the 
 launch  of  the  Service,  U  S  WESTs  Chief  Executive  Officer  stated  that  [  i]  ntroduction  of  this 
 card  represents  another  step  toward  offering  our  customers  one-  stop  shopping  with  complete, 
 integrated  solutions  to  meet  all  their  communications  needs.  39  U  S  WEST  explained  that  its  new 
 calling  card  responded  to  customers  requests  that  U  S  WEST  give  them  a  way  to  make  long 
 distance  calls  while  away  from  the  home  or  office.  The  one-  stop  shopping  advantage  touted  by 
 U  S  WEST  was  repeated  and  emphasized  in  several  reports  describing  the  new  offering.  40 


 16.  Our  concern  in  this  regard  is  heightened  by  the  structure  of  U  S  WESTs 
 agreement  with  Frontier  to  provide  in-  region,  interLATA  transmission  for  the  Service.  The 
 Frontier  agreement,  much  like  the  agreement  in  the  1-  800-  AMERITECH  Order,  provides  that  U 
 S  WEST  may  terminate  the  contract  or  any  orders  for  service  made  pursuant  to  the  contract  for 
 its  convenience  at  any  time  after  the  contract  has  been  in  effect  by  giving  Frontier  30  days 
 notice.  41  This  affords  U  S  WEST  the  right  not  only  to  contract  with  other  long  distance 
 providers,  but  to  utilize  its  affiliates  resources  to  provide  similar  services.  42  Thus,  U  S  WEST 


 38  See  U  S  WEST  Communications,  177  F.  3d  at  1060  (  By  offering  one-  stop  shopping  for  local  and  long 
 distance  under  their  own  brand  name  and  with  their  own  customer  care  .  .  .  [the  BOCs]  could  build  up  goodwill 
 as  full  service  providers,  positioning  themselves  in  these  markets  before  section  271  allows  them  actually  to 
 enter.). 


 39  AT&  T  Complaint,  Exhibit  K  (emphasis  added). 


 40  AT&  T  Complaint,  Exhibits  G,  I,  and  J.  Further,  U  S  WEST  emphasized  in  a  late  1996  filing  to  the 
 Iowa  Utilities  Board  that  its  calling  card  Service  was  essential  for  U  S  WESTs  effective  participation  in  the 
 long  distance  market.  Id.,  Exhibit  H.  These  contemporaneous  representations  concerning  the  one-  stop 
 shopping  advantage  U  S  WEST  sought  to  gain  with  its  Service  severely  undercut  U  S  WESTs  current  contention 
 that  it  was  not  seeking  a  jumpstart.  See  U  S  WEST  Brief  re  Applicability  of  Ameritech  in  AT&  T  Case  at  9, 
 11-  14.  U  S  WESTs  argument  is  also  belied  by  an  independent  industry  analysis  which  concludes  that  BOC 
 calling  card  services,  like  U  S  WESTs,  are  targeted  to  jumpstarting  the  BOCs  entry  into  the  long-  distance 
 market.  See  Yankee  Group  Report,  Exhibit  1  to  AT&  Ts  Reply  Brief  Concerning  Effect  of  QWEST  Order,  File 
 No.  E-  97-  28  (Feb.  12,  1999),  at  21  (BOCs  are  using  calling  card  platforms  in  preparation  for  authorization  for 
 in-  region  long-  distance  entry,  and  the  cards  are  designed,  in  part,  to  accustom  [the  BOCs]  local  customer  base 
 to  perceiving  the  [BOC]  as  an  all-  distance,  multiple  service  provider). 


 41  U  S  WEST  August  22,  1997  Supplemental  Interrogatory  Responses  at  15. 


 42  See  U  S  WEST  Answer  in  AT&  T  Case,  Attachment  11  (RFP  at  9);  U  S  WEST  August  22,  1997 
 Supplemental  Interrogatory  Responses  at  15,  18. 
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 preserved  the  right  to  replace  Frontiers  services  with  the  services  of  U  S  WESTs  section  272 
 affiliate  once  the  Commission  grants  U  S  WEST  section  271  authorization.  43  In  doing  so,  U  S 
 WEST  positioned  itself  well  to  substitute  the  long  distance  service  offered  by  [its]  section  272 
 affiliate,  when  [it]  obtain[  s]  section  271  approval,  into  the  [1-  800-  4USWEST]  package  in  the 
 future.  44 


 17.  In  the  Qwest  Teaming  Order  and  the  1-  800-  AMERITECH  Order,  we  found  that 
 the  challenged  offerings  allowed  the  defendant  carriers  to  enhance  [their]  goodwill  in  the 
 marketplace  and  to  add  value  when  dealing  with  their  customers  in  a  way  that  further 
 cemented  their  relationships  with  their  end  users  before  their  markets  were  open  to  meaningful 
 competition.  45  Here,  it  is  apparent  that  U  S  WEST  sought  to  enhance  its  goodwill  by  controlling 
 the  customer  relationship.  Specifically,  the  RFP  provided  that  U  S  WEST  owns  and  creates  all 
 marketing  communications  (card  creation,  creation  design,  collateral,  fulfillment,  messages,  etc.) 
 as  well  as  the  customer  relationship.  46  This  requirement  was  ultimately  incorporated  into  U  S 
 WESTs  contract  with  Frontier.  47  Thus,  U  S  WEST  controls  the  information  sent  to  its  customers 
 concerning  its  Service,  as  well  as  all  other  aspects  of  the  relationship  with  its  customers.  48  This 
 provides  U  S  WEST  with  a  significant  competitive  advantage  in  building  goodwill  with  the  1-  800- 
 4USWEST  customers.  We  believe  that  once  U  S  WEST  receives  Commission  authorization  to 
 offer  in-  region,  long  distance  service,  the  1-  800-  4USWEST  customers  who  receive  local  service 
 from  U  S  WEST  will  be  more  inclined  to  select  U  S  WEST  as  their  presubscribed  long  distance 
 carrier  as  well. 


 18.  Another  troubling  factor  is  the  manner  in  which  U  S  WEST  promotes  the  Service 
 to  its  local  subscriber  base.  In  addition  to  advertising  through  various  media,  U  S  WEST  avails 
 itself  of  a  communication  channel  that  is  uniquely  available  to  it  as  the  monopoly  provider  of  local 


 43  The  RFP  provides  additional  evidence  that  U  S  WEST  intended  the  Service  to  afford  a  considerable 
 jumpstart  for  its  in-  region,  long  distance  operations  as  it  received  section  271  authority  in  each  state.  For 
 example,  pursuant  to  the  RFP,  U  S  WEST  could  cancel  the  portion  of  the  contract  concerning  Frontiers 
 provision  of  in-  region  interLATA  service  on  60  days  notice,  and  could  effect  such  a  cancellation  on  a  state-  by-state 
 basis.  U  S  WEST  Answer  in  AT&  T  Case,  Attachment  11  (RFP  at  9).  Thus,  the  RFP  expressly 
 contemplated  that  U  S  WEST  quickly  would  move,  on  a  state-  by-  state  basis,  to  substitute  its  section  272  long-distance 
 affiliate  as  the  provider  of  record  for  in-  region,  interLATA  traffic  generated  by  1-  800-  4USWEST 
 customers. 


 44  Qwest  Teaming  Order,  13  FCC  Rcd  at  21467,    41.  See  also  U  S  WEST  Communications,  177  F.  3d  at 


 1060. 
 45  Qwest  Teaming  Order,  13  FCC  Rcd  at  21468,    42;  1-  800-  AMERITECH  Order,  15  FCC  Rcd  at  ___,   


 14. 
 46  U  S  WEST  Answer  in  AT&  T  Case,  Attachment  11  (RFP  at  10)  (emphasis  added). 


 47  U  S  WEST  August  22,  1997  Supplemental  Interrogatory  Responses  at  28. 
 48  While  Frontier,  through  its  affiliate  LinkUSA,  apparently  provides  some  customer  service  to  U  S  WEST 
 customers  in  connection  with  their  use  of  the  1-  800-  4USWEST  Service,  it  is  of  little  significance  given  U  S 
 WESTs  contractual  control  over  messages  provided  to  customers  and  over  the  customer  relationship  in  general. 
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 service  within  its  region    bill  inserts  and  other  mailings  that  draw  on  its  subscriber  list.  49  Thus,  U 
 S  WEST  can  advertise  the  Service  to  virtually  every  subscriber  on  its  network,  and  it  can  do  so 
 using  a  customer  database  that  is  either  unavailable,  or  available  only  at  a  significant  additional 
 charge,  to  its  competitors  in  the  local  service  market.  Moreover,  by  using  bill  inserts,  U  S  WEST 
 can  effectively  promote  the  Service  at  a  fraction  of  what  a  stand-  alone  mailing  would  cost  one  of 
 its  competitors,  even  assuming  the  competitor  had  access  to  U  S  WESTs  subscriber  mailing  list. 
 Use  of  a  subscriber  list,  and  the  unique  benefits  it  provides,  is  one  of  the  factors  the  Commission 
 found  problematic  in  the  1-  800-  AMERITECH  Order.  50 


 19.  In  sum,  U  S  WESTs  participation  in  the  long  distance  market  through  its  1-  800- 
 4USWEST  Service  enables  it  to  obtain  significant  competitive  advantages  that  are  similar  to  what 
 the  Qwest  Teaming  Order  found  to  be  objectionable  and  almost  identical  to  what  the  1-  800- 
 AMERITECH  Order  found  to  be  objectionable.  The  Service  allows  U  S  WEST  to  build  goodwill 
 with  its  local-  service  customers,  depicting  itself  as  a  full-  service  provider  prior  to  receiving 
 section  271  approval.  Indeed,  the  full-  service,  or  one-  stop  shopping,  advantages  provided  by  the 
 Service  appear  to  have  been  U  S  WESTs  primary  objective  in  implementing  the  Service  in  the 
 first  place.  51  As  the  Commission  held  in  the  1-  800-  AMERITECH  Order,  these  competitive 
 advantages  could  reduce  U  S  WESTs  incentive  to  open  its  local  market  to  competition  and,  thus, 
 run  counter  to  Congresss  intent  in  enacting  section  271.  52 


 2.  U  S  WEST  Is  Effectively  Holding  Itself  Out  As  a  Provider  of  Long-Distance 
 Service. 


 20.  We  also  must  inquire  whether  U  S  WEST  is  effectively  holding  itself  out  to 
 customers  as  a  provider  of  long  distance  services.  In  the  Qwest  Teaming  Order,  the  Commission 
 found  that,  through  the  challenged  services,  the  defendant  carriers  were  holding  themselves  out  in 
 such  a  manner,  because  they  had  taken  several  specific  steps  to  brand  [the  challenged  offerings] 
 as  their  exclusive  combined  service  offerings.  53  In  affirming  the  Commission,  the  Court  of 
 Appeals  agreed  that,  viewed  as  a  whole,  the  challenged  promotional  materials  could  lead 
 consumers  to  believe  that  the  BOCs  were  providing  in-  region  long  distance  service.  54 


 21.  Similarly,  in  the  1-  800-  AMERITECH  Order,  we  noted  that  the  use  of  the  vanity 
 800  number  55  was  plainly  calculated  to  cause  customers  to  associate  Ameritech  with  the  services 


 49  U  S  WEST  October  3,  1997  Interrogatory  Responses  at  3-  6. 


 50  1-  800-  AMERITECH  Order,  15  FCC  Rcd  at  ___,    15. 
 51  See,  supra,  at    15. 
 52  See  1-  800-  AMERITECH  Order,  15  FCC  Rcd  at  ___,    16;  U  S  WEST  Communications,  177  F.  3d  at 
 1060. 
 53  Qwest  Teaming  Order,  13  FCC  Rcd  at  21471,    45. 


 54  U  S  WEST  Communications,  177  F.  3d  at  1061. 
 55  A  vanity  number  is  a  telephone  number  for  which  the  letters  associated  with  the  numbers  digits  on  a 
 telephone  handset  spell  a  name  or  word  of  value  to  the  number  holder.  In  re  Toll  Free  Service  Access  Codes, 
 (continued.) 
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 offered  through  the  1-  800-  AMERITECH  platform.  56  Thus,  the  800  number  allowed  Ameritech  to 
 link  the  services  long  distance  offering  (as  well  as  its  other  offerings)  with  the  carriers 
 accumulated  customer  good  will  and  its  established  reputation  as  a  local  service  provider.  57 


 22.  In  this  case,  U  S  WEST  virtually  concedes  that  its  promotional  and  marketing 
 materials  may  have  caused  in  the  minds  of  its  customers  the  type  of  confusion  that  the 
 Commission  and  Court  of  Appeals  have  found  to  be  problematic.  58  Specifically,  U  S  WEST 
 acknowledges  that  some  of  its  promotional  materials  might  have  created  some  confusion  in  some 
 customers,  and  that  from  a  regulatory  perspective,  some  of  the  materials  might  be  deemed  to 
 have  gone  over  the  line.    59 


 23.  Indeed,  an  examination  of  U  S  WESTs  promotional  materials  confirms  that  U  S 
 WEST  is  holding  itself  out  as  a  provider  of  long  distance  service.  The  materials  prominently 
 display  the  U  S  WEST  brand,  creating  the  impression  that  U  S  WEST  provides  all  components  of 
 the  Service,  including  long  distance.  60  Other  statements  in  the  materials  similarly  foster  this 
 impression.  For  example,  one  advertisement  features  the  U  S  WEST  logo  in  large  type  and,  in 
 describing  the  Service,  strongly  suggests  that  U  S  WEST  is  the  long  distance  service  provider.  61 
 Several  other  promotional  materials  attest  to  the  cards  ability  to  make  all  types  of  calls,  including 
 long  distance.  62  The  promotional  materials  U  S  WEST  used  to  introduce  and  market  its  Service 
 are  strikingly  similar  to  those  found  to  be  troublesome  and  misleading  in  the  1-  800-  AMERITECH 
 Order.  63 


 (Continued  from  previous  page) 
 Fourth  Report  and  Order  and  Memorandum  Opinion  and  Order,  13  FCC  Rcd  9058,  9058,    1  (1998)  (  Toll  Free 
 Service  Access  Codes  Order). 


 56  1-  800-  AMERITECH  Order,  15  FCC  Rcd  at  __,    18. 


 57  As  the  Commission  stated  in  the  Toll  Free  Service  Access  Codes  Order,  vanity  numbers  are  of  value  to 
 their  subscribers  because  they  can  generate  high  visibility  and  consumer  recognition  when  used  in  advertising. 
 Id.  at  9064,    11. 


 58  QWEST  Teaming  Order,  13  FCC  Rcd  at  21471,    45;  U  S  WEST  Communications,  177  F.  3d  at  1061. 


 59  U  S  WEST  Brief  re  Applicability  of  Ameritech  in  AT&  T  Case  at  18. 
 60  See  generally  MCI  Complaint,  Exhibit  B;  U  S  WEST  Answer  in  AT&  T  Case,  Attachments  6-  9. 
 61  U  S  WEST  Answer  in  AT&  T  Case,  Attachment  8  (  Because  1-  800-  4USWEST  gives  you  a  low  20- 
 cents-  per-  minute  rate  on  every  call  you  make  when  youre  away  from  home.  Its  a  better  rate  than  those  charged 
 by  our  long  distance  competitors.)  (emphasis  added). 


 62  MCI  Complaint,  Exhibit  B  (  use  the  1-  800-  4USWEST  Calling  Card  to  make  local  calls,  long  distance 


 calls,  international  calls.  .  .  );  U  S  WEST  Answer  in  AT&  T  Case,  Attachment  9  (  Introducing  1-  800- 
 4USWEST.  All  your  calls  with  just  one  card);  AT&  T  Complaint,  Exhibit  K  (  U  S  WEST  has  introduced  the  U 
 S  WEST  Express  Calling  Card,  which  allows  users  to  place  domestic  long  distance  calls  anytime  from  anywhere 
 in  the  United  States  for  just  20  cents  a  minute.). 


 63  1-  800-  AMERITECH  Order,  15  FCC  Rcd  at  __,    3,  19. 
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 24.  U  S  WEST  argues  that  its  1-  800-  4USWEST  customers  always  have  a  choice  in 
 selecting  their  long  distance  service  provider,  because  they  can  dial  0+  to  access  another  service 
 provider.  64  Because  this  0+  capability  is  disclosed  on  the  back  of  its  calling  card  and  on  certain 
 promotional  materials,  U  S  WEST  contends  that  it  cannot  obtain  any  benefit  from  holding  itself 
 out  as  the  provider  of  long  distance  services.  65  However,  even  while  disclosing  in  certain 
 materials  the  availability  of  the  0+  option,  U  S  WEST  actively  discourages  its  customers  from 
 using  that  option.  Almost  uniformly,  U  S  WEST  describes  the  0+  option  as  one  that  customers 
 should  never  consider  using  in  comparison  to  dialing  1-  800-  4USWEST.  66  U  S  WESTs  repeated 
 warnings  that  dialing  0+  doesnt  work  and  that  U  S  WEST  cannot  protect  customers  if  they 
 dial  0+  severely  undercut  U  S  WESTs  reliance  on  its  advertisements  references  to  0+  capability. 
 Moreover,  the  references  to  0+  capability  actually  support  our  conclusion  that  U  S  WEST  is 
 unlawfully  holding  itself  out  as  a  long  distance  service  provider.  By  comparing  the  long  distance 
 services  provided  by  its  1-  800-  4USWEST  Service  to  those  furnished  by  other  long  distance 
 carriers  through  the  0+  option,  U  S  WEST  implicitly  suggests  to  its  customers  that  it  is  a  less 
 expensive  provider  of  long  distance  services.  67 


 25.  U  S  WEST  also  contends  that  the  shortcomings  in  its  initial  promotional  materials 
 for  the  Service  were  remedied  by  the  promotional  materials  it  has  used  since  November  1997, 
 which  specify  that  Frontier  handles  in-  region,  interLATA  calls.  68  However,  this  is  no  different 
 from  the  situation  the  Commission  confronted  in  the  1-  800-  AMERITECH  Order.  Although  later 
 promotional  materials  in  that  case  identified  the  supporting  long  distance  provider  who  handled 
 in-  region,  interLATA  calls,  they  usually  did  so  in  small  type.  69  In  this  case,  there  also  is  a 
 proportional  dissimilarity  in  type  size  between  the  U  S  WEST  brand  name  and  the  Frontier  brand 
 name.  70  Moreover,  the  disclosures  are  generally  relegated  to  an  obscure  portion  of  the 
 promotional  materials. 


 64  U  S  WEST  Brief  re  Applicability  of  Ameritech  in  AT&  T  Case  at  2-  4,  16-  17. 
 65  Id. 
 66  See  U  S  WEST  January  25,  1999  Letter  at  1  (  Dial  1-  800-  4USWEST  and  You  Will  Save  .  .  .  It  Works 
 .  .  .  [and]  Its  Complete;  Dial  0  and  We  Cant  Guarantee  Youll  Save  .  .  .  It  Doesnt  Work  .  .  .  [and]  Its 
 Incomplete.).  Other  advertisements  warned  customers  that,  although  they  could  still  dial  0  when  using  the 
 Service,  U  S  WEST  could  not  protect  them  if  they  did.  See  AT&  T  Complaint,  Exhibit  B. 


 67  Similarly,  U  S  WESTs  promotional  materials  expressly  compare  U  S  WESTs  calling  card  services  for 


 long  distance  calls  with  the  long  distance  services  provided  by  MCI,  Sprint,  and  AT&  T.  U  S  WEST  January  25, 
 1999  Letter  at  14.  This  further  bolsters  our  conclusion  that  U  S  WEST  is  holding  itself  out  as  a  provider  of  long 
 distance  services.  1-  800-  AMERITECH  Order,  15  FCC  Rcd  at  __,    20. 


 68  U  S  WEST  Brief  re  Applicability  of  Ameritech  in  AT&  T  Case  at  15-  16;  U  S  WEST  January  25,  1999 


 Letter,  Attachments. 
 69  1-  800-  AMERITECH  Order,  15  FCC  Rcd  at  __,    21. 


 70  U  S  WEST  January  25,  1999  Letter,  Attachments.  In  addition,  not  all  of  the  later  disclaimers  state  that 
 Frontier  handles  the  in-  region,  interLATA  calls.  At  least  one  of  the  disclaimers  continues  to  use  the  original 
 (continued.) 
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 Federal  Communications  Commission  DA  01-  418 
 13 
 26.  U  S  WEST  further  asserts  that  in-  region  interLATA  calls  are  branded  and  billed  as 
 Frontier  calls,  which  purportedly  confirms  the  distinction  between  U  S  WEST  and  Frontier  and 
 eliminates  any  possible  customer  confusion.  71  We  disagree.  Viewing  the  Service  as  a  whole  and 
 the  manner  in  which  U  S  WEST  promotes  it,  we  conclude  that  U  S  WEST  holds  itself  out  as  a 
 long  distance  provider.  72  The  vanity  access  number  all  but  ensures  that  the  offering,  and  all  of  its 
 components,  generally  will  be  perceived  as  a  U  S  WEST-  provided  service.  Furthermore,  given 
 the  prominence  of  U  S  WESTs  brand  name  on  the  promotional  materials,  the  fact  that  U  S 
 WEST  does  not  furnish  the  in-  region,  interLATA  transmission  for  the  Service  likely  will  be  lost 
 on  all  but  a  few  sophisticated  consumers.  73  This  is  the  case  regardless  of  whether  a  customers 
 monthly  U  S  WEST  statement  identifies  long  distance  calls  as  being  carried  by  Frontier.  74 


 3.  U  S  WEST  Performs  Activities  Typically  Undertaken  by  Resellers. 
 27.  In  determining  whether  U  S  WEST  performs  activities  in  connection  with  its 
 Service  that  are  typically  performed  by  those  who  resell  interLATA  service,  we  look  to  the  degree 
 of  control  U  S  WEST  exercises  over  marketing  and  the  customer  relationship.  75  Although  the 
 facts  of  this  case  are  slightly  different  than  in  the  1-  800-  AMERITECH  Order,  the  degree  of 


 (Continued  from  previous  page) 
 language  that  calls  made  via  1-  800-  4USWEST  will  be  handled  by  U  S  WEST  Communications,  U  S  WEST 
 Long  Distance  or  Frontier.  Call  Customer  Service  for  more  details.  Id.  at  6. 


 71  U  S  WEST  Brief  re  Applicability  of  Ameritech  in  AT&  T  Case  at  15. 


 72  See  U  S  WEST  Communications,  177  F.  3d  at  1061  (considered  in  their  entirety,  the  U  S  WEST  and 
 Ameritech  promotional  materials  could  lead  consumers  to  link  long-  distance  service  to  the  BOCs,  particularly 
 as  long-  distance  was  offered  only  as  part  of  a  full-  service  package  within  a  BOC  brand  name.). 


 73  Cf.  United  States  v.  Western  Elec.  Co.,  698  F.  Supp.  348,  356  nn.  38,  42  (D.  D.  C.  1988)  (advertisements 


 for  long  distance  service  in  connection  with  BOC-  provided  calling  cards  that  failed  to  indicate  that  the  BOCs 
 were  not  providing  the  long  distance  service  were  misleading  and  inconsistent  with  the  Modified  Final 
 Judgments  prohibitions,  because  customers  would  be  misled  into  believing  the  BOCs  were  carrying  the  long 
 distance  calls). 


 74  The  fact  that  the  long  distance  providers  name  was  listed  on  Ameritechs  customer  bills  in  the  1-  800- 


 AMERITECH  Order  also  did  not  save  the  Ameritech  service  from  a  section  271  violation.  1-  800-  AMERITECH 
 Order,  15  FCC  Rcd  at  __,    7,  22. 


 75  Qwest  Teaming  Order,  13  FCC  Rcd  at  21473,    48;  1-  800-  AMERITECH  Order,  15  FCC  Rcd  at  __,   


 23-  25. 
13
 Federal  Communications  Commission  DA  01-  418 
 14 
 control  U  S  WEST  exercises  over  the  customer  relationship  appears  to  be  just  as  significant.  76  U 
 S  WEST  made  it  clear  in  the  RFP  and  the  resulting  agreement  with  Frontier  that  U  S  WEST 
 would  exercise  exclusive  control  over  messages  provided  to  customers  and  the  overall  customer 
 relationship.  77  While  Frontier  apparently  is  not  prohibited  from  responding  to  certain  customer 
 service  inquiries,  it  does  so  subject  to  U  S  WESTs  direction,  as  U  S  WEST  is  contractually 
 authorized  to  dictate  how  Frontier  responds  to  customer  inquiries  and  what  messages  Frontier 
 provides  to  customers. 


 28.  Similarly,  U  S  WEST  exercises  exclusive  control  over  the  marketing  of  the  1-  800- 
 4USWEST  Service.  As  described  above,  the  agreement  between  U  S  WEST  and  Frontier 
 provides  that  U  S  WEST  owns  and  creates  all  marketing  communications.  78  Further,  the 
 agreement  states  that  Frontier  does  not  have  any  approval  rights  about  any  of  the  promotional, 
 advertising  or  fulfillment  packages,  and  that  U  S  WEST,  as  a  courtesy,  supplies  Frontier  with  a 
 copy  of  such  materials.  79  Thus,  U  S  WEST  controls  the  right  to  market  and  sell,  under  the  1- 
 800-  4USWEST  name,  not  only  its  own  local  and  intraLATA  toll  services,  but  Frontiers  long 
 distance  services  as  well.  80 


 29.  U  S  WESTs  exercise  of  exclusive  control  over  customer  relations  and  marketing 
 demonstrates  that  U  S  WEST  was  significantly  involved  in  the  design  and  development  of  the 
 long  distance  component  of  its  1-  800-  4USWEST  Service.  The  fact  that  U  S  WEST  could  insist 
 on  such  requirements,  select  a  long  distance  provider  who  would  accept  the  requirements  without 
 modification,  and  reject  those  who  would  not,  is  a  testament  to  U  S  WESTs  control  over  the 
 design  of  the  Service.  81  For  these  reasons,  we  conclude  that  U  S  WEST  is  engaged  in  activities 
 typically  performed  by  resellers.  82 


 76  Indeed,  U  S  WEST  makes  almost  no  attempt  to  distinguish  between  the  customer  control  restrictions 
 imposed  in  its  agreement  with  Frontier  and  those  described  in  the  1-  800-  AMERITECH  Order.  U  S  WEST 
 simply  states  that  [  t]  he  business  relationship  between  Frontier  and  U  S  WEST  as  reflected  in  the  record 
 demonstrates  some  similarities  and  some  material  differences  as  between  that  relationship  and  the  one  outlined  in 
 the  AMERITECH  Calling  Card  Order.  U  S  WEST  Brief  re  Applicability  of  Ameritech  in  AT&  T  Case  at  10,  n. 
 22.  Yet  U  S  WEST  fails  to  support  this  assertion  with  any  cites  to  the  record  or  discussion  of  differing  contract 
 terms.  U  S  WEST  merely  suggests  that  Frontiers  carrying,  branding,  and  rating  of  the  calls  is  inconsistent  with 
 the  conclusion  that  U  S  WEST  acts  as  a  reseller.  Id.  As  discussed  infra  at  n.  74,  however,  it  is  clear  that  the  long 
 distance  company  in  the  1-  800-  AMERITECH  Order  also  branded  and  carried  the  calls  in  question.  1-  800- 
 AMERITECH  Order,  15  FCC  Rcd  at  __,    7,  22. 


 77  U  S  WEST  Answer  in  AT&  T  Case,  Attachment  11  (RFP  at  10);  U  S  WEST  August  22,  1997 


 Supplemental  Interrogatory  Responses  at  28. 
 78  U  S  WEST  August  22,  1997  Supplemental  Interrogatory  Responses  at  28. 


 79  Id.  at  22. 
 80  The  parties  have  not  identified  any  instances  in  which  Frontier  engaged  in  independent  marketing, 
 sales,  or  promotional  activities  in  connection  with  the  1-  800-  4USWEST  Service. 
 81  U  S  WEST  declared,  in  its  RFP,  that  it  would  own  the  customer  relationship  and  would  exercise 


 exclusive  control  over  the  marketing  of  the  1-  800-  4USWEST  Service.  These  requirements  were  apparently 
 (continued.) 
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 Federal  Communications  Commission  DA  01-  418 
 15 
 4.  Conclusion 
 30.  Based  on  the  totality  of  the  circumstances,  we  conclude  that,  through  the  1-  800- 
 4USWEST  service,  U  S  WEST  is  "providing"  in-  region,  interLATA  service  in  violation  of  section 
 271.  First,  the  Service  affords  U  S  WEST  material  benefits  uniquely  associated  with  the  inclusion 
 of  long  distance  service  in  the  offering.  Specifically,  it  permits  U  S  WEST  to  accumulate  a 
 significant  base  of  customers  who  rely  on  the  Service,  and  it  enables  U  S  WEST  to  amass 
 goodwill  as  a  full-  service  provider  with  its  local  service  customers.  Second,  through  the  Service 
 and  the  many  associated  promotional  materials  that  prominently  bear  U  S  WESTs  brand,  the 
 carrier  essentially  holds  itself  out  as  providing  long  distance  service.  Finally,  in  connection  with 
 the  Service,  U  S  WEST  controls  numerous  functions,  including  marketing  and  customer  care,  that 
 are  typically  performed  by  a  reseller  of  long  distance  service.  All  of  these  factors  lead  us  to 
 conclude  that  U  S  WEST  is  providing  in-  region,  interLATA  service  in  violation  of  section  271. 


 B.  We  Reject  U  S  WESTs  Arguments  Regarding  Remedies. 
 31.  U  S  WEST  devotes  much  of  its  supplemental  briefing  to  remedy-  related 
 arguments,  contending,  first,  that  the  Commissions  alleged  delay  in  ruling  on  liability  renders  any 
 damages  award  inappropriate.  According  to  U  S  WEST,  until  a  ruling  in  this  case,  the  state  of 
 the  law  regarding  the  legality  of  its  Service  was  unclear.  83  We  disagree,  but  note  that  we  need  not 
 decide  damages  at  this  time.  We  will  address  damages  when,  and  if,  complainants  file 
 supplemental  complaints  for  damages. 


 32.  Second,  U  S  WEST  attempts  to  expand  the  scope  of  this  proceeding  by  arguing 
 that  proposed  marketing  and  promotional  changes  to  its  Service  convert  the  Service  into  a  lawful 
 offering.  84  We  decline  U  S  WESTs  invitation  to  issue  a  declaratory  ruling  regarding  its 
 prospective  conduct.  Our  task  in  this  section  208  complaint  proceeding  is  to  adjudicate  the 
 lawfulness  of  prior  or  current  conduct  and  not  to  opine  on  the  lawfulness  of  hypothetical  or  future 
 conduct.  However,  U  S  WEST  is  free  to  file  a  Petition  for  Declaratory  Ruling  requesting  an 
 opinion  as  to  the  lawfulness  of  proposed  changes  to  its  Service. 


 C.  We  Need  Not  and  Do  Not  Reach  Complainants  Other  Claims. 
 33.  In  addition  to  their  section  271  claims,  complainants  argue  that:  (1)  the  1-  800- 
 4USWEST  service  amounts  to  an  unreasonable  practice,  in  violation  of  section  201(  b);  (2)  U  S 
 WEST  excluded  complainants  in  a  discriminatory  manner  from  providing  transport  services  to 
 support  the  Service,  in  violation  of  section  202(  a);  (3)  the  structure  of  the  Service  contravenes 


 (Continued  from  previous  page) 
 adopted  wholesale  in  U  S  WESTs  agreement  with  Frontier.  U  S  WEST  August  22,  1997  Supplemental 
 Interrogatory  Responses  at  22,  28. 


 82  1-  800-  AMERITECH  Order,  15  FCC  Rcd  at  __,    25-  26. 


 83  U  S  WEST  Brief  re  Applicability  of  Ameritech  in  AT&  T  Case  at  4-  6. 
 84  Id.  at  20-  22. 
15
 Federal  Communications  Commission  DA  01-  418 
 16 
 U  S  WESTs  equal  access  obligations,  in  violation  of  section  251(  g);  and  (4)  by  holding  out  itself 
 as  a  provider  of  in-  region,  interLATA  services  prior  to  receiving  authorization  under  section  271, 
 U  S  WEST  has  circumvented  separate  affiliate  safeguards,  in  violation  of  section  272.  Because 
 we  find  that  U  S  WEST  violated  section  271,  we  need  not  and  do  not  reach  complainants  claims 
 alleging  other  violations  of  the  Communications  Act.  85 


 IV.  CONCLUSION 
 34.  We  find  that  U  S  WEST,  through  its  1-  800-  4USWEST  Service,  is  providing  in-region, 
 interLATA  services  without  authorization,  in  violation  of  section  271  of  the  Act.  We  do 
 not  reach  other  statutory  claims  raised  by  complainants. 


 V.  ORDERING  CLAUSES 
 35.  Accordingly,  IT  IS  ORDERED,  pursuant  to  sections  1,  4(  i),  4(  j),  208,  and  271  of 
 Act,  as  amended,  47  U.  S.  C.    151,  154(  i),  154(  j),  208,  and  271,  that  the  Formal  Complaints 
 filed  by  MCI  Telecommunications  Corporation  and  AT&  T  Corporation  ARE  GRANTED  to  the 
 extent  that  they  allege  that  the  1-  800-  4USWEST  Service  violates  section  271  of  the  Act. 


 FEDERAL  COMMUNICATIONS  COMMISSION 


 David  H.  Solomon 
 Chief,  Enforcement  Bureau 


 85  1-  800-  AMERITECH  Order,  15  FCC  Rcd  at  __,    28;  Qwest  Teaming  Order,  13  FCC  Rcd  at  21476,    53. 
16