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 Federal  Communications  Commission  FCC  01-  308 
 Before  the 
 Federal  Communications  Commission 
 Washington,  D.  C.  20554 


 In  the  Matter  of  ) 
 )  File  No.  EB-  01-  IH-  0339 
 SBC  Communications,  Inc.  ) 
 )  NAL/  Acct.  No.  200132080059 
 Apparent  Liability  for  Forfeiture  ) 


 NOTICE  OF  APPARENT  LIABILITY  FOR  FORFEITURE  AND  ORDER 
 Adopted:  October  12,  2001  Released:  October  16,  2001 
 By  the  Commission: 
 Paragraph 
 I.  INTRODUCTION  ..............................................................................................................  1 


 II.  FACTS  ................................................................................................................................  4 
 A.  SBC  Applies  for  Section  271  Authority  in  Kansas  and  Oklahoma  ...............................  4 
 B.  The  Operation  And  Oversight  Of  SBCs  Loop  Qualification  System  At  The 
 Time  The  Reply  Affidavits  Were  Filed  ......................................................................  11 


 C.  The  Preparation  And  Submission  Of  The  Inaccurate  Reply  Affidavits  .......................  15 
 D.  Questions  Arise  About  The  Accuracy  Of  The  Reply  Affidavits  .................................  31 
 E.  SBC  Notifies  The  Commission  Of  The  Inaccurate  Affidavits  ....................................  37 


 III.  DISCUSSION..................................................................................................................  41 
 A.  The  Evidence  Does  Not  Warrant  A  Finding  Of  Apparent  Liability  For 
 Intentional  Misrepresentation  Regarding  The  Three  Reply  Affidavits  ........................  43 


 B.  SBC  Apparently  Violated  Its  Duty  To  Disclose  The  Inaccurate  Statements  In 
 A  Timely  Manner  To  The  Commission  .....................................................................  47 


 C.  SBC  Apparently  Misrepresented  Facts  To  The  Commission  During  The 
 Enforcement  Bureaus  Investigation  .........................................................................  65 


 D.  SBC  Apparently  Violated  The  SBC/  SNET  Consent  Decree  .......................................  81 
 E.  SBC  Did  Not  Violate  Section  271  Of  The  Act  ..........................................................  90 
 IV.  CONCLUSION  ...............................................................................................................  91 
 V.  ORDERING  CLAUSES..................................................................................................  92 
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 Federal  Communications  Commission  FCC  01-  308 
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 I.  INTRODUCTION 
 1.  This  Notice  of  Apparent  Liability  and  Order  (  NAL)  relates  to  a  matter  at  the 
 heart  of  the  Commissions  processes  --  the  completeness  and  accuracy  of  information  submitted 
 by  regulated  companies  to  the  agency.  Since  April  2001,  the  Commissions  Enforcement  Bureau 
 has  conducted  an  informal  investigation  into  potential  misconduct  by  SBC  Communications,  Inc. 
 (  SBC)  relating  to  inaccurate  statements  in  three  affidavits  filed  by  the  company  in  the 
 proceeding  in  which  the  Commission  granted  SBC  the  authority  to  provide  long-  distance  service 
 in  Kansas  and  Oklahoma.  1 


 2.  Based  on  our  evaluation  of  the  information  that  SBC  has  supplied  to  the 
 Commission  during  the  course  of  this  investigation,  we  find  that  SBC  is  apparently  liable  for  a 
 forfeiture  for:  (1)  apparently  failing  to  notify  the  Commission  within  30  days  that  information 
 contained  in  its  section  271  application  for  Kansas  and  Oklahoma  was  no  longer  substantially 
 accurate  or  complete  in  all  significant  respects,  in  apparent  violation  of  section  1.65  of  the 
 Commissions  rules,  47  C.  F.  R.    1.  65;  (2)  apparently  making  a  misrepresentation  or  a  willful 
 material  omission  bearing  on  a  matter  within  the  jurisdiction  of  the  Commission  in  a  written 
 statement  submitted  by  SBC  in  connection  with  the  investigation  into  the  filing  of  the  incorrect 
 affidavits  in  the  Kansas/  Oklahoma  section  271  proceeding,  in  apparent  violation  of  section  1.17  of 
 the  Commissions  Rules,  47  C.  F.  R.    1.  17;  and  (3)  apparently  failing  to  comply  with  the  terms  of 
 a  consent  decree  that  resolved  an  earlier  investigation  of  SBC  involving  analogous  issues  and 
 required  SBC  to  train  certain  employees  on  Commission  rules  relating  to  contacts  with  the 
 agency.  2 


 3.  Based  on  these  findings,  we  find  SBC  apparently  liable  for  a  forfeiture  in  the 
 amount  of  two  million,  five  hundred  twenty  thousand  dollars  ($  2,  520,000),  which  is  the  statutory 
 maximum  for  these  apparent  violations.  In  addition  to  these  specific  apparent  violations,  we  also 
 note  our  more  general  concern  that  SBC  has  not  exercised  the  degree  of  care  we  expect  from  our 
 regulatees  in  dealing  with  the  Commission.  Finally,  we  also  order  SBC  to  file  certain  reports 
 regarding  future  compliance  with  section  1.65  and  the  SBC/  SNET  Consent  Decree. 


 1  Joint  Application  by  SBC  Communications,  Inc.,  Southwestern  Bell  Tel.  Co.,  and  Southwestern  Bell  Commun. 
 Serv.,  Inc.  d/  b/  a  Southwestern  Bell  Long  Distance  for  Provision  of  In-  Region,  InterLATA  Services  in  Kansas  and 
 Oklahoma,  Memorandum  Opinion  and  Order,  FCC  01-  29  (rel.  Jan.  22,  2001)  (  Kansas/  Oklahoma  Order  or 
 Order),  appeal  pending  sub  nom.  Sprint  Communications  Co.  L.  P.  et  al.  v.  FCC,  No.  01-  1076  (D.  C.  Cir.  2001). 
 The  Enforcement  Bureau  also  is  separately  investigating  additional  inaccurate  affidavits  filed  by  SBC  in  the 
 Kansas/  Oklahoma  section  271  proceeding  relating  to  the  companys  Loop  Maintenance  Operating  System 
 (  LMOS).  SBC,  on  June  8,  2001,  notified  the  Commission  pursuant  to  section  1.  65  of  our  rules  that  information 
 filed  concerning  LMOS  was  inaccurate.  Letter  from  Geoffrey  M.  Klineberg,  Esq.,  Kellogg,  Huber,  Hansen,  Todd 
 &  Evans,  P.  L.  L.  C.  to  Magalie  Roman  Salas,  Secretary,  Federal  Communications  Commission  at  1  (June  8,  2001). 


 2  SBC  Communications,  Inc.,  Order,  14  FCC  Rcd  12741  (1999)  (  SBC/  SNET  Consent  Decree)  (resolving 


 investigation  into  potential  violations  by  SBC  of  sections  271  and  272  of  the  Communications  Act  and  section  1.65 
 of  the  Commissions  rules,  and  potentially  inaccurate  statements  made  by  SBC  employees,  all  in  relation  to  SBCs 
 application  for  transfer  of  various  authorizations  from  Southern  New  England  Telephone  Company  (  SNET)  to 
 SBC). 
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 II.  FACTS 
 A.  SBC  Applies  for  Section  271  Authority  in  Kansas  and  Oklahoma 
 4.  On  October  26,  2000,  SBC  filed  an  application  with  the  Commission  seeking 
 authorization  to  provide  in-  region,  interLATA  services  in  Kansas  and  Oklahoma  in  accordance 
 with  section  271  of  the  Communications  Act  of  1934,  as  amended.  3  Under  section  271,  SBC  had 
 to  demonstrate  that  it  provided  competitors  with  nondiscriminatory  access  to  unbundled  network 
 elements,  pursuant  to  section  251(  c)  and  252(  d)  of  the  Act.  4  As  part  of  its  obligation  to  provide 
 access  to  these  network  elements,  SBC  also  had  to  show  that  it  provided  competing  carriers  with 
 nondiscriminatory  access  to  its  operations  support  systems  (OSS),  which  are  used  by  carriers  for 
 pre-  ordering,  ordering,  provisioning,  maintenance  and  repair,  and  billing  services.  5 


 5.  The  Kansas/  Oklahoma  section  271  proceeding  marked  the  first  time  that  an 
 applicant,  as  part  of  its  section  271  showing,  had  to  demonstrate  compliance  with  the  terms  of  the 
 Commissions  UNE  Remand  Order.  6  The  UNE  Remand  Order  required,  among  other  things,  that 
 an  incumbent  local  exchange  carrier  such  as  SBC  make  loop  qualification  information  available  to 
 competitors  as  part  of  the  pre-  ordering  functionality  of  its  OSS.  7  SBC  thus  had  to  show,  as  part 
 of  the  section  271  proceeding,  that  it  provided  competitors  with  the  same  level  of  access  to  loop 
 information  as  that  available  to  itself,  so  that  a  competitor  could  determine  during  the  pre-ordering 
 stage  whether  a  requested  loop  was  capable  of  supporting  advanced  services  equipment.  8 


 6.  In  its  application,  SBC  maintained  that  it  provided  access  to  loop  qualification 
 information  in  accordance  with  the  UNE  Remand  Order.  9  On  November  15,  2000,  however,  IP 


 3  47  U.  S.  C.    271.  Although  our  decision  granting  SBCs  section  271  application  refers  to  the  SBC  affiliates 
 that  applied  for  section  271  approval  as  SWBT  (the  acronym  for  the  SBC  affiliate  Southwestern  Bell  Telephone 
 Co.)  throughout  this  Notice  of  Apparent  Liability  and  Order  we  will  refer  to  SBC  and  its  affiliates  simply  as 
 SBC. 


 4  See  47  U.  S.  C.    271(  c)(  2)(  B)(  ii). 


 5  Implementation  of  the  Local  Competition  Provisions  in  the  Telecommunications  Act  of  1996,  First  Report  and 
 Order,  11  FCC  Rcd  15499,  15752,  paras.  516-  18  (1996)  (subsequent  history  omitted);  see  also  Application  by 
 Ameritech  Michigan  Pursuant  to  Section  271  of  the  Communications  Act  of  1934,  as  amended,  to  Provide  In-Region, 
 InterLATA  Services  in  Michigan,  Memorandum  Opinion  and  Order,  12  FCC  Rcd  20,543,  20,614,  paras. 
 131-  32  (1997). 


 6  Kansas/  Oklahoma  Order,  para.  121. 


 7  See  Implementation  of  the  Local  Competition  Provisions  of  the  Telecommunications  Act  of  1996,  Third  Report 
 and  Order,  15  FCC  Rcd  3696,  3885,  paras.  427-  31  (  UNE  Remand  Order). 
 8  Kansas/  Oklahoma  Order,  para.  121  n.  325  (citing  UNE  Remand  Order,  15  FCC  Rcd  at  18426,  para.  148). 


 9  See  Affidavit  of  Carol  Chapman,  para.  105-  08,  attached  to  Brief  in  Support  of  Joint  Application  by 
 Southwestern  Bell  for  Provision  of  In-  Region,  InterLATA  Services  in  Kansas  and  Oklahoma,  CC  Docket  No.  00- 
 217  (filed  Oct.  26,  2000)  (  SBC  Brief). 
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 Communications  Corp.  (  IP)  filed  comments  alleging  that  SBC  filtered  its  loop  qualification 
 information  for  requesting  carriers  in  violation  of  the  UNE  Remand  Order.  10  IP  contended  that 
 SBC  did  not  provide  access  to  all  of  the  information  contained  in  its  own  electronic  databases,  but 
 rather  provided  information  on  only  the  best  loop,  as  determined  by  SBC,  to  the  particular  end 
 user.  According  to  IP,  this  withholding  of  information  amounted  to  improper  filtering  in 
 contravention  of  Commission  rules. 


 7.  Two  weeks  later,  IP  made  a  second,  but  related,  allegation.  IP  claimed  that  SBCs 
 loop  qualification  system  failed  to  return  information  on  available  copper  loops  to  requesting 
 carriers  when  an  end  user  was  served  by  both  copper  and  fiber.  11  IP  asserted  that,  where  an  end 
 user  had  both  copper  and  fiber  loops  to  its  premises,  requesting  carriers  would  not  receive  loop 
 qualification  information  on  the  copper  loop  because  SBCs  loop  qualification  system  only 
 returned  fiber  as  the  best  loop.  As  IP  noted,  competing  carriers  that  were  capable  of  providing 
 service  only  over  copper  loops  would  effectively  be  precluded  from  offering  service  because  such 
 carriers  would  not  know  that  the  copper  loops  existed.  12  IP  asserted  that  this  practice  also 
 violated  the  requirements  of  the  UNE  Remand  Order. 


 8.  On  December  11,  2000,  SBC  filed  its  reply  brief  and  supporting  affidavits  in  the 
 Kansas/  Oklahoma  section  271  proceeding.  In  response  to  IPs  allegations,  SBC  denied  that  it 
 unlawfully  filtered  information  in  its  loop  qualification  system.  SBC  first  argued  that  it  had  no 
 obligation  to  return  information  on  more  than  one  loop  to  a  requested  address  and  that  therefore 
 IPs  first  allegation  was  irrelevant.  Additionally,  SBC  contended  that  the  method  by  which  its 
 loop  qualification  system  retrieved  and  returned  information  to  requesting  carriers  was  without 
 regard  to  the  best  loop.  13  Relying  on  three  supporting  affidavits,  SBC  claimed  that  its  loop 
 qualification  process  utilized  the  same  logic  as  its  provisioning  system.  Thus,  according  to  the 
 affiants,  in  returning  loop  information,  SBCs  system  would  behave  as  if  it  were  actually 
 provisioning  the  service  requested  to  a  particular  address,  including,  where  necessary,  piecing 
 together  previously  unassociated  parts  of  a  loop.  Since  the  system  could  provision  digital 
 subscriber  line  (xDSL)  service  only  over  a  copper  loop,  the  loop  qualification  system  would 
 provide  information  about  such  loops  in  response  to  queries  from  competitors.  14 


 10  Comments  of  IP  Communications  Corp.  on  SBCs  Applications  for  271  Relief  in  Kansas  and  Oklahoma,  CC 
 Docket  No.  00-  217,  at  12-  14  (filed  Nov.  15,  2000)  (  IP  Comments). 
 11  Letter  from  Howard  J.  Siegel,  Vice  President  of  Regulatory  Policy,  IP  Communications  Corp.  to  Magalie 


 Roman  Salas,  Secretary,  Federal  Communications  Commission,  CC  Docket  No.  00-  217  (filed  Nov.  30,  2000)  (  IP 
 Ex  Parte  Letter). 


 12  Id.  at  2. 


 13  See  Reply  Brief  of  Southwestern  Bell  In  Support  of  InterLATA  Relief  in  Kansas  and  Oklahoma,  CC  Docket 
 No.  00-  217,  at  69-  70  (filed  December  11,  2000)  (  SBC  Reply  Brief). 
 14  See  Affidavit  of  Mark  Welch  paras.  5-  6,  Affidavit  of  Angela  Cullen  paras.  2-  7,  and  Affidavit  of  Carol 


 Chapman  paras.  5-  12,  attached  to  SBC  Reply  Brief. 
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 9.  The  Commission  accepted  this  explanation.  In  the  Order  granting  the  application, 
 the  Commission  found  that  SBC  had  demonstrated  that  it  provided  competing  carriers  with 
 nondiscriminatory  access  to  the  same  detailed  information  about  the  loop,  in  the  same  time  frame, 
 as  the  company  made  available  to  itself.  15  In  so  finding,  the  Commission  referred  to  the 
 representations  made  by  the  SBC  personnel  in  their  reply  affidavits,  including  representations  that 
 the  loop  qualification  process  used  the  same  logic  as  the  provisioning  process.  16  In  addressing  the 
 IP  filtering  allegations,  the  Commission  determined,  with  respect  to  IPs  first  allegation,  that  it 
 was  not  self-  evident  from  the  UNE  Remand  Order  that  SBC  had  to  return  information  on  all 
 loops  to  a  given  address.  17  As  a  result,  the  Commission  declined  to  find  that  SBC  had  violated  the 
 UNE  Remand  Order  on  those  grounds.  The  Commission  also  rejected  IPs  allegations  that  SBC 
 did  not  return  loop  information  on  copper  loops  at  an  address  also  served  by  fiber.  Although  the 
 Commission  stated  that,  if  IPs  second  allegation  was  true,  this  practice  would  appear  to  violate 
 the  UNE  Remand  Order,  it  concluded  that  SBC  had  satisfactorily  refuted  the  IP  allegations.  18 


 10.  The  three  affidavits  supporting  the  reply  brief  that  addressed  the  loop  qualification 
 issue  were  signed  by  SBC  employees  Carol  Chapman,  Mark  Welch,  and  Angela  Cullen 
 (collectively,  the  reply  affiants).  As  noted  above,  each  of  the  reply  affiants  claimed  in  his  or  her 
 affidavit  that  SBCs  loop  qualification  system  searched  for  information  about  loops  as  if  it  were 
 provisioning  the  particular  service  requested.  Therefore,  if  a  carrier  requested  xDSL  service  over 
 a  copper  loop,  SBCs  loop  qualification  system  would  return  information  as  if  it  were  actually 
 provisioning  xDSL  service  over  the  copper  loop.  In  reality,  however,  SBCs  system  provided 
 information  only  about  the  first  loop  in  SBCs  records,  regardless  of  whether  that  loop  was  a 
 xDSL-  capable  copper  loop  or  a  fiber  loop.  Thus,  where  an  address  was  served  by  both  copper 
 and  fiber  loops,  unless  the  copper  loop  was  also  the  first  loop  in  SBCs  systems,  SBCs  loop 
 qualification  system  would  not  disclose  that  loop  to  a  requesting  CLEC. 


 B.  The  Operation  And  Oversight  Of  SBCs  Loop  Qualification  System  At  The 
 Time  The  Reply  Affidavits  Were  Filed 


 11.  Generally,  xDSL  service  may  only  be  provided  via  loops  using  copper  wire,  as 
 opposed  to  loops  composed  of  fiber  optic  cable.  Thus,  before  a  carrier  undertakes  to  provide 
 xDSL  service  to  a  given  customer,  the  carrier  first  determines  whether  that  customer  is  connected 
 to  the  wider  telephone  network  via  a  copper  loop.  Without  a  copper  loop,  that  customer  cannot 
 receive  xDSL  service.  Until  April  2001,  SBCs  loop  qualification  system  identified  only  the 
 first  loop  loaded  in  SBCs  Loop  Facilities  Assignment  and  Control  System  (LFACS).  19  Thus, 


 15  Kansas/  Oklahoma  Order  para.  124. 
 16  See,  e.  g.,  id.  para.  126  n.  342,  para.  128  n.  352,  para.  129  nn.  355-  56. 
 17  Id.  para.  128. 
 18  Id.  para.  129. 
 19  Letter  from  Priscilla  Hill-  Ardoin,  Senior  Vice  President,  SBC  Communications,  Inc.  to  David  H.  Solomon, 
 Chief,  Enforcement  Bureau,  Federal  Communications  Commission  at  4  (Apr.  6,  2001)  (  SBC  Report). 
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 when  a  carrier  sought  to  learn  whether  it  could  provide  xDSL  service  to  a  potential  customer, 
 SBCs  loop  qualification  system  would  tell  the  carrier  about  a  copper  loop  only  if  it  was  the 
 first  loop  on  SBCs  system.  Otherwise,  SBC  would  only  inform  the  carrier  that  the  potential 
 customer  was  served  only  by  a  non-  copper  loop.  20 


 12.  Beginning  about  June  2000,  John  Mileham  was  the  loop  qualification  project 
 manager  for  SBC.  In  that  position,  Mr.  Mileham  was  responsible  for  the  day-  to-  day  management 
 of  SBCs  loop  qualification  system  and  was  therefore  one  of  the  most  knowledgeable  people  at 
 the  company  on  the  system.  21  In  August  2000,  Mr.  Mileham  prepared  an  overview  describing  the 
 process  by  which  SBCs  loop  qualification  system  searched  for  information  on  behalf  of 
 requesting  carriers.  Mr.  Milehams  overview  discussed  the  process  of  returning  information  to  a 
 carrier  that  requested  actual  loop  information.  22  Mr.  Mileham  wrote  that  the  loop  qualification 
 process  would  first  query  a  back-  end  database,  LFACS.  LFACS  would  then  return  a  list  of 
 circuit  identifiers  for  the  requested  end  user  address,  and  the  loop  qualification  system  would 
 search  LFACS  for  the  specific  loop  make-  up  information  on  the  first  circuit  from  that  list  (as 
 opposed  to  the  first  copper  circuit).  23  Mr.  Mileham  forwarded  his  overview  to  numerous  persons 


 20  SBC  estimates  that  this  scenario  could  have  happened  no  more  than  five  percent  of  the  time.  See  Letter  from 
 Edwardo  Rodriguez,  Jr.,  Director,  Federal  Regulatory,  SBC  Communications,  Inc.  to  Magalie  Roman  Salas, 
 Secretary,  Federal  Communications  Commission  at  5  (Apr.  13,  2001)  (  SBC  1.65  Report). 


 21  After  submitting  its  April  6  report,  SBC  produced  additional  information  in  response  to  a  letter  of  inquiry 


 from  the  Enforcement  Bureau  dated  May  4,  2001.  Letter  from  David  H.  Solomon,  Chief,  Enforcement  Bureau, 
 Federal  Communications  Commission  to  Sandra  L.  Wagner,  Vice  President-  Federal  Regulatory,  SBC 
 Telecommunications,  Inc.  (May  4,  2001)  (  Letter  of  Inquiry).  Additionally,  at  the  request  of  the  Enforcement 
 Bureau,  SBC  made  available  six  employees  for  informal  interviews:  Carol  Chapman,  Angela  Cullen,  John 
 Mileham,  Edwardo  Rodriguez,  Jr.,  Dennis  Schuessler,  and  Mark  Welch.  Unless  otherwise  indicated,  references  to 
 statements  by  these  employees  refer  to  their  statements  in  these  interviews. 


 22  SBCs  loop  qualification  system  allows  competitors  to  request  access  to  three  different  types  of  loop  make-  up 


 information.  Most  relevant,  competitors  could  request  access  to  actual  loop  information  that  SBC  may  have  in  its 
 electronic  databases  based  on  a  particular  address.  The  pre-  ordering  transactions  at  the  heart  of  this  NAL  involve 
 actual  loop  information  requests.  Competitors  could  also  request  design  loop  information,  which  is  the  theoretical 
 make-  up  of  a  loop  based  on  the  standard  loop  design  for  the  longest  loop  to  the  end-  users  distribution  area,  or 
 could  request  that  SBC  perform  a  manual  search  of  its  paper  records  to  determine  actual  loop  information.  Order, 
 para.  122  &  n.  329. 


 23  As  fully  described  in  Mr.  Milehams  loop  qualification  overview: 


 Process:  Loop  Qual  performs  a  facility  assignment  query  into  LFACS  based  on  the  service 
 address.  LFACS  returns  a  list  of  circuit  ids  associated  with  that  address.  The  list  order  is 
 not  in  any  predictable  order  but  is  repeatable  for  any  given  address.  Loop  Qual  then  performs 
 a  loop  makeup  query  into  LFACS  using  the  first  circuit  id  from  the  facility  assignment  list. 
 LFACS  builds  the  loop  makeup  starting  at  the  service  address  and  working  backwards  toward 
 the  central  office  gathering  cable  length,  gauge  break,  load  coil,  bridged  tap,  disturber  and 
 risk  data.  Added  to  this  is  information  based  on  the  distribution  area  such  as  Pronto  RT 
 capability  and  Loop  Medium  Type.  The  loop  makeup  (LMU)  is  then  presented  to  the 
 requestor. 


 John  D.  Mileham,  SBC  Loop  Qual  System  Overview  2  (Aug.  22,  2000)  (emphasis  added). 
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 within  SBC,  including  SBCs  legal  department  and  at  least  one  of  the  SBC  reply  affiants,  Carol 
 Chapman. 


 13.  In  addition,  as  part  of  his  duties  as  loop  qualification  project  manager,  Mr. 
 Mileham  hosted  technical  meetings  and  conference  calls  with  competing  carriers  designed  to 
 provide  a  forum  for  questions  and  answers  concerning  technical  aspects  of  the  loop  qualification 
 system.  During  these  sessions,  which  began  in  June  2000,  competing  carriers  complained  to  him 
 that  they  were  receiving  insufficient  information  on  available  copper  loops.  After  making 
 inquiries,  he  determined  that  the  system  could  be  programmed  to  return  information  on  copper 
 loops.  Mr.  Mileham  told  Enforcement  Bureau  staff  that,  beginning  in  or  around  September  2000, 
 he  began  the  pre-  work  on  a  copper  loop  availability  change  request.  At  some  point  between  mid-December 
 2000  and  January  10,  2001,  Mr.  Mileham  submitted  a  change  request  to  effectuate  this 
 modification.  24 


 14.  Mr.  Mileham  was  unquestionably  aware  that  SBCs  loop  qualification  system  did 
 not  use  provisioning  logic,  and  that  the  system  sometimes  did  not  return  loop  make-  up 
 information  about  available  copper  loops  serving  particular  end  users.  As  events  unfolded, 
 however,  Mr.  Milehams  knowledge  of  the  SBC  loop  qualification  system  was  not  reflected  in  the 
 reply  affidavits.  Instead,  each  of  those  affiants  submitted  an  affidavit  asserting  that  SBCs  system 
 worked  in  a  manner  contrary  to  the  facts. 


 C.  The  Preparation  And  Submission  Of  The  Inaccurate  Reply  Affidavits 
 1.  The  Angela  Cullen  Affidavit 
 15.  Angela  Cullen  was  one  of  the  reply  affiants.  At  the  time  the  affidavits  were  filed, 
 Ms.  Cullen  was  a  Director  in  SBCs  information  technology  organization.  As  part  of  her  duties  in 
 that  position,  she  measured  the  performance  of  SBCs  loop  qualification  system  and  stated  she 
 was  familiar  with  the  loop  qualification  process.  Earlier  in  the  Kansas/  Oklahoma  section  271 
 proceeding,  Ms.  Cullen  had  filed  an  affidavit  addressing  the  technical  method  by  which  competing 
 carriers  interacted  with  SBCs  OSS  for  pre-  ordering  and  ordering  xDSL  capable  loops.  25  After  IP 
 made  its  filtering  allegations,  SBC  chose  Ms.  Cullen  to  submit  another  affidavit  to  accompany 
 the  reply  brief  refuting  IPs  claims. 


 16.  Before  Ms.  Cullen  began  preparing  her  affidavit,  however,  she  received  an  e-  mail 
 from  an  SBC  attorney  stating  that  SBCs  loop  qualification  system  returned  information  on  the 
 loop  that  the  system  would  actually  provision,  if  the  requesting  carrier  had  requested  xDSL  or  line 
 sharing  service.  26  According  to  Ms.  Cullen,  she  was  asked  to  verify  that  the  loop  qualification 


 24  In  his  interview  with  the  Enforcement  Bureau,  Mr.  Mileham  said  that  he  submitted  the  change  request  in  mid-December, 
 following  his  review  of  Mr.  Welchs  Reply  Affidavit  in  the  Kansas/  Oklahoma  proceeding. 
 25  Affidavit  of  Angela  Cullen,  para.  2,  attached  to  SBC  Brief. 


 26  See  Attachment  G  to  SBC  Report.  Ms.  Cullens  block  quote,  and  the  portion  of  her  e-  mail  that  originated 
 from  the  SBC  attorneys  e-  mail  to  her,  states  (emphasis  in  original): 


 (continued.) 
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 system  worked  as  described  in  the  attorneys  e-  mail.  Ms.  Cullen  told  the  Enforcement  Bureau 
 that  she  copied  the  attorneys  description  (with  minor  non-  substantive  changes)  into  an  e-  mail  she 
 sent  to  two  other  SBC  employees  whom  she  believed  to  be  subject  matter  experts  on  the  SBC 
 system.  In  her  e-  mail  message,  Ms.  Cullen  stated  that  [  w]  e  need  to  present  rebuttal  testimony 
 that  says  from  a  technical  perspective  LoopQual  provides  and  then  inserted  the  attorneys 
 description. 


 17.  Over  the  next  few  days,  Ms.  Cullens  e-  mail  message  was  forwarded  to  several 
 other  SBC  employees,  including  Mr.  Mileham  and  Dennis  Schuessler,  who  was  an  area  manager 
 at  SBC  and  responsible  for  SBCs  pre-  ordering  OSS  electronic  interface.  27  Although  she  did  not 
 originally  direct  her  e-  mail  to  Messrs.  Mileham  and  Schuessler,  Ms.  Cullen  told  the  Enforcement 
 Bureau  that  she  considered  both  men  to  be  subject-  matter  experts  regarding  loop  qualification. 


 18.  The  day  after  receiving  Ms.  Cullens  message,  Mr.  Schuessler  responded  that  the 
 e-  mails  description  of  the  loop  qualification  system  was  basically  accurate.  28  Mr.  Schuessler 
 said  that  requesting  carriers  sent  requests  for  loop  qualification  information  to  SBCs  LFACS, 
 which  behaved  as  if  it  were  actually  provisioning  the  loop  requested,  and  that  when  the  system 
 requests  actual  information  from  LFACS,  LFACS  uses  the  same  algorithms  that  it  would  to 
 provision  the  order.  29  Mr.  Schuessler  noted  that  he  would  leave  the  technical  details  to  John 
 Mileham  to  answer,  and  copied  Mr.  Mileham  on  his  response.  30 


 19.  Mr.  Schuessler  has  stated  that,  at  the  time  he  responded  to  Ms.  Cullens  e-  mail,  he 
 did  not  consider  himself  to  be  an  expert  on  SBCs  loop  qualification  system.  Mr.  Schuessler  has 
 also  stated  that  he  did  not  perform  any  research  into  the  companys  system  following  his  receipt 
 of  the  Cullen  e-  mail.  Rather,  he  gave  an  answer  that  was  his  best  understanding  of  the  system  at 
 the  time.  In  an  interview  with  the  Enforcement  Bureau,  Mr.  Schuessler  admitted  that  he  should 
 not  have  responded  substantively  to  Ms.  Cullens  e-  mail,  but  that  he  simply  wanted  to  help  her  in 
 light  of  the  failure  by  other  persons  to  respond  to  her  request  for  assistance.  According  to  Mr. 


 (Continued  from  previous  page) 
 .  .  .loop  qual  info  on  the  loop  that  would  be  provisioned  if  the  customer  requested  an  xDSL-capable 
 loop  or  a  HFPL  UNE  for  the  customer  (address  searched).  Our  systems  are 
 provisioning  systems,  which,  when  an  order  is  placed,  search  for  a  specific  loop  at  that   
 requested  address  on  which  we  can  provision  an  xDSL  capable  loop.  The  systems  arent 
 designed  to  merely  provide  information;  they  design  service  and  tell  technicians  what  to 
 provision  so  that  we  can  provide  that  service.  If  a  specific  telephone  number  using  a  specific 
 loop  is  requested  for  line  sharing  (note  that  this  doesnt  or  shouldnt  matter  with  a  new, 
 stand-  alone  xDSL-  capable  loop),  and  the  loop  provisioned  isnt  the  same  as  the  existing  loop 
 used  for  voice  service,  we  do  a  line  station  transfer  (LST)  to  ensure  that  the  voice  service  is 
 transferred  to  the  xDSL-  capable  loop. 


 27  See  Attachment  G  to  SBC  Report. 


 28  Id. 
 29  Id. 
 30  Id. 
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 Schuessler,  Mr.  Mileham  was  the  actual  expert  on  the  subject  at  issue,  and  he  assumed  that  Mr. 
 Mileham  would  correct  his  statement  if  he  were  wrong.  Although  he  and  Mr.  Mileham  had 
 several  conversations  regarding  SBCs  loop  qualification  system  between  December  2000  and 
 April  2001,  the  two  claim  that  they  never  discussed  Ms.  Cullens  e-  mail  or  her  subsequent 
 affidavit. 


 20.  Both  Ms.  Cullens  e-  mail  and  Mr.  Schuesslers  response  were  forwarded  to  Mr. 
 Mileham  while  he  was  on  vacation.  According  to  Mr.  Mileham,  when  he  returned  home  on 
 December  3,  2000,  he  opened  his  e-  mail  from  home  and  read  some  of  approximately  three 
 hundred  e-  mail  messages  before  shutting  down  his  computer.  The  next  day  at  the  office,  he 
 claims,  he  discovered  that  the  e-  mails  he  had  downloaded  the  day  before  were  missing.  As  Mr. 
 Mileham  told  the  Enforcement  Bureau,  when  he  returned  home  to  retrieve  the  missing  e-  mails, 
 his  computer  crashed  for  some  reason  and  he  was  forced  to  reload  his  operating  system  onto  his 
 home  computer,  apparently  deleting  the  missing  e-  mails  forever. 


 21.  Mr.  Mileham  represents  that,  although  his  previous  job  involved  desktop  computer 
 support,  he  did  not  attempt  to  recover  the  three  hundred  lost  e-  mails.  As  he  told  the  Enforcement 
 Bureau,  he  assumed  that  they  were  lost  when  he  re-  loaded  his  operating  system.  Nor  did  Mr. 
 Mileham  solicit  anyones  help  in  recovering  the  lost  e-  mails  or  tell  any  other  SBC  employees, 
 including  his  supervisors,  about  his  computer  crash.  According  to  Mr.  Mileham,  he  was  the  only 
 SBC  employee  who  had  experienced  this  problem.  Finally,  Mr.  Mileham  did  not  disclose  the 
 deletion  of  his  e-  mails  to  any  of  the  competing  carriers  who  communicated  with  him  via  e-  mail  to 
 resolve  questions  about  SBCs  loop  qualification  system.  Mr.  Mileham  stated  that  because  of  this 
 system  crash,  he  did  not  review  Ms.  Cullens  e-  mail  or  Mr.  Schuesslers  response  until  March 
 2001.  According  to  Mr.  Mileham,  had  he  reviewed  either  message  at  the  time  they  were  sent,  he 
 would  have  explained  that  the  loop  qualification  system  found  the  first  loop  to  the  given  address, 
 but  would  not  necessarily  identify  a  copper  loop  if  one  was  present. 


 22.  Angela  Cullen  knew  Mr.  Mileham  was  responsible  for  loop  qualification.  Even 
 though  she  had  received  no  response  from  him,  however,  Ms.  Cullen  never  tried  to  contact  him 
 after  receiving  Mr.  Schuesslers  response.  Instead,  Ms.  Cullen  proceeded  to  draft  an  affidavit 
 based  upon  her  own  research  and  the  feedback  she  received  from  Mr.  Schuessler  and  another 
 SBC  affiant,  Carol  Chapman.  In  the  affidavit  accompanying  SBCs  reply  comments,  Ms.  Cullen 
 asserted  that  SBCs  loop  qualification  system  returned  information  to  requesting  carriers  by 
 querying  the  LFACS  provisioning  system.  Ms.  Cullen  stated,  consistent  with  Mr.  Schuesslers  e-mail, 
 that  when  a  carrier  requested  information  from  SBCs  loop  qualification  system,  LFACS 
 presented  the  requesting  carrier  with  information  on  the  loop  that  the  system  would  use  to 
 provision  the  requested  service.  31  More  precisely,  Ms.  Cullen  said  that  LFACS  simply  provides 
 the  information  on  the  loop  that  would  be  assigned  to  fulfill  a  request  for  DSL  service  to  the 
 address.  32 


 31  Reply  Affidavit  of  Angela  Cullen,  para.  4,  attached  to  SBC  Reply  Brief  (  Cullen  Reply  Aff.). 
 32  Id.  para.  4. 
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 2.  The  Mark  Welch  Affidavit 
 23.  Mark  Welch,  a  General  Manager  in  SBCs  Network  Regulatory  organization,  also 
 submitted  a  reply  affidavit  responding  to  IP  Communications  allegations.  Mr.  Welch  was 
 responsible  for  developing  SBCs  network  policies,  primarily  with  respect  to  the  outside  network.  33  Prior  to  his  reply  affidavit,  Mr.  Welch  had  never  testified  or  submitted  an  affidavit  on 


 the  topic  of  SBCs  loop  qualification  system.  Rather,  Mr.  Welch  said  his  participation  in 
 regulatory  proceedings  had  focused  on  other  topics,  such  as  provisioning,  maintenance  and  repair 
 testing,  and  general  wholesale  products  functionality  matters. 


 24.  In  a  five-  page  affidavit  attached  to  SBCs  reply  comments,  Mr.  Welch  explained 
 that  SBC  would  perform  a  line  and  station  transfer  (  LST)  when  provisioning  a  competitors 
 order  in  the  event  that  the  competitor  requested  DSL  or  line  sharing  service  to  an  end  user  that 
 was  being  served  by  facility  already  in  use.  In  such  situations,  LFACS  would  identify  or  create 
 from  existing  pieces  of  the  network  a  spare  circuit  over  which  SBC  could  provision  the  service 
 requested  by  the  competitor.  In  a  single  sentence,  Mr.  Welchs  affidavit  then  claimed  SBC  would 
 provide  loop  qualification  information  on  a  xDSL-  capable  facility,  if  available,  and  would  perform 
 the  LST  to  provision  the  requested  xDSL  capable  loop,  rather  than  return  information  to  the 
 requesting  carrier  on  an  existing  fiber  loop.  34  This  assertion  was  wrong. 


 25.  Mr.  Welch  said  that  when  he  drafted  his  affidavit,  he  relied  upon  his  understanding 
 of  the  loop  qualification  system,  which  developed  during  his  attendance  at  State  collaborative 
 DSL  proceedings.  At  these  proceedings,  he  primarily  discussed  physical  provisioning  of  DSL  and 
 line  sharing.  Mr.  Welch  said  he  gained  his  loop  qualification  knowledge  not  from  his  official 
 duties  but  simply  from  being  present  when  others  discussed  the  loop  qualification  system.  Mr. 
 Welch  told  the  Enforcement  Bureau,  however,  that  he  did  not  write  the  language  in  his  affidavit 
 regarding  loop  qualification  and  that  it  was  not  his  idea  to  include  the  subject  in  his  affidavit.  Mr. 
 Welch  stated  that  when  he  initially  drafted  his  reply  affidavit,  he  did  not  include  anything  about 
 the  loop  qualification  system.  Mr.  Welch  could  not  recall  how  the  sentence  got  into  his  affidavit, 
 who  wrote  it,  or  whose  idea  it  was  to  add  it  to  his  affidavit.  But  in  a  separate  interview  with  the 
 Enforcement  Bureau,  Carol  Chapman  indicated  that  she  had  suggested  to  Mr.  Welch  that  he 
 include  language  regarding  SBCs  loop  qualification  system  in  his  affidavit,  although  she  did  not 
 recall  drafting  any  specific  language. 


 26.  On  December  6,  2000,  Mr.  Welch  sent  a  draft  of  his  five-  page  affidavit  --  which  by 
 then  contained  the  loop  qualification  sentence  --  by  e-  mail  to  a  number  of  SBC  employees, 
 including  Mr.  Mileham,  Mr.  Schuessler,  and  Ms.  Chapman.  35  In  the  e-  mail,  Mr.  Welch  briefly 


 33  Reply  Affidavit  of  Mark  Welch  para.  1,  attached  to  SBC  Reply  Brief  (  Welch  Reply  Aff.). 


 34  Welch  Reply  Aff.  para.  6.  Mr.  Welch  wrote:  If  there  is  an  available  DSL-  capable  facility  to  that  address, 
 SWBT  will  provide  the  loop  qualification  information  for  that  DSL-  capable  facility  and  perform  the  LST  versus 
 providing  loop  qualification  information  for  the  line  that  is  served  by  DLC  and  therefore  is  not  DSL-  capable.  Id. 


 35  See  Letter  from  Sandra  L.  Wagner,  Vice  President-  Federal  Regulatory,  SBC  Telecommunications,  Inc.  to  Brad 


 Berry,  Deputy  Chief,  Enforcement  Bureau,  Federal  Communications  Commission  (May  3,  2001)  (  May  3,  2001 
 Letter). 
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 summarized  the  main  points  in  his  affidavit,  attached  it,  and  asked  for  comments.  The  only  person 
 who  responded  to  his  request  was  John  Mileham,  who  (now  back  from  vacation)  sent  his 
 response  the  next  day.  Mr.  Mileham  made  only  minor  edits  and  failed  to  correct  the  one  sentence 
 in  Mr.  Welchs  affidavit  that  described  matters  within  Mr.  Milehams  job  responsibilities.  36  Mr. 
 Mileham  admits  that  the  Welch  affidavit  was  incorrect  and  that  he  understood  at  that  time  how 
 the  system  actually  worked.  Mr.  Mileham  claimed  in  an  affidavit  filed  with  the  Commission 
 during  the  Enforcement  Bureau  investigation  that  he  reviewed  Mr.  Welchs  affidavit  late  at 
 night  and  that  he  must  have  skipped  this  important  sentence.  37  As  discussed  below,  however, 
 the  evidence  demonstrates  that  Mr.  Mileham  actually  reviewed  Mr.  Welchs  affidavit  around 
 noon.  38 


 3.  The  Carol  Chapman  Affidavit 
 27.  Carol  Chapman  submitted  the  third  SBC  reply  affidavit  addressing  the  IP 
 allegations.  At  the  time  SBC  filed  the  reply  affidavits,  Ms.  Chapman  was  an  associate  director  in 
 SBCs  wholesale  marketing  group  and,  like  Ms.  Cullen,  had  drafted  a  previous  affidavit 
 accompanying  SBCs  application.  In  late  November  2000,  she  was  approached  to  draft  a  reply 
 affidavit  addressing  a  number  of  issues  raised  by  competing  carriers,  including  the  IP  allegations 
 concerning  loop  qualification.  Ms.  Chapman  told  the  Enforcement  Bureau  that,  in  writing  her 
 reply  affidavit,  she  relied  on  draft  versions  of  the  Welch  and  Cullen  affidavits,  specifically  using 
 their  explanations  of  how  the  loop  qualification  system  worked.  But  Ms.  Chapman  also  stated 
 that  she  was  the  person  who  suggested  to  Mark  Welch  that  he  discuss  loop  qualification  in  his 
 affidavit,  although  she  did  not  recall  drafting  any  language  for  use  in  the  Welch  affidavit.  Ms. 
 Chapman  did  not  attempt  to  contact  Mr.  Mileham  about  the  issue  even  though  she  knew  he 
 oversaw  SBCs  loop  qualification  system. 


 28.  Like  those  of  Ms.  Cullen  and  Mr.  Welch,  Ms.  Chapmans  affidavit  incorrectly 
 described  how  the  loop  qualification  system  functioned.  Specifically,  Ms.  Chapman  represented 
 that  LFACS,  upon  receipt  of  a  loop  qualification  request,  would  perform  the  same  type  of  query 
 as  if  it  were  provisioning  the  service  requested  and  that  the  the  loop  qualification  process  follows 
 the  same  process  as  the  assignment  process.  39 


 29.  In  addition  to  allegedly  relying  on  Mr.  Welch  and  Ms.  Cullen  in  her  reply  affidavit, 
 Ms.  Chapman  used  her  own  understanding  of  the  loop  qualification  process.  Specifically,  she  had 
 worked  on  SBCs  team  that  developed  the  loop  qualification  offering  between  January  and  May 
 2000.  According  to  Ms.  Chapman,  because  of  a  series  of  changes  in  the  loop  qualification  system 
 during  this  period,  it  was  not  unusual  for  team  members  to  have  different  understandings  of  how 
 the  system  worked.  Ms.  Chapman  stated  that  at  one  point,  she  believed  that  the  loop  qualification 


 36  Mileham  Aff.  para.  7. 
 37  Id. 
 38  See  May  3,  2001  Letter. 
 39  Reply  Affidavit  of  Carol  Chapman  para.  5,  attached  to  SBC  Reply  Brief. 
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 system  looked  only  for  the  first  available  loop  to  an  end-  user,  but  was  informed  otherwise  by 
 another  SBC  employee. 


 30.  But  well  before  she  submitted  her  reply  affidavit,  Ms.  Chapman  had  received  and 
 read  the  loop  qualification  overview  drafted  by  John  Mileham.  As  described  above,  the  Mileham 
 overview  accurately  stated  that  SBCs  loop  qualification  system  would  provide  information  only 
 about  the  first  loop  on  SBCs  system.  Thus,  carriers  requesting  a  copper  loop  to  a  given 
 address  would  be  told  of  such  a  loop  only  if  that  loop  was  also  the  first  loop.  Ms.  Chapman 
 stated  in  an  interview  with  the  Enforcement  Bureau  that  she  misread  the  overview  at  that  time  and 
 mistakenly  thought  that  the  description  referred  to  the  LFACS  search  for  copper  loops  during 
 provisioning.  Ms.  Chapman  stated  that  Mr.  Milehams  overview  accurately  describes  the  loop 
 qualification  as  it  actually  worked  at  that  time,  that  is,  by  looking  for  the  first  loop.  Ms. 
 Chapman  stated  that  she  did  not  consult  the  loop  qualification  overview  during  the  preparation  of 
 her  reply  affidavit. 


 D.  Questions  Arise  Regarding  The  Accuracy  Of  The  Reply  Affidavits 
 31.  On  December  11,  2000,  SBC  submitted  its  reply  brief  to  the  Commission  and 
 included  the  affidavits  from  Ms.  Cullen,  Mr.  Welch  and  Ms.  Chapman.  The  Commission  granted 
 SBCs  application  and,  in  the  Order  released  on  January  22,  2001,  referred  to  SBCs 
 representations  concerning  the  operation  of  the  loop  qualification  system  and  how  LFACS  would 
 return  information  to  a  requesting  carrier  as  if  it  were  provisioning  the  service  requested.  40 


 32.  In  early  February  2001,  a  few  weeks  after  the  Commission  released  the  Order, 
 Dennis  Schuessler  read  the  Orders  loop  qualification  discussion.  During  his  review,  Mr. 
 Schuessler  discovered  what  he  believed  was  an  apparent  inconsistency  between  the  Commissions 
 description  of  how  SBCs  loop  qualification  system  worked  and  what  he  had  learned  about  the 
 system  in  a  state  loop  qualification  proceeding  in  Illinois.  41 


 33.  Within  the  next  few  days,  Mr.  Schuessler  met  with  Angela  Cullen  regarding  this 
 issue.  42  In  that  meeting,  he  expressed  concern  that  the  Commission  had  incorrectly  described 
 SBCs  loop  qualification  system,  and  had  done  so  in  reliance  on  the  reply  affidavits.  But  rather 
 than  investigating  the  matter  further,  Ms.  Cullen  simply  reminded  Mr.  Schuessler  that  he  had 
 reviewed  her  affidavit  before  it  was  submitted.  According  to  Mr.  Schuessler,  she  suggested  that 
 he  raise  the  issue  with  Ms.  Chapman.  Despite  the  concerns  Mr.  Schuessler  raised  about  her 
 affidavit,  Ms.  Cullen  stated  in  an  interview  with  the  Enforcement  Bureau  that  she  made  no 
 attempt  to  verify  whether  her  statements  had  been  accurate  or  to  make  other  SBC  employees 
 aware  of  Mr.  Schuesslers  concerns.  And  although  Mr.  Schuessler  now  concedes  that  Mr. 


 40  Kansas/  Oklahoma  Order,  para.  128  n.  352. 
 41  Affidavit  of  Dennis  W.  Schuessler  (  Schuessler  Aff.)  para.  10,  SBC  Report,  Attachment  F. 
 42  Id.  para.  11. 
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 Mileham  would  have  been  the  best  person  with  whom  to  confer  regarding  the  loop  qualification 
 systems  functionality,  Mr.  Schuessler  states  he  never  did  so  after  reviewing  the  Order. 


 34.  Mr.  Schuessler  did  relay  his  concerns  to  Mark  Welch.  According  to  Mr.  Welch, 
 around  the  time  that  the  Commission  released  the  Order,  Mr.  Schuessler  approached  him  after  a 
 meeting.  Mr.  Welch  told  the  Enforcement  Bureau  that  Mr.  Schuessler  said  he  was  concerned  that 
 the  loop  qualification  system  did  not  work  as  described  in  the  reply  affidavits.  In  response,  Mr. 
 Welch  said  he  told  Mr.  Schuessler  that  the  system  had  to  work  that  way.  Mr.  Welch  stated  in 
 the  Enforcement  Bureau  interview  that  he  felt  that  Mr.  Schuessler  was  wrong  and  told  him  to 
 check  the  Order  and  confer  with  the  experts.  Despite  this  conversation,  Mr.  Welch  claims  that 
 he  did  not  review  his  affidavit  to  determine  if  he  had  included  any  potentially  incorrect  information 
 or  attempt  to  verify  that  the  other  affidavits  containing  loop  qualification  system  information  were 
 correct.  Mr.  Welch  also  states  that  he  did  not  contact  or  inform  anyone  else  about  his 
 conversation  with  Mr.  Schuessler. 


 35.  On  March  6,  2001,  approximately  one  month  after  he  relayed  his  concerns  to  Ms. 
 Cullen  and  Mr.  Welch,  Mr.  Schuessler  spoke  with  Carol  Chapman.  In  the  interim,  he  had 
 exchanged  calls  with  Ms.  Chapman  and  left  a  message  explaining  that  he  and  Ms.  Cullen  had 
 spoken  and  that  they  had  questions  about  the  Commissions  order.  According  to  Ms.  Chapman, 
 Mr.  Schuessler  told  her  that  his  reading  of  the  Commissions  discussion  of  SBCs  loop 
 qualification  system  did  not  match  his  understanding  of  how  the  system  actually  worked. 
 Specifically,  Mr.  Schuessler  told  Ms.  Chapman  that  he  believed  the  Commissions  statement  that 
 the  system  followed  provisioning  logic  was  incorrect.  He  then  asked  if  her  affidavit  and  the 
 Commissions  description  of  the  system  in  the  Order  were  consistent.  She  told  him  they  were, 
 and  that  it  would  be  a  problem  if  the  system  did  not  work  as  described  in  the  affidavits. 


 36.  Almost  immediately  after  her  conversation  with  Mr.  Schuessler,  Ms.  Chapman 
 called  John  Mileham  and  described  the  problem.  Mr.  Mileham  told  her  that  the  description  in  the 
 SBC  affidavits  was  wrong  and  that  the  reply  affiants  should  have  checked  with  him  (apparently 
 failing  to  recall  his  involvement  with  the  Welch  affidavit).  Ms.  Chapman,  believing  that  the 
 affidavits  might  well  contain  incorrect  statements,  called  SBCs  legal  department.  She  did  not 
 attempt  to  contact  Ms.  Cullen  or  Mr.  Welch  to  discuss  the  matter.  Soon  after  that,  Ms.  Cullen 
 and  Mr.  Welch  were  informed  that  their  affidavits  were  inaccurate. 


 E.  SBC  Notifies  The  Commission  Of  The  Inaccurate  Affidavits 
 37.  In  mid-  to-  late  March  2001,  SBC  was  preparing  to  file  its  application  for  section 
 271  authority  for  Missouri.  At  the  same  time,  the  company  was  also  investigating  the 
 inaccuracies  in  its  Kansas/  Oklahoma  affidavits.  While  SBC  was  attempting  to  determine  why  it 
 had  filed  inaccurate  affidavits  in  the  Kansas/  Oklahoma  proceeding,  it  also  had  to  ascertain  how  its 
 loop  qualification  system  actually  functioned  before  it  filed  its  Missouri  application.  In  the 
 Kansas/  Oklahoma  proceeding,  SBC  had  asserted  in  numerous  places  that  its  OSS  (of  which  the 
 loop  qualification  system  was  a  part)  was  identical  throughout  its  five-  state  SWBT  region  (i.  e., 
 Kansas,  Oklahoma,  Missouri,  Texas,  and  Arkansas).  SBC  contended  that  it  used  the  same 
 systems  in  the  same  locations  to  provide  access  to  its  OSS  throughout  the  SWBT  region  and  a 
 competitor  accessing  the  system  in  Texas  would  follow  the  same  procedures  and  use  the  same 
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 functionalities  of  the  OSS  when  it  accessed  the  system  in  Kansas,  Oklahoma,  or  Missouri.  43  Thus, 
 before  SBC  could  file  its  Missouri  application,  it  had  to  conclude  its  internal  inquiry  into  the 
 Kansas/  Oklahoma  affidavits  and  determine  how  the  system  worked  because  any  uncertainty  about 
 the  loop  qualification  functionality  in  Kansas  and  Oklahoma  also  applied  to  the  system  in 
 Missouri.  Once  it  determined  how  its  system  actually  worked,  SBC  was  faced  with  the  prospect 
 of  representing  to  the  Commission  and  interested  parties  in  the  Missouri  271  application  that  the 
 loop  qualification  system  functioned  differently  than  as  represented  in  the  Kansas/  Oklahoma 
 proceeding. 


 38.  Faced  with  these  parallel,  yet  inextricably  linked,  matters,  SBC  informed  the 
 Commission  of  the  concerns  with  the  loop  qualification  system.  In  a  preliminary  meeting  with  the 
 Commissions  Common  Carrier  Bureau  on  or  about  March  26th,  when  SBC  was  on  the  verge  of 
 submitting  its  Missouri  application,  SBC  indicated  that  something  had  arisen  that  might  affect  its 
 Missouri  application.  SBC  explained  to  CCB  staff  that  it  had  filed  affidavits  in  the 
 Kansas/  Oklahoma  proceeding  that  may  have  contained  inaccurate  statements  concerning  the 
 operation  of  its  loop  qualification  system.  Moreover,  SBC  indicated  that  the  loop  qualification 
 system  in  Kansas,  Oklahoma,  and  Missouri  did  not  work  as  described  in  the  Commissions 
 Kansas/  Oklahoma  Order.  The  Common  Carrier  Bureau  advised  that  SBC  should  not  submit  its 
 section  271  application  for  Missouri  until  it  had  remedied  this  matter  and  that  the  company  should 
 inform  the  Commissions  Enforcement  Bureau  of  this  development.  SBC  agreed.  44 


 39.  On  or  about  March  30,  2001,  SBC  then  met  with  the  Enforcement  Bureau  to  give 
 its  preliminary  understanding  of  the  problem.  At  the  conclusion  of  the  meeting,  Bureau  staff 
 requested  that  SBC  file  a  report  describing  its  understanding  of  the  circumstances  surrounding  the 
 filing  of  the  inaccurate  affidavits.  On  April  6,  2001,  SBC  filed  a  report  signed  by  a  Senior  Vice 
 President  in  which  it  admitted  that  the  reply  affidavits  contained  inaccuracies.  SBC  attached  to 
 this  report  a  new  round  of  affidavits  from  each  of  the  reply  affiants  (Mr.  Welch,  Ms.  Chapman  and 
 Ms.  Cullen)  and  from  Messrs.  Mileham  and  Schuessler.  The  affidavits  attached  to  the  report 
 described  generally  the  process  by  which  the  reply  affiants  collected  and  included  the  inaccurate 
 information  in  their  reply  affidavits,  how  Messrs.  Mileham  and  Schuessler  and  other  SBC 


 43  See  SBC  Brief  at  19-  20. 
 44  On  April  3,  2001,  SBC  implemented  an  enhancement  to  its  loop  qualification  system  that  caused  the  system  to 
 return  actual  loop  make-  up  information  on  a  loop  connected  to  the  customer  address  requested  by  the  competitive 
 carrier,  if  such  information  exists  in  SBCs  LFACS  system  and  can  be  located,  retrieved  and  returned  within  two 
 minutes.  The  enhancement  causes  the  system  to  search  LFACS  first  for  a  non-  loaded  copper  loop  connected  to  the 
 end  user  for  which  actual  information  exists.  If  the  system  finds  such  actual  information,  then  it  will  return  it  to 
 the  requesting  carrier.  See  Affidavit  of  Brian  Horst,  attached  to  Brief  in  Support  of  Application  by  Southwestern 
 Bell  for  Provision  of  In-  Region,  InterLATA  Services  in  Missouri,  CC  Docket  No.  01-  88  (filed  April  4,  2001). 
 Moreover,  in  a  footnote  to  an  affidavit  submitted  with  its  271  application  for  Missouri,  SBC  stated  that  it  has 
 learned  that,  contrary  to  its  subject  matter  experts  early  understanding  of  the  interrelationship  between  LFACS 
 and  the  loop  qualification  system  software,  the  LFACS  provisioning  logic  was  not  being  used  to  search  for  loop 
 makeup  information.  The  recent  enhancement  to  the  loop  qualification  system,  however,  was  designed  to  search 
 for  loop  makeup  information  in  a  manner  similar  to  how  LFACS  would  attempt  to  provision  an  xDSL-  capable  loop 
 if  one  were  requested  by  a  CLEC.  See  Affidavit  of  Derrick  Hamilton  at  4,  n.  3,  Attachment  J  to  SBC  Report. 
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 employees  responded  or,  in  some  cases,  failed  to  respond  to  inquiries  concerning  the  functionality 
 of  the  loop  qualification  system,  and  the  information  upon  which  the  reply  affidavits  were  based. 


 40.  Shortly  thereafter,  on  or  about  April  9,  2001,  Enforcement  Bureau  staff  contacted 
 SBC  and  inquired  as  to  whether  the  company  intended  to  file  a  section  1.65  notice  in  the 
 Kansas/  Oklahoma  proceeding.  Under  section  1.65  of  the  Commissions  rules,  absent  good  cause, 
 applicants  are  required  to  disclose  inaccuracies  in  their  pending  applications  as  promptly  as 
 possible,  and  in  any  event  within  30  days,  whenever  information  furnished  in  the  application  is  no 
 longer  substantially  accurate  or  complete  in  all  significant  respects  or  there  has  been  a 
 substantial  change  as  to  any  other  matter  which  may  be  of  decisional  significance.  45  On  April 
 13,  2001,  SBC  filed  a  letter  pursuant  to  section  1.65  of  the  Commissions  rules  in  which  it  advised 
 that  certain  reply  affidavits  filed  in  the  Kansas/  Oklahoma  proceeding  contained  inaccurate 
 information  on  a  loop  qualification  issue.  46 


 III.  DISCUSSION 
 41.  Under  section  503  of  the  Act,  any  person  who  is  determined  by  the  Commission  to 
 have  willfully  or  repeatedly  failed  to  comply  with  any  of  the  provisions  of  the  Act,  or  any  rule  or 
 order  issued  by  the  Commission  under  the  Act,  shall  be  liable  for  a  forfeiture  penalty.  47  In  order 
 to  impose  such  a  forfeiture  penalty,  the  Commission  must  issue  a  notice  of  apparent  liability,  the 
 notice  must  be  received,  and  the  person  against  whom  the  notice  has  been  issued  must  have  an 
 opportunity  to  show,  in  writing,  why  no  such  forfeiture  penalty  should  be  imposed.  48  The 


 45  Section  1.  65  of  the  Commissions  Rules,  47  C.  F.  R.    1.  65,  states  in  relevant  part: 
 Section  1.65(  a).  Substantial  and  significant  changes  in  information  furnished  by  applicants 
 to  the  Commission.  Each  applicant  is  responsible  for  the  continuing  accuracy  and  completeness 
 of  information  furnished  in  a  pending  application  or  in  Commission  proceedings  involving  a 
 pending  application.  Whenever  the  information  furnished  in  the  pending  application  is  no  longer 
 substantially  accurate  and  complete  in  all  significant  respects,  the  applicant  shall  as  promptly  as 
 possible  and  in  any  event  within  30  days,  unless  good  cause  is  shown,  amend  or  request  the 
 amendment  of  his  application  so  as  to  furnish  such  additional  or  corrected  information  as  may  be 
 appropriate.  Whenever  there  has  been  a  substantial  change  as  to  any  other  matter  which  may  be 
 of  decisional  significance  in  a  Commission  proceeding  involving  the  pending  application,  the 
 applicant  shall  as  promptly  as  possible  and  in  any  event  within  30  days,  unless  good  cause  is 
 shown,  submit  a  statement  furnishing  such  additional  or  corrected  information  as  may  be 
 appropriate,  which  shall  be  served  upon  parties  of  record  in  accordance  with    1.  47.  Where  the 
 matter  is  before  any  court  for  review,  statements  and  requests  to  amend  shall  in  addition  be 
 served  upon  the  Commission's  General  Counsel.  For  the  purposes  of  this  section,  an  application 
 is  pending  before  the  Commission  from  the  time  it  is  accepted  for  filing  by  the  Commission 
 until  a  Commission  grant  or  denial  of  the  application  is  no  longer  subject  to  reconsideration  by 
 the  Commission  or  to  review  by  any  court. 


 46  SBC  1.65  Report  at  1. 


 47  47  U.  S.  C.    503(  b);  47  C.  F.  R.    1.80(  a). 
 48  47  U.  S.  C.    503(  b)(  4);  47  C.  F.  R.    1.80(  f). 
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 Commission  will  then  issue  a  forfeiture  if  it  finds  by  a  preponderance  of  the  evidence  that  the 
 person  has  violated  the  Act  or  a  Commission  rule.  49  As  set  forth  in  more  detail  below,  we 
 conclude  under  this  standard  that  SBC  is  apparently  liable  for  a  forfeiture  for  its  apparent 
 violations  of  Commission  rules  and  a  Commission  Order. 


 42.  The  duty  of  absolute  truth  and  candor  is  a  fundamental  requirement  for  those 
 appearing  before  the  Commission.  Our  decisions  rely  heavily  on  the  completeness  and  accuracy 
 of  applicants  submissions  because  we  do  not  have  the  resources  to  verify  independently  each  and 
 every  representation  made  in  the  thousands  of  pages  submitted  to  us  each  day.  For  that  reason, 
 we  are  disturbed  by  SBCs  apparent  actions  here.  SBC  did  not  exercise  reasonable  care  in 
 verifying  the  information  regarding  the  operation  of  its  loop  qualification  system  before  submitting 
 the  three  affidavits  at  issue.  Moreover,  although  our  rules  require  companies  promptly  to  correct 
 inaccurate  or  incomplete  information  submitted  to  the  Commission,  SBC  took  over  two  months 
 after  the  company  first  focused  on  the  fact  that  the  affidavits  were  (or  may  have  been)  incorrect  to 
 notify  the  Commission  that  the  reply  affidavits  were  wrong.  Furthermore,  when  the  Commission 
 began  to  investigate  those  inaccuracies,  an  SBC  employee  apparently  intentionally  misrepresented 
 facts  to  the  Commission  in  an  affidavit  attached  to  a  report  signed  by  an  SBC  Senior  Vice 
 President.  Finally,  SBC  apparently  violated  the  terms  of  the  June  1999  SBC/  SNET  Consent 
 Decree,  in  which  SBC  promised  to  train  its  employees  who  have  regular  contact  with  the 
 Commission  as  part  of  their  assigned  duties  in  our  rules  governing  contacts  with,  and 
 representations  to,  the  Commission. 


 A.  The  Evidence  Does  Not  Warrant  a  Finding  of  Apparent  Liability  for 
 Intentional  Misrepresentation  Regarding  the  Three  Reply  Affidavits 


 43.  The  Commission  initiated  this  investigation  primarily  to  determine  whether  SBC 
 intentionally  misrepresented  the  functionality  of  its  loop  qualification  system  in  order  to  obtain  a 
 grant  of  its  section  271  application.  We  have  determined  that  the  evidence,  although  deeply 
 troubling,  does  not  support  a  finding  that  SBC  apparently  engaged  in  making  intentional 
 misrepresentations  in  violation  of  section  1.  17  of  the  Commissions  Rules  in  connection  with  the 
 three  reply  affidavits.  50  With  that  said,  we  do  conclude  that  SBC  was  negligent  in  collecting  the 
 information  it  relied  upon  in  its  reply  affidavits  and  in  making  its  showing  under  section  271. 


 49  See,  e.  g.  Tuscola  Broadcasting  Co.,  Memorandum  Opinion  and  Order,  76  FCC  2d  367,  371  (1980)  (applying 
 preponderance  of  the  evidence  standard  in  reviewing  Bureau  level  forfeiture  order).  Cf.  47  U.  S.  C.    312(  d) 
 (assigning  burden  of  proof  in  hearings  to  Commission). 


 50  Section  1.  17  of  the  Commissions  Rules,  47  C.  F.  R.    1.  17,  states  in  relevant  part: 


 Section  1.17  Truthful  written  statements  and  responses  to  Commission  inquiries  and 
 correspondence.  .  .  .No  applicant,  permittee  or  licensee  shall  in  any  response  to  Commission 
 correspondence  or  inquiry  or  in  any  application,  pleading,  report  or  any  other  written  statement 
 submitted  to  the  Commission,  make  any  misrepresentation  or  willful  material  omission  bearing 
 on  any  matter  within  the  jurisdiction  of  the  Commission. 
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 While  such  negligence  does  not  violate  the  Communications  Act  or  any  Commission  rule,  51  we 
 expect  a  higher  degree  of  care  from  our  regulatees  than  that  exhibited  here  by  SBC. 


 44.  SBCs  negligence  in  collecting  the  information  submitted  to  the  Commission  is 
 easily  summarized.  First,  SBC  began  the  process  when  an  SBC  attorney,  apparently  without 
 consulting  anyone  with  specialized  knowledge  of  the  loop  qualification  system,  wrote  a 
 description  of  the  functionality  of  the  system  and  sent  it  to  Angela  Cullen.  52  The  description 
 incorrectly  indicated  that  the  system  returned  loop  information  as  if  it  were  actually  provisioning 
 the  service  requested.  Ms.  Cullen  copied  and  pasted  the  description  into  an  e-  mail  she  sent  to 
 various  persons  within  the  company  with  responsibility  for  loop  qualification  matters.  Her  e-  mail 
 message  was  then  forwarded  to  Dennis  Schuessler,  whose  responsibilities  included  OSS  interfaces 
 (but  not  the  back  office  systems  operations)  and  John  Mileham,  who  was  SBCs  principal  loop 
 qualification  expert.  Without  doing  any  independent  research,  Mr.  Schuessler  told  Ms.  Cullen 
 that  her  description  of  the  system  was  basically  accurate  and  said  that  he  would  leave  the 
 technical  details  to  John  Mileham  to  answer.  Mr.  Schuessler  copied  Mr.  Mileham  on  his  e-  mail. 
 Mr.  Mileham,  however,  never  responded  to  this  message  or  Ms.  Cullens  initial  e-  mail.  Then, 
 despite  never  hearing  from  the  companys  foremost  loop  qualification  expert,  and  despite  Mr. 
 Schuesslers  advice  that  Mr.  Mileham  should  give  her  the  technical  details,  Ms.  Cullen  drafted  and 
 SBC  submitted  an  affidavit  that  included  an  incorrect  description  of  the  loop  qualification  system. 


 45.  SBC  also  submitted  inaccurate  affidavits  signed  by  Mark  Welch  and  Carol 
 Chapman.  Mr.  Welch,  an  SBC  employee  with  little  loop  qualification  experience,  included  one 
 sentence  in  his  affidavit  that  incorrectly  described  the  functionality  of  the  loop  qualification 
 system.  While  Mr.  Welch  claims  that  it  was  not  his  idea  to  include  this  sentence  in  his  affidavit, 
 he  could  not  recall  how  the  sentence  made  its  way  into  his  affidavit  or  who  suggested  that  he 
 include  it.  Ms.  Chapman,  for  her  part,  claims  that  she  relied  on  the  draft  affidavits  of  Ms.  Cullen 
 and  Mr.  Welch  when  writing  the  section  of  her  own  affidavit  pertaining  to  the  loop  qualification 
 system.  However,  despite  this  stated  reliance  on  Mr.  Welchs  affidavit,  Ms.  Chapman  claims  that 
 she  was  the  one  who  suggested  to  Mr.  Welch  that  he  include  something  in  his  affidavit  concerning 
 the  operation  of  the  loop  qualification  system.  Before  submitting  his  affidavit,  Mr.  Welch  sent  a 
 copy  to  Mr.  Mileham  and  Mr.  Schuessler,  among  others,  for  their  review  and  comment.  While 
 Mr.  Schuessler  failed  to  respond,  Mr.  Mileham  did  review  it.  However,  Mr.  Mileham  did  not 
 correct  Ms.  Welchs  inaccurate  description,  claiming  that  he  must  have  skipped  the  relevant 
 sentence  relating  to  system  because  he  read  it  late  at  night.  53  Ms.  Chapman,  on  the  other  hand, 


 51  Commission  precedent  makes  clear  that  misrepresentation  requires  an  intent  to  deceive  on  the  part  of  the 
 allegedly  offending  party.  See  Swan  Creek  Communications  v.  FCC,  39  F.  3d  1217,  1222  (D.  C.  Cir.  1994);  Fox 
 Television  Stations,  Inc.,  Memorandum  Opinion  and  Order,  10  FCC  Rcd  8452,  8478,  para.  60  (1995).  Cf.  Assn  of 
 American  Physicians  and  Surgeons,  Inc.  v.  Clinton,  187  F.  3d  655,  661-  662  (D.  C.  Cir.  1999)  (reversing  district 
 court  finding  that  partys  declaration  filed  with  court  had  been  submitted  in  bad  faith;  holding  that  district  court 
 had  not  cited  any  evidence  that  at  the  time  the  declaration  was  drafted,  declarant  disbelieved  what  he  was  stating  or 
 that  the  declarants  statements  were  objectively  unreasonable). 


 52  Although  SBC  has  declined  to  identify  the  attorney,  the  evidence  shows  that  none  of  the  persons  from  SBCs 


 legal  department  who  worked  on  the  271  application  possessed  any  expertise  on  loop  qualification  matters. 
 53  Mileham  Aff.,  para.  7. 
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 never  consulted  with  Mr.  Mileham  for  assistance  in  writing  her  affidavit  even  though  she 
 understood  that  he  was  the  companys  loop  qualification  expert. 


 46.  The  confluence  of  errors  committed  by  SBC  during  this  process  is,  as  noted  above, 
 troubling.  But  after  close  consideration  of  the  available  evidence,  we  conclude  that  the  company 
 did  not  apparently  violate  section  1.17  of  our  rules  when  it  submitted  the  three  reply  affidavits. 
 Though  the  companys  lack  of  care  could  hardly  be  more  evident,  we  find  that  it  is  not  reasonable 
 to  infer  that  the  company  intentionally  submitted  false  affidavits  to  the  Commission  during  the 
 271  proceeding.  54  As  we  discuss  in  more  detail  below,  it  is  certainly  permissible,  as  a  general 
 matter,  to  infer  an  intention  to  mislead  from  the  circumstances  surrounding  the  making  of  a  false 
 statement.  55  However,  we  believe  the  evidence  here  is  more  indicative  of  sloppiness  on  SBC's 
 part  in  submitting  the  three  affidavits  in  question  than  any  plan  to  mislead  the  Commission  about 
 the  true  workings  of  the  loop  qualification  system. 


 B.  SBC  Apparently  Violated  Its  Duty  To  Disclose  The  Inaccurate  Statements  In 
 A  Timely  Manner  To  The  Commission 


 47.  We  conclude  that  SBC  apparently  violated  section  1.65  of  the  Commissions  rules, 
 47  C.  F.  R.    1.65.  Under  section  1.65(  a),  applicants  generally  must  disclose  inaccuracies  in  their 
 pending  applications  within  30  days:  (1)  whenever  information  furnished  in  the  pending 
 application  is  no  longer  substantially  accurate  or  complete  in  all  significant  respects;  and 
 (2)  whenever  there  has  been  a  substantial  change  as  to  any  other  matter  which  may  be  of 
 decisional  significance  in  a  Commission  proceeding  involving  the  pending  application.  56  The 
 purpose  of  section  1.65  is  to  inform  the  Commission,  the  public,  and  concerned  parties  of  material 
 changes  in  the  application.  57  Moreover,  section  1.65  imposes  an  affirmative  obligation  on 
 regulated  entities  to  inform  the  Commission  of  the  facts  needed  to  fulfill  its  duties.  As  one  court 
 has  stated,  [  t]  he  Commission  is  not  expected  to  play  procedural  games  with  those  who  come 
 before  it  in  order  to  ascertain  the  truth.    58 


 48.  There  is  no  question  that  SBCs  principal  loop  qualification  expert,  John  Mileham, 
 knew  throughout  the  time  period  relevant  to  this  investigation  that  the  system  did  not  routinely 
 provide  loop  make-  up  information  regarding  copper  loops  when  both  copper  loops  and  fiber 
 loops  were  present.  Mr.  Mileham  stated  as  much  in  an  interview  with  the  Enforcement  Bureau, 
 and  his  August  2000  memorandum  documents  his  knowledge  in  this  regard.  There  is  also  no 


 54  As  noted  above,  Commission  precedent  makes  clear  that  misrepresentation  requires  an  intent  to  deceive  on  the 
 part  of  the  allegedly  offending  party.  See  Swan  Creek  Communications,  39  F.  3d  at  1222;  Fox  Television  Stations, 
 Inc.,  10  FCC  Rcd  at  8478,  para.  60. 


 55  See  para.  66,  infra. 


 56  47  C.  F.  R.    1.65(  a). 
 57  See  Pinelands,  Inc.  and  BHC  Communications,  Inc.,  Memorandum  Opinion  and  Order,  7  FCC  Rcd  6058, 
 6064  n.  25  (1992);  WPIX,  Inc.,  Memorandum  Opinion  and  Order,  33  FCC  2d  782,  783-  84,  para.  3  (1972). 
 58  RKO  General,  Inc.  v.  FCC,  670  F.  2d  215,  229  (D.  C.  Cir.  1981)  (internal  citations  omitted). 
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 question  that  Mr.  Mileham  reviewed  at  least  one  of  the  three  reply  affidavits  before  they  were 
 submitted.  He  received  and  edited  the  five-  page  Welch  affidavit,  but  claims  to  have  skipped  the 
 sentence  that  erroneously  described  SBCs  loop  qualification  system  --  the  only  sentence  in  the 
 affidavit  dealing  with  his  area  of  responsibility.  Given  Mr.  Milehams  admitted  knowledge  of  the 
 true  workings  of  SBCs  loop  qualification  system,  and  his  participation  in  the  drafting  of  at  least 
 one  of  the  three  affidavits  at  issue,  a  strong  argument  can  be  made  that  the  clock  under  section 
 1.65  began  running  as  early  as  December  11,  2000  --  the  date  SBC  filed  the  reply  affidavits  with 
 the  Commission. 


 49.  Nevertheless,  under  the  facts  here  presented,  we  hold  that  the  section  1.65  clock 
 did  not  begin  to  run  until  the  time  that  a  relevant  SBC  manager,  Dennis  Schuessler,  first  reviewed 
 the  Kansas/  Oklahoma  Order  and  recognized  the  reply  affidavits  were  or  may  have  been 
 inaccurate.  59  While  we  do  not  know  the  precise  date  this  occurred,  the  available  evidence 
 indicates  that  it  occurred  in  early  February,  more  than  two  months  before  SBC  filed  its  section 
 1.65  statement  in  the  Kansas/  Oklahoma  proceeding.  60 


 50.  In  early  February  2001,  shortly  after  the  Commission  released  the  Order  on 
 January  22,  Mr.  Schuessler  recognized  an  inconsistency  between  the  loop  qualification  system  as 
 described  in  the  Order  and  his  then-  current  understanding  of  the  actual  operation  of  the  system. 
 At  that  time,  Mr.  Schuessler  was  a  manager  at  SBC  with  substantial  responsibilities  concerning 
 SBCs  OSS.  Mr.  Schuesslers  concerns  upon  reviewing  the  Order  led  him  to  initiate  separate 
 conversations  in  the  first  week  of  February  with  reply  affiants  Welch  and  Cullen.  However, 
 neither  Ms.  Cullen  nor  Mr.  Welch,  also  SBC  managers,  made  any  effort  to  verify  the  accuracy  of 
 their  statements  or  to  investigate  Mr.  Schuesslers  concerns.  And,  like  Mr.  Schuessler,  they  made 
 no  efforts  to  bring  the  matter  to  the  Commissions  attention  or  to  urge  others  to  do  so.  Despite 
 his  concerns,  Mr.  Schuessler  waited  an  entire  month  before  finally  speaking  to  Ms.  Chapman.  By 
 his  own  admission,  he  attempted  to  call  her  only  two  or  three  times  during  that  month,  and  left  a 
 single  message  on  her  voicemail  in  which  he  told  her  only  that  he  had  a  question  for  her  about  the 
 Order.  He  did  not  attempt  to  explain  his  specific  concern  to  her  either  in  a  voicemail  or  an  e-  mail. 
 Furthermore,  he  made  no  attempt  to  ascertain  whether  his  concerns  were  well-  founded  by 
 researching  the  functionality  of  the  system.  Although  Ms.  Chapman,  soon  after  her  discussion 
 with  Mr.  Schuessler,  brought  the  matter  to  the  attention  of  SBCs  legal  department  on  or  about 
 March  6,  2001,  the  company  did  not  file  its  section  1.65  statement  until  April  13,  2001.  61 


 59  We  note  that  under  section  1.  65,  which  requires  applicants  to  notify  the  Commission  of  substantial  changes 
 as  promptly  as  possible  and  in  any  event  within  30  days,  the  30-  day  time  limit  is  the  maximum  amount  of  time 
 that  an  applicant  is  allowed  before  it  must  file  its  notification,  absent  good  cause.  47  C.  F.  R.    1.65(  a). 


 60  In  his  affidavit,  Mr.  Schuessler  states  that  he  received  a  copy  of  the  Order  on  January  31,  2001  and  reviewed  it 


 sometime  between  that  date  and  February  5,  2001.  Schuessler  Aff.  at  4-  5,  paras.  10-  11. 
 61  Even  assuming  the  30-  day  clock  did  not  begin  until  March  6,  2001,  SBC  still  apparently  violated  the 


 requirements  of  section  1.65  by  failing  to  file  its  report  until  April  13,  2001.  Even  then,  the  Enforcement  Bureau 
 had  to  remind  SBC  of  its  obligations  under  section  1.  65  before  the  company  ultimately  filed  its  notice. 
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 51.  Section  1.65  requires  applicants  to  disclose  additional  or  corrected  information 
 whenever  prior  filings  are  no  longer  substantially  accurate  or  complete  in  all  significant  respects 
 or  there  has  been  a  substantial  change  as  to  any  other  matter  which  may  be  of  decisional 
 significance  .  62  We  find  that  the  inaccuracies  in  the  reply  affidavits  were  of  such  significance 
 that  SBC  should  have  notified  the  Commission  no  later  than  30  days  of  the  discovery  by  Mr. 
 Schuessler  that  the  affidavits  were  or  may  have  been  inaccurate.  The  significance  of  the 
 inaccuracies  to  the  proceeding  is  demonstrated  by  the  Commissions  express  reliance  on  the  reply 
 affidavits  in  the  text  of  the  Order.  Due  to  its  reliance  on  the  reply  affidavits,  the  Commission  did 
 not  reach  the  question  about  whether  SBCs  loop  qualification  system,  as  it  actually  operated, 
 complied  with  the  UNE  Remand  Order.  63 


 52.  Moreover,  SBCs  delay  in  filing  the  section  1.  65  notice  had  potentially  important 
 impacts  on  the  Commissions  processes.  SBCs  delay  in  submitting  the  1.65  statement  effectively 
 deprived  the  Commission  and  interested  parties  of  the  opportunity  for  reconsideration  of  the 
 Order  under  the  procedures  set  forth  in  sections  1.106  and  1.108  of  the  Commissions  rules.  We 
 thus  find  that  SBCs  delay  in  filing  the  1.  65  statement  materially  affected  the  Commissions 
 processes. 


 53.  Neither  SBCs  meetings  with  Commission  staff  in  late  March  2001,  nor  its  April  6  th  report  to  the  Enforcement  Bureau  alleviate  our  concerns  about  the  late  section  1.  65  filing. 
 More  specifically,  we  do  not  find  that  SBC  constructively  discharged  its  section  1.65  obligations 
 prior  to  its  actual  notice  filed  on  April  13.  Section  1.  65  requires  a  written  filing  in  the  docket  of 
 the  relevant  proceeding  so  that  all  interested  parties  may  become  aware  of  the  new  changed 
 information.  Oral  representations  to  Commission  staff  do  not  suffice  for  this  purpose.  Nor  could 
 SBCs  April  6  th  report  serve  as  a  section  1.65  notification.  That  report  was  not  served  on 
 interested  parties  nor  was  it  placed  in  the  record  of  the  271  proceeding.  Indeed,  SBC  initially 
 requested  confidential  treatment  of  the  report,  which,  under  Commission  rules,  required  the 
 Enforcement  Bureau  to  keep  it  confidential  for  the  time  being.  64  Indeed,  as  noted  below,  the 
 appeal  of  our  Order  was  and  remains  pending  before  the  D.  C.  Circuit.  Without  a  section  1.65 
 filing  from  SBC,  the  parties  to  that  appeal  had  no  knowledge  of  this  development.  SBCs 
 contacts  with  the  Commission  staff  prior  to  April  13,  2001  thus  did  not  serve  the  purposes  behind 
 section  1.65.  65 


 62  47  C.  F.  R.    1.65(  a). 
 63  UNE  Remand  Order,  para.  129. 
 64  After  discussions  with  Bureau  staff  concerning  its  request  for  confidential  treatment,  SBC  withdrew  its  request 
 by  letter  on  April  18,  2001.  See  Letter  from  Sandra  L.  Wagner,  Vice  President-  Federal  Regulatory,  SBC 
 Telecommunications,  Inc.,  to  Brad  Berry,  Deputy  Chief,  Enforcement  Bureau,  Federal  Communications 
 Commission  (April  18,  2001). 


 65  In  any  event,  SBCs  earliest  conversations  with  Commission  staff  occurred  more  than  thirty  days  after  Mr. 


 Schuessler  became  aware  of  the  inaccuracies  in  the  reply  affidavits,  which  demonstrates  that  SBC  apparently 
 would  have  violated  section  1.  65  even  if  its  oral  representations  in  late  March  constituted  adequate  notice  under 
 that  provision. 
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 54.  We  also  note  that  SBCs  Kansas  and  Oklahoma  271  application  was  pending,  as 
 that  term  is  defined  in  section  1.65,  during  the  relevant  time  period.  Under  section  1.65,  an 
 application  is  pending  from  the  time  that  the  Commission  accepts  the  applications  filing  until  the 
 Commissions  decision  granting  or  denying  the  application  is  no  longer  subject  to  reconsideration 
 by  the  Commission  or  review  by  the  courts.  66  Since  the  D.  C.  Circuit  still  is  considering  the  appeal 
 of  the  Commissions  Order,  SBCs  section  271  application  for  Kansas  and  Oklahoma  was  and 
 remains  pending  for  the  purposes  of  section  1.65. 


 55.  In  light  of  SBC's  apparent  willful  and/  or  repeated  failure  to  comply  with  section 
 1.65  of  the  rules,  we  find  that  a  forfeiture  appears  to  be  warranted.  Section  503(  b)(  1)  of  the  Act 
 states  that  any  person  who  willfully  or  repeatedly  fails  to  comply  with  any  provision  of  the  Act  or 
 any  rule,  regulation,  or  order  issued  by  the  Commission,  shall  be  liable  to  the  United  States  for  a 
 forfeiture  penalty.  67  For  the  time  period  relevant  to  this  proceeding,  section  503(  b)(  2)(  B)  of  the 
 Act  authorizes  the  Commission  to  assess  a  forfeiture  of  up  to  $120,000  for  each  violation,  or  each 
 day  of  a  continuing  violation,  up  to  a  statutory  maximum  of  $1,200,000  for  a  single  act  or  failure 
 to  act.  68  In  determining  the  appropriate  proposed  forfeiture  amount,  we  consider  the  factors 
 enumerated  in  section  503(  b)(  2)(  D)  of  the  Act,  including  the  nature,  circumstances,  extent  and 
 gravity  of  the  violation,  and,  with  respect  to  the  violator,  the  degree  of  culpability,  any  history  of 
 prior  offenses,  ability  to  pay,  and  such  other  matters  as  justice  may  require.  69 


 56.  Section  1.  80  of  the  Commissions  Rules  and  the  Commissions  Forfeiture  Policy 
 Statement  establish  a  base  forfeiture  of  $3,000  for  violations  of  section  1.65.  70  The  circumstances 
 of  this  case,  however,  appear  to  justify  a  substantial  increase  in  this  base  amount  under  certain 
 upward  adjustment  criteria  contained  in  the  Rules  and  the  Forfeiture  Policy  Statement:  the 
 egregiousness  of  the  misconduct  and  SBCs  ability  to  pay  considered  with  the  deterrent  effect  of 
 the  forfeiture  amount.  71  We  also  consider  whether  SBC  voluntarily  disclosed  the  inaccuracies  to 
 the  Commission  in  determining  whether  a  downward  adjustment  to  the  forfeiture  amount  is 
 appropriate. 


 66  47  C.  F.  R.    1.65(  a). 
 67  47  U.  S.  C.    503(  b)(  1)(  B);  see  also  47  C.  F.  R.    1.80(  a)(  2).  We  note  that  willful  is  defined  in  the  statute  as 
 not  requiring  specific  intent  to  violate  the  law.  See,  e.  g.,  Southern  California  Broad.  Co.,  Memorandum  Opinion 
 and  Order,  6  FCC  Rcd  4387,  4387,  para.  5  (1991)  (quoting  47  U.  S.  C.    312(  f))  (  willful    means  the  conscious 
 and  deliberate  commission  or  omission  of  such  act,  irrespective  of  any  intent  to  violate  the  Act  or  Commission 
 rules;  this  definition  applies  to  Section  503  as  well  as  Section  312).  A  violation  is  repeated  if,  among  other 
 things,  it  continues  over  more  than  one  day.  Id.  6  FCC  Rcd  at  4388. 


 68  47  U.  S.  C.    503(  b)(  2)(  B);  see  also  47  C.  F.  R    1.80(  b)(  2). 


 69  47  U.  S.  C.    503(  b)(  2)(  D);  see  also  The  Commission's  Forfeiture  Policy  Statement  and  Amendment  of  Section 
 1.  80  of  the  Rules  to  Incorporate  the  Forfeiture  Guidelines,  12  FCC  Rcd  17087,  17100,  para.  27  (1997) 
 (  Forfeiture  Policy  Statement);  recon.  denied  15  FCC  Rcd  303  (1999);  47  C.  F.  R.    1.80(  b)(  4). 


 70  47  C.  F.  R.    1.80;  Forfeiture  Policy  Statement,  12  FCC  Rcd  at  17114,  Appendix  A,  Section  I. 


 71  Forfeiture  Policy  Statement,  12  FCC  Rcd  at  17001,  para.  27. 
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 57.  Egregiousness.  SBCs  conduct  here  appears  particularly  egregious  because  just 
 two  years  ago,  in  June  1999,  the  company  and  the  Commission  entered  into  the  SBC/  SNET 
 Consent  Decree,  which  resolved  a  similar  investigation.  Like  here,  that  investigation  related  to 
 statements  made  by  SBC  employees  before  and  shortly  after  the  Commission  granted  an 
 application.  Both  investigations  involved  a  potential  violation  of  section  1.  65,  a  potential 
 violation  of  section  271  of  the  Act  (and  section  272  in  the  case  of  the  SBC/  SNET  Consent 
 Decree),  and  whether  SBC  employees  made  intentionally  inaccurate  statements  to  the 
 Commission. 


 58.  In  the  SBC/  SNET  Consent  Decree,  SBC  agreed  to  implement  a  compliance  plan 
 that  involved  training  certain  categories  of  SBC  employees  regarding  Commission  rules  relating  to 
 contacts  with,  and  representations  to,  the  FCC  .  72  Section  1.65  was  one  of  these  key  rules, 
 and  indeed  was  a  subject  of  the  underlying  investigation.  So,  in  addition  to  the  general  notice 
 provided  by  section  1.65  itself,  SBC  had  actual  notice  of  the  importance  of  that  section  (including 
 in  the  post-  grant  context)  and  had  made  commitments  specifically  designed  to  ensure  future 
 compliance.  Nevertheless,  less  than  two  years  after  entering  into  this  consent  decree,  SBC 
 appears  to  have  violated  section  1.  65(  a)  in  a  context  remarkably  similar  to  the  one  at  issue  in  the 
 SBC/  SNET  Consent  Decree. 


 59.  Moreover,  the  violation  occurred  on  a  material  issue  in  a  major  Commission 
 proceeding  against  a  backdrop  of  repeated  Commission  references  to  the  importance  of  section 
 1.65  in  section  271  proceedings  like  the  one  here.  73  Section  271  proceedings  are  at  the  center  of 
 Congress  efforts  to  promote  competition  in  the  Telecommunications  Act  of  1996.  They  are  the 
 subject  of  significant  litigation.  For  SBC  to  keep  the  parties  and  the  Commission  uninformed  of 
 material  inaccuracies  relating  to  its  section  271  application  is  extremely  serious. 


 60.  Ability  to  pay/  deterrent  effect.  In  the  Forfeiture  Policy  Statement,  the 
 Commission  made  it  clear  that  companies  with  higher  revenues,  such  as  SBC,  74  could  expect 
 higher  forfeitures  than  those  reflected  in  the  base  amounts: 


 [O]  n  the  other  end  of  the  spectrum  of  potential  violations,  we  recognize  that  for 
 large  or  highly  profitable  communication  entities,  the  base  forfeiture  amounts  .  .  . 


 72  SBC/  SNET  Consent  Decree,  14  FCC  Rcd  at  12751. 
 73  See,  e.  g.,  Application  by  Ameritech  Michigan  Pursuant  to  Section  271  of  the  Communications  Act  of  1934,  as 
 amended,  to  Provide  In-  Region,  InterLATA  Services  in  Michigan,  Order,  12  FCC  Rcd  3309,  3323,  para.  23  (1997) 
 (citing  47  C.  F.  R.    1.65(  a)  and  reminding  applicants  of  their  obligation  under  Commission  rules  to  maintain  the 
 continuing  accuracy  and  completeness  of  information  furnished  to  the  Commission);  Application  by  SBC 
 Communications  Inc.,  Pursuant  To  Section  271  Of  The  Communications  Act  of  1934,  as  amended,  To  Provide  In-Region, 
 InterLATA  Services  In  Oklahoma,  Memorandum  Opinion  and  Order,  12  FCC  Rcd  8685,  8720,  para.  60 
 (1997)  (citing  Ameritech  Michigan  Orders  reference  to  section  1.65  and  noting  that  [  g]  iven  the  expedited  time  in 
 which  the  Commission  must  review  these  applications,  it  is  the  responsibility  of  the    [applicant]  to  submit  to  the 
 Commission  a  full  and  complete  record  upon  which  to  make  determinations  on  its  application.). 


 74  In  2000,  SBC  had  operating  revenues  of  $51.4  billion  with  operating  income  of  $10.7  billion.  See  SBC 


 Telecomm.,  Inc.,  2000  Annual  Report  at  4  (2001). 
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 are  generally  low.  In  this  regard,  we  are  mindful  that,  as  Congress  has  stated,  for  a 
 forfeiture  to  be  an  effective  deterrent  against  these  entities,  the  forfeiture  must  be 
 issued  at  a  high  level  .  For  this  reason,  we  caution  all  entities  and  individuals 
 that,  independent  from  the  uniform  base  forfeiture  amounts  ,  we  intend  to  take 
 into  account  the  subsequent  violators  ability  to  pay  in  determining  the  amount  of  a 
 forfeiture  to  guarantee  that  forfeitures  issued  against  large  or  highly  profitable 
 entities  are  not  considered  merely  an  affordable  cost  of  doing  business.  Such  large 
 or  highly  profitable  entities  should  expect  in  this  regard  that  the  forfeiture  amount 
 set  out  in  a  Notice  of  Apparent  Liability  against  them  may  in  many  cases  be  above, 
 or  even  well  above,  the  relevant  base  amount.  75 


 The  statutory  maximum  for  a  continuing  violation  of  section  1.  65  is  $1.  2  million.  While  it  is 
 unclear  whether  such  a  forfeiture  will  act  as  a  sufficient  deterrent  to  SBC  against  future  violations 
 of  section  1.65,  76  we  believe  that  anything  less  is  unlikely  to  do  so.  This  is  particularly  the  case  in 
 light  of  the  fact  that  the  $1.  3  million  payment  made  by  SBC  as  part  of  the  SBC/  SNET  Consent 
 Decree  apparently  did  not  act  as  a  sufficient  deterrent  with  respect  to  the  situation  now  before  us. 


 61.  Voluntary  disclosure.  In  the  Forfeiture  Policy  Statement,  the  Commission  stated 
 that  forfeiture  amounts  may  be  reduced  where  a  person  voluntarily  brings  a  matter  to  the 
 Commissions  attention.  77  We  find,  however,  that  a  downward  adjustment,  for  this  reason,  in  the 
 proposed  forfeiture  is  not  warranted  in  this  case.  Specifically,  we  find  that  SBC  did  not 
 voluntarily  disclose  this  problem  to  the  Commission  within  the  meaning  of  the  Forfeiture  Policy 
 Statement.  SBCs  requisite  disclosure  of  this  problem  did  not  actually  occur  until  it  filed  its 
 section  1.65  notice  on  April  13,  2001,  after  the  Enforcement  Bureau  brought  the  requirement  to 
 the  companys  attention.  This  was  more  than  two  months  after  its  section  1.  65  obligation  was 
 triggered,  and  more  than  a  month  after  SBCs  attorneys  knew  the  reply  affidavits  were  (or 
 apparently  were)  inaccurate. 


 62.  Moreover,  SBC  knew  that  it  would  be  required  to  demonstrate  in  its  Missouri  271 
 application  that  its  loop  qualification  system  complied  with  the  UNE  Remand  Order  and  to 
 describe  how  this  system  functioned.  However,  because  it  had  claimed  that  its  OSS  was  identical 
 throughout  the  SWBT  region  in  the  Kansas/  Oklahoma  proceeding,  any  problem  with  the  system 
 functionality  in  Kansas  and  Oklahoma  also  applied  to  Missouri.  Any  change  in  SBCs  description 
 of  the  system  operation  from  the  Kansas/  Oklahoma  271  application  to  the  Missouri  application 
 would  attract  attention  both  from  interested  parties  and  the  Commission.  SBC  thus  had  every 
 incentive  to  let  the  Commission  know  of  this  change  before  it  filed  the  Missouri  application.  We 


 75  Forfeiture  Policy  Statement,  12  FCC  Rcd  at  17099-  100,  para.  24. 
 76  We  note  that  Congressman  Fred  Upton,  Chairman  of  the  Subcommittee  on  Telecommunications  and  the 
 Internet  of  the  House  Committee  on  Energy  and  Commerce,  has  introduced  legislation  to  increase  the  statutory 
 forfeiture  caps.  See  H.  R.  1765,  107  th  Cong.,  1  st  Sess.  (2001). 


 77  Forfeiture  Policy  Statement,  12  FCC  Rcd  at  17101,  para.  27;  see  also  47  U.  S.  C.    503(  b)(  2)(  D)  and  47  C.  F.  R. 


   1.80(  b)(  4). 
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 do  not  believe  that  bringing  the  matter  to  the  attention  of  the  Commission  under  these 
 circumstances  constitutes  voluntariness  within  the  meaning  of  the  Forfeiture  Policy  Statement 
 and  we  decline  to  reduce  the  proposed  forfeiture  amount  on  this  basis. 


 63.  Considering  all  of  the  enumerated  factors  and  the  particular  circumstances  of  this 
 case,  as  discussed  above,  we  find  that  SBC  is  apparently  liable  for  the  statutory  maximum  $1.2 
 million  forfeiture  for  its  apparent  violation  of  section  1.  65.  As  discussed  above,  the  seriousness  of 
 this  matter  demands  that  SBC  be  held  apparently  liable  for  the  statutory  maximum  forfeiture.  For 
 a  full  two  months  before  it  filed  the  1.65  notice  in  the  Kansas/  Oklahoma  docket,  SBC  knew  that 
 the  reply  affidavits  were  or  may  have  been  inaccurate.  Under  these  circumstances,  SBCs 
 apparent  failure  to  comply  with  its  affirmative  obligations  under  section  1.  65  was  of  a  continuing 
 nature  in  that  it  failed  to  inform  the  Commission  of  these  matters  over  a  significant  period  of  time. 
 Thus,  in  consideration  of  the  facts  of  this  case  and  in  accordance  with  section  503(  b)(  2)(  b)  of  the 
 Commissions  Rules,  we  find  that  SBC  is  apparently  liable  for  a  $1.  2  million  forfeiture  for  its 
 apparent  continuing  violation  of  section  1.  65. 


 64.  In  addition  to  any  forfeiture  we  may  impose,  we  believe  it  is  important  for  SBC  to 
 inform  the  Commission  regarding  the  steps  it  is  taking  to  ensure  compliance  with  section  1.  65. 
 Accordingly,  we  order  SBC  to  file  a  report,  within  30  days  of  the  release  date  of  this  NAL, 
 supported  by  affidavits  of  persons  with  personal  knowledge,  discussing  steps  it  has  taken  to 
 ensure  future  compliance  with  section  1.  65.  In  addition,  we  order  SBC  to  report,  within  nine 
 months  of  the  release  date  of  this  NAL,  through  an  independent  audit,  on  the  success  of  its  efforts 
 to  comply  with  section  1.65  for  the  period  beginning  30  days  from  the  release  date  of  this  NAL 
 and  concluding  six  months  thereafter. 


 C.  SBC  Apparently  Misrepresented  Facts  To  The  Commission  During  The 
 Enforcement  Bureaus  Investigation 


 65.  We  conclude  that  SBC  is  apparently  liable  for  willful  and/  or  repeated 
 misrepresentations  committed  in  SBCs  April  6,  2001  report  to  the  Commissions  Enforcement 
 Bureau.  That  report  was  signed  by  an  officer  of  SBC  and  was  supported  by  John  Milehams 
 affidavit,  among  others.  We  find  that  Mr.  Milehams  affidavit,  upon  which  SBC  explicitly  relied 
 in  its  report,  contains  apparent  misrepresentations  about  his  involvement  in  the  review  of  the 
 incorrect  reply  affidavits,  in  violation  of  section  1.17  of  our  rules. 


 66.  Under  section  1.17  of  our  rules,  [  n]  o  applicant    shall  in    any    written 
 statement  submitted  to  the  Commission    make  any  misrepresentation  or  willful  material 
 omission  bearing  on  any  matter  within  the  jurisdiction  of  the  Commission.  78  The  Commission 
 defines  misrepresentation  as  an  intentional  misrepresentation  of  fact  intended  to  deceive  79  and 
 has  concluded  that  an  intent  to  deceive  is  an  essential  element  of  a  misrepresentation  finding.  80 


 78  47  C.  F.  R.    1.17. 


 79  Silver  Star  Communications-  Albany,  Inc.  3  FCC  Rcd  6342,  6349  (Rev.  Bd.  1988). 
 80  See  Swan  Creek  Communications  v.  FCC,  39  F.  3d  1217,  1222  (D.  C.  Cir.  1994). 
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 The  Commission  has  also  stated  that  intent  is  a  factual  question  that  may  be  inferred  if  other 
 evidence  shows  that  a  motive  or  logical  desire  to  deceive  exists  .  .  .  81  The  ultimate  facts  are 
 often  proved  through  circumstantial  evidence,  as  such  evidence  may  be  the  only  way  of  proving 
 knowledge  or  intent.  82  We  consider  misrepresentation  to  be  a  serious  violation,  83  as  our  entire 
 regulatory  scheme  rests  upon  the  assumption  that  applicants  will  supply  [the  Commission]  with 
 accurate  information.  84  For  this  reason,  applicants  before  the  Commission  are  held  to  a  high 
 standard  of  candor  and  forthrightness.  85  Therefore,  we  will  assess  a  forfeiture  if  we  find  by  a 
 preponderance  of  the  evidence  that  SBC  has  violated  section  1.17. 


 67.  Mr.  Milehams  explanation  for  his  failure  to  correct  the  inaccuracies  in  the  Cullen 
 and  Welch  affidavits,  submitted  by  SBC  as  part  of  its  report  to  the  Enforcement  Bureau,  appears 
 to  constitute  misrepresentation.  First,  with  respect  to  the  draft  affidavit  from  Mark  Welch,  Mr. 
 Mileham  reviewed  the  Welch  affidavit  prior  to  the  time  it  was  filed;  and  despite  his  knowledge  of 
 the  actual  workings  of  SBCs  loop  qualification  system,  he  failed  to  correct  the  inaccuracy  in  the 
 affidavit.  In  SBCs  April  6,  2001  report  and  Mr.  Milehams  supporting  affidavit,  the  company 
 explained  that  Mr.  Mileham  must  have  skipped  this  important  sentence  because  he  reviewed 
 Mr.  Welchs  affidavit  late  at  night.  86 


 81  Black  Television  Workshop,  8  FCC  Rcd  4192,  4198,  n.  41  (1993),  recon.  denied,  8  FCC  Rcd  8719  (1993),  rev. 
 denied,  9  FCC  Rcd  4477  (1994),  aff'd  sub  nom.  Woodfork  v.  FCC,  70  F.  3d  639  (D.  C.  Cir.  1995)  (affirming  ALJs 
 finding  that  the  record  encompasses  documents  containing  misrepresentations). 


 82  Ned  N.  Butler  and  Claude  M.  Gray,  D.  B.  A.  The  Prattville  Broadcasting  Co.,  Prattville,  Ala.,  Memorandum 


 Opinion  and  Order,  5  FCC  2d  601,  603-  604  (Rev.  Bd.  1966)  (internal  citations  omitted).  In  criminal  cases,  where 
 the  burden  of  proof  is  higher,  the  D.  C.  Circuit  has  recognized  that  [  i]  ntent  may,  and  generally  must,  be  proved 
 circumstantially  .  .  .,  United  States  v.  Jackson,  513  F.  2d  456,  461  (D.  C.  Cir.  1975)  (footnotes  omitted),  and  has 
 stated  that  it  does  not  distinguish  between  direct  and  circumstantial  evidence  in  evaluating  the  sufficiency  of  the 
 evidence.  United  States  v.  Lam  Kwong-  Wah,  924  F.  2d  298,  303  (D.  C.  Cir.  1991),  cert.  denied,  506  U.  S.  901,  113 
 S.  Ct.  287,  121  L.  Ed.  2d  213  (1992). 


 83  Fox  Television  Stations,  Inc.,  Memorandum  Opinion  and  Order,  10  FCC  Rcd  8452,  8478,  para.  60  (1995). 


 84  Policy  Regarding  Character  Qualifications  in  Broadcast  Licensing,  102  FCC  2d  1179,  1210,  para.  58  (1986) 
 (subsequent  history  omitted)  (  Character  Policy  Statement).  The  integrity  of  the  Commissions  processes  cannot 
 be  maintained  without  honest  dealing  by  regulated  companies.  See  id.,  102  FCC  2d  at  1211,  para.  61. 
 Regardless  of  the  factual  circumstances  of  each  case,  misrepresentation  to  the  Commission  is  always  an  egregious 
 violation.  Forfeiture  Policy  Statement,  12  FCC  Rcd  at  17098,  para.  21.  The  Commission  may  treat  even  the 
 most  insignificant  misrepresentation  as  an  event  disqualifying  a  licensee  from  further  consideration.  Character 
 Policy  Statement,  102  FCC  2d  at  1210,  para.  60.  See  also  Forfeiture  Policy  Statement,  12  FCC  Rcd  at  17098, 
 para.  21. 


 85  WHW  Enterprises  Inc.,  v.  FCC,  753  F.  2d  1132,  1138  (D.  C.  Cir.  1985)  (upholding  Commission  sanctions 


 against  license  applicant  for  misrepresentation);  Sea  Island  Broadcasting  Corp.  of  S.  C.,  60  FCC  2d  146,  147,  para. 
 3  (1976)  (  The  Commission  insists  on  complete  candor  from  its  licensees  and  where  .  .  .  that  candor  has  been 
 found  lacking  in  response  to  official  Commission  inquiries,  the  Commission  has  terminated  the  license.),  affd, 
 Sea  Island  Broadcasting  Corp.  of  S.  C.  v.  Federal  Communications  Commission,  627  F.  2d  240  (D.  C.  Cir.  1980). 


 86  See  SBC  Report  at  5,  nn.  5-  6;  Mileham  Affidavit,    6-  7. 
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 68.  Mr.  Mileham  apparently  has  committed  misrepresentation  or  a  willful  material 
 omission  in  this  regard.  The  e-  mails  between  Messrs.  Welch  and  Mileham,  together  with  Mr. 
 Milehams  statements  during  an  interview  with  the  Enforcement  Bureau,  show  that  Mr.  Mileham 
 did  not  review  the  Welch  affidavit  late  at  night,  as  he  claimed,  but  rather  around  noon.  SBC 
 provided  the  Enforcement  Bureau  with  copies  of  the  e-  mail  from  Mr.  Welch  to  Mr.  Mileham  and 
 Mr.  Milehams  return  e-  mail.  87  According  to  the  face  of  the  e-  mail,  Mr.  Welch  sent  his  affidavit 
 to  Mr.  Mileham  at  3:  57  p.  m.  on  December  6,  2000.  In  his  interview,  Mr.  Mileham  told 
 Commission  staff  that  he  usually  left  his  office  by  6:  00  p.  m.  each  day.  He  also  stated  that  he  did 
 not  recall  staying  late  to  review  Mr.  Welchs  affidavit.  Mr.  Mileham  did  state,  however,  that  he 
 reviewed  and  responded  to  Mr.  Welchs  e-  mail  as  soon  as  he  saw  it  and  that,  immediately  after  he 
 made  his  corrections  to  the  document,  he  sent  the  red-  lined  version  back  to  Mr.  Welch. 
 According  to  the  face  of  this  e-  mail,  Mr.  Mileham  sent  this  version  by  e-  mail  to  Mr.  Welch  at 
 12:  08  p.  m.  on  December  7,  2000.  88  Thus,  it  is  apparent  from  the  evidence  that  Mr.  Mileham  did 
 not  review  Mr.  Welchs  affidavit  late  at  night,  as  he  claimed  in  his  affidavit  to  the  Commission. 
 Based  on  the  totality  of  the  circumstances  surrounding  Mr.  Mileham's  inclusion  of  this  incorrect 
 statement  in  his  affidavit,  we  conclude  that  he  made  the  statement  with  the  specific  intention  to 
 mislead  the  Commission,  not  merely  through  inadvertence  or  mistake. 


 69.  There  is  another  ground  supporting  our  finding  of  an  apparent  misrepresentation  in 
 the  Mileham  affidavit  in  a  sworn  affidavit  filed  with  the  Commission,  Mr.  Mileham  stated  that 
 the  Cullen  e-  mail  outlining  her  understanding  of  the  loop  qualification  system  was  deleted 
 accidentally  and  that  he  never  reviewed  it.  Specifically,  Mr.  Mileham  claimed  that  he  downloaded 
 approximately  300  e-  mails  from  home  after  returning  from  vacation.  He  reviewed  a  few  of  these 
 e-  mails,  then  shut  off  his  home  computer.  When  he  went  into  the  office,  the  e-  mails  he  had 
 previously  downloaded  were  not  on  his  work  computer.  When  he  returned  home,  his  home 
 computer  crashed  and  he  was  forced  to  reload  his  operating  system,  deleting  all  of  his  files, 
 including  the  previously  downloaded  e-  mails.  Thus,  according  to  Mr.  Milehams  affidavit,  he 
 never  saw  the  Cullen  e-  mail  and  never  had  an  opportunity  to  correct  the  erroneous  description  of 
 SBCs  loop  qualification  system. 


 70.  In  an  interview  with  the  Enforcement  Bureau,  Mr.  Mileham  stated  that  he  did  not 
 attempt  to  recover  the  lost  e-  mails  from  his  work  or  home  computer.  Mr.  Mileham  also  stated 
 that  he  did  not  disclose  the  loss  of  these  e-  mails  to  anyone  at  SBC  --  including  his  supervisors  -- 
 or  the  competing  carriers  who  regularly  contacted  him  about  loop  qualification  issues.  89 


 71.  We  find  that  Mr.  Mileham  apparently  misrepresented  the  facts  or  made  a  willful 
 material  omission  in  his  affidavit  when  describing  his  lost  e-  mail  problem,  and  that  SBC  therefore 


 87  See  May  3,  2001  Letter. 
 88  In  submissions  to  the  Commission,  SBC  has  not  suggested  that  the  times  on  the  face  of  the  e-  mails  were 
 incorrect. 
 89  Mr.  Mileham  claimed  that  he  may  have  disclosed  this  information  to  contractors,  but  SBC  never  provided  the 


 Enforcement  Bureau  with  access  to  these  persons. 
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 apparently  violated  section  1.17  of  our  rules  when  it  submitted  his  affidavit  accompanying  its 
 April  6,  2001  report  to  the  Enforcement  Bureau.  As  an  initial  matter,  neither  Mr.  Mileham  nor 
 SBC  has  explained  how  Mr.  Milehams  e-  mails  could  disappear  from  his  work  computer  simply 
 because  he  downloaded  them  from  home.  But  even  if  this  were  the  case,  we  do  not  find  it 
 credible  that  Mr.  Mileham  --  whose  previous  job  involved  desktop  computer  support  --  not  only 
 lost  approximately  three  hundred  e-  mails  in  the  first  place,  but  failed  to  make  the  slightest  effort  to 
 recover  them,  and  failed  to  notify  a  single  SBC  employee  --  including  his  supervisors  --  about  this 
 important  event.  By  his  own  account,  Mr.  Mileham  uses  e-  mail  extensively,  referring  questions 
 and  complaints  from  competing  carriers  to  knowledgeable  SBC  employees,  and  relaying  answers 
 from  those  employees  back  to  the  competing  carriers.  Nevertheless,  SBC  contends  that  Mr. 
 Mileham  apparently  took  no  corrective  measures  upon  losing  approximately  three  hundred 
 unopened  e-  mails  from  people  inside  the  company  or  competing  carriers. 


 72.  Nor  do  we  find  credible  Mr.  Milehams  claim  that  he  thought  he  had  no  obligation 
 to  try  to  recover  the  lost  e-  mails  since  anyone  who  really  wanted  to  contact  him  would  simply 
 continue  trying  to  reach  him  upon  receiving  no  response  or  an  out  of  office  reply.  Indeed,  SBC 
 has  informed  us  that  neither  Mr.  Schuessler  nor  John  Williamson  --  the  SBC  employee  who 
 forwarded  Ms.  Cullens  e-  mail  to  Mr.  Mileham  and  Mr.  Schuessler--  has  any  record  of  receiving 
 such  an  out  of  office  message  from  Mr.  Mileham  in  response  to  their  e-  mails.  90  We  are  not 
 aware  of  any  plausible  explanation  for  Mr.  Milehams  statements  other  than  that  they  apparently 
 constitute  misrepresentation  or  willful  material  omissions  in  violation  of  section  1.  17.  Thus,  we 
 conclude  it  is  reasonable  to  infer  that  Mr.  Mileham  apparently  intentionally  engaged  in 
 misrepresentation. 


 73.  Mr.  Milehams  apparent  misrepresentations  were  material  to  the  Commissions 
 investigation  into  the  circumstances  surrounding  the  filing  of  the  inaccurate  reply  affidavits 
 because  they  served  to  excuse  both  Mr.  Mileham  and  SBC  from  responsibility  for  submitting  the 
 incorrect  affidavits  in  the  Kansas/  Oklahoma  proceeding.  At  the  time  SBC  filed  the  reply 
 affidavits,  Mr.  Mileham  was  the  project  manager  for  its  loop  qualification  offering.  Mr.  Mileham 
 prepared  a  loop  qualification  overview  that  was  widely  circulated  within  SBC  and  that  accurately 
 described  SBCs  first  loop  methodology.  He  also  consulted  widely  within  SBC  regarding  loop 
 qualification  issues  raised  by  competing  carriers.  Furthermore,  each  of  the  reply  affiants 
 considered  him  to  be  a  subject-  matter  expert  on  SBCs  loop  qualification  system.  Thus,  his 
 review  of  the  Cullen  e-  mail  and  the  Welch  affidavit  was  essential  to  their  accuracy.  Nevertheless, 
 when  Mr.  Mileham  was  contacted  by  Ms.  Cullen  and  Mr.  Welch,  he  failed  to  correct  their 
 inaccurate  descriptions  of  the  SBC  loop  qualification  system.  As  a  result,  by  claiming  that  Mr. 
 Mileham  never  had  an  opportunity  to  review  the  Cullen  e-  mail  because  of  his  computer  crash,  and 
 that  he  only  reviewed  Mr.  Welchs  affidavit  late  at  night  and  must  have  missed  the  important 
 sentence,  both  Mr.  Mileham  and  SBC  provided  a  reason  why  the  only  SBC  employee  who 
 admitted  to  understanding  the  actual  operation  of  the  system  failed  to  correct  the  inaccurate 
 affidavits.  Thus,  Mr.  Milehams  explanations  were  consistent  with  and  supported  SBCs 


 90  See  Sworn  Statement  of  Vincenzo  Leone,  attached  to  Letter  from  Sandra  L.  Wagner,  Vice  President-  Federal 
 Regulatory,  SBC  Telecommunications,  Inc.,  to  Trent  Harkrader,  Enforcement  Bureau,  Federal  Communications 
 Commission  (May  11,  2001)  (  May  11,  2001  Letter). 
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 explanation  that  it  did  not  intentionally  submit  incorrect  affidavits  to  the  Commission.  His 
 apparent  misrepresentations  directly  benefited  SBC  in  its  efforts  to  convince  the  Commission  that 
 the  filing  of  the  incorrect  affidavits  was  not  intentional.  91 


 74.  SBC  has  argued  to  the  Enforcement  Bureau  that  it  has  no  responsibility  for 
 misrepresentations  or  willful  material  omissions  by  its  employees  within  the  scope  of  their 
 employment  during  a  Commission  investigation.  92  This  claim  is  wholly  without  support  under  the 
 Act  or  Commission  precedent,  and  SBC  has  provided  no  authority  for  its  assertion.  Section  217 
 of  the  Act  explicitly  states,  [  i]  n  construing  and  enforcing  the  provisions  of  this  Act,  the  act, 
 omission,  or  failure  of  any  officer,  agent,  or  other  person  acting  for  or  employed  by  any  common 
 carrier    acting  within  the  scope  of  his  employment,  shall  in  every  case  be  also  deemed  to  be  the 
 act,  omission,  or  failure  of  such  carrier    as  well  as  that  of  the  person.  93 


 75.  Moreover,  we  have  a  long  history  of  holding  regulated  entities  responsible  for  the 
 representations  of  employees  or  other  agents  acting  within  the  scope  of  their  employment,  94 
 including  misrepresentation.  95  We  have  consistently  found  that,  regardless  of  mitigating  factors, 


 91  In  this  regard,  we  note  that  SBC  has  not  filed  anything  with  the  Enforcement  Bureau  distancing  itself  from 
 Mr.  Milehams  apparent  misrepresentations.  Thus,  SBC  continues  to  rely  on  Mr.  Milehams  apparently 
 intentionally  false  statements  as  a  basis  for  its  explanation  of  how  it  unintentionally  submitted  the  incorrect  reply 
 affidavits  and  continues  to  gain  potential  benefit  from  such  apparently  intentionally  false  statements. 


 92  See  Letter  from  Reid  M.  Figel,  Kellogg,  Huber,  Hansen,  Todd  &  Evans,  P.  L.  L.  C.,  to  David  H.  Solomon,  Chief, 


 Enforcement  Bureau,  Federal  Communications  Commission  (June  20,  2001). 
 93  47  U.  S.  C.    217.  See  also  Vista  Services  Corp.,  Order  of  Forfeiture,  FCC  00-  378,  para.  9  (rel.  Oct.  23,  2000) 


 (rejecting  argument  that  company  not  liable  for  conduct  of  telemarketing  firms  and  third  party  verifiers);  Long 
 Distance  Direct,  Inc.,  Order,  15  FCC  Rcd  3297,  3300,  para.  8  n.  8  (2000);  Amer-  I-  Net  Services  Corp,  Order  of 
 Forfeiture,  15  FCC  Rcd  3118,  3120,  para.  7  (2000);  Heartline  Communications,  Inc.,  Notice  of  Apparent  Liability 
 for  Forfeiture,  11  FCC  Rcd  18487,  18494,  para.  13  (1996). 


 94  See,  e.  g.,  Russellville  Educational  Broadcast  Foundation,  Letter,  14  FCC  Rcd  11208,  11209  (Mass  Media 


 Bur.  1999)  ([  L]  icensees  cannot  be  excused  from  responsibility  for  the  acts  of  their  employees.);  Hemmingford 
 Media,  Inc.,  Order  of  Forfeiture,  14  FCC  Rcd  2940,  2941,  para.  7  (Compl.  and  Info.  Bur.  1999)  ([  The 
 Commission]  remind[  s]  respondent  that  the  responsibility  for  compliance  with  the  terms  of    [the  radio  stations] 
 license  rests  solely  and  exclusively  with  the  licensee.);  Zapis  Communications  Corp.,  Memorandum  Opinion  and 
 Order,  7  FCC  Rcd  7859,  para.  5  (Mass  Media  Bur.  1992)  ([  I]  t  is  well  established  that  an  employer  remains 
 responsible  for  the  actions  of  its  employees.) 


 95  See,  e.  g.,  Rocket  Radio,  Inc.,  Memorandum  Opinion  and  Order,  70  FCC  2d  413,  424-  425  (holding  licensee 


 responsible  for  an  employees  false  affidavit  that  was  submitted  to  the  Commission),  recon.  denied,  66  FCC  2d  193 
 (Rev.  Bd.  1977);  Sea  Island  Broadcasting  Corp.,  61  FCC  2d  at  944,  para.  43  (  It  is  undisputed  that  the  denial  of 
 knowledge  of  fraudulent  billing  contained  in  the    statement    constituted  a  knowing  misrepresentation  by  an 
 officer  or  director  of  the  licensee  corporation.  Moreover,  even  if  he  had  been  a  mere  employee,  the  licensee  could 
 not  escape  responsibility  for  his  misrepresentation.);  Ned  N.  Butler  and  Claude  M.  Gray,  D.  B.  A.  The  Prattville 
 Broadcasting  Co.,  Prattville,  Ala.,  Decision,  4  FCC  2d  555,  563  (Rev.  Bd.  1966)  (  The  Commission  has 
 repeatedly  refused  to  absolve  a  licensee  of  responsibility  for  deceptions  practiced  by  his  employees,  and  in  instances 
 of  serious  transgressions  has  imposed  sanctions  upon  the  licensee  notwithstanding  his  professed  lack  of 
 knowledge.) 
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 an  employer  is  responsible  for  the  statements  or  actions  of  its  employees  96  and  those  who  control 
 the  corporation  must  be  held  accountable  for  the  conduct  of  those  who  have  been  delegated  the 
 authority  to  act  in  its  name.  97  This  is  particularly  true  where,  as  here,  the  company  relies  on  an 
 employees  factual  representations  in  a  sworn  report  to  the  Commission,  presumably  following 
 due  diligence  by  the  company  to  verify  those  representations. 


 76.  We  reject  the  argument  that,  in  order  for  an  employees  actions  to  be  imputed  to 
 the  company,  the  employee  must  be  a  partner,  shareholder,  officer  or  director  of  the  licensee.  98 
 Such  a  result  would  encourage  a  corporation  to  delegate  as  much  authority  as  possible  to  the 
 lowest  level  employee  possible  in  order  to  insulate  itself  from  responsibility  for  misconduct.  99  As 
 the  Commission  has  cautioned,  [  m]  erely  standing  back  and  waiting  for  disaster  to  strike  or  for 
 the  Commission  to  become  aware  of  it  will  not  insulate  corporate  owners  from  the  consequences 
 of  misconduct.  100  Where  the  transgressions  of  an  employee  are  serious,  we  have  held  the 
 employing  licensees  responsible  and  imposed  sanctions  regardless  of  the  employers  lack  of 
 knowledge.  101  Indeed,  the  employee  training  efforts  that  SBC  promised  to  undertake  in  the 
 SBC/  SNET  Consent  Decree  were  directed  at  avoiding  precisely  this  type  of  situation. 


 77.  SBC  volunteered  Mr.  Mileham  as  an  employee  with  knowledge  of  the  facts  and 
 explicitly  relied  on  Mr.  Milehams  affidavit.  For  instance,  SBCs  April  6,  2001  report,  which  was 
 signed  by  a  SBC  Senior  Vice  President,  states  that  Mr.  Milehams  affidavit  help[  s]  to  explain 


 96  See,  e.  g.,  Zapis  Communications  Corp.,  7  FCC  Rcd  at  7859,  para.  5  (licensee  held  responsible  for  employees 
 action  when,  in  violation  of  station  policy,  employee  broadcast  telephone  conversation  without  the  other  partys 
 knowledge  or  consent);  Frank  Battaglia,  Letter,  7  FCC  Rcd  2345  (Mass  Media  Bur.  1992)  (admonishing  licensee 
 for  employee  hoax  broadcast  even  though  station  denounced  broadcast,  fired  employees  involved,  and  took  other 
 corrective  measures). 


 97  See  generally  Northwestern  Indiana  Broadcasting  Corp.,  Initial  Decision,  65  FCC  2d  73  (ALJ  1976)  (stations 


 renewal  license  denied  after  discovery  that  general  manager/  vice  president  submitted  false  information  to  the 
 Commission). 


 98  See,  e.  g.,  Sea  Island  Broadcasting  Corp.,  61  FCC  2d  at  944,  para.  43  (license  revoked  where  management 


 misrepresented  stations  billing  practices  to  Commission  and  Commission  noted  that  even  if  offending  person  had 
 been  a  mere  employee  instead  of  an  officer  or  director  of  the  company,  licensee  would  still  be  responsible). 


 99  Character  Policy  Statement,  102  FCC  2d  at  1218,  para.  78  (  A  corporation  must  be  responsible  for  the  FCC-related 


 misconduct  occasioned  by  the  actions  of  its  employees  in  the  course  of  their  broadcast  employment.  To 
 hold  otherwise  would,  inter  alia,  encourage  corporate  owners  to  improperly  delegate  authority  over  station 
 operations  in  order  to  neutralize  any  future  misconduct.). 


 100  Id. 


 101  KWK  Radio,  Inc.,  34  FCC  1039  (1963)  (revoking  broadcast  license  due  to  fraud  by  station's  general  manager 
 in  conducting  a  treasure  hunt  contest),  affd,  KWK  Radio,  Inc.  v.  FCC,  337  F.  2d  540  (1964);  Eleven  Ten 
 Broadcasting  Corp.,  Decision,  32  FCC  706,  708-  09,  paras.  6-  7  (1962)  (denying  renewal  in  part  because  of  log 
 alterations  made  by  station  employee),  affd  sub  nom.  Immaculate  Conception  Church  v.  FCC,  320  F.  2d  795  (D.  C. 
 Cir.  1963);  Carol  Music,  Inc.,  Decision,  37  FCC  379,  380,  para.  3  (1964)  (adopting  in  relevant  part  initial  decision 
 revoking  license  based  in  part  on  refusal  by  station  manager  to  furnish  information  requested  by  the  Commission). 
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 how  it  came  about  that  [the]  reply  affidavits  contained  inaccurate  statements.  102  SBCs  report 
 specifically  cites  Mr.  Milehams  apparently  untruthful  statements  that  he  did  not  review  the  Cullen 
 e-  mail  because  it  was  accidentally  deleted  and  that  he  reviewed  the  Welch  affidavit  late  at 
 night  and  must  have  skipped  the  relevant  sentence.  103 


 78.  For  these  reasons,  we  hold  that  SBC  is  responsible  for  Mr.  Milehams  apparent 
 misrepresentations  in  the  affidavit  attached  to  SBCs  April  6,  2001  submission  to  the  Enforcement 
 Bureau.  104 


 79.  In  light  of  SBC's  apparent  willful  and/  or  repeated  failure  to  comply  with  section 
 1.17  of  the  Commissions  rules,  we  find  that  a  substantial  proposed  forfeiture  is  warranted. 
 Section  503(  b)(  1)  of  the  Act  states  that  any  person  who  willfully  or  repeatedly  fails  to  comply 
 with  any  provision  of  the  Act  or  any  rule,  regulation,  or  order  issued  by  the  Commission,  shall  be 
 liable  to  the  United  States  for  a  forfeiture  penalty.  105  For  the  time  period  relevant  to  this 
 proceeding,  section  503(  b)(  2)(  B)  of  the  Act  authorizes  the  Commission  to  assess  a  forfeiture  of 
 up  to  $120,000  for  each  violation,  or  each  day  of  a  continuing  violation,  up  to  a  statutory 
 maximum  of  $1,200,000  for  a  single  act  or  failure  to  act.  106  In  determining  the  appropriate 
 proposed  forfeiture  amount,  we  consider  the  factors  enumerated  in  section  503(  b)(  2)(  D)  of  the 
 Act,  including  the  nature,  circumstances,  extent  and  gravity  of  the  violation,  and,  with  respect  to 
 the  violator,  the  degree  of  culpability,  any  history  of  prior  offenses,  ability  to  pay,  and  such  other 
 matters  as  justice  may  require.  107 


 80.  Considering  all  of  the  enumerated  factors  and  the  particular  circumstances  of  this 
 case,  we  find  that  SBC  is  apparently  liable  for  the  maximum  $120,000  forfeiture  for  its  apparent 
 violation  of  section  1.  17.  First,  we  note  that  the  base  forfeiture  for  misrepresentation  is  the 
 statutory  maximum.  108  In  this  regard,  as  noted  above,  the  Commission  has  indicated  that 


 102  SBC  Report  at  4. 
 103  SBC  Report  at  5,  nn.  5-  6. 
 104  SBCs  argument  that  it  is  not  responsible  for  the  statements  of  its  employees  in  this  context  raises  potentially 
 troubling  concerns  in  other  contexts  as  well.  Regardless  of  whether  SBC  continues  to  make  this  legal  argument  in 
 any  response  to  this  NAL,  we  request  that,  as  part  of  any  such  response,  or  separately  if  it  does  not  file  a  response 
 (e.  g.,  if  it  simply  pays  the  proposed  forfeiture),  SBC  identify  any  other  situations  where  it  believes  the  Commission 
 should  treat  SBC  employees  acting  within  the  scope  of  their  employment  as  not  speaking  on  behalf  of  SBC.  This 
 will  assist  us  in  considering  the  extent  to  which  it  is  appropriate  for  us  to  rely  (or  not  to  rely)  on  written  or  oral 
 statements  by  SBC  employees  in  any  such  other  contexts. 


 105  47  U.  S.  C.  503(  b)(  1)(  B);  see  also  47  C.  F.  R.    1.80(  a)(  2). 


 106  47  U.  S.  C.    503(  b)(  2)(  B);  see  also  47  C.  F.  R    1.80(  b)(  2). 
 107  47  U.  S.  C.    503(  b)(  2)(  D);  see  also  Forfeiture  Policy  Statement,  12  FCC  Rcd  17087,  17100,  para.  27;  47 
 C.  F.  R.    1.80(  b)(  4). 
 108  47  C.  F.  R.  1.80. 
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 misrepresentation  always  is  an  egregious  violation.  109  We  have  further  stated  that  [  a]  ny  entity 
 or  individual  that  engages  in  this  type  of  behavior  should  expect  to  pay  the  highest  forfeiture 
 applicable  to  the  service  at  issue.  110  Moreover,  the  apparent  misrepresentation  is  particularly 
 egregious  here  because  it  occurred  in  the  context  of  an  investigation  into  possible 
 misrepresentation,  i.  e.,  in  a  context  where  the  company  and  its  employees  should  have  had  a 
 heightened  awareness  of  the  importance  of  not  submitting  misrepresentations  to  the  Commission. 
 As  with  the  proposed  finding  regarding  section  1.65,  the  relationship  to  the  SBC/  SNET  Consent 
 Decree  and  the  need  for  a  sufficient  deterrent  also  support  a  substantial  proposed  forfeiture  here. 


 D.  SBC  Apparently  Violated  The  SBC/  SNET  Consent  Decree 
 81.  We  also  conclude  that  SBC  apparently  willfully  or  repeatedly  violated  the  terms  of 
 the  June  1999  Consent  Decree  arising  out  of  the  merger  between  SBC  and  Southern  New 
 England  Telephone  Corporation.  The  SBC/  SNET  Consent  Decree  resolved  an  informal 
 investigation  by  the  Commission  into  allegations  (similar  to  the  ones  at  issue  here)  that  SBC 
 violated  sections  271  and  272  of  the  Act,  that  SBC  violated  section  1.65  of  the  Commissions 
 Rules,  and  that  SBC  employees  made  inaccurate  statements  to  the  Commission.  The  Commission 
 agreed  to  resolve  the  matter  by  Consent  Decree  following  SBCs  promise  to,  among  other  things, 
 institute  a  training  program  for  employees  dealing  with  the  Commission.  111  We  conclude  that 
 SBC  apparently  willfully  or  repeatedly  violated  the  terms  of  the  SBC/  SNET  Consent  Decree  by 
 ignoring  its  obligation  to  train  one  of  its  affiants  in  the  section  271  proceeding  in  the 
 Commissions  rules  regarding  contacts  with  and  representations  to  the  agency. 


 82.  Under  the  terms  of  the  Compliance  Plan  incorporated  by  reference  into  the 
 SBC/  SNET  Consent  Decree,  SBC  employees  who  engage  in  regular  contacts  with  the 
 Commission  as  part  of  their  assigned  duties  must  be  informed  of  the  Plan  and  the  Commissions 
 rules  and  regulations  regarding  contacts  with,  and  representations  to,  the  Commission  through  a 
 Compliance  Primer.  112  The  covered  employees  subject  to  this  requirement  include,  among  others, 
 those  employees  assigned  to  SBCs  Washington,  D.  C.  office,  subject  matter  experts,  attorneys, 
 and  other  employees  who  meet  with  the  Commission  on  a  regular  basis.  113  These  employees  also 
 must  certify  that  they  have  reviewed  and  understand  SBC  and  Commission  requirements  for 


 109  Forfeiture  Policy  Statement,  12  FCC  Rcd  at  17098,  para.  21. 
 110  Id. 
 111  Order,  para.  3. 
 112  See  SBC/  SNET  Consent  Decree,  14  FCC  Rcd  at  12751  (  SBC  employees  who  make  regular  contacts  with  the 
 FCC  (  SBCs  FCC  representatives)  as  part  of  their  assigned  duties  (e.  g.  employees  assigned  to  SBCs  Washington 
 D.  C.  office,  subject  matter  experts,  attorneys  and  other  employees  who  meet  with  the  FCC  on  a  regular  basis)  will 
 be  informed  of  this  Plan  and  the  FCCs  rules  and  regulations  regarding  contacts  with,  and  representations  to,  the 
 FCC  through  a  Compliance  Primer  and  will  be  required  to  ensure  that  other  employees  participating  in  FCC 
 contacts  are  informed  of  the  Plan  and  the  applicable  FCC  rules  and  regulations.) 


 113  See  SBC/  SNET  Consent  Decree,  14  FCC  Rcd  at  12751. 
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 interaction  with  the  agency.  114  Finally,  these  employees  must  ensure  that  other  employees 
 participating  in  Commission  contacts  are  informed  of  the  Compliance  Plan  and  the  applicable 
 Commission  rules  and  regulations.  115 


 83.  In  an  inquiry  letter,  the  Enforcement  Bureau  directed  SBC  to  explain  whether 
 certain  of  its  employees,  including  Carol  Chapman,  Angela  Cullen,  Mark  Welch,  Dennis 
 Schuessler,  and  John  Mileham,  were  informed  of  the  Compliance  Plan  and  to  describe  any  training 
 these  persons  received  regarding  SBCs  ethical  standards  and  the  Commissions  rules  and  policies 
 with  respect  to  contacts  and  representations  to  the  Commission.  116  SBCs  response  was  silent 
 about  whether  any  of  these  persons  received  any  information  about  the  Compliance  Plan  or 
 received  training  on  the  Commissions  rules  regarding  contacts  with  and  representations  to  the 
 agency.  117  Rather,  SBC  represented  that  the  named  employees  were  advised  of  their  obligation 
 to  provide  truthful  information  to  the  Commission  at  all  times    and  each  understood  that 
 obligation.  118  These  individuals  also  were  advised  or  were  aware  that  they  should  advise  legal 
 counsel  and/  or  their  superior  if  they  discovered  that  information  they  provided  to  the  Commission 
 was  inaccurate.  SBC  added  that  each  of  the  individuals  also  reviewed  and  acknowledged 
 understanding  of  SBCs  Code  of  Business  Conduct,  which  states  that  SBC  employees  should 
 comply  not  only  with  the  letter,  but  the  intent  of  the  law  and  proscribes  deliberate 
 misrepresentations  of  facts,  assets  or  records  in  order  to  deceive  someone  who  relies  on  the 
 representation.  119  Additionally,  SBC  represented  that  Ms.  Cullen,  Ms.  Chapman  and  Mr.  Welch 
 knew  that  they  should  contact  271  legal  counsel  in  the  event  that  there  was  a  change  in  the 
 information  they  submitted  to  the  Commission.  120  Ms.  Chapman  and  Ms.  Cullen  also  received 
 witness  training  emphasizing  the  obligation  to  be  truthful  in  testimony.  121 


 84.  We  first  conclude  that  SBC  was  required  to  inform  Ms.  Chapman  of  the 
 requirements  set  out  in  the  Compliance  Plan.  Specifically,  the  SBC/  SNET  Consent  Decree 


 114  Id.,  14  FCC  Rcd  at  12749. 
 115  Id.,  14  FCC  Rcd  at  12751. 
 116  See  Letter  of  Inquiry  at  4. 
 117  See  Affidavit  of  Sandra  L.  Wagner,  Vice  President--  Federal  Regulatory,  SBC,  attached  to  May  11,  2001 
 Letter. 
 118  Id.  at  2-  3. 


 119  Id.  at  3. 
 120  Id. 
 121  See  id.  SBC  also  described  other  company  policies  but,  from  its  response,  did  not  make  clear  that  the 
 individuals  about  whom  the  Enforcement  Bureau  inquired  knew  or  were  informed  about  these  policies. 
 Specifically,  SBC  represented  that  legal  counsel  repeatedly  and  routinely  advised  all  witnesses  that  information 
 presented  in  271  proceedings  must  be  accurate  and  complete.  Additionally,  SBC  represented  that  its  practice  is  to 
 advise  all  employees  submitting  sworn  testimony  or  information  to  the  Commission  that  they  must  provide  true 
 and  correct  information.  Id. 
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 required  that  SBC  employees  who  make  regular  contacts  with  the  FCC    as  part  of  their 
 assigned  duties    will  be  informed  of  the  Compliance  Plan  and  the  Commissions  rules  and 
 regulations  regarding  contacts  with,  and  representations  to,  the  FCC  through  the  Compliance 
 Primer  ....  122  Ms.  Chapmans  responsibilities  demonstrate  that  she  should  have  received  the 
 required  training  and  instruction.  Specifically,  in  affidavits  submitted  to  the  Commission, 
 including  the  affidavit  supporting  the  SBC  Report  in  this  investigation,  Ms.  Chapman  describes 
 her  responsibilities  at  SBC  as  representing  SBCs  positions  to  regulatory  bodies  and  monitoring 
 state  and  federal  regulatory  proceedings  affecting  SBCs  wholesale  marketing.  123  Moreover,  Ms. 
 Chapmans  actual  interaction  with  the  Commission  supports  this  conclusion,  as  she  was  heavily 
 involved  with  SBCs  section  271  applications  for  Texas  and  Kansas/  Oklahoma.  In  those 
 proceedings,  she  submitted  sworn  direct  and  reply  affidavits  and  met  with  CCB  staff  at  least  three 
 times  to  discuss  the  companys  showing.  124  In  giving  examples  of  employees  having  regular 
 contacts  with  the  Commission,  the  SBC/  SNET  Consent  Decree  made  clear  that  not  only  did  the 
 requirements  cover  employees  assigned  to  SBCs  Washington,  D.  C.  office,  but  also  subject 
 matter  experts    who  meet  with  the  FCC  on  a  regular  basis.  Thus,  based  on  her  own 
 description  of  her  job  responsibilities  and  her  regular  contacts  with  the  Commission,  Ms. 
 Chapman  should  have  received  a  Compliance  Primer  informing  her  of  the  Compliance  Plan  and 
 the  Commissions  rules  concerning  contacts  with  and  representations  to  the  Commission. 


 85.  We  also  conclude  that  SBCs  other  efforts  to  train  Ms.  Chapman  do  not 
 demonstrate  compliance  with  the  SBC/  SNET  Consent  Decree.  In  response  to  a  specific  Bureau 
 inquiry,  SBC  has  provided  no  information  indicating  that  it  educated  Ms.  Chapman  about  the 
 Compliance  Plan  or  about  the  Commissions  rules,  as  required  by  the  SBC/  SNET  Consent  Decree.  125  Under  the  Consent  Decree,  Ms.  Chapman  also  had  to  certify  that  she  had  reviewed  the 


 SBC  Compliance  Primer  and  understood  the  Commissions  standards  for  interaction  with  the 
 agency.  126  But  in  response  to  the  Bureaus  inquiry,  SBC  has  offered  no  evidence  that  it  fulfilled 
 any  of  these  requirements  with  respect  to  Ms.  Chapman.  SBC  has  asserted,  however,  that  it  had  a 
 Code  of  Conduct  in  place  for  many  years  prior  to  and  after  the  Consent  Decree.  Although  we 
 acknowledge  the  existence  and  importance  of  this  Code  of  Conduct,  we  also  note  its  apparent 
 ineffectiveness  in  preventing  company  employees  from  making  inaccurate  statements  to  the 
 Commission,  and  its  apparent  failure  to  ensure  timely  notification  of  inaccuracies  in  pending 
 applications.  We  also  note  that  this  Code  of  Conduct  was  in  effect  during  the  relevant  time  when 
 the  Commission  was  investigating  SBCs  conduct  that  led  to  the  more  specific  requirements  in  the 


 122  SBC/  SNET  Consent  Decree,  14  FCC  Rcd  at  12751. 
 123  See  e.  g.,  Attachment  B  to  SBC  Report,  para.  1;  Affidavit  of  Carol  Chapman,  para.  1,  attached  to  SBC  Brief. 
 124  We  also  note  that,  subsequent  to  the  Kansas/  Oklahoma  proceeding,  Ms.  Chapman  submitted  affidavits  in 
 SBCs  Missouri  and  Missouri/  Arkansas  271  proceedings. 
 125  See  Letter  of  Inquiry  at  4.  Indeed,  it  appears  from  this  and  other  information  submitted  to  the  Bureau  that 


 SBC  failed  to  train  any  employees  who  regularly  submitted  affidavits  to  the  Commission. 
 126  SBC/  SNET  Consent  Decree,  14  FCC  Rcd  at  12749. 
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 SBC/  SNET  Consent  Decree.  That  is  precisely  why  the  more  specific  requirements  were  included 
 in  the  SBC/  SNET  Consent  Decree. 


 86.  Moreover,  under  the  terms  of  the  SBC/  SNET  Consent  Decree,  Ms.  Chapman  (as 
 an  SBC  employee  who  make[  s]  regular  contacts  with  the  FCC  and  as  a  subject  matter  expert 
   who  meet[  s]  with  the  FCC  on  a  regular  basis)  should  have  informed  Mr.  Welch,  Ms.  Cullen, 
 Mr.  Schuessler,  and  Mr.  Mileham  about  the  Compliance  Plan  and  the  applicable  FCC  rules  and 
 regulations.  127  Once  again,  SBC  has  offered  no  evidence  on  this  point  in  response  to  the  Bureaus 
 inquiry.  128 


 87.  In  light  of  SBC's  apparent  willful  and/  or  repeated  failure  to  comply  with  the  terms 
 of  the  SBC/  SNET  Consent  Decree,  we  find  that  a  proposed  forfeiture  is  apparently  warranted.  As 
 noted  above,  section  503(  b)(  1)  of  the  Act  states  that  any  person  who  willfully  and/  or  repeatedly 
 fails  to  comply  with  any  provision  of  the  Act  or  any  rule,  regulation,  or  order  issued  by  the 
 Commission,  shall  be  liable  to  the  United  States  for  a  forfeiture  penalty.  129  For  the  time  period 
 relevant  to  this  proceeding,  section  503(  b)(  2)(  B)  of  the  Act  authorizes  the  Commission  to  assess  a 
 forfeiture  of  up  to  $120,000  for  each  violation,  or  each  day  of  a  continuing  violation,  up  to  a 
 statutory  maximum  of  $1,200,000  for  a  single  act  or  failure  to  act.  130  In  determining  the 
 appropriate  forfeiture  amount,  we  consider  the  factors  enumerated  in  section  503(  b)(  2)(  D)  of  the 
 Act,  including  the  nature,  circumstances,  extent  and  gravity  of  the  violation,  and,  with  respect  to 
 the  violator,  the  degree  of  culpability,  any  history  of  prior  offenses,  ability  to  pay,  and  such  other 
 matters  as  justice  may  require.  131 


 88.  We  note  that  there  is  no  base  amount  for  violations  of  consent  decrees  in  the 
 Forfeiture  Policy  Statement  and  section  1.  80  of  the  Commissions  Rules.  The  Commission  has 
 made  clear,  however,  that  such  an  omission  should  not  signal  that  the  Commission  considers  any 
 unlisted  violation  as  nonexistent  or  unimportant.  132  We  believe  that  a  consent  decree  violation, 
 like  misrepresentation,  is  particularly  serious.  The  whole  premise  of  a  consent  decree  is  that 
 enforcement  action  is  unnecessary  due,  in  substantial  part,  to  a  promise  by  the  subject  of  the 


 127  Id.  at  12751  (SBC  employees  who  make  regular  contacts  with  the  Commission  as  part  of  their  assigned  duties 
 will  be  required  to  ensure  that  other  employees  participating  in  FCC  contacts  are  informed  of  the  Plan  and  the 
 applicable  FCC  rules  and  regulations.) 


 128  We  are  concerned  by  the  lack  of  training  provided  to  Ms.  Cullen,  Mr.  Welch,  Mr.  Schuessler  and  Mr. 


 Mileham  but  find  that  their  contacts  with  the  Commission  were  not  sufficiently  regular  under  the  terms  of  the 
 SBC/  SNET  Consent  Decree  to  warrant  their  inclusion  in  the  same  group  as  Ms.  Chapman. 


 129  47  U.  S.  C.  503(  b)(  1)(  B);  see  also  47  C.  F.  R.    1.80(  a)(  2). 


 130  47  U.  S.  C.    503(  b)(  2)(  B);  see  also  47  C.  F.  R    1.80(  b)(  2). 
 131  47  U.  S.  C.    503(  b)(  2)(  D);  see  also  Forfeiture  Policy  Statement,  12  FCC  Rcd  at  17100,  para.  27;  47  C.  F.  R. 
   1.80(  b)(  4). 
 132  Forfeiture  Policy  Statement,  12  FCC  Rcd  at  17099,  para.  22. 
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 consent  decree  to  take  the  enumerated  steps  to  ensure  future  compliance.  133  Where,  as  here,  it 
 appears  that  a  regulated  entity  violated  a  consent  decree,  we  believe  a  substantial  proposed 
 forfeiture  is  warranted.  This  is  particularly  true  where,  as  here,  it  appears  that  the  consent  decree 
 violation  may  have  caused  the  precise  type  of  violations  it  was  designed  to  avoid.  Although  we 
 can  only  speculate,  had  SBC  properly  carried  out  the  compliance  provisions  of  the  SBC/  SNET 
 Consent  Decree  regarding  contacts  with  the  Commission,  these  troubling  events,  or  at  least 
 significant  parts  of  them,  might  never  have  occurred. 


 89.  As  with  the  section  1.  65  proposed  forfeiture,  in  addition  to  the  seriousness  of  the 
 violation,  we  believe  considerations  of  ability  to  pay/  deterrent  effect  and  the  repeated/  continuing 
 nature  of  the  violation  also  counsel  in  favor  of  a  substantial  proposed  forfeiture.  Accordingly, 
 considering  all  of  the  enumerated  factors  and  the  particular  circumstances  of  this  case,  we  find 
 that  SBC  is  apparently  liable  for  a  $1.  2  million  forfeiture,  the  statutory  maximum,  for  its  apparent 
 willful  or  repeated  violation  of  the  terms  of  the  Consent  Decree.  As  with  the  section  1.  65  issue, 
 in  addition  to  any  forfeiture  we  may  impose,  we  believe  it  is  important  for  SBC  to  inform  the 
 Commission  about  the  steps  it  is  taking  to  ensure  future  compliance  with  the  portions  of  the 
 SBC/  SNET  Consent  Decree  dealing  with  Commission  contacts.  Accordingly,  we  order  SBC  to 
 file  a  report,  within  30  days  of  the  release  date  of  this  NAL,  supported  by  affidavits  of  persons 
 with  personal  knowledge,  discussing  steps  it  has  taken  to  ensure  future  compliance  with  the 
 relevant  portions  of  the  SBC/  SNET  Consent  Decree.  In  addition,  we  order  SBC  to  report,  within 
 nine  months  of  the  release  date  of  this  NAL,  through  an  independent  audit,  on  the  success  of  its 
 efforts  to  comply  with  the  relevant  portions  of  the  SBC/  SNET  Consent  Decree  for  the  period 
 beginning  30  days  from  the  release  date  of  this  NAL  and  concluding  six  months  thereafter. 


 E.  SBC  Did  Not  Violate  Section  271  of  the  Act 
 90.  Finally,  we  hold  that  the  evidence  before  us  does  not  demonstrate  that  SBC  ceased 
 to  meet  a  condition  of  the  Commissions  approval  of  its  271  application.  134  During  the 
 Kansas/  Oklahoma  proceeding,  IP  suggested  that,  where  both  fiber  and  copper  loops  served  an 
 end  user  address,  SBC  returned  information  on  only  the  fiber  loop,  thereby  failing  to  inform  the 
 carrier  that  a  copper  loop  was  available.  IP  asserted  that  this  practice  violated  the  UNE  Remand 
 Order.  135  In  the  Order  granting  SBCs  application,  the  Commission  found  that,  if  true,  this 
 practice  would  appear  to  violate  the  UNE  Remand  Order.  136  Based  on  the  evidence  generated 


 133  See,  e.  g.,  SBC/  SNET  Consent  Decree,  14  FCC  Rcd  at  12741  (citing  SBCs  promises  regarding  its  compliance 
 program  and  employee  training  efforts  as  factors  supporting  adoption  of  Consent  Decree). 
 134  See  47  U.  S.  C.    271(  c)  and  (d)(  6). 


 135  IP  also  claimed  that  SBCs  failure  to  return  information  on  all  available  loops  to  an  address  was  a  violation  of 
 the  Commissions  requirements  in  the  UNE  Remand  Order.  In  the  order  granting  SBCs  Kansas  and  Oklahoma 
 applications,  the  Commission  found  that,  despite  SBCs  acknowledgement  that  it  returned  information  on  only  one 
 loop,  it  was  not  self-  evident  from  the  UNE  Remand  Order  that  SBC  was  required  to  provide  information  on  all 
 loops  serving  a  particular  address.  Therefore,  the  Commission  found  that  SBC  was  not  in  violation  of  the  UNE 
 Remand  Order.  See  Order,  para.  128. 


 136  Id.,  para.  129. 
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 during  this  investigation,  we  conclude  that  SBC's  provision  of  loop  qualification  information 
 between  October  26,  2000  and  April  3,  2001  met  the  requirements  of  section  271.  Although  the 
 evidence  indicates  that  SBC's  loop  qualification  system  in  some  instances  provided  detailed 
 information  on  a  fiber  loop  even  when  a  copper  loop  was  available  for  a  particular  address,  we 
 find  this  was  not  competitively  significant  under  the  circumstances  in  this  case.  137 


 IV.  CONCLUSION 
 91.  We  find  SBC  apparently  liable  for  a  total  forfeiture  of  $2,520,000.  SBC  has 
 apparently  willfully  or  repeatedly  violated  section  1.  65  of  the  Commissions  rules  concerning  the 
 disclosure  of  information  that  is  of  decisional  significance  or  that  renders  prior  filings  no  longer 
 substantially  accurate  or  complete  in  all  significant  respects.  Additionally,  we  conclude  that  SBC 
 apparently  willfully  or  repeatedly  violated  section  1.  17  of  the  Commissions  rules  by  submitting  an 
 affidavit  with  misrepresentations  or  willful  material  omissions  to  the  Commission  during  its 
 investigation  into  SBCs  inaccurate  reply  affidavits  in  the  Kansas/  Oklahoma  proceeding.  We  also 
 find  that  SBC  apparently  willfully  or  repeatedly  violated  the  terms  of  the  SBC/  SNET  Consent 
 Decree  by  failing  to  inform  its  employees  who  made  regular  contacts  with  the  Commission  about 
 the  Compliance  Plan  and  about  the  Commissions  regulations  regarding  contacts  with,  and 
 representations  to,  the  Commission  and  by  those  persons  failing  to  relay  that  information  to  other 
 relevant  employees.  Finally,  we  order  SBC  to  file  certain  reports  regarding  future  compliance 
 with  section  1.65  of  the  Rules  and  the  SBC/  SNET  Consent  Decree. 


 V.  ORDERING  CLAUSES 
 92.  ACCORDINGLY,  IT  IS  ORDERED  THAT,  pursuant  to  section  503(  b)  of  the 
 Act,  138  and  section  1.80  of  the  Commissions  Rules,  139  SBC  Communications,  Inc.  is  HEREBY 
 NOTIFIED  of  its  APPARENT  LIABILITY  FOR  FORFEITURE  in  the  amount  of  two  million, 
 five  hundred  twenty  thousand  dollars  ($  2,520,000.00)  for  willfully  or  repeatedly  violating  sections 
 1.17  and  1.65  of  the  Commissions  Rules  and  the  terms  of  the  SBC/  SNET  Consent  Decree. 


 93.  IT  IS  FURTHER  ORDERED  THAT,  pursuant  to  section  1.80  of  the 
 Commission's  Rules,  within  thirty  (30)  days  of  the  release  date  of  this  NOTICE  OF  APPARENT 
 LIABILITY  AND  ORDER,  SBC  Communications,  Inc.  SHALL  PAY  to  the  United  States  the 
 full  amount  of  the  proposed  forfeiture  OR  SHALL  FILE  a  written  statement  showing  why  the 
 proposed  forfeiture  should  not  be  imposed  or  should  be  reduced. 


 137  Based  on  the  record  in  this  proceeding,  (i)  these  circumstances  occurred  no  more  than  five  percent  of  the  time, 
 and  (ii)  even  in  those  cases,  the  inquiring  customer  would  be  informed  about  copper  loops  in  the  distribution  plant 
 serving  a  customer's  general  area,  at  which  point  the  customer  could  request  detailed  information  on  copper  loops 
 through  a  manual  query  at  no  additional  charge.  See  SBC  1.65  Report. 


 138  47  U.  S.  C.    503(  b). 


 139  47  C.  F.  R.    1.80. 
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 94.  Payment  of  the  forfeiture  amount  may  be  made  by  mailing  a  check  or  similar 
 instrument  payable  to  the  order  of  the  Federal  Communications  Commission,  to  the  Forfeiture 
 Collection  Section,  Finance  Branch,  Federal  Communications  Commission,  P.  O.  Box  73482, 
 Chicago,  Illinois  60673-  7482.  The  payment  should  note  the  NAL/  Acct.  No.  referenced 
 above. 


 95.  The  response,  if  any,  must  be  mailed  to  Charles  W.  Kelley,  Chief,  Investigations 
 and  Hearings  Division,  Enforcement  Bureau,  Federal  Communications  Commission,  445  12th 
 Street  S.  W.,  Room  3-  B443,  Washington,  D.  C.,  20554,  and  must  include  the  NAL/  Acct.  No. 
 referenced  above. 


 96.  IT  IS  FURTHER  ORDERED  that  a  copy  of  this  Notice  of  Apparent  Liability  shall  be 
 sent  by  Certified  Mail/  Return  Receipt  Requested  to  SBC  Communications,  Inc.  c/  o  Sandra  L. 
 Wagner,  Vice  President-  Federal  Regulatory,  1401  I  Street,  N.  W.,  Suite  1100,  Washington,  D.  C. 
 20005. 


 97.  IT  IS  FURTHER  ORDERED  that,  pursuant  to  sections  4(  i),  218  and  403  of  the  Act,  140  SBC  Communications,  Inc.  SHALL  FILE  a  report  within  thirty  (30)  days  of  the  release 
 date  of  this  NOTICE  OF  APPARENT  LIABILITY  AND  ORDER,  supported  by  affidavits  of 
 persons  with  personal  knowledge,  discussing  steps  it  has  taken  to  ensure  future  compliance  with 
 section  1.  65.  IT  IS  FURTHER  ORDERED  that  SBC  Communications,  Inc.  SHALL  REPORT 
 within  nine  (9)  months  of  the  release  date  of  this  NOTICE  OF  APPARENT  LIABILITY  AND 
 ORDER,  through  an  independent  audit,  on  the  success  of  its  efforts  to  comply  with  section  1.65 
 for  the  period  beginning  thirty  (30)  days  from  the  release  date  of  this  NOTICE  OF  APPARENT 
 LIABILITY  AND  ORDER  and  concluding  six  months  thereafter. 


 140  47  U.  S.  C.    154(  i),  218  and  403. 
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 38 
 98.  IT  IS  FURTHER  ORDERED  that,  pursuant  to  sections  4(  i),  218  and  403  of  the  Act, 
 SBC  Communications,  Inc.  SHALL  FILE  a  report  within  thirty  (30)  days  of  the  release  date  of 
 this  NOTICE  OF  APPARENT  LIABILITY  AND  ORDER,  supported  by  affidavits  of  persons 
 with  personal  knowledge,  discussing  steps  it  has  taken  to  ensure  future  compliance  with  the 
 portions  of  the  SBC/  SNET  Consent  Decree  concerning  training  of  relevant  employees  regarding 
 contacts  with  the  Commission.  IT  IS  FURTHER  ORDERED  that  SBC  Communications,  Inc. 
 SHALL  REPORT  within  nine  (9)  months  of  the  release  date  of  this  NOTICE  OF  APPARENT 
 LIABILITY  AND  ORDER,  through  an  independent  audit,  on  the  success  of  its  efforts  to  comply 
 with  portions  of  the  SBC/  SNET  Consent  Decree  concerning  training  of  relevant  SBC 
 Communications,  Inc.  employees  regarding  contacts  with  the  Commission  for  the  period 
 beginning  30  days  from  the  release  date  of  this  NOTICE  OF  APPARENT  LIABILITY  AND 
 ORDER  and  concluding  six  months  thereafter. 


 FEDERAL  COMMUNICATIONS  COMMISSION 


 Magalie  Roman  Salas 
 Secretary 
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