United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued April 24, 2000 Decided August 1, 2000

No. 99-1538

AT&T Corporation,

Appellant

v\.

Federal Communications Commission,

Appellee

Bell Atlantic, U S West Communications, Inc.,

Public Service Commission of the State of New York, et al.,

Intervenors

Consolidated with

99-1540

Appeals of An Order of the

Federal Communications Commission

David W. Carpenter argued the cause for appellants. With him on the
briefs were Mark E. Haddad, Peter D. Keisler, Daniel Meron, Mark C.
Rosenblum, Roy E. Hoffinger, and Jonathan Jacob Nadler.

Randall B. Lowe, Renee R. Crittendon, Russell M. Blau, Mark J. Tauber,
Michael D. Hays, J. G. Harrington, and John D. Seiver were on the briefs
for intervenors Prism Communication Services, RCN Telecom Services,
Competitive Telecommunications Commission, Close Call America, Inc., and
Global NAPs, Inc.

Jonathan E. Nuechterlein, Deputy General Counsel, Federal Communications
Commission, argued the cause for appellee. With him on the brief were
Christopher J. Wright, General Counsel, John E. Ingle, Deputy Associate
General Counsel, and James M. Carr, Counsel. Joel Marcus, Counsel,
entered an appearance.

Michael E. Glover argued the cause for intervenors Bell Atlantic and U S
West Communications, Inc. With him on the brief were Randal S. Milch,
Edward Shakin, Mark L. Evans, Henk Brands, William T. Lake, Lynn R.
Charytan, Dan L. Poole and Robert B. McKenna, Jr. John H. Harwood, II
entered an appearance.

Lawrence G. Malone and Jonathan D. Feinberg were on the brief for
intervenor Public Service Commission of the State of New York.

Before: Randolph, Tatel and Garland, Circuit Judges.

Opinion for the Court filed by Circuit Judge Tatel.

Tatel, Circuit Judge: Appellants challenge the Federal Communications
Commission\'s approval of an application by Bell Atlantic to provide
long distance service in New York, arguing that the company failed to
implement two elements of a fourteen-point competitive checklist
prescribed by the Telecommunications Act of 1996. The FCC\'s approval of
Bell Atlantic\'s application was the first time since the 1982 break-up
of AT&T that a Bell operating company received regulatory permission to
offer long distance service in a state where it provides local telephone
service. Finding no defect in the

Commission\'s analysis, we affirm in all respects.

I

Historically, local telephone companies operated as monopolies. \"States
typically granted an exclusive franchise in each local service area to a
local exchange carrier (LEC), which owned, among other things, the local
loops (wires connecting telephones to switches), the switches (equipment
directing calls to their destinations), and the transport trunks (wires
carrying calls between switches) that constitute a local exchange
network.\" AT&T Corp. v. Iowa Util. Bd., 119 S. Ct. 721, 726 (1999). For
the better part of the twentieth century, appellant AT&T Corporation
provided most local and long distance phone service throughout the
country.

In 1974, the United States filed an antitrust action against AT&T
alleging \"monopolization by the defendants with respect to a broad
variety of telecommunications services and equipment in violation of
section 2 of the Sherman Act.\" United States v. American Tel. and Tel.
Co., 552 F. Supp 131, 139 (D.D.C. 1982), aff\'d sub nom. Maryland v.
United States, 460 U.S. 1001 (1983). Following several years of
discovery and nearly a full year of trial, AT&T and the government
settled. Known as the Modification of Final Judgment (\"MFJ\"), the
resulting consent decree required AT&T to divest itself of the
twenty-two Bell operating companies, or \"BOCs,\" that provided local
telephone service.

Consolidated into seven regional holding companies (four today as a
result of mergers), the BOCs continued to have a monopoly in local phone
service in their respective service areas. Because \"there are many ways
in which the company controlling the local exchange monopoly could
discriminate against competitors in the interexchange \[long distance\]
market,\" the MFJ prohibited BOCs from offering so-called \"interLATA\"
or long distance service. AT&T, 552 F. Supp. at 188. The MFJ left open
the possibility that BOCs could someday provide long distance service,
but only if they \"los\[t\] the ability to leverage their monopoly power
into the competitive \[long distance\] markets,\" either \"as a result
of technological developments which eliminate the \[BOCs\'\] local
exchange monopoly or from changes in the structures of the competitive
markets.\" Id. at 194. No BOC ever obtained permission to provide long
distance telephone service under the MFJ.

This regulatory landscape remained largely unchanged until Congress
enacted the Telecommunications Act of 1996, Pub. L. No. 104-104, 110
Stat. 56. That Act fundamentally restructured local telephone markets by
ending the BOCs\' local monopoly. Designed to \"open\[ \] all
telecommunications markets to competition,\" the Act established \"a
pro-competitive, de-regulatory national policy framework\" that sought
to eliminate the barriers that competitive local exchange carriers,
known as \"CLECs,\" faced in offering local telephone service. S. Conf.
Rep. No. 230, 104th Cong., 2d Sess. 1 (1996). To this end, the 1996 Act
requires BOCs to

offer CLECs access to their local telephone networks in three ways: by
selling local telephone services to competitors at wholesale rates for
resale to end users; by leasing network elements to competitors on an
unbundled basis; and by interconnecting a requesting competitor\'s
network with their own. See 47 U.S.C. § 251(c)(2)-(4). The 1996 Act
requires BOCs to offer the latter two services on \"rates, terms, and
conditions that are just, reasonable, and nondiscriminatory.\" Id. §
251(c)(2)(D), (c)(3). Through any of these three routes, CLECs may offer
local phone service in competition with BOCs.

Added by the 1996 Act, section 252 of the Communications Act of 1934
established procedures for CLECs to request and obtain access to network
elements and other facilities. The requesting carrier and the BOC
\"may\" first attempt to negotiate an agreement governing the rates,
terms, and conditions under which the CLEC accesses the BOC\'s
facilities. See id. § 252(a)(1). If the parties reach an agreement, they
must submit it to the appropriate state commission for approval. See id.
§ 252(a)(1), (e)(1). If an agreement is not reached, section 252 directs
the state commission to arbitrate and resolve the dispute. Id. §
252(b)(1), (b)(4)(C). The state commission must \"ensure that such
resolution and conditions meet the requirements of section 251\" and
\"establish any rates for interconnection, services, or network elements
according to subsection (d) of this section.\" Id. § 252(c)(1)-(2).

Subsection (d) requires rates to be \"based on the cost \... of
providing the interconnection or network element (whichever is
applicable), and \[ \] nondiscriminatory.\" Id. § 252(d)(1)(A).
Subsection (f) permits a BOC to file with the appropriate state
commission \"a statement of the terms and conditions that such company
generally offers within that State to comply with the requirements of
section 251.\" Id. § 252(f)(1). It also requires states to review such
statements for compliance with sections 251 and 252(d). Id. § 252(f)(2).

Section 601(a)(1) of the 1996 Act frees BOCs from all restrictions and
obligations imposed by the MFJ, including the prohibition against
providing long distance service. Telecommunications Act of 1996 §
601(a)(1), Pub. L. No. 104-104, 110 Stat. at 143. To encourage BOCs to
open their markets to competition as quickly as possible, the Act
permits them to provide \"in-region\" long distance service (long
distance service originating in a state in which they offered local
service under the MFJ) if they demonstrate that they have opened their
local markets in that state to competition by fulfilling the
requirements of section 271. See 47 U.S.C. § 271(b)(1). BOCs may
immediately begin providing \"out-of-region\" long distance service
(long distance service originating outside the states in which the
particular BOC offered local service under the MFJ). See id. §
271(b)(2).

Under section 271, a BOC wishing to provide in-region long distance
service must apply to the FCC for approval. Id. § 271(b)(1). In its
application, the BOC must first demonstrate that it has satisfied either
section 271(c)(1)(A), known as \"Track A,\" or section 271(c)(1)(B),
known as \"Track B.\" To satisfy Track A, the BOC must show that it has
entered into an agreement to provide access and interconnection to \"one
or more unaffiliated competing providers of telephone exchange service
\... to residential and business subscribers.\" Id. § 271(c)(1)(A). If
no such request for access and interconnection has been made, Track B
requires the BOC to show that \"a statement of the terms and conditions
that the \[BOC\] generally offers to provide such access and
interconnection has been approved or permitted to take effect by the
State commission.\" Id. § 271(c)(1)(B).

Once the BOC has shown that it has satisfied either Track A or Track B,
it must establish that its offering of services to CLECs meets the
fourteen requirements of a \"competitive checklist\" contained in
section 271(c)(2)(B). The checklist incorporates by reference many of
the substantive requirements of the Act\'s local competition provisions,
sections 251 and 252, described supra at 4-5. See id. § 271(c)(2)(B).
For example, the BOC must demonstrate that it provides
\"\[i\]nterconnection in accordance with the requirements of sections
251(c)(2) and 252(d)(1)\"; \"\[n\]ondiscriminatory access to network
elements in accordance with the requirements of sections 251(c)(3) and
252(d)(1)\"; \"\[l\]ocal loop transmission \... unbundled from local
switching\"; \"\[l\]ocal switching unbundled from transport, local loop
transmission, or other services\"; and \"\[n\]ondiscriminatory access to
\[ \] 911 and E911 services \[and\] directory assistance services to
allow the other carrier\'s customers to obtain telephone numbers.\" Id.
§ 271(c)(2)(B)(i), (ii), (iv), (vi), (vii)(I)-(II). In addition to
satisfying the competitive checklist\'s fourteen requirements, the BOC
must demonstrate that it will provide in-region long distance service in
accordance with the nondiscrimination and separate affiliate
requirements of section 272. See id. §§ 271(d)(3)(B), 272. Finally, the
BOC must persuade the FCC that \"the requested authorization is
consistent with the public interest, convenience, and necessity.\" Id. §
271(d)(3)(C).

The statute gives the FCC ninety days to determine whether an applicant
has met section 271\'s requirements, including whether it has \"fully
implemented the competitive checklist.\" Id. § 271(d)(3). The Commission
must \"consult with the Attorney General,\" who shall \"provide to the
Commission an evaluation of the application using any standard the
Attorney General considers appropriate.\" Id. § 271(d)(2)(A). Although
\"\[t\]he Commission shall give substantial weight to the Attorney
General\'s evaluation,\" that evaluation \"shall not have any preclusive
effect on any Commission decision.\" Id. The FCC must also \"consult
with the State commission of any State that is the subject of the
application in order to verify the compliance of the \[BOC\] with the
requirements \[for providing in-region long distance service\].\" Id. §
271(d)(2)(B).

Since passage of the 1996 Act, the FCC has implemented the statute\'s
local competition provisions through a series of regulations and orders.
Of particular relevance to this case, the Local Competition First Report
and Order adopted \"initial rules designed to \... open\[ \] the local
exchange and exchange access markets to competition.\" In the Matter of
Implementation of the Local Competition Provisions in the
Telecommunications Act of 1996, 11 F.C.C.R. 15499, 15507 p 6 (1996)
(\"Local Competition First Report and Order\"). The Local Competition
First Report and Order listed a minimum set of network elements that
BOCs must provide to competing carriers, established interconnection
rules, and adopted a methodology for pricing network elements known as
\"TELRIC\" (total element long-run incremental cost). Id. at 15514-15 pp
27-29.

Prior to the filing of the application at issue in this case, the FCC
had received and rejected five section 271 applications. It rejected the
first because the applicant, SBC Communications, failed to demonstrate
that it satisfied Track A. In the Matter of Application by SBC
Communications, Inc., Pursuant to Section 271 of the Communications Act
of 1934, as amended, to Provide In-Region, InterLATA Services in
Oklahoma, 12 F.C.C.R. 8685, 8686 p 1 (1997), aff\'d, SBC Communications
v. FCC, 138 F.3d 410 (D.C. Cir. 1998). It rejected the others because
the applicants failed to comply with various requirements of the
competitive checklist. See In the Matter of Application of Ameritech
Michigan, Pursuant to Section 271 of the Communications Act of 1934, as
amended, to Provide In-Region, InterLATA Services in Michigan, 12
F.C.C.R. 20543, 20546-47 p 5 (1997) (failure to provide
nondiscriminatory access to operations support system, interconnection,
and 911 and E911 services); In the Matter of Application of BellSouth
Corporation, et al., Pursuant to Section 271 of the Communications Act
of 1934, as amended, to Provide In-Region, InterLATA Services in South
Carolina, 13 F.C.C.R. 539, 547 p 14 (1997) (failure to (1) provide
nondiscriminatory access to operations support systems, (2) provide
unbundled network elements in a manner that permits competing carriers
to combine them through collocation, and (3) offer certain retail
services at discounted rates), aff\'d, BellSouth Corp. v. FCC, 162 F.3d
678 (D.C. Cir. 1998); In the Matter of Application by BellSouth
Corporation, et al., Pursuant to Section 271 of the Communications Act
of 1934, as amended, to Provide In-Region, InterLATA Services in
Louisiana, 13 F.C.C.R. 6245, 6246-47 p 1 (1998) (failure to provide
nondiscriminatory access to operations support system and to make
telecommunications services available for resale); In the Matter of
Application of BellSouth Corporation, BellSouth Telecommunications,
Inc., and BellSouth Long Distance, Inc., for Provision of In-Region,
InterLATA Services in Louisiana, 13 F.C.C.R. 20599, 20605 p 10 (1998)
(failure to provide nondiscriminatory access to operations support
system and unbundled network elements). After oral argument in this
case, however, the Commission approved SBC Communications\'s application
to provide long distance service in Texas. In the Matter of Application
by SBC Communications, Inc., Southwestern Bell Tel. Co., And
Southwestern Bell Communications Services, Inc. d/b/a Southwestern Bell
Long Distance Pursuant to Section 271 of the Telecommunications Act of
1996 To Provide In-Region, InterLATA Services in Texas, FCC No. 00-238
(June 30, 2000).

Bell Atlantic filed its application to provide in-region long distance
service in New York on September 29, 1999. By then, the Supreme Court
had invalidated that portion of the Local Competition First Report and
Order, specifically Rule 319, which listed the network elements that
BOCs must provide to competitors. Iowa Util. Bd., 119 S. Ct. at 734-36.
According to the Court, \"the FCC did not adequately consider the
\'necessary and impair\' standards \[of section 251(d)(2) of the
statute\] when it gave blanket access to these network elements.\" Id.
at 734. Because Bell Atlantic filed its application while the Commission
was still revising its network element rule in response to the Supreme
Court\'s vacatur, the company agreed to demonstrate compliance with the
vacated rule. See In the Matter of Application by Bell Atlantic New York
for Authorization Under Section 271 of the Communications Act to Provide
In-Region, InterLATA Service in the State of New York, 15 F.C.C.R. 3953,
3966-67 p 30 (1999) (\"Bell Atlantic\"). When this opinion was in page
proofs, the Eighth Circuit, acting on remand from the Supreme Court\'s
decision in Iowa Util. Bd., invalidated the TELRIC pricing methodology.
See Iowa Util. Bd. v. FCC, No. 96-3321 (8th Cir. July 18, 2000). By
basing rates on hypothetical rather than actual costs, the court held,
the TELRIC methodology forced BOCs to charge less for network elements
than Congress intended. Id., slip op. at 7-8. That decision has no
effect on this case, however, because Bell Atlantic has in fact shown
compliance with the TELRIC methodology, just as it did with the vacated
Rule 319.

The Bell Atlantic application represented the culmination of more than
two years of work by the company and the New York Public Service
Commission (\"NYPSC\"). After Bell Atlantic submitted a draft
application in February 1997, the NYPSC commenced collaborative
proceedings involving the company and its competitors to open New
York\'s local exchange market to competition. The NYPSC also issued an
order establishing rates for access to certain Bell Atlantic network
elements. Spanning over one hundred pages, that order set rates for
local loops, local switching, tandem switching, interoffice transport,
signal control points, etc. Opinion and Order Setting Rates for First
Group of Network Elements, Op. No. 97-2 (NYPSC Apr. 1, 1997) (\"1997
NYPSC Order\").

At about the same time, the NYPSC began developing performance measures
and service quality standards to assess whether Bell Atlantic was
providing the nondiscriminatory access to its network that the 1996 Act
requires. Bell Atlantic, 15 F.C.C.R. at 3959 p 11. The NYPSC also hired
the consulting firm KPMG to test Bell Atlantic\'s operations support
systems for processing orders from Bell Atlantic\'s competitors. After
extensive testing, during which Bell Atlantic corrected many problems,
KPMG concluded that the company\'s operations support systems could
adequately accommodate \"reasonable, anticipated commercial volumes\" of
competitors\' requests for network access. Id. at 3959 p 10.

On December 21, 1999, the FCC approved Bell Atlantic\'s application to
provide long distance service in New York. The Commission began by
observing that \"\[t\]he well established pro-competitive regulatory
environment in New York in conjunction with recent measures to achieve
section 271 compliance has, in general, created a thriving market for
the provision of local exchange and exchange access service. Competitors
in New York are able to enter the local market using all three entry
paths provided under the Act.\" Id. at 3959 p 13. The FCC cited Bell
Atlantic\'s estimates that competitors serve over one million phone
lines in New York. Id. at 3960 p 14. According to the Department of
Justice, moreover, CLECs in New York served approximately 8.9 percent of
access lines as of June 1999, an amount \"significantly larger than the
national average of less than five percent.\" Evaluation of the United
States Department of Justice 9 (Nov. 1, 1999) (\"DOJ Evaluation\").

Relying on uncontested evidence that Bell Atlantic had entered into
interconnection agreements with several competing New York carriers, the
Commission determined that the company had satisfied Track A. Bell
Atlantic, 15 F.C.C.R. at 3977 p 62. The Commission next examined Bell
Atlantic\'s compliance with the fourteen components of the competitive
checklist, concluding that the company had \"fully implemented\" each.
47 U.S.C. § 271(d)(3)(A)(i). The Commission also found that Bell
Atlantic had demonstrated that it would comply with the separate
affiliate and nondiscrimination requirements of section 272. Bell
Atlantic, 15 F.C.C.R. at 4153 p 403. Finding approval of the company\'s
application to be \"consistent with promoting competition in the local
and long distance telecommunications markets,\" the Commission concluded
that Bell Atlantic\'s provision of long distance service in New York
would be in the public interest. Id. at 4162 p 425.

On December 28, 1999, appellants AT&T and Covad Communications, a
provider of high-speed, data-oriented telecommunications services,
appealed the FCC\'s decision pursuant to 47 U.S.C. § 402(b)(6), (9),
which gives this court exclusive jurisdiction to review FCC orders
relating to applications to provide long distance service under section
271. After this court denied appellants\' request for stay pending
appeal AT&T v. FCC, Nos. 99-1538, 99-1540 (D.C. Cir. Jan. 4, 2000)
(order denying motion for stay), Bell Atlantic began providing long
distance service to customers in New York.

AT&T mounts four challenges to the FCC\'s approval of Bell Atlantic\'s
application, the first two of which Covad joins: (1) Bell Atlantic\'s
prices for certain network elements do not conform to the TELRIC pricing
methodology; (2) contrary to the Commission\'s conclusion, Bell Atlantic
fails to provide competitors nondiscriminatory access to two types of
unbundled loops, DSL-capable loops and hot cut loops; (3) the company
imposes use restrictions on combinations of network elements that
violate the 1996 Act; and (4) the company\'s proposed script for
handling calls requesting new service or changes to existing service
conflicts with section 272\'s nondiscrimination safeguards. Supported by
intervenors NYPSC, Bell Atlantic, and U S West, the FCC argues that the
company has satisfied both the competitive checklist and section 272\'s
nondiscrimination safeguards. We consider each of appellants\' arguments
in turn.

II

Section 271\'s competitive checklist directs the FCC to determine
whether Bell Atlantic\'s rates (which have been approved by the NYPSC)
comply with section 252\'s requirement that the rates be \"just and
reasonable\" and \"based on the cost \... of providing the \... network
element.\" 47 U.S.C. § 252(d)(1), (d)(1)(A)(i). The FCC considers
section 252 satisfied only if the rates conform to TELRIC. See Bell
Atlantic, 15 F.C.C.R. at 4081 p 237; see also Local Competition First
Report and Order, 11 F.C.C.R. at 15844 p 672. A forward-looking
methodology, TELRIC bases rates on \"the cost of operating a
hypothetical network built with the most efficient technology
available.\" Iowa Util. Bd., 119 S. Ct. at 728 n.3. TELRIC is not a
specific formula, but a framework of principles that govern pricing
determinations. \"\[W\]hile TELRIC consists of \'methodological
principles\' for setting prices, states retain flexibility to consider
\'local technological, environmental, regulatory, and economic
conditions.\' \" Bell Atlantic, 15 F.C.C.R. at 4084 p 244 (quoting Local
Competition First Report and Order, 11 F.C.C.R. at 15812). In other
words, while state commissions use TELRIC to establish rates,
application of TELRIC principles may result in different rates in
different states.

The FCC does not conduct de novo review of state pricing determinations
in section 271 proceedings, nor does it adjust rates to conform with
TELRIC. See Bell Atlantic, 15 F.C.C.R. at 4084 p 244. It assesses only
whether those rates comply with basic TELRIC principles. In language
critical to this case, the FCC described its role this way:

> In reviewing state pricing decisions in the context of section 271
> applications, we will not reject an application because isolated
> factual findings by a commission might be different from what we might
> have found if we were arbitrating the matter under section 252(e)(5).
> Rather, we will reject the application only if basic TELRIC principles
> are violated or the state commission makes clear errors in factual
> findings on matters so substantial that the end result falls outside
> the range that the reasonable application of TELRIC principles would
> produce.

Id.

Neither AT&T nor Covad challenges the TELRIC standard. They claim
instead that rates established by the NYPSC for leasing three network
elements\--switches, voice grade loops, and DSL-compatible
loops\--violate TELRIC.

We review the FCC\'s TELRIC compliance determinations pursuant to the
arbitrary and capricious standard. See 5 U.S.C. § 706(2)(A); Achernar
Broad. Co. v. FCC, 62 F.3d 1441, 1445 (D.C. Cir. 1995) (applying
arbitrary and capricious standard to FCC action). Highly deferential,
that standard presumes the validity of agency action, requiring us to
determine whether the agency has considered the relevant factors and
\"articulate\[d\] a rational connection between the facts found and the
choice made.\" Motor Vehicle Mfrs. Ass\'n of the United States, Inc. v.
State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43 (1983) (internal
quotation marks omitted). We \"may reverse only if the agency\'s
decision is not supported by substantial evidence, or the agency has
made a clear error in judgment.\" Kisser v. Cisneros, 14 F.3d 615, 619
(D.C. Cir. 1994).

Three characteristics of section 271 proceedings call for special
deference to the FCC. For one thing, not only do section 271 issues
\"require\[ \] a high level of technical expertise,\" Marsh v. Oregon
Natural Resources Council, 490 U.S. 360, 377 (1989), but the Commission
must consider those issues in the context of rapid technological and
competitive change. As the agency points out, \"at any given point at
which a section 271 application might be filed, the rapidly changing
telecommunications industry will have recently unleashed a handful of
new technological challenges and unsettled legal disputes.\" Appellee\'s
Br. at 12. To deal with these constantly-unfolding changes, the section
271 process \"must have some play in the joints.\" Id. Second, unlike
most agency decisions that we review, much of the FCC\'s order is itself
a review of a state agency decision. Also possessing a considerable
degree of expertise, the NYPSC did a significant amount of background
work, such as establishing prices, instituting collaborative proceedings
to design provisioning methods, and developing performance measures.
Finally, and perhaps most important with respect to appellants\'
challenges to the NYPSC pricing determinations, enormous flexibility is
built into TELRIC. In other words, we decide only whether the FCC\'s
determination that Bell Atlantic\'s rates do not fall \"outside the
range that the reasonable application of TELRIC principles would
produce\" is itself arbitrary or capricious. Bell Atlantic, 15 F.C.C.R.
at 4084 p 244. Cf. Patrick Thomas v. NLRB, 213 F.3d 651, 2000 WL 694335,
at \*6 (D.C. Cir. 2000) (\"\[A\] court reviews with deference a Board
decision that was itself made with deference to the Union.\"). Although
we thus give substantial deference to the Commission\'s decision, we
emphasize that \"\[t\]his does not mean that our review is toothless but
merely that we must be very cautious in entertaining an invitation to
reverse.\" Patrick Thomas, 2000 WL 694335, at \*6.

Switching costs

AT&T and Covad claim that the rates the NYPSC set for switches\--the
equipment used to direct calls to their destination\--violate TELRIC in
two respects: first, the rates ignore substantial discounts Bell
Atlantic will likely receive on the purchase of new switches, and
second, they erroneously include the costs not just of new switches, but
of more costly \"growth additions\" to existing switches. With respect
to the latter argument, appellants claim that because TELRIC
contemplates construction of a new network using the most efficient
technology, it requires the NYPSC to have used the less costly new
switches as the basis for the rates. According to appellants, these two
errors caused Bell Atlantic\'s switch rates to exceed substantially
those that proper application of TELRIC would have yielded.

Addressing switching costs in its April 1997 pricing order, the NYPSC
began by noting the wide disparity between the estimates provided by
Bell Atlantic (\$586 per line) and AT&T (\$125 per line). Based on that
disparity, other evidence in the record, and its own analysis, the
agency found \"neither figure \... reliable.\" 1997 NYPSC Order at 84.
\"In these circumstances,\" the NYPSC explained, \"\[its\] staff
examined the data on switching costs closely.\" Id. at 85. Starting with
the historic cost of switches installed in 1993 and 1994, the agency
adjusted that cost downward to reflect the declining price of switches,
yielding a per-line price of \$192.67. The NYPSC acknowledged that its
analysis did not take into account \"atypically large discounts\"
received by Bell Atlantic \"from its vendors after 1994 in connection
with a major switch replacement program.\" Id. at 85 n.1. The reason,
the agency explained in a subsequent order, was that it understood that
Bell Atlantic would not receive such large discounts in the future.
Order Denying Motion to Reopen Phase 1 and Instituting New Proceeding
3-4 (NYPSC Sept. 30, 1998) (\"1998 NYPSC Order Denying Motion to
Reopen\").

More than a year after the NYPSC issued its 1997 order, AT&T and other
long distance carriers petitioned the agency to lower switching rates.
They relied on evidence, only recently revealed by Bell Atlantic, that
it would in fact continue to receive large discounts on purchases of all
new switches. Seeking to avoid piecemeal changes to the rates, and
explaining that the new information would affect its prior analysis in
several ways, the NYPSC concluded that \"\[t\]he web of interconnected
effects argues strongly against making the selective modification urged
by the motion without a comprehensive review of switching costs.\" Id.
at 11. The NYPSC went on to note that \"\[w\]hile the effect of the
adjustment on switching prices cannot be presumed to be trivial\--though
it might turn out to be so\--switching costs in general represent a much
smaller component of CLEC expense than do the much more significant link
costs.\" Id. at 12. Accordingly, the agency declined to revise the
rates, but scheduled a comprehensive review of switching costs to begin
in January 1999. See id.

The FCC found no problem with the NYPSC\'s resolution of this issue.
\"AT&T has presented no evidence to persuade us that New York did not
conform to TELRIC principles simply because it failed to modify one
input into its cost model.\" Bell Atlantic, 15 F.C.C.R. at 4085 p 245.
Sympathetic to the NYPSC\'s position that \"its determination of
allowable switch costs was the result of a complex analysis that does
not lend itself to simple arithmetic correction through the adjustment
of a single input,\" the FCC concluded that the prospect of future
modification makes the rates no less TELRIC-compliant. Id.

The FCC\'s decision seems reasonable to us. Not only are
state-agency-approved rates always subject to refinement, but we suspect
that rates may often need adjustment to reflect newly discovered
information, like that about Bell Atlantic\'s future discounts. If new
information automatically required rejection of section 271
applications, we cannot imagine how such applications could ever be
approved in this context of rapid regulatory and technological change.
Moreover, both the NYPSC and the FCC agree that adjusting switching
rates to reflect discounts is not so simple as subtracting the amount of
the discount; it requires other adjustments to the cost model. Under
these circumstances, we are comfortable deferring to the Commission\'s
conclusion that basic TELRIC principles have not been violated and that
the NYPSC has not made such \"clear errors in factual findings\" that
switching costs fall \"outside the range that the reasonable application
of TELRIC principles would produce.\" Id. at 4084 p 244. After all, not
only is the \$193 per-line switching cost considerably closer to AT&T\'s
proposed \$125 than to Bell Atlantic\'s much higher estimate, and not
only do \"switching costs in general represent a much smaller component
of CLEC expense than do the much more significant link costs\" (which
appellants have not challenged), 1998 NYPSC Order Denying Motion to
Reopen at 12, but the NYPSC has said it will reexamine switching
discounts, ordering refunds if appropriate.

Appellants\' challenge to the inclusion of so-called \"growth
additions\" is largely a corollary of their discount argument. At oral
argument, FCC counsel explained that growth additions to existing
switches cost more than new switches only because vendors offer
substantial new switch discounts in order to make telephone companies
dependent on the vendors\' technology to update the switches. In fact,
as far as we can tell from the record, the growth addition issue did not
even surface in the NYPSC proceedings until after AT&T, relying on the
new evidence about discounts, requested reconsideration of switch costs.
Accordingly, we think the Commission reasonably concluded that because
failure to reflect discounts did not violate TELRIC, inclusion of growth
additions did not either.

Voice Grade Loops

A loop is \" \'a transmission facility between a distribution frame, or
its equivalent, in an incumbent LEC central office, and the network
interface device at the customer premises.\' \" Bell Atlantic, 15
F.C.C.R. at 4095 p 268 (quoting Local Competition First Report and
Order, 11 F.C.C.R. at 15691). In plain English, loops are the wires that
connect telephones to the switches that direct calls to their
destination. There are many different types of loops: \"two-wire and
four-wire analog voice-grade loops, and two-wire and four-wire loops
that are conditioned to transmit the digital signals needed to provide
services such as ISDN, ADSL, HDSL, and DS1-level signals.\" Bell
Atlantic, 15 F.C.C.R. at 4095 p 268. The 1997 NYPSC pricing order set
rates for Bell Atlantic loops. 1997 NYPSC Order at Attachment D.

AT&T and Covad challenge the rates for one type of loop\--voice grade
local loops. They argue that the NYPSC violated basic TELRIC principles
by assuming that the \"feeder\" portion of the loop would always use
optical fiber, rather than copper. This assumption, according to
appellants, produced rates for leasing loops fifteen percent higher than
proper application of TELRIC would have yielded.

AT&T originally advanced this argument in the NYPSC rate proceeding,
claiming that copper feeder should always be used for loops less than
9,000 feet long. Rejecting this argument in its 1997 order, the NYPSC
based local loop rates on the assumption that fiber feeder would be used
for all loops. The agency relied on a 1991 Bell Atlantic study
establishing that \"the investment costs associated with fiber exceeded
those of copper, but the difference was found to be more than offset by
the lower provisioning and maintenance costs of fiber.\" 1997 NYPSC
Order at 83. In its rehearing order, the NYPSC devoted twenty-nine more
pages to this issue, reaffirming its conclusion and elaborating on its
reasoning. Opinion and Order Concerning Petitions for Rehearing of
Opinion No. 97-2, Op. No. 97-14 (NYPSC Sept. 22, 1997) (\"1997 NYPSC
Rehearing Order\"). Emphasizing TELRIC\'s forward-looking character, and
relying on its own independent analysis, the NYPSC pointed out that
while Bell Atlantic\'s plant includes substantial amounts of copper
feeder, \"virtually none is being installed on a going-forward basis.\"
Id. at 23-24. The reason, the agency explained, is \"fiber\'s
superiority with respect to its initial cost, its ongoing operation and
maintenance expense, and its flexibility and reliability.\" Id. at 24.
Not only are fiber\'s material costs lower than copper\'s for the same
capacity, but copper\'s heavier weight and greater volume make it both
more difficult and more expensive to install. See id. The smaller space
taken up by fiber, moreover, reduces costs substantially, an especially
critical consideration in dense cities like New York. See id. Finally,
fiber offers numerous operational advantages over copper. See id. at 25.
The NYPSC tied all these factors back to TELRIC: \"What TELRIC
contemplates is the network that would actually be built, using the most
cost-efficient, forward-looking technology available, which would
certainly lead us to posit all-fiber feeder.\" Id. at 26.

Largely reiterating the NYPSC\'s conclusion, the FCC rejected
appellants\' challenge to the use of fiber feeder. \"We have no reason
to disagree with the \[NYPSC\'s\] conclusion that Bell Atlantic\'s use
of fiber \... does not make its rates inconsistent with a TELRIC
methodology.\" Bell Atlantic, 15 F.C.C.R. at 4087 p 249.

Appellants fault the FCC\'s decision on a host of largely procedural
grounds: the Commission failed to address a detailed AT&T study that
proves copper is more cost-effective for shorter loops; it failed to
consider AT&T\'s evidence purportedly showing that other BOCs had
conceded that copper is more cost-effective; and it could not have
reasonably deferred to the NYPSC\'s findings because the only evidence
the NYPSC relied on (the 1991 Bell Atlantic study) was never placed in
the record and the only rationale offered by that agency (that fiber
feeder is more economical in dense Manhattan) is \"plainly inadequate.\"
Appellants\' Br. at 30.

These arguments miss the mark. The question whether the FCC adequately
considered AT&T\'s comments is \"subsumed within \[appellants\'\]
substantive challenge\" to the FCC\'s conclusion that the assumption of
fiber feeder was appropriate, Chemical Mfrs. Ass\'n v. EPA, 28 F.3d
1259, 1263 (D.C. Cir. 1994), and we find no basis for faulting the
Commission\'s decisionmaking on that point. The FCC analyzed the
NYPSC\'s original and rehearing orders, which exhaustively evaluated
AT&T\'s arguments, thoroughly explained fiber\'s superiority, and relied
on far more than the unique characteristics of Manhattan and the 1991
Bell Atlantic study. Based on this analysis, the Commission determined
that AT&T did not \"present\[ \] sufficient evidence to prove that the
\[NYPSC\] erred in its determination.\" Bell Atlantic, 15 F.C.C.R. at
4087 p 249.

Appellants make one additional argument. They claim that in the
Universal Service Tenth Report and Order the Commission found copper to
be more cost-effective than fiber for short distances. In the Matter of
Federal-State Joint Board on Universal Service; Forward-Looking
Mechanism for High Cost Support for Non-Rural LECs, 14 F.C.C.R. 20156
(1999) (\"Universal Service Tenth Report and Order\"). That order,
however, expressly stated that \"it may not be appropriate to use \[the
nationwide values developed in the universal service proceedings\] \...
for other purposes, such as determining prices for unbundled network
elements.\" Id. at 20172 p 32. Explaining that the universal service
model employed nationwide, not state-specific, pricing inputs, the
Commission \"caution\[ed\] parties from making claims in other
proceedings based upon the input values \[adopted in the Tenth Report
and Order\].\" Id. In any event, the Tenth Report and Order did not say
that copper is more cost-effective. It said only that \"\[w\]hen fiber
is more cost effective, the model will use it to replace copper for
loops that are shorter than 18,000 feet.\" Id. at 20196 p 85 (emphasis
added).

Relying on the NYPSC\'s comprehensive analysis, as the 1996 Act directs,
the FCC concluded that Bell Atlantic\'s use of fiber for voice grade
loops conforms with TELRIC. Not only have appellants offered no
persuasive reason to disturb that judgment, but we cannot imagine a
question more suited for administrative rather than judicial resolution
than whether copper or fiber loops are more cost-effective. See
Association of Oil Pipe Lines v. FERC, 83 F.3d 1424, 1445 (D.C. Cir.
1996) (\"Because the Commission\'s analysis required a high level of
technical expertise, the court owes deference to the Commission\'s
informed and rationally exercised discretion.\").

DSL Loop Conditioning

\"Digital Subscriber Line\" or \"DSL\" technology \"describes a \'family
of transmission technologies that use specialized electronics at the
customer\'s premises and at a telephone company\'s central office \...
to transmit high-speed data signals over copper cables.\' \" Bell
Atlantic, 15 F.C.C.R. at 4087 p 250 (quoting Bell Atlantic Affidavit in
Support of DSL Links). Only recently developed, DSL technology \"allows
transmission of data \... at vastly higher speeds than can be achieved
with analog data transmission.\" Bell Atlantic, 15 F.C.C.R. at 4117 p
316 n.1000. When competitors seek to provide DSL service over Bell
Atlantic loops that exceed a certain length, the company must sometimes
\"condition\" those loops to make them DSL-compatible by removing load
coils and bridge taps that interfere with transmission of digital
signals. See id. at 4088-89 p 252.

Although BOCs have been obligated to provide access to unbundled loops
capable of supporting DSL technologies since the Local Competition First
Report and Order was issued in 1996, demand for DSL-compatible loops in
New York emerged only in the past year. See id. at 4117 pp 316-17. In
fact, a Covad witness testifying in late July 1999 explained that Covad
had just begun ordering DSL loops. For this reason, the 1997 NYPSC Order
did not address rates for DSL conditioning, so when Bell Atlantic filed
its section 271 application in September 1999, the company had in place
only the interim conditioning rates that it had filed with the NYPSC
just one month earlier.

Responding to increased demand for DSL loops and to complaints from
competitors that Bell Atlantic\'s interim conditioning charges were
excessive, the NYPSC initiated fast-track proceedings to set permanent
conditioning rates. As a result of those proceedings, the agency
significantly reduced Bell Atlantic\'s interim conditioning charges. It
also created a \"placeholder\" rate subject to future adjustment as the
NYPSC conducts further inquiry. See Order and Opinion Concerning DSL
Charges, Op. No. 99-12 (NYPSC Dec. 17, 1999). Because the NYPSC issued
this order only one week before the end of the FCC\'s ninety-day review
period, the Commission\'s order focuses only on Bell Atlantic\'s interim
rates.

Although concerned that interim rates \"create uncertainty,\" the FCC
concluded that \"a BOC\'s application for in-region \[long distance
service\] should not be rejected solely because permanent rates may not
yet have been established for each and every element or nonrecurring
cost of provisioning an element.\" Bell Atlantic, 15 F.C.C.R. at 4090-91
p 258. \"\[T\]his question,\" the Commission explained, \"should be
addressed on a case-by-case basis.\" Id. at 4091 p 258. The Commission
listed several factors that led it to conclude that Bell Atlantic\'s use
of interim rates did not preclude a finding of checklist compliance:
\"\[t\]he conditioning of DSL loops is a relatively new issue\"; the
NYPSC \"has a substantial track record of setting other applicable
prices at TELRIC rates\"; \"Bell Atlantic\'s interim rates are subject
to refund or true-up if the \[NYPSC\] determines that they exceed
applicable TELRIC-based costs\"; and the interim rates applied only to
\"a few ancillary items\" affecting a small percentage of unbundled
loops. Id. at 4090-91 pp 258-59. Noting that \"\[a\]t some point, states
will have had sufficient time to complete \[permanent rate
proceedings\],\" the FCC warned that it will \"become more reluctant to
continue approving section 271 applications containing interim rates. It
would not be sound policy for interim rates to become a substitute for
completing these significant proceedings.\" Id. at 4091 p 260.

AT&T and Covad argue that Bell Atlantic\'s interim conditioning rates
violate TELRIC. \"When there is a substantial challenge to a particular
rate that has not been previously reviewed by a state commission, the
FCC\'s duty is to determine its lawfulness and grant the application
only if it is found lawful.\" Appellants\' Reply Br. at 17.

Because AT&T and Covad\'s argument rests on their interpretation of
section 271, we employ the familiar two-step Chevron process. Chevron
U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837,
842-43 (1984). If \"Congress has directly spoken to the precise question
at issue,\" the court \"must give effect to the unambiguously expressed
intent of Congress.\" Id. In determining whether Congress has spoken to
the precise question at issue, we \"exhaust the traditional tools of
statutory construction.\" Natural Resources Defense Council, Inc. v.
Browner, 57 F.3d 1122, 1125 (D.C. Cir. 1995) (internal quotation marks
omitted). \"\[I\]f the statute is silent or ambiguous with respect to
the specific issue,\" the court must determine whether the agency\'s
interpretation \"is based on a permissible construction of the
statute.\" Chevron, 467 U.S. at 843. In making this determination, we
afford substantial deference to the agency\'s interpretation of the
statute because \"the responsibilities for assessing the wisdom of \...
policy choices and resolving the struggle between competing views of the
public interest are not judicial ones, and because of the agency\'s
greater familiarity with the ever-changing facts and circumstances
surrounding the subjects regulated.\" FDA v. Brown & Williamson Tobacco
Corp., 120 S. Ct. 1291, 1300 (2000) (internal quotation marks and
citation omitted). As long as the agency\'s interpretation is
reasonable, we uphold it \"regardless whether there may be other
reasonable, or even more reasonable, views.\" Serono Lab., Inc. v.
Shalala, 158 F.3d 1313, 1321 (D.C. Cir. 1998).

In support of their argument that section 271 requires the Commission to
have denied Bell Atlantic\'s application on the basis of its interim
conditioning rates, appellants rely on section 271(d)(3)\'s requirement
that the FCC \"not approve \[an application\] unless it finds that \...
\[the applicant\] has fully implemented the competitive checklist.\" 47
U.S.C. § 271(d)(3). They also point out that the competitive check-list
requires Bell Atlantic to offer \"\[n\]ondiscriminatory access to
network elements in accordance with the requirements of section\[ \]
\... 252(d)(1),\" which the FCC has interpreted to require
TELRIC-compliant rates. Id. § 271(c)(2)(B)(ii). Neither provision,
however, speaks, as Chevron put it, unambiguously to \"the precise
question at issue\": Does the fact that interim rates (reviewed by
neither the NYPSC nor the FCC) govern a small component of local loops
that has only recently become the subject of competitor demand preclude
a finding of checklist compliance?

Moving to Chevron step two, we think the FCC has reasonably answered
this question in the negative. Rapid advances in technology continuously
spark demand for new products and services. See Bell Atlantic, 15
F.C.C.R. at 4091 p 259. As a result, competitors may often demand access
to new technologies before state agencies are able to set
TELRIC-compliant rates\--exactly what happened here. Given this fact of
life in the telecommunication industry at this early stage of the
implementation of the 1996 Act, and given that the FCC has only ninety
days in which to act on section 271 applications, the agency\'s approach
strikes a reasonable balance between ensuring that an applicant has
opened local markets to competition by charging just and reasonable
rates and not allowing technological developments to become obstacles to
an applicant\'s entry into in-region long distance markets.

In deferring to the Commission\'s resolution of the interim rate issue,
we are influenced by an additional factor. The agency narrowly cabined
its acceptance of interim rates to the unique circumstances of this
case: emergence of a recently developed technology produced demand for a
new service before the state commission had an opportunity to approve
permanent rates; the state commission instituted fast-track proceedings
to set permanent rates; and those proceedings ended just days before the
FCC approved the section 271 application.

III

Checklist item four requires BOCs to show that they provide competitors
with \"\[n\]ondiscriminatory access to network elements,\" which include
local loops, and \"\[l\]ocal loop transmission from the central office
to the customer\'s premises, unbundled from local switching or other
services.\" 47 U.S.C. § 271(c)(2)(B)(ii) (iv). Appellants contend that
Bell Atlantic fails to provide nondiscriminatory access to two types of
unbundled loops: DSL-capable loops and voice grade, hot cut loops.

DSL-capable loops

Comments submitted to the FCC opposing Bell Atlantic\'s application
charge the company with failing to provide access to loops capable of
supporting DSL technology on a nondiscriminatory basis. For example,
Covad summarized its data as follows: \"Covad\'s own, substantiated data
shows that for every 100 loop orders it places in New York, only 50%
will receive a due date within 72 hours. Of those 50 remaining orders,
only 74% (37) will be wired in the central office by the time Bell
Atlantic has committed to do so. And of those 37 remaining orders, only
78% (29) of them will actually be provisioned to the customer\'s
premises on time.\" The Justice Department was also concerned about Bell
Atlantic\'s provisioning of DSL loops: \"As to Bell Atlantic\'s
historical performance in provisioning DSL loops, we are unable to
conclude on the current record that Bell Atlantic has demonstrated an
acceptable level of performance. It is possible, however, that the
Commission may obtain information not currently available to the
Department that would support such a conclusion\.... \[W\]e cannot
conclude that CLECs currently have access to DSL loops necessary for
them to compete effectively.\" DOJ Evaluation at 27-28.

The FCC took a different approach. Acknowledging the concerns about Bell
Atlantic\'s performance with respect to DSL loops, the FCC based its
finding of checklist compliance on the company\'s provisioning of
unbundled loops generally, not of DSL-capable loops in particular. In
reaching this conclusion, the Commission relied on several factors. To
begin with, it observed that although BOCs have been obligated to
provide access to DSL-capable loops since 1996, the Commission had not
\"previously provided guidance to the BOCs as to the type and level of
proof necessary in this area to establish compliance with section 271.\"
Bell Atlantic, 15 F.C.C.R. at 4117 p 316. Moreover, the Commission
explained, \"no previous applicant has made a separate showing on the
provision of xDSL loops.\" Id. (The \"small \'x\' before the letters
\'DSL\' signifies the use of the term as a generic transmission
technology.\" Id. at 4087 p 250 n.818.)

Second, the FCC pointed out that because demand for DSL loops did not
surface until 1999, the NYPSC and other state authorities had only
recently begun developing and adopting performance standards and
measures for DSL loop ordering and provisioning. See id. at 4117 p 317.
Considering DSL issues for the first time in August 1999, the NYPSC
initiated collaborative proceedings to address Bell Atlantic\'s DSL loop
provisioning by defining provisioning methods and developing
DSL-specific performance standards. See id. The FCC explained: \"Bell
Atlantic and competing carriers have agreed to joint testing and
provisioning procedures for xDSL loops. Provisioning xDSL loops to
competitors involves processes that are more complex than those involved
with the provision of a voice-grade loop.\" Id. at 4118 p 319.

Third, DSL loops represent only a \"small fraction\" of all unbundled
loops. Id. at 4118-19 pp 320-21. In support of this finding, the
Commission noted that Bell Atlantic provisioned just seven DSL-specific
loops in June 1999, fifty-six in July, 449 in August, and 653 in
September. Id. at 4118 p 320. Although the company also provisioned more
than 3,300 premium loops since January 1999 that could \"on occasion\"
be used for DSL service, the FCC was unable to determine what portion,
if any, was so used. Id. at 4119 p 320 n.1012. In contrast to the small
number of DSL loops, Bell Atlantic provisioned 50,000 unbundled voice
grade loops through September 1999. See id. at 4119 p 321.

Finally, Bell Atlantic and its competitors (including Covad) submitted
conflicting data about Bell Atlantic\'s provisioning performance. Noting
that \"\[t\]he absence of a New York performance benchmark or \[NYPSC\]
reconciliation of conflicting data claims makes it difficult for this
Commission to decide between the competing statistics,\" the FCC
explained that different methodologies in calculating the statistics
likely accounted for the divergence and \"complicate\[d\] its efforts to
analyze the data.\" Id. at 4120 p 326.

\"In light of these unique circumstances,\" the Commission concluded,
\"we should rely upon Bell Atlantic\'s overall showing of loop
performance in evaluating whether Bell Atlantic has met its burden of
demonstrating that it provides unbundled local loops in accordance with
checklist item 4.\" Id. at 4121 p 327. Acknowledging that this analysis
diverged from the Justice Department\'s, the FCC explained: \"We have
given substantial weight to the Department of Justice\'s views, but
nonetheless, based upon our review of the record on loops as a whole,
find that Bell Atlantic establishes that it provisions unbundled local
loops at a level of performance sufficient for checklist compliance.\"
Id. at 4121 p 328. The Commission cautioned, however, that \"\[i\]f xDSL
services continue to grow rapidly \... the aggregate loop results will
be more heavily influenced by Bell Atlantic\'s performance in
provisioning xDSL-specific loops. If the future aggregate performance
declines from current levels, we will take appropriate enforcement
action.\" Id. at 4122 p 329.

AT&T and Covad claim that the Commission\'s reasoning suffers from
several flaws. The first is statutory. Section 271, they point out,
requires the FCC to determine whether an applicant \"has fully
implemented the competitive checklist\" and denies the FCC the power to
\"limit or extend the terms used in the competitive checklist.\" 47
U.S.C. § 271(d)(3)(A)(i), (d)(4). According to appellants, the evidence
reveals systemic discrimination with respect to DSL loops, thus
precluding a finding that Bell Atlantic \"fully implemented\" the
competitive checklist.

Responding with a Chevron argument, the FCC contends that Congress has
not spoken to the \"precise question\" that appellants raise: Must the
Commission make a finding of nondiscriminatory access with respect to
each type of loop, or does the statute permit the agency to evaluate a
BOC\'s overall loop performance? The Commission argues that the statute
speaks generally of nondiscriminatory access to \"network elements\" and
\"local loop transmission,\" and that the statute nowhere unambiguously
requires it to make pass-fail evaluations of each category of loop.
According to the Commission, the fact that section 271 says \"fully
implemented,\" not \"substantially complied,\" does not answer the
question of what must be fully implemented.

We agree with the FCC that the statute is ambiguous with respect to the
precise issue before us. Section 271 does not say that an applicant must
show that it provides nondiscriminatory access to each category of loop
or to every single loop. The statute requires only that the BOC provide
\"\[n\]ondiscriminatory access to network elements\" (which include
local loops) and \"\[l\]ocal loop transmission.\" 47 U.S.C. §
271(c)(2)(B)(ii), (iv). It thus leaves open precisely what section
271\'s nondiscriminatory access requirement means. That the FCC may not
\"limit or extend the terms used in the competitive checklist,\" id. §
271(d)(4), changes nothing. The Commission neither \"limit\[ed\]\" nor
\"extend\[ed\]\" the term \"local loop transmission,\" nor did it
disregard any checklist item. Rather, it gave content to the statute by
defining nondiscriminatory access to unbundled local loops.

Because Congress has not spoken to the precise question at issue, we ask
whether the FCC reasonably interpreted section 271 to allow assessment
of an applicant\'s overall provisioning of loops, as opposed to
mandating pass-fail analysis with respect to DSL-capable loops. See
Chevron, 467 U.S. at 843. We think it did. To begin with, in reading the
term \"nondiscriminatory access\" not to require a separate showing with
respect to DSL-capable loops, the Commission relied on the same
characteristics of the DSL loop market that influenced its decision
regarding interim rates: \"competitors have been ordering xDSL-capable
loops in New York for a relatively short period of time; there has been
a recent surge in demand; and xDSL-capable loops remain a small
percentage of loop orders.\" Bell Atlantic, 15 F.C.C.R. at 4121 p 327.
In addition, the agency explained, \"\[p\]rovisioning xDSL loops to
competitors involves processes that are more complex than those involved
with the provision of a voice-grade loop.\" Id. at 4118 p 319. Moreover,
not only did the NYPSC institute proceedings to improve Bell Atlantic\'s
DSL performance, but the FCC might have been unable to complete its work
within the ninety-day statutory review period had it been required to
make separate determinations with respect to each and every type of
loop. As both the Commission and intervenors point out, there are many
different types of loops, including two-wire loops, four-wire loops,
analog loops, digital loops, fiber loops, and copper loops. See id. at
4095 p 268, 4097 p 275; Bell Atlantic and U S West\'s Br. at 5. There
are also \"countless uses to which loops can be put, including
residential service, business service, voice service, data service,
alarm service, and so on. Under \[appellants\'\] theory, each of these
different kinds and uses of loops could become independent checklist
items requiring stand-alone satisfaction.\" Id.

Our conclusion that the FCC\'s interpretation is reasonable rests, as
did the agency\'s decision, on the \"unique factual circumstances\"
presented by Bell Atlantic\'s application with respect to DSL loops:
demand for DSL loops had only recently surfaced, DSL loops constitute
but a small fraction of total loop orders, and provisioning DSL loops
involves technical difficulties not encountered in provisioning voice
grade loops. See Bell Atlantic, 15 F.C.C.R. at 4119 p 322. Unlike Bell
Atlantic, moreover, \"\[f\]uture applicants \... may have the benefit of
clearly-defined performance standards and verified performance data\....
\[and\] will have a clear picture of the evidentiary showing \[the FCC\]
would expect for a showing of checklist compliance with respect to
xDSL-capable loops.\" Id. at 4122 p 330 n.1032. We therefore expect, as
did the FCC, that as DSL-capable loops become a larger proportion of
unbundled loops, and as performance standards are developed, checklist
compliance will require \"a separate and comprehensive evidentiary
showing with respect to the provision of xDSL-capable loops.\" Id. at
4122 p 330.

That the Justice Department had a different view about DSL-capable loops
does not undermine the Commission\'s order. The FCC never disputed the
Justice Department\'s concerns about Bell Atlantic\'s provisioning of
DSL loops. Acknowledging those concerns, the Commission disagreed with
the Department about what section 271 required. Interpreting the
Telecommunications Act is the FCC\'s job, not the Justice Department\'s,
a proposition recognized by both Congress and the Department. See 47
U.S.C. § 271(d)(2)(A) (\"\[T\]he Attorney General\'s evaluation \...
shall not have any preclusive effect on any Commission decision\"); DOJ
Evaluation at 13 n.25 (\"We have examined these facts to assess their
impact on the development of competition in New York and have not,
however, attempted to determine whether they establish compliance with
the legal requirements of the competitive checklist or the Commission\'s
rules, matters which we leave for the Commission\'s judgment.\").

Appellants make one final argument about DSL loops. They claim the FCC
improperly relied on Bell Atlantic\'s promise\--made in an ex parte
submission shortly before the Commission approved its application\--to
establish a separate affiliate to provide retail advanced services, such
as DSL services. See Bell Atlantic, 15 F.C.C.R. at 4123 p 331 n.1036. In
support, they point to this sentence from the Commission\'s order: \"In
this case, we have further assurance that competing carriers in New York
will have nondiscriminatory access to xDSL-capable loops in the future
as a result of Bell Atlantic\'s commitment to establish a separate
affiliate through which it will offer retail advanced services.\" Id. at
4122-23 p 331. Notwithstanding this statement, the record does not
support appellants\' argument. The Commission rejected Covad\'s motion
to strike Bell Atlantic\'s ex parte submission, expressly stating that
it had not relied on it in approving the application. Id. at 3970 p 40.
The order itself, moreover, indicates that the Commission did not rely
on the Bell Atlantic submission. The order mentions the submission only
after concluding that the company provided nondiscriminatory access to
loops, and then only in the context of advising future applicants about
what they would need to do to obtain approval. Id. at 4122-23 WW 331-33.

Hot Cut Loops

When a customer changes its local service provider from Bell Atlantic to
a competitor, Bell Atlantic must perform a \"hot cut,\" \"manually
disconnecting the customer\'s loop in the Bell Atlantic central office
and reconnecting the loop at the competing carrier\'s collocation
space.\" Id. at 4122-23 p 291 n.925. \"The customer is taken out of
service while the hot cut is in progress, thereby making the cut
\'hot,\' although if the cut is successful, the service disruption will
last no more than five minutes.\" Id.

AT&T and Covad mount two challenges to the FCC\'s conclusion that Bell
Atlantic provisions hot cut loops in a nondiscriminatory manner. They
challenge both the standard the Commission used and the factual basis
for the agency\'s conclusion.

The FCC has developed two standards for determining whether BOCs provide
nondiscriminatory access to certain products or services, both of which
it has applied in prior section 271 proceedings. When considering
\"those functions the BOC provides to competing carriers that are
analogous to the functions a BOC provides to itself in connection with
its own retail service offerings\"\--i.e., those with retail
analogues\--the Commission asks whether the BOC has \"provide\[d\]
access that is equal to \... the level of access that the BOC provides
itself, its customers, or its affiliates, in terms of quality, accuracy,
and timeliness.\" Id. at 3971 p 44. With respect to functions lacking
retail analogues, the Commission looks \"to whether the BOC\'s
performance offers an efficient competitor a meaningful opportunity to
compete.\" Id. at 4095 p 269. Because provisioning hot cuts has no
retail analogue, the FCC applied the \"meaningful opportunity to
compete\" standard to Bell Atlantic\'s hot cut performance. Id.

Use of this standard was erroneous, appellants contend. \"The FCC should
have required Bell Atlantic to prove that it was providing hot cuts with
the least amount of service disruption and missed appointments that is
technically and commercially feasible.\" Appellants\' Br. at 45.
Appellants derive this standard in the following way. They begin with
Rule 311(b), which governs functions having retail analogues: \"to the
extent technically feasible,\" the rule says, BOCs must provide access
to network elements at the same level of quality as they provide to
their own customers. 47 C.F.R. § 51.311(b). Appellants argue that Rule
311(b) applies to hot cuts because the FCC said in the order approving
Bell Atlantic\'s application that the standard for compliance absent
retail analogues (as in the case of hot cuts) is no weaker than the
standard where there are retail analogues. Accordingly, they argue, the
meaningful opportunity to compete standard employed in the former
scenario must include a requirement that the BOC take all technically
feasible steps to provision hot cut loops. Appellants also contend that
their standard is compelled by the statute\'s requirement that BOCs
provide nondiscriminatory access to local loops.

We are unconvinced. Applying to obligations that have retail analogues,
Rule 311(b) has nothing to do with obligations, like hot cut
provisioning, that have no such analogue. As the FCC points out, the
meaningful opportunity standard \"is neither stronger nor weaker than
the standard for functions with retail analogues. It is simply
different, because it requires an objective level of performance rather
than a level that varies with each carrier\'s individual retail
performance.\" Appellee\'s Br. at 33. Appellants thus may not import
Rule 311(b)\'s \"technically feasible\" requirement into the meaningful
opportunity to compete standard. Section 271\'s \"nondiscriminatory\"
requirement, moreover, is not self-defining. While appellants\'
definition is plausible, the Commission interprets the word differently,
and it is to the Commission that we owe deference.

Applying the meaningful opportunity standard, the FCC determined that
Bell Atlantic made \"a minimally acceptable showing\" of checklist
compliance with respect to hot cuts. Bell Atlantic, 15 F.C.C.R. at 4115
p 309. It found that the company completed over ninety percent of hot
cuts within a specified period of time, that fewer than five percent
resulted in service outages, and that fewer than two percent of hot cut
lines reported installation troubles. Id. at 4114-15 p 309. Appellants
advance several challenges to this conclusion. Our review is pursuant to
the arbitrary and capricious standard. See 5 U.S.C. § 706(2)(A).

Appellants first argue that the FCC failed to give \"substantial
weight,\" 47 U.S.C. § 271(d)(2)(A), to the Justice Department\'s finding
that \"the number and magnitude of the deficiencies \[in Bell
Atlantic\'s hot cut provisioning\] are imposing a real constraint on
competition through the use of unbundled loops and that significant
improvement is needed in this area,\" DOJ Evaluation at 20. We disagree
with appellants. The Commission\'s analysis and the Justice
Department\'s evaluation rested on the same factual findings\--those
made by the NYPSC\--but differed over the standard a BOC must meet to
satisfy the statute. As the Justice Department itself explained: \"Our
assessment of the facts regarding Bell Atlantic\'s wholesale performance
is substantially consistent with the NYPSC\'s assessment\.... To the
extent there is a difference between the Department\'s judgment and that
of the NYPSC, it arises largely from the Department\'s conclusion that
needed improvements should be achieved before Bell Atlantic is
authorized to provide \[long distance service\] in New York, rather than
relying on post-271 approval regulatory mechanisms to attempt to ensure
such improvements.\" Id. at 13-14 (footnote omitted). Moreover, the
Department explained: \"We have examined these facts to assess their
impact on the development of competition in New York and have not,
however, attempted to determine whether they establish compliance with
the legal requirements of the competitive checklist or the Commission\'s
rules, matters which we leave for the Commission\'s judgment.\" Id. at
13 n.25.

The Commission and the Justice Department thus disagreed only about
where to draw the line between acceptable and unacceptable hot cut
performance. The Commission was satisfied with Bell Atlantic\'s level of
performance; the Department was not. As the Department recognized,
line-drawing is the agency\'s responsibility. Congress required only
that the FCC give the Department\'s evaluation \"substantial weight,\"
admonishing that the evaluation should not have \"preclusive effect.\"
47 U.S.C. § 271(d)(2)(A). To accept appellants\' argument\--particularly
where the Justice Department and the FCC agreed on the facts but
disagreed about the law\--would give the Department\'s evaluation
precisely such preclusive effect.

AT&T and Covad next argue that the FCC failed to give \"substantial
weight\" to the Justice Department\'s conclusion that Bell Atlantic\'s
hot cut deficiencies had reduced competition in the New York market. But
as the Commission noted in the order approving the company\'s
application, \"the Department did not specify in what manner and to what
extent the New York local exchange market is affected adversely by these
problems. Nor did the Department provide any indication as to what level
of hot cut performance or what types of improvements Bell Atlantic
should be required to demonstrate in order to satisfy section 271.\"
Bell Atlantic, 15 F.C.C.R. at 4108 p 297. To be sure, the FCC conducted
no detailed analysis of the effect on competition, relying instead on
industry-approved metrics (such as on-time performance and service
outages) to conclude that Bell Atlantic provided competitors with a
meaningful opportunity to compete. The Commission certainly could have
undertaken its own competition studies, but given that it is the
agency\'s responsibility to determine precisely how to measure whether
an applicant provides nondiscriminatory access to local loops, we find
its reliance on industry-approved metrics neither arbitrary nor
capricious.

Appellants also contend that the FCC failed to provide reasoned support
for its conclusion that Bell Atlantic met the Commission\'s performance
targets. Noting that the NYPSC advocated a ninety-five percent on-time
performance rate, they claim that the Commission failed to support its
determination that a ninety percent rate represents a meaningful
opportunity to compete. As the FCC points out, however, the NYPSC also
said that a ninety percent rate cannot be considered discriminatory.
Appellee\'s Br. at 35. Equally important, the Commission has wide
discretion to determine where to draw administrative lines, and
appellants point to nothing suggesting that the agency abused its
discretion in drawing the line at ninety as opposed to ninety-five
percent. See Department of Health and Human Svcs., Indian Health
Service, Oklahoma City v. FLRA, 885 F.2d 911, 917 (D.C. Cir. 1989)
(\"Because of the need for expertise and judgment, the drawing of the
lines between \[competing proposals\] is ultimately within the
jurisdiction of the \[agency\], which has been vested by Congress with
administration of the statute, whose decision must be sustained absent
arbitrary action.\"). The same principle refutes appellants\' challenge
to the Commission\'s conclusion that Bell Atlantic satisfactorily
performed hot cuts with minimal service outages (five percent) and
installation troubles (two percent).

AT&T and Covad next argue that the FCC\'s conclusion that fewer than
five percent of customers suffered service outages caused by Bell
Atlantic rests on a legal error, i.e., that the five percent figure did
not include service outages where fault could be attributed to neither
Bell Atlantic nor AT&T. Because Bell Atlantic bears the burden of
establishing that it has satisfied the competitive checklist, appellants
argue, the FCC must assume that the company caused the outages of
unattributed origin, raising its error rate to 6.5 percent. But how does
attributing outages of unknown origin to Bell Atlantic follow
automatically from the proposition that the company has the burden of
proof? Appellants never explain this connection. Moreover, we find no
reason to disturb the Commission\'s judgment that Bell Atlantic
satisfied its burden of proof. The company offered evidence about the
number of service outages, which AT&T attempted to rebut with its own
data. Relying on an NYPSC reconciliation of this conflicting data, the
FCC concluded that many of the outages cited by AT&T could not fairly be
attributed to Bell Atlantic. See Bell Atlantic, 15 F.C.C.R. at 4110-11
pp 302-03. The outages-of-unknown-origin problem thus represents a
failure of AT&T\'s rebuttal evidence, not of Bell Atlantic\'s proof.

Equally unpersuasive is appellants\' argument that \"it was absurd for
the FCC to find that CLECs have nondiscriminatory access to unbundled
loops when unrebutted evidence showed that more than 10 percent of CLEC
loop orders result in dropped \[directory\] listings.\" Appellants\' Br.
at 54. The Commission responded to this argument in the order approving
Bell Atlantic\'s application, stating: \"We find that Bell Atlantic has
taken adequate measures to detect any dropped listings and restore them
to the directory assistance database promptly. No other commenter raises
this objection, suggesting the difficulty is of little competitive
consequence. In fact, several parties support Bell Atlantic\'s assertion
of compliance with this checklist item.\" Bell Atlantic, 15 F.C.C.R. at
4134 p 355 (footnote omitted). Acknowledging that the Justice
Department, relying on an AT&T study, had expressed concern about
directory listings, the Commission explained that the Department \"did
not have the benefit of Bell Atlantic\'s reply \[to AT&T\'s study\],
which we believe sufficiently rebuts AT&T\'s claims.\" Id. at 4134 p
356. Although the Commission did not document all problems with AT&T\'s
study, its conclusion finds sufficient support in the record and is
neither arbitrary nor capricious.

IV

We turn to AT&T\'s challenge to the use restrictions Bell Atlantic
places on certain combinations of network elements. Bell Atlantic and
its competitors use network elements to provide two types of
telecommunications services: exchange services, which subscribers use to
make calls within local exchange areas (local calls), and exchange
access services, which long distance carriers use to originate and
terminate long distance calls. Adhering to an NYPSC policy, Bell
Atlantic prohibits competing carriers from using a certain combination
of unbundled network elements\--a combination of loop and transport
known as the enhanced extended link or \"EEL\"\--to provide exchange
access (long distance) services unless those carriers use those elements
primarily to provide exchange (local) services. In other words, Bell
Atlantic denies EEL access to carriers seeking to use them either
exclusively or predominately for long distance service; those carriers
must instead provide long distance service as they had before the 1996
Act\--by purchasing special access services from Bell Atlantic. Special
access charges for those services exceed what competitive carriers like
AT&T would have to pay to lease EELs. Thus this dispute.

The Commission originally considered these use restrictions in its Local
Competition First Report and Order, finding them to violate section
251(c)(3)\'s requirement that BOCs \"provide such unbundled network
elements in a manner that allows requesting carriers to combine such
elements in order to provide such telecommunications service.\" 47
U.S.C. § 251(c)(3). Because long distance service is a
\"telecommunications service,\" the FCC reasoned, BOCs must provide
access to network elements to carriers wishing to use them to provide
long distance as well as local service. \"Although we conclude \... that
we have discretion under the 1934 Act, as amended by the 1996 Act, to
adopt a limited, transitional plan to address public policy concerns
raised by the bypass of access charges via unbundled elements,\" the FCC
explained, \"we believe that our interpretation of section 251(c)(3)
\... is compelled by the plain language of the 1996 Act.\" Local
Competition First Report and Order, 11 F.C.C.R. at 15679 p 356.

In 1999, the Supreme Court vacated the rule listing the network elements
BOCs must provide to competitors, see Iowa Util. Bd., 119 S. Ct. 721,
leading the Commission to reconsider its position with respect to EEL
access. As part of the process of developing new unbundled network
element rules, the Commission issued a Supplemental Order expressly
authorizing\--indeed, mandating\--the use restrictions that appellants
challenge here. Issued approximately one month before the FCC approved
Bell Atlantic\'s application, the Supplemental Order provides:

> \[U\]ntil resolution of our Fourth \[Further Notice of Proposed
> Rulemaking\], which will occur on or before June 30, 2000,
> interexchange carriers (IXCs) may not convert special access services
> to combinations of unbundled loops and transport network elements\....
> This constraint does not apply if an IXC uses combinations of
> unbundled network elements to provide a significant amount of local
> exchange service, in addition to exchange access service, to a
> particular customer.

In the Matter of Implementation of the Local Competition Provisions of
the Telecommunications Act of 1996, 15 F.C.C.R. 1760, 1760 p 2 (1999)
(\"Supplemental Order\") (emphasis added), clarified, In the Matter of
Implementation of the Local Competition Provisions of the
Telecommunications Act of 1996, FCC No. 00-183 (June 2, 2000)
(\"Supplemental Order Clarification\"). In other words, the Commission
mandated these use restrictions on an interim basis. In a Supplemental
Order Clarification, released June 2, 2000, the Commission extended the
temporary constraint beyond June 30, \"while we compile an adequate
record \... for addressing the legal and policy issues that have been
raised.\" Supplemental Order Clarification at p 8.

Acknowledging that it had changed its position, the FCC explained that
the interim rule \"is consistent with the Commission\'s finding in the
Local Competition First Report and Order, that we may, where necessary,
establish a temporary transitional mechanism to help complete all of the
steps toward the pro-competitive goals of the 1996 Act, including the
full implementation of a competitively-neutral system to fund universal
service and a completed transition to cost-based access charges.\"
Supplemental Order, 15 F.C.C.R. at 1763 p 7. Under the Commission\'s
universal service program, local telephone service in high-cost areas is
subsidized by incumbent LEC exchange access revenue. The FCC was
concerned that if it allowed carriers to bypass special access charges
by using network elements to provide their own exchange access, LEC
exchange access revenue would decline, thus threatening universal
service funding.

In comments opposing Bell Atlantic\'s application (submitted before
promulgation of the Supplemental Order), AT&T, relying on the same
reasons the FCC gave in the Local Competition First Report and Order,
contended that these use restrictions are unlawful, precluding the
Commission\'s finding that Bell Atlantic provided \"nondiscriminatory
access to network elements in accordance with the requirements of
sections 251(c)(3) and 252(d)(1).\" 47 U.S.C. § 271(c)(2)(B)(ii). The
Commission responded in the order approving Bell At-

lantic\'s application:

> In the wake of the Supreme Court\'s January 25, 1999 decision vacating
> the Commission\'s Rule 51.319 that identified the network elements
> incumbent LECs are required to provide on an unbundled basis, and
> prior to adoption of our order reinstating that rule, the incumbents\'
> obligations with regard to offering unbundled network elements or
> combinations thereof has been unclear.

Bell Atlantic, 15 F.C.C.R. at 4080 p 236 (citing Iowa Util. Bd., 119 S.
Ct. 721). \"Given this vacuum,\" the FCC reasoned, \"it would be
inequitable to penalize Bell Atlantic for complying with the rules
established by the New York Commission,\" which permit these use
restrictions. Id. The Commission also relied on its determination in the
Supplemental Order that the imposition of use restrictions on an interim
basis was lawful. See id.

Renewing its argument here, AT&T claims that Bell Atlantic\'s use
restrictions violate section 251(c)(3). According to AT&T, the
Supplemental Order is unlawful and Bell Atlantic\'s imposition of use
restrictions precludes a finding of checklist compliance. The FCC
responds that compliance with Commission orders cannot serve as a basis
for rejecting an application. The reason, the FCC explains, is that the
statute does not permit appellants in section 271 proceedings to
collaterally attack orders or rules adopted by the Commission in other
proceedings. Calling its position \"prudent,\" the Commission further
argues that \"any such challenge could be brought only through a
petition for review of the Supplemental Order itself, see 47 U.S.C § 402
(a), not as a collateral attack on this section 271 appeal, see 47
U.S.C. § 402 (b)(6), (9).\" Appellee\'s Br. at 40. \"Because the
Supplemental Order must be deemed lawful for purposes of this case,\"
the Commission concludes, \"Bell Atlantic\'s use restrictions cannot be
a basis for challenging its section 271 authorization.\" Id.

Since this issue presents a straightforward question of statutory
construction, we again invoke Chevron. Under Chevron step one, the
\"precise question\" is this: In a section 271 proceeding, may an
applicant\'s compliance with a collateral order provide the basis for a
finding that the applicant has not \"fully implemented the competitive
checklist\"? 47 U.S.C. § 271(d)(3)(A)(i). Put another way, does the
statute require the Commission in section 271 proceedings to entertain
challenges to orders adopted in other proceedings? We cannot see how
section 271(d)(3)(A)(i) speaks unambiguously to this issue. The section
says nothing about what full implementation requires, nor whether the
Commission can interpret it as being satisfied by compliance with agency
orders.

The question, then, is whether the FCC\'s interpretation of section
271(d)(3)(A)(i) is reasonable. See Chevron, 467 U.S. at 843. The
Commission based its interpretation on the \"very unfortunate practical
consequences\" that would result from adopting AT&T\'s interpretation of
the statute. Appellee\'s Br. at 41. Under that interpretation, during
the ninety-day statutory review period the FCC would have to resolve all
collateral challenges to rules and orders issued in other proceedings,
and then defend its decision in a section 271 appeal to this court.
According to the Commission, this would risk converting \"precisely
focused, extremely expedited\" section 271 \"adjudications, as well as
this Court\'s subsequent review proceedings, into forums for the
mandatory resolution of major industry-wide issues already pending in
traditional notice-and-comment rulemaking proceedings.\" Id.

Given the deference we owe the Commission, particularly where, as here,
it has made a judgment about the most efficient way to proceed in a
complex administrative matter, we find its interpretation of the statute
reasonable. The Commission\'s concerns about encumbering the ninety-day
administrative process and prolonging litigation, thus delaying BOC
entry into long distance markets, seem well-founded. Under AT&T\'s
interpretation of the statute, parties to section 271 proceedings could
challenge (before both the Commission and this court) virtually every
aspect of the agency\'s local competition regulations\--including
TELRIC, as AT&T counsel conceded at oral argument. Such a challenge
would further complicate these already enormously complex proceedings,
requiring the Commission, in addition to resolving the many other issues
before it, to present a comprehensive defense of TELRIC, all within the
ninety days prescribed by the statute. We would then have to determine
whether TELRIC was the appropriate pricing methodology, and in doing so
we would create a holding that would supplant any pending petitions for
review of the underlying TELRIC orders, at least in this circuit. We
thus agree with the FCC that allowing collateral challenges could change
the nature of section 271 proceedings from an expedited process focused
on an individual applicant\'s performance into a wide-ranging,
industry-wide examination of telecommunications law and policy.

Perhaps allowing substantive challenges to collateral orders would
result in speedier realization of competitive local and long distance
telephone markets. But the FCC has a different view, and this being a
policy judgment, it is for the agency\--not this court\--to make.
\"Congress quite clearly gave the Commission the primary responsibility
to make delicate judgments under this statute\....\" SBC Communications,
138 F.3d at 421. We are particularly comfortable deferring to the
Commission\'s judgment because the agency adopted the Supplemental Order
only as \"a limited, transitional plan to address public policy
concerns, relating to universal service, raised by the bypass of access
charges via unbundled elements.\" Cf. Competitive Telecommunications
Ass\'n v. FCC, 117 F.3d 1068, 1073-75 (8th Cir. 1997) (\"CompTel\").

We do not agree with AT&T that AT&T v. FCC, 978 F.2d 727 (D.C. Cir.
1992) requires a different result. There, AT&T filed a section 208
complaint challenging a competitor\'s failure to file a tariff in
violation of the Communications Act. The Commission, acknowledging that
this court had invalidated a previous order exempting nondominant
carriers from filing tariffs, deferred consideration of the \"validity\"
of the policy to a future rulemaking and dismissed AT&T\'s complaint.
Id. at 731. Calling the Commission\'s action an \"administrative law
shell game,\" id. at 732, we found the dismissal of AT&T\'s complaint
\"with only a promise to address the legal issue it raised in a future
rulemaking\" to be arbitrary and capricious, id. at 733.

AT&T differs from this case in a fundamental respect. Unlike there,
where the Commission dismissed AT&T\'s section 208 complaint, here the
Commission fully considered AT&T\'s challenges to the Commission\'s
approval of Bell Atlantic\'s section 271 application. Although the
Commission declined to consider AT&T\'s challenge to the Supplemental
Order, there is no evidence that its reason for doing so was, as in
AT&T, a desire to \"avoid judicial review\" motivated by a \"fear\[ \]
\... \[that the order\] cannot withstand judicial scrutiny.\" Id. at
731. Instead, the Commission relied on its view\--reasonable, we have
held\--that section 271 does not permit collateral challenges to
Commission orders. AT&T could have challenged the Supplemental Order by
filing a petition for review pursuant to 47 U.S.C. § 402(a). In fact,
this is exactly what Bell Atlantic and other BOCs did when challenging
the TELRIC methodology\--they filed a petition for review of the Local
Competition First Report and Order, which the Eighth Circuit resolved
just days ago. See Iowa Util. Bd. v. FCC, No. 96-3321 (8th Cir. July 18,
2000). AT&T may still be able to challenge the Supplemental Order by
filing a section 208 complaint when Bell Atlantic actually refuses to
permit it to use EELs to provide long distance service. Thus this case
involves neither an \"administrative law shell game\" nor a \"promise to
address the legal issue \... in a future rulemaking.\" Id. at 732-33.

A final note. The parties debate the implications of CompTel, 117 F.3d
at 1073-75. The FCC argues that the decision supports the interim
restrictions authorized by the Supplemental Order. AT&T thinks that
CompTel was wrongly decided. We need not resolve that debate because the
lawfulness of the Supplemental Order is not a proper subject of this
section 271 proceeding.

V

This brings us to AT&T\'s final challenge to the Commission\'s order. In
Bell Atlantic\'s section 271 application, the company stated its
intention to market its affiliate\'s long distance service to customers
who call Bell Atlantic to establish or change their existing local
service. Bell Atlantic explained that when it receives calls relating to
local service, it will mention its affiliate\'s long distance service,
then offer to read the names of other long distance carriers in random
order.

AT&T claims that Bell Atlantic\'s practice violates section 272(c)(1),
which prohibits BOCs from discriminating between their long distance
affiliate and other providers of long distance service. See 47 U.S.C. §
272(c)(1). Section 272(g)(2), however, expressly permits BOCs to engage
in joint marketing. See id. § 272(g)(2). Under section 272(g)(3),
moreover, \"\[t\]he joint marketing and sale of services permitted under
this subsection shall not be considered to violate the nondiscrimination
provisions of subsection (c) of this section.\" Id. § 272(g)(3). We read
this provision to exempt joint marketing activities from section
272(c)(1)\'s nondiscrimination requirement. It is true, as AT&T points
out, that section 272(g)(3) is titled \"Rule of construction,\" but we
do not see how this alters its clear implications.

AT&T also argues that prior to the 1996 Act the FCC required BOCs to
read the names of available long distance carriers in alphabetical
order, showing favoritism to none. According to AT&T, because section
251(g) requires BOCs to adhere to all pre-Act nondiscrimination
requirements until \"explicitly superseded by regulations prescribed by
the Commission,\" 47 U.S.C. § 251(g), BOCs may not deviate from the
prior practice of reading the list of all long distance carriers,
including themselves, in alphabetical order. The Commission persuasively
responded to this issue in its 1997 Order denying BellSouth\'s South
Carolina application:

> \[T\]he equal access obligations requiring BOCs to provide the names
> and telephone numbers of interexchange carriers in random order were
> written at a time when BOCs could not provide (and therefore could not
> market) long distance services. Now that BOCs \... are permitted under
> the Act to market their services jointly, we must harmonize the
> existing equal access requirements with the right under the Act to
> engage in joint marketing.

In the Matter of Application of BellSouth Corp., 13 F.C.C.R. at 671 p
238 (footnote omitted).

VI

Approving a section 271 application requires a delicate judgment about
the current state of competition in local markets, as well as how best
to foster future competition. The FCC must ensure\--as it has in five
previous cases\--that BOCs failing to comply with the 1996 Act\'s local
competition provisions are not allowed to provide long distance service.
The Commission must be equally careful to ensure\--as it has in this
case\--that BOCs that satisfy the statute\'s requirements are not barred
from long distance markets. \"Setting the bar for statutory compliance
too high would inflict two quite serious harms,\" as the FCC points out.
Appellee\'s Br. at 11. \"First, it would dampen every BOC\'s incentive
to cooperate closely with state regulators to open its local markets to
full competition\.... Second, setting the bar too high would
simultaneously deprive the ultimate beneficiaries of the 1996
Act\--American consumers\--of a valuable source of price-reducing
competition in the long distance market.\" Id.

We believe that the Commission set the bar at a reasonable height. It
demanded real evidence that Bell Atlantic had complied with all
checklist requirements, but at the same time, it did not allow \" \'the
infeasible perfect to oust the feasible good.\' \" Edison Elec. Inst. v.
ICC, 969 F.2d 1221, 1227 (D.C. Cir. 1992) (quoting Commonwealth of
Pennsylvania v. ICC, 535 F.2d 91, 96 (D.C. Cir. 1976)). Given the
evidence of growing competition in the New York local telephone market,
see supra at 9-10, the NYPSC\'s careful work on a host of technical and
complex issues, and the thorough analysis conducted by the FCC in the
limited time permitted by section 271(c), we find no basis for faulting
the Commission\'s conclusion that Bell Atlantic satisfied the statute\'s
requirements for entry into the long distance telephone market.

The Commission\'s order approving Bell Atlantic\'s application is
affirmed.

So ordered.