Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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**MEMORANDUM OPINION AND ORDER**

**Adopted:** July 12, 2001 **Released:** July 13, 2001

By the Chief, Common Carrier Bureau:

# INTRODUCTION

1\. In this Order, we grant Frontier's[^1] petition for flexibility in
the pricing of certain interstate special access and dedicated transport
services.[^2] As detailed below, the Commission established the
parameters for granting such relief in the *Pricing Flexibility Order*
released in August 1999.[^3] In doing so, the Commission recognized the
importance of granting pricing flexibility to incumbent local exchange
carriers ("LECs") as competition develops in order to "ensure that our
own regulations do not unduly interfere with the operation of
\[interstate access\] markets."[^4] Frontier's petition requests both
Phase I and Phase II relief for various access services in the
Rochester, New York Metropolitan Statistical Area ("MSA"). For the
reasons that follow, we grant Frontier's petition.

# BACKGROUND

2\. To recover the costs of providing interstate access services,
incumbent LECs charge interexchange carriers ("IXCs") and end users for
access services in accordance with the Commission's Part 69 access
charge rules.[^5] The Commission has long recognized that it should
allow incumbent LECs progressively greater flexibility in the pricing of
access services as they face increasing competition for the provision of
these services.[^6] In the *Access Charge Reform First Report and
Order*, the Commission adopted a market-based approach to access charge
reform, pursuant to which it would relax restrictions on incumbent LEC
pricing as competition emerges.[^7] At that time, the Commission
deferred resolution of the specific timing and degree of pricing
flexibility to a future order.[^8] Subsequently, in the *Pricing
Flexibility Order*, the Commission provided detailed rules for
implementing the market-based approach.[^9]

3\. In that order, the Commission established a framework for granting
price cap LECs greater flexibility in the pricing of interstate access
services once they make a competitive showing, or satisfy "triggers," to
demonstrate that market conditions in a particular area warrant the
relief they seek.[^10] Pricing flexibility for special access and
dedicated transport services[^11] is available in two phases, based on
an analysis of competitive conditions in individual MSAs.[^12]

4\. [Phase I Pricing Flexibility]{.underline}. A price cap LEC that
obtains Phase I relief is allowed to offer, on one day's notice,
contract tariffs[^13] and volume and term discounts for qualifying
services, so long as the services provided pursuant to contract are
removed from price caps.[^14] To protect those customers that may lack
competitive alternatives, a price cap LEC receiving Phase I flexibility
must maintain its generally available price cap constrained tariffed
rates for these services.[^15] To obtain Phase I relief, a price cap LEC
must meet triggers designed to demonstrate that competitors have made
irreversible, sunk investments in the facilities needed to provide the
services at issue.[^16] In particular, to receive pricing flexibility
for dedicated transport and special access services (other than channel
terminations to end users), a price cap LEC must demonstrate that
unaffiliated competitors have collocated in at least 15 percent of the
LEC's wire centers within an MSA, or have collocated in wire centers
accounting for 30 percent of the LEC's revenues from these services
within an MSA.[^17] In both cases, the price cap LEC also must show,
with respect to each wire center, that at least one collocator is
relying on transport facilities provided by an entity other than the
incumbent LEC.[^18]

5\. Higher thresholds apply for obtaining Phase I pricing flexibility
for channel terminations between a LEC end office and an end user
customer. A competitor collocating in a LEC end office continues to rely
on the LEC's facilities for the channel termination between the end
office and the customer premises, at least initially, and thus is more
susceptible to exclusionary pricing behavior by the LEC.[^19] As a
result, a price cap LEC must demonstrate that unaffiliated competitors
have collocated in at least 50 percent of the LEC's wire centers within
an MSA, or have collocated in wire centers accounting for 65 percent of
the LEC's revenues from these services within an MSA.[^20] Again, the
LEC must demonstrate, with respect to each wire center, that at least
one collocator is relying on transport facilities provided by an entity
other than the incumbent LEC.[^21]

6\. [Phase II Pricing Flexibility]{.underline}. A price cap LEC that
receives Phase II relief is allowed to offer dedicated transport and
special access services free from the Commission's Part 69 rate
structure and Part 61 price cap rules. The LEC, however, is required to
file, on one day's notice, generally available tariffs for those
services for which it receives Phase II relief.[^22] To obtain Phase II
relief, a price cap LEC must meet triggers designed to demonstrate that
competition for the services at issue within the MSA is sufficient to
preclude the incumbent from exploiting any individual market power over
a sustained period.[^23] To obtain Phase II relief for dedicated
transport and special access services (other than channel terminations
to end users), a price cap LEC must demonstrate that unaffiliated
competitors have collocated in at least 50 percent of the LEC's wire
centers within an MSA, or have collocated in wire centers accounting for
65 percent of the LEC's revenues from these services within an MSA.[^24]
Higher thresholds apply for obtaining Phase II pricing flexibility
relief for channel terminations between a LEC end office and an end user
customer.[^25] To obtain such relief, a price cap LEC must demonstrate
that unaffiliated competitors have collocated in at least 65 percent of
the LEC's wire centers within an MSA, or have collocated in wire centers
accounting for 85 percent of the LEC's revenues from these services
within an MSA.[^26] Once again, the LEC also must demonstrate, with
respect to each wire center, that at least one collocator is relying on
transport facilities provided an entity other than the incumbent
LEC.[^27]

**III. DISCUSSION**

7\. Frontier seeks both Phase I and Phase II relief in the Rochester,
New York MSA for special access and dedicated transport services (other
than channel terminations to end users). Frontier seeks only Phase I
relief for end user channel terminations. The particular services for
which it seeks relief are set forth in its petition and listed in
Appendix A of this Order.[^28]

8\. As noted above, pricing flexibility will be granted upon the
satisfaction of certain competitive showings. An incumbent LEC bears the
burden of proving that it has satisfied the applicable triggers for the
pricing flexibility it seeks for each MSA.[^29] For special access and
dedicated transport services, the Commission established two means of
satisfying this requirement. The incumbent may show: (1) the total
number of wire centers in the MSA; (2) the number and location of the
wire centers in which competitors have collocated; (3) in each wire
center on which the incumbent bases its petition, the name of at least
one collocator that uses transport facilities owned by an entity other
than the incumbent to transport traffic from that wire center; and (4)
that the percentage of wire centers in which competitors have collocated
and use competitive transport satisfies the trigger the Commission
adopted with respect to the pricing flexibility sought by the incumbent
LEC.[^30] Alternatively, the incumbent may show: (1) in each wire center
on which the incumbent bases its petition, the name of at least one
collocator that uses transport facilities owned by an entity other than
the incumbent to transport traffic from that wire center; (2) the total
base period[^31] revenues in the MSA generated by the services for which
the incumbent seeks relief; and (3) that the wire centers in which
competitors have collocated and use competitive transport account for a
sufficient percentage of the incumbent\'s base period revenues generated
by the services at issue within the relevant MSA to satisfy the trigger
the Commission adopted with respect to the pricing flexibility sought by
the incumbent LEC.[^32]

9\. To demonstrate that it qualifies for pricing flexibility in the
Rochester, New York MSA, Frontier chose, and has met, the requirements
of the latter alternative. First, Frontier identified collocators using
competitive transport facilities from applications for collocation
service and collocation agreements associated with Frontier's
collocation arrangements.[^33] Using these records, Frontier was able
to: (1) identify those competitive local exchange carriers ("CLECs")
collocating in its wire centers; and (2) identify those CLECs paying
Frontier for cable space, which is needed only when the CLEC is using
non-Frontier cable transport facilities.[^34] Second, Frontier provides
aggregate 1999 base period billing revenues generated by the services
for which it seeks relief in the Rochester, New York MSA. Frontier
tracks recurring demand for its Rochester study area by employing a
historical database of interstate Uniform Service Order Codes ("USOCs")
and the Carrier Access Billing System ("CABS"). Frontier used the USOC
database, which contains bill number, circuit number, quantity billed,
central office codes, and percentage of interstate use ("PIU") data, and
CABS, which details rate elements by office, to allocate revenues to
particular wire centers, in accordance with Commission rules.[^35]
Third, Frontier submits data to show that the wire centers in which
competitors have collocated account for a sufficient percentage of its
base period revenues generated by the services at issue within the
Rochester, New York MSA to satisfy the trigger the Commission adopted
with respect to the pricing flexibility that it sought.[^36] Based upon
a review of the information submitted, we conclude that Frontier has
satisfied its *prima facie* burden of demonstrating that it has met the
applicable triggers for the various services in the MSA for which it
requests relief.

10\. AT&T contends that Frontier has erroneously identified AT&T as a
collocator using non-Frontier Entrance Facilities for two wire centers
cited in Frontier's petition.[^37] In response, Frontier asserts that it
used information obtained from collocation applications and physical
inspection of the wire centers to identify collocation
arrangements.[^38] Frontier states that in one wire center it has
installed conduit for AT&T, which AT&T could use for non-Frontier
transport cable, but AT&T has not done so, and, in the other wire
center, at AT&T's request, Frontier has installed cable capable of being
used by AT&T for competitive transport.[^39] More important, however,
Frontier identified in its initial filing collocators other than AT&T
using competitive transport in each of the two wire centers at issue.
Thus, even if AT&T were not collocating or using competitive transport
in these wire centers, Frontier would still satisfy the applicable
triggers. As it was required to do, Frontier provided to each CLEC upon
which it relied a copy of its petition and an appendix indicating the
wire centers in which Frontier contends the CLEC is collocated and using
competitive transport.[^40] No CLEC other than AT&T has come forward to
contest Frontier's claim. Thus, we reject AT&T's argument that Frontier
has failed to satisfy its burden in this regard.

> 11\. AT&T also argues that Frontier has not met its burden of proof
> because Frontier

aggregated revenue data at the MSA-level. According to AT&T, without
revenue data by wire center, it is impossible to verify that the total
revenue associated with wire centers in which competitors have
collocated does in fact account for a sufficient percentage of base
period revenues to meet the pricing flexibility triggers.[^41] The
Common Carrier Bureau rejected this argument in the *BellSouth Order*, a
fact acknowledged by AT&T in its instant opposition.[^42] In the
*BellSouth Order*, the Common Carrier Bureau found that wire
center-level data was not required for a LEC to make a *prima facie*
showing that it has satisfied the revenue-based triggers.[^43] Frontier
responds that it has provided precisely the same level of detail as did
BellSouth, and should be given the same relief.[^44]

12\. We have reviewed Frontier's revenue allocation methodology, as
described in its petition, and the data provided by Frontier in both the
public and confidential versions of its petition and find that Frontier
has met the requirements stated in Section 1.774 of the Commission's
rules.[^45] Furthermore, we note that the Commission's rules do not
require that Frontier report revenue data at the wire center level. We
again caution future filers of pricing flexibility petitions, however,
that lack of data disaggregated to the wire center level could pose a
problem if the Commission were to determine that one of the wire centers
does not meet the collocation requirements. If the data is aggregated
above the wire center level, and the Commission rejects non-revenue
evidence with respect to a particular wire center, the Commission would
not have the data necessary to determine whether the remaining wire
centers in the MSA account for revenue sufficient to meet the
trigger.[^46] By aggregating the data above the wire center level,
therefore, the incumbent LEC runs the risk that its petition will be
rejected upon a determination that it had relied on a wire center that
does not qualify under the Commission's rules. Because we have not
rejected any of Frontier's wire centers, however, the lack of revenue
data at the wire center level is not a concern here. Apart from AT&T's
generalized assertions, moreover, no party filed comments that call
Frontier's data into question. Thus, we reject AT&T's argument.

**IV. ORDERING CLAUSES**

13\. Accordingly, IT IS ORDERED, pursuant to Section 1.774 of the
Commission\'s Rules, 47 C.F.R. § 1.774, and the authority delegated by
Sections 0.91 and 0.291 of the Commission\'s Rules, 47 C.F.R. §§ 0.91
and 0.291, and the *Pricing Flexibility Order,* that the petition filed
by Frontier IS GRANTED to the extent detailed herein.

FEDERAL COMMUNICATIONS COMMISSION

Dorothy T. Attwood

Chief, Common Carrier Bureau

**APPENDIX A**

**Services Qualifying for Pricing Flexibility**

**[Special Access Services Basket\*]{.underline}**

Metallic Service

Telegraph Grade Service

Voice Grade Service (including WATS)

Program Audio Service

Digital Data Service

High Capacity Service -- DS1

High Capacity Service -- DS3

Fractional T1 Service

Digiline Interface Options

ADSL Service

SDSL Service

**[Trunking Services Basket\*]{.underline}**

Voice Grade Service

DS1 Service

Common Channel Signaling Network Connection

DS3 Service

\*Includes dedicated transport services (entrance facilities,
direct-trunked transport, flat-rated portion of tandem switched
transport, flat-rated multiplexing), channel terminations between the
serving wire center and end user's premises, flat-rated interoffice
transport, and the optional features and functions associated with these
services.

[^1]: "Frontier" refers to Frontier Telephone of Rochester, Inc., and
    Frontier Communications of Seneca-Gorham, Inc.

[^2]: *See* Pleading Cycle Established For Frontier Petition For Pricing
    Flexibility For Special Access And Dedicated Transport Services,
    CCB/CPD No. 01-07, Public Notice, DA 01-731 (Mar. 22, 2001) ("Public
    Notice"); *see also* Petition for Pricing Flexibility For Special
    Access And Dedicated Transport Services, CCB/CPD No. 01-07 (filed
    Mar. 20, 2001) ("Frontier Petition"). AT&T was the only party to
    file comments. *See* AT&T Opposition to Frontier Petition For
    Pricing Flexibility For Special Access And Dedicated Transport
    Services, CCB/CPD No. 01-07 (filed Apr. 4, 2001) ("AT&T
    Opposition").

[^3]: Access Charge Reform, CC Docket No. 96-262, Fifth Report and
    Order, 14 FCC Rcd 14,221 (1999) ("*Pricing Flexibility Order*"),
    aff'd, *WorldCom v. FCC*, 238 F.3d 449 (D.C. Cir. 2001).

[^4]: *Pricing Flexibility Order*, 14 FCC Rcd at 14,224 (citing Access
    Charge Reform, CC Docket No. 96-262, First Report and Order, 12 FCC
    Rcd 15,982, 15,985, 16,094 (1997) ("*Access Charge Reform First
    Report and Order*")).

[^5]: *See* 47 C.F.R. Part 69. Part 69 establishes two basic categories
    of access services: special access services and switched access
    services. Special access services employ dedicated facilities that
    run directly between the end user and an IXC point of presence (POP)
    --- the physical plant where an IXC connects its network with the
    LEC network. Charges for special access services generally are
    divided into channel termination charges and channel mileage
    charges. Channel termination charges recover the costs of facilities
    between the customer's premises and the LEC end office and the costs
    of facilities between the IXC POP and the LEC serving wire center.
    Channel mileage charges recover the costs of facilities (also known
    as interoffice facilities) between the LEC serving wire center and
    the LEC end office serving the end user.

[^6]: *See* Price Cap Performance Review for Local Exchange Carriers, CC
    Docket No. 94-1, Second Further Notice of Proposed Rulemaking, 11
    FCC Rcd 858 (1995) ("*Price Cap Second FNPRM*"); *see also* Access
    Charge Reform, CC Docket No. 96-262, Notice of Proposed Rulemaking,
    11 FCC Rcd 21,354, 21,428-48 (1996) ("*Access Charge Reform NPRM*")
    (seeking comments on the Commission's pricing flexibility
    proposals).

[^7]: *See Access Charge Reform First Report and Order*, 12 FCC Rcd
    15,982 (1997).

[^8]: *See id*. at 15,989.

[^9]: *See Pricing Flexibility Order*, 14 FCC Rcd at 14,224-25 (citing
    *Access Charge Reform First Report and Order*, 12 FCC Rcd at 15,989,
    16,106).

[^10]: The Commission instituted price cap regulation for the Regional
    Bell Operating Companies (BOCs) and GTE in 1991, and permitted other
    LECs to adopt price cap regulation voluntarily, subject to certain
    conditions. Policy and Rules Concerning Rates for Dominant Carriers,
    CC Docket No. 87-313, Second Report and Order, 5 FCC Rcd 6786,
    6818-20 (1990) ("*LEC Price Cap Order*"). The *Pricing Flexibility
    Order* applies only to price cap LECs, that is, those LECs that are
    subject to price cap regulation.

[^11]: For purposes of pricing flexibility proceedings, "dedicated
    transport services" refer to entrance facilities, direct-trunked
    transport, and the dedicated component of tandem-switched transport.
    *See* *Pricing Flexibility Order*, 14 FCC Rcd at 14,234 n.54. These
    services are defined in 47 C.F.R. § 69.2(qq) (entrance facilities),
    § 69.2(oo) (direct-trunked transport), and § 69.2(ss)
    (tandem-switched transport).

[^12]: *See* 47 C.F.R. § 22.909(a) of the Commission's rules for a
    definition of an MSA.

[^13]: A contract tariff is a tariff based on an individually negotiated
    service contract. *See* 47 C.F.R. § 61.3(o); *see also* 47 C.F.R. §
    61.55 (describing the required composition of the contract-based
    tariffs).

[^14]: *See Pricing Flexibility Order,* 14 FCC Rcd at 14,287.

[^15]: *See id.* at 14,235.

[^16]: *See id*. at 14,234.

[^17]: *See id*. at 14,23; 47 C.F.R.§ 69.709(b).

[^18]: *See Pricing Flexibility Order*, 14 FCC Rcd at 14,234 n.55; 47
    C.F.R.§ 69.709(b).

[^19]: *See Pricing Flexibility Order*, 14 FCC Rcd at 14,279.

[^20]: *See id*. at 14,234; 47 C.F.R.§ 69.711.

[^21]: *See Pricing Flexibility Order*, 14 FCC Rcd at 14,234 n.55; 47
    C.F.R. § 69.711(b).

[^22]: *See Pricing Flexibility Order*, 14 FCC Rcd at 14,301.

[^23]: *See id*.

[^24]: *See Pricing Flexibility Order*, 14 FCC Rcd at 14,299; 47 C.F.R.
    § 69.709(c).

[^25]: *See Pricing Flexibility Order*, 14 FCC Rcd at 14,235, 14,299.

[^26]: *See id*. at 14,235; 47 C.F.R. § 69.711(c).

[^27]: *See* 47 C.F.R. § 69.711(c).

[^28]: *See* Frontier Petition, Attachment 1.

[^29]: *See Pricing Flexibility Order*, 14 FCC Rcd at 14,309.

[^30]: *See id*.; 47 C.F.R. §§ 1.774(a)(3)(i)-(iii), (iv)(A).

[^31]: For price cap LECs, the \"base period\" is the 12-month period
    (*i.e.*, the calendar year) ending six months before the effective
    date of the LECs\' annual access tariffs. *See* 47 C.F.R. § 61.3(g).

[^32]: *See* *Pricing Flexibility Order*, 14 FCC Rcd at 14,309; 47
    C.F.R. §§ 1.774(a)(3)(i)-(iii), (iv)(B).

[^33]: *See* Frontier Petition at 4.

[^34]: This information was provided by the CLEC at the time of or
    subsequent to its initial collocation application. *See id*.

[^35]: *See* 47 C.F.R. § 69.725. For a detailed description of
    Frontier's allocation methods, *see* Frontier Petition at 4-7.

[^36]: *See* Frontier Petition, Attachment 3.

[^37]: *See* AT&T Opposition at 2 (citing Carpiniello Declaration, ¶ 2)
    (these wire centers are identified in the confidential version of
    the Carpiniello Declaration).

[^38]: *See* Reply Comments of Frontier Telephone of Rochester, Inc. and
    Frontier Communications of Seneca-Gorham, Inc., CCB/CPD No. 01-07 at
    2 (filed Apr. 16, 2001) ("Frontier Reply Comments").

[^39]: *See id*.

[^40]: *See* Frontier Petition, Attachment 4.

[^41]: *See* AT&T Opposition at 3-4.

[^42]: BellSouth Petition for Pricing Flexibility for Special Access and
    Dedicated Transport Services, CCB/CPD No. 00-20, Memorandum Opinion
    and Order, 15 FCC Rcd 24,588, 24,596-97 (2000) ("*BellSouth
    Order*"); AT&T Opposition at 3-4.

[^43]: *See BellSouth Order*, 15 FCC Rcd at 24,597.

[^44]: *See* Frontier Reply Comments at 3.

[^45]: *See* 47 C.F.R. § 1.774.

[^46]: For example, if a petition using data aggregated at the MSA level
    purported to show that competitors were collocated in ten wire
    centers providing 35 percent of the revenues for a particular
    service, but it included a wire center that it should not have, the
    Bureau would be unable to determine what percentage of the revenues
    was attributable to the remaining wire centers and would be forced
    to reject the petition for that MSA. If, on the other hand, that
    same petition provided data disaggregated to the wire center level,
    the Bureau would be able to review the revenue data for the
    remaining wire centers to determine whether the incumbent LEC had
    still satisfied the trigger for that particular MSA.