SBC said it was confident that its Sec. 271 application for Ark. ...

SBC said it was confident that its Sec. 271 application for Ark. and Mo. would pass FCC scrutiny despite concerns expressed Mon. by Dept. of Justice (CD Sept 25 p5). SBC said in meantime it would work with Commission to “answer any questions federal regulators may have regarding our application.” DoJ said it couldn’t support application because “several important issues” remained unresolved, among them: (1) Prices SBC charges competitors for use of network elements in Mo. (2) Problems with maintenance and repair systems in both states. (3) Level of “postentry performance oversight and enforcement” in Ark. Legg Mason said it thought application had “good chance -- about 70%” of clearing FCC review. In research report issued Tues., Legg Mason analysts said DoJ’s concerns weren’t delivered with “much intensity.” DoJ “declined to endorse SBC’s bid but didn’t throw up a roadblock either,” it said. For example, Justice questioned whether unbundled network element (UNE) rates in Mo. reflected forward-looking costs, but also noted that SBC had reduced some of those rates on interim basis, Legg Mason analysts said. Legg- Mason added “a few caveats,” saying for example that it took only 2 commissioners to deny an application, since FCC has 4 rather than 5 members now. Application also could be affected by FCC annoyance with misstatements SBC has admitted it made in seeking approval of earlier Kan. and Okla. applications. Agency has been looking into that issue and is expected to fine SBC. Analyst Anna-Maria Kovacs, Commerce Capital Markets, said “DoJ’s recommendation leaves the FCC all the room it needs to decide either way, but the issues raised make passage less than a slam- dunk.” However, she said Justice used standard that market must be “fully and irreversibly open to competition, a standard that is somewhat tougher than the FCC standard, which seeks to ensure that competitors have the opportunity to compete.” Kovacs said it’s “somewhat difficult to handicap this joint application” given problems that came up in SBC’s earlier effort to gain approval for Mo. Agency was particularly concerned about quality of maintenance and repair systems offered to competitors and same issue could be problem this time around for both states, she said. Although these are small states, they set stage for when SBC returns soon with applications for Cal. and Ameritech states, she said. If FCC and states are comfortable with SBC’s ability to fix outstanding concerns, for example on maintenance and repair systems, SBC will get better “welcome” when it returns with applications for higher visibility states, Kovacs said.