Evaluation Of The United States Department Of Justice

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Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554



In the Matter of

Application by Verizon New England
Inc., Verizon Delaware Inc., Bell
Atlantic Communications, Inc. (d/b/a
Verizon Long Distance), NYNEX
Long Distance Company (d/b/a Verizon
Enterprise Solutions), Verizon Global
Verizon Networks Inc., and Verizon Select
Services Inc., for Authorization to Provide          
In-Region, InterLATA Services in
New Hampshire and Delaware


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WC Docket No. 02-157

EVALUATION OF THE
UNITED STATES DEPARTMENT OF JUSTICE


Charles A. James
Assistant Attorney General
Antitrust Division

Margaret A. Ward
Counsel to the Assistant Attorney General

R. Hewitt Pate
Deputy Assistant Attorney General

Michael L. Katz
Deputy Assistant Attorney General

 
Communications with respect to this document should be addressed to:
 

W. Robert Majure
Assistant Chief

John Henly
Jeffrey Prisbrey
Economists
Economic Regulatory Section

Nancy M. Goodman
Chief

Benjamin D. Brown
Laura R. Starling
Lauren J. Fishbein

Attorneys
Telecommunications and Media
  Enforcement Section

August 1, 2002


Table of Contents

Table of Contents

Index of Full Citations

Introduction and Summary

  1. State Commission Proceedings
    1. Delaware
    2. New Hampshire

  2. The Department's Evaluation
    1. Delaware
    2. New Hampshire

  3. Conclusion

INDEX OF FULL CITATIONS

Short Citation

Full Citation

DOJ Evaluations and Related Materials
DOJ Arkansas/Missouri Evaluation Evaluation of the U.S. Department of Justice, In re: Joint Application by SBC Communications Inc., Southwestern Bell Telephone Company, and Southwestern Bell Communications Services, Inc. d/b/a Southwestern Bell Long Distance for Provision of In-Region InterLATA Services in Arkansas and Missouri, FCC CC Docket No. 01-194 (Sept. 24, 2001), available at .
DOJ Georgia/Louisiana I Evaluation Evaluation of the U.S. Department of Justice, In re: Joint Application by BellSouth Corporation, BellSouth Telecommunications, Inc., and BellSouth Long Distance, Inc. for Provision of In-Region InterLATA Services in Georgia and Louisiana, FCC CC Docket No. 01-277 (Nov. 6, 2001), available at .
DOJ Kansas/Oklahoma Evaluation Evaluation of the U.S. Department of Justice, In re: Joint Application by SBC Communications Inc., Southwestern Bell Telephone Company, and Southwestern Bell Communications Services, Inc. d/b/a Southwestern Bell Long Distance for Provision of In-Region InterLATA Services in Kansas and Oklahoma, FCC CC Docket No. 00-217 (Dec. 4, 2000), available at .
DOJ Maine Evaluation Evaluation of the U.S. Department of Justice, In re: Application by Verizon New England Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in Maine, FCC CC Docket No. 02-61, (Apr. 25, 2002), available at .
DOJ Missouri I Evaluation Evaluation of the U.S. Department of Justice, In re: Application of SBC Communications Inc., Southwestern Bell Telephone Company, and Southwestern Bell Communications Services, Inc. d/b/a Southwestern Bell Long Distance for Provision of In-Region InterLATA Services in Missouri, FCC CC Docket No. 01-88 (May 9, 2001), available at .
DOJ Pennsylvania Evaluation Evaluation of the U.S. Department of Justice, In re: Application by Verizon Pennsylvania Inc., Verizon Long Distance, Verizon Enterprise Solutions, Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in Pennsylvania, FCC CC Docket No. 01-138 (July 26, 2001), available at .
DOJ Rhode Island Evaluation Evaluation of the U.S. Department of Justice, In re: Application by Verizon New England Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in Rhode Island, FCC CC Docket No. 01-324 (Jan. 4, 2002), available at .
FCC Orders, Reports, and Related Materials
FCC Connecticut Order Memorandum Opinion and Order, In re: Application of Verizon New York Inc., Verizon Long Distance, Verizon Enterprise Solutions, Verizon Global Networks Inc., and Verizon Select Services, Inc., for Authorization to Provide In-Region, InterLATA Services in Connecticut, 16 FCC Rcd 14,147 (July 20, 2001), available at .
FCC Massachusetts Order Memorandum Opinion and Order, In re: Application of Verizon New England Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions) and Verizon Global Networks Inc., for Authorization to Provide In-Region, InterLATA Services in Massachusetts, 16 FCC Rcd 8988 (Apr. 16, 2001), available at .
FCC Maine Order Memorandum Opinion and Order, In re: Application of Verizon New England Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in Maine, FCC 02-187 (June  19, 2002), available at 2002 WL 1339069 and .
FCC New Jersey Order Memorandum Opinion and Order, In re: Application of Verizon New Jersey Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions) and Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in New Jersey, FCC 02-189 (June 24, 2002), available at 2002 WL 1363263 and .
FCC New York Order Memorandum Opinion and Order, In re: Application by Bell Atlantic New York for Authorization Under Section 271 of the Communications Act To Provide In-Region, InterLATA Services in the State of New York, 15 FCC Rcd 3953 (Dec. 22, 1999), aff'd, AT&T Corp. v. FCC, 220 F.3d 607 (D.C. Cir. 2000), available at .
FCC Pennsylvania Order Memorandum Opinion and Order, In re: Application of Verizon Pennsylvania Inc., Verizon Long Distance, Verizon Enterprise Solutions, Verizon Global Networks Inc., and Verizon Select Services, Inc., for Authorization to Provide In-Region, InterLATA Services in Pennsylvania, 16 FCC Rcd 17,419 (Sept. 19, 2001), available at .
FCC Rhode Island Order Memorandum Opinion and Order, In re: Application of Verizon New England Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions) and Verizon Global Networks Inc., for Authorization to Provide In-Region, InterLATA Services in Rhode Island, FCC 02-63 (Feb. 22, 2002), available at 2002 WL 257346 and .
FCC Vermont Order Memorandum Opinion and Order, In re: Application of Verizon New England Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions) and Verizon Global Networks Inc., for Authorization to Provide In-Region, InterLATA Services in Vermont, FCC 02-118 (Apr. 17, 2002), available at 2002 WL 575615 and .
State Commission Orders and Related Materials
Delaware PSC Comments Consultative Comments of the Public Service Commission of Delaware, In re: Application by Verizon New England Inc., Verizon Delaware Inc., et al., for Authorization to Provide In-Region InterLATA Services in New Hampshire and Delaware, FCC WC Docket No. 02-157 (July  16, 2002).
Delaware PSC PAP Order Order, In re: Inquiry into Verizon Delaware Inc.'s Compliance with the Conditions Set Forth in 47 U.S.C. Section 271(c) (filed February 1, 2002), Delaware PSC Docket No. 02-001 (June 25, 2002), attached to Verizon Br. App. B-DE as Tab 20.
Delaware PSC Pricing Order I Findings, Opinion, & Order No. 4542, In re: Application of Bell Atlantic-Delaware, Inc. for Approval of its Statement of Terms and Conditions Under Section 252(f) of the Telecommunications Act of 1996, Delaware PSC Docket No. 96-324 (July 8, 1997), attached to Verizon Br. App. E as Tab 14.
Delaware PSC Pricing Order II Findings, Opinion, and Order No. 5967, In re: Application of Verizon Delaware Inc. (F/K/A Bell Atlantic-Delaware, Inc.), for Approval of its Statement of Terms and Conditions Under Section 252(f) of the Telecommunications Act of 1996, Delaware PSC Docket No. 96-324 (June 4, 2002), attached to Verizon Br. App. E as Tab 33.
New Hampshire PUC Comments Consultative Comments of the New Hampshire Public Utilities Commission on Verizon New Hampshire's Compliance with Section 271 of the Telecommunications Act of 1996, (July 17, 2002), In re: Application by Verizon New England Inc., Verizon Delaware Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in New Hampshire and Delaware, FCC WC Docket No. 02-157 (July 17, 2002).
New Hampshire PUC PAP Order I Order, In re: Petition to Approve Carrier to Carrier Performance Guidelines and Performance Assessment Plan, New Hampshire PUC Docket No. 01-006 (Mar. 29, 2002), attached to New Hampshire PUC Comments as App. 5.
New Hampshire PUC PAP Order II Order Regarding Motion for Reconsideration, Rehearing and/or Clarification, In re: Petition to Approve Carrier to Carrier Performance Guidelines and Performance Assessment Plan, New Hampshire PUC Docket No. 01-006 (May 24, 2002), attached to New Hampshire PUC Comments as App. 6.
New Hampshire PUC Pricing Order I Order Granting in Part and Denying in Part, Bell Atlantic Petition for Approval of Statement of Generally Available Terms Pursuant to the Telecommunications Act of 1996, New Hampshire Docket No. 97-171 (July 6, 2001), attached to Verizon Br. App. I-NH as Tab 3.
New Hampshire PUC Pricing Order II Order Approving in Part and Denying in Part Statement of Generally Available Terms and Conditions [for] Additional Unbundled Network Elements, New Hampshire PUC Docket No. 01-206 (Apr. 12, 2002), attached to Verizon Br. App. D-NH as Tab 7.
New Hampshire PUC Pricing Order of Notice Order of Notice, New Hampshire PUC Docket No. 02-110 (June 18, 2002), attached to Verizon Br. App. O-NH as Tab 14.
New Hampshire PUC Section 271 Compliance Letter Letter from New Hampshire Public Utilities Commission to J. Michael Hickey, Verizon New Hampshire, In re: Application of Verizon New England Inc., d/b/a Verizon New Hampshire, for a Favorable Recommendation to Offer InterLATA Service Under 47 U.S.C. § 271, New Hampshire PUC Docket No. 01-151 (June 14, 2002), attached to New Hampshire PUC Comments as App. 2.
Verizon's Application and Related Filings
PwC Sapienza/Bluvol Decl. Joint Declaration of Russell J. Sapienza and Catherine (Kate) Bluvol, attached to Verizon Br. App. C-NH as Tab 1.
PwC Sapienza/Cobourn Decl. Joint Declaration of Russell J. Sapienza and William M. Cobourn, Jr., attached to Verizon Br. App. B-DE as Tab 2.
Verizon Br. Application by Verizon New England and Verizon Delaware for Authorization to Provide In-Region, InterLATA Services in New Hampshire and Delaware, In re: Application by Verizon New England Inc., Verizon Delaware Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks, Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in New Hampshire and Delaware, FCC WC Docket No. 02-157 (June 27, 2002).
Verizon Guerard/Canny/Abesamis/DeVito Decl. Joint Declaration of Elaine M. Guerard, Julie A. Canny, Beth A. Abesamis, and Marilyn C. DeVito, attached to Verizon Br. App. A as Tab E.
Verizon Hickey/Garzillo/Anglin Decl. Joint Declaration of J. Michael Hickey, Patrick A. Garzillo, and Michael J. Anglin, attached to Verizon Br. App. A as Tab F.
Verizon Martin/Garzillo/Sanford Decl. Joint Declaration of Joshua W. Martin III, Patrick A. Garzillo, and Gary Sanford, attached to Verizon Br. App. A as Tab G.
Verizon McLean/Wierzbicki/Webster DE Decl. Joint Declaration of Kathleen McLean, Raymond Wierzbicki, and Catherine T. Webster Regarding Delaware, attached to Verizon Br. App. A as Tab D.
Verizon McLean/Wierzbicki/Webster NH/DE Decl. Joint Declaration of Kathleen McLean, Raymond Wierzbicki, and Catherine T. Webster Regarding Delaware, attached to Verizon Br. App. A as Tab C.
Verizon Section 271 NH Compliance Letter II Letter from J. Michael Hickey, Verizon New England, to New Hampshire Public Utilities Commission, In re: Verizon New Hampshire Section 271 Inquiry, New Hampshire PUC Docket No. 01-151 (June 5, 2002), attached to Verizon Br. App. B-NH as Tab 28.
Verizon Torre Decl. Declaration of John A. Torre, attached to Verizon Br. App. A as Tab I.
Third-Party Comments and Affidavits/Declarations
AT&T Comments Comments of AT&T Corp., In re: Application by Verizon New England Inc., Verizon Delaware Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in New Hampshire and Delaware, FCC WC Docket No. 02-157 (July 17, 2002).
AT&T Pitts/Baranowski Decl. Joint Declaration of Catherine E. Pitts and Michael R. Baranowski, attached to AT&T Comments as Tab 3.
BayRing Comments Comments of Freedom Ring Communications, L.L.C. d/b/a BayRing Communications, In re: Application by Verizon New England Inc., Verizon Delaware Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in New Hampshire and Delaware, FCC WC Docket No. 02-157 (July 17, 2002).
WorldCom Comments Comments of WorldCom, Inc. on the Application by Verizon for Authorization to Provide In-Region, InterLATA Services in New Hampshire and Delaware, In re: Application by Verizon New England Inc., Verizon Delaware Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions), Verizon Global Networks Inc., and Verizon Select Services Inc., for Authorization to Provide In-Region, InterLATA Services in New Hampshire and Delaware, FCC WC Docket No. 02-157 (July 17, 2002).
WorldCom Frentrup Decl. Declaration of Chris Frentrup on Behalf of WorldCom , Inc., attached to WorldCom Comments.

Before the
FEDERAL COMMUNICATIONS COMMISSION
Washington, D.C. 20554



In the Matter of

Application by Verizon New England
Inc., Verizon Delaware Inc., Bell
Atlantic Communications, Inc. (d/b/a
Verizon Long Distance), NYNEX
Long Distance Company (d/b/a Verizon
Enterprise Solutions), Verizon Global
Verizon Networks Inc., and Verizon Select
Services Inc., for Authorization to Provide          
In-Region, InterLATA Services in
New Hampshire and Delaware


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WC Docket No. 02-157

EVALUATION OF THE
UNITED STATES DEPARTMENT OF JUSTICE


Introduction and Summary

The United States Department of Justice ("Department"), pursuant to Section 271(d)(2)(A) of the Telecommunications Act of 1996(1) ("1996 Act"), submits this evaluation of the joint application filed on June 27, 2002 by Verizon New England Inc., Verizon Delaware Inc., Bell Atlantic Communications, Inc. (d/b/a Verizon Long Distance), NYNEX Long Distance Company (d/b/a Verizon Enterprise Solutions),Verizon Global Networks Inc., and Verizon Select Services Inc. to provide in-region, interLATA services in Delaware and New Hampshire.

This application to the Federal Communications Commission ("FCC" or "Commission") is Verizon's first for the states of Delaware and New Hampshire, and follows its successful applications for long distance entry in Massachusetts, Rhode Island, Vermont, and Maine, in its New England region, as well as successful applications for New Jersey, Pennsylvania, Connecticut, and New York.(2) The Department concludes that Verizon has generally succeeded in opening its local markets in Delaware and New Hampshire to competition and recommends that the Commission approve Verizon's application for Section 271 authority in Delaware and New Hampshire, subject to satisfying itself as to the pricing issues mentioned below.

I. State Commission Proceedings

A. Delaware

The Delaware Public Service Commission ("Delaware PSC") has facilitated the development of competition in the local telecommunications markets by establishing carrier-to-carrier wholesale performance measurements(3); conducting extensive pricing proceedings that established wholesale rates for unbundled network elements ("UNEs")(4); and adopting a Performance Assurance Plan intended to ensure that an appropriate level of wholesale performance is maintained once Verizon's Section 271 application is approved.(5)

The Delaware PSC's review of Verizon's state Section 271 filing included an independent third-party test by PricewaterhouseCoopers ("PwC") designed to determine whether the operations support systems ("OSS") that Verizon uses in Delaware are the same as those it uses in Pennsylvania.(6) PwC concluded that Verizon's assertions regarding the sameness of its "Delaware and Pennsylvania Operational Support Systems (specifically the pre-order, order, provisioning, maintenance & repair, relationship management infrastructure, and billing domains) and Performance Measures Calculations Process" are "fairly stated, in all material respects."(7)

The Delaware PSC has recommended that the FCC approve Verizon's Section 271 application.(8)

B. New Hampshire

The New Hampshire Public Utilities Commission ("New Hampshire PUC") has facilitated the development of competition in the local telecommunications markets by establishing carrier-to-carrier wholesale performance measurements, which incorporate improvements from New York and several other states(9); conducting extensive pricing proceedings that established wholesale rates for UNEs(10); and adopting a Performance Assessment Plan intended to ensure that an appropriate level of wholesale performance is maintained once Verizon's Section 271 application is approved.(11) In addition, the New Hampshire Commission is establishing a Rapid Response Process, modeled on that created by the Maine PUC, in order to resolve certain disputes between Verizon and CLECs more quickly than traditional dispute resolution processes would allow.(12)

The New Hampshire PUC's review of Verizon's state Section 271 filing included an independent third-party test by PricewaterhouseCoopers ("PwC") designed to determine whether the operations support systems ("OSS") that Verizon uses in New Hampshire are the same as those it uses in Massachusetts.(13) PwC concluded that Verizon's assertions regarding the "sameness" of its "New England Region Operational Support Systems (specifically the pre-order, order, provisioning, maintenance & repair, relationship management infrastructure, and billing domains) and Performance Metrics Reporting" are "fairly stated, in all material respects."(14)

The New Hampshire PUC has recommended that the FCC approve Verizon's Section 271 application.(15)

II. The Department's Evaluation

In assessing whether the local markets in a state are fully and irreversibly open to competition, the Department looks first to the actual entry in a market.(16) But the Department does not broadly presume that all three entry tracks -- facilities-based, unbundled network elements ("UNEs"), and resale -- are open or closed on the basis of an aggregate level of entry alone.(17)

A. Delaware

Together, according to Verizon's data, Verizon and CLECs serve a total of approximately 636,000 lines in Verizon's Delaware service area as of March 2002.(18) Of the total lines in Verizon's service area in Delaware, 38.6 percent, or approximately 246,000 serve businesses, and 61.4 percent, or approximately 390,000 serve residential customers.(19) For business and residential customers combined, Verizon estimates that CLECs using all modes of entry serve approximately 49,000 lines, or approximately 7.7 percent of all lines in Verizon's service area in the state.(20)

Competitors have made some progress in penetrating the business market in Delaware. CLECs serve approximately 15.2 percent of all business lines in Verizon's Delaware's service area.(21) CLECs serve approximately 10.3 percent of all business lines using their own facilities that are either connected directly to the customer premises or connected through loops leased from Verizon.(22) CLECs resell Verizon's services to serve approximately 3.5 percent of all business lines.(23) CLECs use the UNE-platform (a combination of loop, switch, and transport elements) to serve 1.3 percent of such lines.(24)

By contrast, CLECs serve approximately 3.1 percent of all residential lines in Verizon's Delaware service area.(25) CLECs serve approximately 1.9 percent of all residential lines using facilities that are either connected directly to the customer premises or connected through loops leased from Verizon.(26) CLECs serve approximately 1.2 percent of all residential lines through resale, and less than one-one-hundredth of 1 percent of such lines by means of the UNE-platform.(27)

The amount of entry by competitive facilities-based carriers serving business customers in Delaware and the absence of complaints regarding Verizon's fulfillment of its obligations to open its markets to that mode of entry lead the Department to conclude that opportunities to serve business customers via facilities are available there. The absence of complaints regarding the resale mode of entry indicates that opportunities to serve both business and residential customers through that mode are likewise available. Although there is significantly less competition to serve residential customers via facilities and to serve both business and residential customers via the UNE-platform, the Department does not believe that there remain any material non-price obstacles to competition in Delaware created by Verizon. Verizon has submitted evidence to show that its OSS in Delaware are the same as those that the Commission found satisfactory in Pennsylvania.(28) Moreover, there have been few complaints regarding Verizon's Delaware OSS in this proceeding.

The low levels of CLEC penetration of residential markets in Delaware and, in particular, the lack of entry by means of the UNE-platform, may reflect the higher UNE pricing that was in effect for most of the period preceding this application as opposed to the UNE prices on which the application is based. The Delaware PSC issued a pricing order that reduced certain UNE rates three weeks before Verizon filed this application.(29)

The Department notes, however, complaints filed by commenters regarding UNE rates in Delaware,(30) and urges the Commission to examine these comments carefully in determining whether Verizon's prices are cost-based.(31) As the Department has stated previously, "[b]ecause of the Commission's experience and expertise in rate-making issues . . . the Department will not attempt to make its own independent determination whether prices are appropriately cost-based."(32)

B. New Hampshire

Together, according to Verizon's data, Verizon and CLECs serve a total of approximately 893,000 lines in Verizon's New Hampshire service area as of March 2002.(33) Of the total lines in Verizon's service area in New Hampshire, 35.5 percent, or approximately 317,000 serve businesses, and 64.5 percent, or approximately 576,000 serve residential customers.(34) For business and residential customers combined, Verizon estimates that CLECs using all modes of entry serve approximately 145,000 lines, or approximately 16.2 percent of all lines in Verizon's service area in the state.(35)

Competitors have made significant progress in penetrating the business market in New Hampshire. CLECs serve approximately 33.8 percent of all business lines in Verizon's New Hampshire service area.(36) CLECs serve approximately 21.5 percent of all business lines using facilities that are either connected directly to the customer premises or connected through loops leased from Verizon.(37) CLECs resell Verizon's services to serve approximately 10.4 percent of all business lines.(38) CLECs use the UNE-platform (a combination of loop, switch, and transport elements) to serve 1.9 percent of such lines.(39)

CLECs serve approximately 6.6 percent of all residential lines in Verizon's New Hampshire service area.(40) Facilities-based carriers serve approximately 6.3 percent of all residential lines.(41) Indeed, most CLEC service to residential customers in New Hampshire is facilities-based, including that provided over the cable television facilities of AT&T Broadband.(42) CLECs serve approximately two-tenths of 1 percent all residential lines through resale, and less than one-tenth of 1 percent of such lines by means of the UNE-platform.(43)

The amount of entry by competitive facilities-based and resale carriers serving business customers in New Hampshire and the absence of complaints regarding Verizon's fulfillment of its obligations to open its markets to these modes of entry, lead the Department to conclude that opportunities to serve business customers via the facilities-based and resale modes of entry are available there. Although there is significantly less competition to serve residential customers through all modes of entry and to serve business customers via the UNE-platform, the Department does not believe that there remain any material non-price obstacles to competition in New Hampshire created by Verizon. Verizon has submitted evidence to show that its OSS in New Hampshire are the same as those that the Commission found satisfactory in Massachusetts.(44) Moreover, there have been few complaints regarding Verizon's New Hampshire OSS in this proceeding.

The low levels of CLEC penetration of residential markets in New Hampshire and, in particular, the lack of entry by means of the UNE-platform, may reflect the higher UNE pricing that was in effect for most of the period preceding this application as opposed to the UNE prices on which the application is based. The New Hampshire PUC issued orders that reduced certain UNE rates within weeks of Verizon's filing of this application.(45)

The Department notes, however, complaints from commenters regarding the resulting UNE rates in New Hampshire,(46) and urges the Commission to look carefully at these comments in determining whether Verizon's prices are cost-based.(47) As the Department has stated previously, "[b]ecause of the Commission's experience and expertise in rate-making issues . . . the Department will not attempt to make its own independent determination whether prices are appropriately cost-based."(48)

III. Conclusion

The record in this matter suggests that Verizon has succeeded in opening its local markets in Delaware and New Hampshire to competition in most respects. The Department therefore recommends approval of Verizon's application for Section 271 authority in Delaware and New Hampshire, subject to the Commission's satisfying itself as to the pricing issues mentioned above.

  Respectfully submitted,
Charles A. James
Assistant Attorney General
Antitrust Division

R. Hewitt Pate
Deputy Assistant Attorney General
Antitrust Division

Michael L. Katz
Deputy Assistant Attorney General
Antitrust Division

Margaret A. Ward
Counsel to the Assistant Attorney General
Antitrust Division

W. Robert Majure
Assistant Chief

John Henly
Jeffrey Prisbrey
Economists
Economic Regulatory Section

   /s/    Nancy M. Goodman
Nancy M. Goodman
Chief

Benjamin D. Brown
Laura R. Starling
Lauren J. Fishbein

Attorneys
Telecommunications and Media
  Enforcement Section

Antitrust Division
U.S. Department of Justice
1401 H Street, NW, Suite 8000
Washington, DC 20530
(202) 514-5621

August 1, 2002


Certificate of Service

I hereby certify that I have caused a true and accurate copy of the foregoing Evaluation of the United States Department of Justice to be served on the persons indicated on the attached service list by first class mail, overnight mail, hand delivery, or electronic mail on August 1, 2002.

     /s/   Benjamin D. Brown
Benjamin D. Brown
Attorney
Telecommunications and Media
  Enforcement Section
Antitrust Division
U.S. Department of Justice

Service List

Chairman Michael K. Powell
Commissioner Kathleen Q. Abernathy
Commissioner Michael J. Copps
Commissioner Kevin J. Martin
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554

Marlene H. Dortch
Secretary
Office of the Secretary
Federal Communications Commission
445 12th Street, SW
TW-B204
Washington, DC 20554

Janice Myles
Common Carrier Bureau
Federal Communications Commission
445 12th Street, SW
Room 5-C327
Washington, DC 20554

Qualex International
Portals II
445 12th Street, SW
Room CY-B402
Washington, DC 20554

Henry L. Thaggert
Common Carrier Bureau
Federal Communications Commission
445 12th Street, SW
Washington, DC 20554

Debra A. Howland
Executive Director and Secretary
Public Utilities Commission
State of New Hampshire
8 Old Suncook Road
Concord, NH 03301-7319

Michael E. Glover
Senior Vice President and
Deputy General Counsel
Verizon
1515 North Court House Road
Suite 500
Arlington, VA 22201

Lori E. Wright
Chris Frentrup
WorldCom, Inc.
1133 19th Street, NW
Washington, DC 20036

Eric J. Branfman
Harisha J. Bastiampillai
Swidler Berlin Shereff Friedman, LLP
3000 K Street, NW
Suite 300
Washington, DC 20007

Marybeth M. Banks
H. Richard Juhnke
Sprint Corporation
401 9th Street, NW
Suite 400
Washington, DC 20004

Mark C. Rosenblum
Richard Rubin
James Talbot
Lawrence Lafaro
AT&T Corporation
295 North Maple Avenue
Basking Ridge, NJ 07920

Alan M. Shoer
Assistant General Counsel
Cavalier Telephone
2134 West Laburnum Avenue
Richmond, VA 23227

Chairman Thomas B. Getz
Commissioner Susan S. Geiger
Commissioner Nancy Brockway
Public Utilities Commission
State of New Hampshire
8 Old Suncook Road
Concord, NH 03301-7319

Kate Bailey
Public Utilities Commission
State of New Hampshire
8 Old Suncook Road
Concord, NH 03301-7319

Chairwoman Arnetta Mcrae
Commissioner Joshua M. Twilley
Commissioner Donald J. Puglisi
Commissioner Jaymes B. Lester
Commissioner Joann T. Conaway
Delaware Public Service Commission
861 Silver Lake Boulevard
Cannon Building, Suite 100
Dover, DE 19904

Bruce H. Burcat
Executive Director
Delaware Public Service Commission
861 Silver Lake Boulevard
Cannon Building, Suite 100
Dover, DE 19904

Connie S. McDowell
Chief of Technical Services
Delaware Public Service Commission
861 Silver Lake Boulevard
Cannon Building, Suite 100
Dover, DE 19904

Benjamin A. Thayer
Chief Operating Officer
BayRing Communications
359 Corporate Drive
Portsmouth, NH 03801

Dirck A. Hargraves
Telecommunications Research
and Action Center
P.O. Box 27279
Washington, DC 20005

Matthew D. Bennett
Policy Director
Alliance For Public Technology
919 18th Street, N.W., Suite 900
Washington, DC 20006


FOOTNOTES

1. Pub. L. No. 104-104, 110 Stat. 56 (1996) (codified as amended in scattered sections of 47 U.S.C.).

2. See generally FCC New Jersey Order, FCC Maine Order, FCC Vermont Order; FCC Rhode Island Order; FCC Pennsylvania Order; FCC Connecticut Order; FCC Massachusetts Order; FCC New York Order.

3. Delaware PSC Comments at 3-4 (approving use of New York performance measures in Delaware); see also Verizon Br. at 125-26 (stating Verizon expects to report performance pursuant to measures "essentially" to those used in New York and Massachusetts beginning July 2002). Verizon had been reporting performance in Delaware pursuant to measures "essentially the same" as those used in Pennsylvania when the FCC approved that application. Verizon Br. at 125. Verizon subsequently adapted the New York measures for use in Pennsylvania, pursuant to a condition imposed by the Pennsylvania PUC for a recommendation of approval to the FCC. FCC Pennsylvania Order ¶ 131 & n.451.

4. Delaware PSC Comments at 10-11; Delaware PSC Pricing Order I at 50-59 (establishing UNE and interconnection rates); Delaware PSC Pricing Order II at 39-42 (approving rates for new UNEs and revising non-recurring charge rates); see also Verizon Br. at 64-74.

5. Delaware PSC Comments at 4-5; Delaware PSC PAP Order at 1-3 (approving Delaware PAP, effective on earlier of Nov. 1, 2002 or first day of month following month in which application is approved by FCC); see also Verizon Guerard/Canny/Abesamis/DeVito Decl. ¶¶ 32-33 (explaining Delaware PAP is based on that adopted in Virginia, which is based on the New York PAP); Verizon Br. at 126-27 (noting Delaware and New Hampshire plans "parallel the plans in effect in New York, Massachusetts, Rhode Island, Vermont, Maine, and Connecticut" in terms of amount, structure, and allocation of annual remedy payments at risk).

6. Verizon McLean/Wierzbicki/Webster DE Decl. ¶ 11; see also FCC Pennsylvania Order ¶¶ 12-52 (concluding Verizon provides CLECs non-discriminatory access to its OSS in Pennsylvania).

7. PwC Sapienza/Cobourn Decl. ¶¶ 9-13.

8. Delaware PSC Comments at 31-32.

9. New Hampshire PUC Comments at 6; Verizon Br. at 125 (noting Verizon New Hampshire performance measures are "virtually identical" to the latest version of those developed in the New York PSC's collaborative carrier working group process and employed in New York, Massachusetts, Connecticut, Rhode Island, Maine, and Vermont).

10. New Hampshire PUC Comments at 13-17; New Hampshire PUC Pricing Order I at 170-75 (establishing UNE rates); New Hampshire PUC Pricing Order II at 55-59 (revising rates in compliance with FCC orders in UNE Remand and Advanced Services proceedings); New Hampshire PUC Section 271 Compliance Letter at 3-4 (revising analog loop, switching and transport, DS-1 loop, and DUF rates); Verizon Section 271 NH Compliance Letter II at 1-3 & Attach. 1 (confirming revised rates); see also New Hampshire PUC Pricing Order of Notice at 2-5 (opening proceeding to reexamine pricing inputs).

11. New Hampshire PUC Comments at 6, 18-20; New Hampshire PUC PAP Order I at 84-88 (approving PAP filed by Verizon on condition of certain modifications); New Hampshire PUC PAP Order II at 16-17 (approving PAP filed by Verizon as modified in accord with prior order); see also Verizon Guerard/Canny/Abesamis/DeVito Decl. ¶ 30 (noting submission of PAP in accord with PUC conditions).

12. Verizon Section 271 NH Compliance Letter II at 3 ("The process will be tested for six months, and Verizon NH and Staff will report to the Commission proposed revisions, if any, based on actual experience."); cf. DOJ Maine Evaluation at 2-3 n.6 (describing Rapid Response Process established in Maine).

13. Verizon McLean/Wierzbicki/Webster NH/DE Decl. ¶ 11; see also FCC Massachusetts Order ¶¶ 43-181 (concluding that Verizon provides CLECs non-discriminatory access to its OSS, including unbundled loops, in Massachusetts).

14. PwC Sapienza/Bluvol Decl. ¶¶ 12-16.

15. New Hampshire PUC Comments at 2 (approval recommended subject to conditions listed); see also generally New Hampshire PUC Section 271 Compliance Letter .

16. See DOJ Pennsylvania Evaluation at 3-4 ("The Department first looks to actual competitive entry, because the experience of competitors seeking to enter a market can provide highly probative evidence about the presence or absence of artificial barriers to entry. Of course, entry barriers can differ by types of customers or geographic areas within a state, so the Department looks for evidence relevant to each market in a state." (Footnote omitted.)).

17. See, e.g., DOJ Georgia/Louisiana Evaluation I at 7 ("Although the Department presumes that fully facilities-based competition is not hindered in a competitively significant manner based on the entry recorded in Georgia, the amount of entry does not justify extending such a presumption to other modes of entry in Georgia."); DOJ Missouri I Evaluation at 6-7 ("The Department presumes that opportunities to serve business customers by fully facilities-based carriers and resellers are available in Missouri, based on the entry efforts reflected in SBC's application. There is significantly less competition to serve residential customers. There also is less competition by firms seeking to use UNEs, including the UNE-platform, and there are some indications that a failure by SBC to satisfy all of its obligations may have constrained this type of competition." (Footnotes omitted.)).

18. See Verizon Martin/Garzillo/Sanford Decl. ¶ 46; Verizon Torre Decl. Attach. 2 at 3 tbl. 1. Delaware has several incumbent local exchange carriers other than Verizon.

19. See id.

20. See id.

21. See Verizon Martin/Garzillo/Sanford Decl. ¶ 46; Verizon Torre Decl. Attach. 2 at 3 tbl. 1 (CLECs serve approximately 37,300 business lines).

22. See Verizon Martin/Garzillo/Sanford Decl. ¶ 46; Verizon Torre Decl. Attach. 2 at 3 tbl. 1 (CLECs serve approximately 25,400 business lines using at least some of their own facilities).

23. See Verizon Martin/Garzillo/Sanford Decl. ¶ 46; Verizon Torre Decl. Attach. 2 at 3 tbl. 1 (CLECs serve approximately 8,700 business lines via resale).

24. See Verizon Martin/Garzillo/Sanford Decl. ¶ 46; Verizon Torre Decl. Attach. 2 at 3 tbl. 1 (CLECs serve approximately 3,200 business lines through the UNE-platform).

25. See Verizon Martin/Garzillo/Sanford Decl. ¶ 46; Verizon Torre Decl. Attach. 2 at 3 tbl. 1 (CLECs serve approximately 12,000 residential lines).

26. See Verizon Martin/Garzillo/Sanford Decl. ¶ 46; Verizon Torre Decl. Attach. 2 at 3 tbl. 1 (exact number of residential facilities-based lines filed as confidential business information).

27. See Verizon Martin/Garzillo/Sanford Decl. ¶ 46; Verizon Torre Decl. Attach. 2 at 3 tbl. 1 (CLECs serve approximately 4,700 residential lines via resale and 40 residential lines through the UNE-platform).

28. See supra notes 6-7 and accompanying text.

29. See supra note 4 and accompanying text. The Delaware PSC required Verizon to recalculate certain rates using revised input assumptions. Delaware PSC Pricing Order II at 39-41.

30. AT&T Comments at 4-6, 8-12; AT&T Pitts/Baranowski Decl. ¶¶ 6-14; WorldCom Comments at 1-4; WorldCom Frentrup Decl. ¶¶ 2-8.

31. The Department notes once more that "[p]ricing based on forward-looking costs 'simulates the prices for network elements that would result if there were a competitive market for the provision of such elements to other carriers' and 'will result in the creation of the "right" investment incentives for competitive facilities-based entry, rather than distorting the entrant's "make or buy" decision with respect to the network element.'" DOJ Arkansas/Missouri Evaluation at 6 n.19 (quoting DOJ Local Competition Comments at 28-29)). "Prices that are set either above or below the element's true economic cost can distort entry decisions and may impede the development of competition on the merits." Id. (citing DOJ Local Competition Comments at 29).

32. DOJ Rhode Island Evaluation at 6; DOJ Missouri I Evaluation at 1-2; DOJ Kansas/Oklahoma Evaluation at 11.

33. See Verizon Hickey/Garzillo/Anglin Decl. ¶ 38; Verizon Torre Decl. Attach. 1 at 3 tbl. 1. New Hampshire has several incumbent local exchange carriers other than Verizon.

34. See id.

35. See id.

36. See Verizon Hickey/Garzillo/Anglin Decl. ¶ 38; Verizon Torre Decl. Attach. 1 at 3 tbl. 1 (CLECs serve approximately 107,000 business lines).

37. See Verizon Hickey/Garzillo/Anglin Decl. ¶ 38; Verizon Torre Decl. Attach. 1 at 3 tbl. 1 (CLECs serve approximately 68,000 business lines using at least some of their own facilities).

38. See Verizon Hickey/Garzillo/Anglin Decl. ¶ 38; Verizon Torre Decl. Attach. 1 at 3 tbl. 1 (CLECs serve approximately 33,000 business lines via resale).

39. See Verizon Hickey/Garzillo/Anglin Decl. ¶ 38; Verizon Torre Decl. Attach. 1 at 3 tbl. 1 (CLECs serve approximately 6,100 business lines through the UNE-platform).

40. See Verizon Hickey/Garzillo/Anglin Decl. ¶ 38; Verizon Torre Decl. Attach. 1 at 3 tbl. 1 (CLECs serve approximately 38,000 residential lines).

41. See Verizon Hickey/Garzillo/Anglin Decl. ¶ 38; Verizon Torre Decl. Attach. 1 at 3 tbl. 1 (CLECs serve approximately 36,000 residential lines using at least some of their own facilities).

42. Verizon Torre Decl. Attach 1 at 7.

43. See Verizon Hickey/Garzillo/Anglin Decl. ¶ 38; Verizon Torre Decl. Attach. 1 at 3 tbl. 1 (CLECs serve approximately 1,100 residential lines via resale and 430 residential lines through the UNE-platform).

44. See supra notes 13-14 and accompanying text.

45. See supra note 10 and accompanying text.

46. AT&T Comments at 6-21; AT&T Pitts/Baranowski Decl. ¶¶ 15-23; BayRing Comments at 11-24.

47. The Department notes once more that "[p]ricing based on forward-looking costs 'simulates the prices for network elements that would result if there were a competitive market for the provision of such elements to other carriers' and 'will result in the creation of the "right" investment incentives for competitive facilities-based entry, rather than distorting the entrant's "make or buy" decision with respect to the network element.'" DOJ Arkansas/Missouri Evaluation at 6 n.19 (quoting DOJ Local Competition Comments at 28-29)). "Prices that are set either above or below the element's true economic cost can distort entry decisions and may impede the development of competition on the merits." Id. (citing DOJ Local Competition Comments at 29).

48. DOJ Rhode Island Evaluation at 6; DOJ Missouri I Evaluation at 1-2; DOJ Kansas/Oklahoma Evaluation at 11.

Updated June 25, 2015