[]{#__RefHeading___Toc533572505 .anchor}Before the

**Federal Communications Commission**

**Washington, D.C. 20554**

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| In the Matter of                 | * | CC Docket No. 01-337         |
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| Broadband Telecommunications     | * |                              |
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[]{#__RefHeading___Toc533572506 .anchor}NOTICE OF PROPOSED RULEMAKING

**Adopted: December 12, 2001 Released: December 20, 2001**

# Comment Date: 45 Days After Publication in the Federal Register {#comment-date-45-days-after-publication-in-the-federal-register .Appendix-Heading}

# Reply Date: 30 Days After Comment Date {#reply-date-30-days-after-comment-date .Appendix-Heading}

By the Commission: Chairman Powell and Commissioner Copps issuing
separate statements.

TABLE OF CONTENTS

Paragraph

Before the [1](#__RefHeading___Toc533572505)

NOTICE OF PROPOSED RULEMAKING [1](#__RefHeading___Toc533572506)

Comment Date: 45 Days After Publication in the Federal Register
[1](#comment-date-45-days-after-publication-in-the-federal-register)

Reply Date: 30 Days After Comment Date
[1](#reply-date-30-days-after-comment-date)

I. INTRODUCTION [2](#introduction)

II\. Background [5](#background)

A. Streamlining Regulation of Firms in Increasingly Competitive Markets
[6](#streamlining-regulation-of-firms-in-increasingly-competitive-markets)

B. Competitive Safeguards to Ensure Competition in Related Markets
[8](#competitive-safeguards-to-ensure-competition-in-related-markets)

III\. Identification of Incumbent LEC-Provided Broadband Services
Markets
[11](#identification-of-incumbent-lec-provided-broadband-services-markets)

A. Relevant Product Market [12](#relevant-product-market)

B. Relevant Geographic Market [16](#relevant-geographic-market)

C. Market Power Analysis [16](#market-power-analysis)

IV\. Appropriate Regulatory REQUIREMENTS
[19](#appropriate-regulatory-requirements)

A. Overview [19](#overview)

B. Existing Regulatory Structure [20](#existing-regulatory-structure)

C. Alternative Requirements [21](#alternative-requirements)

V. PRocedural Matters [25](#procedural-matters)

*A.* *Ex Parte* Presentations [25](#ex-parte-presentations)

B. Comment Filing Procedures [26](#comment-filing-procedures)

C. Initial Regulatory Flexibility Analysis
[27](#initial-regulatory-flexibility-analysis)

1\. Need for, and Objectives of, the Proposed Rules
[28](#need-for-and-objectives-of-the-proposed-rules)

2\. Legal Basis [28](#legal-basis)

3\. Description and Estimate of the Number of Small Entities to Which
the Proposed Rules will Apply
[28](#description-and-estimate-of-the-number-of-small-entities-to-which-the-proposed-rules-will-apply)

4\. Description of Projected Reporting, Recordkeeping and Other
Compliance Requirements
[30](#description-of-projected-reporting-recordkeeping-and-other-compliance-requirements)

5\. Steps Taken to Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
[30](#steps-taken-to-minimize-significant-economic-impact-on-small-entities-and-significant-alternatives-considered)

6\. Federal Rules that May Duplicate, Overlap, or Conflict with the
Proposed Rules
[31](#federal-rules-that-may-duplicate-overlap-or-conflict-with-the-proposed-rules)

VI\. Ordering CLAUSEs [31](#ordering-clauses)

SEPARATE STATEMENT OF CHAIRMAN MICHAEL K. POWELL
[1](#__RefHeading___Toc533572532)

SEPARATE STATEMENT OF [1](#__RefHeading___Toc533572533)

COMMISSIONER MICHAEL J. COPPS [1](#__RefHeading___Toc533572534)

*Re:* *Review of the Section 251 Unbundling Obligations of Incumbent
Local Exchange Carriers, Notice of Proposed Rulemaking; and Review of
Regulatory Requirements for Incumbent LEC Broadband Telecommunications
Services, Notice of Proposed Rulemaking.*
[1](#__RefHeading___Toc533572535)

# INTRODUCTION

1.  In this proceeding, we initiate an examination of the appropriate
    regulatory requirements for the incumbent local exchange carriers'
    (LECs') provision of domestic broadband telecommunications services
    ("broadband services"). Here, we focus on traditional Title II
    common carrier regulation, historically arising largely out of
    sections 201 and 202 of the Communications Act of 1934, as
    amended,[^1] as applied to incumbent LEC provision of broadband
    services.[^2] In particular, we seek comment on what regulatory
    safeguards and carrier obligations, if any, should apply when a
    carrier that is dominant in the provision of traditional local
    exchange and exchange access services provides broadband service.
    This is one of several proceedings addressing issues raised by
    changes in the marketplace for broadband services and related
    information services.

2.  Three of these proceedings, including this one, focus, among other
    things, on regulatory treatment under Title II of broadband services
    and the facilities over which they are provided. More specifically,
    in the Title II proceedings, we are initiating a broad review of our
    competition policies in light of our experience since first
    implementing the market opening provisions of the Act and
    developments in the marketplace such as the birth of broadband
    services. In addition to the present proceeding, we initiate a
    related Title II proceeding today in a companion Notice of Proposed
    Rulemaking (NPRM) in the *Triennial UNE Review* proceeding. That
    proceeding addresses, among other things, incumbent LECs' wholesale
    obligations under section 251 to make their facilities available as
    unbundled network elements (UNEs) to competitive carriers for the
    provision of broadband services.[^3] The Commission recently
    released two additional NPRMs that address national performance
    measurements and standards.[^4]

3.  The fourth proceeding, to be initiated by the Commission in the near
    future, will address the basic question of how broadband services
    offered by wireline telecommunications providers should be
    classified under the Communications Act when bundled with
    information services, in particular whether such bundled offerings
    should be classified as Title I services.[^5] The present proceeding
    does not seek to answer these definitional questions with respect to
    bundled offerings, but instead focuses on the appropriate regulation
    of broadband offerings that are regulated under Title II of the
    Act.[^6]

4.  The world of telecommunications is changing dramatically, with
    broadband services assuming an increasingly critical role in our
    economy and our everyday lives. The basic elements of the existing
    regulatory requirements for the provision of broadband services by
    incumbent LECs were initially developed in a prior era of
    circuit-switched, analog voice services characterized by a one-wire
    world for access to communications. Historically, consumers have
    only been able to access telecommunications services through the
    wireline facilities installed by their local telephone company.
    Today, the services provided by different communications networks
    are converging, as cable providers, satellite providers, and
    terrestrial wireless network providers develop new services that are
    becoming increasingly substitutable for the broadband services
    provided over the traditional telephone network.[^7] At the same
    time, the provision of broadband services to residential customers
    is a nascent market, and enormous new investment and innovation will
    be required if we are to realize the full promise of broadband
    deployment. As such, much is unknown about consumer demand for
    services such as DSL and the incentive and ability of dominant
    carriers to exercise market power in the broadband market. Thus, we
    initiate this proceeding to consider what changes, if any, we should
    make in our traditional regulatory requirements to reflect the
    relevant competitive landscape and create the right incentives for
    broadband services growth and investment.

5.  As discussed in more detail below, under existing domestic common
    carrier regulation, incumbent local exchange carriers are generally
    treated as dominant carriers, absent a specific finding to the
    contrary for a particular market.[^8] As dominant domestic carriers,
    incumbent LECs are subject to tariff filing, tariff support and
    pricing requirements.[^9] The present broadband services market
    differs from the historic market for the provision of analog voice
    services in which traditional common carrier regulation arose. In
    particular, the one-wire world for customer access appears to no
    longer be the norm in broadband services markets as the result of
    the development of intermodal competition among multiple platforms,
    including DSL, cable modem service, satellite broadband service, and
    terrestrial and mobile wireless services.

6.  The Commission has addressed the role of continued regulation as
    competition develops in other contexts, such as traditional long
    distance service. The issues presented in this proceeding are
    different and more challenging than those in the prior Commission
    proceedings, however. This is due to the fact that the incumbent LEC
    local exchange plant is used to provide services with very different
    competitive characteristics. For example, broadband services are
    often provided over certain of the same facilities as other local
    exchange and exchange access services. At the same time, residential
    broadband services, such as DSL, while still a nascent market,
    generally appear to be subject to significant intermodal
    competition, while traditional access services that may be provided
    over these same facilities are generally subject to much less
    competition.

7.  In this proceeding, we seek comment on the nature and scope of the
    market for domestic broadband services.[^10] We also seek comment on
    the relevant market dynamics -- including intermodal competition and
    the nascent stage of market development for residential broadband
    services -- affecting the provision of domestic broadband services.
    Finally, we request comment on the appropriate regulatory
    requirements under Title II of the Act for the provision of
    broadband services by incumbent LECs given current market
    conditions. In particular, we ask interested parties to address how
    the Commission can best balance the goals of encouraging broadband
    investment and deployment, fostering competition in the provision of
    broadband services, promoting innovation, and eliminating
    unnecessary regulation. As part of this proceeding, we also invite
    comment on the Petition filed by SBC Communications on October 3,
    2001, requesting an expedited ruling that it is non-dominant in the
    provision of broadband services, and asking the Commission to
    forbear from dominant carrier regulation of those services.[^11]

# Background

8.  For most of the twentieth century, telephony was viewed as a natural
    monopoly that required regulation. The primary concern of regulators
    at that time was to prevent incumbent monopolists from exploiting
    their market power at the expense of regulated ratepayers.[^12] As
    competition was introduced into former monopoly markets, it was
    recognized that regulation would need to be modified to account for
    this introduction of competition. Thus, the Commission initiated a
    series of proceedings to streamline the regulation of carriers that
    lacked market power, and for whom monopoly regulation was
    unnecessary. While the Commission initially focused its streamlining
    efforts on new entrants that lacked individual market power, it
    later moved to reduce regulation of former monopoly carriers as
    competition eroded their market power. At the same time that the
    Commission was reducing certain forms of regulation that competition
    rendered unnecessary, it also recognized the need to prevent
    incumbent carriers possessing market power in one market from
    leveraging that market power into a related, competitive or
    potentially competitive market. Accordingly, the Commission adopted
    a variety of competitive safeguards that were intended to prevent
    such leveraging. We summarize the various regulatory requirements
    the Commission has developed in the past below. As discussed more
    fully in Section IV, we ask parties to comment on whether any of the
    regulatory tools developed in these proceedings has relevance for
    the Commission's regulatory approach to incumbent LEC-provided
    broadband services.

## Streamlining Regulation of Firms in Increasingly Competitive Markets

9.  Between 1979 and 1985, the Commission conducted the *Competitive
    Carrier* proceeding,[^13] which examined how Commission regulations
    should be adapted for new firms entering formerly monopolistic
    markets.[^14] In a series of orders, the Commission distinguished
    two kinds of carriers -- those with market power (dominant carriers)
    and those without market power (non-dominant carriers).[^15] The
    Commission sought to reduce regulation of new competitive entrants,
    which it had classified as non-dominant, on the ground that, because
    they lacked market power, they could not impose the kinds of harms
    much of existing regulation was intended to prevent. Thus, the
    Commission eliminated rate regulation of non-dominant carriers,
    reduced existing tariff filing requirements, and lightened the
    section 214 obligations imposed on non-dominant carriers.[^16] In
    addition, it found that it was unnecessary to subject non-dominant
    carriers to the same accounting regulations that applied to dominant
    carriers.

10. As competition developed in the interstate, interexchange market,
    the Commission initiated the *Interstate Interexchange* proceeding
    to consider whether it was in the public interest to streamline the
    regulation of the sole dominant interexchange carrier, AT&T. [^17]
    Based on its review, the Commission found that certain services
    provided by AT&T had become "substantially competitive."[^18]
    Accordingly, it streamlined the regulation of those services
    provided by AT&T.

11. Despite this streamlining, AT&T remained classified as a dominant
    carrier with respect to the interstate interexchange market and
    continued to be subject to price cap regulation for certain
    services, including those provided to residential customers.
    Consequently, AT&T in 1993 filed a motion seeking to be
    re-classified as a non-dominant carrier in the interstate, domestic,
    interexchange market and to be regulated in the same manner as its
    competitors.[^19] In the *AT&T Reclassification Order*, the
    Commission found that AT&T no longer possessed individual market
    power in the interstate, interexchange market, and it accordingly
    reclassified AT&T as non-dominant.[^20] Significantly, the
    Commission also found that continued dominant carrier regulation
    stifled AT&T's ability to compete, which in turn could inhibit the
    growth of competition in the interstate, interexchange market.[^21]

12. More recently, as competition in the provision of interstate access
    services increased, the Commission recognized that many incumbent
    LECs remained subject to significant regulatory constraints.
    Accordingly, the Commission's *Pricing Flexibility Order*[^22]
    granted pricing flexibility to incumbent LECs subject to price cap
    regulation, once certain competitive thresholds were met, to
    increase their ability to respond to competition in this
    market.[^23] The *Pricing Flexibility Order* designed a framework to
    provide greater flexibility to incumbent LECs and to facilitate the
    removal of services from price cap regulation as competition
    developed in the exchange access market, while ensuring that these
    LECs could not use this flexibility to engage in anticompetitive
    behavior.[^24] The Commission also established a framework for
    granting incumbent LECs subject to price cap regulation greater
    flexibility in the pricing of all interstate access services once
    they satisfied certain competitive criteria.[^25]

## Competitive Safeguards to Ensure Competition in Related Markets

13. With the introduction of competition into former monopoly markets,
    the Commission recognized the benefits of streamlining regulation of
    carriers that lacked individual market power. The Commission also
    recognized the need to introduce new regulations to prevent carriers
    possessing market power in one market from leveraging that power
    into a second competitive market. In a series of proceedings, the
    Commission considered and adopted a variety of these competitive
    safeguards, including various structural safeguards (such as the
    separate subsidiary requirements of *Computer II* and those imposed
    on independent LECs' provision of interexchange services),
    non-structural safeguards (such as those imposed in *Computer III*),
    accounting safeguards (including Part 64 rules and the affiliate
    transaction rules), and various reporting and performance
    requirements (such as certain access service reports required under
    ARMIS). These safeguards also had the effect of allowing carriers
    possessing market power to compete in related competitive markets
    rather than being banned from these markets altogether.

14. One of the earliest instances where the Commission considered the
    need for competitive safeguards was in the *Computer Inquiries*.
    [^26] At that time, the Commission attempted to balance the benefits
    of having AT&T and its Bell Operating Companies (BOCs) participate
    in the emerging market for enhanced services with the desire to
    protect new competitors from possible cross-subsidization or
    anti-competitive behavior by the incumbents using their control over
    bottleneck facilities. The *Computer II* and *III* proceedings
    sought to ensure that the BOCs could not use their control over
    bottleneck local exchange facilities to discriminate against
    independent information service providers (ISPs). Initially, as a
    result of the *Computer II* proceeding, the Commission subjected BOC
    entry into the information service market to strict separate
    affiliate requirements.[^27] In *Computer III*, however, the
    Commission offered an alternative set of safeguards to the separate
    affiliate requirements of *Computer II*. The *Computer III*
    requirements included Open Network Architecture (ONA) and Comparably
    Efficient Interconnection (CEI) requirements. The Commission
    determined that the costs of structural separation outweighed the
    benefits, and that nonstructural safeguards could protect
    competitive ISPs from anticompetitive behavior by the BOCs while
    avoiding the inefficiencies associated with structural
    safeguards.[^28] The Commission also required the BOCs to comply
    with other nonstructural safeguards regarding network disclosure and
    quality, installation, and maintenance reporting.[^29] The related
    market, information services, was and continues to be unregulated,
    although the Commission retains jurisdiction over information
    services through Title I of the Act.

15. Then, in 1998, in response to passage of the 1996 Act and BOC entry
    into the interLATA information services market, the Commission
    issued the *Computer III Further Notice* to address issues raised by
    the interplay between the safeguards and terminology established in
    the 1996 Act and the *Computer III* regime.[^30] In the *Computer
    III Further Notice*, the Commission observed that BOCs remain the
    dominant providers of local exchange and exchange access services in
    their in-region states, and thus continue to have the ability to
    engage in anticompetitive behavior against competitive ISPs.[^31]
    The Commission noted, however, that the movement toward local
    exchange and exchange access competition should gradually decrease
    and eventually eliminate the need for regulation of the BOCs to
    ensure that they do not discriminate against competitive ISPs.[^32]
    In the *1999 Computer III Report and Order*, the Commission
    concluded that in today's telecommunications market, given the
    protection afforded by the ONA requirements and the 1996 Act, it
    should eliminate the requirement that BOCs file CEI plans and obtain
    Commission approval for those plans prior to providing new
    information services.[^33]

16. Separate from the *Computer II* and *III* line of orders, in 1996,
    the Commission initiated a proceeding to examine how its regulations
    should be adapted to acknowledge the potential entry of BOCs and
    incumbent LECs into the long distance telecommunications market.
    Specifically, in the *LEC Classification Order*, the Commission
    determined whether the BOCs and independent incumbent LECs should be
    treated as dominant or non-dominant carriers in their provision of
    long distance services. [^34] The Commission analyzed whether the
    BOCs' and other incumbent LECs' monopoly positions in the local
    exchange and exchange access markets, along with their control of
    bottleneck facilities, should subject them to dominant carrier
    regulation in the related long distance market, which was
    competitive and substantially deregulated. After engaging in a
    market power analysis, the Commission concluded that, upon entry,
    the BOCs and other incumbent LECs would be unlikely to have
    sufficient market shares to allow them to profitably raise and
    maintain prices above competitive levels in the long distance
    market. The Commission further concluded that the competitive
    safeguards imposed on the BOCs and other incumbent LECs, including
    separate affiliate requirements,[^35] made it unlikely that the BOCs
    and other incumbent LECs could engage in anti-competitive behavior
    to such an extent that they could gain individual market power in
    the interexchange market. Therefore, the Commission determined that
    BOC affiliates and independent incumbent LEC affiliates should be
    classified as non-dominant in the provision of in-region,
    interstate, domestic, long distance services.[^36]

# Identification of Incumbent LEC-Provided Broadband Services Markets

17. The first step in assessing what regulatory requirements are
    appropriate for incumbent LEC-provided broadband services is to
    define and analyze the relevant markets in which incumbent LECs
    provide these services.[^37] Consistent with Commission precedent,
    our regulatory response should be guided by a full understanding of
    the existing market dynamics for broadband services.[^38] We begin
    our analysis by asking questions about the relevant product and
    geographic markets for incumbent LEC-provided broadband
    services.[^39] We then analyze what, if any, market power the
    incumbent LECs may possess in the relevant markets for broadband
    services.[^40]

## Relevant Product Market

18. We initially ask parties to identify the relevant product markets
    that include incumbent LEC-provided broadband services.[^41] While
    we recognize that parties' identification of the relevant product
    markets may vary depending on the definition of "broadband
    services," our goal is to rigorously define the relevant markets so
    as to include all reasonably substitutable services. In proposing
    relevant product markets, we ask parties to identify not only which
    services to include within a particular product market, but also
    which customer classes to include within a relevant product
    market.[^42] We ask the parties to support their proposed relevant
    product definitions with reliable empirical data.[^43]

19. In discussing the relevant product markets for broadband services,
    we ask commenters to consider not only broadband services provided
    over local telephone networks, but also broadband services offered
    over other platforms, such as cable, wireless, and satellite.
    Specifically, we seek comment on the willingness and ability of end
    users to purchase other broadband services as substitutes for an
    incumbent LEC's broadband services.[^44] In this regard, we also ask
    parties to discuss whether significant price differentials between
    services imply that the services are in different product markets.

20. Traditionally, the Commission has identified two broad categories of
    markets for telecommunications services: (1) the mass market,
    comprised primarily of residential users; and (2) the larger
    business market, comprised of medium and large business users.[^45]
    In identifying these markets, the Commission has distinguished
    mass-market consumers from larger business customers because the
    services offered to one group may not be adequate or feasible
    substitutes for services offered to the other.[^46] We seek comment
    concerning whether these two broad market categories are appropriate
    for incumbent LEC-provided broadband services.[^47] Commenters
    should provide any relevant data to demonstrate the existence of a
    separate mass market and larger business product market.

21. We note that SBC contends in its petition that two separate relevant
    product markets for broadband services exist -- one for mass-market
    customers and another for larger business users. SBC further
    contends that four different service platforms exhibit sufficient
    substitutability to be included within the mass market for broadband
    services -- xDSL, cable modem, satellite and fixed wireless
    services.[^48] We seek comment on SBC's proposal, and on the extent
    to which any other platform, such as mobile wireless services,
    should also be considered an actual or potential source of
    intermodal competition. To the extent that parties identify a
    separate product market for mass-market broadband services,
    moreover, we seek comment on the degree of substitution among these
    platforms and on SBC's conclusion that "broadband services for the
    mass market represent a discrete product market and . . . DSL and
    cable modem services are both part of the same product market."[^49]

22. Similarly, we seek comment on whether there is a larger business
    market for broadband services in which the following services all
    fall within the same product market: Frame Relay;[^50] Asynchronous
    Transfer Mode (ATM);[^51] Gigabit Ethernet (GigE);[^52] Switched
    Multimegabit Data Service (SMDS);[^53] and Remote Local Area Network
    (RLAN) service.[^54] According to SBC, customers and service
    providers view these services in this proposed market as
    interchangeable, and services are generally priced at similar
    levels.[^55] We seek comment on SBC's proposed identification of a
    larger business market for broadband services. We note that we are
    *not* considering whether traditional special access services belong
    in the larger-business market for advanced services as these
    services are governed by the Commission's pricing flexibility
    regime.[^56]

23. We also seek comment on whether separate product markets for
    mass-market customers and larger business customers are overly broad
    and should be segmented further. We seek comment on whether the
    broadband services that are marketed to small and medium enterprises
    (SMEs)[^57] and to small or home offices (SOHOs)[^58] constitute
    separate product markets that should not be aggregated into the same
    grouping as the mass-market or larger business market. We seek
    comment on the peculiar customer needs and carrier limitations that
    might make the SME or SOHO markets distinct from other relevant
    product markets. Consistent with the analysis the Commission has
    applied in prior orders, parties recommending that particular
    services be grouped in one of many narrower relevant product markets
    should substantiate this contention with reliable empirical
    evidence.[^59]

24. We also seek comment on whether, within the general product markets
    for large and medium business customers, on the one hand, and
    mass-market customers, on the other, we should distinguish between
    retail markets and wholesale markets. That is, should broadband
    services that are sold directly to end-user customers be considered
    separate relevant products from broadband services that are sold as
    inputs to other firms that offer services to end-user customers? In
    addition, with respect to retail services sold to mass-market
    end-user customers, we seek comment on whether we should separately
    define relevant product markets for broadband services sold on a
    stand-alone basis and for those sold as part of bundled service
    packages. For example, should xDSL-based telecommunications services
    that are sold on a stand-alone basis be placed in a separate
    relevant product market from a bundled service package that includes
    xDSL, internet access, and possibly customer premises equipment
    (such as an xDSL modem)?

25. When commenting on the appropriate product markets for broadband
    services, parties should address not only those services that are
    provided over telephone networks, but also any intermodal
    competition for broadband services.[^60] Commenters should address
    the extent to which different intermodal competitors compete in each
    identified product market. To what extent do these intermodal
    competitors share common ownership with incumbent LECs, and what
    effect should this have on our analysis?

26. In addition, parties should consider the extent to which residential
    customers might view narrowband services as a substitute for
    broadband services and the extent to which residential customers
    might substitute lower-speed, circuit-switched services as
    substitutes for higher-speed broadband services. We seek comment on
    whether the relevant product market, from the consumer's
    perspective, is actually broader than our definition of broadband
    services. Specifically, we seek comment on whether the
    cross-elasticity of demand between narrowband and broadband services
    for residential consumers is sufficiently high that narrowband
    services will constrain any supra-competitive pricing by broadband
    service providers. We note that the Commission has previously
    identified the high-speed access product market as separate from the
    low-speed market.[^61] Thus, we seek comment on whether we should
    reconsider this conclusion for purposes of this proceeding. In
    addition, we seek comment on the operational, functional and other
    differences that might prevent low-speed access from acting as a
    substitute for high-speed access, and on the degree of
    interchangeability that we should consider relevant to establishing
    separate product markets. Alternatively, if the broadband services
    provided by an incumbent LEC are sold solely in conjunction with the
    LEC's traditional voice service offering, would this inhibit our
    ability to define a discrete broadband services product market?

## Relevant Geographic Market

27. We seek comment on the appropriate geographic market for each of the
    relevant product markets for broadband services. We note that the
    Commission has previously identified the geographic scope of the
    relevant market for some broadband services as local.[^62] SBC, in
    contrast, claims that the relevant geographic market for broadband
    services is the incumbent LEC's service area.[^63] We further note
    that, in the *WorldCom/MCI Merger Order*, the Commission stated that
    it would include within the same relevant geographic market all
    customers facing similar competitive choices.[^64] We ask whether it
    would be appropriate to use the latter (customer aggregation) market
    definition in this proceeding. To the extent commenters contend that
    using the customer aggregation definition is appropriate, we ask
    parties to comment on the alternative geographic market definitions
    discussed above, or to propose alternative geographic markets.
    Commenters should specifically address the degree of geographic
    overlap that might exist among all intramodal and intermodal
    competitors.

## Market Power Analysis

28. Within each relevant product and geographic market, we seek comment
    on whether the incumbent LECs possess individual market power and
    are likely to be able to exercise such power. We note that the
    Commission has recognized that a carrier can profitably raise and
    sustain prices above competitive levels and thereby exercise market
    power in two ways.[^65] First, a carrier may be able to raise prices
    by restricting its own output, which usually requires a large market
    share.[^66] Second, a carrier may be able to raise prices by
    increasing its rivals' costs or by restricting its rivals' output
    through the carrier\'s control of an essential input, such as access
    to bottleneck facilities, that its rivals need to offer their
    services.[^67] In assessing the first type of market power, the
    Commission traditionally has focused on certain well-established
    market features, including market share, supply and demand
    substitutability, the cost structure, size, and resources of the
    firm.[^68] We ask commenters to analyze the incumbent LECs' market
    position in each relevant broadband services market according to
    these indicia.[^69]

29. With respect to the second type of market power, the Commission has
    focused on the incumbent LEC's ability to exercise market power
    through its control of local bottleneck facilities. Accordingly, we
    seek comment on the extent to which an incumbent LEC could leverage
    market power from the local exchange and exchange access markets
    into the markets for broadband services. High initial investment,
    economies of scale, access to customers, and the monopoly legacy of
    the telecommunications networks all contribute to incumbent LEC
    market power in the local exchange and exchange access market. The
    Commission previously has found that an incumbent LEC might
    improperly exercise its existing market power through
    cross-subsidization, raising its rivals costs, or improper
    discrimination.[^70] In this proceeding, we seek comment on the
    extent to which incumbent LECs have the ability and incentive to use
    their market power in the local exchange and exchange access markets
    to unfairly disadvantage rival suppliers of broadband services in
    any way, including charging higher prices to rivals for essential
    inputs, providing rivals with poorer quality interconnection,
    imposing unnecessary delays, or discriminating against rivals
    inappropriately in other ways.[^71] More specifically, we seek
    comment on whether incumbent LECs possess market power with respect
    to certain inputs, such as special access services, which they could
    use to raise rivals' costs in certain broadband service markets
    where these inputs are critical to a firm's ability to provision the
    particular broadband service to end user customers.

30. The Commission has recognized how intermodal competition can reduce
    the likelihood of anti-competitive behavior.[^72] The Commission
    also has recognized that different companies use different
    technologies, each with distinct advantages and disadvantages, to
    bring broadband services to end users.[^73] And while the Commission
    has concluded that "\[a\]nti-competitive coordination among
    competitors is difficult" in markets with vigorous intermodal
    competition, the interplay between competitors that use different
    delivery platforms in the context of broadband services merits
    closer examination.[^74] Therefore, we ask that commenters identify
    actual and potential competitors in each relevant product market
    regardless of the platform used to deliver broadband services and
    provide any relevant evidence concerning these competitors' ability
    to prevent incumbent LECs from raising prices above competitive
    levels and engaging in anti-competitive behavior.

31. In other words, commenters should specifically address the role of
    both intermodal and intramodal competition in assessing an incumbent
    LEC's ability to leverage power into the markets for broadband
    services. For example, does the existence of actual or potential
    intermodal competition constrain an incumbent LEC's ability or
    incentive to discriminate? Should our analysis of market power
    distinguish between markets with extensive intramodal competition
    and those with extensive intermodal competition, which does not rely
    on the incumbent's facilities? To the extent a particular geographic
    market does not currently exhibit extensive intermodal competition,
    we seek comment on whether we should consider the likelihood that
    intermodal competition will appear in the future. If future
    intermodal competition is relevant, we ask commenters to identify
    and support a reasonable time frame within which intermodal
    competition for broadband services would have to emerge for such
    potential competition to affect our analysis of the incumbent LECs'
    market power. In addition, commenters should address the extent to
    which the nascent nature of competition in a particular market
    should inform our analysis of market power.

32. We also ask that commenters explore the extent to which current
    statutory and regulatory requirements, including any competitive
    safeguards, limit the market power of incumbent LECs. For example,
    how should the presence of "wholesale" regulations, such as those
    contained in section 251(c) of the Communications Act, affect our
    analysis of the level of competition present at the "retail" level?
    Finally, commenters should identify any other relevant market
    characteristics in the broadband services markets that may affect
    our analysis of market power.

# Appropriate Regulatory REQUIREMENTS

## Overview 

33. Once we have defined the relevant product and geographic markets for
    broadband services, we can use this information to determine what
    regulatory requirements, if any, should govern the provision of
    broadband services. We begin by briefly describing relevant portions
    of the existing regulatory structure for broadband services provided
    by incumbent LECs. Then we invite interested parties to propose
    alternative requirements for these broadband services in light of
    existing market and technological developments. We encourage
    interested parties to develop proposals for new or modified
    regulatory requirements for broadband services.

34. At the outset, we ask interested parties to consider the potential
    for deregulation or reduced regulation to foster increased broadband
    deployment and competition among providers of broadband services. We
    also ask that interested parties address how their proposals would
    serve the Act's mandate to foster the deployment of broadband
    services and the facilities used in the provision of broadband
    services. In addition, we invite interested parties to address the
    effect of the statutory requirements in the 1996 Act on these
    proposals, as the Act's existing statutory safeguards may reduce the
    need for other forms of regulation. Moreover, we ask interested
    parties to address the development of intermodal as well as
    intramodal competition in the provision of broadband services, and
    the existence of new technologies for the distribution of broadband
    services, such as fixed wireless and satellite, that have the
    potential to further increase competition. In addition, our existing
    and historical regulatory requirements have not necessarily
    differentiated bottleneck facilities from the services that are
    provided using those facilities, as such differentiation was not
    necessary under the public switched telephone network paradigm.
    Accordingly, we ask commenters to address the complexity added by
    the fact that incumbent LEC facilities -- previously used to provide
    simple one-wire voice services -- are now being used to provide a
    variety of different services, many of which are at different stages
    of market development.

## Existing Regulatory Structure

35. As previously discussed, the Commission historically has
    distinguished between dominant carriers, which possess individual
    market power, and non-dominant carriers, which lack individual
    market power.[^75] Non-dominant carriers have been subject to
    significantly reduced regulation. In contrast, dominant carriers are
    subject to a broad range of regulatory requirements, that are
    generally intended to protect consumers from unjust and unreasonable
    rates, terms and conditions and unreasonable discrimination in the
    provision of communications services.[^76] The Commission has
    streamlined dominant carrier regulation, however, to reflect the
    development of competition as exemplified in the *Pricing
    Flexibility Order*.

36. The Commission's dominant carrier regulation includes rate
    regulation and tariff filing requirements.[^77] For example, as
    provided in section 204(a)(3) of the Act, incumbent LECs may file
    tariff revisions on either seven days' or fifteen days' notice.[^78]
    The Commission's rules also require supporting information, which in
    some cases includes detailed cost data, be filed by dominant
    carriers with their tariff filings.[^79]

37. Incumbent LECs are subject to rate level regulation in the provision
    of their interstate access services.[^80] The BOCs and GTE are
    subject to mandatory price cap regulation, and several other
    incumbent LECs have entered price caps on an elective basis.[^81]
    Smaller incumbent LECs are regulated under rate-of-return
    regulation.[^82] As described above, however, the Commission has
    taken a number of steps to provide price cap incumbent LECs with
    increased pricing flexibility for interstate access services as
    wireline competition develops.[^83] In addition, in markets where
    carriers may have the incentive and ability to leverage control over
    bottleneck facilities to disadvantage competitors in related
    markets, the Commission has developed various safeguards to limit
    that ability.[^84]

## Alternative Requirements

38. The basic elements of the current regulatory requirements for the
    provision of broadband services by incumbent LECs were largely in
    place well before the development of competition between providers
    of broadband services. In addition, the requirements were primarily
    developed to address problems created in a one-wire, analog,
    circuit-switched world. As a result, the existing regulatory
    requirements may be poorly suited to achieving the Act's goals of
    promoting infrastructure investment, innovation, and the "deployment
    of advanced services to all Americans."[^85] In particular, should
    the Commission consider streamlined regulatory requirements for
    incumbent LEC provision of some, or all, broadband services, and, if
    so, what regulatory safeguards might be necessary?

39. Even in situations where a fully competitive market has not yet been
    realized, deregulation or reduced regulation may lower
    administrative costs, encourage investment and innovation, reduce
    prices and offer consumers greater choice. The Commission previously
    has recognized that,

    while the regulatory tools are able to prevent dominant firms from
    fully exercising their market power, use of these tools also imposes
    costs beyond the obvious administrative costs of enforcement and
    compliance to regulatory agency and regulated companies
    respectively. In some circumstances, these costs can have profound
    negative implications for consumer welfare. Thus, as a matter of
    policy it is clear it is desirable to adjust regulatory methods in
    particular circumstances to the extent the law permits.[^86]

    Accordingly, we ask whether reduced regulation of services provided
    by incumbent LECs, regardless of the extent of existing competition,
    may foster competition and the deployment of broadband facilities
    used in the provision of many of these services. Interested parties
    are encouraged to address the costs and benefits of regulation in
    this context.

40. In particular, we seek comment on whether such an approach would
    further the Commission's ongoing efforts to fulfill the goals of
    section 706 of the Act, which directs the Commission to "encourage
    the deployment on a reasonable and timely basis of advanced
    telecommunications capability to all Americans." The Act
    specifically suggests consideration of regulatory forbearance or
    other approaches that remove barriers to infrastructure
    investment.[^87] We seek comment on what additional steps we can
    take in the context of this proceeding to fulfill our Congressional
    mandate under section 706.

41. As discussed above, incumbent LECs currently are classified as
    dominant in the provision of broadband services.[^88] We seek
    comment on what relevance, if any, these types of regulations have
    for broadband services provided by incumbent LECs. We seek comment
    on whether it would be appropriate to streamline the traditional
    dominant carrier regulation of incumbent LECs' provision of
    broadband services, and if so, how such dominant carrier regulation
    should be reduced. For example, interested parties may believe that
    a streamlined version of the existing regulatory structure should be
    applied to some, or all, incumbent LEC broadband services. In
    particular, we ask for specific proposals as to which existing
    regulations might be removed or streamlined in their application to
    broadband services. We urge parties supporting such an approach to
    identify the elements of the existing regulations that they believe
    should be retained and address in a comprehensive manner both the
    costs and benefits of those regulatory requirements. We also ask
    parties to address the public interest benefits of declaring an
    incumbent LEC non-dominant or of streamlining regulations, including
    the impact of any proposed regulatory structure on service quality,
    prices, and the availability of competitive alternatives.

42. We also ask parties to comment on whether incumbent LECs should be
    reclassified as non-dominant in the provision of broadband
    services.[^89] Those that support classifying incumbent LECs as
    non-dominant in the provision of broadband services should explain
    whether, under *Competitive Carrier* precedent, it is possible to
    classify a carrier as non-dominant with respect to certain services
    when it remains dominant with respect to others, and in particular,
    should we do so when the services utilize certain of the same
    facilities?[^90]

43. As noted above, in different situations, the Commission has used a
    variety of safeguards to protect against an incumbent's ability to
    leverage market power arising from its control of bottleneck
    facilities into related markets. We seek comment on whether any of
    our existing safeguards would be an appropriate model for safeguards
    applied to incumbent LEC provision of broadband services.[^91] We
    note that some incumbent LECs have provided broadband services
    through a separate affiliate.[^92] Should an incumbent LEC's
    corporate structure be a relevant consideration for our analysis
    here?[^93] We invite parties to suggest alternative competitive
    safeguards that could deter discrimination or make attempted
    discrimination easier to detect, but could achieve this goal at a
    reduced regulatory cost.[^94] We ask parties proposing alternative
    safeguards to discuss whether their proposal better reflects new
    broadband service markets characterized by multiple competing
    platforms providing data-centric, digital, packet-switched services.
    We seek comment on what safeguards should remain, if any, if we
    declare an incumbent LEC non-dominant? For example, we seek comment
    on the impact of a declaration of non-dominance should have on a
    carrier's obligations under *Computer II/III*.[^95]

44. We also ask interested parties to comment on whether the statutory
    requirements applicable to incumbent LECs under section 251 of the
    Act reduce the need for dominant carrier regulations or existing
    competitive safeguards. In particular, section 251 establishes
    extensive regulatory requirements applicable to incumbent LECs,
    including collocation, unbundling and resale obligations.[^96] We
    also ask commenters to address whether the nondiscrimination
    requirements related to collocation, unbundling and resale in
    section 251 of the Act \-- and the extent of incumbent LEC
    compliance with such requirements \-- reduce the need for other
    forms of regulation, including dominant carrier regulation and
    competitive safeguards. As noted above, the Commission will be
    examining its Section 251 unbundling rules as part of its triennial
    review.[^97] We ask parties to comment on how possible changes to
    those rules might affect the continuing need for dominant carrier
    regulation or various competitive safeguards.

45. We ask commenting parties to take a number of issues into account in
    commenting on or developing proposals for a new or modified
    regulatory framework for the provision of broadband services. We
    invite comment on whether deregulation or reduced regulation would
    foster the deployment of broadband services and the facilities used
    in the provision of many such services as contemplated in section
    706 of the Act, and would facilitate increased competition in the
    provision of such services. Alternatively, others suggest that
    ensuring intramodal competitive pressure will spur broadband
    deployment.[^98] We seek comment on this contention. In addition,
    interested parties should discuss the extent to which different
    categories of broadband services face different levels of
    competition, warranting different regulatory treatment. We also ask
    interested parties to address the extent to which the markets for
    different broadband services are at different stages in their
    development and whether markets at different stages of development
    warrant different regulatory treatment.

46. We note that in other, innovative, competitive industries, such as
    the computer industry, competitors, producing software, hardware,
    and microprocessors, constantly pursue innovation and implement
    price reductions. We ask whether such dynamic and innovative
    competition is either likely or a reasonable goal for the provision
    of broadband services and those services that are dependent on
    broadband services. Assuming that it is, we seek comment on the best
    means to promote that goal. We ask what forms of regulation or
    de-regulation would best spur deployment of alternative technologies
    and facilities by existing and potential competitors. We note the
    substantial investment needed to build broadband networks, and ask
    what costs our current regulations impose on providers, and seek
    input as to the burden of those regulations. More generally, we seek
    comment on whether existing regulation inhibits or stimulates the
    deployment of broadband services. Specifically, we seek comment on
    whether reductions in existing regulation would allow incumbent LECs
    to compete more effectively on an intermodal basis and thus would
    stimulate competitive responses by companies using alternative
    technologies such as cable, wireless, and satellite. If this is the
    case, exactly what reductions in existing regulation are warranted?
    We note that these alternative technologies are not subject to the
    same regulations as incumbent wireline competitors in the broadband
    services market. Would removal of regulations applicable to
    incumbent wireline providers spur innovation and competitive
    responses by providers using other technologies? Alternatively, does
    regulation of the wireline market serve the public interest by
    providing benefits to consumers in the alternative technology
    markets?

47. In a similar vein, we ask interested parties to consider whether the
    development of various broadband service categories are at different
    stages of evolution and thus should be treated differently. For
    example, the provision of broadband services to residential
    end-users is arguably still in the early stages of its development,
    and thus it may not be appropriate to rely on current market share
    data to evaluate whether any particular market participant has or
    would likely have a dominant position in the provision of these
    services due to the nascency of the market. However, the provision
    of broadband services to large business and institutional users may
    be a more mature market and therefore current market share data may
    be a more reliable indicator of market power. Are there meaningful
    differences in the stage of market development for different
    broadband services? Would any such differences warrant different
    regulatory treatment?

48. We also ask commenters to address the implications of their
    proposals as broadband services evolve in the future. For example,
    the services we evaluate in this proceeding may ultimately be
    replaced in the future by other services using different
    technologies. We ask parties to comment on how such potential
    changes should impact our decision to choose an appropriate
    regulatory framework. Finally, we ask interested parties to comment
    on whether there are other regulatory requirements that we should
    consider modifying or eliminating in the context of this proceeding.
    Perhaps some new regulations would be needed as others are modified
    or eliminated? We ask parties proposing consideration of additional
    regulatory requirements to provide a full analysis of the costs and
    benefits of those requirements consistent with the issues discussed
    above.

# PRocedural Matters

## *Ex Parte* Presentations

49. These matters shall be treated as a "permit-but-disclose" proceeding
    in accordance with the Commission's *ex parte* rules.[^99] Persons
    making oral *ex parte* presentations are reminded that memoranda
    summarizing the presentations must contain summaries of the
    substance of the presentations and not merely a listing of the
    subjects discussed. More than a one or two sentence description of
    the views and arguments presented in generally required.[^100] Other
    requirements pertaining to oral and written presentations are set
    forth in section 1.1206(b) of the Commission's rules.

## Comment Filing Procedures

50. Pursuant to sections 1.415 and 1.419 of the Commission's
    rules,[^101] interested parties may file comments within 45 days
    after publication of this Notice in the Federal Register and may
    file reply comments within 30 days after the date for filing
    comments. All filings should refer to CC Docket No. 01-337. Comments
    may be filed using the Commission's Electronic Comment Filing System
    (ECFS) or by filing paper copies.[^102] Comments filed through ECFS
    can be sent as an electronic file via the Internet to
    \<http://www.fcc.gov/e-file/ecfs.html\>. Generally, only one copy of
    an electronic submission must be filed. In completing the
    transmittal screen, commenters should include their full name,
    postal service mailing address, and the applicable docket numbers,
    which in this instance is CC Docket No. 01-337. Parties may also
    submit an electronic comment by Internet e-mail. To get filing
    instructions for e-mail comments, commenters should send an e-mail
    to <ecfs@fcc.gov>, and should include the following words in the
    body of the message: "get form\<your e-mail address." A sample form
    and directions will be sent in reply.

51. Parties that choose to file by paper must file an original and four
    copies of each, and are hereby notified that effective December 18,
    2001, the Commission's contractor, Vistronix, Inc., will receive
    hand-delivered or messenger-delivered paper filings for the
    Commission's Secretary at a new location in downtown Washington, DC.
    The address is 236 Massachusetts Avenue, N.E., Suite 110,
    Washington, DC 20002. The filing hours at this location will be 8:00
    a.m. to 7:00 p.m. All hand deliveries must be held together with
    rubber bands or fasteners. Any envelopes must be disposed of before
    entering the building. This facility is the only location where
    hand-delivered or messenger-delivered paper filings for the
    Commission's Secretary will be accepted. Accordingly, the Commission
    will no longer accept these filings at 9300 East Hampton Drive,
    Capitol Heights, MD 20743. In addition, this is a reminder that,
    effective October 18, 2001, the Commission discontinued receiving
    hand-delivered or messenger-delivered filings for the Secretary at
    its headquarters location at 445 12th Street, SW, Washington, DC
    20554.

52. Other messenger-delivered documents, including documents sent by
    overnight mail (other than United States Postal Service (USPS)
    Express Mail and Priority Mail), must be addressed to 9300 East
    Hampton Drive, Capitol Heights, MD 20743. This location will be open
    8:00 a.m. to 5:30 p.m. The USPS first-class mail, Express Mail, and
    Priority Mail should continue to be addressed to the Commission\'s
    headquarters at 445 12th Street, SW, Washington, DC 20554. The USPS
    mail addressed to the Commission\'s headquarters actually goes to
    our Capitol Heights facility for screening prior to delivery at the
    Commission.

+----------------------------------+-----------------------------------+
| **If you are sending this type   | **It should be addressed for      |
| of document or using this        | delivery to...**                  |
| delivery method...**             |                                   |
+----------------------------------+-----------------------------------+
| Hand-delivered or                | 236 Massachusetts                 |
| messenger-delivered paper        |                                   |
| filings for the Commission's     | Avenue, NE, Suite 110,            |
| Secretary                        |                                   |
|                                  | Washington, DC 20002 (8:00 to     |
|                                  | 7:00 p.m.                         |
+----------------------------------+-----------------------------------+
| Other messenger-delivered        | 9300 East Hampton Drive,          |
| documents, including documents   |                                   |
| sent by overnight mail (other    | Capitol Heights, MD 20743         |
| than United States Postal        |                                   |
| Service Express Mail and         | (8:00 a.m. to 5:30 p.m.)          |
| Priority Mail)                   |                                   |
+----------------------------------+-----------------------------------+
| United States Postal Service     | 445 12^th^ Street, SW             |
| first-class mail, Express Mail,  |                                   |
| and Priority Mail                | Washington, DC 20554              |
+----------------------------------+-----------------------------------+

Parties who choose to file by paper should also submit their comments on
diskette. These diskettes should be submitted to Janice Myles, Policy &
Program Planning Division, Common Carrier Bureau, Federal Communications
Commission, 236 Massachusetts Avenue, N.E.,

Suite 110, Washington, DC 20002. Such a submission should be on a 3.5
inch diskette formatted in an IBM compatible format using Microsoft Word
or compatible software. The diskette should be accompanied by a cover
letter and should be submitted in "read only" mode. The diskette should
be clearly labeled with the commenter's name, proceeding (including the
docket number, in this case, CC Docket No. 01-337), type of pleading
(comment or reply comment), date of submission, and the name of the
electronic file on the diskette. The label should also include the
following phrase: "Disk Copy \-- Not an Original." Each diskette should
contain only one party's pleading, preferably in a single electronic
file. In addition, commenters must send diskette copies to the
Commission's copy contractor, Qualex International, Portals II, 445
12^th^ Street S.W., CY-B402, Washington, D.C. 20554.

53. Regardless of whether parties choose to file electronically or by
    paper, parties should also file one copy of any documents filed in
    this docket with the Commission's copy contractor, Qualex
    International, Portals II, 445 12^th^ Street S.W., CY-B402,
    Washington, D.C. 20554 (telephone 202-863-2893; facsimile
    202-863-2898) or via e-mail at <qualexint@aol.com>.

54. Comments and reply comments must include a short and concise summary
    of the substantive arguments raised in the pleading. Comments and
    reply comments must also comply with section 1.48 and all other
    applicable sections of the Commission's rules.[^103] We direct all
    interested parties to include the name of the filing party and the
    date of the filing on each page of their comments and reply
    comments. All parties are encouraged to utilize a table of contents,
    regardless of the length of their submission. We also strongly
    encourage that parties track the organization set forth in the
    Notice in order to facilitate our internal review process.

## Initial Regulatory Flexibility Analysis

55. As required by the Regulatory Flexibility Act of 1980, as amended
    (RFA),[^104] the Commission has prepared the present Initial
    Regulatory Flexibility Analysis (IRFA) of the possible significant
    economic impact on a substantial number of small entities by the
    policies and rules proposed in this Notice. Written public comments
    are requested on this IRFA. Comments must be identified as responses
    to the IRFA and must be filed by the deadlines for comments on the
    Notice provided above in Section V.B. The Commission will send a
    copy of the Notice, including this IRFA, to the Chief Counsel for
    Advocacy of the Small Business Administration.[^105] In addition,
    the Notice and IRFA (or summaries thereof) will be published in the
    Federal Register.[^106]

### Need for, and Objectives of, the Proposed Rules 

56. In this proceeding, we seek comment on: (1) the nature and scope of
    the market for domestic broadband services; (2) the relevant market
    dynamics affecting the provision of domestic broadband services;
    and (3) the appropriate regulatory requirements for the provision of
    broadband services by incumbent LECs, given current market
    conditions. The basic elements of the existing regulatory
    requirements for incumbent LEC-provided broadband services were
    initially developed in an era of circuit-switched, analog voice
    services, and may no longer serve the public interest. Thus, we ask
    interested parties to address how the Commission can best balance
    the goals of encouraging advanced telecommunications investment and
    deployment, fostering competition in the provision of broadband
    services, promoting innovation, and eliminating unnecessary
    regulation. This proceeding also invites comment on the Petition
    filed by SBC Communications on October 3, 2001, requesting an
    expedited ruling that it is non-dominant in the provision of
    advanced services, and asking the Commission to forebear from
    dominant carrier regulation of those services.

### Legal Basis

57. The legal basis for any action that may be taken pursuant to the
    Notice is contained in sections 4, 10, 201-202, 214, 303 and 403 of
    the Communications Act of 1934, as amended, 47 U.S.C. §§ 154, 160,
    201-204, 214, 303, and 403, section 706 of the Telecommunications
    Act of 1996, and sections 1.1, 1.48, 1.411, 1.412, 1.415, 1.419, and
    1.1200-1.1216, of the Commission's rules, 47 C.F.R. §§ 1.1, 1.48,
    1.411, 1.412, 1.415, 1.419, and 1.1200-1.1216.

### Description and Estimate of the Number of Small Entities to Which the Proposed Rules will Apply

58. The RFA directs agencies to provide a description of and, where
    feasible, an estimate of the number of small entities that will be
    affected by the proposed rules.[^107] The RFA generally defines the
    term "small entity" as having the same meaning as the terms "small
    business," "small organization," and "small governmental
    jurisdiction."[^108] In addition, the term "small business" has the
    same meaning as the term "small business concern" under the Small
    Business Act.[^109] A small business concern is one which: (1) is
    independently owned and operated; (2) is not dominant in its field
    of operation; and (3) satisfies any additional criteria established
    by the Small Business Administration (SBA).[^110]

59. We have included small incumbent LECs in this present RFA analysis.
    As noted above, a "small business" under the RFA is one that, *inter
    alia*, meets the pertinent small business size standard (e.g*.*, a
    telephone communications business having 1,500 or fewer employees),
    and "is not dominant in its field of operation."[^111] The SBA\'s
    Office of Advocacy contends that, for RFA purposes, small incumbent
    LECs are not dominant in their field of operation because any such
    dominance is not "national" in scope.[^112] We have therefore
    included small incumbent LECs in this RFA analysis, although we
    emphasize that this RFA action has no effect on FCC analyses and
    determinations in other, non-RFA contexts.

60. *Local Exchange Carriers*. Neither the Commission nor the SBA has
    developed a definition for small local exchange carriers. The
    closest applicable definitions for this type of carrier under SBA
    rules is for telephone communications companies other than
    radiotelephone (wireless) companies.[^113] The most reliable source
    of information regarding the number of LECs nationwide appears to be
    the data that we collect annually in connection with the
    Telecommunications Relay Service (TRS).[^114] According to our most
    recent data, there are 1,335 incumbent LECs.[^115] Although some of
    these carriers may not be independently owned and operated, or have
    more than 1,500 employees, we are unable at this time to estimate
    with greater precision the number of LECs that would qualify as
    small business concerns under the SBA\'s definition. Consequently,
    we estimate that there are no more than 1,335 small entity incumbent
    LECs that may be affected by the proposals in the NPRM.

### Description of Projected Reporting, Recordkeeping and Other Compliance Requirements

61. We expect that any proposal we may adopt pursuant this Notice will
    decrease existing reporting, recordkeeping or other compliance
    requirements. As noted above, dominant carriers are currently
    subject to a broad range of regulatory requirements that are
    generally intended to protect consumers from unjust and unreasonable
    rates, terms, and conditions and unreasonable discrimination in the
    provision of communications services.[^116] The Commission's
    dominant carrier regulation includes rate regulation and tariff
    filing requirements,[^117] and also requires supporting information,
    which in some cases includes detailed cost data, to be filed by
    dominant carriers with their tariff filings.[^118] Incumbent LECs
    are subject to rate level regulation in the provision of their
    interstate access services.[^119] The BOCs and GTE are subject to
    mandatory price cap regulation, and several other incumbent LECs
    have entered price caps on an elective basis, while smaller
    incumbent LECs are regulated under rate-of-return regulation.[^120]
    In addition, in markets where carriers may have the incentive and
    ability to leverage control over bottleneck facilities to
    disadvantage competitors in related markets, the Commission has
    developed various safeguards to neutralize that ability. This Notice
    seeks comment on what relevance, if any, these types of regulations
    have for broadband services provided by incumbent LECs, and asks
    whether it would be appropriate to streamline the traditional
    dominant carrier regulations of incumbent LECs' provision of
    broadband services.

### Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant Alternatives Considered

62. The RFA requires an agency to describe any significant, specifically
    small business, alternatives that it has considered in reaching its
    proposed approach, which may include the following four alternatives
    (among others): (1) the establishment of differing compliance or
    reporting requirements or timetables that take into account the
    resources available to small entities; (2) the clarification,
    consolidation, or simplification of compliance or reporting
    requirements under the rule for small entities; (3) the use of
    performance, rather than design, standards; and (4) an exemption
    from coverage of the rule, or any part thereof, for small
    entities.[^121]

63. The overall objective of this proceeding is to reduce existing
    regulatory burdens on incumbent LECs to the extent consistent with
    the public interest. The Notice seeks specific proposals as to which
    existing regulations might be removed or streamlined in their
    application to broadband services, and asks parties to comment on
    whether incumbent LECs should be reclassified as non-dominant in the
    provision of broadband services.[^122] The Notice further asks
    parties to discuss the extent to which different categories of
    broadband services face different levels of competition, warranting
    different regulatory treatment, and to address the extent to which
    the markets for different broadband services are at different stages
    in their development and thus should be treated differently for
    regulatory purposes. It asks what forms of regulation or
    de-regulation would best spur deployment of alternative technologies
    and facilities by existing and potential competitors, and seeks
    comment on whether existing regulation inhibits or stimulates the
    deployment of broadband services.

### Federal Rules that May Duplicate, Overlap, or Conflict with the Proposed Rules

64. None.

# Ordering CLAUSEs

65. Accordingly, IT IS ORDERED that, pursuant to the authority contained
    in sections 2, 4(i)-4(j), 201, and 303(r) of the Communications Act
    of 1934, as amended, 47 U.S.C. §§ 152, 154(i)-4(j), 201, 303(r),
    this Notice IS ADOPTED.

66. IT IS FURTHER ORDERED that the Commission's Consumer Information
    Bureau, Reference Information Center, SHALL SEND a copy of this
    Notice, including the Initial Regulatory Flexibility Analysis, to
    the Chief Counsel for Advocacy of the Small Business Administration.

    FEDERAL COMMUNICATIONS COMMISSION

    Magalie Roman Salas

    Secretary

[]{#__RefHeading___Toc533572532 .anchor}SEPARATE STATEMENT OF CHAIRMAN
MICHAEL K. POWELL

*Re: Review of Regulatory Requirements for Incumbent LEC Broadband
Telecommunications Services et al., CC Docket No. 01-337 et al.*

*Re: Review of the Section 251 Unbundling Obligations of Incumbent Local
Exchange Carriers et al., CC Docket Nos. 01-338 et al.*

In this combined statement, I write separately to underscore my support
for these two *Notices of Proposed Rulemaking*, which comprise the
second and third in a series of notices the Commission recently
announced that will begin Phase II of our local competition
implementation and enforcement efforts under the 1996 Act.[^123]

Review of Regulatory Requirements for Incumbent LEC Broadband
Telecommunications Services

I vigorously support the *Notice* we hereby adopt that initiates a
review of the regulatory requirements applicable to incumbent LEC
provision of high-speed telecommunications services. In this proceeding,
the Commission will ask whether potentially robust competition among
multiple types of broadband service providers suggests that we should
avoid subjecting incumbents to the same regulatory burdens that we
impose on these carriers with respect to their provision of local
telephone service. That is, we ask whether incumbent LECs, which are so
clearly dominant in the provision of local phone service, must also be
treated as dominant as they use DSL and other technologies to provide
high-speed telecommunications services in competition with cable modem
service providers and other types of platforms. I would point out that
this item focuses on traditional Title II common carrier regulation,
historically arising out of the section 201 and 202 of the
Communications Act of 1934, as applied to incumbent LEC provision of
high-speed *telecommunications services.* In contrast, the
aforementioned proceeding regarding regulation of incumbent LEC
broadband information services will address the question whether Title I
should apply when incumbent LECs provide a bundled high-speed
*information service* offering.

I would emphasize that our initiation of this proceeding should not
suggest a grand departure from our ongoing efforts to implement
unbundling, collocation and other market-opening requirements with
respect to incumbent LECs pursuant to section 251(c)(3) of the Act.
These other requirements are intended to allow competing carriers,
particularly facilities-based carriers, to provide new and innovative
telecommunications services. By the express terms of the statute, the
Commission is duty-bound to continue our implementation and enforcement
of these provisions, and we will.

Rather, this *Notice of Proposed Rulemaking* is intended to develop
further one more avenue of thinking about how regulation can serve to
help (or hinder) broadband deployment. It is, in that sense, not a
signpost heralding a new direction but an attempt to add yet another
arrow to the regulatory quiver we will use to attack and, in conjunction
with other forces outside our purview, eventually subdue the broadband
beast.

Notwithstanding my enthusiasm for our decision to initiate this inquiry,
I for one have an open mind as to how these questions should be
answered. For example, it may prove too unwieldy for both carriers and
the Commission to treat incumbents as dominant for their provision of
traditional local service but non-dominant for their provision of
high-speed telecommunications services. I also acknowledge that
declaring incumbent LEC provision of broadband telecommunications
services non-dominant could have consequences in other areas of
regulation that the Commission has not yet fully anticipated. Yet the
importance of broadband deployment to the public interest and welfare is
too great to disregard any potential method of facilitating that
deployment. In sum, we must ensure that we leave no stone unturned in
our pursuit of this important goal.

Review of the Section 251 Unbundling Obligations of Incumbent Local
Exchange Carriers

I similarly and wholeheartedly support the *Notice* we adopt here that
initiates our scheduled triennial review of UNE obligations imposed on
incumbent LECs pursuant to sections 251(c)(3) and 251(d)(2). Taking our
cues from the Supreme Court in its opinion remanding to the Commission
the task of giving meaningful effect to these provisions, my former
colleagues and I determined that the agency would, in three years,
revisit its decisions regarding the availability of UNEs.[^124] The
purpose of this triennial review would be to keep those decisions
current with ongoing market and regulatory developments. That was in
1999, and now the year 2002 fast approaches.

Not surprisingly, however, I support this item for reasons other than
the fact that it will put the Commission in a position to deliver on the
commitment it made in 1999. [First]{.underline}, it underscores the
Commission's ongoing commitment to the promotion of facilities-based
competition, which was pronounced most clearly by my former colleagues
and I in the 1999 *UNE Remand Order*.[^125] I believe this commitment
should focus, in particular, on both so-called "full facilities-based"
competition and competition from newer entrants who supplement their own
facilities with network elements leased from the incumbent. As I have
demonstrated in my decisions and public statements over my four years at
the Commission, I fully support the use of facilities and individual
UNEs as means to promote local competition while simultaneously
furthering the related goals of encouraging deregulation and innovation.
The 1996 Act and our experience since its passage demand no less.

[Second]{.underline}, I support this item because it emphasizes further
an area of inquiry begun in the *UNE Remand Order.* Specifically, in
that *Order,* we considered how the Act's goals of encouraging broadband
deployment and investment in competing facilities should shape
unbundling policy.[^126] I support our decision here to continue and to
expand this area of inquiry.

[Third]{.underline}, I support the Commission's decision, in seeking
comment here on whether to unbundle aspects of the incumbent's network,
to ask whether and the extent to which we should take note of the
availability of technologies other than circuit-switched telephony
provided by traditional common carriers. In particular, this *Notice*
expressly focuses on the roles that cable and wireless companies have
begun and will continue to play in the market for telephony and
broadband telecommunications services. This emphasis may also be viewed
as expansion of an avenue of inquiry begun by the previous Commission.
Specifically, in the *UNE Remand Order,* my former colleagues and I
appropriately followed the Supreme Court's demand that we not blind
ourselves to the availability of self-provisioned or other alternative
facilities in determining whether to unbundle elements of the incumbent
LEC's network.[^127]

To my mind, it seems premature to suggest that the availability of such
technologies should be fully dispositive of the question whether to
require the availability of specific UNEs. Yet it does stand to reason
that such availability may give us some indication of the alternative
tools newer entrants could use to serve customers if the Commission were
to decline to unbundle any particular element of the network. I
encourage parties to provide detailed and well-supported comments in
order to help us determine whether this line of reasoning is, in fact,
sound.

As this *Notice* itself reminds us, the Commission now has the benefit
of two years of experience with the current unbundling rules and almost
six years of experience with promoting competition since the 1996 Act
was passed. These are no doubt merely the opening chapters of a
regulatory epic that will take many years to rewrite a near century-long
history of legally sanctioned monopoly in the telephone market. But I
believe it is critical that we take stock of the lessons we have learned
so far and make any changes that may be necessary to ensure that our
rules remain faithful to the statute and its goals of promoting
competition, deregulation and innovation in telecommunications markets.

\* \* \*

I thank the Common Carrier Bureau staff and my colleagues for their
enormous work on these *Notices* and look forward to working with them,
as well as my state commission colleagues, in carrying out both of these
important "Phase II" proceedings.

[]{#__RefHeading___Toc533572533 .anchor}SEPARATE STATEMENT OF

[]{#__RefHeading___Toc533572534 .anchor}COMMISSIONER MICHAEL J. COPPS

[]{#__RefHeading___Toc533572535 .anchor}*Re:* *Review of the Section 251
Unbundling Obligations of Incumbent Local Exchange Carriers, Notice of
Proposed Rulemaking; and Review of Regulatory Requirements for Incumbent
LEC Broadband Telecommunications Services, Notice of Proposed
Rulemaking.*

I will vote to approve these Notices of Proposed Rulemaking because I
think they have been significantly improved, and given more balance,
during the discussions preceding today's meeting. These Notices
recognize the importance of competition and, importantly, do not reach
tentative conclusions. Nevertheless, I do not vote for these Notices
without some concern for the competition framework laid out by Congress
in the 1996 Act.

I understand the need to ask questions. In particular, the Commission
indicated in 1999 that it would reexamine every three years the list of
network elements that need to be unbundled pursuant to section
251(c)(3). I generally do not mind asking questions, but we must be
sensitive to the larger context.

This is a time of great uncertainty in the economy, for the
telecommunications industry, and for competition for both
telecommunications and Internet services. The years since passage of the
Act have seen high-flying expectations, and lately, descent into worry
and trepidation. I hear from competitors and incumbents alike the desire
for certainty and stability in the regulatory environment. I fear that
these broad Notices may not be meeting this need.

Some parties may read these Notices and conclude that the Commission has
a predetermined agenda to remake the competition framework. Whether
accurate or not, this perception, coupled with the uncertainty created
by these broad Notices, can damage competition as surely as any final
rules adopted by this Commission.

We must recognize that setting competition policy is the exclusive
jurisdiction of Congress. I approach these proceedings optimistic that
the Commission will show proper restraint and will not presume to
question the statutory competitive framework. Instead, the Commission
should use these proceedings to understand the marketplace better in our
role as policy implementers and not policy makers. And we should not
create concern, even unwittingly, that our zeal to deregulate before
meaningful competition develops might cripple the very competition that
Congress sought to engender.

Let the record show, however, that if our proceedings should ever turn
into an attempt to undermine the competitive framework that Congress
adopted in the 1996 Act, I will -- without hesitation -- oppose such
overreaching.

[^1]: 47 U.S.C. §§ 201 & 202 (1996). We refer to the Communications Act
    of 1934, as amended by the Telecommunications Act of 1996, as the
    "Communications Act" or the "Act."

[^2]: For purposes of this proceeding, unless otherwise indicated, we
    use the term "broadband telecommunications service" or "broadband
    service" in a very general sense to describe a broad array of
    high-speed telecommunications services. *See* note 37, *infra*, for
    further discussion of this point.

[^3]: *Review of the Section 251 Unbundling Obligations of Incumbent
    Local Exchange Carriers*, CC Docket No. 01-338, *Implementation of
    the Local Competition Provisions of the Telecommunications Act of
    1996*, CC Docket No. 96-98, *Deployment of Wireline Services
    Offering Advanced Telecommunications Capability*, CC Docket No.
    98-147, Notice of Proposed Rulemaking, FCC 01-361 (adopted Dec. 12,
    2001).

[^4]: *Performance Measurements and Standards for Unbundled Network
    Elements and Interconnection, et al.*, CC Docket No. 01‑318, Notice
    of Proposed Rulemaking, FCC 01‑331 (rel. Nov. 19, 2001) (*UNE
    Measurements and Standards Notice*); *Performance Measurements and
    Standards for Interstate Special Access Services, et al.*, CC Docket
    No. 01‑321, Notice of Proposed Rulemaking, FCC No. 01‑339 (rel. Nov.
    19, 2001) (*Special Access Measurements and Standards Notice*).

[^5]: The question of how cable modem service should be classified is
    the subject of a separate on-going proceeding and will not be
    considered in this forthcoming proceeding. *See Inquiry Concerning
    High-Speed Access to the Internet over Cable and Other Facilities*,
    GN Docket No. 00-185, Notice of Inquiry, 15 FCC Rcd 19287 (2000)
    (*Cable Access Notice*).

[^6]: Accordingly, interested parties need not comment on the
    appropriate statutory classification of bundled
    broadband/information services in this proceeding. Those issues will
    be considered in the separate proceeding described above.

[^7]: *Inquiry Concerning the Deployment of Advanced Telecommunications
    Services to All Americans in a Reasonable and Timely Fashion, and
    Possible Steps to Accelerate Such Deployment Pursuant to Section 706
    of the Telecommunications Act of 1996*, Second Report, 15 FCC Rcd
    20913, 20928-30, 20932-38, 20952-54 & 20958-61. (2000) (*Second
    Section 706 Report*).

[^8]: Our use of the term "dominant" here is limited to the provision of
    domestic telecommunications services, and is not intended to
    encompass findings of dominance related to foreign carrier
    affiliation. The regulatory safeguards applicable to carriers that
    are treated as dominant on particular international routes because
    of an affiliation or alliance with a foreign carrier with market
    power are set forth in section 63.10 of the Commission's rules, 47
    C.F.R. § 63.10. These safeguards differ from those the Commission
    has imposed on carrier found to be dominant for other reasons.

[^9]: The BOCs are also subject to certain *Computer II/III* obligations
    generally designed to ensure that competitive information service
    providers (ISPs) have nondiscriminatory access to the basic
    underlying services used in the provision of information services.
    The continued need for these requirements is currently being
    examined in a separate proceeding. *Computer III Further Remand
    Proceedings: Bell Operating Company Provision of Enhanced Services;
    1998 Biennial Review -- Review of Computer III and ONA Safeguards
    and Requirements*, CC Docket Nos. 95-20 & 98-10, Further Notice of
    Proposed Rulemaking, 13 FCC Rcd 6040 (1998); *Further Comment
    Requested to Update and Refresh Record on Computer III
    Requirements*, CC Docket Nos. 95-20 & 98-10, Public Notice, 16 FCC
    Rcd 5363 (2001).

[^10]: This proceeding is not intended to address the international
    services market.

[^11]: SBC Petition For Expedited Ruling That It Is Non-Dominant In Its
    Provision Of Advanced Services And For Forbearance From Dominant
    Carrier Regulation Of Those Services, filed Oct. 3, 2001.

[^12]: Economists have recognized different ways to exercise market
    power by distinguishing between "Stiglerian" market power, which is
    the ability of a firm profitably to raise and sustain its price
    significantly above the competitive level by restricting its own
    output, and "Bainian" market power, which is the ability of a firm
    profitably to raise and sustain its price significantly above the
    competitive level by raising its rivals' costs and thereby causing
    the rivals to restrain their output. *See Regulatory Treatment of
    LEC Provision of Interexchange Services Originating in the LEC's
    Local Exchange Area*, 12 FCC Rcd 15756, 15803, n.214 (1997) (*LEC
    Classification Order*).

[^13]: *Policy and Rules Concerning Rates for Competitive Common Carrier
    Services and Facilities Authorizations Therefor*, Notice of Proposed
    Rulemaking, 77 FCC 2d 308 (1979) (*Competitive Carrier* *Notice*);
    First Report and Order, 85 FCC 2d 1 (1980) (*Competitive Carrier
    First Report and Order*); Further Notice of Proposed Rulemaking, 84
    FCC 2d 445 (1981); Second Further Notice of Proposed Rulemaking, 47
    Red. Reg. 17,308 (1982); Second Report and Order, 91 FCC 2d 59
    (1982), *recon. denied*, 93 FCC 2d 54 (1983); Third Further Notice
    of Proposed Rulemaking, 48 Fed. Reg. 28,292 (1983); Third Report and
    Order, 48 Fed. Reg. 46,791 (1983); Fourth Report and Order, 95 FCC
    2d 554 (1983) (*Competitive Carrier Fourth Report and Order*),
    *vacated AT&T v. FCC*, F.2d 727 (D.C. Cir. 1992), *cert. denied, MCI
    Telecommunications Corp. v. AT&T*, 113 S. Ct. 3020 (1993); Fourth
    Further Notice of Proposed Rulemaking, 96 FCC 2d 1191 (1984); Fifth
    Report and Order, 98 FCC 2d 1191 (1984); Sixth Report and Order, 99
    FCC 2d 1020 (1985), *vacated MCI Telecommunications Corp. v. FCC*,
    765 F.2d 1186 (D.C. Cir. 1985) (collectively referred to as the
    *Competitive Carrier* proceeding).

[^14]: The primary focus of this proceeding was on the so-called
    specialized common carriers, domestic satellite carriers, resale
    (including value-added) carriers, and miscellaneous common carriers.
    *See Competitive Carrier* *Notice*, 77 FCC 2d at 309, para. 1.

[^15]: In the *Competitive Carrier Fourth Report and Order*, the
    Commission defined market power as "the ability to raise prices by
    restricting output," and as "the ability to raise and maintain
    prices above the competitive level without driving away so many
    customers as to make the increase unprofitable." *See Competitive
    Carrier Fourth Report and Order*, 95 FCC 2d at 558, para. 7.

[^16]: *See Competitive Carrier* proceeding.

[^17]: *Competition in the Interstate Interexchange Marketplace*, Notice
    of Proposed Rulemaking, 5 FCC Rcd 2627 (1990); Report and Order, 6
    FCC Rcd 5880 (1991) (*First Interexchange Competition Order*);
    Order, 6 FCC Rcd 7255 (1991); Memorandum Opinion and Order, 6 FCC
    Rcd 7569 (1991); Memorandum Opinion and Order, 7 FCC Rcd 2677
    (1992); Memorandum Opinion and Order on Reconsideration, 8 FCC Rcd
    2659 (1993); Second Report and Order, 8 FCC Rcd 3668 (1993) (*Second
    Interexchange Competition Order*); Memorandum Opinion and Order, 8
    FCC Rcd 5046 (1993); Memorandum Opinion and Order on
    Reconsideration, 10 FCC Rcd 4562 (1995) (collectively referred to as
    the *Interexchange Competition* proceeding).

[^18]: *First Interexchange Competition Order*, 6 FCC Rcd at 5911, para.
    188 (finding that services in AT&T's Basket 3 under price cap
    regulation, other than analog private line services, and services
    outside of price cap regulation, including Tariff 12, were
    "substantially" competitive); *see also Second Interexchange
    Competition Order*, 8 FCC Rcd at 3668, para. 1 (replacing price cap
    regulation with further streamlined regulation for all of AT&T's
    Basket 2 services, except for 800 directory assistance).

[^19]: *Motion of AT&T Corp. to be Reclassified as a Non-Dominant
    Carrier*, Order, 11 FCC Rcd 3271, 3283, para. 14 (1995) (*AT&T
    Reclassification Order*).

[^20]: *Id*. at 3347, para. 140.

[^21]: *Id*. at 3288**,** para. 27.

[^22]: *Access Charge Reform, Price Cap Performance Review for Local
    Exchange Carriers, Interexchange Carrier Purchases of Switched
    Access Services Offered by Competitive Local Exchange Carriers,
    Petition of U.S. West Communications, Inc. for Forbearance from
    Regulation as a Dominant Carrier in the Phoenix, Arizona MSA*, 14
    FCC Rcd 14221 (1999) (*Pricing Flexibility Order*).

[^23]: *Id*. at 14232-33, para. 19. In addition, this order granted
    immediate pricing flexibility to price cap LECs in the form of
    streamlined introduction of new services, geographic deaveraging of
    rates for services in the trunking basket, and the removal, upon
    implementation of toll dialing parity, of certain interstate
    interexchange services from price cap regulation. *See id*. at
    14225, para. 4.

[^24]: *Id*. at para. 3.

[^25]: *Id*. at para. 4.

[^26]: *See, e.g., Regulatory and Policy Problems Presented by the
    Interdependence of Computer and Communication Services and
    Facilities* (*Computer I*), 28 FCC 2d 291 (1970) (Tentative
    Decision); 28 FCC 2d 267 (1971) (Final Decision).

[^27]: *Amendment of Section 64.702 of the Commission's Rules and
    Regulations* (*Computer II*), 77 FCC 2d 384 (1980) (*Computer II
    Final Decision*), *recon*., 84 FCC 2d 50 (1980) (*Computer II
    Reconsideration Order), further recon*., 88 FCC 2d 512 (1981)
    (*Computer II Further Reconsideration Order), affirmed sub nom.
    Computer and Communications Industry Ass'n v. FCC*, 693 F.2d 198
    (D.C. Cir. 1982), *cert. denied*, 461 U.S. 938 (1983). Initially,
    the separate affiliate requirement applied to the then-integrated
    Bell System. However, following divestiture of AT&T in 1984, the
    Commission extended the structural separation requirements of
    *Computer II* to the BOCs. *See United States v. AT&T*, 552 F. Supp.
    131 (D.D.C. 1982), *aff'd sub nom. Maryland v. United States*, 460
    U.S. 1001 (1983); *Policy and Rules Concerning the Furnishing of
    Customer Premises Equipment, Enhanced Services and Cellular
    Communications Services by the Bell Operating Companies North
    American Telephone Association* *Petition for Declaratory Ruling on
    the Requirement for Sale of Customer Premises Equipment by the Bell
    Operating Companies*, CC Docket No. 83-115, ENF 83-5, Report And
    Order, 95 FCC 2d 1117 (1983).

[^28]: *Computer III Further Remand Proceedings: Bell Operating Company
    Provision of Enhanced Services and 1998 Biennial Regulatory Review
    -- Review of Computer III and ONA Safeguards and Requirements*,
    Report and Order, 14 FCC Rcd 4289, 4293-94, at para. 7 (1999)
    (*Computer III Report and Order*). The Commission initially applied
    the Computer III and ONA rules to both AT&T and the BOCs. *Computer
    III Phase I Order*, 104 FCC 2d 958 (1986). In subsequent orders, the
    Commission first modified, and then relieved, AT&T of most Computer
    III and ONA requirements. *See, e.g., Computer III Phase I
    Reconsideration Order*, 2 FCC Rcd 3035 (1987); *Competition in the
    Interstate Interexchange Marketplace*, Memorandum Opinion and Order
    on Reconsideration, 10 FCC Rcd 4562 (1995); *see also Computer III
    Report and Order*, 14 FCC Rcd at 4294-95, para. 8. ONA is the
    overall design of a carrier's basic network services to permit all
    users of the basic network, including the information services
    operations of the carrier and its competitors, to interconnect to
    specific basic network functions and interfaces on an unbundled and
    equal-access basis. The BOCs and GTE through ONA must unbundle key
    components, or elements, of their basic services and make them
    available under tariff, regardless of whether their information
    services operations utilize the unbundled components. *See Computer
    III Report and Order*, 14 FCC Rcd at 4294-95, para 8, n.17. The
    Commission has never imposed CEI requirements on GTE or any other
    independent LEC. A remand from the Court of Appeals for the Ninth
    Circuit regarding the sufficiency of ONA unbundling as a condition
    of lifting structural separation is pending. *Computer III Further
    Remand Proceedings: Bell Operating Company Provision of Enhanced
    Services; 1998 Biennial Regulatory Review -- Review of Computer III
    and ONA Safeguards and Requirements,* Further Notice of Proposed
    Rulemaking, 13 FCC Rcd 6040, 6051-52, paras. 15-16 (1998) (*Computer
    III Further Notice*).

[^29]: *Computer III Phase I Order*, 104 FCC 2d at 1080-86, 1089-91,
    paras. 246-55, 260-65; *Computer III Phase II Order*, 2 FCC Rcd at
    3084-86, paras. 88-98.

[^30]: *Computer III Report and Order*, 14 FCC Rcd at 4291, para. 3,
    n.5.

[^31]: *Computer III Further Notice*, 13 FCC Rcd at 6072, para. 51.

[^32]: *Id*.

[^33]: *Computer III Report and Order*, 14 FCC Rcd at 4292, para. 4
    (BOCs are now only required to post their CEI plans and plan
    amendments on their Internet sites, and to notify the Commission
    upon posting); *see also Computer III Further Notice*, 13 FCC Rcd at
    6077-78, para. 61-62.

[^34]: *LEC Classification Order*, 12 FCC Rcd 15756 (1997). In
    particular, the 1996 Act significantly altered the legal and
    regulatory requirements governing the local exchange marketplace.
    Among other things, the 1996 Act allowed the BOCs, under certain
    conditions, to enter markets from which they previously were
    restricted, including the interLATA telecommunications and interLATA
    information services markets. However, the services offered in these
    markets relied on incumbent-controlled facilities where the
    incumbent had, or may have had, market power, and the potential for
    leveraging this market power was of concern.

[^35]: *See* 47 U.S.C. 272; 47 C.F.R. § 64.1903. The Commission recently
    sought comment on whether the separate affiliate requirements for
    incumbent LECs continue to serve the public interest. *See 2000
    Biennial Regulatory Review Separate Affiliate Requirements of
    Section 64.1903 of the Commission's Rules*, CC Docket No. 00-175,
    Notice of Proposed Rulemaking, FCC No. 01-261, 16 FCC Rcd \_\_, 2001
    WL 1078734, at para. 8. (rel. Jul. 14, 2001).

[^36]: *LEC Classification Order*, 12 FCC Rcd at 15762-63, paras. 6-7.

[^37]: Although we are cognizant that the term "broadband services" has
    been used in common parlance to identify, rather than precisely
    define, those services that at their most basic level allow users to
    send and receive large amounts of information, we purposely use the
    term here to avoid pre-judging which services belong in the same
    product markets. By using the term broadband services, we intend to
    avoid addressing statutory-based definitional issues and instead
    focus on addressing the relevant markets in which these services
    participate. We will be addressing the definitional issues in the
    forthcoming Title I broadband proceeding, described at para. 3,
    above.

[^38]: As competition develops, the Commission has moved from adopting
    prescriptive regulations to relying on market forces to promote the
    public interest. *See, e.g., Multi-Association Group (MAG) Plan For
    Regulation Of Interstate Services Of Non-Price Cap Incumbent Local
    Exchange Carriers and Interexchange Carriers,* Second Report and
    Order and Further Notice of Proposed Rulemaking in CC Docket No.
    00-256, Fifteenth Report and Order in CC Docket No. 96-45, and
    Report and Order in CC Docket Nos. 98-77 and 98-166, 16 FCC Rcd
    \_\_, 2001 WL 1381097, para. 187 (rel. Nov. 8, 2001) (*MAG Plan
    Order*) (noting the Commission's policy of progressively
    deregulating interexchange carriers when they lack market power and
    concluding that, rather than adopt new regulatory measures, the
    Commission "should rely on competition to ensure that consumers
    realize benefits from the access charge reforms we adopt in this
    Order"); *Reform of Access Charges Imposed by Competitive Local
    Exchange Carriers*, Seventh Report and Order and Further Notice of
    Proposed Rulemaking, CC Docket No. 96-262, 16 FCC Rcd. 9923,
    9926-30, paras. 8-18 (2001) (noting that one of the Commission's
    "overarching goals" in access charge reform includes implementing
    "deregulation as competition develops" and discussing relevant
    decisions) (citations omitted); *Pricing Flexibility Order,* 14 FCC
    Rcd at 14243-44, para. 45 (deregulating the price cap LECs' corridor
    and interstate intraLATA toll services after finding that full
    implementation of inter-and intraLATA toll dialing parity would
    generate sufficient competition to "preclude the price cap LECs from
    exploiting over a sustained period any individual market power they
    may have with respect to these services"); *Policy and Rules
    Concerning The Interstate, Interexchange Marketplace*, Second Report
    and Order, 11 FCC Rcd 20730, 20733, para. 4 (1996) (detariffing long
    distance services based on the principle that market forces will
    generally ensure that rates remain reasonable and that carriers have
    the same incentives and rewards that firms in other competitive
    markets confront); *see also* Preamble of Telecommunications Act of
    1996, Pub. L. 104-104, 110 Stat. 56 (1996) (directing Commission ".
    . . to promote competition and reduce regulation in order to secure
    lower prices and higher quality services for American
    telecommunications consumers and encourage the rapid deployment of
    new telecommunications technologies").

[^39]: *See, e.g., LEC Classification Order,* 12 FCC Rcd at 15768-69,
    para. 16 ("In order to determine that a particular carrier or group
    of carriers possesses market power, it is first necessary to define
    the relevant product and geographic markets"); *AT&T
    Reclassification Order*, 11 FCC Rcd at 3285, para. 19 (to determine
    whether a carrier has market power one must first "identify the
    relevant product and geographic markets").

[^40]: *See, e.g., LEC Classification Order*, 12 FCC Rcd at 15802, para.
    82 ("In order to reclassify the BOC interLATA affiliates as
    non-dominant, our rules require us to conclude that they will not
    possess market power in the provision of those interLATA services in
    the relevant product and geographic markets."); *AT&T
    Reclassification Order*, 11 FCC Rcd at 3285, para. 19 (to reclassify
    AT&T as non-dominant, one must first "assess whether AT&T has market
    power" in the relevant markets).

[^41]: *See generally LEC Classification Order,* 12 FCC Rcd at
    15768-15801, paras. 16-80.

[^42]: For example, in analyzing the relevant product markets for
    long-distance services, the Commission has identified separate
    product markets for mass-market consumers and for medium and large
    business customers. *See Application of WorldCom, Inc. and MCI
    Communications Corp. for Transfer of Control of MCI Communications
    Corp. to WorldCom, Inc.*, 13 FCC Rcd 18025, 18040-18042, paras.
    24-29 (1998) (*WorldCom/MCI Merger Order*).

[^43]: Such data may include econometric estimates of cross elasticity
    of demand or marketing studies that show consumer substitutability
    of demand for competing services.

[^44]: *LEC Classification Order,* 12 FCC Rcd at 15782, para. 41 n.119
    ("\[I\]n defining the relevant product market, one must examine
    whether a 'small but significant and non-transitory' increase in the
    price of the relevant product would cause enough buyers to shift
    their purchases to a second product, so as to make the price
    increase unprofitable. If so, the two products should be considered
    in the same product market") (citation omitted); *id.* at 15782,
    para. 41 ("our new approach will rely exclusively on demand
    considerations to define the relevant product market, rather than
    supply substitutability"); *see also, e.g.,* *AT&T Reclassification
    Order*, 11 FCC Rcd at 3274, para. 5 (listing various factors
    relevant to market power, including "the number size and
    distribution of competing firms, the nature of barriers to entry, \[
    \] the availability of reasonably substitutable services, and
    whether the firm controlled bottleneck facilities") (citations and
    internal quotations omitted); *Competitive Carrier First Report and
    Order*, 85 FCC 2d at 21, paras. 56-57 ("we define a dominant carrier
    as a carrier that possesses market power," which "refers to the
    control a firm can exercise in setting the price of its output").

[^45]: *See, e.g., WorldCom/MCI Merger Order*, 13 FCC Rcd at 18040-41,
    paras. 26-27 (identifying the mass market and the larger business
    market as the two relevant product markets for long distance
    services and determining that no additional relevant product markets
    existed because the record contained insufficient information on
    cross-elasticities of demand and, more importantly, because "owners
    of transmission capacity provide all the same services, and
    production substitution among these services is nearly universal.")
    (citations and internal quotations omitted).

[^46]: *See Application of GTE Corp., Transferor, and Bell Atlantic
    Corp., Transferee, For Consent to Transfer Control*, CC Docket No.
    98-184, Memorandum Opinion and Order, 15 FCC Rcd 14032, 14088-89,
    para. 102 & n.253 (*Bell Atlantic/GTE Merger Order*) (*citing*
    *Application of Ameritech Corp. and SBC Communications, Inc. for
    Transfer of Control of Corporations Holding Commission Licenses and
    Lines*, CC Docket No. 98-141, Memorandum Opinion and Order, 14 FCC
    Rcd 14712, 14746, para 68 and n.146 (*SBC/Ameritech Merger Order*);
    *WorldCom/MCI Order*, 13 FCC Rcd at 18119, para. 164; *Application
    of NYNEX Corp., Transferor, and Bell Atlantic Corp., Transferee, For
    Consent to Transfer Control of NYNEX Corp. and its Subsidiaries,*
    Memorandum Opinion and Order, 12 FCC Rcd 19985, 20016, para. 53
    (1997) (*Bell Atlantic/NYNEX Merger Order*)).

[^47]: SBC Petition at 19, 28, and 34.

[^48]: *Id*. at 21.

[^49]: *Id*. at 22-23 (citations omitted).

[^50]: Frame Relay is a "high-speed packet-switched technology used to
    communicate digital data between, among other things, geographically
    dispersed local area networks." *Independent Data Communications
    Manufacturers Association, Inc*., Memorandum Opinion and Order, 10
    FCC Rcd 13717, 13720, para. 6 (1995) (*Frame Relay Order*). For a
    discussion of frame-relay technology, *see id.* at 13720-21, paras.
    6-8.

[^51]: ATM is a "high bandwidth, low-delay, connection-oriented
    packet-like switching and multiplexing technique" in which
    "\[u\]sable capacity is segmented into 53-byte fixed-sized cells,
    consisting of header and information fields \[and\] allocated to
    services on demand." *See* Harry Newton, *Newton's Telecom
    Dictionary: The Official Dictionary of Telecommunications and the
    Internet* 63 (17^th^ ed. 2001) (*Newton's Telecom Dictionary*).

[^52]: Ethernet is a collection of standards for exchanging information
    over computer networks. Of the three basic functional layers of data
    transmission, Ethernet defines the physical and datalink layers and
    works with other standards, such as Internet protocol (IP), to
    transmit data from sender to recipient. A relatively new, high-speed
    version of Ethernet, GigE, supports data rates up to 1 gigabit per
    second (Gbps), which is equivalent to 1000 megabits per second
    (Mbps)). *See* J.P. Morgan Securities, Inc. & McKinsey & Company,
    Inc., *Broadband 2001: A Comprehensive Analysis of Demand, Supply,
    Economics, and Industry Dynamics in the U.S. Broadband Market* 123
    (April 2, 2001) (*Broadband Analysis*).

[^53]: SMDS is a "connectionless high-speed data transmission service
    intended for application in a Metropolitan Area Network" that
    comprises "a public network designed for LAN-to-LAN
    interconnection." *See, e.g., Newton's Telecom Dictionary* 632.

[^54]: RLAN is an xDSL offering designed for business customers that
    allows a remotely located employee to access a corporate local area
    network (LAN). *See* SBC Petition at 29 n.73.

[^55]: *Id*. at 31-34.

[^56]: *See generally Pricing Flexibility Order*, 14 FCC Rcd 14221.

[^57]: SMEs are typically defined as having between one and 500
    employees and encompass a heterogeneous group of small
    entrepreneurs, such as florists, dry cleaners and gas stations, to
    multi-location enterprises that employ hundreds of people. *See,
    e.g., Broadband Analysis* at 89.

[^58]: SOHOs are typically defined as businesses with fewer than five
    employees. *See Small Business Administration, Small Business
    Expansions in Electronic Commerce: A Look at How Small Firms Are
    Helping Shape the Fastest Growing Segments of E-Commerce* (June
    2000), available at <http://www.sba.gov/ADVO/stats/e_comm2.pdf>.

[^59]: *See Implementation of the Non-Accounting Safeguards of Sections
    271 and 272 of the Communications Act of 1934, as amended; and
    Regulatory Treatment of LEC Provision of Interexchange Services
    Originating in the LEC\'s Local Exchange Area*, Notice of Proposed
    Rulemaking, CC Docket No. 96-149, 11 FCC Rcd 18877, 18934-35, para.
    119 (1996) (*Non-Accounting Safeguards Notice*); *see also, e.g.,
    LEC Classification Order,* 12 FCC Rcd at 15784, para. 44 (noting
    that "credible evidence" should include information sufficient to
    identify services that are likely substitutes and the carrier or
    group of carriers that allegedly possesses market power).

[^60]: In this context, we refer to "intramodal competitors" as those
    competitive providers whose services are either delivered partially
    or wholly over incumbent LEC facilities, or over platforms using the
    same or similar technology that the incumbent LEC has deployed.
    "Intermodal competitors" are competitive providers that rely
    exclusively on alternative technological platforms than those
    deployed by incumbent LECs to deliver similar services.

[^61]: *See Applications for Consent to the Transfer of Control of
    Licenses and Section 214 Authorizations by Time Warner Inc. and
    America Online, Inc., Transferors, to AOL Time Warner Inc.,
    Transferee*, CS Docket 00-30, Memorandum Opinion & Order, 16 FCC Rcd
    6547, 6568-78 paras. 53-74 (*AOL-Time Warner Merger Order*).

[^62]: *Id*. at 6578, para. 74.

[^63]: SBC Petition at 34.

[^64]: *WorldCom/MCI Merger Order*, 13 FCC Rcd at 18042-43, paras.
    30-31; *see also, e.g., LEC Classification Order,* 12 FCC Rcd at
    15793-94, paras. 65-66 (finding point-to-point geographic markets
    for interstate long-distance calling, but treating the
    point-to-point markets as a single national geographic market
    "unless there is credible evidence indicating that there is or could
    be a lack of competition in a particular point-to-point market, and
    there is a showing that geographic rate averaging will not
    sufficiently mitigate the exercise of market power").

[^65]: As in previous orders, we refer in the following discussion to a
    carrier's ability to engage in such a strategy generally as the
    ability to "raise prices." *See, e.g., LEC Classification Order*, 12
    FCC Rcd at 15803, n.213.

[^66]: *Id*. *a*t 15802-03, para. 83. The Commission has termed this
    type of market power "Stiglerian" market power. *See id*. at n.214
    (citation omitted).

[^67]: *Id*. at 15802-03, para. 83. The Commission has termed this type
    of market power "Bainian" market power. *See id.* at n.214 (citation
    omitted).

[^68]: *AT&T Reclassification Order*, 11 FCC Rcd at 3293-94, para. 38;
    *Competitive Carrier First Report and Order*, 85 FCC 2d at 21, para.
    57.

[^69]: Commenters should use prior Commission orders as their guides for
    relevant factors in our analysis. In determining whether a firm
    possesses market power, the Commission previously has focused on
    factors such as market share, supply and demand elasticity, entry
    barriers, potential competition, the cost structure, size, or
    resources of the firm, and control of bottleneck facilities. *See
    AT&T Reclassification Order*, 11 FCC Rcd at 3346-47, para. 139
    (concluding that AT&T lacked market power after examining factors
    such as supply elasticity, demand elasticity, market share, trends
    in market share and other indicia of market conduct and performance,
    including price levels and trends in prices over time); *Competitive
    Carrier First Report and Order*, 85 FCC 2d at 21, para. 57.

[^70]: *See, e.g., SBC/Ameritech Merger Order*, 14 FCC Rcd at
    14795-14825, paras. 186-254 (describing the incentives, ability and
    means for an incumbent LEC to engage in price and non-price
    discrimination); *Non-Accounting Safeguards Notice,* 11 FCC Rcd at
    18886, para. 14 ("If an incumbent LEC charges its competitors prices
    for inputs that are higher than the output prices charged, then the
    incumbent LEC can create a price squeeze. The incumbent LEC could
    lower its retail price to reflect its unfair cost advantage, and
    competing providers would be forced either to match the price
    reduction and absorb profit margin reductions or maintain their
    retail prices at existing levels and accept reductions in their
    market shares. If the price squeeze were severe enough and continued
    long enough, the incumbent LEC's market share could become so large,
    and the competitors so weakened, that the incumbent LEC could
    unilaterally raise and sustain a price above competitive levels by
    restricting its output. Alternatively, the incumbent LEC affiliate
    could simply match its competitors' prices and extract
    supra-competitive profits.") (citations and internal quotations
    omitted).

[^71]: *See, e.g., SBC/Ameritech Merger Order*, 14 FCC Rcd at 14763-64,
    para. 107 (finding that an incumbent "LEC has an incentive to: (1)
    delay interconnection negotiations and resolution of interconnection
    disputes; (2) limit both the methods and points of interconnection
    and the facilities and services to which entrants are provided
    access; (3) raise entrants' costs by charging high prices for
    interconnection, network elements and services, and by delaying the
    provisioning of, and degrading the quality of, the interconnection,
    services, and elements it provides").

[^72]: *See, e.g., Comsat Corporation, Petition Pursuant to Section
    10(c) of the Communications Act of 1934, as amended, for Forbearance
    from Dominant Carrier Regulation and for Reclassification as a
    Non-Dominant Carrier*, Order and Notice of Proposed Rulemaking, 13
    FCC Rcd 14083, 14122-23, para. 76 (1998) ("Intermodal competition
    leads us to believe that fiber-optic cables represent a substitute
    for satellites in the transmission of switched voice service.").

[^73]: *Inquiry Concerning the Deployment of Advanced Telecommunications
    Services to All Americans in a Reasonable and Timely Fashion, and
    Possible Steps to Accelerate Such Deployment Pursuant to Section 706
    of the Telecommunications Act of 1996,* First Report*,* 14 FCC Rcd
    2398, 2423-24, at para. 48 (*First Section 706 Report*).

[^74]: *Id*.

[^75]: *See* Section II, *supra*.

[^76]: 47 U.S.C. §§ 201 & 202. Many of these regulatory requirements are
    also intended to discourage potential anti-competitive behavior by
    incumbent LECs.

[^77]: Section 203(a) of the Act generally requires common carriers to
    file tariffs governing the provision of their basic communications
    services, although section 203(b)(2) gives the Commission broad
    authority to modify requirements made pursuant to this authority. 47
    U.S.C. § 203 (a) & (b)(2) (1996).

[^78]: 47 C.F.R. § 61.58(a)(2)(i) (1999). The Commission's rules also
    specify different notice periods for a variety of other tariff
    filings by dominant carriers, including incumbent LECs. 47 C.F.R.
    § 61.58(a)(2)(ii)-(e)(iii)(4) (1999). SBC and, until recently,
    Verizon, provide advanced services through separate subsidiaries
    that were treated as non-dominant, pursuant to Commission merger
    orders. *See Bell Atlantic/GTE Merger Order*, 15 FCC Rcd 14032;
    *SBC/Ameritech Merger Order*, 14 FCC Rcd 14712. These subsidiaries
    had been deemed non-dominant in their provision of broadband
    services. However, in January 2001, the United States Court of
    Appeals for the District of Columbia Circuit held, in *ASCENT v.
    FCC*, that data affiliates of incumbent LECs are subject to all
    obligations of section 251(c) of the Act. Specifically, the *ASCENT*
    decision overturned the Commission's determination in the
    *SBC/Ameritech Merger Order* that, because the separate advanced
    services affiliate was not a successor or assign of the BOC, the
    separate advanced services affiliate was not subject to the resale
    obligations of section 251(c)(4). *Association of Communications
    Enterprises* v. *FCC*, 235 F.3d 662 (D.C. Cir. 2001); s*ee also
    SBC/Ameritech Merger Order*, 14 FCC Rcd 14712. Because the
    Commission incorporated by reference the successor or assign
    analysis of the *SBC/Ameritech Merger Order* into the *Bell
    Atlantic/GTE Merger Order*, the D.C. Circuit's decision also impacts
    the Commission's conclusion in the *Bell Atlantic/GTE Merger Order*.

[^79]: 47 C.F.R. § 61.38-39 (1999). Non-dominant IXCs are prohibited
    from filing tariffs except for the limited purposes contained in
    61.19(b) and (c). Non-dominant (competitive) LECs are permitted to
    tariff access charges within the limits set in the *CLEC Access
    Charge Order*, but may not tariff charges above those benchmarks.

[^80]: 47 C.F.R. §§ 61.41-49 (price cap rules) & 65.1-65.830 (rate of
    return rules).

[^81]: *See generally* *MAG Plan Order*, 16 FCC Rcd \_\_, 2001 WL
    1381097.

[^82]: *Id*.

[^83]: *See generally* Section II, *supra*; *LEC Pricing Flexibility
    Order*, 14 FCC Rcd 14221 (1999). The price cap incumbent LECs have
    taken advantage of this pricing flexibility to offer a variety of
    advanced trunking and special access services outside of price cap
    regulation.

[^84]: *See generally* forthcoming Title I broadband proceeding,
    described at para. 3, above.

[^85]: Section 706 of the Telecommunications Act of 1996, Pub. L.
    104-104, 110 Stat. 56 (1996), reproduced in the notes under 47
    U.S.C. § 157.

[^86]: *Competitive Carrier Proceeding,* Further Notice of Proposed
    Rulemaking, 84 FCC 2d at 449, para 12.

[^87]: The Commission has initiated a number of proceedings to ensure
    that the goals of Section 706 are met. *See* *First Section 706
    Report*, 14 FCC Rcd 2398; *Second Section 706 Report*, 15 FCC Rcd
    20913. Specifically, the Commission has sought "to remove any
    barriers to deployment; to remove any barriers to investment in
    technologies that can deliver advanced services; and to vigorously
    promote a competitive marketplace." *Inquiry Concerning the
    Deployment of Advanced Telecommunications Services to All Americans
    in a Reasonable and Timely Fashion, and Possible Steps to Accelerate
    Such Deployment Pursuant to Section 706 of the Telecommunications
    Act of 1996*, Third Notice of Inquiry, 16 FCC Rcd at 15515, para. 1.

[^88]: *See* Sections I and II, *supra*. As part of this proceeding, we
    also invite comment on the SBC Petition requesting an expedited
    ruling that it is non-dominant in the provision of advanced services
    and asking the Commission to forbear from dominant carrier
    regulations of those services. Commenters should address elements of
    the statutory forbearance analysis under Section 10 of the
    Telecommunications Act with specificity. 47 U.S.C. § 160 (1996).

[^89]: *See* SBC Petition at 1-2.

[^90]: *See* *Competitive Carrier First Report and Order,* 85 FCC 2d at
    1, n.55.

[^91]: Comments on the applicability of *Computer II/III* safeguards to
    incumbent LEC broadband services, or regarding modifications to
    those safeguards, should be addressed in the Commission's
    forthcoming Broadband Proceeding.

[^92]: *See, e*.*g*., *SBC/Ameritech Merger Order*, 14 FCC Rcd 14712.

[^93]: *See* SBC Petition at 10 ("As for the larger business context,
    SBC has been competing in that market since the early-to-mid 1990s,
    but its market share within its region has remained static at
    approximately 12 percent; that in itself is proof that SBC could not
    possibly quickly gain market power in this market through illegal
    conduct"). *See also Advanced Services Order & NPRM* (Aug. 99).

[^94]: We note that Verizon has proposed that incumbent LECs might be
    required to make bandwidth available to competitors at "commercially
    reasonable rates." Verizon suggests that this approach could further
    Congress' section 706 mandate by reducing regulatory burdens on
    incumbent LECs, while ensuring ubiquitous availability of broadband
    services to both competitors and consumers. *Laying the Last Mile,*
    Tom Tauke Remarks to Progress and Freedom and Foundation Conference,
    August 21, 2001.

[^95]: We note that the applicability of *Computer II/III* to broadband
    services is being directly addressed in the forthcoming Broadband
    NPRM.

[^96]: Section 251(c) of the Communications Act, 46 U.S.C. § 251(c)
    (1996).

[^97]: *See* Section I, *supra*.

[^98]: *See, e.g.*, WorldCom Opposition, CC Docket 98-147 (Oct. 2,
    1998); AT&T Comments, CC Docket No. 95-20 (Apr. 16, 2001).

[^99]: 47 C.F.R. §§ 1.1200-1.1216.

[^100]: *See* 47 C.F.R. § 1.1206(b)(2).

[^101]: 47 C.F.R. §§ 1.415, 1.419.

[^102]: *See Electronic Filing of Documents in Rulemaking Proceedings*,
    63 Fed. Reg. 24121 (1998).

[^103]: *See* 47 C.F.R. § 1.48.

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

[^105]: *See* 5 U.S.C. § 603(a).

[^106]: *See* *id.*

[^107]: 5 U.S.C. §§ 603(b)(3), 604(a)(3).

[^108]: *Id*. § 601(6).

[^109]: *Id*. § 601(3) (incorporating by reference the definition of
    "small business concern" in the Small Business Act, 15 U.S.C.
    § 632). Pursuant to 5 U.S.C. § 601(3), the statutory definition of a
    small business applies "unless an agency, after consultation with
    the Office of Advocacy of the Small Business Administration and
    after opportunity for public comment, establishes one or more
    definitions of such terms which are appropriate to the activities of
    the agency and publishes such definitions(s) in the Federal
    Register."

[^110]: 5 U.S.C. § 632.

[^111]: *Id*.

[^112]: Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to
    William E. Kennard, Chairman, FCC (May 27, 1999). The Small Business
    Act contains a definition of "small business concern," which the RFA
    incorporates into its own definition of "small business." *See* 15
    U.S.C. § 632(a) (Small Business Act); 5 U.S.C. § 601(3) (RFA). SBA
    regulations interpret "small business concern" to include the
    concept of dominance on a national basis. 13 C.F.R. § 121.102(b).
    Since 1996, out of an abundance of caution, the Commission has
    included small incumbent LECs in its regulatory flexibility
    analyses. *See, e.g., Implementation of the Local Competition
    Provisions of the Telecommunications Act of 1996*, CC Docket 96-98,
    First Report and Order, 11 FCC Rcd 15499, 16144-45 (1996).

[^113]: 13 C.F.R. § 121.201, NAICS codes 51331, 51333, and 51334.

[^114]: 47 C.F.R. § 64.601 *et seq*.; Carrier Locator: Interstate
    Service Providers, FCC Common Carrier Bureau, Industry Analysis
    Division (rel. Oct. 2000) (Carrier Locator).

[^115]: Carrier Locator at Table 1. The total for competitive LECs
    includes competitive access providers and competitive LECs.

[^116]: *See* Section IV, above.

[^117]: Section 203(a) of the Communications Act generally requires
    common carriers to file tariffs governing the provision of their
    basic communications services, although section 203(b)(2) gives the
    Commission broad authority to modify requirements made pursuant to
    this authority. 47 U.S.C. § 203 (a) & (b)(2) (1996).

[^118]: 47 C.F.R. § 61.38-39 (1999). Non-dominant IXCs are prohibited
    from filing tariffs except for the limited purposes contained in
    61.19(b) and (c). Non-dominant (competitive) LECs are permitted to
    tariff access charges within the limits set in the *CLEC Access
    Charge Order*, but may not tariff charges above those benchmarks.

[^119]: *See* 47 C.F.R. §§ 61.41-49 (price cap rules) & 65.1-65.830
    (rate of return rules).

[^120]: *See generally* *MAG Plan Order*, 16 FCC Rcd \_\_, 2001 WL
    1381097.

[^121]: 5 U.S.C. § 603(c).

[^122]: *See* Section IV, above.

[^123]: The first of these items was the *Notice of Proposed Rulemaking*
    regarding performance requirements for UNE provisioning that we
    adopted at the November agenda meeting. *Performance Measurements
    and Standards for Unbundled Network Elements and Interconnection, et
    al.*, CC Docket No. 01‑318, Notice of Proposed Rulemaking, FCC
    01‑331 (rel. Nov. 19, 2001). In addition to that *Notice* and the
    two items captioned above, we will in the coming weeks seek comment
    on the appropriate regulatory framework for incumbent LEC provision
    of broadband information services.

[^124]: *Implementation of the Local Competition Provisions of the
    Telecommunications Act of 1996,* Third Report and Order and Fourth
    Further Notice of Proposed Rulemaking, 15 FCC Rcd 3696 (1999) ("*UNE
    Remand Order*"), ¶ 151.

[^125]: *UNE Remand Order,* ¶ 14.

[^126]: *UNE Remand Order,* ¶¶ 107-113.

[^127]: *UNE Remand Order,* ¶ 8.