In the Matter of Implementation of the Local Competition
               Provisions in the Telecommunications Act of 1996;
              Interconnection between Local Exchange Carriers and
                   Commercial Mobile Radio Service Providers

                   CC Docket No. 96-98; CC Docket No. 95-185

                       FEDERAL COMMUNICATIONS COMMISSION

                              1996 FCC LEXIS 4312

                           RELEASE-NUMBER: FCC 96-325

                August 8, 1996 Released; Adopted August 1, 1996

             ACTION:   [*1]   FIRST REPORT AND ORDER [PART 2 OF 5]

JUDGES:
   By the Commission: Chairman Hundt and Commissioners Quello, Ness, and Chong
issuing separate statements.

OPINION:
   418. We conclude that customized routing, which permits requesting carriers
to designate the particular outgoing trunks that will carry certain classes of
traffic originating from the competing provider's customers, is technically
feasible in many LEC switches. Customized routing will enable a competitor to
direct particular classes of calls to particular outgoing trunks, which will
permit a new entrant to self-provide, or select among other providers of,
interoffice facilities, operator services, and directory assistance. n927 Bell
Atlantic notes that customized routing is generally technically feasible for
local calling, although it notes that the technology and capacity constraints
vary from switch to switch. n928 SBC contends that customized routing is
technically feasible for older switches, such as the 1AESS switch. n929 AT&T
acknowledges that, although the ability to establish customized routing in 1AESS
switches may be affected by the "call load" in each office, only 9.8% of the
switches used by the seven RBOCs, GTE and SNET are 1AESS  [*2]   switches. n930
We recognize that the ability of an incumbent LEC to provide customized routing
to a requesting carrier will depend on the capability of the particular switch
in question. Thus, our requirement that incumbent LECs provide customized
routing as part of the "functionality" of the local switching element applies,
by definition, only to those switches that are capable of performing customized
routing. An incumbent LEC must prove to the state commission that customized
routing in a particular switch is not technically feasible.

n927 See, e.g., AT&T June 28 Ex Parte. In addition, we note that the Illinois
Commission recently directed Ameritech and Centel to permit a carrier purchasing
wholesale local exchange service to designate a provider of operator services
and directory assistance other than that of the incumbent LEC. Such access is
accomplished through the routing of such calls from the incumbent LEC's switch
to the competing provider of the operator service or directory assistance. See
Illinois Wholesale Order at 45.


n928 Letter from Patricia Koch, Assistant Vice President, Bell Atlantic, to
William Caton, Acting Secretary, FCC, June 24, 1996 (Bell Atlantic June 24 Ex
Parte); see also BellSouth comments at 41-42 n.89 (the ability to provide
customized routing depends on the quantity of customized routing requests from
other competitors).  [*3]

n929 SBC comments at 41-42.

n930 Letter from Bruce Cox, Government Affairs Director, AT&T, to William F.
Caton, Secretary, FCC, July 11, 1996 (AT&T July 11 Ex Parte).

   419. Section 251(d)(2)(A) requires the Commission, in determining which
network elements should be made available to competing providers, to consider
"whether access to such network elements as are proprietary in nature is
necessary." n931 To withhold a proposed network element from a competing
provider, an incumbent LEC must demonstrate that the element is proprietary and
that gaining access to that element is not necessary because the competing
provider can use other, nonproprietary elements in the incumbent LEC's network
to provide service. n932 U S West asserts that switch unbundling could raise
concerns involving, among other things, "licensing of intellectual property." It
cites a request by one interconnector to be the exclusive provider of particular
features in U S West's generic switching software. n933 Bell Atlantic states
that it is not at liberty to sub-license the software that operates vertical
switching features. n934 We note, however, that these incumbent LECs do not
object to providing  [*4]   vertical switching functionalities to requesting
carriers under the resale provision of section 251(c)(4). n935 In addition, the
vast majority of parties that discuss unbundled local switching do not raise
proprietary concerns with the unbundling of either basic local switching or
vertical switching features. Even if we accept the claim of U S West and Bell
Atlantic that vertical features are proprietary in nature, these carriers do not
meet the second consideration in our section 251(d)(2)(A) standard, which
requires an incumbent LEC to show that a new entrant could offer the proposed
telecommunications service through the use of other, nonproprietary elements in
the incumbent LEC's network. n936 Accordingly, we find that access to unbundled
local switching is clearly "necessary" under our interpretation of section
251(d)(2)(A). n937

n931 47 U.S.C. @ 251(d)(2)(A).

n932 See supra Section V.E.

n933 U S West comments at 55 n.117.

n934 Bell Atlantic comments, Albers Attachment at 17-18.

n935 U S West reply at 26-27; Bell Atlantic comments at 26.

n936 See supra Section V.E.

n937 Id.


   420. Section 251(d)(2)(B) directs the Commission to consider  [*5]   whether
the failure to provide access to an unbundled element "would impair the ability
of the telecommunications carrier seeking access to provide the services that it
seeks to offer." n938 We have interpreted the term "impair" to mean either
increased cost or decreased service quality that would result from using network
elements of the incumbent LEC other than the one sought. n939 SBC and MFS
contend that access to unbundled local switching may not be essential for new
entrants because competitors are likely to deploy their own switches. n940 These
parties present no evidence that competitors could provide service using another
element in the LEC's network at the same cost and at the same level of quality.
In addition, most commenters that address this issue generally argue that local
switching is essential for the provision of competing local service, n941 and we
agree. We thus conclude that a requesting carrier's ability to offer local
exchange services would be impaired, if not thwarted, without access to an
unbundled local switching element.

n938 47 U.S.C. @ 251(d)(2)(B).

n939 See supra Section V.E.

n940 SBC reply at 23; MFS comments at 46.

n941 See, e.g., LDDS reply at 18 (unbundled local switching is "critical" to
local competition); TIA comments at 18; AT&T Mar. 21 Letter at 17-18.  [*6]

   421. Section 251(c)(3) requires that incumbent LECs provide access to
unbundled network elements on terms and conditions that are "just, reasonable,
and nondiscriminatory." n942 We agree with CompTel and LDDS that new entrants
will be disadvantaged if customer switchover is not rapid and transparent. We
also note that the Michigan Commission has recognized the significance of
customer switchover intervals and has directed Ameritech and GTE to file
proposals on how they will "ensure the equal availability of expeditious
processing of local, interLATA, and intraLATA carrier changes." n943 Therefore,
we require incumbent LECs to switch over customers for local service in the same
interval as LECs currently switch end users between interexchange carriers. This
requirement applies to switchovers that only require the incumbent LEC to make
changes to software. Switchovers that require the incumbent LEC to make physical
modifications to its network, such as connecting a competitor's loop to its
switch, are not subject to this requirement, and instead are governed by our
terms and conditions for all unbundled elements. n944 Today, incumbent LECs
routinely change customers' presubscribed   [*7]   interexchange carriers
quickly and transparently, thereby contributing to the competitiveness of the
interexchange market. We expect that a similar requirement for local exchange
switchovers that require only a software change will similarly contribute to
local exchange competition.

n942 47 U.S.C. @ 251(c)(3).

n943 In the Matter, On the Commission's Own Motion, To Establish Permanent
Interconnection Arrangements Between Basic Local Exchange Service Providers,
Opinion and Order, Mich. Pub. Serv. Comm'n, Case No. U-10860, at 36-37 (June 5,
1996).

n944 See supra Section V.G., discussing provisioning intervals for unbundled
network elements.


   422. We reject the proposal by some incumbent LECs to define unbundled local
switching as the facilities that provide a point of access to the switch, but
that would not actually include switching functionality. Under this definition,
the purchaser of the local switching element would not actually obtain local
switching, only the right to purchase local switching functionality and other
switching features at wholesale rates. We believe that the unbundled local
switching element must include the functionality of connecting lines  [*8]   and
trunks. The definition proposed by these incumbent LECs would contravene the
requirement in section 251(c)(3) that incumbent LECs provide network elements
"in a manner that allows requesting carriers to combine such elements in order
to provide such telecommunications service." n945 If a competing provider
combined its own loops and transport with the local switching element ("point of
access"), it would be unable to provide telecommunications service without
separately purchasing, at wholesale rates, switching functionality from the
incumbent LEC.

n945 47 U.S.C. @ 251(c)(3).

   423. We also disagree with the proposal to define local switching as a point
of access plus basic switching functionality, but that would exclude vertical
switching features. n946 As a legal matter, this definition is inconsistent with
the 1996 Act's definition of "network element," which includes all the
"features, functionalities, and capabilities provided by means of such facility
or equipment." n947 In addition, this definition would not fulfill the
pro-competitive objectives of the 1996 Act as effectively as the per-line
definition we adopt. A competitor that obtains basic and vertical switching
[*9]   features at cost-based rates will have maximum flexibility to distinguish
its offerings from those of the incumbent LEC by developing a variety of service
packages and pricing plans. n948 Moreover, an upfront purchase of all local
switching features may speed entry by simplifying practical issues such as the
pricing of individual switching features.

n946 Sprint comments at 34; USTA reply at 16-17; SBC reply at 20; NYNEX reply at
31; MECA comments at 29.

n947 47 U.S.C. @ 153(29); see supra section V.C., which interprets the Act's
definition of "network element."

n948 See, e.g., LDDS comments at 33; AT&T comments at 21.

   424. We also address the impact on small incumbent LECs. For example, the
Illinois Independent Telephone Association and the Rural Telephone Coalition
favor rules that recognize the differences between larger and smaller LECs. n949
We have considered the economic impact of our rules in this section on small
incumbent LECs. In this section, for example, we expressly provide for the fact
that certain LECs may possess switches that are incapable of performing
customized routing for competitors that purchase unbundled local switching. As
noted by Rural  [*10]   Telephone Coalition and the Illinois Independent
Telephone Coalition, this approach is necessary to accommodate the different
technical capabilities of large and small carriers. We also note that section
251(f) of the 1996 Act provides relief for certain small LECs from our
regulations under section 251.

n949 Illinois Ind. Tel. Ass'n comments at 1; Rural Tel. Coalition reply at 37.

   (2) Tandem Switching Capability


   425. We also affirm our tentative conclusion in the NPRM that it is
technically feasible for incumbent LECs to provide access to their tandem
switches unbundled from interoffice transmission facilities. We note that some
states already have required incumbent LECs to unbundle tandem switching. n950
Parties do not contend, pursuant to section 251(d)(2)(A), that tandem switches
are proprietary in nature. With regard to section 251(d)(2)(B), we find that
competitors' ability to provide telecommunications service would be impaired
without unbundled access to tandem switching. Therefore, we find that the
availability of unbundled tandem switching will ensure that competitors can
deploy their own interoffice facilities and connect them to incumbent LECs'
tandem switches  [*11]   where it is efficient to do so.

n950 See, e.g., Ameritech comments at 43, Cincinnati Bell comments at 18, GTE
comments at 38, AT&T March 21 Letter at 23.

   426. We define the tandem switch element as including the facilities
connecting the trunk distribution frames to the switch, and all the functions of
the switch itself, including those facilities that establish a temporary
transmission path between two other switches. The definition of the tandem
switching element also includes the functions that are centralized in tandems
rather than in separate end office switches, such as call recording, the routing
of calls to operator services, and signaling conversion functions.

   (3) Packet Switching Capability

   427. At this time, we decline to find, as requested by AT&T and MCI, that
incumbent LECs' packet switches should be identified as network elements.
Because so few parties commented on the packet switches in connection with
section 251(c)(3), the record is insufficient for us to decide whether packet
switches should be defined as a separate network element. We will continue to
review and revise our rules, but at present, we do not adopt a national rule for
the unbundling of packet  [*12]   switches.

   3. Interoffice Transmission Facilities

   a. Background

   428. In the NPRM, we proposed to require incumbent LECs to make available
unbundled transport facilities in a manner that corresponds to the rate
structure for interstate transport charges. We specifically proposed to require
unbundled access to links between the end office and the serving wire center
(SWC), the SWC and the IXC point of presence (POP), the end office and the
tandem switch, and the tandem switch and the SWC. We also tentatively concluded
that incumbent LECs should be required to unbundle channel termination
facilities for special access from the interoffice facilities. In addition, we
requested comment on whether and how other interoffice facilities used by
incumbent LECs should be unbundled.

   b. Comments

   429. The vast majority of the parties that discussed local transport
unbundling supported the Commission's proposal to provide access to dedicated
and shared interoffice facilities as unbundled network elements. n951 BellSouth,
for example, asserts that individual transport components should be available as
unbundled elements, and notes that some LECs already have unbundled transport
from its other  [*13]   access services. n952


n951 AT&T comments at 22; USTA comments at 35; Frontier comments at 16; GCI
comments at 12; Sprint comments at 39; GST comments at 24; NYNEX comments at
63; NEXTLINK comments at 23; ACSI comments at 41; MCI comments at 17; ALTS
comments at 30; Citizens Utilities comments at 15; CompTel comments at 45; TIA
comments at 13; Bell Atlantic comments at 22; U S West comments at 48; Teleport
comments at 37; MFS comments at 48; USTA comments at 35; TCC comments at 35; New
York Commission comments at 27; Ameritech comments at 43; BellSouth comments at
42.

n952 BellSouth comments at 42-43.

   430. Several incumbent LECs contend that they already provide unbundled
transport services pursuant to the Commission's Expanded Interconnection rules.
n953 PacTel asserts that its proposal to tariff unbundled transport elements,
including dedicated transport and tandem-switched transport, will fulfill its
duties under sections 251 and 271. n954 Bell Atlantic and TIA, on the other
hand, indicate that existing tariffs for unbundled transport facilities are
insufficient to comply with the 1996 Act. n955 MFS asks the Commission to
clarify that, under the expanded interconnection  [*14]   rules as well as the
1996 Act, incumbent LECs must unbundle all interoffice transport facilities
without requiring the requesting carrier to purchase channel terminations or
other elements. n956

n953 Ameritech comments at 42-43; Cincinnati Bell comments at 18; GTE comments
at 38.

n954 PacTel comments at 57.

n955 Bell Atlantic comments at 27 (Bell Atlantic has already filed, or plans to
file, intrastate tariffs for the network elements it has unbundled under
expanded interconnection.); TIA comments at 13.

n956 MFS comments at 48; accord AT&T comments at 22; MCI comments at 17.

   431. Parties agree that local transport unbundling is technically feasible.
n957 MCI, for example, asserts that transport facilities are already unbundled
for exchange access and thus there is no question that unbundling is technically
feasible. n958 NCTA, GST, TIA, and MFS contend that unbundling transport
elements should be presumed technically feasible because of the Commission's
Expanded Interconnection proceeding. n959 AT&T and Telecommunications Resellers
Association point out that IXCs currently obtain interconnections between
transport elements and the tandem switches pursuant  [*15]   to standard
specifications. n960

n957 See, e.g., GST comments at 24; AT&T comments at 22; GTE reply at 18-19;
GVNW comments at 28; NYNEX comments at 65; MCI comments at 32; Comcast comments
at 18; CompTel comments at 31; NCTA comments at 42; MFS comments at 48;
Telecommunications Resellers Ass'n comments at 35; Ameritech comments at 43.

n958 MCI comments at 32.

n959 NCTA comments at 42; GST comments at 24; TIA comments at 13; MFS comments
at 47-48.

n960 AT&T comments at 22; Telecommunications Resellers Ass'n comments at 35.



   432. A number of commenters specify particular components of local transport
that should be unbundled: (1) dedicated transport trunks from incumbent LEC end
offices to competitors' switches, to IXC POPs, and to other end offices of the
incumbent LEC; and (2) common transport trunks between incumbent LEC end offices
and tandem switches. n961 In addition, ALTS, MFS, AT&T, and MCI contend that
requesting carriers should have the ability to order such transport trunks with
or without electronics (i.e., as "dark fiber"). n962 GTE disagrees and argues
that the definition of network element only encompasses facilities "used in the
provision  [*16]   of telecommunications service," and that dark fiber does not
meet this definition because LECs do not "use" it in their networks. n963

n961 See, e.g., AT&T comments at 22; NYNEX comments at 62-63; GVNW comments at
20; TCC reply at 18; ACSI comments, Attachment 1 at 5-6.

n962 ALTS comments at 30; MCI comments at 32; AT&T comments at 22; MFS comments
at 48.

n963 GTE reply at 21.

   433. Several parties ask that the Commission specify additional transport
components as unbundled network elements beyond those proposed in the NPRM. AT&T
contends that incumbent LECs should have to unbundle their digital cross-connect
systems (DCSs), which are now used to disaggregate high-speed traffic from IXCs
into individual circuits. n964 MCI and AT&T contend that these facilities will
enable IXCs to use more cost-efficient, high-speed facilities to route traffic
to the incumbent LEC and have the traffic disaggregated into individual circuits
at the DCS. n965 CompTel asserts that, when direct-trunked transport transits a
tandem switch or other intermediate node, incumbent LECs should offer each
individual link as an unbundled element. n966 MCI also asserts that competitors
need "loop  [*17]   transport" to carry traffic from the incumbent's unbundled
loops to the competitor's switch. n967

n964 AT&T comments at 22 n.23; accord SBC comments at 87.

n965 AT&T comments at 22; MCI comments at 17.

n966 CompTel comments at 45.

n967 MCI comments at 22.


   434. A number of parties assert that the availability of unbundled transport
facilities would promote local competition. AT&T contends that it seeks to
combine unbundled common transport with competitive tandem switching and
dedicated transport to provide IXCs with alternative access service from the
competitor's end office to the IXC POP. n968 AT&T, Telecommunications Resellers
Association, and TIA assert that the availability of unbundled dedicated
transport will allow competitors to connect their switches to incumbent LEC
switches efficiently. n969 MCI contends that incumbent LECs have denied MCI
access to trunks between the incumbent LECs' end offices, thereby increasing
MCI's costs of deploying local facilities and restricting MCI's ability to
acquire redundant facilities for its local traffic. n970 NYNEX and LDDS
recommend that the Commission require incumbent LECs to offer unbundled
dedicated transport  [*18]   between their own end office or tandem switches and
the requesting carrier's switch or POP. n971 The Texas Public Utility Commission
has specifically required incumbent LECs to provide competitors with "loop
facilities transport service," which connects an unbundled loop to the
competitor's switch. n972

n968 AT&T Mar. 21 Letter at 22.

n969 Id.; Telecommunications Resellers Ass'n comments at 35; TIA comments at 13.

n970 MCI comments at 46.

n971 NYNEX comments at 63 n.126; LDDS reply at 18.

n972 Texas Commission comments at 18.

   435. Several parties caution that pricing distortions could accompany a
ruling that transport components are network elements under section 251(c)(3).
n973 GTE, for example, argues that the Commission should not permit requesting
carriers to use unbundled transport elements to avoid access charges. n974
Similarly, Ameritech states that the 1996 Act prohibits arbitrary price
distinctions between switched and special transport, and that, if interoffice
facilities are unbundled from tandem switching, no such distinction can be made.
n975 Other parties maintain that the 1996 Act requires cost-based pricing of all
unbundled elements,   [*19]   including transport elements. n976

n973 See e.g., GTE comments at 38; CompTel comments at 45; Ameritech comments at
43.

n974 GTE comments at 38.

n975 Ameritech comments at 43.

n976 ACSI comments at 42; MCI comments at 32.

   436. A few parties oppose a requirement that incumbent LECs unbundle
facilities that correspond to interstate transport and special access rate
elements. n977 Cincinnati Bell argues that these elements are already available
through existing tariffs, and therefore should not be required to be offered as
unbundled elements pursuant to the 1996 Act. n978 MECA argues that local
transport and special access facilities are toll access facilities and therefore
are not necessary to provide competitive basic local exchange service. n979 MECA
also states that any requirement concerning local transport and special access
should not apply to any LEC that was not covered by the MFJ restrictions and, in
order to minimize arbitrage opportunities, any modifications to local transport
and special access must wait until the LECs have restructured their local rates.
n980

n977 See, e.g., MECA comments at 38; Cincinnati Bell comments at 18.

n978 Cincinnati Bell comments at 18.  [*20]

n979 MECA comments at 38.

n980 MECA comments at 38.


   437. TCC urges the Commission to define dedicated transport as an interoffice
transmission path dedicated to a single carrier, including multiplexing and
grooming, redundant facilities, and cross-office wiring to a digital
cross-connect panel. n981 ACSI argues that the Commission should require
incumbent LECs to make both dedicated and switched transport available at the
DS-0, DS-1, DS-3 and Optical Carrier levels, which should be offered as
completely unbundled links between serving wire centers (SWCs) and
interconnector points-of-presence, the central office and the SWC, the end
office and the tandem, and the SWC and the tandem. n982 Teleport advocates that
interoffice trunking facilities be defined in terms of their underlying
transmission characteristics without reference to the use of the facility. n983

n981 TCC comments at 38; see also NYNEX comments at 63 for a similar definition.

n982 ACSI comments at 41.

n983 Teleport comments at 37.

   438. ALTS argues that, since there are currently well-defined standards for
transport, there should be no impediment to requiring equivalent levels of
technical  [*21]   performance among competing carriers, i.e., no meaningful
distinctions among the technical performance of different DS1s. n984 Therefore,
as in the case with local loops, ALTS contends that competitors should receive
the same or better ordering, provisioning, and installation service as the
incumbent provides itself and that penalties should be assessed if deadlines are
not met. n985

n984 ALTS comments at 30.

n985 Id. at 30-31.

   c. Discussion

   439. We conclude that incumbent LECs must provide interoffice transmission
facilities on an unbundled basis to requesting carriers. The record supports our
conclusion that such access is technically feasible and would promote
competition in the local exchange market. We note that the 1996 Act requires
BOCs to unbundle transport facilities prior to entering the in-region, interLATA
market. n986

n986 47 U.S.C. @ 271(c)(2)(B)(v).


   440. We require incumbent LECs to provide unbundled access to shared
transmission facilities between end offices and the tandem switch. n987 Further,
incumbent LECs must provide unbundled access to dedicated transmission
facilities between LEC central offices or between such offices and those of
competing  [*22]   carriers. This includes, at a minimum, interoffice facilities
between end offices and serving wire centers (SWCs), SWCs and IXC POPs, tandem
switches and SWCs, end offices or tandems of the incumbent LEC, and the wire
centers of incumbent LECs and requesting carriers. The incumbent LEC must also
provide, to the extent discussed below, all technically feasible transmission
capabilities, such as DS1, DS3, and Optical Carrier levels (e.g. OC-3/12/48/96)
that the competing provider could use to provide telecommunications services. We
conclude that an incumbent LEC may not limit the facilities to which such
interoffice facilities are connected, provided such interconnection is
technically feasible, or the use of such facilities. In general, this means that
incumbent LECs must provide interoffice facilities between wire centers owned
by incumbent LECs or requesting carriers, or between switches owned by incumbent
LECs or requesting carriers. For example, an interoffice facility could be used
by a competitor to connect to the incumbent LEC's switch or to the competitor's
collocated equipment. We agree with the Texas Commission that a competitor
should have the ability to use interoffice   [*23]   transmission facilities to
connect loops directly to its switch. We anticipate that these requirements will
reduce entry barriers into the local exchange market by enabling new entrants to
establish efficient local networks by combining their own interoffice facilities
with those of the incumbent LEC.

n987 Section V.I. addresses unbundled access to the tandem switching element.

   441. The ability of new entrants to purchase the interoffice facilities we
have identified will increase the speed with which competitors enter the market.
By unbundling various dedicated and shared interoffice facilities, a new entrant
can purchase all interoffice facilities on an unbundled basis as part of a
competing local network, or it can combine its own interoffice facilities with
those of the incumbent LEC. The opportunity to purchase unbundled interoffice
facilities will decrease the cost of entry compared to the much higher cost that
would be incurred by an entrant that had to construct all of its own facilities.
An efficient new entrant might not be able to compete if it were required to
build interoffice facilities where it would be more efficient to use the
incumbent LEC's facilities. We  [*24]   recognize that there are alternative
suppliers of interoffice facilities in certain areas. We are convinced, however,
that entry will be facilitated if competitors have greater, not fewer, options
for procuring interoffice facilities as part of their local networks, and that
Congress intended for competitors to have these options available from
competitors. Thus, the rules we establish for the unbundled interoffice
facilities should maximize a competitor's flexibility to use new technologies in
combination with existing LEC facilities.

   442. We find that it is technically feasible for incumbent LECs to unbundle
the foregoing interoffice facilities as individual network elements. The
interconnection and unbundling arrangements among the larger LECs, IXCs, and
CAPs that resulted from our Expanded Interconnection rules confirm the technical
feasibility of unbundling interoffice facilities used by incumbent LECs to
provide special access and switched transport. n988 As AT&T and
Telecommunications Resellers Association point out, IXCs currently interconnect
with incumbent LECs' transport facilities pursuant to standard specifications.
n989 We also note that commenters do not identify technical  [*25]   feasibility
problems with unbundling interoffice facilities.

n988 See, e.g., MCI comments at 32; NCTA comments at 42; GST comments at 24; TIA
comments at 13; MFS comments at 47-48.

n989 AT&T comments at 22; Telecommunications Resellers Ass'n comments at 35.

   443. We also find that it is technically feasible for incumbent LECs to
unbundle certain interoffice facilities not addressed in our Expanded
Interconnection proceeding. First, we conclude that an incumbent LEC must
provide unbundled access to interoffice facilities between its end offices, and
between any of its switching offices and a new entrant's switching office, where
such interoffice facilities exist. This allows a new entrant to purchase
unbundled facilities between two end offices of the incumbent LEC, or between
the new entrant's switching office and the incumbent LEC's switching office.

Although our Expanded Interconnection rules did not specifically require
incumbent LECs to unbundle these facilities, commenters do not identify any
potential technical problem with such unbundling. Moreover, some LECs already
offer unbundled dedicated interoffice facilities, for example, between their end
offices and SWCs  [*26]   for exchange access.

   444. In addition, as a condition of offering unbundled interoffice
facilities, we require incumbent LECs to provide requesting carriers with access
to digital cross-connect system (DCS) functionality. A DCS aggregates and
disaggregates high-speed traffic carried between IXCs' POPs and incumbent LECs'
switching offices, thereby facilitating the use of cost-efficient, high-speed
interoffice facilities. AT&T notes that the BOCs, GTE, and other large LECs
currently make DCS capabilities available for the termination of interexchange
traffic. n990 We find that the use of DCS functionality could facilitate
competitors' deployment of high-speed interoffice facilities between their own
networks and LECs' switching offices. Therefore, we require incumbent LECs to
offer DCS capabilities in the same manner that they offer such capabilities to
IXCs that purchase transport services.

n990 Letter from Bruce Cox, Government Affairs Director, AT&T, to William F.
Caton, Acting Secretary, FCC, July 18, 1996.

   445. We disagree with PacTel's assertion that it is not technically feasible
for incumbent LECs to provide DCS functionality to competitors that purchase
unbundled   [*27]   interoffice facilities. n991 First, contrary to PacTel's
assertion, we do not require incumbent LECs to develop new arrangements for the
offering of DCS capabilities to competitors. We only require that DCS
capabilities be made available to competitors to the extent incumbent LECs offer
such capabilities to IXCs. Second, PacTel suggests the provision of DCS
capabilities requires physical partitioning of the DCS equipment in order to
prevent carriers from gaining control of each other's traffic. n992 We do not
require such partitioning for the provision of DCS capabilities. As noted above,
we only require incumbent LECs to permit competitors to use DCS funtionality in
the same manner that incumbent LECs now permit IXCs to use such functionality.

n991 Letter from Alan Ciamporcero, Vice President, PacTel, to William F. Caton,
Acting Secretary, FCC, July 17, 1996 (PacTel July 17 Ex Parte).

n992 Id.

   446. Section 251(d)(2)(A) requires the Commission to consider whether "access
to such network elements as are proprietary in nature is necessary." n993
Commenters do not identify any proprietary concerns relating to the provision of
interoffice facilities that LECs are required  [*28]   to unbundle. We also note
that many of these facilities are also currently offered on an unbundled basis
to competing carriers. Therefore, the record provides no basis for withholding
these facilities from competitors based on proprietary considerations.

n993 47 U.S.C. @ 251(d)(2)(A).


   447. Section 251(d)(2)(B) requires the Commission to consider whether the
failure to provide access to an unbundled element "would impair the ability of
the telecommunications carrier seeking access to provide the services that it
seeks to offer." n994 We have interpreted the term "impair" to mean either
increased cost or decreased service quality that would result from using
network elements other than the one sought. n995 Certain commenters contend that
unbundled access to these facilities would improve their ability to provide
competitive local exchange and exchange access service. n996 MCI, for example,
argues that its inability to obtain unbundled access to trunks between an
incumbent LEC's end offices raises its cost of providing local service. n997
Accordingly, we conclude that the section 251(d)(2)(B) requires incumbent LECs
to provide access to shared interoffice facilities and dedicated  [*29]
interoffice facilities between the above-identified points in incumbent LECs'
networks, including facilities between incumbent LECs' end offices, new
entrant's switching offices and LEC switching offices, and DCSs. We believe that
access to these interoffice facilities will improve competitors' ability to
design efficient network architecture, and in particular, to combine their own
switching functionality with the incumbent LEC's unbundled loops. n998

n994 47 U.S.C. @ 251(d)(2)(B).

n995 See supra Section V.E.

n996 See, e.g., AT&T Mar. 21 Letter; LDDS Comments at 47.

n997 MCI comments at 46.

n998 See, e.g, MCI comments at 22.

   448. We reject Cincinnati Bell's argument that existing tariffs for transport
and special access services filed pursuant to our Expanded Interconnection rules
fulfill our obligation to implement the requirements of section 251(c). n999
First, the Expanded Interconnection rules require the unbundling of interstate
transport services only by Class A carriers n1000 whereas section 251(c)
requires network unbundling by all incumbent LECs, except for carriers that are
exempt under section 251(f) from our interconnection rules. n1001  [*30]
Consequently, some non-Class A carriers that were not subject to our Expanded
Interconnection requirements will be required to comply with the requirements of
this Order. Second, we find that the Class A carriers' existing tariffs for
unbundled transport elements do not satisfy the unbundling requirement of
section 251(c), as suggested by Cincinnati Bell, because such tariffs are only
for interstate access services, not for unbundled interoffice facilities. As
such, existing federal tariffs for transport and special access exclude
intrastate transport, and therefore are not equivalent to unbundled interoffice
facilities, which we have determined to be nonjurisdicational in nature.

n999 Cincinnati Bell comments at 18.

n1000 Class A carriers are those exchange carriers having more than $ 100
million in total company regulated revenues. See 1990 Cost Support Order, 5 FCC
Rcd 1364, (Com. Car. Bur. 1990); Commission Requirements for Cost Support
Material to be Filed with 1989 Annual Access Tariffs, 4 FCC Rcd 1662, 1663 (Com.
Car. Bur. 1988).

n1001 See infra Section XII, addressing the exemption for rural LECs.


   449. We also disagree with MECA, GTE, and Ameritech that  [*31]   we should
consider "pricing distortions" in adopting rules for unbundled interoffice
facilities. n1002 Section, below, addresses the pricing of unbundled network
elements identified pursuant to section 251(c)(3) as it relates to our current
access charge rules. Nor are we are persuaded by MECA's argument that incumbent
LECs not subject to the MFJ should not be required to unbundle transport
facilities because, according to MECA, such facilities are unnecessary for local
competition. n1003 As discussed above, the ability of a new entrant to obtain
unbundled access to incumbent LECs' interoffice facilities, including those
facilities that carry interLATA traffic, is essential to that competitor's
ability to provide competing telephone service.

n1002 MECA comments at 38, GTE comments at 38; Ameritech comments at 43.

n1003 MECA comments at 38.

   450. We do not impose specific terms and conditions for the provision of
unbundled interoffice facilities. We believe that the rules we establish in this
Order for all unbundled network elements adequately address ALTS's concern
regarding the provisioning, billing, and maintenance of unbundled transport
facilities. n1004 We also decline  [*32]   at this time to address the
unbundling of incumbent LECs' "dark fiber." Parties that address this issue do
not provide us with information on whether dark fiber qualifies as a network
element under sections 251(c)(3) and 251(d)(2). Therefore, we lack a sufficient
record on which to decide this issue. We will continue to review and revise our
rules in this area as necessary.

n1004 Section V.G addresses terms and conditions governing incumbent LECs'
provision of access to unbundled network elements.

   451. Rural Telephone Coalition contends that incumbent LECs should not be
required to construct new facilities to accommodate new entrants. n1005 We have
considered the economic impact of our rules in this section on small incumbent
LECs. In this section, for example, we expressly limit the provision of
unbundled interoffice facilities to existing incumbent LEC facilities. We also
note that section 251(f) of the 1996 Act provides relief for certain small LECs
from our regulations under section 251.

n1005 Rural Tel. Coalition reply at 36.

   4. Databases and Signaling Systems

   a. Background

   (1) NPRM

   452. In the NPRM, we tentatively concluded that incumbent LECs should be
required  [*33]   to unbundle access to their signaling systems and databases as
network elements. n1006 We asked commenters to identify points at which carriers
interconnect with SS7 networks n1007 today, as well as the technical feasibility
of establishing other points of access and interconnection. n1008 We also asked
commenters to identify those signaling and database functions currently provided
by incumbent LECs on an unbundled basis, and other functions not currently
offered by incumbent LECs, that the parties believe should be offered on an
unbundled basis. n1009

n1006 NPRM at para. 107.

n1007 A signaling network that is physically separate from the voice networks.

n1008 NPRM at para. 108.

n1009 NPRM at para. 108.

   453. In the NPRM, we noted the possibility that competitors that provide
local exchange service using resold incumbent LEC services or unbundled elements
might want to connect an alternative call processing database to the incumbent
LEC's SS7 network in order to offer services and features not available through
the incumbent LEC's own SS7 network databases. n1010

n1010 NPRM at para. 112.

   454. We also sought comment on unbundling access to the Advanced  [*34]
Intelligent Network (AIN), and referenced our separate Intelligent Networks
proceeding which deals with related issues. n1011 We sought comment on whether
to unbundle access to AIN facilities and functionalities.

n1011 NPRM at para. 113; see In the Matter of Intelligent Networks, CC Docket
No. 91-346, Notice of Inquiry, 6 FCC Rcd 7256 (1991), Notice of Proposed
Rulemaking, 8 FCC Rcd 6813 (1993) (Intelligent Networks). We incorporated the
record of the Intelligent Network proceeding into this docket by reference. NPRM
at para. 113 n.151.

   (2) SS7 Signaling Network Technology

   455. Signaling systems facilitate the routing of telephone calls between
switches. Most LECs employ signaling networks that are physically separate from
their voice networks, and these "out-of-band" signaling networks simultaneously
carry signaling messages for multiple calls. In general, most LECs' signaling
networks adhere to a Bellcore standard Signaling System 7 (SS7) protocol. n1012

n1012 The SS7 protocol is widely used and has been adopted by Bellcore, the
American National Standards Institute, and the International Telecommunication
Union--Telecommunication Standardization Sector. See Bellcore, BOC Notes on the
LEC Networks (1994).  [*35]

   456. SS7 networks use signaling links to transmit routing messages between
switches, and between switches and call-related databases. A typical SS7 network
includes a signaling link, which transmits signaling information in packets,
from a local switch to a signaling transfer point (STP), which is a
high-capacity packet switch. n1013 The STP switches packets onto other links
according to the address information contained in the packet. n1014 These
additional links extend to other switches, databases, and STPs in the LEC's
network. n1015 A switch routing a call to another switch will initiate a series
of signaling messages via signaling links through an STP to establish a call
path on the voice network between the switches.

n1013 STPs are usually deployed in pairs for redundancy purposes. Id.

n1014 Any element capable of handling SS7 signaling messages is also generally
referred to as a Signaling Point. Each Signaling Point has a unique network
address and every SS7 signaling message has a routing label containing addresses
for the origination and destination of the message plus a signaling link
selection code. Id.

n1015 For example, an STP to STP connection is generally used for inter-network
interconnection. An STP to switch connection is a common part of the SS7 network
and is used to connect end offices to the SS7 network. A connection between a
call-related database and a switch is usually done via a connection at an STP
(i.e., database to STP to switch). Id.  [*36]

   457. As mentioned above, the SS7 network also employs signaling links (via
STPs) between switches and call-related databases, such as the Line Information
Database (LIDB), Toll Free Calling (i.e., 800, 888 number) database, and AIN
databases. These links enable a switch to send queries via the SS7 network to
call-related databases, which return customer information or instructions for
call routing to the switch. n1016

n1016 Switch software commonly referred to as a "trigger" interrupts call
progress, in order for the switch to query call-related databases. Id.

   458. From the perspective of a switch in a LEC network, the databases
discussed above merely supply information or instructions. Updating or
populating the information in such databases, however, takes place through a
separate process involving different equipment. Carriers input information
directly into a service management system (SMS), which in turn downloads such
information into the individual databases.

   459. The Advanced Intelligent Network (AIN) is a network architecture that
uses distributed intelligence in centralized databases to control call
processing and manage network information, rather than performing  [*37]   those
functions at every switch. An AIN-capable switch n1017 halts call progress when
a resident software "trigger" is activated, and uses the SS7 network to access
intelligent databases, known as Service Control Points (SCPs), that contain
service software and subscriber information, for instruction on how to route,
monitor, or terminate the call. n1018 AIN is being used in the deployment of
number portability, wireless roaming, and such advanced services as same number
service (i.e., 500 number service) and voice recognition dialing. AIN services
are designed and tested in an off-line computer known as a Service Creation
Environment (SCE). Once a service is successfully tested, the software is
transferred to an SMS that administers and supports SCP databases in the
network. The SMS then regularly downloads software and information to an SCP
where interaction with the voice network takes place via the signaling links and
STPs discussed above.

n1017 A switch with AIN capabilities is referred to as a service switching point
(SSP). Id.

n1018 Switch queries and database responses use a part of the SS7 protocol
called the Transaction Capabilities Application Part (TCAP). Id.  [*38]

   b. Comments


   460. Almost all parties, including incumbent LECs, support the Commission's
tentative conclusion to require incumbent LECs to unbundle access to their
signaling systems. n1019 Parties generally agree that access to SS7 network
signaling is essential to the provision of competitive local exchange service
and that providing such access is technically feasible. n1020 Indeed, most BOCs
state that they already provide access to their signaling systems. n1021
BellSouth states that it currently provides such access at its STPs via
signaling links to all carriers, including IXCs, independent telephone
companies, wireless carriers, and other local exchange carriers. n1022
Commenters also report that independent SS7 network aggregators currently
provide access to signaling systems to many independent local exchange and
interexchange carriers, and to some competitive local carriers. n1023 In
addition, several state commissions note that they already have, or are
considering, a requirement that incumbent LECs unbundle access to their
signaling systems, including associated databases. n1024

n1019 See, e.g., Ad Hoc Telecommunications Users Committee comments at 24; ACSI
comments at 42; ALTS comments at 31; AT&T comments at 23; Comcast comments at
20; Ericsson comments at 5; GCI comments at 12; GST comments at 24; Intermedia
comments at 13; MFS comments at 48-49; MCI comments at 32; Sprint comments at
39; Teleport comments at 37; Time Warner comments at 44-45; Ameritech comments
at 46-47; BellSouth comments at 43; NYNEX comments at 71; PacTel comments at
57-60; Alabama Commission comments at 18; District of Columbia Commission
comments at 23; Florida Commission comments at 17; Mass. Commission comments at
7; New York Commission comments at 27; Wyoming Commission comments at 23. These
parties also generally support access to databases associated with signaling.
Some parties, however, urge the Commission to weigh the potential harm from
access to database and signaling systems, which might give someone the
opportunity to cause inadvertent or malicious damage to large parts of the
public switched network. Secretary of Defense comments at 6-7; Sprint comments
at 39-40; Lincoln Tel. reply at 15; GVNW comments at 20, 29 (screening necessary
to prevent network failures from proliferating between interconnected networks).
[*39]

n1020 See, e.g., Ad Hoc Telecommunications Users Committee comments at 24; ACSI
comments at 42; ALTS comments at 31; AT&T comments at 23; Citizens Utilities
comments at 15; CompTel comments at 43; Continental comments at 19; Ericsson
comments at 5; Frontier comments at 16; GCI comments at 12; LCI comments at 18;
MCI comments at 32; NEXTLINK comments at 23; Sprint comments at 39-40; TIA
comments at 14; Ameritech comments at 47; Bell Atlantic comments at 27-28; GTE
comments at 38-41; U S West comments at 57-58; California Commission comments at
26; Colorado Commission comments at 24; Louisiana Commission comments at 5;
Wyoming Commission comments at 23-24; USTN reply at 4.

n1021 Ameritech comments at 46-47; Bell Atlantic comments at 27-30; BellSouth
comments at 43; GTE comments at 40-41; NYNEX comments at 71; PacTel comments at
58-59; SBC comments at 46-48; Sprint comments at 39-41; USTA comments at 36.

n1022 BellSouth comments at 43.

n1023 AT&T comments at 23; BellSouth comments at 44-45; NYNEX comments at 71;
GVNW comments at 29 (most small incumbent LECs obtain SS7 functionalities from
US Intelco or a neighboring large incumbent LEC); GTE comments at 40-41 n.61
(competitors include Independent Telecommunications Network, Southern New
England Telephone, and GTE Intelligent Network Services); NYNEX comments at 71;
PacTel comments at 58; Bell Atlantic comments at Attachment 3, 16 (independent
SS7 providers offer an out-of-band signaling channel which allows the service
providers to interconnect with other SS7 networks); USTN reply at 1. Commenters
note that these aggregators also provide access to databases associated with
signaling.  [*40]


n1024 See, e.g., California Commission comments at 26 (under consideration by
the California Commission); Colorado Commission comments at 24; Louisiana
Commission comments at Attachment A; Michigan Commission comments at 12; Texas
Commission comments at 19; Wyoming Commission comments at 23-24 (Wyoming
Commission has draft rules only); In the Matter of the Commission Investigation
Relative to the Establishment of Local Exchange Competition and Other
Competitive Issues, Case No. 95-845-TP-COI at 49 (Ohio Commission June 12, 1996)
(access to SS7 functionalities, and necessary customer databases such as 911,
LIDB, Toll Free Calling, and Directory Assistance).

   461. Some incumbent LECs argue that, because there are competitive providers
for SS7 network services, there is no need for the Commission to require
incumbent LECs to unbundle these network elements for competing carriers. n1025
Most potential competitors counter that access to incumbent LEC SS7 networks
will be necessary for some carriers, either because alternative providers of
signaling systems and databases will not be available to them or because it will
not be technically feasible to use any signaling network other  [*41]   than the
incumbent LEC's SS7 network. n1026 AT&T argues that, even where there are
alternative SS7 networks, unbundling of the incumbent's SS7 network will
increase competition and help control costs for new entrants. n1027

n1025 See, e.g., Bell Atlantic comments at 27-28; BellSouth comments at 44-45;
GTE comments at 40-41 (access is not necessary under section 251(d)(2)(A) to the
extent it is proprietary and denial of such access would not impair the
provision of competitive services under section 251(d)(2)(B) to the extent it is
not proprietary); PacTel comments at 40, 57-60; NYNEX comments at 71 (there are
already alternative suppliers of these functions, and as demand grows, more will
enter the market).

n1026 See AT&T comments at 23; Letter from Frank Simone, Regulatory Division
Manager, Federal Government Affairs, AT&T to William Caton, Acting Secretary,
FCC, June 13, 1996 (AT&T June 13 Ex Parte).

n1027 AT&T comments at 23; accord Telecommunications Resellers Ass'n comments at
36.

   462. Some incumbent LECs contend that the 1996 Act only requires them to
unbundle access to their signaling systems and databases to the extent necessary
to support call routing  [*42]   and completion for competitors. n1028 Other
parties, including IXCs, disagree and contend that access to incumbent LECs'
signaling systems under the 1996 Act should include access to all associated
databases and use of deployed AIN technology, and that such access is necessary
in order for them to compete successfully in the local exchange market. n1029

n1028 ALLTEL comments at 10; Ameritech comments at 46-47; Bell Atlantic comments
at 22.

n1029 See, e.g., AT&T comments at 23; MCI reply at 30-31.


   463. Many parties argue that open access and interconnection to incumbent
LECs' SS7 networks and signaling protocols are critical to maintaining the
seamless routing and completion of traffic between competing carriers. n1030
Frontier asserts that the use of proprietary or closed protocols by incumbent
LECs effectively can prevent interconnected networks from communicating with
each other. n1031 Several state commissions have proposed or required that
incumbent LECs provide unaltered transmission of signaling information between
interconnecting carriers and their customers. n1032 In support of such access,
several commenters cite recent interconnection agreements that provide  [*43]
for the exchange of SS7 signaling messages. n1033

n1030 ACSI comments at 45 (open access is important to support CLASS features
and access to databases); Frontier comments at 16; GST comments at 24; MCI
comments at 33; New York Commission comments at 27 (signaling systems may
represent a bottleneck to efficient exchange of traffic for all LECs); Texas
Commission comments at 20; Wyoming Commission comments at 24; USTN reply
comments at 2.

n1031 Frontier comments at 16 n.31 (such anti-competitive behavior would be
contrary to the pro-competitive goals of the 1996 Act); accord Wyoming
Commission comments at 24 (incumbent LECs may not claim a proprietary right to
signaling protocols).

n1032 Wyoming Commission comments at 23-24 (Wyoming Commission draft rules
require unaltered transmission of signaling information); Texas Commission
comments at 19 (Texas law requires interconnecting carriers to provide
nondiscriminatory access to ensure the interoperability of networks and service
to end users).

n1033 Georgia Commission comments at Attachment E 6-7 (BellSouth and MCIMetro
interconnection agreement provides for the exchange of SS7 signaling messages
including the Transaction Capabilities Application Part (TCAP) part of the SS7
protocol that supports inter alia CLASS features).  [*44]

   464. Virtually all parties agree that physical access, or interconnection, to
the incumbent LEC's SS7 network should occur at the STP, because it provides
essential network management and security functions that are not performed by
other SS7 network elements. n1034 Commenters assert that such access at the STP
would provide other carriers with access to all of the functions of an incumbent
LEC's SS7 network. n1035 A few parties urge the Commission to require incumbent
LECs to unbundle direct access to SCP databases. n1036 Most commenters,
including all of the incumbent LECs, assert that such access is not technically
feasible because SCP databases do not perform the mediation functions present at
the STP. n1037 Some incumbent LECs argue that direct access to any SS7 network
elements, other than the STP, would require development of additional industry
standards before such access could be considered technically feasible. n1038

n1034 See, e.g., Ameritech comments at 48-50; Bell Atlantic comments at 27; MCI
comments at 34-35; NYNEX comments at 71; Sprint comments at 40. Part of the STP
security function is to screen incoming signaling traffic for unusable messages
and to prevent them from reaching the SCP or switch where they could potentially
cause reliability and performance problems. GVNW comments at 29; SBC comments at
46; USTA comments at 36. The STP also prevents unauthorized access to
proprietary information. GTE comments at 39-40.  [*45]

n1035 Bell Atlantic comments at 27; GTE comments at 39; USTA comments at 36. See
AT&T comments at 24 n.25.

n1036 Frontier comments at 16; LCI comments at 18.


n1037 See, e.g., ACSI at 45; Bell Atlantic comments at 27-28; Colorado
Commission comments at 24 (Colorado Commission requires unbundled access to the
SCP via the STP); Comcast comments at 18; GTE comments at 40 (until appropriate
mediation techniques and associated software and hardware are developed, access
to SCP databases should remain through the STP); PacTel comments at 59; NYNEX
comments at 71; SBC comments at 47; Ameritech reply at 20-21 (industry has yet
to develop standards for SCP access); AT&T reply at 19-20 n.32; PacTel reply at
21-22.

n1038 GTE comments at 40; SBC comments at 47; Sprint comments at 40.

   465. Several parties advocate access to unbundled signaling links and STPs.
n1039 BellSouth, however, argues that incumbent LECs should only have to provide
access to their SS7 network at an STP for competitors. n1040 Parties describe
several methods for competing carriers to access unbundled elements of the
incumbent LEC's SS7 network. A new entrant could provide or purchase signaling
[*46]   links to connect its switch to the incumbent LEC's STP, or it could
provide its own signaling link and STP and then connect its STP to the incumbent
LEC's STP. n1041 SBC adds that a competing carrier could also contract with a
third party that has already established signaling link connectivity to the
incumbent LEC's STPs. n1042 SBC also notes that it requires certification of new
companies before implementing SS7 interconnection in order to protect the
integrity of its network. n1043

n1039 ALTS comments at Attachment A, 23; AT&T comments at 23; Cable & Wireless
comments at 19, 24-25; Citizens Utilities comments at 15; GCI comments at 12;
Frontier comments at 16; Telecommunications Resellers Ass'n comments at 35;
NYNEX comments at 71 (provides unbundled access to network signaling resources
for call set up and for database queries through unbundled signaling links and
ports at its STPs); PacTel reply at 21-22; TIA comments at 14; California
Commission comments at 26 (California Commission is considering inter alia,
unbundling STPs and signaling links); Colorado Commission comments at 26;
Wyoming Commission comments at 23-24 (Wyoming Commission draft rules require
unbundling of signaling links, STPs, and SCPs); Iowa Commission comments at
Appendix B, 4 (arguing that signaling links and STPs must be unbundled by
incumbent LECs).  [*47]

n1040 BellSouth reply at 23.

n1041 SBC comments at 47; Sprint comments at 40 (currently provides access to
its SS7 network through "A" signaling links which run from the end office to the
STP and through "B" signaling links which connect the STPs of two separate SS7
networks); U S West comments at 48 (competitors should be able to provide their
own transport to an STP or purchase transport from the incumbent LEC); PacTel
comments at 58 (Pacific Bell proposed, before the California Commission, to
unbundle its signaling links that provide interconnection between other
carriers' switches or STPs to Pacific Bell's STPs).

n1042 SBC comments at 47.

n1043 SBC comments at 47.


   466. Commenters disagree over what databases qualify as network elements
under the 1996 Act. Some parties, including IXCs and other potential local
competitors, argue that access to all incumbent LEC databasess should be
unbundled as network elements. n1044 This would include both incumbent LEC
call processing and non-call processing databases. n1045 Most incumbent LECs
counter that administrative or "back office" databases do not fall within the
definition of network element in the 1996   [*48]   Act. n1046 Incumbent LECs
supporting this limited definition also argue that only those databases used for
the routing and completion of calls are required to be unbundled by the 1996
Act. n1047

n1044 ACSI comments at 42-44; AT&T comments at 23-26; ALTS comments at 31; MCI
comments at 32-33.

n1045 ACSI comments at 42-44; ALTS comments at 31; MCI comments at 32-33 (both
call processing and non-call processing databases necessary to route, complete
and bill simple and complex calls should be unbundled as network elements).

n1046 Ameritech comments at 48-51; Bell Atlantic reply at 12-23; GTE reply at
21; Lincoln Tel. reply at 12; NYNEX reply at 34.

n1047 Bell Atlantic reply at 12-23; GTE reply at 21; Lincoln Tel. reply at 12;
NYNEX reply at 34.

   467. A number of parties urge the Commission to require incumbent LECs to
provide competing carriers with the same access to their databases that they
provide to themselves. n1048 Some potential local competitors argue that access
to a number of existing incumbent LEC databases is important if they are to
compete effectively with the incumbent LEC. n1049 Many parties, including most
incumbent LECs, identify access to  [*49]   the Line Information Database (LIDB)
n1050 and the Toll Free Calling (i.e., 800, 888 numbers) database n1051 as
important to the provision of local service. n1052 Some potential local
competitors contend that databases are a significant expense and that they will
be prohibitively costly to duplicate immediately or in the near future. n1053
The Louisiana Commission notes that it currently requires incumbent LECs to
provide competitive providers with access to LIDB, Toll Free Calling, and AIN
databases through signaling interconnection such that the functionality,
quality, terms and conditions are equal to those the incumbent LEC provides to
itself. n1054 Several incumbent LECs respond that they already provide such
access to the LIDB and Toll Free Calling databases via their SS7 network. n1055
GVNW argues that all access to call-related databases must be mediated to
prevent unauthorized messages from entering an incumbent's database. n1056

n1048 ALTS comments at 31; ACSI comments at 42-43; MCI comments at 32-33; NCTA
comments at 42 (competitors' customer information should be included in
incumbent LEC databases on the same price, terms, and conditions as the
incumbent LEC provides for itself); Teleport comments at 37; Wyoming Commission
comments at 23 (nondiscriminatory access for call routing and completion); GCI
comments at 13; LCI comments at 18; Vartec comments at 5.  [*50]

n1049 ACSI comments at 42-43; MCI comments at 32-37. Letter from Leonard
Sawicki, MCI Telecommunications to Robert Tanner, Common Carrier Bureau, FCC,
July 3, 1996 (MCI July 3 Ex Parte). MCI identifies LIDB, Toll Free Calling,
Local Number Portability and Directory Assistance databases as call processing
databases necessary for new entrants to offer competitive local telephone
service. Id.


n1050 Parties described the LIDB as a database containing information as to
whether a subscriber number is a valid working line, telephone line type, call
screening information and validation information for calling cards. See MCI July
3 Ex Parte. See In the Matter of Local Exchange Carrier Line Information
Database, Report and Order, 8 FCC Rcd 7130 (1993).

n1051 Toll free calling (i.e., 800, 888 numbers) is a nationwide service
generally used to bill the called party. It utilizes a single national SMS and
ten regional toll free calling SCP databases. Toll Free Calling SCPs are
currently owned by Ameritech, Bell Atlantic, BellSouth, GTE, NYNEX, PacTel, SBC,
SNET, Sprint (local), and U S West. The national SMS is owned by Bellcore and
operated by a third party administrator. See In the Matter of Toll Free Service
Access Codes, Notice of Proposed Rulemaking, 10 FCC Rcd 13692 (1995).  [*51]

n1052 ACTA comments at 14; ALTS comments at 31; Ameritech comments at 47 (call
routing and completion functions sometimes require supplemental calling
functions or information such as 800 number routing data or credit
verification); GTE comments at 24; U S West comments at 48; Bell Atlantic reply
at 12-23; GTE reply at 18; NYNEX reply at 34.

n1053 AT&T comments at 23-24; NCTA comments at 42; Telecommunications Resellers
Ass'n comments at 36.

n1054 Louisiana Commission comments at 5; see Michigan Commission comments at 12
(requires non-discriminatory access to databases necessary for the provision of
local exchange service including LIDB and Toll Free Calling databases).

n1055 Ameritech comments at 47; BellSouth comments at 43; GTE comments at 40;
NYNEX comments at 71; Sprint comments at 40.

n1056 GVNW comments at 29; see also MECA comments at 38-39 (competitors should
not have direct "on-line" access to incumbent databases).

   468. Many potential local competitors argue that access to the incumbent
LEC's LIDB should be unbundled. n1057 Most parties agree that query access to
the LIDB is technically feasible. n1058 Most potential local competitors
[*52]   contend that they also need access to the incumbent LECs' administrative
database (SMS) that is used to input customer data into the LIDB. n1059 AT&T
argues that such access is technically feasible, and can be provided to
competitors in the same manner that the incumbent LEC now does for itself. n1060
Other parties propose that the Commission require the incumbent LEC to input a
competing carriers' customer information into its LIDB for the competitor. n1061

n1057 ACTA comments at 14; ACSI comments at 42 (access to the LIDB is important
to identify presubscribed interexchange carriers); GST comments at 25; ALTS
comments at 31.

n1058 AT&T comments at 24; ALTS comments at 31; Ameritech comments at 46-51;
Bell Atlantic comments at 27-28; GTE comments at 38-41; Louisiana Commission
comments at 5; NCTA comments at 42; NYNEX reply at 34; Teleport comments at
37-38; U S West comments 48.


n1059 AT&T comments at 25-26; American Network Exchange comments at 5
(requesting access to LIDB, but without the current restrictions imposed by In
the Matter of Policies and Rules Concerning Local Exchange Carrier Validation
and Billing Information for Joint Use Calling Cards, CC Docket No. 91-115); ACSI
comments at 42; Citizens Utilities comments at 15; NCTA comments at 42;
Teleport comments at 37.  [*53]

n1060 AT&T comments at 26. The conditions, (e.g., type of media, electronic
information transfer method) applicable to competitor interconnection with such
databases should be identical to those the incumbent LEC uses for itself. Id.

n1061 Georgia Commission comments at 21 (under BellSouth-MCIMetro
interconnection agreement, BellSouth will enter MCIMetro line information into
its LIDB so as to enable MCIMetro customers to participate in alternative
billing systems, such as collect calling and third number billing).

   469. Several parties argue that the Commission should unbundle the Toll Free
Calling database for access by competitors. n1062 Most incumbent LECs commented
that they already provide query access to their Toll Free Calling databases.
n1063 In addition, access to the single national SMS is available under tariff
administered by Bellcore. n1064

n1062 ALTS comments at 31; American Network Exchange comments at 5; ACSI
comments at 43; Louisiana Commission comments at 5.

n1063 GTE comments at 40; Sprint comments at 40; NYNEX reply at 34. Reservation
and activation of 800 and 888 numbers is available today as an unbundled tariff
offering from many common carriers and independent suppliers through the RESP
ORG process. See In the Matter of Toll Free Service Access Codes, Notice of
Proposed Rulemaking, 10 FCC Rcd 13692 (1995).  [*54]

n1064 Access to individual 800 and 888 numbers is achieved through the RESP ORG
process administered by Bellcore. Customers contact a RESP ORG (which can be an
IXC, LEC, wireless carrier, or a large organization like Westinghouse) which
enters subscriber information into the 800 SMS, assigning a number to the
subscriber. The SMS than loads the routing information into the SCPs, at which
time the number is working and can be utilized by the subscriber. See In the
Matter of Toll Free Service Access Codes, Notice of Proposed Rulemaking, 10 FCC
Rcd 13692 (1995).

   470. Parties also argue that they need equal access to 911 and E911 services,
including the underlying Automatic Location Indicator (ALI) database. n1065
Several state commissions have also asserted that such access is necessary for
new entrants as well as incumbent LECs. n1066 NCTA asserts that competitors must
have access to incumbent LEC systems for 911 and E911 services because currently
only incumbent LECs maintain them. n1067

n1065 ACSI comments at 43; ALTS comments at 32; Citizens Utilities comments at
15; Comcast comments at 20; Continental comments at 19; GST comments at 25; MCI
comments at 18, 33-34; NCTA comments at 42; Teleport comments at 37.  [*55]

n1066 Georgia Commission comments at 19; Wyoming Commission comments at 23.

n1067 NCTA comments at 42.


   471. Some competitive providers urge the Commission to require incumbent LECs
to unbundle access to their AIN. n1068 Several parties argue that AIN should be
unbundled to allow competitors to access the incumbent LEC's AIN physically at
all points that the incumbent does for itself. n1069 Cable & Wireless argues
that larger carriers may be able to design and build their own AIN technology,
but smaller carriers may not be able to afford to deploy all of the necessary
equipment. n1070 MCI argues that access to the incumbent LEC's AIN capabilities
would allow them to bring new services to the marketplace and enhance their
ability to compete with the incumbent. n1071 Several commenters ask the
Commission to adopt the approach of the Louisiana Commission which ordered
unbundled access to incumbent LEC databases for all services that the incumbent
LEC provides itself, including 800 number, LIDB, and AIN services. n1072 Sprint
argues that access to AIN should be unbundled to the extent AIN is used by the
incumbent LEC to provide call routing functions. n1073 Many incumbent  [*56]
LECs respond that AIN is still an evolving technology, and therefore it is not
technically feasible for the Commission to require unbundled access. n1074 Some
incumbent LECs also argue that AIN is not a signaling system or database, and
therefore is not a network element under the Act. n1075

n1068 Ad Hoc Telecommunications Users Committee comments at 24-25; ACTA comments
at 18; ACSI at 42; Cable & Wireless comments at 23-25; CompTel comments at 43;
GCI comments at 13; MCI comments at 33-34; Cable & Wireless reply at 23-24; USTN
reply at 3-4. Letter from Genevieve Morelli, Vice President & general Counsel,
CompTel to William Caton, Acting Secretary, FCC, June 14, 1996 (CompTel June 12
Ex Parte); Letter from Linda Oliver, Counsel for WorldCom to William Caton,
Acting Secretary, FCC, June 14, 1996 (WorldCom June 14 Ex Parte).

n1069 CompTel comments at 43 (competitive providers should be able to
interconnect with AIN elements at all points that ILECs interconnect currently);
MCI comments at 35.

n1070 Cable & Wireless comments at 23 (access to the incumbent LEC's existing
AIN platform including the SMS database, signaling links and SCPs will allow new
entrants to bring new services to the market efficiently and quickly).  [*57]

n1071 MCI comments at 35.

n1072 ACSI comments at 43; CompTel comments at 43-44; MCI comments at 35
(competitive providers should stand in the same relationship to AIN components
as the ILEC does when it offers AIN services to its customers).

n1073 Sprint reply at 20 n.27.

n1074 BellSouth comments at 44; SBC comments at 44; PacTel reply at 22
(Intelligent Networks docket contains evidence that AIN unbundling is not
technically feasible).

n1075 Bell Atlantic comments at 29; Ameritech reply at 21 (arguing that because
there are no services provided via AIN that are not also provided via the
switch, that AIN unbundling is not necessary for competitive providers).


   472. A number of parties assert that currently the only technically feasible
point of access to the incumbent LEC's AIN is at the incumbent LECs' SCE and
SMS. n1076 Several competitive providers contend that access at the SCE and SMS
would provide a competing carrier with the same ability to offer AIN-based
services as the incumbent LEC without having to recreate initially all of the
AIN elements. n1077 Ericsson notes that mere unbundling of databases and
signaling elements is not likely to  [*58]   allow competitors to create and
offer competing AIN services unless they have access to both a service creation
environment and service management system. n1078 Bell Atlantic asserts that
AIN is not a network element within the scope of the 1996 Act, but allows that,
if it were, unbundled access to the SMS should meet the requirements of section
251. n1079 BellSouth, however, contends that the Commission should not attempt
to declare undefined "software building blocks" to be network elements. n1080
GVNW further argues that such access will require "partitioning" of incumbent
LECs' databases to protect each carriers' information. n1081

n1076 Ameritech comments at 49 (Ameritech claims that it has offered to provide
database access via its SMS and SCE in the Intelligent Networks proceeding, but
also argues that such access is still under development and not yet technically
feasible); GTE comments at 42 (record in CC Docket No. 91-346 contains
persuasive evidence that, other than access to the SMS, access to AIN network
elements is neither technically nor operationally feasible at this time); Sprint
comments at 41; Ameritech reply at 15 (agreeing with Sprint's position on SMS
access); Bell Atlantic comments at 29-30 (as demonstrated in the Intelligent
Networks docket, the only point at which it is technically feasible to provide
AIN access is at the Service Management System level); LCI comments at 18-19.
[*59]

n1077 Ameritech comments at 49 (working on such access for third parties,
although Ameritech believes it is not yet technically feasible); Bell Atlantic
comments at 29 (access for third parties at the SMS would satisfy the
requirements of section 251); Cable & Wireless comments at 24; Ericsson comments
at 5-7; Sprint comments at 40 (access at the SMS is the only technically
feasible point of interconnection for AIN that maintains network reliability);
GVNW comments at 31 (competitor could create its own services in an incumbent
LEC's SMS using the incumbent's SCE, which would protect the integrity of the
incumbent LEC's AIN platform); LCI comments at 18 (SMS and SCE access are
essential for competitors to provide advanced services).

n1078 Ericsson comments at 6.

n1079 Bell Atlantic comments at 29.

n1080 BellSouth comments at 46.

n1081 GVNW comments at 31.

   473. In our Intelligent Networks docket, several parties, including most
incumbent LECs, expressed support for the Commission's proposal to require
unbundled access to the SMS by third parties. n1082 Several parties argue that
such access is technically feasible. n1083 Most incumbent LECs agree  [*60]
that, of the potential points of access to AIN proposed in our Intelligent
Networks NPRM, access to the SMS poses the least risk of harm to the public
switched network. n1084 Many of these commenters argue that access to the SMS
would provide competitors with an opportunity to create innovative call
processing services. n1085 U S West, however, contends that, since third parties
using SMS access would be dependent on incumbent LEC software at the SCE,
competitors would not be satisfied with such access because it would not allow
them to develop their own proprietary services. n1086 Other parties argue that
SMS access will not provide significant benefits to third parties because of the
limitations inherent in the service creation parameters established by the LECs.
n1087


n1082 See, e.g., BellSouth update comments in CC Docket No. 91-346 at 6; Bell
Atlantic comments in CC Docket No. 91-346 at 6; GTE comments in CC Docket No.
91-346 at 21; Central comments in CC Docket No. 91-346 at 12; SNET comments in
CC Docket No. 91-346 at 5; NYNEX comments in CC Docket No. 91-346 at 3 n.3,
10-11; Siemens comments in CC Docket No. 91-346 at 2; TIA comments in CC Docket
No. 91-346 at 2; MCI comments in CC Docket No. 91-346 at 10; Ericsson reply in
CC Docket No. 91-346 at 2-3.  [*61]

n1083 MCI comments in CC Docket No. 91-346 at 6; Siemens comments in CC Docket
No. 91-346 at 2; TIA comments in CC Docket No. 91-346 at 2.

n1084 Bell Atlantic comments in CC Docket No. 91-346 at 6-7; BellSouth comments
in CC Docket No. 91-346 at 12, 13; GTE comments in CC Docket No. 91-346 at 19,
21; NYNEX comments in CC Docket No. 91-346 at 3; PacTel comments in CC Docket
No. 91-346 at 20-21; SBC comments in CC Docket No. 91-346 at 5, 8; U S West
comments in CC Docket No. 91-346 at 52; United and Central comments in CC Docket
No. 91-346 at 1.

n1085 GSA comments in CC Docket No. 91-346 at 3; SNET comments in CC Docket No.
91-346 at 2; Siemens comments in CC Docket No. 91-346 at 2; TIA comments in CC
Docket No. 91-346 at 2; MCI in CC Docket No. 91-346 comments at 10; Ericsson
reply in CC Docket No. 91-346 at 2-3.

n1086 U S West comments in CC Docket No. 91-346 at 53; Ad Hoc Telecommunications
Users Committee comments in CC Docket No. 91-346 at 11 (incumbent LECs' ability
to mimic third party services created in the incumbent LEC's SCE will diminish
the incentive of third parties to create new services that would compete with
LEC AIN offerings).

n1087 AT&T comments in CC Docket No. 91-346 at 5-11 (competitors would be
restricted to the particular LEC's AIN architecture and software platform,
preventing the creation and deployment of unique AIN services); ALLNET comments
in CC Docket No. 91-346 at 2; Ad Hoc Telecommunications Users Committee comments
in CC Docket No. 91-346 at 8-9.  [*62]

   474. Several parties argue that incumbent LEC SCP databases and AIN triggers
in the incumbent LEC switch should be unbundled for a requesting carrier. n1088
Most incumbent LECs argue that sufficient mediation needs to be developed and
implemented before any third party interconnection to AIN will be technically
feasible. n1089 Some parties, however, counter that there is sufficient
screening in the STP and that incumbent LECs should be required to accept AIN
signaling messages from competitors' AIN SCP databases without additional
mediation. n1090 AT&T argues that the refusal to carry AIN messages prevents
competitive carriers from offering the same advanced AIN and CLASS services as
the incumbent. n1091 AT&T further contends that mediation will not be necessary,
because just as carriers are certified before interconneting with other
carriers' SS7 networks, carriers can be certified for AIN. n1092 Some
competitors argue that a short transitional period of mediated access could be
established to allow time for the adoption of standards to ensure network
integrity, but only if incumbent LECs were required to use the same mediated
access. n1093

n1088 Ad Hoc Telecommunications Users Committee comments at 17; GCI at 12;
Louisiana Commission at 5; LCI comments at 18.  [*63]


n1089 BellSouth comments at 47. Mediation refers to additional screening
software or devices to prevent incorrect or unacceptable AIN messages from
reaching the switch or SCP database. Id.

n1090 ACTA comments at 21 (mediation devices will increase post dial delay and
significantly increase competitors costs); CompTel comments at 45 (since section
251 unbundling is limited to telecommunications carriers, who already adhere to
network security and integrity requirements as well as rigorous testing
procedures, there is no need for mediation for access to AIN elements).

n1091 AT&T reply at 20 (arguing that such a refusal violates the requirement of
section 251(c)(2) for interconnection on "just, reasonable and
nondiscriminatory" terms).

n1092 See Letter in CC Docket No. 91-346 from Bruce Cox, Government Affairs
Director, AT&T, to William F. Caton, Acting Secretary, FCC, Aug. 21, 1995 (AT&T
Intelligent Networks Proposal) Attachment at 2; but see PacTel reply at 22
(certification would not prevent competitors from sending erroneous messages to
an incumbent LEC's AIN SCP which could lead to unauthorized changes in a
customer's service or PIC).

n1093 Cable & Wireless comments at 25; MCI comments at 36; ACSI comments at 44.
[*64]

   475. A few parties, including AT&T and MCI, propose unbundling of AIN in
order to allow competing carriers to interconnect their own SCP database to the
incumbent LECs' AIN so that competing carriers could provide call processing
instructions to the incumbent LEC's switch for calls to or from its own
customers. n1094 AT&T argues that this would allow it to offer different
services to the customer than does the incumbent LEC, which would increase
competition in the local exchange market. n1095 Ericsson admits that this is "an
attractive concept which might increase competition" but argues that there are
numerous technical issues that must be resolved, including billing and service
interaction issues. n1096 Incumbent LECs, manufacturers and other parties argue
that it is not technically feasible for a competing provider to connect its own
alternative call processing database to the incumbent LEC signaling network.
n1097 Many parties, including virtually all incumbent LECs, argue against
allowing a competing carrier or reseller to connect its own alternative call
processing database directly to the incumbent LEC's SS7 network because of the
network reliability and security issues it  [*65]   creates. n1098 These parties
warn that requiring such unbundled access to AIN could make an incumbent LEC's
switch vulnerable to inappropriate routing and billing instructions from the
competitor's SCP. n1099 BellSouth argues that the Intelligent Networks docket
supports a finding that this type of AIN unbundling is not technically feasible.
n1100 Sprint contends that it could not forecast capacity needs for a competing
carrier's alternative database in order to identify its own network capacity
requirements. n1101 GVNW adds that any national rule requiring such a form of
interconnection would require many small incumbent LECs to make uneconomic
upgrades of their switches in order to accommodate it. n1102

n1094 ACTA comments at 21; AT&T comments at 23-25; Cable & Wireless comments at
24; MCI comments at 18, 33 (arguing that such interconnection is supported by
the findings of the Information Industry Liaison Committee (IILC) Issue #026
Task Force on Long Term Unbundling); CompTel comments at 44; AT&T reply at
19-20.


n1095 AT&T comments at 23-25. AT&T admits that this arrangement would require
carriers to agree upon an expanded signaling message set for AIN call
processing, but it argues that such messages are already defined by Bellcore and
it is the refusal of incumbent LECs' to accept them that prevents its
deployment. Id.  [*66]

n1096 Ericsson comments at 6.

n1097 Sprint comments at 41 (there are significant network reliability issues
involved with introducing a third party database to an SS7 network); BellSouth
comments at 46 (before interconnection of a third-party database to an incumbent
LEC's signaling system, more development is still needed for routing, protocol
screening, call gapping, resource contention, overload control, feature
interaction management and billing concerns for such an arrangement); Ericsson
comments at 6 (interconnection of a third-party database to an incumbent LEC's
signaling system might promote competition but there are complex technical
issues to address before such a scheme could become technically feasible);
Teleport comments at 37-38.

n1098 BellSouth comments at 45-46 (introduction of a third-party database to an
incumbent LEC's signaling system creates the potential for fraud, sabotage, and
slamming of the incumbent LEC's customers); SBC comments at 45 (record in CC
Docket No. 91-346 is replete with evidence demonstrating the current technical
infeasibility of interconnection of third-party databases to an incumbent LEC'
signaling system); Sprint comments at 41 (cannot test for system validation and
feature interaction); Teleport comments at 37-38; GVNW comments at 30-31 (such
interconnection must be mediated to protect both networks from potential harm
from incorrect SS7 messages).  [*67]

n1099 BellSouth comments at 46; Ericsson comments at 6; TCG comments at 37-38;
GTE reply at 21-22 (third-party access to AIN triggers not technically feasible
without mediation because of network reliability and service integrity issues);
Teleport comments at 37-38; but see Cable & Wireless comments at 24 (incumbent
LEC arguments concerning network integrity are analogous to AT&T arguments in
Carterfone that non-Bell System equipment could cause malfunctions in the
network).

n1100 BellSouth comments at 45-46 (areas still needing resolution include
routing, protocol screening, call gapping, resource contention, overload
control, feature interaction management, and billing). See also Letter in CC
Docket No. 91-346 from Karen Weis, Division Manager, AT&T, and Ben G. Almond,
Executive Director, Federal Regulatory, BellSouth, to William F. Caton, Acting
Secretary, FCC, Dec. 14, 1995 (AT&T-BellSouth Intelligent Networks Joint
Report). The AT&T-Bell South Intelligent Networks Joint Report detailed the
results of their laboratory-to-laboratory test concerning the interconnection of
an AT&T SCP to BellSouth's SSP. Id.

n1101 Sprint comments at 41.

n1102 GVNW comments at 30-31.  [*68]


   476. Many parties contend that further testing of AIN is needed before
further access and interconnection between carriers can be considered
technically feasible. n1103 Most of the BOCs support a two year testing plan for
the industry to further investigate issues relating to AIN before moving
forward to third party interconnection. n1104 Several parties, however, urge the
Commission to reject the LECs' proposed Intelligent Networks testing plan, argue
that it is not necessary to ensure network integrity and that it is inconsistent
with the 1996 Act. n1105 Parties opposed to the LECs' testing plan assert that
it is vague and revisits work that has already been done in existing industry
fora. n1106 Supporters of the LECs' testing plan, however, counter that they are
willing to consider working within existing industry fora. n1107 As described in
the Intelligent Networks docket, the LEC testing plan will take place over a two
year period with final recommendations to be decided by the participants
themselves. Some competitors, while allowing for the need for further testing,
advocate imposing a mandatory time limit on the resolution of the outstanding
mediation issues for unbundled  [*69]   access to AIN. n1108

n1103 Bell Atlantic comments at 29 n.10; BellSouth comments at 47; Ericsson
comments at 6-7; GTE comments at 42; GVNW comments at 32; Lincoln Tel. comments
at 10; SBC comments at 46; U S West comments at 58.

n1104 Bell Atlantic comments at 29 n.10; BellSouth comments at 47; GTE comments
at 42; Lincoln Tel. comments at 10; SBC comments at 44 (Commission should issue
order in CC Docket No. 91-346 that endorses the Tier 1 LECs' joint proposal for
an industry IN project); U S West comments at 58 (industry testing plan will
lead to development of non-proprietary AIN interfaces). See Letter in CC Docket
No. 91-346 from Sandra Wagner, Director, Federal Regulatory, SBC Communications,
Inc., to William F. Caton, Acting Secretary, FCC, June 23, 1995 (LEC Intelligent
Networks Proposal). Active participants in the LEC Proposal are Bell Atlantic,
GTE, PacTel, SBC and U S West. Other incumbent LECs supporting the LEC Proposal,
but not currently "active" include BellSouth, Lincoln Tel., SNET, and Sprint.

n1105 Cable & Wireless comments at 26; MCI comments at 36-37. See also AT&T
update comments in Docket 91-346 at 5-6.

n1106 MCI comments at 36-37; but see GTE reply at 22 (testing is necessary and
is not intended for delay).  [*70]

n1107 Letter in CC Docket No. 91-346 from Sandra Wagner, Director, Federal
Regulatory, SBC Communications, to William Caton, Acting Secretary, FCC, May 22,
1996 (SBC May 22 Intelligent Networks Ex Parte). SBC contends that the Joint LEC
project proposed creating a new forum directly in response to MCI's prior
assertions that ATIS sponsored forums were ineffective in addressing
interconnection issues. Id. at 4-5.

n1108 Cable & Wireless comments at 25; MCI comments at 36 (advocating that the
Commission refer outstanding issues from the IILC Issue #026 consensus document
to an established forum and that it should monitor progress to ensure
implementation of access to the remaining interface points is accomplished
within six months of the end of an initial negotiation or arbitration process).


   477. Some commenters believe that a Commission order to unbundle AIN
functionalities would satisfy the objectives of the Intelligent Networks
proceeding. n1109 AT&T asserts that, if unbundled signaling explicitly includes
the exchange of AIN signaling messages between incumbent LEC switches and
competitor's SCPs, then the Commission does not need to pursue CC Docket No.
91-346 further  [*71]   because its objectives will be met in this proceeding.
n1110 SBC, however, urges the Commission not to merge the Intelligent Networks
proceeding into this docket. n1111
n1109 AT&T comments at 25 n.29; Cable & Wireless comments at 26.

n1110 SCB comments at 25 n.29.

n1111 SBC comments at 46 (arguing that record in CC Docket No. 91-346 is already
complete).

   c. Discussion

   478. In the interconnection section above, we conclude that the exchange of
signaling information between LECs necessary to exchange traffic and access call
related databases was included within the interconnection obligation of section
251(c)(2). n1112 Thus, notwithstanding any obligations under section 251(c)(3),
incumbent LECs are required to accept and provide signaling in accordance with
the exchange of traffic between interconnecting networks. We conclude that this
exchange of signaling information may occur through an STP-to-STP
interconnection.

n1112 See supra, Section IV. We emphasize, in Section V.J.4.c.(4), such exchange
of signaling information does not include the exchange of AIN signaling
information between networks for the purpose of providing AIN messages to the
incumbent LEC's switch from a competitor's SCP database.  [*72]

   (1) Signaling Links and STP

   479. We conclude that incumbent LECs, upon request, must provide
nondiscriminatory access to their signaling links and STPs on an unbundled
basis. We believe it is technically feasible for incumbent LECs to provide such
access, and that such access is critical to entry in the local exchange market.
Further, the 1996 Act requires BOCs to provide "nondiscriminatory access to
databases and associated signaling necessary for call routing and completion" as
a precondition for entry into in-region interLATA services. n1113 Thus, it
appears that Congress contemplated the unbundling of signaling systems as
network elements.

n1113 47 U.S.C. @ 271(c)(2)(B)(x). See also statement of Sen. Pressler, noting
that "access to signaling and databases [is] important if you are going to
compete and get into the market." 141 Cong. Rec. S8163 (June 12, 1995).

   480. We conclude that access to unbundled signaling links and STPs is
technically feasible. n1114 The majority of commenters, including incumbent
LECs, agree that it is technically feasible to provide unbundled access to
signaling links and STPs. n1115 Parties note that incumbent LECs and signaling
aggregators  [*73]   already provide such access. n1116 In addition, several
state commissions already require incumbent LECs to provide unbundled elements
of SS7 networks. n1117 Because of the screening role played by the STP and
associated network reliability concerns that were raised in the record, however,
we do not require that incumbent LECs permit requesting carriers to link their
own STPs directly to the incumbent's switch or call-related databases. n1118 We
take a deliberately conservative approach here because of significant evidence
in the record and we note that mere conclusory objections to technical
feasibility would not alone be sufficient evidence.


n1114 As discussed infra, we conclude that it is not technically feasible to
unbundle the SCP from its associated STP, therefore, we do not require incumbent
LECs to unbundle those signaling links connecting SCPs to STPs. We emphasize
that we take this conservative course here because of the real evidence in the
record and note that mere conclusory objections to technical feasibility will
not be considered sufficient evidence of such.

n1115 See, e.g., AT&T comments at 23; TIA comments at 14; U S West comments at
48; PacTel reply at 21-22.  [*74]

n1116 See, e.g., BellSouth comments at 43; GVNW comments at 29; NYNEX comments
at 71; USTN reply at 1.

n1117 See, e.g., Colorado Commission comments at 24; Michigan Commission
comments at 12; Texas Commission comments at 19.

n1118 See, e.g., Ameritech comments at 50; Bell Atlantic comments at 27; MCI
comments at 34-35; Sprint comments at 40. We note, however, that we do not
preempt those state commissions that have required incumbent LECs to do so. See
Illinois Wholesale Order.

   481. Under section 251(d)(2)(A), the Commission must consider whether access
to proprietary network elements is necessary. n1119 Commenters did not identify
proprietary concerns with signaling protocols for the SS7 network. n1120
Moreover, in general, SS7 signaling networks adhere to Bellcore standards,
rather then LEC-specific protocols and provide seamless interconnectivity
between networks. n1121 Thus, we conclude that the unbundling of signaling links
and STPs does not present proprietary concerns with respect to the incumbent
LEC.

n1119 47 U.S.C. @ 251(d)(2)(A).

n1120 AT&T argues that there are no proprietary information issues because
signaling information is generated in the incumbent LEC's switch and is
provisioned entirely by the incumbent LEC. AT&T comments at 26.  [*75]

n1121 A few commenters urge that we prohibit incumbent LECs from taking a
proprietary interest in signaling protocols. These parties argue that such a
proprietary interest conflicts with the continuing necessity for open access to
signaling protocols to maintain the seamless nationwide "network of networks."
See Frontier comments at 16 n.31; Wyoming Commission comments at 24.


   482. Under section 251(d)(2)(B), the Commission must consider whether "the
failure to provide access to such network elements would impair the ability of
the telecommunications carrier seeking access to provide the services that it
seeks to offer." n1122 Access to signaling systems continues to be a critical
element to providing competing local exchange and exchange access service. The
vast majority of calls made over incumbent LEC networks are set-up and
controlled by separate signaling networks. Incumbent LECs argue that access to
signaling systems and associated databases is already available from other
providers and therefore, they should not have to unbundle them for access by
competitors. n1123 As discussed above, section 251(d)(2)(B) only relieves an
incumbent LEC of its unbundling obligation if  [*76]   other unbundled elements
in its network could provide the same service without diminution of quality.
Because alternative signaling methods, such as in-band signaling, would provide
a lower quality of service, n1124 we conclude that a competitor's ability to
provide service would be significantly impaired if it did not have access to
incumbent LECs' unbundled signaling links and STPs.

n1122 47 U.S.C. @ 251(d)(2)(B).

n1123 See, e.g., Bell Atlantic comments at 27-28; BellSouth comments at 44; GTE
comments at 40-41; NYNEX comments at 71.

n1124 SS7 network signaling is critical in the provision of modern
telecommunications services, allowing signaling messages to travel separately
from the voice path for individual calls, increasing efficiency and making
possible a host of new signaling-based services. AT&T comments at 23. Popular
features like Calling Number Identification (Caller ID) and Calling Name
Identification, as well as enhanced call set-up functions and such Custom
Calling features as Repeat Call and Return Call, would be unavailable without
SS7 capabilities. Bell Atlantic comments at Attachment 3, 17.

   483. The purchase of unbundled elements of the SS7   [*77]   network gives
the competitive provider the right to use those elements for signaling between
its switches (including unbundled switching elements), between its switches and
the incumbent LEC's switches, and between its switches and those third party
networks with which the incumbent LEC's SS7 network is interconnected. When a
competitive provider purchases unbundled switching from the incumbent LEC, the
incumbent LEC must provide nondiscriminatory access to its SS7 network from that
switch in the same manner in which it obtains such access itself. Carriers that
provide their own switching facilities should be able to access the incumbent
LEC's SS7 network for each of their switches via a signaling link between their
switch and an incumbent LEC's STP. n1125 Competitive carriers should be able to
make this connection in the same manner as an incumbent LEC connects one of its
own switches to the STP. This could be accomplished by the incumbent providing
an unbundled signaling link from its STP to the competitor's switch or by a
competitor bringing a signaling link from its switch to the incumbent LEC's STP.

n1125 Competitors should be able to interconnect their own switches to the
incumbent LEC's signaling system in any technically feasible manner. Competitors
may bring a signaling "A" link from their switch to the incumbent LEC's STP.
CAPs use this type of connection today to connect their tandem switches to
incumbent LECs' STPs. AT&T comments at 24 n.26. Competitors might also link
their switch to their own STP, and then connect to an incumbent LEC's STP via a
signaling "D" or "B" link.  [*78]

   (2) Call-Related Databases


   484. We conclude that incumbent LECs, upon request, must provide
nondiscriminatory access on an unbundled basis to their call-related databases
n1126 for the purpose of switch query and database response through the SS7
network. n1127 Thus, for example, we find that it is technically feasible for
incumbent LECs to provide access to the Line Information Database (LIDB), the
Toll Free Calling Database and Number Portability downstream databases. n1128
The vast majority of parties, including incumbent LECs, agree that it is
technically feasible to provide access to the LIDB and the Toll Free Calling
databases at an STP linked to the database. n1129 Several state commissions also
report that they have ordered incumbent LECs' to provide such access to the LIDB
and the Toll Free Calling databases. n1130 We require incumbent LECs to provide
this access to their call-related databases by means of physical access at the
STP linked to the unbundled database. We find that such access is critical to
entry in the local exchange market.

n1126 Call-related databases are those SS7 databases used for billing and
collection or used in the transmission, routing, or other provision of a
telecommunications service.  [*79]

n1127 Query and response access to a call-related database is intended to
require the incumbent LEC only to provide access to its call-related databases
as is necessary to permit a competing provider's switch (including the use of
unbundled switching) to access the call-related database functions supported by
that database. The incumbent LEC may mediate or restrict access to that
necessary for the competing provider to provide such services as are supported
by the database.

n1128 AT&T indicates that for LIDB and 800/888 database queries standard TCAP
messages have been established, and reliability, security, provisioning, and
billing issues have been addressed. Letter from Karen Weis, Division Manager,
AT&T to William Caton, Acting Secretary, FCC, July 16, 1996 (AT&T July 16 Ex
Parte). Bell Atlantic states that it currently provides interconnection for LIDB
and 800 databases. Bell Atlantic comments at 2. Number portability "downstream
databases" are defined in Part 51 of our rules as adopted by this Order. See In
the Matter of Telephone Number Portability, First Report and Order and Further
Notice of Proposed Rulemaking, CC Docket No. 95-116, FCC 96-286 (rel. July 2,
1996).  [*80]

n1129 See, e.g., Ameritech comments at 47; AT&T comments at 24; ALTS comments at
31; GTE comments at 40; MCI comments at 34-35; NYNEX comments at 71; U S West
comments at 48.

n1130 Louisiana Commission comments at 5; Michigan Commission comments at 12;
PacTel comments at Appendix A, 7 (California Commission has required such
access).

   485. We conclude that it is not technically feasible to unbundle the SCP from
its associated STP. We note that the overwhelming majority of commenters contend
that it is not technically feasible to access call-related databases in a manner
other than by connection at the STP directly linked to the call-related
database. n1131 Parties argue that the STP is designed to provide mediation and
screening functions for the SS7 network that are not performed at the switch or
database. n1132 We, therefore, emphasize that access to call-related databases
must be provided through interconnection at the STP and that we do not require
direct access to call-related databases.

n1131 See, e.g., Sprint comments at 40; AT&T reply at 19-20 n.32.

n1132 See, e.g., GTE comments at 40; USTA comments at 36.


   486. Several commenters also identified  [*81]   access to call-related
databases used in the incumbent's AIN to be critical to fair competition in the
local market, n1133 and some state commissions have ordered incumbent LECs to
provide access to AIN databases. n1134 We conclude that such access is
technically feasible via an STP for those call-related databases used in the
incumbent LEC's AIN. n1135 First, of course, when a new entrant purchases an
incumbent's local switching element it is technically feasible for the new
entrant to use the incumbent's SCP element in the same manner, and via the same
signaling links, as the incumbent itself. Thus, we find no technical impediments
in the record with regard to such access when a requesting carrier is also
purchasing a local switching element associated with the AIN call-related
database.

n1133 Cable & Wireless comments at 24; Citzens Utilities coments at 15; MCI
comments at 32-33; TIA comments at 14; CompTel comments at 43; AT&T comments at
23-26.

n1134 Louisiana Commission comments at 5; Wyoming Commission comments at 23-24;
see also Illinois Wholesale Order.

n1135 AT&T comments at 23-26; CompTel comments at 43; MCI comments at 36; Letter
from Wendy Blueming, Regulatory Affairs and Public Policy, SNET to William
Caton, Acting Secretary, FCC, July 23, 1996 (SNET July 23 Ex Parte); AT&T July
16 Ex Parte.  [*82]

   487. Further, we conclude that when a new entrant deploys its own switch, and
links it to the incumbent LEC's signaling system, it is technically feasible for
the incumbent to provide access to the incumbent's SCP to provide AIN-supported
services to customers served by the new entrant's switch. Some SS7 network
services resellers currently provide such access. n1136 Other potential local
competitors present additional evidence supporting the technical feasibility of
such access. n1137 Unlike the situation where a competitor's SCP would control
the incumbent's switch (which is discussed below in section V.I.4.c.(4)), in
this scenario, the incumbent's SCP will respond to and control the competitor's
switch, and potential competitors that have commented in the record do not
express network reliability concerns with regard to such control. n1138 Further,
like the software resident in a switch, the incumbent LEC's applications
resident in an SCP are merely part of the overall software and hardware making
up the SCP facility. Thus, carriers purchasing access under either scenario
above may use the incumbent's service applications in addition to their own.
n1139

n1136 SNET July 23 Ex Parte; Letter from Stephen Kraskin, Illuminet (USTN) to
Office of the Secretary, FCC July 23, 1996 (USTN July 23 Ex Parte).  [*83]

n1137 See AT&T July 16 Ex Parte; see also AT&T comments at 23-26; CompTel
comments at 43; MCI comments at 36.

n1138 See AT&T July 16 Ex Parte. AT&T asserts that no additional or unique
reliability problems would be created that have not already been addressed and
resolved by those incumbent LECs who have proposed SMS access for third parties
in the Intelligent Networks proceeding. Id.

n1139 See infra, Section V.I.4.c.(3) on unbundled access to the incumbent LEC's
SCE and SMS.


   488. Although we conclude that access to incumbent AIN SCPs is technically
feasible, we agree with BellSouth that such access may present the need for
mediation mechanisms to, among other things, protect data in incumbent AIN SCPs
and ensure against excessive traffic volumes. n1140 In addition, there may be
mediation issues a competing carrier will need to address before requesting such
access. n1141 Accordingly, if parties are unable to agree to appropriate
mediation mechanisms through negotiations, we conclude that during arbitration
of such issues the states (or the Commission acting pursuant to section
252(e)(5)) must consider whether such mediation mechanisms will be available and
will  [*84]   adequately protect against intentional or unintentional misuse of
the incumbent's AIN facilities. We encourage incumbent LECs and competitive
carriers to participate in industry fora and industry testing to resolve
outstanding mediation concerns. n1142 Incumbent LECs may establish reasonable
certification and testing programs for carriers proposing to access AIN call
related databases in a manner similar to those used for SS7 certification. n1143

n1140 Letter from W.W. Jordan, Executive Director - Federal Regulatory,
BellSouth to William Caton, Acting Secretary, FCC, July 16, 1996 (BellSouth July
16 Ex Parte) ("With a BellSouth SCP to a ALEC SSP [switch] interconnection
arrangement, network reliability and security concerns, from BellSouth's
perspective, would largely be limited to issues associated with traffic
management."); Letter from James Smith, Director--Federal Relations, Ameritech
to William Caton, Acting Secretary, FCC, July 17, 1996 (Ameritech July 17 Ex
Parte) ("The volume of queries sent from the CLEC SSP [switch] could overload
the LEC SCP, interfering with the operation of the service provided to that
CLEC, or with other services which may operate on the LEC's SCP."); Letter from
Joseph Mulieri, Director--FCC Relations, Bell Atlantic to Robert S. Tanner,
Attorney Advisor, FCC, July 18, 1996 (Bell Atlantic July 18 Ex Parte). BellSouth
also raises the need for mediation to prevent unauthorized modification of
information within an incumbent LEC's AIN SCP database. BellSouth July 16 Ex
Parte. Incumbent LECs' comments in this proceeding and in the IN docket
generally focus on the need for mediation to prevent a competitor's database
from sending inappropriate AIN signaling information to the incumbent LEC's
switch (see infra Section V.I.4.c.(4)). See PacTel comments at 61-62; BellSouth
comments at 45-46; Bell Atlantic comments at Appendix 3, 18-19; U S West
comments in CC Docket No. 91-346 at 73-74, 84; NYNEX comments in CC Docket No.
91-346 at 14-15; SBC comments in CC Docket No. 91-346 at 8-9.  [*85]

n1141 Mediation may be necessary for requesting carriers to ensure that
inadvertent feature interactions, network management control and customer
privacy concerns do not arise from such access. See, e.g., Ameritech July 17 Ex
Parte.

n1142 See, e.g., Christine Maglott, Information Industry Liaison Committee
Wrestles with Mediation Issues, ATIS News, 3, Vol. 11, No.3, May-June, 1996.

n1143 SBC notes that carriers proposing to gain access to its SS7 network and
gather information from its SCP must be certified and enter into contractual
agreements for information access and proper billing. SBC comments at 47-48.


   489. We recognize that providing unbundled access to AIN call-related
databases at cost, and in particular providing access to the incumbent LEC's
software applications that reside in the AIN databases, may reduce the
incumbent's incentive to develop new and advanced services using AIN. In the
near term, however, requiring entrants to bear the cost of deploying a fully
redundant network architecture, including AIN databases and their application
software, would constitute a significant barrier to market entry for competitive
carriers. As local service markets  [*86]   develop, however, competition may
reduce the incumbent LEC's control over bottleneck facilities and increase the
importance of innovation. In those circumstances it is important that incumbent
LECs have the incentive to develop unique and innovative services supported by
AIN. Therefore at a later date, we will revisit the proper balance between
providing unbundled access and maintaining the incentives of incumbent LECs to
innovate.

   490. Parties generally do not identify proprietary concerns when access to
call-related databases is provided via STPs. In general, signaling protocols
used to access call-related databases adhere to open Bellcore standards. Parties
also do not raise proprietary concerns with specific call-related databases
themselves. Today, many separate carriers access incumbent LEC Toll Free Calling
and LIDB databases for the proper routing and billing of calls. n1144 Thus, we
conclude that, in general, unbundled access to call-related databases does not
present proprietary concerns with respect to section 251(d)(2)(A). Incumbent
LECs may, however, present such proprietary concerns in the arbitration process
with regard to specific databases, and states (or the Commission  [*87]   acting
pursuant to section 252(e)(5)) may take action to limit unnecessary access to
proprietary information.

n1144 See AT&T July 16 Ex Parte.

   491. We also conclude that denying access to call-related databases would
impair the ability of a competing provider to offer services such as Alternative
Billing Services and AIN-based services. AIN-based services represent the
cutting edge of telephone exchange services, and competitors would be at a
significant disadvantage if they were forced to develop their own AIN capability
immediately. In addition, the record indicates that deployment of call-related
databases in the near term would represent a substantial cost to new entrants.
As mentioned above, incumbent LECs argue that access to certain call-related
databases is already competitively available and therefore they should not have
to unbundle access to them. n1145 As discussed above, however, section
251(d)(2)(B) would only relieve an incumbent LEC of its unbundling obligation if
other unbundled elements in its network could provide the same service without
diminution of quality. Because of the absence of such elements, we conclude that
a competitor's ability to provide service  [*88]   would be significantly
impaired if it did not have unbundled access to incumbent LECs' call-related
databases, including the LIDB, Toll Free Calling, and AIN databases for the
purpose of switch query and database response through the SS7 network.

n1145 We note that competitive provision of AIN SCP database services is not
evidenced in the record.


   492. We also conclude that access to call-related databases as discussed
above, and access to the service management system discussed below, must be
provided to, and obtained by, requesting carriers in a manner that complies with
section 222 of the Act. Section 222, which was effective upon adoption, sets out
requirements for privacy of customer information. Section 222(a) provides that
all telecommunications carriers have a duty to protect the confidentiality of
proprietary information of other carriers, including resellers, equipment
manufacturers, and customers. Section 222(b) requires that telecommunications
carriers that use proprietary information obtained from another
telecommunications carrier in providing any telecommunications service "shall
use that information only for such purpose, and shall not use such information
for  [*89]   its own marketing purposes." n1146 Sections 222(c) and (d) provide
protection for, and limitations on the use of, and access to, customer
proprietary network information (CPNI). n1147 We note that we have initiated a
proceeding to clarify the obligations of carriers with regard to section
222(c) and (d). n1148

n1146 47 U.S.C. @ 222(b).

n1147 Section 222(f)(1) defines CPNI as "information that relates to the
quantity, technical configuration, type, destination, and amount of use of a
telecommunications service subscribed to by any customer of a telecommunications
carrier, and that is made available to the carrier by the customer solely by
virtue of the carrier-customer relationship." 47 U.S.C. @ 222(f)(1)(A).

n1148 See Implementation of the Telecommunications Act of 1996:
Telecommunications Carriers' Use of Customer Proprietary Network Information and
other Customer Information, Notice of Proposed Rulemaking, CC Docket No. 96-115,
FCC 96-221 (rel. May 17, 1996).

   (3) Service Management Systems

   493. Finally, we conclude that incumbent LECs should provide access, on an
unbundled basis, to the service management systems (SMS), which allow
competitors to create, modify,   [*90]   or update information in call-related
databases. We believe it is technically feasible for incumbent LECs to provide
access to the SMS in the same manner and method that they provide for their own
access. We find that such access is necessary for competitors to effectively use
call-related databases, which we have already found to be critical to entry in
the local exchange market.

   494. Commenters argue that they need equal access to incumbent LECs' SMSs to
write or populate their own information in call-related databases. n1149 As
discussed above, information bound for many call-related databases is entered
first at an off-line SMS, which then downloads the information to the
call-related database for real time use on the network. We find that competing
provider access to the SMS is technically feasible if it is provided in the same
or equivalent manner that the incumbent LEC currently uses to provide such
access to itself. n1150 For example, if the incumbent LEC inputs information
into the SMS using magnetic tapes, the competitive carrier must be able to
create and submit magnetic tapes for the incumbent to input into the SMS in the
same way the incumbent inputs its own magnetic  [*91]   tapes. If the incumbent
accesses the SMS through an electronic interface, the competitive carrier should
be able to access the SMS through an equivalent electronic interface. n1151 We
further conclude that, whatever method is used, the incumbent LEC must provide
the competing carrier with the information necessary to correctly enter or
format for entry the information relevant for input into the particular
incumbent LEC SMS.

n1149 AT&T comments at 26; MCI comments at 34-35.

n1150 Many carriers currently submit such information to incumbent LECs or third
party SMSs. USTN reply at 1-4; Bell Atlantic comments at Attachment 3, 16; GTE
comments at 40-41 n.61.

n1151 For example, access to the AIN SMS is accomplished through the SCE, which
is a computer environment for the design and test of AIN based services.


   495. Specifically with respect to AIN, we find that the record in the
Intelligent Networks proceeding supports access to the SMS. n1152 A competing
carrier seeking access to the SMS that is part of the incumbent LEC's AIN would
do so through the incumbent LEC's service creation environment (SCE), an
interface used to design, create, and test AIN supported services.   [*92]
Software successfully tested in the SCE is transferred to the SMS, where it is
then downloaded into an SCP database for active deployment on the network. We
are persuaded that the risk of harm to the public switched network from such
access to the SMS is minimized by the technical safeguards inherent in the SCE
and SMS. As described in comments filed in the Intelligent Networks docket,
competitors accessing the SCE and SMS would not communicate directly with the
LEC's database or switch. n1153 We therefore conclude that such access is
technically feasible, and that incumbent LECs should provide requesting carriers
with the same access to design, create, test, and deploy AIN-based services at
the SMS that the incumbent LEC provides for itself. n1154 While many incumbent
LECs express concerns with the technical feasibility of access to AIN, we
conclude that those concerns deal primarily with the interconnection of third
party AIN SCP databases to the incumbent LEC's AIN and not access to the SCE and
SMS. n1155

n1152 See Intelligent Networks, Notice of Proposed Rulemaking, 8 FCC Rcd 6813
(1993). In the Intelligent Networks proceeding, most incumbent LECs supported
SMS access. See GTE comments in CC Docket No. 91-346 at 21; United and Central
comments in CC Docket No. 91-346 at 12; SNET comments in CC Docket No. 91-346 at
5; NYNEX comments in CC Docket No. 91-346 at 3 n.3, 10-11; BellSouth update
comments in CC Docket No. 91-346 at 6; Bell Atlantic comments in CC Docket No.
91-346 at 6. Other parties, including potential competitors and manufacturers,
also supported SMS access. See Siemens comments in CC Docket No. 91-346 at 2;
TIA comments in CC Docket No. 91-346 at 2; MCI comments in CC Docket No. 91-346
at 10; Ericsson reply in CC Docket No. 91-346 at 2-3. Many commenters asserted
that SMS access through the SCE would provide a valuable opportunity for third
parties to create services. See GSA comments in CC Docket No. 91-346 at 3; SNET
comments in CC Docket No. 91-346 at 2; Siemens comments in CC Docket No.91-346
at 2; Ericsson reply in CC Docket No. 91-346 at 2-3; TIA comments in CC Docket
No. 91-346 at 2; MCI comments in CC Docket No. 91-346 at 10.  [*93]

n1153 In their comments, BellSouth and Bell Atlantic describe the way they
provide or plan to provide access to the SMS for third parties. Bell Atlantic
proposes to first develop and deploy AIN services based on customer request and
then subsequently to allow third parties themselves to create AIN services at a
terminal either in a Bell Atlantic office or a third party office. Bell Atlantic
comments in CC Docket No. 91-346 at 6. BellSouth proposes to permit third
parties to use the service logic resident on BellSouth's service creation
environment to create AIN services. BellSouth update reply in CC Docket No.
91-346 at 10.

n1154 Incumbent LECs that have deployed AIN must provide such access to
competing carriers that will allow them to develop call processing applications
pursuant to the same parameters the incumbent LEC uses itself, such as the
time-of-day and origination of call parameters. BellSouth's recently proposed
service to provide access to its SCE and SMS appears to be an example of the
type of access to the SMS that incumbent LECs must provide to competitors upon
request. Pleading Cycle Established for Comments on BellSouth
Telecommunications, Inc.'s Petition for Expedited Waiver of Part 69 Rules,
Public Notice, DA 96-27 (Jan. 17, 1996) (BellSouth Part 69 Waiver Petition).
[*94]


n1155 Of the three potential points of access to AIN proposed in the Intelligent
Networks NPRM, LEC commenters generally agree that SMS access poses the least
risk of harm to the public switched telephone network. See Bell Atlantic
comments in CC Docket No. 91-346 at 6-7; BellSouth comments in CC Docket No.
91-346 at 12, 13; GTE comments in CC Docket No. 91-346 at 19, 21; NYNEX comments
in CC Docket No. 91-346 at 3; PacTel comments in CC Docket No. 91-346 at 20-21;
SBC comments in CC Docket No. 91-346 at 5, 8; U S West comments in CC Docket No.
91-346 at 52; United and Central comments in CC Docket No. 91-346 at 1.
Competitors also support such access. See MCI Comments at 6; Siemens Comments at
2; TIA Comments at 2.

   496. We recognize that, although technically feasible, providing
nondiscriminatory access to the SMS and SCE for the creation and deployment of
AIN services may require some modifications, including appropriate mediation, to
accommodate such access by requesting carriers. We note that BellSouth is
currently prepared to tariff and offer such access to third parties, and other
incumbent LECs, including Bell Atlantic and Ameritech, indicate that they have
made significant  [*95]   progress towards implementing such access. n1156
Therefore, if parties are unable to agree to appropriate mediation mechanisms
through negotiations, we conclude that during arbitration of such issues the
states (or the Commission acting pursuant to section 252(e)(5)) must consider
whether such mediation mechanisms will be available and will adequately protect
against intentional or unintentional misuses of the incumbent's AIN facilities.
We again encourage incumbent LECs and competitive carriers to participate in
industry fora and industry testing to resolve outstanding mediation concerns.

n1156 BellSouth Part 69 Waiver Petition. BellSouth proposes to tariff services
that permit third parties to create and administer AIN services through access
to the SCE and SMS. BellSouth's SCE/SMS service will support third-party service
development with the following AIN triggers: off-hook immediate, off-hook delay,
public office dialing plan, customized dialing plan, feature code and
terminating attempt triggers. Id. See Bell Atlantic comments in CC Docket No.
91-346 at 6, 8; Ameritech July 17 Ex Parte.

   497. Parties did identify some proprietary concerns regarding access to the
SCE and  [*96]   SMS used in the incumbent LEC's AIN. Some incumbent LECs
contend that the interface used at the SCE is proprietary in nature. n1157 GVNW
argues that specific AIN-based services designed by carriers should be
proprietary in nature. n1158 Competitors correctly argue that AIN can be used,
not only for telecommunication services traditionally supported by the switch,
but as a means to deploy advanced services not otherwise possible. n1159 We find
that competing providers without access to AIN would be at a significant
disadvantage to incumbent LECs, because they could not necessarily offer the
same services to the customer. This access will help competing providers without
imposing costs on incumbent LECs because the entrants will pay the cost. n1160
We therefore conclude, under section 251(d)(2)(A), that access to AIN, including
those elements that may be proprietary, is necessary for successful entry into
the local service market.

n1157 U S West comments at 58 n.124 (for example, BellSouth uses DESIGNedge for
such access which utilizes a proprietary database technology tailored to its
network); Bell Atlantic comments at 28-29.


n1158 GVNW comments at 30 (incumbent LECs should be able to copyright AIN based
services that they create or incumbents will have much less incentive to
develop such services).  [*97]

n1159 AT&T comments at 23-25; Cable & Wireless comments at 24; MCI comments at
18, 33.

n1160 See supra, Section VII.

   498. Most parties generally did not identify proprietary concerns with access
to those SMSs used other than for AIN. Some parties, however, argue that there
are proprietary interfaces used to enter information into various databases.
n1161 Competing carriers counter that competitive providers would not need to
have direct access to the proprietary methods of data entry used by incumbent
LECs, and as a result we conclude that the unbundled access to SMSs used for
other than AIN does not present proprietary concerns with respect to section
251(d)(2)(A). n1162

n1161 AT&T June 13 Ex Parte.

n1162 AT&T comments at 26.

   499. We also conclude that unbundled access to all SMSs is necessary for a
competing provider to effectively use unbundled call-related databases. We find
that the inability of competing carriers to use the SMS in the same manner that
an incumbent LEC uses to input data itself would impair the ability of a
competing carrier to effectively offer services to its customers using unbundled
call-related databases. Commenters in the record  [*98]   point out that access
to call-related databases alone would not allow the competing carrier to provide
such services to its customers without access to an SMS. n1163 We also conclude
that AIN-based services are important to a new entrant's ability to compete
effectively for customers with the incumbent LEC, and in developing new business
by introducing new AIN based services. Thus we conclude that a competitor's
ability to provide service would be significantly impaired if it did not have
unbundled access to an incumbent LEC's SMS, including access to the SMS(s) used
to input data to the LIDB, Toll Free Calling, Number Portability and AIN
call-related databases.

n1163 Ericsson comments at 6.

   500. We reject the contention by several incumbent LECs that signaling and
database access was meant by the 1996 Act to apply only to such access as is
necessary for call routing and completion. Although the competitive checklist
for BOC entry into in-region interLATA services under section 271 requires
"nondiscriminatory access to databases and associated signaling necessary for
call routing and completion" n1164 the definition of a network element is more
comprehensive in scope. A network  [*99]   element as defined by the 1996 Act
includes "databases" and in particular "databases sufficient for billing and
collection or used in the transmission, routing, or other provision of a
telecommunications service." n1165 We find that the inclusion of "other
provision of a telecommunications service" meant Congress intended the
unbundling of databases to be read broadly and could include databases beyond
those directly used in the transmission or routing of a telecommunications
service.

n1164 47 U.S.C. @ 271(c)(2)(B)(x).


n1165 47 U.S.C. @ 153(29).

   (4) Third Party Call-Related Databases

   501. We find that there is not enough evidence in the record to make a
determination as to the technical feasibility of interconnection of third party
call-related databases to the incumbent LEC's signaling system. Some parties
argue that such interconnection, including the interconnection of third party
AIN SCP databases, would allow them to provide more efficient or advanced call
processing and services to customers, thereby increasing their ability to
compete with the incumbent LEC. n1166 AT&T and MCI specifically argue that it
would be technically feasible for them to interconnect   [*100]   their AIN SCP
database to an incumbent LEC's AIN for the purpose of providing call processing
instructions to the incumbent LEC's switch. n1167 Incumbent LECs contend that
such interconnection would leave their switch vulnerable to a multitude of
potential harms because sufficient mediation for such interconnection does not
currently exist at the STP or SCP and has not yet been developed. n1168 AT&T
counters that there is no need for additional mediation and that sufficient
certification and testing of AIN based services before deployment in such a
fashion is technically feasible. n1169

n1166 AT&T comments at 23-25; Cable & Wireless comments at 24; MCI comments at
18, 33.

n1167 AT&T comments at 23-25; MCI comments at 18, 33.

n1168 See U S West comments in CC Docket No. 91-346 at 73-74, 84; NYNEX comments
in CC Docket No. 91-346 at 14-15; SBC comments in CC Docket No. 91-346 at 8-9.

n1169 See AT&T Intelligent Networks Proposal Attachment at 2.

   502. At this time, in view of this record and the record compiled in the
Intelligent Networks docket, we cannot make a determination of the technical
feasibility of such interconnection. We do, however, believe that  [*101]
state commissions could find such an arrangement to be technically feasible and
we do not intend to preempt such an order through these rules. The Illinois
Commission recently ordered access to incumbent LECs' AIN that does allow for
this type of interconnection. n1170 We intend to address this issue early in
1997, either in the IN docket or in a subsequent phase of this proceeding,
taking into account, inter alia, any relevant decisions of state commissions.
n1171

n1170 Illinois Wholesale Order.

n1171 There are other additional outstanding issues from the Intelligent
Networks proceeding that are not resolved here including direct access to the
SCP and national standards for AIN access.


   503. We also address the impact on small incumbent LECs. For example, GVNW
asserts that any national rule requiring this form of interconnection would
require many small incumbent LECs to make uneconomic upgrades of their switches
in order to accommodate it. n1172 We have considered the economic impact of our
rules in this section on small incumbent LECs. Accordingly, we have not adopted
any national standards concerning AIN at this time. We also note that section
251(f) provides relief  [*102]   for certain small LECs from our regulations
implementing section 251.

n1172 GVNW comments at 30-31.

   5. Operation Support Systems

   a. Background

   504. We sought comment, in the NPRM, on whether national requirements for
electronic ordering interfaces would reduce the time and resources required for
new entrants to enter and compete in regional markets. n1173 We also sought
comment on the unbundling of databases generally in our discussion on unbundling
database and signaling systems. n1174

n1173 NPRM at para. 89.

n1174 NPRM at paras. 107-114.

   b. Comments

   505. Several new entrants argue that incumbent LECs should be required to
unbundle access to their "operations support systems" and "back-office"
databases as network elements. n1175 Parties define operations support systems
and back office databases generally to include those systems and databases
required for pre-ordering, ordering, provisioning, maintenance and repair, and
billing. n1176 Several state commissions report that they have required
incumbent LECs to provide access to some of these systems and databases. n1177
Potential competitors argue that, without such access, incumbent LECs can make
it extremely  [*103]   difficult for them to utilize unbundled network elements
and resold services, thereby severely impairing their ability to compete. n1178
Competitors argue that they should be able to access such incumbent LEC systems
as necessary to receive and input data. n1179 Competitors contend that such
access is required by sections 251(c)(3) and 251(c)(4) as part of the terms and
conditions of each section. n1180 TCC further argues that until such access is
in place, incumbent LECs will not have met the requirements of either section
251(c)(3) or (c)(4) and therefore BOCs cannot be deemed to have met the
requirements of section 271(c)(2)(B)(i). n1181

n1175 ACTA comments at 14; ACSI comments at 42-43; ALTS comments at 31; American
Network Exchange comments at 5; AT&T comments at 33-39; Cable & Wireless
comments at 36-37; Citizens Utilities comments at 15; CompTel comments at 31;
GCI comments at 16; MCI comments at 33; TCC comments at 54-60; Teleport comments
at 38-39; Vartec comments at 6-10 (incumbent LECs should unbundle access to the
Billing Name and Address database); WorldCom June 14 Ex Parte at 4-5; CompTel
June 14 Ex Parte.


n1176 See Competition Policy Institute comments at 16; GCI comments at 16; MCI
comments at 18; NCTA comments at 42; Sprint comments at 17-18, 41; Teleport
comments at 38-39. MCI also identifies several "back office" databases it
believes are necessary to provide competitive local telephone service including,
among others, Customer Record Information System (CRIS), Master Street Address
Guide (MSAG), CMDS System (industry mechanism to exchange billed messages such
as third-party, collect and calling cards), Telecommunications Management
Network Type Database (TMN), and Number Assignment Database. MCI July 3 Ex Parte
at 2-4.  [*104]
n1177 Texas Commission comments at 19 (number assignment, ordering and repairs);
In Re Petition of AT&T for the Commission to Establish Resale Rules, Rates,
Terms and Conditions and the Initial Unbundling of Services, Georgia Commission
Docket 6352, (Georgia Commission May 29, 1996); Order Declaring Resale
Prohibitions Void and Establishing Tariff Terms, New York Commission Case
94-C-0095 and Case 95-C-0657 (New York Commission June 25, 1996).

n1178 ACSI comments at 47; AT&T comments at 33-39 (an incumbent LEC's monopoly
control over operational support systems is as formidable an obstacle to market
entry as its control over the network itself); Cable & Wireless comments at
36-37; Citizens Utilities comments at 15; Continental comments at 19; Sprint
comments at 17-19, 22; TCC comments at 54-60 (incumbent LECs can block new entry
by refusing to install "automated, nondiscriminatory systems" for ordering,
installing, maintaining, repairing and billing); Teleport comments at 38-39;
CompTel comments at 37-38 (such access is necessary for competitors to combine
unbundled network elements into telecommunications services of their own
design); Vartec comments at 7-8 (competitors will be unable to compete unless
incumbent LECs provide access to unbundled billing and collection functions).
[*105]

n1179 See, e.g., ACSI comments at 47; MCI comments at 24.

n1180 TCC comments at 56 (section 251(c)(3) requires that unbundled network
elements be provided at nondiscriminatory rates, terms and conditions, and
section (c)(4) requires that services for resale be provided free of any
"unreasonable or discriminatory conditions or limitations"); CompTel comments at
37 (Commission should set an aggressive, firm deadline for compliance); GCI
comments at 16.

n1181 TCC comments at 56-57.

   506. In contrast, most incumbent LECs argue that operations support systems
do not qualify as network elements under the 1996 Act. n1182 Ameritech argues
that competitors have not demonstrated that they need access to such systems in
order to provide telecommunications services. n1183 Several incumbent LECs
assert that an incumbent LEC may negotiate with a competitor to provide such
support services, but that the 1996 Act does not require them to unbundle these
systems as network elements. n1184 Other parties argue that such access is not
currently technically feasible and should be resolved through the negotiations
process. n1185 SBC contends that its provisioning processes are neutral
[*106]   with respect to competing providers of service and that provisioning
for competitors does not take longer than provisioning for its own customers.
n1186

n1182 BellSouth comments at 45; GTE comments at 44; U S West comments at 48;
Lincoln Tel. reply at 12-14; Ameritech reply at 19-20 (only for routing,
terminating, billing or providing telecommunications service); Bell Atlantic
reply at 12-23 n.15 (not necessary to offer service and numerous resellers have
operated in Bell Atlantic territory without such direct access); BellSouth reply
at 24, n.45; GTE reply at 23; NYNEX reply at 33-34; PacTel reply at 22
(operations support systems not used in the provision of a telecommunications
service). Letter from Michael Glover, General Attorney, Bell Atlantic, to
William Kennard, General Counsel, FCC, April 15, 1996 (Bell Atlantic April 15 Ex
Parte).

n1183 Ameritech comments at 19-20; NYNEX comments at 33-34 (administrative
databases are not used in routing or completion of calls); Bell Atlantic reply
at 14; U S West reply at 27.

n1184 NYNEX comments at 33-34; Ameritech reply at 19-20; Lincoln Tel. reply at
14 (competitors must provide their own ordering systems); Bell Atlantic April 15
Ex Parte at 9.  [*107]

n1185 Lincoln Tel. comments at 9 (re-engineering customer service systems only
for purpose of supporting competitors would be extremely profligate); GVNW
comments at 10-12.

n1186 Letter from Sandra Wagner, Director, Federal Regulatory, SBC
Communications, Inc. to William Caton, Acting Secretary, FCC, June 4, 1996 (SBC
June 4 Ex Parte).

   507. Several potential local competitors, including most large IXCs, urge the
Commission to require incumbent LECs to provide access to their operation
support systems through real-time "electronic interfaces" or "electronic
bonding." n1187 AT&T argues that virtually every incumbent LEC uses automated
interfaces internally to support and coordinate functionalities such as
ordering, provisioning, maintenance, and billing. n1188 TCC argues that the
availability of such operational interface standards for external interaction
are limited, and that incumbent LECs have powerful disincentives to develop and
implement such interfaces in the absence of clear rules requiring them. n1189
Parties commented that such interfaces are necessary so that carriers relying on
interconnection, unbundled network elements, or resale from the incumbent LEC
[*108]   can offer their customers services of the same quality as those offered
by the incumbent LEC. n1190 AT&T argues that incumbent LECs must provide such
access for competitors at the same level of quality and within the same
intervals as they do for their own end-users so that customers do not "perceive
any differences in the quality of service provided by one carrier as compared to
another." n1191 Competitors contend that such interfaces need to be similar to
the PIC conversion process, so that it is as easy for consumers to switch local
service providers as it is to switch interexchange carriers. n1192 Teleport
argues that it would be at a competitive disadvantage if it was required to use
slower, more expensive manual systems while the incumbent LEC continued to use
its modern and efficient systems. n1193

n1187 ACTA comments at 14-15; AT&T comments at 33-39; MCI comments at 33-34;
Sprint comments at viii, 17-19, 22; Teleport comments at 38-39; Texas Commission
comments at 19; TCC comments at 56-58 Appendix D; AT&T reply at 20-21.

n1188 AT&T comments at 36-37.

n1189 TCC comments at 55.

n1190 ACTA comments at 14-15; AT&T comments at 33-39; MCI comments at 33-34;
Sprint comments at viii, 17-19, 22; Teleport comments at 38-39; TCC comments at
55 (a competitor must be able to seamlessly deliver services, add features, and
bill "as if it owned the facilities").  [*109]


n1191 AT&T comments at 35. AT&T argues that such a requirement is supported by
Commission precedent including Policy and Rules Concerning the Furnishing of
Customer Premises Equipment, Enhanced Services and Cellular Communications
Services by the Bell Operating Companies, Report and Order, 95 F.C.C. 2d 1117,
1135-36 (1983) (adopting safeguards to prevent BOCs from providing superior
access, installation, and maintenance services to themselves than to competitive
providers of CPE, enhanced services and cellular services); Amendment of
Sections 64.702 of the Commission's Rules and Regulations (Third Computer
Inquiry), Report and Order, 104 F.C.C. 2d 958, 1026-27 (1986) (requiring BOCs to
provide competing enhanced service providers with comparably efficient
interconnection "to control potential discrimination" by BOCs in favor of their
own offerings); id. at 1041 (time periods for installation, maintenance, and
repair must be the same for competing carriers as for BOC's own offerings).

n1192 ACTA comments at 16; AT&T comments at 35-36; CompTel comments at 3, 37;
TCC comments at 54 (should be as easy for consumers to switch local service
providers as it is currently to switch long distance providers). See Letter from
Mary Brown, Director, Corporate Rates & Federal Regulatory Analysis, MCI, to
William Kennard, General Counsel, FCC, Mar. 20, 1996 (IXCs Joint Ex Parte) at 6.
[*110]

n1193 Teleport comments at 39; accord TCC comments at 55 (for example, an
incumbent LEC could enter its own service orders electronically, but require the
competing carrier to submit such orders manually via a multiple page form faxed
or e-mailed to the incumbent for subsequent processing).

   508. AT&T and TCC commented on AT&T's experience in the Rochester, New York
market as a reseller of Rochester Telephone's services under Rochester
Telephone's Open Market Plan. n1194 Parties noted that AT&T was required to
submit a detailed order form, initially through a facsimile machine and later
through e-mail, in order to resell Rochester Telephone services. n1195 AT&T
asserts that it was signing up between one and two hundred new customers daily
and therefore had to fax up to 1400 pages daily to Rochester Telephone. n1196
AT&T and TCC contend that such a manual process is clearly discriminatory and in
violation of the 1996 Act because it creates additional delay and the potential
for human error, resulting in customer dissatisfaction. n1197 TCC argues further
that such a disparity in systems allows for the incumbent LEC to schedule
service commencement and issue new phone numbers   [*111]   during the initial
contact with a customer, while the competitor, at best, must put the customer on
hold while it calls the incumbent LEC to obtain such information. n1198

n1194 See Petition of Rochester Telephone Corp. for Approval of Proposed
Restructuring Plan, Opinion and Order Approving Joint Stipulation and Agreement,
Case 93-C-0103, Opinion No. 94-25 (NY Pub. Serv. Comm'n) (Nov. 10, 1994); In the
Matter of Rochester Telephone Corp., Petition for Waivers to Implement its Open
Market Plan, 10 FCC Rcd 6776 (1995); see also Big Boys Come Calling, N.Y. Times,
Oct. 19, 1995 at 1.

n1195 AT&T comments at 34-35 (AT&T had to complete a multi-page form for every
individual customer that wanted to switch to AT&T and Rochester Telephone would
not change a customer's service until AT&T faxed multiple documents to it); TCC
comments at 55.

n1196 AT&T comments at 34 (AT&T estimated that for each customer it ordered
services for, it took at least four hours for Rochester to complete and respond
to AT&T).


n1197 AT&T comments at 34 (AT&T argues that the problems with a manual process
were "intolerable" in the Rochester market, and would be significantly magnified
in larger or more heavily populated areas); TCC comments at 55.  [*112]

n1198 TCC comments at 55-56 (at worst the competing carrier must hang up with
the customer and call back later with the necessary information).

   509. Several parties argue that electronic interfaces should provide
competitors with transparent access to the underlying information rather than
the individual databases necessary for ordering and provisioning, installation,
maintenance and repair, recording and billing, and monitoring service. n1199
Commenters assert that large incumbent LECs may have, for example, certain
information necessary for billing, stored among several databases systems, each
with individual operating systems. n1200 AT&T asserts that it will be difficult
and expensive for a competing carrier to individually access multiple systems
and that the difficulty and expense will be compounded for parties wishing to
compete in several incumbent LECs' territories. n1201 AT&T contends, therefore,
that incumbent LECs should create and deploy a "gateway" to all of their
internal operations support systems and databases so that a competing carrier
could use one method of access to the underlying information. n1202 U S West
contends that competitors must develop systems  [*113]   that are compatible
with incumbent LEC electronic interfaces and argues that incumbent LECs should
not be required to develop individualized systems for each competing carrier.
n1203

n1199 AT&T comments at 33-39; Telecommunications Resellers Ass'n comments at 22
n.52-53; TCC comments at 56-57 (electronic interface capabilities should allow
competitors, inter alia, to enter customer trouble reports, obtain report
commitments, schedule customer site visits and receive notification of network
conditions affecting service); Letter from Antoinette Cook Bush, Counsel,
Ameritech to William Caton, Acting Secretary, FCC, July 10, 1996 (Ameritech July
10 Ex Parte). Ameritech argues that, once operational interfaces are in place,
it will be unnecessary for carriers to provide competitors with direct access to
the underlying systems or databases providing such functions. Id. at 5.

n1200 AT&T comments at 33-39.

n1201 Id.

n1202 Id.

n1203 Letter from Cyndie Eby, Executive Director -- Federal Regulatory, U S West
to Robert Tanner, Attorney Advisor, FCC, July 9, 1996 (U S West July 9 Ex
Parte).


   510. Since the passage of the 1996 Act, several states have proceeded
[*114]   to implement rules for local competition, several of which include
provisions concerning electronic interfaces. n1204 The Georgia Commission
ordered BellSouth to establish electronic operational interfaces by July 15,
1996, and ordered both incumbent BellSouth and requesting carrier AT&T to submit
a joint report to the commission within thirty days concerning the
implementation schedule necessary to deploy such interfaces. n1205 After a
motion for reconsideration, the Georgia Commission provided BellSouth with an
additional month to establish these interfaces and added additional deadlines
for the deployment and operation of such interfaces. n1206 The Illinois
Commission ordered Ameritech and Centel to provide competitors with "all
operational interfaces at parity with those provided their own retail
customers." n1207 The Louisiana Commission has proposed rules on local
competition that require incumbent LECs to deploy systems for competitors that
are equivalent to those used by incumbents for their own retail exchange
services. n1208 Under those rules, such access must be equal to that provided to
an incumbent LECs' own personnel. n1209 The California Commission adopted
interim rules  [*115]   ordering incumbent LECs to deploy automated on-line
systems for access by competitors. n1210 The Indiana Commission concluded that a
competitor's ability to utilize "electronic access, technical interfaces, or
access to databases to place service orders, receive phone number assignments,
receive information necessary to bill [its] customers and to inform the
incumbent LEC of cases of trouble" is essential to the development of resale
competition. n1211 Indiana ordered incumbent LECs to provide all operational
interfaces at parity with those the incumbent provides to its own retail
customers. n1212 The Ohio Commission's rules on local competition require all
LECs to provide "nondiscriminatory, automated operational support systems" that
support access by competing carriers to such functions as pre-ordering,
ordering, provisioning, repair and maintenance, number assignment, and billing.
n1213 The Oklahoma Commission has proposed rules that require an incumbent LEC,
to the extent it provides itself, its affiliates or subsidiaries, automated
interfaces for the purpose of service ordering, maintenance or repair, to make
such interfaces available to competitors. n1214

n1204 Letter from Bruce Cox, Government Affairs Director, AT&T to William Caton,
Acting Secretary, FCC, July 11, 1996 (AT&T July 11 Ex Parte). AT&T submitted
orders or rules from eight states that have taken action on the issue of
electronic interfaces. Id.  [*116]

n1205 Petition of AT&T for the Commission to Establish Resale Rules, Rates,
Terms and Conditions and the Initial Unbundling of Services, Docket No. 6352-U
at 11-12, 15 (Georgia Commission May 29, 1996). The Georgia Commission ordered
BellSouth to establish interfaces for "pre-service ordering, service ordering
and provisioning, directory listing and line information databases, service
trouble reporting, and daily usage data." Id. at 15.

n1206 Motion for Reconsideration in Docket No. 6352-U (Georgia Commission July
2, 1996). The Georgia Commission directed that most electronic interfaces must
be fully operational by the end of 1996, and established March 31, 1997 as an
absolute deadline. Id.

n1207 Illinois Wholesale Order. The Illinois Commission ordered both incumbent
LECs, to the extent they could not "fully and immediately" implement operational
parity, to submit a plan with specific timetables for achieving compliance. Id.
at 51.

n1208 Substitute Proposed Regulations for Competition in the Local
Telecommunications Market, Docket No. U-20883 (Louisiana Commission March 5,
1996). The Louisiana Commission further requires "direct on-line access" to
incumbent LECs' mechanized order entry system, number administration system,
trouble reporting and monitoring system, customer usage data, and local listing
databases. Id.  [*117]

n1209 Id.


n1210 Order Instituting Rulemaking on the Commission's Own Motion into
Competition for Local Exchange Service, R. 95-04-043 and I. 95-04-044
(California Commission April 26, 1995). The California Commission ordered such
access for "service ordering and implementation scheduling." Id. at Appendix E,
14.

n1211 In the Matter of the Investigation on the Commission's Own Motion into Any
and All Matters Relating to Local Telephone Exchange Competition Within the
State of Indiana, Cause No. 39983, Interim Order on Bundled Resale and Other
Issues (Indiana Commission July 1, 1996).

n1212 Id. at 49. The Commission also ordered incumbents Ameritech and GTE, to
the extent they contend that they are unable to fully and immediately implement
operational parity, to submit a comprehensive plan with specific timetables for
achieving compliance. Id..

n1213 In the Matter of the Commission Investigation Relative to the
Establishment of Local Exchange Competition and Other Competitive Issues, Case
No. 95-845-TP-COI (Ohio Commission June 12, 1996).

n1214 All Sources Proposed Rules, Docket No. RM950000019 (Local Telephone
Competition) (Oklahoma Commission March 7, 1996). Oklahoma rules clarify that
such interfaces should not permit competitors to directly access the incumbent's
underlying systems. Id. at 79.  [*118]

   511. A few incumbent LECs commented on their own efforts to develop and
implement electronic interfaces, including development of a single gateway for
competing carrier access. Ameritech contends that "operational interfaces are
essential to promote viable competitive entry." n1215 Bell Atlantic states that
it currently provides ordering and repair information to IXCs and is working on
implementing similar electronic interfaces for competing local carriers. n1216
GTE commented that it supports access to its trouble administration information
for AT&T and MCI. n1217 U S West also supports trouble administration electronic
access for AT&T and MCI and is developing access to all of its operations
support systems for IXCs. n1218 U S West also states that it expects to build on
such access for IXCs to develop access to meet the needs of local competitors.
n1219 NYNEX also provides currently for electronic access for IXCs to its
operations support systems for presubscription, ordering and provisioning,
trouble administration, and access billing. n1220 NYNEX, which has been ordered
by the New York Commission to provide electronic interfaces for local
competitors by October 1, 1996, n1221  [*119]   recently proposed to expand the
use of its current electronic access for IXCs to local competitors. n1222

n1215 Ameritech July 10 Ex Parte.

n1216 Letter from Patricia Koch, Assistant Vice President, Federal External
Affairs and Regulatory Relations, Bell Atlantic, to William Caton, Acting
Secretary, FCC, June 21, 1996 (Bell Atlantic June 21 Ex Parte).

n1217 GTE reply at 23 n.31 (GTE provides electronic bonding for trouble
administration to both AT&T and MCI).


n1218 Letter from Cyndie Eby, Executive Director-Federal Regulatory to William
Caton, Acting Secretary, FCC, June 28, 1996 (U S West June 28 Ex Parte). U S
West supports a mediated electronic interface for IXCs to submit trouble
reports to U S West. Id.

n1219 U S West July 9 Ex Parte.

n1220 Letter from Alan Cort, Director, Federal Regulatory Matters, NYNEX to
William Caton, Acting Secretary, FCC, July 12, 1996 (NYNEX July 12 Ex Parte).
Such electronic access can be achieved through "a stand alone PC with a dial up
modem, or through a customer's [IXC's] network to allow network to network
connectivity." Id.

n1221 Order Declaring Resale Prohibitions Void and Establishing Tariff Terms,
Case 94-C-0095, et. al, (New York Commission June 25, 1996).  [*120]

n1222 Letter from Alan Cort, Director, Federal Regulatory Matters, NYNEX to
William Caton, Acting Secretary, FCC July 17, 1996 (NYNEX July 17 Ex Parte).
NYNEX will provide competing providers with access to its Direct Customer Access
System. It is currently testing local service applications with potential new
entrants. Id.

   512. Sprint and MCI argue that current use of electronic interfaces,
including the Customer Account Record Exchange (CARE) system used by LECs and
IXCs to exchange subscriber account information electronically, is evidence of
the technical feasibility of electronic bonding. n1223 TCC urges the Commission
to require the provision of timely and accurate CARE by all local service
providers to all IXCs. n1224 Vartec asserts that incumbent LECs and IXCs already
share access to the Billing Name and Address (BNA) database. n1225 TCC argues
that all local service providers should be required to continue to support the
standard interface that exists today for IXCs to request BNA information to
complete the billing process for its customers. n1226 In addition, TCC notes
that competing carriers purchasing unbundled local switching from the incumbent
LEC will require  [*121]   access to billing data to bill IXCs for exchange
access. n1227

n1223 MCI comments at 18; Sprint comments at 17; TCC comments at 58 n.60
(currently there are approximately 56 million CARE transactions annually).

n1224 TCC comments at 58 (CARE information includes a customer's billing
telephone number, working telephone number, billing address and service
address).

n1225 Vartec comments at 8-9.

n1226 TCC comments at 58-59.

n1227 TCC comments at 59.


   513. Several commenters advocate national standards for electronic
interfaces. n1228 Ameritech asserts that "the ability to do business between
multiple local exchange carriers and incumbent LECs dictates that these
electronic interfaces adhere to national or industry-based standards where
available." n1229 Sprint proposes that the Commission require industry to
develop such standards and incumbent LECs to implement those standards within
twelve months. n1230 AT&T argues that, while industry has primary responsibility
for developing standards, section 256(b)(1) establishes an "oversight"
responsibility for the Commission in the development of such industry
standards. n1231 American Communications Services  [*122]   argues that such
standards should conform to Bellcore and ANSI requirements as well as relevant
industry guidelines and manufacturer specifications. n1232 Ameritech asserts
that, if an ANSI or other national or industry-based standard exists, incumbent
LECs should have a duty to conform their electronic interfaces to those
standards within a reasonable period of time. n1233 Sprint reports that industry
has been working on developing standards for electronic interfaces in the
Electronic Communications Implementation Committee (ECIC), n1234 a working
committee in the Telecommunications Industry Forum of the Alliance for
Telecommunications Industry Solutions (ATIS). n1235 The ECIC defines electronic
bonding as "interactive electronic information exchange involving
application-to-application communications between telecommunications
jurisdictions" supporting operations, administration, maintenance, and
provisioning. n1236 The ECIC has already developed guidelines for a "Trouble
Administration" application and is close to completing those for an
"Interexchange Carrier/Customer Account Record Exchange" application. n1237 A
few incumbent LECs identified the "Electronic Data Interchange (EDI)"   [*123]
standard as a potential basis for electronic interfaces. n1238 Several parties
also commented that the Ordering and Billing Forum (OBF) is working on
developing standards for electronic interfaces. n1239 SBC and NYNEX note that
ECIC, OBF, EDI and the T1M1 standards committees n1240 are all working in
conjunction to develop electronic interfaces for inter-telecommunications
company transactions. n1241

n1228 AT&T comments at 36-39; Cable & Wireless comments at 36-37; Teleport
comments at 38-39.

n1229 Ameritech July 10 Ex Parte at 5.

n1230 Sprint comments at 18. See also AT&T comments at 38. AT&T urges the
Commission to direct industry to work towards developing such standards, set a
date for their implementation and make it clear to incumbent LECs that such
standards are a necessary part of meeting the requirements of sections 251(c)(3)
and (c)(4). Id.

n1231 AT&T comments at 38.

n1232 ACSI comments at 47; see Ameritech July 10 Ex Parte at 5. Ameritech adds
that the telecommunications industry has the responsibility to develop its own
standards through existing bodies such as ANSI. Id.

n1233 Ameritech July 10 Ex Parte at 5.

n1234 ECIC was formerly known as the Electronic Bonding Implementation Team
(EBIT) before becoming a working committee of ATIS.  [*124]

n1235 Letter from Jay Keithley, Vice President, Law & External Affairs, Sprint,
to William F. Caton, Acting Secretary, FCC, June 25, 1996 (Sprint June 25 Ex
Parte). Current active members of the ECIC include: Ameritech, AT&T, Bell
Atlantic, BellSouth, Cincinnati Bell, DSET, GTE, MCI, NYNEX, Objective Systems
Integrators, OpenCon Systems, Pacific Bell, Pirelli Cable, SNET, Southwestern
Bell, Sprint, Touch of Gray Engineering, Telegenics, Teleport, and U S West. Id.
See also Letter from Todd Silbergeld, Director--Federal Regulatory, SBC
Communications to William Caton, Acting Secretary, FCC (July 12, 1996) (SBC July
12 Ex Parte).

n1236 Sprint June 25 Ex Parte.

n1237 Sprint June 25 Ex Parte. The ECIC will next work on a
"Ordering/Provisioning" application. It has identified but not yet established
priorities for other applications including: Performance Monitoring, Alarm
Monitoring, Network Management, Traffic Management, Testing and Reporting,
Ordering Competitive LEC Services (including Resale), Ordering SONET, Product
Availability/Capability, Electronic Bonding for Government and Large Customers,
and Intercompany Billing. Id. See also U S West July 9 Ex Parte.  [*125]

n1238 Ameritech July 10 Ex Parte at 5-6. EDI is defined by the
Telecommunications Industry Forum. Id. at 6.

n1239 AT&T comments at 38; BellSouth reply at 27; Ameritech July 10 Ex Parte at
5. An electronic ordering interface could be based on the "access service
request" defined by OBF. Billing information could be exchanged via the
"exchange message interface" or the "exchange message record" also defined by
OBF. Ameritech July 10 Ex Parte at 5-6.

n1240 T1M1 is a standards committee under the T1 Telecommunications committee,
and is a part of ATIS.

n1241 SBC July 12 Ex Parte; NYNEX July 17 Ex Parte.

   514. AT&T argues that a national standard for electronic interfaces should
provide for a uniform method of access to underlying information by competing
carriers to all incumbent LECs. As envisioned by AT&T, such a gateway would
provide transparent access for all competing local exchange providers to
incumbent LEC administrative and back office databases. Bell Atlantic and AT&T
together agree that, given "appropriate guidance from the Commission, the
industry can achieve consensus on sufficient data elements and formatting
conventions to facilitate that 95%   [*126]   of all inter-telecommunications
company transactions may be processed via electronic gateways within twelve
months." n1242 Bell Atlantic and AT&T argue that "transaction sets" n1243 to
facilitate the exchange of information across electronic interfaces need to be
created to support the functions of pre-ordering and ordering, n1244
provisioning, n1245 repair and maintenance, n1246 and billing. n1247 AT&T
commented that electronic interfaces are scalable to different size entities, so
that any phone company with at least a PC computer and a modem can utilize one
of their applications. n1248

n1242 Letter from Bruce Cox, Government Affairs Director to William Caton,
Acting Secretary, FCC, July 3, 1996 (AT&T-Bell Atlantic Joint Ex Parte). This
language was also supported by Beechwood Data Systems, a systems integrator
company working with, among others, AT&T and NYNEX on electronic interfaces.

n1243 A "transaction set" refers to a set of standard data elements necessary to
support any electronic exchange of information for a particular function, like
provisioning.


n1244 Pre-ordering and ordering includes the exchange of information between
LECs about current or proposed customer products and services or unbundled
network elements or some combination thereof. AT&T-Bell Atlantic Joint Ex Parte.
TCC includes such information as customer data on current services, and credit
and payment history. TCC comments at 57 n.58, Appendix D.  [*127]

n1245 Provisioning involves the exchange of information between LECs where one
executes a request for a set of products and services or unbundled network
elements or combination thereof from the other with attendant acknowledgements
and status reports. AT&T-Bell Atlantic Joint Ex Parte.

n1246 Maintenance [and repair] involves the exchange of information between LECs
where one initiates a request for repair of existing products and services or
unbundled network elements or combination thereof from the other with attendant
acknowledgements and status reports. AT&T-Bell Atlantic Joint Ex Parte.

n1247 Billing involves the provision of appropriate usage data by one LEC to
another to facilitate customer billing with attendant acknowledgements and
status reports. It also involves the exchange of information between LECs to
process claims and adjustments. AT&T-Bell Atlantic Joint Ex Parte.

n1248 Letter from Bruce Cox, Government Affairs Director, AT&T to William Caton,
Acting Secretary, FCC, July 1, 1996 (AT&T July 1 Ex Parte).

   515. Several state commissions commented that they are not opposed to
national standards but want the flexibility to implement additional  [*128]   or
different state standards. n1249 The Colorado Commission believes national
technical standards are a worthy goal, but they must carefully consider
differences in regional and network conditions. n1250 The California Commission,
however, contends that incumbent LEC provisioning systems vary considerably by
company and region. n1251 Incumbent LECs argue that there should be no national
standards for the provision, maintenance and repair of network elements because
operating and administrative systems differ between incumbent LECs. n1252

n1249 Pennsylvania Commission comments at 25; but see California Commission
comments at 26-28 (standards could hinder innovation and efficiency).

n1250 Colorado Commission comments at 24-25, 27.

n1251 California Commission comments at 27 (the two biggest incumbent LECs in
California have significant differences in how they provision and operate their
network).

n1252 Bell Atlantic comments at 31; PacTel comments at 40-44 (Commission could
order standards for similarly situated networks but there will be many
differences between incumbent LECs' ordering and billing systems); NYNEX reply
comments at 32-33 (arguing that there are also differences in incumbent LECs'
test equipment).  [*129]

   c. Discussion


   516. We conclude that operations support systems and the information they
contain fall squarely within the definition of "network element" and must be
unbundled upon request under section 251(c)(3), as discussed below. Congress
included in the definition of "network element" the terms "databases" and
"information sufficient for billing and collection or used in the transmission,
routing, or other provision of a telecommunications service." n1253 We believe
that the inclusion of these terms in the definition of "network element" is a
recognition that the massive operations support systems employed by incumbent
LECs, and the information such systems maintain and update to administer
telecommunications networks and services, represent a significant potential
barrier to entry. It is these systems that determine, in large part, the speed
and efficiency with which incumbent LECs can market, order, provision, and
maintain telecommunications services and facilities. Thus, we agree with
Ameritech that "operational interfaces are essential to promote viable
competitive entry." n1254

n1253 47 U.S.C. @ 153(29) (emphasis added).

n1254 Ameritech July 10 Ex Parte at 5.  [*130]

   517. Nondiscriminatory access to operations support systems functions can be
viewed in at least three ways. First, operations support systems themselves can
be characterized as "databases" or "facilit[ies] . . . used in the provision of
a telecommunications service," and the functions performed by such systems can
be characterized as "features, functions, and capabilities that are provided by
means of such facilit[ies]." n1255 Second, the information contained in, and
processed by operations support systems can be classified as "information
sufficient for billing and collection or used in the transmission, routing, or
other provision of a telecommunications service." n1256 Third, nondiscriminatory
access to the functions of operations support systems, which would include
access to the information they contain, could be viewed as a "term or condition"
of unbundling other network elements under section 251(c)(3), or resale under
section 251(c)(4). Thus, we conclude that, under any of these interpretations,
operations support systems functions are subject to the nondiscriminatory access
duty imposed by section 251(c)(3), and the duty imposed by section 251(c)(4) to
provide resale services  [*131]   under just, reasonable, and nondiscriminatory
terms and conditions.

n1255 47 U.S.C. @ 153(29).

n1256 Id.

   518. Much of the information maintained by these systems is critical to the
ability of other carriers to compete with incumbent LECs using unbundled network
elements or resold services. Without access to review, inter alia, available
telephone numbers, service interval information, and maintenance histories,
competing carriers would operate at a significant disadvantage with respect to
the incumbent. Other information, such as the facilities and services assigned
to a particular customer, is necessary to a competing carrier's ability to
provision and offer competing services to incumbent LEC customers. n1257
Finally, if competing carriers are unable to perform the functions of
pre-ordering, ordering, provisioning, maintenance and repair, and billing for
network elements and resale services in substantially the same time and manner
that an incumbent can for itself, competing carriers will be severely
disadvantaged, if not precluded altogether, from fairly competing. Thus
providing nondiscriminatory access to these support systems functions, which
would include access  [*132]   to the information such systems contain, is vital
to creating opportunities for meaningful competition.

n1257 For these reasons, it is most important that incumbent LECs, which
currently own the overwhelming majority of local facilities in any market,
provide this information to those new entrants who initially will rely to
varying degrees on incumbent LEC facilities. See e.g., AT&T comments at 33-34.



   519. As noted in the comments above, several state commissions have ordered
real-time access or have ongoing proceedings working to develop and implement it
within their jurisdictions. The New York Commission, building on its pioneering
experience with the Rochester Telephone "Open Market Plan," has facilitated a
working group on electronic interfaces comprised of both incumbent LECs and
potential competitors. n1258 The New York Commission focused on these issues in
response to the frustrations and concerns of resellers in the Rochester market.
n1259 In particular, AT&T alleged that it was "severely disadvantaged due to the
fact that [Rochester Telephone] has failed to provide procedures for resellers
to access [their] databases for on-line queries needed to perform basic service
[*133]   functions [such] as scheduling customer appointments." n1260 The New
York Commission has concluded that wherever possible NYNEX will provide new
entrants with real-time electronic access to its systems. n1261 As another
example, the Georgia Commission recently ordered BellSouth to provide electronic
interfaces such that resellers have the same access to operations support
systems and informational databases as BellSouth does, including interfaces for
pre-ordering, ordering and provisioning, service trouble reporting, and customer
daily usage. n1262 In testimony before the Georgia Commission, a BellSouth
witness acknowledged that "no one is happy, believe me, with a system that is
not fully electronic." n1263 As noted above, Georgia ordered BellSouth to
establish these interfaces within two months of its order (by July 15, 1996),
but recently extended the deadline an additional month (to August 15th). n1264
Both the Illinois and Indiana Commissions ordered incumbent LECs immediately to
provide to competitors access to operational interfaces at parity with those
provided to their own retail customers, or submit plans with specific timetables
for achieving such access. n1265 Several   [*134]   other states have passed
laws or adopted rules ordering incumbent LECs to provide interfaces for access
equal to that the incumbent provides itself. n1266 We recognize the lead taken
by these states and others, and we generally rely upon their conclusions in this
Order.

n1258 Order Declaring Resale Prohibitions Void and Establishing Tariff Terms,
Case 94-C-0095, et. al. (New York Commission June 25, 1996).

n1259 Order Declaring Resale Prohibitions Void and Establishing Tariff Terms,
Case 94-C-0095, et. al, (New York Commission June 25, 1996). In New York
proceeding, resellers argued that interfaces were as important to competition as
the level of the wholesale discount. Id.

n1260 AT&T Communications of New York, Inc. Complaint, Petition for Declaratory
Judgement and for Reconsideration of Opinion No. 94-25 New York Commission, page
12.

n1261 Id. at 13-14. The New York Commission operations working group has focused
on five areas for implementation: (1) service ordering, (2) trouble
administration, (3) credit and collection, (4) billing and usage detail, (5)
local exchange company requirements. Id. at 13-17.

n1262 See In Re Petition of AT&T for the Commission to Establish Resale Rules,
Rates, Terms and Conditions and the Initial Unbundling of Services, Docket 6352,
(Georgia Commission May 29, 1996).  [*135]

n1263 Id.


n1264 Motion for Reconsideration in Docket No. 6352-U (Georgia Commission July
2, 1996).

n1265 In the Matter of the Investigation on the Commission's Own Motion into Any
and All Matters Relating to Local Telephone Exchange Competition Within the
State of Indiana, Cause No. 39983, Interim Order on Bundled Resale and Other
Issues (Indiana Commissions July 1, 1996); Illinois Wholesale Order.

n1266 See e.g., Texas Commission comments at 19; In the Matter of the Commission
Investigation Relative to the Establishment of Local Exchange Competition and
Other Competitive Issues, Case No. 95-845-TP-COI (Ohio Commission June 12,
1996); Order Instituting Rulemaking on the Commission's Own Motion into
Competition for Local Exchange Service, R. 95-04-043 and I. 95-04-044
(California Commission April 26, 1995).

   520. We conclude that providing nondiscriminatory access to operations
support systems functions is technically feasible. Incumbent LECs today provide
IXCs with different types of electronic ordering or trouble interfaces that
demonstrate the feasibility of such access, and perhaps also provide a basis for
adapting such interfaces for use between local  [*136]   service providers.
n1267 Further, as discussed above, several incumbent LECs, including NYNEX and
Bell Atlantic, are already testing and operating interfaces that support limited
functions, and are developing the interfaces to support access to the remaining
functions identified by most potential competitors. n1268 Some incumbent LECs
acknowledge that nondiscriminatory access to operations support systems
functions is technically feasible. n1269 Finally, several industry groups are
actively establishing standards for inter-telecommunications company
transactions. n1270

n1267 See, e.g., Bell Atlantic June 21 Ex Parte; NYNEX July 12 Ex Parte; NYNEX
July 17 Ex Parte; U S West June 28 Ex Parte; U S West July 9 Ex Parte.

n1268 Bell Atlantic June 21 Ex Parte; NYNEX July 17 Ex Parte.

n1269 See NYNEX reply at 33-34; GTE reply at 23 n.28; Bell Atlantic reply at 14.

n1270 Industry standards committees include ECIC, EDI, OBF and T1M1. See
Ameritech July 10 Ex Parte, Sprint June 25 Ex Parte, NYNEX July 17 Ex Parte.

   521. Section 251(d)(2)(A) requires the Commission to consider whether "access
to such network elements as are proprietary in nature is necessary." n1271
[*137]   Incumbent LECs argue that there are proprietary interfaces used to
access these databases and information. Parties seeking to compete with
incumbent LECs counter that access to such databases and information is vitally
important to the ability to broadly compete with the incumbent. As discussed
above, competitors also argue that such access is necessary to order, provision,
and maintain unbundled network elements and resold services, and to market
competing services effectively to an incumbent LEC's customers. We find that it
is absolutely necessary for competitive carriers to have access to operations
support systems functions in order to successfully enter the local service
market.

n1271 47 U.S.C. @ 251(d)(2)(A).


   522. Section 251(d)(2)(B) requires the Commission to consider whether "the
failure to provide access to such network elements would impair the ability of
the telecommunications carrier seeking access to provide the services that it
seeks to offer." n1272 As mentioned above, parties identified access to
operations support systems functions as critical to the provision of local
service. We find that such operations support systems functions are essential to
the ability  [*138]   of competitors to provide services in a fully competitive
local service market. Therefore, we conclude that competitors' ability to
provide service successfully would be significantly impaired if they did not
have access to incumbent LECs' operations support systems functions.

n1272 47 U.S.C. @ 251(d)(2)(B).

   523. We thus conclude that an incumbent LEC must provide nondiscriminatory
access to their operations support systems functions for pre-ordering, ordering,
provisioning, maintenance and repair, and billing available to the LEC itself.
n1273 Such nondiscriminatory access necessarily includes access to the
functionality of any internal gateway systems n1274 the incumbent employs in
performing the above functions for its own customers. For example, to the extent
that customer service representatives of the incumbent have access to available
telephone numbers or service interval information during customer contacts, the
incumbent must provide the same access to competing providers. Obviously, an
incumbent that provisions network resources electronically does not discharge
its obligation under section 251(c)(3) by offering competing providers access
that involves human intervention,   [*139]   such as facsimile-based ordering.
n1275

n1273 We adopt the definition of these terms as set forth in the AT&T-Bell
Atlantic Joint Ex Parte as the minimum necessary for our requirements. We note,
however, that individual incumbent LEC's operations support systems may not
clearly mirror these definitions. Nevertheless, incumbent LECs must provide
nondiscriminatory access to the full range of functions within pre-ordering,
ordering, provisioning, maintenance and repair and billing enjoyed by the
incumbent LEC.

n1274 A gateway system refers to any electronic interface the incumbent LEC has
created for its own use in accessing support systems for providing pre-ordering,
ordering, provisioning, repair and maintenance, and billing.

n1275 Such access was all that Rochester Telephone provided to AT&T, when AT&T
attempted to compete as a reseller of Rochester Telephone service. See Letter
from Bruce Cox, Government Affairs Director, AT&T to William Caton, Acting
Secretary, FCC, July 10, 1996 (AT&T July 10 Ex Parte).


   524. We recognize that, although technically feasible, providing
nondiscriminatory access to operations support systems functions may require
some modifications  [*140]   to existing systems necessary to accommodate such
access by competing providers. n1276 Although, as discussed above, many
incumbent LECs are actively developing these systems, even the largest and most
advanced incumbent LECs have not completed interfaces that provide such access
to all of their support systems functions. State commissions such as Georgia,
Illinois, and Indiana, however, have ordered that such access be made available
to requesting carriers in the near term. As a practical matter, the interfaces
developed by incumbents to accommodate nondiscriminatory access will likely
provide such access for services and elements beyond a particular state's
boundaries, and thus we believe that requirements for such access by a small
number of states representing a cross-section of the country will quickly lead
to incumbents providing access in all regions.

n1276 See supra, Section V.G. regarding accommodation of unbundling.

   525. In all cases, however, we conclude that in order to comply fully with
section 251(c)(3) an incumbent LEC must provide, upon request, nondiscriminatory
access to operations support systems functions for pre-ordering, ordering,
provisioning, maintenance  [*141]   and repair, and billing of unbundled network
elements under section 251(c)(3) and resold services under section 251(c)(4).
Incumbent LECs that currently do not comply with this requirement of section
251(c)(3) must do so as expeditiously as possible, but in any event no later
than January 1, 1997. n1277 We believe that the record demonstrates that
incumbent LECs and several national standards-setting organizations have made
significant progress in developing such access. This progress is also reflected
in a number of states requiring competitor access to these transactional
functions in the near term. Thus, we believe that it is reasonable to expect
that by January 1, 1997, new entrants will be able to compete for end user
customers by obtaining nondiscriminatory access to operations support systems
functions.

n1277 See infra, Section VII.B. for a discussion of exemptions and suspensions
for small and rural incumbent LECs.

   526. We have considered the economic impact of our rules in this section on
small incumbent LECs. For example, RTC urges us to recognize the differences
between carriers in regards to computerized network administration and
operational interfaces. Our requirement  [*142]   of nondiscriminatory access to
operations support systems recognizes that different incumbent LECs possess
different existing systems. We also note, however, that section 251(f) of the
1996 Act provides relief for certain small LECs from our regulations
implementing section 251.

   527. Ideally, each incumbent LEC would provide access to support systems
through a nationally standardized gateway. Such national standards would
eliminate the need for new entrants to develop multiple interface systems, one
for each incumbent. We believe that the progress made by standards-setting
organizations to date evidences a strong national movement toward such a uniform
standard. n1278 For example, both AT&T and Bell Atlantic agree that, given
appropriate guidance from the Commission, the industry can achieve consensus on
national standards such that within 12 months 95% of all
inter-telecommunications company transactions may be processed via nationally
standardized electronic gateways. n1279

n1278 See Sprint June 25 Ex Parte; AT&T comments at 38; BellSouth reply at 27.

n1279 AT&T-Bell Atlantic Joint Ex Parte.

   528. In order to ensure continued progress in establishing national
standards,   [*143]   we propose to monitor closely the progress of industry
organizations as they implement the rules adopted in this proceeding. Depending
upon the progress made, we will make a determination in the near future as to
whether our obligations under the 1996 Act require us to issue a separate notice
of proposed rulemaking or take other action to guide industry efforts at
arriving at appropriate national standards for access to operations support
systems.



   6. Other Network Elements

   a. Background

   529. In the NPRM, we requested comment on other network elements the
Commission should require incumbent LECs to unbundle. We tentatively concluded
that "subscriber numbers" and "operator call completion services" should be
unbundled. n1280 We also, under our discussion of section 251(b)(3), sought
comment on nondiscriminatory access to telephone numbers, operator services, and
directory assistance. n1281

n1280 NPRM at para. 116.

n1281 NPRM at paras. 214-217.

   b. Comments

   530. Many parties support the Commission's tentative conclusion that
incumbent LECs should be required to unbundle "operator call completion
services" as a separate network element. n1282 AT&T argues that such a network
[*144]   element would be more correctly described as the "operator systems"
used to provide these services. n1283 Some state commissions have proposed or
required unbundling of operator services because they are critical to new
entrants' ability to enter the local exchange market. n1284 Several incumbent
LECs, however, argue that they should not be required to unbundle operator
services as a network element, because both alternative providers and incumbent
LECs provide them on a nondiscriminatory basis. n1285 Some incumbent LECs also
advance the argument that Congress did not intend for operator services to be
treated as a network element, instead requiring BOCs to provide
nondiscriminatory access to such services as one of the conditions for BOC entry
into in-region interLATA services under section 271. n1286

n1282 ACSI comments at 44; ALTS comments at 32 (competitors must have
nondiscriminatory access to busy line verification and call interrupt as these
functionalities are currently only available from the incumbent LEC); AT&T
comments at 26; Continental comments at 19; MCI comments at 18-20; Cable &
Wireless comments at 20; Citizens Utilities comments at 15; Colorado Commission
comments at 24; Comcast comments at 20; Competition Policy Institute comments at
16; DOJ comments at 21; Frontier comments at 17 n.32; GCI comments at 12;
Telecommunications Resellers Ass'n comments at 36; TIA comments at 13 (special
toll, public telephone and other calls requiring operator assistance); Wyoming
Commission comments at 21; Jones Intercable reply at 30.  [*145]

n1283 AT&T comments at 26 n.32; see also Competition Policy Institute comments
at 16 (defined operator services as the live or mechanized systems which provide
customers with operator services, such as call intercept, directory assistance
and call completion); Jones Intercable reply at 30 n.51.

n1284 Wyoming comments at 22; Illinois Wholesale Order; AT&T reply 20-21 n.34.
See Letter from Daniel Brenner, Vice President for Law & Regulatory Policy,
NCTA, to Regina Keeney, Chief, Common Carrier Bureau, FCC, April 15, 1996 (NCTA
April 15 Ex Parte).


n1285 Bell Atlantic comments at 30 (operator services is a competitive market
with over 145 operator services providers in the United States); GTE comments
at 44; USTA comments at 17 (incumbent LECs already provide operator services on
a contract or tariff basis); U S West comments at 46 n.103.

n1286 Ameritech reply at 12 n.15; Bell Atlantic comments at 30; Cincinnati Bell
comments at 19 (arguing that unbundling of operator services would impose large
costs on smaller incumbent LECs); GTE comments at 44 (section 271 requires
nondiscriminatory access to call completion services, not unbundled access to
the relevant databases); PacTel reply at 21; SBC comments at 83-84; USTA reply
at 17-18.  [*146]

   531. Commenters advance different proposals as to how to unbundle access to
operator call completion services. Some competitors advocate defining the entire
service as a network element so that a competitor could provide its own operator
services by interconnecting at the incumbent LEC's switch. n1287 AT&T argues
that such services are not necessary for competitors that have their own
comparable systems. n1288 Some competitors argue that incumbent LECs must make
subscriber name and number and billing and collection services available so that
a competitor can provide call completion and directory assistance with its own
operators. n1289 Other parties, mostly incumbent LECs, state that such a
proposal is not technically feasible. n1290 MCI further states that it needs
access to incumbent LEC subscriber number information for the provision of
directory assistance and call completion services by its own operator systems.
n1291 Other competitors want the incumbent LEC to provide them with unbranded
operator call completion services, n1292 much as some of the larger incumbent
LECs and IXCs do now for smaller carriers. n1293

n1287 MCI comments at 37; AT&T reply at 21 (incumbent LECs must unbundle
operator systems so that a competitor providing its own does not have to pay for
the incumbent LECs' services).  [*147]

n1288 AT&T comments at 26.

n1289 ACSI comments at 44.

n1290 See SBC reply at 22-23.

n1291 MCI comments at 37.

n1292 Unbranded or rebranded operator services involve the provision of such
services by the incumbent LEC for the requesting carrier either: (1) without any
identification to the customer that it is the incumbent LEC actually providing
such services; or (2) in a manner that the incumbent LEC identifies itself to
the customer solely as the requesting carrier for the provision of these
services.

n1293 ACSI comments at 47-48; AT&T comments at 26; GCI comments at 12.

   532. Many commenters argue that directory assistance and the databases used
to provide such services should be separately unbundled as a network element.
n1294 Some commenters advocate requiring incumbent LECs to provide unbranded
directory assistance as a network element. n1295 MCI notes that Pacific Bell
operates a joint directory assistance database for itself and GTE, and argues
that competing carriers should be able to participate in a similar type
arrangement with incumbent LECs. n1296


n1294 NCTA comments at 42; Teleport comments at 37; GST comments at 25; GCI
comments at 12; MCI comments at 37 (MCI further recognizes directory assistance
and directory listings).  [*148]

n1295 Comcast comments at 20; Citizens Utilities comments at 15.

n1296 MCI comments at 33, 38 (California Commission ruling adopting this
requirement is published at Re GTE California Incorporated, 31 CPUC 2d, 370
(1989)).

   533. Some commenters argue that access to "subscriber numbers" should be
unbundled and that access to the Number Assignment database should be unbundled.
n1297 MCI advocates that the Commission require incumbent LECs to provide
unbundled access to their subscriber number information sufficient for the
provision of directory assistance and call completion service by competing
carriers using their own operators. n1298 Other parties argue that such access
should not be required. n1299

n1297 MCI comments at 19-20; ACSI comments at 43.

n1298 MCI comments at 37.

n1299 GTE comments at 43 (to the extent "subscriber numbers" means number
administration, nondiscriminatory access is assured by industry guidelines and
the Commission's intent to establish a number administration entity); Cincinnati
Bell comments at 19 (subscriber numbers and information sufficient for billing
and collection should be addressed in the bona fide request process).  [*149]

   c. Discussion

   (1) Operator Services and Directory Assistance

   534. We conclude that incumbent LECs are under the same duty to permit
competing carriers nondiscriminatory access to operator services and directory
assistance facilities as all LECs are under section 251(b)(3). n1300 We further
conclude that, if a carrier requests an incumbent LEC to unbundle the facilities
and functionalities providing operator services and directory assistance as
separate network elements, the incumbent LEC must provide the competing provider
with nondiscriminatory access to such facilities and functionalities at any
technically feasible point. We believe that these facilities and functionalities
are important to facilitate competition in the local exchange market. Further,
the 1996 Act imposes upon BOCs, as a condition of entry into in-region interLATA
services the duty to provide nondiscriminatory access to directory assistance
services and operator call completion services. n1301 We therefore conclude that
unbundling facilities and functionalities providing operator services and
directory assistance is consistent with the intent of Congress.

n1300 See Dialing Parity Order supra, Section I.  [*150]

n1301 47 U.S.C. @ 271(c)(2)(B)(vii)(II)-(III).


   535. As discussed in our section on nondiscriminatory access under section
251(b)(3), n1302 the provision of nondiscriminatory access to operator services
and directory assistance must conform to the requirements of section 222, which
restricts carrier's use of CPNI. n1303 In particular, access to directory
assistance and underlying directory information does not require incumbent LECs
to provide access to unlisted or unpublished telephone numbers, or other
information that the incumbent LEC's customer has requested the LEC not to make
available. In conforming to section 222, we anticipate that incumbent LECs will
provide such access in a manner that will protect against the inadvertent
release of unlisted customer names and numbers.

n1302 See Dialing Parity Order supra, Section I.

n1303 See Implementation of the Telecommunications Act of 1996:
Telecommunications Carriers' Use of Customer Proprietary Network Information and
other Customer Information, CC Docket No. 91-115, Notice of Proposed Rulemaking,
FCC 96-221 (rel. May 17, 1996).

   536. We note that several competitors advocate unbundling the facilities and
functionalities  [*151]   providing operator services and directory assistance
from particular resold services or the unbundled local switching element, so
that a competing provider can provide these services to its customers supported
by its own systems rather than those of the incumbent LEC. n1304 Some incumbent
LECs argue that such unbundling, however, is not technically feasible because of
their inability to route individual end user calls to multiple systems. n1305 We
find that unbundling both the facilities and functionalities providing operator
services and directory assistance as separate network elements will be
beneficial to competition and will aid the ability of competing providers to
differentiate their service from the incumbent LECs. We also note that the
Illinois Commission has recently ordered such access. n1306 We therefore find
that incumbent LECs must unbundle the facilities and functionalities providing
operator services and directory assistance from resold services and other
unbundled network elements to the extent technically feasible. As discussed
above in our section on unbundled switching, we require incumbent LECs, to the
extent technically feasible, to provide customized routing,   [*152]   which
would include such routing to a competitor's operator services or directory
assistance platform. n1307

n1304 See, e.g., AT&T comments at 26; Cable & Wireless comments at 20; Colorado
Commission comments at 24; DOJ comments at 21; Frontier comments at 17 n.32; MCI
comments at 18-20; Jones Intercable reply at 30.

n1305 SBC reply at 22-23.

n1306 See Illinois Wholesale Order.

n1307 See infra, Section V.I.2.

   537. We also note that some competitors seek access to operator services and
directory assistance in order to serve their own customers. n1308 Some of these
parties argue that nondiscriminatory access to such network elements requires
incumbent LECs to provide rebranded operator call completion services and
directory assistance to the competing carrier's customers. n1309 Incumbent LECs
argue that the provision of these services on an unbranded or rebranded basis is
not technically feasible because of their inability at the operator services or
directory assistance platforms to identify the carrier serving the end user.
n1310 As we concluded in our discussion on section 251(b)(3), we find that
incumbent LECs must permit nondiscriminatory access to both  [*153]   operator
services and directory assistance in the same manner required of all LECs.

n1311 We make no finding on the technical feasibility of providing branded or
unbranded service to competitors based on the record before us. We note,
however, that the Illinois Commission has ordered incumbent LECs to provide
rebranded operator call completion services and directory assistance to
requesting competitive carriers. n1312

n1308 AT&T comments at 26.

n1309 ACSI comments at 47-48; AT&T comments at 26; Comcast comments at 20; GCI
comments at 12.

n1310 SBC reply at 22-23.

n1311 See Dialing Parity Order supra, Section I.

n1312 See Illinois Wholesale Order.

   538. As discussed above, incumbent LECs must provide access to databases as
unbundled network elements. n1313 We find that the databases used in the
provision of both operator call completion services and directory assistance
must be unbundled by incumbent LECs upon a request for access by a competing
provider. In particular, the directory assistance database must be unbundled for
access by requesting carriers. n1314 Such access must include both entry of the
requesting carrier's customer information into  [*154]   the database, and the
ability to read such a database, so as to enable requesting carriers to provide
operator services and directory assistance concerning incumbent LEC customer
information. We clarify, however, that the entry of a competitor's customer
information into an incumbent LEC's directory assistance database can be
mediated by the incumbent LEC to prevent unauthorized use of the database. We
find that the arrangement ordered by the California Commission concerning the
shared use of such a database by Pacific Bell and GTE is one possible method of
providing such access. n1315

n1313 See supra, Section V.J.

n1314 We find the joint directory assistance database used by Pacific Bell and
GTE to be one method of such access. MCI comments at 38.

n1315 See Re GTE California Incorporated, 31 CPUC 2d 370 (1989).

   539. Section 251(d)(2)(A) requires the Commission to consider whether "access
to such network elements as are proprietary in nature is necessary." n1316
Parties generally did not identify proprietary concerns with unbundling access
to operator call completion services or directory assistance. Incumbent LECs
generally did not claim a proprietary interest  [*155]   in their directory
assistance databases. Many parties contend that proprietary interests leading to
restrictions on use or sharing of such database information would injure their
ability to compete effectively for local service. n1317 For the reasons
described below, we find that access to the systems supporting both operator
call completion services and directory assistance is necessary for new entrants
to provide competing local exchange service.

n1316 47 U.S.C. @ 251(d)(2)(A).

n1317 MCI comments at 37-38.



   540. Section 251(d)(2)(B) requires the Commission to consider whether "the
failure to provide access to such network elements would impair the ability of
the telecommunications carrier seeking access to provide the services that it
seeks to offer." n1318 Parties identified access to operator call completion
services and directory assistance as critical to the provision of local service.
n1319 Therefore we conclude that competitors' ability to provide service would
be significantly impaired if they did not have access to incumbent LECs'
operator call completion services and directory assistance.

n1318 47 U.S.C. @ 251(d)(2)(B).

n1319 MCI comments at 37-38.  [*156]

   (2) Subscriber Numbers

   541. Some commenters argue that the Commission should require incumbent LECs
to unbundle access to subscriber numbers. We conclude that no Commission action
under section 251(b)(3) is required at this time to ensure nondiscriminatory
access to subscriber numbers. Issues regarding access to subscriber numbers will
be addressed by our implementation of section 251(e). n1320

n1320 See supra, note 10.

VI. METHODS OF OBTAINING INTERCONNECTION AND ACCESS TO UNBUNDLED ELEMENTS

   542. In this section, we address the means of achieving interconnection and
access to unbundled network elements that incumbent LECs are required to make
available to requesting carriers.

A. Overview

   1. Background

   543. Section 251(c)(2) requires incumbent LECs to provide interconnection
with the LEC's network "for the facilities and equipment of any requesting
telecommunications carrier." n1321 Section 251(c)(6) imposes upon incumbent LECs
"the duty to provide . . . for physical collocation of equipment necessary for
interconnection or access to unbundled network elements at the premises of the
[LEC], except that the carrier may provide for virtual collocation if the [LEC]
demonstrates  [*157]   to the State commission that physical collocation is not
practical for technical reasons or because of space limitations." n1322 In the
NPRM, we noted that section 251(c)(6) does not expressly limit the Commission's
authority under section 251(c)(2) to establish rules requiring incumbent LECs to
make available a variety of methods of interconnection, except in situations
where the incumbent can demonstrate to the state commission that physical
collocation is not practical for technical reasons or space limitations. We
tentatively concluded that the Commission has the authority to require any
reasonable method of interconnection, including physical collocation, virtual
collocation, and meet point interconnection arrangements. n1323

n1321 47 U.S.C. @ 251(c)(2).

n1322 47 U.S.C. @ 251(c)(6).


n1323 NPRM at para. 64. Under the Commission's Expanded Interconnection rules,
LECs are not required to offer a collocating carrier a choice between physical
and virtual collocation. Special Access Order, 7 FCC Rcd at 7407; Switched
Transport Order, 8 FCC Rcd at 7404; see also Physical Collocation Designation
Order, 8 FCC Rcd 4589 (under our Expanded Interconnection rules, LECs must
provide virtual collocation where: virtual collocation is available on an
intrastate basis; a LEC has negotiated an interstate virtual collocation
arrangement; LECs are exempted from providing physical collocation because of
space constraints; or a state commission has granted a waiver). Also, see
Section VI.B.1.b. regarding the definitions of physical and virtual collocation.
[*158]

   2. Comments

   544. Many parties agree with our tentative conclusion that we have the
authority to require any reasonable method of interconnection. n1324 The
Illinois Commission states that the purpose of 251(c)(6) is to eliminate any
question about the Commission's authority to require physical collocation, and
not to limit the type of interconnection incumbent LECs are required to provide
under 251(c)(2). n1325

n1324 See, e.g., MFS comments at 17-18 (if Congress meant that 251(c)(6)
collocation was the exclusive means of obtaining interconnection or access to
unbundled elements, then subsections (c)(2) and (c)(3) would not have been
required); Teleport comments at 26; Citizens Utilities comments at 11; Illinois
Commission comments at 33; Pennsylvania Commission comments at 22; Sprint reply
at 21.

n1325 Illinois Commission comments at 33; MFS comments at 18 (no inference can
be drawn that Congress intended any limitation on the Commission's authority to
require forms of interconnection other than physical collocation, especially in
light of section 251(i)).

   545. CAPs and IXCs argue that incumbent LECs should be required to offer
competitive entrants the choice between  [*159]   physical and virtual
collocation, regardless of whether it is practical to offer physical collocation
at a particular LEC premises. n1326 Consumer Federation of America and the
Consumers Union argue that the Commission can and should order physical and
virtual collocation. n1327 MCI contends that interconnectors have the right to
choose virtual or physical collocation, or both, and should have the right to
switch from one arrangement to another while paying only the actual costs of
such a change. n1328 Sprint argues that the authority to require physical
collocation necessarily includes the authority to require less invasive forms of
collocation, such as virtual. n1329 Hyperion contends that small carriers lack
the financial resources to make the economic investment necessary for physical
collocation at every end office. Hyperion suggests that permitting new entrants
to request virtual or physical collocation, depending upon their requirements
would encourage competition. n1330 ACTA asserts that the cost of converting
existing virtual collocation arrangements to physical should be borne by the
incumbent LEC. n1331

n1326 See, e.g., AT&T comments at 41; Hyperion comments at 14; MFS comments at
23.  [*160]

n1327 CFA/CU comments at 14.


n1328 MCI comments at 56.

n1329 Sprint Comments at 19.

n1330 Hyperion comments at 15.

n1331 ACTA comments at 16.

   546. Several parties urge the Commission to require interconnection at "meet
points." n1332 Teleport states that incumbent LECs currently provide meet point
interconnection arrangements between one another's facilities and are thus
obligated to provide such arrangements to others. n1333 Teleport also claims
that requiring meet point arrangements would be pro-competitive because it would
allow competitors the flexibility to construct more efficient networks by
eliminating the need to match the incumbent LEC's network. n1334

n1332 A meet point is a point, designated by two carriers, at which one
carrier's responsibility for service begins and the other carrier's
responsibility ends.

n1333 Teleport reply at 25; Sprint reply 21-22 (argues for a "mid-span" meet
arrangement whereby two carriers' fiber optic cables would be spliced together
at a point between two repeaters).

n1334 Teleport reply at 25.

   547. Incumbent LECs respond that the statute does not give the Commission
authority to require  [*161]   virtual collocation in addition to physical
collocation. n1335 Ameritech argues that Congress specifically addressed
collocation in section 251(c)(6), and that it would be inappropriate to mandate
virtual collocation pursuant to the general duty under section 251(c)(2) to
provide interconnection. It contends that, under principles of statutory
construction, the specific language of section 251(c)(6), which provides for
virtual collocation only where physical collocation is not practical, should
govern the general language of section 251(c)(2). n1336

n1335 See, e.g., Bell Atlantic comments at 34; PacTel comments at 36.

n1336 Ameritech comments at 24.

   548. GTE claims that section 251(c)(2) does not provide for any Commission
role in specifying acceptable forms of interconnection. n1337 Bell Atlantic and
BellSouth claim that meet point interconnection arrangements are very complex
and should not be mandated by the Commission or the states, but rather left to
the negotiation process. n1338 PacTel argues that incumbent LECs should not be
required to develop new network capabilities or expand current network
facilities to interconnect with competitors. n1339

n1337 GTE comments at 22.  [*162]

n1338 Bell Atlantic comments at 22; BellSouth comments at 23.

n1339 PacTel comments at 19.



   3. Discussion

   549. We conclude that, under sections 251(c)(2) and 251(c)(3), any requesting
carrier may choose any method of technically feasible interconnection or access
to unbundled elements at a particular point. Section 251(c)(2) imposes an
interconnection duty at any technically feasible point; it does not limit that
duty to a specific method of interconnection or access to unbundled elements.

   550. Physical and virtual collocation are the only methods of interconnection
or access specifically addressed in section 251. Under section 251(c)(6),
incumbent LECs are under a duty to provide physical collocation of equipment
necessary for interconnection unless the LEC can demonstrate that physical
collocation is not practical for technical reasons or because of space
limitations. In that event, the incumbent LEC is still obligated to provide
virtual collocation of interconnection equipment. Under section 251, the only
limitation on an incumbent LEC's duty to provide interconnection or access to
unbundled elements at any technically feasible point is addressed in section
251(c)(6)   [*163]   regarding physical collocation. Unless a LEC can establish
that the specific technical or space limitations in subsection (c)(6) are met
with respect to physical collocation, we conclude that incumbent LECs must
provide for any technically feasible method of interconnection or access
requested by a competing carrier, including physical collocation. n1340 If, for
example, we interpreted section 251(c)(6) to limit the means of interconnection
available to requesting carriers to physical and virtual collocation, the
requirement in section 251(c)(2) that interconnection be made available "at any
technically feasible point" would be narrowed dramatically to mean that
interconnection was required only at points where it was technically feasible to
collocate equipment. We are not pursuaded that Congress intended to limit
interconnection points to locations only where collocation is possible.

n1340 Because we require incumbent LECs to offer virtual collocation in addition
to physical collocation, we reject the suggestion of ACTA that the cost of
converting from virtual to physical collocation be borne by the incumbent LEC.
See ACTA comments at 16.


   551. Section 251(c)(6) provides the  [*164]   Commission with explicit
authority to mandate physical collocation as a method of providing
interconnection or access to unbundled elements. Such authority was previously
found lacking by the U.S. Court of Appeals for the D.C. Circuit in Bell Atlantic
v. FCC, n1341 which was decided prior to enactment of the 1996 Act. While
section 251(c)(6) limits an incumbent LEC's duty to provide physical collocation
in certain circumstances, we find that it does not limit our authority to
require, under sections 251(c)(2) and (c)(3), the provision of virtual
collocation. We note that under our Expanded Interconnection rules, that were
amended subsequent to the Bell Atlantic decision, competitive entrants using
physical collocation were required by many incumbent LECs to convert to virtual
collocation. If the Commission concluded that subsection (c)(6) places a
limitation on our authority to require virtual collocation, competitive
providers would be required to undertake costly and burdensome actions to
convert back to physical collocation even if they were satisfied with existing
virtual collocation arrangements. We conclude that Congress did not intend to
impose such a burden on requesting carriers  [*165]   that wish to continue to
use virtual collocation for purposes of section 251(c). Further, the record
indicates that this requirement would be costly and would delay competition.
n1342 In short, we conclude that, in enacting section 251(c)(6), Congress
intended to expand the interconnection choices available to requesting carriers,
not to restrict them.

n1341 Bell Atlantic Telephone Companies v. FCC, 24 F.3d 1441 (D.C. Cir. 1994)
(Bell Atlantic v. FCC).

n1342 See Teleport comments at 32; ALTS comments at 23; Time Warner comments at
42-44 (objecting to non-recurring charges for the reconnection of existing
interconnected virtual collocation services to a replacement physical
collocation arrangement).

   552. We also conclude that requiring incumbent LECs to provide virtual
collocation and other technically feasible methods of interconnection or access
to unbundled elements is consistent with Congress's desire to facilitate entry
into the local telephone market by competitive carriers. In certain
circumstances, competitive carriers may find, for example, that virtual
collocation is less costly or more efficient than physical collocation. We
believe that this may be particularly  [*166]   true for small carriers which
lack the the financial resources to physically collocate equipment in a large
number of incumbent LEC premises. n1343 Moreover, since requesting carriers will
bear the costs of other methods of interconnection or access, this approach will
not impose an undue burden on the incumbent LECs.

n1343 See Hyperion comments at 15.


   553. Consistent with this view, other methods of technically feasible
interconnection or access to incumbent LEC networks, such as meet point
arrangements, in addition to virtual and physical collocation, must be available
to new entrants upon request. n1344 Meet point arrangements (or mid-span meets),
for example, are commonly used between neighboring LECs for the mutual exchange
of traffic, and thus, in general, we believe such arrangements are technically
feasible. n1345 Further, although the creation of meet point arrangements may
require some build out of facilities by the incumbent LEC, we believe that such
arrangements are within the scope of the obligations imposed by sections
251(c)(2) and 251(c)(3). In a meet point arrangement, the "point" of
interconnection for purposes of sections 251(c)(2) and 251(c)(3) remains
[*167]   on "the local exchange carrier's network" n1346 (e.g., main
distribution frame, trunk-side of the switch), and the limited build-out of
facilities from that point may then constitute an accommodation of
interconnection. n1347 In a meet point arrangement each party pays its portion
of the costs to build out the facilities to the meet point. We believe that,
although the Commission has authority to require incumbent LECs to provide meet
point arrangements upon request, such an arrangement only makes sense for
interconnection pursuant to section 251(c)(2) but not for unbundled access under
section 251(c)(3). New entrants will request interconnection pursuant to section
251(c)(2) for the purpose of exchanging traffic with incumbent LECs. In this
situation, the incumbent and the new entrant are co-carriers and each gains
value from the interconnection arrangement. Under these circumstances, it is
reasonable to require each party to bear a reasonable portion of the economic
costs of the arrangement. In an access arrangement pursuant to section
251(c)(3), however, the interconnection point will be a part of the new
entrant's network and will be used to carry traffic from one element in the
[*168]   new entrant's network to another. We conclude that in a section
251(c)(3) access situation, the new entrant should pay all of the economic costs
of a meet point arrangement. Regarding the distance from an incumbent LEC's
premises that an incumbent should be required to build out facilities for meet
point arrangements, we believe that the parties and state commissions are in a
better position than the Commission to determine the appropriate distance that
would constitute the required reasonable accommodation of interconnection.

n1344 See Teleport comments at 26-30; see also Washington Utilities and
Transportation Commission, Fourth Supplemental Order Rejecting Tariff Filings
and Ordering Refiling; Granting Complaints, in Part, (Washington Commission Oct.
31, 1995), Docket No. UT-941464, at 45; Application of Electric Lightwave, Inc.,
MFS Intelnet of Oregon, Inc., and MCI Metro Access Transmission Services, Inc.,
Public Utility Commission of Oregon Order, Order No. 96-021, (Oregon Commission
Jan. 12, 1996), at 68-69; Rules for Telecommunications Interconnection and
Unbundling, Arizona Corporation Commission Order, Decision No. 59483, (Arizona
Commission Jan. 11, 1996), Proposed Rule R14-2-1303 (Attachment E hereto).
[*169]

n1345 The Michigan Commission recently required Ameritech to provide meet point
interconnection. Michigan Public Service Commission, Case No. U-10860 (Michigan
June 5, 1996) at 18 n.4.

n1346 47 U.S.C. @ 251(c)(2).

n1347 See, supra Section IV.E., above, discussing accommodation of
interconnection.

   554. Finally, in accordance with our interpretation of the term "technically
feasible," we conclude that, if a particular method of interconnection is
currently employed between two networks, or has been used successfully in the
past, a rebuttable presumption is created that such a method is technically
feasible for substantially similar network architectures. Moreover, because the
obligation of incumbent LECs to provide interconnection or access to unbundled
elements by any technically feasible means arises from sections 251(c)(2) and
251(c)(3), we conclude that incumbent LECs bear the burden of demonstrating the
technical infeasibility of a particular method of interconnection or access at
any individual point.

   B. Collocation

   1. Collocation Standards

   a. Adoption of National Standards

   (1). Background

   555. In the NPRM we tentatively concluded that we should adopt  [*170]
national rules for virtual and physical collocation. This tentative conclusion
was based on the belief that national standards would help to speed the
development of competition. n1348 We also sought comment on specific national
standards that we might adopt, and on whether any specific state approaches
would serve as an appropriate model. n1349

n1348 NPRM at para. 24.

n1349 NPRM at para. 70.



   (2). Comments

   556. Incumbent LECs and state commissions argue that collocation is a state
matter and that terms and conditions for collocation should be negotiated
between the parties n1350 or determined by the states. n1351 Some parties
recommend that, to the extent national guidelines are necessary, the Commission
should readopt the standards established in the Expanded Interconnection
proceeding. n1352 Teleport and the New York Commission suggest that, if we adopt
rules, we should use the New York Commission's "comparably efficient
interconnection" standard as a model. n1353 The Alabama and Missouri Commissions
support the approach to interconnection that each adopted in their respective
states. n1354 Pacific Telesis supports California's "preferred outcomes
approach." n1355  [*171]

n1350 BellSouth comments at 23; SBC comments at 64; USTA comments at 19; PacTel
comments at 34.

n1351 See, e.g., New York Commission comments at 13-14; see also Ohio Commission
comments at 29; Florida Commission comments at 22; Oregon Commission comments at
23.

n1352 USTA comments at 19; Bell Atlantic comments at 32-33; Sprint reply at 22;
California Commission comments at 24, Texas Commission comments at 13-14;
District of Columbia Commission comments at 20.

n1353 Teleport comments at 30 (this standard is consistent with, if not demanded
by, the requirements for nondiscriminatory interconnection in section
251(c)(2)(C)); New York Commission comments at 34 (the Commission should not set
specific rules, but should adopt guidelines that incumbent LECs offer comparably
efficient interconnection).

n1354 Alabama Commission comments at 17 (under Alabama's interconnection model,
parties negotiate collocation arrangements and may petition the Alabama
commission to require collocation under specific terms and conditions should
negotiations fail); Missouri Commission comments at 12 (The Missouri Commission
requires the incumbent LEC to provide the type of interconnection that the
interconnecting carrier requests, either physical or virtual. The Commission
also requires that large incumbent LECs tariff their interconnection
arrangements, and that collocators pay a deposit).  [*172]

n1355 PacTel comments at 36.

   557. Competitive providers generally favor national standards for
collocation. n1356 MFS argues that Congress did not intend for the states to
have a policy role in collocation matters, and that unambiguous national
guidelines are needed to prevent incumbent LECs from engaging in discriminatory
practices and to avoid duplicative litigation in multiple forums. n1357

n1356 Intermedia comments at 6; Teleport comments at 30; ALTS comments at 21;
Hyperion comments at 14; ACSI comments at 14; NCTA comments at 34;
Telecommunications Resellers Ass'n comments at 46; Time Warner comments at 32;
MFS comments at 20-21; AT&T comments at 39.

n1357 MFS comments at 20-21.



   (3). Discussion

   558. We conclude that we should adopt explicit national rules to implement
the collocation requirements of the 1996 Act. We find that specific rules
defining minimum requirements for nondiscriminatory collocation arrangements
will remove barriers to entry by potential competitors and speed the development
of competition. Our experience in the Expanded Interconnection proceeding
indicates that incumbent LECs have an economic incentive to interpret regulatory
ambiguities  [*173]   to delay entry by new competitors. n1358 We and the states
should therefore adopt, to the extent possible, specific and detailed
collocation rules. We find, however, that states should have flexibility to
apply additional collocation requirements that are otherwise consistent with the
1996 Act and our implementing regulations.

n1358 Our review of the LECs' initial physical and virtual collocation tariffs
raised significant concerns regarding the implementation of our Expanded
Interconnection requirements and resulted in the designation of numerous issues
for investigation. The Commission has not yet reached decisions on most of these
issues, though it has found that certain rates for virtual collocation were
unlawful. See Local Exchange Carriers' Rates, Terms, and Conditions for Expanded
Interconnection Through Virtual Collocation for Special Access and Switched
Transport, 10 FCC Rcd 6375 (Com. Car. Bur. 1995) (Phase I Report and Order); see
also Local Exchange Carriers' Rates, Terms, and Conditions for Expanded
Interconnection for Special Access, 8 FCC Rcd 6909 (Com. Car. Bur. 1993)
(Physical Collocation Designation Order); Local Exchange Carriers' Rates, Terms,
and Conditions for Expanded Interconnection Through Virtual Collocation for
Special Access and Switched Transport, 10 FCC Rcd 11116 (Com. Car. Bur. 1995
(Virtual Collocation Designation Order).  [*174]

   b. Adoption of Expanded Interconnection Terms and Conditions for Physical and
Virtual Collocation under Section 251

   (1). Background

   559. In our Expanded Interconnection proceeding, we required LECs to offer
expanded interconnection to all interested parties, which allowed competitors
and end users to terminate their own special access and switched transport
access transmission facilities at LEC central offices. n1359 We required Tier 1
LECs n1360 to offer physical collocation, with the interconnecting party paying
the LEC for central office floor space. n1361 We required that LECs provide
space to interested parties on a first-come first-served basis, and that they
provide virtual collocation when space for physical collocation is exhausted.
n1362 Under virtual collocation, interconnectors are allowed to designate
central office transmission equipment dedicated to their use, as well as to
monitor and control their circuits terminating in the LEC central office.
Interconnectors, however, do not pay for the incumbent's floor space under
virtual collocation arrangements and have no right to enter the LEC central
office. Under our virtual collocation requirements, LECs must install,
[*175]   maintain, and repair interconnector-designated equipment under the same
intervals and with the same or better failure rates for the performance of
similar functions for comparable LEC equipment. n1363


n1359 Expanded Interconnection with Local Telephone Company Facilities, First
Report and Order, 7 FCC Rcd 7369 (1992) (Special Access Order), vacated in part
and remanded, Bell Atlantic, 24 F.3d 1441 (1994); First Reconsideration, 8 FCC
Rcd 127 (1993); vacated in part and remanded, Bell Atlantic, 24 F.3d 1441;
Second Reconsideration, 8 FCC Rcd 7341 (1993); Second Report and Order, 8 FCC
Rcd 7374 (1993) (Switched Transport Order), vacated in part and remanded, Bell
Atlantic Telephone Cos., v. FCC, 24 F.3d 1441; Remand Order, 9 FCC Rcd 5154
(1994) (Virtual Collocation Order), remanded for consideration of 1996 Act,
Pacific Bell, et al. v. FCC, 81 F.3d 1147 (1996) (collectively referred to as
Expanded Interconnection). Interstate access is a service traditionally provided
by local telephone companies and enables IXCs and other customers to originate
and terminate interstate telephone traffic. Special access is a form of
interstate access that uses dedicated transmission lines between two points,
without switching the traffic on those lines. Switched transport is another form
of interstate access comprising the transmission of traffic between
interexchange carriers' (or other customers') points of presence and local
telephone companies' end offices, where the traffic is switched and routed to
end users.  [*176]

n1360 Tier 1 LECs are local exchange carriers having $ 100 million or more in
"total company annual regulated revenues." Commission Requirements for Cost
Support Material to be Filed with 1990 Annual Access Tariffs, 5 FCC Rcd 1364,
1364 (Com. Car. Bur. 1990)(1990 Cost Support Order).

n1361 The interconnecting party uses the space to locate equipment necessary to
terminate its transmission links for interconnection with the LEC's network. The
interconnector has physical access to this space in the LEC central office to
install, maintain, and repair its transmission equipment. Special Access Order,
7 FCC Rcd at 7391.

n1362 7 FCC Rcd at 7391.

n1363 Special Access Order, 7 FCC Rcd at 7394; Switched Transport Order, 8 FCC
Rcd at 7393.

   560. In the Expanded Interconnection proceeding, we required the LECs to file
tariffs to implement our virtual and physical collocation requirements. Our
initial review of the LECs'tariffs raised significant concerns regarding the
LECs' provision of physical and virtual collocation. n1364 Consequently, the
Bureau partially suspended the rates proposed by many of the LECs and allowed
these rates to take effect subject to investigation  [*177]   and an accounting
order.

n1364 See Special Access Physical Collocation Designation Order, 8 FCC Rcd 6909;
Virtual Collocation Designation Order, 10 FCC Rcd 11116; see also supra, note
1358.

   561. In 1994, the U.S. Court of Appeals for the District of Columbia Circuit
found that the FCC lacked the authority under section 201 of the 1934
Communications Act to require physical collocation and remanded all other issues
to the Commission. n1365 On remand, we adopted rules for both special access and
switched transport that required LECs to provide either virtual or physical
collocation, at the LECs' option. n1366 Those rules currently are in place,
although the court of appeals remanded the Remand Order to us to consider the
impact of the 1996 Act on those rules. n1367 In the 1996 Act, Congress
specifically directed incumbent LECs to provide physical collocation for
interconnection and access to unbundled network elements, absent technical or
space constraints, pursuant to section 251(c)(6) of the Communications Act.

n1368

n1365 Bell Atlantic v. FCC, 24 F.3d 1441.

n1366 Remand Order, 9 FCC Rcd 5154.

n1367 Pacific Bell et al. v. FCC, 81 F.3d 1147 (D.C. Cir. 1996). As discussed in
Section VI.B.2.a, below, we find that the 1996 Act does not supplant or
otherwise alter our Expanded Interconnection rules for interstate
interconnection services provided pursuant to section 201 of the Communications
Act.  [*178]

n1368 47 U.S.C. @ 251(c)(6).

   562. We sought comment in the NPRM on whether, for purposes of implementing
physical and virtual collocation under section 251, we should readopt the
standards set out in our Expanded Interconnection proceeding and, if so, how to
adapt those standards to reflect the new statutory requirements and other policy
considerations of the 1996 Act. n1369

n1369 NPRM at para. 71.

   (2). Comments

   563. To the extent parties addressed the substantive content of national
rules, most favor readoption of the Expanded Interconnection rules. Assuming
that national standards are to be adopted, several state commissions and a
number of incumbent LECs generally favor readoption of our Expanded
Interconnection requirements because they were developed based on an extensive
record. n1370 BellSouth, in contrast, argues that the Commission's Expanded
Interconnection rules are no longer necessary under the 1996 Act, because
parties should be free to negotiate agreements between themselves without being
governed by FCC rules. n1371 SBC and Pacific Telesis argue that physical
collocation should be negotiated in order to allow parties to address unique
requirements. n1372  [*179]   Cincinnati Bell argues that the FCC should not
establish regulations regarding services that are ancillary to collocation such
as rent, insurance, and equipment maintenance, because they are not activities
within the purview of Title II of the Communications Act. n1373

n1370 Bell Atlantic comments at 33; Cincinnati Bell comments at 15; PacTel
comments at 35; NYNEX comments at 66; Roseville Tel. comments at 2-3; SNET
comments at 15; GTE comments at 24 (Expanded Interconnection rules should be
readopted if used to identify acceptable outcomes and not to dictate behavior);
see also Alabama Commission comments at 17; Texas Commission comments at 14;
Illinois Commission comments at 35.

n1371 BellSouth comments at 24 (the Act sets up a new framework under which the
parties must be free to negotiate arrangements "unencumbered by excessive rules
and regulations").

n1372 PacTel reply at 12; SBC comments at 64 (collocation should be negotiated
and should not be subject to uniform requirements because of the differing
conditions at each location).

n1373 Cincinnati Bell comments at 15.



   564. CAPs and IXCs also generally favor readoption of our Expanded
Interconnection  [*180]   requirements. n1374 Several commenters advocate
specific amendments that they believe are required by the 1996 Act or by
intervening circumstances. n1375 MFS, however, argues that the purposes of the
1996 Act are much broader than those of the Expanded Interconnection proceedings
and that the collocation standards under section 251 should reflect this
difference. n1376 MCI contends that existing collocation rules, terms, and
conditions should be significantly modified. n1377 Teleport asserts that the
Commission should require all incumbent LECs to refile with the FCC their most
recent physical collocation tariffs, subject to the previously applicable
accounting orders. n1378

n1374 See, e.g., Sprint comments at 21; Time Warner comments at 38; Intermedia
comments at 6.

n1375 ALTS comments at 24; Telecommunications Resellers Ass'n comments at 47;
Intermedia comments at 9 (incumbent LECs must tariff cross-connect elements for
services not currently offered, such as packet switching, frame relay, ATM, and
SONET services); ACSI comments at 16 (revised Expanded Interconnection rules
should reflect resolution of issues raised in designation orders).

n1376 MFS comments at 22; see also MCI comments at 54.  [*181]

n1377 MCI comments at 58.

n1378 Teleport comments at 31; Intermedia comments at 7 (arguing that LECs must
establish terms and conditions for physical collocation within 30 days).

   (3). Discussion

   565. We conclude that we should adopt the existing Expanded Interconnection
requirements, with some modifications, as the rules applicable for collocation
under section 251. n1379 Those rules were established on the basis of an
extensive record in the Expanded Interconnection proceeding, and are largely
consistent with the requirements of section 251(c)(6). Adoption of those
requirements for purposes of collocation under section 251, moreover, has
substantial support in the record of this proceeding. Thus, the standards
established for physical and virtual collocation in our Expanded Interconnection
proceeding will generally apply to collocation under section 251. The most
significant requirements of Expanded Interconnection are specifically set out in
rules we adopt here. We address pricing and rate structure issues separately, in
section VII below.

n1379 See Remand Order, 9 FCC Rcd at 5168-69, 5174-83.


   566. We find, however, that certain modifications to our Expanded  [*182]
Interconnection requirements are necessary to account for specific provisions of
section 251(c)(6) and service arrangements that differ from those contemplated
in our Expanded Interconnection orders. n1380 For example, the Expanded
Interconnection requirements apply to Tier 1 LECs that are not NECA pool
members, and section 251 applies to "incumbent LECs," though there is an
exemption for certain rural carriers. n1381 Expanded Interconnection also allows
end-users to interconnect their equipment, while section 251 requires that
interconnection and access to unbundled network elements be provided to "any
requesting telecommunications carrier." n1382 Accordingly, we set forth below
several modifications to the terms and conditions for collocation as they are
described in our Expanded Interconnection orders for application in implementing
section 251. We believe that, in light of the expedited statutory time frame for
this rulemaking and limited record addressing the specific terms and conditions
for collocation under section 251 in this proceeding, it would be impractical
and imprudent to develop a large number of new substantive collocation
requirements in this order. We may consider  [*183]   the need for additional or
different requirements in a subsequent proceeding, if we determine that such
action is warranted.

n1380 See supra, note 1358, 1359.

n1381 See infra, Section XII.

n1382 See 47 U.S.C. @ 251(c)(2), (3).

   567. The most significant difference between the Expanded Interconnection
rules and the collocation rules we adopt to implement the 1996 Act concerns the
collocation tariffing requirement. As discussed below, the 1996 Act does not
require that collocation be federally tariffed. n1383 We thus do not adopt,
under section 251, the Expanded Interconnection tariffing requirements
originally adopted under section 201 for physical and virtual collocation. The
existing tariffing requirements of Expanded Interconnection for interstate
special access and switched transport will continue to apply for use by
customers that wish to subscribe to those interstate services. n1384

n1383 See infra, Section VI.B.2.a.

n1384 See infra, Section VI.B.2.a.

   568. We reject SBC's contention that we may not adopt any terms and
conditions in this proceeding that differ from those in the Expanded
Interconnection proceeding. SBC argues that Congress intended,   [*184]   in
section 251(c)(6), to use the term "physical collocation" as a term of art, and
thereby to adopt wholesale the terms and conditions for physical collocation
that the Commission adopted in the Expanded Interconnection proceeding. A
variety of terms and conditions for physical collocation are possible and
section 251(c)(6) makes no reference to the Commission's decisions on these
issues in the Expanded Interconnection proceeding. If Congress had intended to
readopt those rules wholesale without permitting the Commission any flexibility
in the matter, we believe that Congress would have been more explicit rather
than merely using the phrase "physical collocation." Thus, we believe that we
can and should modify our preexisting standards, as set forth below, for
purposes of implementing the provisions of section 251(c)(6). In the following
sections (c. - i.) we address comments filed by interested parties concerning
application of our existing Expanded Interconnection requirements for purposes
of collocation under section 251. n1385

n1385 In a number of instances, we decline to adopt proposals for modifications
to our Expanded Interconnection requirements.

   569. Finally, our experience  [*185]   reviewing the tariffs that incumbent
LECs filed to implement our requirements for physical and virtual collocation
suggests that rates, terms, and conditions under which incumbent LECs propose to
provide these arrangements pursuant to section 251(c)(6) bear close scrutiny.

n1386 We strongly urge state commissions to be vigilant in their review of such
arrangements. n1387 We will review this issue and revise our requirements as
necessary.

n1386 See Special Access Physical Collocation Designation Order, 8 FCC Rcd 6909;
Virtual Collocation Designation Order, 10 FCC Rcd 11116.

n1387 Some areas our investigations have found problematic in the past include
channel assignment, letters of agency, charges for repeaters, and placement of
point-of-termination bays.

   c. The Meaning of the Term "Premises"

   (1). Background

   570. In the Expanded Interconnection proceeding, we required collocation at
end offices, serving wire centers, and tandem switches, as well as at remote
distribution nodes and any other points that the LEC treats as a "rating point."
n1388 Section 251(c)(6) requires physical collocation "at the premises of the
local exchange carrier." n1389 In the NPRM, we tentatively  [*186]   concluded
that the term "premises" includes, in addition to LEC central offices and tandem
offices, all buildings or similar structures owned or leased by the incumbent
LEC that house LEC network facilities. We sought comment on whether structures
that house LEC network facilities on public rights-of-way, such as vaults
containing loop concentrators or similar structures, should be deemed to be LEC
"premises." n1390

n1388 See Remand Order, 9 FCC Rcd at 5168; Special Access Order, 7 FCC Rcd at
7418; Switched Transport Order, 8 FCC Rcd at 7409. A rating point is a point
used in calculating the length of interoffice special access links.

n1389 47 U.S.C. @ 251(c)(6).

n1390 NPRM at para. 72.

   (2). Comments

   571. Incumbent LECs generally argue that collocation is infeasible at
locations other than central offices, tandem switching locations, and remote
nodes, and that only such locations should be included in the interpretation of
the word "premises." n1391 Pacific Telesis argues that points for collocation
cannot be determined until the Commission determines the points of
interconnection and access to unbundled network elements. n1392 Ameritech
contends that we should  [*187]   define the term "premises" as only those
portions of central office buildings in which the LEC has the exclusive right of
occupancy and in which the technically feasible point of interconnection or
access to unbundled elements is located. n1393 The Rural Tel. Coalition asks
that interconnection and collocation points be established in a flexible manner
to recognize size and volume differences among carriers. n1394

n1391 See, e.g., USTA comments at 20; NYNEX comments at 66; Cincinnati Bell
comments at 15; Ameritech comments at 22 (the term "premises" should only
include central offices housing network facilities in which the incumbent LEC
has the exclusive right of occupancy).


n1392 Bell Atlantic comments at 37.

n1393 Ameritech comments at 22.

n1394 Rural Tel. Coalition comments at 31.

   572. CAPs and IXCs generally favor an expansive definition of the term
"premises" that includes "structures housing LEC network facilities on public
rights-of-way including vaults containing loop concentrators or similar
structures." n1395 These commenters argue that physical collocation should be
offered at any incumbent LEC location where physical collocation is technically
[*188]   feasible, including central offices, cable vaults, manholes,
cross-connect points, loop carrier, and building closets. n1396 ALTS and MFS
contend that assertions of technical infeasibility should be addressed in
fact-specific situations and should not narrow the general application of
section 251(c)(6). n1397 The Illinois Commission supports our tentative
conclusion and argues that collocation should not be restricted to central and
tandem offices. n1398

n1395 See, e.g., AT&T comments at 40; see also Telecommunications Resellers
Ass'n comments at 46; Hyperion comments at 14.

n1396 See, e.g., MFS comments at 23.

n1397 ALTS reply at 35; MFS reply at 29.

n1398 Illinois Commerce Commission at 33.

   (3). Discussion

   573. The 1996 Act does not address the definition of premises, nor is the
term discussed in the legislative history. Therefore, we look to the purposes of
the 1996 Act and general uses of the term "premises" in other contexts in order
to define this term for purposes of section 251(c)(6). The term "premises" is
defined in varying ways, according to the context in which it is used. n1399 In
light of the 1996 Act's procompetitive purposes, we find that  [*189]   a broad
definition of the term "premises" is appropriate in order to permit new entrants
to collocate at a broad range of points under the incumbent LEC's control. A
broad definition will allow collocation at points other than those specified for
collocation under the existing Expanded Interconnection requirements. We find
that this result is appropriate because the purposes of physical and virtual
collocation under section 251 are broader than those established in the Expanded
Interconnection proceeding. We therefore interpret the term "premises" broadly
to include LEC central offices, serving wire centers and tandem offices, as well
as all buildings or similar structures owned or leased by the incumbent LEC that
house LEC network facilities. We also treat as incumbent LEC premises any
structures that house LEC network facilities on public rights-of-way, such as
vaults containing loop concentrators or similar structures.

n1399 See Gibbons v. Brandt, 170 F.2d 385, 387 (7th Cir. 1948) ("the word
'premises' does not have one fixed and absolute meaning. It is to be determined
always by its context . . .").


   574. As discussed below, we conclude that section 251(c)(6) requires
collocation  [*190]   only where technically feasible. In light of this
conclusion, we find that adoption of a definition of "premises" that depends on
whether interconnection or access to unbundled network elements at a particular
point is "technically feasible," as suggested by Ameritech and Pacific Telesis,
would be superfluous. We also conclude that it is not appropriate to adopt a
definition of "premises," as suggested by several parties, that is dependent on
whether it is "practical" to collocate equipment at a particular point. We note
however, that neither physical nor virtual collocation is required at points
where not technically feasible. n1400 We therefore decline to adopt specific
requirements regarding collocation at particular points in the LEC network, as
suggested by GVNW and others. Because collocation is only required where
technically feasible, the approach we here adopt will enable competitors to take
advantage of opportunities to collocate equipment without imposing undue burdens
on incumbent LECs, whether large or small.

n1400 Incumbent LECs are required to permit the collocation of equipment for the
purpose of interconnection under section 251(c)(2) or access to unbundled
network elements under section 251(c)(3). Interconnection and access to
unbundled network elements are only required under these sections at technically
feasible points. 47 U.S.C. @ 251(c)(2) and (3).  [*191]

   575. We also address the impact on small incumbent LECs. For example, the
Rural Tel. Coalition asks that interconnection and collocation points be
established in a flexible manner. We have considered the economic impact of our
rules in this section on small incumbent LECs. For example, we do not adopt
rigid requirements for locations where collocation must be provided. Incumbent
LECs are not required to physically collocate equipment in locations where not
practical for technical reasons or because of space limitations, and virtual
collocation is required only where technically feasible. We also note, however,
that section 251(f) of the 1996 Act provides relief to certain small LECs from
our regulations implementing section 251. n1401

n1401 See infra, Section XII.

   d. Collocation Equipment

   (1). Background

   576. In the Expanded Interconnection proceeding, we allowed collocation for
central office equipment needed to terminate basic transmission facilities
between LEC central offices and third-party premises. Acceptable equipment
included optical terminating equipment and multiplexers. We did not require the
LECs to permit collocation of enhanced services equipment or customer  [*192]
premises equipment because such equipment was not necessary to foster
competition in the provision of basic transmission services. We also did not
require LECs to allow the collocation of switches. n1402 Section 251(c)(6)
requires incumbent LECs to allow collocation of "equipment necessary for
interconnection or access to unbundled elements . . . ." n1403 We sought comment
in the NPRM on what types of equipment competitors should be permitted to
collocate on LEC premises. n1404

n1402 See generally Remand Order, 9 FCC Rcd at 5178-81 (paras. 82-94); see also
Special Access Order, 7 FCC Rcd at 7412-16, Switched Transport Order, 8 FCC Rcd
at 7411-16.

n1403 47 U.S.C. @ 251(c)(6).

n1404 NPRM at para. 72.

   (2). Comments

   577. BOCs and other incumbent LECs generally favor limiting the type of
equipment allowed to be collocated to transmission equipment necessary to
interconnect to LEC networks. n1405 Sprint argues that incumbent LECs should be
permitted to limit the amount of space they have to provide to that needed for
equipment necessary for the particular type of interconnection that is taking
place. n1406 IXCs and CAPs argue that any type of equipment may be collocated
[*193]   absent demonstrable harm to the LEC, and that any arbitrary limit on
the types of equipment to be collocated could foreclose efficient methods of
interconnection and/or access to unbundled elements. n1407 MFS contends that
competing providers should not be required to demonstrate affirmatively that
equipment is "necessary" before allowing it to be collocated. The Illinois
Commission supports a policy that would not restrict the type of equipment to be
collocated except where necessary to prevent harm to the network. The Colorado
Commission supports limiting allowable equipment to that used to provide a
telecommunications service. n1408 The Association of Telemessaging Services
International urges the Commission to require collocation of equipment used to
provide enhanced services. n1409

n1405 See, e.g., SBC comments at 63-64; Bell Atlantic comments at 34; GTE reply
at 14; PacTel comments at 38, reply at 13.

n1406 Sprint reply at 23.

n1407 See, e.g., MFS comments at 24; MCI comments at 54-55; Time Warner comments
at 39; GCI comments at 10.

n1408 Illinois Commission comments at 34; Colorado Commission comments at 23.

n1409 Association of Telemessaging Services International reply at 16.  [*194]

   578. WinStar argues that the 1996 Act establishes its right to place its
microwave facilities on the roofs of incumbent LEC buildings in which its
termination equipment is to be collocated in order to ensure that wireline
facilities are not favored over wireless, and therefore urges the Commission to
adopt a collocation standard that is technology neutral. n1410

n1410 WinStar comments at 4, reply at 4.

   (3). Discussion


   579. We believe that section 251(c)(6) generally requires that incumbent LECs
permit the collocation of equipment used for interconnection or access to
unbundled network elements. Although the term "necessary," read most strictly,
could be interpreted to mean "indispensable," we conclude that for the purposes
of section 251(c)(6) "necessary" does not mean "indispensable" but rather "used"
or "useful." This interpretation is most likely to promote fair competition
consistent with the purposes of the Act. (We note that this view is consistent
with the findings of the Colorado Commission). n1411 Thus, we read section
251(c)(6) to refer to equipment used for the purpose of interconnection or
access to unbundled network elements. n1412 Even if the collocator could
[*195]   use other equipment to perform a similar function, the specified
equipment may still be "necessary" for interconnection or access to unbundled
network elements under section 251(c)(6). We can easily imagine circumstances,
for instance, in which alternative equipment would perform the same function,
but with less efficiency or at greater cost. A strict reading of the term
"necessary" in these circumstances could allow LECs to avoid collocating the
equipment of the interconnector's choosing, thus undermining the procompetitive
purposes of the 1996 Act.

n1411 Colorado Public Utilities Commission, Proposed Rules Regarding
Implementation of @@ 40-15-101 et. seq., Requirements Relating to
Interconnection and Unbundling, Docket No. 95R-556T, (Colorado Commission, March
29, 1996) at 19-20.

n1412 Cf. National Railroad Passenger Corporation v. Boston and Maine Corp., 503
U.S. 407, 417 (1992) (upholding the ICC's interpretation of the word "required"
as "useful or appropriate," rather than "indispensable"); McCulloch v. Maryland,
4 Wheat. 316, 413 (1819) (Chief Justice Marshall read the word "necessary" to
mean "convenient, or useful," rejecting a stricter reading of the term).
[*196]

   580. Consistent with this interpretation, we conclude that transmission
equipment, such as optical terminating equipment and multiplexers, may be
collocated on LEC premises. We also conclude that LECs should continue to permit
collocation of any type of equipment currently being collocated to terminate
basic transmission facilities under the Expanded Interconnection requirements.
In addition, whenever a telecommunications carrier seeks to collocate equipment
for purposes within the scope of section 251(c)(6), the incumbent LEC shall
prove to the state commission that such equipment is not "necessary," as we have
defined that term, for interconnection or access to unbundled network elements.
State commissions may designate specific additional types of equipment that may
be collocated pursuant to section 251(c)(6).


   581. We do not find, however, that section 251(c)(6) requires collocation of
equipment used to provide enhanced services, contrary to the arguments of the
Association of Telemessaging Services International. n1413 We also decline to
require incumbent LECs to allow collocation of any equipment without
restriction. n1414 Section 251(c)(6) requires collocation only of equipment
[*197]   "necessary for interconnection or access to unbundled elements."
Section 251(c)(2) requires incumbent LECs to provide "interconnection" for the
"transmission and routing of telephone exchange service and exchange access,"
and section 251(c)(3) requires incumbent LECs to provide access to unbundled
network elements "for the provision of a telecommunications service." n1415
Section 251(c)(6) therefore requires incumbent LECs to provide physical or
virtual collocation only for equipment "necessary" or used for those purposes.
We find that section 251(c)(6) does not require collocation of equipment
necessary to provide enhanced services. n1416 At this time, we do not impose a
general requirement that switching equipment be collocated since it does not
appear that it is used for the actual interconnection or access to unbundled
network elements. n1417 We recognize, however, that modern technology has tended
to blur the line between switching equipment and multiplexing equipment, which
we permit to be collocated. We expect, in situations where the functionality of
a particular piece of equipment is in dispute, that state commissions will
determine whether the equipment at issue is actually  [*198]   used for
interconnection or access to unbundled elements. We also reserve the right to
reexamine this issue at a later date if it appears that such action would
further achievement of the 1996 Act's procompetitive goals. Finally, because we
lack an adequate record on the issue, we decline to adopt AT&T's proposal that
we require that incumbent LECs allow collocated equipment to be used for
"hubbing." n1418

n1413 ATSI reply at 16.

n1414 See, e.g., MFS comments at 24.

n1415 47 U.S.C. @ 251(c)(3).

n1416 We note that we declined to require collocation of enhanced services
equipment in our Computer III and ONA proceedings. See Third Computer Inquiry,
Report and Order, 104 FCC 2d 958, 1037-38 (1986); Computer III Remand, 6 FCC Rcd
7571 (1991). Enhanced services are defined as services that "employ computer
processing applications which act on the format, content, code, protocol or
similar aspects of the subscriber's transmitted information; provide the
subscriber additional, different, or restructured information; or involve
subscriber interaction with stored information." 47 C.F.R. @ 64.702. This
definition appears not to include the provision of "telecommunications
services." See 47 U.S.C. @ 153(43), (46).  [*199]

n1417 If switching equipment is located at the collocated space, generally the
only equipment used for interconnection or access to unbundled elements is the
cross-connect equipment. The switching equipment generally performs other
functions.

n1418 AT&T advocates requiring LECs to allow new entrants to "connect additional
equipment of their own to their collocated equipment in the collocated space."
Letter from Betsy Brady, Federal Government Affairs Director and Attorney, to
Robert McDonald, Common Carrier Bureau, July 12, 1996, at 3, n.2 (AT&T July 12,
1996 Ex Parte). See also AT&T comments at 40 n. 51.

   582. In response to WinStar's suggestion that we require collocation of
microwave transmission facilities, we note that collocation of microwave
transmission equipment was required where reasonably feasible by the Special
Access Order. n1419 We also require the collocation of microwave equipment under
section 251, although we modify the Expanded Interconnection standard we adopt
under section 251 for when such collocation is required slightly to conform to
the standard for the provision of physical collocation in section 251(c)(6). We
therefore require that incumbent  [*200]   LECs allow competitors to use
physical collocation for microwave transmission facilities except where this is
not practical for technical reasons or because of space limitations, in which
case virtual collocation is required where technically feasible. n1420

n1419 Special Access Order, 7 FCC Rcd at 7416; see also Remand Order, 9 FCC Rcd
at 5178-79.

n1420 Under our technical feasibility standard, the costs of any construction
necessary to accommodate the proposed interconnection arrangement are to be
borne by the party seeking to interconnect. See supra, Section IV.E.


   e. Allocation of Space
   (1). Background

   583. In the Expanded Interconnection proceeding, we required LECs to allocate
space for physical collocation on a first-come, first-served basis. We also
required LECs to take into account interconnector demand for collocation space
when reconfiguring space or building new central offices, and we found that
imposing reasonable restrictions on warehousing of space by collocating carriers
was appropriate. n1421 The NPRM sought comment on whether national guidelines
would deter anticompetitive behavior through the manipulation or unreasonable
allocation of space by either  [*201]   incumbent LECs or new entrants. n1422

n1421 Special Access Order, 7 FCC Rcd at 7408.

n1422 NPRM at para. 72.

   (2). Comments

   584. CAPs and IXCs support adoption of rules governing incumbent LEC space
allocation. AT&T asserts that incumbent LECs should be required to consider the
needs of collocators when remodeling or building new facilities. n1423 MFS and
Teleport contend that incumbent LECs should not be able to limit the amount of
space that may be occupied by an interconnector's equipment unless the incumbent
LEC demonstrates that space is nearing exhaustion. n1424 MCI asserts that we
should prohibit an incumbent LEC from denying a collocator use of available
space unless the incumbent demonstrates that it had plans for such space prior
to the request for collocation. n1425 In locations where space is scarce, MCI
argues that incumbent LECs should be required to file reports with the FCC on
the status and planned increase and use of space. n1426 Bell Atlantic counters
that such a policy could prevent it from serving its customers efficiently.
n1427 Pacific Telesis suggests that the Commission reiterate its policy of
allowing "reasonable restrictions on warehousing   [*202]   of unused space by
interconnectors." n1428 The Pennsylvania Commission asserts that it is not
necessary for the FCC to adopt national guidelines regarding space allocation.
n1429 GVNW argues that collocation should be required in rural areas only where
there is space available. n1430

n1423 AT&T comments at 41-42 (where space is unavailable incumbent LECs should
be required to provide trunking at no extra cost and enable the interconnector
to connect to designated equipment elsewhere, with a timetable for moving the
interconnector to the incumbent LEC's premises when space becomes available).

n1424 MFS comments at 34; Teleport comments at 33.

n1425 MCI comments at 56.

n1426 MCI comments at 56.

n1427 Bell Atlantic reply at 16.

n1428 PacTel comments at 36.

n1429 Pennsylvania Commission comments at 22.

n1430 GVNW comments at 8.



   (3). Discussion

   585. We believe that incumbent LECs have the incentive and capability to
impede competitive entry by minimizing the amount of space that is available for
collocation by competitors. Accordingly, we adopt our Expanded Interconnection
space allocation rules for purposes of section 251, except  [*203]   as
indicated herein. LECs will thus be required to make space available to
requesting carriers on a first-come, first-served basis. We also conclude that
collocators seeking to expand their collocated space should be allowed to use
contiguous space where available. We further conclude that LECs should not be
required to lease or construct additional space to provide physical collocation
to interconnectors when existing space has been exhausted. We find such a
requirement unnecessary because section 251(c)(6) allows incumbent LECs to
provide virtual collocation where physical collocation is not practical for
technical reasons or because of space limitations. Consistent with the
requirements and findings of the Expanded Interconnection proceeding, we
conclude that incumbent LECs should be required to take collocator demand into
account when renovating existing facilities and constructing or leasing new
facilities, just as they consider demand for other services when undertaking
such projects. We find that this requirement is necessary in order to ensure
that sufficient collocation space will be available in the future. We decline,
however, to adopt a general rule requiring LECs to file  [*204]   reports on the
status and planned increase and use of space. State commissions will determine
whether sufficient space is available for physical collocation, and we conclude
that they have authority under the 1996 Act to require incumbent LECs to file
such reports. We expect individual state commissions to determine whether the
filing of such reports is warranted.

   586. We also agree with Pacific Telesis that restrictions on warehousing of
space by interconnectors are appropriate. n1431 Because collocation space on
incumbent LEC premises may be limited, inefficient use of space by one
competitive entrant could deprive another entrant of the opportunity to
collocate facilities or expand existing space. In the Expanded Interconnection
proceeding, we allowed "reasonable restrictions on warehousing of space," n1432
and will adopt this provision for purposes of section 251. As discussed below,
we also adopt measures to ensure that incumbent LECs themselves do not
unreasonably "warehouse" space, although we do permit them to reserve a limited
amount of space for specific future uses. n1433 Incumbent LECs, however, are not
permitted to set maximum space limitations without demonstrating   [*205]   that
space constraints make such restrictions necessary, as such maximum limits could
constrain a collocator's ability to provide service efficiently.

n1431 PacTel comments at 36.

n1432 Special Access Order, 7 FCC Rcd at 7408; see also Remand Order, 9 FCC Rcd
at 187-88.

n1433 See infra, Section VI.B.1.i.


   587. We also address the impact on small incumbent LECs. For example, GVNW
argues that we should require collocation in rural areas only where there is
space available. We have considered the impact of our rules in this section on
small incumbent LECs and do not require physical collocation at any point where
there is insufficient space available. We decline, however, to adopt rules
regarding space availability that apply differently to small, rural carriers
because the rules we here adopt are sufficiently flexible. We also note,
however, that section 251(f) of the 1996 Act provides relief to certain small
LECs from our regulations implementing section 251. n1434

n1434 See infra, Section XII.

   f. Leasing Transport Facilities

   (1). Background

   588. Our Expanded Interconnection rules require LECs to provide collocation
for the purpose of allowing collocators  [*206]   to terminate their own
transmission facilities for special access or switched transport service. n1435
We did not require that collocation be made available for other purposes, for
example, when the interconnecting party wished only to connect incumbent LEC
transmission facilities to collocated equipment. We sought comment in the NPRM
on whether we should modify the standards of the Expanded Interconnection
proceeding in light of the new statutory requirements and disputes that have
arisen in the investigations regarding the incumbent LECs' physical and virtual
collocation tariffs. n1436

n1435 See Remand Order, 9 FCC Rcd at 5180-81, 5183; Special Access Order, 7 FCC
Rcd at 7403; Switched Transport Order, 8 FCC Rcd at 7402.

n1436 NPRM at para. 73.

   (2). Comments

   589. MCI and others argue that collocators should not be prohibited from
leasing transport facilities from the incumbent LEC to connect equipment in the
collocated space to any other point in the incumbent LEC's network. n1437
Pacific Telesis contends that LECs should not be required to permit collocation
of equipment that will be connected to a LEC's transmission facilities because
such a policy would result   [*207]   in exhaustion of central office space and
is outside the purposes of the 1996 Act. n1438 Bell Atlantic argues that
permitting such interconnection is not advisable, because it would allow
resellers to obtain lower-priced interconnection and access to unbundled
elements without providing any facilities of their own. n1439

n1437 MCI comments at 55; ACTA comments at 16; Telecommunications Resellers
Ass'n comments at 47.

n1438 PacTel comments at 39, reply at 14.

n1439 Bell Atlantic reply at 16.

   (3). Discussion


   590. Although in Expanded Interconnection the Commission required that
interested parties interconnect collocated equipment with their own transmission
facilities, n1440 we conclude that it would be inconsistent with the provisions
of the 1996 Act to adopt that requirement under section 251. Rather, we conclude
that a competitive entrant should not be required to bring transmission
facilities to LEC premises in which it seeks to collocate facilities. Entrants
should instead be permitted to collocate and connect equipment to unbundled
network transmission elements obtained from the incumbent LEC. The purpose of
the Expanded Interconnection requirement was to   [*208]   foster competition in
the market for interstate switched and special access transmission facilities.
n1441 The purposes of section 251 are broader. Section 251(c)(3) requires that
competitive entrants be given access to unbundled elements and that they be
permitted to combine such elements. n1442 Prohibiting competitors from
connecting unbundled network elements to their collocated equipment would appear
contrary to the provisions of section 251(c)(3).

n1440 Special Access Order, 7 FCC Rcd at 7403; Switched Transport Order, 8 FCC
Rcd at 7402.

n1441 See Special Access Order, 7 FCC Rcd at 7372; Switched Transport Order, 8
FCC Rcd at 7377.

n1442 47 U.S.C. 251(c)(3).

   591. Finally, we find that Bell Atlantic's opposition to this requirement is
without merit. Bell Atlantic argues that collocators should be required to
provide their own transmission facilities because otherwise new entrants could
compete without providing any of their own facilities. Section 251(c)(3)
specifically states that unbundled elements are to be provided in a manner that
allows requesting carriers to combine elements in order to provide
telecommunications service. As stated above, requiring   [*209]   collocators to
supply their own transmission facilities would amount to a prohibition on
connecting unbundled transmission facilities to other unbundled elements
connected to equipment in the collocation space. Although such interconnection
arrangements were not required by our Expanded Interconnection requirements, we
conclude that they are required by section 251 when collocated equipment is used
to achieve interconnection or access to unbundled network elements.

   g. Co-Carrier Cross-Connect

   (1). Background

   592. In the most common collocation configuration under existing
requirements, the designated physical collocation space of several competitive
entrants is located close together within the LEC premises. Since carriers
connect to the collocation space via high-capacity lines, different competitive
entrants seeking to interconnect with each other may find connecting between
their respective collocation spaces on the LEC premises the most efficient means
of interconnecting with each other. We sought comment in the NPRM on whether we
should adopt any requirements in addition to those adopted in the Expanded
Interconnection proceeding in order to fulfill the mandate of the 1996
[*210]   Act. n1443

n1443 NPRM at para. 73.

   (2). Comments


   593. Several CAPs and IXCs argue that we should adopt as an additional
requirement that interconnectors be allowed to connect directly to other
collocators located at the collocation space. n1444 Incumbent LECs generally
object to such a configuration on the basis that such access is not expressly
required by the statute and that we therefore lack authority to impose such a
requirement. n1445

n1444 See, e.g., MCI comments at 55; MFS comments at 24; GGI comments at 10;
Telecommunications Resellers Ass'n comments at 47; Intermedia comments at 9.

n1445 See, e.g., GTE reply at 15; Bell Atlantic reply at 15; PacTel reply at 14;
Sprint reply at 23.

   (3). Discussion

   594. We believe that it serves the public interest and is consistent with the
policy goals of section 251 to require that incumbents permit two or more
collocators to interconnect their networks at the incumbent's premises. Parties
opposed to this proposal have offered no legitimate objection to such
interconnection. Allowing incumbent LECs to prohibit collocating carriers from
interconnecting their collocated equipment would require them to interconnect
collocated  [*211]   facilities by routing transmission facilities outside of
the LECs' premises. We find that such a policy would needlessly burden
collocating carriers. To the extent equipment is collocated for the purposes
expressly permitted under section 251(c)(6), the statute does not bar us from
requiring that incumbent LECs allow connection of such equipment to other
collocating carriers located nearby. We find that requiring LECs to allow such
interconnection of collocated equipment will foster competition by promoting
efficient operation. It is also unlikely to have a significant effect on space
availability. We find authority for such a requirement in section 251(c)(6),
which requires that collocation be provided on "terms and conditions that are
just, reasonable, and nondiscriminatory" and in section 4(i), which permits the
Commission to "perform any and all acts, make such rules and regulations, and
issue such orders, not inconsistent with this Act, as may be necessary in the
execution of its functions." n1446 We therefore will require that incumbent LECs
allow collocating telecommunications carriers to connect collocated equipment to
such equipment of other carriers within the same LEC premises  [*212]   so long
as the collocated equipment is used for interconnection with the incumbent LEC
or access to the LEC's unbundled network elements.

n1446 47 U.S.C. @ 154(i).

   595. We clarify that we here require incumbent LECs to provide the connection
between the equipment in the collocated spaces of two or more collocating
telecommunications carriers unless they permit the collocating parties to
provide this connection for themselves. We do not require incumbent LECs to
allow placement of connecting transmission facilities owned by competitors
within the incumbent LEC premises anywhere outside of the actual physical
collocation space.

   h. Security Arrangements

   (1). Background


   596. Under our Expanded Interconnection requirements, incumbent LECs
typically require that physically collocated equipment be placed inside a
collocation cage within the incumbent LEC facility. Such cages are intended to
separate physically the competitors' facilities from those of the incumbent and
to prevent access by unauthorized personnel to any parties' equipment. Such
cages frequently add considerably to the cost of establishing physical
collocation at a particular LEC premises and could constitute a   [*213]
barrier to entry in certain circumstances.

   (2). Comments

   597. Teleport argues that cage construction is one of the most expensive
items associated with physical collocation and that we should modify our
Expanded Interconnection requirements to allow new entrants to subcontract
construction of their physical collocation security arrangements with
contractors approved by the incumbent LEC. n1447 ALTS and MCI argue that
security measures should only be provided at the request of the entrant and at
the cost the entrant would have incurred if it performed the construction
itself. n1448 GVNW argues that incumbent LECs need to ensure that a competitor's
personnel do not cause breaches of security and therefore should be subject to
minimum proficiency requirements. n1449

n1447 Teleport comments at 32.

n1448 ALTS comments at 23; MCI comments at 58; contra PacTel reply at 15.

n1449 GVNW comments at 10; accord Rural Tel. Coalition comments at 31.

   (3). Discussion

   598. Based on the comments in this proceeding and our previous experience
with physical collocation in the Expanded Interconnection docket, we will
continue to permit LECs to require reasonable security arrangements  [*214]   to
separate an entrant's collocation space from the incumbent LEC's facilities. The
physical security arrangements around the collocation space protect both the
LEC's and competitor's equipment from interference by unauthorized parties. We
reject the suggestion of ALTS and MCI that security measures be provided only at
the request of the entrant since LECs have legitimate security concerns about
having competitors' personnel on their premises as well. We conclude that the
physical separation provided by the collocation cage adequately addresses these
concerns. At the same time, we recognize that the construction costs of physical
security arrangements could serve as a significant barrier to entry,
particularly for smaller competitors. We also conclude that LECs have both an
incentive and the capability to impose higher construction costs than the new
entrant might need to incur. We therefore conclude that collocating parties
should have the right to subcontract the construction of the physical
collocation arrangements with contractors approved by the incumbent LEC.
Incumbent LECs shall not unreasonably withhold such approval of contractors.
Approval by incumbent LECs of such contractors  [*215]   should be based on the
same criteria as such LECs use for approving contractors for their own purposes.
We decline, however, to require that competitive entrants' personnel be subject
to minimum training and proficiency requirements as suggested by GVNW. We find
that such concerns are better resolved through negotiation and arbitration.

   i. Allowing Virtual Collocation in Lieu of Physical

   (1). Background


   599. Section 251(c)(6) requires that incumbent LECs provide physical
collocation unless the carrier "demonstrates to the state commission that
physical collocation is not practical for technical reasons or because of
space limitations . . . ." n1450 In the NPRM, we sought comment on whether the
Commission should establish guidelines for states to apply when determining
whether physical collocation is not practical for "technical reasons or because
of space limitations." n1451

n1450 47 U.S.C. @ 251(c)(6).

n1451 NPRM para. 72.

   (2). Comments

   600. Pacific Telesis argues that national standards to determine whether
physical collocation is not practical at a specific LEC location are
unnecessary. It further argues that "reduced reliability or other harm to the
network"   [*216]   should be considered a technical reason that justifies
refusal to allow physical collocation. n1452 IXCs and CAPs assert that the
burden of showing that physical collocation is not practical should fall on the
incumbent LEC. n1453 AT&T contends that an incumbent LEC should be required to
show that there is no practical way of providing additional space before it is
relieved of its obligation to provide physical collocation. If physical
collocation is genuinely not practical, then AT&T argues that the incumbent
should provide trunking at no cost to allow the entrant to interconnect. n1454
Time Warner asserts that, where physical collocation is not possible in a LEC
central office, LECs should supply a substitute at cost. n1455 State commissions
that comment on this issue generally oppose strict national rules and argue
that, to the extent such rules are adopted, they should allow the states maximum
flexibility. n1456

n1452 PacTel comments at 39.

n1453 See, e.g., Hyperion comments at 14; ACSI comments at 16; AT&T comments at
41.

n1454 AT&T comments at 41-42.

n1455 Time Warner comments at 36, 40.

n1456 See, e.g., Texas Commission comments at 14; Pennsylvania Commission
comments at 22; Oregon Commission comments at 23.  [*217]

   601. Time Warner also asserts that the FCC should require LECs to offer a $ 1
sale and repurchase option for virtually collocated equipment. n1457 The
Independent Cable and Telecommunications Association argues that incumbent LECs
should be required to provide virtual collocation that is equal in all
functional aspects to physical collocation in order to avoid prejudicing small
entities that may not have sufficient market share to justify a physical
collocation arrangement. n1458

n1457 Time Warner comments at 38.

n1458 ICTA reply at 13.


   (3). Discussion
   602. Section 251(c)(6) clearly contemplates the provision of virtual
collocation when physical collocation is not practical for technical reasons or
because of space limitations. n1459 Section 251(c)(6) requires the incumbent LEC
to demonstrate to the state commission's satisfaction that there are space
limitations on the LEC premises or that technical considerations make
collocation impractical. Because the space limitations and technical
practicality issues will vary considerably depending on the location at which
competitor equipment is to be collocated, we find that these issues are best
handled on a case-by-case  [*218]   basis, as they were under our Expanded
Interconnection requirements. n1460 In light of our experience in the Expanded
Interconnection proceeding, we require that incumbent LECs provide the state
commission with detailed floor plans or diagrams of any premises where the
incumbent alleges that there are space constraints. Submission of floor plans
will enable state commissions to evaluate whether a refusal to allow physical
collocation on the grounds of space constraints is justified. We also find that
the approach detailed by AT&T in its July 12 Ex Parte submission to be useful
and believe that state commissions may find it a valuable guide. n1461

n1459 47 U.S.C @ 251(c)(6).

n1460 See Special Access Order, 7 FCC Rcd 7407.

n1461 AT&T describes a detailed proposed showing that would be required of an
incumbent LEC that claims physical collocation is not practical because of space
exhaustion. The proposed showing would require the specific identification of
the space on incumbent LEC premises that is used for various purposes, as well
as specific plans for rearrangement/expansion and identification of steps taken
to avoid exhaustion. AT&T July 12, 1996 Ex Parte.

   603.   [*219]   Although section 251(c)(6) provides that incumbent LECs are
not required to provide physical collocation where impractical for technical
reasons or because of space limitations, our experience in the Expanded
Interconnection proceeding has not demonstrated that technical reasons, apart
from those related to space availability, are a significant impediment to
physical collocation. We therefore decline to adopt any rules for determining
when physical collocation should be deemed impractical for technical reasons.

   604. Incumbent LECs are allowed to retain a limited amount of floor space for
defined future uses. Allowing competitive entrants to claim space that incumbent
LECs had specifically planned to use could prevent incumbent LECs from serving
their customers effectively. n1462 Incumbent LECs may not, however, reserve
space for future use on terms more favorable than those that apply to other
telecommunications carriers seeking to hold collocation space for their own
future use. n1463

n1462 Special Access Order, 7 FCC Rcd at 7409.

n1463 See supra, Section VI.B.1.e.


   605. We decline to adopt AT&T's suggestion that incumbent LECs should be
required to lease additional  [*220]   space or provide trunking at no cost
where they have insufficient space for physical collocation. n1464 In light of
the availability of substitute virtual collocation arrangements, we find that
requiring the type of "substitute" for physical collocation as advocated by AT&T
is unnecessary. We similarly reject Time Warner's suggestion that incumbent
LECs supply a "substitute" for physical collocation at cost, except to the
extent we require virtual collocation. On the other hand, we will require
incumbent LECs with limited space availability to take into account the demands
of interconnectors when planning renovations and leasing or constructing new
premises, as we have in the Expanded Interconnection proceeding. n1465

n1464 See AT&T comments at 41-42.

n1465 See Special Access Order, 7 FCC Rcd at 7408.

   606. Incumbent LECs are not required to provide collocation at locations
where it is not technically feasible to provide virtual collocation. Although
space constraints are a concern normally associated with physical collocation,
given our broad reading of the term "premises," n1466 we find that space
constraints could preclude virtual collocation at certain LEC premises  [*221]
as well. State commissions will decide whether virtual collocation is
technically feasible at a given point. We do, however, require that incumbent
LECs relinquish any space held for future use before denying virtual collocation
due to a lack of space unless the incumbent can prove to a state commission that
virtual collocation at that point is not technically feasible. Moreover, when
virtual collocation is not feasible, we require that incumbent LECs provide
other forms of interconnection and access to unbundled network elements to the
extent technically feasible. n1467

n1466 See supra, Section VI.B.1.c.

n1467 See supra, Section VI.A.

   607. Finally, we decline to require that incumbent LECs provide virtual
collocation that is equal in all functional aspects to physical collocation. Our
Expanded Interconnection rules required a variety of standards for the virtual
collocation and have been largely successful. In addition, Congress was aware of
the differences between virtual and physical collocation when it adopted section
251(c)(6), and this section does not specify any requirements for virtual
collocation. n1468 As discussed above, we adopt the Expanded Interconnection
[*222]   requirements for virtual collocation under section 251. n1469 We find,
however, that a standard simply requiring equality in all functional aspects
could be difficult to administrate and could lead to substantial disputes. We
also decline to adopt the suggestion that we require LECs to offer virtual
collocation under the "$ 1 sale and repurchase option." n1470 We do not find
evidence that such a specific requirement is necessary at this time. We reserve
the right to revisit these issues in the future, however, if we perceive that
smaller entities would be disadvantaged by our existing standards.

n1468 See Remand Order, 9 FCC Rcd at 5166-69.

n1469 See supra, Section VI.B.1.a.

n1470 This configuration is described as involving "the acquisition by the
interconnectors of the equipment to be dedicated for interconnectors' use on the
LEC premises and the sale of that equipment to the LECs for a nominal $ 1 sum
while maintaining a repurchase option." Time Warner comments at 42.


   2. Legal Issues
   a. Relationship between Expanded Interconnection Tariffs and Section 251

   (1). Background

   608. The enactment of sections 251 and 252 raises the question of whether,
and to what  [*223]   extent, the interconnection, access to unbundled network
element, and collocation requirements set forth in those sections, and the
delegation of specific rate-setting authority to the states under section
252(d)(1), as a matter of law supplant our section 201 Expanded Interconnection
requirements. We tentatively concluded in the NPRM that our existing Expanded
Interconnection policies for interstate special access and switched transport
should continue to apply. n1471

n1471 NPRM at para. 73.

   (2). Comments

   609. Although commenting parties have not addressed this question directly,
some commenters appear to assume that LECs will be required to continue to
tariff their collocation offerings with the FCC, as currently required under
Expanded Interconnection. n1472 Other parties appear to assume that requirements
to file federal tariffs are inconsistent with, and superseded by, the
negotiation and arbitration provisions in section 252.

n1472 See, e.g., MFS comments at 32; MCI comments at 58.

   (3). Discussion

   610. Our Expanded Interconnection rules require the largest incumbent LECs to
file tariffs with the Commission to offer collocation to parties that wish to
terminate  [*224]   interstate special access and switched transport
transmission facilities. Section 252 of the 1996 Act, on the other hand,
provides for interconnection arrangements rather than tariffs, for review and
approval of such agreements by state commissions rather than the FCC, and for
public filing of such agreements. Section 252 procedures, however, apply only to
"requests for interconnection, services, or network elements pursuant to section
251." n1473 Such procedures do not, by their terms, apply to requests for
service under section 201. Moreover, section 251(i) expressly provides that
"nothing in this section shall be construed to limit or otherwise affect the
Commission's authority under section 201," n1474 which provided the statutory
basis for our Expanded Interconnection rules. Thus, we find that the 1996 Act,
as a matter of law, does not displace our Expanded Interconnection requirements,
and, in fact, grants discretion to the FCC to preserve our existing rules and
tariffing requirements to the extent they are consistent with the Communications
Act.

n1473 47 U.S.C @ 252(a)(1) (emphasis added).

n1474 Section 201 authorizes the Commission "to establish physical connections
with other carriers . . ." 47 U.S.C. @ 201.  [*225]


   611. We further conclude that it would make little sense to find that
sections 251 and 252 supersede our Expanded Interconnection rules, because the
two sets of requirements are not coextensive. For example, our Expanded
Interconnection rules encompass collocation for interstate purposes for all
parties, including non-carrier end users, that seek to terminate transmission
facilities at LEC central offices. n1475 In comparison, section 251 requires
collocation only for "any requesting telecommunications carrier." n1476 Certain
competing carriers -- and non-carrier customers not covered by section 251 --
may prefer to take interstate expanded interconnection service under general
interstate tariff schedules. We find that it would be unnecessarily disruptive
to eliminate that possibility at this time. We also conclude that permitting
requesting carriers to seek interconnection pursuant to our Expanded
Interconnection rules as well as section 251 is consistent with the goals of the
1996 Act to permit competitive entry through a variety of entry strategies.
Thus, a requesting carrier would have the choice of negotiating an
interconnection agreement pursuant to sections 251 and 252 or   [*226]   taking
tariffed interstate service under our Expanded Interconnection rules.

n1475 Special Access Order, 7 FCC Rcd at 7403.

n1476 See 47 U.S.C. @ 251(c)(2) and (3).

   612. Finally, we expect that, over time, sections 251 and 252 and our
implementing rules may replace our Expanded Interconnection rules as the primary
regulations governing interconnection for carriers. We note that section 251 is
broader than our Expanded Interconnection requirements in certain respects. For
example, section 251 requires incumbent LECs to offer collocation for purposes
of accessing unbundled network elements, whereas our Expanded Interconnection
rules require collocation only for the provision of interstate special access
and switched transport. n1477 In addition, section 251(c)(6) requires incumbents
to offer physical collocation subject to certain exceptions, whereas our
existing Expanded Interconnection rules only require carriers to offer virtual
collocation, although they may choose to offer physical collocation under Title
II regulation in lieu of virtual collocation. In the future, we may review the
need for a separate set of Expanded Interconnection requirements and revise our
requirements  [*227]   if necessary. We believe that this approach is consistent
with Congress' determination that the need for federal regulations will likely
decrease as the provisions of the 1996 Act take effect and competition develops
in the local exchange and exchange access markets. n1478

n1477 See Special Access Order, 7 FCC Rcd 7369; Switched Transport Order, 8 FCC
Rcd 7372.

n1478 See, e.g., 47 U.S.C. @ 161 (requiring the Commission to "review all
regulations . . . in effect at the time of the review that apply to the
operations or activities of any provider of telecommunications service.").

   b. Takings Issues

   (1). Background


   613. In Bell Atlantic v. FCC, the U.S. Court of Appeals for the D.C. Circuit
found that the Commission lacked authority under the Communications Act to
impose physical collocation on the LECs. The court found that this requirement
implicated the Fifth Amendment takings clause. n1479 On remand, the Commission
required LECs to provide virtual collocation. In Pacific Bell v. FCC, n1480
several LECs challenged the Commission's virtual collocation rules on
essentially identical grounds, claiming that the virtual collocation rules also
constituted an unauthorized   [*228]   taking. The court did not reach the
merits of these claims. Instead, addressing the scope of section 251 immediately
following enactment and before the FCC had yet exercised its interpretive
authority with respect to the provision, the court stated that regulations
enacted to implement the 1996 Act would render moot questions regarding the
future effect of the virtual collocation order under review. The court did not
vacate the order, but remanded to the Commission the issues presented in that
case. n1481

n1479 See Bell Atlantic v. FCC, 24 F.3d 1441 (D.C. Cir. 1994).

n1480 81 F.3d 1147 (D.C. Cir. 1996).

n1481 Id.

   (2). Comments

   614. U S West and BellSouth argue that virtual collocation is a taking and
that the Commission lacks authority under section 201 to require virtual
collocation under its Expanded Interconnection rules. n1482 U S West also argues
that the Commission lacks authority to require virtual collocation under section
251. n1483 Some incumbent LECs and the Florida Commission also argue that
physical collocation amounts to a taking in violation of the Fifth Amendment.
n1484 In opposition, several competitive carriers argue that rates that recover
incremental  [*229]   costs of collocation will satisfy constitutional "just
compensation concerns." n1485

n1482 U S West comments at 29-30; BellSouth comments at 25.

n1483 U S West comments at 30.

n1484 ALLTEL comments at 9; GTE comments at 66-68; US West comments at 29-31;
Florida Commission comments at 15 (readoption of old physical collocation rules
would be invalidated as a taking but should be readopted as model rules for the
states to adopt if they chose).

n1485 MFS reply at 23; ACSI reply at 8-9; GST reply 14; ALTS reply at 8-11.

   (3). Discussion

   615. We conclude that the ruling in Bell Atlantic does not preclude the rules
we are adopting in this proceeding. The court in Bell Atlantic did not hold that
an agency may never "take" property; the court acknowledged that, as a
constitutional matter, takings are unlawful only if they are not accompanied by
"just compensation." n1486 Instead, the court simply said that the
Communications Act of 1934 should not be construed to permit the FCC to take LEC
property without express authorization. Because the court concluded that
mandatory physical collocation would likely constitute a taking, n1487 and that
section 201 of the Act  [*230]   did not expressly authorize physical
collocation, the court held that the Commission was without authority under
section 201 to impose physical collocation requirements on LECs. n1488

n1486 Bell Atlantic, 24 F.3d at 1445.


n1487 The Commission maintains the position that mandatory physical collocation
should not properly be seen to create a takings issue. See Remand Order, 9 FCC
Rcd at 5169.

n1488 See Bell Atlantic, 24 F.3d at 1447 ("we hold that the Act does not
expressly authorize an order of physical colocation and thus the Commission may
not impose it.").

   616. The question of statutory authority to impose (physical or virtual)
collocation obligations on incumbent LECs largely evaporates in the context of
the 1996 Act. New section 251(c)(6) expressly requires incumbent LECs to provide
physical collocation, absent space or technical limitations. Where such
limitations exist, the statute expressly requires virtual collocation. Thus,
under the court's analysis in Bell Atlantic, there is no warrant for a narrowing
construction of section 251 that would deny us the authority to require either
form of collocation. Moreover, for the reasons stated in the Virtual Collocation
[*231]   Order, n1489 we continue to believe that virtual collocation, as we
have defined it, is not a taking, and that our authority to order such
collocation (under either section 251 or section 201) is not subject to the
strict construction canon announced in Bell Atlantic.

n1489 See 9 FCC Rcd at 5161-66.

   617. Given that we now have express statutory authority to order physical and
virtual collocation pursuant to section 251, any remaining takings-related issue
necessarily is limited to the question of just compensation. As discussed in
Section VII.B.2.a.(3).(c), below, we find that the ratemaking methodology we are
adopting to implement the collocation obligations under section 251(c) is
consistent with congressional intent and fully satisfies the just compensation
standard. There is, therefore, no merit to the LECs' Fifth Amendment-based
claims.

   VII. PRICING OF INTERCONNECTION AND UNBUNDLED ELEMENTS

A. Overview


   618. The prices of interconnection and unbundled elements, along with prices
of resale and transport and termination, are critical terms and conditions of
any interconnection agreement. If carriers can agree on such prices voluntarily
without government intervention,   [*232]   these agreements will be submitted
directly to the states for approval under section 252. To the extent that the
carriers, in voluntary negotiations, cannot determine the prices, state
commissions will have to set those prices. The price levels set by state
commissions will determine whether the 1996 Act is implemented in a manner that
is pro-competitor and favors one party (whether favoring incumbents or entrants)
or, as we believe Congress intended, pro-competition. As discussed more fully in
Section II.D. above, it is therefore critical to implementing Congress's
pro-competitive, de-regulatory national policy framework to establish among the
states a common, pro-competition understanding of the pricing standards for
interconnection and unbundled elements, resale, and transport and termination.
While such a common interpretation might eventually emerge through judicial
review of state arbitration decisions, we believe that such a process could
delay competition for years and require carriers to incur substantial legal
costs. n1490 We therefore conclude that, to expedite the development of fair and
efficient competition, we must set forth rules now establishing this common,
pro-competition  [*233]   understanding of the 1996 Act's pricing standards.
Accordingly, the rules we adopt today set forth the methodological principles
for states to use in setting prices. This section addresses interconnection and
unbundled elements, and subsequent sections address resale and transport and
termination, respectively.

n1490 For a discussion of our legal authority to adopt national pricing rules,
see supra, Section II.D.

   619. While every state should, to the maximum extent feasible, immediately
apply the pricing methodology for interconnection and unbundled elements that we
set forth below, we recognize that not every state will have the resources to
implement this pricing methodology immediately in the arbitrations that will
need to be decided this fall. Therefore, so that competition is not impaired in
the interim, we establish default proxies that a state commission shall use to
resolve arbitrations in the period before it applies the pricing methodology. In
most cases, these default proxies for unbundled elements and interconnection are
ceilings, and states may select lower prices. In one instance, the default proxy
we establish is a price range. Once a state sets prices according  [*234]   to
an economic cost study conducted pursuant to the cost-based pricing methodology
we outline, the defaults cease to apply. In setting a rate pursuant to the
cost-based pricing methodology, and especially when setting a rate above a
default proxy ceiling or outside the default proxy range, the state must give
full and fair effect to the economic costing methodology we set forth in this
Order and must create a factual record, including the cost study, sufficient for
purposes of review after notice and opportunity for the affected parties to
participate.

   620. In the following sections, we first set forth generally, based on the
current record, a cost-based pricing methodology based on forward-looking
economic costs, which we conclude is the approach for setting prices that best
furthers the goals of the 1996 Act. In dynamic competitive markets, firms take
action based not on embedded costs, but on the relationship between
market-determined prices and forward-looking economic costs. If market prices
exceed forward-looking economic costs, new competitors will enter the market. If
their forward-looking economic costs exceed market prices, new competitors will
not enter the market and   [*235]   existing competitors may decide to leave.
Prices for unbundled elements under section 251 must be based on cost under the
law, and that should be read as requiring that prices be based on
forward-looking economic costs. New entrants should make their decisions whether
to purchase unbundled elements or to build their own facilities based on the
relative economic costs of these options. By contrast, because the cost of
building an element is based on forward-looking economic costs, new entrants'
investment decisions would be distorted if the price of unbundled elements were
based on embedded costs. In arbitrations of interconnection arrangements, or in
rulemakings the results of which will be applied in arbitrations, states must
set prices for interconnection and unbundled network elements based on the
forward-looking, long-run, incremental cost methodology we describe below. Using
this methodology, states may not set prices lower than the forward-looking
incremental costs directly attributable to provision of a given element. They
may set prices to permit recovery of a reasonable share of forward-looking joint
and common costs of network elements. n1491 In the aftermath of the arbitrations
[*236]   and relying on the state experience, we will continue to review this
costing methodology, and issue additional guidance as necessary.


   n1491 We define these and other forward-looking cost concepts infra, Section
VII.B.2.a. We define what we consider to be a reasonable share of
forward-looking joint and common costs infra, Section VII.B.2.a.

   621. We reject various arguments raised by parties regarding the recovery of
costs other than forward-looking economic costs in section 251(c)(2) and (c)(3)
prices, including the possible recovery of: (1) embedded or accounting costs in
excess of economic costs; (2) incumbent LECs' opportunity costs; (3) universal
service subsidies; and (4) access charges. As discussed in Section VII.B.2.a.
below, certain portions of access charges may continue to be collected for an
interim period in addition to section 251(c)(3) prices.

   622. With respect to prices developed under the forward-looking, cost-based
pricing methodology, we conclude that incumbent LECs' rates for interconnection
and unbundled elements must recover costs in a manner that reflects the way they
are incurred. We adopt certain rules that states must follow in setting rates in
arbitrations.   [*237]   These rules are designed to ensure the efficient
cost-based rates required by the 1996 Act.

   623. In the next section of the Order, we establish default proxies that
states may elect to use prior to utilizing an economic study and developing
prices using the cost-based pricing methodology. We recognize that certain
states may find it difficult to apply an economic costing methodology within the
statutory time frame for arbitrating interconnection disputes. We therefore set
forth default proxies that will be relatively easy to apply on an interim basis
to interconnection arrangements. We discuss with respect to particular unbundled
elements the reasonable rate structure for those elements and the particular
default proxies we are establishing for use pending our adoption of a generic
forward-looking cost model. Finally, we discuss the following additional
matters: generic forward-looking costing models that we intend to examine
further by the first quarter of 1997 in order to determine whether any of those
models, with modifications, could serve as better default proxies; the future
adjustment of rates; the relationship of unbundled element prices to retail
prices; and the meaning   [*238]   of the statutory prohibition against
discrimination in sections 251 and 252.

   624. Those states that have already established methodologies for setting
interconnection and unbundled rates must review those methodologies against the
rules we are adopting in this Order. To the extent a state's methodology is
consistent with the approach we set forth herein, the state may apply that
methodology in any section 252 arbitration. However, if a state's methodology is
not consistent with the rules we adopt today, the state must modify its
approach. We invite any state uncertain about whether its approach complies with
this Order to seek a declaratory ruling from the Commission.

B. Cost-Based Pricing Methodology


   625. As discussed more fully in Section II.D. above, although the states have
the crucial role of setting specific rates in arbitrations, the Commission must
establish a set of national pricing principles in order to implement Congress's
national policy framework. For the reasons set forth in the preceding section
and as more fully explained below, we are adopting a cost-based methodology for
states to follow in setting interconnection and unbundled element rates. In
setting forth  [*239]   the cost-based pricing methodology for interconnection
and access to unbundled elements, there are three basic sets of questions that
must be addressed. First, does the 1996 Act require that the same standard apply
to the pricing of interconnection provided pursuant to section 251(c)(2), and
unbundled elements provided pursuant to section 251(c)(3)? Second, what is the
appropriate methodology for establishing the price levels for interconnection
and for each unbundled element, how should costs be defined, and is the price
based on economic costs, embedded costs, or other costs? Third, what are the
appropriate rate structures to be used to set prices designed to recover costs,
including a reasonable profit? We address each of these questions in the
following sections.

   1. Application of the Statutory Pricing Standard

   a. Background

   626. In the NPRM, we proposed that any pricing principles we adopt should be
the same for interconnection and unbundled network elements because sections
251(c)(2) and (c)(3) and 252(d)(1) use the same pricing standard. n1492 We
invited parties to comment on this issue and to justify any proposed distinction
in the priority for interconnection and unbundled  [*240]   network elements. We
also stated our belief that the same pricing rules that apply to interconnection
and unbundled network elements should also apply to collocation under section
251(c)(6) of the 1996 Act.

   n1492 NPRM at para. 122.

   b. Comments

   627. Commenters generally agree that any pricing rules adopted by the
Commission for interconnection and unbundled elements should be the same. n1493
These parties assert that any pricing rules the Commission ultimately adopts
should not, therefore, create incentives to substitute or arbitrage one type of
classification for another. Commenters also generally agree that the pricing
rules the Commission adopts for interconnection and unbundled elements should
also apply to collocation. n1494 Many of these parties agree that collocation is
a subset of the interconnection arrangements contemplated by sections 251(c)(2)
and 252(d)(1). n1495 On the other hand, a few parties contend that the pricing
standards contained in section 252(d)(1) for interconnection and unbundled
elements do not apply to collocation provided under section 251(c)(6). n1496
BellSouth argues that the Commission should not adopt any national standards for
virtual collocation.   [*241]   n1497 Other commenters, including some that
oppose the establishment of pricing rules by the Commission, argue that, to the
extent that the Commission adopts national standards for collocation, they
should generally follow those established in the Commission's Expanded
Interconnection proceeding in CC Docket No. 91-141. n1498

   n1493 See, e.g., Citizens Utilities comments at 16 n.14; Ohio Commission
comments at 42; Teleport comments at 46.

   n1494 E.g., ACSI comments at 16; ALTS comments at 34-35; Citizens Utilities
comments at 16 n. 14; Colorado Commission comments at 34; MCI comments at 54,
61; MFS comments at 30; NEXTLINK comments at 26; PacTel comments at 63; Sprint
comments at 42; Teleport comments at 46.

   n1495 See, e.g., Citizens Utilities comments at 16 n. 14; Colorado Commission
comments at 34; MFS comments at 30; NEXTLINK comments at 26.



   n1496 See, e.g., SNET comments at 24 n.44.

   n1497 BellSouth comments at 23.

   n1498 See, e.g., Bell Atlantic comments at 32-34.

   c. Discussion

   628. Sections 251(c)(2) and (c)(3) impose an identical duty on incumbent LECs
to provide interconnection and access to network elements "on rates, terms, and
conditions that   [*242]   are just, reasonable, and nondiscriminatory." n1499
In addition, both interconnection and unbundled network elements are made
subject to the same pricing standard in section 252(d)(1). Based on the plain
language of sections 251(c)(2), (c)(3), and section 252(d)(1), we conclude that
Congress intended to apply the same pricing rules to interconnection and
unbundled network elements. The pricing rules we adopt shall, therefore, apply
to both.

   n1499 47 U.S.C. @ 251(c)(2), (c)(3).

   629. We further conclude that, because section 251(c)(6) requires that
incumbent LECs provide physical collocation on "rates, terms, and conditions
that are just, reasonable, and nondiscriminatory," which is identical to the
standard for interconnection and unbundled elements in sections 251(c)(2) and
(c)(3), collocation should be subject to the same pricing rules. n1500 We also
note that, because collocation is a method of obtaining interconnection and
access to unbundled network elements, collocation is properly treated under the
same pricing rules. This legal conclusion that there should be a single set of
pricing rules for interconnection, unbundled network elements, and collocation
provides greater  [*243]   consistency and guidance to the industry, regulators,
and the courts. Moreover, if reduces the regulatory burdens on state commissions
of developing and applying different pricing rules for collocation,
interconnection, and unbundled network elements. We note that our adoption of
this single set of pricing rules should minimize regulatory burdens, conflicts,
and uncertainties associated with multiple, and possibly inconsistent rules,
thus facilitating competition on a reasonable and efficient basis minimizing the
economic impact of our rules for all parties, including small entities and small
incumbent LECs. n1501

   n1500 See supra, Section VI.B.

   n1501 See Regulatory Flexibility Act, 5 U.S.C. @@ 601 et seq.

   2. Rate Levels

   a. Pricing Based on Economic Cost

   (1) Background

   630. We observed in the NPRM that economists generally agree that prices
based on forward-looking long-run incremental costs (LRIC) give appropriate
signals to producers and consumers and ensure efficient entry and utilization of
the telecommunications infrastructure. n1502 We noted, however, that there was a
lack of general agreement on the specifics of methodology for deriving prices
based on LRIC or   [*244]   total service long-ran incremental cost (TSLRIC).

We invited parties to comment on whether we should require the states to employ
a LRIC-based pricing methodology and to explain with specificity the costing
methodology they support. n1503 We recognized, however, that prices based on
LRIC might not permit recovery of forward-looking costs if there were
significant forward-looking joint and common costs among network elements. n1504
We sought comment on how, if rates are set above incremental cost, to deal with
the problems inherent in allocating common costs and any other overheads. n1505
We observed that, by defining the unbundled elements at a sufficiently
aggregated level, it may be possible to reduce the costs to be allocated as
joint and common by identifying a substantial portion of costs as incremental to
a particular element. To the extent that joint and common costs cannot be
entirely eliminated, we sought comment on various methodologies for assigning
them, including the use of a fixed allocator or on the basis of inverse demand
elasticity. We also sought comment on whether, regardless of the method of
allocating common costs, we should limit rates to levels that do not exceed
[*245]   stand-alone costs. n1506 Finally, we invited parties to comment on
whether a LRIC-based methodology would establish a price for interconnection and
unbundled network elements that includes a reasonable profit and thus complies
with section 252(d)(1). n1507

   n1502 NPRM at para. 124.

   n1503 Id. at para. 126.

   n1504 Id. at para. 129.

   n1505 Id. at para. 130.

   n1506 Id. For a definition of stand-alone costs, see Section VII.B.2.a.
infra.

   n1507 47 U.S.C. @ 252(d)(1)(A)(i); NPRM at para. 129.

   631. A number of states already employ, or have plans to utilize, some form
of LRIC or TSLRIC methodology in their approach to setting prices for unbundled
network elements, n1508 with several states choosing LRIC or TSLRIC as a price
floor. n1509 For instance, the Connecticut Commission adopted a TSLRIC
methodology to measure the cost of service of SNET, its principal incumbent LEC.
n1510 Arizona also requires incumbent LECs to conduct TSLRIC cost studies to
establish the underlying cost of unbundled services and facilities. n1511 The
Ohio Commission has adopted Long Run Service Incremental Cost ("LRSIC"), which
is closely related to TSLRIC. n1512 The Missouri and Wyoming   [*246]
Commissions are among a number of state commissions that have not yet adopted a
pricing methodology, but are considering LRIC or TSLRIC. n1513 Oklahoma law
provides for submission of LRIC cost studies and studies identifying a
contribution to common costs for interconnection of facilities and access to
network elements to the Oklahoma Commission during an arbitration. n1514 A
number of states have yet to choose a pricing methodology. For instance, the New
York Commission sets prices on a case-by-case basis. n1515 Unbundled element
prices also exist in several states pursuant to negotiated interconnection
agreements that have either already been approved by state commissions or are
under consideration. n1516


   n1508 See, e.g., California Commission comments at 29 (California has adopted
TSLRIC as the standard for developing the costs of unbundled elements and in a
rulemaking this summer will determine the unbundled network elements and what
level of shared and common costs should be included in the price of each);
Michigan Commission comments at 13 (1996 prices for loops to remain at levels
established by the Michigan Commission in its original interconnection order or
at TSLRIC); Texas Commission comments at 22 (Texas Commission has employed
LRIC-based pricing methodologies for many years; SWBT and GTE required to file
LRIC cost studies to be used in pricing not later than November 1, 1996).
[*247]

   n1509 See, e.g., Colorado Commission comments at Attachment (Rules
Prescribing Principles for Costing and Pricing of Regulated Services of
Telecommunications Service Providers) 4 CCR 723-30, Rules 4-5; Hawaii
Administrative Rules, Sections 6-80-32-34 (setting out a three-tiered pricing
regime with TSLRIC set as floor for pricing of competitive services); Louisiana
Commission comments at Attachment (Louisiana Public Service Commission
"Regulations for Competition in the Local Telecommunications Market"), p.30;
Washington Commission comments at 25, Appendix B (Washington Utilities and
Transportation Commission v. U S West Communications, Docket No. UT-950200 at 82
(Washington Commission, April 11, 1996)); Wisconsin Stat. Ann. section 196.204
(requiring the price of each network service or function to exceed TSLRIC).

   n1510 Connecticut Commission comments at 4.

   n1511 Arizona Commission comments, Exhibit V (Arizona Administrative Code
R14-2-1101 et seq.), p. 10.

   n1512 See Ohio Commission comments at 43-45.

   n1513 See, e.g., Missouri Commission comments at 11 (supports LRIC for
costing; LRIC is defined in pending state legislation); Wyoming Commission
comments at 26-27 (draft rules propose use of TSLRIC as a price floor, with
prices to include a contribution to shared, common, and joint costs, and the sum
of prices for unbundled elements not to exceed retail for bundled services;
incumbent LECs shall impute the prices of unbundled elements into the price
floors of each of their own services that utilize the network elements).
[*248]

   n1514 Oklahoma Commission comments at Appendix A (Corporation Commission
Telephone Rules OAC 165:55-17-25), pp.10-11.

   n1515 Competition, The State Experience at 80 (compilation of written
responses by state commission staffs to questions by FCC staff, compiled by
NARUC) (March 8, 1996).

   n1516 According to information in our possession, such agreements have been
negotiated in, among other states, Alabama, Florida, Georgia, Kentucky,
Illinois, Louisiana, Mississippi, North Carolina, South Carolina, and Tennessee.
Letter from W.W. Jordan, Executive Director - Federal Regulatory, BellSouth, to
William F. Caton, Acting Secretary, July 11, 1996 at Attachment (containing
chart detailing agreements between BellSouth and new entrants in Alabama,
Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South
Carolina, and Tennessee); "Interconnection Agreement Under Sections 251 and 252
of the telecommunications Act of 1996, by and between, Ameritech Information
Industry Services and MFS Intelenet of Illinois, Inc.," dated May 17, 1996
(filed July 25, 1996).