(page one) MEMORANDUM CONCERNING DRAFT BILL Introduction and Summary Congress long ago entrusted the Federal Communications Commission ("Commission") with authority to regulate the telecommunications industry. In the early 1980s, however, consent decrees entered in the AT&T and GTE antitrust cases had the effect of conferring on the federal courts extensive regulatory authority over the telecommunications industry, quite apart from and in addition to the authority exercised by the Commission. By enacting the draft bill, Congress would consolidate once again federal regulatory authority over this vital industry in the Commission. After the bill is enacted, it is likely that motions will be made in the decree court to vacate the decrees, on the grounds that their continued application would be inconsistent with the regulatory jurisdiction given to the Commission by the bill. However, while the bill can be expected to result in the court's vacation of the AT&T and GTE decrees, the bill is not an effort to divest the courts of jurisdiction in a pending case. Rather, the bill would ensure that future federal regulation of the telecommunications industry is uniform and consistent with the public interest, as expressed in the Communications Act of 1934, as amended. (page two) Accordingly, the draft bill would require the Commission to promulgate new federal regulations, the substance of which would be identical to the substance of the AT&T and GTE consent decrees. The bill thus would have the effect of transferring administration of those decrees from the federal courts to the Commission. The bill would attain this result by (a) requiring the Commission to enact a detailed set of regulations that replicate the operative portions of the AT&T and GTE decrees, (b) empowering the Commission to remedy violations of the regulations, (c) providing that the Commission can modify or rescind, and grant exemptions and waivers from, the regulations at a later date, and (d) providing that violations of the regulations shall not be deemed to constitute violations of any existing antitrust decree. An index of the draft bill is attached. The regulations name neither the AT&T nor the GTE decrees, nor any of the parties bound thereby. Rather, as discussed below, AT&T, the Bell Operating Companies ("BOCs"), GTE, GTE Sprint, and the General Telephone Operating Companies ("GTOCs") are referred to in generic terms. Thus, AT&T is referred to as a "dominant interexchange carrier," the BOCs are termed "Class I Local Telephone Companies," and the GTOCs are termed "Class II Local Telephone Companies." - 2 - (page three) A. Outline of the Telecommunications Industry Development Act of 1986. 1. Section 101 states the purpose of the legislation, which is to help to ensure the orderly and competitive development of the Nation's telecommunications industry by centralizing in the Commission the regulation of the industry. This section also indicates that the regulations are based on, and should implemented in accordance with, the public interest standard of the common carrier provisions of the Communications Act. 2. Section 201 requires the Commission to adopt the regulations set out in detail in the bill. Part A of the regulations contains definitions (with some definitions of the same terms differing as applied to Class I and Class II local telephone companies, in order to reflect differences in the AT&T and GTE decrees); Part B contains the operative portions of the AT&T decree; and Part C contains the operative portions of the GTE decree. 3. Section 202 provides the remedies for violations of the regulations promulgated by the Commission pursuant to Section 201. In place of the civil and criminal contempt power available to the decree court to redress violations of the decrees, the bill would explicitly give the Commission the power to issue cease-and-desist orders and to impose any of the other remedies available to it in dealing with common carrier violations of the Communications Act and the Commission's regulations thereunder. - 3 - (page four) 99th Congress 2d Session A BILL To ensure the orderly and competitive development of the telecommunications industry. Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the "Telecommunications Industry Development Act of 1986." TITLE I SEC. 101. PURPOSE OF LEGISLATION. In order to ensure the orderly and competitive development of this Nation's telecommunications industry, the Congress deems it necessary and appropriate for the Federal Communications Commission, in conformance with the purposes of subchapter II of chapter 5 of Title 47 of the United States Code, otherwise known as the Communications Act of 1934, as amended, to promulgate and implement the following regulations. TITLE II SEC. 201. ADOPTION BY COMMISSION OF REGULATIONS CONCERNING CLASS I AND CLASS II LOCAL TELEPHONE COMPANIES. Within thirty (30) days after the date of this Act, the Federal Communications Commission shall, without regard to the procedures otherwise required by the Administrative Procedure Act, 5 U.S.C. §§ 551, et seq., adopt the following regulations concerning Class I and Class II local telephone companies (as defined in such regulations), and publish such regulations in the Federal Register. (page five) "Part A: Definitions. "Sec. 1. General Definitions. For the purpose of these regulations, unless the context otherwise requires -- (a) "Carrier" means any person deemed a carrier under the Communications Act of 1934 or amendments thereto, or, with respect to intrastate telecommunications, under the laws of any State. (b) "Class I local telephone company" means any telephone company and its affiliates that, individually or together with its affiliates, was serving more than ten million five hundred thousand (10,500,000) telephone access lines on January 1, 1985. (c) "Class II local telephone company" means any telephone company and its affiliates that, individually or together with its affiliates, was serving more than five million (5,000,000) and less than ten million five hundred thousand (10,500,000) telephone access lines on January 1, 1985. (d) "Commission" means the Federal Communications Commission. (e) "Customer premises equipment" means equipment employed on the premises of a person (other than a carrier) to originate, route, or terminate telecommunications, but does not include equipment used to multiplex, maintain, or terminate access lines. - 2 - (page six) (f) "Dominant interexchange carrier" means any carrier, other than a Class I or Class II local telephone company, that the Commission has defined as a "dominant carrier" pursuant to 47 C.F.R. Part 61, and that, for the last fiscal year ending prior to January 1, 1985, received annual revenues of over ten billion dollars ($10,000,000,000) from the offering of domestic message toll service, as defined in 47 C.F.R. § 31.510. (g) "Electronic publishing" means the provision of any information that dominant interexchange carriers or their affiliates have, or have caused to be, originated, authored, compiled, collected, or edited, or in which they have a direct or indirect financial or proprietary interest, and that is disseminated to an unaffiliated person through some electronic means. (h) "Information" means knowledge or intelligence represented by any form of writing, signs, signals, pictures, sounds, or other symbols. (1) "Information access" means the provision of specialized exchange telecommunications services by a Class I or Class II local telephone company in an exchange area in connection with the origination, termination, transmission, switching, forwarding or routing of telecommunications traffic to or from the facilities of a provider of information services. Such specialized exchange telecommunications services include, where necessary, the provision of network - 3 - (page seven) control signaling, answer supervision, automatic calling number identification, carrier access codes, testing and maintenance of facilities, and the provision of information necessary to bill customers. (j) "Person" means any individual, partnership, firm, corporation, association, or other business or legal entity. (k) "Technical information" means intellectual property of all types, including, without limitation, patents, copyrights, and trade secrets, relating to planning documents, designs, specifications, standards, and practices and procedures, including employee training. (1) "Telecommunications" means the transmission, between or among points specified by the user, of information of the user's choosing, without change in the form or content of the information as sent and received, by means of an electromagnetic transmission medium, including all instrumentalities, facilities, apparatus, and services (including the collection, storage, forwarding, switching, and delivery of such information) essential to such transmission. (m) "Telecommunications equipment" means equipment, other than customer premises equipment, used by a carrier to provide telecommunications services. (n) "Telecommunications service" means the offering for hire of telecommunications facilities, or of telecommunications by means of such facilities." - 4 - (page eight) "Sec. 2. Definitions Relating to Class I Local Telephone Companies. For the purpose of Part B of these regulations concerning Class I local telephone companies, unless the context otherwise requires-- (a) "Affiliate" means any organization or entity that is under direct or indirect common ownership with or control by a Class I local telephone company or is owned or controlled by another affiliate of such company. For the purposes of this paragraph, the terms "ownership" and "owned" mean a direct or indirect equity interest (or the equivalent thereof) of more than fifty (50) percent of an entity. "Subsidiary" means any organization or entity in which a local telephone company has stock ownership, whether or not controlled by a Class I local telephone company. (b) "Exchange access" means the provision of exchange services for the purpose of originating or terminating interexchange telecommunications. Exchange access services include any activity or function performed by a Class I local telephone company in connection with the origination or termination of interexchange telecommunications, including but not limited to the provision of network control signaling, answer supervision, automatic calling number identification, carrier access codes, directory services, testing and maintenance of facilities and the provision of information necessary to bill customers. Such services shall be provided - 5 - (page nine) by facilities in an exchange area for the transmission, switching, or routing, within the exchange area, of interexchange traffic originating or terminating within the exchange area, and shall include switching traffic within the exchange area above the end office and delivery and receipt of such traffic at a point or points within an exchange area designated by an interexchange carrier for the connection of its facilities with those of the Class I local telephone company. Such connections, at the option of the interexchange carrier, shall deliver traffic with signal quality and characteristics equal to that provided similar traffic of any dominant interexchange carrier or other non-affiliated interexchange carrier, including equal probability of blocking, based on reasonable traffic estimates supplied by each interexchange carrier. Exchange services for exchange access shall not include the performance by any Class I local telephone company of interexchange traffic routing for any interexchange carrier. (c) "Exchange area" or "exchange" means a geographic area established by a Class I local telephone company in accordance with the following criteria: (1) any such area shall encompass one or more contiguous local exchange areas serving common social, economic, and other purposes, even where such configuration transcends municipal or other local governmental boundaries; - 6 - (page ten) (2) every point served by a Class I local telephone company within a State shall be included within an exchange area; (3) no such area which includes part or all of one standard metropolitan statistical area (or a consolidated statistical area, in the case of densely populated States) shall include a substantial part of any other standard metropolitan statistical area (or a consolidated statistical area, in the case of densely populated States), unless the Commission shall otherwise allow; and (4) except with approval of the Commission, no exchange area located in one State shall include any point located within another State. (d) "Information service" means the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information which may be conveyed via telecommunications, except that such service does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service. (e) "Interexchange telecommunications" means telecommunications between a point or points located in one exchange telecommunications area and a point or points located in one or more other exchange areas or a point outside an exchange area. - 7 - (page eleven) (f) "Transmission facilities" means equipment (including without limitation wire, cable, microwave, satellite, and fiberoptics) that transmit information by electromagnetic means or which directly support such transmission, but does not include customer premises equipment." "Sec. 3. Definitions Relating to Class II Local Telephone Companies. For the purposes of Part C of these regulations concerning Class II local telephone companies, unless the context otherwise requires-- (a) "Affiliate" or "affiliates" means any organization or entity, other than a Class II local telephone company, in which, directly or indirectly, a parent company of a Class II local telephone company has any ownership or equity interest or control. (b) "Exchange access" means the provision of exchange services for the purposes of originating or terminating interexchange telecommunications. Exchange access services include any activity or function performed by a Class II local telephone company in connection with the origination or termination of interexchange telecommunications, including but not limited to the provision of network control signaling, answer supervision, automatic calling number identification, carrier access codes, directory services, testing and maintenance of facilities, and the provision of information necessary to bill customers. Such services shall be provided - 8 - (page twelve) by facilities in an exchange or serving area for the transmission, switching, or routing, within the exchange or serving area, of interexchange traffic originating or terminating within the exchange or serving area, and, except as provided in Section 10(b)(2) of these regulations, shall include switching traffic within the exchange area above the end office and delivery and receipt of such traffic at a point or points within an exchange or serving area designated by an interexchange carrier for the connection of its facilities with those of the Class II local telephone company. Such connections, at the option of the interexchange carrier, shall deliver traffic with signal quality and characteristics equal to that provided to similar traffic of any dominant interexchange carrier or any IOC, including equal probability of blocking, based on reasonable traffic estimates supplied by each interexchange carrier. Exchange services for exchange access shall not include the performance by any Class II local telephone company of interexchange traffic routing for any interexchange carrier, except that tariffed routing of traffic among multiple points of presence designated by an interexchange carrier (solely at the option of such carrier) within an exchange or serving area based on the destination of such traffic outside a Class II local telephone company's facilities (but not routing of traffic among trunk groups from an end office or access tandem to a point of presence or any routing beyond such points of presence) shall not be considered - 9 - (page thirteen) interexchange traffic routing. There shall not be more than one point of presence of any interexchange carrier at any physical location. (c) "Exchange area" or "exchange" means those geographic areas established by a Class II local telephone company within which such company has the facilities and capability (on the schedule set forth in Section 10(b) of these regulations) to provide traffic switching above end offices and delivery and receipt of such traffic at a point or points designated by an interexchange carrier within such exchange areas for the connection of its facilities with those of the Class II local telephone company. Additional or different exchange areas shall be established by Class II local telephone companies in the future, with the approval of the Commission, when and where the foregoing criteria are met. In addition to the foregoing, each Class II local telephone company exchange area shall meet the following criteria: (1) Any such exchange area shall encompass one or more contiguous local exchange areas serving common social, economic, or other purposes, even where such configuration transcends municipal or other local governmental boundaries, and shall take into consideration Class I local telephone company exchange areas and associated serving areas; - 10 - (page fourteen) (2) No such area which includes part or all of one metropolitan statistical area (or a consolidated statistical area, in the case of densely populated states) shall include a substantial part of any other metropolitan statistical area (or consolidated statistical area, in the case of densely populated states), unless the Commission shall allow; and (3) Except with approval of the Commission, no exchange area located in one State shall include any point located within another State. (d) "Exchange telecommunications" means: 1. Telecommunications between points within an exchange or serving area; 2. Telecommunications between or among a point or points within a Class II local telephone company exchange or serving area and either (a) a point or points within another Class II local telephone company exchange or serving area, (b) a point or points within the serving area of any IOC, or (c) a point or points within an exchange area of a Class I local telephone company if the Class II local telephone company exchange or serving area(s) and the IOC serving area are associated with the Class I local telephone company exchange area as of the date of these regulations; and - 11 - (page fifteen) 3. Telecommunications between a point or points within a Class II local telephone company exchange or serving area and a point or points within an IOC serving area which has been associated with such Class II local telephone company exchange or serving area with the approval of the Commission as permitted by Section 3(g) of these regulations. (e) "Independent operating company" and "IOC" mean any carrier, other than a dominant interexchange carrier, or a Class I or Class II local telephone company, providing exchange telecommunications and exchange access service. (f) "Information service" means the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information which may be conveyed via telecommunications, except that such service does not include (1) any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service, or (2) the provision of time, weather, and such other similar audio services that are offered by any Class II local telephone company as of the date of these regulations. (g) "Interexchange telecommunications" means telecommunications between a point or points located in one exchange or serving area (as defined herein or as established - 12 - (page sixteen) by a Class I local telephone company as of the date of these regulations) and a point or points located in one or more other such areas or a point outside such an area; provided, however, that telecommunications between or among a point or points within a Class II local telephone company exchange or serving area and either (1) a point or points within another Class II local telephone company exchange or serving area, (2) a point or points within the serving area of any IOC, or (3) a point or points within an exchange area of a Class I local telephone company, if the Class II local telephone company exchange or serving area(s) and the IOC serving area have been associated with the Class I local telephone company exchange area as of the date of these regulations, shall not be inter- exchange telecommunications; and provided further that, with the approval of the Commission, a Class II local telephone company may associate the serving areas of other IOCs with its exchange or serving areas, and in such cases telecommunications between a point or points within the Class II local telephone company exchange or serving area and a point or points within the associated IOC serving area shall also not be interexchange telecommunications. - 13 - (page seventeen (h) "Serving area" means (1) a geographic area, not within an exchange area, in which a Class II local telephone company does not have the facilities and capability identified in Section 3(c) of these regulations but in which it provides exchange telecommunications and exchange access services, provided that all Class II local telephone company geographic areas associated with a single Class I local telephone company exchange area as of the date of these regulations, may be combined into a single Class II local telephone company serving area, and (2) a geographic area in which an IOC provides exchange telecommunications and exchange access services. (i) "Transmission facilities" means equipment (including without limitation cable, microwave, satellite, and fiber optics) that transmits information by electromagnetic means or which directly support such transmission. "Part B: Regulations Concerning Class I Local Telephone Companies. "Sec. 4. Equal Access. (a) Each Class I local telephone company shall provide to all interexchange carriers and information service providers exchange access, information access, and exchange services for such access on an unbundled, tariffed basis, that is equal in type, quality, and price to that provided to dominant interexchange carriers and their affiliates." "(b) Each Class I local telephone company shall take the following actions to ensure such equal access: - 14 - (page eighteen) (1) On and after September 1, 1986, each end office of each Class I local telephone company shall offer such equal access, upon bona fide request. Nothing in these regulations shall be construed to permit a Class I local telephone company to refuse to provide to any interexchange carrier or information service provider, upon bona fide request, exchange or information access superior or inferior in type or quality to that provided for a dominant interexchange carrier's interexchange services or information services at charges reflecting the reduced or increased cost of such access. (2) (i) Notwithstanding subsection (b)(1), in those instances in which a Class I local telephone company is providing exchange access for Message Telecommunications Service on the date of these regulations through access codes that do not permit the designation of more than one interexchange carrier, then, in accordance with subsection (b)(1), exchange access for additional carriers shall be provided through access codes containing the minimum number of digits necessary at the time access is sought to permit nationwide multiple carrier designation for the number of interexchange carriers reasonably expected to require such designation in the immediate future. - 15 - (page nineteen) (ii) Each Class I local telephone company shall, in accordance with subsection (b)(1), offer as a tariffed service exchange access that permits each subscriber automatically to route, without the use of access codes, all the subscriber's interexchange communications to the interexchange carrier of the customer's designation. (iii) At such time as the national numbering area (area code) plan is revised to require the use of additional digits, each Class I local telephone company shall provide exchange access to every interexchange carrier, including any dominant interexchange carrier, through a uniform number of digits. (3) Notwithstanding subsections (b)(1) and (b)(2), with respect to access provided through an end office employing switches technologically antecedent to electronic, stored program control switches or those offices served by switches that characteristically serve fewer than ten thousand (10,000) access lines, a Class I local telephone company may not be required to provide equal access through a switch if, upon complaint being made to the Commission, the Class I local telephone company carries the burden of showing that for particular categories of services, such access is not physically feasible except at costs that clearly outweigh potential benefits to users of telecommunications services. Any such - 16 - (page twenty) denial of access under the preceding sentence shall be for the minimum divergence in access necessary, and for the minimum time necessary, to achieve such feasibility." "(c) Each Class I local telephone company shall take the following additional actions: (1) Each Class I local telephone company shall file with the Commission tariffs for the provision of exchange access, including the provision by each Class I local telephone company of exchange access for any dominant interexchange carrier's interexchange telecommunications. Such tariffs shall provide unbundled schedules of charges for exchange access and shall not discriminate against any carrier or other customer. (2) Each tariff for exchange access shall be filed on an unbundled basis specifying each type of service, element by element, and no tariff shall require an interexchange carrier to pay for types of exchange access that it does not utilize. The charges for each type of exchange access shall be cost justified and any differences in charges to carriers shall be cost justified on the basis of differences in services provided. (3) Except as otherwise authorized by the Commission prior to the date of these regulations, and notwithstanding the requirements of subsection (c) (2), from the date of these regulations until September 1, 1991, the charges for - 17 - (page twenty-one) delivery or receipt of traffic of the same type between end offices and facilities of interexchange carriers within an exchange area, or within reasonable subzones of an exchange area, shall be equal, per unit of traffic delivered, or received, for all interexchange carriers. Provided, however, that the facilities of any interexchange carrier within five miles of any dominant interexchange carrier's class 4 switch shall, with respect to end offices served by such class 4 switch, be considered to be in the same subzone as such class 4 switch. (4) Each Class I local telephone company offering exchange access as part of a joint or through service shall offer to make exchange access available to all interexchange carriers on the same terms and conditions, and at the same charges, as are provided as part of a joint or through service, and no payment or consideration of any kind shall be retained by a Class I local telephone company for the provision of exchange access under such joint or through service other than through tariffs filed pursuant to this subsection (c)." "(d)(1) Nothing in these regulations shall be construed to require a Class I local telephone company to allow joint ownership or use of its switches, or to require a Class I local telephone company to allow co-location in its building of the equipment of other carriers. When a Class I local telephone - 18 - (page twenty-two) company uses facilities that (A) are employed to provide exchange telecommunications or exchange access or both, and (B) also are used for the transmission or switching of interexchange telecommunications, then the costs of such latter use shall be allocated to the interexchange use and shall be excluded from the costs underlying the determination of charges for either of the former uses." "(e) Nothing in these regulations shall either require a Class I local telephone company to bill customers for the interexchange services of any interexchange carrier or preclude a Class I local telephone company from billing its customers for the interexchange services of any interexchange carrier it designates. Provided, however, that when a Class I local telephone company does provide billing services to an interexchange carrier, such Class I local telephone company may not discontinue local exchange service to any customer because of nonpayment of interexchange charges unless it offers to provide billing services to all interexchange carriers. And provided further, that such Class I local telephone company's cost of any such billing shall be included in its tariffed access charges to such interexchange carrier. And further provided, that if a Class I local telephone company provides such billing services to a dominant interexchange carrier pursuant to this subsection, it shall include upon the portion of the bill devoted to interexchange services the following legend: - 19 - (page twenty-three) This portion of your bill is provided as a service to [name of dominant interexchange carrier]. There is no connection between this company and [name of dominant interexchange carrier]. You may choose another company for your long distance telephone calls while still receiving your local telephone service from this company." "(f) Whenever, as permitted by these regulations, a Class I local telephone company fails to offer exchange access to an interexchange carrier that is equal in type and quality to that provided for the interexchange traffic of any dominant interexchange carrier, nothing in these regulations shall prohibit such Class I local telephone company from collecting reduced charges for such less-than-equal exchange access to reflect the lesser value of such exchange access to the interexchange carrier and its customers compared to the exchange access provided to any dominant interexchange carrier. Provided, however, that whenever, as permitted by these regulations, a Class I local telephone company fails to offer exchange access to an interexchange carrier that is equal in type and quality to that provided for the interexchange traffic of any dominant interexchange carrier, the tariffs filed for such less-than-equal access shall reflect the lesser cost, if any, of such access as compared to the exchange access provided to such dominant interexchange carrier." - 20 - (page twenty-four) "Sec. 5. Non-discrimination. No Class I local telephone company shall discriminate between dominant interexchange carriers and their affiliates and their products and services, and other persons and their products and services in the: (1) procurement of products and services; (2) establishment and dissemination of technical information and procurement and interconnection standards; (3) interconnection and use of the Class I local telephone company's telecommunications service and facilities or in the charges for each element of service; and (4) provision of new services and the planning for and implementation of the construction or modification of facilities, used to provide exchange access and information access." "Sec. 6. Line-of-Business Restrictions. "(a) No Class I local telephone company shall, directly or through any affiliated enterprise: (1) provide interexchange telecommunications services or information services; (2) manufacture or provide telecommunications products or customer premises equipment (except for provision of customer premises equipment for emergency services); or (3) provide any other product or service, exchange telecommunications and exchange service, that is not a natural monopoly regulated by tariff." - 21 - (page twenty-five) "(b) The restrictions imposed upon Class I local telephone companies and their affiliates by subsection (a) shall be removed by the Commission upon a showing by a petitioning Class I local telephone company (or its affiliate), after a proceeding in accordance with the Administrative Procedure Act, that there is no substantial possibility that the petitioning Class I local telephone company (or its affiliate) could use its monopoly power to impede competition in the market it seeks to enter. Provided, however, that insofar as any Class I local telephone company or its affiliate is, as of the date of these regulations, authorized to engage in activity otherwise prohibited by subsection (a), by virtue of a line-of-business waiver granted by the district court in United States v. Western Electric Co., No. 82-0192 (D.D.C.), pursuant to section VIII(C) of the Modified Final Judgment in that case, such Class I local telephone company or its affiliate may continue to engage in such activity under the terms and conditions of such waiver." "(c) Notwithstanding the provisions of subsection (a)(2), each Class I local telephone company shall be permitted to provide, but not manufacture, customer premises equipment." "(d) Nothing in these regulations shall be deemed to prohibit a Class I local telephone company from producing, publishing, or distributing printed directories that contain advertisements and that list general product and business categories, the service or product providers under these categories, and their names, telephone numbers, and addresses." - 22 - (page twenty-six) "Sec. 7. Miscellaneous Provisions Concerning Class I Local Telephone Companies. "(a) Except as otherwise authorized by the Commission prior to the date of these regulations, each Class I local telephone company shall maintain the separation of all facilities, personnel, and books of account between those relating to the exchange telecommunications or exchange access functions and those relating to other functions (including the provision of interexchange switching and transmissions and the provision of customer premises equipment to the public); provided that there shall be no joint ownership of facilities, but appropriate provision may be made for sharing, through leasing or otherwise, of multifunction facilities so long as the separate portion of each Class I local telephone company is ensured control over the exchange telecommunications and exchange access functions." "(b) Class I local telephone companies may collectively support and share the costs of a centralized organization for the provision of engineering, administrative and other services that can most efficiently be provided on a centralized basis. Class I local telephone companies shall collectively provide, through a centralized organization, a single point of contact for coordination of Class I local telephone companies to meet the requirements of national security and emergency preparedness." - 23 - (page twenty-seven) "Sec. 8. Provisions Concerning Relationships between Dominant Interexchange Carriers and Class I Local Telephone Companies. "(a) No dominant interexchange carrier shall acquire the stock or assets of any Class I local telephone company." "(b) Until September 1, 1987, any dominant interexchange carrier or its affiliates shall, upon order of any Class I local telephone company, provide on a priority basis all research, development, manufacturing, and other support services to enable such Class I local telephone company to fulfill the requirements set forth in Sections 4 through 7 of these regulations. No dominant interexchange carrier or its affiliates shall take any action that interferes with the Class I local telephone companies' requirements of non-discrimination, as established by Section 5 of these regulations." "(c)(i) No dominant interexchange carrier shall engage in electronic publishing over its own transmission facilities. Provided, however, that nothing in these regulations shall preclude a dominant interexchange carrier from offering electronic directory services that list general product and business categories, the service or product providers under these categories, and their names, telephone numbers, and addresses; or from providing the time, weather, and such other audio services as were offered as of August 24, 1982, to the geographic areas of the country receiving those services as of that date. - 24 - (page twenty-eight) (ii) Upon application of a dominant interexchange carrier to the Commission, subsection (c)(i) shall cease to have any force or effect after August 24, 1989, unless the Commission finds that the public interest clearly requires its extension." "Part C: Regulations Concerning Class II Local Telephone Companies. "Sec. 9. Separation Between Class II Local Telephone Companies and Affiliated Interexchange Carriers. "(a) Except as otherwise authorized by the Commission prior to the date of these regulations, each affiliate of a Class II local telephone company shall maintain total separation between itself and any interexchange carrier affiliated with such Class II local telephone company, as follows: (1) No Class II local telephone company shall directly or indirectly transfer to or obtain from the acquired entities any assets, operations, or line of business, except as provided in subsections (d) and (e) of this Section; (2) No parent company of any Class II local telephone company shall, under any circumstances, maintain for the acquired entities and any Class II local telephone company (A) common directors, officers, employees (other than the Chief Executive Officer and President of the parent company of a Class II local telephone company), (B) common facilities or assets, or (C) common books of accounts, costs, or expenditures; - 25 - (page twenty-nine) (3) In no event shall a parent company of a Class II local telephone company directly or indirectly provide to, or utilize for the benefit of, any affiliated interexchange carrier any proprietary Class II local telephone company telecommunications information, including but not limited to non-public Class II local telephone company customer information or non-public network engineering information; (4) Neither a Class II local telephone company, nor any affiliate thereof (nor such affiliate's successors), shall directly or indirectly provide any administrative, engineering, research and development, or similar services to any affiliated interexchange carrier, nor shall such affiliated interexchange carrier directly or indirectly provide any such services to Class II local telephone company or affiliate thereof (or its successors); (5) All financing of any affiliated interexchange carrier shall be provided directly by the parent company of the Class II local telephone company with which such interexchange carrier is affiliated, any financing affiliate wholly owned by such parent company, or by unaffiliated sources; (6) Class II local telephone companies and any affiliated interexchange carrier shall not jointly provide telecommunications or information services or jointly own the assets used to provide such services; and - 26 - (page thirty) (7) An interexchange carrier affiliated with a Class II local telephone company shall (A) obtain all services, information, and products from other affiliates (other than Class II local telephone companies) only pursuant to contracts, and on terms and conditions no more favorable than such services, information, and products are offered to Class II local telephone companies and (B) bear the fully allocated cost of any services, information, and products obtained from any such affiliate that are not offered by that affiliate to Class II local telephone companies." "(b) No officer or employee of a Class II local telephone company nor of a parent company of such Class II local telephone company who has direct or indirect managerial or operational authority over a Class II local telephone company shall also have any such authority with respect to an affiliated interexchange carrier. Provided, however, that this requirement shall not apply to the Chief Executive Officer and the President of any parent company of such Class II local telephone company." "(c) An interexchange carrier affiliated with a Class II local telephone company may not be identified with, nor may its services be marketed or identified in connection with, any Class II local telephone company or the services offered by any Class II local telephone company, except that a Class II local - 27 - (page thirty-one) telephone company may inform its subscribers in a non-discriminatory manner of the services offered by interexchange carriers. Nothing contained herein shall prevent an affiliated interexchange carrier and a Class II local telephone company from each separately being identified with the parent company of such Class II local telephone company." "(d) Nothing in subsections (a) or (b) above shall prohibit a parent company of a Class II local telephone company from: (1) transferring to any affiliated interexchange carrier the assets, stock, operations, or telecommunications or information services of: (A) any company that was affiliated with a Class II local telephone company on January 1, 1985, and that on that date possessed domestic satellite transponder capacity; (B) any company that was affiliated with a Class II local telephone company on January 1, 1985, and that on that date provided packet switching services; for purposes of this subsection (d), "packet switching services" means the offering of a capability to transmit data one-way in a specially formatted and addressed manner; - 28 - (page thirty-two) (C) any affiliate of a Class II local telephone company that provides only interexchange telecommunications or information services, customer premises equipment (but not the manufacture thereof or research and development therefor), or unregulated exchange telecommunications or information services; (D) any affiliate of a Class II local telephone company not providing goods or services to a Class II local telephone company; or (E) any other affiliate of a Class II local telephone company, subject to the approval of the Commission (except for any domestic interexchange assets or facilities that provide service to or from Hawaii, which assets or facilities shall not be transferred pursuant to this subsection (d)(1)(E)); (2) consolidating in a newly created affiliate the assets, stock, operations, or services of any affiliated interexchange carrier; and (A) any company that was affiliated with a Class II local telephone company on January 1, 1985, and that on that date possessed domestic satellite transponder capacity; - 29 - (page thirty-three) (B) any company that was affiliated with a Class II local telephone company on January 1, 1985, and that on that date provided packet switching services; (C) any affiliate of a Class II local telephone company that provides only interexchange telecommunications or information services, customer premises equipment (but not the manufacture thereof or research and development therefor) or unregulated exchange telecommunications or information services; (D) any affiliate of a Class II local telephone company not providing goods or services to a Class II local telephone company; or (E) any other affiliate of Class II local telephone company, subject to the approval of the Commission. (3) Any assets, stock, operations, or services of any affiliate of a Class II local telephone company transferred or consolidated pursuant to subsections (d)(1) or (d)(2) above shall not include any such assets, stock, operations, or services that were at any time owned, operated, conducted, or offered by such Class II local telephone company as a regulated exchange or exchange access service." - 30 - (page thirty-four) "(e) Nothing in subsection (d) shall prohibit a parent company of a Class II local telephone company from transferring any unregulated exchange telecommunications services or customer premises equipment from such Class II local telephone company." "(f) A parent company of a Class II local telephone company shall submit an annual written report to the Commission, accompanied by an affidavit of its Chief Executive Officer and of its President, setting out a summary of the transactions described by this Section 9 and attesting to such parent company's compliance with these regulations, and shall provide all further information concerning such transactions as may be requested by the Commission." "Sec. 10. Equal Access. "(a) Each Class II local telephone company shall provide to all interexchange carriers and information service providers exchange access, information access, and exchange services for such access on an unbundled, tariffed basis, that is equal in type, quality, and price for all interexchange carriers and information services of a Class II local telephone company." "(b) Each Class II local telephone company shall take the following actions to ensure such equal access: (1) Each Class II local telephone company shall, as promptly as possible, and in no case more than twelve (12) months after receipt of a written request from any - 31 - (page thirty-five) interexchange carrier other than a dominant interexchange carrier, offer to all interexchange carriers exchange access on an unbundled, tariffed basis, that is equal in type and quality to that provided for the interexchange telecommunications services of any dominant interexchange carrier, any IOC, or any Class I local telephone company, through its end offices that employ switches technologically capable of providing equal exchange access or for which the capability of providing equal exchange access is commercially available to any Class II local telephone company, consistent with the following: (A) Each Class II local telephone company shall offer equal exchange access through its end offices employing (i) 1-ESS (Electronic Switching System) switches, DMS-100 (Digital Multiplex System) switches, or other electronic stored program control switches, other than those referred to in subsections (ii) and (iii) below, technologically capable of providing equal exchange access, no later than the date of these regulations; (ii) GTD-5 (General Telephone Digital) switches no later than January 1, 1987; and (iii) 1-EAX and 2-EAX (Electronic Automatic Exchange) switches no later than September 1, 1987; - 32 - (page thirty-six) (B) No later than September 1, 1987, equal exchange access shall be offered through end offices serving at least two-thirds of the exchange access lines provided by all Class II local telephone companies, provided that (i) a Class II local telephone company need not offer equal exchange access through an end office if, because of changed circumstances that could not reasonably have been foreseen, it is no longer economically feasible to install at that end office a switch technologically capable of providing equal exchange access, and (ii) if any non-affiliated manufacturer of switches shall fail to provide to the Class II local telephone companies the hardware and software necessary to provide equal exchange access, the two-thirds amount shall be reduced to that extent; and (C) No later than December 31, 1990, equal exchange access shall be offered through all end offices serving greater than ten thousand (10,000) exchange access lines, provided that a Class II local telephone company need not offer equal exchange access through such an end office if, because of changed circumstances that could not reasonably have been foreseen, it is no - 33 - (page thirty-seven) longer economically feasible to install at that end office a switch technologically capable of providing equal exchange access. Nothing in these regulations shall be construed to permit a Class II local telephone company to refuse to provide to any interexchange carrier or information service provider, upon bona fide request, exchange or information access superior or inferior in type or quality to that provided for the interexchange services or information services of a dominant interexchange carrier, any IOC, or any Class I local telephone company at charges reflecting the reduced or increased cost of such access. (2) Notwithstanding subsection (b)(1), a Class II local telephone company shall not have the obligation to provide the facilities and capability for switching interexchange traffic above an end office if the end office is located in such Class II local telephone company's serving area, or to transport such traffic between the end office and a point or points within the serving area designated by an interexchange carrier other than by direct Class II local telephone company transmission facilities. A Class II local telephone company shall use its best efforts to obtain from other carriers those functions that such Class II local telephone company is not obligated to provide under the preceding sentence." - 34 - (page thirty-eight) (3)(A) Notwithstanding subsection (b)(1), in those instances in which a Class II local telephone company is providing exchange access for Message Telecommunications Service as of the date of these regulations through access codes that do not permit the designation of more than one interexchange carrier, then, in accordance with the schedule set out in subsection (b)(1), exchange access for additional carriers shall be provided through access codes containing the minimum number of digits necessary at the time access is sought to permit nationwide, multiple carrier designation for the number of interexchange carriers reasonably expected to require such designation in the immediate future. (B) Each Class II local telephone company shall, in accordance with the schedule set out in subsection (b)(1), offer as a tariffed service exchange access that permits each subscriber automatically to route, without the use of access codes, all the subscriber's interexchange communications to the interexchange carrier of the subscriber's designation. (C) At such time as the national numbering area (area code) plan is revised to require the use of additional digits (but in no event earlier than the schedule set out in subsection (b)(1)), each Class II local telephone company shall provide exchange access to every interexchange carrier through a uniform number of digits. - 35 - (page thirty-nine) (4) No Class II local telephone company shall be required to provide equal exchange access through an end office employing switches of the technology known generically as step-by-step, provided that (a) such Class II local telephone company complies with the requirements of subsection (b)(1), and (b) at all end offices employing electromechanical (including step-by-step) switches such Class II local telephone company offers a commercially available trunk side interconnect arrangement to all interexchange carriers, unless such access is not physically possible except at costs that clearly outweigh potential benefits to users of telecommunications services. Each Class II local telephone company shall provide to the Commission such information as it may request concerning any such analysis." "(c)(1) Each Class II local telephone company shall file tariffs for the provision of exchange access, including the provision by such Class II local telephone company of exchange access for any affiliated interexchange carrier's interexchange telecommunications. Such tariffs shall provide unbundled schedules of charges for exchange access, and shall not discriminate against any carrier or other customer. (2) Each tariff for exchange access shall be filed on an unbundled basis specifying each type of service, element by element, and no tariff shall require an - 36 - (page forty) interexchange carrier to pay for types of exchange access that it does not utilize. The charges for each type of exchange access shall be cost justified and any differences in charges to carriers shall be cost justified on the basis of differences in services provided. (3) Except as otherwise authorized by the Commission prior to the date of these regulations, and notwithstanding the requirements of subsection (c)(2), from the effective date of the tariffs referred to in subsection (c)(1) until September 1, 1991, the charges for delivery or receipt of traffic of the same type between end offices and facilities of interexchange carriers within an exchange area, or within reasonable subzones of an exchange area, shall be equal, per unit of traffic delivered or received, for all interexchange carriers. Provided, however, that the facilities of any interexchange carrier within five (5) miles of a Class II local telephone company switch performing a class 4 function shall, with respect to end offices served by such switch, be considered to be in the same subzone as such switch. (4) Each Class II local telephone company (and affiliate thereof) offering exchange access as part of a joint or through service shall offer to make exchange access available to all interexchange carriers on the same terms and conditions, and at the same charges, as are provided as part of a joint or through service, and no - 37 - (page forty-one) payment or consideration of any kind shall be retained by a Class II local telephone company for the provision of exchange access under such joint or through service other than through tariffs filed pursuant to subsection (c) (1)." "(d)(1) Subject to the provisions of Sections 11 and 12 of these regulations, these regulations shall not require a Class II local telephone company to allow joint ownership or use of its switches, or to require a Class II local telephone company to allow co-location in its building of the equipment of other carriers. When a Class II local telephone company uses facilities that (A) are employed to provide exchange telecommunications or exchange access or both, and (B) are also used for the transmission or switching of interexchange telecommunications, then the costs of such latter use shall be allocated to the interexchange use and shall be excluded from the costs underlying the determination of charges for either of the former uses. (2) Nothing in these regulations shall either require a Class II local telephone company to bill customers for the interexchange services of any interexchange carrier or preclude a Class II local telephone company from billing its customers for the interexchange services of any interexchange carrier it designates, provided that when a Class II local telephone company does provide billing - 38 - (page forty-two) services to an interexchange carrier, such Class II local telephone company may not discontinue local exchange service to any customer because of nonpayment of interexchange charges unless it offers to provide billing services to all interexchange carriers. Such Class II local telephone company's cost of any such billing shall be included in its tariffed access charges to such interexchange carrier. If a Class II local telephone company provides billing services to any affiliated interexchange carrier, it shall include upon the portion of the bill devoted to interexchange services the following legend: This portion of your bill is provided as a service to [the affiliated interexchange carrier]. You may choose another company for your long distance telephone calls while still receiving your local telephone service from this company. (3) Whenever, as permitted by these regulations, a Class II local telephone company fails to offer exchange access to an interexchange carrier that is equal in type and quality to that provided for the interexchange traffic of any dominant interexchange carrier or IOC, nothing in these regulations shall prohibit such Class II local telephone company from collecting reduced charges for such less-than-equal exchange access to reflect the lesser value of such exchange access to such interexchange carrier and its customers compared to the exchange access provided to any other dominant interexchange carrier or IOC." - 39 - (page forty-three) "Sec. 11. Non-Discrimination. No Class II local telephone company shall discriminate between the interexchange telecommunications services, information services, or customer premises equipment of any affiliate (including any information services offered by the Class II local telephone company itself) and the interexchange telecommunications services, information services, or customer premises equipment of other persons in the: (a) establishment and dissemination of technical information and interconnection standards; (b) interconnection and use of the Class II local telephone company's exchange telecommunications or exchange access services and facilities or in the charges for each element of service; and (c) provision of new exchange access and information access services and the planning for and implementation of the construction or modification of facilities used to provide exchange access and information access." "Sec. 12. Line-of-Business Restrictions. "(a)(1) No Class II local telephone company shall provide interexchange telecommunications services or own, individually or jointly with any affiliate or any other person, facilities that are used to provide such services. Provided, however, that nothing in these regulations shall prohibit a Class II local telephone company from providing telecommunications - 40 - (page forty-four) services between Hawaii and Alaska, respectively, and points outside of the United States, and owning the assets necessary to provide such services, if such Class II local telephone company is providing such services as of the date of these regulations. (2) Notwithstanding subsection (a)(1), a Class II local telephone company's capacity for interexchange switching and interexchange transmission in facilities in service on January 1, 1984, or in a Class II local telephone company's construction program as of January 1, 1983, and in service by January 1, 1987, may be leased by such Class II local telephone company to any interexchange carrier (or any successor) with which such Class II local telephone company was, as of January 1, 1983, providing interexchange telecommunications services jointly or on a joint through or concurring tariff basis, for the provision of interexchange telecommunications services by such carrier. Any such leases shall ensure that such Class II local telephone company retains control of sufficient switching and transmission capacity to provide exchange telecommunications and exchange access services in accordance with the requirements of these regulations. (3) Nothing in these regulations shall prohibit a Class II local telephone company, in any location in which it has assets subject to subsection (a)(2) for which it has not recovered its capital investment and for which the leases described in - 41 - (page forty-five) subsection (a)(2) are not in effect, from replacing an existing agreement with a Class I local telephone company or dominant interexchange carrier with an agreement with an interexchange carrier (other than an affiliated interexchange carrier) that will permit the recovery of the net book value of such capital investment and the costs thereof, including a return on debt or equity, so long as that agreement terminates when such net book value has been recovered. (4) In the event that the arrangements described in subsections (a) (2) and (a) (3) are not in effect, each Class II local telephone company shall make its interexchange routing and transmission capacity provided by assets subject to subsection (a) (2) available to all interexchange carriers on non-discriminatory terms and conditions, and may expand and modernize (but not replace) such interexchange routing and transmission facilities if it offers to make available such expanded or modernized capacity to all interexchange carriers on non-discriminatory terms and conditions. (5) Nothing in subsections (a)(2), (a)(3), or (a)(4) shall preclude, either explicitly or implicitly, a Class II local telephone company or parent company thereof from pursuing appropriate remedies before regulatory bodies and elsewhere to recover such Class II local telephone company's financial investment in the assets subject to subsection (a)(2)." - 42 - (page forty-six) "(b)(1) No Class II local telephone company shall provide information services or own jointly with any affiliate or any other person facilities that are used to provide such services. (2) Notwithstanding subsection (b)(1), a Class II local telephone company may provide information services through a separate entity (either an incorporated subsidiary or an unincorporated division having separate books of account and reporting directly to the chief operating officer of such Class II local telephone company) that obtains from such Class II local telephone company telecommunications services, telecommunications facilities (including the right to co-locate its equipment in buildings used to provide exchange telecommunications), and billing services, only to the extent that such services and facilities are made available to other persons pursuant to tariffed and unbundled schedules of charges and in accordance with the requirements of Section 11 of these regulations, and obtains administrative and other services (including the use of Class II local telephone company maintenance and installation personnel) from such Class II local telephone company (A) only on the same terms that such services are obtained by non-affiliated persons, and (B) in other cases only at fully allocated costs. No such separate entity shall to any extent own or control facilities used to provide regulated exchange telecommunications or exchange access services, have personnel who simultaneously market both - 43 - (page forty-seven) regulated exchange telecommunications or exchange access services and information services, or directly or indirectly obtain proprietary Class II local telephone company marketing, customer, or network engineering information. (3) The limitations of subsections (b)(1) and (b)(2) shall expire: (A) upon a showing before the Commission by a Class II local telephone company that there is no substantial possibility that it could use its monopoly power to impede competition in the information services market it seeks to enter; or (B) whenever and to the extent that the Commission relieves a Class I local telephone company of the provisions of Section 6 of these regulations, either (i) throughout a State, in which case the limitations of subsections (b)(1) and (b)(2) shall not apply to the information services of a Class II local telephone company within such State, or (ii) in any Class I local telephone company exchange area, in which case the limitations of subsections (b)(1) and (b)(2) shall not apply to the information services of a Class I local - 44 - (page forty-eight) telephone company within any Class II local telephone company exchange or serving area, if telecommunications between such Class II local telephone company exchange or serving area and such Class I local telephone company exchange area are not interexchange telecommunications. (c) Insofar as any Class II local telephone company or its affiliate is, as of the date of these regulations, authorized to engage in activity otherwise prohibited by subsections (a) or (b), by virtue of Section V(D)(3)(b) of the final judgment in United States v. GTE Corporation, No. 83-1298 (D.D.C.), such Class II local telephone company or its affiliate may continue to engage in such activity under the terms and conditions upon which it could lawfully engage in such conduct as of the date of these regulations. "Sec. 13. Miscellaneous Provisions Concerning Class II Local Telephone Companies and Their Affiliates. "(a) For eight (8) years after the date of these regulations, except with the approval of the Commission, no Class II local telephone company or its affiliate shall acquire a direct or indirect equity interest in (or the equivalent thereto), whether or not controlling, or the assets of, any carrier providing interexchange telecommunications services in the United States. Provided, however, that this subsection (a) shall not prohibit a Class II local telephone company from retaining any direct or indirect equity interest in any such - 45 - (page forty-nine) carrier that such Class II local telephone company (or its affiliate) lawfully possessed as of the date of these regulations." "(b) Subsection (a) shall not prohibit an insurance company affiliated with a Class II local telephone company, if any, and the pension and profit-sharing trusts of any affiliate of a Class II local telephone company, from acquiring, or holding for investment purposes, interests in the assets, stock, or other beneficial interests in any organization to the extent permitted by the laws governing investments of insurance companies and pension and profit-sharing trusts." "(c) Subsection (a) shall not prohibit the acquisition by any affiliate of a Class II local telephone company, by purchase or other form of transfer, of (1) assets used to provide exchange telecommunications which shall only incidentally be used to provide interexchange services, or (2) an interexchange carrier that obtains less than five (5) percent of its gross telecommunications revenues from telecommunications services between points within the United States." SEC. 202. REMEDY FOR VIOLATIONS OF COMMISSION REGULATIONS. If it appears to the Commission at any time that any person subject to any provision of any regulation promulgated pursuant to Section 201 has failed to comply with such provision, or that any person has violated any provision of any such - 46 - (page fifty) regulation, the Commission may, after notice and opportunity for hearing, direct such person to comply, or to cease and desist from failure to comply, with any provision of any such regulation, and may order or impose such further remedy provided in subchapter V of chapter 5 of Title 47 of the United States Code, as the Commission may deem appropriate. SEC. 203. MODIFICATION OF, EXEMPTION FROM, AND WAIVER OF COMMISSION REGULATIONS. (a) The Commission may modify or rescind any provision of any regulation promulgated pursuant to Section 201, and in connection with such modification or recession may expressly permit any action or course of conduct theretofore prohibited by such provision, if, after notice and an opportunity for hearing, the Commission determines that such modification or rescission would be in the public interest. Any such determination by the Commission shall be sustained upon judicial review unless the court concludes that the Commission's determination was arbitrary or capricious, or an abuse of the Commission's discretion. (b) The Commission may by rules and regulations or, upon application of any interested person or on its own motion, by order, after notice and opportunity for hearing, in whole or in part exempt any person or class of persons from the application of any provision of any regulation promulgated pursuant to Section 201, or waive the application of any such provision to any action or course of conduct proposed to be taken or engaged - 47 - (page fifty-one) in by any person or class of persons, if the Commission determines that such exemption or waiver would be in the public interest. SEC. 204. EFFECT OF COMMISSION REGULATIONS. Any action or course of conduct expressly permitted by any provision of any regulation promulgated pursuant to Section 201, or by any order issued by the Commission pursuant to such regulations, or by any action of the Commission pursuant to Section 203, shall not, with respect to the person or class of persons expressly permitted to take such action or engage in such conduct, be deemed to violate any provision of any final judgment or decree entered before the date of this Act by any court of the United States in any case arising under the antitrust laws of the United States. - 48 - (page fifty-two) 4. Section 203 empowers the Commission to modify, rescind, or provide exemptions from or waivers of the regulations promulgated pursuant to section 201. 5. Section 204 provides that conduct that is expressly permitted by the regulations promulgated pursuant to Section 201, whether as promulgated, as modified or rescinded, or in accordance with exemptions or waivers granted by the Commission, shall not be deemed to violate any existing antitrust consent decrees. It is anticipated that this section will cause the courts to vacate the AT&T and GTE decrees, because the Commission's new regulations will substantially duplicate the provisions of the decrees. B. Differences Between the Draft Bill and the AT&T and GTE Decrees. 1. The first--and most frequent--difference between the provisions of the draft bill and those of the consent decrees are the general terms that the bill uses for the specific companies identified in the decree. Thus, AT&T is referred to as a "dominant interexchange carrier," the BOCs are "Class I local telephone companies," the GTOCs are "Class II local telephone companies, " GTE is a "parent" or "affiliate" of a "Class II local telephone company," and GTE Sprint is an "interexchange carrier affiliated with a Class II local telephone company." - 4 - (page fifty-three) 2. The draft bill omits portions of the AT&T decree whose requirements have already been satisfied or that would be unnecessary after the transfer of authority to the Commission. These provisions include: Part I(A) (AT&T Reorganization) ; Part II(C) (BOC submission of procedures for ensuring compliance with non-discrimination); Part III(A) (applicability and effect), Part IV (compliance); Part VI (visitorial provisions); Part VII (retention of jurisdiction); Part VIII (B) 2 ("yellow pages" transferred to BOCs); Part VIII (G) (distribution of assets at reorganization), Part VIII(H) (BOCs' debt ratios at reorganization); Part VIII(I) (court retains sua sponte remedial jurisdiction); Part VIII (J) (plan of reorganization to be approved by court); Appendix A (list of BOCS); and Appendix B V (A) (1) (certain equal access requirements to be satisfied by September 1, 1984 and September 1, 1985). 3. The draft bill also omits portions of the GTE decree whose requirements have already been satisfied or that would be unnecessary after the transfer of authority to the Commission. These provisions include: Part III (applicability); Part V(D) (estoppel effect of government actions under the decree) ; Part V(E) (GTE to file compliance report prior to decree's effective date); Part VII(A) (retention of jurisdiction and additional government relief); Part VIII(B) (compliance) ; Part IX (visitorial provisions); - 5 - (page fifty-four) Part X (effective date); Part XI (A) (government's burden of proof in seeking further relief, and decree does not immunize GTE from antitrust laws); Appendix A (list of GTOCs); Appendix C (list of BOCs); and Appendix B (equal access; GTE required to file requests for waivers from FCC orders). 4. In four places (pp. 17, 23, 25, 37), the draft bill includes the language "except as otherwise authorized by the Commission prior to the date of these regulations" in order to conform the language of the decrees to subsequent Commission orders. 5. The line-of-business waiver provisions in the regulations required by the bill include grandfather clauses (pp. 22, 45) that will permit the BOC- and GTOC-affiliated beneficiaries of waiver orders under the decrees to continue to operate their businesses under the terms and conditions of those waivers. 6. Two provisions of the GTE decree explicitly mention GTE Satellite Corporation and GTE Telenet Inc. In order to avoid mentioning those companies by name in the regulations, the bill refers to GTE Satellite as "any company that was affiliated with a Class II local telephone company on January 1, 1985, and that on that date possessed domestic satellite transponder capacity," and refers to GTE Telenet as "any company that was affiliated with a Class II local telephone company on January 1, 1985, and that on that date provided packet switching services." See pp. 28-30 of the bill. - 6 - (page fifty-five) Index to Draft Bill TITLE I Page SEC. 101. Purpose of Legislation. 1 TITLE II SEC. 201. Adoption by Commission of Regulations Concerning Class I and Class II Local Telephone Companies. 1 Part A: Definitions. 2 Sec. 1. General Definitions. 2 Sec. 2. Definitions Relating to Class I Local Telephone Companies. 5 Sec. 3. Definitions Relating to Class II Local Telephone Companies. 8 Part B: Regulations Concerning Class I Local Telephone Companies. 14 Sec. 4. Equal Access. 14 Sec. 5. Non-discrimination. 21 Sec. 6. Line-of-Business Restrictions. 21 Sec. 7. Miscellaneous Provisions Concerning Class I Local Telephone Companies. 23 Sec. 8. Provisions Concerning Relationships between Dominant Interexchange Carriers and Class I Local Telephone Companies. 24 Part C: Regulations Concerning Class II Local Telephone Companies. 25 Sec. 9. Separation Between Class II Local Telephone Companies and Affiliated Interexchange Carriers 25. Sec. 10. Equal Access. 31 Sec. 11. Non-discrimination. 40 Sec. 12. Line-of-Business Restrictions. 40 (page fifty-six) Page Sec. 13. Miscellaneous Provisions Concerning Class II Local Telephone Companies. 45 SEC. 202. Remedy for Violations of Commission Regulations. 46 SEC. 203. Modification of, Exemption from, and Waiver of Commission Regulations. 47 SEC. 204. Effect of Commission Regulations. 48 (page fifty-seven) 2 MEMO TO: SENATOR DOLE FROM: PETE VELDE SUBJECT: AT&T BREAKFAST (handwritten) Monday, June 9, 1986 SO FAR TWO OF THE SEVEN CEOS OF THE BELL OPERATING COMPANIES HAVE DENIFITELY COMMITTED TO THE BREAKFAST. THEY ARE BILL WEISS OF AMERITECH AND TOM BOLGER OF BELL ATLANTIC. THE CEO OF SOUTHWESTERN BELL WAS SCHEDULED BUT WAS ADMITTED TO THE HOSPITAL THIS AFTERNOON FOR SOME TESTS FOR POSSIBLE HEART PROBLEMS. IF AT ALL POSSIBLE, HE WILL BE HERE. I HAVE YET TO HEAR FROM TWO OTHERS, BUT AM REASONABLY SURE AT LEAST ONE MORE WILL ATTEND. DO YOU STILL WANT TO GO AHEAD WITH THE BREAKFAST? (blank line) YES (blank line) NO CC SHELIA BURKE (rest of page handwritten) Kansas President, Southwestern Bell yes 4 yes X 42985 Capitol Bill Weiss Tom Bolger Pete Velde Mike Pettit