MONT. URGES FCC TO REJECT QWEST 271 BID, OTHERS REPEAT ENDORSEMENTS

Mont. PSC staffers said agency in Aug. gave Qwest until Oct. 1 to file full rate case, during which PSC would address its concerns that Qwest’s access charges created potential for wholesale-retail price squeeze in intrastate interexchange markets, and would take up other issues related to company’s revenue requirements and rate designs. Qwest still is under rate-of-return regulation in Mont. but hasn’t had its rates or earnings examined since Sept. 1998 rate rebalancing agreement with PSC. Staffers said Qwest also had failed to comply with requirement to file tariffs for reverse line sharing, setting rates and terms for providing Qwest DSL services on loops controlled by CLECs. Up to now, Bell companies haven’t pursued 271 applications at FCC if state commission recommended rejection. This also marks first multistate 271 application where one state is opposed while rest express support.

Qwest said it offered to discuss issue of access charge levels in context of collaborative review of all Mont. local exchange providers’ access charges. It objected to PSC’s demand for full rate case as condition for 271 endorsement, saying requirement went far beyond what states must consider in 271 reviews. Qwest also objected to PSC’s reverse line- sharing requirement, again saying agency would impose something FCC hadn’t required in previous Bell 271 approvals. Qwest Mont. Pres. Rick Hays said: “The PSC record shows we have met every requirement specified in 271.” He said Mont. PSC “based its negative recommendation on matters that aren’t germane to Telecom Act requirements and it will be up to the FCC to determine the relevance of the PSC’s issues.”

Mont. PSC had voted 4-1 to file its negative recommendation, with Comr. Bob Rowe filing dissent along with PSC’s comments. Rowe said: “I continue to disagree with the Montana Commission’s well-intentioned but misguided invitation for the FCC to masticate intrastate access and other intrastate rate issues in the 271 maw. We all have more nourishing (relevant and appropriate) Section 271 issues on which to chew.”

Qwest early last month withdrew 2 Sec. 271 petitions to address FCC concerns on company’s accounting. In Sept. 30 refiling that combined states included in original 2 petitions, Qwest said it had met Sec. 272 accounting concerns by creating new long distance subsidiary. It said it also would use refiling as opportunity to address critics’ complaints about agreements with CLECs that hadn’t been filed with state commissions. But those issues didn’t figure at all in negative Mont. recommendation. Mont. last week rejected AT&T petition to reopen 271 case to examine whether Qwest’s new long distance unit met Sec. 272’s requirements and in its comments urged FCC to address issue. PSC staffers said negative recommendation to FCC was entirely consistent with its positive Aug. 1 submission due to Qwest’s failure to comply with conditions PSC had attached.

Most other states simply reiterated endorsements they gave when Qwest first applied for Sec. 271 entry. Wash. Utilities & Transportation Commission (WUTC) told FCC “nothing in Qwest’s supplemental application causes us to change our earlier recommendation that [FCC] approve Qwest’s application.” WUTC said evidence “continues to support our determination that Qwest’s local exchange market is fully open to competition and that Qwest has satisfied the requirements of Section 271 of the Act.” Terse Utah PSC comments said it still thought Qwest had met Telecom Act’s Sec. 271 and 272: “Nothing has occurred to alter our original recommendation.” Colo. PUC urged FCC to grant Qwest application “without delay” because “the consuming public in Colorado should be kept waiting no longer.” Wyo. PSC said its review of Qwest’s refiled application “has, if anything, strengthened our earlier conviction that Qwest’s application should be granted.”

Ia. Utilities Board (IUB) said it was “unaware of any significant event that has occurred since the initial filing by Qwest… that would alter its previous recommendation.” IUB, like several other state regulators, said it reviewed changes made by Qwest to ease FCC’s concerns on Sec. 272 compliance and was “confident that all transactions between [Qwest and its Sec. 272 affiliate] will be accounted for in accordance with GAAP.” Qwest withdrew its first application after FCC questioned whether company’s financial problems had caused it to veer from compliance with generally accepted accounting principles (GAAP) as required by Sec. 272 of Telecom Act. Sec. 272 requires Bells to operate their long distance services through separate affiliates that must comply with GAAP.

N.D. PSC also “reaffirmed” its support of Qwest’s first Sec. 271 petition for those states, saying it had turned down AT&T request to consider whether Qwest and its new Sec. 272 affiliate were in compliance with Sec. 272 of Telecom Act. N.D. PSC determined that its role was “limited to the 14- point competitive checklist and the Track A and B requirements” in Sec. 271, so Sec. 272 issues didn’t have to be considered, statement that one PSC commissioner disagreed with. Comr. Susan Wefald issued concurring statement saying Sec. 272 separate affiliate issues were important part of earlier PSC review and only reason PSC didn’t file comments with FCC on those issues was “lack of time.” Wefald said “these issues are still important as they involve the new company established by Qwest to handle its interstate long distance.”

Ida. PUC said it would begin audit of Qwest and its separate affiliate 6 months after Qwest received long distance authority. Audit will look at, among other things, “proper accounting and audit independence, elimination of passthrough billing, calculation and use of Fair Market Value, logging and billing of Qwest employee time for services provided to Qwest Long Distance [affiliate], billing of any employee discounts available to Qwest Long Distance employees for Qwest services.” PUC also endorsed Qwest’s 2nd application, saying “nothing has intervened” to cause it to change its initial recommendation that FCC approve application. Neb. PSC said it “continues to recommend approval of Qwest’s 271 application.” Like other commissions, Neb. PSC reviewed Qwest’s so-called “secret” agreements with CLECs, once they were submitted to state regulators in Aug. PSC said it “cannot say for certain that such previously undisclosed agreements did not impact the validity of the testing that was undertaken to demonstrate Qwest’s compliance with the Section 271 checklist.” It said it “trusts that the FCC will perform its own full and careful analysis of Qwest’s performance related to such agreements.”

In other comments, Sprint urged FCC to deny Qwest’s petition on ground that local markets weren’t yet fully open to competition since competitors’ “residential market shares are still de minimis.” Sprint also accused Qwest of inflating its CLEC line estimates by including one-way lines. It said it knew that because Qwest attributed lines to it, even though Sprint didn’t provide CLEC service in Qwest’s states. Lines Qwest is including for Sprint are “one-way Dial IP lines,” which can’t be used to provide 2-way service, Sprint said. Joint filing by Colo. Payphone Assn., Minn. Independent Payphone Assn. and Northwest Public Communications Council urged rejection “until Qwest complies with its new services test obligations” under Sec. 276 of Telecom Act. Group said Qwest’s failure to comply with that test harmed payphone competition. At issue is requirement that Qwest set its rates for payphone services according to “cost-based principles of the new services test” and file cost-support data with the FCC and public utility commissions, group said.