DOJ denies SBC: FCC advised to reject long-distance bid

Playing what one analyst called its usual bad cop role, the Justice Department last week formally recommended that the FCC deny SBC Communications' long-distance application in Texas. One reason: The DOJ said SBC failed to open its local loop to competing ISPs supplying high-speed DSL services.

"SBC has not shown that it is providing nondiscriminatory access to its local lines," said Joel Klein, assistant attorney general of the DOJ's antitrust division.

For example, the DOJ found SBC's performance on "hot cuts" - the process of moving customers from SBC's local service to a competitor's without interrupting service - to be below the level the FCC described as minimally acceptable when it approved Bell Atlantic's New York application last year.

The DOJ report also said SBC appears to have substantially overestimated the number of lines served in Texas by facilities-based carriers and casts doubt on the RBOC's ability to provision interconnection trunks to these competitors in a timely fashion.

The DOJ document devotes many pages to the DSL issue, stating that loop provisioning performance data provided by SBC was "fundamentally flawed" and in some cases revealed blatant discrimination.

For example, the report says, in December 1999 SBC missed the due dates on 12% of DSL loops competitive local exchange carriers ordered, as opposed to 6.3% for its own retail operation.

The report says SBC has failed to show how offering its data services through a separate affiliate, a condition it agreed to as part of the Ameritech merger, will remedy the situation.

But the outright rejection and seemingly damning commentary in the DOJ's 45-page evaluation did little to undermine the confidence of SBC executives, who strongly believe the FCC will approve the carrier's application.

"The FCC will step back, look at the total record and recognize that we've made tremendous progress - the numbers are there, and the market's open - it's time to move on," said Paul Mancini, vice president and assistant general counsel for SBC.

Analysts agreed. Because the DOJ's role in the Section 271 approval process is merely advisory, it maximizes its influence by recommending rejection, said Scott Cleland, a managing director at Legg Mason Precursor Group.

"The DOJ is playing bad cop so that the FCC can play good cop," he said. "It increases the FCC's ability to extract concessions in the next round. SBC is 95% there; what the DOJ is saying is, `we want 98%.'"

Comments from SBC and other parties in response to the DOJ's recommendation are expected Feb. 22. The FCC has until April 9 to decide on SBC's application.