SBC Alleged To Be Violating Act's Interconnection Provisions

Telecom Policy Report, April 28, 2004

Despite strong urging from the California Public Utilities Commission (CPUC), SBC Communications continues to protect the secrecy of the interconnection agreement it struck nearly three weeks ago with a competitor, Sage Telecom, for access to the Bell company's local telephone network. And while it remains unclear why SBC insists on not allowing its agreement with Sage to be perused by regulators, federal law nevertheless instructs that such agreements are, in fact, subject to review by state commissions.

Section 252 of the 1996 Telecom Act says that "any interconnection agreement adopted by negotiation or arbitration shall be submitted for approval to the State commission. A State commission to which an agreement is submitted shall approve or reject the agreement, with written findings as to any deficiencies."

"I can't tell you why they [SBC] believe they don't have to submit this [Sage interconnection agreement] to us," CPUC attorney Ellen LeVine told TPR. "For whatever reason, they don't seem to think they need to do that. Of course, that isn't the way we see it."

Well-placed sources inside SBC insist the company has not yet been "ordered" to submit the Sage agreement to the CPUC. "We keep hearing words like 'compelled' and 'ordered' being bandied about by the press," one SBC source noted. "No one has ordered or compelled us to do anything. We've been asked by the CPUC to submit the agreement to them for review, but we do not believe this agreement is subject to the provisions of the Telecom Act."

One SBC source who requested anonymity characterized the SBC-Sage pact as a "commercial agreement" that does not fall within the guidelines for interconnection as spelled out in Sections 251 and 252 of the Telecom Act. "There's a great deal of proprietary information in the agreement," the source said. "This is the kind of information we don't want to see fall into the hands of our competitors."

Even so, CPUC General Counsel Randolph Wu in an April 21 letter to SBC, reminded the Bell company that according to the Telecom Act, "interconnection agreements arrived at through negotiation must be filed with and approved by the state commission." In order for the CPUC to perform this statutory duty, the SBC-Sage interconnection agreement "must be formally filed with the Commission and open to review by any interested party," Wu told SBC.

He asked the Bell company to file the SBC/Sage Telecom agreement "in its entirety" with the CPUC for review no later than close of business April 23. As for SBC's concerns about so-called "proprietary information," Wu said that to the extent SBC or Sage Telecom believes that some provisions of their agreement contain sensitive information that should remain confidential, "SBC should identify those specific provisions and may initially file them under seal" subject to the CPUC's consideration.

Thumbing a somewhat hardened nose at the state regulator, SBC's General Attorney and Assistant General Counsel James Young answered the CPUC request with what amounted to a flat rejection. "Your understanding of the [SBC-Sage] agreement is incorrect," he said in SBC's April 23 response to the CPUC. "The agreement is a commercial arrangement that was not negotiated pursuant to Sections 251 and 252 of the [Telecom] Act and contains terms and conditions not subject to those provisions."

Observers familiar with the Sage-SBC matter say the agreement has assumed the trappings of a "sweetheart deal." The California Association of Competitive Telecommunications Companies (CALTEL) told the CPUC that SBC's refusal to reveal the terms of a secret deal is a clear violation of federal law. CALTEL this week sent a letter to the CPUC with an overview of "right-to-know" provisions contained in the Telecom Act, claiming that SBC's failure to disclose its agreement with Sage is nothing short of illegal.

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