I
103D CONGRESS
1ST SESSION
H. R. 3609
To improve the competitiveness of American industry in the markets for
telecommunications equipment and customer premises equipment, and
for other purposes.
IN THE HOUSE OF REPRESENTATIVES
NOVEMBER 21, 1993
Mr. SLATTERY introduced the following bill; which was referred jointly to the
Committees on Energy and Commerce and the Judiciary
A BILL
To improve the competitiveness of American industry in the
markets for telecommunications equipment and customer
premises equipment, and for other purposes.
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ‘‘Telecommunications
Equipment Research and Manufacturing Competition Act
of 1993’’.
SEC. 2. FINDINGS.
The Congress finds that—
(1) universal access to advanced telecommuni-
cations services through the public switched tele-
phone network by all persons, including persons with
disabilities and public educational institutions, would
be advanced, and
(2) the continued economic growth and the
international competitiveness of American industry,
would be assisted,
by permitting the Bell Telephone Companies, through
their affiliates, to manufacture (including design, develop-
ment, and fabrication) telecommunications equipment and
customer premises equipment, and to provide tele-
communications equipment, and to engage in research
with respect to such equipment.
SEC. 3. AMENDMENTS TO THE COMMUNICATIONS ACT OF
1934.
Title II of the Communications Act of 1934 (47
U.S.C. 201 et seq.) is amended by adding at the end the
following new section:
‘‘SEC. 228. REGULATION OF MANUFACTURING BY BELL
TELEPHONE COMPANIES.
‘‘(a) GENERAL AUTHORITY.—Subject to the require-
ments of this section and the regulations prescribed there-
under, but notwithstanding any restriction or obligation
imposed before the date of enactment of this section pur-
suant to the Modification of Final Judgment on the lines
of business in which a Bell Telephone Company may en-
gage, a Bell Telephone Company, through an affiliate of
that company, may manufacture and provide tele-
communications equipment and manufacture customer
premises equipment, except that neither a Bell Telephone
Company nor any of its affiliates may engage in such man-
ufacturing in conjunction with a Bell Telephone Company
not so affiliated or any of its affiliates.
‘‘(b) SEPARATE MANUFACTURING AFFILIATE.—Any
manufacturing or provision authorized under subsection
(a) shall be conducted only through an affiliate that is sep-
arate from any Bell Telephone Company.
‘‘(c) COMMISSION REGULATION OF MANUFACTURING
AFFILIATE.—
‘‘(1) REGULATIONS REQUIRED.—The Commis-
sion shall prescribe regulations to ensure that Bell
Telephone Companies and their affiliates comply
with the requirements of this subsection.
‘‘(2) BOOKS, RECORDS, ACCOUNTS.—A manu-
facturing affiliate required by subsection (b) shall
maintain books, records, and accounts separate from
its affiliated Bell Telephone Company which identify
all financial transactions between the manufacturing
affiliate and its affiliated Bell Telephone Company
and, even if such manufacturing affiliate is not a
publicly held corporation, prepare financial state-
ments which are in compliance with Federal finan-
cial reporting requirements for publicly held corpora-
tions, file such statements with the Commission, and
make such statements available for public inspection.
‘‘(3) IN-KIND BENEFITS TO AFFILIATE.—Con-
sistent with the provisions of this section, neither a
Bell 
Telephone 
Company 
nor 
any 
of 
its
nonmanufacturing affiliates shall perform sales, ad-
vertising, installation, production, or maintenance
operations for a manufacturing affiliate, except
that—
‘‘(A) a Bell Telephone Company and its
nonmanufacturing affiliates may sell, advertise,
install, and maintain telecommunications equip-
ment and customer premises equipment after
acquiring such equipment from their manufac-
turing affiliate; and
‘‘(B) institutional advertising, of a type not
related to specific telecommunications equip-
ment, carried out by the Bell Telephone Com-
pany or its affiliates, shall be permitted if each
part pays its pro rata share.
‘‘(4) DOMESTIC MANUFACTURING REQUIRED.—
‘‘(A) GENERAL
RULE.—A manufacturing
affiliate required by subsection (b) shall conduct
all of its manufacturing within the United
States and, except as otherwise provided in this
paragraph, all component parts of customer
premises equipment manufactured by such affil-
iate, and all component parts of telecommuni-
cations equipment manufactured by such affili-
ate, shall have been manufactured within the
United States.
‘‘(B) EXCEPTION.—Such affiliate may use
component parts manufactured outside the
United States if—
‘‘(i) such affiliate first makes a good
faith effort to obtain equivalent component
parts manufactured within the United
States at reasonable prices, terms, and
conditions; and
‘‘(ii) for the aggregate of tele-
communications equipment and customer
premises equipment manufactured and sold
in the United States by such affiliate in
any calendar year, the cost of the compo-
nents manufactured outside the United
States contained in the equipment does not
exceed 40 percent of the sales revenue de-
rived from such equipment.
‘‘(C) 
CERTIFICATION
REQUIRED.—Any
such affiliate that uses component parts manu-
factured outside the United States in the manu-
facture of telecommunications equipment and
customer premises equipment within the United
States shall—
‘‘(i) certify to the Commission that a
good faith effort was made to obtain equiv-
alent 
parts 
manufactured 
within 
the
United States at reasonable prices, terms,
and conditions, which certification shall be
filed on a quarterly basis with the Commis-
sion and list component parts, by type,
manufactured outside the United States;
and
‘‘(ii) certify to the Commission on an
annual basis that for the aggregate of tele-
communications equipment and customer
premises equipment manufactured and sold
in the United States by such affiliate in
the previous calendar year, the cost of the
components 
manufactured 
outside 
the
United States contained in such equipment
did not exceed the percentage specified in
subparagraph (B)(ii) as adjusted in ac-
cordance with subparagraph (G).
‘‘(D) REMEDIES FOR FAILURES.—(i) If the
Commission determines, after reviewing the cer-
tification required in subparagraph (C)(i), that
such affiliate failed to make the good faith ef-
fort required in subparagraph (B)(i) or, after
reviewing the certification required in subpara-
graph (C)(ii), that such affiliate has exceeded
the 
percentage 
specified 
in 
subparagraph
(B)(ii), the Commission may impose penalties
or forfeitures as provided for in title V of this
Act.
‘‘(ii) Any supplier claiming to be damaged
because a manufacturing affiliate failed to
make the good faith effort required in subpara-
graph (B)(i) may make complaint to the Com-
mission as provided for in section 208 of this
Act, or may bring suit for the recovery of actual
damages for which such supplier claims such
affiliate may be liable under the provisions of
this Act in any district court of the United
States of competent jurisdiction.
‘‘(E) ANNUAL REPORT.—The Commission,
in consultation with the Secretary of Commerce,
shall, on an annual basis, determine the cost of
component parts manufactured outside the
United States contained in all telecommuni-
cations equipment and customer premises
equipment sold in the United States as a per-
centage of the revenues from sales of such
equipment in the previous calendar year.
‘‘(F) USE OF INTELLECTUAL PROPERTY IN
MANUFACTURE.—A manufacturing affiliate may
use intellectual property created outside the
United States in the manufacture of tele-
communications equipment and customer prem-
ises equipment in the United States. A compo-
nent manufactured using such intellectual prop-
erty shall not be treated for purposes of sub-
paragraph (B)(ii) as a component manufac-
tured outside the United States solely on the
basis of the use of such intellectual property.
‘‘(G) RESTRICTIONS ON COMMISSION AU-
THORITY.—The Commission may not waive or
alter the requirements of this paragraph, except
that the Commission, on an annual basis, shall
adjust the percentage specified in subparagraph
(B)(ii) to the percentage determined by the
Commission, in consultation with the Secretary
of Commerce, as directed in subparagraph (E).
‘‘(5) INSULATION OF RATE PAYERS FROM MAN-
UFACTURING AFFILIATE DEBT.—Any debt incurred
by any such manufacturing affiliate may not be is-
sued by its affiliated Bell Telephone Company, and
such manufacturing affiliate shall be prohibited from
incurring debt in a manner that would permit a
creditor, on default, to have recourse to the assets
of its affiliated Bell Telephone Company’s tele-
communications services business.
‘‘(6) RELATION
TO
OTHER
AFFILIATES.—A
manufacturing affiliate required by subsection (b)
shall not be required to operate separately from the
other affiliates of its affiliated Bell Telephone Com-
pany, but if an affiliate of a Bell Telephone Com-
pany becomes affiliated with a manufacturing entity,
such affiliate shall be treated as a manufacturing af-
filiate of that Bell Telephone Company and shall
comply with the requirements of this section.
‘‘(7) AVAILABILITY OF EQUIPMENT TO OTHER
CARRIERS.—A manufacturing affiliate required by
subsection (b) shall make available, without discrimi-
nation or self-preference as to price, delivery, terms,
or conditions, to all regulated local telephone ex-
change carriers for use with the public telecommuni-
cations network, any telecommunications equipment,
including software integral to the functioning of tele-
communications equipment (including upgrades),
manufactured by such affiliate so long as each such
purchasing carrier—
‘‘(A) does not either manufacture tele-
communications equipment, or have an affili-
ated telecommunications equipment manufac-
turing entity, or
‘‘(B) agrees to make available, to the Bell
Telephone Company affiliated with such manu-
facturing affiliate or any of the regulated local
exchange telephone company carrier affiliates of
such company, any telecommunications equip-
ment, including software integral to the func-
tioning of telecommunications equipment (in-
cluding upgrades), manufactured for use with
the public telecommunications network by such
purchasing carrier or by any entity or organiza-
tion with which such purchasing carrier is affili-
ated.
‘‘(8) SALES
PRACTICES
OF
MANUFACTURING
AFFILIATES.—
‘‘(A) PROHIBITION
OF
DISCONTINUATION
OF EQUIPMENT FOR WHICH THERE IS REASON-
ABLE DEMAND.—A manufacturing affiliate re-
quired by subsection (b) shall not discontinue or
restrict sales to other regulated local telephone
exchange carriers of any telecommunications
equipment, including software integral to such
telecommunications equipment, including up-
grades, that such affiliate manufactures for sale
as long as there is reasonable demand for the
equipment by such carriers; except that such
sales may be discontinued or restricted if such
manufacturing affiliate demonstrates to the
Commission that it is not making a profit,
under a marginal cost standard implemented by
the Commission by regulation, on the sale of
such equipment.
‘‘(B) DETERMINATIONS
OF
REASONABLE
DEMAND.—Within 60 days, the Commission
shall reach a determination as to the existence
of reasonable demand as referred to in subpara-
graph (A), and in doing so, the Commission
shall consider—
‘‘(i) whether the continued manufac-
ture of the equipment will be profitable;
‘‘(ii) whether the equipment is func-
tionally or technologically obsolete;
‘‘(iii) whether the components nec-
essary to manufacture the equipment con-
tinue to be available;
‘‘(iv) whether alternatives to the
equipment are available in the market; and
‘‘(v) such other factors as the Com-
mission deems necessary and proper.
‘‘(9) JOINT
PLANNING
OBLIGATIONS.—Each
Bell Telephone Company shall, consistent with the
antitrust laws, engage in joint network planning and
design with other regulated local telephone exchange
carriers operating in the same area of interest; ex-
cept that no participant in such planning shall delay
the introduction of new technology or the deploy-
ment of facilities to provide telecommunications serv-
ices, and agreement with such other carriers shall
not be required as a prerequisite for such introduc-
tion or deployment.
‘‘(d) INFORMATION REQUIREMENTS.—
‘‘(1) FILING OF INFORMATION ON PROTOCOLS
AND TECHNICAL REQUIREMENTS.—Each Bell Tele-
phone Company shall, in accordance with regulations
prescribed by the Commission, maintain and file
with the Commission full and complete information
with respect to the protocols and technical require-
ments for connection with and use of its telephone
exchange service facilities. Each such company shall
report promptly to the Commission any material
changes or planned changes to such protocols and
requirements, and the schedule for implementation
of such changes or planned changes.
‘‘(2) FILING AS PREREQUISITE TO DISCLOSURE
TO
AFFILIATE.—A Bell Telephone Company shall
not disclose to any of its affiliates any information
required to be filed under paragraph (1) unless that
information is immediately so filed.
‘‘(3) ACCESS
BY
COMPETITORS
TO
INFORMA-
TION.—The Commission may prescribe such addi-
tional regulations under this subsection as may be
necessary to ensure that manufacturers in competi-
tion with a Bell Telephone Company’s manufactur-
ing affiliate have access to the information with re-
spect to the protocols and technical requirements for
connection with and use of its telephone exchange
service facilities required for such competition that
such company makes available to its manufacturing
affiliate.
‘‘(4) PLANNING INFORMATION.—Bell Telephone
Companies shall provide, to other regulated local
telephone exchange carriers operating in the same
area of interest, timely information on the planned
deployment of telecommunications equipment, in-
cluding software integral to such telecommunications
equipment, including upgrades.
‘‘(e) ADDITIONAL COMPETITION REQUIREMENTS.—
The Commission shall prescribe regulations requiring that
any Bell Telephone Company which has an affiliate that
engages in any manufacturing authorized by subsection
(a) shall—
‘‘(1) provide, to other manufacturers of tele-
communications equipment and customer premises
equipment that is functionally equivalent to equip-
ment manufactured by the Bell Telephone Company
manufacturing affiliate, opportunities to sell such
equipment to such Bell Telephone Company which
are comparable to the opportunities which such
Company provides to its affiliates;
‘‘(2) not subsidize its manufacturing affiliate
with revenues from its regulated telecommunications
services; and
‘‘(3) only acquire equipment from its manufac-
turing affiliate at the open market price.