S.1364

Excerpt from Telecommunications Fair Competition Enforcement Act of 2001 as introduced in the Senate on August 3, 2001:

SEC. 8. SEPARATION OF RETAIL AND WHOLESALE FUNCTIONS.

(a) IN GENERAL - Title II of the Communications Act of 1934 (47 U.S.C. 201 et seq.) is amended by adding at the end the following:

SEC. 277. FUNCTIONAL SEPARATION OF RETAIL SERVICES.

(a) IN GENERAL - A Bell operating company may only provide retail service:

(1) through a division that is legally separate from the part of the Bell operating company that provides wholesale services; and

(2) in a manner that is consistent with the Code of Conduct described in subsection (b).

(b) CODE OF CONDUCT- The Code of Conduct for the provision of retail service by a Bell operating company is as follows:

(1) A Bell operating company shall transfer to its retail division all relationships with retail customers, including customer interfaces and retail billing and all development, marketing, and pricing of retail services.

(2) A Bell operating company shall transfer to its retail division all accounts for retail services and all assets, systems, and personnel used by the Bell operating company to carry out the business functions described in paragraph (1).

(3) The retail division required by this section:

(A) shall be operated independently from the wholesale services and functions of the Bell operating company of which it is a division;

(B) shall maintain books, records, and accounts separate from those maintained by other departments, divisions, sections, affiliates, or units of the Bell operating company of which it is a division;

(C) shall have separate employees and office space from the wholesale services and functions of the Bell operating company of which it is a division;

(D) shall tie its management compensation only to the performance of the retail division;

(E) may not own any telecommunications facilities or equipment jointly with the Bell operating company of which it is a division;

(F) shall not engage in any joint marketing with the wholesale services department, division, section, affiliate, or unit of the Bell operating company of which it is a division;

(G) shall conduct all wholesale transactions with the Bell operating company of which it is a division on a fully compensatory, arms-length basis, in accordance with part 32 of the Commission's rules (part 32 of title 47, Code of Federal Regulations);

(H) shall offer retail telecommunications service solely at rates set by tariff; and

(I) shall also offer all of its retail telecommunications services to telecommunications carriers for wholesale purchase at the avoided cost discount as established pursuant to sections 251(c)(4) and 252(d)(3).

(4) A Bell operating company shall provide services, facilities, and network elements to any requesting carrier, including its retail division solely at rates, terms, and conditions set by tariff; shall offer physical and virtual collocation pursuant to tariffs; shall not provide any retail service except through its retail division; and shall not grant its retail division any preferential intellectual property rights. The Bell operating company shall conduct any business with unaffiliated persons in the same manner as it conducts business with its retail division, and shall not prefer, or discriminate in favor of, such retail division in the rates, terms, or conditions offered to the retail division, including--

(A) fulfilling any requests from unaffiliated persons for ordering, maintenance, and repair of unbundled network elements and services provided for resale, within a period no longer than that in which it fulfills such requests from its retail division;

(B) utilizing the same operating support systems for dealings with unaffiliated persons providing telecommunications service as it uses with its retail division;

(C) providing any customer or network information to unaffiliated persons providing retail services on the same terms and conditions as it provides such information to its retail division;

(D) fulfilling any requests from an unaffiliated person for exchange access within a period no longer than that in which it fulfills requests for exchange access from its retail division; and

(E) fulfilling any such requests in subparagraph (D) with service of a quality that meets or exceeds the quality of exchange access it provides to its retail division.

(c) Biennial Audit:

(1) GENERAL REQUIREMENT- A Bell operating company shall obtain and pay for a joint Federal/State audit every 2 years which shall be conducted by an independent auditor to determine whether such company has complied with this section and the regulations promulgated to implement this section.

(2) RESULTS SUBMITTED TO COMMISSION; STATE COMMISSIONS- The auditor described in paragraph (1) shall submit the results of the audit to the Commission and to the State commission of each State in which the company audited provides service, and the Commission shall make such results available for public inspection. Any party may submit comments on the final audit report.

(3) ACCESS TO DOCUMENTS - For purposes of conducting audits and reviews under this subsection:

(A) the independent auditor, the Commission, and the State commission shall have access to the financial books, records, and accounts of each Bell operating company and its retail division necessary to verify transactions conducted with that company that are relevant to the specific activities permitted under this section and that are necessary for the regulation of rates;

(B) the Commission and the State commission shall have access to the working papers and supporting materials of any auditor who performs an audit under this section; and

(C) the State commission shall implement appropriate procedures to ensure the protection of any proprietary information submitted to it under this section.

(d) Transition:

(1) A Bell operating company shall have one year from the date of enactment of the Telecommunications Fair Competition Enforcement Act of 2001 to comply with subsections (a) and (b).

(2) Until such time as the Bell operating company complies with the requirements of subsection (a), it shall file quarterly reports demonstrating how it is implementing compliance with the nondiscrimination requirements of subsection (b)(4).

(e) RATEPAYER PROTECTION - The Commission shall not relax any cost allocation rules, accounting safeguards, or other requirements in a manner that reduces its ability to enforce the provisions of this section.

(f) DEFINITIONS- In this section:

(1) BELL OPERATING COMPANY - Notwithstanding section 3(4)(C), the term Bell operating company' includes any affiliate of such company other than its retail division.

(2) RETAIL DEVISION- The term `retail division' means the division required by this section.

(3) RETAIL SERVICE- The term `retail service' means any telecommunications or information service offered to a person other than a common carrier or other provider of telecommunications.

(g) REPORT ON VIOLATIONS- Until December 31, 2010, the Commission shall report to Congress annually on the amount and nature of any violations of sections 251, 252, 271, and 272 by each Bell Operating Company.

(h) PRESERVATION OF EXISTING AUTHORITY - Nothing in this section shall be construed to limit the authority of the Commission under any other section of this Act to prescribe additional safeguards consistent with the public interest, convenience, and necessity.

SEC. 278. SEPARATE RETAIL AFFILIATE.

(a) REPEATED VIOLATIONS - If, beginning 2 years after enactment of the Telecommunications Fair Competition Enforcement Act of 2001, the Commission finds that a Bell operating company willfully or knowingly violated the requirements of sections 251, 252, 271, or 272 of this Act, the Commission may require the Bell Operating Company to implement structural separation under this section.

(b) IN GENERAL- If the Commission requires a Bell operating company to implement structural separation under this section, then that Bell operating company may provide retail services only through a separate affiliate. A Bell operating company and a separate affiliate established under this section shall not engage in any joint marketing of retail services, notwithstanding section 272(g).

(c) STRUCTURAL SEPARATION OF BUSINESS - A Bell operating company shall comply with subsection (b) by transferring the following business functions to its retail affiliate, at the higher of book value or market value:

(1) all relationships with retail customers, including customer interfaces and retail billing; and

(2) all development, marketing, and pricing of retail services.

(d) Structural Separation of Assets:

(1) A Bell operating company shall comply with subsection (b) by transferring the following assets to its retail affiliate at the higher of book or market value:

(A) all accounts for retail services, subject to the requirements of subsection (j); and

(B) all assets, systems, and personnel used by the Bell operating company to carry out the business functions described in subsection (c).

(2) The price, terms, and conditions of the transfer of assets required by paragraph (1) shall be made publicly available.

(e) SEPARATE SUBSIDIARY SAFEGUARDS - The separate affiliate required by this section:

(1) shall operate independently from the Bell operating company;

(2) shall maintain books, records, and accounts separate from those maintained by the Bell operating company of which it is an affiliate;

(3) shall have separate officers and directors from the Bell operating company of which it is an affiliate;

(4) shall have separate capital stock, the outstanding shares of which may not be held by the Bell operating company in any amount exceeding four times the amount of shares held by unaffiliated persons;

(5) shall have separate employees and separate employee benefit plans from the Bell operating company of which it is an affiliate;

(6) may not obtain credit under any arrangement that would permit a creditor, upon default, to have recourse to the assets of the Bell operating company;

(7) may not own any telecommunications facilities or equipment;

(8) shall conduct all transactions with the Bell operating company of which it is an affiliate on an arms' length basis, with any such transactions reduced to writing and available for public inspection;

(9) shall offer retail telecommunications service solely at rates set by tariff;

(10) shall offer all of its retail telecommunications services for wholesale purchase at the avoided cost discount as established pursuant to sections 251(c)(4) and 252(d)(3);

(11) shall have separate office space from the wholesale services and functions of the Bell operating company of which it is an affiliate;

(12) shall tie its management compensation only to the performance of the retail affiliate; and

(13) shall conduct all wholesale transactions with the Bell operating company of which it is an affiliate on a fully compensatory basis, in accordance with part 32 of the Commission's rules (part 32 of title 47, Code of Federal Regulations).

(f) NONDISCRIMINATION SAFEGUARDS - A Bell operating company:

(1) shall provide services, facilities and network elements to any requesting carrier, including its retail affiliate, solely at rates set by tariff;

(2) shall conduct any business with unaffiliated entities in the same manner as it conducts business with its retail affiliate, and shall not prefer, or discriminate in favor of, such retail affiliate in the rates, terms, or conditions offered to the retail affiliate, including--

(A) fulfilling any requests from an unaffiliated entity for exchange access service within a period no longer than that in which it fulfills requests for exchange access service from its retail affiliate;

(B) fulfilling any such requests with service of a quality that meets or exceeds the quality of exchange access services it provides to its retail affiliate;

(C) fulfilling any requests from an unaffiliated entity for ordering, maintenance and repair of unbundled network elements and services provided for resale, within a period no longer than that in which it fulfills such requests from its retail affiliate;

(D) utilizing the same operating support systems for dealings with unaffiliated entities providing telecommunications service as it uses with its retail affiliate; and

(E) providing any customer or network information to unaffiliated entities providing telecommunications services on the same terms and conditions as it provides such information to its retail affiliate;

(3) shall not offer physical and virtual collocation other than pursuant to generally available tariffs;

(4) shall not grant its retail affiliate any preferential intellectual property rights; and

(5) shall not provide any retail service for its own use, but shall procure such services from a carrier other than its retail affiliate.

(g) Biennial Audit:

(1) GENERAL REQUIREMENT- A Bell operating company shall obtain and pay for a joint Federal/State audit every 2 years conducted by an independent auditor to determine whether such company has complied with this section and the regulations promulgated under this section.

(2) RESULTS SUBMITTED TO COMMISSION; STATE COMMISSIONS- The auditor described in paragraph (1) shall submit the results of the audit to the Commission and to the State commission of each State in which the company audited provides service, which shall make such results available for public inspection. Any party may submit comments on the final audit report.

(3) ACCESS TO DOCUMENTS- For purposes of conducting audits and reviews under this subsection:

(A) the independent auditor, the Commission, and the State commission shall have access to the financial books, records, and accounts of each Bell operating company and of its affiliates necessary to verify transactions conducted with that company that are relevant to the specific activities permitted under this section and that are necessary for the regulation of rates;

(B) the Commission and the State commission shall have access to the working papers and supporting materials of any auditor who performs an audit under this section; and

(C) the State commission shall implement appropriate procedures to ensure the protection of any proprietary information submitted to it under this section.

(h) PRESERVATION OF EXISTING AUTHORITY- Nothing in this section shall be construed to limit the authority of the Commission under any other section of this Act to prescribe safeguards consistent with the public interest, convenience, and necessity.

(i) PRESUBSCRIPTION - Concurrent with the establishment of the separate retail affiliate required by this section, in any local calling area served by a Bell operating company, consumers shall have the opportunity to select their provider of telephone exchange service by means of a balloting process established by rule by the Commission.

(j) RATEPAYER PROTECTION - The Commission shall not relax any cost allocation rules, accounting safeguards, or other requirements in a manner that reduces its ability to enforce the provisions of this section.

(k) DEFINITIONS- In this section:

(1) BELL OPERATING COMPANY - Notwithstanding section 3(4)(C), the term Bell operating company' includes any affiliate of such company other than its retail affiliate.

(2) RETAIL AFFILIATE - The term 'retail affiliate' means the affiliate required by this section.

(3) RETAIL SERVICE - The term 'retail service' means any telecommunications or information service offered to a person other than a common carrier or other provider of telecommunications.'

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