Justice Has Serious SBC Questions

February 28, 2003
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The U.S. Justice Department has raised several concerns with SBC Communications Inc.’s bid to enter the long-distance telephone market in Michigan.

In reviewing the telecom giant’s application to the Federal Communications Commission, the Justice Department last week said that it had “serious questions” about SBC’s performance and is unable to support the long distance request in Michigan “based on the current record.”

Among the questions remaining are SBC’s process of informing local phone service competitors about changes to its operations support system, notification procedures informing competing carriers when a customer selects a new  phone company, billing errors, and the reliability of its reported performance data.

Problems in all of those areas could affect emerging competition within the local telephone market, the Justice Department said.

“SBC has made significant strides in opening its Michigan markets, as demonstrated by the levels of entry achieved to date,” said R. Hewitt Pate, acting assistant attorney general in charge of the Justice Department’s Antitrust Division. “Serious concerns remain in several areas that may affect whether the current state of competition is irreversible, however, and these concerns merit the FCC’s careful attention.”

Yet the Justice Department did not preclude the FCC from addressing its concerns with SBC prior to concluding a review of the company’s long-distance applications.

The federal Telecommunications Act of 1996 allows the Baby Bells like SBC to enter long distance markets provided they demonstrate to the FCC that competition exists for local phone service in their regions. The Baby Bells are required to meet a checklist used to determine whether local competition exists.

In reviewing long-distance bids, the FCC must give “substantial weight” to the Justice Department’s assessment of competitive conditions in each state.

Competitors in the local telephone market that lease SBC network space to provide service pounced on the Justice Department report as further indication that SBC has not met the standards of local competition needed to enter the long distance market.

“The Justice Department has confirmed the reports by competitors who know SBC’s basic systems cannot meet even the minimal requirements of federal law,” said David Waymire, spokesman for Michigan Alliance for Competitive Telecommunications. “SBC should be forced to fix the problems before it gets long distance approval — not receive approval, then be given the opportunity to fix these fundamental problems. The monopoly was fined more than $6.5 million last year for interfering with competition in Michigan, and those problems continue.”

The Michigan Public Service Commission, in endorsing SBC’s application in January, adopted an order requiring the company to develop compliance and improvement plans to address issues that it felt needed further attention. The Department of Justice suggested that the FCC may want to consider improvements that SBC may implement.

SBC, in a prepared statement, downplayed the Department of Justice Report, saying it was “one of many steps in the long distance application and approval process.”

“The DOJ recommended that the Federal Communications Commission further review certain issues, and satisfy itself that SBC meets federal requirements necessary to receive authority to provide long distance service to Michigan customers,” SBC stated.

The FCC is expected to rule on SBC’s application by April 16.           

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