FCC Filings #96-149

Before the Federal Communications Commission
Washington, D.C. 20554

TABLE OF CONTENTS

SUMMARY

TIA urges the Commission, in implementing the structural separation and non-discrimination provisions of Section 272, to make every effort to see that its rules effectively address the full range of risks to competition in the area of manufacturing. TIA believes that the potential risks of cross-subsidy and discrimination in favor of BOC-affiliated manufacturers in procurement, network design, standards-setting, and access to network-related information are real and substantial, given the current, immature state of competition in the BOCs' local exchange markets. Effective implementation and enforcement of the competitive safeguards embodied in Section 272 and other relevant sections of the Act is therefore essential, in order to ensure that the benefits of a fully competitive equipment marketplace are preserved.

TIA's position on specific issues addressed in the Commission's Notice is as follows:

• TIA agrees with the Commission's tentative conclusion that the BOC manufacturing activities addressed in Section 272 are not within the scope of Section 2(b) of the Communications Act, and that because such activities cannot be segregated into inter and intrastate portions, any inconsistent state regulation should be preempted.
• TIA agrees that a BOC may conduct manufacturing activities, interLATA telecommunications services, and interLATA information services in a single separate affiliate, provided that the requirements imposed on all such activities are met.
• TIA believes that Section 271(f) does not preclude application of the Section 272 safeguards to previously-authorized activities, at the end of the one-year transition period provided in Section 272(h).
• To the extent that a single affiliate may be employed for manufacturing and other activities, establishment of a consistent set of rules would appear generally appropriate. However, in implementing the Section 272(b) structural separation requirements, the Commission should ensure that competitive concerns in the manufacturing area are adequately addressed.
• TIA concurs in the Commission's tentative conclusion that the "independent operation" provision in Section 272(b)(1) has a meaning that extends beyond the specific requirements of Section 272(b)(2)-(5). In order to ensure operational independence and the protection of competition and ratepayer interests, BOC affiliates that engage in manufacturing should be required to maintain separate facilities, and conduct marketing, administrative, research and development, and other operational functions on an independent basis, separate and apart from their affiliated BOCs.
• TIA agrees with the Commission's tentative conclusion that Section 272(b)(3) prohibits the sharing of all "in-house" functions. TIA believes that this requirement, together with the "independent operation" provision of Section 272(b)(1), requires the use of separate "outside" services as well.
• TIA endorses the Commission's tentative conclusion that a BOC may not co-sign a contract to enable the separate affiliate to obtain credit. TIA further believes that Section 272(b)(1) and (b)(4) should be construed to prohibit any and all arrangements which would result in a BOC having any responsibility, directly or indirectly, for the financial obligations of its separate affiliate.
• TIA believes that the "arm's length" provision of Section 272(b)(5) requires the establishment of procedures to ensure that all transactions between the BOC and its separate affiliate are auditable. In addition, this provision serves to underscore the need for strong, comprehensive rules implementing the other Section 272 structural separation and non-discrimination requirements.
• TIA urges the Commission, in implementing the non-discrimination provisions of Section 272(c)(1), to define "goods" and "services" to include, at a minimum, all types of telecommunications equipment, customer premises equipment, and related equipment, software, and services. To ensure that the requirements of Section 272(c)(1) are effectively enforced, TIA further urges the Commission to consider adoption of an appropriate classification scheme which identifies discrete categories of products and related services procured by the BOCs.
• TIA agrees with the Commission's tentative conclusion that Section 272(a) bars a BOC from transferring its local exchange operations to another affiliate as a means to avoid the non-discrimination requirements of Section 272.
• TIA believes that Congress intended to establish a standard for nondiscrimination under Section 272(c)(1) that is stricter than that embodied in Section 202, and agrees with the Commission's conclusion that under the Section 272 standard, BOCs must treat all other entities in the same manner as they treat their affiliates.
• TIA believes that under Section 272(c)(1) requires the BOCs to provide all manufacturers with access to information relating to the manufacture or sale of equipment for use in or connection to the BOCs' networks in a non-discriminatory manner, i.e., at the same time and on the same terms and conditions.
• TIA urges that all BOCs be required to establish specific procedures to ensure non-discrimination in their procurement of "goods" and "services." These procedures should include the specific standards to be used in making procurement decisions. BOC procedures (and any changes thereto) should be submitted for Commission review and approval, following the receipt of comments from vendors and other interested parties.
• TIA believes that the BOCs should be strongly encouraged, if not required, to participate in the activities of accredited standard-setting groups, in establishing standards which affect the manufacture of equipment designed for use in or connection to the BOCs' networks. At a minimum, in developing technical standards for the operation of their networks and the interconnection of products and services thereto, as well as the generic specifications for products that they seek to procure, the BOCs should be required to establish and follow procedures that are open, transparent and non-discriminatory.
• TIA agrees with the Commission that the language of Section 272(e)(1) should be construed in a manner which ensures that any "unaffiliated entity" seeking to purchase service from a BOC, including equipment vendors, will be treated in a non-discriminatory manner.
• TIA urges the Commission to ensure that there are mechanisms in place to facilitate enforcement of the manufacturing-related safeguards established pursuant to Section 272 and Section 273 of the Act. In this regard, each BOC should be required to provide procurement reports to the Commission on a regular basis, in an approved format, detailing the BOC's level of purchases from affiliated and non-affiliated suppliers in appropriately-disaggregated product categories.
• In addition, the Commission should take steps to ensure that it has access to sufficient transaction-specific data to ascertain whether a BOC has complied with the non-discrimination requirements of Section 272(c)(1) and other relevant provisions. Appropriate record retention requirements should be put in place in order to ensure that the information necessary to investigate complaints and to conduct audits of BOC procurement activities is preserved.
• In enforcing the provisions of Section 272 and 273, as they relate to BOC manufacturing, the Commission should make full use of its existing authority under Title II of the Communications Act, as well as the new authority granted under Sections 273(f) and (g) of the Act.

BEFORE THE
Federal Communications Commission
WASHINGTON, D.C.

COMMENTS OF THE TELECOMMUNICATIONS INDUSTRY ASSOCIATION

The Telecommunications Industry Association ("TIA"), by its attorneys, hereby submits its comments in response to the Notice of Proposed Rulemaking ("NPRM") in the above-captioned proceeding, in which the Commission will establish rules to implement the separate affiliate and non-discrimination requirements of Section 272 of the Communications Act, as amended.

I. INTRODUCTION [NPRM Section I.A.-I.B.; Paragraphs 1-14]

TIA is a national trade association whose membership includes over 500 manufacturers and suppliers of all types of telecommunications equipment, customer premises equipment ("CPE"), and related products and services. TIA's members are located throughout the United States, and collectively provide the bulk of the physical plant and associated products and services used to support and improve our domestic telecommunications infrastructure. In addition, TIA's member firms have enjoyed increasing success in marketing equipment and related services in other developed and developing nations around the world, thereby contributing to the growing U.S. trade surplus in sales of telecommunications equipment.

Implementation of the AT&T Consent Decree, the so-called Modification of Final Judgment (MFJ), had a truly profound and overwhelmingly positive effect on the telecommunications equipment industry in the United States. AT&T's divestiture of the Bell Operating Companies, coupled with the MFJ prohibition on BOC entry into manufacturing, created an environment in which all manufacturers have been given the opportunity to compete on the merits for sales to the BOCs and other potential customers. The more open, competitive environment which has emerged under the MFJ has yielded enormous benefits to American consumers, the domestic equipment industry, and the U.S. economy, in the form of lower prices, improved quality, and an ever-expanding array of innovative new products, many of them manufactured by firms which did not even exist at the time the MFJ was entered.

In order to ensure that these benefits are not lost or diminished, the Telecommunications Act of 1996 imposes the following conditions on Bell Operating Company entry into manufacturing: 1) the BOCs may not engage in manufacturing telecommunications equipment or CPE until they have taken certain steps to open their local exchange markets to competition, and have secured the Commission's approval to provide in-region interLATA services pursuant to Section 271(d) of the Act; 2) the BOCs may engage in manufacturing activities only through a "separate affiliate" which complies with the structural separation and non-discrimination requirements established in Section 272 of the Act, as well as the regulations established by the Commission in implementing this section; and 3) the BOCs must comply with the additional manufacturing-specific safeguards established in Section 273 of the Act and the Commission's implementing regulations.

A. Scope of Comments [NPRM Section I.B.; Paragraph 11]

TIA believes that effective implementation and vigorous enforcement of all of the above-described conditions is essential to the maintenance of the current highly dynamic, vigorously competitive domestic equipment marketplace. As the Commission's Notice of Proposed Rulemaking indicates, the purpose of this proceeding is the establishment of rules to implement the non-accounting separate affiliate and non-discrimination requirements of Sections 271 and 272. However, while the Commission's Notice and TIA's responsive comments generally focus on the construction and implementation of Section 272 in particular, TIA urges the Commission to remain cognizant of the interrelationship of the rules to be adopted in this proceeding with the accounting safeguards to be established in CC Docket 96-150 and the manufacturing-specific provisions of Section 273, which remain to be addressed in a separate proceeding. In many respects, the provisions of Section 272 complement and reinforce the safeguard provisions of Section 273. Moreover, in certain areas, the manufacturing-specific provisions of Section 273 may help to inform the Commission's construction and implementation of the Section 272 safeguards, as they relate to BOC manufacturing activities.

B. Need for Safeguards [NPRM Section I.B.; Paragraphs 3, 5-14]

As the Commission's Notice indicates, the Section 272 separate affiliate and non-discrimination safeguards have two primary purposes:

1. "to protect subscribers to BOC monopoly services, such as local telephony, against the potential risk of having to pay costs incurred by the BOCs to enter competitive [businesses],such as ... equipment manufacturing"
2. "to protect competition in those [competitive] markets from the BOCs' ability to use their existing market power in local exchange services to obtain an anticompetitive advantage in those new markets the BOCs seek to enter."

TIA believes that these two objectives are generally complementary and mutually reinforcing in nature. In these comments, TIA urges the Commission to adopt regulations that are carefully crafted to curb the BOCs' ability to give their manufacturing affiliates unfair advantages, through cross-subsidization and various forms of discrimination. Adoption and aggressive enforcement of strong implementing rules is essential in order to preserve the current, vigorously competitive equipment marketplace and the increasingly strong domestic manufacturing industry which has emerged in the post-divestiture environment. Effective implementation and enforcement of the Section 272 safeguards will also serve to protect and advance the interests of business and residential consumers, who will benefit from the price reductions, quality improvements, and increasingly diverse selection of products and vendors which can be expected, if a competitive marketplace is maintained.

In this regard, TIA is encouraged by the Commission's acknowledgment in its Notice that significant risks to competition and consumers will exist even after a BOC has satisfied the market-opening "checklist" requirements of Section 271(d)(3)(A) and the FCC has determined that entry into now-prohibited interLATA and manufacturing markets should be permitted, pursuant to Section 271(d)(3)(C). As the Commission has recognized, "[the BOCs] currently provide an overwhelming share of local exchange and exchange access services" in their respective areas, i.e., "approximately 99.5 percent of the market as measured by revenues." Moreover, as the Notice indicates, where a BOC is regulated under rate-of-return regulation, a price caps structure with sharing (either for interstate or intrastate services), or a price caps scheme with periodic "X-factor" adjustments based on changes in industry productivity, or is entitled to revenues based on costs recorded in regulated books of account, the BOC may seek to "improperly allocate to its regulated core business costs that would be properly attributable to its competitive ventures."

In addition to the clear threat of BOC cross-subsidy, the Commission's Notice recognizes that "[w]ith respect to BOC manufacturing activities, a BOC may have an incentive to purchase only its own equipment, even if such equipment is more expensive or of lower quality than that available from other manufacturers." The Notice also gives appropriate recognition to the BOCs' incentives to favor affiliated manufacturers in other areas (e.g., standard-setting, access to network-related information) upon their entry into the manufacturing business.

TIA believes that the potential risks of cross-subsidy and discrimination in favor of BOC-affiliated manufacturers in procurement and other areas are real and substantial, given the current, immature state of competition in the BOCs' local exchange markets. As the discussion above indicates, by virtue of their dominant position in local service markets, the BOCs retain the ability to use their enormous purchasing power and control of bottleneck facilities to influence equipment standards and markets in ways designed to favor their affiliates' products.

Accordingly, TIA strongly urges the Commission, in implementing the provisions of Section 272 and other relevant sections of the Act, to make every effort to see that its rules address the full range of risks to competition in the area of manufacturing in an effective, comprehensive manner, and that the statutory requirements and rules adopted by the Commission are vigorously enforced, in order to ensure that the benefits of a fully competitive equipment marketplace are preserved.

II. SCOPE OF THE COMMISSION'S AUTHORITY [NPRM Section II.B.; Paragraph 30]

TIA agrees with the Commission's tentative conclusion that its authority under Section 272 "extends to all BOC manufacturing of telecommunications equipment and CPE." As the Notice indicates, the manufacturing activities addressed by Section 272 "are not within the scope of Section 2(b)" of the Communications Act, which limits the Commission's authority only as to "charges, classifications, practices, services, facilities, or regulation for or in connection with intrastate communications service."

TIA also concurs in the Commission's observation that assuming arguendo that Section 2(b) were applicable to BOC manufacturing, such activities "plainly cannot be segregated into interstate and intrastate portions." Accordingly, TIA agrees that any state regulation with respect to BOC manufacturing that is inconsistent with the requirements of Section 272 or the Commission's implementing regulations "would necessarily thwart and impede federal policies, and should be preempted."

III. ACTIVITIES SUBJECT TO SECTION 272 REQUIREMENTS [NPRM Section III; Paragraphs 31-35, 38-39]

A. Definition of Manufacturing [NPRM Paragraph 31]

Pursuant to Section 272(a) of the Communications Act, as amended, BOCs (or BOC affiliates) may engage in "manufacturing" activities, "as defined in Section 273(h)," only through one or more affiliates that are separate from the incumbent LEC entity. As the Commission's Notice observes, Section 273(h) provides that the term "manufacturing" has the same meaning as it had under the AT&T Consent Decree, and therefore "refers not only to the fabrication of telecommunications equipment and CPE, but also to the design and development of equipment."

By referencing the MFJ definition of the term "manufacturing," Section 273(h) establishes a statutory definition that identifies the scope of activities that fall within the separate affiliate requirements and other safeguards established in Section 272, as well as the manufacturing-specific safeguards established in Section 273. As the Notice indicates, the meaning of the term "manufacturing" under the AT&T Consent Decree was first established in the 1987 District Court decision cited by the Commission. TIA believes that, when viewed in light of the Court's decision, Section 273(h) effectively establishes a definition of "manufacturing" that has the following dimensions:

• (1) As the discussion above indicates, under the AT&T Consent Decree, the term "manufacturing" was construed by the courts to encompass "design, development, and fabrication."

This is particularly important because most of a manufacturer's competitive advantage results from design and development, rather than simple fabrication. As the District Court's 1987 opinion explains:

• A manufacturing restriction that prohibited fabrication but permitted all design and development would not have assuaged the concerns expressed, at the time the decree was entered, by the Department and the Court about cross-subsidization, discriminatory purchasing, and interconnection discrimination. The likelihood of cross-subsidization was greater in the design and development area than in fabrication. The risk of cross-subsidization arose primarily from the existence of joint and common costs that made improper allocation of costs between regulated and unregulated activities difficult to detect. And it would have been more difficult to distinguish equipment research, design and development expenses than to distinguish equipment fabrication from those associated with network activities.

  In addition, because it is the designer or developer of that interface that needs information about the network, the concern that discrimination in network changes or in access to information about changes in network standards arose primarily from BOC involvement in designing or developing the manner in which equipment interconnects with the BOC=s network, rather than merely specifying generic or functional requirements. For these reasons, the parties and the Court believed that, under the conditions they anticipated would exist at divestiture, if the BOCs were allowed to perform design functions that included designing or developing interface specifications, they could use and gain an anticompetitive advantage from network information not available to their competitors. Merely requiring the BOCs to use independent fabricators to assemble products based on interface specifications designed and developed by the BOCs would not have removed the potential for discrimination on which the equipment restrictions were based.

(2) The BOCs have been permitted to provide CPE, but the MFJ definition of "manufacturing" bars them from engaging in the design and development of such products.

The Court's opinion draws this distinction quite clearly, as follows:

• The Court made crystal clear in the explanation of its recommendation that the decree be modified to permit the Regional Companies to provide CPE that the term 'provide' or 'providing' was meant to be synonymous with marketing or selling (as distinguished from designing or developing).

(3) The BOCs have been permitted to perform network planning and central office engineering, including planning capacity, design, layout, procurement, design recommendations for transmission systems, and installation of central office equipment, but the Consent Decree=s definition of "manufacturing" prevents them from engaging in design activities related to telecommunications equipment.

As the Court explained:

• The design, maintenance, and operation of the exchange networks constitutes the principal business of the Regional Companies under the decree, and it would be specious to argue that they are prohibited from engaging in this essential facet of that business.

  But the performance of such work is a far cry from the design of specific products -- a process that takes place after generic specifications for the network have been determined and disseminated. It is at that point that an equipment manufacturer designs the telecommunications or CPE products as well as the detailed plans on how to build such products or systems. That design function is an integral part of 'manufacturing,' and as such it is prohibited to the Regional Companies under section II(D)(2).

(4) "Manufacturing" includes the development of software "integral" to equipment hardware.

In upholding the District Court's order, the Court of Appeals explained that:

• [O]nce it is determined that the parties intended for Section II(D)(2) to embrace design and development of telecommunications equipment, it takes no additional argument to conclude that software programming essential to design and development of such equipment is prohibited. Indeed, because 'firmware' circuitry has largely supplanted the more cumbersome vacuum tubes, wires and switches that formerly comprised the heart of many pieces of telecommunications equipment, the reading of Section II(D)(2) urged by the DOJ would leave the BOCs free to perform the most significant design and development functions associated with the manufacture of telecommunications products...Permitting the BOCs to engage in the development of such software would thus create the types of anticompetitive risks that Section II(D)(2) was intended to eliminate.

  'Telecommunications equipment' encompasses those pieces of hardware and software essential to the provision of a telecommunications service -- through both the signaling and call paths. For software to be 'integral' to hardware, it must be essential to the operation of the product in providing telecommunications service, i.e., without such software, the product would be incapable of real time call processing. Determinations regarding whether software is 'integral' to hardware can often be made by considering the overall functionality of the product.

(5) "Manufacturing" does not encompass all forms of telecommunications software.

In its opinion, the Court of Appeals went on to observe that:

• [T]he Decree does not restrict software development relating to the design and operation of the BOCs' local-exchange networks.

As the discussion above indicates, under the AT&T Consent Decree, as construed by the courts, the BOCs have been permitted to engage in the development of software that is not "integral" to telecommunications equipment or CPE. In some instances, it may be easy to distinguish between permissible and prohibited software activities, but in others it may not. Accordingly, TIA urges the Commission to consider using its authority under Section 273(g) to require that all software activities undertaken by a BOC and its affiliates, including Bellcore, be conducted through a separate affiliate, in accordance with the requirements of Section 272.

B. Use of Single Separate Affiliate [NPRM Section III; Paragraph 33]

As the Commission's Notice indicates, Section 272(a)(1) requires the BOCs to conduct activities subject to the separate affiliate requirement through "one or more affiliates." TIA agrees with the Commission=s tentative conclusion that "a BOC may conduct all, or some combination, of its manufacturing activities, interLATA telecommunications services, and interLATA information services in a single separate affiliate, so long as all the requirements imposed pursuant to the statute and our regulations are otherwise met." As the Commission has observed, the legislative history of the 1996 Act suggests that Congress intended to permit the consolidation of activities subject to Section 272 in a single separate affiliate. Provided that all obligations under Sections 272 and 273, as well as the Commission's implementing rules are met, TIA does not oppose the use of a single entity.

C. Previously-Authorized Activities [NPRM Section III; Paragraphs 34, 39]

Section 272(h) provides that "[w]ith respect to any activity in which a Bell operating company is engaged on the date of enactment," the BOC shall have 1 year from enactment to comply with the requirements of Section 272. TIA believes that Section 272(h) clearly applies with respect to all activities identified in Section 272(a)(2) as subject to the separate affiliate requirements of Section 272, including BOC manufacturing activities.

TIA does not believe that the provisions of Section 271(f) preclude the application of Section 272 to any previously-authorized manufacturing activities that a BOC was engaged in at the time of enactment. This section merely prevents Sections 271 and 273 from "prohibiting" a BOC from continuing to engage in activities in which it was authorized to engage at the time of enactment. When read in conjunction with the relevant provisions of Section 272, it is clear that Section 271(f) does not prevent application of the safeguards provided for in Section 272 to previously-authorized activities, at the end of the one-year transition period provided in Section 272(h). Indeed, such application is specifically mandated by Section 272(a)(2)(A).

In considering the applicability of Section 272(h) and 271(f) to previously-authorized manufacturing activities, it is important to note that Section 272(a)(2)(A) expressly requires the BOCs to engage in "manufacturing activities," without limitation, in accordance with the requirements of Section 272. In contrast, Section 272(a)(2)(B) contains an express exemption from these requirements for previously-authorized activities involving the origination of interLATA telecommunications services. The language of the statute thus makes it clear that all manufacturing activities ultimately must conform to the requirements of Section 272.

Section 272(h) provides for a one-year transition period to enable a BOC to bring manufacturing activities it was authorized to undertake pursuant to MFJ waivers into conformity with Section 272. This transition period was included in order to give the Commission sufficient time to promulgate its Section 272 rules and to give the BOCs time to make the necessary adjustments to conform to the new rules. To construe Section 271(f) as creating an implicit, permanent exemption for previously-authorized manufacturing activities, notwithstanding the absence of an explicit exemption of the sort explicitly included in Section 272(a)(2)(B)(iii) for previously-authorized interLATA activities only, would render Section 272(h) a nullity.

Such a result would be contrary to the most fundamental principle of statutory construction, i.e., that "[a] statute should be construed so that effect is given to all its provisions, so that no part will be inoperative or superfluous, void or insignificant, and so that one section will not destroy another unless the provision is the result of obvious mistake or error." Accordingly, in the absence of an explicit exemption for previously-authorized manufacturing activities, the requirements of Section 272 clearly must be deemed applicable to such activities, following the end of the one-year transition period established in Section 272(h).

IV. STRUCTURAL SEPARATION REQUIREMENTS [NPRM Section IV; Paragraphs 55-64]

As the Commission's Notice observes, Section 272(b) establishes five structural and transactional requirements for BOC separate affiliates established pursuant to Section 272(a). In these comments, TIA addresses the proper application of four of these requirements to BOC manufacturing activities. The Commission has indicated that issues relating to implementation of Section 272(b)(2)'s requirement that the separate affiliate maintain separate books, records, and accounts will be addressed, along with other accounting safeguards issues, in a separate proceeding (i.e., CC Docket No. 96-150). TIA will convey its position with respect to this facet of the Section 272 safeguards in separate comments to be filed in that proceeding.

A. Uniform v. Customized Requirements [NPRM Section IV; Paragraph 56]

As a threshold matter, the Commission has requested comment on whether the 1996 Act permits and whether it should "interpret or apply any of the section 272(b) requirements differently" with respect to BOC provision of interLATA services, which are regulated under Title II, as opposed to nonregulated manufacturing and information services. The NPRM also seeks comment on how different requirements could be imposed on the three types of activities, where all three activities are conducted through one affiliate, as Section 272(a)(1) appears to allow.

In general, TIA believes that Section 272(b) requirements should be construed and applied consistently to all activities covered by Section 272 -- interLATA service, interLATA information service, and manufacturing. Section 272(b) establishes the basic criteria for a BOC separate affiliate. Structural separation is essential to ensure proper cost allocation and avoid cross-subsidization, a major goal of section 272. To the extent that a single affiliate is employed for manufacturing and other activities subject to the Section 272 structural separation requirements, establishment of a consistent and common set of rules under Section 272(b) would appear generally appropriate, and in some respects unavoidable.

As the Commission's NPRM observes, "[a] BOC's potential incentive and ability to favor its affiliate and to improperly allocate costs may vary . . . depending on the activity involved." TIA comments focus on the need for implementation of Section 272(b) in a manner that effectively addresses competitive concerns arising in the context of manufacturing. To the extent that a different construction or application of a particular provision may be required or advocated, in order to accommodate concerns specific to the provision of interLATA telecommunications or information services, TIA's primary concern would be to ensure that the approach adopted by the Commission does not undermine or diminish the effectiveness of the Section 272 requirements in preventing cross-subsidization or discrimination in favor of BOC-affiliated manufacturers.

B. Independent Operation [NPRM Section IV.A.; Paragraphs 57-60]

Section 272(b)(1) provides that the separate affiliate shall "operate independently" from its affiliated BOC. As the Commission's notice recognizes, "[u]nder principles of statutory construction, a statute should be interpreted to give meaning to each of its provisions." Accordingly, the Commission tentatively concludes that the "operate independently" requirement should be interpreted as "imposing requirements beyond those listed in subsections 272(b)(2)-(5)." The Notice seeks comment on this tentative conclusion and on "what requirements the Commission should adopt to implement the statutory requirement that affiliates operate independently."

TIA concurs in the Commission's tentative conclusion that the "independent operation" provision in Section 272(b)(1) has a meaning that extends beyond the specific requirements of Section 272(b)(2)-(5). To the extent that paragraphs (2)-(5) do not explicitly identify all actions necessary to ensure that the separate affiliate "operates independently" from the BOC, this section effectively directs the Commission to impose whatever additional requirements may be needed to ensure such independence. For example, Section 272(b) does not specifically require "separate facilities" but, clearly, separate facilities are necessary to ensure operational independence and to prevent cross-subsidization of BOC competitive activities. Similarly, Section 272(b) does not make specific reference to the need for separate marketing, administrative capabilities, or research and development resources. Nonetheless, TIA believes that in order to ensure operational independence, and the protection of competition and ratepayer interests, consistent with the purposes of Section 272, BOC separate affiliates that engage in manufacturing should be required to conduct activities in each of these areas on an independent basis, separate and apart from their affiliated BOCs. Moreover, as the discussion of Section 272(b)(3) below indicates, TIA believes that the requirements of Section 272(b)(1) should be construed to prohibit the shared or common use of "outside consultants" by a BOC and its separate affiliate as a means to evade the "separate employee" requirement and thereby subsidize the affiliate's competitive activities.

In its Notice, the Commission seeks comment on whether the "independent operation" requirement should be interpreted as imposing separation requirements of the sort adopted in the Commission's Computer II or Competitive Carrier proceedings. TIA believes that while certain elements of the Computer II structural separations regime may provide useful points of reference, neither Computer II nor Competitive Carrier ever purported to address the specific cross-subsidy and discrimination issues associated with BOC entry into the manufacturing business.

The Competitive Carrier decision cited in the Commission's Notice dealt with the establishment of rules establishing the terms on which independent LECs could secure "non-dominant" status for their interstate, interexchange activities, and is therefore clearly inappropriate as a model for the establishment of separation requirements applicable to BOC manufacturing affiliates. Indeed, the order cited by the Commission concedes that the subject rules provide only incomplete protection against cost-shifting and other anticompetitive conduct, and acknowledges that the affiliate qualifying for "non-dominant" treatment is "not necessarily structurally separated from an exchange telephone company in the sense ordered by the Second Computer Inquiry."

While certain of the Computer II structural separation requirements (e.g., separate books and records, separate officers) are reflected in the separation requirements of Section 272(b), the focus of Computer II was on the establishment of rules to govern the provision of CPE and enhanced services by AT&T and, subsequently, the divested Bell Operating Companies. Accordingly, while some elements of Computer II may serve as points of reference for the current discussion, TIA does not believe that this line of cases provides an appropriate model for the development of comprehensive rules to govern the relationship between a BOC and a separate affiliate engaged in the manufacture of telecommunications equipment and/or CPE.

Finally, in its Notice, the Commission notes that Section 274(b) requires that a BOC separate affiliate or electronic publishing joint venture must be "operated independently," and goes on to prescribe certain specific activities that the electronic publishing affiliate can and cannot perform, including prohibitions on BOC "hiring or training of personnel on behalf of a separated affiliate" or "perform[ing] research and development on behalf of a separated affiliate." The Notice goes on to request comment on the relevance of the "independent operation" requirement in Section 274(b) to the construction of Section 272(b)(1). In TIA's view, the inclusion of these requirements in Section 274(b) provides useful guidance, in identifying several areas which TIA believes must be addressed by the Commission, along with the other areas of concern identified above (e.g., separate facilities, marketing, etc.), in adopting rules construing and implementing Section 272(b)(1).

C. Separate Officers, Directors, Employees [NPRM Section IV.C.; Paragraph 62]

Section 272(b)(3) provides that the separate affiliate "shall have separate officers, directors, and employees from the [BOC] of which it is an affiliate." In discussing implementation of this provision, the Notice observes that in Computer II, the Commission required the separate subsidiary to have its own operating, marketing, installation, and maintenance personnel, while allowing the sharing of certain "administrative services" (e.g. accounting, legal, personnel, insurance, pension). The Commission tentatively concludes that Section 272(b)(3) "prohibits the sharing of in-house functions such as operating, installation, and maintenance personnel, including the sharing of administrative services permitted under Computer II if those services are performed in-house." The Notice also requests comment on whether the BOC and its affiliate should be barred from sharing the same outside services, such as insurance or pension services, and on "what other types of personnel sharing may be prohibited by section 272(b)(3)."

TIA agrees with the Commission's tentative conclusion that Section 272(b)(3) prohibits the sharing of all "in-house" functions, including those authorized under Computer II. TIA further believes that this requirement, together with the "independent operation" provision of Section 272(b)(1), requires the use of separate "outside" services as well. The separate affiliate must be required to stand on its own and not rely on its affiliated BOC to undertake any service or to subsidize activities undertaken by outside consultants on the affiliate's behalf. This is the only effective way to ensure that Section 272(b) fulfills its intended purpose of protecting competition and consumers from the adverse effects of BOC cross-subsidization.

D. Credit Arrangements [NPRM Section IV.D.; Paragraph 63]

Section 272(b)(4) states that the BOC affiliate "may not obtain credit under any arrangement that would permit a creditor, upon default, to have recourse to the assets of the [BOC]." The Commission's Notice tentatively concludes that "a BOC may not co-sign a contract, or any other instrument with a separate affiliate that would allow the affiliate to obtain credit in a manner that violates Section 272(b)(4)."

TIA agrees with the Commission's tentative conclusion that a BOC may not co-sign a contract to enable the separate affiliate to obtain credit. TIA further believes that Section 272(b)(4), particularly when considered in conjunction with the "independent operation" requirement of Section 272(b)(1), prohibits any and all arrangements or activities which would result in the BOC in having any responsibility, directly or indirectly, for the financial obligations of the separate affiliate. In this regard, TIA notes in particular that the ability of a BOC affiliated vendor to rely on ultimate recourse to the BOC's credit would enable it to obtain more advantageous financing and to offer more advantageous financing to its customers, and would thereby give it an unreasonable and unfair advantage over non-affiliated vendors.

In addition to barring the BOCs from co-signing a contract to extend credit to its separate affiliate, the Commission's implementing regulations also should cover all other activities and arrangements which have such an effect, e.g., any reference to the BOC in debentures, reference to the BOC in any equity instruments, use of the same underwriting facilities, or other arrangements in which the responsibility for cost, debt, equity, or business risk could be shifted to the BOC away from the separate affiliate.

E. "Arms Length" Requirement [NPRM Section IV.E.; Paragraph 64]

Section 272(b)(5) provides that the separate affiliate must "conduct all transactions with the [BOC] of which it is an affiliate on an arm's length basis with any such transactions reduced to writing and available for public inspection." As the discussion above indicates, the Commission will address accounting issues associated with its implementation of Section 272(b)(5) in a separate rulemaking (i.e., CC Docket No. 96-150). However, the Commission seeks comment in this proceeding on whether implementation of the "arm's length" requirement necessitates any non-accounting safeguards.

TIA believes that the arm's length requirement requires the establishment of procedures, consistent with generally accepted accounting principles, to ensure that all transactions between the BOC and its separate affiliate are indeed auditable. Unless such procedures are adopted, the biannual audit requirement under Section 272(d) would be rather meaningless.

In response to the Commission's request for comments on the need for non-accounting safeguards, TIA believes that the "arm's length" requirement of Section 272(b)(5) operates to reinforce the "independent operation" requirements of Section 272(b)(1). In this regard, activities that indicate a less than "arm's length" relationship between a BOC and its separate affiliate (e.g., movement of personnel back and forth between the BOC and its affiliate, joint promotional activities, joint marketing) also would reflect a failure to "operate independently," as required pursuant to Section 272(b)(1).

The requirement that transactions between the BOC and its affiliate occur only on an "arm's length" basis also reinforces the non-discrimination requirements established in Section 272(c). Implicit in the notion of an "arm's length" transaction is the principle that the BOC's separate affiliate should be dealt with in the same manner as any other entity seeking to engage in similar transactions with the BOC. While TIA does not propose that any specific non-accounting requirements be imposed solely to implement the requirements of Section 272(b)(5), TIA believes that this provision lends added support for the adoption of strong, comprehensive rules implementing these other provisions of Section 272, as described herein.

V. NONDISCRIMINATION SAFEGUARDS [NPRM Section V; Paragraphs 65-81]

As the Notice recognizes, once a BOC separate affiliate enters a competitive market such as manufacturing, the BOC will be subject to economic incentives that may lead it to use its control of essential local exchange facilities and dominant position in local service markets to "favor its competitive affiliate or to take actions that could weaken the affiliate's rivals." In addition to the potential for discrimination in BOC procurement, specific concerns cited in the Notice with respect to manufacturing include the possibility that a BOC could "share information with its manufacturing affiliate or set standards that enable its manufacturing affiliate to produce equipment at a lower cost or with superior compatibility with the BOC's network as compared to that of competing manufacturers."

The Section 272 non-discrimination provision of primary interest to manufacturers is Section 272(c)(1), which provides that, in its dealings with its separate affiliate, a BOC "may not discriminate between that company or affiliate and any other entity in the provision or procurement of goods, services, facilities and information, or in the establishment of standards." Other nondiscrimination requirements discussed in the Notice, contained in Section 272(e), focus on preventing discrimination by a BOC in the provision of local exchange and exchange access facilities and services. These provisions are of primary interest to interLATA service providers. However, to the extent that a BOC separate affiliate may seek to market its equipment, together with resold BOC services, in competition with unaffiliated equipment vendors, the provisions of Section 272(e)(1) address the potential for discrimination in the BOC's provision of service to the affiliate and its competitors.

A. Section 272(c)(1) [NPRM Section V.A.-C.; Paragraphs 67-79]

1. Definitional Issues [NPRM Section V.A.-C.; Paragraphs 67, 76]

In its Notice, the Commission invites comment on the need for definition of several of the terms used in Section 272(c)(1), including the terms "goods," "services," "facilities," and "information." In this regard, the Commission's Notice specifically inquires as to "whether further defining these terms . . . would enable competing providers to detect violations of this section by enabling them to compare more accurately a BOC's treatment of its affiliates with a BOC's treatment of unaffiliated competing providers." Elsewhere in its Notice, the Commission observes that while certain of the terms used in Section 272(c)(1) have been defined in the context of the Computer III proceedings, the Computer III rules do not specifically address the term "goods." Accordingly, the Notice specifically seeks comment on "what regulations, if any, would be necessary to define that term."

As the discussion above indicates, TIA's primary concern in this proceeding is to ensure that the Section 272 non-discrimination provisions are implemented in a manner that effectively addresses the potential for BOC discrimination in areas that affect competition in the equipment marketplace, e.g., procurement, information disclosure, network design, standard-setting, and provisioning. Rather than proposing comprehensive definitions of the terms used in Section 272(c)(1) for use in all contexts, TIA's comments focus on the need for a construction of these terms that is sufficiently detailed and expansive to make this provision effective in addressing the areas of specific concern to manufacturers.

In this regard, TIA believes that the terms "goods" and "services" should at a minimum be construed to encompass all types of telecommunications equipment, customer premises equipment, and related equipment, software, and services. Adoption of definitions that include all products and services whose design and intended use relates to the provision or use of telecommunications facilities or services will help to ensure that Section 272(c)(1) is applied in a manner that addresses the potential for discrimination against competing vendors in the areas identified above.

As the discussion in Section V.A.5. below indicates, TIA believes that each BOC should be required to establish with specificity the procedures it intends to follow in order to ensure that it does not discriminate in the procurement of equipment and related services. In order to ensure that the non-discrimination requirements of Section 272(c)(1) are effectively enforced in the area of procurement in particular, TIA would further urge the Commission to consider adoption of an appropriate classification scheme which identifies discrete categories of products and related services procured by the BOCs. Establishment of such a scheme would greatly facilitate the monitoring of BOC compliance in this area.

2. Application to BOC Affiliates [NPRM Section V.B.; Paragraphs 70, 79]

In discussing the scope of application of the Section 272 provisions, the NPRM notes that "[t]he nondiscrimination provisions of Section 272(c)(1) do not apply to the conduct of BOC affiliates," and that as a result "a BOC might have the incentive and ability to transfer network capabilities of its local exchange company to the operations of its competitive affiliates to avoid the nondiscriminatory provision of these capabilities as required by Sections 272(c)(1) and (e)." In response to this concern, the Commission tentatively concludes that "any transfer by a BOC of existing network capabilities of its local exchange entity to its affiliates is prohibited by Section 272(a)," which requires any BOC affiliate that is a local exchange carrier subject to Section 251(c) to be separate from the Section 272(a) affiliate(s). The Notice seeks comment on this conclusion, as well as whether, in the alternative, a transfer of BOC network capabilities to a competitive affiliate would make that affiliate a "successor or assign" of the BOC, thus subjecting the affiliate to the nondiscrimination requirements of Section 272.

While the focus of discussion in the Notice is a concern that the BOC might seek to avoid its obligations to provide network facilities and services on a non-discriminatory basis, if network capabilities were transferred from the BOC to an affiliate not subject to Section 272(c)(1), associated procurement and standard-setting activities arguably might be removed from the nondiscrimination requirements of this section as well. Accordingly, TIA is concerned that the potential problem identified in the notice with respect to the transfer of local exchange facilities by a BOC also could undermine the pro-competitive purposes of Section 272(c)(1) in the area of manufacturing. TIA agrees with the Commission's tentative conclusion that Section 272(a) bars a BOC from transferring its local exchange operations to another affiliate as a means to avoid the non-discrimination requirements of Section 272. Alternatively, TIA believes that any attempt by a BOC to transfer its local exchange facilities to a separate entity would make such an entity a "successor or assign" and thus subject to the requirements of Section 272(c)(1).

3. Nondiscrimination Standard [NPRM Section V.C.; Paragraphs 72-73]

In its Notice, the Commission correctly observes that Section 272(c)(1) provides that a BOC "may not discriminate," in contrast to Section 202 of the Communications Act, which bars only "unjust or unreasonable" discrimination. In light of this difference in language, the Commission seeks comment on "whether Congress intended to impose a stricter standard for compliance with Section 272(c)(1) by enacting this flat prohibition on discrimination." TIA believes that Congress did intend to establish a stricter standard for nondiscrimination under Section 272(c)(1) than the standard provided for in Section 202 of the Communications Act. The absence of the modifier "unjust or unreasonable" with respect to the word discrimination in Section 272(c) clearly establishes a higher standard than that provided in Section 202 where the modifier appears. The plain meaning of the statute is therefore clear.

Applying the language of the statute, the Commission tentatively concludes that the prohibition "means, at a minimum, that BOCs must treat all other entities in the same manner as they treat their affiliates, and must provide and procure goods, services, facilities and information to and from these other entities under the same terms, conditions, and rates." The Notice seeks comment on this tentative conclusion, as well as on "what regulations, if any, are necessary to implement this provision."

TIA agrees with the Commission's conclusion that the BOCs must provide and procure goods, services, facilities, and information to or from other entities on the same terms and conditions that it employs in dealing with its manufacturing affiliate. As the discussion of procurement in Section V.A.5. below indicates, TIA believes that each BOC should be required to submit for Commission approval the procedures it intends to use to satisfy the nondiscrimination requirement of Section 272(c)(1). These procedures should be nondiscriminatory and the standards for procurement decisions should be developed and applied in a nondiscriminatory manner. Once approved, these procedures should apply to all BOC procurement activities, whether or not the supplier is affiliated, that involve the purchase of "goods" or "services," defined in a manner consistent with the discussion at Section V.A.1. above.

4. Information Disclosure [NPRM Section V.C.; Paragraphs 74-75]

In its Notice, the Commission observes that as a BOC enters competitive markets, it "could disclose information to its affiliates before disclosing this information to unaffiliated carriers, providers, or manufacturers." The Notice goes on to cite the network information disclosure rules developed in the Computer II and Computer III proceedings, and invites comment on whether any of these safeguards are sufficient to implement the requirements of Section 272(c)(1).

In considering the adequacy of the existing safeguards cited by the Commission, it is important to note what types of information these rules do and do not include. The current rules require the disclosure of information that "would affect either intercarrier connection or the manner in which customer premises equipment is attached to the interstate network." They do not mandate disclosure of the type of information need to manufacture and market equipment (e.g., central office or transmission equipment) for use in the BOCs' networks. Clearly, such information must be included within the requirements of Section 272(c)(1), in order for this section to achieve its intended purpose of preventing discrimination by a BOC in favor of an affiliated manufacturer.

The existing network disclosure rules are also inadequate in that they do not guarantee equal treatment, as required pursuant to the express terms of Section 272(c)(1), in the release of information to BOC affiliates and non-affiliates. To remedy this deficiency, in a manner consistent with the language of the statute, the BOCs must be required to provide all manufacturers with access to information relating to the manufacture or sale of equipment for use in or connection to the BOC network, in a non-discriminatory manner, i.e., at the same time and on the same terms and conditions.

5. Procurement Activities [NPRM Section V.C.; Paragraphs 76-77]

In its Notice, the Commission observes that Section 273(c)(1) "prohibits, for example, a BOC from purchasing network equipment solely from its affiliate, purchasing the equipment from the affiliate at inflated prices, or giving any preference to the affiliate's equipment in the procurement process and thereby excluding rivals from the market in the BOC's service area and undermining competition." The Commission seeks comment on "how the BOCs could establish nondiscriminatory procurement procedures designed to ensure that other entities are treated on the same terms and conditions as a BOC affiliate in the procurement of goods, services, facilities, and information," and on "the nature and extent of rules necessary to ensure that such procedures are implemented."

TIA believes that a BOC should be required to establish with specificity the procedures it intends to follow in order to ensure that it does not discriminate in its procurement of "goods" and "services" defined in a manner consistent with the recommendations made by TIA in Section V.A.1. above. These procedures should include specific standards that would be used in making procurement decisions. Once the procedures are filed with the Commission by the BOCs, they should be reviewed by the Commission and approved or disapproved. In the course of conducting its review, the Commission should solicit the views of independent vendors. This approach is flexible in that the BOC establishes the procurement procedures (not the FCC), while providing the Commission with information needed to ensure that BOC procurement is conducted in a non-discriminatory manner, consistent with the requirements of Section 272(c)(1). Should a BOC decide to change its procedures, such changes must be reported to the FCC and reviewed. If the proposed changes are material in nature, they would also be subject to public comment and approval by the Commission.

6. Standard-Setting Activities [NPRM Section V.C.; Paragraph 78]

As the Notice indicates, "a BOC could act anticompetitively by creating standards that require or favor equipment designs which are proprietary to its affiliate." The Commission seeks comment on what regulations, if any, are necessary to implement Section 272(c)(1)'s prohibition on BOC discrimination in the establishment of standards. More specifically, the Notice seeks comment on what "standards" are encompassed by this provision and on what procedures, if any, should be implemented to ensure that a BOC does not discriminate between its affiliate and other entities in setting standards.

In this regard, the Commission asks whether BOCs should be "required to participate in standard-setting bodies in the development of standards covered by this section." TIA believes that the BOCs should be strongly encouraged, if not required, to participate in the standards-development activities of accredited standard-setting groups, in establishing standards which affect the manufacture of equipment designed for use in or connection to the BOCs' networks. At a minimum, in developing technical standards for the operation of their networks and the interconnection of products and services thereto, as well as the generic specifications for products that they seek to procure, the BOCs should be required to establish and follow procedures that are open, transparent and non-discriminatory. While a commitment to follow ANSI-like procedures does not entirely eliminate the potential for BOC manipulation of standards in a manner that favors its manufacturing affiliate, the use of such procedures would make discrimination in this area less likely and easier to detect.

With regard to the scope of the term "standards," for purposes of Section 272(c)(1), TIA believes that this term should be construed to encompass all activities undertaken in connection with a BOC's efforts to establish technical specifications for BOC network operation, the interconnection of equipment and services to the BOC's network, and the BOC's own procurement of "goods" or "services," defined in a manner consistent with the recommendations made by TIA in Section V.A.1. above.

B. Section 272(e)(1) [NPRM Section II.D.; Paragraphs 80-85]

Section 272(e)(1) provides that "[a BOC] and an affiliate that is subject to the requirements of Section 251(c) shall fulfill any requests from an unaffiliated entity for telephone exchange service and exchange access within a period no longer than the period in which it provides such telephone exchange service and exchange access to itself or to its affiliates." In its Notice, the Commission tentatively concludes that the phrase "an unaffiliated entity" should be construed to include "any entity, regardless of line of business, that is not affiliated with a BOC. . . ." TIA agrees with the Commission that the language of Section 272(e)(1) should be interpreted in a manner which ensures that any> "unaffiliated entity" seeking to purchase service from a BOC for its own use or for resale, including equipment vendors, will be treated in a non-discriminatory manner.

VI. ENFORCEMENT OF SECTION 272 [NPRM Section VII.A.; Paragraphs 94-96]

A. Mechanisms to Facilitate Enforcement [NPRM Section VII.A.; Paragraph 94]

The Commission's Notice observes that "[e]nforcement of the statutory separate affiliate and nondiscrimination safeguards established by Sections 271 and 272 and the rules that we may adopt to implement those provisions will be critical in ensuring the full development of competition in the local and interexchange telecommunications markets." While this passage in the Notice does not specifically mention manufacturing, clearly effective enforcement of the Section 272 safeguards is also critical to the maintenance of a competitive equipment marketplace, once the BOCs are permitted to manufacture.

Accordingly, TIA urges the Commission to make every effort to ensure that there are mechanisms in place "to facilitate the detection and adjudication of violations" of the manufacturing-related safeguards established pursuant to Section 272, as well as Section 273 of the Act. As the discussion above indicates, TIA believes that the BOCs should be required to establish concrete procedures implementing the non-discrimination requirements of Section 272(c)(1) in the area of procurement. The establishment of Commission-approved procedures should make it easier for the Commission and private parties to ascertain whether a BOC is conducting its procurement activities in a manner consistent with its obligations under Section 272(c)(1) and other equipment-related provisions of the Act.

B. Reporting/Monitoring Requirements [NPRM Section VII.A.; Paragraph 95-96]

The Notice specifically invites comment on whether the Commission should "impose reporting requirements on BOCs analogous to those requirements imposed by our CEI plans and ONA plans under Computer III." TIA believes that reporting, monitoring, auditing, and complaint procedures need to be established to ensure compliance with the non-discrimination requirements of Section 272, in particular, as they relate to BOC manufacturing activities. These procedures are critically important. If they are inadequate, the safeguards will be rendered ineffective. While adoption of reporting requirements similar to those adopted in Computer III would be helpful in ensuring that the BOCs conduct their service provisioning activities in a non-discriminatory manner, such provisions do not address the areas of greatest concern to manufacturers.

For example, in the area of procurement, TIA believes that the BOCs should be required to provide regular reports to the Commission concerning its procurement of goods and services. BOC reporting obligations should include a requirement that each BOC provide a consolidated report to the Commission, in an approved format, detailing its level of purchases from affiliated and non-affiliated suppliers in appropriately-disaggregated product categories. In addition, the Commission must establish rules to ensure compliance by the BOCs with the Section 272(c)(5) requirement that all transactions between a BOC and its separate affiliate must be "reduced to writing and available for public inspection."

The Commission should take further steps to ensure that it has available sufficient transaction-specific data to ascertain whether a BOC has complied with the non-discrimination requirements of Section 272(c)(1) and other relevant provisions, as well as its Commission-approved procurement compliance plans. In this regard, the Commission should have or be able to readily obtain the volume of a particular purchase, the price of the purchase, the nature of the purchased products/services, the selected supplier, and relevant information with regard to proposals made by other prospective suppliers. Before collecting such data, the Commission should take steps to ensure that it has adequate procedures in place providing for confidential treatment of commercially sensitive information. To the extent that the Commission determines not to require that all such data be reported on a regular basis, appropriate record retention requirements should be put in place in order to ensure that the information necessary to investigate complaints and to conduct audits of BOC procurement activities is preserved for a reasonable period.

In addition to the above-described reporting/monitoring mechanisms, the Commission also should make aggressive use of audits to ferret out problems. In addition to the biannual audits required pursuant to Section 272(d), the Commission should conduct spot examinations of BOC purchasing records and reserve the right to investigate on a more comprehensive basis, where it has a reasonable basis to suspect discrimination.

In enforcing the provisions of Section 272 and 273, as they relate to BOC manufacturing, the Commission should make full use of its existing authority under Sections 206-209 of the Communications Act, as well as the supplemental authority granted under Sections 273(f) and (g) of the Act. These and other relevant provisions of the Communications Act, should provide ample authority for the establishment and implementation the reporting/monitoring mechanisms described above, which are essential to achieving the statutory goal of preventing anticompetitive cross-subsidy and discrimination.

VII. CONCLUSION

TIA urges the Commission to take action to preserve the benefits of the vigorously competitive domestic equipment marketplace which exists today, by adopting appropriate rules implementing the structural separation and non-discrimination requirements of Section 272, in a manner consistent with the foregoing comments.

Respectfully submitted,