To ensure full and expeditious enforcement of the provisions of the Communications Act of 1934 that seek to bring about competition in local telecommunications markets, and for other purposes.

August 3, 2001

Mr. HOLLINGS (for himself, Mr. INOUYE, and Mr. STEVENS) introduced the following bill; which was read twice and referred to the Committee on Commerce, Science, and Transportation

To ensure full and expeditious enforcement of the provisions of the Communications Act of 1934 that seek to bring about competition in local telecommunications markets, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Telecommunications Fair Competition Enforcement Act of 2001'.

SEC. 2. FINDINGS.

The Congress finds:

(1) The Telecommunications Act of 1996 put in place the proper framework to achieve competition in local telecommunications markets.

(2) The Telecommunications Act of 1996 recognized that local exchange facilities are essential facilities and required that all incumbent local exchange carriers open their markets to competition by interconnecting with and providing network access to new entrants, a process to be overseen by Federal and State regulators.

(3) To increase the incentives of the Bell operating companies to open their local networks to competition, the Telecommunications Act of 1996 allows the Bell operating companies to provide interLATA voice and data services in their service region only after opening their local networks to competition.

(4) While some progress has been made in opening local telecommunications markets, the Federal Communications Commission has determined that, 6 years after passage of the Telecommunications Act of 1996, the Bell operating companies have met the market opening requirements of that Act in only 5 States.

(5) It is apparent that the incumbent local exchange carriers do not have adequate incentives to cooperate in this process and that regulators have not exercised their enforcement authority to require compliance.

(6) By improving mandatory penalties on Bell operating companies and their affiliates that have not opened their network to competition, there will be greater assurance that local telecommunications markets will be opened more expeditiously and, as a result, American consumers will obtain the full benefits of competition.

(7) Competitive carriers continue to experience great difficulty in gaining access to the Bell network, and, 5 years after enactment of the Telecommunications Act of 1996, Bell operating companies continue to control over 92 percent of all access lines nationwide.

SEC. 3. PURPOSES.

The purposes of this Act are--

(1) to improve and strengthen the enforcement of the Telecommunications Act of 1996, in order to ensure that local telecommunications markets are opened more rapidly to full, robust, and sustainable competition; and

(2) to provide an alternative dispute resolution process for expeditious resolution of disputes concerning interconnection agreements.

SEC. 4. ENFORCEMENT OF COMPETITION.

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

`PART IV--ENFORCEMENT

`SEC. 291. SHARED JURISDICTION OVER CERTAIN DISPUTES.

`(a) Violations of Sections 251, 252, 271, and 272- A complaint under section 208 alleging that a specific act or practice or failure to act, of a Bell operating company or its affiliate, constitutes a violation of section 251, 252, 271, or 272 may be filed at the Commission or at a State commission.

`(b) ENFORCEMENT OF INTERCONNECTION AGREEMENTS- An action to enforce compliance by a Bell operating company or its affiliate with an interconnection agreement entered into under section 252 may be initiated at the Commission or at a State Commission.

`(c) INITIATING PARTY- A complaint described in subsection (a) or an enforcement action described in subsection (b) may be brought by a telecommunications carrier or by the Commission or a State commission on its own motion.

`SEC. 292. EXPEDITED CONSIDERATION OF INTERCONNECTION, INTERLATA, AND SEPARATE AFFILIATE COMPLAINTS AND ENFORCEMENT ACTIONS.

`(a) IN GENERAL- The Commission shall make a final determination with respect to any complaint described in section 291(a) or an enforcement action described in section 291(b) within 90 days after the date on which the complaint, or the filing initiating the action, is received by the Commission.

`(b) Interim Relief-

`(1) VIOLATIONS OF ACT- Within 30 days after a complaint described in section 291(a) has been filed with the Commission, the Commission shall issue an order to the Bell operating company or its affiliate named in the complaint directing it to cease the act or practice that constitutes the alleged violation, or initiate an act or practice to correct the alleged violation, pending a final determination by the Commission if--

`(A) the complaint contains a prima facie showing that the alleged violation occurred or is occurring;

`(B) the complaint describes with specificity the act or practice, or failure to act, that constitutes the alleged violation; and

`(C) it appears from specific facts shown by the complaint or an accompanying affidavit that substantial injury, loss, or damage will result to the complainant before the 90-day period in subsection (a) expires if the order is not issued.

`(2) INTERCONNECTION AGREEMENTS- Within 30 days after an enforcement action described in section 291(b) has been initiated at the Commission by a telecommunications carrier, the Commission shall issue an order to the Bell operating company or its affiliate named in the action directing it to cease the act or practice that constitutes the alleged noncompliance with the interconnection agreement, or initiate an act or practice to correct the alleged noncompliance, pending a final determination by the Commission if--

`(A) the filing initiating the action contains a prima facie showing that the alleged noncompliance occurred or is occurring;

`(B) the filing describes with specificity the act or practice, or failure to act, that constitutes the alleged noncompliance; and

`(C) it appears from specific facts shown by the filing or an accompanying affidavit that substantial injury, loss, or damage will result to the telecommunications carrier before the 90-day period in subsection (a) expires if the order is not issued.

`(c) BURDEN OF PROOF- In any proceeding under this part with respect to a complaint described in section 291(a), or an enforcement action described in section 291(b), by a telecommunications carrier against a Bell operating company or its affiliate, and upon a prima facie showing by a carrier that there are reasonable grounds to believe that there is a violation or noncompliance, the burden of proof shall be on such Bell operating company or its affiliate to demonstrate its compliance with the section allegedly violated, or with the terms of such agreement, as the case may be.

`SEC. 293. ALTERNATIVE DISPUTE RESOLUTION OF INTERCONNECTION COMPLAINTS.

`(a) INTERCONNECTION AGREEMENTS- A party to an interconnection agreement entered into under section 252 may submit a dispute under the agreement to the alternative dispute resolution process established by subsection (b). An action brought under this section may be brought in lieu of an action described in section 291(b) at the Commission or at a State commission.

`(b) Alternative Dispute Resolution Process-

`(1) COMMISSION TO PRESCRIBE PROCESS- Within 180 days after the date of enactment of the Telecommunications Fair Competition Enforcement Act of 2001, the Commission shall, after notice and opportunity for public comment, issue a final rule implementing an alternative dispute resolution process for the resolution of disputes under interconnection agreements entered into under section 252. The process shall be available to any party to such an agreement, including agreements entered into prior to the date of enactment of that Act, unless such prior agreement specifically precludes the use of alternative dispute resolution.

`(2) PROCESS REQUIREMENTS- In carrying out paragraph (1), the Commission shall prescribe a process that--

`(A) provides for binding private commercial arbitration of disputes in an open, nondiscriminatory, and unbiased forum;

`(B) ensures that a dispute submitted to the process can be resolved within 45 days after the date on which the dispute is filed; and

`(C) requires any decision reached under the process to be in writing, available to the public, and posted on the Internet.

`(3) REQUESTS FOR INFORMATION- Any person or panel conducting an arbitration under this subsection may require any party to the dispute to provide such information as may be necessary to enable that person or panel to reach a decision with respect to the dispute. If the party that receives such a request for information fails to comply with such a request for information within 7 business days after the date on which the request was made, then, unless that party shows that the failure to comply was due to extenuating circumstances, the person or panel conducting the arbitration shall render a decision or award in favor of the other party to the arbitration within 14 business days after the date on which the request was made. The decision or award in favor of a party shall not apply if the party in whose favor a decision or award would be rendered under the preceding sentence is not in compliance

with a request for information from the person or panel conducting the arbitration.

`(4) REMEDIES AND AUTHORITY OF ARBITRATOR- Any person or panel conducting an arbitration under this subsection may grant to the prevailing party any relief available in law or equity, including remedies available under this Act, injunctive relief, specific performance, monetary awards, and direct, consequential, and compensatory damages.

`(5) ARBITRATION AWARD AND ENFORCEMENT- A final decision or award made by a person or panel conducting an arbitration under this subsection shall be binding upon the parties and is not subject to appeal by the parties or review by the Commission, a State commission, or any Federal or State court. A decision or award under the process may be enforced in any district court of the United States having jurisdiction under sections 9 through 13 of title 9, United States Code.

`SEC. 294. ENFORCEMENT OF PERFORMANCE STANDARDS.

`(a) COMMISSION TO PRESCRIBE PERFORMANCE STANDARDS FOR COMPLIANCE WITH INTERCONNECTION AGREEMENTS- Not later than 180 days after the date of enactment of the Telecommunications Fair Competition Enforcement Act of 2001 the Commission shall, after notice and opportunity for public comment, issue final rules for performance standards, data validation procedures, and audit requirements to ensure prompt and verifiable implementation of interconnection agreements entered into under section 252 and for the purposes of sections 251, 252, 271, and 272. At a minimum, the rules shall include the most rigorous performance standards, data validation procedures, and audit requirements for such agreements adopted by the Commission or any State commission before the date of enactment of the Telecommunications Fair Competition Enforcement Act of 2001, as well as any new performance standards, data validation procedures, and audit requirements needed to ensure full compliance with the requirements of this Act for the opening of local telecommunications markets to competition. In establishing performance standards, data validation procedures, and audit requirements under this section, the Commission shall ensure that such standards, procedures, and requirements are quantifiable and sufficient to determine ongoing compliance by incumbent local exchange carriers with the requirements of their interconnection agreements, including the provision of operating support systems, special access, and retail and wholesale customer service standards, and for the purposes of enforcing sections 251, 252, 271, and 272.

`(b) SPECIFIC REQUIREMENT FOR PROVISION OF LOCAL LOOPS- A Bell operating company or its affiliate which has not been granted an exemption, suspension, or modification under section 251(f) of the requirement to provide access to local loops (including subloop elements to the extent required under section 251(d)(2)) as an unbundled network element under section 251(c)(3) shall provide any such local loop to a requesting telecommunications carrier with which such Bell operating company or affiliate has an interconnection agreement entered into under section 252 within 5 business days after receiving a request for a specific local loop.

`(c) ENFORCEMENT OF PERFORMANCE METRICS- Any violation of this section, or the rules adopted hereunder, shall be a violation of section 251.

`SEC. 295. FORFEITURES; DAMAGES; ATTORNEYS FEES.

`(a) IN GENERAL- The forfeitures provided in this section are in addition to any other requirements, forfeitures, and penalties that may be imposed under any other provision of this Act, any other law, or by a State commission or court.

`(b) Forfeitures for Violation of Sections 251, 252, 271, or 272-

`(1) IN GENERAL- The Commission shall impose a forfeiture of $10,000,000 for each violation by a Bell operating company or any affiliate of such company of section 251, 252, 271, or 272, and a forfeiture of $2,000,000 for each day on which the violation continues.

`(2) FORFEITURE INCREASED THREEFOLD FOR REPEAT VIOLATIONS- The forfeiture under paragraph (1) shall be increased threefold for a repeated violation of any such section by a Bell operating company or its affiliate.

`(c) Compensatory and Punitive Damages; Costs and Attorney's Fees-

`(1) IN GENERAL- In any civil action brought by a telecommunications carrier against a Bell operating company or any affiliate of such company for damages for a violation of section 251, 252, 271, or 272, or violation of any interconnection agreement entered into under section 252 by a Bell operating company, the carrier may be awarded--

`(A) both compensatory and punitive damages; and

`(B) reasonable attorney fees and costs incurred in bringing the action.

`(2) TREBLE DAMAGES- In any such action, the telecommunications carrier may be awarded treble damages for a repeated violation of any such section or interconnection agreement by a Bell operating company or its affiliate.

`(d) FORFEITURE FOR FAILURE TO COMPLY WITH ORDER GRANTING INTERIM RELIEF- If the Bell operating company or its affiliate to which an order is issued under section 292(b) does not comply with the order within 7 days after the date on which the Commission releases the order, and the Commission makes a final determination that the Bell operating company or affiliate is in violation of section 251, 252, 271, or 272, or violation of an interconnection agreement entered into under section 252, then the Commission shall impose a forfeiture of $10,000,000 for each such violation, and a forfeiture of $2,000,000 for each day on which the violation continued after issuance of the order.

`(e) ATTORNEYS FEES- The Commission, a State commission, a court, or person conducting an arbitration under section 293 may award reasonable attorney fees and costs to the prevailing party in an action commenced by a complaint described in section 291(a), an enforcement action described in section 291(b), or an alternative dispute resolution proceeding under section 293, respectively.

`(f) FORFEITURES DIVIDED BETWEEN COMPLAINANTS AND COMMISSION- Any forfeiture imposed under

subsection (b) or (d) shall be paid to the Commission and divided equally between--

`(1) either--

`(A) the party whose complaint commenced the action that resulted in the determination by the Commission, if the Commission's determination was made in response to a complaint; or

`(B) the party against which the violation was committed, if the action that resulted in the determination by the Commission was commenced by the Commission or a State commission; and

`(2) the Commission for use by its Enforcement Bureau for the purpose of enforcing parts II and III of title II of the Communications Act of 1934 (47 U.S.C. 251 et seq. and 271 et seq.) and carrying out part IV of title II of that Act.

`(g) ADJUSTMENT FOR INFLATION- The amount of each forfeiture provided for under subsections (b) and (d) shall be increased for violations during each calendar year beginning with 2004 by a percentage amount equal to the percentage increase (if any) in the CPI for the preceding year over the CPI for 2001. For purposes of this subsection, the CPI for any year is the average for the 12 months of the year of the Consumer Price Index for all-urban consumers published by the Department of Labor.

`SEC. 296. SAVINGS CLAUSES.

`(a) OTHER REMEDIES UNDER ACT- The remedies in this part are in addition to any other requirements or penalties available under this Act or any other law.

`(b) ANTITRUST LAWS- Nothing in this part modifies, impairs, or supersedes the applicability of any antitrust law, except that a violation by an incumbent local exchange carrier of section 251 or 252 shall also be a violation of the Act of July 2, 1890, commonly known as the Sherman Anti-Trust Act (15 U.S.C. 1 et seq.).'.

SEC. 5. RATEPAYER PROTECTION.

The Commission shall not forbear from, or modify, any cost allocation rules, accounting safeguards, or other requirements in a manner that reduces its ability to enforce the provisions of this Act.

SEC. 6. STATUTE OF LIMITATIONS EXTENDED TO 3 YEARS.

Section 503(b)(6) of the Communications Act of 1934 (47 U.S.C. 503(b)(6)) is amended by striking `1 year' each place it appears and inserting `5 years'.

SEC. 7. STATE COMMISSIONS MAY USE FEDERAL FORFEITURES.

In any action brought before a State commission to enforce compliance with section 251, 252, 271, or 272 of the Communications Act of 1934 (47 U.S.C. 251, 252, 271, or 272) or an interconnection agreement entered into under section 252, the State commission may apply to the Federal Communications Commission requesting that the Commission impose a forfeiture under section 295 of that Act in addition to any relief granted by the State commission in that action. The Federal Communications Commission may impose a forfeiture under section 295 of that Act upon application by a State commission under this section if it determines that the State commission proceeding was conducted in accordance with the requirements of State law.

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.'.

END