I. INTRODUCTION

Section 271 of the Communications Act (Act) establishes both the procedures by which a Bell Operating Company (BOC) may apply to provide interLATA services in one of its in-region States,⁽¹⁾ and the substantive standards by which that application must be judged. The provision reflects Congress' judgment that, under appropriate circumstances, the BOCs should be allowed to offer interLATA services. Section 271 cannot be fully understood or properly applied, however, unless it is viewed in the larger context of the Telecommunications Act of 1996 (1996 Act) and its underlying purposes.

The overriding goal of the 1996 Act is to promote competition in all telecommunications markets.⁽²⁾ But Congress was particularly concerned about introducing and expanding competitive entry in local telecommunications service markets.⁽³⁾ Consequently, the 1996 Act required the BOCs and other local exchange carriers to "unbundle their networks and to resell to competitors the unbundled elements, features, functions, and capabilities that . . . new entrants need to compete in the local market."⁽⁴⁾

More importantly, perhaps, Congress sought to create incentives for firms to cooperate in the opening of their monopoly markets to competition.⁽⁵⁾ Section 271 is the most prominent example of that effort.⁽⁶⁾ In essence, Congress held out interLATA entry as a reward for the BOCs' acceptance of and compliance with interconnection, unbundling, and resale obligations designed to facilitate entry by alternative providers of local telecommunications services. The floor manager of the telecommunications bill in the House of Representatives, Representative Bliley, succinctly summarized the bargain: "Once the [BOCs] open the local exchange networks to competition, [they] are free to compete in the long distance and manufacturing markets."⁽⁷⁾

Congress charged the Federal Communications Commission (Commission or FCC) with the task of reviewing and disposing of BOC interLATA applications.⁽⁸⁾ The Commission may not act completely on its own, however. It must consult with the State commission implicated by each BOC application "in order to verify the compliance of the [BOC] with the requirements of [section 271]."⁽⁹⁾ Section 271 also directs the Department of Justice (DOJ) to evaluate each BOC application and the Commission to give "substantial weight," though not preclusive effect, to that evaluation.⁽¹⁰⁾ In the end, though, section 271 makes the BOCs the masters of their own fate, because it links the success of their interLATA applications directly to their commitment to opening their local markets to meaningful competition.⁽¹¹⁾

To date, the Commission has considered -- and denied -- three section 271 applications: one by Southwestern Bell (SBC) to provide in-region, interLATA services in Oklahoma, another by Ameritech to market such services in Michigan, and a third by BellSouth to commence long distance operations in South Carolina.⁽¹²⁾ In so doing, the Commission has given its answers to many, though by no means all, of the questions raised by the frequently ambiguous text of section 271. The Commission's decisions have not, however, terminated the many disputes about the meaning and application of that provision. Southwestern Bell has appealed the Commission's denial of its Oklahoma application.⁽¹³⁾ The Commission's order dismissing Ameritech's request has already sparked collateral litigation in the United States Court of Appeals for the Eighth Circuit⁽¹⁴⁾ and may eventually be appealed to the District of Columbia Circuit Court of Appeals.⁽¹⁵⁾ Other questions will doubtless arise as BOCs seek to offer interLATA services in other States.⁽¹⁶⁾

This paper examines the text and legislative history of section 271 in an effort to divine how Congress intended that provision to be applied. It also assesses whether the interpretations of section 271 that the Commission has issued to date consist with that congressional design. Section II considers the preconditions to BOC entry -- the legal and factual findings that the Commission must make in order to grant a BOC's application to offer in-region, interLATA services. Section III discusses the procedural framework within which the Commission must operate -- the agencies with which it must consult, the standard of proof that it must apply, and the legal standard against which any Commission decision must be judged. The objective is to develop a construction of section 271 that is consonant with the text and intent of the statute and that promotes the overriding goal of the 1996 Act -- to promote competition in all telecommunications markets, particularly the market for local exchange services.

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1. Section 271(i) defines an in-region state to mean "a State in which a [BOC] or any of its affiliates was authorized to provide wireline telephone exchange service pursuant to the reorganization plan approved under the AT&T Consent Decree, as in effect on the day before the date of enactment of the Telecommunications Act of 1996." 47 U.S.C. § 271(i)(1). Pursuant to that decree, 22 BOCs owned by AT&T were dispersed among seven new and independent Regional Bell Operating Companies. NYNEX, for example, received the two companies that offer local telephone service in New York, Massachusetts, Rhode Island, Vermont, New Hampshire, and Maine. Thus, NYNEX would need to secure authorization pursuant to section 271 in order to market interLATA services originating within the State of New York.

Unless otherwise noted, all of the statutory provisions discussed herein were added to the Communications Act of 1934 by the Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 (1996 Act). For convenience, and unless otherwise indicated, all statutory citations in this paper will refer to the section numbers that will apply after the 1996 Act's provisions have been codified in the United States Code.

2. The 1996 Act "provide[s] for a procompetitive, de-regulatory national policy framework designed to accelerate rapidly private sector deployment of advanced telecommunications and information technologies and services to all Americans by opening all telecommunications markets to competition." H.R. Conf. Rep. No. 104-458, 104th Cong., 2d Sess. 113 (1996), reprinted in 1996 U.S.C.C.A.N. 124 (emphasis added) (Conference Report). A conference report "is the most persuasive evidence of congressional intent besides the statute itself." Resolution Trust Corp. v. Gallagher, 10 F.3d 416, 421 (7th Cir. 1993). Accord Estate of Wallace v. Commissioner, 965 F.2d 1038, 1045 (11th Cir. 1992).

Members of Congress understood that the 1996 Act would be judged by its success in bringing into full bloom the nascent competition that had appeared as of the date of enactment.

We must all be vigilant to ensure that competition can take root and that it grow and it prosper. If it does not, then this bill will be a failure.

141 Cong. Rec. S700 (daily ed. Feb. 1, 1996) (statement of Sen. Burns).

3. See infra notes 264-265 and accompanying text.

4. 141 Cong. Rec. H8465 (daily ed. Aug. 4, 1995) (statement of Rep. Goodlatte). See also Iowa Utils. Bd. v. FCC, 120 F.3d 753, 816 (8th Cir.), petitions for cert. filed, 66 U.S.L.W. 3387 (U.S. Nov. 19, 1997) (Nos. 97-831 et al.) ("Congress clearly included measures in the Act, such as the interconnection, unbundled access, and resale provisions, in order to expedite the introduction of pervasive competition into the local telecommunications industry").

5. See, e.g., id. at H8282 (daily ed. Aug. 2, 1995) (statement of Rep. Bliley) ("key to this bill is the creation of an incentive for the current monopolies to open their markets to competition"). As a sponsor of the House telecommunications reform bill, H.R. 1555, the chairman of the committee with jurisdiction over the bill, and the majority floor manager of that bill during the House debate, Representative Bliley's views on the meaning and purpose of the bill are entitled to substantial weight. See, e.g., Rice v. Rehner, 463 U.S. 713, 728 (1983) (sponsor); Mills v. United States, 713 F.2d 1249, 1253 (7th Cir. 1983), cert. denied, 464 U.S. 1069 (1984) (floor manager).

6. See 141 Cong. Rec. H8465 (daily ed. Aug. 4, 1995) (statement of Rep. Goodlatte) (bill's conditioning of BOC interLATA entry on the presence of local competition "is a strong incentive for [BOCs] to comply with the requirements of this legislation"); id. at S8464 (daily ed. June 15, 1995) (statement of Sen. Dorgan) ("[c]omplete elimination of barriers to competition will occur only if the [BOCs] have positive incentives to cooperate with the introduction of meaningful competition"); id. at S8138 (daily ed. June 12, 1995) (statement of Sen. Kerrey) (long distance entry "is the carrot that is being offered" for opening local markets). Statements of individual legislators can provide evidence of legislative intent when they are consistent with the statutory language and other legislative history. Grove City College v. Bell, 465 U.S. 555, 567 (1984).

7. 141 Cong. Rec. H8282 (daily ed. Aug. 2, 1995).

8. Section 271(b)(1) provides that a BOC may offer in-region, interLATA services "if the Commission approves the application of such company . . . under subsection [271](d)(3)." 47 U.S.C. § 271(b)(1).

9. Id. § 271(d)(2)(B).

10. Id. § 271(d)(2)(A).

11. See 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, 8729 (1997) (Separate Statement of Chairman Reed Hundt) (SBC Order).

12. See id.; Application of 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, CC Docket No. 97-137, FCC 97-298 (rel. Aug. 19, 1997), recon. pending (Ameritech Order); Application of BellSouth Corp., et al., Pursuant to Section 271 of the Communications Act of 1934, as amended, To Provide In-Region, InterLATA Services in South Carolina, Memorandum Opinion and Order, CC Docket No. 97-208, FCC 97-418 (rel. Dec. 24, 1997) (BellSouth Order). The Commission dismissed SBC's application because the company failed to demonstrate "that it is providing access and interconnection to an unaffiliated, facilities-based competing provider of telephone exchange service to residential and business subscribers, as required by section 271(c)(1)(A) of the statute." SBC Order, 12 FCC Rcd at 8686, ¶ 1. The Commission rejected Ameritech's request because the firm did not show that it had fully implemented the competitive checklist of section 271(c)(2) or that its interLATA operations would be conducted in accordance with the structural separation requirements of section 272. Ameritech Order, supra, ¶ 5. The Commission turned down BellSouth's application for failure to comply with the competitive checklist. See BellSouth Order, supra, ¶¶ 2, 12.

13. SBC Communications, Inc. v. FCC, No. 97-1425 (D.C. Cir. argued Jan. 9, 1998).

14. See Petition for Immediate Issuance and Enforcement of the Mandate, Iowa Utils. Bd. v. FCC, No. 96-3321, et al. (8th Cir. filed Sept. 18, 1997); Petition of the State Commission Parties and the National Association of Regulatory Utility Commissioners for Issuance and Enforcement of the Mandate, Iowa Utils. Bd. v. FCC, No. 96-3321, et al. (8th Cir. filed Sept. 18, 1997). For a discussion of the issues presented by the Eighth Circuit litigation, see notes 228-237 infra and accompanying text.

15. Any Commission decision granting or denying a section 271 application may be reviewed only by the D.C. Circuit. 47 U.S.C. § 402(b)(6), (9).

16. BellSouth has also applied for authorization to provide long distance service in Louisiana. Application by BellSouth Corp., BellSouth Telecommunications, Inc., and BellSouth Long Distance, Inc. for Provision of In-Region, InterLATA Services in Louisiana, CC Docket No. 97-231 (filed Nov. 6, 1997). BellSouth's request will require the Commission to determine, among other things, whether a BOC may rely on competing wireless telecommunications services -- specifically personal communications services (PCS) -- to satisfy the facilities-based competitor requirement of section 271(c)(1)(A). See notes 112-140 infra and accompanying text.