DR 98-061
        Petition for Enforcement of Resale Agreement and to Permit
                      Assignment of Retail Contracts
         Order Permitting Assignment of Certain Retail Contracts 
                          O R D E R  N O. 23,040
                              October 7, 1998

         APPEARANCES: Downs Rachlin & Martin P.L.L.C. by Nancy
S. Malmquist, Esq. for CTC Communications Corporation; Victor C.
Del Vecchio, Esq. for Bell Atlantic; Office of the Consumer
Advocate by Mr. William Homeyer for residential ratepayers, E.
Barclay Jackson, Esq. for the Staff of the New Hampshire Public
     Utilities Commission.
               On January 26, 1998, the New Hampshire Public Utilities
     Commission (Commission) approved a Resale Service Agreement
     (Resale Agreement) between New England Telephone and Telegraph
     Company (Bell Atlantic) and CTC Communications Corporation (CTC)
     dated December 1, 1997.  On April 27, 1998, CTC filed a Petition 
     requesting that the Commission enforce the Resale Agreement
     (Petition) by ordering Bell Atlantic to permit assignment of
     customer accounts and term agreements without imposing contract
     termination charges.
               On May 14, 1998, noting the need to expeditiously
     resolve interconnection agreement disputes, the Commission issued
     an Order of Notice which set a final hearing date of June 8,
     1998.  Responding to a request for postponement from CTC, the
     Commission issued a Supplemental Order of Notice on June 8, 1998,
     rescheduling the hearing for July 13, 1998.  By Secretarial
     Letter dated June 18, 1998, the Commission requested that the
     parties file testimony in support of their respective positions
     on or before July 6, 1998, and rescheduled the hearing for July
     16, 1998.
               At the hearing on July 16, 1998, the Commission granted
     a motion for intervention filed by the Telecommunications
     Resellers Association (TRA).  TRA was not present at the hearing. 
     The Commission granted Bell Atlantic's Motion for Protective
     Treatment, which was filed on July 6,1998, pursuant to N.H.
     Admin. Rules Puc 204.06, for materials contained in the testimony
     of Bell Atlantic witness Kenneth Gordon.
               Members of the public speaking in favor of CTC's
     petition at the July 16th hearing included Richard Morgan,
     Communications Manager of Pike Industries; William Carr,
     representing Waterville and Booth Creek Ski Holding Companies and
     Eaton Resorts; Patricia Witthaus, Director of Information
     Services, Valley Regional Health Care; John Wills, Network
     Administrator for Monadnock Family Services Community Mental
     Health Center; John Adams, Director of Accounting for the Town of
     Hampton and representative of the Government and Finance Officers
     Association; and Michael Gilbar, Director of Administration
     Services for the Town of Hanover. 
               At the July 16th hearing, CTC and Bell Atlantic
     presented testimony and exhibits.  The parties reserved exhibit
     numbers 12 and 20 for record requests made by the Commission. 
     Staff and the OCA cross-examined witnesses but did not present
     testimony.  Subsequent to the hearing, in the process of filing
     Exhibits 12 and 20, CTC and Bell Atlantic commented further in
     letters dated July 21 and July 28.  By letter dated August 5,
     1998, CTC requested that the Commission strike Bell Atlantic's
     letter of July 28 from the record.  
               The Commission publicly deliberated the issues
     presented in this docket on August 17, 1998.  By letter dated
     September 17, 1998, CTC requested that the Commission's pending
     order insure that no impediment to CTC's resale of contracts be
     raised by Bell Atlantic.  By letter dated September 25, 1998,
     Bell Atlantic responded.    
          A.   CTC
               CTC, an authorized New Hampshire reseller, argues that
     Bell Atlantic violated the terms of the Resale Agreement by
     rejecting orders made by CTC at the request of end-users to
     assume the contract accounts of end-users for resale purposes. 
     According to CTC, Bell Atlantic unilaterally changed its policy
     of allowing end-users to assign their contract accounts to
     resellers without penalty.  As of January 1998, Bell Atlantic
     requires end-user retail customers to terminate the retail
     contract and pay termination charges before obtaining service via
     resale from CTC.  This, according to CTC, is contrary to the
     Resale Agreement and the Telecommunications Act of 1996 (TAct).   
               CTC argues that Section of Attachment A in
     the Resale Agreement grants CTC the right to assume an end-user 
     customer's account.  That section reads: 
          If the reseller assumes the account of an 
          existing Telephone Company end user at the 
          end user's existing premises, the order must 
          identify the end user's billing telephone 
          number and line(s) and indicate that the end 
          user's existing service (or any specified 
          modification to and/or cancellation of the existing 
          service) is to be transferred to the reseller.
          (1) Authorization to Assume an Account - A reseller placing
               an order under which it will assume the account of an
               existing Telephone Company end user customer, or the account
               of an existing end user customer of another reseller, must
               obtain appropriate authorization from that end user for the
               change of service provider.
     CTC claims Section authorizes the assumption of
     contracts by resellers, codifying Bell Atlantic's long-standing
     policy as confirmed in contract discussions between CTC and Bell
     Atlantic.  Assumption of the contract, according to CTC, would
     bind the reseller for the remaining duration of the contract at
     the retail rate the end-user was paying Bell Atlantic.  The
     retail rate could be subject to the wholesale discount only if
     the tariff associated with the contract included criteria
     permitting the contract to be reviewed and re-established as a
     recast contract.  According to CTC, Bell Atlantic has changed its
     contract assumption policy in order to maintain its control of
     customers and its position as the dominant carrier, contrary to
     the intent of the TACT.
               CTC also argues that Bell Atlantic changed the position
     it held in Re Petition Requesting that Incumbent LECs Provide
     Customers with a Fresh Look Opportunity, DE 96-420, regarding
     assumption of contracts without penalty.  CTC cites Bell
     Atlantic's brief in the Fresh Look docket, identifying two
     options for reselling Bell Atlantic services, one of which "is to
     allow a competitive provider to assume the special contract or
     tariff payment-plan agreement of a NYNEX retail end user, so long
     as the provider, through resale, assumes all terms and conditions
     of the agreement, including its length.  Accordingly, no early
     termination of the agreement arises and no penalty is paid."  Id. 
     Furthermore, CTC claims that during negotiation of the Resale
     Agreement Bell Atlantic representatives gave assurances that Bell
     Atlantic customer contracts could be assumed without penalty.  
                    CTC argues that because the end-user's service
     continues without change or interruption, the end-user would be
     unwilling to pay any termination charges.  The imposition of
     termination charges therefore represents an economic barrier to
     competition, the effect of which would be to insulate a portion
     of the business market from competition.
               CTC contends that Bell Atlantic is not entitled to a
     termination fee for the following reasons:  
     (1) Bell Atlantic's prices to resellers cover investment costs,
     even when the wholesale discount is applied.  Since the wholesale
     discount is not applied here, Bell Atlantic covers its investment
     costs and collects additional payment for costs which are
     avoided.  Termination charges therefore would be inappropriate.  
     (2)  CTC assumes the contract obligations for the entire term
     Bell Atlantic's end-user was obligated.  Therefore, since Bell
     Atlantic retains the entire benefit of its contract, termination
     charges would be inappropriate.  
     (3) Termination charges are intended to compensate for tangible
     losses, not intangibles.  Therefore, the "customer relationship"
     and/or the possibility that a customer may purchase other
     services outside the contract are not compensable.  The customer
     relationship, CTC argues, is not a property interest and,
     accordingly, termination charges would be inappropriate.  
     (4) Resale does not terminate a contract.  CTC asserts that the
     contract continues.  Because there is no breach of contractual
     obligations or loss of revenue, termination charges would be
          B.   Bell Atlantic
               According to Bell Atlantic, the issue raised in this
     docket is whether termination liability pertains to long-term
     contracts and payment-plan arrangements for telecommunications
     service in New Hampshire, an issue Bell Atlantic asserts was
     resolved by Order No. 22,798 in Re Petition Requesting that
     Incumbent LECs Provide Customers with a Fresh Look Opportunity
     (Fresh Look Order),dated December 8, 1998.  The Fresh Look Order
     included a termination liability formula balanced to permit Bell
     Atlantic to retain the reasonably anticipated benefit of its
     bargain while fostering competition.  Bell Atlantic argues that
     CTC's proposal disturbs the balance achieved by the Commission's
     order; CTC's proposal removes even the reduced, Fresh Look
     termination charges when a customer abandons the contract.  
               In opposition to CTC's interpretation of Section as mandating contract assignment without termination
     charges, Bell Atlantic points out that the section is completely
     silent on the issue of termination charges.  Furthermore, Bell
     Atlantic states that CTC must necessarily have known, as a result
     of representations made during negotiations and before beginning
     resale operations in New Hampshire, that Bell Atlantic would not
     waive end-user termination liabilities.
               Bell Atlantic further asserts that tariff language
     exists which specifically restricts transfer of service.  For
     example, Paragraph C of Tariff 4.2.8, Superseded Analog Centrex
     Services (effective May 15, 1998), states "Transfer of Service is
     not permitted;" Tariff 5.1.3, Intellipath Digital Centrex Service
     (effective January 18, 1996) prohibits transfer without Bell
     Atlantic's written permission.  Bell Atlantic pointed out that
     all contracts subject the end-user to future changes approved by
     the Commission.  Therefore, Bell Atlantic argues, the contracts
     CTC seeks to assume are not freely assignable.
               Bell Atlantic contends that further support for its
     position is found by the nature of the market that CTC seeks to
     enter.  Bell Atlantic asserts that the market for the services in
     question, Centrex, is competitive because PBX is a substantially
     sufficient alternative to Centrex.  Bell Atlantic concludes that
     it therefore has no ability to use market power to price Centrex
     abusively and that the contracts should not be available for
     unilateral assignment to a reseller.  
                    Moreover, Bell Atlantic claims that CTC's proposal
     damages competition.  Bell Atlantic argues that long-term
     contracts possess two benefits in addition to revenues:  the
     possibility of ancillary sales of features and services, and the
     increased probability of retaining the customer.  Bell Atlantic
     asserts that the loss of these benefits necessitates compensation
     via termination charges.  Losing these two benefits without
     compensation upsets the balance between contractual integrity and
     competition established by the Commission in the Fresh Look
     Order.  Moreover, to reduce the risk of loss of customer control
     posed by the imbalance thus created by regulatory interference,
     Bell Atlantic will hesitate to enter into lower-priced, long-term
     special contracts, depriving customers of this choice.  Hence, as
     interpreted by Bell Atlantic, CTC's proposal harms competition.
               Bell Atlantic also foresees that assignment of
     contracts without imposing termination charges will increase
     customer confusion and operational inefficiency.  According to
     Bell Atlantic, when customers receive a final bill and
     termination charges, they receive clear notification that their
     relationship with Bell Atlantic is severed.  Without that
     notification, customers will not understand that the relationship
     is severed and will try to report troubles, complaints, billing
     inquiries, and repair requests to Bell Atlantic, to which Bell
     Atlantic would be unable to respond.  Bell Atlantic reports that
     its actual experience in the resale environment supports this
               Prior to NYNEX's merger with Bell Atlantic, end users
     were allowed to assign contracts to resellers without terminating
     the end user's contract.  However, Bell Atlantic's witness
     reports that this practice created customer confusion because
     customers did not understand that NYNEX would no longer provide
     customer assistance or repair services.  NYNEX had to expend
     resources educating and redirecting customers.  Beginning in
     April 1998,  the merged Bell Atlantic/NYNEX company instituted a
     policy of terminating the end user contract and selling the
     service to the reseller for resale rather than allowing the
     reseller to assume the contract itself.  Bell Atlantic argues
     that this policy minimizes customer confusion and relieves the
     company of the expense of educating customers.
               In further support of its policy, Bell Atlantic
     indicates that terminating the contract means that Bell
     Atlantic's wholesale service channel (TISOC) is activated.  The
     TISOC is streamlined; it electronically processes the services
     provided to resellers and CLECs.  Bell Atlantic implies that
     without termination of the contract the TISOC would be
     unavailable to CTC. 
               Having considered the testimony, exhibits, and
     arguments in this case, we find the arguments advanced by CTC to
     be persuasive.   Our interpretation of the Resale Agreement
     further implements the complex restructuring of the
     telecommunications industry enacted by Congress as the TAct.  The
     TAct was passed to introduce competition into the local telephone
     market which until that time existed as a regulated monopoly,
     essentially guaranteeing Local Exchange Carriers (LECs) a
     profitable rate of return in exchange for ensuring universal
     telephone service.
               The TAct did not merely decree an open market but
     constructed a "comprehensive regulatory scheme designed to ease
     the transition to competitive markets and to facilitate entry of
     other telecommunication carriers into the local markets."  AT&T
     Communications of the Southern States v. Bell South
     Telecommunications, U.S. District Court (E.D.N.C.) (May 22,
     1998).  The regulatory scheme, 251 and 252 of the TAct,
     requires incumbent LECs (ILECs) to make interconnection
     agreements with other telecommunication carriers for access to
     the ILEC's infrastructure, either by purchasing network elements
     to create a service or by buying the finished service at a
     wholesale rate for resale to consumers.
               CTC chose the resale avenue for entering the local
     market.  CTC planned to assume the contractual rights of certain
     Bell Atlantic customers who have long-term, large volume service
     arrangements pursuant to Bell Atlantic's tariff or pursuant to
     special contracts.  Bell Atlantic, which once permitted such an
     assumption, objected, asserting that (1) denying the assumption
     is within its discretion by virtue of tariff provisions, (2) that
     assumption acts to its detriment, (3) the assumption is anti-competitive, upsetting the balance between competition and
     sanctity of contract created by the Commission in the Fresh Look
     Order, and (4) the assumption creates unnecessary inefficiency
     and customer confusion.  Accordingly, Bell Atlantic changed its
     policy.  It now terminates end user contracts that resellers
     submit for resale, imposes a termination fee, and provides the
     services to the reseller at wholesale prices.
               We find the language of the Resale Agreement
     controlling.  We read the Resale Agreement as clearly
     contemplating CTC's assumption of an existing end-user account
     for service as a reseller.  Bell Atlantic's prior and subsequent
     practice strengthens this view, as does Bell Atlantic's brief in
     the Fresh Look docket and its representations to CTC during
     negotiation of the Resale Agreement.  Bell Atlantic could have
     included different language in the Resale Agreement if it wanted
     to depart from this interpretation and change its policy.  In the
     absence of such language, we find that Bell Atlantic contracted
     to extend that policy to CTC so that CTC would be able to assume
     the account of an enduser, without penalty, and service the
     account via resale.  We will order Bell Atlantic to fulfill the
     intent of the contract, placing CTC in the same position it would
     have enjoyed had Bell Atlantic not changed its policy.    
               Under New Hampshire law, all service contracts are
     freely assignable unless they fall into one of the exceptions to
     that general rule.  See, e.g., Hampton v. Hampton Beach
     Improvement Company, 107 NH 89, 218 A2d. 442 (1996), citing 4
     Corbin Contracts, 865.  "A contract and the right of either
     party to the contract to its performance by the other party, may
     be assigned unless the assignment changes the obligator's
     position to his detriment."  6 CJS 29.  
               Bell Atlantic does not claim that the contracts at
     issue here fall into an exception to the general rule.  Bell
     Atlantic argues that the contracts are non-assignable by virtue
     of tariff provisions requiring its express assent to assignment. 
     We find this tariff provision argument inadequate.  At least one
     of the tariff provisions addressing assignability was filed
     within a compliance tariff on another matter, during the pendency
     of this docket disputing assignability.  It cannot be used to
     support Bell Atlantic's argument.  Other provisions pre-date the
     TAct and should not be used to thwart the goal of the TAct. 
     Moreover, we find that the contract clause incorporating all
     future tariff changes into the contract is appropriate for
     changes as to the rates and terms of telecommunication services
     but not for changes to assignability rights.  We therefore find
     that contracts signed prior to the issuance of this order are
     freely assignable.  However, this order puts resellers and end-users on notice that  contracts signed after the date of this
     order are subject to Bell Atlantic's tariff limitation on
               Without citing any authority for its claim, Bell
     Atlantic argued that it should collect a termination fee upon
     processing CTC orders which assume an end user's contract.  We do
     not accept Bell Atlantic's claim; it contradicts the fact that
     Bell Atlantic's customers are not terminating or cancelling their
     agreements with Bell Atlantic: they are assigning them to CTC.   
     Bell Atlantic argued that it should be compensated for loss of
     customer control, possible ancillary service sales, and stability
     of its rate base.  However, the value of customer control cannot
     be measured, no evidence was presented as to the value of
     possible ancillary sales.  As to a stable rate base, that appears
     to remain stable when assigned at the same retail rate;
     furthermore, a stable rate base would appear to be a perquisite
     provided to a monopoly, not the right of a competitive carrier. 
     Accordingly, we will not provide compensation for these items.  
               Nor will we impose a compensatory fee for an action
     Bell Atlantic itself chooses to make.  In the scenario proposed
     by Bell Atlantic, Bell Atlantic, not the end user, terminates the
     contract and then seeks compensation for its own action.
               In addressing the fact that assignment of these
     customer contracts does not result in their termination, we do
     not lose sight of the fact that the contracts are being assumed
     for resale of Bell Atlantic services.  A number of jurisdictions
     have considered whether an ILEC or state commission can exempt
     special contracts, often called Customer Service Arrangements
     (CSAs), from resale.  In FCC 97-418, CC Docket No. 97-208,
     Opinion and Order, In the Matter of the 271 Application of Bell
     South in South Carolina, (December 24, 1997), the FCC reiterated
     the 8th Circuit's holding that general restrictions on resale of
     CSAs are impermissible.  The Texas Public Utilities Commission
     denied Southwestern Bell's claim that only the services provided
     under CSAs must be available for resale, as opposed to the CSAs
     themselves.  In another case, Complaint of KMC
     Telecommunications, Inc. v. Southwestern Bell Telephone, Docket
     No. 17,759, March 19, 1998, the Texas Public Utilities Commission
     categorically stated, "[t]he law is that CSAs cannot be exempted
     from resale".  Differentiating resale from Fresh Look, the Texas
     Public Utilities Commission said that because the reseller agreed
     to Southwestern Bell's tariff provisions, including termination
     liability, the contracts were not voided or unilaterally changed.
               We find that, when it terminates the end user's
     contract upon receipt of CTC's order, Bell Atlantic in effect
     exempts these contracts from resale, even though the contracts
     are neither voided nor unilaterally changed.  We find this to be
     an unreasonable restriction on resale, in violation of Section
     251(c) of the TAct. See, AT&T Communications of the Southern
     States v. Bell South Telecommunications, No. 5:97-CV-405-BR, U.S.
     District Court, E.D. North Carolina, Western Division (May 22,
     1998), 1998 WL 300218, in which the District Court reasoned that
     an RBOC's exclusion of certain CSAs from resale is not a
     reasonable and nondiscriminatory limitation on resale, in
     violation of 251(c)(4)(B).  As we pointed out above, resale is
     one of the two methods which Congress devised to introduce
     competition into the local telephone market.  Our interpretation
     of the Resale Agreement is consistent both with the language of
     the agreement and our understanding of Congressional intent.  
                    Based upon the foregoing, it is hereby 
               ORDERED, that the Telecommunications Resellers
     Association shall be a full intervenor in this docket; and it is
               FURTHER ORDERED, that Bell Atlantic's Motion for
     Protective Treatment, filed July 6, 1998, is hereby GRANTED; and
     it is
               FURTHER ORDERED, that Bell Atlantic shall permit CTC
     and similarly situated resellers to assume end-user contracts
     executed prior to the issuance of this order, for the purposes of
     resale, treating CTC and such other similarly situated resellers
     in the same manner as other resellers, in conformance with the
     discussion above; and it is
               FURTHER ORDERED, that Bell Atlantic shall not impose a
     termination charge on an end-user or reseller in the above
                    By order of the Public Utilities Commission of New
     Hampshire this seventh day of October, 1998. 
       Douglas L. Patch    Bruce B. Ellsworth    Susan S. Geiger
           Chairman           Commissioner        Commissioner
     Attested by:
     Thomas B. Getz
     Executive Director and Secretary