Joel I. Klein                       Lawrence J. Fullerton
        Acting Assistant Attorney General         Deputy Assistant Attorney General
        Antitrust Division                       Antitrust Division

        Andrew S. Joskow                    Philip J. Weiser
        Deputy Assistant Attorney General         Senior Counsel
        Antitrust Division                     Antitrust Division

        May 16, 1997

Page ii .       

        Table of Contents ......................................................................................................... ii

        Summary of Evaluation ........................................................................................................ v

        Introduction ........................................................................................................................... 1

        I.  The Requirements of Section 271 and the Competitive Objectives
             of the Telecommunications Act ................................................................................ 3

        II.  SBC's Application Does Not Satisfy the Preconditions of
             Section 271(c)(1)(A) or (B) ...................................................................................... 8

             A.The Standards of Track A Govern SBC's Application ................................. 9

             B.SBC's Application Does Not Meet the Requirements of Track A
                Because No Operational Facilities-Based Provider Serves
                Residential Customers ............................................................................. 20
        III.  SBC Has Failed to Show that It Has Satisfied the Competitive
             Checklist Requirements .......................................................................................... 21

             A.  SBC Must Provide Each of the Checklist Items in a Manner
                that Will Enable Its Competitors to Operate Effectively ............................ 21

             B.   The Oklahoma Corporation Commission's Opinion that SBC
                Satisfies the Checklist Reflects Its Erroneous Legal Interpretations ......... 24

             C.   SBC Has Failed to Provide Several Checklist Items .................................. 26

                1.  SBC Has Failed to Show that Competitors Can Effectively
                     Obtain and Maintain Resale Services and Unbundled
                     Elements .......................................................................................... 26

                     a.Checklist Compliance Requires Automated Support
                          Systems ............................................................................... 28

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                     b.A BOC Must Demonstrate that Its Wholesale
                          Support Processes Work Effectively ................................... 29

                     c.  SBC's Provision of Resale Services and Access to
                          Unbundled Elements Fails The Statutory Checklist
                          Standard ............................................................................. 31
                2.  Interconnection: SBC Has Failed to Provide Requested
                     Physical Collocation ....................................................................... 30
                3.  Interim Number Portability: Experience Has Shown that
                     SBC Is Not Yet Able to Provide this Checklist Item
                     Adequately and at Parity with Its Own Retail Services .................. 34

        IV.  SBC Has Failed to Meet the Public Interest Standard as Its Local Markets
             in Oklahoma Are Not Open to Competition ........................................................... 36

             A.  The Public Interest Requirement and the Department of Justice's
                Competitive Assessment ............................................................................. 37

             B.   Issues that Should Be Considered in Determining whether
                Markets Are Open ..................................................................................... 42

                1.  Each of the Three Entry Paths Created by Congress
                          Must Be Available to Competitors ..................................... 42

                2.  The Existence or Lack of Actual Competition ................................ 43

                     a.   Significant Competitive Entry Suggests that the
                          Market Is Open ................................................................... 43

                     b.  Competitive Entry Is Important to Setting
                          Basic Performance Standards .............................................. 45

                     c.  The Department's Inquiry In the Absence of
                          Significant Competitive Entry ............................................ 48

             C.   SBC Has a De Facto Monopoly in Local Exchange
                Telecommunications in Oklahoma and Dominates Exchange
                Access and IntraLATA Toll ........................................................................ 51

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             D.  The Absence of Local Competition in Oklahoma Can in Large
                Part Be Attributed to SBC's Failure to Provide What Competitors
                Need to Enter the Market ............................................................................ 54

                1.  Potential Competitors Are Seeking to Enter Local Markets in
                     Oklahoma But Have Not Yet Been Able to Do So.......................... 54

                2.  Reasons Why Significant Entry Has Not Taken Place
                     in Oklahoma .................................................................................... 55

        Conclusion .......................................................................................................................... 67

        Appendix A: SBC's Wholesale Support Processes ............................................................ 68

        Appendix B: Local Competitors and Potential Competitors in Oklahoma ......................... 90

Page v .

Page vi      

        to its assessment of the BOC's application for in-region interLATA entry.
             SBC's application for interLATA authority in Oklahoma falls short on several grounds, a
        point underscored by the lack of competitive entry into that state, despite the interest of potential
        competitors in entering the local telephone markets. As a threshold matter, SBC fails to meet the
        prerequisites of Section 271(c)(1) so as to be able to satisfy either of the two alternative statutory
        entry tracks. Having received requests for access and interconnection by qualifying potential
        facilities-based competitors, SBC cannot proceed under Track B. Although these requests
        require that SBC's application be evaluated under the standards of Track A, SBC cannot
        presently satisfy Track A because SBC is not "providing access and interconnection" to any
        facilities-based carrier competing with it for both business and residential customers.
             Even if SBC were entitled to proceed under either Track A or Track B, it still could not
        obtain approval under Section 271 because it also has not fully satisfied the competitive
        checklist. Specifically, SBC has failed to: (1) provide adequate wholesale support processes,
        which enable a competitor to obtain and maintain required checklist items such as resale services
        and access to unbundled elements; and (2) provide (a) physical collocation, and (b) adequate
        interim number portability.
             Finally, granting SBC's entry would not be consistent with the public interest. In
        evaluating an application in this regard, the Department seeks to determine whether the BOC's
        local markets have been irreversibly opened to competition. The Department believes that the
        most probative indicator of whether a local market is open to competition is the history of actual

Page vii      

        commercial entry. This does not mean that BOC interLATA entry must be delayed until local
        competition is sufficiently vigorous to discipline the BOC's market power. Actual local entry
        with successful commercial usage of the BOC's wholesale support systems may be sufficient to
        demonstrate that the inputs competitors need are commercially available. Such entry also
        permits the formulation of performance benchmarks that will enable regulators and competitors
        to detect and constrain potential BOC backsliding and competitive misconduct after long
        distance entry. As of yet, however, there is no sufficient history of such entry in Oklahoma and
        our inquiry suggests that several significant obstacles to such competitive entry remain in place.
             Based on our assessment of the market conditions in Oklahoma, we conclude that the
        current lack of entry does not reflect an absence of demand for new entrants or a lack of interest
        on the part of those planning to enter into the local markets in Oklahoma; numerous potential
        competitors -- facilities-based and otherwise -- have sought access and interconnection
        agreements with SBC. Rather, our assessment of market conditions reveals that competitors are
        being denied the opportunities for entry required and contemplated by the 1996 Act, in large part
        due to SBC's failure to provide what potential competitors have requested and need for effective
        entry. Accordingly, granting SBC's application for interLATA authority at this time -- before
        SBC has done its part to remove remaining obstacles to local competition and the necessary steps
        are taken to ensure that competition has the opportunity to develop -- would not be in the public
        interest.

Page 2      

        responsible for protecting competition, ³ a significant statutory role in overseeing the BOC
        interLATA entry process under the Telecommunications Act and helping to ensure that the
        timing of BOC interLATA entry furthers, and does not impede, the competition in all
        telecommunications markets that the 1996 Act seeks to promote.
             SBC's application fails to satisfy the requirements of Section 271. Stated simply, SBC's
        application for interLATA authority in Oklahoma does not satisfy the statutory criteria and the
        Act's underlying objective of ensuring that local markets are open to competition. SBC's
        application, therefore, is premature.
             In Part I of this evaluation, the Department describes the statutory framework of the 1996
        Act. In Part II, the Department explains why SBC has failed to comply with either of the two
        entry tracks established in Section 271(c)(1). Part III then discusses several areas in which SBC
        has failed to satisfy the competitive checklist. Finally, Part IV reviews SBC's application under
        the public interest standard, focusing on the competitive environment in local
        telecommunications in Oklahoma and the reasons why competition has not yet developed there. ⁴

Page 3 .       

        I.  The Requirements of Section 271 and the Competitive Objectives
             of the Telecommunications Act

             Congress' objective in the 1996 Act was to truly and fully open all telecommunications
        markets to competition. Through Sections 251, 252, and 253, among others, Congress sought to
        remove the legal and economic barriers to competition in local exchange and access markets. In
        Section 271, Congress set forth the conditions under which the Bell Operating Companies
        ("BOCs") would be permitted to provide in-region interLATA services.
             Section 271 reflects a Congressional judgment that competition in interLATA markets
        could be enhanced by allowing the BOCs to enter those markets. The significant growth in long
        distance competition since the breakup of the integrated Bell system has produced greater service
        innovation, improvements in quality, and downward pressure on prices. ⁵ InterLATA markets

Page 4      

        remain highly concentrated and imperfectly competitive, however, and it is reasonable to
        conclude that additional entry, particularly by firms with the competitive assets of the BOCs, is
        likely to provide additional competitive benefits. ⁶ See Affidavit of Dr. Marius Schwartz
        ("Schwartz Aff.") 7, 35, 90-98, Exhibit C to this Evaluation.
             But Section 271 reflects Congressional judgments about the importance of opening local
        telecommunications markets competition as well. The incumbent local exchange carriers
        ("LECs"), broadly viewed, still have virtual monopolies in local exchange services and switched
        access, and dominate other local markets as well. ⁷ Taken together, the BOCs have some three-

Page 5      

        quarters of all local revenues nationwide, and their revenues in their local markets are twice as
        large as the net interLATA market revenues in their service areas. ⁸ . Federal
        Communications Commission, Statistics of Communications Common Carriers, Tables 1.4 and
        2.9 (1996). Total access revenues of the reporting local carriers were $29.61 billion, according to
        the common carrier statistics, but this included $7.06 billion in end user charges not billed to the
        interexchange carriers. Other statistics published by the Commission give total access charge
        revenues of the BOCs and independent local carriers as $33.39 billion, including end user
        charges. Federal Communications Commission,         Fund Worksheet Data, Tables 18 and 19 (Dec. 1996). ⁹ Accordingly, more considerable

Page 6      

        benefits could be realized by fully opening these local markets to competition. See Schwartz
        Aff. 38-39. Moreover, we anticipate that there will be significant benefits from enabling not
        only the BOCs, but also interexchange carriers and other firms all to be able to realize the full
        advantages of vertical integration into all markets, as the Commission also has recognized, and
        the 1996 Act is designed to make such integration possible. ¹⁰ See Schwartz Aff. 7, 82-88.
             Section 271 reflects Congress' recognition that the BOCs' cooperation would be
        necessary, at least in the short run, to the development of meaningful local exchange competition,
        and that so long as a BOC continued to control local exchange markets, it would have the natural
        economic incentive to withhold such cooperation and to discriminate against its competitors.

Page 7      

        Accordingly, Congress conditioned BOC entry on completion of a variety of steps designed to
        facilitate entry and foster competition in local markets. These statutory prerequisites to
        interLATA entry ensure that the BOCs have appropriate incentives to take the steps needed to
        open their monopoly markets, while reducing their incentives and opportunities to abuse their
        position in the market, i.e., disadvantaging competitors who are dependent on non-discriminatory
        access to the local exchange network, both for local services and for integrated local and long
        distance services. In particular, Congress carefully structured the four, inter-related prerequisites
        for BOC entry to ensure both (1) that the BOCs would have appropriate incentives to cooperate
        with competitors who wished to enter local markets, and (2) that BOC entry into interLATA
        markets would not be held hostage indefinitely to the business decisions of the BOCs'
        competitors. Thus, rather than allowing for immediate entry or entry at a date certain, Congress
        chose to accept some delay in achieving the benefits of BOC interLATA entry in order to achieve
        the more important opening of local markets to competition.
             Section 271 establishes four basic requirements for long distance entry. ¹¹ The first three

Page 8 .       

        such requirements -- satisfaction of the requirements of Section 271(c)(1)(A) ("Track A") or
        Section 271(c)(1)(B) ("Track B"), the competitive checklist, and Section 272 -- establish specific,
        minimum criteria that a BOC must satisfy in all cases before an application may be granted. In
        addition, Congress imposed a fourth requirement, calling for the exercise of discretion by the
        Department of Justice and the Commission. The Department is to perform a competitive
        evaluation of the application, "using any standard the Attorney General considers appropriate."
        47 U.S.C. 271(d)(2)(A)(1997) (emphasis added). And, in order to approve the application, the
        Commission must find that "the requested authorization is consistent with the public interest,
        convenience, and necessity." 47 U.S.C. 271(d)(3)(C)(1997). In reaching its conclusion on a
        particular application, the Commission is required to give "substantial weight to the Attorney
        General's evaluation." 47 U.S.C. 271(d)(2)(A)(1997).
        II. SBC's Application Does Not Satisfy the Preconditions of Section 271(c)(1)(A) or (B)
             Section 271(c)(1) of the 1996 Act requires the BOC seeking authority to provide in-
        region interLATA services to meet the requirements of subparagraph (A) ("Track A") or
        subparagraph (B) ("Track B"). SBC contends that it meets the standards of both tracks. It
        claims to have satisfied Track A based on an approved interconnection agreement with a
        facilities-based operational provider, Brooks Fiber. At the same time, SBC claims that it has

Page 9 .       

        satisfied Track B on the basis of its Statement of Generally Available Terms ("SGAT"), which
        the Oklahoma Corporation Commission ("OCC") allowed to take effect by lapse of time for
        review under the 1996 Act, without approving it. In our view, based on the facts presented,
        SBC's application can qualify only for Track A consideration, not Track B. ¹² Further, as SBC
        has failed to satisfy Track A's entry requirements, SBC's application should be denied.
             A.The Standards of Track A Govern SBC's Application

             Track A reflects Congress' judgment that, in most circumstances, a BOC should not be
        permitted to provide in-region interLATA service until it "is providing access and
        interconnection," pursuant to binding agreements approved under Section 252, to "one or more
        unaffiliated competing providers of telephone exchange service ... to residential and business
        subscribers." ¹³ Section 271(c)(1)(A). As the Conference Report makes clear, the access and
        interconnection agreements must have been implemented, and the competing provider(s) must be
        "operational." H.R. Conf. Rep. No. 104-458, at 148 (1996). Both residential and business

Page 10      

        customers must be served by one or more facilities-based providers ¹⁴ in order for the BOC to
        satisfy Track A's entry requirements. While each qualifying facilities-based provider need not be
        serving both types of customers if the BOC is relying on multiple providers, it necessarily
        follows that if the BOC is relying on a single provider it would have to be competing to serve
        both business and residential customers.
             Congress understood that requiring operational facilities-based competition pursuant to
        binding agreements approved under Section 252 would impose some delay on BOC entry into in-
        region interLATA services. But a fundamental premise of the 1996 Act is that the development
        of local exchange competition will require opening up the possibilities for access and
        interconnection to the BOC's local network. See S. Rep. No. 104-23, at 5 (1995). The approach
        of Track A, making the BOCs' ability to provide interLATA services dependent on the presence
        of an implemented agreement with an operational competitor, serves Congress' purpose of
        fostering local exchange competition by providing a strong incentive for the BOC to work with
        potential competitors to facilitate their entry. And, as the Conference Report notes, the presence
        of an operational competitor actually using the checklist elements is important in assisting the
        state commission and the FCC in determining, for purposes of Section 271(d)(2)(B), that the
        BOC has fully implemented the checklist elements set out in the Section 271(c)(2) checklist.

Page 11      

        H.R. Conf. Rep. No. 104-458, at 148 (1996). ¹⁵
             The approach that is now embodied in Track A was the only path to approval of in-region
        interLATA services for the BOCs in the Senate bill. ¹⁶ The House Committee's Report confirms
        its concurrence in this approach, emphasizing that "[t]he Committee expects the Commission to
        determine that a competitive alternative is operational and offering a competitive service
        somewhere in the State prior to granting a BOC's petition for entry into long distance." H.R.
        Rep. No. 104-204, pt. 1, at 77 (1995).
             The House, however, added a new provision, which ultimately became Track B. ¹⁷ The
        Conference Report explains that this provision was designed "to ensure that a BOC is not
        effectively prevented from seeking entry into the interLATA services market simply because no
        facilities-based competitor that meets the criteria set out in [Track A] has sought to enter the
        market." H.R. Conf. Rep. No. 104-458, at 148 (1996). For, if Track A were the only entry path
        available, a BOC could find itself permanently barred from providing in-region interLATA
        services simply because no competitor wished to provide the kind of facilities-based business and

Page 12      

        residential competition that would satisfy Track A.
             In short, Track B provides a limited exception to the Track A requirement of operational
        competition under an approved and implemented agreement "if, after 10 months after enactment
        of the Act no such provider has requested the access and interconnection described in
        subparagraph (A) before the date which is three months before the date [of the BOC
        application]." Section 271(c)(1)(B). A BOC may also proceed under Track B if the State
        commission certifies that the only such providers requesting access and interconnection have
        unreasonably delayed the process by failing to negotiate in good faith as required by Section 252,
        or by failing to comply, "within a reasonable period of time," with the implementation schedule
        contained in an agreement approved under Section 252. Id. To satisfy Track B's entry
        requirements, the BOC must provide "a statement of terms and conditions that [the BOC]
        generally offers to provide such access and interconnection" (the "SGAT"), which must be
        "approved or permitted to take effect by the State commission under section 252(f)" in lieu of the
        binding and implemented agreements required by Track A.
             Because Track B was added to deal with the possibility that a BOC, through no fault of
        its own, could find itself barred indefinitely from satisfying Track A, the term "such provider" in
        Track B should be interpreted with reference to the type of facilities-based competition that
        would satisfy Track A. Accordingly, we do not agree with the suggestion by the

Page 13      

        Telecommunications Resellers Association ¹⁸ that a BOC is foreclosed from proceeding under
        Track B if it has received requests for access and interconnection but only from firms seeking to
        provide services that would not satisfy Track A, such as a carrier that does not plan to provide
        service either exclusively or predominantly over its own facilities. See H.R. Rep. No. 104-204,
        pt. 1, at 77 (1995). ¹⁹
             But, contrary to SBC's contention, a BOC is not entitled to proceed under Track B simply
        because firms requesting interconnection and access for the purpose of providing services that
        would satisfy the requirements of Track A are not already providing those services at the time of
        the request. Such an interpretation of Section 271 would radically alter Congress' scheme,
        expanding Track B far beyond its purpose and, for all practical purposes, reading the carefully
        crafted requirements of Track A out of the statute. Similarly, as discussed below, a requesting
        potential facilities-based carrier need not even have fulfilled all of Track A's requirements at the
        time of the BOC's Section 271 application to foreclose the BOC from proceeding under Track B,
        as Congress understood that some time would be necessary before an agreement would be fully

Page 14      

        implemented and a provider would become operational.
             If SBC's interpretation of Track B were correct, Track B would no longer be a limited
        exception applicable where a BOC would otherwise be foreclosed indefinitely from entry into in-
        region interLATA markets. Rather, Track B would become the standard path, allowing BOCs to
        seek authorization to provide in-region interLATA services even if no Section 252 agreement to
        provide access and interconnection to the local network had been successfully implemented,
        despite would-be facilities-based competitors' timely efforts. To accept SBC's position, one
        would have to assume that Congress enacted Track A solely to deal with two situations of
        narrowly limited significance: (1) where a BOC application is filed less than ten months after
        enactment; or (2) where a competitor has managed to begin providing facilities-based local
        exchange services to residential and business customers more than three months before the BOC
        applies under Track B, which the BOC may do as early as ten months after enactment of the
        statute. There is no basis for the assumption that Congress intended Track A, the only track
        included in the bill as originally passed by the Senate, to play such an insignificant role.
             On the contrary, Congress well understood that few, if any, would-be facilities-based
        competitors to the BOCs would be likely to negotiate, obtain state approval, and fully implement
        agreements providing for access and interconnection, and begin offering services satisfying Track
        A, all in the seven months (ten months less the three-month window) immediately following
        enactment of the statute. Indeed, Congress expected that many potential competitors would not
        even make their requests until the FCC's implementing rules were promulgated, within six

Page 15      

        months of enactment. See H.R. Conf. Rep. No. 104-458, at 148-49 (1996). Congress allowed
        state commissions 90 days to review and approve negotiated agreements, while allotting nine
        months for completion of arbitrations, and a further 30 days for review and approval of an
        arbitrated agreement. For a potential competitor merely to have an approved agreement in hand
        would have taken at least the full ten months after passage of the 1996 Act if arbitration were
        necessary, even if the potential competitor had made its request promptly after the 1996 Act
        became law. Moreover, implementation of such an agreement is far from automatic; even if the
        BOC and competing provider cooperate fully, technical issues will inevitably impose some delay
        to full implementation. ²⁰
             Nor is there reason to believe that Congress expected that any significant number of
        facilities-based competitors would be providing service to residential and business customers
        without an implemented agreement for interconnection and access. To the contrary, the 1996 Act
        was premised on Congress' understanding that, at least in the short run, such agreements will

Page 16      

        normally be an essential prerequisite to effective local exchange service competition. ²¹ Or, as the
        Wisconsin Public Utilities Commission aptly put it, "[i]t is not logical to expect facilities-based
        competition prior to interconnection being available." Findings of Fact, Conclusions of Law and
        Order, Matters Relating to Satisfaction of Conditions for Offering InterLATA Service
        (Wisconsin Bell Inc. d/b/a Ameritech Wisconsin), Wisconsin Public Service Commission,
        Docket No. 6720-TI-120 at 15 (Dec. 12, 1996). In sum, reading the phrase "such provider" in
        Track B to require not only that the firm be seeking to provide services that would satisfy Track
        A, but also that it already be providing them, would essentially read Track A out of the statute.
             The legislative history confirms that Congress intended no such result. To the contrary,
        Congress assumed that firms would not yet be operational competitors when they requested the
        interconnection and access arrangements necessary to enable them to compete. Thus, for
        example, the Conference Committee described Track B as ensuring that a BOC is not foreclosed
        from seeking entry "simply because no facilities-based provider that meets the criteria set out in
        new section 271(c)(1)(A) has sought to enter..." H.R. Conf. Rep. No. 104-458, at 148 (1996)
        (emphasis added). It emphasized the importance of the FCC promulgating rules implementing
        Section 251 within six months of the statute's enactment precisely so that "potential competitors

Page 17      

        will have the benefit of being informed of the commission rules in requesting access and
        interconnection before the statutory window in new section 271(c)(1)(B) shuts." Id. at 148-49
        (emphasis added). Accord, H.R. Rep. No. 104-204, pt. 1, at 77-78 (1995) (The bill would "not
        create an unreasonable burden on a would-be competitor to step forward and request access and
        interconnection" (emphasis added)). ²²
             Congress fully appreciated the procompetitive potential of permitting the BOCs to
        provide in-region interLATA services, and it was sensitive to the BOCs' concerns that such entry
        not be unreasonably delayed. But Congress was also concerned with fostering local exchange
        competition. Under SBC's interpretation, Section 271(c)(1)(B) would reward the BOC that
        failed to cooperate in implementing an agreement for access and interconnection and thereby
        prevented its competitor from becoming operational. Properly construed, however, the statute
        serves Congress' procompetitive purposes by affording the BOC a strong incentive to cooperate
        as would-be facilities-based competitors attempt to negotiate agreements and become
        operational.
             Track B appropriately safeguards the BOCs' interests where there is no prospect of
        facilities-based competition that satisfies Track A, either because no competitor desires to
        provide it or because competitors cannot or will not move toward full implementation of a

Page 18      

        Section 252 agreement in a timely fashion. But Track B does not represent congressional
        abandonment of the fundamental principle, carefully set forth in Track A, that a BOC may not
        begin providing in-region interLATA services before there are operational facilities-based
        competitors in the local exchange market, if there are firms moving toward that goal in a timely
        fashion.
             Given the sensible relationship between Track A and B set out above, SBC is clearly not
        entitled to proceed under Track B because it has received requests for interconnection and access
        from at least two qualifying providers, and the state commission has not certified that either
        delayed the negotiation or implementation process. Brooks Fiber ("Brooks") made its initial
        request for access and interconnection with SWBT in March 1996, and Cox Communications
        ("Cox") made its request on October 23, 1996, substantially more than three months before
        SBC's application was filed. ²³
             Both Brooks and Cox have manifested their intent to be facilities-based competitors and
        are working toward that goal. ²⁴ Both have substantial telecommunications facilities in place in
        one or both of the major metropolitan areas in Oklahoma, including switches and installed fiber,

Page 19      

        that they could use to provide service to business and residential consumers. Brooks is already
        providing facilities-based service to business customers in Oklahoma City and Tulsa, and its
        intent to enter the residential market is reflected by its tariff and ongoing internal test of
        residential resale. As SBC itself has noted, Brooks has already invested substantial resources,
        and it plans to invest substantially more to become a facilities-based provider in Oklahoma. ²⁵
        And Cox, with an existing cable television system in Oklahoma City, is precisely the type of
        provider that Congress envisioned as providing meaningful facilities-based competition. See
        H.R. Conf. Rep. No. 104-458, at 148 (1996). ²⁶
             There is no reason to believe that Brooks or Cox would wish to delay becoming
        operational as facilities-based competitors. Neither stands to benefit from delaying SBC's entry
        into in-region interexchange markets because neither has significant interexchange business in
        Oklahoma, and Brooks' substantial investments will yield no return until it begins to serve
        customers. Moreover, SBC's complaints that waiting for Brooks and/or Cox to become
        operational would unduly delay its entry into in-region interLATA service ignore the evidence

Page 20 .       

        that SBC has failed to cooperate fully in that process. ²⁷ And, in any event, if SBC can establish
        that both Brooks and Cox have "violated the terms of an agreement approved under Section 252"
        by failing "to comply, within a reasonable period of time, with the implementation schedule
        contained in such agreement," it has a remedy under Section 271(c)(1)(B).
             Because SBC has received timely requests for interconnection and access from potential
        facilities-based carriers triggering the requirements of Track A (and has not obtained a
        certification that the requesting carriers have failed to negotiate in good faith or have failed to
        implement their agreements within a reasonable period of time), it is not eligible to proceed
        under Track B.
             B.SBC's Application Does Not Meet the Requirements of Track A Because No
                Operational Facilities-Based Provider Serves Residential Customers

             SBC's claim that it has satisfied Track A rests on its provision of interconnection and
        access to Brooks Fiber, the only new operational local exchange provider in Oklahoma with
        whom SBC has an approved access and interconnection agreement. Although Brooks plans to
        offer service to residential subscribers in Oklahoma (and is doing so in other states), and has a
        tariff on file in Oklahoma under which it could at some point serve residential customers, it is not

Page 21 . .       

        presently a "competing provider of telephone exchange services ... to residential ... subscribers,"
        as required by Section 271(c)(1)(A). It is undisputed that Brooks' only residential services are
        provided by resale of SBC services to four Brooks employees who are participating in a very
        limited trial, in order to test whether such resale would work well enough to be offered
        commercially. ²⁸ The provision of service on a test basis does not make Brooks a "competing
        provider" of service to residential "subscribers," in the absence of any effort on Brooks' part to
        provide service on a commercial basis. Therefore, SBC does not satisfy the requirements of
        Track A.
        III.  SBC Has Failed to Show that It Has Satisfied the Competitive Checklist Requirements
             A.SBC Must Provide Each of the Checklist Items in a Manner that Will Enable Its

Page 22      

                Competitors to Operate Effectively

             Section 271(c)(2)(A) requires that a BOC proceeding under Track A provide access and
        interconnection that meets the requirements of the fourteen-point "competitive checklist" set
        forth in Section 271(c)(2)(B), pursuant to "one or more agreements." ²⁹ The competitive checklist
        specifies a minimum set of facilities, services, and capabilities that must always be made
        available to competitors, thereby ensuring that a wide range of entry strategies will be
        available. ³⁰
             Because the statute allows the BOC to provide access and interconnection pursuant to
        "one or more agreements," it does not matter whether any single competitor requests or uses all
        fourteen checklist items, so long as the BOC is providing each element to at least one facilities-
        based competitor. Moreover, that requirement may be satisfied, at least in some instances,
        through the use of "most favored nation" clauses which readily allow provisions of other
        approved interconnection agreements to be imported into agreements with qualifying Track A
        competitors. Since different competitors may need different checklist items, depending on their
        individual business plans, such flexibility furthers the Congressional purpose of maximizing the

Page 23      

        options available to new entrants, without foreclosing BOC long distance entry simply because
        its competitors choose not to use all of the options.
             For the same reason, we believe that, under some circumstances, a BOC may be
        "providing" a checklist item under an agreement even though competitors are not actually using
        that item, at least where no competitor is actually requesting and experiencing difficulty
        obtaining that item. A BOC is providing an item, for purposes of checklist compliance, if the
        item is available both as a legal and practical matter, whether or not any competitors have chosen
        to use it. If a BOC has approved agreements that set forth complete prices and other terms and
        conditions for a checklist item, and if it demonstrates that it is willing and able promptly to
        satisfy requests for such quantities of the item as may reasonably be demanded by providers, at
        acceptable levels of quality, it still can satisfy the checklist requirement with respect to an item
        for which there is no present demand.
             By the same token, however, an agreement that does not set forth complete rates and
        terms for a checklist item, but merely invites further negotiation at some later time, falls short of
        "providing" the item as required by Section 271, as does a mere "paper commitment" to provide a
        checklist item, i.e., one unaccompanied by any showing of the actual ability to provide the item
        on demand. ³¹ Nor does an offer to provide a checklist item at some time in the future constitute

Page 24 .       

        "providing" it, if the item is not presently available. In sum, a BOC is "providing" a checklist
        item only if it has a concrete and specific legal obligation to provide it, is presently ready to
        furnish it, and makes it available as a practical, as well as formal, matter. ³²
             The 1996 Act provides an opportunity for state commissions to evaluate a BOC's
        compliance with the checklist but, as the 1996 Act makes plain, the final determination of
        compliance rests with the FCC. Section 271(d)(3) requires the Commission to deny BOC
        applications unless "it" finds that the statutory requirements have been satisfied. Similarly,
        Section 271(d)(2)(B) requires the FCC to "consult with the State commission . . . in order to
        verify the compliance" of an applicant with the checklist requirements, language which clearly
        indicates that verification is ultimately the FCC's responsibility.
             B.The Oklahoma Corporation Commission's Opinion that SBC Satisfies the
                Checklist Reflects Its Erroneous Legal Interpretations

             SBC has failed to demonstrate compliance with the competitive checklist requirements in
        Oklahoma. ³³ We reach this conclusion, and believe the Commission should as well, despite the

Page 25      

        contrary conclusion of the majority in the Oklahoma Corporation Commission's split 2-1
        decision.
             We assume that the FCC will carefully weigh the views of state commissions, as the
        Department does. In this case, however, the OCC majority did not adopt detailed factual findings
        concerning checklist compliance issues, and their conclusions appear to rest, in large part, on
        what we believe to be an incorrect legal interpretation of the checklist. The OCC majority
        determined that all of the requisite checklist items "are either provided to or generally offered to"
        competitors by SBC, and also noted the absence of any filed complaint regarding provision of
        service, asserting that lack of entry was "not due to SWBT's failure to make available" checklist
        items. ³⁴ The OCC majority, however, made no findings concerning the practical availability of
        checklist items.
             In contrast to the OCC's limited view of what the checklist requires, the Administrative
        Law Judge, who presided over the OCC's Section 271 proceeding, understood Section 271 to
        mean that "all checklist items must be easily and equally accessible, on commercially operational
        terms and on equal terms as to all." He concluded that this standard had not been satisfied with
        respect to several checklist items, including OSS, interim number portability, collocation, and
        directory assistance, finding that "the evidence in this case is that SWBT does not currently
        provide all checklist items in such a manner." Accordingly, the ALJ determined that "[t]he

Page 26 . .       

        evidence in this case indicates that there are currently impediments and blockades to local
        competition in Oklahoma." ³⁵ The dissenting OCC Commissioner, as well as the Oklahoma
        Attorney General and the OCC staff, agreed with the ALJ's finding that the checklist had not
        been satisfied. ³⁶ The Department concurs with their conclusions on this issue.
             C.   SBC Has Failed to Provide Several Checklist Items
                1.  SBC Has Failed to Show that Competitors Can Effectively
                     Obtain and Maintain Resale Services and Unbundled Elements

             The competitive checklist of Section 271(c)(2)(B) requires a BOC proceeding under
        Track A to "provide" resale services and access to unbundled elements, among other items,
        pursuant to Section 251. A CLEC using these items will have to engage in multiple transactions
        with the BOC for each customer or access line the CLEC wins in competition with the BOC.
        Because each BOC has millions of access lines, meaningful compliance with the requirement that
        the BOC make available resale services and access to unbundled elements demands that the BOC
        put in place efficient processes, both electronic and human, by which a CLEC can obtain and
        maintain these items in competitively-significant numbers. The checklist requirements of
        providing resale services and access to unbundled elements would be hollow indeed if the
        efficiency of -- or deficiencies in -- these "wholesale support processes," rather than the dictates
        of the marketplace, determined the number or quality of such items available to competing

Page 27      

        carriers. ³⁷
             A key component of the wholesale support processes necessary to provide adequate resale
        service and unbundled elements is the electronic access to the operations support system (OSS)
        functions that BOCs must provide under the Commission's rules. In its         Order, the Commission required BOCs to provide access to their OSSs systems originally
        designed to facilitate practicable provision of retail services as an independent network element
        under Section 251(c)(3) that the BOCs must provide under item (ii) of the checklist, ³⁸ as well as a
        term or condition of providing access to other network elements under the checklist. In
        evaluating checklist compliance with regard to a BOC's OSS systems, the Department will
        evaluate (1) the functions BOCs make available; and (2) the likelihood that such systems will fail
        under significant commercial usage. Overall, the Department will consider whether a BOC has
        made resale services and unbundled elements, as well as other checklist items, practicably
        available by providing them via wholesale support processes that (1) provide needed
        functionality; and (2) operate in a reliable, nondiscriminatory manner that provides entrants a

Page 28 .       

        meaningful opportunity to compete. ³⁹
                     a.Checklist Compliance Requires Automated Support Systems
             Under Section 271, an applicant must demonstrate that it can practicably provide
        checklist items by means of efficient wholesale support processes, including access to OSS
        functions. These processes must allow CLECs to perform ordering, maintenance, billing, and
        other functions at parity with the BOC's retail operations. Further, a BOC's wholesale support
        processes must offer a level of functionality sufficient to provide CLECs with a meaningful
        opportunity to compete using resale services and unbundled elements. Thus, in general, to
        satisfy the checklist wholesale support processes must be automated if the volume of transactions
        would, in the absence of such automation, cause considerable inefficiencies and significantly

Page 29 .       

        impede competitive entry. Appendix A describes in more detail the types of automated systems
        that, in the Department's experience, are likely to be necessary to provide adequate wholesale
        support processes.

                     b.A BOC Must Demonstrate that Its Wholesale Support Processes
                          Work Effectively

             A BOC's paper promise to provide the necessary (e.g., automated) wholesale support
        processes is a first step. A BOC must also, however, demonstrate that the process works in
        practice. Specifically, a BOC must demonstrate that its electronic interfaces and processes, when
        combined with any necessary manual processing, allow competitors to serve customers
        throughout a state and in reasonably foreseeable quantities, or that its wholesale support
        processes are scalable to such quantities as demand increases. By "reasonably foreseeable," we
        mean those quantities that competitors collectively would ultimately demand in a competitive
        market where the level of competition was not constrained by any limitations of the BOC's
        interfaces or processes, or by other factors the BOC may influence. ⁴⁰

Page 30 .       

             In determining whether a BOC's wholesale support processes can provide the necessary
        functionality, the Department will view internal testing by a BOC as substantially less persuasive
        evidence of operability than testing with other carriers, and testing in either manner as less
        persuasive evidence than commercial operation. In general, the Department will consider testing
        evidence alone only if the more compelling evidence that can be derived from commercial
        operation is not available. Where such commercial operation is limited (e.g., below reasonably
        foreseeable levels, limited to certain geographic regions, or limited to certain functions) or not
        expected, the Department will carefully examine the circumstances to determine whether factors
        under the BOC's control are responsible for the absence of significant commercial use. This
        approach is based on the findings and comments of states, industry organizations, experts,
        CLECs, and BOCs, alike, all of which reflect specific experiences in the local
        telecommunications industry to date, in addition to general experience in this and other
        industries.
                     c.  SBC's Provision of Resale Services and Access to Unbundled
                          Elements Fails The Statutory Checklist Standard

             As Appendix A describes in detail, SBC has not demonstrated that its wholesale support
        processes are sufficient to make resale services and unbundled elements practicably available
        when requested by a competitor, as required by the checklist. Indeed, there is evidence in the
        record to suggest that SBC has thwarted CLEC attempts to test and commercially use the
        wholesale support processes SBC claims to provide, as discussed in Part IV. Most critically,
        however, the Department finds that SBC has failed to demonstrate even through internal testing

Page 31 .       

        the operation of its automated processes for making resale services and unbundled elements
        meaningfully available.

                2.  Interconnection: SBC Has Failed to Provide Requested Physical
                     Collocation

             "Interconnection in accordance with the requirements of sections 251(c)(2) and
        252(d)(1)" is part of the statutory competitive checklist in Section 271(c)(2)(B)(i). Section
        251(c)(6) of the 1996 Act imposes a specific duty to provide physical collocation unless the
        incumbent LEC demonstrates to the state commission that this is not practical due to technical
        limitations or lack of space on the LEC's premises. Applying this requirement, the Commission
        has ruled that a requesting carrier may choose any technically feasible means of obtaining
        interconnection, including physical collocation. ⁴¹ 47 C.F.R. 51.321(b)(1), 51.323 (1997).
        Accordingly, the failure to provide physical collocation upon request constitutes a failure to
        provide interconnection as required by the checklist, unless the BOC has demonstrated that one
        of the exemptions applies. The availability of physical collocation is critical to a competing local
        providers' ability to interconnect and to serve local exchange customers through the use of
        unbundled elements.
             Although SBC has provisions in its SGAT and some of its agreements relating to
        collocation, and claims to generally offer physical collocation as an interconnection alternative, it

Page 32      

        has failed to provide adequately the physical collocation requested by Brooks, among others. ⁴² In
        June, 1996, Brooks Fiber requested collocation in SWBT's central offices in Tulsa and
        Oklahoma, but, as of the date of SBC's application, Brooks still had not received collocation.
        Brooks OCC Comments at 3-4. SWBT's failure to provide physical collocation, which would
        enable CLECs to use unbundled elements and to test the OSS interfaces which support these
        elements, appears to be a region-wide problem.
             SBC's Opposition to ALTS' Motion to Dismiss asserts, through the affidavit of William
        Deere, that Brooks' current virtual collocation arrangements provide access to all functions
        requested in the interconnection agreement, including the ability to use unbundled loops.
        Affidavit of William Deere ("Deere Aff."), 2, attached to SBC Opposition to ALTS' Motion.

Page 33      

        SBC, however, does not effectively respond to Brooks' position in its OCC Comments that its
        current virtual collocation arrangements do not give Brooks the same technically and
        economically feasible access to unbundled elements that its negotiated physical collocation
        arrangements would provide. Brooks explains that, "[w]ith tariffed virtual collocation, the point
        of interconnection normally is outside of the central office, deployment of remote switching
        equipment is not permitted, and the interconnector designates but does not own the transmission
        equipment . . . This type of virtual collocation is not usable by Brooks for unbundled loop access
        due to both network and economic feasibility considerations." Brooks OCC Comments at 3 n.6.
        In its comments in this docket, Brooks continues to assert that its current tariffed virtual
        collocation arrangements do not technically or economically support the use of unbundled loops
        and, as a result, they have had to use less effective alternatives than the use of unbundled loops.
        Opposition of Brooks Fiber Properties, Inc., to Application of SBC Communications Inc., CC
        Docket No. 97-121 ("Brooks FCC Comments"), at 10 n. 6 (May 1, 1997).
             In any event, regardless of the adequacy of virtual collocation, CLECs are entitled to
        physical collocation under the 1996 Act, and SBC must provide it when requested. The fact that
        potential facilities based competitors other than Brooks have requested physical collocation in
        Oklahoma and have yet to receive it from SWBT strongly suggests that the problems experienced
        are attributable to SBC rather than to any particular competitor. Cox Communications made its
        initial request for physical collocation in October of 1996 and it does not expect even to be able

Page 34 .       

        to begin placing equipment until July of 1997. ⁴³ Dobson Wireless ("Dobson"), in its Comments
        in Support of Motion to Dismiss, filed in this docket on April 28, also cites the difficulty of
        obtaining physical collocation from SWBT as an impediment to timely entry in Oklahoma.
        Dobson, despite having initially requested interconnection negotiations on December 13, 1996, is
        still in "negotiations" with SWBT over terms for physical collocation in SWBT's tandem central
        office in Oklahoma City. See Comments of Dobson Wireless, Inc., In Support of Motion to
        Dismiss, CC Docket No. 97-121 ("Dobson ALTS' Motion Comments") at 1-3 (Apr. 28, 1997).
        Thus, on the present record, it cannot be said that SWBT is either providing physical collocation
        or making it generally available in Oklahoma. ⁴⁴
                3.  Interim Number Portability: Experience Has Shown that SBC Is Not
                     Yet Able to Provide this Checklist Item Adequately and at
                     Parity with Its Own Retail Services

             SBC has failed to provide adequate interim number portability as required by the
        competitive checklist. Section 271(c)(2)(B)(xi) requires that the BOC's access and

Page 35      

        interconnection agreements or statement of terms include "[u]ntil the date by which the
        Commission issues regulations pursuant to section 251 to require number portability, interim
        telecommunications number portability through remote call forwarding, direct inward dialing
        trunks, or other comparable arrangements, with as little impairment of functioning, quality,
        reliability and convenience as possible. After that date, full compliance with such regulations."
         Lack of number portability or inferior quality of number portability when switching from the
        BOC to a competitor would constitute a major disincentive for customers to change their local
        exchange provider. Thus, SBC's failure to provide adequate, non-discriminatory number
        portability constitutes a significant barrier to the development of local competition in Oklahoma.
             SBC has provisions in its SGAT and a number of its agreements with competitors
        purporting to provide interim number portability. This is, in fact, one of the few provisions of
        SBC's agreements that any competitor has had the opportunity to use in market conditions in
        Oklahoma, and the experience is not encouraging. Brooks, the only operational local competitor
        in Oklahoma, has sought to port some numbers from SWBT, but Brooks' experience in
        Oklahoma refutes SBC's assertion that it is providing interim number portability on a
        nondiscriminatory basis in accordance with the requirements of the 1996 Act.
             At the time of SBC's application with the Commission, Brooks' customers had
        experienced delays of up to several hours between the disconnection (for billing purposes) and
        the reconnection of the customer's line with remote call forwarding. See Brooks Response to
        AT&T Request for Information, OCC Cause No. PUD 97-64, at 2 (Apr. 9, 1997). Moreover,

Page 36 .       

        SBC has not clearly demonstrated the ability to provision interim number portability ("INP") in a
        "non-discriminatory" manner such that a competitor using INP would be able to provide the same
        level of service to its customers that SWBT provides its own retail customers. Failures of this
        sort can be very disruptive to users, especially business customers, and may discourage them
        from switching providers. SWBT has asserted, and Brooks acknowledges, that some recent INP
        conversions have been implemented without any major service disruptions, but there continue to
        be implementation problems for many Brooks customers. See Brooks FCC Comments at 23-24.
        Even if SBC were able to improve its provisioning of INP to satisfactory levels given Brooks'
        current level of demand, the information before the Commission would not yet justify the
        conclusion that SWBT has the processes or resources in place to handle a commercial quantity of
        INP orders in an efficient manner, once Brooks or others actually have access to unbundled
        elements and their demand for INP becomes significantly greater.
        IV.  SBC Has Failed to Meet the Public Interest Standard as its Local Markets
             in Oklahoma are Not Open to Competition

             The public interest in opening local telecommunications markets to competition also
        requires that the Commission deny SBC's interLATA entry application. SBC does not presently
        face any substantial local competition in Oklahoma, despite the potential for such competition
        and the expressed desire of numerous providers, including some with their own facilities, to enter
        the local markets. The evidence discussed in Part III (and in Appendix A) indicates that SBC's
        failure to provide adequate facilities, services and capabilities for local competition is in large

Page 37 .       

        part responsible for the absence of substantial competitive entry. If SBC were to be permitted
        interLATA entry at this time, its incentives to cooperate in removing the remaining obstacles to
        entry would be sharply diminished, thereby undermining the objectives of the 1996 Act. Finally,
        without observing commercial use or testing of SBC's wholesale support processes to ensure
        their adequacy and ability to meet specified performance measures, the Department cannot
        conclude that regulation can safeguard against any future abuse or neglect by SBC, i.e., to
        prevent it from taking advantage of its dominant position in the market. Accordingly, as the
        local market in Oklahoma has not been irreversibly opened to competition, it would not be in the
        public interest to grant SBC's application for interLATA authority.
             A.The Public Interest Requirement and the Department of Justice's
                Competitive Assessment

              Congress supplemented the threshold requirements of Section 271, discussed in Parts II
        and III above, with a further requirement of pragmatic, real world assessments of the competitive
        circumstances by the Department of Justice and the Commission. Section 271 contemplates a
        substantial competitive analysis by the Department, "using any standard the Attorney General
        considers appropriate," 47 U.S.C. 271(d)(2)(A)(1997). The Commission, in turn, must find
        before approving an application that "the requested authorization is consistent with the public
        interest, convenience, and necessity," 47 U.S.C. 271(d)(3)(C)(1997), and, in so doing, must
        "give substantial weight to the Attorney General's evaluation." 47 U.S.C. 271(d)(2)(A)(1997).
        The Commission's "public interest" inquiry and the Department's evaluation thus serve to

Page 38      

        complement the other statutory minimum requirements, but are not limited by them. ⁴⁵ As we
        explain below, the requirement of a DOJ evaluation under "any standard" and a "public interest"
        finding by the Commission both reflect a Congressional judgment that Section 271 applications
        should be granted only if the BOC's entry at the time it is sought is consistent with Congress'
        goal of opening local telecommunications markets to competition.
             In vesting the Department and the Commission with additional discretionary authority,
        Congress addressed the significant concern that the statutory entry tracks and competitive
        checklist could prove inadequate to open fully the local telephone markets. Although some had
        suggested that Congress adopt additional fixed criteria -- which could have needlessly blocked
        procompetitive BOC entry -- to accomplish this objective, Congress instead chose to rely on the
        Commission's and the Department's expertise and discretion. To underscore this decision,

Page 39      

        Congress made satisfaction of the "public interest" criterion a minimum statutory precondition
        for relief under Section 271. ⁴⁶ Consequently, it is the Department's responsibility to provide a
        practical evaluation of the degree to which the local telephone markets in a particular state have
        been opened to competition, ⁴⁷ and it is the Commission's responsibility to give that evaluation
        substantial weight in applying the statutory public interest standard.
             As the Supreme Court has made clear, the use of the words public interest' in a
        regulatory statute is not a broad license to promote the general public welfare, but "the words
        take meaning from the purposes of the regulatory legislation." NAACP v. Fed. Power Comm'n,
        425 U.S. 662, 669 (1976). The term "public interest" in Section 271(d)(3) of the 1996 Act must
        derive its "content and meaning" from "the purposes" for which it was "adopted." Id. The
        "public interest" standard under the Communications Act is well understood as giving the
        Commission the authority to consider a broad range of factors, ⁴⁸ and the courts have repeatedly

Page 40      

        recognized that competition is an important aspect of that standard under federal
        telecommunications law. ⁴⁹ The 1996 Act reinforces the central importance of competitive
        analysis, for its core purpose, as explicitly stated in the House Conference Report, is "opening all
        telecommunications markets to competition." ⁵⁰ Highlighting its focus on promoting competition
        in telecommunications, Congress as well as the President envisioned a substantial role for the

Page 41      

        Department's expert evaluations, based on the competitive consequences of granting or denying
        a BOC's application. ⁵¹
             In performing its competitive analysis, the Department seeks to determine whether the
        BOC has demonstrated that the local market has been irreversibly opened to competition. To
        satisfy this standard, a BOC must establish that the local markets in the relevant state are fully
        and irreversibly open to the various types of competition contemplated by the 1996 Act -- the

Page 42 . .       

        construction of new networks, the use of unbundled elements of the BOC's network, and resale
        of the BOC's services. If this standard is satisfied, local entry will be constrained only by
        technological limits and the inherent capabilities and resources of the potential competitors, and
        not by artificial barriers. In applying this standard, the Department will look first to the extent to
        which competitors are entering the market. The presence of commercial competition, at a
        nontrivial level, both (1) suggests that the market is open; and (2) provides an opportunity to
        benchmark the BOC's performance so that regulation will be more effective. See Schwartz Aff.
         20, 170-178. If such commercial entry has not occurred, the Department will then consider
        whether the lack of entry reflects the continued existence of significant barriers to competition, or
        results from the independent business decisions of competitors not to enter the market.
             B.   Issues that Should be Considered in Determining whether Markets Are Open
                1.  Each of the Three Entry Paths Created by Congress
                     Must be Available to Competitors

             As the Commission has recognized, the 1996 Act is designed to facilitate entry into local
        exchange and exchange access markets -- along the entry paths of facilities-based services, the
        use of unbundled elements, and resale services -- by mandating that the most significant
        economic, as well as legal, impediments to efficient entry into the monopolized local market be
        removed. ⁵² Since the three entry paths serve distinct and complementary purposes, local markets

Page 43 . .       

        should not be considered to be practicably open to competition unless each of these paths is fully
        available to local entrants.
                2.  The Existence or Lack of Actual Competition
                     a.  Significant Competitive Entry Suggests that the Market Is Open

             In evaluating whether the necessary market-opening steps have been accomplished, the
        Department will look, first and foremost, to the nature and extent of actual local competition. If
        actual, broad-based entry through each of the entry paths contemplated by Congress is occurring
        in a state, this will provide invaluable evidence supporting a strong presumption that the BOC's
        markets have been opened. See Schwartz Aff. 24, 170-182. The lack of competitive entry
        into local markets, however, suggests that local markets are not yet fully open, and it will be
        necessary to ask why entry is not occurring. If practical opportunities are available for resale, the
        use of unbundled elements, and full facilities-based competition, the decisions of competitors not
        to adopt particular strategies in a state for certain areas or groups of customers should not
        preclude long distance entry by a BOC in that state, provided that all of the minimum

Page 44      

        requirements of Section 271 have been satisfied. ⁵³ But if the BOC's failure to provide what is
        needed, or other artificial and significant barriers to entry, are wholly or partly responsible for the
        lack of entry, the Department would view a BOC's interLATA entry as contrary to the public
        interest.
             Actual evidence of competition is much more persuasive and informative than theoretical
        claims that markets are open to entry, for there have been erroneous predictions of the imminence
        of local competition ever since the AT&T divestiture. Important legal issues affecting how
        competition will develop remain unsettled, while local exchange and switched access
        competition today remains in a nascent stage. On a nationwide basis, most customers still lack
        any alternative to the incumbent LEC for local exchange or switched access services. Most
        potential new local entrants are still in the process of preparing to compete on a significant scale,
        rather than actually doing so, and many of the arbitrated agreements under Section 252 of the
        1996 Act have not yet been implemented. This does not mean that it is necessary for BOC
        interLATA entry to wait until local competition has become fully effective. ⁵⁴ As Dr. Schwartz

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        explains in his affidavit, the economic balance of benefits and harms from BOC interLATA entry
        strongly favors withholding such entry until the BOC's local markets are "irreversibly