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 5 OF 5]

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

OPINION:
   1280. There is also significant disagreement regarding whether final-offer
arbitration should be the arbitration model adopted by the Commission in the
event the Commission must conduct the arbitration itself. A broad range of
parties argue that final offer arbitration would result in reasonable
recommendations to the arbitrator. n3144 Vanguard argues that the "final offer"
method of arbitration should permit post-offer negotiation by the parties and
allow the parties to tailor counter-proposals. n3145 Under this approach, the
Commission would permit negotiation to continue after arbitration offers are
exchanged in order to promote negotiated settlements. n3146

   n3144 See, e.g., Teleport comments at 88; USTA comments at 94-95; SBC
comments at 103;

   n3145 Vanguard comments at 39-40.

   n3146 Id. at 40.

   1281. Many competitors oppose a "final offer" arbitration standard. n3147
Sprint, for example, argues that "final-offer" arbitration works well when there
is a single, narrowly defined issue on the table, but, where there are numerous
[*2]   complex technical and economic issues, confronting the arbitrator with an
"either/or" choice leaves insufficient flexibility to achieve a result that
comports with section 251. n3148 In addition, Sprint asserts that, because
arbitration proceedings have a public interest component that sets them apart
from mere private disputes, neither party's offer might serve the public
interest. n3149 Some parties recommend an "open-ended" arbitration system, n3150
while California is in favor of a hybrid between the two. n3151

   n3147 See, e.g., MCI comments at 95-96; Sprint reply at 47; Time Warner
comments at 111; Competitive Policy Institute reply at 21-22; GCI reply at 5.

   n3148 Sprint reply at 47.



   n3149 Id.

   n3150 See, e.g., Time Warner comments at 111.

   n3151 California Commission comments at 50. The California Commission's
procedures for resolving interconnection disputes is based on a four-step
expedited dispute resolution process for resolving disputes between parties who
cannot agree on the terms of interconnection. Step 1 is informal resolution
without state intervention. Step 2 provides for dispute resolution with
mediation by the Administrative Law Judge (ALJ). Step 3 calls for the parties to
submit short pleadings to the ALJ who shall use the state commission's
"preferred outcomes" approach as a guideline in resolving dispute. Step 4 allows
for a party to challenge an ALJ ruling by filing an expedited complaint.  [*3]

   1282. SBC contends that Congress did not intend for arbitration to be binding
to the extent that parties are not legally obligated to enter into an agreement
after the arbitrator issues a decision. n3152 SBC argues that parties are bound
by the arbitrator's decision only if they decide to enter into an agreement.
Vanguard responds that SBC's proposal is contrary to the statute, which does not
give parties the opportunity to reject the results of arbitration and which does
not provide for de novo review. n3153

   n3152 SBC comments at 99.

   n3153 Vanguard reply at 18-20; accord Competition Policy Institute reply at
18-19.

   3. Discussion

   1283. After careful review of the record, we are convinced that establishing
regulations to carry out our obligations under section 252(e)(5) will provide
for an efficient and fair transition from state jurisdiction should we have to
assume the responsibility of the state commission under Section 252(e)(5). The
rules we establish in this section with respect to arbitration under section 252
apply only to instances where the Commission assumes jurisdiction under section
252(e)(5); we do not purport to advise states on how to conduct arbitration
[*4]   when the Commission has not assumed jurisdiction. The rules we establish
will give notice of the procedures and standards the Commission would apply to
mediation and arbitration, avoid delay if the Commission had to arbitrate
disputes in the near future, and may also offer guidance the states may, at
their discretion, wish to consider in implementing their own mediation and
arbitration procedures and standards. We decline to adopt national rules
governing state arbitration procedures. We believe the states are in a better
position to develop mediation and arbitration rules that support the objectives
of the 1996 Act. States may develop specific measures that address the concerns
of small entities and small incumbent LECs participating in mediation or
arbitration.


   1284. The rules we adopt herein are minimum, interim procedures. Adopting
minimum interim procedures now will allow the Commission to learn from the
initial experiences and gain a better understanding of what types of situations
may arise that require Commission action. We note that the Commission is not
required to adopt procedures and standards for mediation and arbitration within
the six-month statutory deadline and that,   [*5]   by adopting minimum interim
procedures, the Commission can better direct its resources to more pressing
matters that fall within the six-month statutory deadline.

   1285. Regarding what constitutes a state's "failure to act to carry out its
responsibility under" section 252, n3154 the Commission was presented with
numerous options. The Commission will not take an expansive view of what
constitutes a state's "failure to act." Instead, the Commission interprets
"failure to act" to mean a state's failure to complete its duties in a timely
manner. This would limit Commission action to instances where a state commission
fails to respond, within a reasonable time, to a request for mediation or
arbitration, or fails to complete arbitration within the time limits of section
252(b)(4)(C). n3155 The Commission will place the burden of proof on parties
alleging that the state commission has failed to respond to a request for
mediation or arbitration within a reasonable time frame. We note the work done
by states to date in putting in place procedures and regulations governing
arbitration and believe that states will meet their responsibilities and
obligations under the 1996 Act. n3156

   n3154 47 U.S.C. @ 252(e)(5).  [*6]

   n3155 47 U.S.C. @ 252(b)(4)(C).

   n3156 See, e.g., In the Matter of the Implementation of the Mediation and
Arbitration Provisions of the Federal Telecommunications Act of 1996, Case No.
96-463-TP-UNC, Ohio Commission, (May 30, 1996); Illinois Commerce Commission On
Its Own Motion Adoption of 83 Ill. Adm. Code 761 to Implement the Arbitration
Provisions of Section 252 of the Telecommunications Act of 1996, Docket No.
96-0297, Illinois Commission (June 14, 1996).

   1286. We agree with the majority of commenters that argue that our authority
to assume the state commission's responsibilities is not triggered when an
agreement is "deemed approved" under section 252(e)(4) due to state commission
inaction. Section 252(e)(4) provides for automatic approval if a state fails to
approve or reject a negotiated or arbitrated agreement within 90 days or 30
days, respectively. Rules of statutory construction require us to give meaning
to all provisions and to read provisions consistently, where it is possible to
do so. We thus conclude that the most reasonable interpretation is that
automatic approval under section 252(e)(4) does not constitute a failure to act.

   1287. We also believe that  [*7]   we should establish interim procedures for
interested parties to notify the Commission that a state commission has failed
to act under section 252. We believe that parties should be required to file a
detailed written petition, backed by affidavit, that will, at the outset, give
the Commission a better understanding of the issues involved and the action, or
lack of action, taken by the state commission. Allowing less detailed
notification increases the likelihood that frivolous requests will be made. With
less detailed notification, the Commission's investigations would be broader and
more burdensome. A detailed written petition will facilitate a decision about
whether the Commission should assume jurisdiction based on section 252(e)(5).


   1288. The moving party should submit a petition to the Secretary of the
Commission stating with specificity the basis for the petition and any
information that supports the claim that the state has failed to act, including,
but not limited to the applicable provision(s) of the Act and the factual
circumstances which support a finding that a state has failed to act. The moving
party must ensure that the applicable state commission and the parties
[*8]   to the proceeding or matter for which preemption is sought are served
with the petition on the same date the party serves the petition on the
Commission. The petition will serve as notice to parties to the state proceeding
and the state commission who will have fifteen days from the date the petition
is filed with the Commission to comment. Under section 252(e)(5), the Commission
must "issue an order preempting the state commission's jurisdiction of that
proceeding or matter" no later than 90 days from the date the petition is filed.
n3157 If the Commission takes notice, as section 252(e)(5) permits, that a state
commission has failed to act, it will, on its own motion, issue a public notice
and provide fifteen days for interested parties to submit comment on whether the
Commission should assume responsibility under section 252(e)(5).

   n3157 47 U.S.C. @ 252(e)(5).

   1289. If the Commission assumes authority under section 252(e)(5), the
Commission must also decide whether it retains authority for that proceeding or
matter. We agree with those parties who argue that, once the Commission assumes
jurisdiction of a proceeding or matter, it retains authority for that proceeding
or matter.   [*9]   For example, if the Commission obtains jurisdiction after a
state commission fails to respond to a request for arbitration, the Commission
maintains jurisdiction over the arbitration proceeding. Therefore, once the
proceeding is before the Commission, any and all further action regarding that
proceeding or matter will be before the Commission. We note that there is no
provision in the Act for returning jurisdiction to the state commission;
moreover, the Commission, with significant knowledge of the issues at hand,
would be in the best position efficiently to conclude the matter. Thus, as both
a legal and policy matter, we believe that the Commission retains jurisdiction
over any matter and proceeding for which it assumes responsibility under Section
252(e)(5).

   1290. We reject the suggestion by some parties that, once the Commission has
mediated or arbitrated an agreement, the agreement must be submitted to the
state commission for approval under state law. We note that section 252(e)(5)
provides for the Commission to "assume the responsibility of the State
commission under this section with respect to the proceeding or matter and act
for the State commission." n3158 This includes  [*10]   acting for the state
commission under section 252(e)(1), which calls for state commission approval of
"any interconnection agreement adopted by negotiation or arbitration." n3159 We,
therefore, do not read section 252(e)(1) or any other provision as calling for
state commission approval or rejection of agreements mediated or arbitrated by
the Commission. In those instances where a state has failed to act, the
Commission acts on behalf of the state and no additional state approval is
required.

   n3158 47 U.S.C. @ 252(e)(5).

   n3159 47 U.S.C. @ 252(e)(1).


   1291. Requirements set forth in section 252(c) for arbitrated agreements
would apply to arbitration conducted by the Commission. We see no reason, and no
party has suggested a policy or legal basis, for not applying such standards
when the Commission conducts arbitration. Thus, arbitrated agreements must: (1)
meet the requirements of section 251, including regulations prescribed by the
Commission pursuant to section 251; (2) establish any rates for interconnection,
services, or network elements according to section 252(d); and (3) provide a
schedule for implementation of the terms and conditions by the parties to the
agreement.   [*11]   n3160 We reject the suggestion made by some parties that,
if the Commission steps into the state commission role, it is bound by state
laws and standards that would have applied to the state commission. While states
are permitted to establish and enforce other requirements, these are not binding
standards for arbitrated agreements under section 252(c). Moreover, the
resources and time potentially needed to review adequately and interpret the
different laws and standards of each state render this suggestion untenable.
Finally, we conclude that it would not make sense to apply to the Commission the
timing requirements that section 252(b)(4)(c) imposes on state commissions. The
Commission, in some instances, might not even assume jurisdiction until nine
months (or more) have lapsed since a section 251 request was initiated.

   n3160 47 U.S.C. @ 252(c).

   1292. Based on the comments of the parties, we conclude that a "final offer"
method of arbitration, similar to the approach recommended by Vanguard, would
best serve the public interest. n3161 Under "final offer" arbitration, each
party to the negotiation proposes its best and final offer and the arbitrator
determines which of the proposals  [*12]   become binding. The arbitrator would
have the option of choosing one of the two proposals in its entirety, or the
arbitrator could decide on an issue-by-issue basis. Each final offer must: (1)
meet the requirements of section 251, including the Commission's rules
thereunder; (2) establish rates for interconnection, services, or network
elements according to section 252(d); and (3) provide a schedule for
implementation of the terms and conditions by the parties to the agreement.
n3162 If a final offer submitted by one or more parties fails to comply with
these requirements, the arbitrator would have discretion to take steps designed
to result in an arbitrated agreement that satisfies the requirements of section
252(c), including requiring parties to submit new final offers within a time
frame specified by the arbitrator, or adopting a result not submitted by any
party that is consistent with the requirements in section 252(c).

   n3161 Vanguard comments at 39-40.

   n3162 47 U.S.C. @ 252(c).


   1293. The parties could continue to negotiate an agreement after they submit
their proposals and before the arbitrator makes a decision. Under this approach,
the Commission will encourage   [*13]   negotiations, with or without the
assistance of the arbitrator, to continue after arbitration offers are
exchanged. Parties are not precluded from submitting subsequent final offers
following such negotiations. We believe that permitting post-offer negotiations
will increase the likelihood that the parties will reach consensus on unresolved
issues. In addition, permitting post-offer negotiations will increase
flexibility and will allow parties to tailor counter-proposals after arbitration
offers are exchanged. To provide an opportunity for final post-offer
negotiation, the arbitrator will not issue a decision for at least 15 days after
submission of the final offers by the parties. In addition, the offers must be
consistent with section 251, including the regulations prescribed by the
Commission. We reject SBC's suggestion that an arbitrated agreement is not
binding on the parties. Absent mutual agreement to different terms, the decision
reached through arbitration is binding. We conclude that it would be
inconsistent with the 1996 Act to require incumbent LECs to provide
interconnection, services, and unbundled elements, impose a duty to negotiate
in good faith and a right to arbitration,   [*14]   and then permit incumbent
LECs to not be bound by an arbitrated determination. We also believe that,
although competing providers do not have an affirmative duty to enter into
agreements under section 252, a requesting carrier might face penalties if, by
refusing to enter into an arbitrated agreement, that carrier is deemed to have
failed to negotiate in good faith. n3163 Such penalties should serve as a
disincentive for requesting carriers to force an incumbent LEC to expand
resources in arbitration if the requesting carrier does not intend to abide by
the arbitrated decision.

   n3163 See 47 U.S.C. @ 252(b)(5) (requiring parties to negotiate in good faith
in the course of arbitration).

   1294. Adopting a "final offer" method of arbitration and encouraging
negotiations to continue allows us to maintain the benefits of final offer
arbitration, giving parties an incentive to submit realistic "final offers,"
while providing additional flexibility for the parties to agree to a resolution
that best serves their interests. To the extent that these procedures encourage
parties to negotiate voluntarily rather than arbitrate, such negotiated
agreements will be subject to review pursuant   [*15]   to section 252(e)(2)(A),
which would allow the Commission to reject agreements if they are inconsistent
with the public interest. This approach also addresses the argument that under
"final offer" arbitration neither offer might best serve the public interest,
because it allows the parties to obtain feedback from the arbitrator on public
interest matters.

   1295. We believe that the arbitration proceedings generally should be limited
to the requesting carrier and the incumbent local exchange provider. This will
allow for a more efficient process and minimize the amount of time needed to
resolve disputed issues. We believe that opening the process to all third
parties would be unwieldy and would delay the process. We will, however,
consider requests by third parties to submit written pleadings. This may, in
some instances, allow interested parties to identify important public policy
issues not raised by parties to an arbitration.

B. Requirements of Section 252(i)

   1. Background

   1296. Section 251 requires that interconnection, unbundled element, and
collocation rates be "nondiscriminatory" and prohibits the imposition of
"discriminatory conditions" on the resale of telecommunications  [*16]
services. n3164 Section 252(i) of the 1996 Act provides that a "local exchange
carrier shall make available any interconnection, service, or network element
provided under an agreement approved under [section 252] to which it is a party
to any other requesting telecommunications carrier upon the same terms and
conditions as those provided in the agreement." n3165 In the NPRM, we expressed
the view that section 252(i) appears to be a primary tool of the 1996 Act for
preventing discrimination under section 251, and we sought comment on whether we
should adopt national standards for resolving disputes under section 252(i) in
the event that we must assume the state's responsibilities pursuant to section
252(e)(5). In addition, because we may need to interpret section 252(i) if we
assume the state commission's responsibilities, we sought comment on the meaning
of section 252(i).



   n3164 47 U.S.C. @@ 251(c)(2)(D) (interconnection rates, terms, and
conditions); 251(c)(3) (unbundled network elements rates, terms, and
conditions); 251(c)(6) (collocation rates, terms, and conditions); and
251(c)(4)(B) (resale). Section 252(d)(1) also requires nondiscriminatory
interconnection and network element charges. 47 U.S.C. @ 252(d)(1).  [*17]

   n3165 47 U.S.C. @ 252(i).

   1297. We also sought comment in the NPRM on whether section 252(i) requires
that only similarly-situated carriers may enforce against incumbent LECs
provisions of agreements filed with state commissions, and, if so, how
"similarly-situated carrier" should be defined. In particular, we asked whether
section 252(i) requires that the same rates for interconnection must be offered
to all requesting carriers regardless of the cost of serving that carrier, or
whether it would be consistent with the statute to permit different rates if the
costs of serving carriers are different. We also asked whether the section can
be interpreted to allow incumbent LECs to make available interconnection,
services, or network elements only to requesting carriers serving a comparable
class of subscribers or providing the same service (i.e., local, access, or
interexchange) as the original parties to the agreement. In the NPRM, we
tentatively concluded that the language of the statute appears to preclude such
differential treatment among carriers.

   1298. Additionally, we sought comment in the NPRM on whether section 252(i)
permits requesting telecommunications carriers to choose  [*18]   among
individual provisions of publicly-filed interconnection agreements or whether
they must subscribe to an entire agreement. We also sought comment regarding
what time period an agreement must remain available for use by other requesting
telecommunications carriers.

   2. Comments

   1299. Two state commissions and SBC believe that implementation of section
252(i) should be left to the states, n3166 while Time Warner favors national
standards. n3167 CompTel argues that we should adopt expedited procedures
whereby carriers may complain to the Commission when incumbent LECs refuse to
make agreements available to them in alleged violation of section 252(i). n3168

   n3166 Pennsylvania Commission comments at 43; Louisiana Commission comments
at 28-29; SBC Comments at 24.

   n3167 Time Warner comments at 112.

   n3168 CompTel comments at 107.


   1300. New entrants generally support the view that section 252(i) does not
require that requesting carriers seeking to avail themselves of a prior
negotiated or arbitrated agreement be "similarly situated" with respect to the
original party who negotiated the agreement. n3169 They argue that such a
limitation would be contrary to Congress's intent,   [*19]   n3170 or that it
could invite perpetual dispute over which carriers are similarly situated and
what cost differences are real and material. n3171 Winstar questions whether
states could implement a "similarly situated" carrier requirement without
unintentionally creating a vehicle for incumbent LECs to discriminate against
competitive entrants. n3172 LDDS specifically agrees with the NPRM's tentative
conclusion that section 252(i) prohibits incumbent LECs from limiting the
availability of agreements to a carrier based on the class of customers the
carrier serves or the type of service it provides. n3173 The Telecommunications
Resellers Ass'n believes section 252(i) prohibits discrimination on the basis of
the cost of serving a carrier, and claims its members have been, and continue to
be, denied preferred service offerings and price points in the interexchange
market under the guise of a "similarly situated" criterion. n3174

   n3169 WinStar comments at 18-19; CompTel comments at 106; LDDS comments at
88; Time Warner comments at 113; ACSI reply at 23-24; Telecommunications
Resellers Ass'n comments at 50.

   n3170 CompTel comments at 106; LDDS comments at 88; Time Warner comments at
113. CompTel also asserts that, subject to cost-based deviations, no carrier
should pay more than any other carrier when it purchases the same service or
facility from the same incumbent LEC, nor should agreements include language
regarding the nature of the carrier who may subsequently enter into the same
agreements. CompTel comments at 106.  [*20]

   n3171 Telecommunications Resellers Ass'n comments at 50-51.

   n3172 WinStar comments at 18-19.

   n3173 LDDS comments at 88.

   n3174 Telecommunications Resellers Ass'n comments at 50-51.

   1301. WinStar suggests we assign to the incumbent LEC a heavy burden of
proving that a new carrier is substantially different from the original parties
to an agreement, and that we require the incumbent LEC to provide service to the
new entrant according to the individual terms of an agreement while the dispute
is pending. WinStar asserts that, absent such requirements, the incumbent LEC
could use alleged technological differences to create barriers to entry. n3175

   n3175 WinStar comments at 19 n.14. WinStar further suggests that the LEC
should be required to adjust the arrangement to account for differences in
technology employed by the new entrant, without revising material terms of the
arrangement. Id.

   1302. GTE, PacTel, USTA, BellSouth, and the Ohio Consumers' Counsel believe
the statute contemplates drawing distinctions between carriers, n3176 such as,
for instance, where the incumbent LEC faces different costs in serving different
carriers. n3177 According to GTE and PacTel,   [*21]   carriers must be
"similarly situated" because the subsequent carrier's technical requirements may
be incompatible with the incumbent LEC's network. n3178 GTE asserts that
providing service under an agreement to carriers that are not similarly situated
with respect to the technical feasibility and costs of interconnection and
transport and termination would be inconsistent with the 1996 Act's requirements
that interconnection be technically feasible and offered at cost-based rates.
n3179

   n3176 GTE comments at 82-83; PacTel comments at 101; USTA comments at 95-96;
BellSouth comments at 80-81; Ohio Consumers' Counsel comments at 51.



   n3177 GTE comments at 82-83; Municipal Utilities comments at 14; USTA
comments at 96.

   n3178 GTE comments at 82-83; PacTel comments at 101.

   n3179 GTE comments at 83.

   1303. Incumbent LECs also generally oppose the view that section 252(i)
permits competitive carriers to choose among provisions in a publicly-filed
interconnection agreement. n3180 For instance, BellSouth contends that the text
of section 252(i) supports its view, and that the legislative history reference
cited in the NPRM casts no light on Congress' intent because the House  [*22]
did not recede to the Senate's language. n3181 GTE urges the Commission to treat
the availability of agreements under section 252(i) the same way it treats AT&T
Tariff 12 and Contract Tariff offerings. n3182 Ameritech, GTE and SBC also
contend that section 252(i)'s requirement that a requesting carrier take service
upon the same terms and conditions as the original carrier precludes unbundled
availability. n3183 USTA argues unbundled availability of agreement provisions
will skew the individualized nature of negotiations, magnify the importance of
each individual term of an agreement, and encourage incumbent LECs to offer only
standardized, relatively high-cost packages. n3184

   n3180 See, e.g., Ameritech comments at 98-99; BellSouth comments at 81; Bay
Springs et al comments at 19; GTE comments at 83; SBC comments at 24; USTA
comments at 96-97.

   n3181 BellSouth comments at 81.

   n3182 GTE comments at 83; see also BellSouth comments at 81; USTA comments at
97.

   n3183 Ameritech comments at 99; GTE comments at 83; SBC comments at 24.

   n3184 USTA comments at 96.


   1304. New entrants, joined by the Ohio Commission, support the view that the
statute makes individual provisions  [*23]   of agreements available to
carriers. n3185 They argue that this comports with the statutory language and
legislative history, n3186 and that requiring requesting carriers to take an
entire agreement will cause delay n3187 and foster discrimination by enabling
incumbent LECs to fashion agreements so that no subsequent carrier may benefit
from them. n3188 MCI argues that, although this approach may make incumbents
less likely to compromise, the effect on negotiations will be small. n3189 The
SBA asserts allowing entrants to utilize individual provisions of agreements
will lead to increased competition, which, in turn, will drive prices towards
the most economically efficient levels, and that these benefits outweigh any
additional burden that such unbundling may place upon incumbents in negotiating
agreements. n3190 SBA further argues that failure to permit unbundling of
agreements would deter entry by smaller competitors that are unable or unwilling
to pay for all of the elements contained in a an agreement negotiated by a
larger competitor. n3191 CompTel asks that we rule that an incumbent LEC may not
insist upon the observance of any term or condition that is not reasonable in
the  [*24]   context of the requesting carrier. n3192
   n3185 See, e.g., ALTS comments at 54-55; LDDS comments at 89; Jones
Intercable comments at 36; Sprint reply at 48; CompTel reply at 45; AT&T
comments at 89-90; NEXTLINK comments at 36-37; MFS comments at 90-91; Time
Warner reply at 45-46; Telecommunications Resellers Ass'n comments at 51; Ohio
Commission comments at 84. Teleport argues that, if the FCC does not adopt its
"preferred outcomes" paradigm for negotiations, it should allow carriers to pick
and choose among provisions, asserting that without the ability to pick and
choose among provisions, unequal bargaining conditions between LECs and
competitive LECs will make meaningful negotiations impossible. Teleport comments
at 54-55.

   n3186 WinStar comments at 17-18; MCI comments at 96; Jones Intercable
comments at 36; SBA comments at 17; Time Warner reply at 46.

   n3187 WinStar comments at 18.

   n3188 See, e.g., Telecommunications Resellers Ass'n comments at 51; Sprint
reply at 48; AT&T comments at 90 n.139; MFS comments at 90-91.

   n3189 MCI comments at 96.

   n3190 SBA comments at 18.

   n3191 SBA comments at 16-17; see also R. Koch comments at 3.

   n3192 CompTel comments at 107.  [*25]

   1305. ALTS suggests that we permit unbundled availability to the level of the
individual paragraphs and sections of section 251, with the exception of network
elements provided pursuant to section 251(c)(3), which ALTS believes should be
provided individually to non-parties on a disaggregated basis. n3193 ALTS argues
such a rule would reduce concern that unbundled availability would slow the
negotiation process by magnifying the importance of individual terms. n3194
Jones Intercable requests that we clarify that the statute permits so-called
"most favored nation" provisions, which allow a new entrant with an
interconnection agreement in place with an incumbent LEC to modify such an
agreement to substitute the preferable terms included in a later agreement that
the incumbent LEC enters with a subsequent new entrant. n3195

   n3193 ALTS comments at 54-55.

   n3194 Id.

   n3195 Jones Intercable comments at 36.


   1306. Parties' suggestions for the length of time agreements should remain on
file pursuant to section 252(i) range from a reasonable period, n3196 until
changes in the network adopted for independent reasons make it no longer
feasible to provide interconnection under an  [*26]   agreement, n3197 to as
long as the agreement remains in operation. n3198 Out of concern that incumbent
LECs might force competitors to renegotiate agreements at unreasonably short
intervals, the SBA argues that there should be no arbitrary limit on the
duration of agreements. n3199
   n3196 BellSouth comments at 81-82. GTE suggested agreements remain publicly
available for a reasonable period, as Commission requires for AT&T's Tariff 12.
GTE comments at 83.

   n3197 MCI comments at 97.

   n3198 Telecommunications Resellers Ass'n comments at 51-52; Time Warner
comments at 114; Lincoln Tel. comments at 25-26.

   n3199 SBA comments at 18.

   1307. Several new entrants also raise issues concerning the filing of
agreements pursuant to section 252(i). Jones Intercable urges us to require that
incumbent LECs file copies of all negotiated agreements at the FCC, as well as
at state commissions. n3200

   n3200 Jones Intercable comments at 20.

   1308. AT&T and the Telecommunications Resellers Ass'n believe section 252(i)
requires that interconnection agreements negotiated prior to enactment of the
1996 Act be available for use by requesting telecommunications carriers, n3201
while F. Williamson  [*27]   opposes this view. n3202 MFS, NCTA and WinStar urge
us to find that section 252(i) applies to interconnection agreements between
adjacent, non-competing LECs. n3203 BellSouth is opposed. n3204

   n3201 AT&T comments at 89; Telecommunications Resellers Ass'n comments at 52.

   n3202 F. Williamson comments at 5 (arguing that nothing in the 1996 Act
requires that existing agreements be submitted or resubmitted to a state
commission for approval). F. Williamson further comments that the statute does
not permit one party to an existing agreement compel renegotiation (and/or
arbitration) under the procedures in section 252. Id.

   n3203 MFS comments at 86; NCTA reply at 13; WinStar reply at 19.

   n3204 BellSouth comments at 64; see also Rural Tel. Coalition comments at
15-16 (asserting sections 251-252 do not apply to agreements between adjacent,
non-competing carriers).

   3. Discussion

   1309. We conclude that it will assist the carriers in determining their
respective obligations, facilitate the development of a single, uniform legal
interpretation of the Act's requirements and promote a procompetitive, national
policy framework to adopt national standards to implement section 252(i).
[*28]   Issues such as whether section 252(i) allows requesting
telecommunications carriers to choose among provisions of prior interconnection
agreements or requires them to accept an entire agreement are issues of law that
should not vary from state to state and are also central to the statutory scheme
and to the emergence of competition. National standards will help state
commissions and parties to expedite the resolution of disputes under section
252(i).


   1310. We conclude that the text of section 252(i) supports requesting
carriers' ability to choose among individual provisions contained in publicly
filed interconnection agreements. As we note above, section 252(i) provides that
a "local exchange carrier shall make available any interconnection, service, or
network element provided under an agreement . . . to which it is a party to any
other requesting telecommunications carrier upon the same terms and conditions
as those provided in the agreement." n3205 Thus, Congress drew a distinction
between "any interconnection, service, or network element[s] provided under an
agreement," which the statute lists individually, and agreements in their
totality. Requiring requesting carriers to elect  [*29]   entire agreements,
instead of the provisions relating to specific elements, would render as mere
surplusage the words "any interconnection, service, or network element."

   n3205 47 U.S.C. @ 252(i).

   1311. We disagree with BellSouth regarding the significance of the
legislative history quoted in the NPRM. The Conference Committee amended section
251(g), S. 652's predecessor to section 252(i), and changed "service, facility,
or function" to "interconnection, service, or element." The House of
Representatives' bill did not contain a version of section 252(i). n3206 We find
that section 252(i)'s language does not differ substantively from the text of
the Senate bill's section 251(g). The Senate Commerce Committee stated its
provision, section 251(g), was intended to "make interconnection more efficient
by making available to other carriers the individual elements of agreements that
have been previously negotiated." n3207

   n3206 Although H.R. 1555's section 244(d) contained similar ideas, its
language and structure are sufficiently different from that of section 252(i)
that we do not consider section 244(d) to be a prior version of section 252(i).

   n3207 Report of the Committee on Commerce, Science, and Transportation on S.
652, S. Rpt. 104-23, 104th Cong., 1st Sess. (1995) at 21-22.  [*30]

   1312. We also find that practical concerns support our interpretation. As
observed by AT&T and others, failure to make provisions available on an
unbundled basis could encourage an incumbent LEC to insert into its agreement
onerous terms for a service or element that the original carrier does not need,
in order to discourage subsequent carriers from making a request under that
agreement. In addition, we observe that different new entrants face differing
technical constraints and costs. Since few new entrants would be willing to
elect an entire agreement that would not reflect their costs and the specific
technical characteristics of their networks or would not be consistent with
their business plans, requiring requesting carriers to elect an entire agreement
would appear to eviscerate the obligation Congress imposed in section 252(i).


   1313. We also choose this interpretation despite concerns voiced by some
incumbent LECs that allowing carriers to choose among provisions will harm the
public interest by slowing down the process of reaching interconnection
agreements by making incumbent LECs less likely to compromise. In reaching this
conclusion, we observe that new entrants, who   [*31]   stand to lose the most
if negotiations are delayed, generally do not argue that concern over slow
negotiations would outweigh the benefits they would derive from being able to
choose among terms of publicly filed agreements. Unbundled access to agreement
provisions will enable smaller carriers who lack bargaining power to obtain
favorable terms and conditions -- including rates -- negotiated by large IXCs,
and speed the emergence of robust competition. n3208
   n3208 See Regulatory Flexibility Act, 5 U.S.C. @@ 601 et seq.

   1314. We conclude that incumbent LECs must permit third parties to obtain
access under section 252(i) to any individual interconnection, service, or
network element arrangement on the same terms and conditions as those contained
in any agreement approved under section 252. We find that this level of
disaggregation is mandated by section 252(a)(1), which requires that agreements
shall include "charges for interconnection and each service or network element
included in the agreement," and section 251(c)(3), which requires incumbent LECs
to provide "non-discriminatory access to network elements on an unbundled
basis." In practical terms, this means that a carrier may  [*32]   obtain access
to individual elements such as unbundled loops at the same rates, terms, and
conditions as contained in any approved agreement. We agree with ALTS that such
a view comports with the statute, and lessens the concerns of carriers that
argue that unbundled availability will delay negotiations.

   1315. We reject GTE's argument that section 252(i)'s statement, that
requesting carriers must receive individual elements "upon the same terms and
conditions" as those contained in the agreement, precludes unbundled
availability of individual elements. GTE's argument fails to give meaning to
Congress's distinction between agreements and elements, and ignores the 1996
Act's prime goals of nondiscriminatory treatment of carriers and promotion of
competition. Instead, we conclude that the "same terms and conditions" that an
incumbent LEC may insist upon shall relate solely to the individual
interconnection, service, or element being requested under section 252(i). For
instance, where an incumbent LEC and a new entrant have agreed upon a rate
contained in a five-year agreement, section 252(i) does not necessarily entitle
a third party to receive the same rate for a three-year commitment.   [*33]
Similarly, that one carrier has negotiated a volume discount on loops does not
automatically entitle a third party to obtain the same rate for a smaller amount
of loops. Given the primary purpose of section 252(i) of preventing
discrimination, we require incumbent LECs seeking to require a third party agree
to certain terms and conditions to exercise its rights under section 252(i) to
prove to the state commission that the terms and conditions were legitimately
related to the purchase of the individual element being sought. By contrast,
incumbent LECs may not require as a "same" term or condition the new entrant's
agreement to terms and conditions relating to other interconnection, services,
or elements in the approved agreement. Moreover, incumbent LEC efforts to
restrict availability of interconnection, services, or elements under section
252(i) also must comply with the 1996 Act's general nondiscrimination
provisions. See Section VII.d.3.

   1316. We further conclude that section 252(i) entitles all parties with
interconnection agreements to "most favored nation" status regardless of whether
they include "most favored nation" clauses in their agreements. Congress's
command under   [*34]   section 252(i) was that parties may utilize any
individual interconnection, service, or element in publicly filed
interconnection agreements and incorporate it into the terms of their
interconnection agreement. This means that any requesting carrier may avail
itself of more advantageous terms and conditions subsequently negotiated by any
other carrier for the same individual interconnection, service, or element once
the subsequent agreement is filed with, and approved by, the state commission.
We believe the approach we adopt will maximize competition by ensuring that
carriers' obtain access to terms and elements on a nondiscriminatory basis.



   1317. We find that section 252(i) permits differential treatment based on the
LEC's cost of serving a carrier. We further observe that section 252(d)(1)
requires that unbundled element rates be cost-based, and sections 251(c)(2) and
(c)(3) require incumbent LECs to provide only technically-feasible forms of
interconnection and access to unbundled elements, while section 252(i) mandates
that the availability of publicly-filed agreements be limited to carriers
willing to accept the same terms and conditions as the carrier who negotiated
the original  [*35]   agreement with the incumbent LEC. We conclude that these
provisions, read together, require that publicly-filed agreements be made
available only to carriers who cause the incumbent LEC to incur no greater costs
than the carrier who originally negotiated the agreement, so as to result in an
interconnection arrangement that is both cost-based and technically feasible.
However, as discussed in Section VII regarding discrimination, where an
incumbent LEC proposes to treat one carrier differently than another, the
incumbent LEC must prove to the state commission that that differential
treatment is justified based on the cost to the LEC of providing that element to
the carrier.

   1318. We conclude, however, that section 252(i) does not permit LECs to limit
the availability of any individual interconnection, service, or network element
only to those requesting carriers serving a comparable class of subscribers or
providing the same service (i.e., local, access, or interexchange) as the
original party to the agreement. In our view, the class of customers, or the
type of service provided by a carrier, does not necessarily bear a direct
relationship with the costs incurred by the LEC to interconnect  [*36]   with
that carrier or on whether interconnection is technically feasible. Accordingly,
we conclude that an interpretation of section 252(i) that attempts to limit
availability by class of customer served or type of service provided would be at
odds with the language and structure of the statute, which contains no such
limitation.

   1319. We agree with those commenters who suggest that agreements remain
available for use by requesting carriers for a reasonable amount of time. Such a
rule addresses incumbent LEC concerns over technical incompatibility, while at
the same time providing requesting carriers with a reasonable time during which
they may benefit from previously negotiated agreements. In addition, this
approach makes economic sense, since the pricing and network configuration
choices are likely to change over time, as several commenters have observed.
Given this reality, it would not make sense to permit a subsequent carrier to
impose an agreement or term upon an incumbent LEC if the technical requirements
of implementing that agreement or term have changed.

   1320. We observe that section 252(h) expressly provides that state
commissions maintain for public inspection copies   [*37]   of interconnection
agreements approved under section 252(f). We therefore decline Jones
Intercable's suggestion that we require carriers to file agreements at the FCC,
in addition to section 252(h)'s filing requirement. However, when the Commission
performs the state's responsibilities under section 252(e)(5), parties must file
their agreements with the Commission, as well as with the state commission.
n3209

   n3209 We note section 22.903(d) of our rules, which remains in effect,
requires the BOCs to file with us their interconnection agreements with their
affiliated cellular providers. 47 C.F.R. @ 22.903(d).



   1321. We further conclude that a carrier seeking interconnection, network
elements, or services pursuant to section 252(i) need not make such requests
pursuant to the procedures for initial section 251 requests, but shall be
permitted to obtain its statutory rights on an expedited basis. We find that
this interpretation furthers Congress's stated goals of opening up local markets
to competition and permitting interconnection on just, reasonable, and
nondiscriminatory terms, and that we should adopt measures that ensure
competition occurs as quickly and efficiently as possible.   [*38]   We conclude
that the nondiscriminatory, pro-competition purpose of section 252(i) would be
defeated were requesting carriers required to undergo a lengthy negotiation and
approval process pursuant to section 251 before being able to utilize the terms
of a previously approved agreement. Since agreements shall necessarily be filed
with the states pursuant to section 252(h), we leave to state commissions in the
first instance the details of the procedures for making agreements available to
requesting carriers on an expedited basis. Because of the importance of section
252(i) in preventing discrimination, however, we conclude that carriers seeking
remedies for alleged violations of section 252(i) shall be permitted to obtain
expedited relief at the Commission, including the resolution of complaints under
section 208 of the Communications Act, in addition to their state remedies.

   1322. We conclude as well that agreements negotiated prior to enactment of
the 1996 Act must be available for use by subsequent, requesting carriers.
Section 252(i) must be read in conjunction with section 252(a)(1), which clearly
states that "agreement" for purposes of section 252, "includes any
interconnection  [*39]   agreement negotiated before the date of enactment . . .
." n3210 We conclude that this language demonstrates that Congress intended
252(i) to apply to agreements negotiated prior to enactment of the 1996 Act and
approved by the state commission pursuant to section 252(e), as well as those
approved under the section 251/252 negotiation process. Accordingly, we find
that agreements negotiated prior to enactment of the 1996 Act must be disclosed
publicly, and be made available to requesting telecommunications carriers
pursuant to section 252(i).

   n3210 47 U.S.C. @ 252(a)(1).

   1323. We also find that section 252(i) applies to interconnection agreements
between adjacent, incumbent LECs. We note that section 252(i) requires a local
exchange carrier to make available to requesting telecommunications carriers
"any interconnection service, or network element provided under an agreement
approved under this section . . . ." n3211 The plain meaning of this section is
that any interconnection agreement approved by a state commission, including one
between adjacent LECs, must be made available to requesting carriers pursuant to
section 252(i). Requiring availability of such agreements will   [*40]   provide
new entrants with a realistic benchmark upon which to base negotiations, and
this will further the Congressional purpose of increasing competition. As stated
in Section III of this Order, adjacent, incumbent LECs will be given an
opportunity to renegotiate such agreements before they become subject to section
252(i)'s requirements. In Section III, we also consider, and reject, the Rural
Tel. Coalition's argument that making agreements between adjacent, noncompeting
LECs available under section 252 will have a detrimental effect on small, rural
carriers. See Section III, supra.

   n3211 47 U.S.C. @ 252(i) (emphasis supplied).



   XV.

   FINAL REGULATORY FLEXIBILITY ANALYSIS

   1324. As required by Section 603 of the Regulatory Flexibility Act (RFA), 5
U.S.C. @ 603, an Initial Regulatory Flexibility Analysis (IRFA) was incorporated
in the NPRM. The Commission sought written public comment on the proposals in
the NPRM. The Commission's Final Regulatory Flexibility Analysis (FRFA) in this
Order conforms to the RFA, as amended by the Contract With America Advancement
Act of 1996 (CWAAA), Pub. L. No. 104-121, 110 Stat. 847 (1996). n3212

   n3212 Subtitle II of the CWAAA is "The Small Business Regulatory Enforcement
Fairness Act of 1996" (SBREFA), codified at 5 U.S.C. @ 601 et seq.  [*41]

   A. Need for and Objectives of this Report and Order and the Rules Adopted
Herein

   1325. The Commission, in compliance with section 251(d)(1) of the
Communications Act of 1934, as amended by the Telecommunications Act of 1996
(the 1996 Act), promulgates the rules in this Order to ensure the prompt
implementation of sections 251 and 252 of the 1996 Act, which are the local
competition provisions. Congress sought to establish through the 1996 Act "a
pro-competitive, de-regulatory national policy framework" for the United States
telecommunications industry. n3213 Three principal goals of the telephony
provisions of the 1996 Act are: (1) opening local exchange and exchange access
markets to competition; (2) promoting increased competition in
telecommunications markets that are already open to competition, particularly
long distance services markets; and, (3) reforming our system of universal
service so that universal service is preserved and advanced as local exchange
and exchange access markets move from monopoly to competition.

   n3213 S. Conf. Rep. No. 230, 104th Cong., 2d Sess. 1 (1996).

   1326. The rules adopted in this Order implement the first of these goals --
opening local   [*42]   exchange and exchange access markets to competition. The
objective of the rules adopted in this Order is to implement as quickly and
effectively as possible the national telecommunications policies embodied in the
1996 Act and to promote the development of competitive, deregulated markets
envisioned by Congress. n3214 In doing so, we are mindful of the balance that
Congress struck between this goal of bringing the benefits of competition to all
consumers and its concern for the impact of the 1996 Act on small incumbent
local exchange carriers, particularly rural carriers, as evidenced in section
251(f) of the 1996 Act.

   n3214 Id.

   B. Analysis of Significant Issues Raised in Response to the IRFA


   1327. Summary of the Initial Regulatory Flexibility Analysis (IRFA). In the
NPRM, the Commission performed an IRFA. n3215 In the IRFA, the Commission found
that the rules it proposed to adopt in this proceeding may have a significant
impact on a substantial number of small business as defined by section 601(3) of
the RFA. The Commission stated that its regulatory flexibility analysis was
inapplicable to incumbent LECs because such entities are dominant in their field
of operation. The Commission  [*43]   noted, however, that it would take
appropriate steps to ensure that the special circumstances of smaller incumbent
LECs are carefully considered in our rulemaking. The Commission also found that
the proposed rules may overlap or conflict with the Commission's Part 69 access
charge and Expanded Interconnection rules. Finally, the IRFA solicited comment
on alternatives to our proposed rules that would minimize the impact on small
entities consistent with the objectives of this proceeding.

   n3215 NPRM at paras. 274-287.

   1. Treatment of Small LECs

   1328. Comments. The Small Business Administration (SBA), the Rural Telephone
Coalition (Rural Tel. Coalition), and CompTel maintain that the Commission
violated the RFA when it failed to include small incumbent LECs in its IRFA
without first consulting SBA to establish a definition of "small business."
n3216 Rural Tel. Coalition and CompTel also argue that the Commission failed to
explain its statement that "incumbent LECs are dominant in their field of
operation" or how that finding was reached. n3217 Rural Tel. Coalition states
that such an analysis of the market power of incumbent LECs is necessary because
incumbent LECs are now facing  [*44]   competition from a variety of sources,
including wireline and wireless carriers. Rural Tel. Coalition recommends that
the Commission abandon its determination that all incumbent LECs are dominant,
and perform regulatory flexibility analysis for incumbent LECs having fewer than
1500 employees. n3218

   n3216 SBA RFA comments at 3-5; Rural Tel. Coalition reply at 38-39; CompTel
reply at 46.

   n3217 Rural Tel. Coalition reply at 39; CompTel reply at 46.

   n3218 Rural Tel. Coalition reply at 40.

   1329. Discussion. In essence, SBA and Rural Tel. Coalition argue that we
exceeded our authority under the RFA by certifying all incumbent LECs as
dominant in their field of operation, and concluding on that basis that they are
not small businesses under the RFA. SBA and Rural Tel. Coalition contend that
the authority to make a size determination rests solely with SBA and that, by
excluding a group (small incumbent LECs) from coverage under the RFA, the
Commission made an unauthorized size determination. n3219 Neither SBA nor Rural
Tel. Coalition cites any specific authority for this latter proposition.

   n3219 SBA RFA comments at 4-5 (citing 15 U.S.C. @ 632(a)(2)); Rural Tel.
Coalition reply at 38.  [*45]

   1330. We have found incumbent LECs to be "dominant in their field of
operation" since the early 1980's, and we consistently have certified under the
RFA n3220 that incumbent LECs are not subject to regulatory flexibility analyses
because they are not small businesses. n3221 We have made similar determinations
in other areas. n3222 We recognize SBA's special role and expertise with regard
to the RFA, and intend to continue to consult with SBA outside the context of
this proceeding to ensure that the Commission is fully implementing the RFA.
Although we are not fully persuaded on the basis of this record that our prior
practice has been incorrect, in light of the special concerns raised by SBA and
Rural Tel. Coalition in this proceeding, we will, nevertheless, include small
incumbent LECs in this FRFA to remove any possible issue of RFA compliance.

We, therefore, need not address Rural Tel. Coalition's arguments that incumbent
LECs are not dominant. n3223

   n3220 See 5 U.S.C. @ 605(b).

   n3221 See, e.g., Expanded Interconnection with Local Telephone Company
Facilities, Supplemental Notice of Proposed Rulemaking, 6 FCC Rcd 5809 (1991);
MTS and WATS Market Structure, Report and Order, 2 FCC Rcd 2953, 2959 (1987)
(citing MTS and WATS Market Structure, Third Report and Order, 93 F.C.C.2d 241,
338-39 (1983)).  [*46]

   n3222 See, e.g., In the Matter of Implementation of Sections of the Cable
Television Consumer Protection Act of 1992: Rate Regulation, Sixth Report and
Order and Eleventh Order on Reconsideration, 10 FCC Rcd 7393, 7418 (1995).

   n3223 Rural Tel. Coalition reply at 39-40.

   2. Other Issues

   1331. Comments. Parties raised several other issues in response to the
Commission's IRFA in the NPRM. SBA and CompTel contend that commenters should
not be required to separate their comments on the IRFA from their comments on
the other issues raised in the NPRM. n3224 SBA maintains that separating RFA
comments and discussion from the rest of the comments "isolates" the regulatory
flexibility analysis from the remainder of the discussion, thereby handicapping
the Commission's analysis of the impact of the proposed rules on small
businesses. n3225 SBA further suggests that our IRFA failed to: (1) give an
adequate description of the projected reporting, recordkeeping, and other
compliance requirements of the proposed rules, including an estimate of the
classes of small entities that will be subject to the requirement and the
professional skills necessary to prepare such reports or records;   [*47]
n3226 and (2) describe significant alternatives that minimize the significant
economic impact of the proposal on small entities, including exemption from
coverage of the rule. n3227 SBA also asserts that none of the alternatives in
the NPRM is designed to minimize the impact of the proposed rules on small
businesses.

   n3224 SBA RFA comments at 2-3, CompTel reply at 46.

   n3225 Id.

   n3226 SBA RFA comments at 5-6, citing 5 U.S.C. @ 603(b)(4).

   n3227 SBA RFA comments at 7-8, citing 5 U.S.C. @ 603(c).

   1332. The Idaho Commission argues that the Commission's rules will be devised
for large carriers and therefore will be "de facto burdensome" to Idaho's
incumbent LECs and probably to potential new entrants, which may be small
companies. n3228 Therefore, Idaho requests that state commissions be permitted
flexibility to address the impacts of our rules on smaller incumbent LECs.

   n3228 Idaho Commission comments at 15.


   1333. The Small Cable Business Association (SCBA) contends that the
Commission's IRFA is inadequate because it does not state that small cable
companies are among the small entities affected by the proposed rules. n3229 In
its comments on the IRFA, SCBA refers  [*48]   to its proposal that the
Commission establish the following national standards for small cable companies:
(1) the definition of "good faith" negotiation; (2) the development of less
burdensome arbitration procedures for interconnection and resale; (3) the
designation of a small company contact person at incumbent LECs and state
commissions; and (4) the application of section 251(f) of the 1996 Act. n3230

   n3229 SCBA RFA comments at 1.

   n3230 Id. at 1-2.

   1334. Discussion. We disagree with SBA's assessment of our IRFA. Although the
IRFA referred only generally to the reporting and recordkeeping requirements
imposed on incumbent LECs, our Federal Register notice set forth in detail the
general reporting and recordkeeping requirements as part of our Paperwork
Reduction Act statement. n3231 The IRFA also sought comment on the many
alternatives discussed in the body of the NPRM, including the statutory
exemption for certain rural telephone companies. n3232 The numerous general
public comments concerning the impact of our proposal on small entities in
response to the NPRM, including comments filed directly in response to the IRFA,
n3233 enabled us to prepare this FRFA. Thus, we conclude  [*49]   that the IRFA
was sufficiently detailed to enable parties to comment meaningfully on the
proposed rules and, thus, for us to prepare this FRFA. We have been working
with, and will continue to work with SBA, to ensure that both our IRFAs and
FRFAs fully meet the requirements of the RFA.

   n3231 NPRM, at para. 283 (rel. Apr. 19, 1996), summarized at 61 Fed. Reg.
18311, 18312 (Apr. 25, 1996).

   n3232 47 U.S.C. @ 251(f).

   n3233 SBA RFA comments; Rural Tel. Coalition reply at 38-41; Idaho Commission
comments at 15; SCBA RFA comments; CompTel reply at 45-46.

   1335. SBA also objects to the NPRM's requirement that responses to the IRFA
be filed under a separate and distinct heading, and proposes that we integrate
RFA comments into the body of general comments on a rule. n3234 Almost since the
adoption of the RFA, we have requested that IRFA comments be submitted under a
separate and distinct heading. n3235 Neither the RFA nor SBA's rules prescribe
the manner in which comments may be submitted in response to an IRFA n3236 and,
in such circumstances, it is well established that an administrative agency can
structure its proceedings in any manner that it concludes will enable it to
[*50]   fulfill its statutory duties. n3237 Based on our past practice, we find
that separation of comments responsive to the IRFA facilitates our preparation
of a compulsory summary of such comments and our responses to them, as required
by the RFA. Comments on the impact of our proposed rules on small entities have
been integrated into our analysis and consideration of the final rules. We,
therefore, reject SBA's argument that we improperly required commenters to
include their comments on the IRFA in a separate section.

   n3234 SBA RFA comments at 2.


   n3235 See, e.g., Inquiry into the Development of Regulatory Policy in Regard
to Direct Broadcast Satellites, Notice of Proposed Policy Statement and
Rulemaking, 86 F.C.C.2d 719, 755 (1981).

   n3236 See 5 U.S.C. @ 603 (IRFA requirements).

   n3237 See Vermont Yankee Nuclear Power Corp. v. Natural Resources Defense
Council, Inc., 435 U.S. 519, 524-25 (1978), citing FCC v. Schreiber, 381 U.S.
279, 290 (1965) and FCC v. Pottsville Broadcasting Co., 309 U.S. 134, 138
(1940).

   1336. We also reject SBA's assertion that none of the alternatives in the
NPRM is designed to minimize the impact of the proposed rules on small
businesses. For  [*51]   example, we proposed that incumbent LECs be required to
offer competitors access to unbundled local loop, switching, and transport
facilities. n3238 These proposals permit potential competitors to enter the
market by relying, in part or entirely, on the incumbent LEC's facilities.
Reduced economic entry barriers are designed to provide reasonable opportunities
for new entrants, particularly small entities, to enter the market by minimizing
the initial investment needed to begin providing service. In addition, we
believe section 251(f) and our rules provide states with significant flexibility
to "deal with the needs of individual companies in light of public interest
concerns," as requested by the Idaho Commission. With regard to the potential
burdens on small entities other than incumbent LECs, we believe our rules permit
states to structure arbitration procedures, for example, in ways that minimize
filing or other burdens on new entrants that are small entities.

   n3238 NPRM paras. 94-97.

   1337. We also disagree with SCBA's assertion that the IRFA was deficient
because it did not identify small cable operators as entities that would be
affected by the proposed rules. The IRFA   [*52]   in the NPRM states: "Insofar
as the proposals in this Notice apply to telecommunications carriers other than
incumbent LECs (generally interexchange carriers and new LEC entrants), they may
have a significant impact on a substantial number of small entities." n3239 The
phrase "new LEC entrants" clearly encompasses small cable operators that become
providers of local exchange service. The NPRM even identifies cable operators as
potential new entrants. n3240

   n3239 NPRM para. 277.

   n3240 NPRM para. 6.

   1338. We agree with SCBA's argument that the Commission should identify
certain minimum standards to provide guidance on the requirement that parties
negotiate in good faith. n3241 As discussed in Section III.B, we conclude that
we should establish minimum standards that will offer parties guidance in
determining whether they are acting in good faith. We believe that these minimum
standards address SCBA's assertion that federal guidelines for good faith
negotiations may be particularly important for small entities because
unreasonable delays in negotiations could represent an entry barrier for small
entities.

   n3241 This good faith requirement is found in 47 U.S.C. @ 251(c)(1).  [*53]


   1339. We also agree with SCBA's recommendation that we should establish
guidelines for the application of section 251(f) regarding exemptions,
suspensions, and modifications of our rules governing interconnection with rural
carriers. As discussed in section XII.B, we find that a rural incumbent LEC
should not be able to obtain an exemption, suspension, or modification of its
obligations under section 251 unless it offers evidence that the application of
those requirements would be likely to cause injury beyond the financial harm
typically associated with efficient competitive entry. We are also persuaded by
the suggestion of SCBA and others that incumbent LECs should bear the burden of
showing that they should be exempt pursuant to section 251(f)(1) from national
interconnection requirements. We believe that this finding is consistent with
the pro-competitive goals of the 1996 Act and our determination in Section XII
that Congress did not intend to withhold from consumers the benefits of local
telephone competition that could be provided by small entities, such as small
cable operators.

   1340. We do not adopt SCBA's proposal to establish abbreviated arbitration
procedures. n3242   [*54]   Most commenters oppose adoption of federal rules to
govern state mediation and arbitration proceedings. As set out in Section XIV.A,
we conclude that state commissions are better positioned to develop rules for
mediation and arbitration that support the objectives of the 1996 Act. The rules
we adopt in Section XIV.A apply only where the Commission assumes a state
commission's responsibilities pursuant to section 252(e)(5). States may develop
specific measures that address the concerns of small entities participating in
mediation or arbitration, as suggested by SCBA. In addition, although we do not
specifically incorporate SCBA's request that the Commission designate a "small
company contact person at incumbent LECs and state commissions," n3243 we find
that a refusal throughout the negotiation process to designate a representative
with authority to make binding representations on behalf of the party, and
thereby significantly delay resolution of issues, would constitute failure to
negotiate in good faith. Therefore, we conclude that the potential benefits of
SCBA's proposal are achieved by our determination that the failure of an
incumbent LEC to designate a person authorized to bind  [*55]   his or her
company in negotiations is a violation of the good faith obligation of section
251.

   n3242 SCBA RFA comments at 1-2.

   n3243 SCBA RFA comments at 2.

   C. Description and Estimates of the Number of Small Entities Affected by this
Report and Order


   1341. For the purposes of this Order, the RFA defines a "small business" to
be the same as a "small business concern" under the Small Business Act, 15
U.S.C. @ 632, unless the Commission has developed one or more definitions that
are appropriate to its activities. n3244 Under the Small Business Act, a "small
business concern" is one that: (1) is independently owned and operated; (2) is
not dominant in its field of operation; and (3) meets any additional criteria
established by the Small Business Administration (SBA). n3245 SBA has defined a
small business for Standard Industrial Classification (SIC) categories 4812
(Radiotelephone Communications) and 4813 (Telephone Communications, Except
Radiotelephone) to be small entities when they have fewer than 1,500 employees.
n3246 We first discuss generally the total number of small telephone companies
falling within both of those SIC categories. Then, we discuss the number of
small  [*56]   businesses within the two subcategories, and attempt to refine
further those estimates to correspond with the categories of telephone
companies that are commonly used under our rules.

   n3244 See 5 U.S.C. @ 601(3) (incorporating by reference the definition of
"small business concern" in 5 U.S.C. @ 632).

   n3245 15 U.S.C. @ 632. See, e.g., Brown Transport Truckload, Inc. v. Southern
Wipers, Inc., 176 B.R. 82 (N.D. Ga. 1994).

   n3246 13 C.F.R. @ 121.201.

   1342. Consistent with our prior practice, we shall continue to exclude small
incumbent LECs from the definition of a small entity for the purpose of this
FRFA. Nevertheless, as mentioned above, we include small incumbent LECs in our
FRFA. Accordingly, our use of the terms "small entities" and "small businesses"
does not encompass "small incumbent LECs." We use the term "small incumbent
LECs" to refer to any incumbent LECs that arguably might be defined by SBA as
"small business concerns." n3247

   n3247 See 13 C.F.R. @ 121.210 (SIC 4813).

   1. Telephone Companies (SIC 481)

   1343. Total Number of Telephone Companies Affected. Many of the decisions and
rules adopted herein may have a significant effect on a substantial number
[*57]   of the small telephone companies identified by SBA. The United States
Bureau of the Census ("the Census Bureau") reports that, at the end of 1992,
there were 3,497 firms engaged in providing telephone services, as defined
therein, for at least one year. n3248 This number contains a variety of
different categories of carriers, including local exchange carriers,
interexchange carriers, competitive access providers, cellular carriers, mobile
service carriers, operator service providers, pay telephone operators, PCS
providers, covered SMR providers, and resellers. It seems certain that some of
those 3,497 telephone service firms may not qualify as small entities or small
incumbent LECs because they are not "independently owned and operated." n3249
For example, a PCS provider that is affiliated with an interexchange carrier
having more than 1,500 employees would not meet the definition of a small
business. It seems reasonable to conclude, therefore, that fewer than 3,497
telephone service firms are small entity telephone service firms or small
incumbent LECs that may be affected by this Order.

   n3248 United States Department of Commerce, Bureau of the Census, 1992 Census
of Transportation, Communications, and Utilities: Establishment and Firm Size,
at Firm Size 1-123 (1995) (1992 Census).  [*58]

   n3249 15 U.S.C. @ 632(a)(1).


   1344. Wireline Carriers and Service Providers. SBA has developed a definition
of small entities for telephone communications companies other than
radiotelephone (wireless) companies. The Census Bureau reports that, there were
2,321 such telephone companies in operation for at least one year at the end of
1992. n3250 According to SBA's definition, a small business telephone company
other than a radiotelephone company is one employing fewer than 1,500 persons.
n3251 All but 26 of the 2,321 non-radiotelephone companies listed by the Census
Bureau were reported to have fewer than 1,000 employees. Thus, even if all 26 of
those companies had more than 1,500 employees, there would still be 2,295
non-radiotelephone companies that might qualify as small entities or small
incumbent LECs. Although it seems certain that some of these carriers are not
independently owned and operated, we are unable at this time to estimate with
greater precision the number of wireline carriers and service providers that
would qualify as small business concerns under SBA's definition. Consequently,
we estimate that there are fewer than 2,295 small entity telephone
communications  [*59]   companies other than radiotelephone companies that may
be affected by the decisions and rules adopted in this Order.

   n3250 1992 Census, supra, at Firm Size 1-123.

   n3251 13 C.F.R. @ 121.201, Standard Industrial Classification (SIC) Code
4812.

   1345. Local Exchange Carriers. Neither the Commission nor SBA has developed a
definition of small providers of local exchange services (LECs). The closest
applicable definition under SBA rules is for telephone communications companies
other than radiotelephone (wireless) companies. The most reliable source of
information regarding the number of LECs nationwide of which we are aware
appears to be the data that we collect annually in connection with the
Telecommunications Relay Service (TRS). According to our most recent data, 1,347
companies reported that they were engaged in the provision of local exchange
services. n3252 Although it seems certain that some of these carriers are not
independently owned and operated, or have more than 1,500 employees, we are
unable at this time to estimate with greater precision the number of LECs that
would qualify as small business concerns under SBA's definition. Consequently,
we estimate that there  [*60]   are fewer than 1,347 small incumbent LECs that
may be affected by the decisions and rules adopted in this Order.

   n3252 Federal Communications Commission, CCB, Industry Analysis Division,
Telecommunications Industry Revenue: TRS Fund Worksheet Data, Tbl. 21 (Average
Total Telecommunications Revenue Reported by Class of Carrier) (Feb. 1996) (TRS
Worksheet).

   1346. Interexchange Carriers. Neither the Commission nor SBA has developed a
definition of small entities specifically applicable to providers of
interexchange services (IXCs). The closest applicable definition under SBA rules
is for telephone communications companies other than radiotelephone (wireless)
companies. The most reliable source of information regarding the number of IXCs
nationwide of which we are aware appears to be the data that we collect annually
in connection with TRS. According to our most recent data, 97 companies reported
that they were engaged in the provision of interexchange services. n3253
Although it seems certain that some of these carriers are not independently
owned and operated, or have more than 1,500 employees, we are unable at this
time to estimate with greater precision the number of IXCs that  [*61]   would
qualify as small business concerns under SBA's definition. Consequently, we
estimate that there are fewer than 97 small entity IXCs that may be affected by
the decisions and rules adopted in this Order.

   n3253 Id.


   1347. Competitive Access Providers. Neither the Commission nor SBA has
developed a definition of small entities specifically applicable to providers of
competitive access services (CAPs). The closest applicable definition under SBA
rules is for telephone communications companies other than radiotelephone
(wireless) companies. The most reliable source of information regarding the
number of CAPs nationwide of which we are aware appears to be the data that we
collect annually in connection with the TRS. According to our most recent data,
30 companies reported that they were engaged in the provision of competitive
access services. n3254 Although it seems certain that some of these carriers are
not independently owned and operated, or have more than 1,500 employees, we are
unable at this time to estimate with greater precision the number of CAPs that
would qualify as small business concerns under SBA's definition. Consequently,
we estimate that there are fewer than  [*62]   30 small entity CAPs that may be
affected by the decisions and rules adopted in this Order.

   n3254 Id.

   1348. Operator Service Providers. Neither the Commission nor SBA has
developed a definition of small entities specifically applicable to providers of
operator services. The closest applicable definition under SBA rules is for
telephone communications companies other than radiotelephone (wireless)
companies. The most reliable source of information regarding the number of
operator service providers nationwide of which we are aware appears to be the
data that we collect annually in connection with the TRS. According to our most
recent data, 29 companies reported that they were engaged in the provision of
operator services. n3255 Although it seems certain that some of these companies
are not independently owned and operated, or have more than 1,500 employees, we
are unable at this time to estimate with greater precision the number of
operator service providers that would qualify as small business concerns under
SBA's definition. Consequently, we estimate that there are fewer than 29 small
entity operator service providers that may be affected by the decisions and
rules adopted in  [*63]   this Order.

   n3255 Id.

   1349. Pay Telephone Operators. Neither the Commission nor SBA has developed a
definition of small entities specifically applicable to pay telephone operators.
The closest applicable definition under SBA rules is for telephone
communications companies other than radiotelephone (wireless) companies. The
most reliable source of information regarding the number of pay telephone
operators nationwide of which we are aware appears to be the data that we
collect annually in connection with the TRS. According to our most recent data,
197 companies reported that they were engaged in the provision of pay telephone
services. n3256 Although it seems certain that some of these carriers are not
independently owned and operated, or have more than 1,500 employees, we are
unable at this time to estimate with greater precision the number of pay
telephone operators that would qualify as small business concerns under SBA's
definition. Consequently, we estimate that there are fewer than 197 small entity
pay telephone operators that may be affected by the decisions and rules adopted
in this Order.

   n3256 Id.


   1350. Wireless (Radiotelephone) Carriers. SBA has developed a definition
[*64]   of small entities for radiotelephone (wireless) companies. The Census
Bureau reports that there were 1,176 such companies in operation for at least
one year at the end of 1992. n3257 According to SBA's definition, a small
business radiotelephone company is one employing fewer than 1,500 persons. n3258
The Census Bureau also reported that 1,164 of those radiotelephone companies
had fewer than 1,000 employees. Thus, even if all of the remaining 12 companies
had more than 1,500 employees, there would still be 1,164 radiotelephone
companies that might qualify as small entities if they are independently owned
are operated. Although it seems certain that some of these carriers are not
independently owned and operated, we are unable at this time to estimate with
greater precision the number of radiotelephone carriers and service providers
that would qualify as small business concerns under SBA's definition.
Consequently, we estimate that there are fewer than 1,164 small entity
radiotelephone companies that may be affected by the decisions and rules adopted
in this Order.

   n3257 United States Department of Commerce, Bureau of the Census, 1992 Census
of Transportation, Communications, and Utilities: Establishment and Firm Size,
at Firm Size 1-123 (1995) (1992 Census).  [*65]

   n3258 13 C.F.R. @ 121.201, Standard Industrial Classification (SIC) Code
4812.

   1351. Cellular Service Carriers. Neither the Commission nor SBA has developed
a definition of small entities specifically applicable to providers of cellular
services. The closest applicable definition under SBA rules is for telephone
communications companies other than radiotelephone (wireless) companies. The
most reliable source of information regarding the number of cellular service
carriers nationwide of which we are aware appears to be the data that we collect
annually in connection with the TRS. According to our most recent data, 789
companies reported that they were engaged in the provision of cellular services.
n3259 Although it seems certain that some of these carriers are not
independently owned and operated, or have more than 1,500 employees, we are
unable at this time to estimate with greater precision the number of cellular
service carriers that would qualify as small business concerns under SBA's
definition. Consequently, we estimate that there are fewer than 789 small entity
cellular service carriers that may be affected by the decisions and rules
adopted in this Order.

   n3259 Id.  [*66]

   1352. Mobile Service Carriers. Neither the Commission nor SBA has developed a
definition of small entities specifically applicable to mobile service carriers,
such as paging companies. The closest applicable definition under SBA rules is
for telephone communications companies other than radiotelephone (wireless)
companies. The most reliable source of information regarding the number of
mobile service carriers nationwide of which we are aware appears to be the data
that we collect annually in connection with the TRS. According to our most
recent data, 117 companies reported that they were engaged in the provision of
mobile services. n3260 Although it seems certain that some of these carriers are
not independently owned and operated, or have more than 1,500 employees, we are
unable at this time to estimate with greater precision the number of mobile
service carriers that would qualify under SBA's definition. Consequently, we
estimate that there are fewer than 117 small entity mobile service carriers that
may be affected by the decisions and rules adopted in this Order.

   n3260 Id.


   1353. Broadband PCS Licensees. The broadband PCS spectrum is divided into six
frequency blocks designated  [*67]   A through F. As set forth in 47 C.F.R. @
24.720(b), the Commission has defined "small entity" in the auctions for Blocks
C and F as a firm that had average gross revenues of less than $ 40 million in
the three previous calendar years. Our definition of a "small entity" in the
context of broadband PCS auctions has been approved by SBA. n3261 The Commission
has auctioned broadband PCS licenses in Blocks A, B, and C. We do not have
sufficient data to determine how many small businesses bid successfully for
licenses in Blocks A and B. There were 90 winning bidders that qualified as
small entities in the Block C auction. Based on this information, we conclude
that the number of broadband PCS licensees affected by the decisions in this
Order includes, at a minimum, the 90 winning bidders that qualified as small
entities in the Block C broadband PCS auction.

   n3261 See Implementation of Section 309(j) of the Communications Act --
Competitive Bidding, PP Docket No. 93-253, Fifth Report and Order, 9 FCC Rcd
5532, 5581-84 (1994).

   1354. At present, no licenses have been awarded for Blocks D, E, and F of
broadband PCS spectrum. Therefore, there are no small businesses currently
providing  [*68]   these services. However, a total of 1,479 licenses will be
awarded in the D, E, and F Block broadband PCS auctions, which are scheduled to
begin on August 26, 1996. Eligibility for the 493 F Block licenses is limited to
entrepreneurs with average gross revenues of less than $ 125 million. n3262 We
cannot estimate, however, the number of these licenses that will be won by small
entities under our definition, nor how many small entities will win D or E Block
licenses. Given that nearly all radiotelephone companies have fewer than 1,000
employees n3263 and that no reliable estimate of the number of prospective D, E,
and F Block licensees can be made, we assume for purposes of this FRFA, that all
of the licenses in the D, E, and F Block Broadband PCS auctions may be awarded
to small entities under our rules, which may be affected by the decisions and
rules adopted in this Order.

   n3262 Amendment of Parts 20 and 24 of the Commission's Rules -- Broadband PCS
Competitive Bidding and the Commercial Mobile Radio Service Spectrum Cap, WT
Docket No. 96-59, Amendment of the Commission's Cellular/PCS Cross-Ownership
Rule, Report and Order, GN Docket No. 90-314, FCC 96-278 (rel. June 24, 1996).
[*69]

   n3263 1992 Census, Table 5, Employment Size of Firms: 1992, SIC Code 4812.

   1355. SMR Licensees. Pursuant to 47 C.F.R. @ 90.814(b)(1), the Commission has
defined "small entity" in auctions for geographic area 800 MHz and 900 MHz SMR
licenses as a firm that had average annual gross revenues of less than $ 15
million in the three previous calendar years. This definition of a "small
entity" in the context of 800 MHz and 900 MHz SMR has been approved by the SBA.
n3264 The rules adopted in this Order may apply to SMR providers in the 800 MHz
and 900 MHz bands that either hold geographic area licenses or have obtained
extended implementation authorizations. We do not know how many firms provide
800 MHz or 900 MHz geographic area SMR service pursuant to extended
implementation authorizations, nor how many of these providers have annual
revenues of less than $ 15 million. We assume, for purposes of this FRFA, that
all of the extended implementation authorizations may be held by small entities,
which may be affected by the decisions and rules adopted in this Order.


   n3264 See Amendment of Parts 2 and 90 of the Commission's Rules to Provide
for the Use of 200 Channels Outside the Designated Filing Areas in the 896-901
MHz and the 935-940 MHz Bands Allotted to the Specialized Mobile Radio Pool, PR
Docket No. 89-583, Second Order on Reconsideration and Seventh Report and Order,
11 FCC Rcd 2639, 2693-702 (1995); Amendment of Part 90 of the Commission's Rules
to Facilitate Future Development of SMR Systems in the 800 MHz Frequency Band,
PR Docket No. 93-144, First Report and Order, Eighth Report and Order, and
Second Further Notice of Proposed Rulemaking, 11 FCC Rcd 1463 (1995).  [*70]

   1356. The Commission recently held auctions for geographic area licenses in
the 900 MHz SMR band. There were 60 winning bidders who qualified as small
entities in the 900 MHz auction. Based on this information, we conclude that the
number of geographic area SMR licensees affected by the rule adopted in this
Order includes these 60 small entities. No auctions have been held for 800 MHz
geographic area SMR licenses. Therefore, no small entities currently hold these
licenses. A total of 525 licenses will be awarded for the upper 200 channels in
the 800 MHz geographic area SMR auction. However, the Commission has not yet
determined how many licenses will be awarded for the lower 230 channels in the
800 MHz geographic area SMR auction. There is no basis, moreover, on which to
estimate how many small entities will win these licenses. Given that nearly all
radiotelephone companies have fewer than 1,000 employees and that no reliable
estimate of the number of prospective 800 MHz licensees can be made, we assume,
for purposes of this FRFA, that all of the licenses may be awarded to small
entities who, thus, may be affected by the decisions in this Order.

   1357. Resellers. Neither the Commission  [*71]   nor SBA has developed a
definition of small entities specifically applicable to resellers. The closest
applicable definition under SBA rules is for all telephone communications
companies. The most reliable source of information regarding the number of
resellers nationwide of which we are aware appears to be the data that we
collect annually in connection with the TRS. According to our most recent data,
206 companies reported that they were engaged in the resale of telephone
services. n3265 Although it seems certain that some of these carriers are not
independently owned and operated, or have more than 1,500 employees, we are
unable at this time to estimate with greater precision the number of resellers
that would qualify as small business concerns under SBA's definition.
Consequently, we estimate that there are fewer than 206 small entity resellers
that may be affected by the decisions and rules adopted in this Order.

   n3265 Id.

   2. Cable System Operators (SIC 4841)

   1358. SBA has developed a definition of small entities for cable and other
pay television services, which includes all such companies generating less than
$ 11 million in revenue annually. This definition includes  [*72]   cable
systems operators, closed circuit television services, direct broadcast
satellite services, multipoint distribution systems, satellite master antenna
systems and subscription television services. According to the Census Bureau,
there were 1,323 such cable and other pay television services generating less
than $ 11 million in revenue that were in operation for at least one year at the
end of 1992. n3266

   n3266 1992 Census, supra, at Firm Size 1-123.


   1359. The Commission has developed its own definition of a small cable system
operator for the purposes of rate regulation. Under the Commission's rules, a
"small cable company," is one serving fewer than 400,000 subscribers nationwide.
n3267 Based on our most recent information, we estimate that there were 1,439
cable operators that qualified as small cable system operators at the end of
1995. n3268 Since then, some of those companies may have grown to serve over
400,000 subscribers, and others may have been involved in transactions that
caused them to be combined with other cable operators. Consequently, we estimate
that there are fewer than 1,468 small entity cable system operators that may be
affected by the decisions and   [*73]   rules adopted in this Order.

   n3267 47 C.F.R. @ 76.901(e). The Commission developed this definition based
on its determination that a small cable system operator is one with annual
revenues of $ 100 million or less. Implementation of Sections of the 1992 Cable
Act: Rate Regulation, Sixth Report and Order and Eleventh Order on
Reconsideration, 10 FCC Rcd 7393.

   n3268 Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996 (based on
figures for Dec. 30, 1995).

   1360. The Communications Act also contains a definition of a small cable
system operator, which is "a cable operator that, directly or through an
affiliate, serves in the aggregate fewer than 1 percent of all subscribers in
the United States and is not affiliated with any entity or entities whose gross
annual revenues in the aggregate exceed $ 250,000,000." n3269 There were
63,196,310 basic cable subscribers at the end of 1995, and 1,450 cable system
operators serving fewer than one percent (631,960) of subscribers. n3270
Although it seems certain that some of these cable system operators are
affiliated with entities whose gross annual revenues exceed $ 250,000,000, we
are unable at this time to estimate with greater  [*74]   precision the number
of cable system operators that would qualify as small cable operators under the
definition in the Communications Act.

   n3269 47 U.S.C. @ 543(m)(2).

   n3270 Paul Kagan Associates, Inc., Cable TV Investor, Feb. 29, 1996 (based on
figures for Dec. 30, 1995).

   D. Summary Analysis of the Projected Reporting, Recordkeeping, and Other
Compliance Requirements and Steps Taken to Minimize the Significant Economic
Impact of this Report and Order on Small Entities and Small Incumbent LECs,
Including the Significant Alternatives Considered and Rejected

   1361. Structure of the Analysis. In this section of the FRFA, we analyze the
projected reporting, recordkeeping, and other compliance requirements that may
apply to small entities and small incumbent LECs as a result of this Order.
n3271 As a part of this discussion, we mention some of the types of skills that
will be needed to meet the new requirements. We also describe the steps taken to
minimize the economic impact of our decisions on small entities and small
incumbent LECs, including the significant alternatives considered and rejected.
n3272 Due to the size of this Order, we set forth our analysis separately for
[*75]   individual sections of the item, using the same headings as were used
above in the corresponding sections of the Order.

   n3271 See 5 U.S.C. @ 604(a)(4).



   n3272 See 5 U.S.C. @ 604(a)(5).

   1362. We provide this summary analysis to provide context for our analysis in
this FRFA. To the extent that any statement contained in this FRFA is perceived
as creating ambiguity with respect to our rules or statements made in preceding
sections of this Order, the rules and statements set forth in those preceding
sections shall be controlling.

   Summary Analysis of Section II

   SCOPE OF THE COMMISSION'S RULES

   1363. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. As discussed in Section II.E, a common carrier, which may be a
small entity or a small incumbent LEC, may be subject to an action for relief in
several different fora if a party believes that small entity or incumbent LEC
violated the standards under section 251 or 252. Should a small entity or a
small incumbent LEC be subjected to such an action for relief, it will require
the use of legal skills.

   1364. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs,   [*76]   and Alternatives Considered. We believe that
our actions establishing minimum national rules will facilitate the development
of competition in the local exchange and exchange access markets for the reasons
discussed in Sections II.A and II.B above. For example, national rules may: help
equalize bargaining power; minimize the need for duplicative marketing
strategies and multiple network configurations; lower administrative costs;
lessen the need to re-litigate the same issue in multiple jurisdictions; and
reduce delay and transaction costs, which can pose particular burdens for small
businesses. In addition, our rules are designed to accommodate differences among
regions and carriers, and the reduced regulatory burdens and increased certainty
produced by national rules may be expected to minimize the economic impact of
our decisions for all parties, including any small entities and small incumbent
LECs. As set forth in Section II.A above, we reject suggestions to adopt more,
or fewer, national rules than we ultimately adopt in this Order. We reject the
arguments that we should establish "preferred outcomes" from which parties could
deviate upon an adequate showing, or that we establish  [*77]   a process by
which state commissions could seek a waiver from the Commission's rules, for the
reasons set forth in Section II.B above.


   1365. We believe that our determination that there are multiple methods for
bringing enforcement actions against parties regarding their obligations under
sections 251 and 252 will assist all parties, including small entities and small
incumbent LECs, by providing a variety of methods and fora for seeking
enforcement of such obligations. (Section II.E - Authority to Take Enforcement
Action.) Similarly, our conclusion that Bell Operating Company (BOC) statements
of generally available terms and conditions are governed by the same national
rules that apply to agreements arbitrated under section 252 should ease
administrative burdens for all parties in markets served by BOCs, which may
include small entities, because they will not need to evaluate and comply with
different sets of rules. (Section II.F - BOC Statements of Generally Available
Terms.) Finally, we decline to adopt different requirements for agreements
arbitrated under section 252 and BOC statements of generally available terms and
conditions for the reasons set forth in section II.F above.   [*78]
   Summary Analysis of Section III

   DUTY TO NEGOTIATE IN GOOD FAITH

   1366. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. Incumbent LECs, including small incumbent LECs that receive
requests for access to network elements and/or services pursuant to sections 251
and 252 of the Act will be required to negotiate in good faith over the terms of
interconnection agreements. This Order identifies several practices as
violations of the duty to negotiate in good faith, including: (1) a party's
seeking or entering into an agreement prohibiting disclosure of information
requested by the FCC or a state commission, or supplied in support of a request
for arbitration pursuant to section 252(b)(2)(B); (2) seeking or entering into
an agreement precluding amendment of the agreement to account for changes in
federal or state rules; (3) an incumbent's denial of a reasonable request for
cost data during negotiations; and (4) an entrant's failure to provide to the
incumbent LEC information necessary to reach agreement. Complying with the
projected requirements of this section may require the use of legal skills. In
addition, incumbent LECs and new entrants having interconnection  [*79]
agreements that predate the 1996 Act must file such agreements with the state
commission for approval under section 252(e).

   1367. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs, and Alternatives Considered. As set forth above, we
believe our decision to establish national rules and a review process concerning
parties' duties to negotiate in good faith are designed to facilitate good faith
negotiations, which should minimize regulatory burdens and the economic impact
of our decisions for all parties, including small entities and small incumbent
LECs. (Section III.A - Advantages and Disadvantages of National Rules.) We also
expect economic impacts to be minimized for small entities seeking to enter into
agreements with incumbent LECs as a result of the decision that incumbent LECs
may not impose a bona fide request requirement on carriers seeking agreements
pursuant to sections 251 and 252. (Section III.B - Specific Practices that may
Constitute a Violation of Good Faith Negotiation.) For the reasons set forth in
Section III.B above, we also find that certain additional practices are not
always violations of the duty to negotiate in good  [*80]   faith, including the
suggested alternative that all nondisclosure agreements violate the good faith
duty.

   1368. We do not require immediate filing of preexisting interconnection
agreements, including those involving small incumbent LECs and small entities.
We set an outer time period of June 30, 1997, by which preexisting agreements
between Class A carriers must be filed with the relevant state commission. This
decision will ensure that third parties, including small entities, are not
prevented indefinitely from reviewing and taking advantage of the terms of
preexisting agreements. It also limits burdens that a national filing deadline
might impose on small carriers. In addition, the determination that preexisting
agreements must be filed with state commissions seems likely to foster
opportunities for small entities and small incumbent LECs to gain access to such
agreements without requiring investigation or discovery proceedings or other
administrative burdens that could increase regulatory burdens. (Section III.C -
Applicability of Section 252 to Preexisting Agreements). For the reasons set
forth in Section III.C above, we reject the alternative of not requiring certain
agreements  [*81]   to be filed with state commissions.



   Summary Analysis of Section IV

   INTERCONNECTION

   1369. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. Incumbent LECs, including small incumbent LECs, are required by
section 251(c) to provide interconnection to all requesting telecommunications
carriers for the transmission and routing of telephone exchange service and
exchange access service. Such interconnection must be: (1) provided at any
technically feasible point; (2) at least equal in quality to that provided to
the incumbent LEC itself and to any other parties with interconnection
agreements; and (3) provided on rates, terms, and conditions that are "just,
reasonable, and nondiscriminatory . . . ." n3273 We conclude that
interconnection refers solely to the physical linking of networks for the mutual
exchange of traffic, and identify a minimum set of technically feasible points
of interconnection. The minimum points at which an incumbent LEC, which may be a
small incumbent LEC, must provide interconnection are: (1) the line side of a
local switch; (2) the trunk side of a local switch; (3) the trunk
interconnection points for a tandem switch; (4) central  [*82]   office
cross-connect points; and (5) out-of-band signaling facilities. In addition, the
points of access to unbundled elements (discussed below) are also technically
feasible points of interconnection. Compliance with these requests may require
the use of engineering, technical, operational, accounting, billing, and legal
skills.

   n3273 47 U.S.C. @ 251(c)(2).

   1370. To obtain interconnection pursuant to section 251(c)(2),
telecommunications carriers must seek interconnection for the purpose of
transmitting and routing telephone exchange traffic, or exchange access traffic,
or both. (Section IV.D. - Definition of "Technically Feasible.") This will
require new entrants to provide either local exchange service or exchange access
service to obtain section 251(c)(2) interconnection. A requesting carrier will
be required to bear the additional costs imposed on incumbent LECs as a result
of interconnection. (Section IV.E. - Technically Feasible Points of
Interconnection.) Carriers seeking interconnection, including small entities,
may be required to collect information to refute claims by incumbent LECs that
the requested interconnection poses a legitimate threat to network reliability.
[*83]   (Id.)


   1371. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs, and Alternatives Considered. The decision to adopt
clear national rules in this section of the Order is also intended to help
equalize bargaining power between incumbent LECs and requesting carriers,
expedite and simplify negotiations, and facilitate comprehensive business and
network planning. This could decrease entry barriers and provide reasonable
opportunities for all carriers, including small entities and small incumbent
LECs, to provide service in markets for local exchange and exchange access
services. (Section IV.B. - National Interconnection Rules). National rules
should also facilitate the consistent development of standards and resolution of
issues, such as technical feasibility, without imposing additional litigation
costs on parties, including small entities and small incumbent LECs. We
determine that successful interconnection at a particular point in a network
creates a rebuttable presumption that interconnection is technically feasible at
other comparable points in the network. (Section IV.E - Definition of
"Technically Feasible.") We also identify minimum   [*84]   points of
interconnection where interconnection is presumptively technically feasible: (1)
the line side of a switch; (2) the trunk side of a switch; (3) trunk
interconnection points at a tandem switch; (4) central office cross-connect
points; and (5) out-of-band signaling facilities. (Section IV.F - Technically
Feasible Points of Interconnection.) These decisions may be expected to
facilitate negotiations by promoting certainty and reducing transaction costs,
which should minimize regulatory burdens and the economic impact of our
decisions for all parties, including small entities and small incumbent LECs. We
decline, however, to identify additional points where interconnection is
technically feasible for the reasons set forth in section IV.F above.

   1372. The ability to enter local markets by offering only telephone exchange
service or only exchange access service may minimize regulatory burdens and the
economic impact of our decisions for some entrants, including small entities. We
decline, however, to interpret section 251(c)(2) as requiring incumbent LECs to
provide interconnection to carriers seeking to offer only interexchange services
for the reasons set forth in section IV.C  [*85]   above. In addition, we
determine that an incumbent LEC may refuse to interconnect on the grounds that
specific, significant, and demonstrable network reliability concerns may make
interconnection at a particular point sufficiently infeasible. We further
determine that the incumbent LEC must prove such infeasibility to the state
commission. (Section IV.E - Definition of "Technically Feasible.")

   1373. Competitive carriers, many of whom may be small entities, will be
permitted to request interconnection at any technically feasible point, and the
determination of feasibility must be conducted without consideration of the cost
of providing interconnection at a particular point. (Section IV.D. - Definition
of "Technically Feasible.") Consequently, our rules permit the party requesting
interconnection, which may be a small entity, and not the incumbent LEC to
decide the points that are necessary to compete effectively. (Section IV.E. -
Definition of Technically Feasible). We decline, however, to impose reciprocal
terms and conditions for interconnection on carriers requesting interconnection.
Our decision that an party requesting interconnection must pay the costs of
interconnecting should  [*86]   minimize regulatory burdens and the economic
impact of our interconnection decisions for small incumbent LECs. Similarly,
regulatory burdens and the economic impact of our decisions may be minimized
through the decision that, while a requesting party is permitted to obtain
interconnection that is of higher quality than that which the incumbent LEC
provides to itself, the requesting party must pay the additional costs of
receiving the higher quality interconnection. (Section IV.H - Interconnection
that is Equal in Quality.)

   Summary Analysis of Section V

   ACCESS TO UNBUNDLED NETWORK ELEMENTS


   1374. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. Under section 251(c), incumbent LECs are required to provide
nondiscriminatory access to unbundled network elements. We identify a minimum
set of network elements: (1) local loops; (2) local and tandem switches; (3)
interoffice transmission facilities; (4) network interface devices; (5)
signaling and call-related database facilities; (6) operations support systems
and functions; and (7) operator and directory assistance facilities. (Section
V.J - Specific Unbundling Requirements.) Incumbent LECs are required  [*87]
to provide nondiscriminatory access to operations support systems and
information by January 1, 1997. States may require incumbent LECs to provide
additional network elements on an unbundled basis. Incumbent LECs must perform
the functions necessary to combine unbundled elements in a manner that allows
requesting carriers to offer a telecommunications service, and the incumbent LEC
may not impose restrictions on the subsequent use of network elements.
Compliance with these requests may require the use of engineering, technical,
operational, accounting, billing, and legal skills.

   1375. If a requesting carrier, which may be a small entity, seeks access to
an incumbent LEC's unbundled elements, the requesting carrier is required to
compensate the incumbent LEC for any costs incurred to provide such access. For
example, in the case of operation support systems functions, such work may
include the development of interfaces for competing carriers to access incumbent
LEC functions for pre-ordering, ordering, provisioning, maintenance and repair,
and billing. Requesting carriers may also have to deploy their own operations
support systems interfaces, including electronic interfaces, in order  [*88]
to access the incumbent LEC's operations support systems functions. The
development of interfaces may require new entrants, including small entities, to
perform engineering work. (Section V.J.5 - Operations Support Systems
Unbundling.)

   1376. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs, and Alternatives Considered. The establishment of
minimum national requirements for unbundled elements should facilitate
negotiations and reduce regulatory burdens and uncertainty for all parties,
including small entities and small incumbent LECs. National requirements for
unbundling may allow new entrants, including small entities, to take advantage
of economies of scale in network design, which may minimize the economic impact
of our decision. As set forth in Section V.B, above, we reject several
alternatives in making this determination, including proposals suggesting that
the Commission should: (1) not identify any required elements; (2) allow the
states exclusively to identify required elements; or (3) adopt an exhaustive
list of elements.

   1377. As set forth above, the 1996 Act defines a network element to include
"all facilities or equipment  [*89]   used in the provision of a
telecommunications service," and all "features, functions, and capabilities that
are provided by means of such facility or equipment, including subscriber
numbers, databases, signaling systems and information sufficient for billing and
collection or used in the transmission, routing or other provision of a
telecommunications service." (Section V.C - Access to Unbundled Elements.) As a
result, new entrants, which may include small entities, should have access to
the same technologies and economies of scale and scope that are available to
incumbent LECs. In reaching our determination, we reject for the reasons set
forth in Section V.C above, the following alternatives: (1) that we should not
adopt a method for identifying elements beyond those identified in the 1996 Act;
and (2) that features sold directly to end users as retail services are not
network elements. Finally, we reject the argument that requesting carriers,
which may include small entities, are required to provide all services typically
furnished by means of an element they purchase. (Id.) Our rejection of this last
alternative may reduce burdens for some small entities by permitting them to
offer  [*90]   some, but not all, of the services provided by the incumbent LEC.



   1378. We conclude that the requirement to provide "access" to unbundled
network elements is independent of the interconnection duty imposed by section
251(c)(2), and that such "access" must be provisioned under the rates, terms and
conditions applicable to unbundled network elements. We believe these
conclusions may provide small entities seeking to compete with incumbent LECs
with the flexibility to offer other telecommunications services in addition to
local exchange and exchange access services. (Section V.D. - Access to Unbundled
Elements.) For the reasons set forth above in Section V.D, we reject the
argument that incumbent LECs are not required to provide access to an element's
functionality, and that "access" to unbundled elements can only be achieved by
interconnecting under the terms of section 251(c)(2). See Section V.C. above.

   1379. As set forth above, we conclude that an incumbent LEC, which may be a
small incumbent LEC, may decline to provide a network element beyond those
identified by the Commission where it can demonstrate that the network element
is proprietary, and that the competing provider could  [*91]   offer the
proposed telecommunications service using other nonproprietary elements within
the incumbent's network. (Section V.E - Access to Unbundled Elements.) This
should minimize regulatory burdens and the economic impact of our decisions for
incumbent LECs, including small incumbent LECs, by permitting such entities to
retain exclusive use of certain proprietary network elements.

   1380. We conclude that incumbent LECs: (1) cannot impose restrictions,
requirements or limitations on requests for, or the sale or use of, unbundled
network elements; (2) must provide requesting carriers with all of the
functionalities of a particular element so that requesting carriers can provide
any telecommunications services that can be offered by means of that element;
(3) must permit new entrants to combine network elements which new entrants
purchase access to, if so requested; (4) must prove to a state commission that
they cannot combine elements that are not ordinarily combined within an their
network, or that are not ordinarily combined in that manner, because such
combination is not technically feasible or it would impair the ability of other
carriers to access unbundled elements and interconnect  [*92]   with the
incumbent LEC; and (5) must provide the operational and support systems
necessary to purchase and combine network elements. As a result of these
conclusions, many small entities should face significantly reduced barriers to
entry in markets for local exchange services. (Section V.F - Access to Unbundled
Elements.) For the reasons set forth in section V.F, we reject the following
alternatives: (1) that incumbent LECs, in all instances, must combine elements
that are not ordinarily combined in their networks; and (2) that incumbent LECs
are not obligated to combine elements for requesting carriers.


   1381. By establishing minimum national rules concerning nondiscriminatory
access to unbundled network elements, requesting carriers, including small
entities, may face reduced transaction and regulatory costs in seeking to enter
local telecommunications markets. Among these minimum rules are: (1) access and
elements which new entrants receive are to be equal in quality between carriers;
(2) incumbent LECs must prove technical infeasibility; (3) the rates, terms and
conditions established for the provisioning of unbundled elements must be equal
between all carriers, and where applicable,   [*93]   between requesting
carriers and the incumbent LEC itself, and they must provide efficient
competitors with a meaningful opportunity to compete; and (4) incumbent LECs
must provide carriers purchasing unbundled elements with access to electronic
interfaces if incumbents use such functions themselves in provisioning
telecommunications services. (Section V.G - Nondiscriminatory Access to
Unbundled Network Elements.)

   1382. As set forth above, we conclude that section 251(c)(3) does not require
new entrants to own or control their own local exchange facilities in order to
purchase and use unbundled network elements and, thus, new entrants can provide
services solely by recombining unbundled network elements. (Section V.H - Access
to Unbundled Elements.)

   1383. As discussed in Section V.J above, we adopt a minimum list of required
unbundled network elements that incumbent LECs, including small incumbent LECs,
must make available to requesting carriers. In adopting this list, we sought to
minimize the regulatory burdens and economic impact for small incumbent LECs.
For example, we declined to adopt a detailed list including many additional
elements, as set forth in Section V.B. We also   [*94]   provided for the fact
that certain LECs may possess switches that are incapable of performing
customized routing for competitors, as discussed in Section V.J.2.(c).(ii).

   Summary Analysis of Section VI

   METHODS OF OBTAINING INTERCONNECTION AND ACCESS TO UNBUNDLED NETWORK ELEMENTS

   1384. Summary of Projected Reporting, Recordkeeping, and Other Compliance
Requirements. We conclude that Section 251(c)(6) requires incumbent LECs,
including small incumbent LECs, to provide for any technically feasible method
of interconnection or access to unbundled network elements, including physical
collocation, virtual collocation, and meet-point interconnection. With certain
modifications, we adopt some of the requirements concerning physical and virtual
collocation that we adopted in the Expanded Interconnection proceeding.
Compliance with these requests may require the use of engineering, technical,
operational, accounting, billing, and legal skills.

   1385. In a meet-point arrangement the new entrant will build out facilities
to the agreed-upon point, which will likely entail the use of engineering and
installation personnel as well as the acquisition of equipment. We allow
incumbent LECs to impose  [*95]   reasonable restrictions on the warehousing of
space by collocators. Therefore, small entities collocating equipment may be
required to use the provided space for the collocation of equipment necessary
for interconnection or access to unbundled network elements or risk losing the
right to use that space. (Section VI.B.1.e - Allocation of Space.) To take
advantage of its right to collocate equipment on an incumbent LEC's premises,
competitive entrants, which may include small entities, will be required to
build or lease transmission facilities between their own equipment, located
outside of the incumbent LECs' premises, and the collocated space. (Section
VI.B.1.f - Leasing Transport Facilities.) We allow incumbent LECs to require
reasonable security arrangements to separate an entrant's collocation space from
the incumbent LEC's facilities. Small entities collocating equipment may
therefore be required to pay for such security arrangements. (Section VI.B.1.h -
Cage Construction.)


   1386. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs, and Alternatives Considered. By readopting our
Expanded Interconnection terms and conditions, which allow  [*96]   competitors
to collocate equipment for interconnection with the incumbent LEC, regulatory
burdens have likely been reduced because the terms and conditions for
collocation have already been established. (Section VI.B.1.b - Readoption of
Expanded Interconnection Terms and Conditions.) This seems likely to benefit all
parties, including small entities and small incumbent LECs, since it should
reduce the time and expense of negotiation, and reduce the costs of adapting to
new terms and conditions for collocation.

   1387. Due to our conclusion that requesting carriers may choose any method of
technically feasible interconnection or access to unbundled elements, new
entrants, including small entities, should have the flexibility to obtain
interconnection or access in the manner that best suits their needs. (Section
VI.A. - Methods of Obtaining Interconnection and Access to Unbundled Elements.)
In particular, as discussed in Section VI.A.3, we recognize that carriers,
including small entities, may find virtual collocation or meet-point
arrangements more efficient than physical collocation in certain circumstances,
particularly if they lack the resources to collocate physically in a large
[*97]   number of incumbent LEC premises.

   1388. We adopt a broad definition of the term "premises," which should allow
carriers, including small entities, to collocate equipment for interconnection
and access to unbundled network elements at a range of incumbent LEC locations.
(Section VI.B.1.c - The Meaning of the Term "Premises.") For the reasons set
forth in Section VI.B above, we interpret the term "premises" broadly to include
incumbent 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 incumbent LEC facilities. However, as set forth above, we reject the
suggestion that security measures be provided only at the request of the
entrant, which should minimize regulatory burdens and the economic impact of our
decisions for small incumbent LECs (Id.)

   1389. We interpret the statute broadly to allow collocation of any equipment
used for interconnection or access to unbundled network elements. (Section
VI.B.1.d - Collocation Equipment.) This standard should offer all competitors,
including small entities, flexibility in collocating equipment they need to
interconnect their networks to   [*98]   those of incumbent LECs. Incumbent LECs
will also be required to make space available to requesting carriers on a
first-come, first-served basis, and collocators seeking to expand their
collocated space should be allowed to use contiguous space where available.
(Section VI.B.1.e - Allocation of Space.) These provisions should minimize
regulatory burdens and economic impacts for small entity entrants by reducing
opportunities for discriminatory treatment based on the size of the requesting
carrier. We decline, however, to require incumbent LECs to file reports on the
status, planned increase, and use of space for the reasons set forth in Section
VI.B.1. above, which will reduce the regulatory burdens and economic impact of
our decisions for small incumbent LECs.

   1390. We conclude that a competitive entrant should be permitted to lease
transmission facilities from the incumbent LEC. (Section VI.B.1.f - Leasing
Transport Facilities). This provision will allow small entities to lease
transmission facilities from incumbent LECs to transmit traffic between the
collocated space and their own networks, which may be comparatively less
burdensome for small entities than the alternative of bringing  [*99]   their
own facilities to the collocated equipment on the incumbent LEC's premises. We
also require incumbent LECs to permit two or more carriers that are collocating
at the incumbent LEC's premises to interconnect their networks. (Section
VI.B.1.g - Co-Carrier Cross-Connect.) This requirement should make it easier for
new entrants to interconnect their networks with those of competitors.



   1391. We require incumbent LECs to provide the relevant state commissions
with detailed floor plans or diagrams of any premises where the incumbent LEC
alleges that there are space constraints. (Section VI.B.1.i. - Allowing Virtual
Collocation in Lieu of Physical). This requirement may reduce burdens for all
parties, including small entities and small incumbent LECs, by aiding state
commissions with their evaluation of incumbent LEC refusals to allow physical
collocation on the grounds of space constraints. For the reasons set forth in
Section VI.B.1 above, however, we decline to require incumbent LECs to lease
additional space or provide trunking at no cost where they have insufficient
space for physical collocation, which should minimize the regulatory burdens and
economic impact of our decisions  [*100]   for incumbent LECs, including small
incumbent LECs.

   Summary Analysis of Section VII

   PRICING OF INTERCONNECTION AND UNBUNDLED NETWORK ELEMENTS

   1392. Summary of Projected Reporting, Recordkeeping, and Other Compliance
Requirements. Pursuant to sections 251(c) and 252(d) of the 1996 Act, incumbent
LECs must provide interconnection and access to unbundled network elements on
rates, terms, and conditions that are just, reasonable, and nondiscriminatory.
In Section VII above, we adopt a methodology for setting arbitrated prices for
interconnection and unbundled elements on the basis of forward-looking economic
cost studies prepared in conformance with a methodology prescribed by the
Commission. Until states utilize economic studies to develop cost-based prices,
they must use default proxies established by the Commission. Small incumbent
LECs may be required, therefore, to prepare economic cost studies. In addition,
small entities seeking arbitration for rates for interconnection or unbundled
elements may find it useful to prepare economic cost studies or prepare
critiques of cost studies prepared by incumbent LECs and others. In both cases,
this may entail the use of economic experts,   [*101]   legal advice, and
possibly accounting personnel.

   1393. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs, and Alternatives Considered. Our conclusion that
prices for interconnection and unbundled elements should be set at
forward-looking long-run economic cost, including a reasonable share of
forward-looking joint and common costs, should permit new entrants, including
small entities, to interconnect with, and acquire unbundled elements from,
incumbent LECs at prices that replicate, to the extent possible, those in a
competitive market. (Section VII.B.2 - Pricing of Interconnection and Unbundled
Elements, Cost-Based Pricing Methodology, Rate Levels.) Our forward-looking
economic cost methodology for determining prices is designed to permit incumbent
LECs to recover their economic costs of providing interconnection and unbundled
elements, which should minimize the economic impact of our decisions on small
incumbent LECs.


   1394. Our conclusion that embedded costs, opportunity costs and universal
service subsidies may not be included in the rates for interconnection and
unbundled elements is intended, in part, to avoid distortions in investment
[*102]   decisions, which should lead to more efficient allocation of resources,
thereby reducing regulatory burdens and economic impacts for some small entities
and small incumbent LECs. (Section VII.B.2 - Pricing of Interconnection and
Unbundled Elements, Cost-Based Pricing Methodology, Rate Levels.) We reject
proposals that would have permitted incumbent LECs to recover their embedded
costs in prices for interconnection and unbundled elements as discussed above in
Section VII.B.2.a.(3)(b). As discussed in Section VII.B.2.a.(3)(b), we reject
the use of the efficient component pricing rule (ECPR) to set prices for
interconnection and unbundled elements.

   1395. Our conclusion that forward-looking common costs should be allocated in
a reasonable manner should ensure that the prices of network elements that are
least likely to be subject to competition are not artificially inflated by large
allocations of common costs. This, in turn, may also produce more efficient
allocations of resources, thereby minimizing regulatory burdens and economic
effects for many parties, including small entities and small incumbent LECs.
(Section VII.B.2 - Pricing of Interconnection and Unbundled Elements, Cost-Based
[*103]   Pricing Methodology, Rate Levels.) We permit, but do not require,
states to impose peak-sensitive pricing systems for shared facilities as
discussed in Section VII.B.3.b.

   1396. We conclude that incumbent LECs should not recover access charges from
entrants that use unbundled network facilities to provide access services to
customers that they win from incumbent LECs. We do, however, permit incumbent
LECs to impose on purchasers of unbundled local switching the carrier common
line charge and a charge equal to seventy-five percent of the transport
interconnection charge for an interim period that shall end no later than June
30, 1997, as discussed in Section VII.B.2.a.(3)(b). As further explained in that
section, this mechanism should serve to reduce any short-term disruptive impact
of our decisions on incumbent LECs, including small incumbent LECs.

   1397. We conclude that the Act requires rates for interconnection and
unbundled elements to be geographically deaveraged, using a minimum of three
geographic zones, in a manner that appropriately reflects the costs of the
underlying elements. (Section VII.B. 3 - Geographic/Class-of-Service Averaging.)
We also conclude that distinctions  [*104]   between the rates charged to
requesting carriers for network elements should not vary based on the classes of
service that the requesting carriers provide to their to customers. We expect
these decisions to lead to increased competition and a more efficient allocation
of resources.

   1398. The default proxies we adopt for rates for interconnection and
unbundled elements, which states may use to establish prices, are designed to
approximate prices that will enable efficient competitors, including small
entities, to enter local exchange markets. (Section VII.C. - Default Proxy
Prices and Ceilings.) We reject the use of rates in interconnection agreements
that predate the 1996 Act as proxy-based ceilings for interconnection and
unbundled element rates as discussed in Section VII.C.1. We also decline to
adopt a generic cost model at this time, as discussed in Section VII.C.3.

   1399. We determine that the nondiscrimination provisions in the Act prohibit
price differences that are not based on cost differences. This should permit
small entities to obtain the same terms and conditions of agreements reached by
larger carriers that possess greater bargaining power without having to incur
the  [*105]   costs of negotiation and/or arbitration. (Section VII.D.3 -
Discrimination.)


   Summary Analysis of Section VIII
   RESALE

   1400. Summary of Projected Reporting, Recordkeeping, and Other Compliance
Requirements. Pursuant to section 251(b)(1), all LECs, which may include small
entity competing LECs and small incumbent LECs, may not impose unreasonable or
discriminatory conditions on, or limit the resale of, their telecommunications
services. Pursuant to section 251(c)(4), incumbent LECs are required to offer
for resale at wholesale rates any telecommunications services that they offer to
subscribers other than telecommunications carriers. Providing such services for
resale may require some small entities and small incumbent LECs to use
additional billing, technical, and operational skills.

   1401. Under section 252(a), resellers, which may include small entities, are
required to prepare and present to incumbent LECs requests for services to
resell. We do not establish guidelines for the content of these requests. Such
requests may involve legal, engineering, and accounting skills. Resellers may
also have to engage in arbitration proceedings with incumbent LECs if voluntary
negotiations   [*106]   resulting from the initial request fail to yield an
agreement. This may involve legal and general negotiation skills. Where a
reseller is negotiating or arbitrating with an incumbent LEC, the reseller may
choose to offer arguments concerning economic and accounting data presented by
state commissions or incumbent LECs. Resellers may also choose to make legal and
economic arguments that certain resale restrictions are unreasonable. These
tasks may require legal, economic, and accounting skills.

   1402. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs, and Alternatives Considered. As set forth in Section
VIII.B, above, our decision to adopt clear national rules should reduce
regulatory burdens and uncertainty for all parties, including small entities and
small incumbent LECs. Moreover, our decision not to impose eligibility
requirements on resellers should minimize regulatory burdens for resellers. We
reject proposals that the Commission not require resale of bundled service
offerings, promotions and discounts lasting longer than 90 days, residential
service, and services offered at rates below cost for reasons set forth in
Section VIII.A.   [*107]

   1403. As discussed in Section VIII.B, we expect that the opportunity to
resell telecommunications services currently offered exclusively by incumbent
LECs will lead to increased competition in the provision of telecommunications
services. We also determine that non-cost-based factors shall not be considered
when arriving at wholesale discounts, and we reject the argument that indirect
costs should not be considered avoided costs. We also reject proposals that we
either require or forbid a state to include a measure of profit in its avoided
cost calculation. As set forth in Section VIII.B, we considered the concerns of
small incumbent LECs and small entity resellers when adopting the default range
for wholesale discounts. In addition, we allow a state to consider including in
wholesale rates the costs that incumbent LECs incur in selling services on a
wholesale basis, which may minimize the economic impact for small incumbent
LECs.


   1404. As discussed in Section VIII.C, we remove obstacles faced by small
businesses in reselling telecommunications services by establishing a
presumption, applicable to incumbent and non-incumbent LECs, that most
restrictions on resale are unreasonable.   [*108]   This presumption should
reduce unnecessary burdens on resellers, which may include small entities. It
may also produce increased opportunities for resale competition, which may be
expected to be beneficial for some small entities and small incumbent LECs. We
do not permit state commissions to require non-incumbent LECs to offer their
services at wholesale rates for the reasons set forth Section VIII.D. For the
reasons discussed in Section VIII.C, above, we decline to forbear from the
application of section 251(b)(1) to non-incumbent LECs. We also conclude that
incumbent LECs are to continue to receive access charge revenues when local
services are resold under section 251(c)(4) for reasons set forth in Section
VIII.E, and that such access services are not subject to resale at wholesale
rates for reasons set forth in Section VIII.A.

   Summary Analysis of Section IX

   DUTIES IMPOSED ON "TELECOMMUNICATIONS CARRIERS" BY SECTION 251(a)

   1405. Summary of Projected Reporting, Recordkeeping, and Other Compliance
Requirements. Small entities that provide telecommunications services are
subject to the same obligations imposed on all telecommunications carriers under
section 251(a)(1) and section  [*109]   251(a)(2), and any reporting
requirements that attend such obligations. Among these duties is the duty to
interconnect, directly or indirectly, with requesting telecommunications
carriers. (Section IX - Duties Imposed on "Telecommunications Carriers" By
Section 251(a).) This will likely require small entities to comply with the
technical, economic, and legal requirements involved with interconnection,
including negotiating contracts, utilizing engineering studies, and adding
operational capacity. (Id.) Small incumbent LECs may incur similar compliance
requirements to the extent they are required to interconnect with entities that
qualify as "telecommunications carriers."

   1406. Small incumbent LECs and small entities providing telecommunications
services will also be under a duty not to install network features, functions,
and capabilities that do not comply with standards and guidelines under sections
255 and 256. (Section IX - Duties Imposed on "Telecommunications Carriers" By
Section 251(a)(2).) In addition, small entities that provide both information
services and telecommunications services are classified as telecommunications
carriers and are subject to certain requirements   [*110]   under 251(a).
(Section IX - Duties Imposed on "Telecommunications Carriers" By Section
251(a)(2).)


   1407. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs, and Alternatives Considered. Small entities who
provide for a fee local, interexchange and international services are defined as
telecommunications carriers and, thus, also receive the benefits of section 251
including interconnection, services, and network elements, which may increase
their ability to compete. (Section IX - Duties Imposed on "Telecommunications
Carriers" By Section 251(a)(2).) We reject the suggestion that CMRS providers,
some of which likely are small entities, should not be included in the
definition of a "telecommunications carrier." (Id.) We determine that entities
operating private, internal or shared communications networks do not qualify as
telecommunications carriers, however, which excludes them from the obligations
and benefits under section 251(a). Small entities providing information services
but not telecommunications services are also not classified as
telecommunications carriers and, thus, will not be bound by the duties of
section 251(a). A carrier that  [*111]   provides both information and
telecommunications services is deemed subject to the requirements of section
251(a). We also conclude that telecommunications carriers that have
interconnected under either section 251(a)(1) or 251(c)(2) may offer information
services through the same arrangement or agreement. This will permit new
entrants, many of which may be small entities, to offer full ranges of services
to end users without having to provide some of those services inefficiently
through distinct facilities or agreements.

   1408. We decide that competitive telecommunications carriers that have the
obligation to interconnect with requesting carriers may choose, based upon their
own characteristics, whether to allow direct or indirect interconnection.
(Section IX - Duties Imposed on "Telecommunications Carriers" By Section
251(a).) This should allow significant flexibility for small entities to choose
the most efficient and economical arrangement for their particular strategy. As
set forth in Section IX, we reject an argument to forbear, under section 10 of
the Communications Act, n3274 from imposing any interconnection requirements on
non-dominant carriers.

   n3274 47 U.S.C. @ 160.  [*112]

   Summary Analysis of Section X

   COMMERCIAL MOBILE RADIO SERVICES

   1409. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. We are applying sections 251 and 252 to LEC-CMRS interconnection
at this time. (Section X.D - Jurisdictional Authority for Regulation of LEC-CMRS
Interconnection Rates.) We may revisit our determination not to invoke
jurisdiction under section 332 to regulate LEC-CMRS interconnection rates if we
determine that the regulatory scheme established by sections 251 and 252 does
not sufficiently address the problems encountered by CMRS providers, many of
which may be small entities, in obtaining interconnection on terms and
conditions that are just, reasonable, and nondiscriminatory.

   1410. Pursuant to our findings in Section X.D, a small CMRS entity seeking to
enter into a reciprocal compensation agreement with an incumbent LEC, which may
be a small incumbent LEC, will have to comply with sections 251 and 252, and
state law. The reporting, recordkeeping, and other compliance requirements
associated with reciprocal compensation are summarized in the following section
concerning obligations under section 251(b).

   1411. Steps Taken to Minimize  [*113]   Significant Economic Impact on Small
Entities and Small Incumbent LECs, and Alternatives Considered. The Commission's
actions may minimize the economic impact on CMRS providers, many of which are
small entities, by declaring that CMRS providers are not required to comply with
the obligations of LECs under section 251(b)(5). We decline to adopt the
alternative of finding that a CMRS provider is a LEC for the reasons set forth
in Section X.A. We also determine that CMRS providers are entitled to request
reciprocal compensation under section 251(b)(5), and that certain CMRS providers
are also entitled to request interconnection under section 251(c)(2). As
discussed in the following section concerning obligations under section 251(b),
these decisions may permit small entity CMRS providers the opportunity to
considerably expand their businesses.


   Summary Analysis of Section XI
   OBLIGATIONS IMPOSED ON LECS BY 251(b)

A. Reciprocal Compensation for Transport and Termination of Telecommunications

   1412. Summary of Projected Reporting, Recordkeeping, and Other Compliance
Requirements. All local exchange carriers, including small incumbent LECs and
perhaps some small entities offering competing  [*114]   local exchange
services, have a duty to establish reciprocal compensation for the transport and
termination of local telecommunications traffic, as defined by state
commissions. As such, small incumbent LECs and small entities offering
competitive local exchange services may be required to measure the exchange of
traffic, and to bill and collect payment from other carriers. (Section XI.A -
Reciprocal Compensation.) Reciprocal compensation for the transport and
termination of traffic may be based on the incumbent LEC's cost studies, which
may require small incumbent LECs to use economic skills to perform cost studies.
To the extent that a competing provider of local exchange services, which may
include a small entity, believes its costs for the transportation and
termination of traffic differ from those of the incumbent LEC, it would also be
required to provide a forward-looking, economic cost study. (Id.)

   1413. If a CMRS provider entered into an agreement with an incumbent LEC
prior to August 8, 1996 that does not provide for mutual compensation, the CMRS
provider may demand to renegotiate the agreement. This may impose the burden of
re-negotiation on small incumbent LECs, which   [*115]   may require legal,
accounting, and economic skills. In addition, pending the successful completion
of negotiation or arbitration, symmetrical reciprocal compensation shall apply,
which may have the effect of raising the amount small incumbent LECs currently
pay CMRS providers to terminate LEC-originated traffic. This may have the effect
of increasing small incumbent LECs' costs. Finally, a state commission may
impose bill-and-keep arrangements between carriers if the state commission
determines that the amount of local telecommunications traffic from one network
to the other is approximately equal to the amount of local telecommunications
traffic flowing in the opposite directions, and is expected to remain thus. This
could have the effect of reducing small incumbent LECs' revenues and decreasing
the expenses of small entities. It also might place a burden on small entities
and small incumbent LECs of establishing that traffic volumes are imbalanced,
which might require accounting, economic, and legal skills.

   1414. We require paging companies seeking to recover fees for terminating
local calls to demonstrate to the state the costs of terminating such calls.
(Section XI.A. - Transport  [*116]   and Termination of Traffic.) Consequently,
small entity paging companies and possibly small incumbent LECs may be required
to use legal, economic, and possibly accounting skills.


   1415. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs, and Alternatives Considered. Our adoption of national
default price ceilings and ranges for transportation and termination of local
traffic being arbitrated by the states should provide all parties, including
small incumbent LECs and many new entrant small entities, with a clear
understanding of the terms and conditions that will govern should they fail to
reach an agreement. This should minimize regulatory burdens and economic impacts
for those companies, in part by reducing the transaction costs of arbitration.
(Section XI.A.3.c.(4) - Default Proxies.) Permitting CMRS providers with
non-reciprocal agreements to renegotiate their agreements, and imposing
symmetrical reciprocal compensation pending completion of negotiation or
arbitration, will provide all parties with certainty as to applicable rates as
of the date of this order, and minimize litigation and regulatory costs. We
believe this decision is   [*117]   consistent with the pro-competitive goals of
the 1996 Act.

   1416. We define transport and termination as separate functions -- each with
its own cost calculation for the purposes of sections 251 and 252. This
definition may permit interconnecting carriers, including small entities, to
obtain transport and termination services at lower rates and avoid paying
above-cost rates or rates for unneeded services. (Section XI.A.2 - Definition of
Transport and Termination of Telecommunications.) We also conclude that a LEC
may not charge a CMRS provider or other carrier, which may be a small entity,
for receiving and terminating LEC-originated traffic. (Section XI.A.4 -
Symmetry.) We do not permit interexchange carriers to use transport and
termination services to avoid the obligation to pay access charges for
terminating interexchange traffic with incumbent LECs. (Section XI.A.2 -
Definition of Transport and Termination of Telecommunications.)

   1417. Our decision to permit new entrants to base reciprocal compensation
arrangements on incumbent LECs' cost studies may reduce barriers to entry by
permitting competing LECs to avoid performing their own forward-looking,
economic cost studies, which  [*118]   may be expected to reduce the overall
burdens and minimize the economic impact of regulation on these small entities.
(Section XI.A.4 - Symmetry.) The ability of state commissions to impose bill and
keep arrangements where the costs of terminating traffic are nearly symmetrical,
traffic volume is roughly balanced, and both are expected to remain so, may
allow small entities and small incumbent LECs to avoid the cost of measuring
traffic exchange. (Section XI.A.5 - Bill and Keep.) For the reasons set forth in
Section XI.A.5 above, we reject the proposed alternative of permitting states to
adopt bill-and-keep arrangements for the transport and termination of traffic
where the cost of terminating traffic is not nearly symmetrical.

   1418. By requiring that rates for transport and termination be cost based, we
believe that all parties in telecommunications markets, including small
incumbent LECs and small entities, may benefit from increased opportunities to
compete effectively in local exchange markets. (Section XI.A.3 - Pricing
Methodology.) In addition, we conclude that termination rates for LECs,
including small incumbent LECs, should include an allocation of forward-looking
common  [*119]   costs, but not an element for the recovery of lost
contributions. These decisions may be expected to minimize the economic impact
of our decisions on small incumbent LECs and small entities.

   1419. This Order eliminates certain charges paging companies may now be
assessed by LECs and enables paging companies to claim new revenues from LECs
for terminating paging calls. (Section XI.A - Transport and Termination of
Traffic.) Paging companies, including small entities, may thereby incur lower
costs. Such entities also may increase their revenues, depending on the outcome
of any proceedings concerning their termination costs. For the reasons set forth
in Section XI.A.3 above, we cannot conclude, at this time, that a LEC's forward
looking costs may be used as a reasonable proxy for the costs of call
termination by paging providers. We further conclude that the default price for
termination of traffic from the end office that we adopt in this proceeding in
Section XI.A.3 above does not apply to termination of traffic by paging
providers. This default price is based on estimates in the record of the costs
to LECs of termination from the end office or end-office switching.

B. Access to  [*120]   Rights-of-Way

   1420. Summary of Projected Reporting, Recordkeeping, and Other Compliance
Requirements. Small incumbent LECs that meet the definition of a utility n3275
and own poles, ducts, conduits and rights-of-way where access was not previously
mandated are now required to provide access to requesting telecommunications
carriers (other than incumbent LECs and cable television systems) which may
require the use of legal, engineering, and accounting resources for evaluation
and processing of attachment requests. (Section XI.B.2 - Section 224(f):
Non-discriminatory Access.) This may also require small incumbent LECs and small
entities to employ technical personnel to modify pole attachment arrangements.

   n3275 The Act defines "utility" as "any person who is a local exchange
carrier or an electric, gas, water, steam, or other public utility, and who owns
or controls poles, ducts, conduits, or rights-of-way used, in whole or in part,
for any wire communication." 47 U.S.C. @ 224(a)(1).

   1421. A complaint of unjustified denial of access must be supported by a
written request for access, the utility's response, and information supporting
the complainant's position. This will likely  [*121]   impose some recordkeeping
requirements on small incumbent LECs and small entities seeking access to
rights-of-way. Our requirements may also impose administrative requirements,
including legal and engineering expertise, on small governmental jurisdictions
n3276 that resolve disputes arising under the section 224 of the Communications
Act. (Section XI.B.5 - Dispute Resolution.) In addition, small governmental
jurisdictions that have established rules and regulations for access to poles,
ducts and conduits specifically, and interconnection generally, are also likely
to have some level of reporting and recordkeeping requirements for competing
telecommunications carriers that use the poles, some of which may be small
entities. (Section XI.B.6 - Reverse Preemption.)

   n3276 Under the Regulatory Flexibility Act, a "small governmental
jurisdiction" is one type of "small entity," and is defined as the "governments
of cities, counties, towns, townships, villages, school districts, or special
districts with a population of less than fifty thousand . . . ." 5 U.S.C. @
601(5).


   1422. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs, and Alternatives  [*122]   Considered. In placing the
burden of proof on the denying utility with respect to the propriety of a denial
of access, we recognize that new entrants, which may be small entities, are not
likely to have access to such information without cooperation from the
utilities. Complaints should not be dismissed where the petitioner was unable to
obtain a written response from the denying utility, or where the utility also
denied the petitioner any relevant information needed to establish a prima facie
case. These provisions should allow an entrant to pursue a claim without the
need for expensive discovery, and should not preclude or discourage entities
with limited resources from seeking redress where access is denied. (Section
XI.B.5 - Dispute Resolution.) For the reasons set forth in Section XI.B.5, we
reject the recommendation that an applicant be allowed to seek injunctive relief
in federal court and select federal jurisdiction for enforcement or appeal of
any matter regarding pole attachments. Our conclusion that state and local pole
attachment requirements are presumed reasonable may minimize burdens on small
governmental jurisdictions by preserving existing rules and procedures, and
[*123]   the local government's expertise with its own rules. (Section XI.B.2 -
Specific Rules.) In reaching this result, we reject the alternative of
invalidating such state regulations in favor of federal rules for the reasons
stated in Section XI.B.2. Our determination not to prescribe numerous specific
rules in this area recognizes the varying technologies and facilities deployed
by incumbent LECs, including small incumbent LECs. For example, we recognize
that utilities, including small incumbent LECs, normally have their own
operating standards that dictate conditions of access. Thus, we leave in place
such conditions of access. For the reasons set forth in Section XI.B.1, we
reject the alternative of prescribing a comprehensive set of substantive
engineering standards governing access to rights-of-way.

   1423. When an attaching entity modifies poles for its use, it will be
entitled to recover a share of its expenses from any later-attaching entities.
(Section XI.B.4 - Modifications.) This should permit attaching entities that
modify poles, some of which may be small entities, to bear only their
proportionate costs and prevent them from effectively subsidizing their
later-entering competitors.   [*124]   The requirement that utilities provide
attaching entities with 60 days' notice prior to commencing modifications to any
pole, duct or conduit should provide attaching entities, some of which may be
small entities, with sufficient time to evaluate the impact of the proposed
modification on their interests and to plan and coordinate any modifications to
their own attachments. (Id.)

C. Imposing Additional Obligations on LECs that are not Incumbent LECs

   1424. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. Our decisions in this section of the Order do not subject any
small entities to reporting, recordkeeping or other compliance requirements.

   1425. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs, and Alternatives Considered. The determination that
the 1996 Act does not permit the particular obligations for incumbent LECs set
forth in section 251(c) to be imposed on non-incumbent carriers, absent a
finding by the Commission under section 251(h)(2), should limit potential
burdens on new entrants, including small entities. (Section XI.C - Imposing
Obligations on LECs that are not Incumbent LECs.)

   Summary  [*125]   Analysis of Section XII

   EXEMPTIONS, SUSPENSIONS AND MODIFICATIONS OF SECTION 251 REQUIREMENTS

   1426. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. Section 251(f)(1) grants rural telephone companies, which may be
small incumbent LECs, an exemption from the requirements of section 251(c)
(which only apply to incumbent LECs) until the rural telephone company has
received a bona fide request for interconnection, services, or network elements,
and the state determines that the exemption should be terminated. Section
251(f)(2) provides that LECs with fewer than two percent of the nation's
subscriber lines may petition a state commission for a suspension or
modification of any requirements of sections 251(b) and 251(c). The latter
provision, section 251(f)(2), is available to all LECs including competitive
LECs, which may be small entities.



   1427. After a carrier has made a bona fide request under Section 251, a rural
telephone company, which may be a small incumbent LEC, seeking to retain its
exemption under section 251(f)(1) must prove to the state commission that it
should retain its exemption. To remove the exemption, a state commission must
find that  [*126]   the bona fide interconnection request is not unduly
economically burdensome, is technically feasible, and is consistent with section
254. The parties involved in such a proceeding may need to use legal,
accounting, economic and/or engineering services. A small incumbent LEC or a
competitive LEC, which may be a small entity, seeking under 251(f)(2) to modify
or suspend the national interconnection requirements imposed by section 251(b)
or 251(c) bears the burden of proving that interconnection would: (1) create a
significant adverse economic impact on telecommunications users; (2) be unduly
economically burdensome; or (3) be technically infeasible.

   1428. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs, and Alternatives Considered. As set forth in Section
XII above, the determination whether a section 251(f) exemption, suspension, or
modification should be continued or granted lies primarily with the relevant
state commission. By largely leaving this determination to the states, our
decisions permit this fact-specific inquiry to be administered in a manner that
minimizes regulatory burdens and the economic impact on small entities and
[*127]   small incumbent LECs. However, to further minimize regulatory burdens
and minimize the economic impact of our decision, we adopt several rules as set
forth in Section XII above, which may facilitate the efficient resolution of
such inquiries, provide guidance, and minimize uncertainty. As set forth in
Section XII above, we find that the rural LEC or smaller LEC must prove to the
state commission that the financial harm shown to justify an exemption,
suspension, or modification would be greater than the harm that might typically
be expected as a result of competition. Finally, we conclude that section 251(f)
adequately provides for varying treatment for smaller or rural LECs where such
variances are justified. As a result, we expect that section 251(f) will
significantly minimize regulatory burdens and economic impacts from the rules
adopted in this Order.

   Summary Analysis of Section XIII

   ADVANCED TELECOMMUNICATIONS CAPABILITIES

   1429. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. Our decision to defer consideration of rules in this section of
the Order does not subject any small entities or small incumbent LECs to
reporting, recordkeeping or other  [*128]   compliance requirements.

   1430. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs, and Alternatives Considered. We do not anticipate that
our decision to defer consideration of rules in this section of the Order will
have any economic impact on small entities or small incumbent LECs.

   Summary Analysis of Section XIV

   PROVISIONS OF SECTION 252


A. Arbitration Process
   1431. Summary of Projected Reporting, Recordkeeping, and Other Compliance
Requirements. Pursuant to section 252(b)(1), a party to negotiation may petition
a state commission to arbitrate any open issues. Small entities and small
incumbent LECs negotiating interconnection agreements may, therefore,
participate in state arbitration in order to obtain an interconnection
agreement, which may impose significant legal costs. (Section XIV.A -
Arbitration Process.) Section 252(e)(5) requires the Commission to assume the
state's responsibility under section 252 if the state "fails to act to carry out
its responsibility" under the section. We require an aggrieved party, which may
be a small entity or a small incumbent LEC, to notify the FCC that a state
commission has failed to act  [*129]   under section 252 by filing a detailed
written petition, backed by affidavit. As set forth above in Section XIV.A, if
the Commission, following a notice and comment period, determines that the state
has failed to act, the Commission will assume authority under section 252(e)(5)
and mediate or arbitrate the dispute. This process may also entail significant
legal expertise.

   1432. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs, and Alternatives Considered. In this Order, the
Commission adopts a minimum set of rules that will provide notice of the
standards and procedures that the Commission will use if it has to assume the
responsibility of a state commission under section 252(e)(5). These rules should
benefit small entities and small incumbent LECs by limiting uncertainty and
minimizing transaction costs associated with the arbitration process. (Section
XIV.A - Arbitration Process.)

   1433. The Commission concludes that, if it arbitrates agreements, it will use
a "final offer" arbitration method, whereby each party to the arbitration
proposes its best and final offer, and the arbitrator chooses between the
proposals. The arbitrator may  [*130]   choose either proposal in its entirety,
or could choose different parties' proposals on an issue-by-issue basis. This
method of arbitration should minimize the economic impact on small entities and
small incumbent LECs by reducing the transaction costs associated with
arbitration. Our rules should also encourage parties, to negotiate after offers
are submitted which should provide additional flexibility for parties including
small entities and small incumbent LECs, to agree to a resolution tailored to
their interests. (Section XIV.A - Arbitration Process.)

   1434. For the reasons set forth above in Section XIV.A, we reject the
alternative of adopting national rules governing state arbitration procedures.
We believe the states are in a better position to develop mediation and
arbitration rules that support the objectives of the 1996 Act. States may
develop specific measures that best address the concerns of small entities and
small incumbent LECs participating in mediation or arbitration.

   1435. As set forth above in Section XIV.A, we reject the suggestion that the
Commission return jurisdiction over an arbitration to the state commission. We
further reject the argument that, once the  [*131]   Commission has mediated or
arbitrated an agreement, the agreement must be submitted to the state commission
for approval under state law. We decline to adopt the alternative suggested by
some parties that, if the Commission steps into the state commission role, it is
bound by state laws and standards that would have applied to the state
commission. (Section XIV.A - Arbitration Process).



   1436. As explained above in Section XIV.A, we also reject the alternative
that an arbitrated agreement not be binding on the parties. Finally, we reject
the alternative of opening the arbitration process to all third parties, which
should minimize the costs involved in such proceedings.

B. Section 252(i)

   1437. Summary of Projected Reporting, Recordkeeping and Other Compliance
Requirements. Our decisions in this section of the Order do not subject any
small entities to reporting, recordkeeping or other compliance requirements.
Incumbent LECs, including small incumbent LECs, are required to file with state
commissions all interconnection agreements entered into with other carriers,
including adjacent incumbent LECs. Incumbent LECs must also permit third parties
to obtain any individual interconnection,   [*132]   service or network element
arrangement on the same terms and conditions as those contained in any agreement
approved under section 252. Moreover, incumbent LECs must prove with specificity
that terms and conditions contained in filed agreements are legitimately related
to the purchase of the individual element or service being sought. Incumbent
LECs must provide "most favored nation" status with regard to subsequent
carriers regardless of whether they include "most favored nation" clauses in
their agreements. Complying with these requirements may require small incumbent
LECs and requesting small entities to use legal and negotiation skills.

   1438. Steps Taken to Minimize Significant Economic Impact on Small Entities
and Small Incumbent LECs, and Alternatives Considered. Our decision to adopt
national standards to implement section 252(i) should minimize the economic
impact of our decision on both small entities and small incumbent LECs by
expediting the resolution of disputes, thereby reducing transaction costs
associated with interconnection. Our decision that section 252(i) permits
requesting carriers to choose among individual provisions contained in
publicly-filed interconnection  [*133]   agreements should minimize the economic
impact for small new entrants by permitting them to obtain the provisions they
desire without having to adopt entire agreements that would not reflect their
costs or the specific technical characteristics of their networks. (Section
XIV.B - Section 252(i).) Moreover, small entities may be able to obtain the same
terms and conditions of agreements reached by larger carriers that possess
greater bargaining power without having to incur the costs of negotiation and/or
arbitration.

   1439. We also determine that publicly-filed agreements need only be made
available to carriers who cause incumbent LECs to incur no greater costs than
did the original carrier, which should minimize the economic impact on small
incumbent LECs. We also minimize the regulatory burden for small entities and
small incumbent LECs by finding that a new entrant seeking interconnection,
network elements, or services pursuant to section 252(i) need not make such
requests pursuant to the procedures for initial section 251 requests, but shall
be permitted to obtain access to agreements on an expedited basis.


   1440. As set forth above, we conclude that section 252(i) permits
differential  [*134]   treatment of carriers based on differences in the costs
of serving those carriers, but does not permit incumbent LECs to limit the
availability of interconnection, services, or network elements only to those
requesting carriers serving a comparable class of subscribers or providing the
same service as the original party to the agreement. (Section XIV - Section
252(i).) These decisions should minimize the impact on small entities by
preventing discrimination and enabling them to obtain the same terms and
conditions as larger carriers that possess greater bargaining power. For the
reasons set forth in Section XIV, we reject the interpretation favored by
commenters arguing that new entrants should not be able to choose among
provisions of interconnection agreements filed with state commissions.

   E. Report to Congress

   1441. The Commission shall send a copy of this FRFA, along with this Order,
in a report to Congress pursuant to the Small Business Regulatory Enforcement
Fairness Act of 1996, 5 U.S.C. @ 801(a)(1)(A). A copy of this FRFA will also be
published in the Federal Register.

   XVI. ORDERING CLAUSES

   1442. Accordingly, IT IS ORDERED that, pursuant to Sections 1-4, 201-205,
214,   [*135]   224 251, 252, and 303(r) of the Communications Act of 1934, as
amended, and Section 601 of the Telecommunications Act of 1996, 47 U.S.C. @@
151-154, 201-205, 224, 251, 252, 303(r) and 601, the REPORT AND ORDER IS
ADOPTED, effective 30 days after publication of a summary in the Federal
Register. The collections of information contained within are contingent upon
approval by the Office of Management and Budget.

   1443. IT IS FURTHER ORDERED that Part 51 of the Commission's rules, 47 C.F.R.
@ 51 is ADDED as set forth in Appendix B hereto.

   1444. IT IS FURTHER ORDERED that, to the extent issues from CC Docket No.
95-185, In the Matter of Interconnection Between Local Exchange Carriers and
Commercial Mobile Service Providers, are resolved here, we incorporate the
relevant portions of the record in that docket.

   1445. IT IS FURTHER ORDERED that, to the extent issues from CC Docket No.
91-346, In the Matter of Intelligent Networks, are resolved here, we incorporate
the relevant portions of the record in that docket.

   1446. IT IS FURTHER ORDERED, in light of the United States Court of Appeals
for the District of Columbia Circuit in Pacific Bell v. FCC, 81 F.3d 1147 (D.C.
Cir. 1996) (table)   [*136]   and the Telecommunications Act of 1996, that the
rules and policies adopted in Expanded Interconnection with Local Telephone
Company Facilities, CC Docket No. 91-141, 9 FCC Rcd 5154 (1994), shall remain in
effect.

   FEDERAL COMMUNICATIONS COMMISSION

   William F. Caton

   Acting Secretary

CONCURBY: HUNDT; QUELLO; NESS; CHONG

CONCUR:
   August 8, 1996


   In the Matter of Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996 (CC Docket No. 96-98) and Interconnection
between Local Exchange Carriers and Commercial Mobile Radio Service Providers
(CC Docket No. 95-185)

   Separate Statement of Chairman Reed E. Hundt

   This order is the most pro-competitive action of government since the
break-up of the Standard Oil Trust. I hope the whole country will join in common
acknowledgement of all those who made this possible.

   The private sector was ably represented, and provided us with much useful
information and suggestions.

   I specifically acknowledge and thank my colleagues, Commissioners Quello,
Ness and Chong, and their staffs, all of whom contributed greatly throughout
this process.

   I would also especially thank Cheryl Parrino, President of the National
Association of Regulatory Utility  [*137]   Commissioners. Her advice and
counsel have been invaluable. Than also go to the two individuals who served as
Chair of NARUC's Communications Committee during this period, Ken McClure and
Lisa Rosenblum. I also thank the many other state commissioners from around the
country who took time to discuss these matters with us, and who sent their
staffs here for extended meetings on all these issues. I would also especially
thank Chairman Dan Miller of the Illinois Commerce Committee who detailed one of
his staff members, Augie Ros, to the FCC.

   I owe a special debt of gratitude and respect to John Nakahata, my Senior
Legal Adviser. John's brilliant, indefatigable, incisive and comprehensive work
was essential to the triumph of analysis and policy that is in this order.

   The highest commendations, however, go to the FCC staff, superbly led by
Regina Keeney and Richard Metzger. I would like specifically to recognize each
of the dedicated members of the Commission's staff who contributed to this
effort, and I apologize if I have inadvertently omitted anyone:

COMMON CARRIER BUREAU

Competitive Pricing Division


Jay Atkinson
Dana Bradford
C. Anthony Bush
Paul D'Ari
Whitney Fox
Aaron  [*138]   Goldschmidt
Lori Huthoefer
Jane Jackson
Cameron Kashani
Dave Konuch
Ed Krachmer
Rich Lerner
Jim Schlichting
Katherine Schroder
John Scott
Les Selzer
Raj Kannan
Bill Sharkey
David Sieradzki
Doug Slotten
Joel Taubenblatt
Matt Warren
Steve Weingarten
Kevin Werbach
Brad Wimmer

Policy and Program Planning Division


Craig Brown
Michelle Carey
Patrick Degraba
David Ellen
Kathleen Franco
Paul Gallant
Lisa Gelb
Jason Grant
Florence Grasso
James Graves
Adam Guglielmo
Kalpak Gude
Matt Harthun
Christopher Heimann
Cindy Jackson
Radhika Karmarkar
Jason Karp
Linda Kinney
Anil Koshy
Stuart Kupinsky
Cheryl Leanza
Mindy Littell
Debbie Maisel
Carol Mattey
Robert McDonald
Susan McMaster
Makysha J. Moton
Janice M. Myles
Brent Olson
Claudia Pabo
Staci Pies
Michael Pryor
Augie Ros
Tonya Rutherford
Cecilia Sangley
Blaise Scinto
Ann Stevens
Donald Stockdale
Jeannie Su
Robert Tanner
Melissa Waksman
Richard Welch
Tracy Wilson
Jim Yancey

Accounting and Audits Division

Ken Moran
David Ahn
Leo Bridge
Chuck Needy

Enforcement Division

Adrien Auger
Anita Cheng
John Muleta

Industry Analysis Division

Tom Beers
Nasir Khilji
Jim  [*139]   Lande
Peyton Wynns

Network Services Division

Judy Albert
Renee Alexander
Lisa Boehley
Rich Cameron
Erin Duffy
Andy Firth
Octavia Florence
Gregory Forbes
Mary DeLuca
Pam Gerr
Marian Gordon
Bill Howden
Amy Lesch
Geri Matise
Kent Nilsson
Vin Paladini
Scott Shefferman

Office of the Bureau Chief


Regina Keeney
Kathie Levitz
Richard Metzger
Mary Beth Richards
Larry Atlas
Greg Rosston
Anna Gomez
Melissa Newman
Tim Peterson
Mindy J. Ginsburg
Andre Copelin
Shirley Chisolm
Lisa Bray
Chris Day
Brian Hughes

INTERNATIONAL BUREAU

Don Gips
Ruth Milkman
Fern Jarmulnek
Kerry Murray
Susan O'Connell

CABLE SERVICES BUREAU

Meredith Jones
John Logan
Libby Beaty
Barbara Esbin
Paul Glenchur
Alexis Johns
JoAnn Lucanik
Mike McMenamin
Tom Power
Len Smith
Les Smith
Nancy Stevenson

OFFICE OF GENERAL COUNSEL

Bill Kennard
Margie Bertman
Nick Bourne
Pat Carney
Sharon Diskin
Doron Fertig
Sheldon Guttmann
John Ingle
Aliza Katz
Joel Kaufman
Tom Koutsky
Jeff Lanning
Sev MacPete
Jim Olson
Sonja Rifken
Larry Schecker
David Solomon
Susan Steiman
Suzanne Tetreault
Debra Weiner
Chris Wright

OFFICE OF ENGINEERING AND TECHNOLOGY  [*140]


Jim Keegan
Bob Kimball

OFFICE OF PLANS AND POLICY

Joe Farrell
Bob Pepper
Elliot Maxwell

OFFICE OF PUBLIC AFFAIRS

Susan Lewis Sallet

WIRELESS TELECOMMUNICATIONS BUREAU

Michele Farquhar
Karen Brinkmann
Jim Coltharp
Walt Strack
Daniel Grosh
Kathy O'Brien
Jeff Steinburg
Rhonda Lien
Zenji Nakazawa
David Nall
Jay Markley

PRINTING AND GRAPHICS BRANCH

Dan Walker
Tyrone Campfield
Ronnie Murray
Carlyn Walker

   STATEMENT OF COMMISSIONER JAMES H. QUELLO

   August 8, 1996

Re: Interconnection Report and Order

Today marks the end of the pre-competitive era in local telephone service. By
our vote today the Commission implements rules that will introduce competition
into this last monopoly telecommunications market.

Our Report and Order refers to these rules as the first part of a trilogy that
also includes future universal service and access charge reform. This is, to be
sure, true. But I must confess that I also see today's action as not the first,
but rather the third and final part, of a different trilogy -- one whose first
two parts were the introduction of competition into the long-distance telephone
market and the divestiture of the Bell Operating  [*141]   Companies from AT&T.
These first two events made local telephone competition inevitable; today we
usher it in.


Any Commissioner would be privileged to have served during one of these events.
I have been lucky enough to have seen all three. From this perspective, then, I
would offer several thoughts to the parties most immediately affected by
today's decision.

First, to the public, I would say: unparalleled changes in the array of
telecommunications services available to you, as well as in the companies that
provide them, are going to occur. As competition proliferates and prices fall,
economic growth will also occur, and that too will benefit all of us. This is
the vision of the 1996 Act, and it is the goal of the rules we adopt today.

To those companies that seek to offer competitive local telephone service, I
would say: the rules we adopt today attempt to provide the regulatory assistance
you need to enter a market in which your competitor not only possesses a
monopoly, but also controls the facilities upon which you must depend to
compete. But even so, our rules are pro-competition, not pro-competitor. They
are intended to make it possible for you to enter the market on  [*142]   fair
and equitable terms, but not to so alter the market that entry occurs even where
it otherwise might not. We have opened the door, but we have not paved the way.

To the wireless communications providers, I would say: we have heard and
understand your concerns regarding the differences in your technical and market
configurations and have, therefore, expressly reserved federal jurisdiction
under Section 332. Nevertheless, it is important that our decisions implementing
competition be technology-neutral and provide an opportunity for negotiations
under the comprehensive interconnection regime embodied by Congress in Section
251. We will presume good faith negotiations by all but stand ever vigilant to
consider and resolve instances of discriminatory treatment.

To our state commission counterparts, I would say: with today's action, we
effectively pass you the pen. It is now your responsibility to write the rules
and set the prices and terms that will make Congress's vision of competition a
reality. To provide added flexibility and to make this process administratively
easier, we have also provided ranges of proxy prices that can be used until, or
even instead of, state-specific  [*143]   rates are set. Our decision today
borrows from and builds on the experience of those of you who are grappling with
statewide competition issues. This has, in sum, been a collaborative process. It
must continue to be a collaborative process if we are collectively to succeed.

To small telephone companies, I would say: our Report and Order relies largely
on state commissions to implement the provisions of the law that ensure that
competition will be introduced in a way that is sensitive to your unique
circumstances. We cannot, and indeed would not want to, perpetuate what one
small company has called a "reasonable, investment-backed expectation to hold
competitive advantages over new market entrants." But while we will not
guarantee your current profit margins, we are also confident that state
decisions will assure that competition in your service areas will take hold in a
reasonable manner.

To the Bell Operating Companies and other large independent local telcos, I
would say: these rules will bring about competition. You will open your markets
to competitors, and in return you will become competitors in other markets. The
rules we adopt today will enable you to do both things.   [*144]   What they
will not enable you to do is avoid the first, but obtain the second. These rules
will bring change, not catastrophe; they will bring opportunity, not oblivion.
It will be a different world, but one in which you will continue to play a vital
role.


Finally, I must acknowledge that this day would not have come without the
tireless dedication and tremendous talents of Gina Keeney and her gifted Common
Carrier Bureau staff. The Chairman will, I am sure, commend each of you at
length, and I will leave that privilege to him. For my part I want to express my
thanks to the entire CCB "Dream Team," and especially to its captain, Richard
Metzger. This job could literally not have been done this well in such short
time without you, and for that you have my profound respect and appreciation.

   SEPARATE STATEMENT OF COMMISSIONER SUSAN NESS

Re: Implementation of the Local Competition Provisions of the Telecommunications
Act of 1996

Today we are fulfilling one of the most important responsibilities assigned to
us by the Telecommunications Act of 1996 -- writing the rules that will achieve
Congress's vision of fair and robust competition in all telecommunications
markets. We are   [*145]   doing so with utmost fidelity to the letter and the
spirit of the statute.

At the heart of the legislation is a bold commitment to supplant monopoly with
competition. Based on the abundant benefits that have flowed to consumers as a
result of competition in the provision of long distance services, information
services, and customer-premises equipment, Congress decreed that the opportunity
for competition be extended to the local telephone market. It ordered that
barriers to entry be swept aside -- and that pathways to competitive entry be
opened.

Sections 251 and 252 of the 1996 Act establish the foundation for this
competition. On this foundation must be built radically different relationships
than those that have previously existed -- between incumbent local exchange
carriers and new entrants, between state and federal regulators, and between
regulators and industry.

Congress recognizes that, to effectuate a new policy of local competition for
markets that have traditionally been protected monopolies, a national policy
framework is essential. But it also recognizes the need for flexibility. This
balance is reflected in the 1996 Act, which sets forth the key principles in
[*146]   the statute, instructs this Commission to formulate implementing
regulations, and assigns many of the duties pertaining to specific carriers and
agreements to the state commissions.

At the same time, Congress encouraged voluntary negotiations between incumbent
local exchange carriers and new entrants. Although voluntary agreements are not
subject to Section 251 and our implementing regulations, we are aware that the
negotiations may be influenced by the legislative and regulatory regime for
arbitrated agreements. The "backdrop" of our rules should encourage, not impede,
the successful negotiation of voluntary agreements.


The 1996 Act intends that the benefits of competition be available in all 50
states, not some lesser number. Congress recognized that some states were
already making progress in the introduction of local competition, and it sought
to permit that progress to continue. Consistent with the statute, the rules we
promulgate today will enable those states in the vanguard to continue on their
pro-competitive course. Other states are being given the tools necessary to
accelerate their progress. All states will have considerable responsibility
for effectuating the transition  [*147]   to competition within their own
borders.

Our decisions in this proceeding are the product of extensive discussions with
state regulators concerning a wide variety of legal, economic, policy, and
practical issues. The insights that have been shared with us by state regulators
have guided us throughout our deliberations. Maintaining a successful
partnership between state and federal regulators will be essential to fulfill
the legislative expectations underlying the new structure set out in Sections
251 and 252 of the 1996 Act.

Our duty is to establish rules that are pro-competition, not pro-competitor.
Competitive access providers, cable companies, interexchange carriers, wireless
companies, and others will all bring unique skills and strategies to the new
competitive arena. Today's ruling, and the decisions that will follow from the
state commissions, will enable all of these entities to compete robustly, and
without hindrance based on other entities' entrenched market power.

In today's order, we are also facilitating new entry by identifying a core set
of unbundled network elements that new entrants may obtain, singly or in
combination, from incumbent LECs, to create new   [*148]   and innovative
services. We send correct economic signals to potential entrants by requiring
the use of forward-looking pricing principles. We promote voluntary negotiations
by establishing minimal rules regarding the duty to bargain in good faith. We
are providing immediate relief from CMRS-LEC interconnection agreements that
violate fair play and flout our existing rules. In these and other respects, we
act forcefully to bring to the local telephone market the dramatic change
Congress intended.

Yet we also maintain fair treatment to the incumbent local exchange carriers.
They. are entitled to fair prices for the services and elements they offer, and
our pricing principles accordingly reject costing methods that ignore the LECs'
current network architecture or deny recovery of reasonable joint and common
costs. The special needs of smaller incumbents, especially rural telcos, must be
addressed with extra care, and just as Congress intended, we safeguard them
today.

Some have expressed concern about the effect on universal service of flash-cut
changes in market rules and pricing principles. We have listened -- and
responded. With an abundance of caution, we have established an  [*149]   access
charge transition of limited duration that will reduce the exposure of incumbent
local exchange carriers to the sudden loss of access charge revenues. But we
have also established for the long-term the principle that prices for network
elements, transport and termination, and collocation must be based on costs --
not hidden subsidies that distort market forces.

We have committed to expeditious completion of the universal service proceeding,
where we must make subsidies explicit and both eligibility and funding must
become competitively neutral. On a parallel track, we must complete reform of
access charges, to eliminate uneconomic incentives that distort investment
decisions. A rational economic structure for all services and elements is vital
to sustainable competition.


Only when the universal service, access reform, and interconnection rules are
all in effect will local telephone subscribers really begin to see the full
benefits of marketplace competition: lower prices, new services, and more
choices. As market power wanes, the role of government will diminish as well.

Competition will take time to emerge. Expectations are high, but the reality
will inevitably lag  [*150]   behind. As the process unfolds over the coming
months and years, there are bound to be unforeseen circumstances, unintended
consequences, and efforts to game the process. We will remain vigilant, and will
reevaluate and refine our rules as necessary to promote competition that is both
robust and fair.

Following the mandate of the Telecommunications Act of 1996, this Commission
will not shrink from taking the steps necessary to enable the benefits of
competition to reach consumers throughout the nation.

   August 8, 1996

   Separate Statement of Commissioner Rachelle B. Chong

Re: In the Matter of Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996, CC Docket No. 96-98; Interconnection between
Local Exchange Carriers and Commercial Mobile Radio Service Providers, CC Docket
No. 95-185; Implementation of Sections 3(n) and 332 of the Communications Act,
GN Docket No. 93-252.

   The passage of the Telecommunications Act of 1996 n1 marked the end of more
than sixty years of monopoly style regulation. The changes wrought by the 1996
Act on the telephone industry are dramatic and comprehensive. I write separately
to emphasize my strong belief that the pro-competitive  [*151]   path we have
unanimously chosen in this interconnection order is the right one.

n1 Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 to be
codified at 47 U.S.C. @@ 151 et. seq. (1996 Act).

   On the day the 1996 Act became law, the Commission embarked on a challenging
journey to help implement the new statute. Our final destination has been
clearly delineated by Congress. We are "to provide for a pro-competitive,
de-regulatory national policy framework designed to accelerate rapidly private
sector deployment of advanced telecommunications and information technologies
and services to all Americans by opening all telecommunications markets to
competition." n2

n2 S. Conf. Rep. No. 104-230, 104th Cong., 2d Sess. 1 (1996).

   True to this charge, we have resolved to act quickly and decisively to open
all telecommunications markets to competition, to provide pricing methodologies
that will drive rates toward cost, and to provide a national policy framework
that will achieve this restructuring of the industry in an orderly and efficient
manner. The rules in this item do not favor any particular industry or player
over another, but instead free them from outdated   [*152]   regulatory
restraints in order to compete with each other.


   The 1996 Act opens up the local telephone network to competitors, and
provides them with unprecedented access through an interconnection framework. n3
The Act provides three methods of entry through which a competitor may enter the
local telephone market: (1) full facilities-based entry; (2) purchase of
unbundled elements from the incumbent local exchange carrier (LEC), i.e. network
"piece parts;" and (3) resale, which gives a competitor the ability to purchase
an incumbent LEC's retail service at a wholesale price and repackage it for sale
to the competitor's own end user.

n3 Interconnection refers to the physical linking of two networks for the mutual
exchange of traffic.

   Facilities-based Competition. The first entry option -- facilities-based
competition -- represents the most dramatic departure from our current
bottleneck monopoly structure. A full facilities-based competitor would offer a
myriad of distinct services through separate facilities to its subscribers, and
thus providing consumers with the benefits of head-to-head competition. As a
practical matter, however, we do not expect a market typified by full-fledged
[*153]   facilities-based competition to blossom overnight. These networks or
systems must be planned, financed and constructed over time. As a result, the
other two entry avenues -- the purchase of unbundled elements and resale -- take
on a special importance in the near term to bring swift competition to the local
marketplace.

   Unbundled Elements. Some new entrants already have some network
infrastructure in place, and lack only a few critical components in order to
provide local exchange service to consumers. For example, today's cable
operators have a coaxial wire that passes over 96.6% of the TV households in
America. n4 If a cable operator can access the remaining necessary network
elements from the incumbent LEC, the cable operator would be only a step away
from providing local telephone service over its upgraded network. This example
points out why it is essential for new entrants to obtain access to those
network piece parts. In our order, we set forth a minimum list of unbundled
network elements that incumbent LECs uniformly must make available to new
entrants upon request. The state commissions may expand upon this list. We
believe that this action will give new entrants what they  [*154]   need so
competition is "jump started."

n4 Paul Kagan Associates, Inc., Marketing New Media, Mar. 18, 1996.

   Resale. Resale is another critically important entry strategy because three
types of new entrants stand to benefit. First, facilities-based. competitors
that want to immediately enter the market prior to completing their own networks
can use resale as a transition mechanism. Second, facilities-based competitors
whose existing infrastructure does not overlap the incumbent LEC's service area,
may choose to use resale to ensure that it can offer a competing local service
package within the same service territory as the incumbent LEC. Third, new
entrants who do not intend to offer facilities-based competition will be able to
compete immediately in the local market by purchasing discounted services of the
incumbent LEC. For all of these categories, our decision provides a viable
avenue for immediate market entry.

   Free Market Negotiations. I highlight that the 1996 Act has made the
mechanism for entry a free market negotiation process between the incumbent LEC
and any potential new competitor. Under Section 252(a)(1), the Commission's
Section 251 rules play no role if an incumbent  [*155]   LEC and a new entrant
reach a purely voluntary agreement, and the state commission approves it through
the process set forth in Section 252.



   Need for Minimum National Baselines. It is only if the carriers are
unsuccessful in their voluntary negotiations that government steps in. The Act
provides that the state commissions arbitrate the disputes. In today's order, we
set forth a baseline of terms and conditions for an arbitrated interconnection
agreement. I support this action for three reasons. First, because
interconnection matters are very complex and technical, I believe that minimum
national guidelines will help parties lower their transaction costs and will
help drive them to reach their voluntary agreements much faster. At the outset
of their voluntary negotiations, parties will understand what their minimum
rights will be in a subsequent state commission arbitration process; it is our
hope this may encourage earlier agreement.

   Second, a baseline of terms and conditions simplifies the state commission
arbitration process. A baseline enables a state commission to quickly approve an
agreement and thus rapidly introduce competition. The presence of a baseline
minimizes any regulatory  [*156]   delay that might result if a state commission
were to establish from scratch its own pricing methodology or conduct a
proceeding to identify network elements that must be unbundled.

   Third, in establishing some national minimum baselines, we greatly aid new
entrants who have national or regional strategies. Without such baselines, these
competitors would face a "patchwork quilt" of differing state regulatory
requirements that may create a potential entry barrier by increasing their entry
costs and causing substantial delay. Thus, it is my view that these baselines
promote swift competitive entry, which in turn will lead to the earlier
introduction of competitive services to consumers.

   Access Charge Transition. Although we take a great leap forward toward
competition with this interconnection order, our goal in making local telephone
competition a reality will not be complete until we finish universal service
reform and restructure our current access charge regime. Our order notes that
the Act sets forth a specific time frame by which the Commission must issue
final rules as to interconnection (August 1996) and universal service reform
(May 1997). Because of the time differential   [*157]   between these dates, and
in order to avoid undue disruption of the incumbent LECs' ability to support
universal service, I have supported our decision to require new entrants when
purchasing unbundled elements to pay a portion of certain access charges until
no later than June 30, 1997. My support for the establishment of a short term
access charge transition scheme is premised on the Commission's firm commitment
to complete universal service and access charge reform by the first half of
1997. I underscore my determination that the interim access charge mechanism
proposed herein is of a finite duration. I can foresee no circumstance upon
which it would be extended beyond the dates set forth in our order.

   Pricing Methodology. Prices of interconnection and unbundled elements, along
with prices for transport and termination and resale, are all crucial to any
interconnection agreement. Again, should the parties voluntarily agree on such
prices, these agreements will be submitted to the states for approval and there
is no government intervention in the process.


   If carriers cannot agree, however, today's decision makes clear that the FCC
will not set these prices. The Act provides that  [*158]   the appropriate state
commission will step in to set prices. To help guide state commissions as they
set prices according to local conditions, we have established methodological
pricing principles that are consistent with the Act's cost-based pricing
provisions. We have asked the state commissions to use the cost-based pricing
methodology described in our order when they conduct an economic cost study to
set their state specific rates. A clear benefit of this approach is that such a
national framework will encourage the swift establishment of a common,
pro-competition understanding of pricing principles among the states.

   We also have established certain default proxies that states will use in the
interim, if they have not completed a cost study during an arbitration, or if
they lack the necessary resources to initiate their own cost study. It is my
view that these default proxies, which are either price ceilings or price
ranges, will greatly speed competition. For example, in a situation where the
state commission has not yet completed a cost study but must render a decision
on specific pricing issues in an arbitration pursuant to the deadline imposed by
Section 252(e)(4), the default  [*159]   proxies will assist the state
commission in resolving the pricing issues quickly and in a way consistent with
the Act's cost-based pricing principles.

   I emphasize that a state commission has the flexibility to set a specific
rate that is either above or below the default proxy ceiling or range if it has
conducted its own cost study consistent with the pricing methodology set forth
in our order. The default proxy is only an interim mechanism and it may not be
relied upon once a state commission has completed its own economic cost study.
n5

n5 It is unfortunate that we did not have enough of a record in this proceeding
to decide what would be an appropriate proxy for paging carriers' termination
costs or to set a default proxy. I am committed to moving forward with a further
rulemaking proceeding on this issue as quickly as possible.

   CMRS-LEC Interconnection Issues. In our order, I have supported our decision
to allow CMRS-LEC interconnection matters to be governed by the Sections 251/252
provisions, while continuing to acknowledge our continuing jurisdiction pursuant
to Section 332 over CMRS-LEC interconnection matters. In doing so, we have
declined to opine on the precise   [*160]   extent of our Section 332
jurisdiction over CMRS-LEC interconnection matters, however. I emphasize that by
opting to use the Section 251/252 framework, we are not repealing our Section
332 jurisdiction by implication or rejecting Section 332 as an alternative basis
for jurisdiction.

   While we have generally crafted our interconnection rules not to favor any
particular industry, player or technology over another, we cannot shut our eyes
to inherent differences between some classes of carriers' services that may pose
potential problems when we seek to apply our new interconnection rules. I
believe that should the need arise in the future, we should not hesitate to
adapt some of our general interconnection rules to recognize the unique nature
of particular classes of service providers, such as CMRS providers. It is for
this reason that I supported the Commission's decision to reserve its right to
exercise jurisdiction over LEC-CMRS interconnection under Section 332.


   There are several differences that set wireless CMRS providers apart from
some of the other telecommunications carriers that will avail themselves of the
Sections 251 and 252 interconnection framework. First, when adopting  [*161]
Section 332 in 1993, Congress created a national regulatory framework for CMRS
providers, and granted the FCC authority to preempt states from entry and rate
regulation. Congress made clear that its intent was to "foster the growth and
development of mobile services that, by their nature, operate without regard to
state lines as an integral part of the national telecommunications
infrastructure." n6 This recognition that CMRS services are uniquely interstate
in scope was apt. CMRS service areas, which are established federally, can
encompass more than one state jurisdiction. n7 Congress was rightly concerned
that imposing multiple state regulatory schemes on CMRS providers may prove
unduly burdensome, cause delay, and otherwise inhibit the industry's growth.
Notably, Congress did not repeal Section 332 when it provided new Sections 251
and 252 in the 1996 Act.

n6 H.R. Report No. 103-11, 103rd Cong., 1st Sess. 260 (1993).

n7 For example, Personal Communications Service (PCS) providers in the
Washington - Baltimore Major Trading Area (MTA) are subject to six jurisdictions
-- Pennsylvania, Delaware, Maryland, Virginia, West Virginia and the District of
Columbia -- due to the large size and location of the federally set service
areas. Should one of these PCS providers need to arbitrate an interconnection
agreement pursuant to Section 251 and 252, such PCS provider could be subjected
to as many as six state arbitration proceedings. This scenario could impose
undue burdens, such as increased transaction costs, regulatory delay, and the
potential for inconsistent results, for CMRS providers with interstate service
areas. For this reason, we reserve our right to in the future to use Section 332
as an alternative basis for jurisdiction over CMRS providers faced with this
type of a dilemma.  [*162]

   Second, CMRS providers have suffered past discrimination at the hand of the
LECs and by certain state commissions with regard to interconnection matters.
Today's record is replete with examples of LECs that have significantly
overcharged CMRS providers for past interconnection. Further, in violation of
our rules, our record reflects that in some cases, LECs have refused to pay CMRS
providers for calls terminated by LECs on the CMRS networks, while other
wireline carriers have received such compensation from the LECs. In other
instances, LECs have required certain CMRS providers to pay for the traffic the
LEC carrier originates and terminates on the systems of the CMRS provider. These
problems have been compounded by certain state commissions who have limited
access by CMRS providers to more reasonable interconnection rates afforded by
LECs to other wireline carriers.

   In this order, we have taken a variety of measures to remedy this
discrimination and to ensure that CMRS providers are placed on an even footing
with other telecommunications carriers when obtaining LEC interconnection. I am
particularly pleased that we will allow CMRS providers with current
interconnection agreements  [*163]   that provide for non-mutual compensation an
opportunity to renegotiate those agreements under the framework of Sections
251/252, without incurring any early termination penalties. In light of the past
discrimination CMRS providers have experienced, however, I would have taken two
additional steps.


   First, I would have extended the "fresh look" opportunity to all CMRS
providers -- not just those with non-mutual compensation arrangements. Our
decision was to limit relief in this instance to contracts that are clearly
unlawful because they violate Section 20.11 of our rules. Section 20.11,
however, requires not only that CMRS-LEC interconnection agreements comply with
principles of mutual compensation, but also that each carrier pay reasonable
compensation. I believe that the record in this proceeding clearly
demonstrates that the rates the LECs have charged CMRS providers have far
exceeded their costs and thus could not fairly be characterized as "reasonable"
compensation.

   Second, instead of requiring the CMRS providers to continue paying their
current interconnection rates, I would have permitted CMRS providers to
immediately begin paying the default proxy rate while their interconnection
[*164]   arrangements were being renegotiated.

   It is my hope that on a going-forward basis, CMRS providers will be able to
obtain fair, reasonable and non-discriminatory interconnection rates under the
terms of today's decision. For reasons of simplicity and regulatory parity, it
makes sense to me to have a single regulatory scheme pursuant to Sections 251
and 252 apply as to all incumbent LEC interconnection matters. Bearing in mind
Congress' concerns about the interstate nature of the CMRS industry, however, I
have concerns that the state-by-state arbitration process may pose undue burdens
on, or otherwise hinder the growth of, the CMRS industry. If it does, I would
not hesitate to invoke our Section 332 jurisdiction if I believe that the
framework we impose today is having adverse impacts on the CMRS industry.

APPENDIX: Appendix A

   List of Commenters in CC Docket No. 96-98


360 [degrees] Communications Company (360 Communications)
Ad Hoc Coalition of Corporate Telecommunications Managers
Ad Hoc Telecommunications Users Committee
AirTouch Communications, Inc. (AirTouch)
Alabama Public Service Commission (Alabama Commission)
Alaska Telephone Association (Alaska Tel. Ass'n)
Alaska Public Utilities  [*165]   Commission (Alaska Commission)
Alliance for Public Technology
Allied Association Partners, LP & Geld Information Systems (Allied Ass'n)
ALLTEL Telephone Services Corporation (ALLTEL)
American Communications Services, Inc. (ACSI)
American Foundation for the Blind
American Mobile Telecommunications Association, Inc. (American Mobile Telecomm.
Ass'n)
American Network Exchange, Inc. & U.S. Long Distance, Inc. (American Network
Exchange)
American Personal Communications
American Petroleum Institute
American Public Communications Council
American Public Power Association (APPA)
America's Carriers Telecommunication Association (ACTA)
Ameritech
Anchorage Telephone Utility (Anchorage Tel. Utility)
Arch Communications Group, Inc. (Arch)
Arizona Corporation Commission (Arizona Commission)
Association for Study of Afro-American Life and History, Inc. (ASALH)
Association for Local Telecommunications Services (ALTS)
Association of Telemessaging Services International
AT&T Corp. (AT&T)
Attorneys General of Connecticut, Delaware, Illinois, Iowa, Massachusetts,
Michigan, Minnesota, Missouri, New York, North Dakota, Pennsylvania, West
Virginia and Wisconsin (Attorneys General)   [*166]
Bay Springs Telephone Co., Crockett Telephone Co., National Telephone Company of
Alabama, Peoples Telephone Company, Roanoke Telephone Co. & West Tennessee
Telephone Company (Bay Springs, et al.)


Black Data Processing Associates
Black Data Processors Association (Black Data Processors Ass'n)
Bell Atlantic Telephone Companies (Bell Atlantic)
Bell Atlantic NYNEX Mobile, Inc. (Bell Atlantic NYNEX Mobile)
BellSouth Corporation, Bell Enterprises, Inc., Bellsouth Telecommunications,
Inc. (BellSouth)
Bogue, Kansas
Buckeye Cablevision, Inc. (Buckeye Cablevision)
Cable & Wireless, Inc. (Cable & Wireless)
Cellular Telecommunications Industry Association (CTIA)
Celpage, Inc. (Celpage)
Centennial Cellular Corp.
Chrysler Minority Dealers Association (Chrysler Minority Dealers Ass'n)
Cincinnati Bell Telephone Company (Cincinnati Bell)
Citizens Utilities Company (Citizens Utilities)
Classic Telephone, Inc. (Classic Tel.)
Colorado Independent Telephone Association (Colorado Independent Tel. Ass'n)
Colorado Public Utilities Commission (Colorado Commission)
COMAV, Corp. (COMAV)
Comcast Cellular Communications, Inc. (Comcast Cellular)
Comcast Corporation (Comcast)
Communications  [*167]   and Energy Dispute Resolution Associates (CEDRA)
Competition Policy Institute
Competitive Telecommunications Association (CompTel)
Connecticut Department of Public Utility Control (Connecticut Commission)
Consumer Federation of America & Consumers Union (CFA/CU)
Consumer Project on Technology on Interconnection & Unbundling (Consumer
Project)
Continental Cablevision, Inc. (Continental)
Cox Communications, Inc. (Cox)
Defense, Secretary of
DeSoto County, Mississippi Economic Development Council
District of Columbia Public Service Commission (District of Columbia Commission)
Economides, Nicholas (N. Economides)
Ericsson Corporation, The (Ericsson)
Excel Telecommunications, Inc. (Excel)
Florida Public Service Commission (Florida Commission)
Fred Williamson & Associates, Inc. (F. Williamson)
Frontier Corporation (Frontier)
General Communication, Inc. (GCI)
General Services Administration/Department of Defense (GSA/DOD)
Georgia Public Service Commission (Georgia Commission)
Greater Washington Urban League
GST Telecom, Inc. (GST)
GTE Service Corporation (GTE)
Guam Telephone Authority
GVNW Inc./Management (GVNW)
Hart Engineers/Robert A. Hart, IV (Hart Engineers)
[*168]   Hawaii Public Utilities Commission (Hawaii Commission)
Home Telephone Company, Inc. (Home Tel.)
Hyperion Telecommunications, Inc. (Hyperion)
Idaho Public Utilities Commission (Idaho Commission)
Illinois Commerce Commission (Illinois Commission)
Illinois Independent Telephone Association (Illinois Ind. Tel. Ass'n)
Independent Cable & Telecommunications Association (Ind. Cable & Telecomm.
Ass'n)
Independent Data Communications Manufacturers Association (IDCMA)
Indiana Utility Regulatory Commission Staff (Indiana Commission Staff)
Information Technology Industry Council (ITIC)
Intelcom Group (U.S.A.), Inc. (Intelcom)
Intermedia Communications, Inc. (Intermedia)
International Communications Association (Intl. Comm. Ass'n)
Iowa Utilities Board (Iowa Commission)
John Staurulakis, Inc. (J. Staurulakis)
Joint Consumer Advocates
Jones Intercable, Inc. (Jones Intercable)
Justice, U. S. Department of (DoJ)
Kansas Corporation Commission (Kansas Commission)
Kentucky Public Service Commission (Kentucky Commission)
Koch, Richard N. (R. Koch)
LCI International Telecom Corp. (LCI)
LDDS Worldcom (LDDS)
Lincoln Telephone & Telegraph Company (Lincoln Tel.)
Louisiana Public Service  [*169]   Commission (Louisiana Commission)
Lucent Technologies, Inc. (Lucent)
Margaretville Telephone Co., Inc. (Margaretville Tel.)
Maryland Public Service Commission (Maryland Commission)
Massachusetts Assistive Technology Partnership Center World Institute on
Disability,
Alliance for Technology Access, Trace Research and Development Center, CPB/WGBH
National Center For Accessible Media (Mass. Assistive Tech. Partnership, et al.)


Massachusetts, Commonwealth of Department of Public Utilities (Mass. Commission)
Massachusetts, Commonwealth of, Office of Attorney General (Mass. Attorney
General)
Matanuska Telephone Association, Inc. (Matanuska Tel.)
MCI
Metricom, Inc. (Metricom)
MFS
Michigan Exchange Carriers Association (MECA)
Michigan, Illinois, and Texas Communities, et al.
Michigan Public Service Commission Staff (Michigan Commission Staff)
Minnesota Independent Coalition (Minnesota Independent Coalition)
Minnesota Public Utilities Commission (Minnesota Commission)
Missouri Public Service Commission (Missouri Commission)
Missouri Public Service Commissioner, Harold Crampton (Missouri Commissioner)
Mobilemedia Communications, Inc. (Mobilemedia)
Motorola Satellite   [*170]   Communications, Inc. and U.S. Leo Services, Inc.
(Motorola)
Municipal Utilities
National Association of the Deaf
National Association of Development Organizations, Gray Panthers, United Seniors
Health Cooperative, United Homeowners Association, National Hispanic Council on
Aging, National Trust/Trustnet, National Association of Commissions for Women,
National Council of Senior Citizens (NADO, et al.)
National Association of Regulatory Utility Commissioners (NARUC)
National Association of State Utility Consumer Advocates (National Ass'n of
State Utility Advocates)
National Bar Association (National Bar Ass'n)
National Cable Television Association, Inc. (NCTA)
National Exchange Carrier Association, Inc. (NECA)
National League of Cities & National Association of Telecommunications Officers
and Advisors (NLC/NATOA)
National Private Telecommunications Association
National Telecommunications & Information Administration (NTIA)
National Wireless Resellers Association (National Wireless Resellers Ass'n)
Nebraska Rural Development Commission
Network Reliability Council, Secretariat of Second (Network Reliability Council)
New Hampshire Public Utilities Commission, New Mexico State  [*171]
Corporation Commission, Utah Division of Public Utilities, Vermont Public
Service Board, and Vermont Department of Public Service (New Hampshire
Commission, et al.)
New Jersey Cable Telecommunications Association, South Carolina Cable
%Television Association & Texas Cable Telecommunications Association (New Jersey
Cable Ass'n, et al.)
New Jersey, Staff of Board of Public Utilities (New Jersey Commission Staff)
New York State Consumer Protection Board (New York Consumer Protection Board)
New York State Department of Public Service (New York Commission)
Nextel Communications, Inc. (Nextel)
NEXTLINK Communications, L.L.C. (NEXTLINK)
North Carolina Utility Commission Public Staff (North Carolina Commission Staff)
North Dakota Public Service Commission (North Dakota Commission)
Northern Telecom, Inc. (Nortel)
NYNEX Telephone Companies (NYNEX)
Ohio Public Utilities Commission (Ohio Commission)
Office of the Ohio Consumers' Counsel (Ohio Consumers' Counsel)
Oklahoma Corporation Commission (Oklahoma Commission)
Omnipoint Corporation (Omnipoint)
Optel, Inc. (Optel)
Oregon Public Utility Commission (Oregon Commission)
Pacific Telesis Group (PacTel)
Paging Network, Inc. (PageNet)   [*172]
Pennsylvania Public Utility Commission (Pennsylvania Commission)
People of the State of California and the Public Utility Commission of the State
of
California (California Commission)


Personal Communications Industry Association (PCIA)
ProNet Inc. (ProNet)
Puerto Rico Telephone Company (Puerto Rico Tel.)
Roseville Telephone Company (Roseville Tel.)
Rural Telephone Coalition (Rural Tel. Coalition)
SBC Communications Inc. (SBC)
Scherers Communications Group, Inc. (SCG)
Small Business Administration, U.S. (SBA)
Small Cable Business Association (SCBA)
SDN Users Association
South Carolina Public Service Commission (South Carolina Commission)
Southern New England Telephone Company (SNET)
Southwestern Bell Telephone Company (SWBT)
Sprint Corporation (Sprint)
Sprint Spectrum & American Personal Communications (Sprint/APC)
State of Maine Public Utilities Commission, State of Montana Public Service
Commission, State of Nebraska Public Service Commission, State of New Hampshire
Public Utilities Commission, State of New Mexico State Corporation Commission,
State of Utah Public Service Commission and Division of Public Utilities, State
of Vermont Department of Public Service  [*173]   and Public Service Board, and
Public Utilities Commission of South Dakota (Maine Commission, et al.)
TCA, Inc. (TCA)
TDS Telecommunications Corporation (TDS)
Telecommunication Industries Analysis Project
Telecommunications Carriers for Competition (TCC)
Tele-Communications, Inc. (TCI)
Telecommunications Industry Association (TIA)
Telecommunications Ratepayers Association for Cost-Based and Equitable Rates
(TRACER)

Telecommunications Resellers Association (Telecomm. Resellers Ass'n)
Telefonica Larga Distancia de Puerto Rico, Inc. (TLD)
Teleport Communications Group, Inc. (Teleport)
Texas Office of Public Utility Counsel (Texas Public Utility Counsel)
Texas, Public Utilities Commission (Texas Commission)
Texas Statewide Telephone Cooperative, Inc.
Texas Telephone Association (Texas Tel. Ass'n)
Time Warner Communications Holdings, Inc. (Time Warner)
Unicom, Inc. (Unicom)
United Calling Network, Inc. (United Calling Network)
United Cerebral Palsy Association
United States Telephone Association (USTA)
USTN Services, Inc. (USTN)
U.S. Network Corporation (U.S. Network)
U S West, Inc. (U S West)
Utah Division of Public Utilities
UTC
Utilex, Inc. (Utilex)
Vanguard  [*174]   Cellular Systems, Inc. (Vanguard)
Vartec Telecom, Inc., Transtel, Telephone Express, CGI, & CommuniGroup Inc. of
Mississippi (Vaxtec, et al.)

Virginia State Corporation Commission Staff (Virginia Commission Staff)
Washington Independent Telephone Association (Wash. Ind. Tel. Ass'n)
Washington Utilities and Transportation Commission (Washington Commission)
Western Alliance
WinStar Communications, Inc. (WinStar)
Wisconsin, Public Service Commission (Wisconsin Commission)
Wyoming Public Service Commission (Wyoming Commission)



   List of Commenters in CC Docket No. 95-185
360 Degree Communications Co. (360 Degrees)
AirTouch Communications, Inc. (Airtouch)
Alaska 3 Cellular Corporation (Alaska CellularOne)
Alaska Telephone Association (ATA)
Alliance of Wireless Service Providers (Alliance)
Allied Personal Communications Industry Association of California (Allied)
ALLTEL Corporation (ALLTEL)
American Mobil Telecommunications Association (AMTA)
America's Carriers Telecommunications Association (ACTA)
American Personal Communications/Sprint Spectrum (APC/Sprint)
Ameritech
Anchorage Telephone Utility (ATU)
Arch Communications Group, Inc. (Arch)
AT&T Corporation (AT&T)   [*175]
Bell Atlantic
Bell Atlantic Nynex Mobile (Bell Atlantic-NYNEX)
BellSouth Corporation (BellSouth)
State of California & the Public Utilities Commission (CPUC)
Cellular Communications of Puerto Rico, Inc. (CCPR)
Cellular Mobile Systems of St. Cloud G.P. (CMS)
Cellular Resellers Association (Cellular Resellers)
Cellular Telecommunications Industry Association (CTIA)
Celpage, Inc. (Celpage)
Centennial Cellular Corporation (Centennial)
Century Cellunet, Inc. (Century Cellunet)
Cincinnati Bell
CMT Partners (CMT)
Comcast Corporation (Comcast)
Competitive Telecommunications Association (CompTel)
Concord Telephone Company (Concord)
Connecticut Department of Public Utility (Connecticut)
Cox Enterprises, Inc. (Cox)
Florida Cellular RSA L.P. (Florida Cellular)
Frontier Corporation (Frontier)
GO Communications Corp. (GO)
General Services Administration (GSA)
GTE Services Corporation (GTE)
GVNW Inc., Management (GVNW)
Hart Engineers and 21st Century Telesis, Inc. (Hart Engineers)
Home Telephone Company, Inc. (HomeTel)
ICO Global Communications (ICO)
Illinois Commerce Commission (Illinois)
Illinois Independent Telephone Association (Illinois Ind. Tel. Assoc.)
Illinois  [*176]   Telephone Association (Illinois Telephone Assoc.)
John Staurulakis, Inc. (JSI)
LDDS WorldCom (LDDS WorldCom)
MCI Telecommunications Corp. (MCI)
MFS Communications Company, Inc. (MFS)
Mercury Cellular & Paging (Mercury)
Mountain Solutions
National Association of Regulatory Utility Commissioners (NARUC)
National Exchange Carrier Association (NECA)
National Telephone Cooperative Association (NTCA)
New Par
New York State Department of Public Service (New York)
Nextel Communications, Inc. (Nextel)
North Carolina 4 Cellular L.P. (North Carolina Cellular)
NYNEX Telephone Companies (NYNEX)
Public Utilities Commission of Ohio (Ohio)
Omnipoint Corporation (Omnipoint)
OPASTCO
Pacific Bell, Pacific Bell Mobile Services, Nevada Bell (Pacific Bell)
Paging Network, Inc. (PageNet)
Personal Communications Industry Association (PCIA)
Point Communications Company (Point)
Poka Lambro Telephone Cooperative (Poka Lambro)
Puerto Rico Telephone Company (PRTC)
Rural Cellular Association (RCA)
Rural Cellular Corporation (RCC)
SBC Communications, Inc. (SBC)
Smithville Telephone Company (Smithville)
Southeast Telephone Company (Southeast Telephone)
Sprint Corporation (Sprint)
Sprint  [*177]   Spectrum and American Personal Communications (Sprint/APC)
Telecommunications Resellers Association (TRA)
Teleport Communications Group (Teleport)
Time Warner Communications Holdings, Inc. (Time Warner)
Telecommunications Ratepayers Association for Cost-Based and Equitable Rates
(TRACER)
Union Telephone Company (Union)
United States Telephone Association (USTA)
US West, Inc. (US West)
Vanguard Cellular Systems, Inc. (Vanguard)
Western Radio Services Co., Inc. (Western)
Western Wireless Corporation (Western Wireless)
Westlink Company (Westlink)


   List of Commenters in CC Docket No. 91-346
Ad Hoc Telecommunications Users Committee (Ad Hoc)
Allnet Communication Services, Inc. (Allnet)
American Telephone and Telegraph Company (AT&T)
Ameritech Operating Companies (Ameritech)
Bell Atlantic Telephone Companies (Bell Atlantic)
BellSouth Corporation (BellSouth)
Cincinnati Bell Telephone (Cincinnati Bell)
Ericsson Corporation (Ericsson)
General Services Administration (GSA)
Geonet
GTE Service Corporation (GTE)
Information Technology Association of America (ITAA)
Joint Filers (includes Bell Atlantic, BellSouth, GTE, Lincoln, Pacific Bell,
Rochester, SNET,
and US WEST)
[*178]
MCI Telecommunications Corporation (MCI)
National Communications System (NCS)
Nextel Communications, Inc. (Nextel)
North American Telecommunications Association (NATA)
Northern Telecom Inc. (Northern Telecom)
NYNEX Telephone Companies (NYNEX)
Pacific Bell and Nevada Bell (Pacific Bell)
Pacific Telesis Corporation (Pactel)
Services-oriented Open Network Technologies, Inc. (SONetech)
Siemens Stromberg-Carlson (Siemens)
Southern New England Telephone Company (SNET)
Southwestern Bell Corporation (SWBT)
Sprint
Telecommunications Industry Association (TIA)
Teleport Communications Group (Teleport)
Teloquent Communications Corporation (Teloquent)
United and Central Telephone Companies (United and Central)
United States Telephone Association (USTA)
US WEST Communications, Inc. (US WEST)

   APPENDIX B - Final Rules

   AMENDMENTS TO THE CODE OF FEDERAL REGULATIONS

1. Part 1 of Title 47 of the Code of Federal Regulations (C.F.R.) is amended as
follows:

   PART 1 -- PRACTICE AND PROCEDURE

2. The table of contents of part 1 is revised to read as follows:

* * * *
Subpart J - Pole Attachment Complaint Procedures
1.1401    Purpose.
1.1402    Definitions.
1.1403    Duty to provide access; modifications; notice of removal,
          increase or modification; petition for temporary stay.
1.1404    Complaint.
1.1405    File numbers.
1.1406    Dismissal of complaints.
1.1407    Response and reply.
1.1408    Number of copies and form of pleadings.
1.1409    Commission consideration of the complaint.
1.1410    Remedies.
1.1411    Meetings and hearings.
1.1412    Enforcement.
1.1413    Forfeiture.
1.1414    State certification.
1.1415    Other orders.
1.1416    Imputation of rates; modification costs.
[*179]
* * * *

3. The authority citation for part 1 is revised to read as follows:

AUTHORITY: 47 U.S.C. 151, 154, 251,252, 303, and 3090) unless otherwise noted.

4. Section 1.1401 is revised to read as follows:

@ 1.1401 Purpose.

   The rules and regulations contained in subpart J of this part provide
complaint and enforcement procedures to ensure that telecommunications carriers
and cable system operators have nondiscriminatory access to utility poles,
ducts, conduits, and rights-of-way on rates, terms, and conditions that are just
and reasonable.


5. Section 1.1402 is mended by revising paragraph (d) to read as follows:
@ 1.1402 Definitions.

* * * *

   (d) The term complaint means a filing by a cable television system operator,
a cable television system association, a utility, an association of utilities, a
telecommunicatiom carrier, or an association of telecommunications carriers
alleging that it has been denied access to a utility pole, duct, conduit, or
right-of-way in violation of this subpart and/or that a rate, term, or condition
for a pole attachment is not just and reasonable.

* * * *

6. Section 1.1403 is mended by retitling the section, by amending paragraphs
[*180]   (a) and (b) and redesignating them as paragraphs (c) and (d),
respectively, and by adding new paragraphs (a) and (b) to read as follows:

@ 1.1403 Duty to provide access; modifications; notice of removal, increase or
modification; petition for temporary stay.

   (a) A utility shall provide a cable television system or any
telecommunications carrier with nondiscriminatory access to any pole, duct,
conduit, or right-of-way owned or controlled by it. Notwithstanding this
obligation, a utility may deny a cable television system or any
telecommunications carrier access to its poles, ducts, conduits, or
rights-of-way, on a non-discriminatory basis where them is insufficient
capacity. or for reasons of safety, reliability and generally applicable
engineering purposes.

   (b) Requests for access to a utility's poles, ducts, conduits or
rights-of-way by a telecommunications carrier or cable operator must be in
writing. If access is not granted within 45 days of the request for access, the
utility must confirm the denial in writing by the 45th day. The utility's denial
of access shall be specific, shall include all relevant evidence and information
supporting its denial, and shall explain how  [*181]   such evidence and
information relate to a denial of access for reasons of lack of capacity,
safety, reliability or engineering standards.

   (c) A utility shall provide a cable television system operator or
telecommmunications carrier no less than 60 days written notice prior to: (1)
removal of facilities or termination of any service to those facilities, such
removal or termination arising out of a rate, term or condition of the cable
television system operator's of telecommunications carrier's pole attachment
agreement, or (2) any increase in pole attachment rates; or (3) any modification
of facilities other than routine maintenance or modifcation in response to
emergencies.


   (d) A cable television system operator or telecommunications carrier may file
a "Petition for Temporary Stay" of the action contained in a notice received
pursuant to paragraph (c) of this section within 15 days of receipt of such
notice. Such submission shall not be considered unless it includes, in concise
terms, the relief sought, the reasons for such relief, including a showing of
irreparable harm and likely cessation of cable television service or
telecommunication service, a copy of the notice, and certification  [*182]
of service as required by @ 1.1404(b) of this subpart. The named respondent may
file an answer within 7 days of the date the Petition for Temporary Stay was
filed. No further filings under this section will be considered unless requested
or authorized by the Commission and no extensions of time will be granted unless
justified pursuant to @ 1.46.

7. Section 1.1404 is amended by revising paragraphs (b) and (c) and by adding
new paragraph (k) to read as follows:

@ 1.1404 Complaint.

* * * *

   (b) The complaint shall be accompanied by a certification of service on the
named respondent, and each of the Federal, State, and local governmental
agencies that regulate any aspect of the services provided by the complainant or
respondent.

   (c) In a case where it is claimed that a rate, term, or condition is unjust
or unreasonable, the complaint shall contain a statement that the State has not
certified to the Commission that it regulates the rates, terms and conditions
for pole attachments. The complaint shall include a statement that the utility
is not owned by any railroad, any person who is cooperatively organized or any
person owned by the Federal Government or any State.

* * *   [*183]   *

   (k) In a case where a cable television system operator or telecommunications
carrier claims that it has been denied access to a pole, duct, conduit or
right-of-way despite a request made pursuant to section 47 U.S.C. @ 224(f), the
complaint shall be filed within 30 days of such denial. In addition to meeting
the other requirements of this section, the complaint shall include the data and
information necessary to support the claim, including:

   (1) The reasons given for the denial of access to the utility's poles, ducts,
conduits and rights-of-way;

   (2) The basis for the complainant's claim that the denial of access is
improper;

   (3) The remedy sought by the complainant;

   (4) A copy of the written request to the utility for access to its poles,
ducts, conduits or rights-of-way;

   (5) A copy of the utility's response to the written request including all
information given by the utility to support its denial of access. A complaint
alleging improper denial of access will not be dismissed if the complainant is
unable to obtain a utility's written response, or if the utility denies the
complainant any other information needed to establish a prima facie case.

8. Section 1.1409 is amended  [*184]   by revising paragraphs (b) and (d) to
read as follows:

@ 1.1409 Commission consideration of the complaint.

* * * *

   (b) The complainant shall have the burden of establishing a prima facie case
that the rate, term, or condition is not just and reasonable or that the denial
of access violates 47 U.S.C. @ 224(f). If, however, a utility argues that the
proposed rate is lower than its incremental costs, the utility has the burden of
establishing that such rate is below the statutory minimum just and reasonable
rate. In a case involving a denial of access, the utility shall have the burden
of proving that the denial was lawful, once a prima facie case is established by
the complainant.

* * * *

   (d) The Commission shall deny the complaint if it determines that the
complainant has not established a prima facie case, or that the rate, term or
condition is just and reasonable, or that the denial of access was lawful.

* * * *

9. Section 1.1416 is amended by retitling the section and by amending paragraph
(b) to read as follows:

@ 1.1416 Imputation of rates; modification costs.

* * * *

   (b) The costs of modifying a facility shall be borne by all parties that
obtain access  [*185]   to the facility as a result of the modification and by
all parties that directly benefit from the modification. Each party described in
the preceding sentence shall share proportionately in the cost of the
modification. A party with a preexisting attachment to the modified facility
shall be deemed to directly benefit from a modification if, after receiving
notification of such modification as provided in subpart J of this part, it adds
to or modifies its attachment. Notwithstanding the foregoing, a party with a
preexisting attachment to a pole, conduit, duct or right of way shall not be
required to bear any of the costs of rearranging or replacing its attachment if
such rearrangement or replacement is necessitated solely as a result of an
additional attachment or the modification of an existing attachment sought by
another party. If a party makes an attachment to the facility after the
completion of the modification, such party shall share proportionately in the
cost of the modification if such modification rendered possible the added
attachment.

10. Part 20 of Title 47 of the Code of Federal Regulations (C.F.R.) is amended
as follows:

   PART 20 -- COMMERCIAL MOBILE RADIO SERVICES  [*186]

11. The authority citation for part 20 is revised to read as follows:

AUTHORITY: Secs. 4, 251-2, 303, and 332, 48 Stat. 1066, 1062, as amended; 47
U.S.C. 154, 251-4, 303, and 332 unless otherwise noted.


12. Section 20.11 is amended by adding paragraph (c) to read as follows:
@ 20.11 Interconnection to facilities of local exchange carriers.

* * * *

(c) Local exchange carriers and commercial mobile radio service providers shall
also comply with applicable provisions of part 51 of this chapter.

13. Part 51 of Title 47 of the Code of Federal Regulations (C.F.R.) is added to
read as follows:
                         PART 51 -- INTERCONNECTION
Subpart A - General information
Sec.
51.1      Basis and purpose.
51.3      Applicability to negotiated agreements.
51.5      Terms and definitions.
Subpart B - Telecommunications carriers
51.100    General duty.
Subpart C - Obligations of all local exchange carriers
51.201    Resale.
51.203    Number portability.
51.219    Access to rights of way.
51.221    Reciprocal compensation.
51.223    Application of additional requirements.
Subpart D - Additional obligations of incumbent local exchange carriers
51.301    Duty to negotiate.
51.303    Preexisting agreements.
51.305    Interconnection.
51.307    Duty to provide access on an unbundled basis to network elements.
51.309    Use of unbundled network elements.
51.311    Nondiscriminatory access to unbundled network elements.
51.313    Just, reasonable and nondiscriminatory terms and conditions for
          the provision of unbundled network elements.
51.315    Combination of unbundled network elements.
51.317    Standards for identifying network elements to be made available.
51.319    Specific unbundling requirements.
51.321    Methods of obtaining interconnection and access to unbundled
          elements under section 251 of the Act.
51.323    Standards for physical collocation and virtual collocation.
Subpart E - Exemptions, suspensions, and modifications
of requirements of section 251 of the Act.
51.401    State authority.
51.403    Carriers eligible for suspension or modification under section
          251(f)(2) of the Act.
51.405    Burden of proof.
Subpart F - Pricing of interconnection and unbundled elements
51.501    Scope.
51.503    General pricing standard.
51.505    Forward-looking economic cost.
51.507    General rate structure standard.
51.509    Rate structure standards for specific elements.
51.511    Forward-looking economic cost per unit.
51.513    Proxies for forward-looking economic cost.
51.515    Application of access charges.
Subpart G - Resale
51.601    Scope of resale rules.
51.603    Resale obligation of all local exchange carriers.
51.605    Additional obligations of incumbent local exchange carriers.
51.607    Wholesale pricing standard.
51.609    Determination of avoided retail costs.
51.611    Interim wholesale rates.
51.613    Restrictions on resale.
51.615    Withdrawal of services.
51.617    Assessment of end user common line charge on resellers.
Subpart H - Reciprocal compensation for transport and termination of local
           telecommunications traffic
51.701    Scope of transport and termination pricing rules.
51.703    Reciprocal compensation obligation of LECs.
51.705    Incumbent LECs' rates for transport and termination.
51.707    Default proxies for incumbent LECs' transport and termination
          rates.
51.709    Rate structure for transport and termination.
51.711    Symmetrical reciprocal compensation.
51.713    Bill-and-keep arrangements for reciprocal compensation.
51.715    Interim transport and termination pricing.
51.717    Renegotiation of existing non-reciprocal arrangements.
Subpart I - Procedures for implementation of section 252 of the Act.
51.801    Commission action upon a state commission's failure to act to carry
          out its responsibility under section 252 of the Act.
51.803    Procedures for Commission notification of a state commission's
          failure to act.
51.805    The Commission's authority over proceedings and matters.
51.807    Arbitration and mediation of agreements by the Commission
          pursuant to section 252(e)(5) of the Act.
51.809    Availability of provisions of agreements to other
          telecommunications carriers under section 252(i) of the Act.
AUTHORITY: Sections 1-5, 7, 201-05, 218., 225-27, 251-54,
271, 48 Stat. 1070, as amended, 1077; 47 U.S.C. 151-55, 157,
201-05, 218, 225-27, 251-54, 271, unless otherwise
noted.
[*187]

Subpart A - General Information.

@ 51.1 Basis and purpose.

   (a) Basis. These rules are issued pursuant to the Communications Act of 1934,
as amended.

   (b) Purpose. The purpose of these rules is to implement sections 251 and 252
of the Communications Act of 1934, as amended, 47 U.S.C. 251 and 252.

@ 51.3 Applicability to negotiated agreements.

To the extent provided in section 252(e)(2)(A) of the Act, a state commission
shall have authority to approve an interconnection agreement adopted by
negotiation even if the terms of the agreement do not comply with the
requirements of this part.

@ 51.5 Terms and definitions.


Terms used in this part have the following meanings:

   Act. The Communications Act of 1934, as amended.

   Advanced intelligent network. "Advanced Intelligent Network" is a
telecommunications network architecture in which call processing, call routing,
and network management are provided by means of centralized databases located at
points in an incumbent local exchange carrier's network.

   Arbitration, final offer. "Final offer arbitration" is a procedure under
which each party submits a final offer concerning the issues subject to
arbitration, and the arbitrator  [*188]   selects, without modification, one of
the final offers by the parties to the arbitration or portions of both such
offers. "Entire package final offer arbitration," is a procedure under which the
arbitrator must select, without modification, the entire proposal submitted by
one of the parties to the arbitration. "Issue-by-issue final offer arbitration,"
is a procedure under which the arbitrator must select, without modification, on
an issue-by-issue basis, one of the proposals submitted by the parties to the
arbitration.

   Billing. "Billing" involves the provision of appropriate usage data by one
telecommunications carrier to another to facilitate customer billing with
attendant acknowledgements and status reports. It also involves the exchange of
information between telecommunications carriers to process claims and
adjustments.

   Commercial Mobile Radio Service (CMRS). "CMRS" has the same meaning as that
term is defined in @ 20.3 of this chapter.

   Commission. "Commission" refers to the Federal Communications Commission.

   Directory assistance service. Directory assistance service" includes, but is
not limited to, making available to customers, upon request, information
contained in directory  [*189]   listings.

   Directory listings. "Directory listings" are any information: (1) identifying
the listed names of subscribers of a telecommunications carrier and such
subscriber's telephone numbers, addresses, or primary advertising
classifications (as such classifications are assigned at the time of the
establishment of such service), or any combination of such listed names,
numbers, addresses or classifications; and (2) that the telecommunications
carrier or an affiliate has published, caused to be published, or accepted for
publication in any directory format.

   Downstream database. A "downstream database" is a database owned and operated
by an individual carrier for the purpose of providing number portability in
conjunction with other functions and services.

   Equipment necessary for interconnection or access to unbundled network
elements. For purposes of section 251(c)(2) of the Act, the equipment used to
interconnect with an incumbent local exchange carrier's network for the
transmission and routing of telephone exchange service, exchange access service,
or both. For the purposes of section 251(c)(3) of the Act, the equipment used to
gain access to an incumbent local exchange carrier's  [*190]   unbundled network
elements for the provision of a telecommunications service.



   Incumbent Local Exchange Carrier (Incumbent LEC). With respect to an area,
the local exchange carrier that: (1) on February 8, 1996, provided telephone
exchange service in such area; and (2) (i) on February 8, 1996, was deemed to be
a member of the exchange carrier association pursuant to @ 69.601Co) of this
chapter; or (ii) is a person or entity that, on or after February 8, 1996,
became a successor or assign of a member described in clause (i) of this
paragraph.

   Interconnection. "Interconnection" is the linking of two networks for the
mutual exchange of traffic. This term does not include the transport and
termination of traffic.

   Local Exchange Carrier (LEC). A "LEC" is any person that is engaged in the
provision of telephone exchange service or exchange access. Such term does not
include a person insofar as such person is engaged in the provision of a
commercial mobile service under section 332(c) of the Act, except to the extent
that the Commission finds that such service should be included in the definition
of the such term.

   Maintenance and repair. "Maintenance and repair" involves the exchange
[*191]   of information between telecommunications carriers where one initiates
a request for maintenance or repair of existing products and services or
unbundled network elements or combination thereof from the other with attendant
acknowledgements and status reports.

   Meet point. A "meet point" is a point of interconnection between two
networks, designated by two telecommunications carriers, at which one carrier's
responsibility for service begins and the other carrier's responsibility ends.

   Meet point interconnection arrangement. A "meet point interconnection
arrangement" is an arrangement by which each telecommunications carrier builds
and maintains its network to a meet point.

   Network element. A "network element" is a facility or equipment used in the
provision of a telecommunications service. Such term also includes, but is not
limited to, features, functions, and capabilities that are provided by means of
such facility or equipment, including but not limited to, subscriber numbers,
databases, signaling systems, and information sufficient for billing and
collection or used in the transmission, routing, or other provision of a
telecommunications service.

   Operator services. "Operator  [*192]   services" are any automatic or live
assistance to a consumer to arrange for billing or completion of a telephone
call. Such services include, but are not limited to, busy line verification,
emergency interrupt, and operator-assisted directory assistance services.

   Physical collocation. "Physical collocation" is an offering by an incumbent
LEC that enables a requesting telecommunications carrier to:

   (1) place its own equipment to be used for interconnection or access to
unbundled network elements within or upon an incumbent LEC's premises;


   (2) use such equipment to interconnect with an incumbent LEC's network
facilities for the transmission and routing of telephone exchange service,
exchange access service, or both, or to gain access to an incumbent LEC's
unbundled network elements for the provision of a telecommunications service;

   (3) enter those premises, subject to reasonable terms and conditions, to
install, maintain, and repair equipment necessary for interconnection or access
to unbundled elements; and

   (4) obtain reasonable amounts of space in an incumbent LEC's premises, as
provided in this part, for the equipment necessary for interconnection or access
to unbundled elements,   [*193]   allocated on a first-come, first-served basis.

   Premises. "Premises" refers to an incumbent LEC's central offices and serving
wire centers, as well as all buildings or similar structures owned or leased by
an incumbent LEC that house its network facilities, and all structures that
house incumbent LEC facilities on public rights-of-way, including but not
limited to vaults containing loop concentrators or similar structures.

   Pre-ordering and ordering. "Pre-ordering and ordering" includes the exchange
of information between telecommunications carriers about current or proposed
customer products and services or unbundled network elements or some combination
thereof.

   Provisioning. "Provisioning" involves the exchange of information between
telecommunications carriers 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.

   Rural telephone company. A "rural telephone company" is a LEC operating
entity to the extent that such entity:

   (1) provides common carrier service to any local exchange carrier study area
that does not include either:

   (i) any incorporated  [*194]   place of 10,000 inhabitants or more, or any
part thereof, based on the most recently available population statistics of the
Bureau of the Census; or

   (ii) any territory, incorporated or unincorporated, included in an urbanized
area, as defined by the Bureau of the Census as of August 10, 1993;

   (2) provides telephone exchange service, including exchange access, to fewer
than 50,000 access lines;

   (3) provides telephone exchange service to any local exchange carrier study
area with fewer than 100,000 access lines; or

   (4) has less than 15 percent of its access lines in communities of more than
50,000 on February 8, 1996.

   Service control point. A "service control point" is a computer database in
the public switched network which contains information and call processing
instructions needed to process and complete a telephone call.

   Service creation environment. "A service creation environment" is a computer
containing generic call processing software that can be programmed to create new
advanced intelligent network call processing services.



   Signal transfer point. A "signal transfer point" is a packet switch that acts
as a routing hub for a signaling network and transfers messages between
[*195]   various points in and among signaling networks.

   State commission. A "state commission" means the commission, board, or
official (by whatever name designated) which under the laws of any State has
regulatory jurisdiction with respect to intrastate operations of carriers. As
referenced in this part, this term may include the Commission if it assumes the
responsibility of the state commission, pursuant to section 252(e)(5) of the
Act. This term shall also include any person or persons to whom the state
commission has delegated its authority under section 251 and 252 of the Act.

   State proceeding. A "state proceeding" is any administrative proceeding in
which a state commission may approve or prescribe rates, terms, and conditions
including, but not limited to, compulsory arbitration pursuant to section 252(b)
of the Act, review of a Bell operating company statement of generally available
terms pursuant section 252(f) of the Act, and a proceeding to determine whether
to approve or reject an agreement adopted by arbitration pursuant to section
252(e) of the Act.

   Technically feasible. Interconnection, access to unbundled network elements,
collocation, and other methods of achieving interconnection  [*196]   or access
to unbundled network elements at a point in the network shall be deemed
technically feasible absent technical or operational concerns that prevent the
fulfillment of a request by a telecommunications carrier for such
interconnection, access, or methods. A determination of technical feasibility
does not include consideration of economic, accounting, billing, space, or site
concerns, except that space and site concerns may be considered in circumstances
where there is no possibility of expanding the space available. The fact that an
incumbent LEC must modify its facilities or equipment to respond to such request
does not determine whether satisfying such request is technically feasible. An
incumbent LEC that claims that it cannot satisfy such request because of adverse
network reliability impacts must prove to the state commission by clear and
convincing evidence that such interconnection, access, or methods would result
in specific and significant adverse network reliability impacts.

   Telecommunications carrier. A "telecommunications carrier" is any provider of
telecommunications services, except that such term does not include aggregators
of telecommunications services (as  [*197]   defined in section 226 of the Act).
A telecommunications carrier shall be treated as a common carrier under the Act
only to the extent that it is engaged in providing telecommunications services,
except that the Commission shall determine whether the provision of fixed and
mobile satellite service shall be treated as common carriage. This definition
includes CMRS providers, interexchange carriers (IXCs) and, to the extent they
are acting as telecommunications carriers, companies that provide both
telecommunications and information services. Private Mobile Radio Service
providers are telecommunications carriers to the extent they provide domestic or
international telecommunications for a fee directly to the public.

   Virtual collocation. "Virtual collocation" is an offering by an incumbent LEC
that enables a requesting telecommunications carrier to:


   (1) designate or specify equipment to be used for interconnection or access
to unbundled network elements to be located within or upon an incumbent LEC's
premises, and dedicated to such telecommunications carrier's use;
   (2) use such equipment to interconnect with an incumbent LEC's network
facilities for the transmission and routing of  [*198]   telephone exchange
service, exchange access service, or both, or for access to an incumbent LEC's
unbundled network elements for the provision of a telecommunications service;
and

   (3) electronically monitor and control its communications channels
terminating in such equipment.

Subpart B - Telecommunications Carriers.

@ 51.100 General duty.

   (a) Each telecommunications carrier has the duty:

   (1) to interconnect directly or indirectly with the facilities and equipment
of other telecommunications carriers; and

   (2) to not install network features, functions, or capabilities that do not
comply with the guidelines and standards as provided in the Commission's rules
or section 255 or 256 of the Act.

   (b) A telecommunication carrier that has interconnected or gained access
under sections 251(a)(1), 251(c)(2), or 251(c)(3) of the Act, may offer
information services through the same arrangement, so long as it is offering
telecommunications services through the same arrangement as well.

Subpart C - Obligations of All Local Exchange Carriers.

@ 51.201 Resale.

The rules governing resale of services by an incumbent LEC are set forth in
subpart G of this part.

@ 51.203 Number  [*199]   portability.

The rules governing number portability are set forth in part 52, subpart C of
this chapter.

@ 51.219 Access to rights of way.

The rules governing access to rights of way are set forth in part 1, subpart J
of this chapter.

@ 51.221 Reciprocal compensation.

The rules governing reciprocal compensation are set forth in subpart H of this
part.

@ 51.223 Application of additional requirements.

   (a) A state may not impose the obligations set forth in section 251(c) of the
Act on a LEC that is not classified as an incumbent LEC as defined in section
251(h)(1) of the Act, unless the Commission issues an order declaring that such
LECs or classes or categories of LECs should be treated as incumbent LECs.



   (b) A state commission, or any other interested party, may request that the
Commission issue all order declaring that a particular LEC be treated as an
incumbent LEC, or that a class or category of LECs be treated as incumbent LECs,
pursuant to section 251(h)(2) of the Act.

Subpart D - Additional Obligations of Incumbent Local Exchange Carriers.

@ 51.301 Duty to negotiate.

   (a) An incumbent LEC shall negotiate in good faith the terms and conditions
of agreements  [*200]   to fulfill the duties established by sections 251(b) and
(c) of the Act.

   (b) A requesting telecommunications carrier shall negotiate in good faith the
terms and conditions of agreements described in paragraph (a) of this section.

   (c) If proven to the Commission, an appropriate state commission, or a court
of competent jurisdiction, the following actions or practices, among others,
violate the duty to negotiate in good faith:

   (1) demanding that another party sign a nondisclosure agreement that
precludes such party from providing information requested by the Commission, or
a state commission, or in support of a request for arbitration under section
252(b)(2)(B) of the Act;

   (2) demanding that a requesting telecommunications carrier attest that an
agreement complies with all provisions of the Act, federal regulations, or state
law;

   (3) refusing to include in an arbitrated or negotiated agreement a provision
that permits the agreement to be amended in the future to take into account
changes in Commission or state rules;

   (4) conditioning negotiation on a requesting telecommunications carrier first
obtaining state certifications;

   (5) intentionally misleading or coercing another party  [*201]   into
reaching an agreement that it would not otherwise have made;

   (6) intentionally obstructing or delaying negotiations or resolutions of
disputes;

   (7) refusing throughout the negotiation process to designate a representative
with authority to make binding representations, if such refusal significantly
delays resolution of issues; and

   (8) refusing to provide information necessary to reach agreement. Such
refusal includes, but is not limited to:

   (i) refusal by an incumbent LEC to furnish information about its network that
a requesting telecommunications carrier reasonably requires to identify the
network elements that it needs in order to serve a particular customer; and

   (ii) refusal by a requesting telecommunications carrier to furnish cost data
that would be relevant to setting rates if the parties were in arbitration.

@ 51.303 Preexisting agreements.

   (a) All interconnection agreements between an incumbent LEC and a
telecommunications carrier, including those negotiated before February 8, 1996,
shall be submitted by the parties to the appropriate state commission for
approval pursuant to section 252(e) of the Act.

   (b) Interconnection agreements negotiated before February  [*202]   8, 1996,
between Class A carriers, as defined by @ 32.11(a)(1) of this chapter, shall be
filed by the parties with the appropriate state commission no later than June
30, 1997, or such earlier date as the state commission may require.

   (c) If a state commission approves a preexisting agreement, it shall be made
available to other parties in accordance with section 252(i) of the Act and @
51.809 of this part. A state commission may reject a preexisting agreement on
the grounds that it is inconsistent with the public interest, or for other
reasons set forth in section 252(e)(2)(A) of the Act.

@ 51.305 Interconnection.

   (a) An incumbent LEC shall provide, for the facilities and equipment of any
requesting telecommunications carrier, interconnection with the incumbent LEC's
network:

   (1) for the transmission and routing of telephone exchange traffic, exchange
access traffic, or both;

   (2) at any technically feasible point within the incumbent LEC's network
including, at a minimum:

   (i) the line-side of a local switch;

   (ii) the trunk-side of a local switch;

   (iii) the trunk interconnection points for a tandem switch;

   (iv) central office cross-connect points;

   (v) out-of-band signaling  [*203]   transfer points necessary to exchange
traffic at these points and access call-related databases; and

   (vi) the points of access to unbundled network elements as described in @
51.319 of this part;


   (3) that is at a level of quality that is equal to that which the incumbent
LEC provides itself, a subsidiary, an affiliate, or any other party, except as
provided in paragraph (4) of this section. At a minimum, this requires an
incumbent LEC to design interconnection facilities to meet the same technical
criteria service standards that are used within the incumbent LEC's network.
This obligation is not limited to a consideration of service quality as
perceived by end users, and includes, but is not limited to, service quality as
perceived by the requesting telecommunications carrier;
   (4) that, if so requested by a telecommunications carrier and to the extent
technically feasible, is superior in quality to that provided by the incumbent
LEC to itself or to any subsidiary, affiliate, or any other party to which the
incumbent LEC provides interconnection. Nothing in this section prohibits an
incumbent LEC from providing interconnection that is lesser in quality at the
sole request of   [*204]   the requesting telecommunications carrier; and

   (5) on terms and conditions that are just, reasonable, and nondiscriminatory
in accordance with the terms and conditions of any agreement, the requirements
of sections 251 and 252 of the Act, and the Commission's rules including, but
not limited to, offering such terms and conditions equally to all requesting
telecommunications carriers, and offering such terms and conditions that are no
less favorable than the terms and conditions the incumbent LEC provides such
interconnection to itself. This includes, but is not limited to, the time within
which the incumbent LEC provides such interconnection.

   (b) A carrier that requests interconnection solely for the purpose of
originating or terminating its interexchange traffic on an incumbent LEC's
network and not for the purpose of providing to others telephone exchange
service, exchange access service, or both, is not entitled to receive
interconnection pursuant to section 251(c)(2) of the Act.

   (c) Previous successful interconnection at a particular point in a network,
using particular facilities, constitutes substantial evidence that
interconnection is technically feasible at that point, or  [*205]   at
substantially similar points, in networks employing substantially similar
facilities. Adherence to the same interface or protocol standards shall
constitute evidence of the substantial similarity of network facilities.

   (d) Previous successful interconnection at a particular point in a network at
a particular level of quality constitutes substantial evidence that
interconnection is technically feasible at that point, or at substantially
similar points, at that level of quality.

   (e) An incumbent LEC that denies a request for interconnection at a
particular point must prove to the state commission that interconnection at that
point is not technically feasible.

   (f) If technically feasible, an incumbent LEC shall provide two-way trunking
upon request.

@ 51.307 Duty to provide access on an unbundled basis to network elements.

   (a) An incumbent LEC shall provide, to a requesting telecommunications
carrier for the provision of a telecommunications service, nondiscriminatory
access to network elements on an unbundled basis at any technically feasible
point on terms and conditions that are just, reasonable, and nondiscriminatory
in accordance with the terms and conditions of any agreement,   [*206]   the
requirements of sections 251 and 252 of the Act, and the Commission's rules.

   (b) The duty to provide access to unbundled network elements pursuant to
section 251(c)(3) of the Act includes a duty to provide a connection to an
unbundled network element independent of any duty to provide interconnection
pursuant to this part and section 251(c)(2) of the Act.



   (c) An incumbent LEC shall provide a requesting telecommunications carrier
access to an unbundled network element, along with all of the unbundled network
element's features, functions, and capabilities, in a manner that allows the
requesting telecommunications carrier to provide any telecommunications service
that can be offered by means of that network element.

   (d) An incumbent LEC shall provide a requesting telecommunications carrier
access to the facility or functionality of a requested network element separate
from access to the facility or functionality of other network elements, for a
separate charge.

@ 51.309 Use of unbundled network elements.

   (a) An incumbent LEC shall not impose limitations, restrictions, or
requirements on requests for, or the use of, unbundled network elements that
would impair the ability   [*207]   of a requesting telecommunications carrier
to offer a telecommunications service in the manner the requesting
telecommunications carrier intends.

   (b) A telecommunications carrier purchasing access to an unbundled network
element may use such network element to provide exchange access services to
itself in order to provide interexchange services to subscribers.

   (c) A telecommunications carrier purchasing access to an unbundled network
facility is entitled to exclusive use of that facility for a period of time, or
when purchasing access to a feature, function, or capability of a facility, a
telecommunications carrier is entitled to use of that feature, function, or
capability for a period of time. A telecommunications carrier's purchase of
access to an unbundled network element does not relieve the incumbent LEC of the
duty to maintain, repair, or replace the unbundled network element.

@ 51.311 Nondiscriminatory access to unbundled network elements.

   (a) The quality of an unbundled network element, as well as the quality of
the access to the unbundled network element, that an incumbent LEC provides to a
requesting telecommunications carrier shall be the same for all
telecommunications  [*208]   carriers requesting access to that network element,
except as provided in paragraph (c) of this section.

   (b) Except as provided in paragraph (c) of this section, to the extent
technically feasible, the quality of an unbundled network element, as well as
the quality of the access to such unbundled network element, that an incumbent
LEC provides to a requesting telecommunications carrier shall be at least equal
in quality to that which the incumbent LEC provides to itself. If an incumbent
LEC fails to meet this requirement, the incumbent LEC must prove to the state
commission that it is not technically feasible to provide the requested
unbundled network element, or to provide access to the requested unbundled
network element, at a level of quality that is equal to that which the incumbent
LEC provides to itself.


   (c) To the extent technically feasible, the quality of an unbundled network
element, as well as the quality of the access to such unbundled network element,
that an incumbent LEC provides to a requesting telecommunications carrier shall,
upon request, be superior in quality to that which the incumbent LEC provides to
itself. If an incumbent LEC fails to meet this requirement,   [*209]   the
incumbent LEC must prove to the state commission that it is not technically
feasible to provide the requested unbundled network element or access to such
unbundled network element at the requested level of quality that is superior to
that which the incumbent LEC provides to itself. Nothing in this section
prohibits an incumbent LEC from providing interconnection that is lesser in
quality at the sole request of the requesting telecommunications carrier.

   (d) Previous successful access to an unbundled element at a particular point
in a network, using particular facilities, is substantial evidence that access
is technically feasible at that point, or at substantially similar points, in
networks employing substantially similar facilities. Adherence to the same
interface or protocol standards shall constitute evidence of the substantial
similarity of network facilities.

   (e) Previous successful provision of access to an unbundled element at a
particular point in a network at a particular level of quality is substantial
evidence that access is technically feasible at that point, or at substantially
similar points, at that level of quality.

@ 51.313 Just, reasonable and nondiscriminatory  [*210]   terms and conditions
for the provision of unbundled network elements.

   (a) The terms and conditions pursuant to which an incumbent LEC provides
access to unbundled network elements shall be offered equally to all requesting
telecommunications carriers.

   (b) Where applicable, the terms and conditions pursuant to which an incumbent
LEC offers to provide access to unbundled network elements, including but not
limited to, the time within which the incumbent LEC provisions such access to
unbundled network elements, shall, at a minimum, be no less favorable to the
requesting carrier than the terms and conditions under which the incumbent LEC
provides such elements to itself.

   (c) An incumbent LEC must provide a carrier purchasing access to unbundled
network elements with the pre-ordering, ordering, provisioning, maintenance and
repair, and billing functions of the incumbent LEC's operations support systems.

@ 51.315 Combination of unbundled network elements.

   (a) An incumbent LEC shall provide unbundled network elements in a manner
that allows requesting telecommunications carriers to combine such network
elements in order to provide a telecommunications service.

   (b) Except upon request,   [*211]   an incumbent LEC shall not separate
requested network elements that the incumbent LEC currently combines.

   (c) Upon request, an incumbent LEC shall perform the functions necessary to
combine unbundled network elements in any manner, even if those elements are not
ordinarily combined in the incumbent LEC's network, provided that such
combination is:

   (1) technically feasible; and


   (2) would not impair the ability of other carriers to obtain access to
unbundled network elements or to interconnect with the incumbent LEC's
network.

   (d) Upon request, an incumbent LEC shall perform the functions necessary to
combine unbundled network elements with elements possessed. by the requesting
telecommunications carrier in any technically feasible manner.

   (e) An incumbent LEC that denies a request to combine elements pursuant to
paragraph (c)(1) or paragraph (d) of this section must prove to the state
commission that the requested combination is not technically feasible.

   (f) An incumbent LEC that denies a request to combine elements pursuant to
paragraph (c)(2) of this section must prove to the state commission that the
requested combination would impair the ability of other carriers to obtain
[*212]   access to unbundled network elements or to interconnect with the
incumbent LEC's network.

@ 51.317 Standards for identifying network elements to be made available.

   (a) In determining what network elements should be made available for
purposes of section 251(c)(3) of the Act beyond those identified in @ 51.319 of
this part, a state commission shall first determine whether it is technically
feasible for the incumbent LEC to provide access to a network element on an
unbundled basis.

   (b) If the state commission determines that it is technically feasible for
the incumbent LEC to provide access to the network element on an unbundled
basis, the state commission may decline to require unbundling of the network
element only if:

   (1) the state commission concludes that:

   (i) the network element is proprietary, or contains proprietary information
that will be revealed if the network element is provided on an unbundled basis;
and

   (ii) a requesting telecommunications carrier could offer the same proposed
telecommunications service through the use of other, nonproprietary unbundled
network elements within the incumbent LEC's network; or

   (2) the state commission concludes that the failure  [*213]   of the
incumbent LEC to provide access to the network element would not decrease the
quality of, and would not increase the financial or administrative cost of, the
telecommunications service a requesting telecommunications carrier seeks to
offer, compared with providing that service over other unbundled network
elements in the incumbent LEC's network.

@ 51.319 Specific unbundling requirements.

   An incumbent LEC shall provide nondiscriminatory access in accordance with @
51.311 of this part and section 251(c)(3) of the Act to the following network
elements on an unbundled basis to any requesting telecommunications carrier for
the provision of a telecommunications service:


   (a) Local Loop. The local loop network element is defined as a transmission
facility between a distribution frame (or its equivalent) in an incumbent LEC
central office and an end user customer premises;

   (b) Network Interface Device.

   (1) The network interface device network element is defined as a
cross-connect device used to connect loop facilities to inside wiring.

   (2) An incumbent LEC shall permit a requesting telecommunications carrier to
connect its own local loops to the inside wiring of premises through  [*214]
the incumbent LEC's network interface device. The requesting telecommunications
carrier shall establish this connection through an adjoining network interface
device deployed by such telecommunications carrier;

   (c) Switching Capability.

   (1) Local Switching Capability.

   (i) The local switching capability network element is defined as:

   (A) line-side facilities, which include, but are not limited to, the
connection between a loop termination at a main distribution frame and a switch
line card;

   (B) trunk-side facilities, which include, but are not limited to, the
connection between trunk termination at a trunk-side cross-connect panel and a
switch trunk card; and

   (C) all features, functions, and capabilities of the switch, which include,
but are not limited to:

   (1) the basic switching function of connecting lines to lines, lines to
trunks, trunks to lines, and trunks to trunks, as well as the same basic
capabilities made available to the incumbent LEC's customers, such as a
telephone number, white page listing, and dial tone; and

   (2) all other features that the switch is capable of providing, including but
not limited to custom calling, custom local area signaling service features,
[*215]   and Centrex, as well as any technically feasible customized routing
functions provided by the switch.

   (ii) An incumbent LEC shall transfer a customer's local service to a
competing carrier within a time period no greater than the interval within which
the incumbent LEC currently transfers end users between interexchange carriers,
if such transfer requires only a change in the incumbent LEC's software;

   (2) Tandem Switching Capability. The tandem switching capability network
element is defined as:

   (i) trunk-connect facilities, including but not limited to the connection
between trunk termination at a cross-connect panel and a switch trunk card;

   (ii) the basic switching function of connecting trunks to trunks; and


   (iii) the functions that are centralized in tandem switches (as distinguished
from separate end-office switches), including but not limited to call
recording, the routing of calls to operator services, and signaling conversion
features;

   (d) Interoffice Transmission Facilities.

   (1) Interoffice transmission facilities are defined as incumbent LEC
transmission facilities dedicated to a particular customer or carrier, or shared
by more than one customer or carrier, that   [*216]   provide telecommunications
between wire centers owned by incumbent LECs or requesting telecommunications
carriers, or between switches owned by incumbent LECs or requesting
telecommunications carriers.

   (2) The incumbent LEC shall:

   (i) provide a requesting telecommunications carrier exclusive use of
interoffice transmission facilities dedicated to a particular customer or
carrier, or use of the features, functions, and capabilities of interoffice
transmission facilities shared by more than one customer or carrier;

   (ii) provide all technically feasible transmission facilities, features,
functions, and capabilities that the requesting telecommunications carrier could
use to provide telecommunications services;

   (iii) permit, to the extent technically feasible, a requesting
telecommunications carrier to connect such interoffice facilities to equipment
designated by the requesting telecommunications carrier, including, but not
limited to, the requesting telecommunications carrier's collocated facilities;
and

   (iv) permit, to the extent technically feasible, a requesting
telecommunications carrier to obtain the functionality provided by the incumbent
LEC's digital cross-connect systems  [*217]   in the same manner that the
incumbent LEC provides such functionality to interexchange carriers;

   (e) Signaling Networks and Call-Related Databases.

   (i) Signaling Networks.

   (i) Signaling networks include, but are not limited to, signaling links and
signaling transfer points.

   (ii) When a requesting telecommunications carrier purchases unbundled
switching capability from an incumbent LEC, the incumbent LEC shall provide
access to its signaling network from that switch in the same manner in which it
obtains such access itself.

   (iii) An incumbent LEC shall provide a requesting telecommunications carrier
with its own switching facilities access to the incumbent LEC's signaling
network for each of the requesting telecommunications carrier's switches. This
connection shall be made in the same manner as an incumbent LEC connects one of
its oval switches to a signal transfer point.


   (iv) Under this paragraph, an incumbent LEC is not required to unbundle those
signaling links that connect service control points to switching transfer points
or to permit a requesting telecommunications carrier to link its own signal
transfer points directly to the incumbent LEC's switch or call-related
databases;   [*218]

   (2) Call-Related Databases.

   (i) Call-related databases are defined as databases, other than operations
support systems, that are used in signaling networks for billing and collection
or the transmission, routing, or other provision of a telecommunications
service.

   (ii) For purposes of switch query and database response through a signaling
network, an incumbent LEC shall provide access to its call-related databases,
including, but not limited to, the Line Information Database, Toll Free Calling
database, downstream number portability databases, and Advanced Intelligent
Network databases, by means of physical access at the signaling transfer point
linked to the unbundled database.

   (iii) An incumbent LEC shall allow a requesting telecommunications carrier
that has purchased an incumbent LEC's local switching capability to use the
incumbent LEC's service control point element in the same manner, and via the
same signaling links, as the incumbent LEC itself.

   (iv) An incumbent LEC shall allow a requesting telecommunications carrier
that has deployed its own switch, and has linked that switch to an incumbent
LEC's signaling system, to gain access to the incumbent LEC's service control
[*219]   point in a manner that allows the requesting carrier to provide any
call-related, database-supported services to customers served by the requesting
telecommunications carrier's switch.

   (v) A state commission shall consider whether mechanisms mediating access to
an incumbent LEC's Advanced Intelligent Network service control points are
necessary, and if so, whether they will adequately safeguard against intentional
or unintentional misuse of the incumbent LEC's Advanced Intelligent Network
facilities.

   (vi) An incumbent LEC shall provide a requesting telecommunications carrier
with access to call-related databases in a manner that complies with section 222
of the Act;

   (3) Service Management Systems.

   (A) A service management system is defined as a computer database or system
not part of the public switched network that, among other things:

   (1) interrconnects to the service control point and sends to that service
control point the information and call processing instructions needed for a
network switch to process and complete a telephone call; and

   (2) provides telecommunications carriers with the capability of entering and
storing data regarding the processing and completing of   [*220]   a telephone
call.


   (B) An incumbent LEC shall provide a requesting telecommunications carrier
with the information necessary to enter correctly, or format for entry, the
information relevant for input into the particular incumbent LEC service
management system.

   (C) An incumbent LEC shall provide a requesting telecommunications carrier
the same access to design, create, test, and deploy Advanced Intelligent
Network-based services at the service management system, through a service
creation environment, that the incumbent LEC provides to itself.

   (D) A state commission shall consider whether mechanisms mediating access to
Advanced Intelligent Network service management systems and service creation
environments are necessary, and if so, whether they will adequately safeguard
against intentional or unintentional misuse of the incumbent LEC's Advanced
Intelligent Network facilities.

   (E) An incumbent LEC shall provide a requesting telecommunications carrier
access to service management systems in a manner that complies with section 222
of the Act;

   (f) Operations Support Systems Functions.

   (1) Operations support systems functions consist of pre-ordering, ordering,
provisioning, maintenance  [*221]   and repair, and billing functions supported
by an incumbent LEC's databases and information.

   (2) An incumbent LEC that does not currently comply with this requirement
shall do so as expeditiously as possible, but, in any event, no later than
January 1, 1997; and

   (g) Operator Service and Directory Assistance. An incumbent LEC shall provide
access to operator service and directory assistance facilities where technically
feasible.

@ 51.321 Methods of obtaining interconnection and access to unbundled elements
under section 251 of the Act.

   (a) Except as provided in paragraph (e) of this section, an incumbent LEC
shall provide, on terms and conditions that are just, reasonable, and
nondiscriminatory in accordance with the requirements of this part, any
technically feasible method of obtaining interconnection or access to unbundled
network elements at a particular point upon a request by a telecommunications
carrier.

   (b) Technically feasible methods of obtaining interconnection or access to
unbundled network elements include, but are not limited to:

   (1) physical collocation and virtual collocation at the premises of an
incumbent LEC; and

   (2) meet point interconnection arrangements.   [*222]

   (c) A previously successful method of obtaining interconnection or access to
unbundled network elements at a particular premises or point on an incumbent
LEC's network is substantial evidence that such method is technically feasible
in the case of substantially similar network premises or points.



   (d) An incumbent LEC that denies a request for a particular method of
obtaining interconnection or access to unbundled network elements on the
incumbent LEC's network must prove to the state Commission that the requested
method of obtaining interconnection or access to unbundled network elements at
that point is not technically feasible.

   (e) An incumbent LEC shall not be required to provide for physical
collocation of equipment necessary for interconnection or access to unbundled
network elements at the incumbent LEC's premises if it demonstrates to the state
commission that physical collocation is not practical for technical reasons or
because of space limitations. In such cases, the incumbent LEC shall be required
to provide virtual collocation, except at points where the incumbent LEC proves
to the state commission that virtual collocation is not technically feasible. If
virtual collocation  [*223]   is not technically feasible, the incumbent LEC
shall provide other methods of interconnection and access to unbundled network
elements to the extent technically feasible.

   (f) An incumbent LEC shall submit to the state commission detailed floor
plans or diagrams of any premises where the incumbent LEC claims that physical
collocation is not practical because of space limitations.

   (g) An incumbent LEC that is classified as a Class A company under @ 32.11 of
this chapter and that is not a National Exchange Carrier Association interstate
tariff participant as provided in part 69, subpart G, shall continue to provide
expanded interconnection service pursuant to interstate tariff in accordance
with @@ 64.1401, 64.1402, 69.121 of this chapter, and the Commission's other
requirements.

@ 51.323 Standards for physical collocation and virtual collocation.

   (a) An incumbent LEC shall provide physical collocation and virtual
collocation to requesting telecommunications carriers.

   (b) An incumbent LEC shall permit the collocation of any type of equipment
used for interconnection or access to unbundled network elements. Whenever an
incumbent LEC objects to collocation of equipment by a requesting  [*224]
telecommunications carrier for purposes within the scope of section 251(c)(6) of
the Act, the incumbent LEC must prove to the state commission that the equipment
will not be actually used by the telecommunications carrier for the purpose of
obtaining interconnection or access to unbundled network elements. Equipment
used for interconnection and access to unbundled network elements includes, but
is not limited to:

   (1) transmission equipment including, but not limited to, optical terminating
equipment and multiplexers; and

   (2) equipment being collocated to terminate basic transmission facilities
pursuant to @@ 64.1401 and 64.1402 of this chapter as of August 1, 1996.

   (c) Nothing in this section requires an incumbent LEC to permit collocation
of switching equipment or equipment used to provide enhanced services.


   (d) When an incumbent LEC provides physical collocation, virtual collocation,
or both, the incumbent LEC shall:
   (1) provide an interconnection point or points, physically accessible by both
the incumbent LEC and the collocating telecommunications carrier, at which the
fiber optic cable carrying an interconnector's circuits can enter the incumbent
LEC's premises, provided  [*225]   that the incumbent LEC shall designate
interconnection points as close as reasonably possible to its premises;

   (2) provide at least two such interconnection points at each incumbent LEC
premises at which there are at least two entry points for the incumbent LEC's
cable facilities, and at which space is available for new facilities in at least
two of those entry points;

   (3) permit interconnection of copper or coaxial cable if such interconnection
is first approved by the state commission; and

   (4) permit physical collocation of microwave transmission facilities except
where such collocation is not practical for technical reasons or because of
space limitations, in which case virtual collocation of such facilities is
required where technically feasible.

   (e) When providing virtual collocation, an incumbent LEC shall, at a minimum,
install, maintain, and repair collocated equipment identified in paragraph (b)
of this section within the same time periods and with failure rates that are no
greater than those that apply to the performance of similar functions for
comparable equipment of the incumbent LEC itself.

   (f) An incumbent LEC shall allocate space for the collocation of the
equipment  [*226]   identified in paragraph (b) of this section in accordance
with the following requirements:

   (1) an incumbent LEC shall make space available within or on its premises to
requesting telecommunications carriers on a fast-come, fast-served basis,
provided, however, that the incumbent LEC shall not be required to lease or
construct additional space to provide for physical collocation when existing
space has been exhausted;

   (2) to the extent possible, an incumbent LEC shall make contiguous space
available to requesting telecommunications carriers that seek to expand their
existing collocation space;

   (3) when planning renovations of existing facilities or constructing or
leasing new facilities, an incumbent LEC shall take into account projected
demand for collocation of equipment;

   (4) an incumbent LEC may retain a limited amount of floor space for its own
specific future uses, provided, however, that the incumbent LEC may not reserve
space for future use on terms more favorable than those that apply to other
telecommunications carriers seeking to reserve collocation space for their own
future use;


   (5) an incumbent LEC shall relinquish any space held for future use before
denying a request  [*227]   for virtual collocation on the grounds of space
limitations, unless the incumbent LEC proves to the state commission that
virtual collocation at that point is not technically feasible; and
   (6) an incumbent LEC may impose reasonable restrictions on the warehousing of
unused space by collocating telecommunications carriers, provided, however, that
the incumbent LEC shall not set maximum space limitations applicable to such
carriers unless the incumbent LEC proves to the state commission that space
constraints make such restrictions necessary.

   (g) An incumbent LEC shall permit collocating telecommunications carriers to
collocate equipment and connect such equipment to unbundled network transmission
elements obtained from the incumbent LEC, and shall not require such
telecommunications carriers to bring their own transmission facilities to the
incumbent LEC's premises in which they seek to collocate equipment.

   (h) An incumbent LEC shall permit a collocating telecommunications carrier to
interconnect its network with that of another collocating telecommunications
carrier at the incumbent LEC's premises and to connect its collocated equipment
to the collocated equipment of another telecommunications  [*228]   carrier
within the same premises provided that the collocated equipment is also used for
interconnection with the incumbent LEC or for access to the incumbent LEC's
unbundled network elements.

   (1) An incumbent LEC shall provide the connection between the equipment in
the collocated spaces of two or more telecommunications carriers, unless the
incumbent LEC permits one or more of the collocating parties to provide this
connection for themselves; and

   (2) An incumbent LEC is not required to permit collocating telecommunications
carriers to place their own connecting transmission facilities within the
incumbent LEC's premises outside of the actual physical collocation space.

   (i) An incumbent LEC may require reasonable security arrangements to separate
a collocating telecommunications carrier's space from the incumbent LEC's
facilities.

   (j) An incumbent LEC shall permit a collocating telecommunications carrier to
subcontract the construction of physical collocation arrangements with
contractors approved by the incumbent LEC, provided, however, that the incumbent
LEC shall not unreasonably withhold approval of contractors. Approval by an
incumbent LEC shall be based on the same criteria  [*229]   it uses in approving
contractors for its own purposes.

Subpart E - Exemptions, Suspensions, and Modifications of Requirements of
Section 251 of the Act.

@ 51.401 State authority.

A state commission shall determine whether a telephone company is entitled,
pursuant to section 251(f) of the Act, to exemption from, or suspension or
modification of, the requirements of section 251 of the Act. Such determinations
shall be made on a case-by-case basis.

@ 51.403 Carriers eligible for suspension or modification under section
251(f)(2) of the Act.


A LEC is not eligible for a suspension or modification of the requirements of
section 251(b) or section 251(c) of the Act pursuant to section 251(f)(2) of
the Act if such LEC, at the holding company level, has two percent or more of
the subscriber lines installed in the aggregate nationwide.

@ 51.405 Burden of proof.

   (a) Upon receipt of a bona fide request for interconnection, services, or
access to unbundled network elements, a rural telephone company must prove to
the state commission that the rural telephone company should be entitled,
pursuant to section 251(f)(1) of the Act, to continued exemption from the
requirements of section  [*230]   251(c) of the Act.

   (b) A LEC with fewer than two percent of the nation's subscriber lines
installed in the aggregate nationwide must prove to the state commission,
pursuant to section 251(f)(2) of the Act, that it is entitled to a suspension or
modification of the application of a requirement or requirements of section
251(b) or 251(c) of the Act.

   (c) In order to justify continued exemption under section 251(f)(1) of the
Act once a bona fide request has been made, an incumbent LEC must offer evidence
that the application of the requirements of section 251(c) of the Act would be
likely to cause undue economic burden beyond the economic burden that is
typically associated with efficient competitive entry.

   (d) In order to justify a suspension or modification under section 251(f)(2)
of the Act, a LEC must offer evidence that the application of section 251(b) or
section 251(c) of the Act would be likely to cause undue economic burden beyond
the economic burden that is typically associated with efficient competitive
entry.

Subpart F - Pricing of Elements.

@ 51.501 Scope.

   (a) The rules in this subpart apply to the pricing of network elements,
interconnection, and methods of obtaining  [*231]   access to unbundled
elements, including physical collocation and virtual collocation.

   (b) As used in this subpart, the term "element" includes network elements,
interconnection, and methods of obtaining interconnection and access to
unbundled elements.

@ 51.503 General pricing standard.

   (a) An incumbent LEC shall offer elements to requesting telecommunications
carriers at rates, terms, and conditions that are just, reasonable, and
nondiscriminatory.

   (b) An incumbent LEC's rates for each element it offers shall comply with the
rate structure rules set forth in @@ 51.507 and 51.509 of this part, and shall
be established, at the election of the state commission--


   (1) pursuant to the forward-looking economic cost-based pricing methodology
set forth in @@ 51.505 and 51.511 of this part; or
   (2) consistent with the proxy ceilings and ranges set forth in @ 51.513 of
this part.

   (c) The rates that an incumbent LEC assesses for elements shall not vary on
the basis of the class of customers served by the requesting carrier, or on the
type of services that the requesting carrier purchasing such elements uses them
to provide.

@ 51.505 Forward-looking economic cost.

   (a) In general.   [*232]   The forward-looking economic cost of an element
equals the sum of:

   (1) the total element long-run incremental cost of the element, as described
in paragraph (b); and

   (2) a reasonable allocation of forward-looking common costs, as described in
paragraph (c).

   (b) Total element long-run incremental cost. The total element long-run
incremental cost of an element is the forward-looking cost over the long run of
the total quantity of the facilities and functions that are directly
attributable to, or reasonably identifiable as incremental to, such element,
calculated taking as a given the incumbent LEC's provision of other elements.

   (1) Efficient network configuration. The total element long-run incremental
cost of an element should be measured based on the use of the most efficient
telecommunications technology currently available and the lowest cost network
configuration, given the existing location of the incumbent LEC's wire centers.

   (2) Forward-looking cost of capital. The forward-looking cost of capital
shall be used in calculating the total element long-run incremental cost of an
element.

   (3) Depreciation rates. The depreciation rates used in calculating
forward-looking economic  [*233]   costs of elements shall be economic
depreciation rates.

   (c) Reasonable allocation of forward-looking common costs.

   (1) Forward-looking common costs. Forward-looking common costs are economic
costs efficiently incurred in providing a group of elements or services (which
may include all elements or services provided by the incumbent LEC) that cannot
be attributed directly to individual elements or services.

   (2) Reasonable allocation.

   (A) The sum of a reasonable allocation of forward-looking common costs and
the total element long-run incremental cost of an element shall not exceed the
stand-alone costs associated with the element. In this context, stand-alone
costs are the total forward-looking costs, including corporate costs, that would
be incurred to produce a given element if that element were provided by an
efficient firm that produced nothing but the given element.



   (B) The sum of the allocation of forward-looking common costs for all
elements and services shall equal the total forward-looking common costs,
exclusive of retail costs, attributable to operating the incumbent LEC's total
network, so as to provide all the elements and services offered.

   (d) Factors that may not  [*234]   be considered. The following factors shall
not be considered in a calculation of the forward-looking economic cost of an
element:

   (1) Embedded costs. Embedded costs are the costs that the incumbent LEC
incurred in the past and that are recorded in the incumbent LEC's books of
accounts.

   (2) Retail costs. Retail costs include the costs of marketing, billing,
collection, and other costs associated with offering retail telecommunications
services to subscribers who are not telecommunications carriers, described in @
51.609 of this part.

   (3) Opportunity costs. Opportunity costs include the revenues that the
incumbent LEC would have received for the sale of telecommunications services,
in the absence of competition from telecommunications carrier that purchase
elements.

   (4) Revenues to subsidize other services. Revenues to subsidize other
services include revenues associated with elements or telecommunications service
offerings other than the element for which a rate is being established.

   (e) Cost study requirements. An incumbent LEC must prove to the state
commission that the rates for each element it offers do not exceed the
forward-looking economic cost per unit of providing the  [*235]   element, using
a cost study that complies with the methodology set forth in this section and @
51.51l of this part.

   (1) A state commission may set a rate outside the proxy ranges or above the
proxy ceilings described in @ 51.513 of this part only if that commission has
given full and fair effect to the economic cost based pricing methodology
described in this section and @ 51.511 of this part in a state proceeding that
meets the requirements of paragraph (e)(2) of this section.

   (2) Any state proceeding conducted pursuant to this section shall provide
notice and an opportunity for comment to affected parties and shall result in
the creation of a written factual record that is sufficient for purposes of
review. The record of any state proceeding in which a state commission considers
a cost study for purposes of establishing rates under this section shall include
any such cost study.

@ 51.507 General rate structure standard.

   (a) Element rates shall be structured consistently with the manner in which
the costs of providing the elements are incurred.

   (b) The costs of dedicated facilities shall be recovered through flat-rated
charges.



   (c) The costs of shared facilities shall be   [*236]   recovered in a manner
that efficiently apportions costs among users. Costs of shared facilities may be
apportioned either through usage-sensitive charges or capacity-based flat-rated
charges, if the state commission finds that such rates reasonably reflect the
costs imposed by the various users.

   (d) Recurring costs shall be recovered through recurring charges, unless an
incumbent LEC proves to a state commission that such recurring costs are de
minimis. Recurring costs shall be considered de minimis when the costs of
administering the recurring charge would be excessive in relation to the amount
of the recurring costs.

   (e) State commissions may, where reasonable, require incumbent LECs to
recover nonrecurring costs through recurring charges over a reasonable period of
time. Nonrecurring charges shall be allocated efficiently among requesting
telecommunications carriers, and shall not permit an incumbent LEC to recover
more than the total forward-looking economic cost of providing the applicable
element.

   (f) State commissions shall establish different rates for elements in at
least three defined geographic areas within the state to reflect geographic cost
differences.

   (1) To establish  [*237]   geographically-deaveraged rates, state commissions
may use existing density-related zone pricing plans described in @ 69.123 of
this chapter, or other such cost-related zone plans established pursuant to
state law.

   (2) In states not using such existing plans, state commissions must create a
minimum of three cost-related rate zones.

@ 51.509 Rate structure standards for specific elements.

   In addition to the general rules set forth in @ 51.507 of this part, rates
for specific elements shall comply with the following rate structure rules.

   (a) Local loops. Loop costs shall be recovered through flat-rated charges.

   (b) Local switching. Local switching costs shall be recovered through a
combination of a flat-rated charge for line ports and one or more flat-rated or
per-minute usage charges for the switching matrix and for trunk ports.

   (c) Dedicated transmission links. Dedicated transmission link costs shall be
recovered through flat-rated charges.

   (d) Shared transmission facilities between tandem switches and end offices.
The costs of shared transmission facilities between tandem switches and end
offices may be recovered through usage-sensitive charges, or in another manner
consistent  [*238]   with the manner that the incumbent LEC incurs those costs.

   (e) Tandem switching. Tandem switching costs may be recovered through
usage-sensitive charges, or in another manner consistent with the manner that
the incumbent LEC incurs those costs.



   (f) Signaling and call-related database services. Signaling and call-related
database service costs shall be usage-sensitive, based on either the number of
queries or the number of messages, with the exception of the dedicated circuits
known as signaling links, the cost of which shall be recovered through
flat-rated charges.

   (g) Collocation. Collocation costs shall be recovered consistent with the
rate structure policies established in the Expanded Interconnection proceeding,
CC Docket No. 91-141.

@ 51.511 Forward-looking economic cost per unit.

   (a) The forward-looking economic cost per unit of an element equals the
forward-looking economic cost of the element, as defined in @ 51.505 of this
part, divided by a reasonable projection of the sum of the total number of units
of the element that the incumbent LEC is likely to provide to requesting
telecommunications carriers and the total number of units of the element that
the incumbent   [*239]   LEC is likely to use in offering its own services,
during a reasonable measuring period.

   (b) (1) With respect to elements that an incumbent LEC offers on a flat-rate
basis, the number of units is defined as the discrete number of elements (e.g.,
local loops or local switch ports) that the incumbent LEC uses or provides.

   (2) With respect to elements that an incumbent LEC offers on a
usage-sensitive basis, the number of units is defined as the unit of measurement
of the usage (e.g., minutes of use or call-related database queries) of the
element.

@ 51.513 Proxies for forward-looking economic cost.

   (a) A state commission may determine that the cost information available to
it with respect to one or more elements does not support the adoption of a rate
or rates that are consistent with the requirements set forth in @@ 51.505 and
51.511 of this part. In that event, the state commission may establish a rate
for an element that is consistent with the proxies specified in this section,
provided that:

   (1) any rate established through use of such proxies shall be superseded once
the state commission has completed review of a cost study that complies with the
forward-looking economic cost  [*240]   based pricing methodology described in
@@ 51.505 and 51.511 of this part, and has concluded that such study is a
reasonable basis for establishing element rates; and

   (2) the state commission sets forth in writing a reasonable basis for its
selection of a particular rate for the element.

   (b) The constraints on proxy-based rates described in this section apply on a
geographically averaged basis. For purposes of determining whether
geographically cleaveraged rates for elements comply with the provisions of this
section, a geographically averaged proxy-based rate shall be computed based on
the weighted average of the actual, geographically cleaveraged rates that apply
in separate geographic areas in a state.



   (c) Proxies for specific elements.

   (1) Local loops. For each state listed below, the proxy-based monthly rate
for unbundled local loops, on a statewide weighted average basis, shall be no
greater than the figures listed in the table below. (The Commission has not
established a default proxy ceiling for loop rates in Alaska).

                  TABLE A
State                         Proxy Ceiling
Alabama                          $ 17.25
Arizon                           $ 12.85
Arkansas                         $ 21.18
California                       $ 11.10
Colorado                         $ 14.97
Connecticut                      $ 13.23
Delaware                         $ 13.24
District of Columbia             $ 10.81
Florida                          $ 13.68
Georgia                          $ 16.09
Hawaii                           $ 15.27
Idaho                            $ 20.16
Illinois                         $ 13.12
Indiana                          $ 13.29
Iowa                             $ 15.94
Kansas                           $ 19.85
Kentucky                         $ 16.70
Louisiana                        $ 16.98
Maine                            $ 18.69
Maryland                         $ 13.36
Massachusetts                    $ 9.83
Michigan                         $ 15.27
Minnesota                        $ 14.81
Mississippi                      $ 21.97
Missouri                         $ 18.32
Montana                          $ 25.18
Nebraska                         $ 18.05
Nevada                           $ 18.95
New Hampshire                    $ 16.00
New Jersey                       $ 12.47
New Mexico                       $ 18.66
New York                         $ 11.75
North Carolina                   $ 16.71
North Dakota                     $ 25.36
Ohio                             $ 15.73
Oklahoma                         $ 17.63
Oregon                           $ 15.44
Pennsylvania                     $ 12.30
Puerto Rico                      $ 12.47
Rhode Island                     $ 11.48
South Carolina                   $ 17.07
South Dakota                     $ 25.33
Tennessee                        $ 17.41
Texas                            $ 15.49
Utah                             $ 15.12
Vermont                          $ 20.13
Virginia                         $ 14.13
Washington                       $ 13.37
West Virginia                    $ 19.25
Wisconsin                        $ 15.94
Wyoming                          $ 25.11
[*241]

   (2) Local switching. The blended proxy-based rate for unbundled local
switching shall be no greater than 0.4 cents ($ 0.004) per minute, and no less
than 0.2 cents ($ 0.002) per minute, except that, where a state commission has,
before August 8, 1996, established a rate less than or equal to 0.5 cents ($
0.005) per minute, that rate may be retained pending completion of a
forward-looking economic cost study. The blended rate for unbundled local
switching shall be calculated as the sum of the following:

   (A) the applicable flat-rated charges for subelements associated with
unbundled local switching, such as line ports, divided by the projected average
minutes of use per flat-rated subelement; and

   (B) the applicable usage-sensitive charges for subelements associated with
unbundled local switching, such as switching and trunk ports. A weighted average
of such charges shall be used in appropriate circumstances, such as when peak
and off-peak charges are used.

   (3) Dedicated transmission links. The proxy-based rates for dedicated
transmission links shall be no greater than the incumbent LEC's tariffed
interstate charges for comparable entrance facilities or direct-trunked
transport offerings,   [*242]   as described in @@ 69.110 and 69.112 of this
chapter.

   (4) Shared transmission facilities between tandem switches and end offices.
The proxy-based rates for shared transmission facilities between tandem switches
and end offices shall be no greater than the weighted per-minute equivalent of
DS1 and DS3 interoffice dedicated transmission link rates that reflects the
relative number of DS1 and DS3 circuits used in the tandem to end office links
(or a surrogate based on the proportion of copper and fiber facilities in the
interoffice network), calculated using a loading factor of 9,000 minutes per
month per voice-grade circuit, as described in @ 69.112 of this chapter.

   (5) Tandem switching. The proxy-based rate for tandem switching shall be no
greater than 0.15 cents ($ 0.0015) per minute of use.

   (6) Collocation. To the extent that the incumbent LEC offers a comparable
form of collocation in its interstate expanded interconnection tariffs, as
described in @@ 64.1401 and 69.121 of this chapter, the proxy-based rates for
collocation shall be no greater than the effective rates for equivalent services
in the interstate expanded inter-connection tariff. To the extent that the
incumbent   [*243]   LEC does not offer a comparable form of collocation in its
interstate expanded interconnection tariffs, a state commission may, in its
discretion, establish a proxy-based rate, provided that the state commission
sets forth in writing a reasonable basis for concluding that its rate would
approximate the result of a forward-looking economic cost study, as described in
@ 51.505 of this part.


   (7) Signaling, call-related database, and other elements. To the extent that
the incumbent LEC has established rates for offerings comparable to other
elements in its interstate access tariffs, and has provided cost support for
those rates pursuant to @ 61.49(h) of this chapter, the proxy-based rates for
those elements shall be no greater than the effective rates for equivalent
services in the interstate access tariffs. In other cases, the proxy-based rate
shall be no greater than a rate based on direct costs plus a reasonable
allocation of overhead loadings, pursuant to @ 61.49(h) of this chapter.

@ 51.515 Application of access charges.

   (a) Neither the interstate access charges described in part 69 nor comparable
intrastate access charges shall be assessed by an incumbent LEC on purchasers of
[*244]   elements that offer telephone exchange or exchange access services.

   (b) Notwithstanding @@ 51.505, 51.511, and 51.513(d)(2) of this part and
paragraph (a) of this section, an incumbent LEC may assess upon
telecommunications carriers that purchase unbundled local switching elements, as
described in @ 51.319(c)(1) of this part, for interstate minutes of use
traversing such unbundled local switching elements, the carrier common line
charge described in @ 69.105 of this chapter, and a charge equal to 75% of the
interconnection charge described in @ 69.124 of this chapter, only until the
earliest of the following, and not thereafter:

   (1) June 30, 1997;

   (2) the later of the effective date of a final Commission decision in CC
Docket No. 96-45, Federal-State Joint Board on Universal Service, or the
effective date of a final Commission decision in a proceeding to consider reform
of the interstate access charges described in part 69; or

   (3) with respect to a Bell operating company only, the date on which that
company is authorized to offer in-region interLATA service in a state pursuant
to section 271 of the Act. The end date for Bell operating companies that are
authorized to offer interLATA  [*245]   service shall apply only to the recovery
of access charges in those states in which the Bell operating company is
authorized to offer such service.

   (c) Notwithstanding @@ 51.505, 51.511, and 51.513(d)(2) of this part and
paragraph (a) of this section, an incumbent LEC may assess upon
telecommunications carriers that purchase unbundled local switching elements, as
described in @ 51.319(c)(1) of this part, for intrastate toll minutes of use
traversing such unbundled local switching elements, intrastate access charges
comparable to those listed in paragraph (b) and any explicit intrastate
universal service mechanism based on access charges, only until the earliest of
the following, and not thereafter:

   (1) June 30, 1997;

   (2) the effective date of a state commission decision that an incumbent LEC
may not assess such charges; or

   (3) with respect to a Bell operating company only, the date on which that
company is authorized to offer in-region interLATA service in the state pursuant
to section 271 of the Act. The end date for Bell operating companies that are
authorized to offer interLATA service shall apply only to the recovery of access
charges in those states in which the Bell operating  [*246]   company is
authorized to offer such service.

Subpart G - Resale.

@ 51.601 Scope of resale rules.

   The provisions of this subpart govern the terms and conditions under which
LECs offer telecommunications services to requesting telecommunications carriers
for resale.

@ 51.603 Resale obligation of all local exchange carriers.

   (a) A LEC shall make its telecommunications services available for resale to
requesting telecommunications carriers on terms and conditions that are
reasonable and non-discriminatory.

   August 8, 1996

   Separate Statement of Commissioner Rachelle B. Chong

Re: In the Matter of Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996, CC Docket No. 96-98; Interconnection between
Local Exchange Carriers and Commercial Mobile Radio Service Providers, CC Docket
No. 95-185; Implementation of Sections 3(n) and 332 of the Communications Act,
GN Docket No. 93-252.

   The passage of the Telecommunications Act of 1996 n1 marked the end of more
than sixty years of monopoly style regulation. The changes wrought by the 1996
Act on the telephone industry are dramatic and comprehensive. I write separately
to emphasize my strong belief that  [*247]   the pro-competitive path we have
unanimously chosen in this interconnection order is the right one.

n1 Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56 to be
codified at 47 U.S.C. @@ 151 et. seq. (1996 Act).

   On the day the 1996 Act became law, the Commission embarked on a challenging
journey to help implement the new statute. Our final destination has been
clearly delineated by Congress. We are "to provide for a pro-competitive,
de-regulatory national policy framework designed to accelerate rapidly private
sector deployment of advanced telecommunications and information technologies
and services to all Americans by opening all telecommunications markets to
competition." n2

n2 S. Conf. Rep. No. 104-230, 104th Cong., 2d Sess. 1 (1996).

   True to this charge, we have resolved to act quickly and decisively to open
all telecommunications markets to competition, to provide pricing methodologies
that will drive rates toward cost, and to provide a national policy framework
that will achieve this restructuring of the industry in an orderly and efficient
manner. The rules in this item do not favor any particular industry or player
over another, but instead free  [*248]   them from outdated regulatory
restraints in order to compete with each other.


   The 1996 Act opens up the local telephone network to competitors, and
provides them with unprecedented access through an interconnection framework. n3
The Act provides three methods of entry through which a competitor may enter
the local telephone market: (1) full facilities-based entry; (2) purchase of
unbundled elements from the incumbent local exchange carrier (LEC), i.e. network
"piece parts;" and (3) resale, which gives a competitor the ability to purchase
an incumbent LEC's retail service at a wholesale price and repackage it for sale
to the competitor's own end user.

n3 Interconnection refers to the physical linking of two networks for the mutual
exchange of traffic.

   Facilities-based Competition. The first entry option -- facilities-based
competition -- represents the most dramatic departure from our current
bottleneck monopoly structure. A full facilities-based competitor would offer a
myriad of distinct services through separate facilities to its subscribers, and
thus providing consumers with the benefits of head-to-head competition. As a
practical matter, however, we do not expect a market  [*249]   typified by
full-fledged facilities-based competition to blossom overnight. These networks
or systems must be planned, financed and constructed over time. As a result, the
other two entry avenues -- the purchase of unbundled elements and resale -- take
on a special importance in the near term to bring swift competition to the local
marketplace.

   Unbundled Elements. Some new entrants already have some network
infrastructure in place, and lack only a few critical components in order to
provide local exchange service to consumers. For example, today's cable
operators have a coaxial wire that passes over 96.6% of the TV households in
America. n4 If a cable operator can access the remaining necessary network
elements from the incumbent LEC, the cable operator would be only a step away
from providing local telephone service over its upgraded network. This example
points out why it is essential for new entrants to obtain access to those
network piece parts. In our order, we set forth a minimum list of unbundled
network elements that incumbent LECs uniformly must make available to new
entrants upon request. The state commissions may expand upon this list. We
believe that this action will   [*250]   give new entrants what they need so
competition is "jump started."

n4 Paul Kagan Associates, Inc., Marketing New Media, Mar. 18, 1996.

   Resale. Resale is another critically important entry strategy because three
types of new entrants stand to benefit. First, facilities-based. competitors
that want to immediately enter the market prior to completing their own networks
can use resale as a transition mechanism. Second, facilities-based competitors
whose existing infrastructure does not overlap the incumbent LEC's service area,
may choose to use resale to ensure that it can offer a competing local service
package within the same service territory as the incumbent LEC. Third, new
entrants who do not intend to offer facilities-based competition will be able to
compete immediately in the local market by purchasing discounted services of the
incumbent LEC. For all of these categories, our decision provides a viable
avenue for immediate market entry.

   Free Market Negotiations. I highlight that the 1996 Act has made the
mechanism for entry a free market negotiation process between the incumbent LEC
and any potential new competitor. Under Section 252(a)(1), the Commission's
Section 251  [*251]   rules play no role if an incumbent LEC and a new entrant
reach a purely voluntary agreement, and the state commission approves it through
the process set forth in Section 252.



   Need for Minimum National Baselines. It is only if the carriers are
unsuccessful in their voluntary negotiations that government steps in. The Act
provides that the state commissions arbitrate the disputes. In today's order, we
set forth a baseline of terms and conditions for an arbitrated interconnection
agreement. I support this action for three reasons. First, because
interconnection matters are very complex and technical, I believe that minimum
national guidelines will help parties lower their transaction costs and will
help drive them to reach their voluntary agreements much faster. At the outset
of their voluntary negotiations, parties will understand what their minimum
rights will be in a subsequent state commission arbitration process; it is our
hope this may encourage earlier agreement.

   Second, a baseline of terms and conditions simplifies the state commission
arbitration process. A baseline enables a state commission to quickly approve an
agreement and thus rapidly introduce competition. The presence  [*252]   of a
baseline minimizes any regulatory delay that might result if a state commission
were to establish from scratch its own pricing methodology or conduct a
proceeding to identify network elements that must be unbundled.

   Third, in establishing some national minimum baselines, we greatly aid new
entrants who have national or regional strategies. Without such baselines, these
competitors would face a "patchwork quilt" of differing state regulatory
requirements that may create a potential entry barrier by increasing their entry
costs and causing substantial delay. Thus, it is my view that these baselines
promote swift competitive entry, which in turn will lead to the earlier
introduction of competitive services to consumers.

   Access Charge Transition. Although we take a great leap forward toward
competition with this interconnection order, our goal in making local telephone
competition a reality will not be complete until we finish universal service
reform and restructure our current access charge regime. Our order notes that
the Act sets forth a specific time frame by which the Commission must issue
final rules as to interconnection (August 1996) and universal service reform
(May 1997).   [*253]   Because of the time differential between these dates, and
in order to avoid undue disruption of the incumbent LECs' ability to support
universal service, I have supported our decision to require new entrants when
purchasing unbundled elements to pay a portion of certain access charges until
no later than June 30, 1997. My support for the establishment of a short term
access charge transition scheme is premised on the Commission's firm commitment
to complete universal service and access charge reform by the first half of
1997. I underscore my determination that the interim access charge mechanism
proposed herein is of a finite duration. I can foresee no circumstance upon
which it would be extended beyond the dates set forth in our order.

   Pricing Methodology. Prices of interconnection and unbundled elements, along
with prices for transport and termination and resale, are all crucial to any
interconnection agreement. Again, should the parties voluntarily agree on such
prices, these agreements will be submitted to the states for approval and there
is no government intervention in the process.


   If carriers cannot agree, however, today's decision makes clear that the FCC
will not set these  [*254]   prices. The Act provides that the appropriate state
commission will step in to set prices. To help guide state commissions as they
set prices according to local conditions, we have established methodological
pricing principles that are consistent with the Act's cost-based pricing
provisions. We have asked the state commissions to use the cost-based pricing
methodology described in our order when they conduct an economic cost study to
set their state specific rates. A clear benefit of this approach is that such a
national framework will encourage the swift establishment of a common,
pro-competition understanding of pricing principles among the states.

   We also have established certain default proxies that states will use in the
interim, if they have not completed a cost study during an arbitration, or if
they lack the necessary resources to initiate their own cost study. It is my
view that these default proxies, which are either price ceilings or price
ranges, will greatly speed competition. For example, in a situation where the
state commission has not yet completed a cost study but must render a decision
on specific pricing issues in an arbitration pursuant to the deadline imposed
[*255]   by Section 252(e)(4), the default proxies will assist the state
commission in resolving the pricing issues quickly and in a way consistent with
the Act's cost-based pricing principles.

   I emphasize that a state commission has the flexibility to set a specific
rate that is either above or below the default proxy ceiling or range if it has
conducted its own cost study consistent with the pricing methodology set forth
in our order. The default proxy is only an interim mechanism and it may not be
relied upon once a state commission has completed its own economic cost study.
n5

n5 It is unfortunate that we did not have enough of a record in this proceeding
to decide what would be an appropriate proxy for paging carriers' termination
costs or to set a default proxy. I am committed to moving forward with a further
rulemaking proceeding on this issue as quickly as possible.

   CMRS-LEC Interconnection Issues. In our order, I have supported our decision
to allow CMRS-LEC interconnection matters to be governed by the Sections 251/252
provisions, while continuing to acknowledge our continuing jurisdiction pursuant
to Section 332 over CMRS-LEC interconnection matters. In doing so, we have
[*256]   declined to opine on the precise extent of our Section 332 jurisdiction
over CMRS-LEC interconnection matters, however. I emphasize that by opting to
use the Section 251/252 framework, we are not repealing our Section 332
jurisdiction by implication or rejecting Section 332 as an alternative basis for
jurisdiction.

   While we have generally crafted our interconnection rules not to favor any
particular industry, player or technology over another, we cannot shut our eyes
to inherent differences between some classes of carriers' services that may pose
potential problems when we seek to apply our new interconnection rules. I
believe that should the need arise in the future, we should not hesitate to
adapt some of our general interconnection rules to recognize the unique nature
of particular classes of service providers, such as CMRS providers. It is for
this reason that I supported the Commission's decision to reserve its right to
exercise jurisdiction over LEC-CMRS interconnection under Section 332.


   There are several differences that set wireless CMRS providers apart from
some of the other telecommunications carriers that will avail themselves of the
Sections 251 and 252 interconnection  [*257]   framework. First, when adopting
Section 332 in 1993, Congress created a national regulatory framework for CMRS
providers, and granted the FCC authority to preempt states from entry and rate
regulation. Congress made clear that its intent was to "foster the growth and
development of mobile services that, by their nature, operate without regard to
state lines as an integral part of the national telecommunications
infrastructure." n6 This recognition that CMRS services are uniquely interstate
in scope was apt. CMRS service areas, which are established federally, can
encompass more than one state jurisdiction. n7 Congress was rightly concerned
that imposing multiple state regulatory schemes on CMRS providers may prove
unduly burdensome, cause delay, and otherwise inhibit the industry's growth.
Notably, Congress did not repeal Section 332 when it provided new Sections 251
and 252 in the 1996 Act.

n6 H.R. Report No. 103-11, 103rd Cong., 1st Sess. 260 (1993).

n7 For example, Personal Communications Service (PCS) providers in the
Washington - Baltimore Major Trading Area (MTA) are subject to six jurisdictions
-- Pennsylvania, Delaware, Maryland, Virginia, West Virginia and the District of
Columbia -- due to the large size and location of the federally set service
areas. Should one of these PCS providers need to arbitrate an interconnection
agreement pursuant to Section 251 and 252, such PCS provider could be subjected
to as many as six state arbitration proceedings. This scenario could impose
undue burdens, such as increased transaction costs, regulatory delay, and the
potential for inconsistent results, for CMRS providers with interstate service
areas. For this reason, we reserve our right to in the future to use Section 332
as an alternative basis for jurisdiction over CMRS providers faced with this
type of a dilemma.  [*258]

   Second, CMRS providers have suffered past discrimination at the hand of the
LECs and by certain state commissions with regard to interconnection matters.
Today's record is replete with examples of LECs that have significantly
overcharged CMRS providers for past interconnection. Further, in violation of
our rules, our record reflects that in some cases, LECs have refused to pay CMRS
providers for calls terminated by LECs on the CMRS networks, while other
wireline carriers have received such compensation from the LECs. In other
instances, LECs have required certain CMRS providers to pay for the traffic the
LEC carrier originates and terminates on the systems of the CMRS provider. These
problems have been compounded by certain state commissions who have limited
access by CMRS providers to more reasonable interconnection rates afforded by
LECs to other wireline carriers.

   In this order, we have taken a variety of measures to remedy this
discrimination and to ensure that CMRS providers are placed on an even footing
with other telecommunications carriers when obtaining LEC interconnection. I am
particularly pleased that we will allow CMRS providers with current
interconnection agreements  [*259]   that provide for non-mutual compensation an
opportunity to renegotiate those agreements under the framework of Sections
251/252, without incurring any early termination penalties. In light of the past
discrimination CMRS providers have experienced, however, I would have taken two
additional steps.


   First, I would have extended the "fresh look" opportunity to all CMRS
providers -- not just those with non-mutual compensation arrangements. Our
decision was to limit relief in this instance to contracts that are clearly
unlawful because they violate Section 20.11 of our rules. Section 20.11,
however, requires not only that CMRS-LEC interconnection agreements comply with
principles of mutual compensation, but also that each carrier pay reasonable
compensation. I believe that the record in this proceeding clearly
demonstrates that the rates the LECs have charged CMRS providers have far
exceeded their costs and thus could not fairly be characterized as "reasonable"
compensation.

   Second, instead of requiring the CMRS providers to continue paying their
current interconnection rates, I would have permitted CMRS providers to
immediately begin paying the default proxy rate while their interconnection
[*260]   arrangements were being renegotiated.

   It is my hope that on a going-forward basis, CMRS providers will be able to
obtain fair, reasonable and non-discriminatory interconnection rates under the
terms of today's decision. For reasons of simplicity and regulatory parity, it
makes sense to me to have a single regulatory scheme pursuant to Sections 251
and 252 apply as to all incumbent LEC interconnection matters. Bearing in mind
Congress' concerns about the interstate nature of the CMRS industry, however, I
have concerns that the state-by-state arbitration process may pose undue burdens
on, or otherwise hinder the growth of, the CMRS industry. If it does, I would
not hesitate to invoke our Section 332 jurisdiction if I believe that the
framework we impose today is having adverse impacts on the CMRS industry.