Big test in Texas: SBC filing faces opposition

When SBC Communications filed for permission with the FCC to enter its home state's $6.2 billion long-distance market last week, it did so in true longhorn style.

The San Antonio-based company presented its case in a 200,000-page document, including attachments, that filled 50 boxes. The Section 271 application that arrived in Washington last Monday revealed the long road that SBC has walked to open its local market in compliance with the 1996 Telecommunications Act's 14-point checklist.SBC's filing describes in agonizing detail how the company's efforts in many instances go beyond the standards Bell Atlantic set in New York to earn FCC approval last year.

"SBC's application is in the same league as Bell Atlantic's, with a strong likelihood of approval," said Scott Cleland, communications policy analyst in Washington for The Legg Mason Precursor Group. "SBC has already gone through the FCC wringer with the Ameritech merger process and so has a very clear idea of what the FCC wants."

The FCC also has high regard for Texas Public Utility Commissioner Pat Wood, one of three commissioners who unanimously endorsed SBC's application on Dec. 16, 1999, Cleland said.

But SBC can't pop the corks on the champagne bottles just yet. There still are arguments that could weigh just as heavily on the FCC's decision to grant or deny the application. For example, many competitive local exchange carriers (CLECs) operating in Texas strongly oppose the filing. Even MCI WorldCom, which lauded Bell Atlantic's entry in New York, said SBC's bid is premature.

"Unlike the situation in New York, substantial barriers to competition still exist in Texas," said an MCI WorldCom spokesman.

Of course, the only votes that count are those of FCC commissioners. But they hardly can be expected to forget SBC's history as a harsh defender of its local monopoly. In the mid 1990s, SBC tried to quash local services competition through the state legislature, and in 1997, the company attempted to get key elements of the Telecom Act overturned.

"SBC doesn't create a warm fuzzy [feeling] for the FCC," Cleland said. "They are a formidable regulatory opponent. But this case will be decided on the merits."

Strictly based on the numbers, SBC's application suggests that the level of competition in Texas is high. Forty-eight facilities-based carriers and 115 resellers serve 1.1 million business customers and about 250,000 residential customers - 12% of all lines in the state, SBC said. SBC processed more than 1.3 million network access orders from competitors in the first nine months of 1999 and claims its system is ready to handle even larger volumes.

But MCI WorldCom and many CLECs disagree, stating SBC's operations support system (OSS) is inadequate and that many orders still are handled manually. "It's a long and onerous process for CLECs seeking to obtain the network piece parts needed to provide service to end users," said Jonathan Askin, vice president of law for the Association for Local Telecommunications Services.

Omniplex Communications Group, a Missouri-based CLEC that resells local, long-distance and wireless services in Dallas, Houston and Beaumont, Texas, said SBC is the most anti-competitive RBOC it deals with.

"We enter orders directly into their OSS interface, but [Southwestern Bell] typists in Fort Worth rekey in the data," said Michael Sawyer, president of Omniplex. "Then when they make a mistake, we have to start all over again."

AT&T and MCI WorldCom voiced similar concerns, citing poor flow-through rates for customer orders, an inability to originate electronic trouble tickets for new customers and the need to fall back on manual processes when sending changes to SBC's line information database.

Opening OSSs is one of the more daunting items on the 14-point checklist that RBOCs must meet. SBC started testing its OSS in March 1998. In October 1999, independent auditor Telcordia Technologies approved the system and concluded that it was well-prepared to handle commercial order volumes, said Jim Shelley, SBC's president of regulatory affairs.

But competitors say SBC's OSS testing didn't measure up to the rigorous workouts administered by Bell Atlantic to its system. In New York, KPMG Peat Marwick and Hewlett-Packard built a test system from scratch to interface with Bell Atlantic's OSS.

SBC enlisted real-world competitors AT&T and MCI WorldCom to test different pieces of its OSS but had no visibility into problems that arose.

Another area where SBC's application may fall short is in DSL loop provisioning. At the time of the Bell Atlantic approval, FCC Chairman William E. Kennard and Commissioner Susan Ness said that an RBOC's record on providing non-discriminatory access to DSL-capable loops would be closely scrutinized in future Section 271 applications.

SBC has provisioned about the same number of DSL loops Bell Atlantic has - about 960 loops were in service as of December 1999 - but SBC said it is much further along in providing an open playing field. SBC even undertook supplemental review sessions in November and December to specifically address the issue as raised by the Justice Department in Bell Atlantic's New York application.

But data CLECs such as Rhythms NetConnections said SBC has yet to provide DSL carriers competitive access to its network. "Today, there is no open competition in local DSL services [in Texas]," said Frank Paganelli, assistant general counsel for Rhythms. Rhythms, which will file a paper opposing SBC's application, still is waiting for the final outcome of an arbitration case with the Texas PUC to win the interconnection agreements that SBC refused two years ago.

Rhythms claims were patently untrue and inaccurate, said an SBC spokeswoman. As a condition of the Ameritech merger, SBC offers discounted DSL loops to wholesale customers because it cannot offer line sharing yet, she said.

The FCC has until mid-April to hear public comments and rule on SBC's application. The Texas PUC has 20 days and the DOJ has 35 days to advise the FCC on their respective opinions.

If approved, SBC could launch long-distance services to Texas residents and businesses as early as April 10.