Date: 1997-07-17
Speaker: JOEL I. KLEIN (republican)
Chamber: S

Acting Assistant Attorney General. Antitrust Division. Department of Justice. Washington. DC. DEAR MR. KLEIN: I have written to the Senate Majority Leader requesting that a hold be placed on your nomination to be Assistant Attorney General of the Justice Departments Antitrust Division. I have concerns as to whether your views of the implementation of the Telecommunications Act of 1996 are in accordance with Congressional intent. Section 271(d)(2)(A). of the Telecommuni.cations Act of 1996 gives the Department of Justice a consultative role when the Federal Communications Commission considers petitions filed by the Bell Operating Companies (BOCs) for authorization to provide inregion interLATA service. This summer the FCC will begin ruling on these applications and I have several concerns about how both the Department and the FCC will implement Section 271 of the Act. As you know. both the House and the Senate. in establishing a test for BOC entry into the interLATA business. rejected the imposition of any requirement that a BOC must face "actual and demonstrable competition" in the local exchange market before obtaining relief. While the statute allows the Department to apply "any standard the Attorney General considers appropriate". a speech you gave in March raises fears the Department and the FCC may attempt to resurrect this test that was rejected in Congress. My concern arises particularly from your March 11 speech announcing the Antitrust Divisions position regarding implementation of Section 271 of the Telecommunications Act of 1996 (47 U.S.C. Section 271). You stated that the Division would take the position that the BOCs should be forbidden to enter long distance under Section 271 until there is "successful fullscale entry" into the local market. As you put it. the point of this requirement is to be sure that with respect to local telephone services. "gas naturally can flow through the pipeline." I also read your speech as suggesting that where there has not been fullscale entry. you would oppose BOC entry unless the BOC could show that its competitors are "gaming the system." You have suggested that Section 271 gives you "broad swath" to urge whatever position the Antitrust Division likes. Congress. however. gave the Attorney General a role in advising the FCC with respect to public interest issues because of the Departments antitrust expertise. See. for example. Sen. Conf. Rep. 104230 for a list of some antitrust standards that might be used. A "gas In the pipeline" standard is plainly unrelated to the antitrust laws and. even worse. violates congressional intent that the checklist should be the only measure of when local markets are open. Simply stated. the Attorney Generals consultation on antitrust issues must be framed by. the specific statutory standards for BOC entry. which preclude anything approaching a "metric test" like the one Congress rejected. More fundamentally. the basic point of the Telecommunications Act is that regulators should stand aside and let market forces work once fair competition is possible. Holding up competition in one market because there is not enough competition in another market .makes no sense. It is particularly harmful in thiscontext. for local telephone competition may be slow in coming to rural states for reasons that have nothing to do with BOCs steps to satisfy the checklist. If so. your approach would prevent rural consumers from realizing the benefits of long distance competition that will be available to residents of urban states. just because potential local competitors want to enter profitable urban markets first. As you prepare to discharge your responsibilities under the Act. I would appreciate your answers to the following questions. This will enable the Subcommittee on Communications to carefully monitor Implementation of this portion of the Telecommunications Act. 1. In your- speech you used the following terms--"real" and "broadbased competitions". "actual. broadbased entry". "true broadbasedentry". "tangible entry". "largescale entry". and entry on a "largescale basis". What do these terms mean to the Department? 2. How many residential customers have to be served by a competitor to meet the Departments entry test? 3. How many business customers have to be served by a competitor to meet the Departments entry test? 4. Does there have to be more than one competitor in the local exchange market to meet the Departments entry test? 5. Does a BOC have to face competition from AT&T. MCI or. Sprint to meet the Departments entry test? 6. How do. you reconcile Congress rejection of a metric test for BOC entry into the long distance market with our statement that "successful fullscale entry" is necessary in order for the Department to "believe the local market is open to competition?" 7. You have used the metaphor that the Department "want(s) to make sure that gas actually can flow through the pipeline" before allowing interLATA entry. How many orders for resold services must be processed by a BOC in order to satisfy this standard? 8. How many orders for unbundled network elements must be processed by a BOC to satisfy this standard? 9. How much market share must a BOC lose to its competitors to demonstrate that "gas can flow through the pipeline?" 10. FCC Chairman Reed Hundt testified on March 12. 1997. before the Senate Commerce Committee that a BOC that satisfied the checklist but did not have an actual competitor in its market would meet the entry standard. Do you agree with Chairman Hundt? 11. If the Department opposes a BOC interLATA application. do you believe the FCC should reject that application? If so. wouldnt that give the Departments recommendation "preclusive effect." something that the Act specifically prohibited? 12. You have also stated that the checklist. the facilitiesbased requirement. the separate subsidiary requirement and the option of "Track B" (the statement of terms and conditions) are all "necessary. though not sufficient. to support entry. What more must a BOC demonstrate to obtain the Departments support? 13. Do you believe that Track B can be used only if no one has requested interconnection under Track A? 14. Can a BOC rely on Track B if it has received interconnection requests from potential competitors but faces no "competing provider" which Is actually providing telephone exchange service to residential and business customers predominantly over its own facilities? 15. What if requesting interconnectors under Track A do not ask for. or wish to pay for. all of the items in the checklist? Can the BOC satisfy the entry test by supplementing their interconnection agreements with a filing iinder Track B to cover at least all remaining items in the checklist? Your prompt attention to these questions would be helpful to the Subcommittee. Sincerely.