**Before the**

**Federal Communications Commission**

**Washington, D.C. 20554**

+----------------------------------+---+---------------------------------+
| In the Matter of                 | * | > CC Docket No. 01-338          |
|                                  | * |                                 |
| Review of the Section 251        | ) |                                 |
| Unbundling Obligations of        | ) |                                 |
| Incumbent Local Exchange         | ) |                                 |
| Carriers                         | ) |                                 |
|                                  | ) |                                 |
|                                  | * |                                 |
|                                  | * |                                 |
+----------------------------------+---+---------------------------------+

**SECOND REPORT AND ORDER**

**Adopted: July 8, 2004 Released: July 13, 2004**

By the Commission: Chairman Powell and Commissioner Abernathy issuing
separate statements. Commissioner Adelstein approving in part,
dissenting in part, and issuing a statement. Commissioner Copps
dissenting and issuing a statement.

**TABLE OF CONTENTS**

**Paragraph**

**I.** **IntrOduction 1**

**II.** **Background 2**

**III.** **Discussion 6**

> [A. Overview 6]{.smallcaps}
>
> [B.]{.smallcaps} "ALL-OR-NOTHING" RULE [11]{.smallcaps}
>
> [C.]{.smallcaps} [Other Proposals 25]{.smallcaps}

**IV.** **Procedural Matters 31**

> [A.]{.smallcaps} [Final Regulatory Flexibility Analysis
> 31]{.smallcaps}
>
> [B.]{.smallcaps} [Final Paperwork Reduction Act Analysis
> 70]{.smallcaps}

**V.** **Ordering Clauses 71**

**APPENDIX A -- LIST OF COMMENTERS**

**APPENDIX B -- FINAL RULES**

I.  **INTRODUCTION**

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1.  On August 21, 2003, the Commission initiated this Further Notice of
    Proposed Rulemaking[^1] to determine whether it should change its
    interpretation of section 252(i) of the Communications Act of 1934,
    as amended (the Act), as implemented by section 51.809 of our rules
    (the "pick-and-choose" rule).[^2] In this Order, we adopt a
    different rule in place of the current pick-and-choose rule.
    Specifically, we adopt an "all-or-nothing rule" that requires a
    requesting carrier seeking to avail itself of terms in an
    interconnection agreement to adopt the agreement in its entirety,
    taking all rates, terms, and conditions from the adopted agreement.
    We find that this new rule will promote more "give-and-take"
    negotiations, which will produce creative agreements that are better
    tailored to meet carriers' individual needs. We also conclude that
    this new rule will reduce negotiation time, expenses, and possible
    areas of dispute, while at the same time provide adequate protection
    against discrimination. In this Order, we advance the cause of
    facilities-based competition by permitting carriers to obtain
    mutually beneficial concessions from the incumbent local exchange
    carrier (LEC) in order to better serve end-user customers.

    II\. BACKGROUND

2.  Sections 251 and 252 of the Act frame the negotiation process for
    developing carriers' interconnection agreements and govern the
    arbitration process for the resolution of carriers' disputes.[^3]
    Section 252(i) of the 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 carrier upon the same terms
    and conditions as those provided in the agreement."[^4] Eight years
    ago in the *Local Competition Order*, the Commission interpreted
    section 252(i) to mean that requesting carriers may choose among
    individual provisions contained in publicly filed interconnection
    agreements.[^5] The Commission determined 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."[^6] Thus, the Commission granted
    requesting carriers the right to "pick and choose" among the
    individual provisions of state-approved interconnection agreements
    without being required to accept the terms and conditions of the
    entire agreement. In coming to this interpretation, the Commission
    concluded that this approach would provide adequate protection from
    discrimination, while at the same time speed the emergence of robust
    competition.[^7] The Commission rejected the argument that the
    pick-and-choose rule would adversely affect negotiations by making
    incumbent LECs less likely to compromise.[^8]

3.  On review, the U.S. Court of Appeals for the Eighth Circuit (the
    Eighth Circuit) vacated the pick-and-choose rule. It held that the
    Commission's interpretation did not balance the competing policies
    of sections 251 and 252, finding that the rule hindered voluntarily
    negotiated agreements "by making incumbent LECs reluctant to grant
    *quids* for *quos*, so to speak, for fear that they would have to
    grant others the same *quids* without receiving *quos*."[^9]
    However, the Supreme Court reversed the Eighth Circuit decision and
    reinstated the pick-and-choose rule. Specifically, the Supreme Court
    reviewed whether the Commission's construction of section 252(i) was
    permissible, and held that the Commission's interpretation was
    reasonable. The Court went on to acknowledge that whether the
    Commission's interpretation would frustrate the Act's goals by
    impeding negotiations "is a matter eminently within the expertise of
    the Commission and eminently beyond our ken."[^10] The Court did
    consider the interpretation we adopt today, finding that the
    all-or-nothing approach "seems eminently fair."[^11]

4.  On May 25, 2001, Mpower, a competitive LEC, called into question the
    appropriate balance of section 251's and section 252's policies when
    it filed a petition for forbearance and rulemaking to establish a
    "New Flexible Contract Mechanism Not Subject to 'Pick and
    Choose.'"[^12] Although it has since withdrawn this petition, Mpower
    originally sought relief from the Commission's pick-and-choose
    requirement on the grounds that it inhibited innovative deal-making
    during negotiations.[^13] Incumbent LECs have also argued that
    abandoning the rule would promote "mutually beneficial commercial
    business relationships between ILECs and CLECs, as opposed to the
    adversarial, regulation-based relationships that are more typical
    today."[^14]

5.  On August 21, 2003, the Commission initiated this rulemaking to
    determine whether it should eliminate the pick-and-choose rule and
    replace it with an alternative interpretation of section
    252(i).[^15] The Commission made three tentative conclusions and
    requested comment on each. First, we tentatively concluded that the
    Commission has legal authority to alter its interpretation of
    section 252(i), so long as the new rule remains a reasonable
    interpretation of the statutory text.[^16] Second, the Commission
    made the tentative conclusion that the current rule discourages
    give-and-take bargaining.[^17] Lastly, we tentatively concluded that
    the Commission should reinterpret section 252(i) so that if an
    incumbent LEC files for and obtains state approval for a statement
    of generally available terms (SGAT), the current pick-and-choose
    rule would apply only to that SGAT, and all other interconnection
    agreements would be subject to an all-or-nothing rule requiring
    carriers to adopt another carrier's interconnection agreement in its
    entirety (the conditional SGAT proposal).[^18]

    III\. DISCUSSION

    A. Overview

6.  As a threshold matter, we determine whether the Commission has the
    authority to reinterpret section 252(i). We adopt the tentative
    conclusion reached in the *FNPRM* that the Commission does indeed
    have the legal authority to reinterpret that provision.[^19]
    Specifically, as described below, we conclude that Congress has not
    directly addressed the question at issue: the degree to which
    interconnection, service or network element provisions from a
    state-approved interconnection agreement must be made available to
    other requesting carriers. We reach this conclusion because the
    plain meaning of the section's text gives rise to two different,
    reasonable interpretations, and because the Supreme Court expressly
    recognized that the Commission has leeway to reinterpret section
    252(i).[^20]

7.  The language in section 252(i) does not limit the Commission to a
    single construction. The Commission, in interpreting section 252(i)
    in the *Local Competition Order*, did conclude that the phrase
    "*any* interconnection, service or network element" relates "solely
    to the individual interconnection, service, or element being
    requested."[^21] Some commenters point to that decision, and focus
    on the sentence's inclusion of the word "any" to demonstrate that
    there is only one permissible reading of section 252(i).[^22]
    However, section 252(i) does not end after the words "any other
    requesting telecommunications carrier";[^23] Congress included the
    clause "upon the same terms and conditions."[^24] As the Eighth
    Circuit explained, the referenced language "could simply indicate
    that an incumbent LEC would not be able to shield an individual
    aspect of a prior agreement from the reach of a subsequent entrant
    who is willing to accept the terms of the entire agreement."[^25]
    Consequently, we find that the inclusion of this phrase creates
    ambiguity, and today we move away from the Commission's narrow
    interpretation and adopt a more holistic and reasonable reading of
    the statute.[^26]

8.  We also find strong support that section 252(i) is ambiguous from
    the Supreme Court's decision in *AT&T v.* *Iowa Utilities Board*,
    which held that the Commission has the expertise to determine a
    reasonable interpretation of section 252(i).[^27] Several
    competitors rely heavily on the Court's pronouncements that the
    current rule "tracks the pertinent language almost exactly," and is
    the "most readily apparent reading."[^28] The Supreme Court,
    however, did not hold that the Commission's current interpretation
    of section 252(i) is compelled by the statute. Had it done so, the
    Court would not have had to reach the question of whether the
    Commission's interpretation is reasonable, nor would it have
    acknowledged that the ability to interpret section 252(i) is a
    matter "eminently within the expertise" of the Commission, and would
    have necessarily foreclosed our ability to make any other
    interpretation.[^29] We are not convinced by the CLEC Coalition's
    assertion that the Court confined the Commission's discretion in
    this area to only its ability to place limits on the pick-and-choose
    rule.[^30] We find no such limitation because it does not stand to
    reason that the Court would declare another possible interpretation
    of section 252(i), *i.e.,* the all-or-nothing rule, to be "eminently
    fair," but then restrict the Commission's discretion to only the
    pick-and-choose rule.[^31] Moreover, the Commission did not
    irrevocably commit itself to the pick-and-choose interpretation
    during its appeal of the *Iowa Utilities Board* decision, as MCI
    suggests.[^32] The Supreme Court has routinely recognized that
    government agencies have discretion to change interpretations of
    ambiguous statutes,[^33] and that an agency is not estopped from
    changing its view.[^34]

9.  Unlike the Commission's attempt in the *Local Competition Order* to
    forecast how a new statutory framework would play out, our
    reassessment of the policies that will effectively advance the Act's
    goals today is informed by the competitive experiences compiled in
    our record. At the time of the *Local Competition Order*'s release,
    the Commission had no practical experience with the actual mechanics
    of interconnection agreements.[^35] In 1996, the Commission could
    not have predicted the tremendous scope and sophistication of the
    interconnection agreement negotiation process and the commensurate
    breadth of bargaining and compromise.[^36] Given the Commission's
    lack of practical experience at the time of the pick-and-choose
    rule's creation, we find that overall it made inaccurate
    presumptions that we now correct below.

10. As discussed below, we conclude that the burdens of the current
    pick-and-choose rule outweigh its benefits. Specifically, based on
    this record, we find that the existing pick-and-choose rule fails to
    promote the meaningful, give-and-take negotiations envisioned by the
    Act. Because we find that the current pick-and-choose rule is not
    compelled by section 252(i) and that an all-or-nothing approach
    better achieves statutory goals, we eliminate the pick-and-choose
    rule and replace it with an all-or-nothing rule. Under the
    all-or-nothing rule we adopt here, a requesting carrier may only
    adopt an effective interconnection agreement in its entirety, taking
    all rates, terms, and conditions of the adopted agreement. However,
    for reasons discussed below, we decline to adopt the *FNPRM*'s
    conditional SGAT proposal.[^37] We also clarify that in order to
    allow this regime to have the broadest possible ability to
    facilitate compromise, the new all-or-nothing rule will apply to all
    effective interconnection agreements, including those approved and
    in effect before the date the new rule goes into effect. As of the
    effective date of the new rule, the pick-and-choose rule will no
    longer apply to any interconnection agreement.[^38]

    B. "All-or-Nothing" Rule

11. On the record now before us, we find that the pick-and-choose rule
    is a disincentive to give and take in interconnection negotiations.
    We also find that other provisions of the Act and our rules
    adequately protect requesting carriers from discrimination.
    Therefore, we conclude that the burdens of retaining the
    pick-and-choose rule outweigh the benefits. We also find the
    all-or-nothing approach to be a reasonable interpretation of section
    252(i) that will "restore incentives to engage in give-and-take
    negotiations while maintaining effective safeguards against
    discrimination."[^39]

12. ***Incentives to Negotiate.*** The record supports adoption of our
    tentative conclusion that "the pick-and-choose rule discourages the
    sort of give-and-take negotiations that Congress envisioned."[^40]
    In the *Local Competition Order*, the Commission considered and
    rejected arguments that the pick-and-choose rule would impede
    interconnection negotiations by making incumbent LECs less likely to
    compromise.[^41] Eight years of experience with negotiations have
    proven otherwise. We conclude that, based on the record evidence,
    the pick-and-choose rule has "significantly impede\[d\] negotiations
    . . . by making it impossible for favorable interconnection-service
    or network-element terms to be traded off against unrelated
    provisions . . . ."[^42] The result has been the adoption of largely
    standardized agreements with little creative bargaining to meet the
    needs of both the incumbent LEC and the requesting carrier.[^43] We
    find that the record evidence supports our conclusion that an
    all-or-nothing rule would better serve the goals of sections 251 and
    252 to promote negotiated interconnection agreements because it
    would encourage incumbent LECs to make trade-offs in negotiations
    that they are reluctant to accept under the existing rule.[^44]

13. Incumbent LECs persuasively demonstrate that they seldom make
    significant concessions in return for some trade-off for fear that
    third parties will obtain the equivalent benefits without making any
    trade-off at all.[^45] In addition, the record demonstrates that the
    pick-and-choose rule imposes material costs and delay on both
    parties and serves as a regulatory obstacle to mutually beneficial
    transactions. For example, incumbent LEC commenters show that, when
    there are proposed trade-offs that would be beneficial to their
    interests, they expend significant resources conferring internally
    to assess the risks of the pick-and-choose rule and to attempt to
    craft language that adequately limits the risk that a requesting
    carrier would be able to adopt a provision without associated
    trade-offs.[^46] As BellSouth demonstrates, "\[u\]nder the specter
    of pick and choose, what should be a simple negotiation that could
    be handled in a matter of days turns into a series of meetings with
    numerous people, and takes significantly longer to negotiate."[^47]
    Moreover, incumbent LECs adduced evidence showing that that the
    pick-and-choose rule deters them from testing and implementing
    mutually beneficial innovative business arrangements through
    interconnection agreements.[^48] PAETEC, a competitive LEC, argues
    that facilities-based competitive LECs in particular will benefit
    from elimination of the pick-and-choose rule because they will be
    able to negotiate mutually beneficial concessions with incumbent
    LECs to facilitate innovative business strategies.[^49] The record
    evidence supports our conclusion that the pick-and-choose rule
    "makes interconnection agreement negotiations even more difficult
    and removes any incentive for ILECs to negotiate any provisions
    other than those necessary to implement what they are legally
    obligated to provide CLECs" under the Act.[^50] We are persuaded,
    based on the record before us, that the pick-and-choose rule
    undermines negotiations by unreasonably constraining incentives to
    bargain during negotiations.

14. We disagree with supporters of the current pick-and-choose rule that
    contend the rule provides requesting carriers, especially small
    carriers, some measure of leverage against the incumbent LECs'
    stronger bargaining position even if those carriers do not actually
    use the pick-and-choose rule to form agreements.[^51] These
    commenters argue that, without the pick-and-choose rule, incumbent
    LECs will have no incentive to bargain fairly with requesting
    carriers, and therefore, more negotiations will end inevitably in
    costly and burdensome arbitrations.[^52] We find, however, that, on
    balance, any hypothetical disadvantage in negotiating leverage is
    outweighed by the potential creativity in negotiation that an
    all-or-nothing rule would help promote. We expect requesting
    carriers, large and small alike, to benefit from the incumbent LECs'
    increased incentives to engage in meaningful give-and-take
    negotiations under an all-or-nothing rule. Specifically, under the
    new rule, requesting carriers should be able to negotiate
    individually tailored interconnection agreements designed to fit
    their business needs more precisely. Requesting carriers with
    limited resources will have the option of adopting a suitable
    agreement in its entirety, as is common practice today,[^53] if they
    decline to pursue negotiated interconnection agreements. And, while
    we recognize that the potential costs of arbitrations are not
    insignificant, the benefits of an all-or-nothing approach outweigh
    these transaction costs. Indeed, the arbitration process created in
    the Act is often invoked under the current pick-and-choose rule and
    will remain as a competitive safeguard for all parties.

15. We also reject commenters' related contentions that incumbent LECs
    would have every incentive to "slow-roll" negotiations in an effort
    to delay competitive entry.[^54] Competitors assert that the
    pick-and-choose rule constrains the ability of incumbent LECs to
    stall negotiations because competitors can choose preexisting
    sections of an agreement rather than beginning from scratch.[^55]
    Indeed, in the *Local Competition Order*, the Commission predicted
    that the pick-and-choose rule would be used by competitive LECs to
    expedite the creation of interconnection agreements and would "speed
    the emergence of robust competition."[^56] Some incumbent LEC and
    competitive LEC commenters agree that, after eight years of
    experience with interconnection negotiations, the pick-and-choose
    rule in practice has resulted in substantial delays in finalizing
    agreements, rather than expediting the process as the Commission
    intended.[^57] Thus, we find that, based on the record, the
    pick-and-choose rule has not expedited the process, as the
    Commission expected, and that the all-or-nothing rule will not add
    delays in reaching agreements. Instead, we conclude that an
    all-or-nothing rule would benefit competitive LECs because
    competitive LECs that are sensitive to delay would be able to adopt
    whole agreements, as is common practice today,[^58] while others
    would be able to reach agreements on individually tailored
    provisions more efficiently.

16. We also find that disputes over obligations under the
    pick-and-choose rule have become a significant obstacle to efficient
    negotiations of interconnection between incumbent LECs and
    requesting carriers. There are conflicting claims on the record with
    regard to abuses of the pick-and-choose rule. Incumbent LECs allege
    that requesting carriers have used the pick-and-choose rule to
    "cherry pick" beneficial terms without adopting legitimately related
    terms that were negotiated in the original agreement.[^59] At the
    same time, competitive LECs allege that incumbent LECs have used the
    "legitimately related" requirement to deny requesting carriers
    provisions to which they were entitled to pick and choose in
    violation of section 252(i) and the Commission's rules.[^60]

17. Without reaching the merits of individual accusations presented in
    the record, we find that the "legitimately related" requirement has
    become an obstacle to give-and-take negotiations rather than an
    incentive for give and take, as the Commission originally intended.
    The record before us demonstrates that attempts by requesting
    carriers to pick and choose often devolve into protracted disputes
    with accusations of anticompetitive motives on both sides. As a
    result, negotiations are delayed, incumbent LECs are reluctant to
    engage in give-and-take negotiations even where terms might be
    legitimately related for fear of having to defend against
    unreasonable pick-and-choose requests, and requesting carriers are
    denied the benefits of individualized agreements that meet their
    business needs. Accordingly, we conclude that, based on the record,
    the pick-and-choose rule has proven to be difficult to administer in
    practice and has impeded productive give-and-take negotiations as
    intended by the Act. Because compliance with the all-or-nothing rule
    we adopt here will be more easily identifiable and administrable, we
    expect the rule to produce fewer disputes over implementation and,
    therefore, to provide increased incentive for incumbent LECs to
    grant concessions in return for trade-offs in the normal course of
    negotiations.

18. ***Protections Against Discrimination.*** Based on the record now
    before us, we conclude that existing state and federal safeguards
    against discriminatory behavior are sufficient and that any
    additional protection that the current pick-and-choose rule may
    provide is unnecessary. In the *Local Competition Order*, the
    Commission concluded that the primary purpose of section 252(i) is
    to prevent discrimination.[^61] The Commission considered and
    rejected an all-or-nothing approach because it was concerned that
    such a rule would be ineffective in preventing certain forms of
    discrimination, contrary to the intent of section 252(i),[^62] and
    that as a practical matter, "few new entrants would be willing to
    elect an entire agreement . . . ."[^63] The current record, however,
    demonstrates that in practice competitive LECs frequently adopt
    agreements in their entirety.[^64] We believe that this practice
    indicates that the pick-and-choose protections against
    discrimination are superfluous. As we stated in the *FNPRM*, we
    continue to have concerns about discrimination as a general
    matter.[^65] We find, however, that the pick-and-choose rule does
    not afford requesting carriers protections against discrimination
    beyond those that would be in place under the all-or-nothing rule we
    adopt here. Because the pick-and-choose rule does not provide added
    protection against discrimination but at the same time serves as a
    disincentive to negotiations, we conclude that the burdens of the
    pick-and-choose rule outweigh the benefits. Thus, we adopt the
    all-or-nothing rule, which we expect to encourage negotiations while
    protecting requesting carriers from discrimination.

19. We conclude that under an all-or-nothing rule, requesting carriers
    will be protected from discrimination, as intended by section
    252(i).[^66] Specifically, an incumbent LEC will not be able to
    reach a discriminatory agreement for interconnection, services, or
    network elements with a particular carrier without making that
    agreement in its entirety available to other requesting carriers. If
    the agreement includes terms that materially benefit the preferred
    carrier, other requesting carriers will likely have an incentive to
    adopt that agreement to gain the benefit of the incumbent LEC's
    discriminatory bargain. Because these agreements will be available
    on the same terms and conditions to requesting carriers, the
    all-or-nothing rule should effectively deter incumbent LECs from
    engaging in such discrimination.

20. Moreover, section 251(c) requires incumbent LECs to provide
    interconnection, unbundled network elements, telecommunications
    services for resale, and collocation on nondiscriminatory terms and
    conditions.[^67] If negotiations reach an impasse, either party may
    petition for arbitration by the state commission.[^68] Section 252
    imposes deadlines for approvals and arbitrations that ensure that
    interconnection agreements are finalized in a timely manner.[^69]
    Section 252(e)(1) requires carriers to file any negotiated or
    arbitrated interconnection agreement with the relevant state
    commission for approval.[^70] Under section 252(e)(2)(A)(i), state
    commissions may reject a negotiated agreement if "the agreement (or
    any portion thereof) discriminates against a telecommunications
    carrier not a party to the agreement . . . ."[^71] Following a state
    commission determination, any party may bring an action in an
    appropriate federal district court to determine whether the
    agreement meets the requirements of sections 251 and 252.[^72] In
    addition, requesting carriers seeking remedies for alleged
    violations of section 252(i) may file complaints pursuant to section
    208.[^73] Given the statutory nondiscrimination provisions and the
    procedural mechanisms to ensure compliance with the Act\'s
    nondiscrimination requirements at both the state and federal levels,
    we conclude that the Act provides requesting carriers with adequate
    protections against discrimination without the pick-and-choose rule.

21. We reject commenters' arguments that, if we adopt an all-or-nothing
    rule, incumbent LECs will insert onerous terms or "poison pills"
    into agreements to discourage competitive LECs from adopting
    agreements in whole.[^74] They argue that to avoid such onerous
    terms, requesting carriers will be forced into lengthy and expensive
    negotiations and ultimately, arbitration.[^75] Indeed, in the *Local
    Competition Order*, the Commission expressed particular concern that
    an all-or-nothing rule would facilitate this type of
    discrimination.[^76] As discussed above, we now believe that the Act
    provides adequate protection against discrimination, including
    poison pills, under an all-or-nothing rule. The record does not
    demonstrate that concerns with regard to poison pills have
    materialized over the eight years of experience with negotiated
    interconnection agreements.[^77] Although the Commission made a
    predictive judgment in the *Local Competition Order* that new
    entrants would likely be unwilling to adopt agreements in their
    entirety, this prediction has simply not proven to be the case in
    practice.[^78] While we recognize that the pick-and-choose rule has
    likely served as a deterrent to poison pill provisions to some
    extent, we also believe that if the Act did not already provide
    adequate protection against this and other forms of discrimination,
    incumbent LECs would have had some degree of incentive to include
    such terms in agreements given the widespread practice by requesting
    carriers of adopting entire agreements. Based on the record of this
    proceeding, we do not find evidence of uses of poison pills to
    discriminate against carriers that are not parties to the
    agreements. Thus, we believe this experience supports our conclusion
    that the Act provides adequate protection against discrimination,
    including poison pills, without the pick-and-choose rule. If
    experience under the rule we adopt today indicates that carriers are
    agreeing to provisions that violate the antidiscrimination mandate
    of the Act, we will take appropriate action as needed.

22. LecStar alleges that interconnection agreements between incumbent
    LECs and larger competitive LECs already contain poison pills.[^79]
    Specifically, LecStar states that these agreements contain
    provisions that can only be fulfilled by larger competitive LECs,
    such as volume and term discounts. Although we do not make any
    findings regarding any particular interconnection agreement, volume
    or term discounts may be included in agreements so long as the
    volume or term of the discount is not discriminatory.[^80] For
    instance, as discussed in the *Local Competition Order*, "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."[^81]

23. We are similarly not persuaded by commenters that the
    pick-and-choose rule must be retained at a minimum for
    interconnection agreements between incumbent LECs and their
    affiliates (including wireless and section 272 separate affiliates)
    due to a higher risk of discrimination by incumbent LECs in favor of
    affiliates.[^82] We note commenters' concerns that incumbent LECs
    could attempt to include poison pills in affiliate agreements.[^83]
    We reaffirm, however, that the Act's nondiscrimination provisions
    discussed above apply to incumbent LECs' interconnection agreements
    with affiliates. We have no reason to believe, based on the record,
    that the Act's protections against discrimination will be any less
    effective in this context.

24. Based on these findings, we conclude that the benefits, in terms of
    protection against discrimination, of the pick-and-choose rule do
    not outweigh the significant disincentive it creates to negotiated
    interconnection agreements. We conclude that requesting carriers
    will be protected against discrimination under the all-or-nothing
    rule and other statutory provisions. Accordingly, we eliminate the
    pick-and-choose rule and replace it with the all-or-nothing
    rule.[^84]

    C. Other Proposals

25. ***The Proposed SGAT Condition.*** We decline to adopt our tentative
    conclusion that the current pick-and-choose rule would continue to
    apply to all approved interconnection agreements if the incumbent
    LEC does not file and obtain state approval for an SGAT.[^85] The
    record of this proceeding reflects widespread opposition to the
    proposed SGAT condition. Incumbent LECs, competitive LECs, wireless
    carriers, and state commissions generally agree that there are
    significant legal and practical concerns with this proposal and that
    an SGAT condition would not afford competitors additional protection
    from discrimination.[^86]

26. Based on the record, we agree with opponents to this proposal and
    find that an SGAT condition would impose significant burdens on
    incumbent LECs, requesting carriers, and state commissions that
    outweigh any benefit in the form of additional protection against
    discrimination. Specifically, we agree with commenters that the SGAT
    condition would impose costs and administrative burdens on incumbent
    LECs to file SGATs in states currently without SGATs; on requesting
    carriers to participate in state SGAT proceedings; and on state
    commissions to conduct proceedings to review and approve the
    SGATs.[^87] At the same time, we recognize that section 252 does not
    require state review before SGATs take effect; nor does it require
    timely updates.[^88] As described above, we conclude that the
    existing safeguards against discrimination, including the section
    252(e)(1) filing requirement and state commission approval, afford
    competitors adequate protection under an all-or-nothing rule.[^89]
    Moreover, we recognize that if the SGAT condition were needed to
    protect against discrimination, the fact that the SGAT provision of
    the Act does not apply to non-BOC incumbent LECs would limit our
    ability to impose a uniform rule.[^90] Accordingly, because we
    believe that the SGAT condition would be burdensome and difficult to
    implement, and is unnecessary given the other protections against
    discrimination, we decline to impose this condition.

27. ***Parties' Proposed Alternatives.*** As an alternative proposal,
    several parties request that we clarify or modify the "legitimately
    related" requirement rather than replacing the pick-and-choose rule.
    These parties argue that by refining the rule, the Commission could
    provide more certainty to reduce disputes and alleviate incumbent
    LECs' concerns about cherry picking without abandoning the
    pick-and-choose rule altogether.[^91] We are not persuaded that
    modifying "legitimately related" short of an all-or-nothing rule
    would eliminate disputes sufficiently to encourage give-and-take
    negotiations. Apart from the difficulties raised by continually
    drawing lines and identifying trade-offs, we reject the notion that
    we should even assess whether provisions are legitimately related in
    a trade-off.[^92] Indeed, given the nature of give-and-take
    negotiations, we conclude that under our new interpretation, all of
    the provisions of a particular agreement taken together should be
    properly viewed as legitimately related under section 252(i). In a
    genuine give-and-take negotiation, otherwise unrelated provisions
    could be traded off for one another. By allowing these trade offs
    under a modified "legitimately related" rule, the incumbent LEC
    would continue to be burdened with demonstrating that the provisions
    are legitimately related, leading to the disputes that currently
    impede give and take in interconnection negotiations. We believe it
    would be difficult to craft a "legitimately related" rule that would
    eliminate these disputes. We believe, however, that compliance with
    an all-or-nothing rule can be readily determined, eliminating many
    of the problems associated with the pick-and-choose rule in the last
    eight years of negotiations. Thus, we conclude that an
    all-or-nothing rule is more likely to facilitate give-and-take
    negotiations than trying to clarify or modify the "legitimately
    related" requirement.

28. We also reject commenters' proposals that call for us to maintain a
    separate pick-and-choose regime for arbitrated agreements even if we
    were to adopt an all-or-nothing approach for negotiated
    agreements.[^93] First, we find that section 252(i), which expressly
    applies to agreements approved under section 252, does not
    differentiate between negotiated and arbitrated agreements.[^94]
    Second, we are not convinced by the argument that we must retain
    pick-and-choose for arbitrated agreements because the rationale for
    our tentative conclusion -- that the pick-and-choose rule creates
    disincentives for give-and-take negotiations -- does not apply in
    the context of arbitrated agreements.[^95] As discussed above, the
    primary purpose of section 252(i) is to prevent discrimination.[^96]
    In the context of arbitrated interconnection agreements, requesting
    carriers are protected from discrimination primarily by the
    arbitration process itself.[^97] Continuing to apply the
    pick-and-choose rule to arbitrated agreements, therefore, is an
    overly broad means of fulfilling the statutory purpose of protecting
    against discrimination. Moreover, we believe that maintaining
    separate regimes for negotiated and arbitrated agreements would be
    unnecessarily difficult to administer in practice. Accordingly, we
    do not find it necessary to adopt separate regulatory regimes for
    negotiated and arbitrated agreements as suggested by commenters. We
    affirm, however, that parties are under a statutory obligation to
    negotiate in good faith.[^98] For example, any carrier attempting to
    arbitrate issues that have previously been resolved in an
    arbitration solely to increase another party's costs would be in
    violation of the duty to negotiate in good faith and could be
    subject to enforcement.

29. A number of commenters in this proceeding propose variations of the
    all-or-nothing or pick-and-choose approaches, or seek various
    clarifications of the current requirement.[^99] We decline to adopt
    these proposed variations or clarifications because, as discussed
    above, we find that the all-or-nothing rule we adopt here will
    better facilitate give-and-take negotiations while, at the same
    time, eliminating disputes regarding the scope of "legitimately
    related."[^100] We do not intend for this rulemaking to create new,
    potentially disruptive disputes that could bring negotiations to a
    standstill. To the extent that carriers attempt to engage in
    discrimination, such as including poison pills in agreements, we
    expect state commissions, in the first instance, will detect such
    discriminatory practices in the review and approval process under
    section 252(e)(1). Discriminatory provisions include, but are not
    limited to, such things as inserting an onerous provision into an
    agreement when the provision has no reasonable relationship to the
    requesting carrier's operations. We would also deem an incumbent
    LEC's conduct to be discriminatory if it denied a requesting
    carrier's request to adopt an agreement to which it is entitled
    under section 252(i) and our all-or-nothing rule.

30. We also reject the contention of at least one commenter that
    incumbent LECs should be permitted to restrict adoptions to
    "similarly situated" carriers.[^101] We conclude that section 252(i)
    does not permit incumbent LECs to limit the availability of an
    agreement in its entirety only to those requesting carriers serving
    a comparable class of subscribers or providing the same service as
    the original party to the agreement.[^102] Subject to the
    limitations in our rules, the requesting carrier may choose to
    initiate negotiations or to adopt an agreement in its entirety that
    the requesting carrier deems appropriate for its business
    needs.[^103] Because the all-or-nothing rule should be much more
    easily administered and enforced than the current rule, we do not
    believe that further clarifications are warranted at this
    time.[^104] Moreover, we conclude that many of the clarifications
    sought by parties should be addressed by state commissions in the
    first instance.[^105]

    IV\. PROCEDURAL MATTERS

    A. Final Regulatory Flexibility Analysis

31. As required by the Regulatory Flexibility Act of 1980, as amended
    (RFA),[^106] an Initial Regulatory Flexibility Analysis (IRFA) was
    incorporated in the *FNPRM*.[^107] The Commission sought written
    public comment on the proposals in the *FNPRM*, including comment on
    the IRFA. No comments were received on the IRFA. This present Final
    Regulatory Flexibility Analysis (FRFA) conforms to the RFA.[^108]

    1\. Need for, and Objectives of, the Rule

32. This Order ensures that market-based incentives exist for incumbent
    and competitive LECs to negotiate innovative commercial
    interconnection arrangements. The current pick-and-choose rule
    implementing section 252(i) may discourage give-and-take negotiation
    because incumbent LECs may be reluctant to make significant
    concessions (in exchange for negotiated benefit) if those
    concessions become automatically available -- without any trade-off
    -- to every potential market entrant. We therefore adopt an
    alternative approach to implementing section 252(i), requiring third
    parties to opt into entire agreements, to promote more innovative
    and flexible arrangements between parties. This Order declines to
    adopt the approach proposed in the *FNPRM* that would eliminate the
    current pick-and-choose regime for incumbent LECs only where the
    incumbent LEC has filed and received state approval of an SGAT.
    Instead, this Order eliminates the pick-and-choose rule and replaces
    it with an all-or-nothing rule, regardless of whether the state has
    an effective SGAT.

    2\. Summary of Significant Issues Raised by Public Comments in
    Response to the IRFA

33. There were no comments raised that specifically addressed the
    proposed rules and policies presented in the IRFA. Nonetheless, the
    agency considered the potential impact of the rules proposed in the
    IRFA on small entities.[^109]

    3\. Description and Estimate of the Number of Small Entities To
    Which the Proposed Rules Would Apply

34. The RFA directs agencies to provide a description of, and, where
    feasible, an estimate of, the number of small entities that may be
    affected by the rules adopted herein.[^110] The RFA generally
    defines the term "small entity" as having the same meaning as the
    terms "small business," "small organization," and "small
    governmental jurisdiction."[^111] In addition, the term "small
    business" has the same meaning as the term "small business concern"
    under the Small Business Act.[^112] A "small business concern" is
    one which: (1) is independently owned and operated; (2) is not
    dominant in its field of operation; and (3) satisfies any additional
    criteria established by the Small Business Administration
    (SBA).[^113]

35. In this section, we further describe and estimate the number of
    small entity licensees and regulatees that may be affected by rules
    adopted in this Order. The most reliable source of information
    regarding the total numbers of certain common carrier and related
    providers nationwide, as well as the number of commercial wireless
    entities, appears to be the data that the Commission publishes in
    its *Trends in Telephone Service* report.[^114] The SBA has
    developed small business size standards for wireline and wireless
    small businesses within the three commercial census categories of
    Wired Telecommunications Carriers,[^115] Paging,[^116] and Cellular
    and Other Wireless Telecommunications.[^117] Under these categories,
    a business is small if it has 1,500 or fewer employees. Below, using
    the above size standards and others, we discuss the total estimated
    numbers of small businesses that might be affected by our actions.

36. We have included small incumbent local exchange carriers in this
    present RFA analysis. As noted above, a "small business" under the
    RFA is one that, *inter alia*, meets the pertinent small business
    size standard (*e.g.*, a telephone communications business having
    1,500 or fewer employees), and "is not dominant in its field of
    operation."[^118] The SBA's Office of Advocacy contends that, for
    RFA purposes, small incumbent local exchange carriers are not
    dominant in their field of operation because any such dominance is
    not "national" in scope.[^119] We have therefore included small
    incumbent local exchange carriers in this RFA analysis, although we
    emphasize that this RFA action has no effect on Commission analyses
    and determinations in other, non-RFA contexts.

37. *Wired Telecommunications Carriers*. The SBA has developed a small
    business size standard for Wired Telecommunications Carriers, which
    consists of all such companies having 1,500 or fewer
    employees.[^120] According to Census Bureau data for 1997, there
    were 2,225 firms in this category, total, that operated for the
    entire year.[^121] Of this total, 2,201 firms had employment of 999
    or fewer employees, and an additional 24 firms had employment of
    1,000 employees or more.[^122] Thus, under this size standard, the
    great majority of firms can be considered small.

38. *Incumbent Local Exchange Carriers.* Neither the Commission nor the
    SBA has developed a small business size standard specifically for
    incumbent local exchange services. The appropriate size standard
    under SBA rules is for the category Wired Telecommunications
    Carriers. Under that size standard, such a business is small if it
    has 1,500 or fewer employees.[^123] According to Commission
    data,[^124] 1,337 carriers have reported that they are engaged in
    the provision of incumbent local exchange services. Of these 1,337
    carriers, an estimated 1,032 have 1,500 or fewer employees and 305
    have more than 1,500 employees. Consequently, the Commission
    estimates that most providers of incumbent local exchange service
    are small businesses that may be affected by our proposed action.

39. *Competitive Local Exchange Carriers, Competitive Access Providers
    (CAPs), "Shared-Tenant Service Providers," and "Other Local Service
    Providers."* Neither the Commission nor the SBA has developed a
    small business size standard specifically for these service
    providers. The appropriate size standard under SBA rules is for the
    category Wired Telecommunications Carriers. Under that size
    standard, such a business is small if it has 1,500 or fewer
    employees.[^125] According to Commission data,[^126] 609 carriers
    have reported that they are engaged in the provision of either
    competitive access provider services or competitive local exchange
    carrier services. Of these 609 carriers, an estimated 458 have 1,500
    or fewer employees and 151 have more than 1,500 employees. In
    addition, 16 carriers have reported that they are "Shared-Tenant
    Service Providers," and all 16 are estimated to have 1.500 or fewer
    employees. In addition, 35 carriers have reported that they are
    "Other Local Service Providers." Of the 35, an estimated 34 have
    1,500 or fewer employees and one has more than 1,500 employees.
    Consequently, the Commission estimates that most providers of
    competitive local exchange service, competitive access providers,
    "Shared-Tenant Service Providers," and "Other Local Service
    Providers" are small entities that may be affected by our proposed
    action.

40. *Interexchange Carriers (IXCs).* Neither the Commission nor the SBA
    has developed a small business size standard specifically for
    providers of interexchange services. The appropriate size standard
    under SBA rules is for the category Wired Telecommunications
    Carriers. Under that size standard, such a business is small if it
    has 1,500 or fewer employees.[^127] According to Commission
    data,[^128] 261 carriers have reported that they are engaged in the
    provision of interexchange service. Of these, an estimated 223 have
    1,500 or fewer employees and 38 have more than 1,500 employees.
    Consequently, the Commission estimates that the majority of IXCs are
    small entities that may be affected by our proposed action.

41. *Operator Service Providers.* Neither the Commission nor the SBA has
    developed a small business size standard specifically for operator
    service providers. The appropriate size standard under SBA rules is
    for the category Wired Telecommunications Carriers. Under that size
    standard, such a business is small if it has 1,500 or fewer
    employees.[^129] According to Commission data,[^130] 23 carriers
    have reported that they are engaged in the provision of operator
    services. Of these, an estimated 22 have 1,500 or fewer employees
    and one has more than 1,500 employees. Consequently, the Commission
    estimates that the majority of OSPs are small entities that may be
    affected by our proposed action.

42. *Prepaid Calling Card Providers.* The SBA has developed a size
    standard for a small business within the category of
    Telecommunications Resellers. Under that SBA size standard, such a
    business is small if it has 1,500 or fewer employees.[^131]
    According to Commission data, 32 companies reported that they were
    engaged in the provision of prepaid calling cards.[^132] Of these 32
    companies, an estimated 31 have 1,500 or fewer employees and one has
    more than 1,500 employees.[^133] Consequently, the Commission
    estimates that the great majority of prepaid calling card providers
    are small entities that may be affected by the rules and policies
    adopted herein.

43. *Other Toll Carriers.* Neither the Commission nor the SBA has
    developed a size standard for small businesses specifically
    applicable to "Other Toll Carriers." This category includes toll
    carriers that do not fall within the categories of interexchange
    carriers, OSPs, prepaid calling card providers, satellite service
    carriers, or toll resellers. The closest applicable size standard
    under SBA rules is for Wired Telecommunications Carriers. Under that
    size standard, such a business is small if it has 1,500 or fewer
    employees.[^134] According to Commission's data, 42 companies
    reported that their primary telecommunications service activity was
    the provision of payphone services.[^135] Of these 42 companies, an
    estimated 37 have 1,500 or fewer employees and five have more than
    1,500 employees.[^136] Consequently, the Commission estimates that
    most "Other Toll Carriers" are small entities that may be affected
    by the rules and policies adopted herein.

44. *Wireless Service Providers.* The SBA has developed a small business
    size standard for wireless firms within the two broad economic
    census categories of "Paging"[^137] and "Cellular and Other Wireless
    Telecommunications." [^138] Under both SBA categories, a wireless
    business is small if it has 1,500 or fewer employees. For the census
    category of Paging, Census Bureau data for 1997 show that there were
    1,320 firms in this category, total, that operated for the entire
    year.[^139] Of this total, 1,303 firms had employment of 999 or
    fewer employees, and an additional 17 firms had employment of 1,000
    employees or more.[^140] Thus, under this category and associated
    small business size standard, the great majority of firms can be
    considered small. For the census category Cellular and Other
    Wireless Telecommunications, Census Bureau data for 1997 show that
    there were 977 firms in this category, total, that operated for the
    entire year.[^141] Of this total, 965 firms had employment of 999 or
    fewer employees, and an additional 12 firms had employment of 1,000
    employees or more.[^142] Thus, under this second category and size
    standard, the great majority of firms can, again, be considered
    small.*Broadband PCS.* The broadband PCS spectrum is divided into
    six frequency blocks designated A through F, and the Commission has
    held auctions for each block. The Commission defined "small entity"
    for Blocks C and F as an entity that has average gross revenues of
    \$40 million or less in the three previous calendar years.[^143] For
    Block F, an additional classification for "very small business" was
    added and is defined as an entity that, together with its
    affiliates, has average gross revenues of not more than \$15 million
    for the preceding three calendar years."[^144] These standards
    defining "small entity" in the context of broadband PCS auctions
    have been approved by the SBA.[^145] No small businesses, within the
    SBA-approved small business size standards bid successfully for
    licenses in Blocks A and B. There were 90 winning bidders that
    qualified as small entities in the Block C auctions. A total of 93
    small and very small business bidders won approximately 40 percent
    of the 1,479 licenses for Blocks D, E, and F.[^146] On March 23,
    1999, the Commission re-auctioned 347 C, D, E, and F Block licenses.
    There were 48 small business winning bidders. On January 26, 2001,
    the Commission completed the auction of 422 C and F Broadband PCS
    licenses in Auction No. 35. Of the 35 winning bidders in this
    auction, 29 qualified as "small" or "very small" businesses.
    Subsequent events, concerning Auction 305, including judicial and
    agency determinations, resulted in a total of 163 C and F Block
    licenses being available for grant. In addition, we note that, as a
    general matter, the number of winning bidders that qualify as small
    businesses at the close of an auction does not necessarily represent
    the number of small businesses currently in service. Also, the
    Commission does not generally track subsequent business size unless,
    in the context of assignments or transfers, unjust enrichment issues
    are implicated.

45. *Narrowband Personal Communications Services.* The Commission held
    an auction for Narrowband PCS licenses that commenced on July 25,
    1994, and closed on July 29, 1994. A second auction commenced on
    October 26, 1994 and closed on November 8, 1994. For purposes of the
    first two Narrowband PCS auctions, "small businesses" were entities
    with average gross revenues for the prior three calendar years of
    \$40 million or less.[^147] Through these auctions, the Commission
    awarded a total of 41 licenses, 11 of which were obtained by four
    small businesses.[^148] To ensure meaningful participation by small
    business entities in future auctions, the Commission adopted a
    two-tiered small business size standard in the *Narrowband PCS
    Second Report and Order*.[^149] A "small business" is an entity
    that, together with affiliates and controlling interests, has
    average gross revenues for the three preceding years of not more
    than \$40 million.[^150] A "very small business" is an entity that,
    together with affiliates and controlling interests, has average
    gross revenues for the three preceding years of not more than \$15
    million.[^151] The SBA has approved these small business size
    standards.[^152] A third auction commenced on October 3, 2001 and
    closed on October 16, 2001. Here, five bidders won 317 (Metropolitan
    Trading Areas and nationwide) licenses.[^153] Three of these claimed
    status as a small or very small entity and won 311 licenses.

46. *220 MHz Radio Service -- Phase I Licensees.* The 220 MHz service
    has both Phase I and Phase II licenses. Phase I licensing was
    conducted by lotteries in 1992 and 1993. There are approximately
    1,515 such non‑nationwide licensees and four nationwide licensees
    currently authorized to operate in the 220 MHz band. The Commission
    has not developed a definition of small entities specifically
    applicable to such incumbent 220 MHz Phase I licensees. To estimate
    the number of such licensees that are small businesses, we apply the
    small business size standard under the SBA rules applicable to
    "Cellular and Other Wireless Telecommunications" companies. This
    category provides that a small business is a wireless company
    employing no more than 1,500 persons.[^154] According to the Census
    Bureau data for 1997, only twelve firms out of a total of 1,238 such
    firms that operated for the entire year in 1997, had 1,000 or more
    employees.[^155] If this general ratio continues in the context of
    Phase I 220 MHz licensees, the Commission estimates that nearly all
    such licensees are small businesses under the SBA's small business
    standard.

47. *220 MHz Radio Service -- Phase II Licensees.* The 220 MHz service
    has both Phase I and Phase II licenses. The Phase II 220 MHz service
    is a new service, and is subject to spectrum auctions. In the *220
    MHz Third Report and Order*, we adopted a small business size
    standard for defining "small" and "very small" businesses for
    purposes of determining their eligibility for special provisions
    such as bidding credits and installment payments.[^156] This small
    business standard indicates that a "small business" is an entity
    that, together with its affiliates and controlling principals, has
    average gross revenues not exceeding \$15 million for the preceding
    three years.[^157] A "very small business" is defined as an entity
    that, together with its affiliates and controlling principals, has
    average gross revenues that do not exceed \$3 million for the
    preceding three years.[^158] The SBA has approved these small size
    standards.[^159] Auctions of Phase II licenses commenced on
    September 15, 1998, and closed on October 22, 1998.[^160] In the
    first auction, 908 licenses were auctioned in three different-sized
    geographic areas: three nationwide licenses, 30 Regional Economic
    Area Group (EAG) Licenses, and 875 Economic Area (EA) Licenses. Of
    the 908 licenses auctioned, 693 were sold.[^161] Thirty-nine small
    businesses won 373 licenses in the first 220 MHz auction. A second
    auction included 225 licenses: 216 EA licenses and 9 EAG licenses.
    Fourteen companies claiming small business status won 158
    licenses.[^162] A third auction included four licenses: 2 BEA
    licenses and 2 EAG licenses in the 220 MHz Service. No small or very
    small business won any of these licenses.[^163]

48. *Specialized Mobile Radio*. The Commission awards "small entity"
    bidding credits in auctions for Specialized Mobile Radio (SMR)
    geographic area licenses in the 800 MHz and 900 MHz bands to firms
    that had revenues of no more than \$15 million in each of the three
    previous calendar years. [^164] The Commission awards "very small
    entity" bidding credits to firms that had revenues of no more than
    \$3 million in each of the three previous calendar years.[^165] The
    SBA has approved these small business size standards for the 900 MHz
    Service.[^166] The Commission has held auctions for geographic area
    licenses in the 800 MHz and 900 MHz bands. The 900 MHz SMR auction
    began on December 5, 1995, and closed on April 15, 1996. Sixty
    bidders claiming that they qualified as small businesses under the
    \$15 million size standard won 263 geographic area licenses in the
    900 MHz SMR band. The 800 MHz SMR auction for the upper 200 channels
    began on October 28, 1997, and was completed on December 8, 1997.
    Ten bidders claiming that they qualified as small businesses under
    the \$15 million size standard won 38 geographic area licenses for
    the upper 200 channels in the 800 MHz SMR band.[^167] A second
    auction for the 800 MHz band was held on January 10, 2002 and closed
    on January 17, 2002 and included 23 BEA licenses. One bidder
    claiming small business status won five licenses.[^168]

49. *Common Carrier Paging.* The SBA has developed a small business size
    standard for wireless firms within the broad economic census
    categories of **"**Cellular and Other Wireless
    Telecommunications."[^169] Under this SBA category, a wireless
    business is small if it has 1,500 or fewer employees. For the census
    category of Paging, Census Bureau data for 1997 show that there were
    1,320 firms in this category, total, that operated for the entire
    year.[^170] Of this total, 1,303 firms had employment of 999 or
    fewer employees, and an additional 17 firms had employment of 1,000
    employees or more.[^171] Thus, under this category and associated
    small business size standard, the great majority of firms can be
    considered small.

50. In the *Paging* *Second Report and Order*, the Commission adopted a
    size standard for "small businesses" for purposes of determining
    their eligibility for special provisions such as bidding credits and
    installment payments.[^172] A small business is an entity that,
    together with its affiliates and controlling principals, has average
    gross revenues not exceeding \$15 million for the preceding three
    years.[^173] The SBA has approved this definition.[^174] An auction
    of Metropolitan Economic Area (MEA) licenses commenced on February
    24, 2000, and closed on March 2, 2000. Of the 2,499 licenses
    auctioned, 985 were sold.[^175] Fifty-seven companies claiming small
    business status won 440 licenses.[^176] An auction of MEA and
    Economic Area (EA) licenses commenced on October 30, 2001, and
    closed on December 5, 2001. Of the 15,514 licenses auctioned, 5,323
    were sold.[^177] One hundred thirty-two companies claiming small
    business status purchased 3,724 licenses. A third auction,
    consisting of 8,874 licenses in each of 175 EAs and 1,328 licenses
    in all but three of the 51 MEAs commenced on May 13, 2003, and
    closed on May 28, 2003. Seventy-seven bidders claiming small or very
    small business status won 2,093 licenses. [^178] Currently, there
    are approximately 74,000 Common Carrier Paging licenses. According
    to the most recent *Trends in Telephone Service,* 608 private and
    common carriers reported that they were engaged in the provision of
    either paging or "other mobile" services.[^179] Of these, we
    estimate that 589 are small, under the SBA-approved small business
    size standard.[^180] We estimate that the majority of common carrier
    paging providers would qualify as small entities under the SBA
    definition.

51. *700 MHz Guard Band Licenses.* In the *700 MHz Guard Band Order*, we
    adopted size standards for "small businesses" and "very small
    businesses" for purposes of determining their eligibility for
    special provisions such as bidding credits and installment
    payments.[^181] A small business in this service is an entity that,
    together with its affiliates and controlling principals, has average
    gross revenues not exceeding \$40 million for the preceding three
    years.[^182] Additionally, a very small business is an entity that,
    together with its affiliates and controlling principals, has average
    gross revenues that are not more than \$15 million for the preceding
    three years.[^183] SBA approval of these definitions is not
    required.[^184] An auction of 52 Major Economic Area (MEA) licenses
    commenced on September 6, 2000, and closed on September 21,
    2000.[^185] Of the 104 licenses auctioned, 96 licenses were sold to
    nine bidders. Five of these bidders were small businesses that won a
    total of 26 licenses. A second auction of 700 MHz Guard Band
    licenses commenced on February 13, 2001, and closed on February
    21, 2001. All eight of the licenses auctioned were sold to three
    bidders. One of these bidders was a small business that won a total
    of two licenses.[^186] *Rural Radiotelephone Service.* The
    Commission has not adopted a size standard for small businesses
    specific to the Rural Radiotelephone Service.[^187] A significant
    subset of the Rural Radiotelephone Service is the BETRS.[^188] The
    Commission uses the SBA's small business size standard applicable to
    "Cellular and Other Wireless Telecommunications," *i.e.*, an entity
    employing no more than 1,500 persons.[^189] There are approximately
    1,000 licensees in the Rural Radiotelephone Service, and the
    Commission estimates that there are 1,000 or fewer small entity
    licensees in the Rural Radiotelephone Service that may be affected
    by the rules and policies adopted herein*.*

52. *Air-Ground Radiotelephone Service.* The Commission has not adopted
    a small business size standard specific to the Air-Ground
    Radiotelephone Service.[^190] We will use SBA's small business size
    standard applicable to "Cellular and Other Wireless
    Telecommunications," *i.e.*, an entity employing no more than 1,500
    persons.[^191] There are approximately 100 licensees in the
    Air-Ground Radiotelephone Service, and we estimate that almost all
    of them qualify as small under the SBA small business size standard.

53. *Aviation and Marine Radio Services.* Small businesses in the
    aviation and marine radio services use a very high frequency (VHF)
    marine or aircraft radio and, as appropriate, an emergency
    position-indicating radio beacon (and/or radar) or an emergency
    locator transmitter. The Commission has not developed a small
    business size standard specifically applicable to these small
    businesses. For purposes of this analysis, the Commission uses the
    SBA small business size standard for the category "Cellular and
    Other Telecommunications," which is 1,500 or fewer employees.[^192]
    Most applicants for recreational licenses are individuals.
    Approximately 581,000 ship station licensees and 131,000 aircraft
    station licensees operate domestically and are not subject to the
    radio carriage requirements of any statute or treaty. For purposes
    of our evaluations in this analysis, we estimate that there are up
    to approximately 712,000 licensees that are small businesses (or
    individuals) under the SBA standard. In addition, between December
    3, 1998 and December 14, 1998, the Commission held an auction of 42
    VHF Public Coast licenses in the 157.1875-157.4500 MHz (ship
    transmit) and 161.775-162.0125 MHz (coast transmit) bands. For
    purposes of the auction, the Commission defined a \"small\" business
    as an entity that, together with controlling interests and
    affiliates, has average gross revenues for the preceding three years
    not to exceed \$15 million dollars. In addition, a \"very small\"
    business is one that, together with controlling interests and
    affiliates, has average gross revenues for the preceding three years
    not to exceed \$3 million dollars.[^193] There are approximately
    10,672 licensees in the Marine Coast Service, and the Commission
    estimates that almost all of them qualify as \"small\" businesses
    under the above special small business size standards.

54. *Fixed Microwave Services.* Fixed microwave services include common
    carrier,[^194] private operational-fixed,[^195] and broadcast
    auxiliary radio services.[^196] At present, there are approximately
    22,015 common carrier fixed licensees and 61,670 private
    operational-fixed licensees and broadcast auxiliary radio licensees
    in the microwave services. The Commission has not created a size
    standard for a small business specifically with respect to fixed
    microwave services. For purposes of this analysis, the Commission
    uses the SBA small business size standard for the category "Cellular
    and Other Telecommunications," which is 1,500 or fewer
    employees.[^197] The Commission does not have data specifying the
    number of these licensees that have more than 1,500 employees, and
    thus are unable at this time to estimate with greater precision the
    number of fixed microwave service licensees that would qualify as
    small business concerns under the SBA's small business size
    standard. Consequently, the Commission estimates that there are up
    to 22,015 common carrier fixed licensees and up to 61,670 private
    operational-fixed licensees and broadcast auxiliary radio licensees
    in the microwave services that may be small and may be affected by
    the rules and policies proposed herein. We noted, however, that the
    common carrier microwave fixed licensee category includes some large
    entities.

55. *Offshore Radiotelephone Service.* This service operates on several
    ultra high frequencies (UHF) television broadcast channels that are
    not used for television broadcasting in the coastal areas of states
    bordering the Gulf of Mexico.[^198] There are presently
    approximately 55 licensees in this service. We are unable to
    estimate at this time the number of licensees that would qualify as
    small under the SBA's small business size standard for "Cellular and
    Other Wireless Telecommunications" services.[^199] Under that SBA
    small business size standard, a business is small if it has 1,500 or
    fewer employees.[^200]

56. *Wireless Communications Services.* This service can be used for
    fixed, mobile, radiolocation, and digital audio broadcasting
    satellite uses. The Commission defined "small business" for the
    wireless communications services (WCS) auction as an entity with
    average gross revenues of \$40 million for each of the three
    preceding years, and a "very small business" as an entity with
    average gross revenues of \$15 million for each of the three
    preceding years.[^201] The SBA has approved these definitions.[^202]
    The Commission auctioned geographic area licenses in the WCS
    service. In the auction, which commenced on April 15, 1997 and
    closed on April 25, 1997, there were seven bidders that won 31
    licenses that qualified as very small business entities, and one
    bidder that won one license that qualified as a small business
    entity. An auction for one license in the 1670-1674 MHz band
    commenced on April 30, 2003 and closed the same day. One license was
    awarded. The winning bidder was not a small entity.

57. *39 GHz Service.* The Commission created a special small business
    size standard for 39 GHz licenses -- an entity that has average
    gross revenues of \$40 million or less in the three previous
    calendar years.[^203] An additional size standard for "very small
    business" is: an entity that, together with affiliates, has average
    gross revenues of not more than \$15 million for the preceding three
    calendar years.[^204] The SBA has approved these small business size
    standards.[^205] The auction of the 2,173 39 GHz licenses began on
    April 12, 2000 and closed on May 8, 2000. The 18 bidders who claimed
    small business status won 849 licenses. Consequently, the Commission
    estimates that 18 or fewer 39 GHz licensees are small entities that
    may be affected by the rules and polices proposed herein.

58. *Multipoint Distribution Service, Multichannel Multipoint
    Distribution Service, and Instructional Television Fixed Service.*
    Multichannel Multipoint Distribution Service (MMDS) systems, often
    referred to as "wireless cable," transmit video programming to
    subscribers using the microwave frequencies of the Multipoint
    Distribution Service (MDS) and Instructional Television Fixed
    Service (ITFS).[^206] In connection with the 1996 MDS auction, the
    Commission defined "small business" as an entity that, together with
    its affiliates, has average gross annual revenues that are not more
    than \$40 million for the preceding three calendar years.[^207] The
    SBA has approved of this standard.[^208] The MDS auction resulted in
    67 successful bidders obtaining licensing opportunities for 493
    Basic Trading Areas (BTAs).[^209] Of the 67 auction winners, 61
    claimed status as a small business. At this time, we estimate that
    of the 61 small business MDS auction winners, 48 remain small
    business licensees. In addition to the 48 small businesses that hold
    BTA authorizations, there are approximately 392 incumbent MDS
    licensees that have gross revenues that are not more than \$40
    million and are thus considered small entities.[^210]

59. In addition, the SBA has developed a small business size standard
    for Cable and Other Program Distribution,[^211] which includes all
    such companies generating \$12.5 million or less in annual
    receipts.[^212] According to Census Bureau data for 1997, there were
    a total of 1,311 firms in this category, total, that had operated
    for the entire year.[^213] Of this total, 1,180 firms had annual
    receipts of under \$10 million, and an additional 52 firms had
    receipts of \$10 million or more but less than \$25 million.[^214]
    Consequently, we estimate that the majority of providers in this
    service category are small businesses that may be affected by the
    proposed rules and policies.

60. Finally, while SBA approval for a Commission-defined small business
    size standard applicable to ITFS is pending, educational
    institutions are included in this analysis as small entities.[^215]
    There are currently 2,032 ITFS licensees, and all but 100 of these
    licenses are held by educational institutions. Thus, we tentatively
    conclude that at least 1,932 ITFS licensees are small businesses.

61. *Local Multipoint Distribution Service.* Local Multipoint
    Distribution Service (LMDS) is a fixed broadband point-to-multipoint
    microwave service that provides for two-way video
    telecommunications.[^216] The auction of the 986 Local Multipoint
    Distribution Service (LMDS) licenses began on February 18, 1998 and
    closed on March 25, 1998. The Commission established a small
    business size standard for LMDS licenses as an entity that has
    average gross revenues of less than \$40 million in the three
    previous calendar years.[^217] An additional small business size
    standard for "very small business" was added as an entity that,
    together with its affiliates, has average gross revenues of not more
    than \$15 million for the preceding three calendar years.[^218] The
    SBA has approved these small business size standards in the context
    of LMDS auctions.[^219] There were 93 winning bidders that qualified
    as small entities in the LMDS auctions. A total of 93 small and very
    small business bidders won approximately 277 A Block licenses and
    387 B Block licenses. On March 27, 1999, the Commission re-auctioned
    161 licenses; there were 32 small and very small business winning
    that won 119 licenses.

62. *218-219 MHz Service.* The first auction of 218-219 MHz (previously
    referred to as the Interactive and Video Data Service or IVDS)
    spectrum resulted in 178 entities winning licenses for 594
    Metropolitan Statistical Areas (MSAs).[^220] Of the 594 licenses,
    567 were won by 167 entities qualifying as a small business. For
    that auction, we defined a small business as an entity that,
    together with its affiliates, has no more than a \$6 million net
    worth and, after federal income taxes (excluding any carry over
    losses), has no more than \$2 million in annual profits each year
    for the previous two years.[^221] In the *218-219 MHz Report and
    Order and Memorandum Opinion and Order*, we defined a small business
    as an entity that, together with its affiliates and persons or
    entities that hold interests in such an entity and their affiliates,
    has average annual gross revenues not exceeding \$15 million for the
    preceding three years.[^222] A very small business is defined as an
    entity that, together with its affiliates and persons or entities
    that hold interests in such an entity and its affiliates, has
    average annual gross revenues not exceeding \$3 million for the
    preceding three years.[^223] The SBA has approved of these
    definitions.[^224] At this time, we cannot estimate the number of
    licenses that will be won by entities qualifying as small or very
    small businesses under our rules in future auctions of 218-219 MHz
    spectrum. Given the success of small businesses in the previous
    auction, and the prevalence of small businesses in the subscription
    television services and message communications industries, we assume
    for purposes of this analysis that in future auctions, many, and
    perhaps all, of the licenses may be awarded to small businesses.

63. *Incumbent 24 GHz Licensees.* This analysis may affect incumbent
    licensees who were relocated to the 24 GHz band from the 18 GHz
    band, and applicants who wish to provide services in the 24 GHz
    band. The applicable SBA small business size standard is that of
    "Cellular and Other Wireless Telecommunications" companies. This
    category provides that such a company is small if it employs no more
    than 1,500 persons.[^225] According to Census Bureau data for 1997,
    there were 977 firms in this category, total, that operated for the
    entire year.[^226] Of this total, 965 firms had employment of 999 or
    fewer employees, and an additional 12 firms had employment of 1,000
    employees or more.[^227] Thus, under this size standard, the great
    majority of firms can be considered small. These broader census data
    notwithstanding, we believe that there are only two licensees in the
    24 GHz band that were relocated from the 18 GHz band, Teligent[^228]
    and TRW, Inc. It is our understanding that Teligent and its related
    companies have less than 1,500 employees, though this may change in
    the future. TRW is not a small entity. Thus, only one incumbent
    licensee in the 24 GHz band is a small business entity.

64. *Future 24 GHz Licensees.* With respect to new applicants in the
    24 GHz band, we have defined "small business" as an entity that,
    together with controlling interests and affiliates, has average
    annual gross revenues for the three preceding years not exceeding
    \$15 million.[^229] "Very small business" in the 24 GHz band is
    defined as an entity that, together with controlling interests and
    affiliates, has average gross revenues not exceeding \$3 million for
    the preceding three years.[^230] The SBA has approved these
    definitions.[^231] The Commission will not know how many licensees
    will be small or very small businesses until the auction, if
    required, is held.

65. *Internet Service Providers.* The SBA has developed a small business
    size standard for Internet Service Providers. This category
    comprises establishments "primarily engaged in providing direct
    access through telecommunications networks to computer-held
    information compiled or published by others."[^232] Under the SBA
    size standard, such a business is small if it has average annual
    receipts of \$21 million or less.[^233] According to Census Bureau
    data for 1997, there were 2,751 firms in this category that operated
    for the entire year.[^234] Of these, 2,659 firms had annual receipts
    of under \$10 million, and an additional 67 firms had receipts of
    between \$10 million and \$24,999,999.[^235] Thus, under this size
    standard, the great majority of firms can be considered small
    entities.

    4\. Description of Projected Reporting, Recordkeeping, and Other
    Compliance Requirements for Small Entities

66. In this Order, we eliminate the current pick-and-choose rule. The
    changes will restrict competitive LECs' choices to opt into specific
    terms and conditions of existing interconnection agreements,
    requiring competitors to opt into entire agreements or negotiate
    their own agreements with incumbents. We do not expect the new rule
    to impose additional burdens beyond those under the existing rule.

    5\. Steps Taken to Minimize Significant Economic Impact on Small
    Entities, and Significant Alternatives Considered

67. The RFA requires an agency to describe any significant alternatives
    that it has considered in developing its approach, which may include
    the following four alternatives (among others): "(1) the
    establishment of differing compliance or reporting requirements or
    timetables that take into account the resources available to small
    entities; (2) the clarification, consolidation, or simplification of
    compliance and reporting requirements under the rule for such small
    entities; (3) the use of performance rather than design standards;
    and (4) an exemption from coverage of the rule, or any part thereof,
    for such small entities."[^236]

68. In this Order, we amend the pick-and-choose rule in a manner that
    encourages more customized contracts between competitive and
    incumbent LECs, as envisioned by the Act. The Order seeks to remove
    disincentives to the ability of incumbent LECs and competitive LECs
    to negotiate more customized agreements, including agreements that
    may include significant concessions in exchange for negotiated
    benefits. Changing the current rules, in favor of an approach where
    competitive LECs -- including small entities -- must opt into entire
    agreements, rather than individual terms and conditions, may impose
    additional burdens on these parties than they currently bear. The
    Commission finds that the current rules, however, expose incumbent
    LECs to the risk that subsequent entrants may reap a one-sided
    benefit from negotiated concessions made between the incumbent LEC
    and the actual contracting competitive LEC, and this creates a
    disincentive to negotiation to both negotiating parties. This may,
    in turn, impose additional burdens on competitors and incumbents as
    the parties attempt to reach agreements and resolve disputes, often
    through arbitration and litigation, in a regulatory environment that
    creates disincentives for either party to compromise. For this
    reason, we do not establish a separate pick-and-choose regime to
    govern small business incumbents or competitors. We believe the
    alternative adopted in this Order will serve the Commission's goal
    of encouraging negotiation while protecting the rights and interests
    of competitors, including small businesses. We believe that this
    approach is the least burdensome way to achieve market-driven
    contract negotiations. Alternatives proposed to address small
    business concerns were not adopted because they do not accomplish
    the Commission's objectives in this proceeding.[^237]

69. **[Report to Congress:]{.underline}** The Commission will send a
    copy of the Order, including this FRFA, in a report to be sent to
    Congress pursuant to the Congressional Review Act.[^238] In
    addition, the Commission will send a copy of the Order, including
    this FRFA, to the Chief Counsel for Advocacy of the SBA. A copy of
    the Order and FRFA (or summaries thereof) will also be published in
    the Federal Register.

    B. Final Paperwork Reduction Act Analysis

70. This Report and Order does not contain information collection(s)
    subject to the Paperwork Reduction Act of 1995 (PRA), Public Law
    104-13.

    V. ORDERING CLAUSES

71. Accordingly, IT IS ORDERED that pursuant to sections 1, 3, 4,
    252(i), and 303(r) of the Communications Act of 1934, as amended, 47
    U.S.C. §§ 151, 153, 154, 252(i), 303(r), the *Second Report and
    Order* in CC Docket No. 01-338 IS ADOPTED, and that Part 51 of the
    Commission's Rules, 47 C.F.R. Part 51, is amended as set forth in
    Appendix B. The requirements of this Report and Order shall become
    effective 30 days after publication in the Federal Register.

72. IT IS FURTHER ORDERED that the Commission's Consumer and
    Governmental Affairs Bureau, Reference Information Center, SHALL
    SEND a copy of this Order, including the Final Regulatory
    Flexibility Analysis, to the Chief Counsel for Advocacy of the Small
    Business Administration.

> FEDERAL COMMUNICATIONS COMMISSION
>
> Marlene H. Dortch
>
> Secretary

# APPENDIX A

# LIST OF COMMENTERS

**Comments in Pick-and-Choose Proceeding, CC Docket No. 01-338**

+------------------------------------+---------------------------------+
| **[Comments]{.underline}**         | **[Abbreviation]{.underline}**  |
+------------------------------------+---------------------------------+
| American Farm Bureau, Inc.         | AFB *et al.*                    |
|                                    |                                 |
| > Anew Telecommunications          |                                 |
| > Corporation                      |                                 |
| >                                  |                                 |
| > d/b/a Call America               |                                 |
| >                                  |                                 |
| > Creative Interconnect, Inc.      |                                 |
| >                                  |                                 |
| > Enhanced Communications Network, |                                 |
| > Inc.                             |                                 |
| >                                  |                                 |
| > Utilities Commission of New      |                                 |
| > Smyrna Beach                     |                                 |
|                                    |                                 |
| A+ American Discount Telecom, LLC  |                                 |
+------------------------------------+---------------------------------+
| Association for Local              | ALTS                            |
| Telecommunications Services        |                                 |
+------------------------------------+---------------------------------+
| BellSouth Corporation              | BellSouth                       |
+------------------------------------+---------------------------------+
| California Public Utilities        | California Commission           |
| Commission                         |                                 |
+------------------------------------+---------------------------------+
| CenturyTel, Inc.                   | CenturyTel                      |
+------------------------------------+---------------------------------+
| CLEC Coalition                     | CLEC Coalition                  |
|                                    |                                 |
| Excel Telecommunications, Inc.     |                                 |
|                                    |                                 |
| KMC Telecom Holdings, Inc.         |                                 |
|                                    |                                 |
| NuVox Inc.                         |                                 |
|                                    |                                 |
| SNiP LiNK LLC                      |                                 |
|                                    |                                 |
| Talk America                       |                                 |
|                                    |                                 |
| VarTec Telecom, Inc.               |                                 |
|                                    |                                 |
| XO Communications, Inc.            |                                 |
|                                    |                                 |
| Xspedius LLC                       |                                 |
+------------------------------------+---------------------------------+
| Covad Communications Company       | Covad                           |
+------------------------------------+---------------------------------+
| Cox Communications, Inc.           | Cox                             |
+------------------------------------+---------------------------------+
| Florida Public Service Commission  | Florida Commission              |
+------------------------------------+---------------------------------+
| Iowa Utilities Board               | Iowa Commission                 |
+------------------------------------+---------------------------------+
| LecStar Telecom, Inc.              | LecStar                         |
+------------------------------------+---------------------------------+
| Mpower Communications Corp.        | Mpower                          |
+------------------------------------+---------------------------------+
| National Association of State      | NASUCA                          |
| Utility Consumer Advocates         |                                 |
+------------------------------------+---------------------------------+
| New York State Department of       | New York Commission             |
| Public Service                     |                                 |
+------------------------------------+---------------------------------+
| PAETEC Communications, Inc.        | PAETEC                          |
+------------------------------------+---------------------------------+
| Promoting Active Competition       | PACE/CompTel                    |
| Everywhere Coalition               |                                 |
|                                    |                                 |
| > The Competitive                  |                                 |
| > Telecommunications Association   |                                 |
+------------------------------------+---------------------------------+
| Qwest Communications International | Qwest                           |
| Inc.                               |                                 |
+------------------------------------+---------------------------------+
| Rural Independent Competitive      | RICA                            |
| Alliance                           |                                 |
+------------------------------------+---------------------------------+
| SBC Communications Inc.            | SBC                             |
+------------------------------------+---------------------------------+
| Sprint Corporation                 | Sprint                          |
+------------------------------------+---------------------------------+
| The Public Utilities Commission of | Ohio Commission                 |
| Ohio                               |                                 |
+------------------------------------+---------------------------------+
| United States Telecom Association  | USTA                            |
+------------------------------------+---------------------------------+
| US LEC Corp.                       | US LEC *et al.*                 |
|                                    |                                 |
| TDS Metrocom, LLC                  |                                 |
|                                    |                                 |
| Focal Communications Corporation   |                                 |
|                                    |                                 |
| Pac-West Telecomm, Inc.            |                                 |
|                                    |                                 |
| Globalcom, Inc.                    |                                 |
|                                    |                                 |
| Lightship Telecom, LLC             |                                 |
|                                    |                                 |
| OneEighty Communications, Inc.     |                                 |
+------------------------------------+---------------------------------+
| Verizon Telephone Companies        | Verizon                         |
+------------------------------------+---------------------------------+
| Verizon Wireless                   | Verizon Wireless                |
+------------------------------------+---------------------------------+
| WorldCom, Inc./MCI                 | MCI                             |
+------------------------------------+---------------------------------+
| Z-Tel Communications, Inc.         | Z-Tel                           |
+------------------------------------+---------------------------------+

**Replies in Pick-and-Choose Proceeding, CC Docket No. 01-338**

+------------------------------------+---------------------------------+
| **[Replies]{.underline}**          | **[Abbreviation]{.underline}**  |
+------------------------------------+---------------------------------+
| American Farm Bureau, Inc.         | AFB *et al.*                    |
|                                    |                                 |
| > Anew Telecommunications          |                                 |
| > Corporation d/b/a Call America   |                                 |
| >                                  |                                 |
| > Creative Interconnect, Inc.      |                                 |
| >                                  |                                 |
| > Utilities Commission of New      |                                 |
| > Smyrna Beach                     |                                 |
| >                                  |                                 |
| > A+ American Discount Telecom,    |                                 |
| > LLC                              |                                 |
+------------------------------------+---------------------------------+
| Arizona Corporation Commission     | Arizona Commission              |
+------------------------------------+---------------------------------+
| AT&T Wireless Services, Inc.       | AT&T Wireless                   |
+------------------------------------+---------------------------------+
| BellSouth Telecommunications, Inc. | BellSouth                       |
+------------------------------------+---------------------------------+
| Birch Telecom, Inc.                | Birch                           |
+------------------------------------+---------------------------------+
| Cablevision Lightpath, Inc.        | Lightpath                       |
+------------------------------------+---------------------------------+
| CenturyTel, Inc.                   | CenturyTel                      |
+------------------------------------+---------------------------------+
| CLEC Coalition                     | CLEC Coalition                  |
|                                    |                                 |
| KMC Telecom Holdings, Inc.         |                                 |
|                                    |                                 |
| NuVox Inc                          |                                 |
|                                    |                                 |
| SNiP LiNK LLC                      |                                 |
|                                    |                                 |
| Talk America                       |                                 |
|                                    |                                 |
| XO Communications, Inc.            |                                 |
|                                    |                                 |
| Xspedius LLC                       |                                 |
+------------------------------------+---------------------------------+
| Cox Communications, Inc.           | Cox                             |
+------------------------------------+---------------------------------+
| National Association of State      | NASUCA                          |
| Utility Consumer Advocates         |                                 |
+------------------------------------+---------------------------------+
| Nextel Communications, Inc.        | Nextel                          |
+------------------------------------+---------------------------------+
| SBC Communications Inc.            | SBC                             |
+------------------------------------+---------------------------------+
| Sprint Corporation                 | Sprint                          |
+------------------------------------+---------------------------------+
| T-Mobile USA, Inc.                 | T-Mobile                        |
+------------------------------------+---------------------------------+
| US LEC Corp.                       | US LEC *et al.*                 |
|                                    |                                 |
| TDS Metrocom, LLC                  |                                 |
|                                    |                                 |
| Focal Communications Corporation   |                                 |
|                                    |                                 |
| Pac-West Telecomm, Inc.            |                                 |
|                                    |                                 |
| Globalcom, Inc.                    |                                 |
|                                    |                                 |
| Lightship Telecom, LLC             |                                 |
|                                    |                                 |
| OneEighty Communications, Inc.     |                                 |
|                                    |                                 |
| Cavalier Telephone                 |                                 |
+------------------------------------+---------------------------------+
| Verizon Telephone Companies        | Verizon                         |
+------------------------------------+---------------------------------+
| WorldCom, Inc./MCI                 | MCI                             |
+------------------------------------+---------------------------------+

**Comments in the Mpower Flex Contract Proceeding, CC Docket No.
01-117**

  ------------------------------------ ----------------------------------
  **[Comments]{.underline}**           **[Abbreviation]{.underline}**

  Association of Communications        ASCENT
  Enterprises                          

  AT&T Corp.                           AT&T

  BellSouth Corporation                BellSouth

  Covad Communications Company         Covad

  Focal Communications Corporation     Focal

  Qwest Corporation                    Qwest

  Sprint Corporation                   Sprint

  Verizon Telephone Companies          Verizon

  WorldCom, Inc.                       WorldCom

  Z-Tel Communications, Inc.           Z-Tel
  ------------------------------------ ----------------------------------

**Replies in the Mpower Flex Contract Proceeding, CC Docket No. 01-117**

  ------------------------------------ ----------------------------------
  **[Replies]{.underline}**            **[Abbreviation]{.underline}**

  Association of Communications        ASCENT
  Enterprises                          

  Association for Local                ALTS
  Telecommunications Services          

  AT&T Corp.                           AT&T

  Focal Communications Corporation     Focal

  Mpower Communications Corp.          Mpower

  United States Telecom Association    USTA

  Verizon Telephone Companies          Verizon

  WorldCom, Inc.                       WorldCom
  ------------------------------------ ----------------------------------

# APPENDIX B

# FINAL RULES

PART 51 of Title 47 of the Code of Federal Regulations is amended as
follows:

**PART 51 -- INTERCONNECTION**

1\. Section 51.809 is amended by revising the section heading,
paragraphs (a), (b), and (c) to read as follows:

**[§ 51.809 Availability of agreements to other telecommunications
carriers under section 252(i) of the Act]{.underline}**.

\(a\) An incumbent LEC shall make available without unreasonable delay
to any requesting telecommunications carrier any agreement in its
entirety to which the incumbent LEC is a party that is approved by a
state commission pursuant to section 252 of the Act, upon the same
rates, terms, and conditions as those provided in the agreement. An
incumbent LEC may not limit the availability of any agreement 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.

\(b\) The obligations of paragraph (a) of this section shall not apply
where the incumbent LEC proves to the state commission that:

> \(1\) The costs of providing a particular agreement to the requesting
> telecommunications carrier are greater than the costs of providing it
> to the telecommunications carrier that originally negotiated the
> agreement, or
>
> \(2\) The provision of a particular agreement to the requesting
> carrier is not technically feasible.

\(c\) Individual agreements shall remain available for use by
telecommunications carriers pursuant to this section for a reasonable
period of time after the approved agreement is available for public
inspection under section 252(h) of the Act.

**STATEMENT OF**

**CHAIRMAN MICHAEL K. POWELL**

> *Re: Review of the Section 251 Unbundling Obligations of Incumbent
> Local Exchange Carriers (CC Docket No. 01-338) Second Report and
> Order*

One of the Commission's most important goals is to advance competition
that is meaningful and sustainable, and that will eventually achieve
Congress' goal of reducing regulation and promoting facilities-based
competition. As carriers continue their migration away from unbundled
network elements and toward increased reliance upon network elements
they own and control, they will require more specialized interconnection
agreements with incumbent LECs. Today's decision removes a rule that has
thwarted those individualized agreements.

Specifically, we adopt an "all-or-nothing" rule, in place of the current
pick-and-choose interpretation of section 252(i). Through this action,
the Commission advances the cause of facilities-based competition by
permitting carriers to negotiate individually tailored interconnection
agreements designed to fit their business needs more precisely.
Consistent with the purpose of section 252(i), it also continues to
safeguard against discrimination. Specifically, nothing in our decision
diminishes the ability of a requesting carrier to avail itself of the
arbitration process clearly set forth in section 252 of the Act.

Preserving parties' ability to contract freely, and indeed encouraging
transactions, is not simply an oft-cited legal policy -- the 1996 Act
makes it our statutory mandate. Our decision today ensures that
facilities-based competitors are given a fighting chance to participate
in local markets.

**STATEMENT OF**

**COMMISSIONER KATHLEEN Q. ABERNATHY**

*Re: Review of the Section 251 Unbundling Obligations of Incumbent Local
Exchange Carriers, Second Report and Order in CC Docket No. 01-338
(adopted July 8, 2004).*

I strongly support the Commission's decision to bolster incentives for
marketplace negotiations by eliminating the "pick and choose" rule. In
enacting the Telecommunications Act of 1996, Congress envisioned a
sharing regime built primarily upon negotiated access arrangements,
rather than governmental mandates. To be sure, the Commission was
required to establish default unbundling rules, and state commissions
were expected to set UNE prices and resolve interconnection disputes.
But Congress anticipated that competitors and incumbents would establish
most terms and conditions at the bargaining table, rather than in
regulatory tribunals and courtrooms.

Unfortunately, this vision has not been realized. Instead, we have
endured eight years of pitched regulatory battles and resource-draining
litigation, and industry participants of all stripes agree that
incumbent LECs and new entrants almost never engage in true
give-and-take negotiations. There are undoubtedly many complex reasons
why the Act's implementation took this course, many of which have
nothing to do with the "pick and choose" rule. But I believe that the
record in this proceeding confirms something I have long suspected: the
"pick and choose" rule impedes marketplace negotiations and is not
necessary to prevent discrimination. When the Supreme Court upheld the
"pick and choose" rule as a valid interpretation of the Act, it
recognized that the rule might "significantly impede negotiations (by
making it impossible for favorable interconnection-service or
network-element terms to be traded off against unrelated provisions),"
and suggested that the Commission would be able to change course if that
came to pass.[^239] That absence of genuine trade-offs is precisely what
has occurred, as incumbent LECs have proven reluctant to make
significant concessions in negotiations as long as third parties can
later come along and avail themselves of the benefit without making the
same trade-off as the contracting party.

By requiring that competitors opt into interconnection agreements on an
"all or nothing" basis, we ensure that third parties take the bitter
with the sweet. In doing so, I am optimistic that we will promote more
meaningful negotiations. Given the almost-complete dearth of marketplace
deals, this change can only improve negotiations, notwithstanding claims
that it will diminish competitors' leverage. In fact, I expect that the
continuing application of the statutory duty of good faith, together
with competitors' ability to opt into any negotiated or arbitrated
agreement (on an all-or-nothing basis), will be sufficient to prevent
discrimination.

The reform we adopt today is part of a much broader transformation. The
"pick and choose" rule, along with a remarkably expansive unbundling
regime, has fostered an expectation that the government will micromanage
every aspect of the relationship between an incumbent LEC and its
wireline competitors. The courts have now made unmistakably clear that
the Commission must impose meaningful limits when adopting new
unbundling rules. While I have no doubt that the Commission will
continue to mandate the unbundling of bottleneck transmission
facilities, it is equally apparent that the concept of maximum
unbundling of all elements in all geographic markets cannot be
sustained. As we move toward adopting new rules under which competitors
will be increasingly required to rely on their own facilities and to
differentiate their services, the availability of customized
interconnection agreements will be all the more vital. I expect that our
elimination of the "pick and choose" rule will help pave the way toward
a regime that is more dependent on negotiated access arrangements and
less dominated by regulatory fiat.

**DISSENTING STATEMENT OF**

**COMMISSIONER MICHAEL J. COPPS**

Re: *Review of the Section 251 Unbundling Obligations of Incumbent Local
Exchange*

*Carriers (CC Docket No. 01-338)*

Eight years ago, the Commission adopted its pick-and-choose rule. It
provided structural assurance that interconnection, service and network
elements would be available to all carriers at nondiscriminatory rates,
terms and conditions. The rule was based on the strongest statutory
reading of Section 252(i). It was designed to minimize contracting costs
and was grounded in principles of equal treatment.

We have no looming judicial charge that compels us to depart from our
pick-and-choose policy. Quite the contrary: the pick-and-choose rule was
upheld by the Supreme Court five years ago. The highest court
characterized the rule as "not only reasonable," but also "the most
readily apparent" interpretation of the statute. This is strong stuff
for a Commission whose policy pronouncements do not always pass muster
with the courts of the land.

I am not convinced that dismantling the pick-and-choose rule and
replacing it with an all-or-nothing approach will usher in a new era of
negotiation and unique commercial deals. While statements about
enhancing give-and-take negotiation have intuitive appeal, their logic
here is thin. Trade-off, compromise and concession are good. They are
features of any negotiation, including negotiation in a pick-and-choose
environment. But in the wireline market, the only wholesaler is also the
dominant force in retail competition. I know of no other industry where
this is true. It makes contracting difficult. The hurly-burly and
give-and-take that go on in so many commercial dialogues are not
guaranteed in this one. Take-it-or-leave-it bargaining means competitors
will walk away without any wholesale alternatives. To understand this
difficulty, look no further than the lack of widespread commercial
agreement reached during the months since the *USTA II* decision.

Pulling apart the fabric that supports competition will not speed its
arrival. Discarding the pick-and-choose policy will increase the costs
of contracting for smaller carriers. It will make it harder for them to
compete. The real losers are consumers---residential and small business
customers---who will face a dwindling set of choices and more limited
competition as a result. For these reasons, I respectfully dissent.

**STATEMENT OF**

**COMMISSIONER JONATHAN S. ADELSTEIN**

**DISSENTING IN PART AND APPROVING IN PART**

*Re: Review of Section 251 Unbundling Obligations of Incumbent Local
Exchange Carriers, CC Docket No. 01-338, FCC 04-164.*

Section 252 of the Communications Act establishes a framework for the
negotiation and arbitration of interconnection agreements between
incumbent carriers and new entrants. Section 252(i) provides a valuable
tool for preventing discrimination between competitive carriers and
incumbents, by requiring incumbents to make available "any
interconnection, service, or network element" to other requesting
carriers. Since 1996, the Commission's rules have implemented this
provision by affording new entrants the ability to choose among
individual provisions contained in publicly-filed interconnection
agreements. That approach, called the "pick and choose" rule, was
affirmed by the Supreme Court as the "most readily apparent" reading of
the statute.

In the realm of our local competition rules, I am reticent to cast aside
rules that have been affirmed by the Supreme Court. Maintaining some
level of regulatory stability in this sector warrants such an approach.
I nonetheless join today's Order to the extent that it provides
incumbents and competitors with greater flexibility to develop
comprehensive negotiated agreements. As a practical matter, the
availability of the pick and choose rule appears to have influenced
virtually all negotiations between incumbents and competitors, even if
the parties to a specific negotiation did not invoke the pick and choose
option. By affording parties the ability to balance a series of
trade-offs, we should provide additional incentive for negotiated
agreements.

The question remains whether this change will provide sufficient
incentive for incumbents and competitors to reach mutually-acceptable
agreements. The experience of the past 8 years, and particularly the
past few months, has demonstrated how difficult it is for competitors
and incumbents to reach negotiated agreements for access to unbundled
network elements and other critical inputs. Competitors raise legitimate
concerns about whether current market conditions create adequate
incentives for both parties. The pick and choose rule has served to
balance, to some degree, disparities in market power, and it is
difficult to predict the effect of its wholesale elimination.

While I support providing parties with some avenue for reaching
agreements outside of the pick and choose framework, I cannot fully
support this item. Particularly in light of the Supreme Court's
conclusion that our current rule "tracks the pertinent language of the
statute almost exactly," I would have supported a more measured
approach. For example, the Commission could have adopted its "all or
nothing" approach for negotiated agreements, but allowed the limited use
of the pick and choose rule for new entrants seeking to include
previously-arbitrated provisions in new interconnection agreements.
These arbitrated provisions have been reviewed by State commissions for
consistency with the Act and our rules, and they do not reflect the
give-and-take of purely negotiated agreements. Such an approach, though
not compelled by our rules, would be a measured way to grant additional
flexibility, now that we have concluded that multiple interpretations of
the statute are permissible. Allowing the use of the pick and choose
rule for previously-arbitrated issues would also address concerns raised
by competitors, some state commissions, and consumer advocacy groups
that adopting the "all or nothing" approach would lead to more
arbitrations, potentially increasing cost and delay for smaller
carriers.

This Commission should be cautious about an approach that may permit
parties to delay unreasonably making available even those provisions of
interconnection agreements that have been arbitrated by state
commissions. We should at minimum commit to monitoring the
implementation of this new approach. Parties forcefully dispute whether
the relief we provide here will lead to mutually-acceptable,
non-discriminatory agreements or towards greater litigation costs
because parties are forced to arbitrate more agreements. The difference
in these outcomes is far from academic, but rather will be reflected in
the existence and number of options available to consumers of
telecommunications services. Our vigilance, and the commitment of our
State commission colleagues who will review these agreements, is
essential if we are to ensure that consumers continue to enjoy the
benefits of choice.

[^1]: *See Review of the Section 251 Unbundling Obligations of Incumbent
    Local Exchange Carriers, Implementation of the Local Competition
    Provisions of the Telecommunications Act of 1996, Deployment of
    Wireline Services Offering Advanced Telecommunications Capability*,
    CC Docket Nos. 01-338, 96-98, 98-147, Report and Order and Order on
    Remand and Further Notice of Proposed Rulemaking, 18 FCC Rcd 16978
    (2003) (*FNPRM*), *corrected by* Errata, 18 FCC Rcd 19020 (2003),
    *aff'd in part, remanded in part, vacated in part*, *United States
    Telecom Ass'n v. FCC*, 359 F.3d 554 (D.C. Cir. 2004), *petitions for
    cert. filed*, Nos. 04-12, 04-15, 04-18 (June 30, 2004).

[^2]: 47 U.S.C. § 252(i); 47 C.F.R. § 51.809. Generally, the
    pick-and-choose rule in section 51.809 permits a requesting carrier
    to include in its interconnection agreement any individual
    interconnection, service, or network element contained in another
    carrier's agreement approved by the state commission.

[^3]: *See Implementation of the Local Competition Provisions in the
    Telecommunications Act of 1996,* CC Docket 96-98, Notice of Proposed
    Rulemaking, 11 FCC Rcd 14171, 14179, para. 20 (1996).

[^4]: 47 U.S.C. § 252(i).

[^5]: *See* 47 C.F.R. § 51.809.

[^6]: *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 Nos. 96-98, 95-185, First Report and Order, 11 FCC Rcd 15499,
    16139, para. 1314 (1996) (*Local Competition Order*), *modified on
    recon.*, 11 FCC Rcd 13042 (1996), *aff'd in part, vacated in part,
    Competitive Telecommunications Ass'n v. FCC*, 117 F.3d 1068 (8th
    Cir. 1997) and *Iowa Utils. Bd. v. FCC*, 120 F.3d 753 (8th Cir.
    1997) (*Iowa Utils. Bd. v. FCC*), *aff'd in part*, *rev'd in part*,
    *AT&T v. Iowa Utils. Bd.*, 525 U.S. 366 (1999) (*AT&T v. Iowa Utils.
    Bd.*), *decision* *on remand*, *Iowa Utils. Bd. v. FCC*, 219 F.3d
    744 (8th Cir. 2000), *aff'd in part,* *rev'd in part, Verizon
    Communications Inc. v. FCC*, 535 U.S. 467 (2002). In conjunction
    with adopting this interpretation, the Commission limited
    competitive LECs' ability to pick and choose provisions from other
    agreements to instances where: (1) the forms of interconnection are
    technically feasible; (2) the incumbent LEC incurs no greater costs
    than with the carrier who originally negotiated the agreement; (3)
    only a reasonable amount of time has passed since adoption of the
    preexisting agreement; and (4) a chosen provision is "legitimately
    related" to other provisions such that it cannot be adopted by
    itself. *See* *Local Competition Order*, 11 FCC Rcd at 16139-40,
    paras. 1315, 1317, 1319.

[^7]: *See Local Competition Order*, 11 FCC Rcd at 16138, para. 1312.

[^8]: *See id.* at 16138-39, para. 1313.

[^9]: *AT&T v. Iowa Utils. Bd.*, 525 U.S. at 377 (citing *Iowa Utils.
    Bd. v. FCC*, 120 F.3d at 801). The court also found that the
    structure of the Act reveals a preference for voluntarily negotiated
    agreements, and that the pick-and-choose rule would "thwart the
    negotiation process and preclude the attainment of binding
    negotiated agreements" because it discourages "the give-and-take
    process that is essential to successful negotiations." *Iowa Utils.
    Bd. v. FCC*, 120 F.3d at 801.

[^10]: *AT&T v. Iowa Utils. Bd.*, 525 U.S. at 396.

[^11]: *Id*.

[^12]: Petition of Mpower Communications Corp. for Establishment of New
    Flexible Contract Mechanism Not Subject to "Pick and Choose," CC
    Docket No. 01-117 (filed May 25, 2001) (Mpower Petition); *see also
    Pleading Cycle Established for Comments on Mpower Petition for
    Forbearance and Rulemaking,* CC Docket No. 01-117, Public Notice, 16
    FCC Rcd 11889 (2001). On October 14, 2003, Mpower filed to withdraw
    this petition. *See* Letter from Douglas G. Bonner, Counsel for
    Mpower Communications Corp., to Marlene H. Dortch, Secretary, FCC,
    CC Docket Nos. 01-117, 01-338, 96-98, 98-147 at 1 (filed Oct. 14,
    2003); *Review of the Section 251 Unbundling Obligations of
    Incumbent Local Exchange Carriers*, CC Docket No. 01-338, Order, 18
    FCC Rcd 21381 (2003). The record from the Mpower proceeding has been
    incorporated into this proceeding. *See FNPRM,* 18 FCC Rcd at 17410,
    para. 714.

[^13]: *See* Mpower Petition at 9. It proposed the concept of "FLEX
    contracts" -- voluntarily negotiated wholesale agreements that other
    carriers could opt into only as a "package deal," neither subject to
    the pick-and-choose rule nor to the state commission filing and
    approval requirement of section 252(e). Contrary to the assertion by
    ALTS, the Commission did not initiate the *FNPRM* solely because of
    the Mpower Petition. *See* Letter from Jason D. Oxman, General
    Counsel, ALTS, to Marlene H. Dortch, Secretary, FCC, CC Docket Nos.
    01-338, 96-98, 98-147 at 1-2 (filed June 25, 2004) (ALTS June 25,
    2004 *Ex Parte* Letter). The issues raised in the *FNPRM* are much
    broader than those raised by Mpower in its narrow petition. As
    explained in the *FNPRM*, the Mpower Petition, as well as other
    carrier complaints about the ineffectiveness of the negotiation
    process, prompted the Commission to reexamine our rule interpreting
    section 252(i). However, the Commission in the *FNPRM* developed its
    own remedy for the problems of the pick-and-choose rule and made its
    own tentative conclusions independent of the Mpower Petition. Thus,
    the Commission incorporated the Mpower proceeding record not because
    its petition raised the same issues as those discussed in the
    *FNPRM*, but rather, because the Commission recognized that the
    subject matter was similar enough to warrant inclusion.

[^14]: Letter from Dee May, Executive Director -- Federal Regulatory,
    Verizon, to Marlene H. Dortch, Secretary, FCC, CC Docket Nos.
    01-338, 96-98, 98-147 at 3 (filed Jan. 17, 2003) (filed on behalf of
    BellSouth, SBC, Qwest, and Verizon).

[^15]: *See FNPRM,* 18 FCC Rcd at 17412-13, para. 720; *see also*
    Appendix A, *infra* (List of Commenters).

[^16]: *See FNPRM*, 18 FCC Rcd at 17413, para. 721.

[^17]: *See id.* at 17413, para. 722. The Commission asked whether it
    was correct in its tentative conclusion that the pick-and-choose
    rule fails to promote meaningful negotiations. For parties asserting
    such failure, we asked for alternative interpretations which would
    restore incentives and also maintain effective safeguards against
    discrimination. We noted our previously expressed concerns about
    "poison pills" and other types of discrimination, and whether such
    concerns could be addressed through narrower means than our current
    rule. *See id*. at 17413-14, paras. 722, 724. "Poison pills" are
    onerous provisions that could be included in an interconnection
    agreement, which would not negatively affect the original requesting
    carrier, but would discourage other carriers from subsequently
    adopting the agreement. *See Local Competition Order*, 11 FCC Rcd at
    16138, para. 1312.

[^18]: *See FNPRM,* 18 FCC Rcd at 17414-15, 17416, paras. 725, 728; 47
    U.S.C. § 252(f). Under the proposal in the *FNPRM*, if an incumbent
    LEC were to decide not to file an SGAT, the pick-and-choose rule
    would continue to apply. In the case of non-BOC incumbent LECs
    (which are not subject to section 252(f)), the *FNPRM* proposed that
    a single interconnection agreement designated as an SGAT-equivalent
    could be filed with the state commission. *See* 18 FCC Rcd at
    17414-15, para. 725. We also asked several questions related to the
    conditional SGAT proposal, including whether it was reasonable to
    interpret section 252(i) to allow carriers to opt into entire
    agreements, but not individual provisions, subject to satisfaction
    of an SGAT filing. *See* *id.* at 17415-16, para. 727.

[^19]: *See id.* at 17413, 17416, paras. 721, 728.

[^20]: *AT&T v. Iowa Utils. Bd.*, 525 U.S. at 396 ("\[W\]hether the
    Commission's approach will significantly impede negotiations (by
    making it impossible for favorable interconnection-service or
    network-element terms to be traded off against unrelated provisions)
    is a matter eminently within the expertise of the Commission and
    eminently beyond our ken.").

[^21]: 47 U.S.C. § 252(i) (emphasis added); *see Local Competition
    Order,* 11 FCC Rcd at 16137-39, paras. 1310, 1315.

[^22]: *See* CLEC Coalition Comments at 3 (citations omitted);
    PACE/CompTel Comments at 3-4. The CLEC Coalition in particular
    argues that the Supreme Court has held that the word "any" in a
    statute "has an expansive meaning, that is, 'one or some
    indiscriminately of whatever kind,'" and thus, the Commission's
    proposed interpretation would "render as mere surplusage," the words
    "any interconnection, service or network element." CLEC Coalition
    Comments at 5 (citing *United States v. Gonzales*, 520 U.S. 1, 5
    (1997)); *see also* CLEC Coalition Reply at 7-8; MCI Comments at
    4-5; MCI Reply at 3-4; Nextel Reply at 4; T-Mobile Reply at 1-3; US
    LEC *et al.* Reply at 7-8.

[^23]: *See* 47 U.S.C. § 252(i).

[^24]: *See U.S. Nat. Bank of Oregon v. Indep. Ins. Agents of America,
    Inc.*, 508 U.S. 439, 455 (1993) (holding that statutory construction
    is a holistic endeavor); *see also McCarthy v. Bronson*, 500 U.S.
    136, 139 (1991) (holding that a statute should be interpreted by
    looking at not only the particular statutory language, but to the
    design of the statute as a whole and to its object and policy).

[^25]: *Iowa Utils. Bd. v*. *FCC*, 120 F.3d at 801 n.22.

[^26]: The legislative history does not resolve the ambiguity. The CLEC
    Coalition argues that a statement from the Senate Commerce Committee
    shows clear intent. *See* CLEC Coalition at 3-4 (arguing that
    section 252(i) was intended to "make interconnection more efficient
    by making available to other carriers the individual elements of
    agreements that have been previously negotiated" (citing *Report of
    the Committee on Commerce, Science, and Transportation on S. 652*,
    S. Rpt. No. 104-23, at 21-22 (1995))). However, we find that this
    language falls short, for the meaning of "individual elements" is
    also ambiguous. Moreover, the Senate bill still contains the phrase,
    "upon the same terms and conditions," and thus, it is unclear if
    Congress meant that any "individual elements," "services,"
    "facilities" or "functions" could be taken so long as either the
    whole provision or the whole agreement was taken. Lastly, we find
    that the CLEC Coalition's reliance upon a sole congressional source
    to prove legislative intent is misplaced because courts typically
    require other corroborating documents. *See Zuber v. Allen*, 398
    U.S. 168, 186-87 (1969) (holding that when interpreting the meaning
    of a statute, little reliance should be placed on committee reports
    unless there is also accompanying floor debate by individual members
    of Congress).

[^27]: *AT&T v. Iowa Utils. Bd.*, 525 U.S. at 396.

[^28]: *Id. See generally* ALTS Comments at 3 (citations omitted); AFB
    *et al*. at 6-8; CLEC Coalition Comments at 4; MCI Comments at 5;
    PACE/CompTel Comments at 3; Sprint Comments at 5; Sprint Reply at 4;
    US LEC *et al*. Comments at 2; Z-Tel Comments at 14; ALTS June 25,
    2004 *Ex Parte* Letter at 1.

[^29]: *AT&T v. Iowa Utils. Bd*., 525 U.S. at 396.

[^30]: *See* CLEC Coalition Comments at 4. Specifically, the CLEC
    Coalition reads the Supreme Court's statement that whichever
    regulatory approach the Commission decides to take "is a matter
    eminently within the \[Commission's\] expertise," to curtail the
    Commission's authority to interpret section 252(i). *See id.*
    (citing *AT&T v. Iowa Utils. Bd.,* 525 U.S. at 396).

[^31]: *AT&T v. Iowa Utils. Bd*., 525 U.S. at 396.

[^32]: Specifically, MCI states that the Commission took the position in
    briefs before both the Supreme Court and the Eighth Circuit that the
    existing rule is the only reasonable interpretation of section
    252(i). *See* MCI Comments at 5-6 (citing *Reply Brief for the
    Federal Petitioners (FCC and the United States),* 1998 WL 396961, at
    \*49 n.33 (June 17, 1998); *Reply Brief for the Federal Petitioners
    and Brief for the Federal Cross-Respondents (FCC and the United
    States)*, LEXIS, 1997 U.S. Briefs 826 (June 17, 1998); *Brief for
    Respondents (FCC and the United States)*, No. 96-3321 (8th Cir. Dec.
    23, 1996)); *see also* MCI Reply at 4-5 n.8; Z-Tel Comments at 13.

[^33]: *See, e.g.*, *Smiley v. Citibank* *(S.D.), N.A.*, 517 U.S. 735,
    742 (1996); *Rust v. Sullivan*, 500 U.S. 173, 187 (1991); *Office of
    Communication, Inc. of the United Church of Christ v. FCC*, 327 F.3d
    1222 (D.C. Cir. 2003) (finding that the Commission had adequately
    explained its departure from two longstanding policies, which were
    based on the agency\'s interpretation of an ambiguous statute); *see
    also Communications Vending Corp. of Arizona v. FCC*, 365 F.3d 1064,
    1070 (D.C. Cir. 2004) (finding the Commission's explanation of its
    change in position regarding independent payphone providers'
    end-user status "more than sufficient to provide the 'reasoned
    explanation' we require of an agency that changes its position.");
    *Texas Office of Pub. Util. Counsel v. FCC*, 265 F.3d 313, 322-24
    (5th Cir. 2001).

[^34]: *Good Samaritan Hosp. v. Shalala*, 508 U.S. 402, 417 (1993). The
    only form of estoppel that courts recognize in this area is judicial
    estoppel. Judicial estoppel applies where a party assumes a
    successful position in a legal proceeding, and then assumes a
    contrary position simply because interests have changed, and is
    especially so if the change in position prejudices a party who
    acquiesced in the position formerly taken. *See New Hampshire v.
    Maine*, 532 U.S. 767, 749 (2001). Judicial estoppel does not apply
    here because the Supreme Court did not adopt the Commission's
    litigation position that its reading of section 252(i) was compelled
    by the statute. *Cf. Maislin Indus., Inc. v. Primary Steel, Inc.*,
    497 U.S. 116, 130-31 (1990) (rejecting agency's later interpretation
    of a statute where court previously determined that "\[a\]ny other
    construction . . . opens the door to the possibility of the very
    abuses . . . which it was the design of the statute to prohibit and
    punish."); *see also New Hampshire v. Maine*, 532 U.S. at 755
    (finding that "broad interests of public policy may make it
    important to allow a change of positions that might seem
    inappropriate as a matter of merely private interests"); *United
    States v. Owens,* 54 F.3d 271, 275 (6th Cir. 1995); *NLRB v. Viola
    Indus. - Elevator Division, Inc.*, 979 F.2d 1384, 1393-95 (10th Cir.
    1992) (en banc) (holding that even when an agency has changed its
    mind, the courts "should not approach the statutory construction
    issue *de novo* and without regard to the administrative
    understanding of the statutes") (citations omitted); *Mesa Verde
    Constr. Co. v. N. Cal. Dist. Council of Laborers*, 861 F.2d 1124,
    1134-36 (9th Cir. 1988) (en banc).

[^35]: A requesting carrier may: (1) purchase services and elements
    through an SGAT in states with effective SGATs; (2) pick and choose
    individual provisions from existing agreements negotiated by other
    competitive carriers; (3) adopt an entire agreement negotiated by
    another competitive carrier; or (4) negotiate a new interconnection
    agreement with the incumbent LEC. *See generally* 47 U.S.C. §
    252(a)(1), (f), (i).

[^36]: Negotiations take typically months to complete, resulting in
    intricate agreements often exceeding 500 pages. *See* Letter from
    Jan S. Price, Associate Director -- Federal Regulatory, SBC, to
    Marlene H. Dortch, Secretary, FCC, CC Docket Nos. 01-338, 96-98,
    98-147, Affidavit of Terri D. Mansir, para. 5 (filed Apr. 29, 2004)
    (SBC Mansir Aff.). The SBC affiant, Terri D. Mansir, serves as SBC's
    Lead Negotiator of interconnection agreements. *See id.* at para. 1.
    The immense size and complexity of the agreements result from the
    wide range of complex issues covered by those agreements, including
    rates for products and services; terms and conditions under which
    they will be provided; and technical operational provisions. *See
    id.* at para. 4.

[^37]: *See* section III.C, *infra*.

[^38]: *See* Verizon Comments at 5.

[^39]: *FNPRM*, 18 FCC Rcd at 17414, para. 724.

[^40]: *Id.* at 17413, para. 722.

[^41]: *See* *Local Competition Order*, 11 FCC Rcd at 16138-39, para.
    1313.

[^42]: *AT&T Corp. v. Iowa Utils. Bd.*, 525 U.S. at 396.

[^43]: *See, e.g.*, Cox Comments at 2, 4; CenturyTel Comments at 3;
    Qwest Comments at 4; SBC Comments at 3-4; NASUCA Comments at 7;
    PAETEC Comments at 3; *see also* BellSouth Comments, CC Docket No.
    01-117, at 2; Verizon Comments, CC Docket No. 01-117, at 2.

[^44]: *See* BellSouth Comments at 6-7; CenturyTel Comments at 4-6;
    Qwest Comments at 6; SBC Comments at 4, 6-7; Verizon Comments at 2;
    *see also* PAETEC Comments at 1-6; Verizon Wireless Comments at 3;
    Florida Commission Comments at 4; New York Commission Comments at 2;
    Ohio Commission Comments at 3. *But see* BellSouth Comments at 4-5
    (seeking forbearance from section 252(i)); USTA Comments at 5
    (opposing both pick-and-choose and all-or-nothing rules).

[^45]: *See* *FNPRM*, 18 FCC Rcd at 17413, para. 722; BellSouth Comments
    at 4-6; CenturyTel at 3; Qwest Comments at 4; SBC Comments at 3-4;
    Verizon Comments at 2-3; BellSouth Reply at 2; SBC Reply at 5;
    Florida Commission Comments at 4; New York Commission Comments at 2;
    Ohio Commission Comments at 3; Letter from Clint Odom, Executive
    Director -- Federal Regulatory Advocacy, Verizon, to Marlene H.
    Dortch, Secretary, FCC, CC Docket Nos. 01-338, 96-98, 98-147,
    Attach. at 1-2 (filed Mar. 25, 2004) (Verizon Mar. 25, 2004 *Ex
    Parte* Letter); *see also* PAETEC Comments at 3-4, 6; BellSouth
    Comments, CC Docket No. 01-117, at 2; Qwest Comments, CC Docket No.
    01-117, at 1; USTA Reply, CC Docket No. 01-117, at 3-4.

[^46]: *See* Letter from Mary L. Henze, Assistant Vice President --
    Federal Regulatory, BellSouth, to Marlene Dortch, Secretary, FCC, CC
    Docket Nos. 01-338, 96-98, 98-147, Affidavit of Jerry D. Hendrix,
    para. 6 (filed May 11, 2004) (BellSouth Hendrix Aff.).

[^47]: BellSouth Hendrix Aff. at para. 6; *see also* PAETEC Comments at
    3.

[^48]: *See* BellSouth Hendrix Aff. at para. 9; *see also* ALTS Comments
    at 5 (conceding that the pick-and-choose rule may "inhibit
    innovative deal making"); SBC Reply at 6; ALTS Reply, CC Docket No.
    01-117, at 7; USTA Reply, CC Docket No. 01-117, at 5.

[^49]: *See* PAETEC Comments at 6-7; *see also* Letter from Robert W.
    McCausland, Vice President, Regulatory Affairs, Sage, to Marlene
    Dortch, Secretary, FCC, CC Docket Nos. 01-338, 96-98, 98-147,
    Declaration of James H. Sturges, paras. 3-18 (filed June 30, 2004).
    *But see* Sprint Reply at 2; T-Mobile Reply at 9.

[^50]: SBC Mansir Aff. at para. 21; *see also* PAETEC Comments at 3.
    *But see* Z-Tel Comments, CC Docket No. 01-117, at 8.

[^51]: *See, e.g.,* MCI Comments at 2, 8-12; ALTS Comments at 4, 11;
    CLEC Coalition Comments at 8, 12; RICA Comments at 3-4; AFB *et al.*
    Comments at 11-12; Z-Tel Comments at 11-12, 15-16; California
    Commission Comments at 3-4; Cox Comments at 5-6; LecStar Comments at
    2; Mpower Comments at 6; PACE/CompTel Comments at 5; US LEC *et al.*
    Comments at 6; Iowa Commission Comments at 3; Lightpath Reply at 2;
    CLEC Coalition Reply at 8-10; AFB *et al.* Reply at 3; Sprint Reply
    at 3-4; AT&T Wireless Reply at 2-3; T-Mobile Reply at 6-7; Arizona
    Commission Reply at 4, 7; *see also* ASCENT Comments, CC Docket No.
    01-117, at 8; Focal Comments, CC Docket No. 01-117, at 3; Z-Tel
    Comments, CC Docket No. 01-117, at 3, 6; WorldCom Reply, CC Docket
    No. 01-117, at 2; ALTS June 25, 2004 *Ex Parte* Letter at 2-3;
    Letter from Brent L. Johnson, Chairman of the Board, and Chris
    Dimock, President & CEO, OneEighty Communications, Inc., to Marlene
    Dortch, Secretary, FCC, CC Docket Nos. 01-338, 98-147, 96-98 at 1, 3
    (filed June 23, 2004) (OneEighty June 23, 2004 *Ex Parte* Letter).
    *But see* PAETEC Comments at 1-6.

[^52]: *See* Cox Comments at 2, 4-6; PACE/CompTel Comments at 8; MCI
    Comments at 18-20; Z-Tel Comments at 11-12; CLEC Coalition Comments
    at 12; LecStar Comments at 5; California Commission Comments at 4-5;
    Birch Reply at 3; Lightpath Reply at 2; Sprint Reply at 2; AT&T
    Wireless at 3-4; Nextel Reply at 9; *see also* Z-Tel Comments, CC
    Docket No. 01-117, at 10-11; ALTS June 25, 2004 *Ex Parte* Letter at
    2. *But see* Verizon Reply at 4.

[^53]: *See* para. 21, *infra.*

[^54]: *See* MCI Comments at 9; *see also* CLEC Coalition Comments at
    12; Mpower Comments at 6; PACE/CompTel Comments at 8-10; CLEC
    Coalition Reply at 12; Arizona Commission Reply at 10-11. *But see*
    SBC Reply at 3 (arguing that incumbent LECs have no incentive to
    delay because most agreements contain an evergreen clause that
    allows the agreement to remain in effect until the effective date of
    a successor agreement).

[^55]: *See* CLEC Coalition Comments at 12-13.

[^56]: *Local Competition Order*, 11 FCC Rcd at 16138-39, para. 1313.

[^57]: *See, e.g.*, BellSouth Hendrix Aff. at para. 6; PAETEC Comments
    at 3; Cox Reply at 2-3; SBC Reply at 3-4.

[^58]: *See* para. 21, *infra.*

[^59]: *See, e.g.,* SBC Comments at 3-4; SBC Mansir Aff. at paras. 6-7,
    14-20; Verizon Comments at 2; SBC Reply at 4-5. *But see* LecStar
    Comments at 3; PACE/CompTel Comments at 6; Sprint Comments at 4-5.

[^60]: *See* CLEC Coalition Comments at 13-16; *see also* Nextel Reply
    at 13; ASCENT Comments, CC Docket No. 01-117, at 8. *See generally
    Local Competition Order*, 11 FCC Rcd at 16139, para. 1315.

[^61]: *See Local Competition Order*, 11 FCC Rcd at 16139, para. 1315.

[^62]: *See id.* at 16138, para. 1312.

[^63]: *Id.*

[^64]: *See* para. 21, *infra*; *see* *also* PAETEC Comments at 2; SBC
    Reply at 2-3; BellSouth Reply at 1; Letter from Clint Odom,
    Executive Director -- Federal Regulatory Advocacy, Verizon, to
    Marlene H. Dortch, Secretary, FCC, CC Docket Nos. 01-338, 96-98,
    98-147, Attach. at 4 (filed Apr. 21, 2004) (Verizon Apr. 21, 2004
    *Ex Parte* Letter).

[^65]: *See FNPRM*, 18 FCC Rcd at 17414, para. 724.

[^66]: *See, e.g.*, BellSouth Reply at 1, 5; SBC Reply at 5. *But see*
    Lightpath Reply at 2; AFB *et al.* Reply at 3; ASCENT Comments, CC
    Docket No. 01-117, at 9; AT&T Reply, CC Docket No. 01-117, at 3;
    WorldCom Reply, CC Docket No. 01-117, at 2.

[^67]: 47 U.S.C. § 251(c)(2)(D), (c)(3), (c)(4)(B), (c)(6).

[^68]: *See* 47 U.S.C. § 252(b).

[^69]: *See* 47 U.S.C. § 252(b)(4)(C), (e)(4).

[^70]: 47 U.S.C. § 252(e)(1); *see also* 47 U.S.C. § 252(e)(2)(A)(i).

[^71]: 47 U.S.C. § 252(e)(2)(A)(i). In the *FNPRM*, we stated that in
    regard to the conditional SGAT proposal, state commissions could
    "reject a customized agreement as discriminatory only if the
    commission found that the parties intended to discriminate against
    other carriers. The fact that a third party might be unable to opt
    into the agreement as a practical matter would not constitute
    unreasonable discrimination in light of the availability of
    interconnection, UNEs, and services under the state-approved SGAT."
    *FNPRM*, 18 FCC Rcd at 17415, para. 725 n.2150. We clarify that,
    because we decline to adopt the conditional SGAT proposal, we also
    decline to adopt this limitation on state commissions' findings of
    discrimination.

[^72]: 47 U.S.C. § 252(e)(6).

[^73]: 47 U.S.C. § 208; *see* *Local Competition Order*, 11 FCC Rcd at
    16141, para. 1321; para. **29**, *infra*.

[^74]: *See* ALTS Comments at 5, 8-9; CLEC Coalition Comments at 7, 9;
    LecStar Comments at 5-6; MCI Comments at 9, 13-14; PACE/CompTel
    Comments at 7; US LEC *et al.* Comments at 6-7; Z-Tel Comments at
    11-12; CenturyTel Reply at 2; CLEC Coalition Reply at 10-11; MCI
    Reply at 8-9; T-Mobile Reply at 16; US LEC *et al.* Reply at 2-3;
    *see also* Covad Comments, CC Docket No. 01-117, at 4-6; Focal
    Comments, CC Docket No. 01-117, at 4-6; Z-Tel Comments, CC Docket
    No. 01-117, at 11; ALTS Reply, CC Docket No. 01-117, at 4; AT&T
    Reply, CC Docket No. 01-117, at 3; Focal Reply, CC Docket No.
    01-117, at 2-3; WorldCom Reply, CC Docket No. 01-117, at 1.

[^75]: *See* MCI Comments at 13; ALTS Comments at 5, 8-9; *see also*
    CLEC Coalition Comments at 12; ALTS June 25, 2004 *Ex Parte* Letter
    at 2; OneEighty June 23, 2004 *Ex Parte* Letter at 3-4.

[^76]: *See Local Competition Order*, 11 FCC Rcd at 16138, para. 1312.

[^77]: *But see* LecStar Comments at 5.

[^78]: For example, Verizon states that of its 3,687 effective
    interconnection agreements, 1,504, or 41% were adoptions of existing
    agreements. *See* Verizon Apr. 21, 2004 *Ex Parte* Letter, Attach.
    at 4*.* SBC states that in the year ending September 30, 2003, SBC
    executed 477 interconnection agreements, of which 282, or roughly
    59%, constituted adoptions *in toto* from SBC's model agreement or
    from other competitive LECs' agreements. *See* SBC Reply at 2.
    BellSouth states that of its 496 operational agreements, about 23%
    resulted from some form of picking and choosing. *See* BellSouth
    Reply at 1. This evidence substantiates one competitive LEC's
    observation that "alternative negotiated terms based on perceived
    pick-and-choose rights are the exception rather than the rule."
    PAETEC at 2.

[^79]: *See* LecStar Comments at 5; *see also* ALTS June 25, 2004 *Ex
    Parte* Letter at 2; OneEighty June 23, 2004 *Ex Parte* Letter at
    2-3. *But see* CenturyTel Reply at 3-4.

[^80]: *See* *Local Competition Order*, 11 FCC Rcd at 16139, para. 1315.

[^81]: *Id.; see also id.* ("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.").

[^82]: *See* Nextel Reply at 14-15; T-Mobile Reply at 15-16; ALTS June
    25, 2004 *Ex Parte* Letter at 2.

[^83]: *See, e.g.,* ALTS June 25, 2004 *Ex Parte* Letter at 2.

[^84]: *See* Appendix B, *infra*. In its comments, BellSouth suggests
    that we could forbear from the requirements of section 252(i) to
    relieve the incumbent LECs from the pick-and-choose rule. *See*
    BellSouth Comments at 4. Instead, we adopt our new interpretation of
    section 252(i) as a rule of general applicability based upon the
    record in this rulemaking proceeding.

[^85]: *See FNPRM*, 18 FCC Rcd at 17414-15, para. 725.

[^86]: *See* ALTS Comments at 9-10; CLEC Coalition Comments at 16-17;
    Cox Comments at 6-8; Mpower Comments at 2, 10; PACE/CompTel Comments
    at 7-8; RICA Comments at 5-6; AFB *et al.* Comments at 9-10; Sprint
    Comments at 5-7; US LEC *et al.* Comments at 7-10; MCI Comments at
    2-3, 17-18, Attach., Declaration of Dayna D. Garvin (MCI Garvin
    Decl.); BellSouth Comments at 6-7; SBC Comments at 4-5; Verizon
    Comments at 5-7; Verizon Wireless Comments at 9; California
    Commission Comments at 5; NASUCA Comments at 23-24; AFB *et al.*
    Reply at 3; Arizona Commission Reply at 4, 8; AT&T Wireless Reply at
    4-5; CLEC Coalition Reply at 14-16; Nextel Reply at 16; Sprint Reply
    at 4-5; T-Mobile Reply at 10-13; US LEC *et al.* Reply at 4; Verizon
    Reply at 7; Letter from Jonathan Lee, Senior Vice President,
    Regulatory Affairs, CompTel/ASCENT, to Marlene H. Dortch, Secretary,
    FCC, CC Docket Nos. 01-338, 98-147, 96-98 at 1-3 (filed July 1,
    2004) (CompTel/ASCENT July 1, 2004 *Ex Parte* Letter); Letter from
    A. Renee Callahan, Counsel for MCI, to Marlene H. Dortch, Secretary,
    FCC, CC Docket Nos. 01-338, 98-147, 96-98, Attach. 1 at 5 (filed
    Dec. 18, 2003) (MCI Dec. 18, 2003 *Ex Parte* Letter); OneEighty June
    23, 2004 *Ex Parte* Letter at 5-6.

    A small number of commenters support the proposed SGAT condition as
    part of the overall all-or-nothing approach proposed in the *FNPRM*.
    *See, e.g.,* PAETEC Comments at 6-7; CenturyTel Comments at 2, 7;
    Qwest Comments at 6-7; New York Commission Comments at 2; CenturyTel
    Reply at 4.

[^87]: *See, e.g.,* SBC Comments at 4-5; California Commission Comments
    at 5; AT&T Wireless Reply at 4-5; Verizon Apr. 21, 2004 *Ex Parte*
    Letter, Attach. at 6.

[^88]: *See* 47 U.S.C. § 252(f); *see also, e.g.*, MCI Comments at 2-3,
    17-18, Garvin Decl.; CLEC Coalition Comments at 17; AFB *et al.*
    Reply at 7; T-Mobile Reply at 9; Arizona Commission Reply at 4, 8.

[^89]: *See* section III.B, *supra*.

[^90]: *See, e.g.,* Sprint Comments at 6-7; CenturyTel Comments at 6-7;
    Verizon Comments at 5-7; *see also* CLEC Coalition Reply at 14-16;
    AFB *et al.* Reply at 6. In the *FNPRM*, we proposed to allow
    non-BOC incumbent LECs to file "SGAT-equivalent" interconnection
    agreements with state commissions. *See FNPRM*, 18 FCC Rcd at 17415,
    para. 727 n.2151.

[^91]: *See, e.g.*, CLEC Coalition Comments at 18; AFB *et al.* Reply at
    9; CLEC Coaliton Reply at 17-19; Letter from John J. Heitmann,
    Counsel for KMC, Xspedius, CompTel, Focal, ALTS, NuVox, SNiP LiNK,
    and XO, to Magalie R. Salas, Secretary, FCC, CC Docket No. 01-338,
    Attach. at 2 (filed May 27, 2004) (KMC *et al.* May 27, 2004 *Ex
    Parte* Letter); Letter from John R. Delmore, Senior Attorney --
    Federal Advocacy, MCI, to Marlene H. Dortch, Secretary, FCC, CC
    Docket Nos. 01-338, 96-98, 98-147 at 1 (filed May 13, 2004).

[^92]: *See, e.g.*, BellSouth Hendrix Aff. at para. 7 ("In a true
    negotiation, unrelated contract provisions left to be resolved are
    often 'horse-traded.' For example, BellSouth may agree to a CLEC's
    requested provision in exchange for the CLEC's agreement to an
    unrelated provision.").

[^93]: *See, e.g.,* Cox Comments at 8-10; Letter from Jonathan Lee, Sr.
    Vice President -- Regulatory Affairs, CompTel/ASCENT, to Marlene H.
    Dortch, Secretary, FCC, CC Docket Nos. 01-338, 96-98, 98-147 (filed
    June 9, 2004) (CompTel/ASCENT June 9, 2004 *Ex Parte* Letter);
    Letter from Jason D. Oxman, General Counsel, ALTS, to Marlene
    Dortch, Secretary, FCC, CC Docket Nos. 01-338, 96-98, 98-147 at 1-2
    (filed July 1, 2004) (ALTS July 1, 2004 *Ex Parte* Letter); Letter
    from J.G. Harrington, Counsel for Cox, to Marlene H. Dortch,
    Secretary, FCC, CC Docket Nos. 01-338, 96-98, 98-147, Attach. at 1-2
    (filed June 30, 2004). *But see* Letter from Terri Hoskins, Senior
    Counsel, SBC, to Marlene H. Dortch, Secretary, FCC, CC Docket Nos.
    01-338, 96-98, 98-147 at 1-4 (filed June 30, 2004).

[^94]: 47 U.S.C. § 252(i). We also note that section 252(e), which
    requires "\[a\]ny interconnection agreement adopted by negotiation
    or arbitration" to be submitted for approval, does not differentiate
    between the two types of agreements. 47 U.S.C. § 252(e)(1).

[^95]: *See* CompTel/ASCENT June 9, 2004 *Ex Parte* Letter at 2.

[^96]: *See* para. **18**, *supra*; *Local Competition Order*, 11 FCC
    Rcd at 16139, para. 1315.

[^97]: *See* *also* para. **20**, *supra.* An argument can even be made
    that arbitrated agreement language is more nondiscriminatory than
    negotiated agreement language.

[^98]: 47 U.S.C. § 251(c)(1).

[^99]: *See, e.g.*, CLEC Coalition Comments at 18-21; Cox Comments at
    8-11; MCI Comments at 20-22; CLEC Coalition Reply at 17-19; MCI
    Reply at 15-17; NASUCA Reply at 7; Z-Tel Comments, CC Docket No.
    01-117, at 15-19; KMC *et al.* May 27, 2004 *Ex Parte* Letter at 2;
    Letter from Mary L. Henze, Assistant Vice President -- Federal
    Regulatory, BellSouth, to Marlene Dortch, Secretary, FCC, CC Docket
    Nos. 01-338, 96-98, 98-147, Attach. 1 at 1-2 (filed Apr. 27, 2004)
    (BellSouth Apr. 27, 2004 *Ex Parte* Letter); MCI Dec. 18, 2003 *Ex
    Parte* Letter, Attach. 1 at 6.

[^100]: Several parties participating in this proceeding also seek
    Commission pronouncements regarding a host of issues beyond those
    raised in the *FNPRM*. *See*, *e.g.*, Verizon Comments at 4 (seeking
    a declaration that agreements governing network elements no longer
    subject to mandatory unbundling are not subject to section 252(i)
    nor the pick-and-choose rule); Birch Reply at 4-5 (proposing
    structural separation of incumbent LECs into wholesale and retail
    operations); T-Mobile Reply at 13-15 (urging the Commission to adopt
    a procedure for federal arbitration of national interconnection
    agreements).  This Order does not take a position on any issue
    outside the scope of the *FNPRM*.

[^101]: *See* BellSouth Hendrix Aff. at para. 11.

[^102]: *See* *Local Competition Order*, 11 FCC Rcd at 16140, para.
    1318.

[^103]: Under the all-or-nothing rule we adopt here, we retain the other
    limitations and conditions of the existing pick-and-choose rule.
    *See* 47 C.F.R. § 51.809; Appendix B, *infra*.

[^104]: We do, however, reject Verizon Wireless' argument that section
    252(i) applies to all LECs and therefore governs even those
    interconnection agreements where neither party is an incumbent LEC.
    *See* Verizon Wireless Comments at 7 n.14 ("\[A\]ll interconnection
    agreements among competitive LEC\[s\], incumbent LECs, and Rural
    incumbent LECs must be filed and approved by the state commission,
    regardless of whether a particular agreement includes an ILEC as a
    party."); *id.* at 6-7. Section 252(i), which governs "agreements
    approved under \[section 252\]," applies only to interconnection
    agreements where at least one party is an incumbent LEC. 47 U.S.C. §
    252(i). Sections 252(a) and 252(b) expressly state that an incumbent
    LEC will be a party to agreements under those sections. *See* 47
    U.S.C. § 252(a)(1), (b)(1); *see also* MCI Reply at 9.

[^105]: *Cf.* *Qwest Communications International Inc. Petition for
    Declaratory Ruling on the Scope of the Duty to File and Obtain Prior
    Approval of Negotiated Contractual Arrangements under Section
    252(a)(1)*, WC Docket No. 02-89, Memorandum Opinion and Order, 17
    FCC Rcd 19337, 19340, para. 7 (2002). However, we reject BellSouth's
    argument that "an agreement in its entirety" does not include
    general terms and conditions, such as dispute resolution or
    escalation provisions. *See* BellSouth Apr. 27, 2004 *Ex Parte*
    Letter, Attach. 1 at 2. Under the all-or-nothing rule, all terms and
    conditions of an interconnection agreement will be subject to the
    give and take of negotiations, and therefore, all terms and
    conditions of the agreement, to the extent that they apply to
    interconnection, services, or network elements, must be included
    within an agreement available for adoption in its entirety under
    section 252(i). *See also* CompTel/ASCENT July 1, 2004 *Ex Parte*
    Letter at 1-3.

[^106]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. §§ 601-12, has
    been amended by the Small Business Regulatory Enforcement Fairness
    Act of 1996 (SBREFA), Pub. L. No. 104-121, Title II, 110 Stat. 857
    (1996).

[^107]: *See Review of the Section 251 Unbundling Obligations of
    Incumbent Local Exchange Carriers, Implementation of the Local
    Competition Provisions of the Telecommunications Act of 1996,
    Deployment of Wireline Services Offering Advanced Telecommunications
    Capability*, CC Docket Nos. 01-338, 96-98, 98-147, Report and Order
    and Order on Remand and Further Notice of Proposed Rulemaking, 18
    FCC Rcd 16978, 17442, para. 788 (2003) (*FNPRM*) (subsequent history
    omitted).

[^108]: *See* 5 U.S.C. § 604.

[^109]: *See* para. 14, *supra*.

[^110]: 5 U.S.C. § 604(a)(3).

[^111]: 5 U.S.C. § 601(6).

[^112]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    "small-business concern" in the Small Business Act, 15 U.S.C. §
    632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a
    small business applies "unless an agency, after consultation with
    the Office of Advocacy of the Small Business Administration and
    after opportunity for public comment, establishes one or more
    definitions of such term which are appropriate to the activities of
    the agency and publishes such definition(s) in the Federal
    Register."

[^113]: 15 U.S.C. § 632.

[^114]: FCC, Wireline Competition Bureau, Industry Analysis and
    Technology Division, "Trends in Telephone Service" at Table 5.3 (May
    2002) (*Trends in Telephone Service May 2002 Report*).

[^115]: 13 C.F.R. § 121.201, North American Industry Classification
    System (NAICS) code 513310 (changed to 517110 in Oct. 2002).

[^116]: 13 C.F.R. § 121.201, NAICS code 513321 (changed to 517211 in
    Oct. 2002).

[^117]: 13 C.F.R. § 121.201, NAICS code 513322 (changed to 517212 in
    Oct. 2002).

[^118]: 15 U.S.C. § 632.

[^119]: Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to
    William E. Kennard, Chairman, FCC (May 27, 1999). The Small Business
    Act contains a definition of "small-business concern," which the RFA
    incorporates into its own definition of "small business." *See* 15
    U.S.C. § 632(a) (Small Business Act); 5 U.S.C. § 601(3) (RFA). SBA
    regulations interpret "small business concern" to include the
    concept of dominance on a national basis. 13 C.F.R. § 121.102(b).

[^120]: 13 C.F.R. § 121.201, NAICS code 513310 (changed to 517110 in
    Oct. 2002).

[^121]: 1997 Economic Census, Establishment and Firm Size, Table 5,
    NAICS code 513310 (issued Oct. 2000).

[^122]: *Id.* The census data do not provide a more precise estimate of
    the number of firms that have employment of 1,500 or fewer
    employees; the largest category provided is "Firms with 1,000
    employees or more."

[^123]: 13 C.F.R. § 121.201, North American Industry Classification
    System (NAICS) code 517110 (changed from 513310 in October 2002).

[^124]: FCC, Wireline Competition Bureau, Industry Analysis and
    Technology Division, "Trends in Telephone Service" at Table 5.3,
    Page 5-5 (Aug. 2003) (*Trends in Telephone Service August 2003
    Report*). This source uses data that are current as of December 31,
    2001.

[^125]: 13 C.F.R. § 121.201, NAICS code 517110 (changed from 513310 in
    October 2002).

[^126]: *Trends in Telephone Service August 2003* *Report* at Table 5.3.

[^127]: 13 C.F.R. § 121.201, NAICS code 517110 (changed from 513310 in
    October 2002).

[^128]: *Trends in Telephone Service August 2003 Report* at Table 5.3.

[^129]: 13 C.F.R. § 121.201, NAICS code 517110 (changed from 513310 in
    October 2002).

[^130]: *Trends in Telephone Service August 2003 Report* at Table 5.3.

[^131]: 13 C.F.R. § 121.201, NAICS code 513330 (changed to 517310 in
    Oct. 2002).

[^132]: *Trends in Telephone Service May 2002 Report* at Table 5.3.

[^133]: *Id.*

[^134]: 13 C.F.R. § 121.201, NAICS code 513310 (changed to 517110 in
    Oct. 2002).

[^135]: *Trends in Telephone Service May 2002 Report* at Table 5.3.

[^136]: *Id.*

[^137]: 13 C.F.R. § 121.201, NAICS code 513321 (changed to 517211 in
    October 2002).

[^138]: 13 C.F.R. § 121.201, NAICS code 513322 (changed to 517212 in
    October 2002).

[^139]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    "Information," Table 5, Employment Size of Firms Subject to Federal
    Income Tax: 1997, NAICS code 513321 (issued October 2000).

[^140]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    "Information," Table 5, Employment Size of Firms Subject to Federal
    Income Tax: 1997, NAICS code 513321 (issued October 2000). The
    census data do not provide a more precise estimate of the number of
    firms that have employment of 1,500 or fewer employees; the largest
    category provided is "Firms with 1000 employees or more."

[^141]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    "Information," Table 5, Employment Size of Firms Subject to Federal
    Income Tax: 1997, NAICS code 513322 (issued October 2000).

[^142]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    "Information," Table 5, Employment Size of Firms Subject to Federal
    Income Tax: 1997, NAICS code 513322 (issued October 2000). The
    census data do not provide a more precise estimate of the number of
    firms that have employment of 1,500 or fewer employees; the largest
    category provided is "Firms with 1000 employees or more."

[^143]: *See 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, Report and Order, 11 FCC
    Rcd 7824 (1996); *see also* 47 C.F.R. § 24.720(b).

[^144]: *See 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, Report and Order, 11 FCC
    Rcd 7824 (1996).

[^145]: *See, e.g., Implementation of Section 309(j) of the
    Communications Act -- Competitive Bidding*, PP Docket No. 93-253,
    Fifth Report and Order, 9 FCC Rcd 5332 (1994).

[^146]: *Broadband PCS, D, E and F Block Auction Closes* (rel. Jan. 14,
    1997); *see also Amendment of the Commission's Rules Regarding
    Installment Payment Financing for Personal Communications Services
    (PCS) Licenses*, WT Docket No. 97-82, Second Report and Order, 12
    FCC Rcd 16436 (1997).

[^147]: *Implementation of Section 309(j) of the Communications Act --
    Competitive Bidding Narrowband PCS*, Third Memorandum Opinion and
    Order and Further Notice of Proposed Rulemaking, 10 FCC Rcd 175,
    196, para. 46 (1994).

[^148]: *See* *Announcing the High Bidders in the Auction of ten
    Nationwide Narrowband PCS Licenses, Winning Bids Total
    \$617,006,674*, Public Notice, PNWL 94-004 (rel. Aug. 2, 1994);
    *Announcing the High Bidders in the Auction of 30 Regional
    Narrowband PCS Licenses; Winning Bids Total \$490,901,787*, Public
    Notice, PNWL 94-27 (rel. Nov. 9, 1994).

[^149]: *Amendment of the Commission's Rules to Establish New Personal
    Communications Services, Narrowband PCS*, Second Report and Order
    and Second Further Notice of Proposed Rule Making, 15 FCC Rcd 10456,
    10476, para. 40 (2000).

[^150]: *Id.*

[^151]: *Id.*

[^152]: *See* Letter to Amy Zoslov, Chief, Auctions and Industry
    Analysis Division, Wireless Telecommunications Bureau, Federal
    Communications Commission, from Aida Alvarez, Administrator, Small
    Business Administration, dated December 2, 1998.

[^153]: *See* *Narrowband PCS Auction Closes*, Public Notice, 16 FCC Rcd
    18663 (WTB 2001).

[^154]: 13 C.F.R. § 121.201, NAICS code 513322 (changed to 517212 in
    October 2002).

[^155]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    Information, "Establishment and Firm Size (Including Legal Form of
    Organization)," Table 5, NAICS code 513322 (October 2000).

[^156]: *Amendment of Part 90 of the Commission's Rules to Provide For
    the Use of the 220-222 MHz Band by the Private Land Mobile Radio
    Service*, Third Report and Order, 12 FCC Rcd 10943, 11068‑70, paras.
    291-95 (1997).

[^157]: *Id.* at 11068, para. 291.

[^158]: *Id.*

[^159]: *See* Letter to Daniel Phythyon, Chief, Wireless
    Telecommunications Bureau, Federal Communications Commission, from
    Aida Alvarez, Administrator, Small Business Administration, dated
    January 6, 1998.

[^160]: *See generally* *220 MHz Service Auction Closes*, Public Notice,
    14 FCC Rcd 605 (WTB 1998).

[^161]: *See FCC Announces It is Prepared to Grant 654 Phase II 220 MHz
    Licenses After Final Payment is Made*, Public Notice, 14 FCC Rcd
    1085 (WTB 1999).

[^162]: *See* *Phase II 220 MHz Service Spectrum Auction Closes*, Public
    Notice, 14 FCC Rcd 11218 (WTB 1999).

[^163]: *See* *Multi-Radio Service Auction Closes*, Public Notice, 17
    FCC Rcd 1446 (WTB 2002).

[^164]: 47 C.F.R. § 90.814(b)(1).

[^165]: *Id.*

[^166]: *See* Letter to Thomas Sugrue, Chief, Wireless
    Telecommunications Bureau, Federal Communications Commission, from
    Aida Alvarez, Administrator, Small Business Administration, dated
    August 10, 1999. We note that, although a request was also sent to
    the SBA requesting approval for the small business size standard for
    800 MHz, approval is still pending.

[^167]: *See* "Correction to Public Notice DA 96-586 'FCC Announces
    Winning Bidders in the Auction of 1020 Licenses to Provide 900 MHz
    SMR in Major Trading Areas,'" Public Notice, 18 FCC Rcd 18367 (WTB
    1996).

[^168]: *See* "Multi-Radio Service Auction Closes*," Public Notice*, 17
    FCC Rcd 1446 (WTB 2002).

[^169]: 13 C.F.R. § 121.201, NAICS code 513322 (changed to 517212 in
    October 2002).

[^170]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    "Information," Table 5, Employment Size of Firms Subject to Federal
    Income Tax: 1997, NAICS code 513321 (issued October 2000).

[^171]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    "Information," Table 5, Employment Size of Firms Subject to Federal
    Income Tax: 1997, NAICS code 513321 (issued October 2000). The
    census data do not provide a more precise estimate of the number of
    firms that have employment of 1,500 or fewer employees; the largest
    category provided is "Firms with 1000 employees or more."

[^172]: *Revision of Part 22 and Part 90 of the Commission's Rules to
    Facilitate Future Development of Paging Systems*, Second Report and
    Order, 12 FCC Rcd 2732, 2811-2812, paras. 178-181 (*Paging Second
    Report and Order*); *see also Revision of Part 22 and Part 90 of the
    Commission's Rules to Facilitate Future Development of Paging
    Systems*, Memorandum Opinion and Order on Reconsideration, 14 FCC
    Rcd 10030, 10085-10088, paras. 98-107 (1999).

[^173]: *Paging Second Report and Order*, 12 FCC Rcd at 2811, para. 179.

[^174]: *See* Letter to Amy Zoslov, Chief, Auctions and Industry
    Analysis Division, Wireless Telecommunications Bureau, from Aida
    Alvarez, Administrator, Small Business Administration, dated
    December 2, 1998.

[^175]: *See* *929 and 931 MHz Paging Auction Closes*, Public Notice, 15
    FCC Rcd 4858 (WTB 2000).

[^176]: *See id.*

[^177]: *See* *Lower and Upper Paging Band Auction Closes*, Public
    Notice, 16 FCC Rcd 21821 (WTB 2002).

[^178]: *See* *id.*

[^179]: *See Trends in Telephone Service May 2002 Report* at Table 5.3.

[^180]: 13 C.F.R. § 121.201, NAICS code 517211.

[^181]: *See Service Rules for the 746-764 MHz Bands, and Revisions to
    Part 27 of the Commission's Rules*, Second Report and Order, 15 FCC
    Rcd 5299 (2000).

[^182]: *See id.* at 5343, para. 108.

[^183]: *See id.*

[^184]: *See id.* at 5343, para. 108 n.246 (for the 746-764 MHz and
    776-794 MHz bands, the Commission is exempt from 15 U.S.C. § 632,
    which requires Federal agencies to obtain SBA approval before
    adopting small business size standards).

[^185]: *See* *700 MHz Guard Bands Auction Closes: Winning Bidders
    Announced*, Public Notice, 15 FCC Rcd 18026 (2000).

[^186]: *See 700 MHz Guard Bands Auction Closes: Winning Bidders
    Announced*, Public Notice, 16 FCC Rcd 4590 (WTB 2001).

[^187]: The service is defined in section 22.99 of the Commission's
    Rules, 47 C.F.R. § 22.99.

[^188]: BETRS is defined in sections 22.757 and 22.759 of the
    Commission's Rules, 47 C.F.R. §§ 22.757, 22.759.

[^189]: 13 C.F.R. § 121.201, NAICS code 513322 (changed to 517212 in
    Oct. 2002).

[^190]: The service is defined in § 22.99 of the Commission's Rules, 47
    C.F.R. § 22.99.

[^191]: 13 CFR § 121.201, NAICS codes 513322 (changed to 517212 in
    October 2002).

[^192]: 13 CFR § 121.201, NAICS code 513322 (changed to 517212 in
    October 2002).

[^193]: *Amendment of the Commission\'s Rules Concerning Maritime
    Communications*, PR Docket No. 92-257, Third Report and Order and
    Memorandum Opinion and Order, 13 FCC Rcd 19853 (1998).

[^194]: *See* 47 C.F.R. §§ 101 *et seq.* (formerly, Part 21 of the
    Commission's Rules) for common carrier fixed microwave services
    (except Multipoint Distribution Service).

[^195]: Persons eligible under parts 80 and 90 of the Commission's Rules
    can use Private Operational-Fixed Microwave services. *See* 47
    C.F.R. Parts 80 and 90. Stations in this service are called
    operational-fixed to distinguish them from common carrier and public
    fixed stations. Only the licensee may use the operational-fixed
    station, and only for communications related to the licensee's
    commercial, industrial, or safety operations.

[^196]: Auxiliary Microwave Service is governed by Part 74 of Title 47
    of the Commission's Rules. *See* 47 C.F.R. Part 74. This service is
    available to licensees of broadcast stations and to broadcast and
    cable network entities. Broadcast auxiliary microwave stations are
    used for relaying broadcast television signals from the studio to
    the transmitter, or between two points such as a main studio and an
    auxiliary studio. The service also includes mobile television
    pickups, which relay signals from a remote location back to the
    studio.

[^197]: 13 C.F.R. § 121.201, NAICS code 513322 (changed to 517212 in
    October 2002).

[^198]: This service is governed by Subpart I of Part 22 of the
    Commission's Rules. *See* 47 C.F.R. §§ 22.1001-22.1037.

[^199]: 13 C.F.R. § 121.201, NAICS code 513322 (changed to 517212 in
    October 2002).

[^200]: *Id.*

[^201]: *Amendment of the Commission's Rules to Establish Part 27, the
    Wireless Communications Service (WCS)*, Report and Order, 12 FCC Rcd
    10785, 10879, para. 194 (1997).

[^202]: *See* Letter to Amy Zoslov, Chief, Auctions and Industry
    Analysis Division, Wireless Telecommunications Bureau, Federal
    Communications Commission, from Aida Alvarez, Administrator, Small
    Business Administration, dated December 2, 1998.

[^203]: *See Amendment of the Commission's Rules Regarding the 37.0-38.6
    GHz and 38.6-40.0 GHz Bands*, ET Docket No. 95-183, Report and
    Order, 12 FCC Rcd 18600 (1997); 63 Fed.Reg. 6079 (Feb. 6, 1998).

[^204]: *Id.*

[^205]: *See* Letter to Kathleen O'Brien Ham, Chief, Auctions and
    Industry Analysis Division, Wireless Telecommunications Bureau, FCC,
    from Aida Alvarez, Administrator, SBA (Feb. 4, 1998) (VoIP); Letter
    to Margaret Wiener, Chief, Auctions and Industry Analysis Division,
    Wireless Telecommunications Bureau, Federal Communications
    Commission, from Hector Barreto, Administrator, Small Business
    Administration, dated January 18, 2002 (WTB).

[^206]: *Amendment of Parts 21 and 74 of the Commission's Rules with
    Regard to Filing Procedures in the Multipoint Distribution Service
    and in the Instructional Television Fixed Service and Implementation
    of Section 309(j) of the Communications Act -- Competitive Bidding*,
    Report and Order, 10 FCC Rcd 9589, 9593, para. 7 (1995) (*MDS
    Auction R&O*).

[^207]: 47 C.F.R. § 21.961(b)(1).

[^208]: *See* Letter to Margaret Wiener, Chief, Auctions and Industry
    Analysis Division, Wireless Telecommunications Bureau, Federal
    Communications Bureau, from Gary Jackson, Assistant Administrator
    for Size Standards, Small Business Administration, dated March 20,
    2003 (noting approval of \$40 million size standard for MDS
    auction).

[^209]: Basic Trading Areas (BTAs) were designed by Rand McNally and are
    the geographic areas by which MDS was auctioned and authorized. *See
    MDS Auction R&O*, 10 FCC Rcd at 9608, para. 34.

[^210]: 47 U.S.C. § 309(j). Hundreds of stations were licensed to
    incumbent MDS licensees prior to implementation of section 309(j) of
    the Communications Act of 1934, 47 U.S.C. § 309(j). For these
    pre-auction licenses, the applicable standard is SBA's small
    business size standard for "other telecommunications" (annual
    receipts of \$12.5 million or less). *See* 13 C.F.R. § 121.201,
    NAICS code 517910.

[^211]: 13 C.F.R. § 121.201, NAICS code 517510.

[^212]: *Id.*

[^213]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    Information, "Establishment and Firm Size (Including Legal Form of
    Organization)," Table 4 (issued October 2000).

[^214]: *Id.*

[^215]: In addition, the term "small entity" under SBREFA applies to
    small organizations (nonprofits) and to small governmental
    jurisdictions (cities, counties, towns, townships, villages, school
    districts, and special districts with populations of less than
    50,000). 5 U.S.C. §§ 601(4)-(6). We do not collect annual revenue
    data on ITFS licensees.

[^216]: *See Rulemaking to Amend Parts 1, 2, 21, 25, of the Commission's
    Rules to Redesignate the 27.5-29.5 GHz Frequency Band, Reallocate
    the 29.5-30.5 Frequency Band, to Establish Rules and Policies for
    Local Multipoint Distribution Service and for Fixed Satellite
    Services*, Second Report and Order, Order on Reconsideration, and
    Fifth Notice of Proposed Rule Making, 12 FCC Rcd 12545, 12689-90,
    para. 348 (1997).

[^217]: *See Rulemaking to Amend Parts 1, 2, 21, 25, of the Commission's
    Rules to Redesignate the 27.5-29.5 GHz Frequency Band, Reallocate
    the 29.5-30.5 Frequency Band, to Establish Rules and Policies for
    Local Multipoint Distribution Service and for Fixed Satellite
    Services*, Second Report and Order, Order on Reconsideration, and
    Fifth Notice of Proposed Rule Making, 12 FCC Rcd 12545, 12689-90,
    para. 348 (1997).

[^218]: *See Rulemaking to Amend Parts 1, 2, 21, 25, of the Commission's
    Rules to Redesignate the 27.5-29.5 GHz Frequency Band, Reallocate
    the 29.5-30.5 Frequency Band, to Establish Rules and Policies for
    Local Multipoint Distribution Service and for Fixed Satellite
    Services*, Second Report and Order, Order on Reconsideration, and
    Fifth Notice of Proposed Rule Making, 12 FCC Rcd 12545, 12689-90,
    para. 348 (1997).

[^219]: *See* Letter to Dan Phythyon, Chief, Wireless Telecommunications
    Bureau, FCC, from Aida Alvarez, Administrator, SBA (Jan. 6, 1998).

[^220]: *See Interactive Video and Data Service (IVDS) Applications
    Accepted for Filing*, Public Notice, 9 FCC Rcd 6227 (1994).

[^221]: *Implementation of Section 309(j) of the Communications Act --
    Competitive Bidding*, Fourth Report and Order, 9 FCC Rcd 2330
    (1994).

[^222]: *Amendment of Part 95 of the Commission's Rules to Provide
    Regulatory Flexibility in the 218-219 MHz Service*, Report and Order
    and Memorandum Opinion and Order, 15 FCC Rcd 1497 (1999).

[^223]: *Id.*

[^224]: *See* Letter to Daniel Phythyon, Chief, Wireless
    Telecommunications Bureau, Federal Communications Commission, from
    Aida Alvarez, Administrator, Small Business Administration, dated
    January 6, 1998.

[^225]: 13 C.F.R. § 121.201, NAICS code 513322 (changed to 517212 in
    October 2002).

[^226]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    Information, "Employment Size of Firms Subject to Federal Income
    Tax: 1997," Table 5, NAICS code 513322 (issued October 2000).

[^227]: *Id.* The census data do not provide a more precise estimate of
    the number of firms that have employment of 1,500 or fewer
    employees; the largest category provided is "Firms with 1,000
    employees or more."

[^228]: Teligent acquired the DEMS licenses of FirstMark, the only
    licensee other than TRW in the 24 GHz band whose license has been
    modified to require relocation to the 24 GHz band.

[^229]: *Amendments to Parts 1, 2, 87 and 101 of the Commission's Rules
    To License Fixed Services at 24 GHz*, Report and Order, 15 FCC Rcd
    16934, 16967, para. 77 (2000) (*24 GHz Report and Order*); *see
    also* 47 C.F.R. § 101.538(a)(2).

[^230]: *24 GHz Report and Order*, 15 FCC Rcd at 16967, para. 77; *see
    also* 47 C.F.R. § 101.538(a)(1).

[^231]: *See* Letter to Margaret W. Wiener, Deputy Chief, Auctions and
    Industry Analysis Division, Wireless Telecommunications Bureau,
    Federal Communications Commission, from Gary M. Jackson, Assistant
    Administrator, Small Business Administration, dated July 28, 2000.

[^232]: Office of Management and Budget, North American Industry
    Classification System, page 515 (1997). NAICS code 514191, "On-Line
    Information Services" (changed to current name and to code 518111 in
    October 2002).

[^233]: 13 C.F.R. § 121.201, NAICS code 518111.

[^234]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    "Information," Table 4, Receipts Size of Firms Subject to Federal
    Income Tax: 1997, NAICS code 514191 (issued October 2000).

[^235]: U.S. Census Bureau, 1997 Economic Census, Subject Series:
    "Information," Table 4, Receipts Size of Firms Subject to Federal
    Income Tax: 1997, NAICS code 514191 (issued October 2000).

[^236]: 5 U.S.C. § 603(c)(1) -- (c)(4).

[^237]: *See* paras. 27-29, *supra.*

[^238]: *See* 5 U.S.C. § 801(a)(1)(A).

[^239]: *AT&T Corp. v. Iowa Utils. Bd.*, 525 U.S. 366, 396 (1999).