Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of )

Implementation of the ) CC Docket No. 96-98

Local Competition Provisions )

of the Telecommunications Act of 1996 )

SUPPLEMENTAL ORDER

**Adopted: November 24, 1999 Released: November 24, 1999**

By the Commission: Commissioner Furchtgott-Roth dissenting and issuing a
statement.

# INTRODUCTION

1\. On September 15, 1999, we adopted the Third Report and Order and
Fourth Further Notice of Proposed Rulemaking in this docket responding
to the Supreme Court's January 1999 decision that directed us to
reevaluate the unbundling obligations of section 251 of the
Telecommunications Act of 1996. (1996 Act).[^1] We hereby modify that
Order with regard to the use of unbundled network elements to provide
exchange access services.[^2]

2\. We conclude that, until resolution of our Fourth FNPRM, which will
occur on or before June 30, 2000, interexchange carriers (IXCs) may not
convert special access services to combinations of unbundled loops and
transport network elements, whether or not the IXCs self-provide
entrance facilities (or obtain them from third parties). This constraint
does not apply if an IXC uses combinations of unbundled network elements
to provide a significant amount of local exchange service, in addition
to exchange access service, to a particular customer.

# DISCUSSION

3\. In the *Third Report and Order and Fourth FNPRM*, we concluded that
we would address in the Fourth FNPRM whether there were any legal or
policy ramifications of applying our unbundling rules in a way that
could "cause a significant reduction of the incumbent LECs' special
access revenues prior to full implementation of access charge and
universal service reform."[^3] We also concluded, in paragraph 486, that
any requesting carrier is entitled to obtain existing combinations of
loops and transport between the end user and the incumbent LEC's serving
wire center on an unrestricted basis at unbundled network element
prices, and that a carrier that is collocated in a serving wire center
is free to order combinations of loops and dedicated transport to that
serving wire center as unbundled network elements as a substitute for
the incumbent LECs' regulated special access services.[^4]

4\. Since the release of the *Third Report and Order and Fourth FNPRM*,
several incumbent LECs have claimed that we did not sufficiently
preserve the special access issue in the Fourth FNPRM. Specifically,
they contend that paragraph 486 allows collocated IXCs that
self-provision entrance facilities (or obtain them from third parties)
to convert the remaining portions of their special access circuits to
unbundled network elements, even though the IXCs are not using the
facilities to provide local exchange service. They contend that this
would have significant effects in the competitive local exchange market
as had been asserted previously to the Commission by BellSouth.[^5] We
intended to compile a complete record in the Fourth FNPRM prior to
determining whether IXCs may employ unbundled network elements solely to
provide exchange access service.[^6] Accordingly, in order to preserve
this issue in the Fourth FNPRM as we intended, we modify our conclusion
in paragraph 486 to now allow incumbent LECs to constrain the use of
combinations of unbundled loops and transport network elements as a
substitute for special access service subject to the requirements in
this Order.[^7] We also modify our conclusion in paragraph 489 to the
extent that it limited our concerns to entrance facilities.[^8] We now
conclude that, until resolution of our Fourth FNPRM, which will occur on
or before June 30, 2000, IXCs may not convert special access services to
combinations of unbundled loops and transport network elements, whether
or not the IXCs self-provide entrance facilities (or obtain them from
third parties). This will give us sufficient time to issue an order
addressing the Fourth FNPRM.

5\. This constraint does not apply if an IXC uses combinations of
unbundled loop and transport network elements to provide a significant
amount of local exchange service, in addition to exchange access
service, to a particular customer.[^9] It therefore does not affect the
ability of competitive LECs to use combinations of loops and transport
(referred to as the enhanced extended link) to provide local exchange
service. It also does not affect the ability of competitive LECs that
are collocated and have self-provided transport (or obtained it from
third parties), but are purchasing unbundled loops, to provide exchange
access service. As we stated in paragraph 487 of the *Third Report and
Order and Fourth FNPRM*, such a competitive carrier is entitled to
purchase unbundled loops in order to provide advanced services (*e.g*.,
interstate special access xDSL service).[^10] Finally, the constraint
will have no effect on competitive LECs using long distance switches to
provide local exchange service.

6\. We also expand the scope of the Fourth FNPRM to seek comment on
whether there is any basis in the statute or our rules under which
incumbent LECs could decline to provide combinations of loops and
transport network elements at unbundled network element prices. We also
seek comment on the argument that the "just and reasonable" terms of
section 251(c) or section 251(g) permit the Commission to establish a
usage restriction on combinations of unbundled loops and transport
network elements. Parties should also address whether there is any other
statutory basis for limiting an incumbent LEC's obligation to provide
combinations of loops and transport facilities as unbundled network
elements. As we stated in the *Third Report and Order and Fourth FNPRM*,
in light of the fact that it is not clear that the 1996 Act permits any
restrictions to be placed on the use of unbundled network elements,[^11]
we particularly urge parties to consider and address what long term
solutions may be necessary to avoid adverse effects on any special
access revenues that support universal service.

7\. This temporary constraint on the use of combinations of unbundled
loops and transport network elements to provide exchange access service
is consistent with the Commission's finding in the *Local Competition
First Report and Order*, that we may, where necessary, establish a
temporary transitional mechanism to help complete all of the steps
toward the pro-competitive goals of 1996 Act, including the full
implementation of a competitively-neutral system to fund universal
service and a completed transition to cost-based access charges.[^12] We
believe that this short-term constraint will avoid disturbing the status
quo while we consider the legal and economic implication of allowing
carriers to substitute combinations of unbundled loops and transport
network elements for the incumbent LECs' special access services. As we
did in the *Local Competition First Report and Order*, we emphasize that
this constraint will apply only as an interim measure.[^13]

# FINAL REGULATORY FLEXIBILITY ANALYSIS

8\. In the *Third Report and Order and Fourth FNPRM*, we conducted a
Final Regulatory Flexibility Analysis, as required by section 603 of the
Regulatory Flexibility Act, 5 U.S.C. § 603. The changes we adopt in this
Order do not affect that analysis.

# ORDERING CLAUSES

9\. Accordingly, IT IS ORDERED that pursuant to authority contained in
sections 1, 3, 4, 201-205, 251, 256, 271, and 303(r) of the
Communications Act of 1934, as amended, 47 U.S.C. §§ 151, 153, 154,
201-205, 251, 252, 256, 271, 303(r), the Commission amends paragraph
486, 489, and 494-96 in the *Third Report and Order and Fourth FNPRM* to
be consistent with the discussion set out above. Thus, the constraint on
the use of unbundled network elements as a substitute for special access
service and the scope of the corresponding inquiry in the Fourth FNPRM
are not limited to entrance facilities, but instead include combinations
of unbundled loops and transport network elements. This constraint does
not apply if an IXC uses combinations of unbundled network elements to
provide a significant amount of local exchange service, in addition to
exchange access service, to a particular customer.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

[^1]: ^?^ *Implementation of the Local Competition Provisions of the
    Telecommunications Act of 1996*, CC Docket No. 96-98, Third Report
    and Order and Fourth Further Notice of Proposed Rulemaking, FCC
    99-238 (rel. Nov. 5, 1999) (*Third Report and Order and Fourth
    FNPRM*) (citing *AT&T v. Iowa Utils. Bd*., 119 S. Ct. 721 (1999)).

[^2]: ^?^ *Id.* at paras. 483-89.

[^3]: ^?^ *Id.* at para. 489.

[^4]: ^?^ *Id.* at para. 486.

[^5]: ^?^ *See* Letter from Michael Kellogg, on behalf of SBC, to
    Magalie Salas, Secretary, Federal Communications Commission, CC
    Docket No. 96-98 (filed Nov. 18, 1999); Letter from Dee May,
    Director, Federal Regulatory Affairs, Bell Atlantic, to Magalie
    Roman Salas, Secretary, Federal Communications Commission, CC Docket
    No. 96-98 (filed Nov. 17, 1999); Letter from William B. Barfield,
    Associated General Counsel, BellSouth Corporation, to Lawrence E.
    Strickling, Chief, Common Carrier Bureau, Federal Communications
    Commission, CC Docket No. 96-98 (filed Aug. 9, 1999) (*BellSouth
    Aug. 9, 1999 Ex Parte)*. BellSouth's *Aug. 9, 1999 Ex Parte*
    indicated that the use of combinations of unbundled loops and
    transport solely for exchange access service would either increase
    the incumbent's local rates or undermine universal service, or both.
    *BellSouth Aug. 9, 1999 Ex Parte* at 1. We underestimated the extent
    of the policy implications associated with temporarily constraining
    IXCs only from substituting entrance facilities for the incumbent
    LEC's special access service, and we therefore now, as explained
    herein, include combinations of unbundled loops and transport
    network elements within the scope of this temporary constraint.

[^6]: ^?^ *See* *Third Report and Order and Fourth FNPRM* at para. 496.

[^7]: ^?^ *Id.* at para. 486 (stating that it would be impermissible for
    incumbent LECs to require that a requesting carrier provide a
    certain amount of local service over combinations of unbundled loop
    and transport facilities).

[^8]: ^?^ *Id.* at para. 489 (stating that we will consider in the
    Fourth FNPRM the "discrete situation involving the use of dedicated
    transport links between the incumbent LEC's serving wire center and
    an interexchange carrier's switch or point of presence (or 'entrance
    facilities')."

[^9]: ^?^ For example, we would consider the local service component as
    described in a joint E*x Parte* submitted by Intermedia to be
    significant. *See* Letter from Edward D. Young, III, Senior Vice
    President and Deputy General Counsel, Bell Atlantic; Heather B.
    Gold, Vice President-Industry Policy, Intermedia Communications;
    Robert W. McCausland, Vice President-Regulatory and Interconnection,
    Allegiance Telecom; Don Shepheard, Vice President, Federal
    Regulatory Affairs, Time Warner Telecom, to Chairman Kennard and
    Commissioners, Federal Communications Commission, CC Docket No.
    96-98, at 1-2 (filed Sept. 2, 1999). In addition, we will presume
    that the requesting carrier is providing significant local exchange
    service if the requesting carrier is providing all of the end user's
    local exchange service. Because we intend the constraint we identify
    in this Order to be limited in duration, we do not find it to be
    necessary for incumbent LECs and requesting carriers to undertake
    auditing processes to monitor whether or not requesting carriers are
    using unbundled network elements solely to provide exchange access
    service. We expect that allowing requesting carriers to self-certify
    that they are providing a significant amount of local exchange
    service over combinations of unbundled loops and transport network
    elements will not delay their ability to convert these facilities to
    unbundled network element pricing, and we will take swift
    enforcement action if we become aware that any incumbent LEC is
    unreasonably delaying the ability of a requesting carrier to make
    such conversions.

[^10]: ^?^ *Third Report and Order and Fourth FNPRM* at para. 487.

[^11]: ^?^ *Id.* at para. 484.

[^12]: ^?^ *Implementation of the Local Competition Provisions of the
    Telecommunications Act of 1996*, CC Docket No. 96-98, First Report
    and Order, 11 FCC Rcd at 15499, 15862-69, paras. 716-32 (1996)
    (*Local Competition First Report and Order*).

[^13]: ^?^ *Id. at* 15866, para. 725.