7 FCC Red No. 2 Federal Communications Commission Record DA 91-1592 
Before the 
Federal Communications Commission 
Washington, D.C. 20554 
In the Matter of 
Commission Requirements for Cost 
Support Material To Be Filed with 
Open Network Architecture 
Access Tariffs 
ORDER 
Adopted: December 20, 1991; Released: December 23, 1991 
By the Deputy Chief (Policy), Common Carrier Bu­
reau: 
I. INTRODUCTION 
1. This Order considers several petitions for waiver of 
the TRP Order 1 filed by the Bell Operating Companies 
(BOCs).2 The TRP Order describes specific data formats 
for basic cost, demand, and rate information to be submit­
ted by BOCs filing tariffs that implement their Open 
Network Architecture (ONA) plans, including the direct 
costs associated with each Basic Service Element (BSE). 3 
To develop BSE direct costs, BOCs begin with the Switch­
ing Cost Information System (SCIS), developed and main­
tained by Bell Communications Research, Inc. (Bellcore). 
and other. similar computer models.4 These computer 
models apportion joint and common switching investment 
between individual BSEs. In their petitions for waiver the 
BOCs ask us to waive the requirement that the BOCs file 
the SCIS model and certain other data. The BOCs con­
tend that the SCIS model, containing switch vendor data, 
as well as inputs to the model supplied by the BOCs, and 
1 Commission Requirements for Cost Support Material To Be 
Filed with Open Network Architecture Access Tariffs, Order, 
DA 91-1168, released Sept. 19, 1991 (Com.Car.Bur.) (TRP Or­
der). 
2 The Bell Operating Companies are the operating companies 
of Ameritech Operating Companies (Ameritech), Bell Atlantic 
Telephone Companies (Bell Atlantic), BellSouth Telephone 
Companies (BellSouth), New York Telephone Company and 
New England Telephone and Telegraph Company (NYNEX), 
Pacific Bell and Nevada Bell (Pacific), Southwestern Bell Tele­
phone Company (Southwestern), and US West Communica­
tions. Inc. (US West). 
3 The Commission specified the rate elements and correspond­
ing cost support demonstration required to implement the 
BOCs' ONA plans in the Part 69 ONA Order. Amendments of 
Part 69 of the Commission's Rules Relating to the Creation of 
Access Charge Subelements for Open Network Architecture, CC 
Docket No. 89-79, Report and Order, Order on Reconsideration, 
and Supplemental Notice of Proposed Rulemaking, 6 FCC Red 
4524 (1991) (Part 69 ONA Order). 
4 US West does not rely on SCIS for the development of BSE 
direct costs, but instead uses its own equivalent model, the 
Service Cost Model (SCM). Ameritech, in addition to SCIS, 
relies on a similar cost model, Common Channel Switching 
521 
output reports generated by SCIS cost studies, all con­
stitute proprietary materials that should be withheld from 
public disclosure. 5 
2. After conducting an in camera review of SCIS and its 
application in the context of Ameritech's ONA rate devel­
opment for Illinois, and examining the summaries of 
methods used by state regulatory authorities to implement 
protected disclosure of SCIS, we have determined that the 
full SCIS model and supporting documentation, as well as 
associated BOC materials and vendor data, should not be 
available for public inspection. The model and supporting 
documentation would be exempt from mandatory disclo­
sure under the FOIA, both because the model and docu­
mentation contain competitively sensitive materials and 
because disclosure of these materials would compromise 
agency programs.6 Such considerations would not, of 
course, justify failing to provide these materials for inspec­
tion by Commission staff. We accordingly require each of 
the BOCs to submit its SCIS model for one study area 
and its complete SCIS inputs and outputs for all study 
areas, together with proprietary post-SCIS rate develop­
ment elements and procedures, for in camera review by 
the Commission. 7 As a result of our action in this Order, 
the full SCIS model and supporting documentation will 
not be available for public inspection. We will determine 
questions relating to restricted access by active participants 
in this Commission proceeding in a subsequent order. 
II. BACKGROUND 
3. The Part 69 ONA Order authorizes local exchange 
carriers to use a flexible, cost-based approach for pricing 
new, and newly unbundled, ONA services.8 Using this 
standard, the Commission requires price cap carriers to 
support new service offerings with cost support that: (1) 
satisfies the net revenue test; (2) identifies the direct costs 
of the new service; (3) includes an appropriate level of 
overhead costs; and (4) provides ratios of direct unit cost 
to unit investment, and direct unit cost to unit price. 
These materials, especially (2) and ( 4 ), enable the Com-
Cost Information System (CCSCIS), for the development of 
direct costs for the Remote Activation of Message Waiting -­
Expanded element. Hereafter, we use the term SCIS to refer to 
these and any other corresponding computer models used by 
BOCs to develop direct BSE costs for ONA implementation. 
5 Requests for waiver of the TRP Order requirements in sev­
eral respects not involving issues of SCIS disclosure were re­
solved in two earlier Orders. Commission Requirements for 
Cost Support Material To Be Filed with Open Network Ar­
chitecture Access Tariffs. Order, DA 91-1309, released Oct. 18, 
1991 (Com.Car.Bur.) (Ameritech TRP Waiver Order), Erratum, 
DA 91-1345, released Oct. 28, 1991; Commission Requirements 
for Cost Support Material To Be Filed with Open Network 
Architecture Access Tariffs, Order, DA 91-1346,' released Oct. 
29, 1991 (Com.Car.Bur.) (Non-SCIS TRP Waiver Order). The 
Ameritech TRP Waiver Order resolved Ameritech 's waiver re­
quests not involving SCIS issues. The Non-SCIS TRP Waiver 
Order resolved non-SCIS waiver requests of the other six BOCs. 
6 See Critical Mass Energy Project v. NRC, 830 F.2d 278 (D.C. 
Cir. 1987) (Critical Mass I). 
7 Ameritech has already complied with this requirement. 
8 Part 69 ONA Order, 6 FCC Red at 4531. 
DA 91-1592 Federal Communications Commission Record 7 FCC Red No. 2 
m1ss1on to evaluate the reasonableness of resulting rates.9 
For the initial ONA tariff filings the BOCs must furnish 
cost information supporting their basic service elements 
(BSEs) as new services. 10 
4. The Part 69 ONA Order implemented an approach to 
pricing new services that accords BOCs reasonable flexi­
bility to price efficiently and maintains the price cap 
incentives to innovate. At the same time, however, the 
Commission expressed concern that the local exchange 
carriers not set excessively high, predatorily low, or un­
reasonably discriminatory rates. 11 Accordingly, the TRP 
Order further specified the cost support material to be 
supplied in conjunction with ONA tariffs. The "cost sup­
port requirements included any engineering or cost ac­
counting studies, such as SCIS, used in the development 
of BSE rates. Cost support materials filed with tariffs are 
routinely available for public inspection.12 The TRP Order 
explained that to assess the reasonableness of the ONA 
rates, the Bureau and the intervenors need complete doc­
umentation of these studies. 13 
5. The BOCs use SCIS to attribute investment to in­
dividual services provided by switching equipment that 
uses shared equipment to provide many services. The 
SCIS model itself consists of algorithms developed and 
maintained by Bellcore, but its operation necessarily 
entails reliance on input data supplied by the BOCs and 
switch vendors. 14 One series of SCIS outputs constitute 
investment figures oriented to the eventual replacement 
cost of the switch, which are then further adjusted to 
generate the BOC's direct costs used as an element in the 
BSE rate development process. Bellcore licenses the SCIS 
model to BOCs and some non-BOC exchange carriers. 15 
6. The TRP Order provided that carriers unable to 
furnish the data required by that Order could file applica­
tions for waiver, demonstrating good cause for furnishing 
a different or lower level of cost support detail and in­
dicating how these deficiencies would be rectified. 16 On 
September 27, 1991, the BOCs filed petitions for waiver 
of several aspects of the TRP Order, including requests by 
In addition, the Order permits a carrier to include "risk 
premiums" the carrier believes it needs to supplement its rate of 
return for risky new services. Id. at 4531. 
10 Because BSEs unbundled from feature group arrangements 
will be offered as alternatives to those arrangements during a 
transition period, such BSEs constitute new offerings under 
price cap criteria. Id. at 4529, para. 25. In addition, BOCs must 
show revenue neutrality for the BSEs and BSAs unbundled 
from feature groups. Id. at 4532. 
11 Id. at 4531. 
12 47 C.F.R. §§ 0.451(a), 0.455(b)( 11). 
13 TRP Order at para. 3. 
14 Technical information provided Bellcore by switch vendors 
includes: long range product development plans and delivery 
schedules; detailed technical descriptions of switch architecture; 
hardware engineering rules and capacities; unit level prices of 
individual switching components; discount schedules; service 
descriptions (how the switch implements a particular service); 
and resource consumptions on a per feature or per function 
basis, as required. See NYNEX Transmittal 57, Description and 
Justification (D&J) Appendix B at 5. 15 See also Bellcore Memorandum, Affidavit of James Britt. 
Several of the BOCs attach to their waiver petitions a 'memo­
randum from Bellcore discussing the proprietary nature of 
SCIS. They also attach an affidavit from the Bellcore employee 
522 
all BOCs for waiver of the filing requirements for SCIS.'7 
Several BOCs attached illustrative nondisclosure agree­
ments, employed to enable review of SCIS in state 
ratemaking proceedings, to their petitions for waiver. On 
October 4, 1991, American Telephone and Telegraph 
Company (AT&T), Ericsson Network Systems Inc. 
(Ericsson), MCI Telecommunications Corporation (MCI), 
and Northern Telecom Inc. (Northern Telecom) filed 
comments regarding the BOCs' waiver petitions. 
7. After reviewing these pleadings, the Bureau on Octo­
ber 18, 1991, released an Order addressing issues raised in 
Ameritech's TRP waiver petition. The Ameritech TRP 
Waiver Order accorded Ameritech's SCIS materials provi­
sional protection against disclosure for purposes of con­
ducting an in camera review, but deferred any final 
decision concerning the SCIS filing requirement and 
waiver requests until after that in camera review. 
Ameritech filed on October 25, 1991, 18 a copy of its SCIS 
model for the state of Illinois as well as supporting docu­
ments.19 
8. The Tariff Division subsequently requested that each 
BOC file supplemental materials describing the extent 
and method of SCIS disclosure in state proceedings, and 
the BOCs filed this information on November 13, 1991. 
These supplemental materials show that BOCs have not 
provided what they consider proprietary SCIS information 
to state regulators absent a protective order or 
nondisclosure agreement.20 
9. State public utility commissions requested and re­
ceived a variety of SCIS information. Some state 
commissions had access to the SCIS model and full docu­
mentation. 21 In addition, in one state proceeding an 
apparently extensive, independent audit was conducted of 
the internal validity of Pacific's SCIS model; because the 
audit was conducted under a rigorous protective order 
and nondisclosure agreements, however, the regulatory 
authority's public report of the audit to the California 
state legislature was essentially devoid of descriptive 
responsible for maintaining SCIS. See Bell Atlantic, NYNEX, 
and Pacific Petitions. 
!6 TRP Order at para. 24. 
Ii Southwestern and US West filed contingency petitions for 
waiver. These carriers expressed an intent to file applications for 
review of the SCIS filing requirement. Southwestern did not file 
a petition for reconsideration. US West filed an application for 
review and petition for stay on October 4, 1991. In light of 
previous actions taken by the Bureau, and described at para. 7, 
US West's petition for stay is moot. Petitions for Reconsider­
ation filed by AT&T and Northern Telecom are pending. 
18 The Ameritech TRP Order at para. 20 required Ameritech to 
file its SCIS model within 72 hours of the Order"s October 18, 
1991 release. On October 23, 1991 Ameritech filed a motion for 
extension of time requesting an extension of the filing require­
ment to and including October 25, 1991. The Bureau granted 
Ameritech's motion. Order, DA 91-1328, released Oct. 24, 1991. 19 In a November 26, 1991, letter the Chief, Tariff Division, 
requested full SCIS information for other Ameritech study areas 
for a similar in camera review. Ameritech filed this information 
on December 9, 1991. 
20 The Florida Public Utilities Commission has not yet ruled 
on a BellSouth motion of confidentiality in one of its proceed­
ings. 
21 See November 13 Reports of Ameritech, Pacific, Southwest­
ern, and US West. 
7 FCC Red No. 2 Federal Communications Commission Record DA 91-1592 
detail.22 Other state comm1ss1ons saw only redacted ver­
sions of the model, stripped of the specific carrier or 
vendor data necessary to track the rate development pro­
cess; portions of the documentation; or some type of 
summary overview of the model.23 
III. PLEADINGS 
10. Petitioners suggest several grounds for precluding 
public inspection of the SCIS model and other docu­
mentation. First, argue the BOCs, SCIS constitutes a valu­
able trade secret which is proprietary to Bellcore. Bell 
Atlantic Petition at 2; BellSouth Petition at 4; NYNEX 
Petition at 2-3; Pacific Petition at 4; see also US West 
Petition at 3. Second, some BOCs assert that when using 
SCIS, the carrier inputs its own proprietary and confiden­
tial information, including negotiated pricing arrange­
ments between itself and equipment vendors as well as 
sensitive demand information. BellSouth Petition at 5; 
NYNEX Petition at 4; see also Southwestern Petition at 
2-3. In addition, the BOCs contend that the SCIS model 
contains engineering, pricing, and operational informa­
tion that is proprietary to several switch manufacturers. 
Bell Atlantic Petition at 3; US West Petition at 6; see also 
BellSouth Petition at 4; Pacific Petition at 4. 
11. Switch vendors also filed comments in support of 
waiver petitions filed by the BOCs.24 Vendors argue that if 
the BOCs comply with the TRP Order, they will disclose 
vendor trade secrets and do irreparable harm to manufac­
turers. Ericsson Comments at l; Northern Telecom Com­
ments at 3. Ericsson urges the Bureau to consider 
alternatives. Ericsson offers support and cooperation for 
any alternative that prevents disclosure of Ericsson pro­
prietary information. Ericsson Comments at 9. Northern 
Telecom agrees to consider specific proposals for public 
disclosure of information related to SCIS if the Commis­
sion establishes appropriate protections for the use and 
disclosure of the company's confidential and proprietary 
information. Northern Telecom Comments at 5-6. 
12. US West offers to file SCM with the Bureau under 
Commission Rules for confidential treatment. US West 
Petition at 10:25 see 47 C.F.R. §§ 0.457(d) & 0.459(a). US 
West's approach would place SCM in the Bureau's posses­
sion for a specific period of time, but would not allow 
public inspection of SCM. The carrier, however, refuses 
to agree to this approach without a Bureau Order, before 
the examination period, declaring SCM a trade secret and 
therefore protected under Section 0.459 of the Commis­
sion's Rules, 47 C.F.R. § 0.459, and FOIA exemption 4. 
13. MCI and AT&T filed oppositions to the BOCs' 
petitions for waiver.26 
22 See Pacific Petition at 1. 
23 See November 13 Reports of Bell Atlantic at 1-2, NYNEX at 
1-2, Southwestern, US West at 3. 
24 The Ameritech TRP Order granted Northern Telecom's peti­
tion for declaratory ruling that parties who provide proprietary 
information to the BOCs, which the Commission then requires 
the BOCs to submit, have standing to request confidentiality for 
that information. Ameritech TRP Order at para. 1 n.4. 
25 US West filed an erratum for page 10 on October 1, 1991. 
523 
IV. DISCUSSION 
14. Our in camera review of Ameritech's SCIS model, 
as well as the pleadings submitted in response to the TRP 
Order, reveals several different types of proprietary in­
formation issues at work in SCIS. First, vendor switch 
data concerning engineering and pricing surfaces directly 
in the SCIS software inputs and could also be "reverse 
engineered" from SCIS algorithms. The vendors' 
uncontested comments demonstrate the competitive na­
ture of the switch market.27 Their decision to reveal com­
petitively sensitive data to Bellcore only pursuant to 
nondisclosure agreements is further evidence of the pro­
prietary nature of the vendor data used in SCIS. We 
therefore determine that unrestricted public disclosure of 
this data would cause competitive harm to switch vendors. 
15. We also find that BOC inputs used to generate SCIS 
investment studies are also competitively sensitive, be­
cause through their disclosure other BOCs and switch 
vendors might use them to determine pricing strategies, 
forecasts of expected financial position regarding switch 
technologies, and learn negotiated pricing arrangements 
between the BOCs and switch vendors. Technology-spe­
cific outputs for individual BOCs' studies are competi­
tively sensitive because they must be provided by switch 
technology to enable reviews of the full BOC rate devel­
opment process. These switch-specific outputs would also 
allow competitors of switch vendors a means to gain 
valuable vendor pricing and switch engineering data. 
16. As to the SCIS model itself, it is not only a valuable 
intellectual property developed for the use of BOCs and 
others, which if disclosed would enable the avoidance of 
substantial licensing fees. but the algorithms that are the 
core of the model are mathematical expressions of the 
technical and cost characteristics of specific switch tech­
nologies. As such, their disclosure would present all the 
competitive harms expected from direct disclosure of ven­
dors' SCIS input data, once the algorithms were reversed 
engineered to disclose the details of the technologies they 
replicate. 
17. Another important factor in our decision is that the 
implementation of ONA. a Commission priority, requires 
a rational means for apportioning joint and common 
switching costs between the BOCs' numerous BSE 
offerings. If switch vendors refuse to provide data for the 
SCIS model, the BOCs may be unable to develop an 
adequate alternative method to apportion investment. We 
presume that any alternatives to SCIS will rely on similar 
modeling methodology and will again require the use of 
proprietary data. The courts have construed FOIA exemp­
tion 4 to embrace situations such as this in which, apart 
from i>rivate competitive harms, disclosure would impair 
This summary cites the erratum. 
26 AT&T has submitted comments only as an interexchange 
carrier, not in its role as a switch vendor. 
27 Trade press accounts of this market also describe structural 
elements that include ( 1) excess supply; (2) strong domestic and 
foreign competition; and (3) consequent tightening of competi­
tive bidding strategy. See, e.g., "Turmoil Pervades the Telephone 
System Industry," Business Communications Review, July 1991; 
"The Global CO Switch Market: A Tough Game Gets Even 
Tougher," Telephony, July 23, 1990; "Confronting Low Bids and 
DA 91-1592 Federal Communications Commission Record 7 FCC Red No. 2 
the effectiveness or efficiency of agency programs.28 Thus, 
both the original statutory intent animating exemption 4 
of the FOIA, 5 U.S.C. § 552, and the judicially developed 
understanding of that provision, exempt the SCIS model 
and associated switch vendor inputs from mandatory 
FOIA disclosure. 
18. Based on our in camera review of Ameritech's SCIS 
model and the pleadings, we determine that the SCIS 
model used by the various BOCs is very similar in its 
basic algorithms. Therefore, the Bureau concludes that all 
versions of the SCIS model, including associated vendor 
and BOC inputs, contain proprietary information.29 Our 
review also shows that individual carriers have many op­
portunities to customize the model through various de­
cision points and user inputs. These opportunities cannot 
be practically or usefully separated from the model's op­
eration; the specific decisions made by BOCs when gen­
erating SCIS studies involve the application of proprietary 
data to the model. Our in camera review of the Ameritech 
SCIS model, in the context of Ameritech's overall ONA 
rate development process, has confirmed the presence and 
significance of multiple decision points and data elements 
in the SCIS-based aspects of Ameritech's cost develop­
ment process, including (1) BOC and switch vendor in­
puts to SCIS; (2) the algorithms constituting the model 
proper; and (3) possible variants in the operation (and 
results) of SCIS cost studies that are introduced by user­
determined parameters. These SCIS-related aspects of the 
BOC rate development process are intimately related to 
the model and equally exempt from mandatory disclosure 
under FOIA. 
V. ORDERING CLAUSES 
19. We have determined that the SCIS model licensed 
by Bellcore to the BOCs, the SCM model, as well as 
associated data from switch vendors. constitute confiden­
tial materials exempt from disclosure under Section 
552(b)(4) of the Freedom of Information Act, 5 U.S.C. § 
552(b)(4), and the Commission's implementing regula­
tions, 47 C.F.R. §§ 0.457(d), 0.459. 
20. Accordingly, IT IS ORDERED pursuant to Section 
0.291 of the Commission's Rules, 47 C.F.R. § 0.291, that 
the request for nondisclosure submitted as part of peti­
tions for waiver of Commission Requirements for Cost 
Support Material To Be Filed with Open Network Ar­
chitecture Access Tariffs. Order, DA 91-1168, released 
Sept. 19, 1991, filed by the Bell Atlantic Telephone Com­
panies, BellSouth Telephone Companies, New York Tele­
phone Company and New England Telephone and 
Telegraph Company, Pacific Bell and Nevada Bell, South­
western Bell Telephone Company, and US West Commu­
nications, Inc., ARE GRANTED to the extent provided 
herein. 
Support Gaps," Business Communications Review, December 
1989; "U.S. Central Office Switch Market," Telecommunications, 
February 1987. 
28 Critical Mass Energy Project v. NRC, 830 F.2d 278 (D.C. Cir. 
1987) (Critical Mass I). As the reviewing court in Critical Mass I 
found that no record evidence had been adduced to support the 
district court's determination that the program interests in­
volved were or might be affected by disclosure, the subsequent 
524 
21. IT IS FURTHER ORDERED, that the requirement 
of simultaneous submission of sensitive materials with a 
request for confidential treatment, specified in Section 
0.459(a) of the Commission's Rules, 47 C.F.R. § 0.459(a), 
IS WAIVED for purposes of the Switching Cost Informa­
tion System and Service Cost Model materials to be sub­
mitted by the Bell Operating Companies under the terms 
of this Order. 
22. IT IS FURTHER ORDERED that the Bell Operat­
ing Companies shall provide their Switching Cost In­
formation System or Service Cost Model for one study 
area and their Switching Cost Information System and 
Service Cost Model inputs, and outputs for all study areas, 
to the Bureau not later than one week after the release of 
this Order. 
FEDERAL COMMUNICATIONS COMMISSION 
Carl D. Lawson 
Deputy Chief (Policy). 
Common Carrier Bureau 
history of that case does not affect this reading of Exemption 4. 
See also 9 to 5 Organization for Women Office Workers v. 
Board of Governors, 721 F.2d 1, 9 (1st Cir. 1983). 
29 Our conclusion includes a preliminary determination that 
US West's SCM model also constitutes proprietary information. 
Although the Bureau has not seen any version of the SCM 
model, US West indicates that it based SCM on the SCIS model. 
See US West Petition for Waiver at 4 & n. 8. All pleadings 
indicate that SCM is similar in nature to SCIS.