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 )

THIRD REPORT AND ORDER AND

FOURTH FURTHER NOTICE OF PROPOSED RULEMAKING

**Adopted: September 15, 1999 Released: November 5, 1999**

**Comment Date: January 12, 2000**

**Reply Date: February 11, 2000**

By the Commission: Commissioner Ness issuing a statement; Commissioner
Furchtgott-Roth concurring in part, dissenting in part and issuing a
statement; Commissioner Powell dissenting in part and issuing a
statement.

**TABLE OF CONTENTS**

Paragraph

I. INTRODUCTION 1

II\. EXECUTIVE SUMMARY 16

III\. BACKGROUND 17

IV\. FRAMEWORK FOR DECIDING WHAT NETWORK ELEMENTS MUST BE UNBUNDLED
PURSUANT TO SECTION 251 22

A. Overview 22

B. The "Necessary" and "Impair" Standards of Section 251(d)(2) 30

1\. Application of the "necessary" and "impair" standards to proprietary
and non-proprietary elements under Section 251(d)(2) 30

a\. Background 30

b\. Discussion 32

2\. Definition of "Proprietary in Nature" 33

a\. Background 33

b\. Discussion 35

3\. The "Necessary" Standard of Section 251(d)(2)(A) 42

a\. Background 42

b\. Discussion 45

4\. The "Impair" Standard of Section 251(d)(2)(b) 49

a\. Background 49

b\. Discussion 52

C. Adoption of a National List of Unbundled Network Elements 118

1\. Background 118

2\. Discussion 121

a\. Legal Authority 122

b\. Goals of the Act 125

D. Modification of the National List 145

1\. Background 145

2\. Discussion 149

a\. Modification of the National List by the Commission 149

b\. Modification of the National List by the States 154

V. APPLICATION OF THE STANDARD TO INDIVIDUAL NETWORK ELEMENTS 163

A. Loops 163

1\. Background 163

2\. Discussion 166

a\. Definition 167

b\. Proprietary Concerns Associated with the Loop 181

c\. Unbundling Analysis for the Loop in General 182

B. The Subloop 203

1\. Background 203

2\. Discussion 206

a\. Definition of the Subloop 207

b\. Proprietary Concerns Associated with Subloops 209

c\. Unbundling Analysis for Subloops 210

d\. Technical Feasibility 221

C. Network Interface Devices (NIDs) 231

1\. Background 231

2\. Discussion 233

a\. Definition of the NID 234

b\. Proprietary Concerns Associated with the NID 237

c\. Unbundling Analysis 238

D. Local Switching 242

1\. Local Circuit Switching 242

a\. Background 242

b\. Discussion 245

2\. Packet Switching 301

a\. Background 301

b\. Discussion 303

E. Interoffice Transmission Facilities 319

1\. Background 319

2\. Discussion 322

a\. Dedicated Transport 323

b\. Shared Transport 370

F. Signaling Networks and Call-Related Databases 381

1\. Signaling Networks 381

a\. Background 381

b\. Discussion 384

2\. Call-Related Databases 401

a\. Background 401

b\. Discussion 403

G. Operations Support Systems 422

1\. Background 422

2\. Discussion 425

a\. Definition of OSS 426

b\. Proprietary Concerns Associated with OSS 433

c\. Unbundling Analysis for OSS 434

H. Operator Services and Directory Assistance 439

1\. Background 439

2\. Discussion 442

a\. Definition of Operator Services and Directory Assistance 444

b\. Proprietary Concerns Associated with OS/DA 446

c\. Unbundling Analysis 447

VI\. MISCELLANEOUS ISSUES 466

A. Section 271-Related Issues 466

1\. Background 466

2\. Discussion 469

B. Combinations of Unbundled Loops and Transport Network Elements 475

1\. Enhanced Extended Link 476

a\. Background 476

b\. Discussion 479

2\. Use of unbundled network elements to provide exchange access
services 484

a\. Background 484

b\. Discussion 485

C. Nondiscrimination Obligations of Incumbent LECs 491

VII\. FOURTH FURTHER NOTICE OF PROPOSED RULEMAKING 493

A. Background 493

B. Discussion 495

VIII\. PROCEDURAL ISSUES 498

A. Final Regulatory Flexibility Analysis 498

1\. Need for, and Objectives of, the Third Report and Order 499

2\. Summary of Significant Issues Raised by the Public Comments in
Response to the IRFA 500

3\. Description and Estimate of the Number of Small Entities to which
Rules will Apply 501

4\. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements 506

5\. Steps Taken to Minimize the Economic Impact of this Order on Small
Entities, and Alternatives Considered 507

6\. Report to Congress 510

B. Initial Regulatory Flexibility Analysis (IRFA) 511

1\. Need for, and Objectives of, the Proposed Rules 512

2\. Legal Basis 514

3\. Description and Estimate of the Number of Small Entities to Which
the Proposed Rules Will Apply 515

4\. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements 518

5\. Steps Taken to Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered 519

6\. Federal Rules that May Duplicate, Overlap, or Conflict with the
Proposed Rules 520

IX\. ORDERING CLAUSES 521

APPENDIX A \-- LIST OF COMMENTERS

Appendix B \-- top 50 metropolitan statistical areas

APPENDIX C \-- final rules

APPENDIX D \-- current unbundled network elements

# INTRODUCTION

1.  In this proceeding, we respond to the Supreme Court's January 1999
    decision that directs us to reevaluate the unbundling obligations of
    section 251 of the Telecommunications Act of 1996 (1996 Act).[^1]
    The Supreme Court's decision removed many of the uncertainties
    surrounding the requirements of section 251 by upholding the
    majority of the Commission's rules implementing that section of the
    Act, including the Commission's jurisdiction to implement sections
    251 and 252 of the Act, the Commission's definitions of network
    elements, and the Commission's rule requiring incumbent local
    exchange carriers (LECs) to offer combinations of unbundled network
    elements that are already combined. The Court has directed us,
    however, to revise the standards under which the unbundling
    obligations of section 251(c)(3) are determined. Specifically, the
    Court has required us to give some substance to the "necessary" and
    "impair" standards in section 251(d)(2), and to develop a limiting
    standard that is "rationally related to the goals of the Act." In
    addition, as we develop the "necessary" and "impair" standards, the
    Court has required us to consider the availability of alternative
    network elements outside the incumbent's network.[^2]

2.  In passing the 1996 Act, Congress overhauled many aspects of federal
    regulation of telecommunications services by establishing a
    pro-competitive and deregulatory framework designed to benefit "all
    Americans by opening all telecommunications markets to
    competition."[^3] Two of the fundamental goals of the 1996 Act are
    to open the local exchange and exchange access markets to
    competition and to promote innovation and investment by all
    participants in the telecommunications marketplace.[^4] Congress
    sought to foster this competition by fundamentally changing the
    conditions and incentives for market entry and by attempting to open
    any remaining local service bottlenecks.[^5] As a result, the
    provisions of the 1996 Act set the stage for a new competitive
    paradigm in which carriers in previously segmented markets are able
    to compete in a dynamic and integrated telecommunications market
    that promises lower prices and more innovative services to
    consumers.

3.  Central to the new statutory scheme is section 251 of the Act, which
    seeks generally to reduce inherent economic and operational
    advantages possessed by incumbent local exchange carriers. Toward
    this end, section 251 imposes specific market-opening mechanisms,
    such as mandatory interconnection, unbundling, and resale
    requirements on incumbent LECs, in order to break the incumbents'
    control over local facilities.[^6] Congress directed the Commission
    to implement the provisions of section 251, and to specifically
    determine which network elements should be unbundled pursuant to
    section 251(c)(3).[^7]

4.  Pursuant to our statutory mandate and the directives of the Supreme
    Court, we reevaluate the unbundling obligations of incumbent LECs,
    pursuant to sections 251(c)(3) and 251(d)(2). The new standards and
    framework we adopt in this Order for determining which network
    elements incumbent LECs must make available on an unbundled basis
    will remove the uncertainties surrounding the incumbents' unbundling
    obligations since passage of the Act. More importantly, however,
    they will define the competitive landscape of telecommunications
    markets for the foreseeable future.

5.  The standards and unbundling obligations that we adopt in this Order
    are designed to create incentives for both incumbent and competitive
    LECs to innovate and invest in technologies and services that will
    benefit consumers through increased choices of telecommunications
    services and lower prices. We recognize that there will be a
    continuing need for all three of the arrangements Congress set forth
    in section 251 to remain available to competitors so that they can
    serve different types of customers in different geographic
    areas.[^8] We continue to believe that the ability of requesting
    carriers to use unbundled network elements, including various
    combinations of unbundled network elements, is integral to achieving
    Congress' objective of promoting rapid competition to all consumers
    in the local telecommunications market.[^9] Moreover, in some areas,
    we believe that the greatest benefits may be achieved through
    facilities-based competition, and that the ability of requesting
    carriers to use unbundled network elements, including various
    combinations of unbundled network elements, is a necessary
    precondition to the subsequent deployment of self-provisioned
    network facilities.

6.  Although Congress did not express explicitly a preference for one
    particular competitive arrangement, it recognized implicitly that
    the purchase of unbundled network elements would, at least in some
    situations, serve as a transitional arrangement until fledgling
    competitors could develop a customer base and complete the
    construction of their own networks. In particular, Congress stated:
    "\[I\]t is unlikely that competitors will have a fully redundant
    network in place when they initially offer local service because the
    investment necessary is so significant. Some facilities and
    capabilities . . . will likely need to be obtained from the
    incumbent \[LEC\] as network elements pursuant to new section
    251."[^10] Implicit in this recognition, and in section 271's
    requirement that the Bell Operating Companies (BOCs) provide access
    and interconnection to their network facilities in accordance with
    the requirements in the competitive checklist, is Congress's
    expectation that new competitors would use unbundled elements from
    the incumbent LEC until it was practical and economically feasible
    to construct their own networks. [^11]

7.  We fully expect that over time competitors will prefer to deploy
    their own facilities in markets where it is economically feasible to
    do so, because it is only through owning and operating their own
    facilities that competitors have control over the competitive and
    operational characteristics of their service, and have the incentive
    to invest and innovate in new technologies that will distinguish
    their services from those of the incumbent. Unbundling rules that
    encourage competitors to deploy their own facilities in the long run
    will provide incentives for both incumbents and competitors to
    invest and innovate, and will allow the Commission and the states to
    reduce regulation once effective facilities-based competition
    develops.[^12] Accordingly, the unbundling rules we adopt in this
    proceeding seek to promote the development of facilities-based
    competition.

8.  We believe that the "necessary" and "impair" standards we adopt
    below address the Supreme Court's mandate and implement the
    statutory language and goals of the Act. The standards we adopt take
    into consideration alternatives outside the incumbent LEC's network,
    and whether those alternatives are actually available to the
    requesting carrier as a practical, economic, and operational matter.
    We consider not only the direct costs, but also other costs and
    impediments associated with using alternative elements that may
    constitute barriers to entry. We believe the Commission must assess
    these factors to determine the availability of alternatives, and
    whether access to the incumbent's network element thereby satisfies
    the "necessary" and "impair" standards of section 251(d)(2).

9.  The unbundling standards we adopt in this Order also seek to
    encourage the rapid introduction of competition in all markets,
    including residential and small business markets. They seeks to
    create incentives for both incumbents and requesting carriers to
    invest and innovate in new technologies by establishing a mechanism
    by which regulatory obligations to provide access to network
    elements will be reduced as alternatives to the incumbent LECs'
    network elements become available in the future. In addition, the
    standards provide reasonable certainty regarding the availability of
    unbundled elements, thereby allowing requesting carriers to attract
    investment capital and move forward with implementing national and
    regional business plans that will allow them to serve the greatest
    number of consumers

10. To date, we have seen the development of facilities-based
    competition among providers of particular services in certain
    sectors of the market. For example, as discussed in more detail
    below, competitors have deployed their own fiber rings and
    approximately 700 circuit switches to provide local exchange and
    exchange access services primarily to medium and large business
    customers in high-density metropolitan areas.[^13] In addition, the
    record in this proceeding suggests that a growing number of carriers
    are deploying packet switches to provide data services in a number
    of markets, particularly for end users with substantial
    telecommunications needs. [^14]

11. Other local markets, however, particularly the residential and small
    business markets, and geographic markets outside of major
    metropolitan areas, have seen minimal competition. This may be due
    to the uncertainty surrounding the ability of competitive LECs to
    use reasonably priced unbundled network elements to serve these
    areas as a result of litigation concerning the Commission's
    unbundling rules.[^15] Because unbundled network elements have not
    been made fully available to requesting carriers as the Commission
    expected in 1996, we do not yet know the extent to which competition
    will develop once all of the unbundling rules are actually
    implemented by incumbent LECs.

12. Only recently have incumbent LECs provided access to combinations of
    unbundled loops, switches, and transport elements, often referred to
    as "the platform." Since these combinations of unbundled network
    elements have become available in certain areas, competitive LECs
    have started offering service in the residential mass market in
    those areas. For example, in January of this year, Bell Atlantic, as
    part of an agreement with the New York Public Service Commission,
    began offering the unbundled network element platform out of
    particular end offices in New York City. As a result, MCI WorldCom
    had acquired upwards of 60,000 new local residential customers in
    New York as of June 1999.[^16] AT&T also plans to serve local
    residential customers over the platform in Texas.[^17]

13. For effective competition to develop as envisioned by Congress,
    competitors must have access to incumbent LEC facilities in a manner
    that allows them to provide the services that they seek to offer, as
    contemplated in section 251(d)(2) of the Act. Despite the
    development of competition in some markets, incumbents still control
    the vast majority of the facilities that comprise the local
    telecommunications network, giving them advantages of economies of
    scale and scope not enjoyed by competitive LECs.[^18] Because
    competitors do not yet enjoy the same economies of scale, scope and
    ubiquity as the incumbent, they may be impaired if they do not have
    access, at least initially, to certain network elements supplied by
    the incumbent LEC.[^19] For example, without access to unbundled
    network elements, a competitive LEC may choose not to enter a
    particular market because the cost and delays associated with
    deploying its own facilities would be too high given the revenues
    obtainable from that market and the relative attractiveness of other
    potential new markets. Similarly, a competitive LEC may decline to
    enter a market because certain of their facilities are subject to
    economies of scale and scope such that the competitor would need a
    larger market share than it is likely to have initially. In such
    cases, competitors may choose to enter a certain market if they can
    obtain access to particular unbundled network elements on
    sufficiently favorable terms that such scale economies are overcome,
    and other potential markets no longer appear more attractive.

14. The standards and rules we adopt in this Order seek to build on
    industry experience and technological changes that have occurred in
    the telecommunications marketplace since the 1996 Act was enacted
    three years ago. Today, both incumbent LECs and requesting carriers
    are at the early stages of deploying innovative technologies to meet
    the ever-increasing demand for high-speed, high-capacity advanced
    services. To encourage competition among carriers to develop and
    deploy new advanced services, the marketplace for these services
    must be conducive to investment, innovation, and meeting the needs
    of consumers. Accordingly, our unbundling rules are designed to
    facilitate the rapid and efficient deployment of all
    telecommunications services, including advanced services.
    Specifically, unbundling rules that are based on a preference for
    development of facilities-based competition in the long run will
    provide incentives for both incumbents and competitors to invest and
    innovate, and should allow the Commission to reduce regulation once
    true facilities-based competition develops.

15. The unbundling standards we adopt in this order also are designed to
    be administratively practical and respond to changes in the
    marketplace as alternatives to the incumbent LECs' network elements
    become available. We are committed to reviewing the unbundling
    obligations in three years, and as the marketplace changes with the
    development of new technologies and increased facilities-based
    competition, we will modify the list of unbundled elements, as
    warranted.

# EXECUTIVE SUMMARY

**Section 251(d)(2)'s "Necessary" and "Impair" Standards**. Section
251(d)(2)(A)'s "necessary" standard is a stricter standard that applies
to proprietary network elements. Section 251(d)(2)(B)'s "impair"
standard applies to non-proprietary network elements. Applying a
stricter standard to proprietary network elements is consistent with
Congress' intention to spur innovation and investment by both incumbent
and competitive LECs. In applying these standards, we look first to what
is occurring in the marketplace today.

-   [Necessary]{.underline}. A proprietary network element is
    "necessary" within the meaning of section 251(d)(2)(A) if, taking
    into consideration the availability of alternative elements outside
    the incumbent's network, including self-provisioning by a requesting
    carrier or acquiring an alternative from a third party supplier,
    lack of access to that element would, as a practical, economic, and
    operational matter, *preclude* a requesting carrier from providing
    the services it seeks to offer. There are limited circumstances
    under which we may unbundle proprietary information or
    functionalities even if those elements are not strictly "necessary,"
    as long as the "impair" standard is met. These circumstances
    are: (1) where an incumbent LEC, for the primary purpose of causing
    a particular network to be evaluated under the stricter "necessary"
    standard in order to avoid its unbundling obligation, implements
    only a minor modification to the network element to make the element
    proprietary; (2) where an incumbent LEC cannot demonstrate that the
    information or functionality that it claims is proprietary
    differentiates its services from its competitors' services, or is
    otherwise competitively significant; or (3) where lack of access to
    the proprietary element would jeopardize the goal of the 1996 Act to
    bring rapid competition to the greatest number of consumers.

-   [Impair]{.underline}. The incumbent LECs' failure to provide access
    to a non-proprietary network element "impairs" a requesting carrier
    within the meaning of section 251(d)(2)(B) if, taking into
    consideration the availability of alternative elements outside the
    incumbent's network, including self-provisioning by a requesting
    carrier or acquiring an alternative from a third-party supplier,
    lack of access to that element *materially diminishes* a requesting
    carrier's ability to provide the services it seeks to offer. In
    order to evaluate whether there are alternatives actually available
    to the requesting carrier as a practical, economic, and operational
    matter, we look at the totality of the circumstances associated with
    using an alternative. In particular, our "impair" analysis considers
    the cost, timeliness, quality, ubiquity, and operational issues
    associated with use of the alternative.

**Goals of the Act**. We also interpret the obligations imposed in
section 251(d)(2) within the larger statutory framework of the 1996 Act.
Congress apparently contemplated that we would consider additional
factors by directing the Commission, in section 251(d)(2), to "consider
*at a minimum*" the "necessary" and "impair" standards. The Supreme
Court decision requires us to apply a limiting standard "rationally
related to the goals of the Act." Accordingly, in addition to the
factors set forth above, we may consider the following factors:

-   [Rapid Introduction of Competition in All Markets]{.underline}. We
    may consider whether the availability of an unbundled network
    element is likely to encourage requesting carriers to enter the
    local market in order to serve the greatest number of consumers as
    rapidly as possible. We also note that Congress required Bell
    Operating Companies to demonstrate that they are providing loops,
    switching, transport, signaling and databases, and operator
    services/directory assistance in order to obtain in-region,
    interLATA approval. While the section 271 checklist does not
    determine definitively which elements all incumbent LECs are
    required to unbundle pursuant to section 251, it sheds some light on
    what Congress believed was required to open local markets to
    competition. Accordingly, we believe that we may consider whether
    requiring all incumbent LECs to unbundle these same elements would
    promote the rapid introduction of competition on a nationwide basis.

-   [Promotion of Facilities-Based Competition, Investment, and
    Innovation]{.underline}. We may consider the extent to which the
    unbundling obligations we adopt will encourage the development of
    facilities-based competition by competitive LECs, and innovation and
    investment by both incumbent LECs and competitive LECs, especially
    for the provision of advanced services.

-   [Reduced Regulation]{.underline}. We may consider the extent to
    which we can encourage investment and innovation by reducing
    regulatory obligations to provide access to network elements, as
    alternatives to the incumbent LECs' network elements become
    available in the future.

-   [Certainty in the Market]{.underline}. We may consider how the
    unbundling obligations we adopt can provide the uniformity and
    predictability that new entrants and fledgling competitors need to
    develop national and regional business plans. We also consider
    whether the rules we adopt provide financial markets with reasonable
    certainty so that carriers can attract the capital they need to
    execute their business plans to serve the greatest number of
    consumers.

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-   [Administrative Practicality]{.underline}. We may consider whether
    the unbundling obligations we adopt are administratively practical
    to apply.

**Modification of the National List**.

-   The Order recognizes that rapid changes in technology, competition,
    and the economic conditions of the telecommunications market will
    require a reevaluation of the national unbundling rules
    periodically. In order to encourage a reasonable period of certainty
    in the market, the Commission expects to reexamine the national list
    of unbundled network elements in three years.

-   Section 251(d)(3) permits state commissions to require incumbent
    LECs to unbundle additional elements as long as the obligations are
    consistent with the requirements of section 251 and the national
    policy framework instituted in this Order.

-   Removal of elements from the national list on a state-by-state basis
    would not be consistent with section 251 and the goals of the Act.

**Network Elements that Must be Unbundled.** Applying the above factors,
the Order concludes that the following network elements must be
unbundled:

-   [Loops]{.underline}. Incumbent local exchange carriers (LECs) must
    offer unbundled access to loops, including high-capacity lines,
    xDSL-capable loops, dark fiber, and inside wire owned by the
    incumbent LEC. The unbundling of the high frequency portion of the
    loop is being considered in another proceeding.

-   [Subloops.]{.underline} Incumbent LECs must offer unbundled access
    to subloops, or portions of the loop, at any accessible point. Such
    points include, for example, a pole or pedestal, the network
    interface device, the minimum point of entry to the customer
    premises, and the feeder distribution interface located in, for
    example, a utility room, a remote terminal, or a controlled
    environment vault. The Order establishes a rebuttable presumption
    that incumbent LECs must offer unbundled access to subloops at any
    accessible terminal in their outside loop plant.

-   To the extent there is not currently a single point of
    interconnection that can be feasibly accessed by a requesting
    carrier, we encourage parties to cooperate in any reconfiguration of
    the network necessary to create one. If parties are unable to
    negotiate a reconfigured single point of interconnection at
    multi-unit premises, we require the incumbent to construct a single
    point of interconnection that will be fully accessible and suitable
    for use by multiple carriers.

-   [Network Interface Device (NID]{.underline}). Incumbent LECs must
    offer unbundled access to NIDs. The NID includes any potential means
    of interconnection with customer premises inside wiring at the point
    where the carrier's local loop facilities end, such as at a cross
    connect device used to connect the loop to customer-controlled
    inside wiring. This includes all features, functions, and
    capabilities of the facilities used to connect the loop to premises
    wiring, regardless of the specific mechanical design.

-   [Circuit Switching]{.underline}. Incumbent LECs must offer unbundled
    access to local circuit switching, except for local circuit
    switching used to serve end users with four or more lines in access
    density zone 1 in the top 50 Metropolitan Statistical Areas (MSAs),
    provided that the incumbent LEC provides non-discriminatory,
    cost-based access to the enhanced extended link throughout zone 1.
    (An enhanced extended link (EEL) consists of a combination of an
    unbundled loop, multiplexing/concentrating equipment, and dedicated
    transport. The EEL allows new entrants to serve customers without
    having to collocate in every central office in the incumbent's
    territory.) Local circuit switching includes the basic function of
    connecting lines and trunks on the line-side and port-side of the
    switch. The definition of the local switching element encompasses
    all of the features, functionalities, and capabilities of the
    switch.

-   [Packet Switching]{.underline}. Incumbent LECs must offer unbundled
    access to packet switching only in limited circumstances in which
    the incumbent has placed digital loop carrier systems in the feeder
    section of the loop or has its Digital Subscriber Line Access
    Multiplexer (DSLAM) in a remote terminal. The incumbent will be
    relieved of this obligation, however, if it permits a requesting
    carrier to collocate its DSLAM in the incumbent's remote terminal on
    the same terms and conditions that apply to its own DSLAM. Packet
    switching is defined as the function of routing individual data
    message units based on address or other routing information
    contained in the data units, including the necessary electronics
    (*e.g.,* DSLAMs).

-   [Interoffice Transmission Facilities]{.underline}. Incumbent LECs
    must offer unbundled access to dedicated interoffice transmission
    facilities, or transport, including dark fiber. Dedicated
    interoffice transmission facilities are defined as incumbent LEC
    transmission facilities dedicated to a particular customer or
    carrier that provide telecommunications between wire centers owned
    by the incumbent LECs or requesting telecommunications carriers, or
    between switches owned by incumbent LECs or requesting
    telecommunications carriers. State commissions are free to establish
    reasonable limits governing access to dark fiber if incumbent LECs
    can show that they need to maintain fiber reserves.

-   Incumbent LECs must also offer unbundled access to shared transport
    where unbundled local circuit switching is provided. Shared
    transport is defined as transmission facilities shared by more than
    one carrier, including the incumbent LEC, between end office
    switches, between end office switches and tandem switches, and
    between tandem switches in the incumbent LEC's network.

-   [Signaling and Call-Related Databases]{.underline}. Incumbent LECs
    must offer unbundled access to signaling links and signaling
    transfer points (STPs) in conjunction with unbundled switching, and
    on a stand-alone basis. The signaling network element includes, but
    is not limited to, signaling links and STPs. Incumbent LECs must
    also offer unbundled access to call-related databases, including,
    but not limited to, the Line Information database (LIDB), Toll Free
    Calling database, Number Portability database, Calling Name (CNAM)
    database, Operator Services/Directory Assistance databases, Advanced
    Intelligent Network (AIN) databases, and the AIN platform and
    architecture. We do not require incumbent LECs to unbundle access to
    certain AIN software that qualify for proprietary treatment.

-   [Operations Support Systems (OSS)]{.underline}. Incumbent LECs must
    offer unbundled access to their operations support systems. OSS
    consists of pre-ordering, ordering, provisioning, maintenance and
    repair, and billing functions supported by an incumbent LEC's
    databases and information. The OSS element includes access to all
    loop qualification information contained in any of the incumbent
    LEC's databases or other records, including information on whether a
    particular loop is capable of providing advanced services.

    **Network Elements that Need Not be Unbundled**. The following
    network elements need not be unbundled:

-   [Operator Services and Directory Assistance (OS/DA)]{.underline}.
    Incumbent LECs are not required to unbundle their OS/DA services
    pursuant to section 251(c)(3), except in the limited circumstance
    where an incumbent LEC does not provide customized routing to a
    requesting carrier to allow it to route traffic to alternative OS/DA
    providers. Operator services are any automatic or live assistance to
    a consumer to arrange for billing or completion of a telephone call.
    Directory assistance is a service that allows subscribers to
    retrieve telephone numbers of other subscribers. Incumbent LECs,
    however, remain obligated under the non-discrimination requirements
    of section 251(b)(3) to comply with the reasonable request of a
    carrier that purchases the incumbents' OS/DA services to rebrand or
    unbrand those services, and to provide directory assistance listing
    updates in daily electronic batch files.

-   [Shared Transport where Circuit Switching is not
    Unbundled]{.underline}. Incumbent LECs are not required to unbundle
    shared transport where they are not required to offer unbundled
    local circuit switching, as described above.

-   [Packet Switching]{.underline}. Incumbent LECs are not required to
    unbundle packet switching, except in a limited circumstance.
    Competitive LECs are actively deploying packet switches to serve
    high-volume customers, and are not impaired in their ability to
    offer service to such customers without access to the incumbent
    LEC's facilities. Competitive LECs are impaired, however, in their
    ability to provide services to small-volume users without access to
    unbundled packet switching. Nonetheless, we consider the other goals
    of the Act in making our unbundling determination, and conclude that
    given the nascent nature of the advanced services market and the
    Act's goal to provide incentives to all carriers to invest and
    innovate, incumbent LECs are generally not required to unbundle
    packet switching.

    **Section 271-Related Issues.**

-   If a network element on the section 271 competitive checklist is not
    required to be unbundled pursuant to section 251(c)(3) (*i.e.*,
    local circuit switching and shared transport in certain
    circumstances), Bell Operating Companies are not required to offer
    unbundled access to any such checklist items in compliance with the
    Commission's pricing rules. While the applicable price, terms, and
    conditions for that element are subject to section 201(b) and 202(a)
    of the Act, it would be counterproductive to mandate that incumbents
    offer elements at forward looking prices when the market price,
    rather than a regulated rate, should prevail in circumstances when
    an element is not unbundled.

    **Combinations of Network Elements**.

-   Given the pendency of litigation in the Court of Appeals for the
    Eighth Circuit, the Order declines to define the enhanced extended
    link as a separate network element, nor does it address whether an
    incumbent LEC must combine network elements that are not already
    combined in the network.

    **Further Notice of Proposed Rulemaking: Use of Unbundled Network
    Elements to Provide Exchange Access Service.**

-   The Further Notice seeks comment on whether there is any basis in
    the statute or our rules under which incumbent LECs could decline to
    provide entrance facilities (the link between an interexchange
    carrier's point of presence and an incumbent's switch or serving
    wire center) at unbundled network element prices.

-   The Further Notice also invites parties to refresh the record on
    whether requesting carriers may use unbundled dedicated or shared
    transport facilities in conjunction with unbundled switching to
    originate or terminate interstate toll traffic to customers to whom
    the requesting carrier does not provide local exchange service.

# BACKGROUND

16. On August 8, 1996, the Commission adopted the *Local Competition
    First Report and Order*, implementing the local competition
    provisions of the 1996 Act. In that order, the Commission
    established rules governing the obligations of incumbent LECs to
    open their local networks to competition pursuant to the
    requirements of section 251 of the 1996 Act. Among other things, the
    order adopted rules implementing the network unbundling requirements
    of sections 251(c)(3) and 251(d)(2) of the 1996 Act. Section
    251(c)(3) imposes a duty on all incumbent LECs to provide to
    competitors access to network elements on an unbundled basis.[^20]
    Section 251(d)(2) provides that, in determining which network
    elements should be unbundled under section 251(c)(3), the Commission
    shall consider, "at a minimum, whether \-- (A) access to such
    network elements as are proprietary in nature is necessary; and (B)
    the failure to provide access to such network element would impair
    the ability of the telecommunications carrier seeking access to
    provide the services that it seeks to offer."[^21]

17. In the *Local Competition First Report and Order*, the Commission
    applied its interpretation of the "necessary" and "impair" standards
    of section 251(d)(2) to the unbundling requirements of section
    251(c)(3). Specifically, the Commission defined "necessary" to mean
    "an element is a prerequisite for competition,"[^22] and it defined
    "impair" to mean "to make or cause to become worse; diminish in
    value."[^23] The Commission also determined that a requesting
    carrier's ability to offer service is "impaired" or "diminished in
    value" if "the quality of the service the entrant can offer, absent
    access to the requested element, declines" or if "the cost of
    providing the service rises."[^24]

18. After addressing the "necessary" and "impair" standards, the
    Commission adopted rule 51.319, which sets forth the network
    elements that incumbent LECs were required to make available to
    requesting carriers on an unbundled basis.[^25] Section 51.319 of
    the Commission's rules required incumbent LECs to offer unbundled
    access to the following network elements: (1) local loops; (2)
    network interface devices; (3) local switching; (4) interoffice
    transmission facilities; (5) signaling networks and call-related
    databases; (6) operations support systems; and (7) operator services
    and directory assistance.[^26] Section 51.317 of the Commission\'s
    rules allowed states to impose additional unbundling requirements
    pursuant to the Commission\'s interpretation of section
    251(d)(2).[^27]

19. Following adoption of the *Local Competition First Report and
    Orde*r, incumbent LECs and state commissions filed various
    challenges to the Commission's rules; these appeals were
    consolidated in the Eighth Circuit. The Eighth Circuit, among other
    holdings, rejected the incumbent LECs' argument that, in determining
    which elements were subject to the unbundling requirements, the
    Commission had not properly applied the "necessary" and "impair"
    standards of section 251(d)(2).[^28] Accordingly, the Eighth Circuit
    upheld section 51.319. The Supreme Court granted several parties'
    requests to review the Eighth Circuit's decision.

20. In its January 25, 1999 opinion, the Supreme Court reversed the
    Eighth Circuit's decision on this issue, stated that section 51.319
    should be vacated, and remanded the matter for further
    proceedings.[^29] While the Court affirmed that the Commission has
    jurisdiction to implement the local competition provisions of the
    1996 Act, including the unbundling requirements in section 251, it
    concluded that the Commission had not adequately considered the
    "necessary" and "impair" standards of section 251(d)(2).[^30] The
    Court found, among other things, that the Commission, in deciding
    which elements must be unbundled, did not adequately take into
    consideration the "availability of elements outside the incumbent's
    network."[^31] The Court also faulted the Commission's "assumption
    that *any* increase in cost (or decrease in quality) imposed by a
    denial of a network element renders access to that element
    'necessary,' and causes the failure to provide that element to
    'impair' the entrant's ability to furnish its desired services. .
    ."[^32] In addition, the Court criticized the Commission's
    interpretation of section 251(d)(2) because it "allows entrants,
    rather than the Commission, to determine" whether the requirements
    of that section are satisfied.[^33] On April 16, 1999, we released a
    Second Further Notice in this docket seeking comment on the
    appropriate unbundling standard, and which network elements should
    be unbundled.[^34]

# FRAMEWORK FOR DECIDING WHAT NETWORK ELEMENTS MUST BE UNBUNDLED PURSUANT TO SECTION 251

## Overview

21. In this section, we discuss our framework for determining whether a
    particular network element should be unbundled. We interpret the
    terms "necessary," "impair," and "proprietary" in section 251(d)(2)
    in a manner that gives substance to those terms. We then discuss how
    we will evaluate alternative elements that are available through
    self-provisioning or from third-party suppliers. In considering
    whether to unbundle a particular network element, we look first to
    what is occurring in the marketplace today. For some network
    elements, we are beginning to see competitors using alternatives in
    discrete situations. In order to determine whether these alternative
    sources of network elements are actually available as a practical,
    economic, and operational matter, so that incumbents should be free
    of any unbundling obligations for that element, we look at several
    factors, including cost, ubiquity, quality, timeliness, and
    operational impediments.

22. We acknowledge that given the complexity associated with a
    competitive LEC's decision to enter a certain market, it is
    extremely difficult to identify one particular factor that is
    dispositive of whether or not a competitor will seek to offer a
    particular service in any given market. For example, even where a
    competitive LEC's costs to provide a service may be comparable to
    the incumbent's costs to provide a similar service, the competitive
    LEC, because it cannot enter all markets simultaneously, may choose
    not to enter a particular market at a particular time because there
    are other markets that are relatively more profitable to serve. The
    competitive LEC might also be dissuaded from entering a market
    because of subsidy distortions or other regulatory factors.
    Conversely, notwithstanding the fact that a competitive LEC's
    infrastructure costs in a particular market may be materially
    different from the incumbent LECs' costs, the competitive LEC may
    still choose to enter that market if it can provide more services
    over its network infrastructure, or offer marketing, service, or
    technical innovations for which customers will pay a premium.

23. Although we may not be able to identify with precision a
    competitor's incentives, or lack of incentives to enter a particular
    market, we nonetheless find that evidence demonstrating the lack of
    competition in certain areas of the country and among certain
    classes of customers is a strong indicator that there may exist
    economic and other types of barriers that may, at a minimum, impair
    a competitor's ability to compete vis-à-vis the incumbent.
    Accordingly, based on evidence provided in the record, we use our
    administrative judgment to identify several factors, including cost,
    ubiquity, quality, timeliness, and operational impediments, that we
    find particularly helpful in explaining whether a competitor's
    ability to provide the service it seeks to offer is impaired without
    access to a particular unbundled network element. Based on the
    actual state of competition, we look at these factors and their
    relationship to alternative sources of network elements to determine
    whether the alternatives are actually available as a practical,
    economic, and operational matter.

24. In particular, we examine both the direct and other costs a carrier
    incurs to substitute the alternative network element for the
    incumbent LEC's network element. We also consider whether
    self-provisioning or purchasing a network element from a third-party
    supplier would prevent a requesting carrier from entering the market
    within a reasonable time, or from expanding its operations to meet
    promptly the demand of its customers. In addition to costs and
    delays, we consider whether using alternative sources of network
    elements introduces quality differences or operational or technical
    impediments that may impair a requesting carrier's ability to
    provide the services that it seeks to offer. Specifically, we assess
    whether use of an alternative source of the network element would
    cause a requesting carrier's customers to experience degraded
    service.

25. We also consider the extent to which a requesting carrier can
    compete for customers on a wide-spread basis using alternative
    sources of the elements outside the incumbent's network. In some
    cases, to compete effectively with the incumbent LEC for the same
    customers, competitive LECs must be able to attain similar economies
    of scale that can only be achieved by serving a broad base of
    customers within a geographic area. Although theoretically, all or
    part, of an incumbent LEC's network can be replicated at some cost,
    as a practical matter, replication of elements in a ubiquitous
    manner may impair a requesting carrier's ability to compete
    vis-à-vis the incumbent. If the competitive LEC must deploy multiple
    facilities in order to be able to bring competition to a broad base
    of customers within a geographic area, the costs and delays
    associated with deploying facilities will likely be magnified, and
    could "materially diminish" that competitor's ability to provide the
    services that it seeks to offer.

26. We find that the language of section 251(d)(2) and the Supreme Court
    decision suggest that we should consider, in addition to the
    "necessary" and "impair" standards, the overall goals of the 1996
    Act. Section 251(d)(2) states that the Commission shall "consider,
    *at a minimum*," the "necessary" and "impair" standards, thus
    leaving the Commission free to consider other relevant factors.[^35]
    In addition, the Supreme Court decision requires us to apply a
    limiting standard "rationally related to the goals of the Act."
    Moreover, as a policy matter, we believe that we may consider
    additional factors to ensure that the unbundling requirements
    promote the goals of the Act.

27. Accordingly, we may consider, in addition to the "necessary" and
    "impair" standards, whether the unbundling obligations we adopt are
    likely to: (1) encourage competitive LECs to rapidly enter the local
    market and serve the greatest number of consumers; (2) advance the
    development of facilities-based competition by competitive LECs, and
    encourage investment and innovation in new technologies and new
    services by both incumbent and competitive LECs; (3) reduce
    regulation of unbundled network elements as alternatives to the
    incumbent LECs' network elements become available in the future, (4)
    provide certainty in the marketplace that will allow new entrants
    and fledgling competitors to develop national and regional business
    plans and bring the benefits of competition to the greatest number
    of consumers; and (5) be administratively practical to apply. We
    conclude that these important policy goals can only be furthered by
    adoption of a national list of unbundled elements that takes into
    consideration, where appropriate, discrete geographic and product
    market variations that create exceptions to the incumbent LECs'
    general duty to unbundle the elements on the list.[^36]

28. We do not assign any particular weight to the factors we identify
    above. Rather, we consider the relationship among the various
    factors to determine whether an incumbent LEC's network element
    should be unbundled. Indeed, there may be circumstances in which
    there is significant evidence that competitors are impaired without
    unbundled access to a particular element, but requiring incumbent
    LECs to unbundle that element would be inconsistent with the goals
    of the Act.

## The "Necessary" and "Impair" Standards of Section 251(d)(2)

### Application of the "necessary" and "impair" standards to proprietary and non-proprietary elements under Section 251(d)(2)

#### Background

29. In the *Local Competition First Report and Order*, the Commission
    concluded that section 251(d)(2) establishes separate standards that
    apply to proprietary and non-proprietary network elements.
    Specifically, the Commission determined that the "necessary"
    standard of section 251(d)(2)(A) applies to proprietary elements,
    and that the "impair" standard in section 251(d)(2)(B) applies to
    non-proprietary elements.[^37] In the *Notice*, we sought comment on
    this interpretation of section 251(d)(2). In particular, we asked
    parties to comment on the difference between the "necessary" and
    "impair" standards. Noting that the Act employs two different terms,
    we asked if the Commission must apply different criteria to
    determine whether a network element meets these standards.[^38]

30. Only a couple of commenters dispute the Commission's previous
    decision to apply the "necessary" standard to proprietary elements
    and the "impair" standard to non-proprietary elements.[^39] In
    particular, Sprint argues that the "necessary" and "impair"
    standards apply only to proprietary elements and thus, all
    non-proprietary elements must be unbundled.[^40]

#### Discussion

31. We find no reason to change our framework for analyzing network
    elements under section 251(d)(2). In subpart (A) of section
    251(d)(2), "necessary' modifies elements that are "proprietary in
    nature" while in subpart (B), "impair" modifies all other network
    elements. We agree with the majority of commenters that the
    "necessary" standard of section 251(d)(2)(A) is a higher standard
    that applies to proprietary network elements or to proprietary
    functions within an element.[^41] We believe that our conclusion
    that section 251(d)(2) establishes a higher standard for proprietary
    network elements than for non-proprietary elements is consistent
    with both the language of the statute and the goals of the 1996 Act
    to encourage incumbent LECs and competitive LECs to innovate and
    invest in new technologies. Specifically, incumbent LECs will have
    an on-going incentive to innovate if we ensure that their investment
    in the proprietary portions of their network is protected. While
    competitive LECs will have access to the incumbent LEC's proprietary
    network elements where necessary, they will not have unlimited
    access to those elements. We believe that this balanced approach
    provides competitive LECs with an incentive to innovate and invest
    in new technologies that will differentiate their services from the
    incumbents' services. We note that applying the "necessary" standard
    to proprietary elements, and the "impair" standard to
    non-proprietary elements is also consistent with the Commission's
    previous interpretation of this section that was implicitly adopted
    by the Supreme Court.[^42]

### Definition of "Proprietary in Nature"

#### Background

32. Section 251(d)(2)(A) states that "\[i\]n determining what network
    elements should be made available for purposes of subsection (c)(3),
    the Commission shall consider, at a minimum, whether . . . . access
    to such network elements as are proprietary in nature is necessary."
    In the *Local Competition First Report and Order*, the Commission
    referred to proprietary network elements as including, for example,
    "those elements with proprietary protocols or elements containing
    proprietary information." The Commission found in the *Local
    Competition First Report and Order* that for most network elements
    subject to the unbundling obligations of section 51.319, parties had
    not identified any proprietary concerns. For those network elements
    where parties did identify proprietary concerns, the Commission
    found that access to those network elements was "necessary."[^43]

33. In the *Notice*, we sought comment on whether we should consider
    network elements as non-proprietary if the interfaces, functions,
    features and capabilities of the elements sought by the requesting
    carrier are defined by recognized standard-setting bodies (*e.g.*
    ITU, ANSI, or IEEE), are defined by Bellcore requirements, or
    otherwise are widely available from vendors.[^44] We further
    requested comment on whether the term "proprietary" should be
    limited to information, software, or technology that can be
    protected by patents, copyright or trade secret laws.[^45] There is
    general agreement among the parties that the Commission should
    define proprietary, under section 251(d)(2)(A), consistent with
    intellectual property categories.[^46] Several competitive LECs
    maintain that we must define the term "proprietary" narrowly so as
    not to create incentives for incumbent LECs to attempt to deny
    access to unbundled network elements on proprietary grounds.[^47]

#### Discussion

34. In this Order, we adopt a limited definition of the phrase
    "proprietary in nature" that tracks the intellectual property
    categories of patent, copyright, and trade secrets. The majority of
    parties addressing this issue support using intellectual property
    law as a basis for defining "proprietary in nature."[^48] We agree,
    and find that the intellectual property laws governing patent,
    copyright and trade secrets find a common purpose in Congress'
    intention to protect proprietary interests under section 251(d)(2).
    The intellectual property laws are designed to protect the
    incentives of authors and inventors to innovate.[^49] Similarly,
    Congress recognized that an incumbent LEC's incentive to innovate
    could be adversely affected by requiring incumbent LECs to unbundle
    proprietary portions of network elements to requesting
    carrier-competitors. Congress therefore required the Commission to
    consider whether unbundling in such instances is "necessary."[^50]

35. We find that if an incumbent LEC can demonstrate that it has
    invested resources (time, material, or personnel) to develop
    proprietary information or network elements that are protected by
    patent, copyright, or trade secret law, the product of such an
    investment is "proprietary in nature" within the meaning of section
    251(d)(2)(A). This definition is consistent with the 1996 Act's
    policy of preserving the incumbent LECs' innovation incentives. It
    is also consistent with the Commission's conclusion, in the *Local
    Competition First Report and Order*, that in some instances it will
    be "necessary" for new entrants to obtain access to proprietary
    elements.[^51] Finally, our decision to define interests that are
    "proprietary in nature" along established intellectual property
    categories is consistent with the Department of Justice and Federal
    Trade Commission *Guidelines for the Licensing of Intellectual
    Property*.[^52]

36. Our definition excludes elements that are based on widely accepted
    industry documents or on standards commonly used by a
    standards-setting body (*e.g*. ITU, ANSI, IEEE) or by vendors. There
    are few innovation incentives associated with elements that are
    based on well-recognized standards that are widely available in the
    market, and we therefore are not required to scrutinize such
    elements under the higher "necessary" standard.

37. Section 251(d)(2) directs the Commission to "consider, at a minimum"
    whether access to proprietary elements is necessary.[^53] As
    discussed below, this discretionary language permits us to consider
    other factors, in addition to the "necessary" standard, in making
    our unbundling determination. We find that there are several
    circumstances which, if they exist with regard to information or
    functionalities that the incumbent LEC claims are proprietary, will
    permit us to order unbundling of the proprietary information or
    functionalities even if unbundled access to the element is not
    strictly "necessary," as long as the "impair" standard is met. The
    first circumstance is where an incumbent LEC, for the primary
    purpose of causing a particular network to be evaluated under the
    stricter "necessary" standard in order to avoid its unbundling
    obligation, implements only a minor modification to the network
    element to make the element "proprietary in nature."[^54] Denying a
    requesting carrier access to the element in this circumstance would
    not encourage innovation and investment by the incumbent LEC, which
    is one of the goals of the 1996 Act,[^55] and would reduce consumer
    benefits by failing to facilitate rapid deployment of competitive
    services. The second circumstance is where an incumbent LEC cannot
    demonstrate that the information or functionality that it claims is
    proprietary differentiates its services from its competitors'
    services, or is otherwise competitively significant.[^56]
    Information or functionalities that do not distinguish an incumbent
    LEC's service from that of its competitors are unlikely to be the
    focus of an incumbent LEC's efforts to innovate, and therefore do
    not require the high level of protection normally afforded to
    proprietary elements under the "necessary" standard. The third
    circumstance is where we find that lack of access to the proprietary
    element would jeopardize the goal of the 1996 Act to bring rapid
    competition to the greatest number of customers.[^57] In such a
    circumstance, we may find that the incumbent LEC's asserted
    proprietary interest is outweighed by the benefits of facilitating
    more rapid deployment of competition for the greatest number of
    consumers. Given the significance of the incumbent LECs' proprietary
    interests, and our commitment to do nothing to discourage innovation
    and investment by all carriers, we do not envision, outside of these
    limited circumstances, unbundling a proprietary network element
    unless the "necessary" standard is satisfied. Moreover, we cannot
    imagine a situation where we would order unbundling of a proprietary
    element unless the "impair" standard has been met.

38. We agree with those commenters that argue that "proprietary in
    nature" applies only to the proprietary interests of the incumbent
    LEC and not to proprietary interests of third parties.[^58] Limiting
    the definition of "proprietary" to interests held by the incumbent
    LEC is consistent with section 251(d)(2)(A)'s goal of preserving the
    incumbent LECs' incentives to innovate. Moreover, sections 251(c)
    and 251(d)(2), by their terms, apply only to the proprietary
    interests of those parties subject to the Act's unbundling
    obligations \-- incumbent LECs. Thus, section 251(d)(2) only
    indirectly affects, if at all, the innovation incentives of third
    parties.[^59]

39. Finally, we reject CompTel's argument that we should limit the
    application of proprietary network elements to those circumstances
    in which the incumbent LEC "discloses" proprietary information.[^60]
    CompTel argues that if unbundling merely provides a requesting
    carrier with the "use" of a proprietary methodology, but does not
    "disclose" or access the proprietary information itself, the element
    is not proprietary.[^61] We find that the "use" or "disclosure"
    rationale does not promote the goal of the Act to encourage
    investment and innovation, and thus is at odds with our decision to
    define "proprietary" along intellectual property categories.

40. Pursuant to patent law, patent holders trade monopoly rights in
    their inventions in exchange for a requirement that they disclose
    the technical details underlying the patent. Patent holders thus
    recover their investments by obtaining a monopoly on the "use" of
    their protected intellectual property. We agree with Ameritech that
    limiting the definition of "proprietary" to requests that would
    reveal proprietary information would turn intellectual property law
    and incentives to innovate on their head; "instead of granting
    exclusivity in exchange for disclosure, it would withhold
    exclusivity unless needed to avoid disclosure."[^62] Similarly,
    under copyright laws, an illegal copy or "use" of a protected work
    can damage an author's incentive to produce the work.[^63] We note,
    however, that the disclosure of sensitive customer information
    contained in unbundled network element must be consistent with the
    requirements of section 222.

### The "Necessary" Standard of Section 251(d)(2)(A)

#### Background

41. In the *Local Competition First Report and Order*, the Commission
    defined a "necessary" network element as one that is a
    "prerequisite" to competition. The Commission stated that "in some
    instances it will be 'necessary' for requesting carriers to obtain
    access to proprietary elements (*e.g*., elements with proprietary
    protocols or elements containing proprietary information) because
    without such elements, the ability of requesting carriers to compete
    would be significantly impaired or thwarted."[^64] It also
    acknowledged that prohibiting incumbents from refusing access to
    proprietary elements could reduce their incentives to offer
    innovative services.[^65] The Commission did not identify any
    proprietary elements subject to unbundling in the *Local Competition
    First Report and Order*, except that it acknowledged the claims of
    several parties that access to the incumbent LECs' advanced
    intelligent network (AIN) may raise proprietary concerns. It
    nevertheless concluded that access to AIN is "necessary" within the
    meaning of section 251(d)(2)(A).[^66]

42. In the *Notice*, the Commission sought comment on the definition of
    "necessary" for the purpose of determining proprietary network
    elements that must be unbundled pursuant to the requirements of
    section 251(d)(2)(A), as well as on what factors or criteria the
    Commission should apply in determining whether access to a network
    element is "necessary." [^67]

43. Several competitive LECs assert that in determining whether
    unbundling of a proprietary network element is "necessary," the
    Commission must evaluate whether the requesting carrier can obtain
    comparable functionality from an alternative network element. They
    maintain that if the requesting carrier would experience a material
    loss in functionality without the network element that that the
    incumbent LEC claims is proprietary, then the incumbent LEC's
    network element is "necessary" within the meaning of section
    251(d)(2)(A).[^68] The incumbent LECs assert generally that both the
    "necessary" and "impair" standards require an analysis of whether
    lack of access to their networks elements, taking into consideration
    alternatives outside the incumbent's network, would *deny* an
    efficient competitor a meaningful opportunity to compete. These
    commenters argue that the "necessary" standard requires the
    Commission to accept a higher degree of proof that alternatives to
    the element are not available.[^69]

#### Discussion

44. We conclude that a proprietary network element is "necessary" within
    the meaning of section 251(d)(2)(A) if, taking into consideration
    the availability of alternative elements outside the incumbent's
    network, including self-provisioning by a requesting carrier or
    acquiring an alternative from a third-party supplier, lack of access
    to that element would, as a practical, economic, and operational
    matter, *preclude* a requesting carrier from providing the services
    it seeks to offer. We agree with NTIA that the proper focus of the
    "necessary" standard is whether access to the incumbent LEC's
    proprietary element is absolutely required for the competitor's
    provision of its intended service.[^70] We find, therefore, that an
    incumbent LEC must provide access to a proprietary element, if
    withholding access to the element would prevent a competitor from
    providing the service it seeks to offer. In other words, we conclude
    that an incumbent LEC's proprietary network element would only be
    available to a competitor if the competitor is unable to offer
    service, without access to the element, because no practical,
    economic, and operational alternative is available, either by
    self-provisioning or from other sources.

45. The standard we assign to the term "necessary," as used in section
    251(d)(2)(A), is consistent with the Supreme Court's decision
    because it considers alternatives available outside the incumbent's
    network and gives substance to the meaning of "necessary." Moreover,
    insofar as the standard focuses on the competitor's ability to
    furnish a desired service, and not merely on whether profits are
    increased by using the incumbent's network, the standard is also
    consistent with the Court's instruction that we must "apply some
    limiting standard, rationally related to the goals of the Act."[^71]

46. This "necessary" standard differs from the "impair" standard we
    adopt below because a "necessary" element would, if withheld,
    *prevent* a carrier from offering service, while an element subject
    to the "impair" standard would, if withheld, merely limit a
    carrier's ability to provide the services it seeks to offer.[^72] We
    therefore disagree with the standards proposed by ALTS and other
    competitive LECs that access to a proprietary element is "necessary"
    if the entrant would experience a material loss in functionality
    without access to the element.[^73] A standard based on a test of
    "material loss" in functionality requires only that the competitive
    LEC's ability to compete be materially affected in some way, as
    opposed to precluded, and ignores the higher degree of protection
    normally afforded intellectual property rights.[^74] The incumbent
    LECs argue that the "necessary" standard is a higher standard that
    is intended to preserve their incentive to invest in proprietary
    protocols,[^75] and that access to a proprietary element is
    "necessary" only if lack of access to that element would deny an
    efficient competitor a meaningful opportunity to compete.[^76] We
    agree with the incumbent LECs' concerns regarding the preservation
    of their investment incentives. We believe that our standard, by
    requiring that a requesting carrier be precluded as a practical,
    economic, and operational matter from providing service without
    access to the proprietary information, sufficiently protects the
    incumbents' proprietary property from nonessential access by
    competitors.

47. We reject, however, the incumbent LECs' proposal to base the
    "necessary" standard on the requirements of an efficient competitor.
    As we explain below in our discussion of the "impair" standard, we
    do not affirmatively base our unbundling standard on an efficient
    competitor because we conclude that the marketplace is better able
    than regulators to distinguish efficient competitors from
    inefficient competitors.[^77] We also note that GTE and SBC state
    that few, if any, network elements are entirely proprietary in
    nature.[^78] Other commenters point out that most network equipment
    and services are non-proprietary because of the need for
    interoperability of networks.[^79] We therefore expect that the
    "necessary" standard will be invoked only when there is a serious
    question of whether access to the element will infringe upon the
    incumbent's intellectual property.

### The "Impair" Standard of Section 251(d)(2)(b)

#### Background

48. In the *Local Competition First Report and Order*, the Commission
    adopted a dictionary definition of the term "impair" that means "to
    make or cause to become worse; diminish in value." The Commission
    stated that "generally . . . an entrant's ability to offer a
    telecommunications service is 'diminished in value' if the quality
    of the service the entrant can offer, absent access to the requested
    element, declines and/or the cost of providing the service
    rises."[^80] In particular, the Commission interpreted the "impair"
    standard as requiring an evaluation of whether the failure of an
    incumbent to provide access to a network element would decrease the
    quality, or increase the financial or administrative cost of the
    service a requesting carrier seeks to offer.[^81]

49. In the *Notice*, we sought comment on the meaning of the term
    "impair," and asked whether we should adopt a standard under which
    we examine whether the new entrant's ability to offer a
    telecommunications service in a competitive manner is materially
    diminished in value.[^82] We also sought comment on the factors or
    criteria we should adopt to determine whether failure to provide
    access to the incumbent LEC's network elements would impair an
    entrant's ability to provide service within the meaning of section
    251(d)(2).[^83]

50. The incumbent LECs argue generally that a requesting carrier is
    impaired if, after taking into account the availability of elements
    from alternative sources outside the incumbent's network, lack of
    access to the requested element would deny a competitor a meaningful
    opportunity to compete. This standard is similar to the standard the
    incumbent LECs propose for the "necessary" standard under section
    251(d)(2)(A).[^84] GTE argues that failure to provide access to a
    network element would impair a requesting carrier's ability to
    provide service only where the element is essential to competition,
    and there is convincing evidence that the carrier cannot compete
    effectively using an alternative network element.[^85] Several
    incumbent also maintain that we must consider all available
    alternatives, including those available from other suppliers and
    through self-provisioning by the requesting carrier.[^86] The Texas
    PUC proposes that a competitor is impaired if, looking at the
    marketplace as a whole, lack of access to the incumbent's network
    element causes it to incur an increase in cost such that the
    competitor does not have a meaningful opportunity to compete.[^87]
    The competitive LECs and the Illinois Commerce Commission propose a
    standard by which a carrier would be impaired if, after taking into
    account the availability of elements from alternative sources
    outside the incumbent's network, lack of access to the requested
    element would materially diminish the requesting carrier's ability
    to provide service.[^88] The difference between the standard
    proposed by the competitive LECs and the standard proposed by the
    incumbent LECs is essentially the difference between whether lack of
    access to an unbundled network element "denies" or "materially
    diminishes" the ability of a competitor to provide the services it
    seeks to offer. Many competitive LECs also assert that the incumbent
    LECs' failure to provide access to an element would impair a
    requesting carrier's ability to provide service where there is no
    competitive wholesale market for the requested element.[^89]

#### Discussion

##### The "Impair" analysis

51. We conclude that the failure to provide access to a network element
    would "impair" the ability of a requesting carrier to provide the
    services it seeks to offer if, taking into consideration the
    availability of alternative elements outside the incumbent's
    network, including self-provisioning by a requesting carrier or
    acquiring an alternative from a third-party supplier, lack of access
    to that element materially diminishes a requesting carrier's ability
    to provide the services it seeks to offer. We find that a
    materiality component, although it cannot be quantified precisely,
    requires that there be substantive differences between the
    alternative outside the incumbent LEC's network and the incumbent
    LEC's network element that, collectively, "impair" a competitive
    LEC's ability to provide service within the meaning of section
    251(d)(2).[^90] We therefore agree with the Illinois Commerce
    Commission that where a competing LEC's "ability to offer a
    telecommunications service in a competitive manner is materially
    diminished in value without access to that element," the
    competitor's ability to provide its desired services would be
    impaired.[^91]

52. We believe that a standard that includes a "materiality" component
    gives substance to the "impair" standard of section 251(d)(2)(B),
    and responds to the Supreme Court's concern that we "apply some
    limiting standard, rationally related to the goals of the Act."[^92]
    A standard that includes a materiality component preserves
    requesting carriers' ability to provide service using unbundled
    elements, as contemplated by the Act, and encourages them to invest
    and innovate. As envisioned by Congress, requesting carriers may
    need each of the three separate means of providing service (resale
    of the incumbent LEC's service, use of unbundled incumbent LEC
    network elements, deployment of self-provisioned facilities), or
    various combinations of these means, in order to serve different
    customer classes in different areas. The purchase of unbundled
    network elements from the incumbent should serve as a transitional
    strategy that will provide requesting carriers with the ability to
    gain a sufficient volume of business to justify economical
    deployment of their own facilities.

53. Although we recognize that the existence of some significant level
    of competitive LEC facilities deployment is probative of whether
    competitive LECs are impaired from providing service within the
    meaning of section 251(d)(2), we decline to adopt the incumbent
    LECs' position that the presence of a single competitor providing
    service, without using the incumbent's unbundled network elements,
    is dispositive evidence that a competitor's ability to provide
    service generally would not be impaired without access to such
    elements.[^93] According to Bell Atlantic, if an efficient
    competitor can and does provide service without access to the
    incumbent's network element, it is irrelevant whether a less
    efficient competitor might claim that it would be impaired without
    access to the element.[^94] We find that the "efficiency" argument
    raised by Bell Atlantic and other incumbent LECs is more relevant to
    the length of time a competitor has been in business than to the
    efficiencies created by the competitor's inherent capabilities or
    cost structure. More importantly, however, we agree with MCI
    WorldCom that the Act is not calibrated to the performance of the
    company whose business plan allows it to rely the least on the
    incumbent LEC's network elements.[^95] The provisions of the 1996
    Act do not contemplate that either the incumbent LEC or the
    regulator will determine whether a particular carrier is
    "efficient." Rather, the Act is designed to create a regulatory
    framework that requires incumbent LECs to make network elements
    subject to the unbundling obligations of section 251 available to
    *all* requesting carriers, subject to the requirements of section
    251(d)(2), and allows the marketplace to determine ultimately which
    competitors thrive or survive.[^96]

54. Moreover, the ability of one or more competitors to serve certain
    customers in a particular market is not dispositive of whether
    competitive LECs without unbundled access to the incumbent LEC's
    facilities are able to compete for other customers in the same
    market or for customers in other markets. In some markets,
    particularly those markets serving high-volume business customers,
    it may be practical and economical for competitive LECs to compete
    using self-provisioned facilities. In other markets, however,
    typically those markets consisting of residential consumers and
    small businesses, the delay and costs associated with
    self-provisioning a network element will preclude those same
    competitors, or others, from assuming the risk of entry, unless they
    can purchase unbundled elements from the incumbent.[^97] We agree
    with the commenters that point out that we cannot evaluate the needs
    of every potential carrier seeking access to each network element on
    a case-by-case basis.[^98] We conclude, however, that we should not
    adopt rules that would deny access to network elements to all
    competitors based on the presence of a single competitor that has
    been able to enter without the use of a particular unbundled network
    element from the incumbent LEC.

55. We believe that Congress rejected implicitly the argument that the
    presence of a single competitor, alone, should be dispositive of
    whether a competitive LEC would be "impaired" within the meaning of
    section 251(d)(2). For example, although Congress fully expected
    cable companies to enter the local exchange market using their own
    facilities, including self-provisioned loops, Congress still
    contemplated that incumbent LECs would be required to offer
    unbundled loops to requesting carriers.[^99] A standard that would
    be satisfied by the existence of a single competitive LEC using a
    non-incumbent LEC element to serve a specific market, without
    reference to whether other competitive LECs are "impaired" under
    section 251(d)(2), would be inconsistent with the Act's goal of
    creating robust competition in telecommunications. In particular,
    such a standard would not create competition among multiple
    providers of local service that would drive down prices to
    competitive levels. Indeed, such a standard would more likely create
    stagnant duopolies comprised of the incumbent LEC and the first new
    entrant in a particular market. An absence of multiple providers
    serving various markets would significantly limit the benefits of
    competition that would otherwise flow to consumers.

56. On the other hand, we are not persuaded by arguments of competitive
    LECs that the "impair" standard is met only once it is determined
    that a wholesale market exists for a particular element.[^100] We
    agree with the incumbent LECs that basing the "impair" standard on
    the existence of a wholesale market does not take into consideration
    self-provisioning as a viable substitute to the incumbent LECs'
    network elements. [^101] The Supreme Court decision in *Iowa Utils.
    Bd.* expressly faulted the Commission's analysis in the *Local
    Competition First Report and Order* for not comparing use of the
    incumbent LEC's element with "self-provision" or with "purchas\[ed
    elements\] from another provider."[^102] We find that, in order to
    thoroughly evaluate the availability of alternative elements outside
    of the incumbent LEC's network, we must consider elements available
    from all sources, including those elements available from
    third-party suppliers and through self-provisioning. [^103]

57. Several of the incumbent LECs argue that our standard should be
    based on an analysis similar to the one used by courts in
    determining whether, according to the essential facilities doctrine,
    a firm must share its facilities with competitors.[^104] We
    disagree. Although we acknowledge that the Supreme Court referred to
    the possibility of adopting a limiting standard based on the
    essential facilities doctrine,[^105] we find nothing in the
    legislative history or statutory language of the 1996 Act, or in the
    Court's decision that requires us to apply that doctrine in
    determining which network elements the incumbent LECs must unbundle.
    Indeed, the Court expressly declined to decide, as a matter of law,
    whether the essential facilities doctrine is mandated by section
    251(d).[^106] Further, we believe that the standard under section
    251(d) better reflects the overall goals of the Act. Accordingly, as
    discussed more fully below, we describe several factors that should
    be considered in determining whether a particular network element
    must be unbundled pursuant to section 251(c)(3).[^107]

58. As an initial matter, the legislative history and statutory language
    of the Act indicate that Congress did not intend to codify the
    essential facilities doctrine when it enacted section 251(d)(2).
    Specifically, the legislative history indicates that Congress was
    aware of antitrust principles and the essential facilities doctrine,
    in particular, when it considered the 1996 Act. At least since 1991,
    the Senate had considered telecommunications legislation that
    expressly referred to "essential facilities."[^108] Yet, in spite of
    its awareness of this doctrine, Congress did not adopt an essential
    facilities test for unbundling of network elements. Congress chose,
    instead, to adopt unbundling requirements that are based upon the
    "necessary" and "impair" standards of section 251(d)(2). Moreover,
    section 601(b)(1) of the Act expressly preserves the existing
    antitrust laws, indicating that Congress intended for the Act to
    augment, not replace, traditional antitrust rules.[^109]

59. The essential facilities doctrine is an antitrust doctrine that
    imposes an obligation on a firm that controls facilities that are
    essential for the existence of competition between itself and a
    competitor to share such facilities on non-discriminatory
    terms.[^110] The doctrine creates a narrow exception to the general
    antitrust presumption that a single firm may decline to deal with
    another firm.[^111] Under the essential facilities doctrine, a court
    may require a firm possessing monopoly control over an essential
    input to deal with a competitor, if it is shown that the monopolist
    is misusing control of an essential facility to foreclose
    competition in a downstream market.[^112]

60. Although we find that the essential facilities doctrine promotes the
    same economic and policy goals embodied in the 1996 Act, we find it
    to be of limited assistance in our analysis of the unbundling
    obligations of the Act because, as NTIA explains, the Act plainly
    imposes on incumbent LECs a broader duty to deal with competitors
    than does the essential facilities doctrine.[^113] In particular,
    the essential facilities doctrine differs from the analysis the
    Commission must undertake under section 251(d)(2) because Congress
    has already created an affirmative obligation for incumbent LECs to
    make their facilities available to competitors.[^114] Specifically,
    section 251(c)(3) imposes on incumbent LECs a general obligation to
    provide access on an unbundled basis to any network elements that
    the Commission identifies under section 251(d)(2). This obligation
    is not limited to situations in which the incumbent is misusing
    control of a unique facility to foreclose competition in a
    downstream market. Rather, section 251(d)(2) requires incumbents to
    share their facilities if competitors are merely \"impaired\" in
    their ability to provide services they seek to offer. In addition,
    sections 251(c)(3) and 251(d)(2) require incumbent LECs to make
    their facilities available at cost-based rates, whereas the
    essential facilities doctrine allows monopolists to continue
    charging monopoly rates for use of their facilities.[^115]

61. It is particularly notable that although the essential facilities
    doctrine is referenced in several Supreme Court rulings, the Supreme
    Court has never explicitly adopted the doctrine.[^116] Moreover,
    because antitrust jurisprudence has not clearly defined the contours
    of the essential facilities doctrine, the doctrine provides limited
    guidance in developing a limiting standard under section 251(d)(2).
    In order to establish liability under the essential facilities
    doctrine, a plaintiff must establish the existence of five
    elements: 1) a monopolist controls an essential facility; 2) the
    competitor is unable to practically or reasonably duplicate the
    essential facility; 3) the monopolist denies a competitor use of the
    facility; 4) the monopolist can feasibly provide the facility;
    and 5) there is no legitimate business justification for denying
    access to the facility the monopolist controls.[^117] Although the
    second prong of this test resembles the inquiry the Commission must
    undertake to evaluate the availability of alternative elements
    outside of the incumbent LEC's network, it does not establish a
    standard by which the Commission can measure the extent to which the
    cost of duplicating the element is economically infeasible, which,
    as described below, is a significant part of the our unbundling
    analysis.

##### Factors for Determining Availability of Alternative Network Elements

62. In order to respond to the Supreme Court's decision, we consider
    whether a requesting carrier's ability to provide the services that
    it seeks to offer would be materially diminished if it were required
    to use an alternative element available outside the incumbent LEC's
    network. We agree with those parties that argue that we must
    consider the totality of the circumstances to determine whether an
    alternative to the incumbent LEC's network element is available in
    such a manner that a requesting carrier can realistically be
    expected to actually provide service using the alternative.[^118] We
    therefore take into account alternatives that are available through
    both self-provisioning and from third-party suppliers,[^119] and we
    consider the extent to which these alternatives are available as a
    practical, economic, and operational matter.

63. We are not persuaded by the incumbents' argument that we must look
    at each element in isolation to determine whether or not that
    element independently satisfies section 251(d)(2).[^120] Such an
    analysis fails to reflect the manner in which carriers interconnect
    their networks, and ignores factors that would impair a requesting
    carrier's ability to actually provide service, which is the focus of
    section 251(d)(2)(B). Even if a particular element may be purchased
    outside of the incumbent LEC's network at reasonable prices, other
    factors, including the costs and delays associated with collocation
    arrangements, as well as additional costs and operational
    impediments associated with the manual processes used to
    interconnect certain network elements, may make it impossible as a
    practical, economic, and operational matter for a competitor to
    provide services in the local market quickly and on a wide-spread
    basis.

64. We acknowledge that some of the factors we consider in our analysis
    may implicate other proceedings or provisions of the statute.[^121]
    We therefore remain open to the possibility that issues that we
    address under our "impair" analysis, (*e.g*., collocation), could be
    addressed in other contexts, such as in enforcement proceedings.

65. Although we recognize that the factors of cost, timeliness, quality,
    ubiquity, and operational factors are only some of the factors that
    may influence a carrier's decision to enter a particular market, we
    agree with the California PUC that these factors are relevant to an
    inquiry of whether alternative sources of network elements are
    reasonably available from other sources, and thus, in many cases,
    whether requesting carriers are able to actually provide service
    using the alternative element.[^122] We also agree with the
    commenters that point out that we cannot evaluate the needs of every
    potential entrant for every network element on a carrier-by-carrier,
    market-by-market, week-by-week (or other time period) basis.[^123]
    We therefore will not analyze the availability of alternative
    elements, including those provided through self-provisioning, from
    the perspective of a carrier using any specific competitive strategy
    in a particular geographic market.

66. Although we find it reasonable to consider cost, time, quality,
    ubiquity, and other factors associated with self-provisioning or
    acquiring an element from a third-party provider, we do not base our
    decision on cost models or on the theoretical availability of
    alternatives from other sources. Rather, we find the marketplace to
    be the most persuasive evidence of the actual availability of
    alternatives as a practical, economic, and operational matter. As
    the Texas PUC stated, the Commission and the states should "base
    their decisions on marketplace information, while recognizing that
    minor increases in a competitor's costs must be weighed against
    other factors such as service quality, technological innovation, and
    the loss of efficiency in a rapidly changing marketplace."[^124]
    Discerning the practical, economic, and operational viability of
    self-provisioning or obtaining alternative elements from third-party
    providers is technical, complex, and subject to considerable
    uncertainty. We believe, however, that an examination of the factors
    we have identified provides the Commission with the ability to
    identify, through the exercise of its administrative judgment,
    discernable material differences between using the incumbent's
    unbundled network elements and those available from other sources
    that ultimately will affect a requesting carrier's ability to
    provide the services it seeks to offer.

67. We assign little weight in our "impair" analysis to the ability of a
    requesting carrier to use the incumbent LECs' resold or retail
    tariffed services as alternatives to unbundled network elements. In
    the *Local Competition First Report and Order*, the Commission
    expressly rejected the incumbent LECs' argument that requesting
    carriers are not impaired in their ability to provide service if
    they can provide their proposed service by purchasing the service at
    wholesale rates from the incumbent LEC. As the Commission concluded
    in that Order, allowing incumbent LECs to deny access to unbundled
    elements solely, or primarily, on the grounds that an element is
    equivalent to a service available at resale would lead to
    impractical results; incumbent LECs could completely avoid section
    251(c)(3)'s unbundling obligations by offering unbundled elements to
    end users as retail services.[^125] In other words, denying access
    to unbundled elements on the grounds that an incumbent LEC offers an
    equivalent retail service could force requesting carriers to
    purchase, for example, an unbundled loop and switching out of an
    incumbent's retail tariff at a wholesale discount, subject to all of
    the associated tariff restrictions. US West maintains that it need
    not unbundle local transport because requesting carriers can
    purchase its tariffed special access services.[^126] In light of the
    little weight we assign to the availability of resold services in
    our analysis, we reject US West's argument. This argument would
    foreclose competitive LECs from taking advantage of the distinct
    opportunity Congress gave them, through section 251(c)(3), to use
    unbundled network elements.[^127]

68. As the Commission explained in the *Local Competition First Report
    and Order*, using unbundled network elements and resold services
    present different opportunities, risks, and costs, in connection
    with providing local telephone service. These differences influence
    the entry strategies of potential competitors.[^128] The Commission
    stated that carriers using unbundled elements will have greater
    opportunities to offer services that are different from those
    services offered by the incumbents. More specifically, carriers
    reselling incumbent LEC services are limited to offering the same
    service an incumbent LEC offers at retail.[^129] While competitive
    LECs using unbundled elements may have greater competitive
    opportunities than carriers offering services available for resale,
    they also face greater risks. A carrier purchasing unbundled
    elements must pay for the cost of the element, pursuant to terms and
    conditions agreed to in negotiations or ordered by states in
    arbitrations. Thus, the competitive LEC faces the risk that end-user
    customers will not demand a sufficient number of services to allow
    the competitive LEC to recoup the costs it incurs using the
    unbundled element; a carrier that resells the incumbent LEC's
    services does not face the same risk.[^130] The 1996 Act grants
    competitive LECs the option of using either the incumbent LEC's
    unbundled network elements or resold services, thereby allowing the
    competitors to balance the risks and opportunities associated with
    each.

69. In addition, even if we agreed with US West that an incumbent LEC's
    retail tariff provided competitive LECs with a viable alternative to
    the incumbent LEC's unbundled network element, competitors would
    have no assurance that the incumbent LEC would not change the tariff
    in such a manner that the competitive LEC could no longer rely on it
    to provide the services it seeks to offer. Most services that
    competitive LECs purchase for resale are contained in state tariffs,
    and are subject to the states' tariff approval process. Relying on
    these state-approved tariffs would compromise our ability to
    determine which network elements must be unbundled pursuant to
    section 251(d)(2) because we would not be able to evaluate each
    incumbent LEC retail tariff as a possible alternative for every
    network element. In addition to being administratively unworkable
    for us to evaluate every state tariff filed by the incumbent LECs,
    relying on these tariffs as alternatives to the incumbent LECs'
    unbundled network elements would create inconsistent unbundling
    rules among the states, a result that, as we explain further below,
    would not promote the development of competition for all consumers.

70. Moreover, we do not find the Supreme Court's decision requiring us
    to consider the availability of elements outside the incumbent LECs'
    network to be at all inconsistent with our decision to consider
    alternatives available through self-provisioning or from third-party
    suppliers. The Supreme Court required us to compare the use of
    unbundled network elements with "self-provision, or with purchase
    from *another provider*."[^131] If we were to construe the Supreme
    Court's opinion in the manner suggested by US West, we would have to
    consider whether an incumbent LEC's duty to unbundle an element
    would be limited by the existence of an alternative service that the
    incumbent LEC provides itself, whether or not there are other
    competitively-supplied alternatives. In other words, under US West's
    argument, the existence of its retail tariffs alone would be
    sufficient to eliminate its obligation to unbundle certain elements.
    The Supreme Court's opinion does not require us to ignore whether
    there are other non-incumbent LEC alternatives to the incumbent
    LEC's unbundled network elements, proposed by US West.

71. We believe that the "impair" standard we adopt in this Order will
    encourage the development of facilities-based competition.
    Specifically, as competitors acquire more customers, and the
    material differences in cost, time, quality, and operational
    impediments diminish, competitors will gradually reduce their
    reliance on the incumbent LECs' facilities. Competitors will also
    deploy more of their own facilities as it becomes practical to do
    so. As the material differences decrease, the Commission will be
    able to apply the same standard to remove elements from the national
    unbundling obligations.

72. [Cost]{.underline}. In addition to the direct cost of purchasing the
    element, we consider all of the costs that requesting carriers would
    incur using an alternative element to provide the services it seeks
    to offer. Although not dispositive, the costs associated with
    self-provisioning or purchasing alternative elements from
    third-party suppliers are relevant to our determination of whether
    the element is a practical and economical alternative to the
    incumbent LEC's unbundled network element.

73. We believe that an "impair" standard based on cost is more
    appropriate than a standard based on profitability, because profit
    margins for both new and existing carriers will depend on the degree
    of competition that exists in the market. If the cost of the
    alternative element is materially greater than the cost of obtaining
    the corresponding element from the incumbent, the requesting carrier
    will not be able to provide service at prices that are competitive
    with the incumbent's prevailing retail prices.

74. In determining whether the cost of self-provisioning or purchasing
    an element from a third-party source is materially higher than using
    the incumbent LEC's unbundled network element, we evaluate the
    difference between the cost to the requesting carrier of obtaining
    the unbundled element from the incumbent LEC at forward-looking
    costs and the cost of an alternative element. Because the
    Commission's rules require that network elements be priced based on
    forward-looking economic costs, we believe that forward-looking
    costs are the appropriate costs to consider in our analysis.

75. In order to provide service using its own facilities, a competitor
    will incur the costs of purchasing, installing, and provisioning the
    equipment it needs to provide service using its own loop or by
    interconnecting with the incumbent's network. The record in this
    proceeding addresses several types of costs associated with using an
    alternative element. These include the direct costs of provisioning
    the element, including fixed and sunk costs, as well as other costs
    that are likely to materially affect the requesting carrier's
    ability to provide the services it seeks to offer. "Fixed costs" are
    costs that do not vary with the level of output.[^132] A "sunk
    cost," on the other hand, is a cost that, once incurred, cannot be
    recouped if the firm ceases production.[^133] To the extent that a
    competitive LEC incurs significant fixed costs or sunk costs when it
    uses its own facilities or acquires facilities from a third party,
    these costs can disadvantage the competitor relative to the
    incumbent.

76. Fixed costs are frequently associated with economies of scale.
    Specifically, where a firm faces both a fixed cost and a constant or
    declining variable cost, the firm's average unit cost will fall as
    output increases, and the firm's cost structure is said to exhibit
    economies of scale. For example, the cost a competitive LEC incurs
    to construct its own fiber transport ring would constitute a fixed
    cost, because, at least in the short run, this cost would not vary
    as the competitive LEC's output changed. [^134] If a competitive LEC
    incurs significant fixed costs when it uses a particular facility,
    in its early stages of development it would have a significantly
    higher average unit cost than the incumbent LEC, which has a
    significantly larger output and customer base over which to spread
    the fixed cost. Since the Commission's rules require unbundled
    transport to be priced based on forward-looking costs (a form of
    long-run average incremental cost), leasing the incumbent's
    unbundled transport facilities is likely to be significantly less
    costly than deploying one's own transport facilities when the
    competitor has a relatively small volume of traffic, and thus its
    output would be small relative to that of the incumbent.[^135]

77. Certain network facilities also involve sunk costs, because the
    facilities cannot be easily re-deployed or sold should the
    competitor decide to cease offering service over those
    facilities.[^136] For example, the cost of the loop serving a
    customer's home is largely a sunk cost because it cannot be
    recovered if the carrier ceases serving the customer. It is
    generally recognized that the need to incur sunk costs can
    constitute a barrier to entry.[^137] Specifically, where an
    incumbent has already deployed sunk facilities to serve all
    customers, a competitive LEC may be unwilling to sink the costs of
    duplicative facilities, either because it may be unable to lure
    customers away from the incumbent and generate enough revenue to
    recover these sunk costs, or because resulting competition between
    itself and the incumbent LEC would drive prices so low that, even if
    the competitive LEC won a significant number of customers, it would
    still be unable to recover its sunk costs. In such situations, the
    incumbent has a "first mover" advantage.[^138]

78. The non-recurring costs of collocating equipment in the incumbent's
    end offices, including the costs of connecting the incumbent LEC's
    unbundled loops to the competitor's switch, and the fees required to
    obtain rights-of-ways, also constitute sunk costs. Unlike the costs
    associated with purchasing portable equipment, such as multiplexers
    or switches, the non-recurring costs incurred to collocate equipment
    and connect network elements to the competitive LEC's collocated
    equipment in an incumbent's central office are sunk costs and cannot
    be recovered if, for whatever reason, the carrier exits that market.

79. Additional costs, such as the costs a competitive LEC incurs to
    connect its own facilities to the incumbent LEC's unbundled network
    elements, affect the extent to which an alternative element is
    available as a practical and economic matter, such that a requesting
    carrier can actually use the element to provide the service it seeks
    to offer. For example, when a competitive LEC deploys its own switch
    but purchases the customer's unbundled loop from the incumbent, the
    competitive LEC may incur significant costs to connect the
    customer's loop, located in the incumbent LEC's central office, to
    its own switch. When these cutover costs are added to the costs of
    collocation, a competitor's ability to provide service in an
    efficient manner, when using its own switch for unbundled switching,
    could be materially diminished. We thus look at all of the costs a
    competitor must incur when using alternatives to the incumbent LEC's
    network element.

80. We find that significant fixed and sunk costs associated with using
    alternatives outside the incumbent LEC's network contribute to a
    finding that lack of access to the incumbent's unbundled network
    elements impairs the requesting carrier's ability to provide the
    service it seeks to offer. This is particularly true for a new
    competitive LEC that has few customers from which it can recover
    these costs. Because the per-customer costs decrease as the number
    of subscribers served by the carrier increases, a carrier must
    acquire a sufficient customer base if it is to recover substantial
    costs associated with deploying its own facilities.[^139] It is
    reasonable, therefore, that a competitive LEC, at a minimum, would
    want to serve a substantial number of business and/or residential
    customers within a particular Metropolitan Statistical Area
    (MSA).[^140] If the competitor must collocate its own switches in
    multiple central offices throughout the MSA in order to serve those
    customers, the costs associated with collocation may impair the
    competitor's ability to provide the services it seeks to offer, even
    if the cost of purchasing the individual equipment hardware is not
    excessive.

81. In addition, we find that the type of customers that a competitive
    LEC seeks to serve is relevant to our analysis of whether the cost
    of self-provisioning or acquiring an element from a third-party
    supplier impairs the ability of a requesting carrier to provide the
    services it seeks to offer. Section 251(d)(2)(B) requires us to
    consider whether lack of access to the incumbent LEC's network
    elements would impair the ability of the carrier to provide the
    *services* it seeks to offer. Consistent with the Act, we define the
    term "services" as it is used in section 251(d)(2)(B), to mean
    "telecommunications service," as it is defined in section 153(46) of
    the Act.[^141] Section 251(c)(3) of the Act places an affirmative
    duty on the incumbent LEC to provide unbundled elements to "any
    requesting telecommunications carrier for the provision of a
    telecommunications service."[^142] Section 251(d)(2)(B), in turn,
    requires that a requesting carrier should not have access to
    unbundled elements unless it would be impaired in its ability to
    provide "the services that it seeks to offer."[^143] Different types
    of customers use different services (*e.g*., large business
    customers order different services than residential customers). We
    therefore conclude that it is appropriate for us to consider the
    particular types of customers that the carrier seeks to serve.

82. Competitive LECs generally seek to provide service to residential
    and small business customers and/or to large business customers. The
    different revenue-generating potential of these different customer
    groups will often determine whether or not a competitive LEC can
    afford to incur the costs of self-provisioning a facility or of
    acquiring it from a third-party supplier, to the extent that it is
    available from a third-party provider. For example, a model
    submitted by MCI WorldCom that compares the costs of serving
    residential customers using unbundled elements from the incumbent
    LEC with the costs of serving the customers using its own facilities
    indicates that, at low market penetration levels, the costs of
    collocation would impair a competitive LEC's ability to serve
    residential customers using its own facilities. The model further
    demonstrates, however, that using the incumbent LEC's unbundled
    network elements, the entrant would be able provide service, even at
    the same low market-penetration levels.[^144]

83. Although the model submitted by MCI WorldCom is clearly not
    dispositive, we note it to illustrate that a requesting carrier's
    ability to serve residential and small business customers may be
    materially diminished without access to the incumbent LEC's network.
    Larger business customers, on the other hand, may generate
    sufficient revenue to allow the requesting carrier to serve the
    customer using certain self-provisioned facilities or facilities
    acquired from third-party sources.

84. We also consider, as part of our analysis, the economies of scale
    and scope that the incumbents have due to their ubiquitous network.
    The record demonstrates that, although facilities-based competition
    has developed in particular markets (primarily for large business
    customers in high-density areas), incumbent LECs continue to enjoy
    significant economies of scale and density not enjoyed by
    competitive LECs.[^145] Because these economies lower the
    incumbent's per-customer costs of providing service, vis-à-vis their
    competitors, we find these economies relevant to our inquiry of the
    extent to which costs of using alternative elements impair a
    requesting carrier's ability to provide the services it seeks to
    provide.

85. We are not persuaded by the argument of BellSouth and other
    incumbent LECs that we should not consider the impact of the
    incumbents' economies of scale because competitors are capable of
    matching or exceeding the incumbent LECs' economies by building
    their own facilities.[^146] The Commission has concluded previously
    that an incumbent LEC's existing infrastructure generally enables it
    to serve new customers at a much lower cost than a requesting
    carrier that must install its own switches, trunking, and loops to
    serve its customers, and that Congress has addressed this problem by
    mandating that incumbent LECs share their economies of scale and
    density with competitors.[^147]

86. We continue to believe that one important purpose of the unbundling
    provisions of the Act is to permit competitive LECs to compete with
    the same economies as the incumbents, especially in the early stages
    of local competition, when their networks are limited in their
    reach, and their customer bases are necessarily small.[^148] The
    incumbent LECs still enjoy cost advantages and superiority of
    economies of scale, scope, and ubiquity as a result of their
    historic, government-sanctioned monopolies. These economies are now
    critical competitive attributes and would belong unquestionably to
    the incumbent LECs if they had "earned" them by superior competitive
    skills. These advantages of economies, however, were obtained by the
    incumbents by virtue of their status as government-sanctioned and
    protected monopolies. We believe that these government-sanctioned
    advantages remain barriers to the requesting carriers' ability to
    provide a range of services to a wide array of customers, and that
    their existence justifies placing a duty on the incumbent carriers
    to share their network facilities. Indeed, Congress, in section 259
    of the Act, recognized expressly the benefits that the incumbent
    LECs have as a result of their economies of scale and scope. Section
    259 requires the Commission to ensure that incumbent LECs make their
    infrastructure available to qualifying carriers on terms and
    conditions that permit the qualifying carriers to "fully benefit
    from the economies of scale and scope of such \[incumbent\] local
    exchange carrier."[^149] Although section 259 of the Act is
    different from section 251 in that qualifying carriers obtaining
    infrastructure from the incumbent LEC pursuant to a section 259
    agreement may not use such infrastructure to compete with the
    incumbent LEC in its service territory, both sections make the
    incumbent LECs' broad economies of scale and scope available to
    other carriers by requiring them to grant other carriers access to
    their networks.[^150]

87. We do not agree with Ameritech that competitive LECs are not
    impaired in their ability to provide service because they have cost
    efficiencies which the incumbent LECs do not have.[^151] Although we
    agree that competitors may have certain cost advantages, we find
    that these advantages are likely to be outweighed by other costs
    that competitive LECs, but not incumbent LECs, incur to provide
    service. For example, many competitive LECs are likely to incur
    higher costs than the incumbent LECs to attract customers, because
    unlike the incumbent, many competitive LECs must establish a brand
    name and develop a reputation for service quality before they can
    overcome the incumbents' long-standing relationships with their
    customers. Similarly, competitive LECs must incur the initial costs
    of setting up their operations and developing their back-office
    systems. AT&T also points out that new entrants face a high level of
    risk when they enter the local market, because they enter without
    the incumbent LEC's knowledge of local operating costs (*e.g*.,
    location and quality of outside plant facilities) and consumer
    demand (*e.g*., peak traffic volumes over certain facilities and
    demand growth).[^152]

88. We recognize that a new entrant in many industries will face
    disadvantages arising from economies of scale. We further recognize
    that, even after competition in local telecommunications markets is
    well-established, and the Commission can eliminate certain
    unbundling requirements, smaller competitors will be at a
    disadvantage to the extent that incumbent LECs continue to enjoy
    significant economies of scale in the provision of local telephone
    service. Nonetheless, we believe that the existence of economies of
    scale, as well as sunk costs, are relevant factors to consider in
    our assessment of whether failure to provide access to a particular
    unbundled network element will impair a requesting carriers' ability
    to provide the services it seeks to offer. Although we find
    economies of scale to be a relevant factor in our analysis, we note
    that we are not basing our determination of whether competitive LECs
    are "impaired" within the meaning of section 251(d)(2) solely on the
    existence of scale economies, nor do we assume that the incumbent
    LEC's scale economies are insurmountable in all circumstances.

89. [Timeliness]{.underline}. We also conclude that the time associated
    with using alternative elements is relevant to a determination of
    whether a requesting carrier would be impaired in its ability to
    provide the services it seeks to offer. A thorough evaluation of the
    delays associated with using alternative elements requires an
    analysis of both the start-up time required for a competitor to
    enter a market and serve a substantial number of customers in an
    MSA, as well as the time it would take a competitor that has already
    entered the market to expand its operations to serve more customers.
    We conclude that delays caused by the unavailability of unbundled
    network elements that exceed six months to one year may, taken
    together with other factors, materially diminish the ability of
    competitive LECs to provide the services that they seek to offer.

90. We recognize that the deployment of alternative elements, whether
    through self-provisioning facilities or by acquiring them from
    third-party suppliers, will require a reasonable amount of time. The
    delays associated with using alternative network elements will exist
    whether the requesting carrier is either just beginning to provision
    service or whether it is deploying additional facilities to expand
    its operations to serve more customers. Commenters differ in their
    opinions as to what constitutes a reasonable time to self-provision
    facilities.[^153] There is considerable evidence in the record,
    however, that indicates that it takes between six months and one
    year to engineer, furnish, and install a switch, including the time
    needed to obtain collocation space in the incumbent LEC's central
    offices where the switch will be connected to unbundled loops.[^154]
    Also, NTIA argues that we should consider as nontrivial any delay in
    service provisioning in excess of six months as compared to the time
    it would take for a competitive LEC to begin provisioning a service
    using an incumbent LEC's network element.[^155]

91. Based on the record before us, we conclude that it is reasonable to
    expect that a competitive LEC will need between six months and one
    year to provide service using a self-provisioned facility or one
    acquired from an alternative source. The local telecommunications
    market grows at an extremely rapid pace for many products and
    services. Indeed, we have reported that the demand for certain
    services has increased significantly from year to year since the
    passage of the 1996 Act[^156] and that we expect this trend to
    continue, particularly for advanced services.[^157] We believe that
    any delay that a competitive LEC experiences in serving this
    fast-paced, high-growth market can impair its ability to provide its
    desired services. Although we cannot quantify precisely how much of
    a delay associated with an alternative network element will
    materially diminish the ability of a competitor to provide its
    desired services, we find that delays that exceed six months to one
    year may, taken together with other factors, materially diminish the
    ability of a competitive LEC to provide the services it seeks to
    offer because it prevents the competitive LEC from responding
    quickly to the demand for its services in a rapidly changing market.
    Moreover, we agree with NTIA that incumbent LECs can take advantage
    of delays caused by the unavailability of unbundled network elements
    by using their "unique access to most customers to gain a foothold
    in new markets, and, in markets where services may be offered
    pursuant to long term-contracts (*e.g*., DSL and other advanced data
    services), to 'lock-up' customers in advance of competitive
    entry."[^158]

92. We disagree with Ameritech that a competitor is not impaired in its
    ability to provide a service if it can deploy alternative facilities
    within two years of its decision to do so.[^159] Congress made
    unbundled elements available to competitive LECs to avoid the time
    it would take competitive LECs to duplicate the incumbents'
    networks, thereby promoting the rapid development of competition for
    all consumers. We believe that requiring consumers to wait up to two
    years to have access to a choice of competitive service offerings,
    while competitors attempt to provide service without access to
    unbundled elements, is unreasonable and inconsistent with the
    objectives of the Act.

93. We also disagree with US West's claim that we should not consider
    the amount of time required for a competitive LEC to self-provision
    an element or acquire it from a third-party supplier because there
    are always inherent provisioning delays associated with using
    alternative elements.[^160] We believe the amount of time it takes a
    competitive LEC to self-provision an element or acquire an
    alternative from a third-party supplier is highly relevant to its
    ability to provide the services it seeks to offer. In particular, we
    agree with commenters that in order to compete effectively,
    competitive LECs must be able to initiate service promptly upon the
    request of their customers.[^161] We also agree with NTIA that
    delays in the introduction of competitive services caused by the
    unavailability of unbundled elements from the incumbent LEC would
    give the incumbent valuable time to entrench itself with existing
    customers.[^162]

94. Although we agree with US West that self-provisioning or acquiring
    alternative network elements from third-party suppliers involves
    normal delays incurred when starting or expanding a business, we
    find that significant delays will materially diminish a requesting
    carrier's ability to provide the services it seeks to offer. In
    addition, we have accounted for the inherent provisioning period to
    which US West refers by determining that it will take competitors
    approximately six months to one year to provide service, and that
    delays that exceed that time period would materially diminish a
    requesting carrier's ability to provide a competitive service.

95. We disagree with US West that it would be too administratively
    complex to consider the differences between the time it would take a
    competitor to obtain an element from the incumbent LEC and the time
    it would take to self-provision an element.[^163] We do not find it
    to be too administratively complex to consider whether a delay
    associated with using an alternative network element exceeds the six
    month to one year timeframe we identified above. As we stated above,
    the "impair" standard does not mandate precise quantification; nor
    does it involve an analysis of the delay suffered by every carrier.
    It requires instead a consideration of whether, as a general matter,
    there is an identifiable difference in the amount of time required
    to provide service using an alternative element and the amount of
    time required to provide service using the incumbent LEC's element,
    such that the delay would materially diminish the competitor's
    ability to provide the services that it seeks to offer.

96. [Quality]{.underline}. We also conclude that the quality of
    alternative network elements available to the competitive LEC is
    relevant to a determination of whether a requesting carrier's
    ability to provide service is impaired. We agree with the California
    PUC and other commenters that a material degradation in service
    quality associated with using an alternative element will materially
    diminish a competitor's ability to effectively provide
    service.[^164] Examples of diminished quality presented in the
    record include greater dialtone delay, higher blocking rates,
    elevated noise on a telephone line and increased failure
    rates.[^165] These types of quality problems, all of which are
    recognizable by the end-user customer may, taken together with other
    factors, materially diminish the ability of the competitor to
    provide the services that it seeks to offer. In addition, we believe
    that the type of service a competitor seeks to provide is also
    relevant to the quality factor. For example, end users may be much
    less tolerant of problems that affect data services, than they would
    be for voice service.[^166]

97. [Ubiquity]{.underline}. We conclude that we should also consider the
    extent to which the competitive LEC can serve customers ubiquitously
    using its own facilities or those acquired from third-party
    suppliers. We agree with competitive LECs that they may be impaired
    if lack of access to an unbundled element materially restricts the
    number or geographic scope of the customers they can serve.[^167]
    For example, incumbent LECs own 98 percent of all access lines in
    Texas and have deployed 1538 switches throughout the state.
    According to the Texas PUC, if a competitive carrier seeks to
    provide local telephone service throughout the state, it would be
    impractical, if not impossible, for the carrier to replicate the
    incumbents' networks.[^168]

98. Although we acknowledge that not all competitive LECs will want to
    provide ubiquitous service across broad geographic areas, those that
    do will likely be disadvantaged vis-à-vis the incumbent, especially
    in the early stages of deployment, because the incumbent LECs still
    enjoy advantages of a ubiquitous network that provide them with
    economies of scale and the ability to reach all consumers in their
    service territories. It is reasonable to expect that, in many cases,
    competitors would want to provide ubiquitous service in order to
    achieve similar economies of scale that will allow them to spread
    the costs of construction, equipment, and marketing across as many
    customers as possible. It is also reasonable to expect that in some
    cases, the ability to serve ubiquitously will be necessary to meet
    consumer demand for competitive alternatives in broad geographic
    areas. It such cases, lack of access to the incumbent's unbundled
    network elements could significantly thwart the competitor's ability
    to respond to consumer demand.[^169] Denying access to the
    incumbent's unbundled network elements, when use of alternative
    sources would materially diminish the competitors' ability to serve
    their intended geographic area, would be inconsistent with the goal
    of the 1996 Act to bring competition to the greatest number of
    customers. Indeed, the inability to provide service ubiquitously may
    be especially important for competitive LECs seeking to serve
    residential and small business customers located throughout a state.

99. [Impact on Network Operation]{.underline}. We find that we should
    also consider how self-provisioning a network element or obtaining
    it from a third-party supplier may affect the technical manner in
    which the competitor can operate its network. We agree with the
    Washington Utilities Commission that overall network performance is
    an important consideration in our "impair" analysis.[^170] In order
    to compete with the incumbent, competitive LECs must be able to
    connect alternative elements either to their own networks or to
    other incumbent LEC elements that they use to provide service. Thus,
    material operational or technical differences in functionality that
    arise from interconnecting alternative elements may also impair a
    requesting carrier's ability to provide its desired services. [^171]

100. As we stated above, the incumbent LECs' relative advantages
     regarding costs, ubiquity, timeliness, and quality comprise only a
     part of a determination of whether or not a competitive LEC's
     ability to provide a competitive service is impaired. Indeed, as
     stated above, competitive LECs may have reasons for not entering a
     particular market that have nothing to do with whether lack of
     access to the incumbent's network would or would not impair their
     ability to offer service in that market. For example, it is likely
     that not all competitive LECs intend to invest in their own
     facilities to serve residential customers. Congress, however,
     clearly intended for competition to develop in these markets, as
     well as in the business markets, and we see as one of the primary
     goals of section 251, to facilitate competition in these markets.
     Because the ground work for competition is still uncharted, and we
     have seen very limited competition in the residential market to
     date, we seek to remove economic and other barriers that may
     forestall the development of competition for these consumers.
     Accordingly, we unbundle elements in a manner that we believe will
     have the desired effect of promoting competition in all markets as
     quickly as possible.

##### Other Factors to Be Weighed in Our Unbundling Analysis

101. We conclude that, in addition to the necessary" and "impair"
     standards, section 251(d)(2) permits us to consider other factors
     that are consistent with the objectives of the Act in making our
     unbundling determination. Section 251(d)(2) states that, "\[i\]n
     determining what network elements should be made available for
     purposes of subsection 251(c)(3), the Commission shall consider, at
     a minimum" the "necessary" and "impair" standards."[^172] This
     language implies clearly that other factors may be considered as
     long as we consider the "necessary" and "impair" standards.
     Moreover, as the D.C. Circuit has held, when Congress requires an
     agency to "consider" several listed factors, it may also consider
     additional factors in making its decision. For example, in *Central
     Vermont Railway, Inc. v. Interstate Commerce Commission*, the D.C.
     Circuit found that the language of a statute addressing railroad
     mergers that directed the Interstate Commerce Commission to
     "consider at least the following \[factors\]," also allowed the
     agency to consider factors other than those specifically
     listed.[^173] In a later case that cited *Central Vermont Railway*,
     the court explained that an agency's duty to "consider' specific
     factors means only that it must "reach an 'express and considered
     conclusion' about the bearing of a factor, but is not required to
     give 'any specific weight' to the factor." [^174]

102. In the *Local Competition First Report and Order*, the Commission
     stated that it agreed with several incumbent LECs that the plain
     import of the "at a minimum" language in section 251(d)(2) requires
     the Commission to consider the standards enumerated there, "as well
     as other standards we believe are consistent with the objectives of
     the 1996 Act."[^175] The Supreme Court did not dispute this
     determination. In fact, it directed us to adopt "some limiting
     standard rationally related to the goals of the Act."[^176] We are
     therefore not persuaded by the argument of the incumbent LECs that
     we may now require unbundling only where the "necessary" or
     "impair" standards have been met.[^177] If Congress had intended to
     require the incumbent LECs to unbundle an element only when it was
     "necessary" to, or would "impair" the requesting carrier's ability
     to provide its desired service, Congress would not have used the
     discretionary phrase "consider at a minimum." Rather, Congress
     would have required the Commission to apply the "necessary" and
     "impair" standard, without consideration of any additional factors.

103. Accordingly, in addition to the "necessary" and "impair" standard,
     we conclude that we may consider several factors, set out below,
     that further the goals of the Act in accordance with the Supreme
     Court's directive. Two fundamental goals of the Act are to open the
     local exchange and exchange access markets to competition and to
     promote innovation and investment by all participants in the
     telecommunications marketplace.[^178] To further the goal of
     opening the local market to competition, we may consider how access
     to specific unbundled network elements will encourage the rapid
     introduction of local competition to the benefit of the greatest
     number of consumers.

104. We may also consider how the unbundling rules we adopt will promote
     facilities-based competition by competitive LECs. We believe that
     it is the development of facilities-based competition that will
     provide both incumbent and competitive LECs with the incentives to
     innovate and invest in new technologies. Such innovation and
     investment will bring greater choices of telecommunication services
     and lower prices to a greater number of consumers. We may also
     consider the extent to which we can reduce regulatory obligations
     to provide access to network elements as alternatives to the
     incumbent LECs' network elements become available in the future.

105. We may further consider whether unbundling particular network
     elements will provide certainty in the market so that competitive
     LECs can attract investment capital and execute their business
     plans. We may also take into account how we can make the unbundling
     rules administratively manageable for the Commission and the states
     to apply. The adoption of administratively workable unbundling
     rules will enable the Commission and the states to implement and
     enforce such rules, thereby facilitating the ability of competitive
     LECs to enter the market as quickly and efficiently as possible.

106. We do not give particular weight to any of the factors we identify.
     Rather, we consider the relationship among the factors we take into
     account for a particular network element, and determine whether the
     sum total of the effect of the factors require a finding that the
     element must be unbundled. Thus, we do not require that all of the
     factors be met before we decide whether or not to require incumbent
     LECs to unbundle a particular network element. Indeed, there may be
     circumstances in which there is significant evidence that
     competitors are impaired without unbundled access to a particular
     element, but that unbundling the element would not further the
     goals of the Act. In the final analysis, as we explain in more
     detail below, we consider the effect of these factors in order to
     develop unbundling obligations that are most consistent with
     Congressional intent.

107. [Rapid Introduction of Competition in All Markets]{.underline}.
     Congress has emphasized that a major goal of the 1996 Act is to
     accelerate the development of local competition. Indeed, the
     preamble to the Act states that it provides a "pro-competitive,
     de-regulatory national policy framework designed to accelerate
     rapidly" deployment of advanced telecommunications technologies by
     opening all markets to competition.[^179] With regard to unbundled
     network elements, in particular, the Eighth Circuit Court of
     Appeals found that the use of unbundled elements promotes the
     prompt development of competition, as intended by the Act. The
     court stated that the Act "provides for unbundled access to
     incumbent LECs' network elements as a way to jumpstart competition
     in the local telecommunications industry."[^180] We therefore find
     that we may consider whether an unbundling obligation is likely to
     encourage requesting carriers to rapidly enter the local market and
     serve the greatest number of customers. Conversely, we may also
     consider whether the failure to require unbundling will cause any
     class of consumers to wait unnecessarily for competitive
     alternatives.

108. We also note that Congress specified certain network elements in
     the section 271 checklist that BOCs are required to unbundle before
     they obtain in-region interLATA relief. In particular, the
     checklist requires BOCs to demonstrate that they are providing
     loops, switching, transport, signaling and databases, and operator
     services/directory assistance.[^181] Accordingly, we may consider
     whether requiring all incumbent LECs to unbundle these same
     elements would promote the rapid introduction of competition on a
     nationwide basis.

109. We agree with NTIA that there is a common purpose between sections
     251 and 271 of the Act of opening the incumbents' monopoly local
     exchange networks to competition.[^182] We believe that Congress
     intended section 251(c)(3) of the Act and the competitive checklist
     to contain similar, if not identical, obligations. Although we do
     not conclude that the checklist determines definitively that all
     incumbent LECs are required, pursuant to section 251, to unbundle
     the items enumerated in section 271, we find that section 271 sheds
     some light on what elements Congress believed should be unbundled
     in order to open local markets to competition. We may therefore
     consider whether an element is among the elements identified in the
     competitive checklist as we make our determination of which network
     elements incumbent LECs must provide on an unbundled basis.

110. [Promotion of Facilities-Based Competition, Investment, and
     Innovation]{.underline}. A fundamental goal of the Act is to
     promote investment and innovation by all participants in the
     telecommunications marketplace, and, in particular, to encourage
     rapid deployment of new telecommunications technologies.[^183] As
     the Commission has stated, the construction of new local exchange
     networks "will not only lead to innovation by the new competitors,
     but should also spur \[the incumbent LECs\] to upgrade their
     systems and offer a broader array of desired service options to
     meet consumers' demands."[^184] By promoting innovation both by the
     incumbent LECs and competitive LECs, the Act enables these carriers
     to produce innovative new services for consumers. Specifically,
     consumers benefit when carriers invest in their own facilities
     because such carriers can exercise greater control over their
     networks, thereby promoting the availability of new products that
     differentiate their services in terms of price and quality. We may
     therefore consider the extent to which the unbundling obligations
     we adopt will advance the development of facilities-based
     competition and will encourage innovation by both incumbent and
     competitive LECs.

111. We seek to adopt unbundling requirements that are broad enough to
     provide requesting carriers with the elements they need to ramp up
     towards facilities deployment. At the same time, we remain
     cognizant of the Supreme Court's mandate against granting blanket
     access to the incumbents' network in a manner that is inconsistent
     with the "necessary" and "impair" standards of section 251(d)(2),
     or with the goals of the 1996 Act.[^185] We believe that the
     standards we articulate in this Order will strike the appropriate
     balance by unbundling only those network elements without which a
     competitive LEC's ability to provide service will be materially
     diminished.

112. We agree with the competitive LECs that argue that unbundled access
     to certain incumbents' network elements will accelerate initially
     competitors' development of alternative networks because it will
     allow them to acquire sufficient customers and the necessary market
     information to justify the construction of new facilities.[^186]
     Indeed, many commenters in this proceeding emphasize that they plan
     to deploy alternative facilities as soon as it is technically and
     economically possible to do so at a cost that is close to the
     incumbent LECs' prices for network elements.[^187] According to
     these commenters, competitive LECs prefer to use their own
     facilities or alternatives outside of the incumbent's network when
     they are able to do so, in order to reduce their reliance on a
     primary competitor.[^188] We find this explanation to be
     reasonable. Use of the incumbent LEC's network elements requires
     competitive LECs to disclose details about their customers to their
     chief competitor. Moreover, it is reasonable to expect that
     competitive LECs would prefer to have direct control of their
     networks to ensure the quality of their service and to offer
     products and pricing packages that differentiate their services
     from the perspective of end users.[^189]

113. [Reduced Regulation]{.underline}. Another goal of the Act is to
     deregulate where market conditions warrant.[^190] We may therefore
     consider the extent to which we can reduce regulatory obligations
     to provide access to network elements as alternatives to the
     incumbent LECs' network elements become available in the future.

114. [Certainty in the Market]{.underline}. Among other things, the Act
     seeks to promote competition by eliminating barriers to entry into
     the local market. We may therefore consider how the unbundling
     obligations we adopt in this Order facilitate competitive entry.
     Accordingly, we find that the unbundling requirements we adopt
     should typically provide the uniformity and predictability new
     entrants and fledgling competitors need to develop and implement
     national and regional business plans. In addition, uniform and
     predictable unbundling rules will provide financial markets with
     reasonable certainty so that competitive LECs can attract the
     investment capital they need to execute their business plans.
     Specifically, uniform and predictable unbundling rules reduce
     substantially competitive LECs' risk of underutilized investment or
     cash flow drain by providing financial markets with some certainty
     that the competitors will be able to execute their business plans.

115. We also find that we should, whenever possible, adopt unbundling
     obligations that can be included easily in interconnection
     agreements between the incumbents and the competitive LECs, with as
     little risk of subsequent litigation as possible. Litigation over
     the incumbents' unbundling obligations requires the parties to
     these agreements, and the state commissions that approve them, to
     expend vast amounts of time and resources, ultimately impairing the
     ability of competitive LECs to execute their business plans.

116. [Administrative Practicality]{.underline} . We may also consider
     whether the unbundling rules we adopt are administratively
     practical to apply. Any rule adopted in an administrative
     proceeding runs the risk of being potentially overinclusive in some
     situations and under-inclusive in other situations. A rule of
     general applicability rarely will neatly fit all situations.
     Nonetheless, administrative agencies are entitled to proceed by
     rulemaking as well as by adjudication.[^191] In addition, the goal
     of administrative efficiency has widespread support from diverse
     segments of the industry, even where they disagree on the
     substantive outcome of the proceeding.[^192] We therefore seek to
     adopt unbundling rules that provide for administrative ease in
     addressing the incumbents' unbundling obligations today, as well as
     in the future, as alternatives to incumbent LEC network elements
     become available. We believe that adopting rules that are
     administratively practical to apply will also enhance certainty in
     the marketplace by allowing us to apply the rules efficiently to
     respond to changes in the marketplace.

## Adoption of a National List of Unbundled Network Elements

### Background

117. In the *Local Competition First Report and Order*, the Commission
     concluded that identifying a specific list of network elements that
     must be unbundled, applicable in all states and territories, would
     best further the "national policy framework" Congress established
     to promote competition in local markets. In particular, the
     Commission found that a national list would: (1) allow requesting
     carriers, including small entities, to take advantage of economies
     of scale; (2) provide financial markets with greater certainty in
     assessing requesting carrier's business plans; (3) facilitate the
     states' ability to conduct arbitrations; and (4) reduce the
     likelihood of litigation regarding the requirements of section
     251(c)(3).[^193]

118. In the *Notice*, we stated that we found nothing in the Supreme
     Court's decision that would require us to eliminate national
     unbundling requirements. We tentatively concluded that we should
     continue to identify a minimum set of network elements that must be
     unbundled on a nationwide basis, and sought comment on this
     conclusion. We also sought comment on whether the existence of
     geographic variations in the availability of elements outside of
     the incumbent LEC's network is relevant to a decision to impose
     minimum national unbundling requirements.[^194]

119. Nearly all of the state commissions commenting in this
     proceeding,[^195] and all of the competitive LECs,[^196] assert
     that we should adopt a national list of unbundled elements. The
     state commissions agree that the Commission has authority to adopt
     such a list, and that it should implement a process for the states
     to modify the list in the future, based on conditions that exist in
     a particular state.[^197] The New York Commission also proposes
     that, in establishing the national list, we should evaluate whether
     to exclude an element from the unbundling obligations in discrete
     market areas where commercially viable alternatives are
     available.[^198] The incumbent LECs argue, on the other hand, that
     the Supreme Court's decision in *Iowa Utils. Bd.* requires a
     geographic market-by-market analysis that will ultimately not
     result in a national list of unbundled elements. These carriers
     propose that the Commission adopt national standards to be applied
     by state commissions on a market-by-market basis. [^199]

### Discussion

120. We adopt our tentative conclusion to identify a minimum list of
     network elements that should be unbundled on a national basis.
     Similar to New York's proposal, we also conclude, as explained
     below, that we must apply discrete geographic and product market
     exceptions to the incumbent's duty to unbundle the elements on the
     national list, where appropriate. We conclude that the Commission
     has the legal authority to adopt a national list of network
     elements that must be made available on an unbundled basis, and
     that the other factors we identify above, such as rapid
     introduction of competition, certainty in the marketplace,
     administrative practicality, and promotion of facilities-based
     competition, can only be furthered by adoption of a national list.

#### Legal Authority

121. The Supreme Court decision in *Iowa Utils. Bd.*, the statutory
     language of section 251(d)(2), and the legislative history of the
     1996 Act support our authority to develop a national list of
     unbundled elements. In particular, the Supreme Court upheld
     explicitly the Commission's jurisdiction to adopt minimum national
     rules to implement each subsection of the 1996 Act.[^200]
     Consistent with the language in the statute, the Supreme Court
     stated that section 251(d)(2) ". . . requires the Commission to
     determine on a rational basis *which network elements must be made
     available*, taking into account the objectives of the Act and
     giving some substance to the 'necessary' and 'impair'
     requirements."[^201] The Court stated that some of the national
     unbundling rules the Commission adopted originally in the *Local
     Competition First Report and Order* might have been supported by
     the standard required by section 251(d)(2). The Court stated
     however, that because the standard was not consistently applied, it
     was forced to vacate Rule 319.[^202] As explained above, we have
     adopted a limiting standard that we believe responds to the Supreme
     Court's concerns.[^203] We have also applied the standard
     consistently to derive a list of network elements that must be made
     available on an unbundled basis nationwide.

122. In addition, we do not find that the Supreme Court decision in
     *Iowa Utils. Bd*. requires us to determine, on a localized
     state-by-state or market-by-market basis which unbundled elements
     are to be made available. The Commission examined the conditions in
     the nation as a whole to determine, in the *Local Competition First
     Report and Order,* that the incumbent LECs must make available a
     minimum list of elements. The Commission also concluded that it
     would not adopt an exhaustive list of elements, but that the states
     would identify additional unbundling obligations based on local
     market conditions.[^204] The Supreme Court did not take issue with
     this determination. The Court held that the Commission must
     determine on a rational basis which network elements must be made
     available, taking into account "the objectives of the Act and
     giving some substance to the 'necessary' and 'impair' requirements
     of section 251(d)(2)."[^205] Although this language permits the
     Commission to undertake a market-by-market assessment of
     alternatives, it plainly does not mandate such an approach. Rather,
     it provides the Commission with the discretion to look at the
     nation as a whole and to identify differences in the availability
     of alternatives outside of the incumbent's network that may exist
     in discrete geographic areas.

123. However the Commission chooses to limit the incumbent LEC's duty to
     unbundle in accordance with the Supreme Court's opinion, Congress
     has charged the Commission in section 251(d)(2) with "determining
     what network elements should be made available for purposes of
     subsection \[251\](c)(3)."[^206] We thus have the authority to
     identify a minimum list of network elements that must be unbundled
     on a nationwide basis.[^207] In addition, the legislative history
     indicates that Congress specifically contemplated that the
     Commission would open the last monopoly bottleneck strongholds in
     telecommunications by requiring incumbents to share their local
     exchange facilities, including "the equipment with capabilities of
     routing and signaling calls, network capacity, and network
     standards."[^208] This legislative history indicates that Congress
     expected the Commission would identify a national list of unbundled
     network elements that would include, at a minimum, these basic
     network elements.

#### Goals of the Act 

124. We find that adoption of a national list of unbundled network
     elements furthers the statutory purpose and design of section
     251(d)(2) to provide competitive LECs with access to unbundled
     network elements that will allow them to provide the services they
     seek to offer. Moreover, we find that adoption of a national list
     is supported by the factors we identify above as being important to
     further the fundamental goals of the Act.

125. [Rapid Introduction of Competition]{.underline}. We find that a
     national list of unbundled elements will encourage the rapid
     introduction of competition in the greatest number of markets
     because it will provide competitive LECs with certainty regarding
     the availability of network elements. In fact, the record reflects
     that many competitive LECs are poised to begin providing service
     using unbundled elements, particularly for residential and small
     business customers, as soon as the elements are available with a
     reasonable degree of certainty.[^209] Thus, we believe that the
     certainty that adoption of a national list will bring to the market
     will benefit the greatest number of consumers, particularly
     residential and small business customers.

126. We agree with AT&T that the lack of nationwide access to unbundled
     elements will hinder mass market competition during the time it
     would take competitive LECs to construct alternative networks
     capable of serving all residential customers and most business
     customers in a community.[^210] Even in areas where competitors are
     able to provide facilities-based service in specific wire centers,
     their ability to provide service on an MSA, LATA, or state-wide
     basis, for all classes of customers, is impaired without access to
     the incumbent's elements on a broader basis. A national list of
     unbundled elements will allow requesting carriers to enter local
     markets in a manner that will allow them to approach the incumbent
     LECs' historic economies of scale, scope, and ubiquity, thereby
     promoting rapid competition for all customers, including
     residential and small business customers, in all areas of the
     country.

127. According to the *FCC* *Local Competition Report*, competitors
     provide only about 1.8 percent of local services to end
     users.[^211] The record in this proceeding indicates that
     requesting carriers have not yet been able to obtain unbundled
     elements on a wide-spread basis nationwide, which may have
     prevented competitive LECs from serving a greater number of end
     users. For example, only recently has unbundled switching been made
     available in combination with other unbundled network elements in
     certain states. MCI WorldCom observes that, with the availability
     of unbundled switching in New York, it has been able to provide
     local service to upwards of 60,000 residential customers since
     January, 1999.[^212] We believe that by re-establishing a national
     list, with certain geographic and product market exceptions that
     are consistent with the standards of section 251(d)(2), we will
     best promote efficient, rapid, and widespread entry by carriers
     using unbundled network elements. Competitive market entry and
     service expansion on a widespread basis is a necessary precondition
     to construction of self-provisioned facilities.

128. Moreover, as the Illinois Commerce Commission; California PUC, and
     Connecticut Department of Public Utility Control all assert, a
     national list will allow competition to proceed quickly because it
     will reduce the number of issues that the states must address in
     upcoming arbitrations under section 252(b) of the Act.[^213] This
     is significant because many states will be conducting arbitrations
     and reviewing interconnection agreements as the initial agreements
     that they approved in 1996 and 1997 begin to expire.

129. We are not persuaded by Ameritech's argument that adoption of
     national standards containing bright-line tests, as opposed to a
     national list of unbundled elements, would facilitate
     arbitrations.[^214] Using the bright-line test proposed by
     Ameritech is inappropriate because the test does not allow us to
     consider the totality of the circumstances to determine whether
     alternative elements are actually available as a practical,
     economic, and operational matter. Moreover, the resources and time
     that requesting carriers would be required to devote to individual
     regulatory proceedings designed to determine if the bright-line
     criteria had been met in every market would delay the introduction
     of competition. The outcomes of each proceeding would likely vary
     across the country, thereby making it more difficult for competing
     carriers to execute reasonably uniform national or regional
     business plans. We believe that a national list of elements will
     better allow carriers to enter the market and to expand their
     businesses as rapidly as possible.

130. As explained below, we will revisit our unbundling rules in three
     years. Although we recognize that due to changes in the market and
     new technologies, the national list will likely be modified over
     time, we do not find that we should delay the onset of meaningful
     competition while we require the incumbent LECs and the competitors
     to produce voluminous amounts of data and participate in multiple
     proceedings to determine whether alternatives to the incumbent's
     network are available and being used in every market. We believe
     that a national list (that accounts for discrete geographic and
     product market exceptions) that can be applied at this time, with
     the least amount of regulatory involvement, will allow carriers to
     deploy resources to provide service to the greatest number of
     consumers instead of conducting regulatory proceedings.

131. We note that we established recently collocation-based triggers to
     determine when it would be appropriate to grant incumbent LECs
     pricing flexibility for certain interstate access services based on
     the existence of competition for those services.[^215] In the
     *Pricing Flexibility Order*, we stated that the triggers we adopted
     were policy determinations based on our agency expertise and our
     interpretation of the record before us in that proceeding. We
     acknowledged, however, that the use of triggers to measure
     competition precisely is not an exact science, particularly because
     we lack verifiable data from competitors concerning the deployment
     of their facilities. Given this constraint, and our desire not to
     impose heavy administrative burdens on the industry or conduct
     protracted proceedings to determine the extent of competition, we
     devised pricing flexibility triggers based on "objectively
     measurable criteria,"[^216] such as the number of collocation
     arrangements in a given wire center.[^217] We found that it is
     appropriate to give incumbent LECs pricing flexibility when
     competitors have made an irreversible, sunk investment in
     facilities, and that collocation by competitors in incumbent LEC
     wire centers is a reliable indication of sunk investment by
     competitors.[^218] Specifically, to obtain pricing flexibility, we
     required incumbent LECs to show that "*at least one* competitor
     relies on transport facilities provided by a transport provider
     other than the incumbent at each wire center listed in the
     incumbent's pricing flexibility petition as the site of an
     operational collocation arrangement."[^219]

132. It is not appropriate to use these types of triggers to determine
     whether alternative sources of network elements are actually
     available as a practical, economic, and operational matter. As we
     explain above, the ability of one competitor to serve certain
     customers in a particular market is not indicative of whether,
     without unbundled access to the incumbent LEC's facilities,
     competitive LECs could provide service to other customers in the
     same market or to customers in other markets. While the triggers we
     adopted in the *Pricing Flexibility Order* allow us to determine
     when an incumbent LEC can re-price its services to respond to
     competition, they do not allow us to evaluate whether the incumbent
     LEC can withhold access to the inputs that requesting carriers need
     to provide competitive services in the first place. In order to
     undertake this evaluation, we must consider the cost, timeliness,
     quality, ubiquity and operational characteristics of alternative
     elements. As we explain above, discerning the practical, economic,
     and operational viability of these alternatives is technical,
     complex, and subject to considerable uncertainty.[^220] Based on
     the record before us, we do not believe that we can develop
     reliable triggers based on objectively measurable criteria to make
     this determination. In particular, the administrative difficulty
     associated with developing triggers that capture the cost,
     timeliness, quality, ubiquity, and operational factors of
     alternatives in every wire center throughout an incumbent LEC's
     service territory requires us to reject such an approach. Indeed,
     the Commission chose precisely to adopt triggers in the *Pricing
     Flexibility Order*,[^221] because we found that they were
     administratively easy to apply. Conversely, it would not be
     administratively easy to apply triggers to determine which network
     elements the incumbent LECs must unbundle. Moreover, the use of
     triggers also does not allow us to evaluate whether the unbundling
     obligations we adopt are consistent with the goals of the Act, as
     the Supreme Court has required us to do.[^222]

133. Moreover, a national list of unbundled network elements will
     facilitate the introduction of rapid competition by eliminating
     needless litigation that would result from unbundling requirements
     that differ in every market. Such litigation would require
     incumbent LECs, competitive LECs, and the state commissions to
     expend considerable time and resources to litigate issues
     surrounding whether a particular unbundled network element should
     be available to individual carriers seeking to serve specific
     customers or specific areas of the state. Although there has been
     significant litigation over the past three years regarding the
     incumbent's duty to unbundle elements under section
     251(c)(3),[^223] we believe that re-establishing a national list,
     subject to the Supreme Court's mandate to include a rational
     limiting standard, will reduce the likelihood of further litigation
     and its accompanying delays and costs, in all fifty states.

134. [Promotion of Facilities-Based Competition, Investment, and
     Innovation]{.underline}. We find that adoption of a national list
     will facilitate the deployment by competitors of their own
     facilities. Permitting competitors to obtain access to unbundled
     elements on a broad basis will allow these carriers to acquire
     sufficient customers and essential market information to enable
     them to determine whether construction of new facilities is
     justified. We believe that it is through self-provisioning their
     own facilities that competitive LECs will have a greater ability to
     serve all classes of customers.

135. Ameritech claims that the Commission "dismissed outright" the
     principal goal of the 1996 Act to encourage new investment and
     innovation by all competitors in the market when it adopted
     national unbundling rules.[^224] According to Ameritech, the
     national unbundling rules adopted in 1996 protected inefficient
     competitors and discouraged efficient entrants from investing and
     innovating in telecommunications services as the Act
     intended.[^225] Based on the incumbents' own evidence, we find this
     argument lacking in credibility.

136. The incumbent LECs have submitted a market study in this
     proceeding, the USTA UNE Report, that details the competitive LECs'
     investment in their own facilities on an element-by-element basis
     since the passage of the 1996 Act, and *during* the time that the
     Commission's national unbundling rules have been in effect.[^226]
     Although the Commission's unbundling rules have been the subject of
     extensive litigation, none of the parties dispute that competitors
     have used unbundled elements, particularly unbundled loops and
     transport, where these elements have been made available. Yet, the
     incumbents' UNE Report shows that competitors have built nearly
     30,000 miles of fiber within the top 50 MSAs, serving nearly 15
     percent of all commercial office buildings.[^227]

137. The USTA UNE Report also states that competitors have deployed
     approximately 700 switches to serve medium and large business
     customers.[^228] The report indicates that these carriers have
     deployed fixed wireless connections to extend their fiber networks
     out to many more customers.[^229] The incumbents also assert that
     many competitors are providing advanced services by attaching their
     own facilities to the incumbent LEC's unbundled copper loops.[^230]
     Overall, the incumbents estimate that competitive LECs are offering
     service over approximately 2.5 million facilities-based lines in
     the incumbents' service territories.[^231] As explained more fully
     below, these facilities are still not available broadly enough to
     prevent competitive LECs, in most cases, from being impaired in
     their ability to provide service without access to the incumbent's
     network. Nonetheless, the data presented by the incumbents shows
     significant and growing investment by the competitive LECs.
     Accordingly, we find no merit in the claim made by Ameritech and
     other incumbent LECs that unbundling elements will impede the Act's
     goal of encouraging new investment and innovation in
     telecommunications services.

138. The incumbents also claim that national unbundling requirements
     will discourage them from investing and innovating, particularly if
     they have to unbundle elements for the provision of advanced
     services.[^232] While we desire to do nothing to discourage
     investment and innovation by all carriers, we note that the
     Commission's national unbundling policy has clearly not discouraged
     incumbent LECs from seeking to serve new markets. Although in the
     *Local Competition First Report and Order,* the Commission did not
     order unbundling of certain equipment used in providing advanced
     services, it made clear that the states could extend the
     incumbents' unbundling obligations as necessary to account for
     changes in technology and to address local conditions.[^233]
     Incumbent LECs have therefore known since 1996 that they might
     eventually be required to unbundle elements used to provide
     advanced services. Moreover, last year, in the *Advanced Services
     Order and NPRM***,** we sought specifically comment on whether to
     unbundle facilities used to provide advanced services.[^234]
     Notwithstanding the fact that the incumbents have been on notice
     that they could be required to unbundle facilities used to provide
     advanced services, the incumbents have announced aggressive rollout
     plans for xDSL service.[^235] In fact, a recent financial analyst's
     report indicates that advanced data services currently comprise an
     average of 9.9 percent of the revenues of the BOCs and GTE.[^236]
     Although the incumbents claim that competitors have deployed more
     advanced services equipment than the incumbents have
     deployed,[^237] they nevertheless acknowledge that the incumbent
     LECs are offering advanced services in 7 of the 10 largest MSAs and
     in 22 of the top 50 MSAs.[^238] We find these statistics to be
     significant because they demonstrate that the development of
     competition, and the threat of losing revenue and customers to
     carriers offering advanced services, provides a powerful incentive
     for carriers to invest.

139. We therefore conclude, as the Commission did in the *Local
     Competition First Report and Order*, that by adopting a national
     list of elements, and by giving the states the flexibility to add
     elements as technology and local market conditions change, we will
     not discourage incumbent LECs from investing and deploying
     innovative services.[^239] The incumbent LECs will have an
     increased incentive to reduce their operating and capital costs and
     to introduce new and innovative services that will increase the
     overall usage level of their networks as they face competition for
     all of their services. Moreover, the Commission's pricing
     methodology includes a risk-adjusted return on capital and economic
     depreciation for the incumbent as part of the forward-looking
     rate.[^240] As we indicated above, we are also adopting a
     "necessary" standard that fully protects the incumbents'
     intellectual property associated with proprietary network elements
     when those elements are used by the incumbent to differentiate its
     products from those of its competitors.[^241] We therefore do not
     find merit in arguments that the adoption of a list of network
     elements that must be unbundled nationwide will discourage
     innovation and investment by incumbent or competitive LECs.

140. [Certainty in the Marketplace.]{.underline} We find that a national
     list of unbundled elements will provide uniformity and
     predictability that will facilitate the development and
     implementation of national and regional business plans by
     competitive LECs, thereby extending the benefits of competition for
     the greatest number of consumers. We agree with the California PUC
     that a national list will allow multi-state competitors to create a
     national business plan with the knowledge that a set of network
     elements will be available in all states.[^242] Indeed, we find
     that the unavailability of elements on a nationwide basis would
     jeopardize the usefulness of unbundled elements as a method of
     serving the maximum number of consumers.[^243]

141. We also continue to believe that national unbundling requirements
     will provide financial markets with greater certainty regarding the
     elements that are available to competitive LECs. Such certainty
     should reduce the risk of entry, thereby making more capital
     available at less cost to new entrants and fledgling
     competitors.[^244] We do not agree with Ameritech that a national
     list would perpetuate uncertainty in capital markets because
     carriers would challenge the list regardless of what elements it
     contains.[^245] As stated above, we believe that a national list
     will actually reduce the risk of litigation.

142. [Administrative Practicality.]{.underline} We find that a national
     list of unbundled elements is administratively easier for the
     Commission, the states, and the industry to apply than a list that
     varies on a state-by-state or market-by-market basis. As we stated
     in the *Notice*, application of the "necessary" and "impair"
     standard is fact-intensive.[^246] Determining the availability of
     practical alternatives to the incumbents' network elements on a
     market-by-market basis, even through the use of bright-line tests
     as proposed by the incumbent LECs, would potentially require the
     Commission or the states to analyze the availability of
     alternatives in almost every wire center. In addition to creating
     uncertainty in the market, such a proposal would consume enormous
     amounts of resources and time, thereby undermining the goal of the
     Act to bring the benefits of rapid competition to all consumers.
     Such an approach would also require a new analysis each time a new
     carrier sought to initiate service in a particular market, and
     would likely lead to additional litigation by adversely affected
     carriers.[^247] We do not believe that Congress or the Supreme
     Court had in mind the adoption of a procedure that would impose
     such an undue---and unworkable---administrative burden on the
     Commission, the states, or the industry.

143. [Reduced Regulation]{.underline}. We believe that a national list
     of elements that contains discrete geographic and product market
     exceptions will result immediately in reduced regulation. Moreover,
     a national framework under which elements can be removed from the
     national list is consistent with the deregulatory goals of the Act.
     Reduced regulation will occur as we remove elements from the list
     as requesting carriers are no longer impaired without access to
     those elements, and it otherwise does not further the goals of the
     Act to continue requiring incumbent LECs to unbundle them.

## Modification of the National List

### Background

144. In the *Local Competition Order First Report and Order*, the
     Commission acknowledged that the rapid pace and ever-changing
     nature of technological advancement in the telecommunications
     industry made it essential that the Commission retain the ability
     to revise the rules as circumstances change. The Commission noted
     that, absent such ability, its rules might impede technological
     change and frustrate the 1996 Act's overriding goal of bringing the
     benefits of competition to consumers of local phone service.
     Accordingly, the Commission determined that, in addition to
     identifying unbundled network elements that incumbent LECs were
     required to make available at the time the original rules were
     adopted, it had the authority to identify additional or different
     unbundling requirements that would apply to incumbent LECs in the
     future.[^248]

145. In the *Local Competition Order First Report and Order*, the
     Commission also determined that state commissions could impose
     additional unbundling requirements, as long as the requirements
     were consistent with the 1996 Act and our regulations.[^249] The
     Commission codified this grant of authority in section 51.317 of
     its rules.[^250] The Commission believed that the states' authority
     to impose additional requirements, combined with its ability to
     modify the national unbundling rules, provided the necessary
     flexibility to accommodate any truly unique conditions that might
     exist.[^251] The Commission, however, did not address the issue of
     whether states could remove elements from the national list.

146. In the *Notice* we sought comment on whether the Commission should
     adopt an approach that would allow sunset or modification of the
     section 253(c)(3) unbundling obligations as technology and market
     conditions evolve over time.[^252] We noted that, under our rules,
     states have the authority to impose additional unbundling
     requirements.[^253] We sought comment on whether section 251(d)(2),
     or any other provision of the Act, provides the Commission with the
     authority to delegate to the states the responsibility of removing
     network elements from any national requirement.[^254] We sought
     comment on proposals for a mechanism for removal, including which
     party should bear the burden of proof.[^255] We asked whether the
     Commission should consider a phase-out period for network elements
     removed from the national list. Further, we asked whether we should
     institute a period of time during which incumbents could not seek
     removal of network elements from our new unbundling rules.[^256] We
     also asked whether we could adopt a "sunset" provision.[^257]

147. Several of the state commissions argue that they have the authority
     to add and subtract elements from the national list,[^258] while
     the Vermont and Illinois state commissions argue that the
     Commission should establish a set of unbundling obligations to
     which the state may add additional unbundling obligations.[^259]
     BellSouth argues that states should be able to add or remove
     unbundled elements in a particular zone.[^260] SBC and GTE oppose
     allowing the states to add or subtract elements.[^261] US West
     argues that states should be able to determine whether network
     elements no longer need to be unbundled, but that they not be
     allowed to add network elements.[^262] The vast majority of
     competitive LECs that commented in this proceeding, as well as NTIA
     and ALTS, argue that the states should be allowed to add, but not
     to remove, elements from the national list.[^263]

### Discussion

#### Modification of the National List by the Commission

148. As discussed above, section 251(d)(2) grants the Commission
     authority to establish a national list of network elements that are
     subject to the unbundling requirements of the Act.[^264] Given the
     rapid changes in technology, competition, and the economic
     conditions of the telecommunications market, we expect that the
     list of unbundled network elements that meets the standards of
     section 251(d)(2) will change over time. We therefore agree with
     commenters that we will need to reevaluate our national rules
     periodically.[^265]

149. The need to reassess periodically the availability of elements
     outside the incumbent's network is borne out by the changes that
     have taken place since we first adopted our unbundling rules three
     years ago. For example, the evidence in this proceeding indicates
     that competition is developing in some geographic markets for
     certain customer groups, (*e.g.*, medium and large businesses in
     major metropolitan areas). Only by periodically reevaluating the
     availability of alternative network elements outside the
     incumbent's network can we truly determine whether the incumbent's
     network should be unbundled in order to meet the requirements of
     section 251 and the goals of the Act. We therefore conclude that as
     market conditions change and new technologies develop, we will
     periodically revisit the issue of what elements are subject to the
     unbundling obligations of the Act.

150. Although we will periodically revisit our unbundling rules, we
     believe that it would be inconsistent with our overall policy goals
     to consider petitions to remove elements from the national list
     immediately upon adoption of this order.[^266] Specifically, as
     discussed above, the rules we adopt today seek to provide a measure
     of certainty to ensure that new entrants and fledgling competitors
     can design networks, attract investment capital, and have
     sufficient time to attempt to implement their business plans.[^267]
     Entertaining, on an *ad hoc* basis, numerous petitions to remove
     elements from the list, either generally or in particular
     circumstances, would threaten the certainty that we believe is
     necessary to bring rapid competition to the greatest number of
     consumers. In addition, entertaining numerous petitions on an *ad
     hoc* basis would undermine the goal of implementing unbundling
     rules that are administratively practical to apply.

151. We expect to reexamine our national list of network elements that
     are subject to the unbundling obligations of the Act every three
     years.[^268] We note that many of the first interconnection
     agreements negotiated in 1996 are now approaching expiration of
     their typical three-year terms and will be eligible for renewal. We
     expect parties to implement the requirements of this Order as they
     negotiate new interconnection agreements. We find that a similar
     three-year time frame for reevaluating the unbundling obligations
     is warranted to provide competitors with reasonable certainty for a
     period of time that is sufficient time to implement their plans.
     Revisiting our rules in three years should provide sufficient
     certainty to the carriers and capital markets and should provide
     carriers with sufficient time to implement their plans.[^269]

152. We decline to adopt a rule mandating that elements will not be
     subject to unbundling after a date certain in the future. Several
     parties have suggested that it would be extremely difficult for us
     to predict a date at which a particular network element would no
     longer meet the "necessary" and "impair" standards of section
     251(d)(2).[^270] As noted by the Illinois Commission, in the three
     years since the Act was implemented, no BOC has demonstrated that
     it satisfies the competitive checklist in section 271. In 1996, few
     would have expected that three years later BOCs would not have
     qualified for section 271 approval. This suggests that it would be
     similarly very difficult for us to predict, at this time, the date
     at which incumbent network elements would no longer be subject to
     unbundling obligations under section 251. Moreover, we note that we
     find no basis in the record before us to make predictive judgments
     about when an unbundling standard will no longer be met for
     particular network elements. Thus, at this point in time, we do not
     have enough information and experience to determine what events
     would lead to an automatic sunset of one of our unbundling
     requirements. Accordingly, at this time, we decline to adopt a
     sunset provision for removing network elements from the national
     list adopted in this Order.

#### Modification of the National List by the States

153. We agree with commenters that section 251(d)(3) provides state
     commissions with the ability to establish additional unbundling
     obligations, as long as the obligations comply with subsections
     251(d)(3)(B) and (C).[^271] Section 251(d)(3) states that:

> In prescribing and enforcing regulations to implement the requirements
> of this section, the Commission shall not preclude the enforcement of
> any regulation, order, or policy of a State commission that---
>
> \(A\) establishes access and interconnection obligations of local

exchange carriers;

> \(B\) is consistent with the requirements of this section; and
>
> \(C\) does not substantially prevent implementation of the
> requirements of this section and the purposes of this part.[^272]

154. This section of the statute allows state commissions to establish
     access obligations of local exchange carriers that are consistent
     with our rules implementing section 251.[^273] We believe that
     section 251(d)(3) grants state commissions the authority to impose
     additional obligations upon incumbent LECs beyond those imposed by
     the national list, as long as they meet the requirements of section
     251 and the national policy framework instituted in this Order. As
     explained below however, we find that state-by-state removal of
     elements from the national list would substantially prevent
     implementation of the requirements and purposes of this section of
     the Act.

155. Section 51.317 of the Commission's rules codifies the standards
     state commissions must apply to add elements to the national list
     of network elements we adopt in this Order.[^274] In its current
     form, Rule 51.317 reflects the Commission's interpretation of the
     necessary and impair standards adopted in the *Local Competition
     First Report and Order*. Inasmuch as we have modified the
     "necessary" and "impair" standard to respond to the Supreme Court's
     directive, we must also amend Rule 51.317 to reflect the new
     standards. Accordingly, we modify Rule 51.317, to bring it into
     compliance with our new standards and the Supreme Court's
     decision*.* Modification of this rule will enable state commissions
     to add additional unbundling obligations consistent with sections
     251(d)(3)(B) and(C) of the Act.[^275]

156. We agree with the California PUC that states have the authority to
     remove network elements *added* *by the states*. Thus, if a state
     commission, pursuant to section 251(d)(3), adds a network element
     to the list of network elements an incumbent LEC must provide,
     state commissions also have the authority subsequently to remove
     those elements they add.[^276] As discussed above, section
     251(d)(3)(A) allows state commissions to impose additional
     unbundling obligations as long as they comply with subsections
     251(d)(3)(B) and (C). If a state commission determines that the
     additional unbundling obligations it imposed no longer comply with
     section 251, it must remove those obligations pursuant to section
     251(d)(3). Beyond ensuring that removal of those state-imposed
     obligations are consistent with sections 251 and 253 of the Act,
     the Commission has no authority to prevent a state from removing a
     state-imposed unbundling obligation. Furthermore, state commissions
     that have imposed additional unbundling requirements, pursuant to
     section 51.317 of our rules, will need to periodically revisit such
     decisions to determine whether such decisions continue to comply
     with the standards articulated in this Order.

157. We conclude that, at this time, removing network elements from the
     unbundling obligations established in this Order on a
     state-by-state basis would not be consistent with the goals of the
     1996 Act. Specifically, in this proceeding, we have examined each
     network element identified previously by the Commission or by the
     parties, and we have made an affirmative finding as to whether or
     not the particular element now satisfies the unbundling standards
     of the Act as clarified by the Supreme Court. Moreover, we have
     considered how unbundling these elements will affect the
     development of competition in the local markets as contemplated by
     Congress, and whether unbundling particular elements will further
     the goals of the Act. Indeed, we have found that unbundling
     particular network elements is necessary to further the goals of
     the Act. Consequently, at this time, state decisions to remove
     these network elements from the national unbundling obligations
     would "substantially prevent implementation of the requirements of
     section 251," as prohibited by subsection 251(d)(3)(C).

158. Furthermore, we find that there are compelling policy reasons for
     not removing elements from the national list on a state-by-state
     basis at this time.[^277] Unbundling obligations that vary from
     state to state in the near future would substantially undermine the
     reasons discussed above for implementing a national list in the
     first instance.[^278] We agree with commenters that argue that
     state-by-state removal of network elements from the national list,
     at least in the near future, would lead to greater uncertainty in
     the market and would hinder the development of competition. [^279]
     As discussed above, we have determined that national unbundling
     rules promote competition in telecommunications market by
     guaranteeing that a specific set of network elements will be
     available nationwide for a minimum amount of time.[^280]

159. We agree with the California PUC and other state commissions that
     having a guaranteed list of network elements provides enough
     certainty to allow competitive LECs to develop and implement
     regional and national business plans.[^281] Creating certainty and
     predictability in the market will also benefit competition by
     enabling competitors to raise capital at lower cost to create and
     enhance their networks.[^282] If each state could remove
     immediately the unbundling obligations established in this Order,
     competitors would not have the benefit of knowing how long an
     element would be available on an unbundled basis in any given
     locale. The resulting uncertainty would frustrate the ability of
     carriers to plan and implement competitive entry strategies
     developed to serve customers on a regional or national basis.

160. We also agree with commenters that state-by-state removal of
     network elements from the national list would complicate
     negotiation of interconnection agreements and would most likely
     lead to increased litigation.[^283] Indeed, it could force
     competitive LECs, each time they seek to enter into an
     interconnection agreement, to demonstrate that the identified
     elements continue to meet the standards of the Act.[^284] Once an
     incumbent LEC is able to convince a state commission that the
     element no longer meets our unbundling standard, the ruling would
     likely set a precedent for other LECs. In addition, the possibility
     that a state decision in one interconnection proceeding could
     affect all interconnection agreements would require competitive
     LECs to monitor the status of these arbitrations even if they are
     not participants in the arbitration. We therefore agree with the
     Illinois Commission that having only this Commission remove
     elements from the national list makes it easier for the states to
     resolve disputed issues during inter-carrier negotiations and
     arbitrations.[^285]

161. We believe that incumbent LECs have more of an incentive than
     competitive LECs to challenge the unbundling obligations set forth
     in this Order.[^286] In addition to the delay and uncertainty
     created by litigating the unbundling obligations of incumbent LECs,
     state commissions, as well as incumbent LECs and competitors, would
     be faced with the additional costs of litigation.[^287] Many state
     commissions and small carriers have limited resources and would be
     unduly burdened if they were have to finance on-going litigation of
     the unbundling rules.[^288] Moreover, as several state commenters
     and NARUC note, section 252(e)(6) appears to limit review of state
     commission decisions to federal district court.[^289] Thus, each
     state decision could eventually lead to litigation in the federal
     courts, creating even more uncertainty and further delaying the
     benefits of competition to consumers.

# APPLICATION OF THE STANDARD TO INDIVIDUAL NETWORK ELEMENTS

## Loops

### Background

162. In the *Local Competition First Report and Order*, the Commission
     found that incumbent LECs must provide local loops on an unbundled
     basis to requesting carriers.[^290] The Commission concluded that
     such access was technically feasible and would promote competition
     in the local exchange market.[^291] The Commission, at that time,
     did not require subloop unbundling, or specify whether "dark fiber"
     fell within the definition of the loop.[^292] The *Local
     Competition First Report and Order* also did not address the status
     of "inside wire" (wiring located inside the customer premises but
     owned by the incumbent).

163. In the *Notice,* we stated that it was our strong expectation that,
     under any reasonable interpretation of the "necessary" and "impair"
     standards of section 251(d)(2), loops would be subject to the
     section 251(c)(3) unbundling obligations.[^293] The *Notice* also
     requested that parties discuss specific costs and analyze the
     availability of alternative sources of the loop facilities.[^294]

164. In general, incumbent LECs contend that the definition of the loop
     should not include high-capacity loops that serve large business
     customers, dark fiber, inside wire, and loop conditioning.[^295]
     State regulatory commissions and competitive LECs argue that loops
     should be unbundled.[^296] The state commissions disagree among
     themselves as to whether or not competitive providers are impaired
     without access to dark fiber. They also disagree as to whether dark
     fiber should be included within the loop and transport unbundled
     network elements definitions or be unbundled as a separate network
     element.[^297]

### Discussion

165. We conclude that LECs must provide access to unbundled loops,
     including high-capacity loops, nationwide. We find that requesting
     carriers are impaired without access to loops, and that loops
     include high-capacity lines, dark fiber, line conditioning, and
     certain inside wire. Requiring carriers to obtain loops from
     alternative sources would materially raise entry costs, delay
     broad-based entry, and limit the scope and timeliness of the
     competitor's service offerings. As described below, we conclude
     that neither self-provisioning loops nor obtaining loops from
     third-party sources is a sufficient substitute that would justify
     excluding loops from an incumbent LEC's unbundling obligation under
     section 251(c)(3).

#### Definition 

166. In the *Local Competition First Report and Order*, the Commission
     defined the loop as "a transmission facility between a distribution
     frame, or its equivalent, in an incumbent LEC central office, and
     the network interface device at the customer premises."[^298] The
     Commission also stated that the definition included, for example,
     two-wire and four-wire analog voice-grade loops, and two-wire and
     four-wire loops that are conditioned to transmit digital signals,
     such as xDSL.[^299] The Commission did not, however, specify
     whether "dark fiber" fell within the definition of the loop.[^300]

167. We modify the definition of the loop network element to include all
     features, functions, and capabilities of the transmission
     facilities, including dark fiber and attached electronics (except
     those used for the provision of advanced services, such as DSLAMs)
     owned by the incumbent LEC, between an incumbent LEC's central
     office and the loop demarcation point at the customer
     premises.[^301] In order to secure access to the loop's full
     functions and capabilities, we require incumbent LECs to condition
     loops. This broad approach accords with section 3(29) of the Act,
     which defines network elements to include their "features,
     functions and capabilities."[^302] Our intention is to ensure that
     the loop definition will apply to new as well as current
     technologies, and to ensure that competitors will continue to be
     able to access loops as an unbundled network element as long as
     that access is required pursuant to section 251(d)(2) standards.

168. [Termination of the Loop]{.underline}*.* The loop definition the
     Commission adopted in the *Local Competition First Report and
     Order* defined the loop as terminating at the network interface
     device (NID) at the customer premises.[^303] We find the
     demarcation point preferable to the NID in defining the termination
     point of the loop because, in some cases, the NID does not mark the
     end of the incumbent's control of the loop facility.[^304] Where
     incumbents maintain ownership and control over a portion of the
     loop beyond the NID, the definition of the loop as set forth by the
     Commission in the *Local Competition First Report and Order* may
     not provide the competitor with actual access to the
     subscriber.[^305]

169. Section 68.3 of our rules defines the demarcation point as that
     point on the loop where the telephone company's control of the wire
     ceases, and the subscriber's control (or, in the case of some
     multiunit premises, the landlord's control) of the wire
     begins.[^306] Thus, the demarcation point is defined by control; it
     is not a fixed location on the network, but rather a point where an
     incumbent's and a property owner's responsibilities meet.[^307] The
     demarcation point is often, but not always, located at the minimum
     point of entry (MPOE), which is the closest practicable point to
     where the wire crosses a property line or enters a building.[^308]
     In multiunit premises, there may be either a single demarcation
     point for the entire building or separate demarcation points for
     each tenant, located at any of several locations, depending on the
     date the inside wire was installed, the local carrier's reasonable
     and nondiscriminatory practices, and the property owner's
     preferences.[^309] Thus, depending on the circumstances, the
     demarcation point may be located either at the NID, outside the
     NID, or inside the NID.

170. Although inside wire typically consists of junction and utility
     boxes, riser cable, and horizontal distribution wiring within an
     apartment building, it can also include the loop facility within a
     campus, a commercial park, or a garden apartment complex. We note
     that Teligent prefers the term "intra-building wiring," to
     emphasize that the plant in question is not always inside the
     customer premises, but may, especially in multiunit buildings,
     exist primarily within the landlord's, rather that the
     subscriber's, premises.[^310] Yet even the term "intra-building
     wire" may suggest limitations that do not apply in some situations,
     because "inside" wire is often out-of-doors, as is the case at
     garden apartments and campuses, among other places.[^311] Thus,
     although we refer to "inside wire" and "customer premises," for the
     sake of convenience, we acknowledge that the wire may be
     out-of-doors, and the "customer" may be a subscriber, a landlord, a
     condominium, a university, and so on.

171. Defining the loop to terminate at the same point as the incumbent
     LEC's control over facilities that it owns, will ensure that the
     competitor will be able to gain access to the entire loop,
     including inside wire.[^312] We note that, in our *Access to
     Competitive Networks* proceeding, we are seeking additional comment
     on the legal and technical issues arising from unbundled inside
     wiring and premises facilities.[^313] We also note that Section
     251(d)(2) imposes obligations only on incumbent local exchange
     carriers and not, for instance, on third parties (such as the
     owners of multi-tenant buildings). Thus, the rules adopted in this
     Order are not intended to give competitive service providers any
     additional legal rights vis-a-vis such third parties, including
     access to a multi-unit building over the objection of the property
     owner. Those issues are being addressed in other proceedings before
     the Commission.[^314]

172. [Conditioned Loops]{.underline}. We clarify that incumbent LECs are
     required to condition loops so as to allow requesting carriers to
     offer advanced services.[^315] The terms "conditioned," "clean
     copper," "xDSL-capable" and "basic" loops all describe copper loops
     from which bridge taps, low-pass filters, range extenders, and
     similar devices have been removed. Incumbent LECs add these devices
     to the basic copper loop to gain architectural flexibility and
     improve voice transmission capability.[^316] Such devices, however,
     diminish the loop's capacity to deliver advanced services, and thus
     preclude the requesting carrier from gaining full use of the loop's
     capabilities. Loop conditioning requires the incumbent LEC to
     remove these devices, paring down the loop to its basic form.

173. GTE contends that the Eighth Circuit, in the *Iowa Utils. Bd. v.
     FCC* decision, overturned the rules established in the *Local
     Competition First Report and Order* that required incumbents to
     provide competing carriers with conditioned loops capable of
     supporting advanced services even where the incumbent is not itself
     providing advanced services to those customers.[^317] We disagree.
     Although the Eighth Circuit overturned certain rules to the extent
     those rules required incumbent LECs to provide access to unbundled
     network elements at levels of quality superior to those the
     incumbent LECs provide themselves, the court also expressly
     affirmed the Commission's determination that section 251(c)(3)
     requires incumbent LECs to provide modifications to their
     facilities to the extent necessary to accommodate access to network
     elements.[^318] We find that loop conditioning, rather than
     providing a "superior quality" loop, in fact enables a requesting
     carrier to use the basic loop. Because competitors cannot access
     the loop with all its native "features, functions, and
     capabilities" unless it has been stripped of accreted devices, we
     conclude that loop conditioning falls within the definition of the
     loop network element, and is also consistent with the Eighth
     Circuit opinion.

174. [Dark Fiber]{.underline}. We also modify the loop definition to
     specify that the loop facility includes dark fiber.[^319] Dark
     fiber is fiber that has not been activated through connection to
     the electronics that "light" it, and thereby render it capable of
     carrying communications services.[^320] Because it is in place and
     easily called into service, we find that dark fiber is analogous to
     "dead count" or "vacant" copper wire that carriers keep dormant but
     ready for service. Thus, we disagree with GTE's argument that,
     unlike vacant copper, dark fiber does not qualify as loop
     plant.[^321] GTE maintains that extra "copper cable is installed to
     provide optimum flexibility" and contrasts this copper to dark
     fiber, which GTE terms "unused inventory." GTE clarifies that
     "\[t\]hese fibers remain dark until they are needed."[^322] We find
     this to be a distinction without a difference, and conclude that
     both copper and fiber alike represent unused loop capacity. We
     find, therefore, that dark fiber and extra copper both fall within
     the loop network element's "facilities, functions, and
     capabilities."[^323]

175. [Attached Electronics]{.underline}. We conclude that, with the
     exception of Digital Subscriber Line Access Multiplexers (DSLAMs),
     the loop includes attached electronics, including multiplexing
     equipment used to derive the loop transmission capacity.[^324] The
     definition of a network element is not limited to facilities, but
     includes features, functions, and capabilities as well.[^325] Some
     loops, such as integrated digital loop carrier (IDLC), are equipped
     with multiplexing devices, without which they cannot be used to
     provide service to end users. Because excluding such equipment from
     the definition of the loop would limit the functionality of the
     loop, we include the attached electronics (with the exception of
     DSLAMs) within the loop definition. By contrast, and as we discuss
     below, we find that the DSLAM is a component of the packet switch
     network element.[^326]

176. [High-Capacity Loops]{.underline}*.* We disagree with incumbent
     LECs that high-capacity loops should be excluded from the
     definition of the loop.[^327] High-capacity loops retain the
     essential characteristic of the loop: they transmit a signal from
     the central office to the subscriber, or vice versa. In a DS1 loop,
     for example, the attached electronics boost the wire's capacity,
     but the wire facility used for transmission of the traffic is
     indistinguishable from any other copper wire. Although it may be
     more profitable to serve customers over higher capacity lines, such
     differences do not support a modification of the loop *definition*
     to exclude high-capacity lines. Whether the Commission should
     refrain from unbundling high-capacity loops is another matter,
     which we discuss below in our unbundling analysis.

177. For similar reasons, we reject US West's argument that we should
     exclude from the definition the loop facilities that underlie
     private line and special access interconnection, because providing
     these services to competitors at lower-than-tariffed rates would
     "promote regulatory arbitrage and serve no valid statutory or
     public purpose."[^328] The Commission has not previously found that
     the requirements of section 251(c)(3) are limited to any particular
     kind of service.[^329] Moreover, section 251(d)(2) of the Act
     refers to a " . . . carrier seeking access to provide the
     *services* *that it seeks to offer*."[^330] We find no basis for
     placing a restriction on what services a carrier may offer using
     the loop network element. Indeed, the prospect of competition among
     carriers to provide services over the loop at prices that more
     closely reflect the provider's costs seems to us to accord fully
     with Congress's intent in passing the 1996 Act. We do not now
     decide whether or not this analysis may extend to the enhanced
     extended loop (EEL), but rather seek comment on that issue in the
     *Further Notice of Proposed Rulemaking*, below.[^331]

178. [Cross Connects]{.underline}*.* In the *Local Competition First
     Report and Order*, the Commission concluded that incumbent LECs
     must provide cross connect facilities between an unbundled loop and
     a requesting carrier's collocated equipment.[^332] The Commission
     emphasized this requirement because of its concern that incumbent
     LECs might have imposed unreasonable rates, terms, and conditions
     for such cross connect facilities in the past.[^333] Nothing in
     this Order disturbs the Commission's findings regarding cross
     connect facilities. In particular, we continue our policy that
     incumbent LECs may recover the cost of providing such facilities in
     accordance with our rules governing the costs of interconnection
     and unbundling. Charges for cross connect facilities must meet the
     cost-based standard provided in section 252(d)(1), and the terms
     and conditions of providing cross connect facilities must be
     reasonable and nondiscriminatory under section 251(c)(3).[^334]

179. Because we agree with the Commission's analysis of cross connect
     facilities in the *Local Competition First Report and Order*, we
     decline to include cross connect facilities within the definition
     of the loop network element.[^335] We continue to view the cross
     connect as a means of interconnection with a network element,
     rather than as part of the network element. We require, however,
     that incumbents provide cross connect facilities according to
     sections 252(d)(1) and 251(c)(3) at any technically feasible point
     that a requesting carrier seeks access to the loop. We conclude
     that such a requirement is needed wherever a competitor seeks
     access to the loop, because cross connection offers a potential
     bottleneck, and incumbents may have the incentive to impose
     unreasonable rates, terms, and conditions for cross-connect
     facilities.

#### Proprietary Concerns Associated with the Loop 

180. In the *Local Competition First Report and Order,* the Commission
     concluded that the technology associated with the loop is not
     proprietary in nature.[^336] Parties in this proceeding have not
     identified any proprietary concerns associated with unbundled
     loops, and we find none. We therefore apply the "impair" standard
     of section 251(d)(2), rather than the "necessary" standard, to
     determine whether loops are subject to the unbundling obligations
     of the Act.

#### Unbundling Analysis for the Loop in General

181. We require incumbent LECs to provide unbundled access to loops
     nationwide. The record demonstrates that lack of access to
     unbundled loops impairs a carrier's ability to provide the services
     it seeks to offer because requiring carriers to self-provision
     loops would materially raise entry costs, delay broad-based entry,
     and limit the scope and quality of the competitor's offerings. We
     conclude that neither self-provisioning loops nor obtaining loops
     from third-party sources is an adequate alternative for loops that
     a carrier can obtain from an incumbent LEC under the section 251(c)
     unbundling obligation. We analyze the obligation to unbundle
     separable elements of the loop, such as inside wire, when we
     discuss subloop unbundling, below. We defer a decision on whether
     to unbundle the high frequency portion of the loop to a further
     proceeding.

182. [Cost and Timeliness]{.underline}*.* We agree with the argument
     that self-provisioning is not a viable alternative to the
     incumbent's unbundled loops because replicating an incumbent's vast
     and ubiquitous network would be prohibitively expensive and delay
     competitive entry.[^337] We find the reasons for unbundling the
     loop that the Commission articulated in the *Local Competition
     First Report and Order* are still valid three years later. In that
     order, the Commission recognized that, without access to unbundled
     loops, competitors would need to invest immediately in duplicative
     facilities in order to compete for most customers, and that such
     investment and construction would likely delay, if not prohibit,
     market entry and postpone, perhaps indefinitely, the benefits of
     telephone competition for consumers. Moreover, the Commission found
     that without access to unbundled loops, competitive LECs would be
     required to sink a large initial investment in loop facilities
     before they had a customer base large enough to justify such an
     expenditure, thereby increasing the risk of entry and raising the
     competitive LEC's cost of capital.[^338] By contrast, permitting a
     competitor to purchase unbundled loops from the incumbent LEC
     allows the competitive LEC to build facilities gradually, and to
     deploy loops for its customers where it is efficient to do
     so.[^339]

183. Nothing in the record of this proceeding leads us to a different
     conclusion. To the contrary, we find that, as a practical matter,
     building loop plant continues to be, in most cases, prohibitively
     expensive and time-consuming. Because of the size of their
     networks, incumbent LECs enjoy advantages of scope that competitors
     cannot replicate.[^340] We find that it would be unreasonable to
     expect a competitive LEC to invest the large sums of capital needed
     to build out ubiquitous loop plant before the competitive LEC has
     established a substantial and secure customer base. Unlike
     switches, which can be scaled to need, relocated if the business
     fails to develop, and which can accommodate a fluctuating customer
     base, much of the loop is often dedicated to a particular location.
     In addition, if the competitive LEC loses the customer back to the
     incumbent or to another competitor, the competitive LEC would
     probably bear the full loss of its sunk investment in the redundant
     loop.[^341]

184. We disagree with incumbents' assertions that we should not unbundle
     high-capacity loops because competitive LECs have successfully
     self-provisioned loops to certain large business customers.
     According to these commenters, the call concentration and revenue
     potential of "high-capacity" lines (DS1 and higher) make
     self-provisioning high-capacity lines an economically viable
     alternative to the incumbent LECs' unbundled high-capacity
     loops.[^342] Building out any loop is expensive and time-consuming,
     regardless of its capacity.[^343] That some competitive LECs, in
     certain instances, have found it economical to serve certain
     customers using their own loops suggests to us only that carriers
     are unimpaired in their ability to serve those particular
     customers. This evidence tells us nothing about the customer the
     competitor would like to serve but cannot because the cost of
     building a loop from the customer premises to the competitive LEC's
     switch is prohibitive.

185. For similar reasons, we reject BellSouth's proposal that we not
     require incumbent LECs to unbundle larger business loops in Special
     Access Pricing zones 1 and 2.[^344] Because of the expense inherent
     in building loops, we find that it would be extremely difficult for
     competitive LECs to overbuild the ubiquitous loop plant that the
     incumbents have built up over decades, even to serve businesses in
     urban districts. The enormous sunk investment required to install
     loops would inevitably lead to competition in patches, rather than
     the seamless competitive service of a fully competitive market.
     Moreover, we find that using Special Access Pricing zones, as
     recently modified by the Commission, would provide incumbent LECs
     with discretion to define their own loop unbundling
     obligations.[^345] We agree with MCI WorldCom that the Special
     Access Pricing zone approach would grant incumbent LECs latitude to
     "change their methodologies for defining zones to upset their
     competitor's business plans."[^346] We find that premising an
     incumbent LEC's loop unbundling obligation on a geographic boundary
     defined, to a large degree, by the incumbent LEC itself could allow
     an incumbent LEC to minimize its unbundling obligation, and would
     not respond to a requesting carrier's need for access to unbundled
     loops.

186. In addition to the large costs of building loop plant, we agree
     with commenters in this phase of the proceeding that overbuilding
     the incumbent LEC's loops would embroil the competitor in lengthy
     rights-of-way disputes, and would require the unnecessary digging
     up of streets.[^347] Thus, we find that even if competitors were
     able to finance the replication of the incumbents' loop plant,
     construction of new facilities would -- at the least -- materially
     delay competitors' ability to bring their services to consumers.
     Such delays would frustrate the competitor's ability to offer
     timely service to prospective customers. Although competitive LECs
     have successfully constructed loops in some circumstances, we find
     that the cost, risk, disruption, and delay of self-provisioning
     loop plant would, for many consumers, foreclose the benefits of
     competition.[^348]

187. Moreover, in the *Local Competition First Report and Order*, the
     Commission specified that the definition of the loop includes
     various grades of loops to allow transmission of digital signals
     needed to provide multiple services and DS1-level signals.[^349]
     The Commission reasoned that the ability to offer various functions
     in competition with incumbent LECs could benefit small entities
     serving niche markets.[^350] We continue to believe that access to
     these high-capacity lines is necessary for ubiquitous deployment of
     high-speed services, including high-speed Internet access. We
     therefore agree with competitive LECs that failing to assure access
     to high-capacity loops would impair their ability to provide the
     services that they seek to offer in broadband service
     markets.[^351]

188. [Ubiquity and Qualit]{.underline}y. We disagree with parties that
     argue that mobile telephones and fixed wireless offer an
     alternative to the incumbent's loop, and that loops therefore
     should not be unbundled.[^352] Although we find these technologies
     promising, we conclude that they are not yet viable alternatives to
     the incumbent's wireline loop facilities. In particular, we find
     that alternative loop technologies are not as widespread as the
     incumbent's ubiquitous network. These alternatives do not offer the
     same functionality as wireline service, and the data capabilities
     of these mobile services are generally inferior to wireline loops'
     data transmission capabilities. Cellular and PCS telephone
     footprints, though expanding, are not ubiquitous. Indeed, millions
     of Americans are not yet served by mobile wireless carriers.[^353]
     Moreover, the sound quality of cellular and PCS service is not
     always equal to wireline service. [^354] Fixed wireless cannot yet
     offer more than four lines, or high-speed Internet
     connection.[^355]

189. We also disagree with the incumbent LECs' argument that cable
     television service offers a viable alternative to the incumbent's
     unbundled loop.[^356] Cable service is largely restricted to
     residential subscribers, and generally supports only one-way
     service, not the two-way communications telephony requires.[^357]
     Moreover, we conclude that declining to unbundle loops in areas
     where cable telephony is available would be inconsistent with the
     Act's goal of encouraging entry by multiple providers. Given that
     neither mobile nor fixed wireless can yet replace wireline service,
     if we were to take the incumbents' approach, consumers might be
     left to a choose between only the cable company and the incumbent
     LEC.

190. [Loops Capable of Providing High-Speed Data
     Services]{.underline}*.* We conclude that permitting incumbents to
     deny access to basic loops stripped of accreted devices, *i.e.*,
     "conditioned" loops, would preclude the ability of competitors to
     offer high-speed data services. Such unencumbered copper wire is
     necessary for requesting carriers to provide most types of xDSL
     service.[^358] While some "flavors" of xDSL can be provided over
     loops with a limited number of impediments, as a general rule the
     quality of such service -- particularly the speed -- is
     significantly diminished, compared to the service provided over
     unencumbered wires.[^359] DSL-capable loops provide end users with
     broadband data transmission, which allows rapid access to the
     Internet.[^360] Unbundling basic loops, with their full capacity
     preserved, allows competitors to provide xDSL services. This in
     turn will foster investment, innovation, and competition in the
     local telecommunications marketplace. Without access to these
     loops, competitors would be at a significant disadvantage, and the
     incumbent LEC, rather than the marketplace, would dictate the pace
     of the deployment of advanced services.[^361] We also note that the
     availability of conditioned loops enables competitors to deploy
     xDSL service beyond the major metropolitan areas.[^362] Finally, we
     note our obligation under section 706 to encourage the deployment
     of advanced services by, among other means, promoting competition
     in the telecommunications market.[^363]

191. As the Commission stated in the *Local Competition First Report and
     Order*, requiring incumbents to provide conditioned loops will, in
     some instances, require the incumbent LEC to take affirmative steps
     to enable requesting carriers to provide services that the
     incumbent does not currently provide.[^364] We now clarify that we
     require the incumbent to provide loops with all their capabilities
     intact, that is, to provide conditioned loops, *wherever* a
     competitor requests, even if the incumbent is not itself offering
     xDSL to the end-user customer on that loop. Thus, incumbent LECs
     cannot refuse a competitive LEC's request for conditioned loops on
     the grounds that they themselves are not planning to offer xDSL to
     that customer.

192. In the *Local Competition First Report and Order*, the Commission
     also stated that requesting carriers would compensate the incumbent
     LECs for the cost of conditioning the loop.[^365] Covad and Rhythms
     argue that, because loops under 18,000 feet generally should not
     require devices to enhance voice-transmission, the requesting party
     should not be required to compensate the incumbent for removing
     such devices on lines of that length or shorter.[^366]

193. We agree that networks built today normally should not require
     voice-transmission enhancing devices on loops of 18,000 feet or
     shorter.[^367] Nevertheless, the devices are sometimes present on
     such loops, and the incumbent LEC may incur costs in removing them.
     Thus, under our rules, the incumbent should be able to charge for
     conditioning such loops.[^368]

194. We recognize, however, that the charges incumbent LECs impose to
     condition loops represent sunk costs to the competitive LEC, and
     that these costs may constitute a barrier to offering xDSL
     services. We also recognize that incumbent LECs may have an
     incentive to inflate the charge for line conditioning by including
     additional common and overhead costs, as well as profits. We defer
     to the states to ensure that the costs incumbents impose on
     competitors for line conditioning are in compliance with our
     pricing rules for nonrecurring costs.[^369]

195. In addition, we agree with commenters that argue that incumbent
     LECs must provide "trouble reports" to the competitive LECs for any
     function or capability of the accessed loop element, and that the
     incumbent may not limit such reports to voice-transmission trouble
     only.[^370] Not knowing whether or not the accessed line is
     functioning properly impairs a competitive LEC's ability to provide
     service, because subscribers may tend to blame the new competitor,
     rather than the familiar incumbent, for any lapse or degradation of
     service. Thus, we conclude that, in so far as it is technically
     feasible, the incumbent must test and report trouble on conditioned
     lines, if requested by the competitor, for all of the line's
     features, functions, and capabilities, and may not restrict its
     testing to voice-transmission only.

196. [Dark Fiber]{.underline}. We agree with commenters that argue that,
     because dark fiber provides high transmission capabilities at
     relatively low cost, unbundling dark fiber is essential for
     competition in the provision of advanced services.[^371] We reject
     the incumbents' reasoning that, because competitive LECs have
     installed lit fiber to certain high-volume customers, they could
     also install their own dark fiber, and therefore are not impaired
     without access to the incumbent's dark fiber.[^372] As with other
     loops, we decline to infer from competitive LEC self-provisioning
     in certain circumstances that, as a general matter, the expense and
     delay involved in laying fiber do not impair the ability of
     entrants and other competitive LECs to provide the services they
     seek to offer.[^373] We see no reason to distinguish dark fiber
     from our general unbundling analysis for loops.

197. US West argues that competitors do not need the incumbent LECs'
     fiber because a wholesale market exists in loop fiber.[^374] We
     find, however, that the nascent wholesale market in fiber loop
     facilities is not yet extensive enough for us to conclude that
     competitors are not impaired without access to incumbent LECs'
     unbundled dark fiber loops.[^375] We also agree with the argument
     that unbundled loops, including fiber, allow competitive LECs to
     build out their networks gradually.[^376] By supplementing their
     own facilities with unbundled fiber loops, a competitive LEC can
     offer advanced services ubiquitously and not limit its service
     offering to small areas of concentrated demand.[^377]

198. Because fiber is currently a more significant component of
     interoffice transport than the loop network element, we discuss
     aspects of dark fiber common to both elements when we discuss
     interoffice transport below.[^378] We note here, however, that GTE
     raises concerns that incumbents, because of their
     carrier-of-last-resort obligations, have a special need for fiber
     reserves.[^379] As we explain in greater detail below, we find
     these concerns exaggerated, because the capacity of fiber can be
     increased many fold simply by increasing the power of the
     electronics that light it. We find, therefore, that a shortage of
     fiber capacity caused by unbundling is highly unlikely.

199. In addition, GTE and the Telecommunications Industry Association
     argue that requiring incumbent LECs to unbundle fiber will reduce
     their incentive to build fiber loops in the first place.[^380] We
     remain skeptical that this is the case, because incumbents face
     loop unbundling obligations no matter which technology they deploy.
     We note, however, that the Texas commission has already established
     moderate restrictions governing the availability dark fiber. [^381]
     We do not wish to disturb the reasonable limitations and technical
     parameters for dark fiber unbundling that Texas or other states may
     have in place. If incumbent LECs are able to demonstrate to the
     state commission that unlimited access to unbundled dark fiber
     threatens their ability to provide service as a carrier of last
     resort, state commissions retain the flexibility to establish
     reasonable limitations governing access to dark fiber loops in
     their states.

200. [Goals of the Act]{.underline}***.*** We conclude that access to
     the full capabilities of incumbent LECs' loop plant nationwide will
     further the goals of the Act. Requiring access to unbundled loops
     will promote the rapid development of competition and bring the
     benefits of competition to greater numbers of consumers. Access to
     unbundled loops will also encourage competition to provide
     broadband services. We are convinced that greater, not fewer,
     options for procuring loops will facilitate entry by competitors,
     and that Congress intended for competitors to have these options
     available."[^382] We find that the benefits of uniform loop
     unbundling outweigh the costs of creating a patchwork regime in
     which incumbents will seek to litigate whether particular loops
     should be unbundled or where an alternative to the incumbent LEC's
     loop is arguably substitutable. For these reasons, incumbent LECs
     must provide unbundled access to their loop network element
     nationwide.

201. [Spectrum Unbundling]{.underline}. A number of parties request that
     the Commission identify loop spectrum as a separate unbundled
     network element.[^383] In particular, they argue that requesting
     carriers need access to the high-frequency loop spectrum on an
     unbundled basis in order to provide advanced telecommunications
     services, including xDSL. We decline, at this time, to identify
     loop spectrum as a separate unbundled network element. In the
     *Advanced Services First Report and Order and FNPRM*, we will
     consider whether the high-frequency spectrum of the loop qualifies
     as an unbundled network element and the operational issues
     associated with such unbundling.[^384] We believe that the record
     developed in that proceeding more fully addresses the issues
     associated with spectrum unbundling, and we therefore decline to
     address those issues in this proceeding.

## The Subloop

### Background 

202. In the *Local Competition First Report and Order*, the Commission
     declined to identify the feeder, feeder/distribution interface
     (FDI), and distribution components of the loops as individual
     network elements.[^385] The Commission noted, however, that subloop
     unbundling could provide competitors flexibility in deploying some
     portions of loop facilities, while elsewhere relying on the
     incumbent LEC's facilities. In addition, the Commission noted that
     carriers would need access at points along the loop closer to the
     customer premises to provide some high bandwidth services, such as
     ADSL.[^386] The Commission also found that, although the record
     presented evidence mainly of logistical, rather than technical,
     impediments to subloop unbundling, proponents of subloop unbundling
     did not address technical issues raised by incumbent LECs. [^387]
     The Commission stated that it would revisit subloop unbundling when
     the record on the issue had been more fully developed[^388] [^389]

203. In the *Notice*, we sought comment on whether, due to technological
     changes, we should require subloop unbundling at the remote
     terminal or at other points within the incumbent LEC's network. We
     sought comment on whether to unbundle incumbent-owned facilities on
     the end-user side of the NID. We asked commenters to apply the
     "necessary" and "impair" standards and to discuss costs and
     availability on an element-by-element basis. We also asked those
     commenters requesting further unbundling of the local loop to
     discuss possible alternatives.[^390]

204. Competitive LECs argue generally that they need unbundled access to
     subloop elements in order to: (1) connect their own facilities to
     the incumbent's inside wire; (2) access loops that an incumbent LEC
     provides over integrated digital loop carrier (IDLC) technology;
     and (3) provide advanced services over xDSL.[^391] These commenters
     argue that they are also financially burdened if they must pay for
     an entire loop when they need to use only a portion of it.[^392]
     Incumbents argue generally that competitors are not impaired
     without access to subloops; that technical and logistical
     impediments prevent subloop unbundling; and that network
     architectures differ too broadly to adopt an unbundling rule that
     applies nationwide.[^393] Several state commissions argue that
     subloop unbundling requires a case-by-case analysis that the states
     are in the best position to perform.[^394] For example, Texas
     states that subloop unbundling meets the "impair" standard of
     section 251(d)(2) and requires subloop unbundling at the remote
     terminal.[^395]

### Discussion

205. We find that lack of access to unbundled subloops materially
     diminishes a requesting carrier's ability to provide services that
     it seeks to offer. We also conclude that access to subloop elements
     is likely to be the catalyst that will allow competitors, over
     time, to deploy their own complementary subloop facilities, and
     eventually to develop competitive loops. Lack of access to subloops
     discourages competitive LECs from attempting to combine their own
     feeder plant with the incumbent's distribution plant to minimize
     their reliance on the incumbents' facilities. We also find that
     lack of unbundled access to the incumbent's subloops would preclude
     competitors from offering some broadband services. Accordingly, we
     conclude that incumbent LECs must provide unbundled access to
     subloops nationwide, where technically feasible.

#### Definition of the Subloop

206. We define subloops as portions of the loop that can be accessed at
     terminals in the incumbent's outside plant. An accessible terminal
     is a point on the loop where technicians can access the wire or
     fiber within the cable without removing a splice case to reach the
     wire or fiber within.[^396] These would include a technically
     feasible point near the customer premises, such as the pole or
     pedestal,[^397] the NID (which we discuss below),[^398] or the
     minimum point of entry to the customer premises (MPOE). Another
     point of access would be the feeder distribution interface (FDI),
     which is where the trunk line, or "feeder," leading back to the
     central office, and the "distribution" plant, branching out to the
     subscribers, meet, and "interface." The FDI might be located in the
     utility room in a multi-dwelling unit, in a remote terminal, or in
     a controlled environment vault (CEV).[^399] We acknowledge that
     some FDIs are more accessible than others; utility rooms are
     generally more spacious than vaults. A third point of access is, of
     course, the main distribution frame in the incumbent's central
     office.[^400]

207. We believe that a broad definition of the subloop that allows
     requesting carriers maximum flexibility to interconnect their own
     facilities at these points where technically feasible will best
     promote the goals of the Act. Access to portions of the loop
     element at these points, *i.e.*, access to the subloop, will
     facilitate rapid development of competition, encourage
     facilities-based competition, and promote the deployment of
     advanced services. Our intention is to ensure that the subloop
     definition will apply to new as well as current technologies, and
     to ensure that competitors will continue to be able to access
     subloop unbundled network elements as long as that access is
     required pursuant to section 251(d)(2) standards.

#### Proprietary Concerns Associated with Subloops

208. The record does not indicate, nor do commenters argue, that
     subloops are proprietary. Moreover, we do not discern any
     copyright, patent, or trademark or trade secrecy implications to
     subloop unbundling. We therefore apply the "impair" standard of
     section of 251(d)(2)(B) to determine whether subloops are subject
     to the unbundling requirements of the Act.

#### Unbundling Analysis for Subloops

209. We conclude that incumbent LECs must provide unbundled access to
     subloops. Applying our unbundling analysis, we conclude that lack
     of access to unbundled subloops at technically feasible points
     throughout the incumbent's loop plant will impair a competitor's
     ability to provide services that it seeks to offer. We agree with
     commenters that self-provisioning subloop elements, like the loop
     itself, would materially raise entry costs, delay broad-based
     entry, and limit the scope and quality of the competitive LEC's
     service offerings.[^401] In addition, we find that access to
     subloop elements promotes self-provisioning of part of the loop,
     and thus will encourage competitors, over time, to deploy their own
     loop facilities and eventually to develop competitive loops where
     it is cost efficient to do so.

210. We clarify that "technically feasible points" would include a point
     near the customer premises, such as the point of interconnection
     between the drop and the distribution cable, the NID, or the MPOE.
     Such access would give competitors unbundled access to the inside
     wire subloop element, in cases where the incumbent owns and
     controls wire inside the customer premises. It would also include
     any FDI, whether the FDI is located at a cabinet, CEV, remote
     terminal, utility room in a multi-dwelling unit, or any other
     accessible terminal.

211. [Cost and Timeliness]{.underline}. We agree with commenters that
     loop facilities, including subloop elements, are the most
     time-consuming and expensive network element to duplicate on a
     pervasive scale, and that the cost of self-provisioning subloops
     can be prohibitively expensive.[^402] Self-provisioning subloops
     would require requesting carriers to incur significant sunk costs
     prior to offering services to end users.[^403] Requiring
     competitors to expend such sums would, at a minimum, delay entry
     and thus postpone the benefits of competition for consumers.[^404]

212. We are not persuaded by GTE's argument that, because the whole loop
     is an acceptable substitute, a competitor is not impaired without
     access to the subloop.[^405] First, as we explain below, the
     undivided loop does not always afford competitors access to
     subscribers, as is the case with IDLC loops.[^406] Also, as a rule,
     requesting carriers that supply their own facilities cannot afford
     to pay twice -- first for the facilities they self-provision, and
     again for the incumbent's loop, including the portion that they do
     not utilize.[^407] We agree with the Illinois Commission that
     unbundling subloops provides greater efficiency for the requesting
     carrier because the carrier will not have to buy the entire loop to
     interconnect its own facilities with wiring on the customer
     premises.[^408] If competing carriers that need only a portion of
     the loop must either pay for the entire loop or forego access to
     that loop altogether, many consumers will be denied the benefits of
     competition.

213. GTE contends that possible rights-of-way, zoning, power supply, and
     similar alleged impediments should prevent us from requiring the
     incumbent to provide loop sub-elements on an unbundled basis.[^409]
     We assume that GTE is referring to potential obstacles that the
     requesting carrier may encounter from cities, counties, electric
     power companies, and similar third parties when it seeks to
     interconnect its equipment at subloop access points. We find that
     such obstacles, however, to the extent they develop, are for the
     competitive LEC to resolve with the municipality or utility. Such
     obstacles are not relevant to our determination of whether the
     competitor is impaired without unbundled access to the incumbent's
     subloop elements, and do not absolve the incumbent from its
     obligation to provide unbundled access to those elements.

214. [Impact on Network Operations]{.underline}. In order to encourage
     the development of facilities-based competition, requesting
     carriers must be able to interconnect their networks with the
     incumbent's network facilities that are designed to provide similar
     services.

215. First, if those competitors that are attempting to rely primarily
     on their own facilities are unable to interconnect near the
     customer premises, the end users those competitors target would
     have to forego the benefits of competition and new technology those
     competitors offer.[^410] We agree with several state regulatory
     commissions that argue that, to the extent that requesting carriers
     are denied flexibility in connecting their facilities to the local
     loop, these carriers are impaired from developing their own network
     infrastructure.[^411] In those instances where competitive carriers
     are able to self-provision a portion of the loop, lack of access to
     the part of the incumbent's loop they need could impede the
     competitors' ability to develop their own network architecture and
     provide new service offerings. On the other hand, the gradual
     self-provisioning that such access encourages could lead, in time,
     to conditions that would permit the eventual elimination of the
     loop element from the unbundling obligations of the Act.

216. For example, wireless providers may require only the final leg of
     loop distribution plant before the wire passes to customer control
     at the demarcation point.[^412] In particular, a facilities-based
     provider's ability to offer service in a multi-unit building or
     campus may be severely impaired if it must install duplicative
     inside wiring.[^413] We agree with the argument that requiring
     competitive LECs to convince landlords and customers to permit the
     construction of redundant inside wiring would substantially impede
     market entry and competition.[^414] Even if permission were
     obtained, over-building inside wire might be sufficiently expensive
     and time-consuming to deter potential competitors.[^415] Thus, we
     conclude that access to these subloop elements at
     technically-feasible interconnection points is necessary for
     successful competition by facilities-based competitors.[^416]

217. Second, carriers need unbundled subloops to serve subscribers
     currently served by IDLC loops. IDLC technology allows a carrier to
     "multiplex" and "de-multiplex" (combine and separate) traffic at a
     remote concentration point, or remote terminal, and to deliver the
     combined traffic directly into the switch, without first separating
     the traffic from the individual lines.[^417] In such cases,
     competitors generally cannot access IDLC loops at the incumbent's
     central office.[^418] In order to reach subscribers served by the
     incumbent's IDLC loops, a requesting carrier usually must have
     access to those loops before the point where the traffic is
     multiplexed. That is where the end-user's distribution subloop can
     be diverted to the competitive LEC's feeder, before the signal is
     mixed with the traffic from the incumbent LEC's other distribution
     subloops for transport through the incumbent's IDLC feeder.[^419]
     Accordingly, we find that denying access at this point may preclude
     a requesting carrier from competing to provide service to customers
     served by the incumbent's IDLC facilities. This would particularly
     affect consumers in rural areas, where incumbent LECs use the
     greatest proportion of DLC loops.[^420]

218. Third, competitors seeking to offer services using xDSL technology
     need to access the copper wire portion of the loop.[^421] In cases
     where the incumbent multiplexes its copper loops at a remote
     terminal to transport the traffic to the central office over fiber
     DLC facilities, a requesting carrier's ability to offer xDSL
     service to customers served over those facilities will be
     precluded, unless the competitor can gain access to the customer's
     copper loop before the traffic on that loop is multiplexed. Thus,
     we note that the remote terminal has, to a substantial degree,
     assumed the role and significance traditionally associated with the
     central office.[^422] In addition, in order to use its own
     facilities to provide xDSL service to a customer, a carrier must
     locate its DSLAM within a reasonable distance of the customer
     premises, usually less than 18,000 feet.[^423] In both of these
     situations, a requesting carrier needs access to copper wire
     relatively close to the subscriber in order to serve the
     incumbent's customer.

219. [Goals of the Act]{.underline}. Access to unbundled subloop
     elements allows competitive LECs to self-provision part of the
     loop, and thus, over time, to deploy their own loop facilities, and
     eventually to develop competitive loops. If requesting carriers can
     reduce their reliance on the incumbent by interconnecting their own
     facilities closer to the customer, their ability to provide service
     using their own facilities will be greatly enhanced, thereby
     furthering the goal of the 1996 Act to promote facilities-based
     competition. Failure to unbundle the subloop would cause
     residential and small business consumers to wait unnecessarily for
     competitive alternatives. We also find that the availability of
     unbundled subloops will accelerate the development of alternative
     networks, because it will allow requesting carriers efficiently to
     connect their facilities with the incumbent's loop plant. Thus, our
     decision to unbundle subloops is consistent with the 1996 Act's
     goals of rapid introduction of competition and the promotion of
     facilities-based entry.

#### Technical Feasibility 

220. We note that parties commenting in this proceeding disagree as to
     the technical feasibility of accessing various points of the loop.
     For example, SBC contends that incumbents should not be required to
     unbundle subloops at the CEV because the CEV is a small, protected
     environment that is not designed for access by multiple parties.
     SBC also argues that unbundling at the cabinet will jeopardize
     network security. [^424] Competitive LECs, on the other hand, argue
     that SBC exaggerates these impediments, which they maintain are not
     insurmountable.[^425]

221. MGC asserts, and we agree, that our collocation rules, which we
     recently clarified in the *Advanced Services First Report and
     Order*, apply to collocation at any technically feasible point,
     from the largest central office to the most compact FDI.[^426] This
     is because our collocation rules concern methods and standards of
     obtaining interconnection and access to unbundled network elements
     under section 251 of the Act, and thus are not directed to any one
     type of facility. Although we intend to make collocation available
     at all accessible terminals on the loop, we acknowledge that the
     incumbent's network was not designed to house additional equipment
     of competitors. Our rules do not require incumbents to build
     additional space. Nor do our rules, however, preclude requesting
     carriers from constructing their own facilities adjacent to the
     incumbent's equipment.[^427] Moreover, in some cases, technicians
     may not need to enter the cabinet or vault at all because virtual
     collocation arrangements will satisfy the needs of all
     parties.[^428] We note that, prior to adoption of rules requiring
     incumbent LECs to offer collocation to competitors, incumbent LECs
     raised similar doubts as to whether collocation would be feasible
     at central offices.[^429] As indicated by the number of collocation
     arrangements in place today, these doubts were not well-founded.

222. The record indicates that the space available for collocating and
     interconnecting at various subloop access points will vary
     depending on the incumbent's existing plant at a particular
     location.[^430] For example, the feeder/distribution interface for
     a business park could be located in a room that contains a
     mini-MDF, racks of equipment, and enough unoccupied space to
     accommodate easily the requesting carrier's equipment. In other
     situations, such as at a remote terminal in a cabinet, the FDI may
     be housed in a facility that has no spare space at all.[^431] We
     note that Texas supports unbundling the subloop, but has not
     ordered unbundling at the FDI due to technical problems that,
     according to Texas, would threaten the integrity of the
     network.[^432] Ohio states that copper loops are still the dominant
     technology in its state, and that it has not seen evidence to
     suggest that it is technically feasible to unbundle copper
     subloops.[^433] Ohio also points out that the technical feasibility
     of unbundling subloops at particular points on the network may
     change with the introduction of new technologies.[^434]

223. As we explain above, however, we conclude that the goals of the Act
     are best served by determining unbundling rules that apply to
     network elements nationwide.[^435] In adopting a rule that requires
     incumbents to unbundle subloops at the points identified above, we
     seek to provide requesting carriers maximum flexibility to
     interconnect with the incumbent's network at technically feasible
     points in order to allow competitors to serve customers
     efficiently. Accordingly, we establish a rebuttable presumption
     that the subloop can be unbundled at any accessible terminal in the
     outside loop plant. If the parties are unable to reach an agreement
     pursuant to voluntary negotiations about the availability of space
     or the technical feasibility of unbundling the subloop at one of
     the points identified above, the incumbent will have the burden of
     demonstrating to the state, in the context of a section 252
     arbitration proceeding, that there is no space available or that it
     is not technically feasible to unbundle the subloop at these
     points.[^436]

224. Our approach to subloop unbundling permits evaluation of the
     technical feasibility of subloop unbundling on a case-by-case
     basis, and takes into account the different loop plant that has
     been deployed in different states. We find that the questions of
     technical feasibility, including the question of whether or not
     sufficient space exists to make interconnection feasible at
     assorted huts, vaults, and terminals, and whether such
     interconnection would pose a significant threat to the operation of
     the network, are fact specific. Such issues of technical
     feasibility are best determined by state commissions, because state
     commissions can examine the incumbent's specific architecture and
     the particular technology used over the loop, and thus determine
     whether, in reality, it is technically feasible to unbundle the
     subloop where a competing carrier requests. [^437] We also note we
     are considering legal issues regarding access to premises in the
     *Access to Competitive Networks* proceeding.[^438]

225. We further note that SBC proposes to avoid difficulties associated
     with competing carriers serving multi-unit premises by eliminating
     multiple demarcation points in favor of a single demarcation point,
     which, according to SBC, would remedy competitive LECs\'
     concerns.[^439] OpTel similarly suggests that the incumbent should
     provide a single point of interconnection at or near the property
     line of multi-unit premises.[^440] OpTel further maintains that the
     cost of any network reconfiguration required to create a point of
     interconnection that would be accessible to multiple carriers
     should be shared by all the carriers concerned.[^441]

226. Although we do not amend our rules governing the demarcation point
     in the context of this proceeding, we agree that the availability
     of a single point of interconnection will promote
     competition.[^442] To the extent there is not currently a single
     point of interconnection that can be feasibly accessed by a
     requesting carrier, we encourage parties to cooperate in any
     reconfiguration of the network necessary to create one. If parties
     are unable to negotiate a reconfigured single point of
     interconnection at multi-unit premises, we require the incumbent to
     construct a single point of interconnection that will be fully
     accessible and suitable for use by multiple carriers.[^443] Any
     disputes regarding the implementation of this requirement,
     including the provision of compensation to the incumbent LEC under
     forward-looking pricing principles, shall be subject to the usual
     dispute resolution process under section 252.[^444] We emphasize
     that this principle in no way diminishes a carrier\'s right to
     access the loop at any technically feasible point, including other
     points at or near the customer premises. We also note that
     unbundling inside wire, and access to premises facilities in
     general, present specific technical issues, and that we have sought
     additional comment on these issues in our *Access to Competitive
     Networks* proceeding.[^445] If the record developed in that
     proceeding demonstrates the need for additional federal guidance on
     legal or technical feasibility issues related to subloop
     unbundling, we will provide such additional guidance, consistent
     with the policies established in this Order.

227. Our approach to subloop unbundling reflects the network as it
     exists today. Technology may develop, however, in ways that would
     render this approach too limiting. For that reason, we establish a
     further rebuttable presumption that, once one state has determined
     that it is technically feasible to unbundle subloops at a
     designated point, it will be presumed that it is technically
     feasible for any incumbent LEC, in any other state, to unbundle the
     loop at the same point everywhere. If the conditions surrounding a
     request for unbundling at a similar point differ to such an extent
     that it is not technically feasible for the incumbent to provide
     unbundled access to that subloop element, the incumbent will have
     the burden of demonstrating in a section 252 arbitration proceeding
     that such an arrangement is indeed not technically feasible under
     those different conditions. For example, Texas requires subloop
     unbundling at the remote terminal.[^446] If a competitive LEC seeks
     unbundled access to a subloop at the remote terminal from an
     incumbent LEC in New York, the burden rests with the New York
     incumbent LEC to prove that its own situation differs to such an
     extent that the Texas arrangement is not technically feasible. We
     believe that this "best practices" approach insures that incumbent
     LECs do not limit access to subloops based on unforeseeable
     technological and infrastructure developments.

228. In addition to arguing that remote terminals will in some cases be
     inaccessible, SBC also argues that, by separating feeder plant from
     distribution plant, the ability to perform mechanized testing and
     monitoring of the loop from the incumbent's switch would be
     lost.[^447] We do not believe that this technical issue precludes
     us from establishing unbundling obligations for subloops. Once the
     competitor has acquired the customer from the incumbent, the
     competitor will have the incentive to ensure that there is a method
     by which the customer's loop can be tested. The technical method by
     which this testing is accomplished is a matter for the parties to
     decide through negotiations. If the incumbent can demonstrate to
     the satisfaction of the state regulatory commission that it would
     incur increased expenses associated with testing the subloop
     network element, we presume such expenses would be included in the
     forward-looking price of the element.[^448] For similar reasons, we
     reject the argument that subloop unbundling is not feasible because
     it may create additional administrative costs.[^449]

229. Accordingly, we are not persuaded by incumbents' arguments that
     technical feasibility issues require us to find that subloops are
     not subject to the unbundling obligations of the Act. We note that
     incumbent LECs advanced similar arguments against collocation at
     central offices; we continue to reject those arguments in the
     subloop context as well.[^450] To the extent disputes arise over
     the feasibility of interconnecting at various points on the loop,
     states will address these issues as part of the arbitration process
     under section 252.

## Network Interface Devices (NIDs)

### Background

230. In the *Local Competition First Report and Order*, the Commission
     concluded that incumbent LECs must offer unbundled access to the
     network interface device (NID).[^451] It defined the NID network
     element as a cross-connect device used to connect loop facilities
     to inside wiring.[^452] In that order, the Commission noted that a
     competitor deploying its own loops must be able to connect those
     loops to customers' inside wiring in order to provide service,
     especially to customers in multi-tenant buildings. The Commission
     also concluded that a requesting carrier is entitled to connect its
     loops, via its own NID, to the incumbent LEC's NID.[^453]

231. In the *Notice*, we sought comment on application of the
     "necessary" and "impair" standards of section 251(d)(2) to the
     network elements previously identified in the *Local Competition
     First Report and Order*, including the NID.[^454] Incumbent LECs
     argue that NIDs are off-the-shelf devices that can be purchased
     inexpensively.[^455] Competitive LECs argue that self-provisioning
     the NID is economically impracticable at the level of ubiquity
     needed to deploy service on a widespread basis.[^456]

### Discussion

232. We conclude that lack of unbundled access to the incumbent's NID
     impairs the ability of requesting carriers to provide the services
     that they seek to offer. As described below, we conclude that the
     competitor's ability to self-provision NIDs does not constitute a
     viable alternative to unbundled access to the incumbent's NID
     element. Although the physical structure of the NID is widely
     available, it is access to the function, rather than the hardware
     itself, that competitors rely upon. The record indicates that
     requiring a requesting carrier to self-provision NIDs for all
     customers it seeks to serve would materially raise the cost of
     entry, delay broad facilities-based market entry, and materially
     limit the scope and quality of the competitor's service
     offerings.[^457] Accordingly, we require incumbent LECs to provide
     unbundled access to NIDs nationwide.

#### Definition of the NID

233. In the *Local Competition First Report and Order,* the Commission
     defined the NID as a cross-connect device used to connect loop
     facilities to inside wiring. We modify that definition of the NID
     to include all features, functions, and capabilities of the
     facilities used to connect the loop distribution plant to the
     customer premises wiring, regardless of the particular design of
     the NID mechanism. Specifically, we define the NID to include any
     means of interconnection of customer premises wiring to the
     incumbent LEC's distribution plant, such as a cross-connect device
     used for that purpose.[^458]

234. We conclude that the NID definition, for the purposes of our
     unbundling analysis, should be flexible and technology-neutral. The
     Commission's rules permit considerable variation in the
     interconnection facilities between carrier and customer-controlled
     facilities.[^459] Furthermore, evolution in network design and
     technology will likely cause additional design variations among the
     hardware interfaces between carrier and customer premises
     facilities. Accordingly, we define the NID broadly to ensure that
     competitors will be able to obtain access to any of these
     facilities as an unbundled network element. Our intention is to
     ensure that the NID definition will apply to new technologies, as
     well as current technologies, and to ensure that competitors will
     continue to be able to access customer premises facilities as an
     unbundled network element, as long as that access is required
     pursuant to section 251(d)(2) standards.

235. We decline to adopt parties' proposals to include the NID in the
     definition of the loop.[^460] Similarly, we reject arguments that
     we should include inside wiring in the definition of the NID in
     order to permit facilities-based competitors access to inside
     wiring.[^461] Although competitors may choose to access the inside
     wire via the NID, in some circumstances they may choose to access
     the inside wire at another point, such as the minimum point of
     entry. By continuing to identify the NID as an independent
     unbundled network element, we underscore the need for the
     competitive LEC to have flexibility in choosing where best to
     access the loop. Competitors purchasing a subloop at the NID,
     however, will acquire the functionality of the NID for the subloop
     portion they purchase. We therefore find no need to include inside
     wiring in the definition of the NID, or to include the NID as part
     of any other subloop element.

#### Proprietary Concerns Associated with the NID

236. In the *Local Competition First Report and Order,* the Commission
     did not identify any proprietary concerns associated with
     NIDs.[^462] No parties in this proceeding identify any proprietary
     concerns associated with the NID, and we find none. We therefore
     apply the "impair" standard of section 251(d)(2)(A) to determine
     whether NIDs are subject to the unbundling obligations of the Act.

#### Unbundling Analysis

237. We find that lack of access to the NID would materially diminish a
     competitor's ability to provide the services it seeks to offer. In
     particular, we find that requesting carriers would be impaired
     without access to NIDs because self-provisioning NIDs would
     materially raise entry costs, delay broad facilities-based entry,
     and materially limit the scope and quality of the competitor's
     service offerings.[^463] Accordingly, we require incumbent carriers
     to provide unbundled access to their NIDs nationwide. Specifically,
     an incumbent LEC must permit a requesting carrier to connect its
     own loop facilities to the inside wire of the premises through the
     incumbent LEC's network interface device, or at any other
     technically feasible point, to access the inside wire subloop
     network element.

238. [Cost and Timeliness.]{.underline} We agree with those commenters
     that maintain that there are no economic or practical alternatives
     to the NID that would otherwise enable requesting carriers to
     provide service. [^464] NIDs are individually dedicated to specific
     customer premises, and are often difficult to replace. Requesting
     carriers' ability to provide service to their customers would be
     materially diminished if they had to self provision NIDs because of
     the significant labor and construction costs involved in visiting
     the premises of each customer and installing the device. This is
     true for all customers, but is particularly evident for residential
     and small business markets because of the greater number of NIDs
     required to provide service to each customer. [^465] We therefore
     conclude that requiring competitors to install numerous, redundant
     NIDs at the interface to customer premises wiring would constitute
     a substantial economic and practical barrier to market entry, and a
     needless waste of carrier resources.

239. [Ubiquity]{.underline}. We conclude that self-provisioning NIDs is
     not economically practical at the level of ubiquity at which
     incumbent LECs' NIDs are currently deployed. We disagree with GTE's
     argument that the NID should not be unbundled because the hardware
     is inexpensive and available from a multitude of non-incumbent LEC
     sources. Specifically, GTE claims that the NID hardware costs
     between \$25 and \$40, and that requesting carriers can purchase
     NIDs from the same sources that incumbent LECs use.[^466] We do not
     find that the cost and availability of NID hardware is dispositive
     of the need to unbundle access to incumbent LEC-installed NIDs. As
     with other network elements, in conducting our unbundling analysis
     under section 251(d)(2), we do not consider the cost and
     availability of network elements in isolation. Rather, we examine
     whether, after applying the factors we explained in the unbundling
     standard above, a requesting carrier is able, as a practical,
     economic, and operational matter, to use alternatives for the
     incumbent's network elements. Although the record indicates that
     NID hardware may be available from alternative sources and that
     NIDs are affordable individually, it is the aggregate cost and
     difficulty of installing duplicate NIDs at every potential customer
     location that substantially impairs a requesting carrier from
     offering services.[^467]

240. [Goals of the Act]{.underline}***.*** Access to unbundled NIDs
     furthers the Act's goals of promoting innovation, the rapid
     introduction of competition, and the development of
     facilities-based competition. If requesting carriers can reduce
     their reliance on the incumbent by interconnecting their own
     facilities closer to the customer, their ability to provide
     services using their own facilities will be greatly enhanced,
     thereby furthering the goal of the 1996 Act to promote
     facilities-based competition. We find that the availability of
     unbundled NIDs will accelerate the development of alternative
     networks, because it will allow requesting carriers efficiently to
     connect their facilities with the incumbent's loop plant. Thus, our
     decision to unbundle NIDs is consistent with the 1996 Act's goals
     of rapid introduction of competition and the promotion of
     facilities-based entry. We recognize that there may be situations
     where a competitive LEC could successfully self-provision NIDs. We
     find, however, that the benefits of unbundling the NID on a
     nationwide basis outweigh the costs of creating a patchwork regime
     in which incumbents will seek to litigate whether particular NIDs
     should be unbundled or whether an alternative to the incumbent
     LEC's NID is arguably available as a practical, economic, and
     operational matter.

## Local Switching

### Local Circuit Switching

#### Background

241. In the *Local Competition First Report and Order*, the Commission
     concluded that incumbent LECs must provide local circuit switching
     as an unbundled network element.[^468] The Commission found that
     denying access to the local circuit switching element would
     "substantially impair the ability of many competing carriers to
     provide switched telecommunications services."[^469]

242. In the *Notice,* we sought comment on the application of the
     "necessary" and "impair" standards to previously identified
     unbundled network elements, including the switch.[^470] The
     *Notice* requested that parties include specific costs and an
     analysis of the availability of alternative sources of
     switching.[^471]

243. Incumbent LECs argue that a market-by-market analysis of the
     availability of local circuit switching requires a finding that
     requesting carriers are not impaired without access to unbundled
     switching in certain areas.[^472] Conversely, a number of
     requesting carriers argue that they are impaired without unbundled
     local circuit switching nationwide primarily because of the
     operational impairment associated with obtaining collocation and
     coordinated hot cuts.[^473] We note also that at least nine of the
     eleven states participating in this proceeding agree that the
     Commission should unbundle local circuit switching.[^474]

#### Discussion

##### Definition of Local Circuit Switching

244. In the *Local Competition First Report and Order*, the Commission
     defined local circuit switching as including the basic function of
     connecting lines and trunks. [^475] In addition to line-side and
     trunk-side facilities, the definition of the local switching
     element encompasses all the features, functions and capabilities of
     the switch.[^476] With the exception of MCI WorldCom, no commenter
     proposes that we modify the current definition of local switching.
     We disagree with MCI WorldCom, and find no reason to alter our
     current definition of local circuit switching.

245. MCI WorldCom proposes that we modify our definition of local
     circuit switching to omit the line-side/trunk-side distinction in
     favor of a technologically-neutral definition that connects "loop
     access points" and "transport access points" to the "switching
     facility," regardless of whether a given switch has equipment that
     could be identified as line port cards or trunk port cards. MCI
     WorldCom suggests that we should take into account the increasing
     use of switches to connect to facilities other than home run copper
     loops, including DLCs.[^477] We cannot find, on the basis of the
     record before us, that incumbent LEC circuit switching technologies
     have changed in such a way as to warrant modification of our
     circuit switching definition.[^478] Furthermore, adopting MCI
     WorldCom's proposed changes could require state commissions to
     re-evaluate their current pricing analysis of unbundled circuit
     switching. Replacing the existing definition of switching with
     "loop access points" or the "switching facility" could lead to
     uncertainty and different cost determinations in state pricing
     proceedings. We find no procompetitive basis on which to require
     states to modify their settled state proceedings that have
     addressed forward-looking pricing for unbundled switching.
     Accordingly, we decline to modify our definition of local circuit
     switching.

##### Proprietary Concerns Associated With Local Circuit Switching

246. We conclude that incumbent LECs may not withhold access to switch
     routing tables as part of the unbundled local circuit switching
     element under section 251(d)(2)(A). With the exception of
     Ameritech, no commenter identifies any proprietary concerns
     associated with local circuit switching.[^479] Ameritech argues
     that, if we conclude that local switching qualifies as an unbundled
     network element, we should decline to require incumbent LECs to
     make their switch routing tables available to requesting carriers
     because these tables are "proprietary," within the meaning of
     section 251(d)(2)(A).[^480] According to Ameritech, routing tables
     are "part of the computer software that instructs a switch how to
     route network traffic," and contain "extremely valuable
     information" that is not "necessary" to a requesting carrier under
     section 251(d)(2)(A).[^481] Ameritech further argues that its
     routing tables meet the legal requirements for trade secret
     protection from unauthorized disclosure.[^482]

247. Ameritech contends that, because it has invested resources in
     creating economic value in its routing tables, and it takes
     reasonable steps to protect its routing tables from unauthorized
     disclosure, switch routing tables meet the general requirements for
     trade secret protection.[^483] No opposing party addresses whether
     Ameritech's routing table meets the legal requirements for trade
     secret protection. CompTel avers that switch routing tables merely
     perform a function that allows a switch to operate in a network,
     and as such, switch routing tables are not proprietary and should
     be included within the unbundled switching element.[^484] On the
     basis of Ameritech's uncontested assertion that its routing tables
     qualify for trade secret protection, we find that Ameritech's
     routing table may qualify for trade secret protection. Thus, it
     appears that the routing aspect of the local circuit switching
     element may be proprietary.

248. [The "Necessary" Standard]{.underline}. As previously discussed,
     there are several circumstances which, if they exist with respect
     to information or functionalities that the incumbent LEC claims are
     proprietary, will permit us to order unbundling of the proprietary
     information or functionality even if such unbundling is not
     strictly "necessary." Access to the incumbent LEC's routing tables
     may be necessary for some carriers because they would be precluded,
     as an economic matter, from providing service to certain classes of
     customers if they were forced to self-provision their own routing
     tables. Requesting carriers would be economically precluded from
     providing service because of the costs associated with developing
     their own routing tables and the additional non-recurring and
     administrative costs of substituting dedicated transport unbundled
     network elements for shared transport.[^485] As we found in the
     *Local Competition Third Reconsideration Order*, the high costs
     that requesting carriers would incur without access to shared
     transport would deter entry and impose significant costs on new
     entrants without any corresponding, direct benefits.[^486]

249. Even if it is not strictly necessary for all carriers to have
     access to the incumbent LECs' routing tables, we find that they
     should be required to unbundle them because two of the three
     circumstances that we identified previously exist, and because
     requesting carriers would be impaired without access to routing
     tables as part of the unbundled local circuit switching element.

250. Specifically, we find that it is unlikely that Ameritech will
     compete for end-user customers based on the ability to send a call
     to an appropriate destination, or that its routing tables allow it
     to differentiate its services from its competitors' services. As we
     stated above, information or functionalities that do not
     distinguish an incumbent LEC's service from that of its
     competitor's services are unlikely to be the focus of an incumbent
     LEC's efforts to innovate, and therefore do not require the higher
     level of protection normally afforded to proprietary elements under
     the "necessary" standard.

251. Moreover, we find that incumbent LECs may not withhold access to
     switch routing tables as part of the unbundled local switching
     element because doing so would jeopardize the goal of the 1996 Act
     to bring rapid competition to the greatest number of customers. One
     of the most essential functions a switch performs is to provide
     routing information that sends a call to the appropriate
     destination.[^487] Requiring requesting carriers to engage in the
     potentially lengthy process of compiling traffic studies and
     populating routing tables with data in the incumbent LEC's
     unbundled switch would frustrate a requesting carrier's ability to
     use unbundled local circuit switching to serve customers quickly.

252. As described below, we conclude that carriers would be impaired
     without access to routing tables as part of the unbundled local
     circuit switching element. Requesting carriers have not generally
     deployed self-provisioned local circuit switches to serve the mass
     market.[^488] We conclude that requesting carriers are impaired
     without access to unbundled local circuit switching to serve
     certain customer classes in discrete geographic areas. We therefore
     order incumbent LECs to provide access to unbundled local circuit
     switching in these circumstances.[^489] We note that requesting
     carriers will request unbundled access to local circuit switching
     when, in the judgment of the requesting carrier, the costs and
     delays associated with self-provisioning switching do not warrant
     purchase and installation of a local circuit switch. Accordingly,
     because of the circumstances identified above, and because
     requesting carriers would be impaired without access to routing
     tables as part of the local circuit switching element, we find that
     incumbent LECs may not, pursuant to section 251(d)(2)(A), withhold
     access to switch routing tables.

##### General Unbundling Analysis for Local Circuit Switching

253. We conclude that, as a general matter, unbundled local circuit
     switching meets the "impair" standard set forth in section
     251(d)(2). Accordingly, we require incumbent LECs to provide local
     switching as an unbundled network element. Based on the record, we
     find that, in general, lack of access to unbundled local switching
     materially raises entry costs, delays broad-based entry, and limits
     the scope and quality of the new entrant's service offerings. As
     discussed in detail below, our unbundling analysis focuses upon the
     ability of a requesting carrier to self-supply switching because
     the record does not support a finding that requesting carriers, as
     a general matter, can obtain switching from carriers other than the
     incumbent LEC.[^490] We find, however, that an exception to this
     rule is required under certain market circumstances. We find that,
     where incumbent LECs have provided nondiscriminatory, cost-based
     access to combinations of loop and transport unbundled network
     elements, known as the enhanced extended link (EEL), requesting
     carriers are not impaired without access to unbundled switching for
     end users with four or more lines within density zone 1 in the top
     50 metropolitan statistical areas (MSAs).

254. [Alternatives Outside the Incumbent's Network]{.underline}. As of
     March 1999, approximately 167 different competitors have deployed
     approximately 700 switches throughout the country.[^491] According
     to USTA, approximately 320 cities are served by at least one
     competitive switch.[^492] SBC, using a methodology that tracks
     requesting carriers' switches by examining migration of lines using
     ported numbers, contends that within the 50 largest MSAs,
     competitors' switches currently serve approximately 75 percent of
     all BOC and GTE rate exchange areas.[^493] Although certain
     requesting carriers argue that incumbent LEC statistics are not
     precise, [^494] the record indicates that a significant number of
     competitive switches have been deployed.[^495] Our examination of
     switching investments in the market shows that requesting carriers
     have self-provisioned a significant number of switches, but that
     this investment represents only a small fraction of the number of
     switches deployed by the incumbent LECs.

255. Since the Commission adopted the *Local Competition First Report
     and Order*, competition has continued to develop in certain
     geographic markets, particularly for large business customers or
     other users with substantial telecommunications needs.[^496] The
     pattern of switch deployment by competitors suggests that the costs
     and operational delays of self-provisioning switching do not
     preclude requesting carriers from serving certain customer classes
     in certain geographic markets. In general, however, we conclude
     that requesting carriers are impaired in their ability to provide
     service in most markets, primarily because of the costs of
     self-provisioning switching in those markets.[^497] We find that
     section 251(d)(2)(B) requires consideration not simply of whether
     denial of access to unbundled switching would impair a competitor's
     ability to serve the high-volume business market that many
     requesting carriers are already serving, but whether the requesting
     carrier is impaired in its ability to provide the "services that it
     seeks to offer," including services to residential and small
     business markets. Although the groundwork for residential local
     competition is evolving, and competition, to date, has focused upon
     users with substantial telecommunications needs, we do have some
     evidence that some requesting carriers will seek to offer
     residential phone service to the mass market where unbundled
     switching is available. [^498] Accordingly, we find that our
     unbundling analysis should take into account the possibility that
     carriers will offer residential service. We find that, taking into
     account the cost, quality, ubiquity and timeliness factors in our
     "impair" standard as well as the goals of the Act, lack of access
     to unbundled switching as a general matter, impairs the ability of
     a requesting carrier to provide service to consumers.

256. Incumbent LECs use the geographic dispersion of deployed local
     circuit switches to argue for a geographic or market-specific
     approach to circuit switch unbundling. [^499] Certain incumbent
     LECs further argue that the presence of one competitor's switch and
     collocation in a given market is dispositive of whether requesting
     carriers generally will be impaired without access to unbundled
     switching.[^500] We reject this argument. Just as the Supreme Court
     made clear that the "impair" standard is not triggered by *any*
     increase in cost or decrease in quality, we find that switch
     unbundling cannot turn on whether a single carrier has
     self-provisioned switching. The fact that a single carrier is
     collocated in a particular central office and is not using
     unbundled switching does not conclusively demonstrate that a
     variety of carriers can self-provision switches without significant
     cost or other impediments that diminish a collocating carrier's
     ability to provide the services it seeks to offer. Indeed, based on
     financial analysts' reports of competitive LECs' operations, a
     significant number of requesting carriers currently
     self-provisioning switches are not generating net income (*i.e.,*
     profits).[^501] Thus, it is too early to know whether
     self-provisioning is economically viable in the long run, although
     capital markets appear to be supplying requesting carriers with
     access to capital in the absence of demonstrated profitability.

257. Incumbent LECs have provided business case analyses that purport to
     demonstrate that a requesting carrier could expect to earn profits
     upon entry using self-provided switching by comparing the revenues
     that could be expected from self-provisioning switching with the
     full costs of entry.[^502] As discussed in Section IV above, we
     favor an analytical approach that considers the totality of the
     circumstances a requesting carrier will face, rather than a
     specific business case analysis, to determine whether lack of
     access to particular network elements materially diminishes a
     requesting carrier's ability to provide the services it seeks to
     offer. Adopting a business case approach would require the
     Commission to conduct a detailed analysis of the profitability of
     entry for a representative firm using various business strategies
     in each possible market.[^503] Such an approach would also require
     the Commission to make specific assumptions regarding the
     competitor's business model, including which technology a
     competitor would choose to deploy, which market a competitor would
     choose to enter (*e.g.,* business and/or residential), and what
     services a competitor would choose to offer. In addition, a
     business case approach would require the Commission to forecast
     revenues that a requesting carrier would earn if it entered a
     particular market. Whereas the actual costs of network elements
     such as switches are quantifiable, revenues may fluctuate according
     to evolving competitive conditions in the local telecommunications
     market.

258. Although we do not adopt an approach that is based on a business
     case analysis for determining whether a particular entity is
     impaired, we do make several general observations regarding the
     direct cost that bear on a requesting carrier's decision to
     self-provision a switch. Fixed costs are the largest portion of the
     cost of a switch. The average cost of providing service to
     customers decreases as the number of customers served increases. As
     a general rule, we find that scale economies are more pronounced
     when switches operate at full utilization. Because incumbent LEC
     switches serve the majority of customers for local exchange
     service, they are likely to be able to take advantage of
     substantially greater economies of scale than the competitor would
     using its own switches.[^504] We find however, that
     facilities-based competitors need not deploy switches in exactly
     the same network configuration as an incumbent, thus allowing
     competitors to achieve their own unique and competitive
     efficiencies by deploying their own switches.[^505]

259. [Cost.]{.underline} We find, as a general matter, that the total
     costs of self-provisioning a switch impose on the requesting
     carrier a significant cost disadvantage relative to the incumbent
     LEC, particularly in its early stages of entry. We emphasize that
     cost is only one factor we examine in our "impair" analysis. The
     evidence of circuit switching direct costs submitted in the record
     varies significantly. For example, incumbent LECs provide evidence
     that the direct costs to competitors of self-provisioning switches
     is between \$100,000 and \$814,000 and that the incremental cost is
     between \$110 and \$146 per line.[^506] AT&T counters that
     incumbent LEC models exaggerate the efficiencies associated with
     requesting carrier switches.[^507] Independent sources, however,
     estimate the fixed cost per host switch to be \$447,000 and the
     per-line cost to be \$83.[^508] The disparity in switching costs
     contained in the record appear to depend on the technical
     attributes of the switch at issue. The more critical aspect of our
     "impair" analysis is not the costs of purchasing a local circuit
     switch, but rather the economies of scale that may characterize
     local circuit switching and the additional costs that requesting
     carriers incur when placing their self-provisioned switches into
     operation.

260. We find that incumbent LECs retain material scale advantages with
     regard to provisioning and operating local circuit switches.
     Requesting carriers therefore will encounter generally greater
     direct costs per subscriber when provisioning their own switches,
     particularly in the early stages of entry when requesting carriers
     may not have the large number of customers that is necessary to
     increase their switch utilization rates significantly. When we
     examine the market as a whole, we find that requesting carriers
     incur higher costs due to their inability to realize economies of
     scale using circuit switching equipment. We find that the
     scalability of a switch mitigates but does not eliminate the
     incumbent LEC's scale advantages and reduces but does not eliminate
     competitor's sunk costs and entry barriers. For example, it is
     generally less expensive to purchase a 20,000 line switch rather
     than four increments of 5000 lines. [^509] Furthermore, the
     advantages of incumbent LEC scale economies are more pronounced
     when requesting carriers provide switch-based service to a
     relatively small number of customers through a self-provisioned
     switch.[^510] For example, competitor's switching costs per minute
     at a 10% penetration level are slightly more than twice the cost of
     an incumbent LEC serving the remaining 90% of the market with its
     own switch.[^511] We find that, as a general proposition,
     requesting carriers will incur a materially greater cost when
     self-provisioning switching at low penetration levels. As a
     requesting carrier's switch utilization rates increase, the
     difference between the switching costs incurred by competitive and
     incumbent LECs decreases, but the impact of this difference does
     not become irrelevant in the impair analysis until incumbent LEC
     and competitor's switch utilization levels are more
     comparable.[^512] Market facts show that that competitors have made
     inroads into the local telecommunications markets, but they have
     garnered only between 2.6 percent to 5 percent of the market for
     switched telecommunications services.[^513] A significant portion
     of these figures represent service to medium and large business
     customers, rather than to the mass market.[^514] Accordingly, we
     find that as a general matter, requesting carriers have not gained
     sufficient market share to generate switch utilization rates and
     economies of scale comparable to the incumbent LEC, particularly to
     serve the mass market.

261. We recognize that switches deployed by competitive LECs may be able
     to serve a larger geographic area than switches deployed by the
     incumbent LEC, thereby reducing the direct, fixed cost of
     purchasing circuit switching capacity and allowing requesting
     carriers to create their own switching efficiencies. If a
     competitor uses a single switch to serve a rate area consisting of
     10-15 incumbent LEC switches, the average utilization of the
     competitor's one switch can be as high, or higher, than many, or
     even all, of the incumbent LEC switches. This dynamic mitigates, to
     a varying degree, incumbent LEC advantages of scale, but does not
     enable competitive LECs to achieve comparable scale economies,
     particularly in the early stages of entry.[^515] Incumbent LECs
     contend that once a requesting carrier incurs the costs to deploy a
     switch, it can economically extend the reach of the switch to serve
     broader markets. We find, however, that switch capacity,
     distance-sensitive transport costs, and collocation costs
     significantly impair a requesting carrier from fully exploiting
     this market entry strategy. We note that, for smaller carriers, an
     inability to achieve switching scale economies may have greater
     effect upon their ability to offer service than it does for larger
     carriers. For example, TRA contends that, without access to
     unbundled switching, smaller requesting carriers with targeted
     entry plans deploy their own switch to serve approximately 3,000
     lines will incur a direct additional cost of \$300,000 annually
     without access to unbundled local switching.[^516] We find that
     utilizing unbundled switching is likely to mitigate this
     early-stage entry barrier and is consistent with Congress'
     intention that requesting carriers use unbundled network elements
     as a transitional market entry strategy.[^517]

262. We find, as a general matter, that the costs of self-provisioning
     switching also materially diminish a requesting carrier's ability
     to provide the services it seeks to offer. Our standard recognizes
     that the full costs of using self-provisioned circuit switching
     must include the costs incurred by a competitor to substitute its
     local circuit switch for that of the incumbent LEC. These costs
     include the costs of collocating in an incumbent LEC's central
     office from which the requesting carrier accesses unbundled loops
     to serve its end-user customers. Requesting carriers require
     collocation because they have not yet duplicated the incumbent
     LEC's loop plant to provide "last mile" connectivity to end users.
     Obtaining unbundled loops and connecting these loops to collocated
     equipment is therefore the only reasonable and economically
     rational manner by which requesting carriers can provide
     connectivity to their end users.

263. We agree with parties that argue that collocation imposes
     materially greater costs on requesting carriers than use of the
     incumbent LEC's switching.[^518] Based on the record, it appears
     that the current range for non-recurring charges for obtaining
     physical collocation is between \$15,000 and \$508,000 for each
     central office from which a competitor serves customers using the
     incumbent LEC's unbundled loops.[^519] This additional cost
     increases the costs of the equipment installed in the cage by
     between 15 to 20 percent.[^520] We find that due in part to these
     non-recurring charges, a requesting carrier's decision to collocate
     presumes significant market penetration, even in dense wire
     centers. For example, data submitted by MCI WorldCom for New York
     City suggests that collocation in dense wire centers is not
     profitable until a requesting carrier's market penetration exceeds
     8-15 percent.[^521] We agree that the costs associated with
     collocation and the revenue opportunities associated with a given
     wire center may not justify establishing a collocation arrangement
     with the incumbent LEC in many central offices.[^522]

264. Accordingly, we find that as a general matter, collocation costs
     materially diminish the ability of a requesting carrier to offer
     service using self-provisioned switching. Although the collocation
     rules we adopted in our *Advanced Services First Report and Order
     and FNPRM* are intended, and expected, to reduce the costs and
     operational delays associated with collocation, our revised rules
     do not eliminate altogether the cost and delay associated with
     collocation.[^523] We recognize that incumbent LECs still have an
     incentive and the ability to raise a requesting carrier's cost of
     collocation, and thus raise the total cost of self-provisioning
     switching.

265. In addition to the costs of establishing collocation arrangements
     with the incumbent LEC, requesting carriers incur additional costs
     to extend unbundled loops to their collocation cage. The manual
     work of extending a loop to a requesting carrier's collocation cage
     is known as a coordinated loop cutover. A coordinated loop cutover
     requires incumbent LEC technicians to disconnect the subscriber's
     loop from the incumbent LEC's main distribution frame and rapidly
     cross-connect it to the competitor's facilities. From the time the
     technician disconnects the subscriber's loop until the competitor
     re-establishes service, the subscriber is without service.
     Simultaneously, incumbent LEC and competitor technicians must
     coordinate to ensure that the subscriber's telephone number is
     "ported" to the competitor's switch so that inbound calls are
     properly routed to the requesting carrier's switch.

266. The coordinated cutover process imposes a non-recurring cost on
     competitive carriers that connect their own switches to unbundled
     loops. For example, AT&T contends that the non-recurring, per-line
     charge for a coordinated cutover is approximately \$45 in New
     York.[^524] CompTel argues that a manual loop and switching port
     migration costs between \$59.91 and \$218.62 per unbundled
     loop.[^525] We acknowledge that incumbent LECs may incur
     coordinated cutover costs when they win customers from competitive
     LECs. The record does not demonstrate, however, that incumbent LECs
     are incurring coordinated cutover costs in the same or
     substantially similar volumes as competitive LECs. We find that the
     additional cost of coordinated loop cutovers, when added to the
     costs of collocation, materially diminishes a competitor's ability
     to substitute its own switch for unbundled switching. Although this
     per-line non-recurring cost is likely to vary between incumbent
     LECs, it represents a significant cost to those requesting carriers
     seeking to provide service to the mass market due to the large
     number of individual loop cutovers that are necessary to serve this
     market.

267. [Ubiquity and Timeliness.]{.underline} In addition to the costs
     associated with accessing individual unbundled loops in multiple
     end offices, we find that collocation and the coordinated loop
     cutover process imposes a material delay on competitive LECs that
     offer services using self-provisioned switches, and materially
     limits the scope of customers a requesting carrier may serve
     quickly. The delay includes the total amount of time required to
     purchase, install, turn up a switch, and obtain collocation, as
     well as the amount of time needed for incumbent LECs to complete
     coordinated loop cutovers.

268. In order to self-provision a switch, a requesting carrier must
     order, test the switch, and integrate it into its network and
     internal operations support systems.[^526] Incumbent LECs claim
     that a switch can be fully provisioned in as little as 40
     days.[^527] Although this may be theoretically possible, there is
     evidence in the record that the time frame for provisioning a
     switch is significantly longer.[^528] Furthermore, incumbent LECs
     focus their analysis on the time to purchase a switch rather than
     the time required to put a switch into operation. Actual delivery
     of a switch is only one part of the process of self-provisioning
     switching.[^529] Requesting carriers assert that it takes
     approximately six months to one year to engineer, furnish and
     install a switch.[^530]

269. Related to the time required to provision a switch is the time
     required to provision collocation. Incumbents and requesting
     carriers offer conflicting assertions regarding the time required
     to provision collocation in incumbent LEC central offices. We are
     troubled by anecdotal evidence that collocation imposes a delay of
     six, nine or twelve months on the provision of ubiquitous
     service.[^531] MCI WorldCom for example, argues that collocating on
     a broad scale to provide ubiquitous service results in lengthy
     collocation delays.[^532] NorthPoint maintains that some incumbent
     LECs have imposed "governors" on the number of collocation
     applications they will accept, thereby delaying ubiquitous rollout
     of services.[^533] Incumbent LECs counter that they have, and will
     continue to, provision collocation on a broad scale and in a timely
     fashion.[^534] Ameritech specifically contends that competitive
     LECs have established collocation arrangements in rate centers in
     which 70 percent of Ameritech's access lines are located.[^535] The
     presence of one collocator, in and of itself, however, does not
     establish how long it will take to accommodate subsequent
     collocators. We find nothing in the record to demonstrate
     conclusively that incumbent LECs have committed to and satisfied a
     collocation provisioning interval of less than six months.

270. We therefore find incumbent LEC arguments that requesting carriers
     do not experience collocation delays contradicted by the actual
     experiences of requesting carriers. Incumbent LECs do not appear to
     include such things as the collocation application process in their
     analysis of collocation delays. We are persuaded by those
     commenters that assert that collocation, examined from the time a
     requesting carrier initiates the collocation process until a
     collocation arrangement is delivered, generally imposes a delay of
     approximately six months on the provision of service.[^536] We
     conclude that, although the delays associated with provisioning
     collocation arrangements will vary from incumbent LEC to incumbent
     LEC and by requesting carrier, as a general matter, collocation
     delays materially diminish the ability of a requesting carrier to
     provide the services it seeks to offer. As discussed in Section IV
     above, although we cannot quantify precisely how much of a delay
     associated with collocation and self-provisioning switching will
     materially diminish the ability of a competitor to provide the
     services it seeks to offer, we find that delays that exceed six
     months to one year materially diminish the ability of a competitive
     LEC to provide the services it seeks to offer because such delay
     prevents the competitive LEC from responding quickly to the demand
     for its services in a rapidly changing market.

271. As noted above, requesting carriers must also wait for coordinated
     cutovers before providing service with their own switch.[^537] We
     disagree with BellSouth, GTE, Ameritech, and other commenters that
     argue that the Commission should not consider coordinated cutover
     delays and service-quality issues in its impair analysis.[^538]
     Without coordinated loop cutovers, requesting carriers
     self-provisioning switching and accessing unbundled loops cannot
     provide the services they seek to offer. To date, incumbent LECs
     have provisioned relatively small volumes of coordinated loop
     cutovers compared to anticipated demands.[^539] Incumbent LECs
     counter that they have instituted procedures to provide timely
     coordinated cutovers to requesting carriers.[^540] Where incumbent
     LECs have undergone comprehensive testing of their loop
     provisioning processes, however, independent auditors have found
     difficulties regarding coordinated loop cutover performance.[^541]
     Furthermore, because broad-based residential competition is at best
     nascent, incumbent LECs generally have not successfully provisioned
     coordinated loop cutovers in the volumes necessary for requesting
     carriers to serve the mass market. We therefore find incumbent LEC
     promises of future hot cut performance insufficient to support a
     Commission finding that the coordinated loop cutover process does
     not impair the ability of a requesting carrier to provide the
     service it seeks to offer without unbundled circuit
     switching.[^542] We recognize that the hot cut process requires
     manual processing, which likely creates delays between the time a
     requesting carrier wins a customer and the time it can provide
     service to that customer. Accordingly, we find that the coordinated
     loop cutover process impairs the ability of a requesting carrier to
     provide timely service.

272. [Goals of the 1996 Act]{.underline}. As noted above, our unbundling
     analysis takes into account whether unbundling a particular network
     element is consistent with the goals of the 1996 Act.[^543] We find
     our decision to unbundle local circuit switching is consistent with
     the 1996 Act's goals of rapid introduction of competition and the
     promotion of facilities-based entry.

273. Our unbundling analysis considers how the switch unbundling
     obligation we adopt will encourage requesting carriers to rapidly
     enter the local market in order to serve the greatest number of
     customers, and whether the failure to require unbundling will cause
     any class of consumers to wait unnecessarily for competitive
     alternatives. Failure to unbundle local circuit switching would
     cause residential and small business consumers to wait
     unnecessarily for competitive alternatives. As discussed above, the
     costs and operational delays associated with collocating in
     multiple end offices and provisioning delays caused by the
     inability of a requesting carrier to gain access to unbundled local
     circuit switching will cause residential and small business
     customers to wait for service. Requiring incumbent LECs to provide
     access to unbundled switching, and to use unbundled switching in
     combination with other network elements, will allow requesting
     carriers to serve the greatest number of customers, without
     incurring collocation and switch provisioning delays. Where
     unbundled switching has been made available, requesting carriers
     have gained market share in the residential and small business
     markets.[^544] Accordingly, we find that requiring incumbent LECs
     to provide access to unbundled switching will allow requesting
     carriers to rapidly enter local markets.

274. We also find that the availability of unbundled switching will also
     accelerate the development of alternative networks because it will
     allow requesting carriers to generate revenues to justify the
     construction of new switching facilities.[^545] As noted above,
     many carriers emphasize that they plan to deploy alternative
     facilities as soon as it is technically and economically possible
     to do so at a cost close to the incumbent LECs' prices for network
     elements.[^546] Granting requesting carriers access to unbundled
     switching will allow these carriers to serve customers in areas
     where traffic volumes and customer densities make it difficult
     initially to justify deploying a switch. Furthermore, allowing
     requesting carriers to purchase unbundled switching will allow new
     entrants to test market demand for circuit switched services before
     deploying their own facilities. As requesting carriers obtain
     customers using unbundled switching, we expect that the revenues
     generated from this activity will enable requesting carriers to
     extend the reach of their existing switching capabilities or deploy
     switching capability to serve the residential and small business
     market.

275. On balance, we conclude that local circuit switching should be
     unbundled nationwide. We now consider whether it would be
     appropriate to establish an exception to the national unbundling
     requirement.

##### Exception to National Unbundling Requirement

276. As discussed in section IV above, we do not limit our unbundling
     analysis to the cost, timeliness, ubiquity and quality factors
     described above. Rather, we look at the totality of the
     circumstances and marketplace developments when considering whether
     a requesting carrier is impaired without access to unbundled local
     circuit switching. In addition to examining where requesting
     carriers have deployed switches, we look to the marketplace to see
     which customers are receiving service from facilities-based
     competitors. To the extent the market shows that requesting
     carriers are not serving a market segment with self-provisioned
     switches, we find that this fact is probative evidence that for a
     discrete market segment requesting carriers are impaired without
     access to unbundled local circuit switching. Conversely, to the
     extent that the market shows that requesting carriers are generally
     providing service in particular situations with their own switches,
     we find this fact to be probative evidence that requesting carriers
     are not impaired without access to unbundled local circuit
     switching. The task before us is to develop an administratively
     simple rule that reflects marketplace developments and provides
     certainty to market participants. We seek to adopt a rule that
     serves as a reasonable proxy for when competitors are indeed
     impaired in their ability to provide the services they seek to
     offer.

277. In their initial and reply comments in this proceeding, the parties
     take sharply diverging positions regarding the circumstances and
     geographic areas where local circuit switches should be unbundled,
     if at all. Incumbent LECs generally support elimination of their
     obligation to unbundle local circuit switches in a geographic area
     where one requesting carrier has deployed a single local circuit
     switch.[^547] Competitive LECs oppose the incumbent LEC proposals
     for elimination of the circuit switch unbundling obligation and
     argue that local circuit switching should be unbundled on a
     national basis.[^548] In several *ex parte* presentations after the
     record closed, a number of parties softened their initial positions
     and propose a more narrowly tailored rule for determining when
     circuit switching need not be unbundled.[^549] A number of other
     parties respond to these fall-back positions in subsequent *ex
     parte* presentations.[^550]

278. Despite our conclusion that, in general, requesting carriers are
     impaired without access to unbundled switching, we conclude that it
     is appropriate to establish a more narrowly tailored rule to
     reflect significant marketplace developments. As described more
     fully below, we find that requesting carriers are not impaired
     without access to unbundled local circuit switching when they serve
     customers with four or more lines in density zone 1 in the top 50
     metropolitan statistical areas (MSAs), as set forth in Appendix B,
     where incumbent LECs have provided nondiscriminatory, cost-based
     access to the enhanced extended link (EEL) throughout density zone
     1.[^551]

279. [Top 50 MSAs]{.underline}. We conclude that it is appropriate to
     create an exception to the switching unbundling obligation in
     certain circumstances in the top 50 MSAs, as they are defined by
     the Office of Management and Budget.[^552] We thus respond to
     various suggestions in the record that an exception from the
     switching unbundling obligation should encompass the top 29, top 35
     and top 100 MSAs in the United States.[^553]

280. As previously noted, as of March, 1999, approximately 167 different
     competitors have deployed approximately 700 switches throughout the
     country.[^554] When we analyze where requesting carriers have
     deployed these switches, we find that most of these switches have
     been deployed within the confines of the top 50 MSAs.[^555]
     According to USTA's data, which relies on the Local Exchange
     Routing Guide, approximately 61 percent of all requesting carrier
     switches nationwide have been deployed in the top 50 MSAs.[^556]
     More significantly, the vast majority of these MSAs contain
     multiple switches owned by competitors. In particular, four or more
     competitive switches have been deployed in 96 percent of the top 50
     MSAs.[^557] According to USTA's data, only two MSAs in the top 50
     \-- Cincinnati and Las Vegas \-- have less than three requesting
     carrier switches serving an incumbent LEC rate exchange area within
     the MSA.

281. Based on the evidence in the record, we conclude that exempting
     incumbent LECs from unbundling local circuit switching in certain
     circumstances in the top 50 MSAs is reasonable because nearly all
     of the top 50 MSAs contain a significant number of competitive
     switches.[^558] In contrast, MSAs below the top 50 typically
     contain fewer competitive switches. For example, in US WEST's
     territory, no MSA between 50 and 150 contains more than three
     competitive switches.[^559] In the top 100 MSAs in Ameritech's
     territory, only six percent of Ameritech's wire centers are served
     by four or more competitive switches.[^560]

282. We recognize that drawing the line at the top 50 MSAs means that
     incumbent LECs serving more rural territories, which have fewer
     MSAs that are in the top 50 MSAs, will continue to be subject to an
     unbundled switching obligation. We nonetheless believe that this is
     a reasonable exercise of our administrative discretion. Extending
     an incumbent LEC's switch unbundling exemption to include more than
     the top 50 MSAs would require us to find that requesting carriers
     are not impaired without unbundled access to local circuit
     switching in these MSAs. We have no basis in the record before us
     to make such a finding because there are relatively few competitive
     switches outside of the top 50 MSAs.

283. We note that collocation costs and delay, as compared to revenue
     potential, may contribute to the relative lack of robust
     competitive switch deployment in areas outside of the top 50 MSAs.
     As discussed above, the total costs of a competitor using
     self-provisioned local circuit switching on an MSA basis include
     the costs incurred in providing service to every customer that the
     competitor seeks to serve. We concluded above that collocation
     imposes indirect costs on carriers installing their own
     switches.[^561] We also found that the amount of collocation cost
     are likely to vary according to individual requesting
     carriers.[^562] We believe that the revenue potential of serving
     less dense markets outside the top 50 MSAs is unlikely to outweigh
     the costs of collocating in these markets, and accordingly,
     competitors are impaired without access to unbundled local
     switching.

284. [Density Zone 1]{.underline}. When we examine the deployment of
     switches by competitors at a more granular level, we find that,
     based on the record before us, requesting carriers have deployed
     greater numbers of switches in areas of high customer density.
     Several incumbent LECs argue that switching should not be unbundled
     in dense wire centers, but each proffers its own geographic market
     definition for our local circuit switch unbundling analysis.[^563]
     BellSouth proposes, and other incumbent LECs support, the use of
     density zones 1 and 2 to capture the areas in which competitors
     have deployed switches and where incumbent LECs need not unbundle
     switching.[^564]

285. We conclude that it is appropriate to create an exception to the
     local circuit switching unbundling obligation only in density zone
     1, within the top 50 MSAs. The exception applies to density zone 1
     as it was defined on January 1, 1999. Based on the limited evidence
     in the record, we believe that density zone 1 closely reflects the
     wire centers where competitive LEC switches are located. In
     particular, of the seven markets in the top 50 MSAs served by
     BellSouth, each MSA contains at least one density zone 1[^565]
     where approximately 97 percent of all competitive LEC switches have
     been deployed.[^566] We recognize that only one commenter,
     BellSouth, provided detailed data to describe where requesting
     carriers have deployed switches in density zone 1. The record does
     not contain similar data for other incumbent LECs. Given the record
     before us and the need to provide a measure of certainty to the
     market, we believe that drawing a line at density zone 1 within the
     top 50 MSAs represents a reasonable approximation of where
     requesting carriers are not impaired without access to unbundled
     local circuit switching.

286. In order to prevent incumbent LECs from modifying their density
     zones to limit their unbundling obligation for local circuit
     switching, we freeze, for unbundling purposes, the incumbent LECs'
     density zone 1 as it was defined on January 1, 1999. Otherwise,
     incumbent LECs would retain significant discretion to define their
     density zone boundaries in the future. The Commission reviews
     incumbent LEC zone density pricing plans under a "reasonableness"
     standard.[^567] For example, our rules allow incumbent LECs to
     define zone boundaries upon a showing that "the assignment of
     central offices to each of the zones reflects cost-related
     characteristics, such as traffic density or some measure of traffic
     through each office."[^568] MCI WorldCom argues that using the zone
     approach would allow incumbent LECs to "redefine breakpoints to put
     more central offices into zones in which the incumbent LECs were
     not required to provide switching as an unbundled network element"
     and would allow incumbent LECs to "change their methodologies for
     defining zones to upset their competitor's business plans."[^569]
     To address the possibility that incumbent LECs, going forward,
     could amend their density zones to minimize their unbundling
     obligations, we create an exception to the unbundling obligation in
     the density zones as they existed on January 1, 1999.[^570] We
     believe that freezing the zones as of January 1, 1999, for purposes
     of section 251 unbundling obligations, addresses MCI WorldCom's
     concerns.

287. As discussed in our unbundling analysis above, as requesting
     carriers' switch utilization rates increase, the difference between
     the switching costs incurred by competitive and incumbent LECs
     decreases, and the per line switching costs will decrease as a
     requesting carrier's customer base grows.[^571] Because of
     increased demand for telecommunications services and the enhanced
     revenue opportunities associated with serving customers in
     high-density areas, such as density zone 1, we find that requesting
     carriers serving these dense areas are able to make more efficient
     use of their switching facilities, and can thus counter incumbent
     LEC scale economies. We therefore find that the cost of purchasing
     a circuit switch does not impair a requesting carrier's ability to
     provide the services it seeks to offer in density zone 1, in
     certain circumstances.

288. [Need for Enhanced Extended Link]{.underline}. Our conclusion that
     competitors are not impaired in certain circumstances without
     access to unbundled switching in density zone 1 in the top 50 MSAs
     also is predicated upon the availability of the enhanced extended
     link (EEL). As noted in section VI(B) above, the EEL allows
     requesting carriers to serve a customer by extending a customer's
     loop from the end office serving that customer to a different end
     office in which the competitor is already collocated. The EEL
     therefore allows requesting carriers to aggregate loops at fewer
     collocation locations and increase their efficiencies by
     transporting aggregated loops over efficient-high capacity
     facilities to their central switching location. Thus, the cost of
     collocation can be diminished through the use of the EEL. We agree
     with ALTS that, if requesting carriers can obtain
     nondiscriminatory, cost-based access to the enhanced extended link,
     their collocation costs would decrease, and they would need to
     collocate in as few as one incumbent LEC central office in an MSA
     to provide service.[^572]

289. We are not persuaded by arguments that use of the EEL produces only
     a short term advantage over collocation.[^573] Although we agree
     with SBC that distance-sensitive EEL costs can exceed the costs
     associated with collocation over time, we find that the ability of
     a requesting carrier to provision EELs more quickly than
     collocation arrangements, without the substantial upfront costs of
     establishing collocation in multiple central offices, can reduce
     significantly the costs of self-provisioning a switch in the
     initial phase of an entry strategy. When projected EEL costs exceed
     projected collocation costs, competitive LECs may reconfigure their
     networks to ensure the continued efficiency of their networks. We
     conclude that requesting carriers, reacting to marketplace demands
     and their own network topologies, are better able to weigh the
     costs and benefits of EELs compared to collocation and adjust their
     plans accordingly. Where a requesting carrier chooses the EEL, we
     find that it reduces a requesting carrier's reliance on
     collocation.

290. [Customers with Four or More Lines]{.underline}. Our analysis of an
     incumbent LEC's local circuit switching obligation has focused
     primarily upon the geographic areas where competitive carriers have
     deployed switches. We now consider whether, within these geographic
     areas, market facts demonstrate that requesting carriers are not
     impaired without access to local circuit switching for discrete
     market segments or customer classes.

291. We conclude that without access to unbundled local circuit
     switching, requesting carriers are impaired in their ability to
     serve the mass market. As discussed above, our unbundling analysis
     takes into account market conditions to determine whether a
     requesting carrier is impaired without access to unbundled local
     circuit switching. Since the Commission adopted the *Local
     Competition First Report and Order*, competition has continued to
     develop, primarily for business customers or users with substantial
     telecommunications needs.[^574] Commenters in this proceeding
     generally argue that requesting carriers have deployed switches to
     serve medium and large business customers and are not yet serving
     mass market customers, which largely are residential
     customers.[^575] No party in this proceeding, however, identifies
     the characteristics that distinguish medium and large business
     customers from the mass market.

292. There are several methods we could use to distinguish between the
     mass market and the medium and large business market for purposes
     of our unbundling analysis. For example, we could use revenues,
     number of employees, number of lines, or some other factor to
     distinguish between the mass market and the medium and large
     business market.

293. We find, however, that a rule that provides access to unbundled
     local switching for requesting carriers when they serve customers
     with three lines or less captures a significant portion of the mass
     market. First, virtually all residential customers would be
     captured by such a rule. While an increasing number of American
     homes are served by second lines, we believe it is a rare case in
     which residences have three lines, and even more unusual for a home
     to have four or more lines. Second, any business that has three or
     fewer lines is likely to share more characteristics of the mass
     market customer than a medium and large business. In particular,
     small businesses are likely to use the same number of lines as many
     residential subscribers and purchase similar volumes and types of
     telecommunications services.

294. We recognize that a rule that removes unbundling obligations based
     on line count will be marginally overinclusive or underinclusive
     given individual factual circumstances. We find, however, that in
     our expert judgment, a rule that distinguishes customers with four
     lines or more from those with three lines or less reasonably
     captures the division between the mass market -- where competition
     is nascent -- and the medium and large business market -- where
     competition is beginning to broaden.

295. Our decision to examine mass market and larger business markets
     separately is consistent with the Commission's merger review
     analysis and the Commission's reform of the interstate access
     charge regime. In the *MCI-WorldCom* merger, we identified two
     distinct product markets -- residential and small business, which
     we described as one market, and medium and large business
     customers, which we described as the larger business market.[^576]
     In the *Access Reform* proceeding, the Commission distinguished
     between primary residences and single line businesses which
     constitute a large portion of the mass market, and multi-line
     business customers which constitute the medium and large business
     markets.[^577] We therefore conclude that it is appropriate to make
     a similar distinction between mass market customers and larger
     business customers in creating an exception to the unbundling
     obligation for local circuit switching.

296. As discussed above, a requesting carrier is materially diminished
     in its ability to offer service to mass market customers without
     access to unbundled switching because it will face materially
     greater costs, materially greater delay, and will lack the same
     ubiquitous reach as the incumbent LEC's network. In addition to the
     costs of establishing a collocation arrangement with the incumbent
     LEC, we noted above that requesting carriers incur additional costs
     and face service quality impediments when extending a customer's
     loop to their collocation cages.[^578]

297. In contrast, marketplace developments suggest that competitors are
     not impaired in their ability to serve certain high-volume
     customers in the densest areas. We believe that the coordinated
     cutover process will not necessarily impair the ability of a
     requesting carrier to serve an end user in density zone 1. Medium
     and large business customers are often sophisticated users of
     telecommunications services that are able to order their operations
     in a manner that minimizes disruptions that may be caused by
     coordinated cutovers.[^579] For example, requesting carriers
     seeking to provide service to medium and large business customers
     may engage in direct outbound marketing in such a way as to control
     coordinated cutover order flows to the incumbent LEC.[^580] In
     addition, to the extent that incumbent LECs provide requesting
     carriers with unbundled switching to serve the mass market,
     requesting carriers will require fewer coordinated loop cutovers in
     the aggregate and incumbent LECs can focus their efforts on
     coordinated cutovers for customers not served with unbundled local
     circuit switching.[^581] Finally, because business customers
     generate comparably greater revenues than residential customers,
     requesting carriers may be more willing to incur the provisioning
     difficulties that may be present in the coordinated cutover
     process.

298. We conclude that carriers will not be impaired in their ability to
     serve high volume users only when the EEL is provided throughout
     density zone 1. While some customers in this area already are being
     served by facilities-based carriers without the EEL, the
     availability of the EEL will ensure that requesting carriers are
     able to serve customers ubiquitously throughout the area. If the
     EEL is available and a requesting carrier seeks to serve a high
     volume business, the incumbent LEC can provision the high capacity
     loop and connect directly to a requesting carrier's collocation
     cage.[^582] In this scenario, the requesting carrier need not
     initiate a coordinated loop cutover. Moreover, the availability of
     the EEL substantially reduces the delay a requesting carrier would
     experience before it is able to actually provide service.[^583]

299. [Goals of the 1996 Act]{.underline}. As noted above, our unbundling
     analysis considers how the switching unbundling obligation we adopt
     will encourage requesting carriers to rapidly enter the local
     market and whether the failure to require unbundling will cause any
     class of consumers to wait unnecessarily for competitive
     alternatives. Our decision to relieve incumbent LECs of their
     unbundling obligations in the circumstances described above will
     not require medium and large businesses to wait unnecessarily for
     competitive alternatives. We find that requesting carriers have
     deployed a large number of switches to serve medium and large
     business customers in the densest areas of the top 50 MSAs, and
     these medium and large business customers by and large, have a
     choice in their local service provider.[^584] Accordingly, we find
     that relieving incumbent LECs of their unbundled switching
     obligation, as set forth herein, will not require medium and small
     business consumers to wait unnecessarily for competitive
     alternatives because they are largely available today. Furthermore,
     eliminating an incumbent LEC's local circuit switching obligation
     in these circumstances is consistent with our goal to reduce
     regulation when possible. Our decision also provides requesting
     carriers with access to the elements they need to ramp up towards
     continued deployment of self-provisioned switches and is therefore
     consistent with our policies of encouraging facilities-based
     competition and encouraging innovation.

### Packet Switching

#### Background

300. In the *Local Competition First Report and Order*, the Commission
     declined to find that incumbent LEC packet switches should be
     identified as unbundled network elements because the Commission did
     not have an adequate record to support such a conclusion.[^585] In
     the *Notice*, we sought comment on whether "packet switches should
     be unbundled pursuant to section 251(c)(3), and whether there is
     "any basis for treating network elements used in the provisioning
     of packet-switched advanced services any differently than those
     used in the provisioning of circuit-switched voice services."[^586]
     Incumbent LECs argue that they generally trail in the deployment of
     packet switches, and therefore should not be subject to unbundling
     requirements that might eliminate their incentives to invest in
     equipment used to provide advanced services.[^587] Several
     competitors argue in favor of unbundling packet switching to
     encourage the broad-based deployment of advanced services.[^588]

301. We are aware, however, that US WEST has argued that section
     251(c)(3) does not apply to any network elements, such as packet
     switches, used to provide advanced services, such as xDSL.[^589] We
     note that the Commission has requested, and has received, a remand
     from the United States Court of Appeals for the District of
     Columbia Circuit to address US WEST's argument that the Commission
     is without statutory authority to require incumbent LECs to provide
     access to unbundled elements used in the provision of advanced
     services.[^590] After receiving a more complete administrative
     record, we intend to fully address US WEST's arguments in the
     *Advanced Services Memorandum Opinion and Order and NPRM* remand
     proceeding.[^591] In remanding back to the agency, the court
     declined to vacate portions of the *Advanced Services Memorandum
     Opinion and Order and NPRM* challenged by US WEST. Accordingly, our
     decision in that Order that xDSL services are "either" telephone
     exchange service or exchange access service remains in effect
     during the pendency of the *Advanced Services Memorandum Opinion
     and Order and NPRM* remand proceeding.[^592] We therefore may
     consider whether packet switching should be unbundled under the
     framework established in this proceeding.

#### Discussion

##### Definition of Packet Switching

302. As a threshold matter, we must define the functionality of the
     packet switching unbundled network element. In packet-switched
     networks, messages between network users are divided into units,
     commonly referred to as packets, frames, or cells. These individual
     units are then routed between network users. The switches that
     provide this routing function are "packet switches," and the
     function of routing individual data units based on address or other
     routing information contained in the units is "packet
     switching."[^593]

303. We find that a component of the packet switching functionality, and
     included in our definition of packet switching is the Digital
     Subscriber Line Access Multiplexer (DSLAM). The DSLAM splits voice
     (low band) and data (high band) signals carried over a copper
     twisted pair. DSLAM equipment sometimes includes a splitter. If
     not, a separate splitter device separates voice and data traffic.
     The voice signal is transmitted toward a circuit switch, and the
     data from multiple lines is combined in packet or cell format and
     is transmitted to a packet switch, typically ATM or IP. The DSLAM
     combines: (1) the ability to terminate copper customer loops (which
     includes both a low-band voice channel and a high-band data
     channel, or solely a data channel); (2) the ability to forward the
     voice channels, if present, to a circuit switch or multiple circuit
     switches; (3) the ability to extract data units from the data
     channels on the loops; and (4) the ability to combine data units
     from multiple loops onto one or more trunks that connect to a
     packet switch or packet switches.

304. We define packet switching as the function of routing individual
     data units, or "packets," based on address or other routing
     information contained in the packets. The packet switching network
     element includes the necessary electronics (*e.g.,* routers and
     DSLAMs). We find that packet switching qualifies as a network
     element because it includes "all features, functions and
     capabilities . . . sufficient . . . for transmission, routing or
     other provision of a telecommunications service."[^594] Because
     packet switching and DSLAMs are used to provide telecommunications
     services, packet switching qualifies as a network element.[^595] We
     adopt a definition of packet switching that does not favor or
     disadvantage one packet switching technology over another. Our
     intention is to define packet switching in such a way as to capture
     the functionality of packet networks, without regard to a
     particular "packetizing" technology that an incumbent LEC has
     deployed in its network. Several parties propose definitions of
     packet switching which elaborate on the Commission's existing
     circuit switching definition.[^596] We decline to adopt proposed
     definitions of packet switching that exclude DSLAMs from the packet
     switching functionality.[^597] We further decline to adopt
     equipment-specific packet switching network elements, as proposed
     by Intermedia and e.spire.[^598] We find that with today's
     technology, packetizing is an integral function of the DSLAM.
     Accordingly, we include the DSLAM functionality, with the routing
     and addressing functions of packet switches, in our functional
     definition of packet switching.

##### Proprietary Concerns Associated With Packet Switching

305. No party alleged that packet switching was proprietary within the
     meaning of section 251(d)(2). We find that the record provides no
     basis for withholding packet switching from competitors based on
     proprietary considerations or subjecting packet switching to the
     more demanding "necessary" standard set forth in section
     251(d)(2)(A).[^599] Instead we examine packet switching under the
     "impair" standard of section 251(d)(2)(B).

##### Unbundling Analysis for Packet Switching

306. We decline at this time to unbundle the packet switching
     functionality, except in limited circumstances. Among other
     potential factors, we recognize that the presence of multiple
     requesting carriers providing service with their own packet
     switches is probative of whether they are impaired without access
     to unbundled packet switching. The record demonstrates that
     competitors are actively deploying facilities used to provide
     advanced services to serve certain segments of the market ---
     namely, medium and large business --- and hence they cannot be said
     to be impaired in their ability to offer service, at least to these
     segments without access to the incumbent's facilities. In other
     segments of the market, namely, residential and small business, we
     conclude that competitors may be impaired in their ability to offer
     service without access to incumbent LEC facilities due, in part, to
     the cost and delay of obtaining collocation in every central office
     where the requesting carrier provides service using unbundled
     loops. We conclude, however, that given the nascent nature of the
     advanced services marketplace, we will not order unbundling of the
     packet switching functionality as a general matter.

307. Both the record in this proceeding, and our findings in the *706
     Report*, establish that advanced services providers are actively
     deploying facilities to offer advanced services such as xDSL across
     the country.[^600] Competitive LECs and cable companies appear to
     be leading the incumbent LECs in their deployment of advanced
     services.[^601] For example, in 1999, Rhythms expects to roll out
     xDSL services in 1,000 end offices nation wide.[^602] Covad's
     planned network deployment is expected to reach 51 MSAs by the end
     of 1999.[^603] In the past year, NorthPoint deployed facilities
     capable of transmitting xDSL signals in 17 metropolitan
     markets.[^604] NorthPoint plans to expand its DSL-based local
     networks from 25 major markets, representing 37 metropolitan
     statistical areas (MSAs), to 28 markets, or 61 MSAs, by the end of
     1999.[^605] Qwest announced in August 1999, that it is now
     providing DSL service in 13 U.S. markets and plans to expand to
     more than 30 major markets by the end of 1999.[^606] In addition,
     EarthLink has partnered with Sprint to offer nationwide xDSL
     service.[^607] KMC Telecom Inc. announced aggressive rollout of DSL
     services with plans to introduce additional broadband applications
     by year-end.[^608] Marketplace developments like the ones described
     above suggest that requesting carriers have been able to secure the
     necessary inputs to provide advanced services to end users in
     accordance with their business plans. This evidence indicates that
     carriers are deploying advanced services to the business market
     initially as well as the residential and small business markets.

308. Several parties, in addition to the incumbent LECs, argue that the
     Commission should not unbundle packet switching or DSLAMS
     generally.[^609] We recognize that equipment needed to provide
     advanced services, such as DSLAMS and packet switches, are
     available on the open market at comparable prices to incumbents and
     requesting carriers alike.[^610] Incumbent LECs and their
     competitors are both in the early stages of packet switch
     deployment, and thus face relatively similar utilization rates of
     their packet switching capacity. Packet switching utilization rates
     will differ from circuit switching utilization rates because of the
     incumbent LEC's monopoly position as carrier of last resort.
     Incumbent LEC circuit switches, because they serve upwards of 90
     percent of the circuit switched market, may achieve higher
     utilization rates than the circuit switches of requesting carriers.
     Because the incumbent LEC does not retain a monopoly position in
     the advanced services market, packet switch utilization rates are
     likely to be more equal as between requesting carriers and
     incumbent LECs. It therefore does not appear that incumbent LECs
     possess significant economies of scale in their packet switches
     compared to the requesting carriers.

309. Collocating in incumbent LEC central offices imposes material costs
     and delays on a requesting carrier and materially diminishes a
     requesting carrier's ability to provide the services it seeks to
     offer. As discussed above, we identified the costs and delays
     associated with collocation as factors that impair a requesting
     carrier's ability to self-provision circuit switches to serve
     residential and small business market.[^611] We see no reason to
     distinguish a requesting carrier's collocation-related costs and
     delays to provide circuit-switched service from those collocation
     costs and delays incurred by requesting carriers to provide
     packet-switched services. These costs and delays lead us to find
     that competitors are impaired in their ability to offer advanced
     services without access to incumbent LEC facilities. As discussed
     in more detail below, that conclusion is not dispositive of whether
     unbundling is appropriate at this time under section 251(d)(2). As
     discussed in section IV above, in addition to the "impair" standard
     we consider whether unbundling will open local markets to
     competition and how access to a given network element will
     encourage the rapid introduction of local competition to the
     benefit of the greatest number of customers.[^612]

310. NorthPoint argues that an additional impediment it faces when
     providing advanced services using xDSL technologies is the absence
     of line sharing.[^613] Currently, many incumbent LECs offer
     advanced services over the high-frequency range of the same loops
     they use to offer voice services. Although the incumbent LEC may
     use a single copper pair to provide xDSL services, in the absence
     of line sharing, requesting carriers providing xDSL services must
     purchase an additional unbundled loop to serve their customers,
     thereby incurring additional non-trivial costs. In light of the
     substantial number of packet switches deployed by competitive LECs,
     even in comparison to incumbent LEC deployment, we conclude that
     these non-trivial costs are substantial enough to impair the
     requesting carrier's ability to provide the services it seeks to
     offer within the meaning of section 251(d)(2). Unlike circuit
     switching services, however, requesting carriers providing data
     services do not face the operational impediment of obtaining a
     coordinated cutover of the loop on a timely basis, because they
     typically are providing service over a second line. Because such
     carriers purchase an additional unbundled copper loop to serve the
     customer, the customer's voice service is never disconnected, and
     the requesting carrier faces none of the timing and quality
     impediments associated with the "hot cut" process.

311. We further decline to unbundle specific packet switching
     technologies incumbent LECs may have deployed in their networks.
     E.spire/Intermedia request that we require incumbent LECs to
     unbundle: (1) the ports on their data switches or routers; and (2)
     the connectivity, including the switching fabric and associated
     software functions, between such ports at capacities ranging from
     DS0 to DS3.[^614] E.spire/Intermedia focus their request upon a
     particular packet-switching technology \-- frame relay.[^615]
     E.spire/Intermedia argue that they are impaired without access to
     these data unbundled network elements to complete "virtual
     circuits" because they lack the incumbent LEC's economies of
     density and the ability to statistically multiplex data traffic to
     make efficient use of transport facilities.[^616]

312. We reject e.spire/Intermedia's request for a packet switching or
     frame relay unbundled network element. First, as discussed above,
     we will define unbundled network elements, to the extent
     practicable, in a technologically neutral manner so as to not favor
     one particular packet switching technology over another. Defining
     an unbundled network element according to a particular packet
     switching technology, such as frame relay, violates this principle
     of technological neutrality. Furthermore, defining packet switching
     elements according to a specific technology creates the possibility
     that as innovative packet switching technologies are deployed, they
     may or may not fall within our definition of packet switching.
     Second, e.spire/Intermedia have not provided any specific
     information to support a finding that requesting carriers are
     impaired without access to unbundled frame relay. We note, however,
     that e.spire/Intermedia are free to demonstrate to a state
     commission that lack of unbundled access to the incumbent's frame
     relay network element impairs their ability to provide the services
     they seeks to offer. A state commission is empowered to require
     incumbent LECs to unbundle specific network elements used to
     provide frame relay service, consistent with the principles set
     forth in this order.

313. We do find, however, one limited exception to our decision to
     decline to unbundle packet switching. Access to packetized services
     to provide xDSL service requires "clean" copper loops without
     bridge taps or other impediments. [^617] Furthermore, xDSL services
     generally may not be provisioned over fiber facilities. In
     locations where the incumbent has deployed digital loop carrier
     (DLC) systems, an uninterrupted copper loop is replaced with a
     fiber segment or shared copper in the distribution section of the
     loop. In this situation, and where no spare copper facilities are
     available, competitors are effectively precluded altogether from
     offering xDSL service if they do not have access to unbundled
     packet switching.[^618] Moreover, if there are spare copper
     facilities available, these facilities may not meet the necessary
     technical requirements for the provision of certain advanced
     services. For example, if the loop length exceeds 18,000 feet, the
     provision of ADSL service is technically infeasible. When an
     incumbent has deployed DLC systems, requesting carriers must
     install DSLAMs at the remote terminal instead of at the central
     office in order to provide advanced services. We agree that, if a
     requesting carrier is unable to install its DSLAM at the remote
     terminal or obtain spare copper loops necessary to offer the same
     level of quality for advanced services, the incumbent LEC can
     effectively deny competitors entry into the packet switching
     market. We find that in this limited situation, requesting carriers
     are impaired without access to unbundled packet switching.
     Accordingly, incumbent LECs must provide requesting carriers with
     access to unbundled packet switching in situations in which the
     incumbent has placed its DSLAM in a remote terminal. This
     obligation exists as of the effective date of the rules adopted in
     this Order. The incumbent will be relieved of this unbundling
     obligation only if it permits a requesting carrier to collocate its
     DSLAM in the incumbent's remote terminal, on the same terms and
     conditions that apply to its own DSLAM. Incumbents may not
     unreasonably limit the deployment of alternative technologies when
     requesting carriers seek to collocate their own DSLAMs in the
     remote terminal.

314. [Policy Goals]{.underline}. Incumbent LECs argue in this proceeding
     that their incentive to invest and innovate in new technologies
     capable of providing advanced services will be curtailed if we
     mandate unbundling.[^619] We note that investments in facilities
     used to provide service to nascent markets are inherently more
     risky than investments in well established markets. Customer demand
     for advanced services is also more difficult to predict accurately
     than is the demand for well established services, such as
     traditional plain old telephone service (POTS).

315. We acknowledge that the incumbent LEC argument that unbundling may
     adversely affect innovation is consistent with economic theory, but
     events in the marketplace suggest that other factors may be driving
     incumbent LECs to invest in xDSL technologies, notwithstanding the
     economic theory. For example, in January 1998, U S WEST announced a
     rollout of ADSL service to 40 in-region metropolitan areas.[^620]
     In October 1998, BellSouth announced its plans to offer ADSL
     service to 1.7 million customers in 30 markets by the end of 1998,
     and 23 additional markets in 1999.[^621] In January 1998, SBC
     announced a "massive rollout" of ADSL, "targeting more than 500
     central offices and 9.5 million residential and business customers
     by year-end."[^622] In January 1999, Bell Atlantic announced plans
     to rollout ADSL service in several states and entered into a
     marketing alliance with America On-Line in which Bell Atlantic
     hopes, by the end of 1999 to make ADSL available to seven million
     subscribers.[^623] Combined, Bell Atlantic and GTE have stated that
     the number of xDSL capable-lines available in region will be 17
     million and they will have ADSL capability in 550 central offices,
     allowing them to serve as many as 6.1 million xDSL customers.[^624]
     Such investments have been planned and undertaken notwithstanding
     the fact that we sought comment in August 1998 on whether
     facilities used to provide advanced services must be unbundled
     pursuant to section 251.[^625]

316. Despite the encouraging signs of investment in facilities used to
     provide advanced services described above, we are mindful that
     regulatory action should not alter the successful deployment of
     advanced services that has occurred to date. Our decision to
     decline to unbundle packet switching therefore reflects our concern
     that we not stifle burgeoning competition in the advanced service
     market. We are mindful that, in such a dynamic and evolving market,
     regulatory restraint on our part may be the most prudent course of
     action in order to further the Act's goal of encouraging
     facilities-based investment and innovation.[^626]

317. Our overriding objective, consistent with the congressional
     directive in section 706, is to ensure that advanced services are
     deployed on a timely basis to all Americans so that consumers
     across America have the full benefits of the "Information Age." The
     advanced services marketplace is a nascent one. Although some
     investment has occurred to date, much more investment in the future
     is necessary in order to ensure that all Americans will have access
     to these services. We remain concerned about the lack of deployment
     in rural areas. We note that we will carefully monitor the
     deployment of broadband services to ensure that the objectives of
     section 706 and the Act are being met. We decline to unbundle
     packet switching at this time, except for the limited exception
     described above.

## Interoffice Transmission Facilities

### Background

318. In the *Local Competition First Report and Order*, the Commission
     concluded that incumbent LECs must provide interoffice transmission
     facilities on an unbundled basis to requesting carriers. In
     particular, the Commission required incumbent LECs to provide
     dedicated and shared transport as an unbundled network element
     pursuant to section 251(c)(3).[^627] The Commission found that such
     access was technically feasible and would promote competition in
     the local exchange market.[^628] In that order, however, the
     Commission declined to address the unbundling of incumbent LEC dark
     fiber because the record provided insufficient evidence to decide
     that issue.[^629]

319. In the *Notice,* we sought comment on the application of the
     "necessary" and "impair" standards to previously identified
     unbundled network elements, including interoffice transport
     facilities.[^630] The *Notice* requested that parties include
     specific costs and an analysis of the availability of alternative
     sources of transport supply.[^631] We also sought comment on
     whether, in light of technological advances or experience in the
     marketplace since adoption of the *Local Competition First Report
     and Order*, we should modify the definition of any of the
     previously identified network elements including, for example, the
     definition of "transport," to include dark fiber.[^632]

320. Incumbent LECs generally argue that interoffice transport should
     not be unbundled where a single alternative source of transport is
     available.[^633] Competitive LECs argue that because alternative
     sources of transport supply are largely unavailable, requesting
     carriers are impaired without access to unbundled transport.[^634]
     Most of the state commissions addressing this issue agree that
     transport should remain an unbundled network element.[^635]

### Discussion

321. We find that requesting carriers are impaired without access to
     unbundled dedicated and shared transport network element. In
     particular, self-provisioning ubiquitous interoffice transmission
     facilities, or acquiring these facilities from non-incumbent LEC
     sources, materially increases a requesting carrier's costs of
     entering a market or of expanding the scope of its service, delays
     broad-based entry, and materially limits the scope and quality of a
     requesting carrier's service offerings. Although the record
     indicates that competitive LECs have deployed transport facilities
     along certain point-to-point routes, the record also demonstrates
     that self-provisioned transport, or transport from non-incumbent
     LEC sources, is not sufficiently available as a practical,
     economic, and operational matter to warrant exclusion of
     interoffice transport from an incumbent LEC's unbundling
     obligations at this time. Accordingly, we conclude that incumbent
     LECs must offer unbundled access to their interoffice transmission
     facilities nationwide.

#### Dedicated Transport

##### Definition

322. In the *Local Competition First Report and Order*, the Commission
     defined dedicated interoffice transmission facilities as "incumbent
     LEC transmission facilities dedicated to a particular customer or
     carrier that provide telecommunications between wire centers owned
     by incumbent LECs or requesting telecommunications carriers, or
     between switches owned by incumbent LECs or requesting
     telecommunications carriers."[^636] The Commission further
     concluded that incumbent LECs must provide all technically feasible
     capacity-related services such as DS1-DS3 and OC3-OC96
     services.[^637]

323. [High-Capacity Transmission]{.underline}. We reaffirm that the
     definition of dedicated transport set forth in the *Local
     Competition First Report and Order* includes all technically
     feasible capacity-related services such as DS1-DS3 and OC3-OC96
     dedicated transport services. We clarify that this definition
     includes all technically feasible capacity-related services,
     including those provided by electronics that are necessary
     components of the functionality of capacity-related services and
     are used to originate and terminate telecommunications services.
     [^638] We find that unbundling high-capacity dedicated transport
     offerings will encourage competition and facilitate the deployment
     of advanced services. Unbundling high-capacity dedicated transport
     offerings also addresses claims by CompTel and other parties that
     non-incumbent LEC facilities cannot provision sufficient bandwidth
     for data-intensive services.[^639] Accordingly, we modify section
     319(d)(ii) of our rules to clarify that incumbent LEC must unbundle
     DS1 through OC192 dedicated transport offerings and such higher
     capacities as evolve over time. Our intention is to ensure that the
     definition of interoffice transmission will apply to new, as well
     as current technologies, and to ensure that competitors will
     continue to be able to access these facilities as unbundled network
     elements as long as that access is required pursuant to section
     251(d)(2).

324. Notwithstanding the fact that we require incumbents to unbundle
     high-capacity transmission facilities, we reject Sprint's proposal
     to require incumbent LECs to provide unbundled access to SONET
     rings.[^640] In the *Local Competition First Report and Order*, the
     Commission limited an incumbent LEC's transport unbundling
     obligation to existing facilities, and did not require incumbent
     LECs to construct facilities to meet a requesting carrier's
     requirements where the incumbent LEC has not deployed transport
     facilities for its own use.[^641] Although we conclude that an
     incumbent LEC's unbundling obligation extends throughout its
     ubiquitous transport network, including ring transport
     architectures, we do not require incumbent LECs to construct new
     transport facilities to meet specific competitive LEC
     point-to-point demand requirements for facilities that the
     incumbent LEC has not deployed for its own use.

325. [Dark Fiber.]{.underline} In addition, we modify the definition of
     dedicated transport to include dark fiber. Dark fiber is deployed,
     unlit fiber optic cable that connects two points within the
     incumbent LEC's network. As discussed above, dark or "unlit" fiber,
     unlike "lit" fiber, does not have electronics on either end of the
     dark fiber segment to energize it to transmit a telecommunications
     service.[^642] Thus, dark fiber is fiber which has not been
     activated through connection to the electronics that "light" it and
     render it capable of carrying telecommunications services.[^643] To
     provide additional capacity, new electronics are attached to
     previously "lit" fiber or to previously "dark" fiber. Because dark
     fiber is already installed and easily called into service, we find
     that it is similar to the unused capacity of other network
     elements, such as switches or "dead count" or "vacant" copper wire
     that is dormant until carriers put it in service.[^644]

326. We agree with state commissions and competitive LECs that dark
     fiber meets the statutory definition of a network element, and
     therefore is included within the definition of the dedicated
     interoffice transport network element.[^645] Section 153(29) of the
     Act defines the term "network element" as a "facility or equipment
     used in the provision of a telecommunications service, including
     "features, functions, and capabilities that are provided by means
     of such facility or equipment."[^646] The Supreme Court upheld this
     broad definition of a network element and acknowledged that it
     includes not only physical elements but non-physical elements as
     well.[^647] Because dark fiber is unused transport capacity, we
     find that it is "a feature, function, and capability of facilities
     used to provide telecommunications services."[^648] In addition, we
     note that since the Commission released its *Local Competition
     First Report and Order*, several states, acting through arbitration
     proceedings, have required incumbent LECs to unbundle dark fiber
     interoffice transport facilities, and several federal district
     courts, in affirming state commission decisions, have held that
     dark fiber meets the statutory definition of an unbundled network
     element.[^649]

327. We reject incumbent LECs' arguments that because dark fiber is
     transport that is not currently "used" in the provision of a
     telecommunications service, within the meaning of section 153(29),
     it does not meet the statutory definition of a network element or
     the definition of interoffice transport.[^650] Rather, we agree
     with the Illinois Commission that the term "used in the provision
     of telecommunications service" in section 153(29) refers to network
     facilities or equipment that is "customarily employed for the
     purpose" of providing a telecommunications service.[^651] Although
     particular dark fiber facilities may not be "lit" they constitute
     network facilities dedicated for use in the provision of
     telecommunications service, as contemplated by the Act. Indeed,
     most other network elements have surplus capacity or can be
     upgraded to provide additional capacity and therefore are not
     always "currently used" as the term is interpreted by incumbent
     LECs. For example, switches, loops, and other network elements each
     may have spare, unused capacity, yet each meets the definition of a
     network element.[^652]

328. We acknowledge that it would be problematic if some facilities that
     the incumbent LEC customarily uses to provide service were deemed
     to constitute network elements (*e.g.,* unused copper wire stored
     in a spool in a warehouse). Defining such facilities as network
     elements would read the "used in the provision" language of section
     153(29) too broadly.[^653] Dark fiber, however, is distinguishable
     from this situation in that it is physically connected to the
     incumbent's network and is easily called into service. Thus, as
     indicated above, we conclude that dark fiber falls within the
     statutory definition of a network element.

329. We also note that our reading of the term \"used\" comports with
     the Commission\'s interpretation of the term \"provide\" in the
     context of section 271. Specifically, in the order denying
     Ameritech's application to provide long distance service pursuant
     to section 271 of the Act, the Commission rejected competitors'
     arguments that the term "provide" requires the BOC to "actually
     furnish" a checklist item.[^654] Rather, the Commission concluded
     that the term "provide" requires incumbent LECs to "make available"
     to requesting carriers the checklist item in question upon
     reasonable demand.[^655] Similarly, we interpret the term "used" in
     the definition of a network element to mean "capable of being used"
     in the provision of a telecommunications service.

330. We do not agree with GTE that, unlike vacant copper, dark fiber
     does not qualify as interoffice transport.[^656] According to GTE,
     dark fiber differs from extra copper pairs in a cable because dark
     fiber is "unused inventory," whereas copper cable is installed to
     provide maximum flexibility.[^657] We find this to be a distinction
     without a difference. Whether located in the loop plant or in the
     transport network of an incumbent LEC, both copper and fiber
     represent unused capacity. Accordingly, we conclude that dark fiber
     falls within the dedicated transport network element's "facilities,
     functions, and capabilities."[^658]

##### Proprietary Concerns Associated with Dedicated Transport

331. In the *Local Competition First Report and Order*, the Commission
     did not identify any proprietary concerns associated with dedicated
     transport.[^659] No party has identified any proprietary concerns
     associated with unbundled dedicated transport in this phase of the
     proceeding, and we find none. We therefore apply the "impair"
     standard of section 251(d)(2) to determine whether dedicated
     transport is subject to the unbundling obligations of the Act.

#####  Unbundling Analysis

332. We conclude that lack of access to unbundled interoffice transport
     impairs a carrier's ability to provide the services it seeks to
     offer. Requiring carriers to self-provision, or acquire from
     third-party providers, extensive interoffice transmission
     facilities materially increases the costs of market entry or of
     expanding service, delays broad-based entry, and limits the scope
     and quality of the competitor\'s service offerings. Neither
     self-provisioning interoffice transport facilities nor obtaining
     these facilities from third-party sources is an adequate
     alternative to the ubiquitous transmission facilities that a
     competitor can obtain from the incumbent LEC under section 251's
     unbundling obligations. Accordingly, we require incumbent LECs to
     provide unbundled access to their interoffice transmission
     facilities.

333. Although the record indicates that competitive LECs have deployed
     interoffice transport facilities along selected point-to-point
     routes, primarily in dense market areas, we find that the these
     facilities are not available, as a practical, economic, and
     operational matter, such that a requesting carrier's ability to
     provide the services it seeks to offer would not be impaired
     without access to the incumbent's ubiquitous interoffice
     transmission facilities. Specifically, the competitive transport
     facilities that currently exist do not interconnect all of an
     incumbent LEC's central offices and all interexchange carrier's
     points of presence within an MSA, or a substantial portion thereof.

334. [Availability of Alternatives Outside the Incumbent's
     Network]{.underline}. Local competitors began deploying fiber
     networks in urban markets approximately 15 years ago.[^660]
     Incumbent LECs have provided a significant amount of data
     indicating the location of transport facilities deployed by
     competitive LECs. For example, the incumbents submitted, through
     the USTA UNE Report, data that indicates that, by the end of 1998,
     competitive LECs had deployed interoffice transport in
     approximately 300 cities.[^661] According to the USTA UNE Report,
     competitors have deployed nearly 30,000 route miles of fiber within
     the top 50 MSAs.[^662]

335. In addition, the USTA UNE Report states that of the top 50 MSAs,
     forty-seven are served by at least three competitors; 29 are served
     by five or more competitors; and 16 are served by seven or more
     competitors.[^663] The USTA Report also asserts that requesting
     carriers have deployed fiber in all but 15 of the MSAs ranked
     between 50 and 150[^664] and that competitors have centered their
     deployment of competitive fiber around "dense" wire centers, which
     USTA defines as wire centers with 40,000 or more access
     lines.[^665] The USTA UNE Report also maintains that as of March
     1999, incumbent LECs have the following number of wire centers that
     are served by at least one competitive fiber provider: Ameritech
     161; Bell Atlantic 274; BellSouth 136; GTE 70; SBC 284; US WEST
     118.[^666]

336. The incumbents also provide evidence of the number of collocation
     arrangements in many of their wire centers. Relying on this data,
     the incumbents argue that there are significant alternatives to
     interoffice transport services available. According to USTA, the
     fact that competitors have operational collocation arrangements in
     approximately 874 dense wire centers implies the presence of
     competitive fiber "nearby."[^667] In particular, according to the
     USTA UNE Report, of the wire centers with 20,000 or more lines, 90
     percent in the SBC region, 72 percent in the Bell Atlantic region,
     and 74 percent in the US West region have collocation, which the
     incumbents assert signifies competitive transport is
     available.[^668]

337. Bell Atlantic also argues that its Competitive Alternative
     Transport Terminal (CATT) service, currently offered on a trial
     basis with Metromedia Fiber Network Services **(**MFN), offers high
     capacity interoffice dedicated transport services to any collocated
     carrier. Bell Atlantic claims that MFN has entered into this CATT
     arrangement in a large number of end offices and that CATT will be
     generally available to other carriers pursuant to tariff.[^669]

338. Other evidence in the record, however, undermines the incumbents'
     suggestion that competitive fiber is sufficiently available that
     transport should not be unbundled. MCI WorldCom, for example,
     provides information about the number of transport providers in the
     six major cities included in the USTA survey. According to MCI
     WorldCom, only eight of the 138 wire centers in Los Angeles have
     three or more collocators that provide transport.[^670] Similarly,
     MCI WorldCom states that only four of 64 wire centers in Seattle
     have three or more collocators providing transport and only one of
     25 wire centers in San Jose has three or more collocators providing
     transport. In addition, MCI WorldCom reports that, in Minneapolis,
     Richmond and Washington DC with 135, 51, and 158 wire centers
     respectively, no end office has three collocators providing
     transport.[^671]

339. In addition, NorthPoint reports that the incumbent LEC is the only
     source of transport for at least 70% of central offices in which
     NorthPoint is collocated, even in dense wire centers in large
     metropolitan areas.[^672] Similarly, Sprint asserts that in New
     York City, which is considered the most mature market in the
     country, Sprint continues to use the incumbent LEC extensively for
     transport because competitive fiber is not available in sufficient
     numbers of incumbent LEC central offices for it to offer a
     ubiquitous service in this area.[^673]

340. [Ubiquity]{.underline}. We conclude that, despite the evidence of
     some competitively deployed interoffice transmission facilities,
     lack of access to the incumbent's dedicated transmission facilities
     impairs a requesting carrier's ability to provide the services it
     seeks to offer. The alternatives cited in the evidence submitted by
     the incumbents are not ubiquitously available, and therefore
     competitive transport if not available as a practical, economic and
     operational matter.

341. As an initial matter, we are not persuaded that the incumbents'
     data accurately reflects the extent to which alternatives are
     actually available to competitors. In particular, we find that only
     at a granular, wire center-by-wire center level does the record
     show the presence of competitive alternatives to the incumbent's
     interoffice transport, albeit on a non-ubiquitous basis. [^674]
     Thus, without access to unbundled dedicated transport, requesting
     carriers would be forced to create a patchwork of alternative
     network facilities, where they have been deployed and are being
     offered to other carriers, or alternatively to construct their own
     transport facilities. The USTA UNE Report based its analysis on the
     markets that have attracted the most competitive transport entry.
     For example, the USTA UNE Report states that "\[I\]n the Los
     Angeles MSA, 72 wire centers serve 40,000 + lines. Of these, 20
     have at least one collocated competitive LEC. An analysis of fiber
     route maps shows that CLEC fiber passes through at least 15 of 20
     wire center areas with collocation."[^675] Thus, according to
     USTA's data, 15 of 72 dense wire centers or approximately 21% of
     dense wire centers in the Los Angeles MSA include competitive fiber
     "nearby." [^676]

342. We note that the incumbents do not explain what is meant by fiber
     that is "nearby." Nor do incumbents explain how having fiber
     "nearby" reflects the availability of ubiquitous transport
     alternatives. In addition, however, because the incumbents' data
     focuses only on the most dense wire centers, the data provides
     little to no information about the availability of transport in
     less dense wire centers in the same cities. If the analysis were
     expanded to include less dense wire centers, or wire centers
     serving less than 40,000 lines, the analysis would presumably show
     a lower percentage of competitive alternatives for the entire MSA
     than is reflected by the data provided by the incumbents.

343. Incumbents rely on the evidence of competitively deployed transport
     submitted in the USTA UNE Report to argue that competitive LECs are
     not impaired without access to unbundled transport facilities in
     locations where competitive LECs have already deployed transport.
     Specifically, the incumbents argue that the Commission should
     exclude dedicated transport from an incumbent LEC's unbundling
     obligations in any area where at least one requesting carrier has
     deployed transport facilities and has collocated its own
     transmission equipment in an incumbent LEC central office.[^677] We
     reject this argument. Although the incumbents' evidence shows that
     nearly 30,000 route miles of fiber have been deployed in the top 50
     MSAs, there are few, if any alternative transport facilities
     outside the incumbent LECs' networks that connect all or most of an
     incumbent LEC's central offices and interexchange carriers' points
     of presence within an MSA.[^678] Even where competitive
     alternatives exist, the alternatives generally do not travel the
     same routes as the incumbent's facilities. Thus, even if
     competitors were able to purchase indirect routing from alternative
     providers, to the extent alternatives exist, competitors more than
     likely have to route their traffic along indirect, inefficient
     routing patterns, thereby increasing their costs of
     transport.[^679] Thus, contrary to arguments made by incumbent
     LECs, we find that the evidence demonstrates that a significant
     number of central offices in a given MSA are not effectively served
     by competitive fiber facilities.

344. We reject any bright-line test that triggers elimination of an
     incumbent LEC's unbundling obligation based on the presence of a
     single competitor that has self-provisioned transport in a
     particular market. As discussed above, in order to determine
     whether or not a requesting carrier's ability to provide the
     services it seeks to offer is "impaired" within the meaning of
     section 251(d)(2), we must determine whether alternatives outside
     the incumbent's network are available as a practical, economic, and
     operational matter, and determine whether unbundling a particular
     element is consistent with the goals of the Act.[^680]

345. In particular, we find that basing our unbundling rules on the
     bright-line proposed by the incumbents does not address whether
     lack of unbundled access to the incumbent's ubiquitous transport
     facilities would impair other requesting carriers' ability to
     provide the services they seek to offer. Indeed, under the test
     proposed by the incumbents, the first new entrant to deploy
     transport facilities in any particular market would determine the
     degree and pace of competition in that market as well as the scope
     of an incumbent LEC's unbundling obligation, and would potentially
     result in the presence of only two competitors in the market
     (*e.g*. a duopoly). Limiting the development of competition in such
     a manner is contrary to the goals of the Act and is inconsistent
     with the purpose of our unbundling rules.

346. In order to provide service, competitive LECs require dedicated
     transport facilities that are more extensive than those that are
     currently deployed along the point-to-point routes. The competitive
     alternatives that are available along limited point-to-point routes
     do not necessarily allow competitive LECs to connect their
     collocation arrangements or switching nodes according to the needs
     of their individual network designs. These carriers also require
     dedicated transport to deliver traffic from their own traffic
     aggregation points to the incumbent LEC's network for purposes of
     interconnection. Without access to the incumbent's ubiquitous
     transport facilities, competitive LECs are faced with the delays
     and costs of deploying their own transport facilities to meet the
     demand. Alternatively, competitive LEC's must utilize a patchwork
     of competitive alternatives, where available, to collect and route
     traffic to the required destination.

347. *Entrance Facilities*. Bell Atlantic and BellSouth specifically
     argue that extensive deployment by competitive LECs of the
     transport link between the interexchange carrier point of presence
     and an incumbent's serving wire center (the "entrance facility"),
     requires us to find that requesting carriers are not impaired in
     their ability to serve these point-to-point markets.[^681]
     According to Bell Atlantic, for example, there are competitors that
     serve approximately 90 percent of Bell Atlantic's special access
     transport customers.[^682] According to BellSouth, 19 percent of
     their wire centers have at least one actual or pending collocation
     arrangement and one actual or pending entrance facility.[^683]

348. We acknowledge that, based on the record before us, the entrance
     facility market appears to be the most mature segment of the
     interoffice transport market, and thus may, in some situations,
     provide requesting carriers with effective alternatives to
     unbundled transport for certain point-to-point routes.[^684] The
     record does not indicate, however, the extent to which these
     facilities are available to other requesting carriers or whether
     the location of these facilities serve the transport needs of
     requesting carriers seeking to provide service to particular
     locations. In particular, the incumbents' data does not indicate
     the locations at which competitive entrance facilities terminate,
     or whether the facilities connect incumbent LEC serving wire
     centers to all or substantially all of the interexchange carrier
     points of presence. Accordingly, we cannot conclude, based on the
     record before us, that the competitive entrance facility market is
     providing requesting carriers with effective alternatives to
     unbundled transport for all, or substantially all of the routes
     requesting carriers would need in order to provide the services
     they seek to offer.

349. *Dark Fiber*. Incumbent LECs argue that some competitive LECs have
     deployed significant amounts of fiber to meet the growing demand
     for transport services, and that competitive LECs are not impaired
     without access to the incumbent's unbundled dark fiber.[^685]
     Incumbent LECs further argue that the presence of competitive fiber
     in dense wire centers is evidence of a wholesale market for
     dedicated transport,[^686] and support this claim by providing
     anecdotal evidence that competitors are swapping fiber capacity
     with each other.[^687] We disagree. Rather, we agree with those
     commenters that argue that a competitive wholesale market for
     alternative network elements has not developed for dedicated
     transport, in part because of the lack of ubiquitous transport
     alternatives.[^688]

350. Although there is evidence of transport deployment by non-incumbent
     providers along some point-to-point routes, the record does not
     support a general finding that requesting carriers can, on a
     ubiquitous basis, practically and effectively substitute transport
     services provided by other competitive carriers for unbundled
     transport. Indeed, the record indicates that the "fiber frenzy" and
     "bandwidth markets" cited by incumbent LECs are largely limited to
     portions of inter-city, long-haul networks that do not ubiquitously
     reach the interoffice segments of the incumbent LEC's
     network.[^689] Lack of access to ubiquitous transport alternatives,
     which allow competitive LECs to interconnect their networks with
     all the central offices serving their customers, will impair these
     carriers' ability to provide the services they seek to offer.[^690]
     Accordingly, we reject the incumbent LECs' argument that the
     presence of a competitive transport alternatives along certain
     routes is evidence that requesting carriers generally are not
     impaired without access to the incumbents' unbundled dark fiber.

351. In addition, to the extent that there may be excess capacity along
     these fiber routes, non-incumbent providers of competitive
     transport facilities are under no legal obligation to offer their
     excess capacity to their competitors. Moreover, interexchange
     carriers (IXCs) operate both as access customers of the incumbent
     LEC, as well as the incumbent's competitor in the local exchange
     market. These inter-carrier relationships complicate the
     functioning of an effective wholesale transport market because the
     alternative provider of transport is also a significant
     competitor.[^691] In these circumstances, it is possible that local
     affiliates of IXCs could potentially discriminate against
     unaffiliated requesting carriers seeking access to competitive
     transport facilities by denying access altogether.

352. Although we include dark fiber in the unbundling obligations of
     section 251(c)(3), we note that GTE argues that it must maintain
     control of its dark fiber reserves because, as a carrier of last
     resort, it is obliged to provide service to any and all customers
     as the need arises.[^692] GTE also argues that requiring incumbent
     LECs to make their reserve capacity available to new entrants
     discourages long term business planning and deprives the incumbents
     of the fruits of their investment.[^693] We note that with the
     addition of electronics such as Dense Wave Division Multiplexing
     (DWDM) equipment, incumbent and competitive carriers alike can
     expand the bandwidth of existing capacity without installing new
     dark fiber.[^694] We find that technological solutions such as
     these largely address GTE's concern that unbundled access to dark
     fiber may adversely affect its ability to provide service. In
     addition, however, if incumbent LECs are able to demonstrate to a
     state commission that unbundling dark fiber threatens their ability
     to provide service as a "carrier of last resort," states have the
     flexibility to establish reasonable limitations and technical
     parameters for dark fiber unbundling.[^695] We conclude, however,
     that for a limitation on dark fiber to be reasonable, it must
     relate to a likely and foreseeable threat to an incumbent LEC's
     ability to provide service as a carrier of last resort. In
     establishing reasonable limitations and technical parameters for
     dark fiber, states should acknowledge that requesting carriers
     require regulatory certainty in order to implement their business
     plans.

353. *Other Technologies*. We reject Bell Atlantic's proposal that the
     Commission consider the availability of wireless transport in our
     unbundling analysis.[^696] The record does not demonstrate that
     wireless transport options are available across any particular MSA.
     Nor does the record address the question of whether integrating
     wireless transport offerings into a wireline transport network
     allows providers to offer service of the same quality and
     functionality as they would be able to offer using wireline
     alternatives. Notably, NEXTLINK, the largest Local Multipoint
     Distribution Service (LMDS) licensee and a potential source of
     competitive wireless transport, supports the continued availability
     of unbundled dedicated transport network elements.[^697]

354. *Tariffed Offerings*. We also reject GTE and US West's argument
     that competitive LECs have access to ubiquitous transport through
     the use of the incumbents' special access tariff
     arrangements.[^698] As discussed above, we give little weight to
     the incumbent LEC's special access tariffs.[^699] Moreover, the
     Commission previously rejected this argument in the *Local
     Competition First Report and Order*.[^700] For reasons the
     Commission articulated in that order, we reject the incumbents'
     argument here. If we were to adopt the incumbents' approach, the
     incumbents could effectively avoid all of the 1996 Act's unbundling
     and pricing requirements by offering tariffed services that,
     according to the incumbents, would qualify as alternatives to
     unbundled network elements. This would effectively eliminate the
     unbundled network element option for requesting carriers, which
     would be inconsistent with Congress' intent to make available to
     requesting carriers three different competitive strategies,
     including access to unbundled network elements.

355. [Cost]{.underline}. We conclude that the costs of self-provisioning
     dedicated transport facilities materially diminish a requesting
     carrier's ability to provide the services it seeks to offer. We
     agree with commenters that argue that replicating the incumbent's
     vast and ubiquitous transport network would be prohibitively
     expensive, and delay competitive entry.[^701] In the *Local
     Competition First Report and Order,* the Commission concluded that
     a requesting carrier would incur "much higher costs" if it "had to
     construct all of its own facilities" to match the scope of an
     incumbent LEC's interoffice transport network.[^702] Nothing has
     changed in the intervening three years to cause us to alter this
     conclusion. Indeed, based on the record before us, we conclude that
     the material costs and delays associated with self-provisioning
     duplicate, ubiquitous transport facilities would impair a
     competitive LEC's ability to offer services to a broad base of
     consumers. Accordingly, we require incumbent LECs to offer
     unbundled access to their dedicated transport facilities.

356. Self-provisioning dedicated transport requires competitive LECs to
     incur significant direct and other costs, including the cost of
     fiber, the cost of deploying fiber in public rights of way,
     trenching and the cost of purchasing and collocating the necessary
     transmission equipment.[^703] For example, the record indicates
     that the direct equipment costs of purchasing interoffice transport
     equipment exceeds \$300 per line,[^704] and that the cost of
     constructing alternative transport facilities (*e.g.,* digging and
     backfilling trench) are between \$200,000 - \$300,000 per mile in
     densely populated areas.[^705] According to GTE, the direct cost of
     constructing a one hundred mile dedicated transport facility is
     close to \$3 million.[^706]

357. In addition, in order to use alternative transport facilities,
     either through self-provisioning or through third-party providers,
     a competitive LEC must collocate at the incumbent's central office.
     Collocating in each end office imposes materially greater costs on
     requesting carriers than would the purchase of the incumbent's
     interoffice transport facilities. Based on the record, it appears
     that the current range for non-recurring charges for provisioning
     physical collocation arrangements is between \$15,000 and \$508,000
     for each central office where a competitor serves customers with
     unbundled loops.[^707] This results in an increase of between 15
     and 20 percent to the costs of the equipment installed in the
     cage.[^708] In addition to the substantial costs of constructing
     and collocating self-provisioned transport facilities, competitive
     LECs must incur additional of negotiating and obtaining municipal
     rights-of-way permissions^.^ [^709]

358. If a competitive LEC were required to obtain transport from
     multiple, non-ubiquitous alternative providers of transport, to the
     extent it is available, they would incur additional costs
     associated with coordinating back office billing and collection
     arrangements, as well as the costs associated with coordinating
     operational issues arising out of use of multiple vendors.[^710]
     While we acknowledge that the precise level of costs will vary
     according to the business plans of each competitive LEC, we
     conclude that contracting with third-parties to coordinate among
     multiple carriers in order to serve ubiquitously would materially
     diminish the ability of a requesting carrier to provide the
     services it seeks to offer. Moreover, because purchasing transport
     capacity is generally less expensive at higher levels of capacity,
     competitive LECs using multiple providers would lose efficiencies
     they would otherwise achieve if they were able to aggregate their
     traffic over the facilities of one ubiquitous provider.[^711]

359. We reject the incumbent LECs' cost models that purport to
     demonstrate that the fact that competitors have deployed a
     significant amount of fiber in downtown business districts is
     evidence that the cost of self-provisioning transport facilities
     does not impair a competitive LEC's ability to provide the service
     it seeks to offer.[^712] We find that cost models estimating the
     costs of self-provisioning transport are highly sensitive to
     assumptions that are not necessarily representative of the actual
     market place. For example, BellSouth provides a cost model that
     analyzes the transport networks of several competitive LECs located
     in Atlanta, and projects that the costs to the competitive LECs of
     extending the scope of their network to reach all central offices
     within that city is between \$35 and \$38 per DS1.[^713] BellSouth
     does not explain the difference between its model's cost estimate
     of \$35-\$38 per month, per dedicated DS1 and the cost estimate of
     \$84 per month, per dedicated DS1 generated by a model the
     Commission developed in its universal service proceeding.[^714] Nor
     does BellSouth explain why the costs generated by its model are
     significantly lower than the costs generated by the model developed
     by Hatfield Associates, Inc., which shows the cost of a DS-1 to be
     \$110 per month.[^715] Moreover, it is not clear whether
     BellSouth's cost estimates assume full utilization of the transport
     facilities. For competitive LECs entering the market that have
     little usage, the relevant comparison between the costs of
     self-provisioning and purchasing unbundled transport from the
     incumbent should be based on the number of DS1s actually carried,
     not on the number of DS1s that could potentially be used by the
     requesting carrier.

360. Ameritech proposes the use of a model that, it asserts, shows that
     in two second tier cities in Ameritech's territory, it is
     economical for competitive LECs to build ubiquitous transport
     networks of less than 100 miles to wire centers with a total of
     100,000 access lines.[^716] Even assuming, *arguendo*, that
     Ameritech's model accurately projects the theoretical viability or
     profitability of extending a competitive LEC's transport network,
     as noted by the Supreme Court, the ability to "amass earnings"
     alone is not dispositive of whether or not a requesting carrier is
     impaired without access to the incumbent's unbundled transport.
     [^717]We therefore find that cost models proposed by BellSouth,
     Ameritech, and others do not accurately indicate the extent to
     which the costs associated with self-provisioning transport
     materially diminish a requesting carrier's ability to provide the
     services it seeks to offer. Finally, as discussed above, we do not
     base our unbundling analysis on individual business case
     analyses.[^718]

361. [Timeliness]{.underline}. We conclude that lack of access to the
     incumbent's interoffice transport network would materially delay a
     requesting carrier entry into the local market or alternatively
     delay expansion of an existing carrier's service offerings. Whether
     requesting carriers self-provision interoffice transport, or
     purchase it from third-party providers, they must collocate their
     own equipment at the incumbent's central office. Thus, collocation
     is an essential prerequisite to self-provisioned and third-party
     provisioned transport, and the time required to collocate affects a
     requesting carrier's ability to provide service using dedicated
     transport.

362. Incumbents and requesting carriers provide different estimates
     about the time required to implement a single collocation
     arrangements in an incumbent LEC's central office. In general,
     competitive LECs argue that each collocation arrangement requires
     between six months and a year to provision.[^719] In addition,
     these carriers argue that the delay associated with implementing
     collocation arrangements is compounded as competitive LECs expand
     their networks and seek to establish more collocation
     arrangements.[^720] Incumbent LECs respond that they have
     provisioned collocation to requesting carriers in a timely fashion
     and on a broad scale.[^721]

363. We acknowledge that collocation arrangements necessarily require
     some time to implement, and that the amount of time required to
     order and provision a collocation arrangement will vary from
     incumbent LEC to incumbent LEC and by requesting carrier.
     Accordingly, we do not attempt to specifically quantify what
     constitutes a reasonable provisioning interval for a single
     collocation arrangement. We agree, however, with commenters that
     provisioning the multiple collocation arrangements needed to
     provide a ubiquitous transport network within an MSA would compound
     significantly the inherent delays associated with provisioning a
     single collocation arrangement. NorthPoint contends that most
     incumbent LECs have imposed "governors" on the number of
     collocation applications they will accept.[^722] Specifically,
     BellSouth has limited the number of collocation applications a
     requesting carrier may file to five per month, thereby delaying
     ubiquitous rollout of services.[^723] Requiring requesting carriers
     to collocate in numerous end offices in order to obtain ubiquitous
     transport facilities would materially delay the ability of
     requesting carriers to enter a market or to expand its service
     offerings to the greatest number of consumers.

364. Several carriers argue that the process of securing necessary
     access to rights-of-way, pole attachments, and conduit space
     significantly delays their ability to compete.[^724] For example,
     NEXTLINK notes that it took two years to negotiate and obtain a
     telecommunications franchise from the City of New York before it
     could deploy competitive facilities, and that it must negotiate
     separate agreements with each municipality traversed by its fiber
     ring.[^725] We find that the delays of this magnitude associated
     with obtaining authority to access public rights-of-way materially
     delay the ability of a requesting carrier to self-provision
     transport.

365. [Functionality and Quality]{.underline}. We conclude that requiring
     carriers to utilize alternative sources of transport imposes
     functional and quality disadvantages that materially diminish a
     requesting carrier's opportunity to provide the services it seeks
     to offer. If the Commission were to adopt the incumbent LEC
     proposals to eliminate unbundled access to interoffice transport in
     areas where there are one or more alternative suppliers in the
     market, carriers would have to use multiple alternative suppliers,
     where available, for their transport requirements. Using a
     patchwork of transport offerings consisting of facilities acquired
     from competitive LEC/competitive access providers and the incumbent
     LEC, in lieu of ubiquitous incumbent LEC transport facilities,
     would introduce additional complexity into a ubiquitous end-to-end
     transport network. For example, Sprint notes that when facilities
     of more than one carrier are involved, repair times are roughly
     three times longer than if the entire transport network were
     controlled by one carrier or provisioned exclusively through
     unbundled transport.[^726] In addition, Sprint argues that an
     end-to-end transport offering provisioned by multiple providers may
     require several digital-to-analog and analog-to-digital conversions
     or protocol conversions, which could lower total connection speeds
     otherwise achievable with a single provider transport
     offering.[^727] Although we do not conclude that digital-to-analog
     or analog-to-digital protocol conversions result in a material
     quality degradation, we find that, as a general matter, requiring
     requesting carriers to utilize a patchwork of competitive
     alternatives, to the extent they are available, to collect and
     route traffic to the required destination can result in a material
     degradation of quality in the service the requesting carrier to
     seeks to provide.

366. [Goals of the Act]{.underline}***.*** We recognize that requiring
     incumbent LECs to unbundle dedicated transport may be marginally
     overinclusive because of the presence of some alternative fiber
     along selected point-to-point routes in dense markets. We believe,
     however, that the benefits of uniform transport unbundling outweigh
     the costs of creating a patchwork regime in which incumbent LECs
     would likely seek to litigate its transport unbundling obligation
     on particular point-to-point routes where transport alternatives
     are arguably available. As we stated above, unbundling requirements
     that provide uniformity and certainty to the market will allow new
     entrants and fledgling competitors to implement national and
     regional business plans and attract capital investment. Litigation
     over the incumbents' unbundling obligations requires the parties to
     these agreements and the state commissions that approve them to
     expend vast amounts of time and resources and would impede the
     development of competition.

367. Creating a patchwork of transport unbundling obligations would be
     inconsistent with the goal of the 1996 Act to facilitate rapid
     entry into the local exchange market. We reiterate the Commission's
     conclusion in the *Local Competition First Report and Order* that
     "\[w\]e recognize that there are alternative suppliers of
     interoffice facilities in certain areas. We are convinced, however,
     that entry will be facilitated if competitors have greater, not
     fewer, options for procuring interoffice facilities as part of
     their local networks, and that Congress intended for competitors to
     have these options available from competitors."[^728] Furthermore,
     we believe that our decision to unbundle interoffice transport is
     consistent with Congress' recognition, in section 271, that
     providing unbundled access to interoffice transport would encourage
     rapid entry into the local exchange market.[^729]

368. We further find that the allegations of the competitive harms
     resulting from a uniform transport unbundling obligation are
     overstated. We believe that there are significant operational and
     technical incentives for a requesting carrier to eliminate its
     reliance upon transport provided by incumbent LECs over the long
     term.[^730] Where alternative providers build transport facilities
     to areas exclusively served by the incumbent LEC's facilities,
     requesting carriers may substitute those alternative sources of
     transport as they become available. We therefore expect the need
     for unbundled transport will decrease as competitive transport
     networks become more ubiquitous. We will closely monitor the
     developments in the transport market to determine whether the
     transport market, or a particular segment of this market, is
     supplying requesting carriers with effective alternatives to the
     incumbent LEC's unbundled network elements when we reexamine these
     rules in three years.[^731]

#### Shared Transport

369. We find that lack of unbundled access to incumbent's shared
     transport would impair the requesting carrier's ability to use
     unbundled switching.[^732] In particular, without access to
     unbundled shared transport, a requesting carrier would have to
     self-provision or purchase dedicated transport from the incumbent,
     which would materially increase the costs and decrease the quality
     of services the requesting carrier could provide, and would
     materially limit the carrier's ability to serve a broad base of
     customers. Accordingly, where an incumbent LEC provides requesting
     carriers with access to unbundled switching, we require incumbent
     LECs also to provide access to unbundled shared transport services.

##### Definition

370. In the *Local Competition Third Reconsideration Order*, the
     Commission defined shared transport as transmission facilities
     shared by more than one carrier, including the incumbent LEC,
     between end office switches, between end office switches and tandem
     switches, and between tandem switches in the incumbent LEC's
     network.[^733] The Commission clarified in that proceeding that
     incumbent LECs are not required to provide shared transport between
     incumbent LEC switches and serving wire centers.[^734] No commenter
     in this phase of the proceeding specifically addressed the
     definition of shared transport and the record provides no basis for
     modifying our definition of shared transport.

371. Ameritech, however, argues that shared transport is not an
     "unbundled" network element within the meaning of section
     251(c)(3). Specifically, Ameritech argues that under the Supreme
     Court's ruling, incumbent LECs must provide to requesting carriers
     pre-assembled combinations of individual unbundled network elements
     if the element can be purchased separately.[^735] Because shared
     transport is technically inseparable from unbundled switching
     requesting carriers do not have the option of using unbundled
     shared transport without also taking unbundled local switching.
     Thus, according to Ameritech, the shared transport element is not
     an "unbundled" element within the meaning of section
     251(c)(3).[^736]

372. We reject Ameritech's arguments. The Supreme Court upheld the
     Commission's interpretation that the phrase "on an unbundled basis"
     in section 251(c) does not refer to physically separated elements
     but rather to separately priced elements.[^737] Shared transport is
     an "unbundled" element because it consists of separately priced
     switching and transport network elements. The fact it is
     technically infeasible for a competitor to use shared transport
     with self-provisioned switching is irrelevant to whether an element
     is "unbundled" pursuant to section 251(c)(3). In addition, the
     Eighth Circuit, in affirming our decision in the *Local Competition
     Third Reconsideration Order,* rejected Ameritech's argument when it
     held that shared transport meets the definition of an unbundled
     network element because it is a "feature, function, \[or\]
     capability," that is provided by facilities and equipment used in
     the provision of a telecommunications service.[^738] Accordingly,
     we conclude that shared transport meets the definition of an
     unbundled network element.

##### Proprietary Concerns Associated With Shared Transport

373. Ameritech asserts that its routing table used to provide shared
     transport is proprietary. As discussed above, we reject Ameritech's
     claim because we find that incumbent LECs may not withhold access
     to unbundled local switching on the grounds that switch routing
     tables are proprietary in nature under section 251(d)(2)(A).[^739]
     With the exception of Ameritech, no commenter identifies any
     proprietary concerns associated with the provision of shared
     transport, and we identify none. Accordingly, we analyze shared
     transport under the "impair" standard of section 251(d)(2)(B).

##### Unbundling Analysis

374. We conclude that a requesting carrier's ability to provide the
     services it seeks to offer is impaired without access to the
     incumbent's unbundled shared transport. Without access to unbundled
     shared transport, a requesting carrier would have to self-provision
     or purchase dedicated transport from the incumbent, which would
     materially increase the costs and decrease the quality of services
     the requesting carrier could provide, and would materially limit
     the carrier's ability to serve a broad base of customers.[^740]
     Accordingly, we conclude that incumbent LECs must provide unbundled
     access to shared transport.

375. [Costs and Quality]{.underline}. We find that lack of unbundled
     access to the incumbent's shared transport facilities materially
     increases a requesting carrier's costs of providing service. As
     described above, we find that there is a lack of ubiquitous
     transport alternatives available to requesting carriers. Thus,
     without access to the incumbent's shared transport facilities, a
     requesting carriers must either deploy its own dedicated facilities
     or purchase dedicated transport from the incumbent. Because
     requesting carriers, in the early stages of entering the local
     market, may not yet have sufficient market information to forecast
     accurately their traffic volumes, they may miscalculate the amount
     of dedicated transport capacity they will need. Specifically, an
     inability to reasonably forecast traffic volumes would likely cause
     a requesting carrier to purchase an insufficient amount, or
     conversely, too much dedicated transport capacity. In shared
     transport arrangements, the switch routes the competitor's traffic
     through the most efficient trunking group available. The trunking
     group is shared among many users, including the incumbent LEC's end
     users, thereby reducing requesting carrier costs and utilizing
     capacity only when necessary to route and complete a call.[^741]

376. In addition, as traffic demands increase, a requesting carrier will
     incur a non-recurring charge each time it purchases additional
     transport capacity. In contrast, where a requesting carrier
     purchases unbundled shared transport to meet increased customer
     demand, it effectively purchases the entire capacity of the
     incumbent LEC's network and will not incur non-recurring charges
     for additional increments of dedicated transport capacity.
     Purchasing only those increments of capacity that the requesting
     carrier requires to meet demand eliminates inefficient use of
     dedicated transport facilities. In addition, at low volumes
     requesting carriers will incur significantly higher recurring,
     per-minute costs to substitute dedicated transport for shared
     transport arrangements at low volumes. We reiterate the
     Commission's conclusion in the *Third Order on Reconsideration*
     that "the relative costs of dedicated transport, including the
     associated NRCs \[non-recurring charges\], is an unnecessary
     barrier to entry for competing carriers."[^742]

377. According to Ameritech, competitive LECs have the option of using
     its end office integration (EOI) service, a tariffed, retail
     service that Ameritech claims will carry, on a minute-of-use basis,
     whatever interoffice transport traffic the competitive LEC delivers
     to its point of interconnection.[^743] Under this plan, Ameritech
     would not require requesting carriers to order dedicated transport
     facilities until their actual volume levels justified provisioning
     a dedicated trunk. Consistent with the little weight we afford the
     incumbents' tariffed offerings for consideration as an alternative
     to dedicated transport, we reject the argument that Ameritech's
     tariffed EOI service eliminates the obligation to unbundle shared
     transport.[^744]

378. We agree with commenters that argue that the ability to obtain
     access to shared transport enables them to handle traffic at peak
     loads and maintain call blockage levels that are at parity with
     those of the incumbent LECs.[^745] As the Commission stated in the
     *Local Competition Third Reconsideration Order*, a new entrant
     entering the local market with smaller traffic volumes would have
     to maintain greater excess transport capacity relative to the
     incumbent LEC in order to provide the same level of service quality
     (*i.e.* same level of successful call completion) as the incumbent
     LEC.[^746] We conclude a requesting carrier would be impaired
     without access to unbundled shared transport because it would have
     to choose between purchasing excess capacity or incurring increased
     call blockage rates.

379. [Goals of the Act]{.underline}. We find that requiring incumbent
     LECs to provide unbundled access to shared transport is consistent
     with the Act's goal of encouraging requesting carriers to rapidly
     enter the local market and serve the greatest number of customers.
     Requiring unbundled access to shared transport is particularly
     important because it addresses the transport needs of requesting
     carriers in the early stages of competitive entry by allowing
     competitors to efficiently purchase transport facilities as they
     ramp up toward higher-capacity dedicated transport requirements.
     Furthermore, when used in conjunction with unbundled switching,
     requesting carriers may find it economical to serve the small
     business and residential markets using shared transport because
     these market segments may not always support traffic volumes that
     justify using dedicated transport services. Accordingly, we find
     that requiring unbundled access to shared transport promotes the
     prompt development of competition to serve the greatest number of
     customers, as intended by the Act.

## Signaling Networks and Call-Related Databases

### Signaling Networks

#### Background 

380. In the *Local Competition First Report and Order*, the Commission
     concluded that incumbent LECs, upon request, must provide
     nondiscriminatory access to their signaling networks on an
     unbundled basis.[^747] The Commission stated that it was
     technically feasible for incumbent LECs to provide such access, and
     that such access was critical to entry in the local exchange
     market.[^748] The Commission concluded that incumbent LECs must
     provide unbundled access to signaling networks as part of the
     unbundled switch network element as well as on a standalone
     basis.[^749]

381. In the *Notice,* we sought comment on the application of the
     "necessary" and "impair" standards to previously identified
     unbundled network elements, including signaling networks.[^750] The
     *Notice* also requested that parties include specific costs and an
     analysis of the availability of alternative signaling
     facilities.[^751]

382. The majority of state commissions and competitive LECs commenting
     in this phase of the proceeding argue that the incumbent LECs'
     signaling networks should be unbundled because alternatives to the
     incumbents' signaling networks are more costly, have lower quality,
     and do not provide the ubiquity of the incumbents' networks.[^752]
     The incumbent LECs argue that based on the availability of
     alternative signaling providers, requesting carriers are not
     impaired in their ability to provide services.[^753]

#### Discussion

383. We conclude that without unbundled access to the incumbent LECs'
     signaling networks, a requesting carrier's ability to provide the
     services it seeks to offer is impaired. Requiring a requesting
     carrier to obtain signaling from alternative sources would
     materially diminish its ability to provide the services it seeks to
     offer, due to the quality differences between the signaling
     networks available from the incumbent LEC and those available from
     alternative providers of signaling. As described below, we conclude
     that neither self-provisioning signaling networks, nor obtaining
     this element from third-party sources, is a sufficient substitute
     that would justify excluding signaling networks from the incumbent
     LECs' unbundling obligation under section 251(c)(3). We therefore
     require incumbent LECs to provide requesting carriers with
     unbundled access to their signaling networks.

##### Definition

384. In the *Local Competition First Report and Order*, the Commission
     defined the signaling network element as including, but not limited
     to, signaling links and signaling transfer points (STPs).[^754] No
     party commenting in this phase of the proceeding has asked us to
     modify our definition, and we find no marketplace developments that
     would cause us to re-evaluate our definition of the signaling
     network element. Accordingly, we reaffirm the definition of
     signaling networks that was adopted in the *Local Competition First
     Report and Order*.[^755]

##### Proprietary Analysis

385. We agree with commenters that signaling links and STPs are not
     proprietary.[^756] Moreover, we do not discern any copyright,
     patent, or trade secret implications to unbundling signaling links
     and STPs, and carriers do not generally rely upon their signaling
     links and STPs to differentiate themselves from their competitors.
     In addition, SS7 signaling networks generally adhere to Bellcore
     standards rather than LEC-specific protocols, and provide seamless
     connectivity between networks.[^757] We therefore conclude that
     signaling links and STPs are not proprietary elements, and we
     analyze signaling networks under the "impair" standard of section
     251(d)(2)(B).

##### Unbundling Analysis

386. Current switch technology requires each local switch to connect to
     a single STP.[^758] All parties, including incumbent LECs, agree
     that because the incumbent LECs' switching networks are already
     connected to a STP, a carrier that purchases unbundled switching
     from an incumbent LEC must also purchase signaling from that
     incumbent LEC.[^759] In such cases, the incumbent LEC must provide
     access to its signaling network from that switch in the same manner
     in which it obtains such access itself.[^760]

387. A requesting carrier that has deployed its own switch, or has
     purchased switching from an alternative source, however, may
     purchase signaling from an incumbent LEC and link its switch to the
     incumbent LEC's signaling network. Alternatively, the requesting
     carrier may self-provision signaling or purchase signaling from an
     alternative provider. Thus, the only issue left to be resolved is
     whether competitive LECs that do not purchase switching from an
     incumbent LEC are impaired without unbundled access to the
     incumbent's signaling network element.

388. We conclude that regardless of whether a requesting carrier
     self-provisions its own switching, or purchases switching from an
     alternative source, the incumbent LEC must provide the requesting
     carrier with unbundled access to the incumbent's signaling network,
     pursuant to section 251(c)(3). Consistent with our framework for
     unbundling as set forth above, we find that in such situations,
     lack of access to unbundled signaling systems materially diminishes
     the ability of a requesting carrier to provide the services it
     seeks to offer. In particular, requiring a competitor to
     self-provision or use alternative sources of signaling materially
     degrades the quality of its service to end users and materially
     restricts its ability to provide service on a ubiquitous basis. We
     therefore require incumbent LECs to provide requesting carriers
     that have deployed their own switching facilities access to the
     incumbent LEC's unbundled signaling network for each of the
     requesting carrier's switches. This connection shall be made in the
     same manner as an incumbent LEC connects one of its own switches to
     a signaling transfer point.

389. [Alternatives in the Market]{.underline}. The record indicates that
     there are several alternatives to the incumbent LECs' signaling
     networks available in the market.[^761] In particular, there are
     six major facilities-based SS7 network providers (AT&T, MCI
     WorldCom, Illuminet, TNX, GTE-INS, and SBC/SNET) and four mid-sized
     facilities-based SS7 network providers (GST, ICG, Intermedia and US
     LEC), that operate regional SS7 networks.[^762] In GTE's service
     area, twelve competitive LECs have opted to build their own
     signaling networks.[^763] In addition, there are several suppliers
     of the equipment used to operate a signaling network: Lucent,
     Tekelec, Nortel, Alcatel, IEX Corporation, SummaFour, and
     Siemens.[^764] We also note that the equipment produced by these
     companies is based on standard interfaces and protocols.

390. As discussed above, however, the mere existence of alternatives
     outside the network does not mean that requesting carriers are not
     impaired without unbundled access to the incumbent LEC's
     network.[^765] Based on our analysis of the factors identified
     above, we find that a requesting carrier is materially diminished
     in its ability to offer service if it is not able to purchase
     signaling as an unbundled network element.[^766]

391. [Cost]{.underline}. In light of the significant evidence of
     multiple third-party providers of signaling, we disagree with
     parties that assert that self-provisioning signaling, or obtaining
     signaling from alternative providers, would involve substantial and
     material cost and would delay competition in the local
     market.[^767] Although several states and competitive LECs argue
     that replication of the incumbent LEC's signaling network would be
     "extremely costly," they have not submitted cost data in the record
     to support their claims.[^768]

392. Unlike self-provisioning a switch or network elements that are
     dedicated to individual subscribers (*i.e.* the NID), deploying a
     signaling network does not require a requesting carrier to incur
     substantial sunk and fixed costs, because a carrier does not need
     multiple signaling facilities in order to establish a signaling
     network that is capable of providing service to a broad base of
     customers. Rather, existing technology permits the carrier that is
     using its own switch to route signals over a single set of A-links
     (links between a specific end office and the SS7 network for any
     given point code).[^769] The carrier's single STP can serve its
     entire network. Alternatively, a competitive LEC can purchase
     signaling from the non-incumbent sources mentioned above. We agree
     with MGC that cost-effective SS7 signaling networks are generally
     available on a national basis.[^770]

393. Several parties argue that because alternative signaling providers
     have not established the ubiquitous presence to match the incumbent
     LECs' signaling footprint, the cost of transport to an alternative
     provider's signaling network materially increases the requesting
     carrier's cost.[^771] Replicating the ubiquitous signaling networks
     of the incumbent LECs may be prohibitively expensive for some
     competitive LECs. In addition, new entrants in the local market
     most likely do not have the scale necessary to justify the
     investment needed to replicate the incumbent LECs' signaling
     networks. We do not find sufficient evidence in the record,
     however, to support a conclusion that the cost of self-provisioning
     or purchasing signaling from alternative sources, in and of itself,
     would require us to unbundle the incumbent's signaling network.
     Accordingly, we find that the cost of non-incumbent LEC alternative
     signaling networks is not dispositive of whether or not a
     competitive LEC's ability to provide the services it seeks to offer
     is materially diminished. For reasons we discuss below, however, we
     do find that competitive LECs need to have access to a ubiquitous
     signaling network in order to ensure the same quality of service as
     the incumbents.

394. [Ubiquity and Quality]{.underline}. Although we do not conclude
     that the cost of self-provisioning alternative signaling impairs a
     requesting carrier's ability to provide the services it seeks to
     offer, we find that lack of access to the incumbent LECs'
     ubiquitous networks materially diminishes this ability. We agree
     with commenters who argue that because alternative vendors of
     signaling networks only have a few geographically dispersed STPs,
     they cannot provide requesting carriers with signaling that is of
     comparable quality to that of the incumbent LECs' signaling
     networks.[^772]

395. The ubiquitous nature of an incumbent LEC's signaling network
     provides it with advantages that competitive LECs cannot achieve
     through use of alternative signaling networks. For example, the
     Bell Operating Companies have deployed at least one STP in every
     LATA.[^773] Each of the incumbent LEC's STPs is connected to one or
     more incumbent switches serving customers limited to a particular
     geographic area within the incumbent LEC's region, while
     alternative signaling systems typically rely on a very few or even
     a single STP pair as a gateway to its signaling system.[^774]
     Consequently, if a competitive LEC uses an alternative provider of
     signaling, the competitive LEC's entire customer base may be
     connected to a single STP pair. If an outage occurs within the
     incumbent LEC's signaling network, only those customers served by
     switches connected to that particular STP will be adversely
     affected. In contrast, where a competitive LEC relies on one or a
     small number of STPs to serve its entire network, a greater
     portion, if not all, of the competitive LECs' customers will be
     negatively affected by a network outage.[^775] The lack of access
     to a ubiquitous signaling network could adversely impact the
     competitive LEC's customer satisfaction, thereby placing the
     competitive LEC at a disadvantage vis-à-vis the incumbent.

396. We note that Time Warner claims that alternative signaling networks
     lack diversity in signaling links that provide redundant signaling
     paths, and this lack of diversity reduces the reliability of the
     signaling network.[^776] Time Warner argues that this lack of
     diversity also leads to more frequent outages that directly impact
     customer satisfaction.[^777] Although we agree that lack of
     diversity in signaling networks could very likely result in greater
     numbers of customers affected by network outages, Time Warner has
     not provided evidence in this proceeding to support its specific
     claim.

397. Other commenters identify similar quality issues associated with
     the use of alternative signaling networks. [^778] We agree that a
     lack of redundant signaling paths may increase the likelihood that
     more customers may be affected by signaling outages. We are,
     however, unable to conclude based on the record before us, if the
     outages attributed to a lack of diversity are isolated incidents,
     or if they are the result of an increased risk of failure. Thus, we
     do not base our decision to unbundle the incumbent LECs signaling
     networks on the lack of diversity in alternative providers'
     signaling networks. As discussed above, however, we find that a
     competitive LEC's ability to provide the service it seeks to offer
     is materially diminished, because alternative providers' signaling
     networks lack the ubiquity of the incumbent LECs' networks, and
     that larger portions of a requesting carrier's network would likely
     be affected by a single point of failure on the signaling
     network.[^779]

398. Other quality problems identified by ALTS' members include poor
     customer service associated with utilizing alternative signaling
     providers.[^780] While we agree that these quality concerns may
     materially decrease the ability of requesting carriers to provide
     the services it seeks to offer, we do not find them dispositive of
     whether requesting carriers are impaired in general. In particular,
     it is not clear from the record whether these quality concerns are
     isolated instances, or alternatively, are prevalent throughout the
     industry.

399. [Goals of the 1996 Act]{.underline}. We conclude that unbundling
     the incumbent LECs' signaling networks will promote the development
     of facilities-based competition and thereby encourage investment
     and innovation in new technologies and telecommunications services.
     Competitive LECs deploying their own switches will not have the
     incentive to do so if they are faced with having to rely on less
     ubiquitous and less reliable alternatives for signaling. Unbundling
     the incumbent LECs' signaling networks will give competitive LECs
     incentive to deploy their own switches, because they can be
     connected to the ubiquitous incumbent LECs' signaling networks. The
     1996 Act was designed to spur competition in the local market. Our
     decision to unbundle incumbent LECs' signaling networks facilitates
     this goal, and creates options for consumers in their local
     telecommunications service.

### Call-Related Databases

#### Background

400. In the *Local Competition Order*, the Commission determined that
     access to call-related databases was technically feasible, and
     concluded that incumbent LECs must provide nondiscriminatory access
     to their call-related databases on an unbundled basis, for the
     purpose of switch query and database response through the SS7
     network.[^781] The Commission also required incumbent LECs to
     provide unbundled access to the Advanced Intelligence Network (AIN)
     platform. The Commission found that such access was technically
     feasible, and that competitors would be impaired without access to
     the AIN platform**.**[^782]

401. In the *Notice*, we asked parties to comment on unbundling the
     seven network elements we previously identified, including
     signaling and call-related databases.[^783] Most requesting
     carriers argue that the Commission should require incumbent LECs to
     provide access to call-related databases on an unbundled
     basis.[^784] Incumbent LECs argue that access to call-related
     databases on an unbundled basis is not required under section
     251(d)(2).[^785]

#### Discussion

402. We find that, as a general matter, requesting carriers' ability to
     provide the services they seek to offer is impaired without
     unbundled access to the incumbent LECs' call-related databases.
     Thus, we require incumbent LECs, upon request, to provide
     nondiscriminatory access to their call-related databases on an
     unbundled basis, for the purpose of switch query and database
     response through the SS7 network. We conclude that requesting
     carriers' ability to provide the services they seek to offer is
     impaired without unbundled access to the incumbent LECs' AIN
     platform and architecture. Thus, we find that incumbent LECs, upon
     request, must provide nondiscriminatory access to their AIN
     platform and architecture. We also conclude, however, that service
     software created in the AIN platform and architecture is
     proprietary and thus analyzed under the "necessary" standard of
     section 251(d)(2)(A). Based on our "necessary' standard, we
     conclude that incumbent LECs are not required to unbundle the
     services created in the AIN platform and architecture that qualify
     for proprietary treatment.

##### Definition

403. In the *Local Competition First Report and Order*, the Commission
     defined call-related databases as "databases, other than operations
     support systems, that are used in signaling networks for billing
     and collection or the transmission, routing, or other provision of
     telecommunications service."[^786] The Commission further required
     incumbent LECs to provide unbundled access to their call-related
     databases, including but not limited to: the Line Information
     database (LIDB), the Toll Free Calling database, the Local Number
     Portability database, and Advanced Intelligent Network
     databases.[^787] No commenter in this phase of the proceeding
     challenges the definitions of call-related databases or AIN that
     were adopted in the *Local Competition First Report and Order,* and
     we find no reason for modifying those definitions. As discussed
     below, however, we clarify that the definition of call-related
     databases includes, but is not limited to, the calling name (CNAM)
     database, as well as the 911 and E911 databases.

404. The Advanced Intelligent Network (AIN) uses distributed
     intelligence in centralized databases to control call processing
     and manage network information, eliminating the need for those
     functions to be performed at every switch.[^788] The AIN database
     enables some call processing functions to be performed outside the
     switch. There are two separate components of the AIN. The first
     component is the AIN platform and architecture. The AIN platform
     and architecture basically consists of an off-line computer known
     as the Service Creation Environment (SCE), Service Management
     System (SMS),[^789] and AIN software. AIN services are designed and
     tested in the SCE. [^790] Once a service is successfully tested,
     the software is transferred to a SMS that administers and supports
     service control point (SCP) databases in the network.[^791] The SMS
     then regularly downloads software and information to a SCP where
     interaction with the voice network takes place via signaling links
     and STPs.[^792]

405. When a software "trigger" is activated, an AIN capable switch uses
     the SS7 network to access databases, SCPs, that contain service
     software and subscriber information, for instruction on how to
     route, monitor, or terminate the call. The second component of the
     AIN is the AIN service software that is developed in the AIN
     platform, and is used to provide telecommunications service.
     Examples of AIN services include: deployment of number portability,
     wireless roaming, and advanced services such as same-number service
     (*i.e.* 500 number service) and voice recognition dialing.

406. As a general matter, no commenter challenges the definitions of
     call-related databases or AIN that were adopted in the *Local
     Competition First Report and Order*. Several commenters, however,
     request that the Calling Name (CNAM) database be classified as a
     call-related database.[^793] The CNAM database contains the name of
     the customer associated with a particular telephone number and is
     used to provide Caller ID and related services.[^794] We take this
     opportunity to clarify that the definition of call-related
     databases includes, but is not limited to, the calling name (CNAM)
     database, as well as the 911 and E911 databases. Call-related
     databases are databases that supply information or instructions
     used for "billing and collection or used in the transmission,
     routing, or other provision of telecommunications service."[^795]
     The CNAM, 911, and E911 databases are call-related databases,
     because they are used for "billing and collection, or used in the
     transmission, routing or other provision of a telecommunications
     service."[^796] CNAM databases are used to provide Caller ID and
     related telecommunications services, and the 911 and E911 databases
     are telecommunications services used to provide emergency
     assistance. We specifically identify the CNAM, 911 and E911
     databases as being illustrative of call-related databases, and not
     as a comprehensive list of all call-related databases.

407. We note that Low Tech Designs requests that the Commission require
     AIN triggers and AIN trigger upgrades be made available to
     competitors on an unbundled basis.[^797] We find that there is not
     enough evidence in the record to make a determination about the
     technical feasibility of unbundling AIN triggers. We therefore
     decline to expand our definition of call-related databases to
     include AIN triggers, and reaffirm the definition of call-related
     databases in the *Local Competition First Report and Order*. Low
     Tech Designs also requests that the Commission mandate the
     interconnection of "CLEC-provided and other third-party AIN/SS7
     Service Control Points and Intelligent Peripherals."[^798] We
     decline this request because we find that there is not enough
     evidence in the record to make a determination as to the technical
     feasibility of interconnecting third-party SCPs and Intelligent
     Peripherals to incumbent LECs' signaling networks. Our refusal to
     grant Low Tech Design's request in this proceeding does not affect
     the ability of any state commission to address this issue.

##### Proprietary Concerns Associated with Call-Related Databases 

408. With the exception of AIN service software, commenters do not
     identify proprietary concerns associated with the provision of
     call-related databases. Moreover, with the exception of AIN service
     software, we do not discern any copyright, patent, or trade secret
     implications to unbundling call-related databases. Thus, with the
     exception of AIN service software, we analyze call-related
     databases under the "impair" standard of section 251(d)(2)(B).

409. Because certain services created in the AIN platform and
     architecture are proprietary, we agree with Ameritech and BellSouth
     that if competitive LECs receive unbundled access to incumbent
     LECs' AIN platforms, access to AIN service software should not be
     unbundled.[^799] Ameritech cites a new proprietary service,
     "Privacy Manager," to illustrate why its AIN service software
     qualifies as a proprietary network element. Privacy Manager is
     derived from the SCE, and allows consumers to screen telemarketing
     calls.[^800] Ameritech asserts that Privacy Manager "includes
     several new and useful improvements" that are subject to patent
     protection, and are the subject of several pending patent
     applications.[^801] Ameritech adds that Privacy Manager is
     currently a trade secret because it has independent economic value,
     is not generally known by or readily discernable to Ameritech's
     competitors, and has been the subject of reasonable security
     measures.[^802] We agree with Ameritech that services such as
     Privacy Manager qualify as "proprietary" treatment. We also agree
     that software services such as Privacy Manager are new and
     innovative products used to differentiate the incumbent LECs'
     service offering. As such, they should be evaluated under the
     "necessary" standard of section 251(d)(2)(A).[^803]

##### Unbundling Analysis for Call-Related Databases 

######  The "Impair" Standard

410. Consistent with our framework for unbundling set forth above, we
     find that lack of access to call-related databases on an unbundled
     basis would materially impair the ability of a requesting carrier
     to provide the services it seeks to offer in the local
     telecommunications market.[^804] In particular, we are persuaded
     that there are no alternatives of comparable quality and ubiquity
     available to requesting carriers, as a practical, economic, and
     operational matter, for the incumbent LECs' call-related databases.
     Thus, we require incumbent LECs to provide non discriminatory
     access to their call-related databases, including, but not limited
     to, the CNAM Database, the 911 Database, the LIDB, Toll Free
     Calling Database, AIN databases, and downstream number portability
     databases, by means of physical access at the signaling transfer
     point linked to the unbundled databases. Incumbent LECs must allow
     requesting carriers that have purchased an incumbent LEC's local
     switching capability to use the incumbent LEC's service control
     point element in the same manner, and via the same signaling links,
     as the incumbent LEC itself. An incumbent LEC must allow a
     requesting carrier that has deployed its own switch and has linked
     that switch to an incumbent LEC's signaling system to gain access
     to the incumbent LEC's service control point in a manner that
     allows the requesting carrier to provide any call-related
     database-supported services to customers served by the requesting
     carrier's switch.

411. We note that our analysis of call-related databases is intertwined
     with our analysis of signaling, because signaling is necessary to
     obtain access to certain call-related databases.[^805] Thus, our
     decision to unbundle the signaling network leads us to unbundle
     call-related databases as well.[^806] We believe that access to
     call-related databases, such as the LIDB, Toll Free calling, CNAM
     and Number Portability databases, encourages efficient network
     architecture deployment and promotes the ability of new entrants
     and established competitors to provide service in the local
     exchange market.[^807] We also agree with commenters that access to
     the incumbent LECs\' call-related databases is critical to
     permitting the seamless routing and completion of traffic both
     among competitors and between competitors and the incumbent
     LEC.[^808]

412. With respect to AIN specifically, the Commission found in the
     *Local Competition First Report and Order* that requesting carriers
     need equivalent access to the incumbent LECs' SMSs to populate
     their own information in call-related databases. The Commission
     explained that information bound for many call-related databases is
     entered into an SMS that then downloads the information to the
     databases for real-time use on the network.[^809] To ensure
     efficient access to the incumbent LECs' databases, we affirm that
     incumbent LECs must provide a requesting telecommunications carrier
     with the information necessary to enter correctly, or format for
     entry, the information relevant for input into the incumbent LECs'
     SMS. The Commission also found in the *Local Competition First
     Report and Order*, that it is technically feasible to access the
     SMS, through the SCE, to deploy AIN services.[^810] There is no
     evidence in this record to suggest otherwise, and we therefore
     affirm the finding in the *Local Competition First Report and
     Order* that incumbent LECs must provide a requesting carrier the
     same access to design, create, test, and deploy AIN-based services
     at the SMS, through a SCE, that the incumbent LEC provides to
     itself. Incumbent LECs must also provide requesting carriers with
     access to call-related databases and access to the SMS in a manner
     that complies with the privacy requirements in section 222 of the
     Act.[^811]

413. As we further found in the *Local Competition First Report and
     Order*, access to the incumbent LECs' SCPs, SMS and SCE for the
     creation and deployment of AIN services may require incumbent LECs
     and requesting carriers to develop measures to protect the
     incumbent LECs' facilities and data.[^812] We continue to believe
     that there may be mediation issues that need to be addressed before
     a competing carrier obtains access to these databases. Accordingly,
     if parties are unable to agree to appropriate mediation mechanisms
     through negotiations, we conclude that during arbitration of such
     issues, state commissions (or the Commission acting pursuant to
     section 252(e)(5)) must consider whether such mediation is
     necessary, and if so, whether it will protect adequately against
     intentional or unintentional misuse of the incumbent LEC's AIN
     facilities.

414. SBC argues that requesting carriers have access to alternative
     call-related databases to store their data in any LIDB in the
     nation.[^813] Similarly, BellSouth and GTE claim that requesting
     carriers can obtain call-related database capabilities from
     alternative sources.[^814] Despite these assertions, we find that
     as with signaling networks, requesting carriers are impaired
     without unbundled access to incumbent LECs call-related databases
     pursuant to section 251(d)(2).

415. [Cost and Quality]{.underline}. Several commenters argue that it
     would be costly for requesting carriers to replicate the incumbent
     LECs' call-related databases, or obtain call-related database
     services from alternative vendors.[^815] MediaOne submitted data to
     support these claims for the LIDB and CNAM databases.[^816] Other
     commenters, however, generally have not submitted sufficient cost
     data in the record to support their claims that it would be
     extremely costly to replicate the incumbent LECs' call-related
     databases, or obtain call-related database services from
     alternative providers. Based on the record before us, we find that
     the cost incurred by a requesting carrier to self-provision or use
     alternative databases does not appear to materially diminish the
     carrier's ability to provide the services it seeks to offer.

416. We conclude that unbundled access to incumbent LECs' call-related
     databases is required in some instances for requesting carriers to
     offer the telecommunications services they seek to provide. For
     example, in some cases, access to incumbent LEC databases is the
     only practical way to ensure proper call flow.[^817] Specifically,
     incumbent LECs are the only providers of CNAM database
     information.[^818] Incumbent LECs' CNAM databases provide
     information about customers of both requesting carriers and
     incumbent LECs.[^819] Therefore, in order for a switch-based
     competitor to provide caller ID to its customers, it must have
     access to the incumbent LEC's CNAM database. Such access is
     critical, especially because a majority of calls to a competitor's
     customers originate from the incumbent.

417. [Goals of the Act]{.underline}. Requiring incumbent LECs to provide
     access to call-related databases, including access to the AIN
     databases, will foster investment and innovation in the local
     telecommunications marketplace. Requesting carriers require access
     to call-related databases and AIN databases to provide the services
     they seek to offer in the local telecommunications market.
     Requesting carriers also require access to the AIN platform and
     architecture, so that they may have the opportunity to devise
     innovative AIN services that will spur competition and benefit
     consumers through greater choices of telecommunications
     services.[^820]

######  The "Necessary" Standard

418. As discussed above, we find that AIN service software qualifies as
     a proprietary network element, and therefore, should be analyzed
     under the "necessary" standard. Our interpretation of the
     "necessary" standard requires the Commission to determine whether,
     after taking into consideration alternatives outside the
     incumbent's network, lack of access to that element would, as a
     practical, economic, and operational matter, preclude the
     requesting carrier from providing the services it seeks to offer.

419. We agree with Ameritech that unbundling AIN service software such
     as "Privacy Manager" is not "necessary" within the meaning of the
     standard in section 251(d)(2)(A). In particular, a requesting
     carrier does not need to use an incumbent LEC's AIN service
     software to design, test, and implement a similar service of its
     own.[^821] Because we are unbundling the incumbent LECs' AIN
     databases, SCE, SMS, and STPs, requesting carriers that provision
     their own switches or purchase unbundled switching from the
     incumbent will be able to use these databases to create their own
     AIN software solutions to provide services similar to Ameritech's
     "Privacy Manager." They therefore would not be precluded from
     providing service without access to it. Thus, we agree with
     Ameritech and BellSouth that AIN service software should not be
     unbundled.[^822]

420. We believe that excluding AIN service software, such as "Privacy
     Manager," from the unbundling requirements of section 251(d)(2),
     will protect incentives for the incumbent LEC to invest and deploy
     new and innovate services. We also believe that such protection, in
     conjunction with our decision to unbundle the AIN platform and
     architecture, will promote innovation and deployment of new
     services by requesting carriers.

## Operations Support Systems

### Background

421. In the *Local Competition First Report and Order*, the Commission
     concluded that incumbent LECs must provide access to operations
     support systems (OSS) functions on an unbundled basis to requesting
     carriers.[^823] The Commission also required incumbent LECs to make
     modifications to their OSS as necessary in order to offer
     nondiscriminatory access to these functions, including access to
     interface design systems.[^824] Specifically, the Commission
     determined in the *Local Competition First Report and Order* that
     the provision of access to OSS functions and the information they
     contain is integral to the ability of competing carriers to enter
     the local exchange market.[^825] The Commission further concluded
     that a requesting carrier that lacks access to the incumbent's OSS
     "will be severely disadvantaged, if not precluded altogether, from
     fairly competing."[^826] In *Iowa Utils. Bd*., the Supreme Court
     expressly affirmed the Eighth Circuit's holding that the
     Commission's designation of operations support systems as a network
     element was an "eminently reasonable" interpretation of the 1996
     Act.[^827]

422. In the *Notice,* we sought comment on the application of the
     "necessary" and "impair" standards to previously identified
     unbundled network elements, including OSS.[^828] The *Notice* also
     requested comment on whether the Commission should modify the
     definition of OSS.

423. All commenters to this proceeding agree that OSS qualifies as an
     unbundled network element.[^829] Incumbent LECs, however, argue
     that the Commission should limit access to OSS functions to those
     instances when a requesting carrier purchases another network
     element, an interconnection offering, or resold services from the
     incumbent LEC.[^830] Competitors, on the other hand, argue that OSS
     qualifies as an independent unbundled network element and therefore
     is not subject to any such limitations.[^831] Additionally, they
     argue that an incumbent LEC's duty to provide unbundled access to
     OSS includes an obligation to provide loop qualification
     information.[^832] ALTS requests that the Commission require
     incumbent LECs to provide access to OSS functions for
     carrier-to-carrier transactions.[^833]

### Discussion

424. We find that requesting carriers are impaired without access to the
     incumbent LEC's OSS as an unbundled network element. The record
     demonstrates that, in general, lack of access to OSS as an
     unbundled network element materially diminishes a requesting
     carrier's ability to provide the services it seeks to offer. We
     also clarify that the definition of OSS includes access to loop
     qualification information. Finally, we reject the incumbent LECs'
     proposal to limit access to OSS to situations where the requesting
     carrier is ordering other unbundled network elements or resold
     services.

#### Definition of OSS

425. In the *Local Competition First Report and Order*, the Commission
     defined OSS as consisting of pre-ordering, ordering, provisioning,
     maintenance and repair, and billing functions supported by an
     incumbent LEC's databases and information.[^834] OSS includes the
     manual, computerized, and automated systems, together with
     associated business processes and the up-to-date data maintained in
     those systems.[^835] Because of the varied, and largely
     non-standardized, development of incumbent LECs' OSS, the
     Commission identified certain functions needed by competitive
     carriers to deliver local exchange and exchange access services at
     the level expected by customers and state commissions.
     Specifically, the Commission identified the five functions of OSS
     that incumbent LECs must make available to competitors on an
     unbundled basis: pre-ordering, ordering, provisioning, repair and
     maintenance, and billing.[^836]

426. We find no reason to modify our definition of OSS. The majority of
     commenters support the existing definition of OSS.[^837] A few
     parties request that we broaden the definition of OSS to include
     access to the incumbent LEC's electronic interface and gateways to
     enable the processing of orders without manual intervention.[^838]
     Because these requests focus on the method by which competitors
     access incumbent LEC OSS, we believe that interface and gateway
     issues are already captured in the nondiscriminatory access
     requirements of the *Local Competition First Report and
     Order*.[^839] Accordingly, we find it unnecessary to modify our
     definition of OSS in this manner. We agree with ALTS, however, that
     the Commission should clarify that the pre-ordering function
     includes access to loop qualification information. Loop
     qualification information identifies the physical attributes of the
     loop plant (such as loop length, the presence of analog load coils
     and bridge taps, and the presence and type of Digital Loop Carrier)
     that enable carriers to determine whether the loop is capable of
     supporting xDSL and other advanced technologies.[^840] This
     information is needed by carriers seeking to provide advanced
     services over those loops through the use of packet switches and
     DSLAMs.[^841]

427. We clarify that pursuant to our existing rules, an incumbent LEC
     must provide the requesting carrier with nondiscriminatory access
     to the same detailed information about the loop that is available
     to the incumbent, so that the requesting carrier can make an
     independent judgment about whether the loop is capable of
     supporting the advanced services equipment the requesting carrier
     intends to install. Based on these existing obligations, we
     conclude that, at a minimum, incumbent LECs must provide requesting
     carriers the same underlying information that the incumbent LEC has
     in any of its own databases or other internal records. For example,
     the incumbent LEC must provide to requesting carriers the
     following: (1) the composition of the loop material, including, but
     not limited to, fiber optics, copper; (2) the existence, location
     and type of any electronic or other equipment on the loop,
     including but not limited to, digital loop carrier or other remote
     concentration devices, feeder/distribution interfaces, bridge taps,
     load coils, pair-gain devices, disturbers in the same or adjacent
     binder groups; (3) the loop length, including the length and
     location of each type of transmission media; (4) the wire gauge(s)
     of the loop; and (5) the electrical parameters of the loop, which
     may determine the suitability of the loop for various technologies.
     Consistent with our nondiscriminatory access obligations, the
     incumbent LEC must provide loop qualification information based,
     for example, on an individual address or zip code of the end users
     in a particular wire center, NXX code, or on any other basis that
     the incumbent provides such information to itself.

428. In addition, we agree with Covad that an incumbent LEC should not
     be permitted to deny a requesting carrier access to loop
     qualification information for particular customers simply because
     the incumbent is not providing xDSL or other services from a
     particular end office.[^842] We also agree with commenters that an
     incumbent must provide access to the underlying loop information
     and may not filter or digest such information to provide only that
     information that is useful in the provision of a particular type of
     xDSL that the incumbent chooses to offer. [^843] For example, SBC
     provides ADSL service to its customers, which has a general
     limitation of use for loops less than 18,000 feet. In order to
     determine whether a particular loop is less than 18,000 feet, SBC
     has developed a database used by its retail representatives that
     indicates only whether the loop falls into a "green, yellow, or
     red" category.[^844] Under our nondiscrimination requirement, an
     incumbent LEC can not limit access to loop qualification
     information to such a "green, yellow, or red" indicator. Instead,
     the incumbent LEC must provide access to the underlying loop
     qualification information contained in its engineering records,
     plant records, and other back office systems so that requesting
     carriers can make their own judgments about whether those loops are
     suitable for the services the requesting carriers seek to offer.
     Otherwise, incumbent LECs would be able to discriminate against
     other xDSL technologies in favor of their own xDSL technology.

429. We disagree, however, with Covad's unqualified request that the
     Commission require incumbent LECs to catalogue, inventory, and make
     available to competitors loop qualification information through
     automated OSS even when it has no such information available to
     itself.[^845] If an incumbent LEC has not compiled such information
     for itself, we do not require the incumbent to conduct a plant
     inventory and construct a database on behalf of requesting
     carriers. We find, however, that an incumbent LEC that has manual
     access to this sort of information for itself, or any affiliate,
     must also provide access to it to a requesting competitor on a
     non-discriminatory basis. In addition, we expect that incumbent
     LECs will be updating their electronic database for their own xDSL
     deployment and, to the extent their employees have access to the
     information in an electronic format, that same format should be
     made available to new entrants via an electronic interface.

430. We also clarify that under our existing rules, the relevant inquiry
     is not whether the retail arm of the incumbent has access to the
     underlying loop qualification information, but rather whether such
     information exists anywhere within the incumbent's back office and
     can be accessed by any of the incumbent LEC's personnel. Denying
     competitors access to such information, where the incumbent (or an
     affiliate, if one exists) is able to obtain the relevant
     information for itself, will impede the efficient deployment of
     advanced services. To permit an incumbent LEC to preclude
     requesting carriers from obtaining information about the underlying
     capabilities of the loop plant in the same manner as the incumbent
     LEC's personnel would be contrary to the goals of the Act to
     promote innovation and deployment of new technologies by multiple
     parties.

431. Consistent with the framework we adopted in the *Local Competition
     First Report and Order*, we conclude that access to loop
     qualification information must be provided to competitors within
     the same time intervals it is provided to the incumbent LEC's
     retail operations. To the extent such information is not normally
     provided to the incumbent LEC's retail personnel, but can be
     obtained by contacting incumbent back office personnel, it must be
     provided to requesting carriers within the same time frame that any
     incumbent personnel are able to obtain such information. It would
     be unreasonable, for instance, if the requesting carrier had to
     wait several days to receive such information from the incumbent in
     the incumbent's personnel have the ability to obtain such
     information in several hours. In order to provide local exchange
     and exchange access service, a competitor needs such information
     quickly to be able to determine whether a particular loop will
     support xDSL service.

#### Proprietary Concerns Associated with OSS

432. The record does not indicate, nor do commenters argue, that OSS is
     proprietary. Moreover, we do not discern any copyright, patent, or
     trademark or trade secrecy implications to unbundling OSS. We
     therefore conclude that OSS should be evaluated under the "impair"
     standard.[^846]

#### Unbundling Analysis for OSS

433. We conclude that lack of access to the incumbent LEC's OSS impairs
     the ability of requesting carriers to provide the services they
     seek to offer. The incumbents' OSS provides access to key
     information that is unavailable outside the incumbents' networks
     and is critical to the ability of other carriers to provide local
     exchange and exchange access service. We therefore require
     incumbent LECs to offer unbundled access to their OSS nationwide.

434. Commenters overwhelmingly agree that the unbundling of OSS
     satisfies the "impair" standard of section 251(d)(2).[^847] OSS is
     a precondition to accessing other unbundled network elements and
     resold services because competitors must utilize the incumbent
     LEC's OSS to order all network elements and resold services.[^848]
     Thus, the success of local competition depends on the availability
     of access to the incumbent LEC's OSS.[^849] Without unbundled
     access to the incumbent LEC's OSS, competitors would not be able to
     provide their customers comparable, competitive service, and hence
     would have to operate at a material disadvantage.[^850] While we
     acknowledge that a competitive market is developing for OSS
     systems, these alternative providers do not provide substitutable
     alternatives to the incumbent LEC's OSS functionality.[^851]
     Alternative OSS vendors provide requesting carriers with an
     electronic interface that allow competitive LECs to access the
     incumbent LEC's OSS and internal customer care systems. These
     vendors cannot provide a sufficient substitute for the incumbent
     LEC's underlying OSS because incumbent LECs have access to
     exclusive information and functionalities needed to provide service
     (*e.g.,* customer service record information, provisioning of
     orders for unbundled network element and resold services, ability
     to initiate repairs for unbundled network elements and resold
     services, etc.).[^852]

435. We reject the incumbent LECs' arguments to limit the scope of a
     requesting carrier's access to the incumbent's OSS functions to
     situations where the competitor is ordering other unbundled network
     elements or resold services from the incumbent LEC.[^853] We find
     such limitations to be discriminatory because access to the same
     information and support functions as the incumbent LEC is needed by
     requesting carriers to provide quality service over their own
     facilities. For example, the incumbent LEC has access to unique
     information about the customer\'s service, and a competitor's
     ability to provide service is materially diminished without access
     to that information. This is true regardless of whether the
     competitor is providing service entirely through its own
     facilities, entirely over the incumbent's, or using some
     combination of the two. In particular, the full facilities-based
     competitor runs the risk of offering a lower quality service from
     the perspective of the end user if it does not know all the details
     of the customer\'s current service offering. As another example,
     carriers may also need to access the repair and maintenance
     function in the incumbent's OSS to submit trouble tickets for
     interconnection trunks.

436. We do not decide ALTS' request at this time that incumbent LECs
     provide access to OSS functions even when the incumbent is no
     longer the retail provider of local service to an end user.[^854]
     The record has not been sufficiently developed to establish how,
     absent access to incumbent LEC OSS, requesting LECs ability to
     provide the services they seek to offer would be materially
     diminished when the incumbent LEC is not involved in providing
     service to a retail customer. The most apparent example of this
     situation would be customer changeovers where competitive LECs are
     serving customers through resale of the incumbent's services or use
     of the incumbent's unbundled network elements. This appears to us
     to be an industry-wide issue. Thus, as a first step, we encourage
     the industry to develop guidelines and standards to facilitate the
     orderly transition of customers from one carrier to another. We
     note that any solution to this problem must adhere to the
     requirements of the Act, including the nondiscriminatory access
     requirements of section 251(c)(3) and the CPNI obligations of
     section 222.[^855]

437. We reject commenters' proposal that the Commission establish and
     ensure that incumbent LECs meet OSS performance standards, both
     quantitative and qualitative, to demonstrate parity under the
     rules.[^856] Failure to satisfy these performance standards,
     according to MCI WorldCom, should automatically trigger a process
     to identify and correct the root cause of the OSS problem.[^857] We
     decline to adopt performance standards in this proceeding. The
     issue before us in this proceeding is whether OSS is subject to the
     unbundling obligations of section 251, not whether the Commission
     should establish performance standards and penalties to determine
     if an incumbent is providing nondiscriminatory access to its OSS
     functions. We note that the states have primary authority under
     section 252 for setting schedules and resolving disputes concerning
     access to OSS functions as unbundled network elements. In addition,
     in the *Second Order on Reconsideration ,* the Commission did not
     preclude requesting carriers from bringing enforcement actions
     against incumbent LECs to the Commission for consideration.[^858]
     Thus, more appropriate forums exist for the resolution of specific
     allegations of noncompliance with our unbundling rules.
     Accordingly, we find it unnecessary, at this time, to modify our
     rules in the manner suggested.

## Operator Services and Directory Assistance

### Background

438. In the *Local Competition First Report and Order,* the Commission
     required incumbent LECs to provide unbundled access to their
     operator services and directory assistance (OS/DA). The Commission
     found that access to the systems supporting both operator call
     completion services and directory assistance was necessary, under
     section 251(d)(2)(A) for new entrants to provide competing local
     exchange service.[^859] The Commission also concluded that a
     competitor's ability to provide service would be significantly
     impaired, under section 251(d)(2)(B), if it did not have access to
     the incumbent LECs' operator call completion services and directory
     assistance.[^860] The Commission therefore required incumbent LECs
     to provide unbundled access to the databases used in the provision
     of both call completion services and directory assistance.[^861] In
     *Iowa Utils. Bd*., the Supreme Court expressly affirmed the Eighth
     Circuit's holding that the Commission's designation of operator
     services and directory assistance as a network element was an
     "eminently reasonable" interpretation of the 1996 Act.[^862]

439. In the *Notice,* we sought comment on whether the definition of
     OS/DA should be modified and whether there are any proprietary
     concerns associated with OS/DA systems.[^863] We also sought
     comment on whether OS/DA should remain an unbundled network
     element.[^864] We sought further comment on the implications of an
     incumbent LEC's obligations to provide OS/DA services under the
     nondiscriminatory access provisions of section 251(b)(3) if those
     services are not provided by incumbent LECs as unbundled network
     elements under section 251(c)(3).[^865]

440. Commenters generally support the existing definition of operator
     services and directory assistance and do not identify proprietary
     concerns associated with OS/DA systems. The majority of commenters,
     including competitive LECs, interexchange carriers, alternative
     OS/DA providers, and most state commissions, argue that incumbents
     should provide unbundled access to their OS/DA services.[^866] The
     incumbent LECs, MGC (a facilities-based competitive LEC), and the
     Ohio PUC note the general availability of third-party OS/DA
     alternatives as evidence of a wholesale market and argue that the
     Commission should not unbundle the incumbent LECs' OS/DA
     services.[^867]

### Discussion

441. We find that where incumbent LECs provide customized routing, lack
     of access to the incumbents' OS/DA service on an unbundled basis
     does not materially diminish a requesting carrier's ability to
     offer telecommunications service.[^868] The record provides
     significant evidence of a wholesale market in the provision of
     OS/DA services and opportunities for self-provisioning OS/DA
     services. Moreover, we do not find that the evidence regarding the
     differences in cost, timeliness, quality, interoperability and
     ubiquity between the incumbent's OS/DA service and alternative
     OS/DA services, provided either through self-provisioning or
     third-party alternatives, is sufficient to conclude that lack of
     unbundled access to the incumbent's OS/DA service would materially
     diminish a requesting carrier's ability to offer the services it
     seeks to provide. We note that nondiscriminatory access to the
     incumbent's underlying databases used in the provision of OS/DA is
     required under section 251(b)(3) of the 1996 Act. The additional
     nondiscrimination requirements of section 251(b)(3), coupled with
     evidence of multiple alternative providers of OS/DA service in the
     marketplace, provide strong evidence that competitors are not
     impaired without access to the incumbent's OS/DA service as an
     unbundled network element.

442. Accordingly, incumbent LECs need not provide access to its OS/DA as
     an unbundled network element. All LECs, however, must continue to
     provide their competitors with nondiscriminatory access to their
     OS/DA, pursuant to section 251(b), as implemented by the
     Commission. We believe that this outcome best comports with the
     realities of a growing OS/DA marketplace, embraces a deregulatory
     approach where justified, and does not unduly confine the entry
     strategies of competitive carriers.

#### Definition of Operator Services and Directory Assistance

443. The Commission has defined operator services as "any automatic or
     live assistance to a consumer to arrange for billing or completion,
     or both, of a telephone call,"[^869] and has stated that directory
     assistance is a service that allows "subscribers to retrieve
     telephone numbers of other subscribers."[^870] In the *Local
     Competition Second Report and Order,* the Commission clarified that
     the nondiscriminatory requirements of section 251(b)(3) included
     the obligation of LECs to comply with the reasonable request of a
     competing provider to rebrand or unbrand its OS/DA services.[^871]
     We recently reaffirmed this holding in the *Directory Listing
     Information Order*, where we stated that to the extent technically
     feasible, a LEC must identify and rebrand the traffic it provides
     to its competitors.[^872]

444. We decline to expand the definition of OS/DA, as proposed by some
     commenters, to include an affirmative obligation to rebrand
     OS/DA[^873] and to provide directory assistance listing updates in
     daily electronic batch files.[^874] We find such modifications
     unnecessary because, as mentioned above, these obligations already
     exist under section 251(b)(3), and the relevant rules promulgated
     thereunder.

#### Proprietary Concerns Associated with OS/DA

445. With the exception of one commenter, no parties identify
     proprietary concerns associated with OS/DA, and we find none.
     [^875] Moreover, we do not discern any copyright, patent, or
     trademark or trade secrecy implications associated with OS/DA.
     Accordingly, we analyze incumbent LECs' obligations to provide
     unbundled access to its OS/DA under the "impair" standard.[^876]

#### Unbundling Analysis

446. Consistent with the unbundling analysis set forth above, we
     conclude that where an incumbent LEC provides customized routing to
     the requesting carrier as part of the unbundled switching element,
     lack of access to the incumbent's OS/DA on an unbundled basis does
     not materially diminish a requesting carrier's ability to provide
     the services it seeks to offer. The record demonstrates that a
     variety of alternative providers of OS/DA offer services at
     comparable cost and quality to those of the incumbents. We agree
     with the incumbent LECs, MGC, and the Ohio PUC that the incumbents
     enjoy no material advantage obtaining the key inputs for OS/DA
     services.[^877] Certain commenters point to differences in cost and
     the amount of time required to implement services provided by these
     alternative sources to support their arguments that competing
     carriers are impaired without access to the incumbents' OS/DA
     services. The majority of these commenters, however, focus on the
     differences in the quality and accessibility of the information in
     the incumbent LECs' OS/DA databases relative to that available from
     third-party sources. As discussed more fully below, we find that
     these quality differences are addressed adequately by other
     sections of the Act.

447. [Alternatives in the Marketplace]{.underline}. Competition in the
     provision of operator services and directory assistance has existed
     since divestiture.[^878] Such competition has accelerated in the
     directory assistance market as a result of the Supreme Court's
     decision to allow copying of carriers' white pages listings in
     their entirety.[^879] For example, according to SBC, more than 30
     competitive LECs presently provide their own OS/DA services or
     resell the services of non-incumbent LECs.[^880] In Bell Atlantic's
     region, only 70 out of 400 interconnection agreements require Bell
     Atlantic to provide OS/DA as an unbundled network element.[^881]
     Thus, in more than 80% of Bell Atlantic's interconnection
     arrangements, competitive LECs have chosen to provide OS/DA for
     themselves or to obtain such service from wholesale providers.
     According to the Rural Telephone Coalition, rural incumbent LECs
     have obtained OS/DA services from outside sources for many years
     because they find third-party sources to be cost-effective.[^882]
     In addition, Bell Atlantic reports that its wireless affiliate,
     Bell Atlantic Mobile, relies on a third-party OS/DA provider.[^883]
     MGC advocates that OS/DA not be unbundled because, in its view,
     competitive LECs can purchase OS/DA from a number of vendors
     offering cost-effective nationwide alternatives to those of the
     incumbent LECs.[^884]

448. Even requesting carriers advocating the unbundling of operator and
     directory assistance services acknowledge that there exists a
     substantial number of alternative providers of operator and
     directory assistance services. For example, AT&T, MCI WorldCom, and
     Sprint have already established national operator services via
     toll-free numbers.[^885] McLeod USA self-provisions nationwide
     directory assistance service.[^886] Metro One provides OS/DA
     services to ALLTEL and GST Telecom.[^887] Cox and Omnipoint obtain
     OS/DA service from Teltrust, and WinStar obtains these services
     from Frontier.[^888] Requesting carriers may also obtain OS/DA
     services and directory listings from numerous wholesale providers,
     including CenturyTel Telecommunications, Clifton Forge,
     Consolidated Communications, Excell, Experian's TEC Group,
     Frontier, HebCom, InfoNXX, Metro One, Quest411 and Teltrust.[^889]

449. It appears that this increasing availability of competitive OS/DA
     providers coincides with a decrease in incumbent LEC OS/DA call
     volumes. Evidence in the record indicates that call volumes to
     incumbent OS/DA services have declined steadily over the past few
     years. For example, SBC claims directory assistance call volumes
     have decreased almost 30 percent since 1995, and SBC
     operator-assisted calls have dropped by over 50 percent during the
     same period.[^890] Similarly, BellSouth's operator-assisted call
     volumes have declined over 60 percent in the past eight
     years.[^891] According to Bell Atlantic, it lost greater than 67
     percent of its wholesale directory assistance calls between 1994
     and 1998.[^892] In fact, Bell Atlantic claims that interexchange
     carriers accounted for over 68% of the operator services market in
     1998 and represented 72% of the wholesale operator services market
     by 1997.[^893] This trend, combined with the number of alternative
     operator services and directory assistance providers outside the
     incumbent LECs' networks, strongly suggests that requesting
     carriers are not impaired without access to the incumbent LECs'
     OS/DA service. Significantly, we find that the existence of
     multiple alternative providers of OS/DA service in the marketplace,
     coupled with evidence of competitors' decreasing reliance on
     incumbent OS/DA services, demonstrates that requesting carriers'
     ability to provide the services it seeks to offer is not materially
     diminished without access to the incumbent's OS/DA service on an
     unbundled basis.

450. [Cost]{.underline}. In light of the significant evidence of
     multiple third-party providers of OS/DA, we find unpersuasive
     assertions that replication of OS/DA service facilities and
     functionalities would involve substantial and material cost and
     would delay competitive entry into the local market.[^894] The
     costs associated with self-provisioning OS/DA include: (1) the cost
     of the facility, including employees, real estate,
     computers;[^895] (2) the cost of transporting traffic to the
     facilities; and (3) the cost of obtaining the underlying subscriber
     information contained in OS/DA databases.[^896] We acknowledge
     that, in some situations, depending on the type of OS/DA service a
     requesting carrier seeks to provide, OS/DA service may be more
     expensive if it is purchased from third-party providers than it
     would be if purchased from the incumbent. We find, however, that
     such differences will not materially diminish a requesting
     carrier's ability to provide local exchange or exchange access
     service.

451. We are unpersuaded by Cox's argument that OS/DA service should be
     unbundled because incumbents enjoy economies of scale and scope
     that greatly reduce the cost of providing these services to their
     own customers.[^897] In light of the number of alternative
     providers currently providing OS/DA service and the competitive
     market that is developing for long distance transport, we find this
     argument unconvincing. We also find that incumbents do not have any
     particular advantage in obtaining the facilities needed to create a
     call center, including employees, real estate and computers.[^898]
     In addition, unlike many other network elements, such as switching
     or transport, the ability to provide a nationwide OS/DA service
     does not require large amounts of sunk and fixed costs in
     facilities that must be deployed ubiquitously in order to serve a
     broad customer base. Rather, a requesting carrier can establish one
     call center or a few regional centers to which it can transport all
     of the calls on its network and provide OS/DA service
     nationwide.[^899] Moreover, we believe that a competitive LEC or a
     group of competitive LECs can achieve economies of scale by
     aggregating demand for OS/DA services over various regions by
     processing them through a single call center. Unlike the
     self-provisioning of switches, or other such network elements,
     self-provisioning a single OS/DA platform would not require the
     competitive carrier to deploy equipment throughout the network to
     ubiquitously serve its customers.

452. Certain competitive LECs assert that purchasing long-haul DS1
     facilities to alternative OS/DA call centers is more expensive than
     purchasing local loops to access OS/DA services provided by
     incumbent LECs.[^900] In particular, Time Warner claims that
     special access rates to trunk its OS/DA calls to a vendor's
     national call center are approximately \$500,000 a year.[^901]
     MediaOne estimates that remote long-haul facilities cost
     \$1500-\$2000 per month for a DS1 compared to local loops
     provisioned by the incumbent LEC for about \$500 per month.[^902]

453. While, on its face, the disparity between transport costs to carry
     OS/DA traffic between the competitor's switch and a
     self-provisioned call center appears significant, it does not
     persuade us that transport costs associated with self-provisioning
     or purchasing OS/DA from third-party vendors materially diminishes
     the ability of requesting carriers to provide local exchange
     service. The record reveals a number of alternative OS/DA providers
     with multiple call centers located throughout the country. For
     example, HebCom operates five regional call centers, Excell
     operates six regional call centers and InfoNXX operates four.[^903]
     Teltrust operates a national OS/DA service with several call
     centers.[^904] The availability of multiple locations of
     alternative providers, both regional and national, allows
     competitors to choose a service that will be most cost-efficient,
     depending on the area in which it provides service. It is not clear
     from the record whether Time Warner considered the availability of
     these regional solutions to its OS/DA needs when making its initial
     decision to transport calls.[^905] Additionally, the incumbent LEC
     itself often maintains regional call centers that are outside the
     local calling area of a particular call center. Bell Atlantic, for
     example, offers directory assistance for most of New England (Rhode
     Island, Vermont, New Hampshire, Maine and western Massachusetts)
     out of its Providence, RI, Burlington, VT and Portland, ME offices,
     with all calls routed through a switch in Manchester, NH.[^906] In
     such cases, the incumbent may also incur long-haul transport costs
     to trunk its OS/DA traffic to the call center.

454. Regardless of the OS/DA provider, the cost of transporting traffic
     to the call center is factored into the overall price of OS/DA
     services. Where a competitive LEC obtains OS/DA services from an
     incumbent LEC, even at cost-based rates, the incumbent charges the
     competitive LEC for transport, either separately or as part of the
     total cost for OS/DA service. Similarly, where a competitive LEC
     obtains OS/DA from an alternative OS/DA provider, the carrier or
     OS/DA provider must pay for transport to the call center. It is
     notable that rural incumbent LECs, which arguably have to haul
     traffic the furthest, find third-party OS/DA sources
     cost-effective.[^907] The fact that rural LECs and a significant
     number of competitive LECs and interexchange carriers presently
     either self-provision these services or rely on wholesale providers
     for their OS/DA services constitutes substantial evidence that the
     cost of transport does not materially diminish the ability to
     provide service.

455. Because OS/DA databases are available on a value added and
     nondiscriminatory basis under section 251(b)(3) of the Act, a
     competing carrier need only provide transport to an incumbent's
     LEC's database. We acknowledge that self-provisioning OS/DA service
     may require competing carriers to incur substantial start-up costs
     that may represent a high percentage of overall expenses until call
     volumes and customer penetration levels rise. [^908] We find,
     however that the costs of self-provisioning OS/DA do not impair a
     requesting carrier's ability to provide service because in addition
     to self-provisioning, there are multiple alternatives available in
     the market.[^909] In addition, regional or nationwide OS/DA call
     centers enable competitive carriers to aggregate call volume to
     reach sufficient economies of scale. We note too that carriers are
     not limited to self-provisioning. Carriers may choose instead to
     use alternative OS/DA providers, reducing the fixed costs of
     provisioning OS/DA services. Moreover, competitive carriers who
     wish to obtain OS/DA from the incumbent may do so consistent with
     the incumbent LEC's nondiscriminatory access obligations under
     section 251(b)(3).[^910]

456. [Quality]{.underline}. We find that the functionality of
     third-party supplied OS/DA is sufficiently equivalent to that of
     the incumbent's services such that a requesting carrier's ability
     to provide the services it seeks to offer is not impaired without
     access to the incumbent's OS/DA service. Although we acknowledge
     that differences in quality may exist, we find that, in light of
     the full scope of OS/DA options available to requesting carriers,
     the differences identified in this proceeding do not materially
     diminish a requesting carrier's ability to offer local exchange or
     exchange access service.

457. Specifically, we find that lack of unbundled OS/DA service from the
     incumbent LEC does not materially diminish the ability of
     requesting carriers to provide the service they seek to offer;
     several carriers have successfully self-provisioned OS/DA, while
     other carriers rely upon alternative providers of OS/DA services.
     Requesting carriers, however, complain that the alternative sources
     for operator services and directory assistance are inferior because
     the information provided to customers is not as complete, and is
     not updated as frequently, as incumbent LEC databases.[^911]
     According to several commenters, incumbent LECs update their
     directory listing databases daily, and often on a real-time basis,
     as they complete service order processes.[^912] In contrast,
     alternative providers may obtain their data from sources such as
     yellow pages databases, scanned white page listings, postal service
     change of address forms, motor vehicle registration records, and
     voter registration records, which are not updated as often.[^913]
     Requesting carriers, however, have the ability, under section
     251(b)(3), to obtain nondiscriminatory access to the incumbent
     LEC's, or any other competing LEC's, databases used in the
     provision of OS/DA.[^914] Where competitive LECs may obtain OS/DA
     information and services, directly or indirectly, from incumbent
     LEC sources, we do not find cognizable differences in the quality
     of that information or services. The record indicates that carriers
     that are entitled to access to incumbent LEC database information
     and updates, such as competitive LECs and interexchange carriers
     like MCI WorldCom, Sprint and AT&T, offer directory assistance on a
     wholesale basis to other competitive LECs.[^915] Additionally, we
     note that third-party OS/DA providers are often able to purchase
     incumbent LEC OS/DA database information and updates.[^916] We are
     therefore not persuaded that lack of unbundled access to incumbent
     LEC databases used in the provision of OS/DA necessarily results in
     quality differences that would materially diminish a requesting
     carrier's ability to offer service.

458. MediaOne claims that operators of alternative OS/DA providers may
     be unfamiliar with the names of the local communities because their
     call centers are often distantly located.[^917] We do not believe
     that this constitutes a material difference in quality. First, we
     note that MediaOne does not explain how an operator's proximity to
     the customer results in a difference in OS/DA service quality.
     Search strategies used by OS/DA operators can be based on fuzzy
     logic queries and phonetic spellings that enable operators to
     retrieve information without the exact spelling of, or familiarity
     with, a place or proper name. For local directory assistance,
     alternative providers also train their call center operators to be
     familiar with the localities and any necessary variations on word
     pronunciations.[^918] In addition, incumbents often maintain remote
     or regional call centers that are located outside the local calling
     area of a large percentage of the incumbent LEC's own
     customers[^919] Thus, the incumbent's operators may have no more
     familiarity with the names of particular locales in a geographic
     area than do the operators of a competitor. Thus, if a competitor
     wants to ensure that the operators it is utilizing are trained for
     a particular area, it can best achieve this result by
     self-provisioning OS/DA service and training its own operators.
     Alternatively, a competitive carrier may also select an alternative
     OS/DA provider with a call center closer to the carrier's customer
     base than the incumbent's call center or contract with the provider
     for special operator training to cover the names of locales within
     the specific geographic markets the competitive carrier serves. We
     are satisfied that operator-training disparities between
     vendor-provided operators and those of the incumbent LEC do not
     materially diminish a requesting carrier's ability to offer
     service.

459. We reject arguments that we should unbundle access to the
     incumbent's OS/DA service because national operator services have
     limited ability to connect to local public safety answering points
     (PSAPs) in emergency situations. Specifically, certain commenters
     argue that in such situations, national operator services usually
     advise the caller to hang-up and dial 911.[^920] While issues of
     public safety are of paramount concern, the standard by which we
     decide to unbundle a non-proprietary network element focuses on
     whether a carrier's ability to provide the services that it seeks
     to offer is impaired by lack of access to that element.[^921]
     Accordingly, we look to whether the ability or inability to connect
     OS/DA calls to a PSAP impairs the ability of a carrier to offer
     local exchange services. We conclude that it does not.

460. Although subscribers may mistakenly dial OS/DA to reach emergency
     assistance, the ability to connect a misdirected call to a PSAP is
     unlikely to result in a competitive advantage in the provision of
     local exchange service. At least one third-party provider of OS/DA
     service, Teltrust, states that it requires its customers to provide
     the emergency number of the PSAP for the originating caller so that
     it knows which agency to call.[^922] In cases where it receives an
     incoming call from an 800 number and does not have an emergency
     number associated with the calling party's location, the operator
     can call emergency services if the calling party can provide the
     name of the location. Should a competitive carrier decide to obtain
     OS/DA services for its customers from the incumbent on a
     nondiscriminatory basis, under section 251(b)(3), it will be able
     to connect its customers to the PSAP in the same manner as the
     incumbent. Moreover, it is not clear whether all incumbent LEC
     OS/DA call centers, especially those with remote OS/DA call
     centers, have the ability to connect their own customers to every
     PSAP.[^923] Thus, even if a requesting carrier had unbundled access
     to the incumbent's OS/DA service, its subscribers may receive
     instructions from the incumbent's operator that do not measurably
     differ from the instructions it would receive from an alternative
     provider's operator. Indeed the only way in which a competitor can
     retain control over the quality of OS/DA service is to self-provide
     its own OS/DA call center and train its own operators. By
     self-providing its own call centers it can require its customers to
     provide it with detailed emergency information and populate its
     database accordingly.

461. We find insufficient evidence in the record to suggest that, based
     on performance measurements, there is a material difference in the
     timelines with which an incumbent's operator, compared to
     third-party operators, can respond to an inquiry. MediaOne asserts
     that the average speed to answer OS/DA calls for competitors is
     15-18 seconds, while the incumbent commits to answering calls to
     its OS/DA platform in less than six seconds.[^924] The data
     MediaOne provides, while helpful, is inconclusive. Specifically,
     the data, which consists of the performance of one incumbent and a
     few competitors, provides too small a sample size for us to
     extrapolate these results over the entire OS/DA industry and
     conclude that competitive carriers' ability to provide service is
     impaired. While we acknowledge that there are likely to be some
     measurable differences among OS/DA providers for particular OS/DA
     components, we do not find sufficient record evidence to conclude
     that a requesting carrier is impaired without access to the
     incumbent's OS/DA service. Moreover, applying the unbundling
     standard we set forth above, the question of whether lack of access
     to the incumbent's network element materially diminishes a
     requesting carrier's ability to provide the services it seeks to
     offer is determined based on the totality of the circumstances.
     Thus, while relevant, we cannot say that the proffered average
     speed to answer calls, or other OS/DA quality issues, contribute
     significantly to a competitor's overall ability to provide local
     exchange and exchange access service.

462. [Timeliness]{.underline}. We do not find any impediments associated
     with self-provisioning OS/DA services that would delay a requesting
     carrier's entry into the local exchange or exchange access market.
     Although AT&T identifies delays associated with implementing the
     customized routing necessary to use alternative OS/DA
     providers,[^925] the record indicates that AT&T's customized
     routing issues have been resolved.[^926] We are unaware of any
     ongoing problems that create material delays when competing
     carriers purchase OS/DA service from alternative providers. We
     agree that customized routing is necessary to access alternative
     sources of OS/DA for competitors not deploying their own
     switches.[^927] Commenters state that a key component of providing
     carriers with a choice of competitive OS/DA suppliers is the
     availability of line class codes in the unbundled switching
     element.[^928] Lack of a customized routing solution that enables
     competitors to route traffic to alternative OS/DA providers would
     therefore effectively preclude competitive LECs from using such
     alternative providers.[^929] Thus, if an incumbent LEC does not
     provide customized routing to requesting carriers that use the
     incumbent's unbundled switching element, it must provide unbundled
     access to its OS/DA service.

463. [Impact on Network Operations]{.underline}. We conclude that the
     interoperability issues identified in the record do not materially
     diminish a requesting carrier's ability to provide local exchange
     or exchange access service. In particular, MCI WorldCom complains
     that incumbent LECs should implement Feature Group D signaling,
     instead of outdated legacy signaling protocol.[^930] According to
     MCI WorldCom, to use the incumbent LECs' signaling protocol instead
     of Feature Group D, most competitive LECs would have to either
     deploy new customized operator platforms or modify their existing
     platforms, both of which impose substantial costs.[^931] SBC
     responds that the customized routing of Feature Group D is not
     technically feasible in all end-office switches.[^932] BellSouth,
     however, offers a technical solution to MCI WorldCom's concern in
     some of its offices and states its willingness to deploy these
     solutions throughout its network.[^933] In instances where the
     requesting carrier obtains the unbundled switching element from the
     incumbent, the lack of customized routing effectively precludes
     requesting carriers from using alternative OS/DA providers and,
     consequently, would materially diminish the requesting carrier's
     ability to provide the services it seeks to offer. Thus, we require
     incumbent LECs, to the extent they have not accommodated
     technologies used for customized routing, to offer OS/DA as an
     unbundled network element.

464. Finally, we find that the ability to obtain nondiscriminatory
     access to operator services and directory assistance under section
     251(b)(3) significantly mitigates any potential impairment a
     requesting carrier may experience if denied access to the
     incumbent's OS/DA services as an unbundled network element.[^934]
     There are a substantial number of regional and national alternative
     providers of OS/DA service that are serving a variety of customers,
     including some incumbent LECs and IXCs. We do not find differences
     in cost, quality, timeliness, and ubiquity that would lead to the
     conclusion that requesting carriers' ability to provide local
     exchange and exchange access services would be materially
     diminished without access to the incumbent's OS/DA service as an
     unbundled network element. Rather, we find that these alternative
     sources of OS/DA service are available as a practical, economic,
     and operational matter. Moreover, we believe that not requiring
     that incumbent LECs to unbundle OS/DA service is consistent with
     the goals of the Act, because it will reduce competitors' reliance
     on the incumbent's network and create new opportunities for
     competitors of OS/DA service to differentiate their services
     through increased quality and decreased prices.

# MISCELLANEOUS ISSUES

## Section 271-Related Issues

### Background

465. Section 271(c)(2)(B) enumerates a competitive checklist that BOCs
     must comply with to obtain interLATA authority.[^935] In
     particular, prior to obtaining authority to provide long distance
     service, section 271(c)(2)(B) requires BOCs to demonstrate, among
     other things, that they are providing or "generally offering" to
     requesting carriers the following network elements: local loops,
     transport, switching, databases and signaling.[^936]

466. In the *Notice*, we sought comment on the interplay between the
     unbundling obligations of section 251(c), and the competitive
     checklist network elements of section 271.[^937] Among other
     things, we sought comment on what pricing standards would apply if
     a checklist network element were no longer required to be unbundled
     pursuant to section 251(c)(3), after considering the "necessary"
     and "impair" standards of section 251(d)(2).[^938]

467. Ameritech argues that if a network element on the checklist no
     longer needs to be unbundled, the item need not be provided to
     requesting carriers at prices predicated on our forward looking
     costs.[^939] Other commenters counter that the inclusion of network
     elements on the checklist is presumptive evidence that these
     elements must be unbundled,[^940] and thus, provided to requesting
     carriers at prices predicated on our forward looking costs.

### Discussion

468. In this Order, we conclude that circuit switching and shared
     transport need not be unbundled in certain circumstances.[^941]
     Nonetheless, providing access and interconnection to these elements
     remains an obligation for BOCs seeking long distance approval. We
     therefore must decide what prices, terms, and conditions apply to
     these elements that no longer need to be unbundled.[^942]

469. We conclude that the prices, terms, and conditions set forth under
     sections 251 and 252 do not presumptively apply to the network
     elements on the competitive checklist of section 271.

470. The Commission must consider unbundling network elements in
     accordance with section 251(c)(3), while according due deference to
     the "necessary" and "impair" standards articulated in section
     251(d)(2), and by the Supreme Court. The Commission must evaluate
     the network elements on the competitive checklist under the
     auspices of section 271. If a checklist network element is
     unbundled, the applicable prices, terms and conditions are
     determined in accordance with sections 251 and 252. If a checklist
     network element does not satisfy the unbundling standards in
     section 251(d)(2), the applicable prices, terms and conditions for
     that element are determined in accordance with sections 201(b) and
     202(a).

471. Although section 271 does not specify that the checklist network
     elements must be provided in accordance with section 251(c)(3), the
     Commission nonetheless has independent authority to ensure that
     items (iv)-(vi) of the checklist are provided on a reasonable,
     nondiscriminatory basis. In *Iowa Utils. Bd.*, the Supreme Court
     affirmed the Commission's regulatory authority over the pricing of
     section 251 unbundled network elements, rejecting the claim that
     this matter is reserved to the states.[^943] In reaching this
     conclusion, the Court held that the Commission's pricing authority
     resides broadly in section 201(b), which grants the agency
     authority to prescribe rules and regulations "as may be necessary
     in the public interest to carry out the provisions of this
     Act."[^944]

472. Section 201(b) provides a basis for the Commission to scrutinize
     the prices, terms, and conditions under which the checklist network
     elements are offered. Section 201(b) states that "\[a\]ll charges,
     practices, classifications, and regulations for and in connection
     with such communication services, shall be *just and reasonable*,
     and any such charge, practice, classification, or regulation that
     is unjust or unreasonable is hereby declared unlawful."[^945]
     Section 202(a) mandates that "\[i\]t shall be unlawful for any
     common carrier to make any unjust or unreasonable discrimination in
     charges, practices, classifications, regulations, facilities, or
     services for or in connection with like communication
     service."[^946] In addition, checklist items (vii) and (x)
     explicitly require "nondiscriminatory access" to OS/DA, databases,
     and signaling.[^947]

473. In circumstances where a checklist network element is no longer
     unbundled, we have determined that a competitor is not impaired in
     its ability to offer services without access to that element. Such
     a finding in the case of switching for large volume customers is
     predicated in large part upon the fact that competitors can acquire
     switching in the marketplace at a price set by the
     marketplace.[^948] Under these circumstances, it would be
     counterproductive to mandate that the incumbent offers the element
     at forward-looking prices. Rather, the market price should prevail,
     as opposed to a regulated rate which, at best, is designed to
     reflect the pricing of a competitive market.[^949]

## Combinations of Unbundled Loops and Transport Network Elements

474. A number of parties identify issues surrounding combinations of
     loop and transport network elements. In particular, several
     competitive LECs argue that the Commission should identify the
     "enhanced extended link" (EEL) as a separate network element or
     require incumbent LECs to provide requesting carriers access to
     loop and transport elements in combination, even if those elements
     are not currently combined.[^950] Incumbent LECs argue that, for
     loop transport elements that are currently combined requesting
     carriers should not be allowed to substitute such combinations of
     elements for existing, regulated special access services.[^951]
     According to incumbent LECs, allowing this substitution would
     either force them to increase local rates or undermine universal
     service.[^952]

### Enhanced Extended Link

#### Background

475. In the *Local Competition Order*, the Commission identified loops
     and transport as network elements subject to the unbundling
     obligation of section 251(c)(3). In rule 51.315(b), the Commission
     prohibited incumbents from separating network elements that are
     currently combined.[^953] In addition, the Commission adopted rules
     51.315(c) -- (f) requiring incumbent LECs to combine unbundled
     network elements in any manner, even if those elements are not
     currently combined.[^954] The Eighth Circuit overturned a number of
     the Commission's rules, including rules 51.315(b) -- (f).[^955]
     Rule 51.315(b), however, was reinstated by the Supreme Court.[^956]
     In light of the reasoning set forth in the Court's opinion, the
     Commission asked the Eighth Circuit to reinstate rules 51.315(c) --
     (f).[^957]

476. In the *Notice,* we sought comment on whether we should identify
     additional network elements beyond the seven listed in the *Local
     Competition First Report and Order*.[^958] We also sought comment
     on whether, in light of the Supreme Court's decision, we could
     require incumbent LECs to combine network elements that are not
     currently combined, such as an unbundled loop with unbundled
     transport.[^959]

477. In response to the *Notice*, a number of parties, including
     competitive LECs and state commissions, argue that we should either
     identify a new network element comprised of unbundled loop,
     multiplexing/concentrating equipment, and dedicated transport (the
     enhanced extended link or "EEL") or, alternatively, reinstate rules
     51.315(c) -- (f) which require incumbent LECs to provide unbundled
     loop and transport elements on a combined basis.[^960] Incumbent
     LECs argue that we should not identify the EEL as a separate
     network element because it would constitute an unlawful combination
     of two or more elements not currently combined.[^961] The incumbent
     LECs also argue that we cannot reinstate rules 51.315(c) -- (f)
     because they are currently pending before the Eighth Circuit.

#### Discussion

478. We decline to define the EEL as a separate network element in this
     Order. As discussed above, the Eighth Circuit is currently
     reviewing whether rules 51.315(c) -- (f) should be reinstated. We
     see no reason to decide now whether the EEL should be a separate
     network element, in light of the Eighth Circuit's review of those
     rules.

479. A number of commenters argue that we should reaffirm the
     Commission's decision in the *Local Competition First Report and
     Order*. [^962] In that order the Commission concluded that the
     proper reading of "currently combines" in rule 51.315(b) means
     "ordinarily combined within their network, in the manner which they
     are typically combined."[^963] Incumbent LECs, on the other hand,
     argue that rule 51.315(b) only applies to unbundled network
     elements that are currently combined and not to elements that are
     "normally" combined.[^964] Again, because this matter is currently
     pending before the Eighth Circuit, we decline to address these
     arguments at this time.

480. We note that in the *Local Competition First Report and Order,* and
     again in this proceeding, we identify the loop and dedicated
     transport as separate unbundled network elements.[^965] In
     particular, as discussed above, we define the loop as the
     functionality that extends from the customer demarcation point to
     the main distribution frame associated with the incumbent LEC's
     central office switch. We define dedicated transport as the
     transmission facilities dedicated to a particular customer between
     wire centers owned by the incumbent LECs or requesting
     telecommunications carriers, or between switches owned by incumbent
     LECs or requesting carriers. To the extent an unbundled loop is in
     fact connected to unbundled dedicated transport, the statute and
     our rule 51.315(b) require the incumbent to provide such elements
     to requesting carriers in combined form. Thus, although in this
     Order, we neither define the EEL as a separate unbundled network
     element nor interpret rule 51.315(b) as requiring incumbents to
     combine unbundled network elements that are "ordinarily combined,"
     we note that in specific circumstances, the incumbent is presently
     obligated to provide access to the EEL. In particular, the
     incumbent LECs may not separate loop and transport elements that
     are currently combined and purchased through the special access
     tariffs. Moreover, requesting carriers are entitled to obtain such
     existing loop-transport combinations at unbundled network element
     prices.[^966]

481. We also decline at this time to reinstate rules 51.315(c) -- (f).
     As discussed above, this issue is currently pending before the
     Eighth Circuit. As a general matter, however, we believe that the
     reasoning of the Supreme Court's decision to reinstate rule
     51.315(b) based on the nondiscrimination language of section
     251(c)(3) applies equally to rules 51.315(c) -- (f). Specifically,
     the Court held that section 251(c)(3)'s nondiscrimination
     requirement means that access provided by the incumbent LEC must be
     at least equal in quality to that which the incumbent LEC provides
     to itself.[^967] We note that incumbent LECs routinely combine loop
     and transport elements for themselves. For example, incumbent LECs
     routinely provide combinations of loop and transport elements for
     themselves in order to: (1) deliver data traffic to their own
     packet switches; (2) provide private line services; and (3) provide
     foreign exchange service.[^968] In addition, we note that incumbent
     LECs routinely provide the functional equivalent of the EEL through
     their special access offerings.[^969]

482. We believe that the basis upon which the Eighth Circuit invalidated
     rules 51.315(c) -- (f) has been called into question by the Supreme
     Court's decision. In particular, the Eighth Circuit determined that
     "unbundled" meant physical separation of network elements.[^970]
     The Supreme Court clarified that "unbundled" means "separate
     prices."[^971] The Supreme Court also stated that section 251(c)
     "does not say, or even remotely imply, that elements must be
     provided \[in discrete pieces, and never in combined form.\]"[^972]
     We also note that an additional basis for the Eighth Circuit's
     decision to invalidate rules 51.315(b) -- (f) was its understanding
     that incumbents "would rather grant their competitors access to
     their facilities" than combine elements on behalf of requesting
     carriers.[^973] Experience over the last year demonstrates that
     incumbent LECs have refused to provide access to network elements
     so that competitors could combine them, except in situations where
     competitive LECs have collocated in the incumbent's central
     offices.[^974] Accordingly, we believe that section 251(c)(3)
     provides a sound basis for reinstating rules 51.315(c) -- (f).

### Use of unbundled network elements to provide exchange access services

#### Background

483. As discussed above, in some situations in the incumbent's network,
     loops and dedicated transport network elements are already combined
     to provide special access services for interexchange carriers. In
     *ex parte* filings, incumbent LECs, including BellSouth and SBC,
     argue that the Commission should restrict a requesting carrier from
     obtaining such combined facilities as unbundled network elements in
     order to prevent requesting carriers from by-passing existing
     special access services.[^975] BellSouth and SBC both argue that
     such a restriction is necessary to prevent interexchange carriers
     from benefiting from the difference between special access rates
     and unbundled network element prices and thus, protect the
     incumbent LECs' current exchange access revenue streams.[^976]
     Competitive LECs respond that the plain language of section
     251(c)(3) precludes the Commission from imposing any restrictions
     on the use of unbundled network elements.[^977]

#### Discussion

484. Section 251(c)(3) of the Act requires incumbent LECs to provide to
     requesting carriers access to unbundled network elements "for the
     provision of a telecommunications service . . . ."[^978] In the
     *Local Competition First Report and Order*, the Commission found
     that section 251(c)(3) "permits interexchange carriers and all
     other requesting carriers, to purchase unbundled elements for the
     purpose of offering exchange access services, or for the purpose of
     providing exchange access services to themselves in order to
     provide interexchange services to consumers."[^979] In particular,
     the Commission found that its conclusion not to impose restrictions
     on the use of unbundled network elements was "compelled by the
     plain language of the 1996 Act" because exchange access and
     interexchange services are "telecommunications services."[^980]
     Moreover, in the *Local Competition First Report and Order*, the
     Commission found that "the language of section 251(c)(3), which
     provides that telecommunications carriers may purchase unbundled
     elements in order to provide a telecommunications service, is not
     ambiguous."[^981] This conclusion that the Act does not permit
     usage restrictions was codified in Rule 51.309(a), which provides
     that "\[a\]n incumbent LEC shall not impose limitations,
     restrictions, or requirements on request for, or the use of,
     unbundled network elements that would impair the ability of a
     requesting telecommunications carrier to offer a telecommunications
     service in the manner the requesting telecommunications carrier
     intends." [^982] That rule was not challenged in court by any
     party.

485. Parties have raised again arguments that allowing requesting
     carriers to use unbundled network elements to provide exchange
     access would have significant policy ramifications. As BellSouth
     explains, existing combinations of unbundled loops and transport
     network elements are a "direct (and often physically identical)
     substitute for the incumbent LEC's regulated access services . . .
     ," but priced significantly lower than tariffed special access
     services.[^983] The special access service that BellSouth and SBC
     refer to consists of entrance facilities from the interexchange
     carrier's point of presence (POP) to an incumbent LEC's switch or
     serving wire center (SWC), a dedicated transport link from the SWC
     to an end office, and a channel termination facility from the end
     office to the end user.[^984]

486. As an initial matter, under existing law, a requesting carrier is
     entitled to obtain existing combinations of loop and transport
     between the end user and the incumbent LEC's serving wire center on
     an unrestricted basis at unbundled network element prices.[^985] In
     particular, any requesting carrier that is collocated in a serving
     wire center is free to order loops and transport to that serving
     wire center as unbundled network elements because those elements
     meet the unbundling standard, as discussed above. Moreover, to the
     extent those unbundled network elements are already combined as a
     special access circuit, the incumbent may not separate them under
     rule 51.315(b), which was reinstated by the Supreme Court.[^986] In
     such situations, it would be impermissible for an incumbent LEC to
     require that a requesting carrier provide a certain amount of local
     service over such facilities.

487. Moreover, we wish to make clear that in situations where the
     requesting carrier is collocated and has self-provisioned transport
     or obtained transport from an alternative provider, but is
     purchasing unbundled loops, that carrier may provide only exchange
     access over those facilities. Thus, for instance, a requesting
     carrier is entitled to purchase unbundled loops in order to provide
     advanced services (*e.g.*, interstate special access xDSL service).

488. Finally, we clarify that interexchange carriers are entitled to use
     unbundled dedicated transport from their POP to a serving wire
     center in order to provide local telephone exchange service. Such
     carriers are entitled to obtain such dedicated transport links
     pursuant to the unbundling standard discussed above. The fact that
     such carriers may also provide exchange access over those
     facilities does not alter our conclusion.

489. We conclude that the record in this phase of the proceeding is
     insufficient for us to determine whether or how our rules should
     apply in 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"). Only a handful of parties commented on the
     special access arbitrage issue that was first raised by BellSouth's
     August 9, 1999, *ex parte* filing. We believe that we should fully
     explore the policy ramifications of applying our rules in a way
     that potentially could cause a significant reduction of the
     incumbent LECs' special access revenues prior to full
     implementation of access charge and universal service reform.
     Therefore, we set certain discrete issues for further comment
     below.

## Nondiscrimination Obligations of Incumbent LECs

490. We reaffirm the conclusion the Commission adopted in the *Local
     Competition First Report and Order* that national rules defining
     "nondiscriminatory access" to unbundled network elements will
     reduce the costs of entry and speed the development of competition
     in local telecommunications markets.[^987] We find that the phrase
     "nondiscriminatory access" in section 251(c)(3) means at least two
     things: first, the quality of an unbundled network element that an
     incumbent LEC provides, as well as the access provided to that
     element, must be equal between all carriers requesting access to
     that element; second, where technically feasible, the access and
     unbundled network element provided by an incumbent LEC must be
     provided in "substantially the same time and manner" to that which
     the incumbent provides to itself.[^988]

491. In those situations where an incumbent LEC does not provide access
     to network elements to itself, we reaffirm our requirement that
     incumbent LECs must provide access in a manner that provides a
     requesting carrier with a meaningful opportunity to compete.[^989]
     Because we believe that the technical infeasibility problem will
     arise rarely, we expect incumbent LECs to fulfill the
     non-discrimination requirement in nearly all instances where they
     provision unbundled network elements. In the rare instances where
     technical feasibility issues arise, incumbent LECs must prove to a
     state commission that it is technically infeasible to provide
     access to unbundled elements at the same level of quality that the
     incumbent LEC provides to itself.[^990]

# FOURTH FURTHER NOTICE OF PROPOSED RULEMAKING

## Background

492. As noted above, in the *Local Competition First Report and Order,*
     the Commission held that for all unbundled network elements,
     including combinations of network elements, incumbent LECs may not
     impose any usage restriction on the use of such elements, or
     combinations thereof. In that order, however, the Commission
     imposed a temporary access charge on the purchase of unbundled
     switching. In particular, the Commission required requesting
     carriers to pay, for a limited time period, the carrier common line
     charge (CCL) and 75 percent of the Tandem Interconnection Charge
     (TIC).[^991] The Commission found that it had discretion under the
     Act "to adopt a limited, transitional plan to address public policy
     concerns raised by the bypass of access charges via unbundled
     elements." This decision was upheld by the Eighth Circuit, which
     found that the Commission decision was reasonable.[^992]

493. In the *Third Order on Reconsideration*, the Commission required
     incumbent LECs to provide access to shared transport as an
     unbundled network element in conjunction with local and tandem
     switching. In that order, the Commission limited the obligation of
     incumbent LECs to provision shared transport to end users to whom
     the requesting carrier was providing local exchange service. The
     Commission sought comment on whether requesting carriers may use
     unbundled dedicated or shared transport facilities in conjunction
     with unbundled switching, to originate or terminate interstate toll
     traffic to customers to whom the requesting carrier does not
     provide local exchange service.[^993] Specifically, the *Further
     Notice of Proposed Rulemaking* requested comment on the "intensely
     interrelated" question of whether such use would conflict with the
     Commission's implementation of access charge reform and universal
     service.[^994]

## Discussion

494. Parties have argued in this proceeding that allowing requesting
     carriers to obtain combinations of loop and transport unbundled
     network elements based on forward-looking cost would provide
     opportunities for arbitrage of special access services. We are
     cognizant that special access pre-dates passage of the 1996
     Telecommunications Act and has historically been provided by
     incumbent LECs at prices that are higher than the unbundled network
     element pricing scheme of section 252(d)(1). Accordingly, in this
     Further Notice we consider whether there is any basis in the
     statute or our rules under which incumbent LECs could decline to
     provide entrance facilities at unbundled network element prices.

495. We 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 entrance facilities. Parties
     should also address whether there is any other statutory basis for
     limiting an incumbent LEC's obligation to provide entrance
     facilities as an unbundled network element.

496. We acknowledge that resolution of this issue potentially could have
     large financial impact on incumbent local exchange carriers. We
     seek comment on this issue, and on the extent to which any such
     impact should be considered in reaching a decision on this issue.
     We seek comment on the policy implications, if any, of a
     significant reduction in special access revenues for our universal
     service program. [^995] Finally, because the record developed in
     the *Further Notice of Proposed Rulemaking* in the *Shared
     Transport Order* is two years old, we invite parties to refresh the
     record on whether requesting carriers may use unbundled dedicated
     or shared transport facilities in conjunction with unbundled
     switching to originate or terminate interstate toll traffic to
     customers to whom the requesting carrier does not provide local
     exchange service.[^996]

# PROCEDURAL ISSUES

## Final Regulatory Flexibility Analysis

497. As required by the Regulatory Flexibility Act (RFA),[^997] an
     Initial Regulatory Flexibility Analysis (IRFA) was incorporated in
     the *Notice* in CC Docket No. 96-98.[^998] The Commission sought
     written public comments on the proposals in the *Notice*, including
     comments on the IRFA. This present Final Regulatory Flexibility
     Analysis (FRFA) conforms to the RFA.[^999]

### Need for, and Objectives of, the Third Report and Order

498. This Order responds to the Supreme Court's January, 1999, decision
     that directs the Commission to revise the standards used to
     determine which network elements incumbent LECs must unbundle
     pursuant to section 251 of the Act.[^1000] More specifically, this
     Order gives substance to the "necessary" and "impair" standards in
     section 251(d)(2) of the Act. Applying these standards, and
     considering the availability of elements outside of the incumbent's
     network, this Order adopts a list of network elements that must be
     unbundled on a national basis, subject to certain discrete
     geographic and product market exceptions. This Order also announces
     that the Commission will reexamine the national list of unbundled
     network elements in three years. It reaffirms a state commission's
     authority to require incumbent LECs to unbundle additional
     elements, as long as the unbundling obligations: (1) are consistent
     with the requirements of section 251; (2) do not substantially
     prevent implementation of the requirements of that section and the
     purposes of the Act; and (3) are consistent with the national
     policy framework established in this Order. Finally the Order
     reaffirms that incumbent LECs are obligated to offer combinations
     of network elements that are already combined, including
     combinations of loop, multiplexing/concentrating equipment, and
     dedicated transport if they are currently combined.

### Summary of Significant Issues Raised by the Public Comments in Response to the IRFA

499. We received no comments in response to the IRFA in the *Notice*. We
     did, however, receive some general small-business-related comments
     which are discussed throughout the Order and are summarized in
     subsection 5 of the FRFA, *infra*.

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

500. In the FRFA to the Commission's *Local Competition First Report and
     Order*,[^1001] we adopted the analysis and definitions set forth in
     determining the small entities affected by this Order for purposes
     of this FRFA. 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 rules.[^1002] The RFA generally defines
     the term \"small entity\" as having the same meaning as the terms
     \"small business,\" \"small organization,\" and \"small
     governmental jurisdiction.\"[^1003] The RFA defines a \"small
     business\" to be the same as a \"small business concern\" under the
     Small Business Act,[^1004] unless the Commission has developed one
     or more definitions that are appropriate to its activities.[^1005]
     Under the Small Business Act, a \"small business concern\" is one
     that: (1) is independently owned and operated; (2) is not dominant
     in its field of operation; and (3) meets any additional criteria
     established by the Small Business Administration (SBA).[^1006]
     Below we further describe and estimate the number of small entities
     that may be affected by the rules adopted in this Order.

501. We have included small incumbent LECs in this 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.\"[^1007] 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.[^1008] We have
     therefore included small incumbent LECs in this RFA analysis,
     although we emphasize that this RFA action has no effect on the
     Commission's analyses and determinations in other non-RFA contexts.

502. The United States Bureau of the Census (the Census Bureau) reports
     that at the end of 1992, there were 3,497 firms engaged in
     providing telephone services, as defined therein, for at least one
     year.[^1009] These firms include a variety of different categories
     of carriers, including LECs, interexchange carriers, competitive
     access providers, wireless providers, operator service providers,
     pay telephone operators, wireless providers, and resellers. At
     least some of these 3,497 telephone service firms may not qualify
     as small entities because they are not \"independently owned and
     operated.\"[^1010] For example, a wireless provider that is
     affiliated with a LEC having more than 1,500 employees would not
     meet the definition of a small business. It seems reasonable to
     conclude, therefore, that fewer than 3,497 of these telephone
     service firms are small entities that may be affected by this
     Order. Since 1992, however, many new carriers have entered the
     telephone services marketplace. At least some of these new entrants
     may be small entities that are affected by this Order.

503. The SBA has developed a definition of small entities for telephone
     communications companies other than radiotelephone (wireless)
     companies. The Census Bureau reports that there were 2,321 such
     telephone companies that had been operating for at least one year
     at the end of 1992.[^1011] According to the SBA\'s definition, a
     wireline telephone company is a small business if it employs no
     more than 1,500 persons.[^1012] All but 26 of the 2,321 wireline
     companies listed by the Census Bureau were reported to have fewer
     than 1,000 employees. Thus, even if all 26 of those companies had
     more than 1,500 employees, there would still be 2,295 wireline
     companies that might qualify as small entities. Although it seems
     certain that some of these carriers are not independently owned and
     operated, we are unable at this time to estimate with greater
     precision the number of wireline carriers and service providers
     that would qualify as small business concerns under the SBA\'s
     definition. Consequently, we estimate that fewer than 2,295 of
     these wireline companies are small entities that this Order may
     affect. Since 1992, however, many wireline carriers have entered
     the telephone services marketplace. Many of these new entrants may
     be small entities that are affected by this Order.

504. [Incumbent Local Exchange Carriers]{.underline}**.** Neither the
     Commission nor the SBA has developed a definition specifically
     directed toward small incumbent LECs. The closest applicable
     definition under SBA rules is for telephone communications
     companies other than radiotelephone (wireless) companies. The most
     reliable source of information regarding the number of LECs
     nationwide of which we are aware appears to be the data that we
     collect annually in connection with the Telecommunications Relay
     Service (TRS). According to our most recent data, 1,410 companies
     reported that they were engaged in the provision of local exchange
     services.[^1013] Although it seems certain that some of these
     carriers are not 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 small incumbent LECs that would
     qualify as small business concerns under SBA\'s definition.
     Consequently, we estimate that there are fewer than 1,410 small
     incumbent LECs that may be affected by the decisions and rules
     adopted in this Order.

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

505. Pursuant to sections 251(c) and (d) of the 1996 Act, incumbent
     LECs, including those that qualify as small entities, are required
     to provide nondiscriminatory access to unbundled network
     elements.[^1014] The only exception to this rule is those carriers
     that qualify and have gone through the process of obtaining an
     exemption, suspension or modification pursuant to section 251(f) of
     the Act. This Order interprets the necessary and impair standards
     of section 251(d)(2) in such a way that it fulfills the Supreme
     Court's requirement that we apply some limiting standard to an
     incumbent LEC's 251(c) obligations.[^1015] In this Order, we
     identify a minimum set of network elements that incumbent LECs are
     obligated to offer to requesting carriers on an unbundled basis
     nationwide: (1) local loops, including dark fiber and high-capacity
     loops;[^1016] (2) subloops;[^1017] (3) network interface
     devices;[^1018] (4) local switching, except under certain
     conditions;[^1019] (5) interoffice transport;[^1020] (6) signaling
     and call-related databases;[^1021] (7) operations support
     systems;[^1022] and (8) in very limited situations, packet
     switching.[^1023] State commissions may require incumbent LECs to
     provide additional network elements on an unbundled basis.[^1024]
     The Order also clarifies that incumbent LECs are obligated to
     provide access to combinations of loop, multiplexing/concentrating
     equipment and dedicated transport if they are currently combined.
     Compliance with the rules and decisions adopted in this Order may
     require the use of engineering, technical, operational, accounting,
     billing, and legal skills.

### Steps Taken to Minimize the Economic Impact of this Order on Small Entities, and Alternatives Considered

506. As we concluded in the original FRFA,[^1025] and as discussed more
     thoroughly above,[^1026] we believe that our actions establishing a
     minimum national list of unbundled network elements in this Order
     facilitates the development of competition in the local exchange
     and exchange access markets. This decision decreases entry barriers
     and provides reasonable opportunities for all carriers, including
     small entities, to provide local exchange and exchange access
     services.

507. National requirements for unbundling allows requesting carriers,
     including small entities, to take advantage of economies of scale
     in network. Requesting carriers, which may include small entities,
     should have access to the same technologies and economies of scale
     and scope available to incumbent LECs. Having such access will
     facilitate competition and help lower prices for all consumers,
     including individuals and small entities. A minimum national list
     of unbundled network elements also should facilitate the
     development of consistent standards and help resolve issues without
     imposing additional litigation costs on parties, including small
     entities.

508. Establishing a minimum national list of unbundled network elements
     facilitates negotiations and reduces regulatory burdens for all
     parties, including small entities. Adopting a national list lowers
     requesting carrier's cost by enabling them to implement regional
     and/or national business plans. In reaching this conclusion we
     considered one proposal to adopt national standards that would be
     applied by state commissions on a market-by-market basis. We
     concluded that this approach would lead to greater uncertainty in
     the market and would hinder the development of competition. We also
     found that it would complicate the negotiation of interconnection
     agreements and lead to increased litigation. Furthermore, this
     approach would increase the administrative burden on state
     commissions and parties arbitrating interconnection agreements
     before these state commissions.[^1027] All of these factors would
     slow the development of competition. Therefore we reaffirmed our
     decision in the *Local Competition First Report and Order* to adopt
     a national list.

### Report to Congress

509. The Commission will send a copy of the Third Report and Order,
     including this FRFA, in a report to be sent to Congress pursuant to
     the Small Business Regulatory Enforcement Fairness Act of
     1996.[^1028] In addition, the Commission will send a copy of the
     Third Report and Order, including the FRFA, to the Chief Counsel
     for Advocacy of the Small Business Administration. The Third Report
     and Order and FRFA, or summaries thereof, will also be published in
     the Federal Register.[^1029]

## Initial Regulatory Flexibility Analysis (IRFA)

510. As required by the RFA,[^1030] the Commission has prepared this
     present Initial Regulatory Flexibility Analysis (IRFA) of the
     possible significant economic impact on small entities by the
     policies and rules proposed in this Fourth Further Notice of
     Proposed Rulemaking. 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 Fourth Further Notice
     of Proposed Rulemaking provided above in section VII. The
     Commission will send a copy of the Fourth Further Notice of
     Proposed Rulemaking, including this IRFA, to the Chief Counsel for
     Advocacy of the Small Business Administration.[^1031] In addition,
     the Fourth Further Notice of Proposed Rulemaking and IRFA, or
     summaries thereof, will be published in the Federal
     Register.[^1032]

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

511. In this proceeding commenters have argued that allowing requesting
     carriers to obtain combinations of loop and transport unbundled
     network elements based on forward-looking cost would provide
     opportunities for arbitrage of special access services. We
     recognize that special access has historically been provided by
     incumbent LECs at prices that are higher than the unbundled network
     element pricing scheme of section 252(d)(1). Accordingly, in this
     Fourth Further Notice, the Commission seeks comment on the legal
     and policy bases for precluding requesting carriers from
     substituting dedicated transport for special access entrance
     facilities. We ask whether there is any basis in the statute or our
     rules under which incumbent LECs could decline to provide entrance
     facilities at unbundled network element prices.

512. Finally, because the record developed in the *Further Notice of
     Proposed Rulemaking* in the *Shared Transport Order* is two years
     old, we invite parties to refresh the record on whether requesting
     carriers may use unbundled dedicated or shared transport facilities
     in conjunction with unbundled switching to originate or terminate
     interstate toll traffic to customers to whom the requesting carrier
     does not provide local exchange service.[^1033]

### Legal Basis

513. Sections 1-4, 10, 201, 202, 251-254, 271, and 303(r) of the
     Communications Act, as amended, 47 U.S.C. §§ 151-54, 160, 201, 202,
     251-54, 271, and 303(r).

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

514. In the FRFA in the Third Report and Order, *supra*, we have
     described the entities possibly affected by that decision.[^1034]
     We anticipate that the same entities, as well as those described
     below, could be affected by any action taken in response to the
     Fourth Further Notice. We therefore incorporate the description and
     estimates used in the FRFA in the Third Report and Order, [^1035]
     and add the following descriptions.

515. *Competitive Local Exchange Carriers*. Neither the Commission nor
     SBA has developed a definition of small entities specifically
     directed toward providers of competitive local exchange services.
     The most reliable source of information regarding the number of
     competitive LECs nationwide of which we are aware appears to be the
     data we collected in the August, 1999 *Local Competition Report.*
     According to our most recent data, 158 companies reported that they
     were local service competitors holding numbering codes.[^1036]
     Although it seems certain that some of these carriers are not
     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 competitive LECs that would qualify as
     small business concerns under SBA's definition. Consequently, we
     estimate that there are fewer than 158 small entity competitive
     LECs that may be affected by the decisions and rules adopted in
     response to the Fourth Further Notice of Proposed Rulemaking.

516. *Competitive Access Providers.* Neither the Commission nor SBA has
     developed a definition of small entities specifically directed
     toward providers of competitive access services (CAPs). The closest
     applicable definition under SBA rules is for telephone
     communications companies other than radiotelephone (wireless)
     companies. The most reliable source of information regarding the
     number of CAPs nationwide of which we are aware appears to be the
     data that we collect annually in connection with the *TRS
     Worksheet*. According to our most recent data, 129 companies
     reported that they were engaged in the provision of competitive
     access services.[^1037] Although it seems certain that some of
     these carriers are not 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 competitive LECs that would
     qualify as small business concerns under SBA's definition.
     Consequently, we estimate that there are fewer than 129 small
     entity competitive LECs that may be affected by the decisions and
     rules adopted in response to the Fourth Further Notice of Proposed
     Rulemaking.

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

517. If the Commission does not establish any restrictions on the use of
     unbundled network elements or combinations of network elements, no
     additional compliance requirements are anticipated from further
     consideration of this issue. If, however, restrictions on access to
     network elements are imposed, and depending on how the restrictions
     are imposed, competitive LECs, CAPs and other purchasers of
     unbundled network elements, including small entities, may be
     subject to additional reporting, recordkeeping and other compliance
     requirements. Incumbent LECs, including small incumbent LECs, would
     also be impacted because they would have to keep track of
     competitive LEC filings and whether the use of the unbundled
     network element changed in such a way that a restriction would
     attach. If restrictions are placed on the use of unbundled network
     elements or combinations of such elements, compliance with these
     requests may require the use of engineering, technical,
     operational, accounting, billing, and legal skills.[^1038]

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

518. If requesting carriers can substitute unbundled network elements,
     such as transport, for entrance facilities, incumbent LECs,
     including small entities, may be significantly economically
     impacted. On the other hand, substituting unbundled network
     elements for entrance facilities could benefit competitive LECs,
     CAPs, and other purchasers of unbundled network elements. The
     Commission will evaluate in this proceeding whether there are legal
     grounds for restricting such access. If no such grounds exist, and
     instead if the statute requires unrestricted access to these
     unbundled network elements or combinations, then the Commission
     will have no alternative other than implementation of the statutory
     requirements for unrestricted access.

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

519. None.

# ADMINISTRATIVE MATTERS

520. Pursuant to Sections 1.415 and 1.419 of the Commission\'s rules, 47
     C.F.R. §§ 1.415, 1.419, interested parties may file comments on or
     before January 12, 2000 and reply comments on or before February
     11, 2000. Comments may be filed using the Commission\'s Electronic
     Comment Filing System (ECFS) or by filing paper copies.
     [See]{.underline} [Electronic Filing of Documents in Rulemaking
     Proceedings]{.underline}, 63 Fed. Reg. 24,121 (1998).

521. Comments filed through the 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.
     If multiple docket or rulemaking numbers appear in the caption of
     this proceeding, however, commenters must transmit one electronic
     copy of the comments to each docket or rulemaking number referenced
     in the caption. In completing the transmittal screen, commenters
     should include their full name, Postal Service mailing address, and
     the applicable docket or rulemaking number. 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.

522. Parties who choose to file by paper must file an original and four
     copies of each filing. If you want each Commissioner to receive a
     personal copy of your comments, you must file an original plus
     eleven copies. All filings must be sent to the Commission's
     Secretary, Magalie Roman Salas, Office of the Secretary, TW-A306,
     Federal Communications Commission, 445 12^th^ Street, S.W.,
     Washington, D.C. 20554. The Common Carrier Bureau contact for this
     proceeding is Jodie Donovan-May at 202-418-1580. If more than one
     docket or rulemaking number appear in the caption of this
     proceeding, commenters must submit two additional copies for each
     additional docket or rulemaking number.

523. Parties who choose to file by paper should also submit their
     comments on diskette. These diskettes should be submitted to: Jodie
     Donovan-May, Federal Communications Commission, 445 12^th^ Street,
     S.W., Washington, D.C. 20554. Such a submission should be on a 3.5
     inch diskette formatted in an IBM compatible format using Word for
     Windows 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 lead docket number in this case, Docket
     No. 96-98, 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
     pleadings, preferably in a single electronic file. In addition,
     commenters must send diskette copies to the Commission\'s copy
     contractor, International Transcription Service, Inc., 1231 20th
     Street, N.W., Washington, D.C. 20037.

524. *Ex Parte Rules.* This proceeding will be treated as a
     "permit-but-disclose" proceeding subject of the
     "permit-but-disclose" requirements under Section 1.1206(b) of the
     Commission's rules.[^1039] Ex parte presentations are permissible
     if disclosed in accordance with Commission rules, except during the
     Sunshine Agenda period when ex parte or otherwise, are generally
     prohibited. Person making oral ex parte presentations are reminded
     that a memorandum summarizing a presentation must contain a summary
     of the substance of the presentation and not merely a listing of
     the subjects discussed. More than a one or two sentence description
     of the view are arguments presented is generally required.[^1040]
     Additional rules pertaining to oral and written presentations are
     set forth in Section 1.1206(b).

# ORDERING CLAUSES

525. Accordingly, IT IS ORDERED that pursuant to Sections 1, 3, 4,
     201-205, 251, 256, 271, 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 THIRD REPORT AND ORDER AND FOURTH FURTHER NOTICE OF
     PROPOSED RULEMAKING is hereby ADOPTED.

526. IT IS FURTHER ORDERED that section 51.317 of the Commission's
     Rules, 47 C.F.R. § 51.317, as set forth in Appendix C hereto, is
     effective 30 days after publication in the Federal Register.

527. IT IS FURTHER ORDERED that § 51.319 of the Commission's Rules , 47
     C.F.R. § 51.319, as set forth in Appendix C hereto, is effective 30
     days after publication in the Federal Register, with the exception
     of only the following requirements, which are effective 120 days
     after publication in the Federal Register: the requirement to
     provide access on an unbundled basis to dark fiber as set forth in
     § 51.319(a)(1); the requirement to provide access on an unbundled
     basis to subloops and inside wire as set forth in § 51.319(a)(2);
     the requirement to provide access on an unbundled basis to packet
     switching in the limited circumstances set forth in § 51.319(c)(5);
     the requirement to provide access on an unbundled basis to dark
     fiber transport as set forth in § 51.319(d)(1)(ii); the requirement
     to provide access on an unbundled basis to the Calling Name
     Database, 911 Database, and E911 Database as set forth in
     §51.319(e)(2)(i); and the requirement to provide access on an
     unbundled basis to loop qualification information as set forth in §
     51.319(g).[^1041]

528. IT IS FURTHER ORDERED that the Commission's Office of Public
     Affairs, Reference Operations Division, SHALL SEND a copy of this
     THIRD REPORT AND ORDER, including the Final Regulatory Flexibility
     Analysis, to the Chief Counsel for Advocacy of the Small Business
     Administration.

529. IT IS FURTHER ORDERED that the Commission's Office of Public
     Affairs, Reference Operations Division, SHALL SEND a copy of this
     FOURTH FURTHER NOTICE OF PROPOSED RULEMAKING, including the Initial
     Regulatory Flexibility Analysis, to the Chief Counsel for Advocacy
     of the Small Business Administration.

FEDERAL COMMUNICATIONS COMMISSION

Magalie Roman Salas

Secretary

**APPENDIX A**

**List of Commenters in CC Docket No. 96-98**

Ad Hoc Telecommunications Users Committee (Ad Hoc)

Allegiance Telecom, Inc. (Allegiance)

Ameritech (Ameritech)

Association for Local Telecommunications Services (ALTS)

AT&T Corp. (AT&T)

Bell Atlantic Telephone Companies (Bell Atlantic)

BellSouth Corporation/BellSouth Telecommunications, Inc. (BellSouth)

Cable and Wireless USA, Inc. (Cable & Wireless)

Centennial Cellular Corporation, CenturyTel Wireless, Inc., Thumb
Cellular Limited Partnership, and Trillium Cellular Corporation
(Centennial Joint)

Choice One Communications, Network Plus, Inc., GST Telecom Inc., CTSI,
Inc., and Hyperion Telecommunications, Inc. (Choice One Joint)

Cincinnati Bell Telephone Company (Cincinnati Bell)

CO Space Services, Inc. (CO Space)

Columbia Telecommunications, Inc. (Columbia)

Competition Policy Institute (CPI)

Competitive Telecommunications Association (CompTel)

Connecticut Department of Public Utility Control (Connecticut DPUC)

Corecomm Limited (Corecomm)

Covad Communications Company (Covad)

Cox Communications, Inc. (Cox)

e.spire Communications, Inc. and Intermedia Communications Inc. (e.spire
Joint)

Excel Communications, Inc. (Excel)

Florida Public Service Commission (Florida PSC)

Focal Communications Corporation (Focal)

General Services Administration (GSA)

GTE Service Corporation (GTE)

Illinois Commerce Commission (Illinois Commission)

Information Technology Industry Council (ITIC)

Inline Connection Corporation (Inline)

Iowa Utilities Board (Iowa)

Joint Consumer Advocates (Joint Consumer Advocates)

Kentucky Public Service Commission (Kentucky PSC)

KMC Telecom Inc. (KMC)

Level 3 Communications, Inc. (Level 3)

Low Tech Designs, Inc. (Low Tech)

MCI WorldCom, Inc. (MCI WorldCom)

McLeodUSA Telecommunications Services, Inc. (McLeod)

Mediaone Group, Inc. (Mediaone)

Metro One Telecommunications, Inc. (Metro One)

Metromedia Fiber Network Services, Inc. (MFN)

MGC Communications, Inc. (MGC)

National Association of Regulatory Utility Commissioners (NARUC)

National Telecommunications and Information Administration (NTIA)

Net2000 Communications, Inc. (Net2000)

Network Access Solutions Corporation (NAS)

New England Voice & Data, LLC (New England Voice & Data)

New Jersey Division of the Ratepayer Advocate (New Jersey DRA)

New York State Department of Public Service (New York DPS)

NEXTLINK Communications, Inc. (NEXTLINK)

Northpoint Communications, Inc. (Northpoint)

Ohio Public Utilities Commission (Ohio PUC)

Optel, Inc. (OpTel)

People of the State of California and the California Public Utilities
Commission (California PUC)

Pennsylvania Public Utility Commission (Pennsylvania PUC)

Pilgrim Telephone, Inc. (Pilgrim)

Prism Communications Services, Inc. (Prism)

Oregon Public Utility Commission (Oregon PUC)

Qwest Communications Corp. (Qwest)

RCN Telecom Services, Inc. (RCN)

Rhythms Netconnections Inc. (Rhythms)

Rural Telephone Coalition (Rural Telephone Coalition)

SBC Telecommunications, Inc. (SBC)

Sprint Corporation (Sprint)

Strategic Policy Research (SPR)

Telecommunications Resellers Association (TRA)

TelTrust, Inc. (TelTrust)

Teligent, Inc. (Teligent)

Texas Public Utility Commission (Texas PUC)

Time Warner Telecom (Time Warner)

United States Telephone Association (USTA)

US WEST, Inc. (US West)

UTC, The Telecommunications Association (UTC)

Vermont Public Service Board (Vermont PSB)

Waller Creek Communications, Inc. (Waller Creek)

Washington Utilities and Transportation Commission (Washington UTC)

Weingarten, Michael (Weingarten)

WinStar Communications, Inc. (WinStar)

Wisconsin Public Service Commission (Wisconsin PSC)

Appendix B

Top 50 Metropolitan Statistical Areas (MSAs)

1.  Los Angeles -- Long Beach

2.  New York

3.  Chicago

4.  Philadelphia

5.  Washington, D.C.

6.  Detroit

7.  Houston

8.  Atlanta

9.  Boston

10. Dallas

11. Riverside -- San Bernardino

12. Phoenix -- Mesa

13. Minneapolis -- St. Paul

14. San Diego

15. Orange County

16. Nassau -- Suffolk

17. St. Louis

18. Baltimore

19. Pittsburgh

20. Oakland

21. Seattle -- Bellevue -- Everett

22. Tampa -- St. Petersburg -- Clearwater

23. Cleveland -- Lorain -- Elyria

24. Miami

25. Newark

26. Denver

27. Portland -- Vancouver

28. San Francisco

29. Kansas City

30. San Jose

31. Cincinnati

32. Fort Worth -- Arlington

33. Norfolk -- Virginia Beach -- Newport News

34. Sacramento

35. San Antonio

36. Indianapolis

37. Orlando

38. Milwaukee -- Waukesha

39. Fort Lauderdale

40. Columbus, OH

41. Las Vegas

42. Charlotte -- Gastonia -- Rock Hill

43. Bergen -- Passaic

44. New Orleans

45. Salt Lake City -- Ogden

46. Buffalo -- Niagara Falls

47. Greensboro -- Winston Salem -- High Point

48. Nashville

49. Hartford

50. Providence -- Fall River -- Warwick

Source: March 1999 LERG; USTA UNE Report at I-22.

APPENDIX C

APPENDIX D

![](media/image1.png){width="4.799305555555556in" height="3.9875in"}

[^1]: Telecommunications Act of 1996, Pub. L. No. 104-104, 110 Stat. 56,
    codified at 47 U.S.C. §§ 151 et seq. (1996 Act).

[^2]: *AT&T v. Iowa Utils. Bd*., 119 S. Ct. 721, 734-36 (1999) (*Iowa
    Utils. Bd*.).

[^3]: Joint Statement of Managers, S. Conf. Rep. No. 104-230, 104^th^
    Cong., 2d Sess., at 1 (1996) (*Joint Explanatory Statement*).

[^4]: *Joint Explanatory Statement* at 1.

[^5]: *See BellSouth Corp. v. FCC*, 144 F.3d 58, 61 (D.C. Cir. 1998)
    ("The 1996 Act rescinded the \[Modified Final Judgment\] . . . and
    changed the entire telecommunications landscape.").

[^6]: 47 U.S.C. §§ 251(c)(3) and (d)(2). The Act also encourages new
    entrants to construct their own competitive facilities. In
    particular, it requires incumbent LECs to interconnect competitive
    LECs' facilities and equipment with their networks. 47 U.S.C. §
    251(c)(2).

[^7]: Section 251(d)(2) states that "in determining what network
    elements should be made available for purposes of subsection (c)(3),
    *the Commission* *shall consider,* at a minimum whether \[the
    elements meet the "necessary" and "impair" standards\]. 47 U.S.C. §
    251(d)(2) (emphasis added).

[^8]: *See Implementation of the Local Competition Provisions of the
    Telecommunications Act of 1996*, CC Docket No. 96-98, First Report
    and Order, 11 FCC Rcd 15499, 15509, para. 12 (1996*) (Local
    Competition First Report and Order*), aff'd in part and vacated in
    part sub nom*., Competitive Telecommunications Ass'n v. FCC*, 117
    F.3d 1068 (8^th^ Cir. 1997) (*CompTel v. FCC*) and *Iowa Utils. Bd.
    v. FCC*, 120 F.3d 753 (8^th^ Cir. 1997) (*Iowa Utils. Bd. v. FCC*),
    aff'd in part and remanded*, AT&T v. Iowa Utils. Bd.*, 119 S. Ct.
    721 (1999); Order on Reconsideration, 11 FCC Rcd 13042 (1996),
    Second Order on Reconsideration, 11 FCC Rcd 19738 (1996), Third
    Order on Reconsideration and Further Notice of Proposed Rulemaking,
    12 FCC Rcd 12460 (1997), further recons. pending.

[^9]: *See Local Competition First Report and Order*, 11 FCC Rcd at
    15509, para. 12.

[^10]: *Joint Explanatory Statement* at 148.

[^11]: *See* 47 U.S.C. § 271(c)(2)(B).

[^12]: *See Promotion of Competitive Networks in Local
    Telecommunications Markets*, Notice of Proposed Rulemaking and
    Notice of Inquiry in WT Docket No. 99-217 and Third Further Notice
    of Proposed Rulemaking in CC Docket No. 96-98, FCC 99-141, paras. 4,
    23 (rel. July 7, 1999) (*Competitive Networks Notice*) ("We believe
    that, in the long term, the most substantial benefits to consumers
    will be achieved through facilities-based competition, because only
    facilities-based competitors can break down the incumbent LECs\'
    bottleneck control over local networks and provide services without
    having to rely on their rivals for critical components of their
    offerings. Moreover, only facilities-based competition can fully
    unleash competing providers\' abilities and incentives to innovate,
    both technologically and in service development, packaging, and
    pricing. . . . In order for competitive networks to develop, the
    incumbent LECs\' bottleneck control over interconnection must
    dissipate. As the market matures and the carriers providing services
    in competition with the incumbent LECs\' local exchange offerings
    grow, we believe these carriers may establish direct routing
    arrangements with one another, forming a network of networks around
    the current system. In time, it is likely that the incumbent LECs
    will cease to be viewed as the presumptive primary providers of
    interconnection, and indeed they will begin to seek interconnection
    and other arrangements with their challengers. These circumstances
    would strengthen the case for substantial deregulation of the
    incumbent LECs.").

[^13]: *See* *infra* Section V(D)(1).

[^14]: *See infra* Section V(D)(2).

[^15]: *See* MCI WorldCom Comments, Tab 1, Decl. of Judith R.
    Levine/Ronald J. McMurtrie, at para. 7.

[^16]: *Id.* at para. 17.

[^17]: Letter from Frank S. Simone, Government Affairs Director, AT&T,
    to Magalie Roman Salas, Secretary, Federal Communications
    Commission, CC Docket No. 96-98, Attachment at 4-5 (filed June 25,
    1999).

[^18]: *Local Competition: August 1999*, Industry Analysis Division,
    Common Carrier Bureau, Federal Communications Commission, at 23
    (August 1999) (*FCC Local Competition Report*) (explaining that
    investment analysts' estimate of total switched lines owned by
    competitive LECs is in the range of two to three percent of
    nationwide switched access lines). *See also* Texas PUC Comments at
    14 (stating that in Texas, for example, incumbent LECs own 98
    percent of all access lines and have deployed 1538 switches
    throughout the state).

[^19]: *See, e.g*., MCI WorldCom Comments, Tab 3, Decl. of Mark T.
    Bryant, at paras. 2-20 (describing the economies of scale to which
    all loop, transport and switching unbundled network elements are
    subject); Covad Comments at iii-iv; Prism Comments at 5-6; Qwest
    Comments at 8-9; AT&T Reply Comments at 45-46.

[^20]: Certain rural telephone companies may be exempt from the
    unbundling provisions of section 251. *See* 47 U.S.C. § 251(f).

[^21]: 47 U.S.C. § 251(d)(2).

[^22]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15641-42, para. 282.

[^23]: *Id*. at para. 285 (quoting Random House College Dictionary 665
    (rev. ed. 1984)).

[^24]: *Local Competition First Report and Order*, 11 FCC Rcd at 15643,
    para. 285.

[^25]: *Id*. at 15683, para. 366.

[^26]: 47 C.F.R. § 51.319. *Local Competition First Report and Order*,
    11 FCC Rcd at 15641-42, paras. 281-83.

[^27]: 47 C.F.R.. § 51.317.

[^28]: *Iowa Utils. Bd. v. FCC*, 120 F.3d at 808-10.

[^29]: *Iowa Utils. Bd.*, 119 S. Ct. at 733-36. As already noted, the
    Supreme Court upheld all but one of the local competition rules that
    had been challenged. The Supreme Court held that the Commission has
    general jurisdiction to implement the 1996 Act\'s local competition
    provisions, and that the Commission\'s rulemaking authority extends
    to sections 251 and 252. The Court further found that: (1) the
    Commission\'s interpretation of \"network element,\" as including
    operator services and directory assistance, operational support
    systems, and vertical switching functions such as caller I.D., call
    forwarding, and call waiting, is reasonable; (2) the Commission
    reasonably omitted a facilities-ownership requirement; (3) the
    Commission\'s rule 51.315(b), which forbids incumbents from
    separating already-combined network elements before leasing them to
    competitors, reasonably interprets section 251(c)(3) of the 1996
    Act; and (4) the Commission\'s \"pick and choose\" rule that
    requires an incumbent LEC to make available to any requesting
    carrier any individual interconnection, service, or network element
    arrangement contained in any state-approved agreement \"upon the
    same rates, terms, and conditions as those provided in the
    agreement\" is a reasonable interpretation of section 252(i) of the
    1996 Act. *Id.* at 729-34.

[^30]: *Id.*. at 730-36.

[^31]: . *Id.*. at 735.

[^32]: . *Id.*

[^33]: . *Id*.

[^34]: *Implementation of the Local Competition Provisions in the
    Telecommunications Act of 1996*, CC Docket No. 96-98, Second Further
    Notice of Proposed Rulemaking, FCC 99-70 (rel. Apr. 16, 1999)
    (*Notice*). A list of parties submitting Comments and Reply Comments
    is provided in Appendix A.

[^35]: 47 U.S.C. § 251(d)(2).

[^36]: *See* *infra* Section V(D).

[^37]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15641-43, paras. 283-85.

[^38]: *Notice* at para. 18.

[^39]: Rhythms Comments at 5-6; Sprint Comments at 9-12.

[^40]: Sprint Comments at 11-12. *See also* Letter from Kathy D. Smith,
    Acting Chief Counsel, National Telecommunications and Information
    Administration ("NTIA"), to Magalie Roman Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98, Attachment at 21
    (filed Aug. 2, 1999) ("NTIA Comments") ("NTIA agrees with Sprint
    that one reasonable construction of the statutory language is that
    the 'necessary' and 'impair' standards were meant to apply only to
    proprietary network elements. We nonetheless recognize that the
    Commission adopted (and the reviewing court implicitly accepted) a
    different construction of the statute in the Local Competition
    Report, and that there are legitimate reasons why the Commission
    would be reluctant to reject that construction now.") (citation
    omitted).

[^41]: *See, e.g.,* Illinois Commission Comments at 5; Texas PUC
    Comments at 8; Ameritech Comments at 36-40; GTE Comments at 11-12;
    SBC Comments at 12-14 (These incumbent LECs agree that network
    elements with proprietary features must be evaluated under the
    "necessary" standard, but state that the "impair" standard applies
    to all network elements. As explained herein, we adopt two distinct
    limiting standards in order to give substance to Congress' use of
    the term "necessary."); ALTS Comments at 14-15; Cable & Wireless
    Comments at 16-17; Choice One Joint Comments at 11; CompTel Comments
    at 16-17; Corecomm Comments at 13-14;; Cox Comments at 19-20;
    e.spire Joint Comments at 5; Excel Comments at 4; MCI Comments at
    20; NEXTLINK Comments at 9; Pilgrim Comments at 6-7; TRA Comments at
    15. *But see* Sprint Comments at 9-13, Rhythms Comments at 5-6
    (arguing that the "impair" standard applies to both proprietary and
    non-proprietary rate elements).

[^42]: Referring to the Commission's decision to limit its section
    251(d)(2) inquiry to the incumbent's own network, the Court stated
    that "that judgment allows entrants, rather than the Commission, to
    determine whether access to *proprietary* elements is *necessary*,
    and whether the failure to obtain access to *nonproprietary*
    elements would *impair* the ability to provide services." *Iowa
    Utils. Bd.*, 119 S. Ct. at 735 (emphasis added).

[^43]: *Local Competition First Report and Order*, 11 FCC Rcd at 15694,
    15697, 15710, 15720, 15739, 15744-45, 15748, 15766, 15774, paras.
    388, 393, 419, 446, 481, 490, 497, 521, 539, In this Order, certain
    parties stated that channel banks and remote terminal equipment used
    with unbundled loops are often proprietary, that vertical switching
    features are proprietary, and that there are proprietary interfaces
    associated with operations support systems. The Commission found
    that the proprietary concerns did not justify denying requesting
    carriers access to these elements. Several parties also identified
    proprietary concerns regarding access to the service creation
    environment interface and service management system used in the
    incumbent LECs' advanced intelligent networks. The Commission
    concluded that access to advanced intelligent networks, including
    those elements that may be proprietary, was "necessary.").

[^44]: *Notice* at para. 15.

[^45]: *Id.*

[^46]: *See, e.g*., Iowa Comments at 4; Allegiance Comments at 4-6; ALTS
    Comments at 16; Ameritech Comments at 40-45; MCI WorldCom Comments
    at 21-22; NorthPoint Comments at 4; SBC Comments at 11-12; Sprint
    Comments at 9-10; US WEST Comments at 25; Waller Creek Comments at
    12.

[^47]: *See* Cable & Wireless Comments at 17-18; Choice One Joint
    Comments at 11-12; CompTel Comments at 18; Corecomm Comments at
    14-17; KMC Comments at 11.

[^48]: *See* Ameritech Comments at 42; ALTS Comments at 16; CompTel
    Comments at 19; GSA Comments at 8; RCN Comments at 10; SBC Comments
    at 12-15.

[^49]: *See* *Feist Publications v. Rural Telephone Service Company,
    Inc*., 499 U.S. 340, 348 (1991) (arguing that the primary objective
    of copyright is to compensate authors and "advance the progress of
    science and art.").

[^50]: *Implementation of the Telecommunications Act of 1996:
    Telecommunications Carriers\' Use of Customer Proprietary Network
    Information and Other Customer Information and Implementation of the
    Non-Accounting Safeguards of Sections 271 and 272 of the
    Communications Act of 1934, as amended*, CC Docket Nos. 96-115 and
    96-149, Second Report and Order and Further Notice of Proposed
    Rulemaking, 13 FCC Rcd 8061 (1998) (*CPNI Order*), on recon. FCC
    99-223 (rel. Sept. 3., 1999), vacated sub nom*. US West v. FCC*,
    File No. 98-9518 (10^th^ Cir., Aug. 18, 1999).

[^51]: *Local Competition First Report and Order*, 11 FCC Rcd at 15641,
    para. 282.

[^52]: U.S. Department of Justice and Federal Trade Commission,
    *Antitrust Guidelines for the Licensing of Intellectual Property*
    (issued Apr. 6, 1995). The Guidelines are limited to patents,
    copyrights and trade secrets and, like the instant rulemaking,
    address the potential anticompetitive effects that may accrue to
    holders of patents, copyrights or trade secrets.

[^53]: 47 U.S.C. § 251(d)(2).

[^54]: Some commenters have expressed concern that the definition of
    "proprietary in nature" should not provide a vehicle for incumbent
    LECs to make minor modifications to network technology to claim that
    the element must then be analyzed under the more restrictive
    "necessary" standard. *See* Cable & Wireless Comments at 17-18; GSA
    Comments at 8.

[^55]: *Joint Explanatory Statement* at 1 (The 1996 Act provides for "a
    pro-competitive, de-regulatory national policy framework designed to
    accelerate rapidly private sector deployment of advanced
    telecommunications and information technologies and services to all
    Americans by opening all telecommunications markets to competition.
    . .").

[^56]: Significant differences in the incumbent LEC's service may be
    derived from characteristics of the service that better satisfy
    consumer preferences in terms of price, quality or features that are
    unavailable elsewhere. *See* Lancaster, *Allocation and Distribution
    Theory: Technological Innovation and Progress*, 56 Amer. Econ. Rev.
    : Papers & Proc. 14, 20-22 (1966). *See generally* *A New Approach
    to Consumer Theory*, 74 J. Pol. Econ. 132 (1966); Tirole, *The
    Theory of Industrial Organization* 99 (1988) (discussing Lancaster
    approach to product characteristics).

[^57]: *See Joint Explanatory Statement* at 1.

[^58]: ALTS Comments at 17-18; Qwest Comments at 37. The Commission is
    currently considering the related question of third-party
    proprietary interests in a separate proceeding. *See* *Petition of
    MCI for Declaratory Ruling*, CC Docket No. 96-98, File No. CCBPol.
    97-4 (March 14, 1997) (*MCI Petition)*.

[^59]: Third-party innovation investment incentives are unlikely to be
    adversely affected by incumbent LEC sharing of proprietary
    information because third parties recover their innovation
    investments through fees paid to them by the incumbent LEC. Other
    third party issues are addressed in the pending *MCI Petition*.

[^60]: CompTel Comments at 19. *See also* RCN Comments at 10.

[^61]: CompTel Comments at 19. *See also* ALTS Comments at 16. The
    Commission concluded in the *Local Competition First Report and
    Order* that concerns about the proprietary nature of a network
    element would arise only if the proprietary information would be
    revealed. Specifically, it concluded that loops are, in general, not
    proprietary in nature because parties did not contend that
    proprietary information associated with certain loop equipment would
    be revealed if loops using such equipment were unbundled. *Local
    Competition First Report and Order*, 11 FCC Rcd at 15694, para. 388.

[^62]: Ameritech Comments at 44.

[^63]: Under CompTel's proposal (CompTel Comments at 19), the Commission
    would be required to find that Ameritech's incentive to create
    proprietary functionalities like Privacy Manager would not be
    adversely affected even though Ameritech would be subject to forced
    sharing of Privacy Manager, and requesting carrier customers could
    obtain the benefits of Privacy Manager without appropriating the
    underlying software.

[^64]: *Local Competition First Report and Order*, 11 FCC Rcd at 15641,
    para. 282.

[^65]: *Id.*.

[^66]: *Id.* at 15748, para. 497.

[^67]: *Notice* at paras. 16, 20.

[^68]: Cable & Wireless Comments at 19; Net2000 Comments at 9-10. *See
    also* NEXTLINK Comments at 11.

[^69]: *See, e.g*., Ameritech Comments at 37-40; SBC Comments at 14; US
    West Comments at 23-26.

[^70]: NTIA Comments at 27.

[^71]: *Iowa Utils. Bd.*, 119 S. Ct. at 735-36.

[^72]: *See* Vermont PSB Comments at 10-11; CPI Comments at 7-9.

[^73]: ALTS Comments at 19. *See also* Cable & Wireless Comments at 3-4;
    MCI WorldCom Comments at 18-19; Net2000 Comments at 9; NEXTLINK
    Comments at 10-12.

[^74]: *See* *supra* Section IV(B)(2).

[^75]: *See, e.g*., GTE Comments at 26; SBC Comments at 14.

[^76]: *See, e.g*., Ameritech Comments at 37-40; SBC Comments at 14; US
    West Comments at 23-26.

[^77]: *See* *infra* Section IV(B)(4).

[^78]: SBC Comments at 12; GTE Comments at 26.

[^79]: *See, e.g*., Choice One Joint Comments at 11-12; KMC Comments at
    11.

[^80]: *Local Competition First Report and Order*, 11 FCC Rcd at 15643,
    para. 285 (citing Random House College Dictionary 665 (rev. ed.
    1984)) .

[^81]: *Local Competition First Report and Order*, 11 FCC Rcd at 15643,
    para. 285.

[^82]: *Notice* at para. 17.

[^83]: *Id.* at para. 20.

[^84]: *See, e.g*., Bell Atlantic Comments at 7-9; BellSouth Comments at
    21-22; SBC Comments at 5, 14; US West Comments at 10-11.

[^85]: GTE Comments at 14-20.

[^86]: *See, e.g*., Ameritech Joint Reply Comments at 16-17.

[^87]: Texas PUC Comments at 7-8.

[^88]: *See, e.g*., Ad Hoc Comments at 4-5; Cable & Wireless Comments at
    10-14; Choice One Joint Comments at 6-7; Excel Comments at 6-8; MCI
    WorldCom Comments at 15-18; Northpoint Comments at 6-10; RCN
    Comments at 12; TRA Comments at 19-23; Illinois Commission Comments
    at 6-7.

[^89]: *See, e.g*., Allegiance Comments at 8-11; Cable & Wireless
    Comments at 6-10; Covad Comments at 14-18; Excel Comments at 8-10;
    NorthPoint Comments at 6-10.

[^90]: *See* Cable & Wireless Comments at 12-14.

[^91]: Illinois Commission Comments at 6-7. Illinois illustrates the
    standard by describing the circumstances under which a carrier would
    be impaired. According to the Illinois Commerce Commission,
    self-provisioning a loop would impair a requesting carrier's to
    compete because it would incur material up-front installation costs
    and delays, and would have to acquire access to rights-of-way and
    undertake other labor-intensive activities to replicate the
    incumbent's loop facilities. *Id*.

[^92]: We note that courts have applied the standard dictionary
    definition of "impair" as "\[t\]o weaken, to make worse, to lessen
    in power, diminish, or relax, or otherwise affect in an injurious
    manner." *See, e.g*., *Humana Inc. v. Forsyth*, 119 S. Ct. 710, 717
    (1999).

[^93]: Bell Atlantic Comments at 14; US West Comments at 12.

[^94]: Bell Atlantic Comments at 9.

[^95]: MCI WorldCom Reply Comments at 23-24.

[^96]: *See* NTIA Comments at 5-6, n.16 ("The obvious conclusion \[of
    the market opening provisions of the 1996 Act\] is that Congress
    sought to foster entry by multiple firms and then let competitive
    market processes distinguish the 'efficient' providers from the
    'inefficient' ones.").

[^97]: *See, e.g*., Qwest Comments at 18 ("The fact that some CLECs are
    engaging in self-supply of network elements also is not evidence of
    lack of impairment. It is evidence only that for some carriers, in
    some instances, for some customers, during particular time periods,
    in particular geographic areas, they are able to cost-justify
    self-supply."); AT&T Reply Comments at 120, 123-24 and Tab B, Aff.
    of R. Glenn Hubbard/William H. Lehr/Janusz A. Ordover/Robert D.
    Willig, at paras. 36-38; MCI WorldCom Reply Comments at 36-37.

[^98]: *See* Ameritech Comments at 36; Choice One Joint Comments at
    12-13; CPI Comments at 13; KMC Comments at 7; MCI WorldCom Comments,
    Tab 2, Decl. of John E. Kwoka, at para. 38; Prism Comments at 9-10.

[^99]: *Joint Explanatory Statement* at 148 (recognizing potential of
    cable companies to become facilities-based competitors within the
    meaning of section 271(c)(1)(A), and stating that competitors will
    still need access to the incumbent LECs' network.).

[^100]: *See, e.g*., Allegiance Comments at 8-11; Cable & Wireless
    Comments at 6-10; Covad Comments at 14-18; Excel Comments at 8-10;
    NorthPoint Comments at 6-10.

[^101]: Ameritech Joint Reply Comments at 17.

[^102]: *Iowa Utils. Bd*., 119 S. Ct. at 735.

[^103]: ALTS points out that although new entrants always have the
    potential of offering service using self-provisioned elements, the
    Act contemplates more immediate entry by competitors through the use
    of resale and unbundled network elements. ALTS Reply Comments at
    19-20. The unbundling standard that we adopt does not allow for the
    incumbent's unbundling obligation to be eliminated based merely upon
    a showing that a requesting carrier has the potential to
    self-provision or acquire facilities at some indefinite time in the
    future. This would be inconsistent, as ALTS suggests, with the Act's
    goal to encourage for all consumers rapid deployment of competitive
    alternatives. The unbundling analysis that we undertake considers
    instead the current facts in the marketplace.

[^104]: *See, e.g*., Ameritech Comments at 28-32; GTE Comments at 14-20;
    US West Comments at 6-7.

[^105]: *Iowa Utils. Bd*., 119 S. Ct. at 734.

[^106]: *Id.*

[^107]: *See* *infra* Sections (IV)(B)(4)(b)(ii) and (IV)(C).

[^108]: MCI WorldCom Comments at 35 (citing 137 Cong. Rec. S7054, S7058
    (daily ed. June 5, 1991) (reading S. 1200, 102d Cong. § 202 1991)).

[^109]: 47 U.S.C. § 601(b)(1).

[^110]: *See* MCI WorldCom Comments at 28-29 (citing Section 2 of the
    Sherman Act, 15 U.S.C. § 2; *MCI Telecommunications Corp. v.
    American Tel. & Tel. Co*., 708 F.2d 1081, 1132-33 (7^th^ Cir. 1983))
    (*MCI v. AT&T*).

[^111]: See Phillip Areeda, *Essential Facilities: An Epithet in Need of
    Limiting Principles*, 58 ANTITRUST L.J. 841, 841 (1989); *Olympia
    Equipment Leasing Co. v. Western Union Telegraph Co*., 797 F.2d 370,
    376, reh. den. 802 F.2d 217 (7^th^ Cir. 1986).

[^112]: *See* *MCI v. AT&T*, 708 F.2d at 1132-33.

[^113]: NTIA Comments at 14-16.

[^114]: *See* NTIA Comments at 16 ("Indeed, to the extent that Congress
    considered the essential facilities doctrine at all, it concluded
    that (1) the ILECs' networks *are* essential facilities and (2) that
    alternative providers must have broad access to those facilities if
    there was to be local competition.") (emphasis in original).

[^115]: *See* Sprint Comments at 15-16.

[^116]: Areeda, *supra* note 111, at 841 (Calling the essential
    facilities doctrine a "so-called" doctrine because "the cases
    support the doctrine only by implication and in a highly qualified
    way. . . . It is less a doctrine than an epithet, indicating some
    exception to the right to keep one's creation to oneself, but not
    telling us what those exceptions are.").

[^117]: *MCI v. AT&T*, 708 F.2d at 1132-33.

[^118]: *See, e.g*., McLeod Comments at 5 (stating that there are
    "multiple dimensions" associated with the question of the
    availability of a particular network element such as ubiquity,
    economies of scale and scope, constrained capital resources and lag
    times associated with new construction); RCN Comments at 12 (stating
    that the Commission should consider how the totality of the
    circumstances indicates that requiring unbundling of an element
    would promote the pro-competitive purpose of the 1996 Act).

[^119]: In this Order, when we refer to the availability to a requesting
    carrier of an element from a third-party supplier, we are referring
    to a supplier other than the incumbent LEC.

[^120]: SBC Comments at 9-11.

[^121]: *See, e.g., Deployment of Wireline Services Offering Advanced
    Telecommunications Capability*, CC Docket No. 98-147, *First Report
    and Order and Further Notice of Proposed Rulemaking*, 14 FCC Rcd
    4761 (1998) (*Advanced Services First Report and Order and FNPRM);
    Performance Measurements and Reporting Requirements for OSS,
    Interconnection, and Operator Services and Directory Assistance*, CC
    Docket No. 98-56, Notice of Proposed Rulemaking, 13 FCC Rcd 12817
    (1998) (*Performance Measurements Notice*).

[^122]: *See, e.g.*, California PUC Reply Comments at 3-8 (stating that
    the Commission should evaluate quality, reliability, geographic
    scope, quantity, time, cost and operational factors associated with
    using an alternative network element.).

[^123]: *See* Ameritech Comments at 36; Choice One Joint Comments at
    12-13; CPI Comments at 13; KMC Comments at 7; MCI WorldCom Comments,
    Tab 2, Decl. of John E. Kwoka, at para. 38; Prism Comments at 9-10.

[^124]: Texas PUC Comments at 7-8.

[^125]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15643-44, paras. 286-87. The Eight Circuit agreed that while
    subsection 251(c)(4) does provide for the resale of
    telecommunications services, it does not establish resale as the
    exclusive means through which a competing carrier may gain access to
    such services. It consequently agreed with the Commission that such
    an interpretation would allow the incumbent LECs to evade a
    substantial portion of their unbundling obligation under section
    251(c)(3). Specifically, the Eighth Circuit stated, in response to
    the incumbent LECs' argument that vertical switching features were
    services subject to resale and therefore need not be unbundled,
    that,

    > Simply because these capabilities can be labeled as 'services'
    > does not convince us that they were not intended to be unbundled
    > as network elements. While subsection 251(c)(4) does provide for
    > the resale of telecommunications services, it does not establish
    > resale as the exclusive means through which a competing carrier
    > may gain access to such services. We agree with the FCC that such
    > an interpretation would allow the incumbent LECs to evade a
    > substantial portion of their unbundling obligation under
    > subsection 251(c)(3).

    *Iowa Utils. Bd. v. FCC*, 120 F.3d at 809. The Supreme Court found
    that the statutory definition of "network element" does not include
    only the physical facilities used to provide local phone service,
    but also includes the features, functions and capabilities that are
    provided by these facilities, such as vertical switching features.
    *Iowa Utils. Bd.*, 119 S. Ct. at 734.

[^126]: Letter from Melissa Newman, Vice President -- Federal
    Regulatory, US West, to Magalie Roman Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98, at 1-2 (filed Aug.
    18, 1999).

[^127]: *See* ALTS Comments at 23 (stating that the Commission should
    not consider the availability of resale because it would "eviscerate
    the 1996 Act's 'bright line' distinction between the resale and UNE
    methods of entry.").

[^128]: *Local Competition First Report and Order*, 11 FCC Rcd at 15667,
    para. 331.

[^129]: *Id.* at 15667, para. 332.

[^130]: *Id.* at 15668, para. 334.

[^131]: *Iowa Utils. Bd.*, 119 S. Ct. at 735 (emphasis added).

[^132]: *See, e.g.,* Dennis W. Carlton & Jeffrey M. Perloff, *Modern
    Industrial Organization* 31 (1989).

[^133]: *See id*. at 32.

[^134]: Similarly, a competitor that purchases its own switch or deploys
    feeder and distribution plant will incur significant fixed costs.

[^135]: *Cf. Applications of Ameritech Corp., Transferor, and SBC
    Communications., Inc., Transferee, for Consent to Transfer Control
    of Corporations Holding Commission Licenses and Lines Pursuant to
    Sections 214 and 310(d) of the Communicaitons Act*, CC Docket No.
    98-141, Description of the Transaction, Public Interest Showing and
    Related Demonstrations, at 49-55 (filed July 24, 1998) (applicants
    argue that, because of economies of scale, they must merge in order
    to compete in areas outside of their regions).

[^136]: *See* MCI WorldCom Comments, Tab 2, Decl. of John E. Kwoka,
    paras. 11-12; AT&T Reply Comments, Tab B, Aff of R. Glenn
    Hubbard/William H. Lehr/Janusz A. Ordover /Robert D. Willig at para.
    51. The total costs of providing telecommunications services include
    sunk costs and fixed costs. Sunk costs are costs that the entrant
    must incur that cannot be recovered if it later decides to exit the
    market, such as non-recurring costs for collocation, delays
    associated with connecting the incumbent's loops to a competitor's
    switch, and fees required by municipalities to construct
    rights-of-way. Fixed costs are those costs that carriers incur which
    do not vary based on the number of customers that they serve.

[^137]: *See, e.g.,* William J. Baumol, John C. Panzar & Robert D.
    Willig*, Contestable Markets and The Theory of Industry Structure*
    290-92 (1982).

[^138]: *See, e.g*., Jean Tirole, *The Theory of Industrial
    Organization* 314-15 (1988); Richard J. Gilbert, *Mobility Barriers
    and the Value of Incumbency in 1 The Handbook of Industrial
    Organization* 491 (Richard Schmalensee and Robert D. Willig, eds.)
    (1989)

[^139]: In addition, the per-customer costs decrease as the distance
    required to reach each subscriber decreases. The per-subscriber cost
    of service will be lower in those situations where carriers can
    aggregate and carry large volumes of traffic over short distances
    rather than small volumes of traffic over long distances. *See* MCI
    WorldCom Comments, Tab 3, Decl of Mark T. Bryant, at para. 11.

[^140]: *See, e.g*., Covad Comments at 2 (business plans call for it to
    deploy facilities in 51 MSAs by the end of 1999); USTA UNE Report at
    III-3 ("Within top 50 MSAs, CLECs have deployed nearly 30,000 miles
    of fiber"). An MSA is also a reasonable entry market because number
    portability is deployed on an MSA basis, and available to serve a
    requesting carrier's customers within these areas. *Telephone Number
    Portability*, First Memorandum Opinion and Order and Further Notice
    of Proposed Rulemaking, 11 FCC Rcd 8352, para. 3 (1997) (requiring
    all LECs to implement long term number portability in the 100
    largest MSAs according to a phased deployment schedule). We
    recognize that carriers may serve areas smaller than the total MSA.
    If we make a determination that the incumbent need no longer offer
    an unbundled element because there are viable alternatives available
    on an MSA basis, we do not believe that such a carrier would be
    impaired because the alternatives would most likely be available to
    serve customers located in smaller areas within the MSA.

[^141]: 47 U.S.C. § 153(46).

[^142]: 47 U.S.C. § 251(c)(3).

[^143]: 47 U.S.C. § 251(d)(2)(B).

[^144]: Letter from Lori Wright, MCI WorldCom, to Magalie Roman Salas,
    Secretary, Federal Communications Commission, CC Docket Nos. 96-98;
    95-185 (filed July 13, 1999).

[^145]: For example, MCI WorldCom describes the economies of scale to
    which several unbundled elements are subject. MCI WorldCom Comments,
    Tab 3, Decl. of Mark T. Bryant, at paras. 2-24. *See also* NTIA
    Comments at 30-31 ("To the extent that the inability to obtain an
    unbundled element from an ILEC increases a CLEC's costs (for
    example, by forcing it to purchase a more expensive substitute or by
    denying the CLEC the economies of scale, scope, or density
    associated with the ILEC UNE), the resulting diminution in profits
    will reduce the internal funds available to extend and upgrade the
    CLEC's network and service offerings)); Qwest Comments at 20
    (stating that the incumbent LECs, themselves, admit that the
    ubiquity of their networks creates unique economies of scope and
    scale.) (citation omitted).

[^146]: BellSouth Reply Comments at 3-5.

[^147]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15508-09, para. 10-11.

[^148]: *Id.* at 15528, 15531, 15624, paras. 56, 61, 242.

[^149]: 47 U.S.C. § 259(b)(4).

[^150]: *Implementation of Infrastructure Sharing Provisions in the
    Telecommunications Act of 1996*, CC Docket No. 96-237, Report and
    Order, 12 FCC Rcd 5470, 5495, 5497, paras. 50, 54 (1997)
    (*Infrastructure Sharing Order*) (stating that incumbent LECs must
    make the same network facilities and functionalities, including
    unbundled network elements and resale, available to qualifying
    carriers under section 259 as they would make available under
    section 251). The Commission also found in the *Infrastructure
    Sharing Order* that cost, availability, timeliness, functionality
    and other operational aspects associated with use of the incumbent
    LEC's infrastructure determine whether or not the qualifying carrier
    seeking access to the incumbent LEC's network under section 259
    "fully benefits from the economies of scale and scope" of the
    incumbent LEC. *Id*. at 5528, para. 117. These are some of the same
    factors that we have identified here as being relevant to whether a
    requesting carrier can achieve the same benefit from using an
    alternative network element as it would from using the incumbent
    LEC's network element.

[^151]: *See, e.g.,* Ameritech Comments at 61; Ameritech Reply Comments,
    Att. A, Aff. of Debra J. Aron/William L. Fitzsimmons/Robert G.
    Harris, at 16-19.

[^152]: AT&T Reply Comments at Tab B, Aff. of R. Glenn Hubbard/William
    H. Lehr/Janusz A. Ordover/Robert D. Willig, at para. 65.

[^153]: *See* *infra* section V(D) (stating that some incumbent LECs
    claim that a switch can be fully provisioned in 40 days (BellSouth
    Reply Comments at 29), while competitive LECs assert that it can
    take between six months and two years (CompTel Comments at 39,
    n.89)).

[^154]: *See* *nfra* Section V(D). AT&T also maintains that gaining
    access to commercial buildings for the deployment of loop facilities
    often involve delays of up to six months while the competitor
    attempts to negotiate access with the building owner. AT&T Reply
    Comments at 82.

[^155]: NTIA Comments at 32.

[^156]: For example, residential customers with existing telephone
    service purchased over two million additional telephone lines for
    their homes between 1996 and 1997. *Trends in Telephone Service*,
    Federal Communications Commission, Sept. 1999, at Table 20.4
    (*Trends in Telephone Service*). The number of cellular telephone
    subscribers increased by nearly 14 million subscribers between
    December 1997 and December 1998. *Trends in Telephone Service* at
    Table 2.1.

[^157]: *Inquiry Concerning the Deployment of Advanced
    Telecommunications Capability 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*,
    Report, 14 FCC Rcd 2398, 2419-20, 2428, 2445-46, paras. 42, 56, 90
    (1999) (*706 Report*) (Report finds that there is currently rapid
    demand for broadband services by all consumers, particularly
    residential consumers, and that such demand is expected to grow.).

[^158]: NTIA Comments at 31.

[^159]: Ameritech Comments at 35.

[^160]: US West Comments at 22-23.

[^161]: *See, e.g.*, AT&T Reply Comments at 45 ("The delays AT&T has
    discussed -- such as those involved in obtaining building access and
    right-of-way agreements to lay fiber -- are substantial delays and
    ones that would be imposed on a recurring, ongoing basis as to CLECs
    that have already 'entered' a market and are seeking to win new
    customers, to build and connect facilities for those customers, and
    to compete with the incumbent LEC in offering timely commitments for
    due dates when those customers are choosing a carrier."); MCI
    WorldCom Comments at 18.

[^162]: NTIA Comments at 31.

[^163]: US West Comments at 22-23.

[^164]: California PUC Reply Comments at 3. *See also* Texas PUC
    Comments at 7-8; Choice One Joint Comments at 6-7; Columbia Comments
    at 9; Corecomm Comments at 17-20; KMC Comments at 5-6; Pilgrim
    Comments at 14-15.

[^165]: TRA Comments at 23. *See also* ALTS Comments at 21-22 ("If use
    of an alternative results in a competitive service offering with
    greater levels of signal loss, circuit outage or mean repair time
    compared to that of the incumbent, it cannot be found that the
    alternative presents the requesting carrier with an element that
    consumers will accept as part of a competitive service offering.").

[^166]: *See* TRA Comments at 23 (stating that a competitive LEC is
    impaired if the substitute element would prevent it from offering
    the same functionality as the incumbent's service, *e.g*., stutter
    dialtone or message-waiting indicator).

[^167]: *See, e.g.*, Cable & Wireless Comments at 11; Prism Comments at
    15; TRA Comments at 23.

[^168]: Texas PUC Comments at 14.

[^169]: *See* MCI WorldCom Comments at 23-24.

[^170]: Washington UTC Comments at 13.

[^171]: *See, e.g.*, ALTS Comments at 21; Cable and Wireless Comments at
    14-16; MCI WorldCom Comments at 25-26; Qwest Comments at 22-25.

[^172]: 47 U.S.C. § 251(d)(2).

[^173]: *Central Vermont Ry. v. ICC*, 711 F.2d 331, 335 (D.C. Cir. 1983)
    (*Central Vermont Ry. V. ICC*).

[^174]: *Time Warner Entertainment Co. v. FCC*, 56 F.3d 151, 175 (D.C.
    Cir. 1995) (quoting *Central Vermont Ry. v. ICC*, 711 at 336).

[^175]: *Local Competition First Report and Order*, 11 FCC Rcd at 15641,
    para. 280.

[^176]: *Iowa Utils. Bd.*, 119 S. Ct. at 734.

[^177]: *See, e.g*., GTE Comments at 27-28; Ameritech Joint Reply
    Comments at 23-25.

[^178]: *Joint Explanatory Statement* at 1.

[^179]: *Id.*

[^180]: *Iowa Utils Bd. v. FCC*, 120 F.3d at 811.

[^181]: 47 U.S.C. § 271(c)(2)(B).

[^182]: NTIA Comments at 35-40.

[^183]: *Joint Explanatory Statement* at 1. *See also* NTIA Comments at
    15, n.42, (citing H.R. Rep. No. 104-204, at 47-48 (1995)("For
    decades, U.S. telecommunications policy has relied heavily on
    regulated monopolies to provide telecommunications service to
    business and consumers. . . . Technological advances would be more
    rapid and services more widely available and at lower prices if
    telecommunications markets were competitive rather than regulated
    monopolies."); 141 Cong. Rec. S8015 (daily ed. June 8, 1995)
    (statement of Sen. Pressler) ("if we had done what we are trying to
    do in this bill -- that is, to require \[incumbent LECs\] to
    unbundle and interconnect, to allow for local competition, . . . the
    whole telephone communications industry might be more innovative
    today than it is.")).

[^184]: *Competitive Networks Notice* at para. 23.

[^185]: *Iowa Utils, Bd.,* 119 S. Ct. a 735. *See also* NTIA Comments at
    25 ("\[The Commission\] should seek so far as possible to construe
    \[Section 251(d)(2)\] in a way that advances the procompetitive
    goals of the 1996 Act, including the promotion of facilities-based
    competition.")

[^186]: *See, e.g*., AT&T Comments at 11-12, 21-22 (stating that using
    unbundled network elements also facilitates the transition to
    facilities-based competition because it permits entrants to gather
    critical information, such as customers' calling volumes and traffic
    patterns, that they need to plan their facilities' deployment); MCI
    WorldCom Comments at 8-9; Sprint Reply Comments at 8.

[^187]: *See, e.g.*, AT&T Reply Comments at 33-34; CompTel Comments at
    12; MCI WorldCom Comments at 8-9, 26-27; Net2000 Comments at 2;
    Sprint Comments at 19-21 ("Any carrier desiring a significant market
    presence over the long term must consider self-provisioning as the
    most desirable business strategy -- indeed the only strategy that
    can ensure that a carrier is the master of its own fate.")

[^188]: *See* MCI WorldCom Comments at 8-9; Sprint Comments at 20; ALTS
    Reply Comments at 23-24; MCI WorldCom Reply Comments at 19.

[^189]: *See* *Competitive Networks Notice* at para. 4; Sprint Comments
    at 19.

[^190]: *Joint Explanatory Statement* at 1.

[^191]: Our mandate from the Court is similar to other instances in
    which federal agencies have implemented a general rule of
    applicability. *See* *FCC v. WNCN Listeners Guild*, 450 U.S. 582
    (1981); *Checkosky v. SEC*, 23 F.3d 452 (D.C. Cir. 1994); *Northeast
    Utils. Service Co. v. FERC*, 993 F.2d 937 (1993).

[^192]: *See, e.g.*, Ameritech Comments at 5 (stating that Ameritech's
    proposed standards are "easy to administer."); CPI Comments at 13
    (stating that the Commission should make regulation efficient by
    avoiding case-by-case decisions); KMC Comments at 2-3 (stating that
    a national list of unbundled elements allows for more efficient
    implementation of the 1996 Act).

[^193]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15616-27, paras. 226-48, 281-83.

[^194]: *Notice* at para. 14.

[^195]: California PUC Comments at 3-4; Connecticut DPUC Comments at
    3-4; Illinois Commission Comments at 2; Iowa Comments at 1-2;
    Kentucky PSC Comments at 2; New York DPS Comments at 4-7; Ohio PUC
    Comments at 3-5; Oregon PUC Comments at 1; Texas PUC Comments at
    2-3; Washington UTC Comments at 3-5; NARUC Reply Comments at 3; New
    Jersey DRA Reply Comments at 11; Wisconsin PSC Reply Comments at
    3-4. *But see* Florida PSC Comments at 7-8 (suggesting that the
    Commission establish a "rebuttable presumption" in favor of
    unbundling network elements listed in section 271 of the 1996 Act
    instead of adopting a national list).

[^196]: *See, e.g.*, Ad Hoc Comments at 3; Allegiance Comments at 2-4;
    AT&T Comments at 39-46; Cable & Wireless Comments at 22-28; Choice
    One Joint Comments at 2-3; Columbia Comments at 8; CO Space Comments
    at 4-5; Corecomm Comments at 8-10; Covad Comments at 3-6; CPI
    Comments at 4-6; Excel Comments at 17-19; KMC Comments at 2-3; MCI
    WorldCom Comments at 4-10; Net2000 Comments at 3-7; New England
    Voice & Data Comments at 4, n.4; NEXTLINK Comments at 3-7;
    NorthPoint Comments at 1-3; OpTel Comments at 2; Prism Comments at
    3-5, 9-10; Rhythms Comments at 9; TelTrust Comments at 2; TRA
    Comments at 9-10 Waller Creek Comments at 11-12.

[^197]: *See, e.g*., NARUC Reply Comments at 3; California PUC Comments
    at 3-4; 7-14; Illinois Commission Comments at 2-3; Kentucky PSC
    Comments at 2; New York DPS Comments at 3-7; Ohio PUC Comments at
    3-5, 21; Oregon PUC Comments at 1; Texas PUC Comments at 3-5;
    Washington UTC Comments at 3-9.

[^198]: New York DPS Comments at 4-5.

[^199]: *See, e.g*., Ameritech Comments at 5-6, 53-65; BellSouth
    Comments at 12-18, 31; GTE Comments at 20-22; SBC Comments at 15-18;
    US West Comments at 26-32.

[^200]: *Iowa Utils. Bd.*, 119 S. Ct. at 733.

[^201]: *Id.*. at 736 (emphasis added).

[^202]: *Id.* (citing *Local Competition First Report and Order*, 11 FCC
    Rcd at 15766, paras. 521-22 (requiring the incumbent LECs to
    unbundle their operational support systems because "competitors'
    ability to provide service successfully would be significantly
    impaired if they did not have access to the incumbent LECs'
    operation support system functions.")).

[^203]: *See* *supra* Section (IV)(B).

[^204]: *Local Competition First Report and Order*, 11 FCC Rcd at 15624,
    para. 243.

[^205]: *Iowa Utils. Bd*., 119 S. Ct. at 736.

[^206]: 47 U.S.C. § 251(d)(2).

[^207]: 47 U.S.C. § 251(d)(2). *See also Iowa Utils. Bd*., 119 S. Ct. at
    736 (section 251(d)(2) "requires the Commission to determine on a
    rational basis *which* network elements must be made available")
    (emphasis in original).

[^208]: H.R. Conf. Rep. 104-204, at 49 (1995).

[^209]: *See, e.g*., Corecomm Comments at 2-3 ("As it expands its
    operations in Ameritech and Bell Atlantic's incumbent areas,
    Corecomm intends to make increasing use of high quality, cost-based
    unbundled network elements from the \[incumbent LECs\] to reach
    those residential customers that may be beyond the reach of most
    competitive carriers' facilities."); Covad Comments at 2 ("Covad's
    planned deployment by the end of 1999 will cover 51 MSAs, more than
    25 percent of the nation's homes and businesses. This is a
    large-scale, national roll-out, based upon the nationwide
    availability of collocation, unbundled dedicated transport, and
    unbundled local loops."); McLeod Comments at 1-2 ("As of March 31,
    1999, McLeodUSA provided competitive local exchange services to over
    143,000 residential and small business customers, with over 395,000
    lines....McleodUSA anticipates that use of unbundled network
    elements to provide service will increase in the future, and
    therefore has a substantial interest in the outcome of this
    proceeding."); NorthPoint Comments at 3 ("...the simple fact is that
    in the local markets in which NorthPoint currently offers service or
    intends to in the near future, the incumbent LECs are the only
    ubiquitous sources for loops, transport and other facilities that
    NorthPoint needs to provide service.").

[^210]: AT&T Reply Comments at 3-4.

[^211]: *FCC Local Competition Report* at 12.

[^212]: MCI WorldCom Comments, Tab 1, Decl. of Judith R. Levine/Ronald
    J. McMurtrie, at para. 17. *See also* AT&T Reply Comments at 15-18
    (stating that because for the last three years, critical unbundled
    network elements have been effectively unavailable because of the
    Eighth Circuit's decision on Rule 315(b), competition has existed
    only at the margins, and has been limited to portions of the highest
    volume customer markets.).

[^213]: Illinois Commission Comments at 2; California PUC Comments at
    3-4; Connecticut DPUC Comments at 3.

[^214]: Ameritech Comments at 64-65.

[^215]: *Access Charge Reform and Price Cap Performance Review for Local
    Exchange Carriers*, CC Docket Nos. 96-262, *et al*., Fifth Report
    and Order and Further Notice of Proposed Rulemaking, FCC 99-206,
    paras. 77-141 (rel. Aug. 27, 1999) (*Pricing Flexibility Order*).

[^216]: *Id.* at para. 84.

[^217]: *Id.* at para. 77.

[^218]: *Id.* at paras. 81-86.

[^219]: *Id.* at para. 82 (emphasis added).

[^220]: *See* *supra* Section (IV)(B)(4)(b)(ii).

[^221]: *Pricing Flexibility Order* at para. 77.

[^222]: *Iowa Utils. Bd*., 119 S. Ct. at 734.

[^223]: *Id.* at 736.

[^224]: Ameritech Comments at 17.

[^225]: *Id.* 17-27.

[^226]: USTA Comments, Peter W. Huber and Evan T. Leo, UNE Fact Report
    (*USTA UNE Report*).

[^227]: *Id.* at II-6, III-3.

[^228]: *Id.* at I-1.

[^229]: *Id.* at 11-4, III-10 to 12.

[^230]: *Id.* at VI-19-20.

[^231]: *Id.* at III-16 (The incumbent LECs state that this total
    excludes US West's territory.).

[^232]: *See* Ameritech Comments at 25-27, BellSouth Reply Comments at
    7-9; SBC Reply Comments at 27.

[^233]: *Local Competition First Report and Order*, 11 FCC Rcd at 15619,
    para. 234.

[^234]: *Deployment of Wireline Services Offering Advanced
    Telecommunications Capability*, CC Docket No. 98-147, Memorandum
    Opinion and Order and Notice of Proposed Rulemaking, 13 FCC Rcd
    24012, 24092-93, paras. 180-82 (*Advanced Services Memorandum
    Opinion and Order and NPRM*), *remanded US West Communications v.
    FCC*, No. 98-1410 (D.C. Cir. Aug. 25, 1999).

[^235]: Today's broadband services include services based on digital
    subscriber line technology (commonly referred to as xDSL), and
    include ADSL (asymmetric digital subscriber line) services. *See,
    e.g*., *Communications Daily*, Nov. 20, 1998, 1998 WL 10697801 (Bell
    Atlantic announces plans to deploy xDSL capable lines in Boston and
    New York City to a total of three million customers);
    *Communications Daily*, Feb. 9, 1999, 1999 WL 7578715( Bell Atlantic
    announces that its xDSL service will pass by 20 million households
    in-region by the end of 2000, with 10 or 11 million lines qualified
    for xDSL upgrade by that date); *Communications Daily*, July 29,
    1999, 1999 WL 7580057 (Bell Atlantic and GTE announces that the
    total number of xDSL-capable lines available in-region by year's end
    will be 17 million, and that they will have ADSL capability
    installed in 550 central offices by year's end, thereby allowing it
    to serve potentially as many as 6.1 million DSL lines);
    *Communications Daily*, July 21, 1999, 1999 WL 7580000 (SBC
    announces that it had 32,000 DSL customers as of the end of 2^nd^
    quarter 1999. SBC plans to reach 10 million homes with xDSL-capable
    wires by the end of 1999); US West at
    <http://www.uswest.com/about/communicator/vol2no1/7.html> (US WEST
    launched ADSL service in 40 in-region metropolitan areas, Jan. 29,
    1998); BellSouth at
    <http://www.bellsouthcorp.com/proactive/documents/render/16942.html>
    (BellSouth announced roll-out of BellSouth.Net Fast Access ADSL
    Internet service in 30 markets. Service began in seven key markets:
    New Orleans, Atlanta, Birmingham, Jacksonville, Raleigh, Charlotte,
    and Ft. Lauderdale encompassing 1.7 million customers by the end of
    1998. It states that service will extend to 23 additional markets in
    1999.).

[^236]: Daniel Reingold and Ehud Gelblum, *Telecom Services -- Local*,
    Merrill Lynch & Co., July 12, 1999, at 3.

[^237]: To the extent that network innovations are undertaken by
    equipment vendors, they are not subject to the unbundling rules we
    adopt.

[^238]: USTA UNE Report at VI-19.

[^239]: *Local Competition First Report and Order*, 11 FCC Rcd at 15626,
    para. 245 ("We are not persuaded that national rules will discourage
    incumbent LECs from developing new technologies and services; to the
    contrary, based on our experience in other telecommunications
    markets, we believe that competition will stimulate innovation by
    incumbent LECs.").

[^240]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15849-50, paras. 686-88; MCI WorldCom Comments at 9 and Tab 2, Decl.
    of John E. Kwoka, at para. 25.

[^241]: *See supra* Section IV(B)(2).

[^242]: California PUC Comments at 3. *See also* CPI Comments at 5; MCI
    WorldCom Comments at ii, 5; Net2000 Comments at 4-5.

[^243]: For example, MCI WorldCom points out that the Commission
    declined to order nationwide unbundling of certain elements in the
    *Local Competition First Report and Order*, including subloop
    elements and dark fiber. It states that this led to dozens of state
    commission arbitrations and subsequent lawsuits, and that where
    determinations have been made on the availability of these elements,
    MCI WorldCom reports that the outcomes have been inconsistent from
    one state to another, for reasons having nothing to do with
    geographic or market differences. It states that the result has been
    that competitive LECs have been unable to formulate any national or
    regional strategies that rely on the use of dark fiber or subloop
    elements. MCI WorldCom Comments at 7-8.

[^244]: *See* NorthPoint Comments at 2 ("Further, as the Commission
    correctly anticipated, the establishment of national requirements
    for unbundled elements has assisted NorthPoint in its efforts to
    attract capital by providing 'financial markets with greater
    certainty in assessing new entrants' business plans'"). The
    availability of a national list of elements will also provide
    certainty for incumbent LECs seeking to raise capital to enter
    markets outside of their service territories.

[^245]: Ameritech Comments at 64.

[^246]: *Notice* at para. 12.

[^247]: *See* MGC Comments at 8 (stating that a national list is an
    administrative necessity and required for business certainty).

[^248]: *Local Competition Order First Report and Order*, 11 FCC Rcd at
    15626, para. 246. The Commission also noted that its existing rules
    set forth a process by which incumbent LECs could request a waiver
    of the requirements adopted in the *Local Competition First Report
    and Order*. *Id.* at 15625, para. 244.

[^249]: *Id.* We based this grant of authority on 47 U.S.C. 252(e)(3),
    which states: "Preservation of Authority. -- Notwithstanding
    paragraph (2), but subject to section 253, nothing in this section
    shall prohibit a State commission from establishing or enforcing
    other requirements of State law in its review of an agreement,
    including requiring compliance with intrastate telecommunications
    service quality standards or requirements." 47 U.S.C. 252(e)(3).
    Section 252(e)(3) requires interconnection agreements to be
    submitted to the state commission for approval.

[^250]: 47 C.F.R. 51.317.

[^251]: *Local Competition Order First Report and Order*, 11 FCC Rcd at
    15625, para. 244.

[^252]: *Notice* at paras. 11, 36.

[^253]: *Id.* at para. 14 (citing 47 C.F.R. § 51.317; *Local Competition
    First Report and Order*, 11 FCC Rcd at 15641-42, paras. 281-83). In
    the *Notice*, we noted that the Supreme Court's analysis of section
    251(d)(2) might have a bearing on Rule 51.317, but that the Court
    did not directly address that issue. We also noted that the
    Commission asked the Eighth Circuit for a voluntary remand of Rule
    51.317 so that the Commission may consider it in light of the
    Supreme Court's decision. *Notice* at 14, n.21. In requesting a
    remand from the Eighth Circuit, the Commission did not attempt to
    defend the substance of Rule 51.317. Nothing in this Order
    interferes or is intended to interfere with the Eighth Circuit's
    jurisdiction over this matter.

[^254]: *Notice* at paras. 14, 38. As part of this inquiry, we asked if
    the Commission should be able to review state decisions to remove
    network elements. *Id.* at para. 14.

[^255]: *Id.* at para 37. We asked if there was a modification of an
    unbundling requirement whether an incumbent LEC should be required
    to continue to unbundle a particular element identified in an
    interconnection agreement until the date that the agreement expired.
    We also asked whether an incumbent LEC should be able to refuse to
    unbundle a network element that is no longer required when
    negotiating a new contract with other parties. *Id.* at para. 36.

[^256]: *Id.* at para. 37.

[^257]: *Id.* at paras. 39-40.

[^258]: Iowa Comments at 2 ("Network elements should be added or removed
    by the state commissions pursuant to the record made before the
    commissions in proceedings to arbitrate and modify interconnection
    agreements."); New York DPS Comments at 5-6; Ohio PUC Comments at
    3-5; Oregon PUC Comments at 1; Texas PUC Comments at 3 ("It is the
    Texas PUC's belief that the Commission has the authority to allow
    states to have substantial discretion in the addition or removal of
    network elements from the presumptive national list .); Washington
    UTC Comments at 7 (claiming that "the Commission could implement
    something analogous to state commission authority to 'subtract'
    elements from the federal list."); NARUC Reply Comments at 3.

[^259]: Vermont PSB Comments at 4-5 (arguing that the Act
    "establish\[es\] a *floor* beneath which State regulatory bodies may
    not go, but not a *ceiling* on State efforts to encourage
    competition"(emphasis in original)); Illinois Commission Comments at
    4. *See also* Kentucky PSC Comments at 1-2 (arguing that "state
    commissions should evaluate issues involving \[unbundled network
    elements\] not specifically prescribed by the \[Commission\]");
    California PUC Comments at 9, 13 (urging the Commission to delegate
    to the states the authority to remove network elements added by the
    states); Connecticut DPUC Comments at 4.

[^260]: BellSouth Comments at 29-30. As part of its proposals, BellSouth
    argues that the Commission should establish a "strong presumption"
    against adding network elements to the list.

[^261]: SBC Comments at 18-19; GTE Comments at 29.

[^262]: US West Comments at 29-32.

[^263]: NTIA Comments at 42, n.114; ALTS Comments at 5-6; CoreComm
    Comments at 10-12; e.spire Joint Comments at 7; Joint Consumer
    Advocates Comments at 5-6; McLeod Comments at 3; MGC Comments at 7;
    Net2000 Comments at 6; NEXTLINK Comments at 5-7; OpTel Comments at
    3, 14; Prism Comments at 10; Qwest Comments at 40-42; RCN Comments
    at 4-5; AT&T Reply Comments at 67; CoreComm Reply Comments at 7;
    Level 3 Reply Comments at 12; MCI WorldCom Reply Comments at
    10-11;RCN Reply Comments at 10. *See also* Covad Comments at 6
    (opposing state authority to remove network elements from the
    national list) Metro One Comments at 19 (arguing that the Act does
    not provide the Commission with the authority to delegate to states
    the responsibility of removing network elements from the national
    list); Cable & Wireless Comments at 45-46 (opposing state authority
    to remove network elements from the national list). *But see* TRA
    Comments at 29-31 (arguing that for the first two years the
    Commission should review petitions, but, subsequently, state
    commissions should be able to add or remove network elements
    pursuant to the case law established during the first two years);
    Excel Comments at 19 (stating that it "would not object to rules
    giving the States a significant role in determining whether to
    remove \[unbundled network elements\] from the mandatory list after
    the initial three-year period"); ALTS Reply Comments at 6 ("The
    Commission only should consider adopting a mechanism for
    state-by-state removal of \[unbundled network elements\] from the
    national list after a two year period during which the Commission's
    unbundling rules are allowed to be given their full effect . . .
    .").

[^264]: *See supra* Section (IV)(D).

[^265]: California PUC Reply Comments at 13; New York DPS Comments at
    1,7; ALTS Comments at 6; CompTel Comments at 54; Cox Comments at
    37-38; KMC Comments at 27; Level 3 Comments at 24; MCI WorldCom
    Comments at 11; McLeod Comments at 3; RCN Comments at 27; Rhythms
    Comments at 3, 28; AT&T Reply Comments at 51; KMC Reply Comments at
    27; Rhythms Reply Comments at 14. *See also* Allegiance Comments at
    24; Cable & Wireless Comments at 46; GTE Reply Comments at 79-80.
    *But see* OpTel Comments at 14-15 (arguing it is premature to
    establish mechanisms for removal); Sprint Comments at 40 (arguing
    that it is premature to address this issue at this time). Sprint is
    also concerned that "if the Commission gives any encouragement at
    all to \[a\] waiver option, it is likely to be inundated with such
    requests." Sprint Comments at 41. The California PUC recommends that
    the review process begin three years after the adoption of a minimal
    list. California PUC Reply Comments at 13. Allegiance recommends
    that removal be considered on an incumbent LEC-by-incumbent LEC
    basis. Allegiance Comments at 25.

[^266]: *See* ALTS Comments at 6-7; MCI WorldCom Comments at 11; Sprint
    Comments at 41 (arguing for a five year "quiet period"); ALTS Reply
    Comments (recommending a two-year "gestation" period); Rhythms Reply
    Comments at 14 (arguing that a two-year period may be too short).

[^267]: Sprint Comments at 41. *See also* Excel Comments at 19.

[^268]: *Accord* California PUC Reply Comments at 13; CO Space Comments
    at 16; Excel Comments at 19; MCI WorldCom Comments at 13 and Tab 2,
    Decl. of John E. Kwoka, para. 38; AT&T Reply Comments at 51.

[^269]: *See* ALTS Comments at 7 (advocating a two year review cycle).
    This is consistent with the MFJ's tri-ennial review process. The
    review may begin after approximately only two years of experience so
    that it can be completed in three-year intervals.

[^270]: Illinois Commission Comments at 15-16; Choice One Joint Comments
    at 27; MCI WorldCom Comments at 12; OpTel Comments at 14; RCN
    Comments at 26; Sprint Comments at 42-43; KMC Reply Comments at
    27-28; Sprint Reply Comments at 12. *See also* CoreComm Comments at
    40; KMC Comments at 27-28; Level 3 Comments at 24; California PUC
    Reply Comments at 14; Pilgrim Reply Comments at 12.

[^271]: California PUC Comments at 7-8; Washington UTC Comments at 6-7;
    Ameritech Comments at 48-49; NEXTLINK Comments at 6, n.17; NTIA
    Comments at 42; Allegiance Reply Comments at 13 (quoting 47 U.S.C. §
    251(d)(3)); MCI WorldCom Reply Comments at 12-13; NARUC Reply
    Comments at 4; Washington UTC Reply Comments at 5-6. *But see* SBC
    Comments at 19 (arguing that section 251(d)(3) prevents states from
    adding network elements to the list).

[^272]: 47 U.S.C. § 251(d)(3).

[^273]: California PUC Comments at 8; Washington UTC Comments at 6;
    Allegiance Reply Comments at 13-14. *But see* GTE Comments at 29;
    SBC Comments at 18-19.

[^274]: 47 C.F.R. § 51.317.

[^275]: Rule 51.317 also codifies the standard under which this
    Commission will consider which network elements must be unbundled.
    *See* Appendix C.

[^276]: California PUC Comments at 9; California PUC Reply Comments at
    13.

[^277]: Covad Comments at 7. Allegiance suggests that once the
    Commission has gained some experience with removing elements from
    the national list that it might be possible to formulate guidelines
    and turn the process over to the states. Allegiance Comments at 25.
    This would be an appropriate inquiry when this Commission reviews
    the national list in three years. *See supra* para. 151.

[^278]: CompTel Comments at 53; Cable & Wireless Comments at 45-46;
    CoreComm Comments at 9, 11-12; MGC Comments at 7; Net 2000 Comments
    5-7; NEXTLINK Comments at 5-6; CoreComm Reply Comments at 7. S*ee*
    *also* s*upra* Section (IV)(D).

[^279]: Illinois Commission Comments at 3; Kentucky PSC Comments at 2;
    ALTS Comments at 6; CompTel Comments at 53; CoreComm Comments at 9;
    NTIA Comments at 42, n.114; CoreComm Reply Comments at 9.

[^280]: *See* Connecticut DPUC Comments at 3 (arguing that a minimum
    national list should facilitate competition by minimizing new
    entrant's cost by taking advantage of economies of scale as they
    enter multiple local markets); Kentucky PSC Comments at 2; MGC
    Comments at 6.

[^281]: California PUC Comments at 3; Kentucky PSC Comments at 2;
    CoreComm Comments at 9; California PUC Reply Comments at 13.

[^282]: MGC Comments at 7; NorthPoint Comments at 2.

[^283]: Illinois Commission Comments at 4; CoreComm Comments at 9; Covad
    Comments at 7-8, 27; MCI WorldCom Comments at 6-7; MGC Comments at
    8; NEXTLINK Comments at 6; Qwest Reply Comments at 42.

[^284]: GSA Comments at 4 (arguing that uniform standards eliminate "the
    need to establish basic requirements for unbundling in each
    instance"); Net2000 Comments at 3 (claiming that "uniform nationwide
    rules would avoid re-litigation of the same issue in dozens of
    jurisdictions"); Qwest Comments at 41. *See also* Prism Comments at
    4; KMC Reply Comments at 2.

[^285]: Illinois Commission Comments at 4; Connecticut DPUC Comments at
    3. *See also* California PUC Comments at 3-4 (stating that a
    national list "facilitates the arbitration process in individual
    states"); GSA Comments at 4 (claiming that "uniform unbundling
    standards will help state regulators to conduct arbitrations . . .
    without the need to establish basic requirements for unbundling in
    each instance"); NorthPoint Comments at 2 (stating that "national
    requirements have significantly eased the burden of interconnection
    negotiations and arbitrations for NorthPoint"); Qwest Comments at 39
    (citing *Local Competition First Report and Order*, 11 FCC Rcd at
    15,528, para. 56); Qwest Reply Comments at 42; Rhythms Reply
    Comments at 13 (arguing that a national list will streamline the
    state arbitration process).

[^286]: CoreComm Reply Comments at 9. *See also* Qwest Comments at
    41-42.

[^287]: Prism Comments at 4-5; Qwest Comments at 41; CoreComm Reply
    Comments at 3. *See also* Allegiance Reply Comments at 3-4 (stating
    that the Commission's national rules "eliminated the need to
    litigate in state after state an incumbent LEC's obligation to offer
    access to loops and other particular network elements that
    facilities-based \[competitive LECs\] need to offer service");
    CoreComm Comments at 9; Covad Comments at 7-8, 27; MGC Comments at
    7-8; Sprint Reply Comments at 12.

[^288]: ALTS Comments at 6; Covad Comments at 7-8, 27; TRA Comments at
    31. *See also* Allegiance Comments at 3.

[^289]: Iowa Comments at 3; Florida PSC Comments at 2-5; NARUC Comments
    at 3-4; Texas PUC Comments at 5.

[^290]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15689-90, para. 377.

[^291]: *Id.*

[^292]: *Id.* at 15695-96, paras. 390-391 (subloop unbundling). Dark
    fiber is defined as "\[u\]nused fiber through which no light is
    transmitted, or installed fiber optic cable not carrying a signal."
    It is "dark" because it is sold without light communications
    transmission. The \[carrier\] leasing the fiber is expected to put
    its own electronics and signals on the fiber and make it "light."
    Harry Newton, *Newton's Telecom Dictionary*, 14^th^ ed. (Flatiron
    Publishing, New York, 1998) 197-98 (*Newton's Telecom Dictionary*).

[^293]: *Notice* at para. 32. (We noted that, in the *Local Competition*
    *First Report and Order*, even incumbent LECs agreed that the loop
    network element must be unbundled pursuant to sections 251(c)(3) and
    251(d)(2) of the Act.).

[^294]: *Notice* at para 33.

[^295]: *See, e.g*., Ameritech Comments at 101-102; BellSouth Comments
    at 64; GTE Comments at 63-68; SBC Comments at 23-24; U S West
    Comments at 38-39.

[^296]: *See, e.g*., Kentucky PSC Comments at para. 3; Ohio PUC Comments
    at 13; Texas PUC Comments at 14; CompTel Comments at 34-35; e-Spire
    Joint Comments at 23; Focal Comments at 6-7; Level 3 Comments at 15;
    MCI WorldCom Comments at 43; Qwest Comments at 59-61.

[^297]: *See, e.g.,* Florida PSC Comments at 8-9; Illinois Commission
    Comments at 15; Iowa Comments at 9.

[^298]: *Local Competition First Report and Order*, 11 FCC Rcd at 15691,
    para. 380.

[^299]: "xDSL" refers to the various kinds of Digital Subscriber Line
    service, such as ADSL (Asynchronous Digital Subscriber Line) and
    HDSL (High‑bit‑rate Digital Subscriber Line). *Id*. at n.823. The
    definition includes the provision of cross-connect facilities. *Id.*
    at 15693, para. 386.

[^300]: In the *Local Competition First Report and Order*, the
    Commission refrained from limiting the transmission technology that
    would fit the loop definition, stating only that the "definition
    includes, *for example*, two-wire and four-wire analog voice-grade
    loops, and two-wire and four-wire loops that are conditioned to
    transmit the digital signals needed to provide services such as
    ISDN, ADSL, HDSL, and DS1-level signals. *Id.* at 15691, para. 380.
    (emphasis added). For a definition of dark fiber, *see supra* n.292.

[^301]: In other words, our revised definition retains the definition
    from the *Local Competition First Report and Order*, but replaces
    the phrase "network interface device" with "demarcation point," and
    makes explicit that dark fiber and loop conditioning are among the
    "features, functions and capabilities" of the loop. Issues regarding
    an incumbent LEC's obligation to afford access under section
    251(c)(3) to facilities that it controls but does not own are being
    addressed in the *Competitive Networks Notice*.

[^302]: 47 U.S.C. 153(29).

[^303]: The network interface device (NID) is the cross-connect device
    used to connect loop facilities to inside wiring. 47 C.F.R. §
    51.319(b)(1). Until 1990, the Commission mandated the connection of
    inside wiring to the Public Switched Telelphone Network through a
    carrier-installed jack to ensure the easy disconnection of inside
    wire if network harm should occur, and to limit access to the
    protector on the carrier\'s side of the demarcation point. *Review
    of Sections 68.104 and 68.213 of the Commission\'s Rules Concerning
    Connection of Simple Inside Wiring to the Telephone Network and
    Petition for Modification of Section 68.213 of the Commission\'s
    Rules filed by the Electronic Industries Association,* Report and
    Order and Further Notice of Proposed Rulemaking, CC Docket No.
    88-57, 5 FCC Rcd 4687, at para. 3 (1990).

[^304]: *See, e.g.* Ohio PUC Comments at 19-20; AT&T Comments at 83-85;
    CoreComm Comments at 35-36; MediaOne Comments at 16-19; OpTel
    Comments at 7-12; RCN Comments at 20-21; Teligent Comments at 2-10;
    WinStar Comments at 2-13.

[^305]: *See* CoreComm Comments at 35-36; KMC Comments at 22; OpTel
    Comments at 7; Letter from W. Kenneth Ferree, Attorney, OpTel, to
    Magalie R.Salas, Secretary, Federal Communications Commission, CC
    Docket Nos. 96-98 and 99-217 (filed July 22, 1999).

[^306]: 47 C.F.R. § 68.3. *See*, *e.g.,* GTE Comments at 89; MGC
    Comments at 19-20.

[^307]: Any loop plant that exists beyond the demarcation point is, by
    definition, beyond the incumbent LEC's control.

[^308]: 47 C.F.R. § 68.3. ("The 'minimum point of entry' \[is\] either
    the closest practicable point to where the wiring crosses a property
    line or . . . enters a multiunit building or buildings.").

[^309]: *See* 47 C.F.R. § 68.3(b)(2) for further definition of the term
    "demarcation point" as it applies in multiunit installations. *See
    also* Teligent Comments at 5-6 (providing a graphic illustration of
    possibilities). In the *Competitive Networks Notice*, we have sought
    comment on how the definition of the demarcation point under Part 68
    affects access to multiple tenant environments by competitive
    telecommunications providers, including whether an incumbent LEC's
    control over the loop for purposes of competitive access may be
    greater than its control for purposes of installation and
    maintenance. *Competitive Networks Notice* at paras. 65-67.
    Accordingly, we may subsequently refine our criteria for determining
    the extent of an incumbent LEC's ownership and control, and hence
    the termination point of the loop, in accordance with the record
    developed in that proceeding.

[^310]: Teligent Comments at 4, n.4.

[^311]: *See, e.g.*, OpTel Comments at 7.

[^312]: We discuss unbundling of inside wire as a separable subloop at
    Section (V)(B) *infra.*

[^313]: *Competitive Networks Notice* at para. 51.

[^314]: *See, e.g.*, *Access to Competitive Networks; Telecommunications
    Services Inside Wiring*, CS Docket No. 95-189, First Report and
    Order and Second Further Notice of Proposed Rulemaking, 13 FCC Rcd
    3659 (1997)*.*

[^315]: *See also Advanced Services Memorandum Opinion and Order and
    NPRM*, 13 FCC Rcd at 24036-37, paras. 52-53.

[^316]: *See* Covad Reply Comments at 13-14.

[^317]: GTE Comments at 86-87; GTE Reply Comments at 72-73.

[^318]: *Iowa Utils Bd. v. FCC*, 120 F.3d at 813, n.33 (citing *Local
    Competition First Report and Order*, 11 FCC Rcd at 15602, para.
    198). Covad notes that no party appealed to the Supreme Court the
    Eighth Circuit's holding that § 251(c)(3) requires incumbent LECs to
    provide such modifications. Covad Reply Comments at 12. *See also*
    AT&T Comments at 76.

[^319]: *Notice* at 34 (We asked parties whether, in light of
    technological or commercial developments since adoption of the
    *Local Competition First Report and Order*, we should modify the
    definition of the loop to include dark fiber.).

[^320]: *See* Choice One Joint Comments at 25; CO Space Comments at 2;
    KMC Comments at 20-21.

[^321]: GTE Reply Comments at 63-64.

[^322]: *Id.* at 64.

[^323]: In designating dark fiber as a network element, we acknowledge
    that some facilities that the incumbent LEC currently uses to
    provide service may not constitute network elements (*e.g.* unused
    copper wire stored in an incumbent LEC's warehouse). Defining all
    such facilities as network elements would read the "used in the
    provision" language of section 153(29) too broadly. Dark fiber,
    however, is distinct in that it is unused loop capacity that is
    physically connected to facilities that the incumbent LEC currently
    uses to provide service; was installed to handle increased capacity
    and can be used by competitive LECs without installation by the
    incumbent Thus, we conclude that dark fiber falls within the
    statutory definition of a network element.

[^324]: *See, e.g.* ALTS Comments at 41-46; CompTel Comments at 32-33;
    MCI WorldCom Comments at 45-46. Carriers providing advanced services
    use DSLAMs to split voice and data traffic and route each to the
    appropriate destination. For discussion of DSLAMs, *see infra*
    Section (V)(D)*.*

[^325]: 47 U.S.C. 153(29).

[^326]: *See* *infra* Section (V)(D)(2) (packet switching)*.*

[^327]: *See generally* Ameritech Comments at 100-102; Bell Atlantic
    Comments at 37-39; Bell South Comments at 65-67, 70-71; GTE Comments
    at 63-70; SBC Comments at 23-25, 30; US West Comments at 36-40. *See
    also* BellSouth Comments at 64.

[^328]: US West Comments at 38-39. US West refers specifically to lines
    "DS1 and higher."

[^329]: *See Local Competition First Report and Order*, 11 FCC Rcd at
    15679-15683, paras. 356-365. *See also* *CompTel v. FCC*, 117 F.3d
    at 1073 (upholding the Commission's decision to allow the incumbent
    to collect the carrier common line charge (CCLC) and 75 percent of
    the transport interconnection charge, until June 30, 1997.)

[^330]: 47 U.S.C.§ 251(d)(2) (*emphasis added*).

[^331]: *See infra* Section VII.

[^332]: *Local Competition First Report and Order,* 11 FCC Rcd at 15693,
    para. 386. A cross connection is defined as "\[a\] connection scheme
    between cabling runs, subsystems, and equipment using patch cords or
    jumpers that attach to connecting hardware on each end." N*ewton's
    Telecom Dictionary* at 187.

[^333]: *Local Competition First Report and Order*, 11 FCC Rcd at 15693,
    para. 386.

[^334]: 47 U.S.C. §§ 252(d)(1) and 251(c)(3).

[^335]: *See, e.g.,* ALTS Comments at 38-39; e.spire/Intermedia Comments
    at 23; MCI WorldCom Comments at 45-46.

[^336]: *Local Competition First Report and Order*, 11 FCC Rcd at 15694,
    para. 388.

[^337]: AT&T Comments at 63-64; Covad Comments at 32; Focal Comments at
    6; Qwest Comments at 59-61; RCN Comments at 15; Sprint Comments at
    29. *See also* MCI WorldCom Comments at 43 (loops comprise 44% of
    ILEC network investment); *Local Competition First Report and
    Order,* 11 FCC Rcd at 15690, para. 378 n.818 (Local loop plant
    comprises approximately \$109 billion.).

[^338]: *Local Competition First Report and Order*, 11 FCC Rcd at 15690,
    para. 378.

[^339]: *Id.* at 15690, para. 378.

[^340]: *See* Illinois Commission Comments at 11-12; ALTS Comments at
    36-37; AT&T Comments at 62-66; CompTel Comments at 34-35; Covad
    Comments at 32; Focal Comments at 6-7; MCI WorldCom Comments at 43;
    Sprint Reply Comments at 6.

[^341]: In theory, the entrant could lease the loop to another
    competitive LEC, if one exists, but the other competitor might have
    its loop needs met by the incumbent LEC.

[^342]: *See* Ameritech Comments at 101-102; Bell Atlantic at 37-39; SBC
    Comments at 23-25; U S West comments at 36-40. Several of these
    parties cite the *USTA UNE Report at* III-3 and III-16 (stating that
    competitive LEC fiber serves 15% of all commercial office buildings
    and between 9% and 18% of all business lines from dense wire centers
    with collocation by one or more competitive LECs.).

[^343]: For example, assuming the availability of existing conduit and
    pole space, the estimated cost for New England Voice & Data to
    install its own fiber is \$46,680 per mile for a 96 fiber cable.
    Letter from Thomas Jones, on behalf of New England Voice & Data,
    LLC***,*** to Magalie Roman Salas, Secretary, Federal Communications
    Commission, CC Docket No. 96-98, at 6 (filed July 15, 1999).

[^344]: BellSouth Comments at 64-66; BellSouth Reply Comments at 37-38.

[^345]: Incumbent LECs generally proceed through a three step process to
    assign central offices to zones within a given study area. In the
    first step, an incumbent LEC ranks its wire centers in order of
    decreasing traffic density, based on some measure of density chosen
    by the incumbent LEC. In the second step, the incumbent LEC sets
    breakpoints within the zone density ranking to partition the wire
    centers into zones and finally, an incumbent LEC further adjusts the
    zones as it sees fit, based on geographic contiguity or community of
    interest reasons. *See* *Expanded Interconnection with Local
    Telephone Company Facilities, CC Docket No. 91-141, Amendment of the
    Part 69 Allocation of General Support Facility Costs, CC Docket No.
    92-222, Report and Order and Notice of Proposed Rulemaking*, 7 FCC
    Rcd 7369 (1992) (*Expanded Interconnection Order*), vacated in part
    and remanded, *Bell Atlantic v. FCC*, 24 F.3d 1441 (1994); First
    Reconsideration, 8 FCC Rcd 127 (1993); Second Reconsideration, 8 FCC
    Rcd 7341 (1993); Second Report and Order, 8 FCC Rcd 7374 (1993);
    Memorandum Opinion and Order, 9 FCC Rcd 5154 (1994), remanded,
    *Pacific Bell v. FCC*, 81 F.3d 1147 (1996); 47 C.F.R. § 61.38(b)(4).

[^346]: MCI WorldCom argues that where a requesting carrier plans to
    purchase unbundled \[elements\], the incumbent LEC could change its
    methodology for ranking central office traffic density in such a way
    that the central office changed zones, and the incumbent LEC was no
    longer required to offer the \[element\] to requesting carriers.
    *See* Letter from Chuck Goldfarb, Director, Law and Public Policy
    MCI WorldCom, to Larry Strickling, Chief, Common Carrier Bureau, CC
    Docket No. 96-98, at 7 (filed August 9, 1999).

[^347]: *See, e.g.,* AT&T Comments at 63-64; Focal Comments at 6; Qwest
    Comments at 60.

[^348]: *See* ALTS Reply Comments at 18-20; Level 3 Reply Comments at 3;
    RCN Reply Comments at 6; Qwest Reply at 50.

[^349]: In the *Local Competition First Report and Order,* the
    Commission stated that its definition of the loop ". . . includes,
    for example . . . DS1-level signals." *Local Competition First
    Report and Order*, 11 FCC Rcd 15691 at para. 380.

[^350]: *Id.* at 15691, para. 380.

[^351]: *See, e.g.,* CompTel Comments at 32-34; e.spire Joint Reply
    Comments at 16; RCN Comments at 16.

[^352]: Ameritech Comments at 103-105; Bell Atlantic Comments at 36-39;
    BellSouth Comments at 67-75; GTE Comments at 66-67; SBC Comments at
    25-30; US West Comments at 37.

[^353]: *See* AT&T Comments at 67-72; Illinois Commission Comments at
    11; ALTS Comments at 37; Level 3 Comments at 15.

[^354]: AT&T Comments at 67-69. Covad points out that xDSL high-speed
    data service cannot be provided over cellular or PCS. Covad Reply
    Comments at 8.

[^355]: AT&T Comments at 69-70.

[^356]: *See*, Ameritech Comments at 103-05; Bell Atlantic Comments at
    36; BellSouth Reply Comments at 38-39; GTE Comments at 68-70; SBC
    Comments at 26-28; US West Comments at 37-38.

[^357]: AT&T Comments at 70-72.

[^358]: *See, e.g.,* Covad Reply Comments at 14; NorthPoint Comments at
    14. As we explained in our recent *Advanced Services First Report
    and Order and FNPRM*, xDSL technology provides multiple benefits to
    the consumer that cannot be achieved with traditional analog
    transmission. The use of xDSL modems allows transmission of data
    over the copper loop at vastly higher speeds than can be achieved
    with analog data transmission. Moreover, combining xDSL technology
    with packet switching permits more efficient use of the network
    because information generated by multiple users can be sent over a
    telecommunications facility that in a circuit-switched environment
    may be dedicated to only one customer for the duration of a call. In
    addition, the customer can potentially make ordinary voice calls
    over the public switched network at the same time he or she is using
    the same line for high-speed data transmission*.* *Advanced Services
    First Report and Order and FNPRM*, 14 FCC Rcd at 4766-67, paras.
    9-10.

[^359]: *Newton's Telecom Dictionary* at 38-39.

[^360]: *Advanced Services First Report and Order and FNPRM*, 14 FCC Rcd
    at 4767, para. 10.

[^361]: *See,* Covad Comments at 36-37. Covad states that Bell Atlantic
    makes conditioned loops available only when Bell Atlantic seeks to
    provide ADSL service to end users, thus holding competitive LEC
    expansion plans hostage until Bell Atlantic is ready. Covad Comments
    at 36, n.63.

[^362]: *See, e.g*., Covad Comments at 36.

[^363]: 47 U.S.C. § 706(a).

[^364]: *Local Competition First Report and Order*, 11 FCC Rcd at 15692,
    para. 382.

[^365]: *Id.*

[^366]: Covad Comments at 42-43; Rhythms Reply Comments at 21.

[^367]: *See generally Bellcore Notes on the Network, Loop
    Transmission*, ch.7.15, (Telcordia, 1997); Regis J. Bates and Donald
    Gregory, *Voice and Data Communications Handbook Signature Edition*,
    (McGraw-Hill, New York, 1997), at 76-77.

[^368]: *Local Competition First Report and Order*, 11 FCC Rcd at 15692,
    para. 382.

[^369]: 47 C.F.R. § 51.507(e). *See generally* 47 C.F.R. §§ 51.501 *et
    seq.; Local Competition First Report and Order*, 11 FCC Rcd at
    15875-15876, paras. 749-751.

[^370]: MGC Reply Comments at 11.

[^371]: Illinois Commission Comments at 15; Iowa Comments at 9; Cable &
    Wireless Comments at 34; CO Space Comments at 7; GSA Comments at 7;
    Waller Creek Comments at 17. *See also* Texas PUC Comments at 16;
    KMC Comments at 21. New England Voice & Data states that fiber loops
    are particularly necessary to bring competition in advanced services
    to the residential market. New England Voice & Data Comments at
    9-10.

[^372]: GTE Comments at 32; US West Comments at 39-40.

[^373]: *See* New England Voice & Data Comments at 14-15.

[^374]: US West Comments at 39-40.

[^375]: New England Voice & Data states that although Neon, NEES, and
    C2C offer fiber in the Northeast, they do not offer fiber on a
    ubiquitous basis, and thus are not a readily available, reasonable
    substitute for unbundled dark fiber. New England Voice & Data
    Comments at 13.

[^376]: RCN Comments at 15.

[^377]: New England Voice & Data Comments at 9-10. New England Voice &
    Data states that without unbundled dark fiber loops, its ability to
    offer advanced services would be limited to approximately two miles
    ("about 12,000") from the central office. New England Voice & Data
    Comments at 10.

[^378]: *See infra* Section (V)(E).

[^379]: GTE Comments at 83-84.

[^380]: GTE Comments at 83-84; Letter from Derek R. Khlopin, Regulatory
    Counsel, Telecommunications Industry Association, to Magalie R.
    Salas, Secretary, Federal Communications Commission, CC Docket No.
    96-98, Attachment at 4-12 (filed Aug. 2, 1999) (stating that
    incumbent LECs continue to build copper loop facilities even though
    fiber could be deployed at no additional cost, because, according to
    TIA, of being required to unbundle new fiber facilities.).

[^381]: *See* Texas PUC Comments at 16-18.

[^382]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15718-15719, para 441.

[^383]: Covad Reply Comments at 9-11; Network Access Solutions Comments
    at 20-26; NorthPoint Comments at 14-16; Rhythms Comments at 16-18;
    Rhythms Reply Comments at 25-28.

[^384]: *Advanced Services First Report and Order and FNPRM*, 14 FCC Rcd
    at 4806-12, paras. 96-107.

[^385]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15695-15696, paras. 390-391.

[^386]: *Id.* at 15696, para. 390.

[^387]: *Id.* at 15696, para. 391.

[^388]: ^.^

[^389]: *Id*.

[^390]: *Notice* at para. 33

[^391]: *See, e.g*., Choice One Joint Comments at 21; Inline Comments at
    3-4; Level 3 Comments at 17-18; RCN Comments at 22-23. Digital Loop
    Carrier (DLC) systems digitally encode and aggregate, i.e.
    "multiplex," the traffic from subscribers' loops into DS1 signals or
    higher for more efficient transmission or more extended range than
    traditionally permitted by copper loops. The analog signals are
    carried from customer premises to a remote terminal (RT) where they
    are converted to digital, mixed with other signals, and carried,
    generally over fiber, to the LEC central office*.* Integrated
    Digital Loop Carriers (IDLC) establish a direct, digital interface
    with the switch at the LEC central office, which makes it difficult,
    or even impossible, for competitors to access individual loops at
    that location. "xDSL" refers to Digital Subscriber Loop; the lower
    case "x" is a place holder for the several versions, or "flavors" of
    DSL technology. DSL modems allow transmission of data over the
    copper loop at vastly higher speeds than can be achieved with analog
    data transmission. In addition, customers using xDSL can make
    ordinary voice calls while using the line for high-speed data
    transmission*.* xDSL cannot work over fiber, and it generally
    requires a "clean" (i.e., conditioned) copper loop.

[^392]: *See, e.g*., Ohio PUC Comments at 20.

[^393]: *See, e.g.*, GTE Comments at 87-89; SBC Comments at 30-31.

[^394]: *See, e.g.,* California PUC Comments at 9-10 (Commission should
    establish guidelines, but allow parties to negotiate and states to
    arbitrate specific terms); Florida PSC Comments at 8 (Subloop
    unbundling should be determined case-by-case); Ohio PUC Comments at
    16-18 (States should develop policy on an ongoing basis as
    technology/business evolves).

[^395]: Texas PUC Comments at 15-16. Texas also describes limitations it
    imposes to safeguard the integrity of the network. *Id*. at 16.

[^396]: Accessible terminals contain cables and their respective wire
    pairs that terminate on screw posts. This allows technicians to
    affix cross connects between binding posts of terminals collocated
    at the same point. Terminals differ from splice cases, which are
    inaccessible because the case must be breached to reach the wires
    within. For a discussion of outside plant, *see* Green, James Harry,
    *The Irwin Handbook of Telecommunications*, McGraw Hill, New York
    (3^rd^ Ed. 1997), at ch. 6.

[^397]: The pole or pedestal is where the distribution connects to the
    "drop." The drop is the dedicated wire connecting the subscriber to
    the network.

[^398]: In the *Local Competition First Report and Order*, the
    Commission defined the NID as a cross-connect device used to connect
    loop facilities to inside wiring*. Local Competition First Report
    and Order*, 11 FCC Rcd at 15697, para. 392, n.852.

[^399]: Controlled environments are necessary to protect the electronic
    devices, such as the multiplexing equipment on IDLC lines, or
    DSLAMs. The controlled environment is known as a "controlled
    environment vault" (CEV) if it is located below ground, and as a
    "hut" if it is located above ground. If the FDI is in a remote
    terminal in a utility room, there may be no distribution or drop,
    and the loop may go directly from the feeder to inside wire.

[^400]: We note that even central offices can present feasibility
    issues, as when they are filled to capacity, or when certain lines,
    such as IDLC, cannot be accessed at that point, but must be accessed
    closer to the end user.

[^401]: *See, e.g.*, ALTS Comments at 46-48; Choice One Joint Comments
    at 21; CoreComm Comments at 33-35; Level 3 Comments at 17-18;
    NorthPoint Comments at 16; OpTel Comments at 6-7.

[^402]: S*ee, e.g*., ALTS Comments at 37-38; AT&T Comments at 63-64;
    Focal Comments at 6-7; Level 3 Comments at 15; MCI WorldCom Comments
    at 43-44; Qwest Comments at 59-61; RCN Comments at 15. *See also*
    *Local Competition First Report and Order* 11 FCC Rcd at 15690,
    para. 378.

[^403]: *Local Competition First Report and Order*, 11 FCC Rcd at 15690,
    para. 378.

[^404]: *Id.*

[^405]: GTE Comments at 86-87

[^406]: Choice One Joint Comments at 21; CoreComm Comments at 34.

[^407]: *See* Ohio PUC Comments at 20 (stating that it is uneconomical
    for competitive LECs to purchase an entire loop just to obtain
    access to the riser cable.) *See also* MCI WorldCom Comments at
    44-45.

[^408]: Illinois Commission Comments at 14-15.

[^409]: GTE Comments at 88-89.

[^410]: *See, e.g.*, OpTel Comments at 7-8; Teligent Comments at 7-8;
    WinStar Comments at 2-3, 5-7.

[^411]: Illinois Commission Comments at 14-15 (stating that subloop
    unbundling, which allows competitive LECs flexibility in
    self-provisioning segments of the loop, allows them to provide their
    own facilities where construction is uncomplicated, and tie those
    facilities to the incumbent LEC's plant.); Texas PUC Comments at 15
    (stating that subloop unbundling would promote development,
    technological advancement, and new types of service.)

[^412]: Depending on the specific architecture, this interconnection
    point might be at the pedestal, the NID, the MPOE, or any other
    accessible terminal.

[^413]: *See, e.g.*, OpTel Comments at 7-8; Teligent Comments at 7-8;
    WinStar Comments at 2-3, 5-7.

[^414]: *See, e.g.,* RCN Comments at 21-22. Because landlords and
    subscribers may reasonably object to the disruption of installing
    duplicative wiring, we reject GTE's argument that the existence of a
    "robustly competitive" market in electrical contractors may be
    interpreted to mean that withholding access to the incumbent's
    inside wire would not impair competitors' ability to offer services.
    GTE Comments at 90.

[^415]: *See, e.g*., KMC Comments at 22; WinStar Comments at 6.

[^416]: *See, e.g.,* OpTel Comments at 7-9; Teligent Comments at 7.

[^417]: The device which accomplishes both the mixing of signals bound
    for the central office, and the separation of signals bound for
    subscribers, is a "multiplexer." *See generally* MCI WorldCom
    Comments at 44-45 (Copper wire runs from the customer premises to a
    remote terminal, from where the traffic is no longer transported on
    its own channel, but rather is transported over shared channels.).

[^418]: *But see* MCI WorldCom, *Unbundling Digital Loop Carriers*, at
    11-15 (March 1999). MCI WorldCom states that there are four ways
    that competitive LECs may gain access to IDLC subscribers: (1)
    Multiple Switch Hosting; (2) Integrated Network Architecture; (3)
    Digital Cross Connect Grooming; and (4) Side Door Grooming. We note,
    however, that Multiple Switch Hosting is available only on the
    newest IDLC systems (Telcordia GR-303) and accommodates only a few
    competitors; Integrated Network Architecture appears to be
    cost-effective only for competitive LECs with substantial market
    penetration, and also works only for GR-303-compatible systems;
    Digital Cross Connect Systems require all loop signals, including
    signals for loops retained by the incumbent LEC, to pass through the
    DCS system for processing, and is therefore very expensive; and MCI
    WorldCom agrees that Side Door Grooming can only be done for a few
    lines per remote terminal. Thus, despite their future potential,
    these methods do not now substantially reduce the competitive LECs'
    need to pick up IDLC customers' traffic before it is multiplexed.

[^419]: In the *Local Competition First Report and Order,* the
    Commission concluded that incumbent LECs must provide competitors
    with access to unbundled loops, regardless of whether the incumbent
    LEC uses IDLC technology, or similar remote concentration systems,
    for the particular loop sought by the competitor. In that Order, the
    Commission noted that if incumbent LECs were not required to
    unbundle IDLC‑delivered loops, end users served by such technologies
    would be effectively deprived of competition for their business, and
    incumbent LECs would be encouraged to hide loops from competitors
    through the use of IDLC technology. The Commission also found that
    it is technically feasible to unbundle IDLC-delivered loops through
    use of a multiplexer to separate the unbundled loop(s) prior to
    connecting the remaining loops to the switch. *Local Competition
    First Report and Order,* 11 FCC Rcd at 15692, para 383. In the three
    years since the *Local Competition First Report and Order*, however,
    such methods have not proven practicable. Competitors are not yet
    able economically to separate and access IDLC customers' traffic on
    the wire-center side of the IDLC multiplexing devices. *See* Level 3
    Comments at 17-18; NorthPoint Comments at 16-18; Prism Comments at
    21; RCN Comments at 22.

[^420]: *See, e.g.,* MCI WorldCom Comments at 44-45. (More than 20% of
    loops use DLC technology, and the percentage will only increase over
    time.). MCI WorldCom Reply Comments at 45 (More than half the wire
    centers in the United States (10,967 out of 20,637) -- the majority
    in rural areas -- serve under 2000 lines. In these rural areas,
    about half the loops are provisioned over DLC). *See also* Choice
    One Joint Comments at 21; CoreComm Comments at 34.

[^421]: *See, e.g*., Covad Comments at 33-34, 39-41.

[^422]: The Commission has long held collocation at the central office
    to be desirable. Our analysis extends the Commission's reasoning to
    new situations as the network architecture evolves. *See generally*
    *Advanced Services First Report and Order and FNPRM,* 14 FCC Rcd at
    4771-94, paras. 19-60.

[^423]: *Id.* at 4772, para 21. *See also* AT&T Comments at 85 (stating
    that high speed data transmission over xDSL technology will come at
    the expense of competition unless CLECs can deploy their own SONET
    rings and lease loop distribution from the ILEC.); Level 3 Comments
    at 17-18; RCN Comments at 22-23. DSL technology can require loop
    lengths as short as 4,000 feet.

[^424]: *See, e.g.,* SBC Comments at 30-31 (By separating feeder from
    distribution, the ability to mechanize testing and monitoring from
    the switch would be lost; sending technicians in place of mechanized
    testing would decrease service and increase prices.) *See also*
    Letter from Lincoln E. Brown, SBC, to Magalie R. Salas, Secretary,
    Federal Communications Commission, CC Docket No. 96-98, (filed July
    30, 1999) (SBC July 30, 1999 *Ex Parte*) (stating that unbundling is
    not feasible at a serving terminal; that FDIs are small and sized
    for serving areas; and present an extremely limited opportunity for
    single CLEC cable; that access to the subloop is not feasible in the
    Hub; and that there is extremely limited opportunity for access at
    RT/FDI combinations due to space constraints.)

[^425]: *See, e.g*., Letter from Scott A. Sarem, MGC, to Magalie R.
    Salas, Secretary, Federal Communications Commission, CC Docket No.
    96-98, (filed July 26, 1999) (MGC July. 23, 1999 *Ex Parte*)
    (stating that GTE has explained to MGC in detail how it would
    provision MGC with subloops through a D-4 channel bank, and citing
    letter from Ellen Robinson, GTE, to Mark Peterson, MGC, Apr.16,
    1998); Letter from Patrick J. Donovan, CoreComm, to Magalie R.
    Salas, Secretary, Federal Communications Commission, CC Docket No.
    96-98, (filed July 30, 1999) (CoreComm Jul. 30, 1999 *Ex Parte.*)
    (stating that loops are typically comprised of segments accessible
    -- and accessed by incumbents -- at natural junctures; FDIs are
    designed to facilitate connection between feeder and distribution);
    Letter from David N. Porter, MCI WorldCom, to Magalie R. Salas,
    Secretary, Federal Communications Commission, CC Docket No. 96-98,
    (filed Aug. 10, 1999) (MCI WorldCom Aug. 10, 1999 *Ex Parte*.)
    (stating that unbundling is feasible at either end of a copper loop;
    and that manufacturers are introducing new DLC and DSL multiplexing
    equipment that will allow local exchange carriers to share common
    shelves).

[^426]: 47 C.F.R. §§ 51.321-323; MGC July 23, 1999 *Ex Parte* at 2.
    Pursuant to our recent *Advanced Services First Report and Order and
    FNPRM*, an incumbent LEC may not refuse to permit collocation of
    equipment on the grounds that it does not satisfy certain Bellcore
    Network Equipment and Building Specifications (NEBS) performance
    requirements, and an incumbent may not impose on a collocating
    competitor safety standards that exceed the safety standards it
    imposes on its own equipment. *Advanced Services First Report and
    Order and FNPRM,* 14 FCC Rcd at 4781-4782, paras. 35-36. In
    addition, we revised our rules to permit collocating carriers to
    construct their own cross connects. *Id.* at 4779-4780, para. 33.

[^427]: *See* MCI WorldCom Aug. 10, 1999 *Ex Parte* at 2.

[^428]: MGC July 23, 1999 *Ex Parte* subpart F; CoreComm July 30, 1999
    *Ex Parte.*. MGC, however, doubts that incumbents' junction boxes do
    in fact lack space for fiber termination equipment, because such
    equipment may not take up more than a shelf or two on an equipment
    rack. MGC July 23, 1999 *Ex Parte.* In a physical collocation
    arrangement, a competitor leases space at a LEC\'s premises for its
    equipment. The competing provider has physical access to this space
    to install, maintain, and repair its equipment. *See Local
    Competition First Report and Order*, 11 FCC Rcd at 15784, n.1361;
    *Expanded Interconnection Order,* 7 FCC Rcd at 7391, para. 42. In a
    virtual collocation arrangement, the competitor designates the
    equipment to be placed at the incumbent LEC\'s premises. The
    competing provider, however, does not have physical access to the
    incumbent\'s premises. Instead, the equipment is under the physical
    control of the incumbent LEC, and the incumbent is responsible for
    installing, maintaining, and repairing the competing provider\'s
    equipment. *See Local Competition First Report and Order*, 11 FCC
    Rcd at 15784-15785, para. 559; *Virtual Collocation Order*, 9 FCC
    Rcd 5154, 5158, para. 7 (1994).

[^429]: *See generally Expanded Interconnection Order*, 7 FCC Rcd 7369
    (1992); *Advanced Services Memorandum Opinion and Order and NPRM*,
    13 FCC Rcd 24012*; Advanced Services First Report and Order FNPRM*,
    14 FCC Rcd 4761.

[^430]: *See* SBC Comments at 30-31; SBC July 30, 1999 *Ex Parte.*

[^431]: SBC July 30, 1999 *Ex Parte.*

[^432]: Texas PUC Comments at 15-16.

[^433]: Ohio PUC Comments at 16-17. *See also* MCI WorldCom Aug. 10,
    1999 *Ex Parte* (defining entire dedicated copper loop from NID to
    RT or CO as single subloop element.).

[^434]: Ohio PUC Comments at 16. *See also* USTA Comments at 35-36.

[^435]: *See* *supra* Section (IV)(C).

[^436]: *See* 47 U.S.C. § 252(b).

[^437]: *See, e.g.,* Florida PSC Comments at 8; Iowa Comments at 9; Ohio
    PUC Comments at 18. *See also* Kentucky PSC Comments at para. 1; New
    York DPS Comments at 6.

[^438]: See Competitive Networks Notice at para. 28 et seq.

[^439]: SBC Reply Comments at 9 (citing OpTel Comments at 10; Teligent
    Comments at 3).

[^440]: OpTel Comments at 10.

[^441]: *Id.*

[^442]: *See* 47 C.F.R. § 68.3.

[^443]: The incumbent is obligated to construct the single point of
    interconnection whether or not it controls the wiring on the
    customer premises.

[^444]: *See* 47 U.S.C. § 252

[^445]: *See generally Competitive Networks Notice* at paras. 49-51 and
    65-67.

[^446]: Texas PUC Comments at 15-16. We note that Texas determined that
    the RT itself would not be part of the unbundled subloop. To protect
    the public interest, Texas places other limitations on its
    unbundling requirement. *Id.*

[^447]: SBC Comments at 31.

[^448]: *See* 47 U.S.C § 252(d).

[^449]: S*ee, e.g.*, GTE Reply Comments at 76.

[^450]: *See, e.g., Expanded Interconnection Order*, 7 FCC Rcd 7369*;
    Advanced Services First Report and Order and FNPRM*, 14 FCC Rcd
    4761.

[^451]: *Local Competition First Report and Order*, 11 FCC Rcd at 15697,
    para. 392.

[^452]: *Id.* at 15697, para. 392, n.852.

[^453]: *Id.* at 15697, para. 392.

[^454]: *Notice* at paras. 31-33.

[^455]: *See, e.g.*, GTE Comments at 56.

[^456]: *See, e.g.,* MCI WorldCom Comments at 47; MGC Comments at 20;
    Net2000 Comments at 12-13; Rhythms Comments at 18.

[^457]: *See, e.g.*, Cable and Wireless Comments at 34-35; Choice One
    Joint Comments at 19; CoreComm Comments at 31.

[^458]: As we discuss at Section (V)(A) *supra*, where we define the
    loop, the loop may terminate at the NID, before the NID, or beyond
    the NID.

[^459]: *See* 47 C.F.R. §§ 68.3, 68.104, 68.213, 68.215.

[^460]: *See* Cable & Wireless Comments at 34; Choice One Joint Comments
    at 19; KMC Comments at 18; MCI WorldCom Comments at 45, 47; MGC
    Comments at 19; Qwest Comments at 67.

[^461]: *See* Cable & Wireless Comments at 34-35; CompTel Comments at
    36.

[^462]: In the *Local Competition First Report and Order*, the
    Commission concluded that incumbent LECs must offer unbundled access
    to the NID, as a network element. *Local Competition First Report
    and Order*, 11 FCC Rcd at 15697, para. 392.

    ^?^ In that phase of the proceeding, the Commission noted that a
    competitor deploying its own loops must be able to connect those
    loops to customers\' inside wiring in order to provide service,
    especially in multi-tenant buildings. The Commission therefore
    concluded that a requesting carrier is entitled to connect its
    loops, via its own NID, to the incumbent LEC\'s NID. *Local
    Competition First Report and Order*, 11 FCC Rcd at 15697, para 392.

[^463]: *See supra* Section (IV)(B)(4).

[^464]: *See* Choice One Joint Comments at 19; CoreComm Comments at 31;
    MGC Comments at 20; KMC Comments at 18; Net2000 Comments at 12-13;
    Rhythms Comments at 18.

[^465]: *See* Cable and Wireless Comments at 33-34; Choice One Joint
    Comments at 19; CoreComm Comments at 31; KMC Comments at 18; Level 3
    Comments at 17; MCI WorldCom Comments at 47.

[^466]: GTE Comments at 56.

[^467]: *See* MCI WorldCom Comments at 47; MGC Comments at 20.

[^468]: *Local Competition First Report and Order*, 11 FCC Rcd at 15602,
    para. 197.

[^469]: Id.

[^470]: *Notice* at para. 32.

[^471]: *Id.* at para. 33.

[^472]: Ameritech Comments at 5; BellSouth Comments at 56; Bell Atlantic
    Comments at 23; GTE Comments at 39; SBC Comments at 42; USTA
    Comments at 34; US WEST Comment at 44.

[^473]: AT&T Comments at 86; Cable & Wireless Comments at 36; KMC
    Comments at 15; Net2000 Comments at 13; Qwest Comments at 70; Sprint
    Comments at 31.

[^474]: California PUC at 4,5; Connecticut PUC Comments at 4,5; Florida
    PSC Comments at 7; Illinois Commission Comments at 11, 12-13; Iowa
    Comments at 6-7, 8; Kentucky PSC Comments at 2; New York DPS
    Comments at 2, 4; Texas PUC Comments at 14; Washington UTC Comments
    at 11. *But see* Ohio PUC Comments at 8.

[^475]: *See* *Local Competition First Report and Order*, 11 FCC Rcd. at
    15706, para. 412. The line-side switch facilities include the
    connection between a loop termination at, for example, a main
    distribution frame (MDF), and a switch line card. Trunk-side
    facilities include the connection between trunk termination at a
    trunk-side cross-connect panel and a trunk card. The "features,
    functions, and capabilities" of the local switch include the basic
    switching function of connecting lines to lines, lines to trunks,
    trunks to lines and trunks to trunks.

[^476]: *Id*. The local switching element includes all vertical features
    that the switch is capable of providing, including customized
    routing functions, CLASS features, Centrex and any technically
    feasible customized routing functions. Custom calling features, such
    as call waiting, three-way calling, and call forwarding, are
    switch-based calling functions. CLASS features, such as caller ID,
    are number translation services that are based on the availability
    of interoffice signaling.

[^477]: MCI WorldCom Comments at 56-58. A loop that connects an end
    office to an end user's premises is sometimes referred to as a "home
    run" copper loop.

[^478]: For example, in response to MCI WorldCom's proposal, Ameritech
    asserted that its switching technology has not changed to warrant a
    modification to the local circuit switching rule*. See* Letter from
    John T. Lenahan, Assistant General Counsel, Ameritech, to Magalie R.
    Salas, Secretary, Federal Communications Commission, CC Docket 96-98
    at 3-4 (filed July 30, 1999) (Ameritech Jul. 30, 1999 *Ex Parte*).

[^479]: Ameritech Comments at 85.

[^480]: *Id.*

[^481]: *Id.*

[^482]: *See* Ameritech July 30, 1999 *Ex Parte* at 4.

[^483]: *See* *id.* at 2.

[^484]: CompTel Reply Comments at 15.

[^485]: *See Implementation of the Local Competition Provision in the
    Telecommunications Act of 1996*, Third Order on Reconsideration and
    Further Notice of Proposed Rulemaking, 12 FCC Rcd 12460, 12486-87,
    para. 50 (1997) (Local Competition Third Reconsideration Order)
    ("\[W\]e concluded that the relative costs of dedicated transport,
    including the associated NRCs \[Non-recurring charges\], is an
    unnecessary barrier to entry for competing carriers.")

[^486]: *Id.* at 12481, para. 34.

[^487]: *Id*. at 12486-87, para. 45.

[^488]: We note that when requesting carriers provide service to end
    users with self-provisioned switches, they do not rely upon the
    incumbent LEC's routing table.

[^489]: *See* *infra* Section V(D)(1)(b)(iii) (exception to national
    unbundling requirement for local circuit switching).

[^490]: *See* TRA Comments at 34-36 (citing Appendix II, Report of the
    Competitive Communications Group). See also, Letter from Chuck
    Goldfarb, Director Law and Public Policy, MCI WorldCom to Larry
    Strickling, Chief, Common Carrier Bureau, Federal Communications
    Commission, CC Docket No. 96-98 (filed August 9, 1999) (MCI WorldCom
    August 9, 1999 *Ex Parte*) ("Wholesale switching markets are
    extremely unlikely to develop due to CLECs' desire to differentiate
    their product offerings by self-provisioning their own switching
    capability wherever feasible.").

[^491]: USTA UNE Report at I-1 (citing Bellcore, TR-EQP-000315, Local
    Exchange Routing Guide (Mar. 1, 1999)).

[^492]: USTA UNE Report at I-1.

[^493]: SBC Comments at 38.

[^494]: At the end of 1998, ALTS put the number of competitive switches
    at 667. *See* ALTS Press Release, The Telecommunications Act of
    1996: Progress After Three Years, January 21, 1999. The Competition
    Policy Institute placed the number of competitive switches at 579 at
    the end of 1999. CPI Reply Comments at 24 (citing 1999 CLEC report,
    The 10^th^ Annual Report from New Paradigm Resources Group, Inc.,
    Table 7). AT&T counters that inclusion of its 4ESS switch in the
    incumbent LEC's count is inappropriate because these switches cannot
    provide certain basic aspects of local phone service. AT&T Reply
    Comments at 96.

[^495]: *See, e.g.,* Ameritech Comments at 70-71; Bell Atlantic Comments
    at 20-21; SBC Comments at 34-35.

[^496]: USTA UNE Report at I-10-19. *See also* AT&T Reply Comments at
    104 ("AT&T's two 5ESS switches in Dallas . . . are not being used
    'to reach . . . as much as 98 percent . . . of the addressable
    business and residential market' as GTE claims is the case.
    \[citations omitted\]. Rather, those switches like AT&T's DMS-100 in
    Washington, D.C. are being used to offer service to business
    customers. The same is true for each of AT&T's local switching in
    other markets, such as Los Angeles, Denver, Detroit and Tampa.");
    Ameritech Comments at 73-79; BellSouth Comments at 58-59; GTE
    Comments at 40-42, 46-47; SBC Comments at 36,38; US WEST Comments at
    42-43.

[^497]: *See* AT&T Reply at 90; CompTel Comments at 39; MCI WorldCom
    Comments, Tab 3, Decl. of Mark T. Bryant, paras. 14-15 (MCI WorldCom
    Bryant Decl).

[^498]: *See* *supra* para. 126.

[^499]: Ameritech Comments at 5-6 (proposing elimination of switch
    unbundling in any wire center in which collocation is available and
    throughout rate exchange area served by one or more competitive
    switches); Bell Atlantic Comments at 23 (proposing elimination of
    switching in any geographic area where competitors currently provide
    self-provisioned switching); BellSouth Comments at 56 (proposing
    national market for elimination of switch unbundling); GTE Comments
    at 39-42 (proposing nationwide elimination of switch unbundling);
    SBC Comments at 42 (proposing elimination of switch unbundling in
    rate exchange areas served by one switch); USTA Comments at 34
    (proposing nationwide elimination of switch unbundling requirement);
    US WEST Comments at 44 (proposing presumption of elimination of
    switch unbundling within 50 miles of a competitor's switch).

[^500]: Ameritech Comments at 5-6, 84; Bell Atlantic Comments at 23;
    BellSouth Comments at 56; GTE Comments at 39; SBC Comments at 42;
    USTA Comments at 34; US WEST Comment at 44.

[^501]: *See, e.g*., Mark Kastan and Daniel Reingold, *Telecom
    Services - Local,* Merrill Lynch & Co., June 3, 1999, at 12, 13
    (stating that of the 10 competitive LECs that are primarily
    facilities based (*i.e.,* less than half of lines are through
    resale), only four of those are EBITDA positive as of the first
    quarter 1999. Of the rest, Merrill Lynch expects them to break even
    (turn EBITDA positive) between 2000 and 2003.). *See also* W. Todd
    Scott and David J. Bank, *Competitive Local Exchange Carriers,* ING
    Barings, July 26, 1999, at 9 (stating that ING Barings expects some
    CLECs to still have negative earnings in 2000 and 2001).

[^502]: *See* Ameritech Comments, Tab B, Aff. of William L. Fitzsimmons
    (Ameritech Fitzsimmons Aff.); USTA Comments at 34 (citing
    Housman/Sidak study of unbundled switching); GTE Comments, Tab B,
    "An Analysis of Alternative Network Elements Available to CLECs."
    *See also* Letter from W. Scott Randolph, Director, Regulatory
    Affairs, GTE Service Corp., to Magalie R. Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98 (filed July 8, 1999)
    ("PNR and Associates, May 1999 Study").

[^503]: The Commission would need to carefully evaluate the specific
    assumptions, both concerning costs and expected revenues, under
    consideration. Ameritech included a study, the Fitzsimmons study,
    that contains a number of weaknesses. We note that it assumes that
    between 40% and 60% of fiber structure costs should be attributed to
    local entry, reflecting the fact that costs can be shared with other
    network providers. In the *Universal Service* proceeding, after much
    discussion by all parties, sharing percentages of from 55% to 90%
    for underground and buried plant were recommended. The Fitzsimmons
    study assumes a start-up cost for a switch of \$150,000 and a per
    line cost of \$110. In contrast, the Commission's universal service
    proceeding has assumed corresponding costs of \$447,000 and \$83.
    The Fitzsimmons study uses a cost of capital of 12%, which is only
    slightly higher than the value of 11.25% assumed in the universal
    service context. Since a competitor would be unlikely to be able to
    obtain debt financing on the same terms as an established incumbent,
    the competitive cost of capital should perhaps reflect a higher
    proportion of equity financing or a higher cost of debt. In either
    case, the assumed value of 12% may be an underestimate of actual
    capital costs. *See* Ameritech Fitzsimmons Aff. at para. 20.

[^504]: *See* MCI WorldCom Bryant Decl. at paras. 21-22.

[^505]: GTE Reply Comments, Tab B, Reply Declaration of Francis J.
    Murphy at 7 ("based on the latest technology options, the number of
    switches required to serve the entire country \[i\]s 4,200 (or only
    22% of the current number of total switches)) (GTE Murphy Reply
    Decl.); California PUC Comments at 4 (competitors "have found it
    advantageous to have their switches serve a much larger geographic
    area than LEC switches, and most competitors in California have
    configured their networks to take advantage of those economies.").

[^506]: GTE submitted evidence to show that the HAI model (developed by
    AT&T, MCI) run with the host/remote option enabled produces a
    stand-alone fixed host switch investment of between \$315,001 and
    \$855,003 and a per-line cost between \$129 and \$124, and a fixed
    remote switch investment cost of between \$17,143 and \$385,716 and
    a per-line cost between \$120 and \$146 . GTE Comments at 43 (citing
    "An Analysis of Alternative Network Elements Available to CLECs" at
    21); The USTA UNE Report provides evidence that small scale circuit
    switches can be purchased for as little as approximately \$100,000.
    USTA UNE Report at I-29, n.66. MCI WorldCom contends that the HAI
    Model bases its results on a fixed switch investment of \$242.73 per
    line for Rocs and large independent telephone companies and a fixed
    investment of \$416.11 per line for small independent telephone
    companies, including additional variable costs per line ranging from
    \$140 to \$80 per line as the size of the switch increases. MCI
    WorldCom Comments at 51 (citing Decl. of Mark T. Bryant, at para.
    21). Ameritech's analysis adopts the Universal Service Joint Board's
    assumption that start-up switch costs total \$150,000 with an
    incremental cost of \$110 per line. Ameritech Fitzsimmons Aff. at
    20. CompTel filed an *Ex Parte* describing the costs, on average, of
    installing a circuit switch as several million dollars. *See* Letter
    from Carol Ann Bischoff, Executive Vice President and General
    Counsel, CompTel, to Lawrence E. Strickling, Chief, Common Carrier
    Bureau, Federal Communications Commission, CC Docket 96-98 (filed
    August 18, 1999) (citing Arias Affidavit at para. 5; Tidwell
    Affidavit May 26, 1999 at para 5; James Affidavit August 10, 1999 at
    para 4; Walker Affidavit at para 4.); SPR Comments at 6. *But* s*ee*
    Comments of Bell Atlantic at 2, filed in CC Docket No. 96-45; CC
    Docket No. 97-160 (filed July 23, 1999) (stating "manufacturers
    offer very large discounts on initial switch purchases, because they
    know that the carrier will be "locked in" to the same manufacturer
    for additional equipment, which can be priced at smaller discounts.
    Since the add-ons are so profitable, the competition for initial
    switch purchases is intense, and manufacturers will offer "fire
    sale" prices to win a switch replacement contract.").

[^507]: AT&T Reply Comments at 95, Tab A, Aff. of Michael R.
    Baranowski/John C. Klick/Brian F. Pitkin, at para. 67) (AT&T
    Baranowski Reply Aff.).

[^508]: *See Commission Takes Action to Reform Universal Service Support
    for Non-Rural Carriers Providing Service in High-Cost Areas and
    Commission Adopts Framework for Federal Universal Service High-Cost
    Support Mechanism; Commission Seeks Comment on the Input Values for
    the Forward-Looking Cost Model*, CC Docket Nos. 96-45; 96-262;
    97-160, FCC No. 99-17 (released May 27, 1999) 1999 WL 345534 (FCC).

[^509]: *See* Comments of Bell Atlantic at 9 filed in CC Docket No.
    96-45; CC Docket No. 97-160 (filed July 23, 1999) (stating "the
    costs per-line of a new switch is significantly below the costs of
    adding capacity to an existing switch."). *See also* Letter from
    Chuck Goldfarb, Director Law and Public Policy, MCI WorldCom to Jake
    Jennings, Special Advisor, Common Carrier Bureau, Federal
    Communications Commission, CC Docket No. 96-98 (filed September 1,
    1999) (arguing that for a 20,000 line switch the average cost per
    line is \$319 and for a 5,000 line switch the average cost per line
    is \$462.).

[^510]: Sprint estimates that if a requesting carrier deploys a switch
    capable of serving 100,000 access lines but initially only serves
    1000 access lines, the cost per line for switching is roughly \$66,
    whereas if the incumbent LEC purchases the same switch at the same
    cost but serves 50,000 lines, it would have a per-line cost of
    roughly \$4.55. Should the requesting carrier purchase a smaller
    switch, Sprint argues that if the requesting carrier served 10,000
    lines its monthly cost for switching would be roughly \$27 per line,
    roughly six times the incumbent LEC's cost of switching. Sprint
    Comments at 29-30. *See*, MCI WorldCom Comments at 51(Bryant Decl.
    at paras. 25-27).

[^511]: MCI WorldCom Comments at 51 (Citing Bryant Decl. chart 11).

[^512]: MCI WorldCom contends that at 10% percent market penetration,
    switching costs for a requesting carrier are about 132% above
    incumbent LEC switching costs but decrease to 31% above incumbent
    LEC switching costs at 30% penetration levels. *See* MCI WorldCom
    Comments at 51 (Bryant Decl. at para. 30).

[^513]: *See* Bell Atlantic Reply Comments, Tab 2, Decl. of Robert W.
    Crandall, at 9. (Bell Atlantic Crandall Reply Decl.) NTIA estimates
    that requesting carriers currently serve between 2 and 3 percent of
    all local access lines. NTIA Comments at 10 (citing Council of
    Economic Advisers, Progress Report: Growth and Competition in U.S.
    Telecommunications 1993-1998 8, 18 (February 8, 1999). *See also FCC
    Local Competition Report* (finding that local competitors have
    capture 5% of the local market).

[^514]: *See* Letter from Lori Wright, Senior Manager, Regulatory
    Affairs, MCI WorldCom, to Magalie R. Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98, July 13, 1999.

[^515]: We agree with AT&T that even if a competitor's switch can be
    used to serve customers scattered throughout a broad geographic
    area, a single switch would still lack the capacity to serve a
    significant percentage of customers in all but the most sparsely
    populated areas. AT&T Reply Comments at 97.

[^516]: TRA Comments at 36.

[^517]: Although Congress did not explicitly express a preference for
    one particular competitive strategy, it implicitly recognized that
    the purchase of unbundled network elements would, at least in some
    situations, serve as a transitional strategy until such time as
    fledgling competitors could develop a customer base and complete the
    construction of their own networks. In particular, Congress stated,
    "\[I\]t is unlikely that competitors will have a fully redundant
    network in place when they initially offer local service because the
    investment necessary is so significant. Some facilities and
    capabilities. . . will likely need to be obtained from the incumbent
    \[LEC\] as network elements pursuant to new section 251." *See*
    *Joint Explanatory Statement* at 148.

[^518]: AT&T Comments at 96, Tab E, Aff. of Michael Pfau, para. 25 (AT&T
    Pfau Aff.); California PUC Comments at 4-5; CPI Comments at 21;
    Cable & Wireless Comments at 36; CompTel Comments at 40. *See also*
    Letter from Jonathan E. Canis, Counsel for ALTS, Intermedia,
    e.spire, to Magalie R. Salas, Secretary, Federal Communications
    Commission, CC Docket No. 96-98 (filed August 27, 1999).

[^519]: *See* Letter from Carol Ann Bischoff, Executive Vice President
    and General Counsel, CompTel, to Lawrence E. Strickling, Chief,
    Common Carrier Bureau, Federal Communications Commission, CC Docket
    No. 96-98 (filed August 18, 1999)(stating that "CompTel members
    report that recent quotes from US West for cageless collocation
    average \$41,000 (compared to \$53,000 for caged collocation.)").
    BellSouth provides information that the total non-recurring cost of
    a 200 square foot collocation costs approximately \$76,000.
    BellSouth Comments at Attachment A at 1. Allegiance claims that GTE
    demanded \$508,000 for a 10 x 10 collocation cage in Santa Monica,
    California. According to Advanced TelCom, initial quotes for 10x10
    cages in U S West's territory run from \$35,000 to \$68,000 and
    \$30,000 to \$82,000 in Pacific and Nevada Bell territories. *See*
    Letter from Jonathan E. Canis, Counsel for ALTS, Intermedia,
    e.spire, to Magalie R. Salas, Esq., Secretary, Federal
    Communications Commission, CC Docket No. 96-98 (filed Aug 27, 1999).
    SBC asserts its average NRC is \$15,405 for caged collocation and
    \$10,566 for cageless collocation in Texas. *See* Letter from
    Lincoln E. Brown, Director -- Federal Regulatory, SBC, to Magalie R.
    Salas, Secretary, Federal Communications Commission, CC Docket No.
    96-98 (filed July 15, 1999). *See also* CompTel Comments at 39, Tab
    E, Aff. of Richard L. Tidwell at para. 5 (CompTel Tidwell Aff.)
    (arguing that total cost of switch installation is \$4-6 million).

[^520]: AT&T Comments at 96. See also, BellSouth Comments Attachment A
    at 1 (describing \$128,700 cost of purchasing necessary equipment
    for one collocation arrangement.).

[^521]: MCI WorldCom's collocation analysis assumes dense wire centers
    (37,500 lines) and a customer churn rate of 15-33 percent. *See*
    Letter from Lori Wright, Senior Regulatory Counsel, MCI WorldCom, to
    Magalie R. Salas, Esq., Secretary, Federal Communications Commission
    (filed July 9, 1999). We find that Ameritech's collocation model
    which assumes a non-recurring charge of \$70,000 may not be accurate
    for individual competitor collocation requests, particularly in
    dense wire centers. Ameritech Comments at 76.

[^522]: We recognize however, that the costs of collocating in a given
    central office will be spread between a requesting carriers total
    service offerings, including services other than circuit-switched
    services.

[^523]: *Advanced Services First Report and Order and FNPRM*, 14 FCC Rcd
    at 4771-94, paras. 19-60.

[^524]: AT&T Comments at 95-96; AT&T Pfau Aff. at paras. 22-23.

[^525]: *See* Letter from Carol Ann Bischoff, Executive Vice President
    and General Counsel, CompTel, to Lawrence E. Strickling, Chief,
    Common Carrier Bureau, CC Docket No. 96-98 (filed August 19, 1999)
    (CompTel August 19, 1999 *Ex Parte*) (describing "Standard Manual
    Loop/Port Migration costs of \$178.00 in Florida, \$59.91 in
    Georgia, \$67.18 in New York, \$107.63 in Illinois, \$143.15 in
    Kansas, \$123.45 in Iowa and \$218.62 in Montana).

[^526]: AT&T Reply Comments at 99.

[^527]: GTE Comments at 45-46; Bell South Comments at 58.

[^528]: MCI WorldCom Comments Tab 5, Decl. of Dennis Herold/Joseph
    Stockhausen/Ray Lathrop, at para. 6) (MCI WorldCom Herold Decl.)
    (arguing that once a decision to deploy a switch is made, it takes
    18 to 24 months to provision a Class 5 switch).

[^529]: For example, according to KMC Telecom, the standard installation
    interval for a Lucent 5ESS switch is between nine and 12 months,
    only 8 weeks of which is attributable to the delivery of the switch
    itself. *See* Letter from Carol Ann Bischoff, Executive Vice
    President, CompTel to Lawrence E. Strickling, Chief, Common Carrier
    Bureau, Federal Communications Commission, CC Docket No. 96-98
    (filed August 18, 1999) (CompTel August 18, 1999 *Ex Parte*).

[^530]: Most commenters addressing switch deployment delays describe the
    outer time boundaries for provisioning a switch. *See e.g.,* Cable &
    Wireless Comments at 36; Choice One Joint Comments at 16; CompTel
    Comments at 39, n. 89 and Tab D, Aff. of Martin J. Arias at para 5
    (switch deployment takes "up to 9 months" or even "almost two
    years.") (CompTel Arias Aff.); KMC Comments at 15; Net2000 Comments
    at 14. *See also*, Letter from Roy Choates, Senior Vice President
    Construction, KMC Telecom, to Magalie R. Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98 (filed August 12,
    1999) (describing actual provisioning interval of 9 -- 12 months for
    Lucent 5 ESS switch). The USTA UNE Report notes that switch vendors
    do not typically deliver a switch until two-and-a-half to three
    months after an order is received. USTA UNE Report at I-30 (citing
    e.spire statement of seven months from placing an order to
    deployment of switch).

[^531]: AT&T Comments at 91 (citing AT&T Pfau Aff. describing
    collocation delays of six to eight months); CompTel Comments at 40
    (citing CompTel Arias Aff. describing collocation delays of several
    months at a minimum); MCI WorldCom Reply Comments at 51 (collocation
    takes 6 months to a year). Rhythms notes that collocation represents
    the "single greatest obstacle" to providing service and that
    collocation typically takes between five and seven months to
    provision. *See* Letter from Jeffrey Blumenfeld, Counsel, Rhythms
    NetConnections, Inc., to Magalie R. Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98 (filed September 8,
    1999).

[^532]: MCI WorldCom Reply Comments at 51. MCI WorldCom estimates that
    establishing a single collocation arrangement requires approximately
    five months before the arrangement is in place. MCI WorldCom also
    argues, however, that if a requesting carrier seeks to expand the
    scope of its services by requesting collocation arrangements, the
    collocation delay amounts to several years before it can provide
    service. MCI WorldCom Herold Decl. at paras. 9-11).

[^533]: *See* Letter from Jonathan E. Canis, Counsel for ALTS,
    Intermedia, e.spire, to Magalie R. Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98 (filed August 27,
    1999) (stating that "BellSouth will accept 5 applications per
    carrier per month.").

[^534]: Ameritech Comments at 77; Bell Atlantic Reply Comments at 14;
    SBC Reply Comments at 16; US WEST Reply Comments at 44. SBC
    submitted an *Ex Parte* presentation which states that the average
    caged collocation interval in Texas is 90 days and 55-70 days for
    cageless collocation. In California, the average caged collocation
    interval is 120 days and 110 days for cageless. *See* Letter from
    Lincoln E. Brown, Director -- Federal Regulatory, SBC, to Magalie R.
    Salas, Federal Communications Commission, CC Docket No. 96-98 (filed
    July 15, 1999).

[^535]: Ameritech Reply Comments at 22.

[^536]: AT&T Comments at 91; CompTel Comments at 40; MCI WorldCom Reply
    Comments.

[^537]: *See* *supra* para. 266.

[^538]: BellSouth Comments at 61; GTE Comments at 45, n. 32; Ameritech
    Reply Comments at 29.

[^539]: AT&T Reply Comments at 105; Ameritech Reply Comments at 29
    (stating that Ameritech has, to date, provisioned 185,000 unbundled
    loops and expects to provision 117,000 additional unbundled loops by
    end of 1999).

[^540]: BellSouth argues that in April, 1999, BellSouth cutover 70% of
    loop orders within 5 minutes and over 88% were performed in 15
    minutes for a average time of 6.94 minutes. Bell South Reply
    Comments , Attachment E, Aff. of W. Keith Milner at para. 10.
    Ameritech argues that if coordinated loop cutovers are relevant to
    the impair analysis, it can accommodate any reasonably foreseeable
    demand, and its coordinated loop cutover process is not error-prone
    such that requesting carriers face service-quality impairments.
    Ameritech Reply Comments, Attachment B, Aff. of John B. Mayer at 11,
    16-29, Schedules 1, 2. This assertion does not carry more weight
    merely because it is made in a sworn affidavit; assertions regarding
    future performance are inherently unsupportable.

[^541]: In Texas, SBC is undergoing a third party test of its
    coordinated loop cutover processes by Telcordia Technologies, Inc.
    In their July, 1999 OSS report, Telcordia states that "\[e\]ighteen
    ordering types for UNE-L (loop provisioning) were tested, of which
    nine were successfully ordered and provisioned by SBC. Nine ordering
    types did not meet expectations, of which six have been selected"
    for retesting. The Public Utility Commission of Texas Southwestern
    Bell Operations Support Systems Report, Issue 1, July 1999, at Pg.
    ES-9. In New York, Bell Atlantic is undergoing a third party test of
    its coordinated loop cutover process by KPMG. In their July, 1999
    OSS report, KPMG states that Bell Atlantic technicians performing
    "disconnects and Main Distribution Frame (MDF) rewiring are not
    performing their activities in a synchronized manner at the
    requested Frame Due Time of the order and perform some portion of
    cut either late or early." KPMG Draft Final Report, July 22, 1999,
    at IV-67. *See* *also* Communications Daily, July 28, 1999 at 10
    ("Major uncorrected exceptions \[found by KPMG in NY\] include BA
    problems with meeting deadlines for "hot cuts," where BA disconnects
    loops from its own network and reconnects it to requesting carrier's
    network. BA has claimed 95% of hot cuts are performed on time and
    without service interruptions, but AT&T claims real rate is only
    75%.); Letter from Robert W. Quinn, Jr., Director -- Federal
    Government Affairs, AT&T, to Mr. Jake Jennings, Special Advisor,
    Common Carrier Bureau, Federal Communications Commission, CC Docket
    No. 96-98 (filed August 18, 1999) (citing supplemental affidavit of
    Mr. Jack Meek before the New York Department of Public Service). Mr.
    Meek's affidavit contends that for the period March 23 through July
    23 approximately 13% of BA-NY's hot cut loop orders resulted in
    errors attributable to BA-NY.

[^542]: Our insistence on actual performance -- and not future promises
    \-- of incumbent LEC compliance with our rules is not new. *See*
    Application of Ameritech Michigan Pursuant to Section 271 of the
    Communications Act of 1934, as amended, To Provide In-Region,
    InterLATA Services in Michigan, CC Docket No. 97-137, *Memorandum
    Opinion and Order*, 12 FCC Rcd 20543 (1997) (*Ameritech Michigan 271
    Order*).

[^543]: *See supra* Section IV(B)(4)(b)(iii).

[^544]: MCI WorldCom Reply at 42-46; AT&T Reply at 23-24; SBC Reply at
    3-4. Since these combinations of unbundled network elements have
    become available, competitive LECs have started offering service in
    the residential mass market in those areas. For example, in January
    of this year, Bell Atlantic, as part of an agreement with the New
    York Department of Public Service, began offering the unbundled
    network element platform out of particular end offices in New York
    City. As a result, between January 1, 1999 and May 26, 1999, MCI
    WorldCom acquired upwards of 60,000 new local residential customers.
    AT&T also plans to begin serving local residential customers over
    the platform in Texas. *See supra* Section I.

[^545]: *See, e.g*., AT&T Comment at 21-22 (stating that using unbundled
    network elements also facilitates the transition to facilities-based
    competition because it permits entrants to gather critical
    information, such as customers' calling volumes and traffic patterns
    that they need to plan their facilities' deployment); ALTS Comment
    at 20-24; MCI WorldCom Comment at 8.

[^546]: *See* CompTel Comments at 12; MCI WorldCom Comments at 8-9,
    26-27; Net2000 Comments at 2-3; Sprint Comments at 16-19.

[^547]: Ameritech Comments at 5-6, 84; Bell Atlantic Comments at 23;
    BellSouth Comments at 56; SBC Comments at 42; GTE Comments at 39;
    USTA Comments at 34; US WEST Comment at 44.

[^548]: *See*, *e.g.,* Cable & Wireless Comments at 36; KMC Comments at
    15; Net2000 Comments at 13; Sprint Comments at 31; Qwest Comments at
    70; AT&T Comments at 86.

[^549]: *See* Letter from Chuck Goldfarb, Director, Law and Public
    Policy MCI WorldCom, to Lawrence E. Strickling, Chief, Common
    Carrier Bureau, Federal Communications Commission, CC Docket No.
    96-98, at 4 (filed August 9, 1999) (concluding that the top 29 MSAs
    should define the geographic scope of an incumbent LEC's local
    circuit switch unbundling obligation); Letter from Christopher M.
    Heimann, Director of Legal Affairs, Ameritech, to Magalie R. Salas,
    Secretary, Federal Communications Commission, CC Docket No. 96-98
    (filed September 7, 1999) (stating that Ameritech "would not oppose
    an MSA approach pursuant to which ULS and the UNE platform would not
    be made available in the top 100 MSAs in the United States.");
    CompTel August 19,1999 *Ex Parte* (arguing that local circuit
    switching should not be unbundled in density zone 1 within the
    highest density MSAs); Letter from Kathleen B. Levitz, Vice
    President -- Federal Regulatory, BellSouth, to Ms. Magalie R. Salas,
    Secretary, Federal Communications Commission, CC Docket No. 96-98
    (filed July 29, 1999)(proposing that local circuit switching should
    not be unbundled in zones 1 and 2 or in rate exchange areas served
    by one of more CLEC switches).

[^550]: *See* Letter from Robert W. Quinn, Jr., AT&T, to Mr. Lawrence
    Strickling, Chief, Common Carrier Bureau, Federal Communications
    Commission, CC Docket No. 96-98 (filed August 19, 1999) (AT&T August
    19, 1999 *Ex Parte*) (arguing AT&T would be impaired if local
    circuit switching is not unbundled in MSAs 36-100); Letter from
    David Scott, Birch Telecom, to Jake E. Jennings, Special Advisor,
    Common Carrier Bureau, Federal Communications Commission, CC Docket
    No. 96-98 (filed September 8, 1999) (opposing attempts to restrict
    the availability of unbundled local circuit switching); Letter from
    Melissa Newman, Vice President -- Federal Regulatory U S WEST, to
    Magalie R. Salas, Secretary, Federal Communications Commission, CC
    Docket No. 96-98 (filed August 18, 1999) (opposing MCI's MSA
    approach);

[^551]: 47 C.F.R. § 69.123 of the Commission's rules define the
    parameters for the establishment of density pricing zones that allow
    price-cap LECs to charge geographically deaveraged rates for
    switched transport services. Density zone 1 is the geographic area
    with the highest access line density and amount of traffic volume.

[^552]: An MSA is made up of a county or group of contiguous counties
    surrounding a city with a population of 50,000 or more. The Office
    of Management and Budget defines MSAs for use in federal statistical
    activities pursuant to 44 U.S.C. § 3504(d)(3) and 31 U.S.C. §
    1104(d). Presently, there are 258 MSAs in the United States.

[^553]: *See* Letter from Chuck Goldfarb, Director, Law and Public
    Policy MCI WorldCom to Larry Strickling, Chief, Common Carrier
    Bureau, Federal Communications Commission, at Page 4, CC Docket No.
    96-98 (filed August 9, 1999) (Top 29 MSAs); AT&T August 19, 1999 *Ex
    Parte* (Top 35 MSAs); Letter from Christopher M. Heimann, Director
    of Legal Affairs, Ameritech, to Magalie R. Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98 (filed September 7,
    1999) (analysis of top 100 MSAs).

[^554]: USTA UNE Report at I-1.

[^555]: USTA UNE Report at I-11 ("Rate Exchange Areas in top 50 MSAs
    Where CLECs Have Obtained NXX Codes"). We recognize also that
    requesting carrier switches may serve more than one rate exchange
    area. *See* USTA UNE Report at I-23 ("According to the March 1999
    LERG, the average CLEC switch in BOC and GTE territory has NXX codes
    for 14 rate exchange areas.").

[^556]: USTA UNE Report at I-11 ("Rate Exchange Areas in top 50 MSAs
    Where CLECs Have Obtained NXX Codes"). We note that the remainder of
    the switches if evenly deployed throughout MSAs 50-200 would result
    in no MSA having more than 2 requesting carrier switches in an MSA.
    For example, the USTA UNE Report states that there are 12
    competitive LEC switches in New York, 23 competitive LEC switches in
    Washington, D.C., 19 competitive LEC switches in Atlanta, 11
    competitive LEC switches in Seattle and 12 competitive LEC switches
    in Denver.

[^557]: *See* USTA UNE Report at I-11.

[^558]: *See* USTA Comments, Tab 3, Map 1 (overlaying borders of top 50
    MSAs to CLEC switches; Source: March 1999 LERG). CompTel also
    submitted the following data to describe competitive LEC operations
    in the top 50 MSAs. Where carriers obtain unbundled loops, they are
    providing service with their own switch. In the New York MSA, there
    are 2,154,569 business lines and the incumbent LEC has provisioned
    49,442 unbundled loops resulting in a market share for all
    competitive LECs of 2.2 percent. In the Los Angeles MSA, there are
    2,149,360 business lines and the incumbent LEC has provisioned
    46,561 unbundled loops resulting in a market share of 2.1 percent.
    In the Chicago MSA, there are 2,068,118 business lines and the
    incumbent LEC has provisioned 20,469 unbundled loops resulting in a
    market share of 1.0 percent. In the Washington, D.C. MSA, there are
    1,657,658 business lines and the incumbent LEC has provisioned 3,391
    unbundled loops resulting in a market share of .2 percent. In the
    Boston MSA, there are 1,355,657 business lines and the incumbent LEC
    has provisioned 3,098 unbundled loops resulting in a market share of
    .2 percent. *See* CompTel August 19, 1999 *Ex Parte*.

[^559]: *See* Letter from Melissa Newman, Vice President -- Federal
    Regulatory, US WEST, to Magalie R. Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98 Attachment A (filed
    August 18, 1999) (US WEST August 18, 1999 *Ex Parte*).

[^560]: *See* Letter from Christopher M. Heimann, Director of Legal
    Affairs, Ameritech to Magalie R. Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98 (filed September 7,
    1999) (Ameritech September 7 *Ex Parte*).

[^561]: *See* *supra* Section (V((D)(1).

[^562]: *Id.*

[^563]: *Id.*

[^564]: 47 C.F.R. § 69.123. Incumbent LECs generally proceed through a
    three-step process to assign central offices to density zones within
    a given study area. In the first step, an incumbent LEC ranks its
    wire centers in order of decreasing traffic density, based on some
    measure of density chosen by the incumbent LEC. In the second step,
    the incumbent LEC sets breakpoints within the zone density ranking
    to partition the wire centers into zones, and finally, an incumbent
    LEC further adjusts the zones as it sees fit, based on geographic
    contiguity or community of interest reasons. See *Expanded
    Interconnection Order*, 7 FCC Rcd at 7454-55, para. 179; 47 C.F.R. §
    61.38(b)(4). See also *Access Charge Reform*, CC Docket No. 96-262,
    Fifth Report and Order and Further Notice of Proposed Rulemaking,
    1999 WL 669188, (rel. August 5, 1999). *See* Letter from Kathleen B.
    Levitz, Vice President -- Federal Regulatory BellSouth, to Magalie
    R. Salas, Secretary, Federal Communications Commission, CC Docket
    No. 96-98 (filed July 28, 1999) (Incumbent LEC Joint *Ex Parte*)
    (96% of Zone 1 wire centers served by one or more CLEC switches; 84
    % of Zone 2 wire centers served by one or more CLEC switches).

[^565]: BellSouth Comments at Attachment D.

[^566]: *See* BellSouth Comments at 59. Specifically, in Atlanta,
    competitive LECs have deployed 20 switches in zone 1; in Miami, 13
    switches in zone 1; in Orlando, 9 switches in zone 1; in Charlotte,
    9 switches in zone 1; in New Orleans, 7 switches in zone 1; in
    Nashville, 7 switches in zone 1; and in Greensboro, 2 switches in
    zone 1.

[^567]: *See GTE Service Corporation Revised Zone Density Pricing Plan*,
    Order, 10 FCC Rcd. 5696, 5697 para. 7 (1995); BellSouth
    Telecommunications Inc., GTE Service Corporation, Lincoln Telephone
    and Telegraph Co. NYNEX Telephone Companies, Pacific Bell, and
    Rochester Telephone Corporation Zone Density Pricing Plans, Order, 8
    FCC Rcd 4443, 4446, para. 8 (1993) (*First Zone Density Order*).

[^568]: *See* *Expanded Interconnection Order*, 7 FCC Rcd at 7454-55,
    para 179; 47 C.F.R. § 61.38(b)(4). MCI WorldCom notes that it is
    unaware of any zone density plan that has been found unreasonable.
    Letter from Chuck Goldfarb, Director, Law and Public Policy, MCI
    WorldCom to Larry Strickling, Chief, Common Carrier Bureau, Federal
    Communications Commission (filed August 9, 1999).

[^569]: MCI WorldCom argues that where a requesting carrier plans to
    purchase unbundled switching, the incumbent LEC could change its
    methodology for ranking central office traffic density in such a way
    that the central office changed zones, and the incumbent LEC was no
    longer required to offer switching to requesting carriers. MCI is
    further unaware of any incumbent LEC methodology or zone plan that
    has ever been found unreasonable. *See* MCI WorldCom August 9 *Ex
    Parte*.

[^570]: *See* CompTel August 19 *Ex Parte* (supporting use of density
    zone 1 as they existed on January 1, 1999 in top MSAs.).

[^571]: As previously noted, MCI WorldCom contends that at 10% percent
    market penetration, switching costs for a requesting carrier are
    about 132% above incumbent LEC switching costs but decrease to 31%
    above incumbent LEC switching costs at 30% penetration levels. *See*
    MCI WorldCom Comments at 51 and MCI WorldCom Bryant Decl. at para.
    30).

[^572]: ALTS Comments at 62.

[^573]: In Texas, SBC compares a \$21 monthly loop cost and a \$29 EEL
    cost which does not include approximately \$40 per month of distance
    sensitive transport costs (assuming 8 miles from the SBC central
    office to collocation cage). SBC further assumes that requesting
    carriers incur on average a \$15,405 non-recurring charge for
    collocation and a \$995 recurring charge per month for collocation.
    Thus, under SBC's cost analysis, it would take a requesting carrier
    a matter of months before the recurring EEL and transport costs are
    greater than the up-front collocation expenses. *See* Letter from
    Lincoln E. Brown, Director - Federal Regulatory, SBC, to Magalie R.
    Salas, Secretary, Federal Communications Commission, CC Docket No.
    96-98 (filed July 15, 1999).

[^574]: *See* *Advanced Services Memorandum Opinion and Order and NPRM*,
    13 FCC Rcd at n. 80 ("The local competition that has developed has
    focused on larger business customers in large cities, not on
    residential or small business customers."). *See also* Trends in
    Telephone Service, Industry Analysis Division, Common Carrier
    Bureau, Federal Communications Commission, September 1999, at
    Section 9-1.

[^575]: USTA UNE Report at I-10-I-19 & App. A. *See also* Ameritech
    Comments at 73-79; AT&T Reply Comments at 104; BellSouth Comments at
    58-59; GTE Comments at 40-42, 46-47; SBC Comments at 36, 38; US WEST
    Comments at 42-43.

[^576]: *See Application of WorldCom, Inc. and MCI Communications
    Corporation for Transfer of Control of MCI Communications
    Corporation to WorldCom, Inc*., Memorandum Opinion and Order, 13 FCC
    Rcd 18025, at paras. 24-26 (1998) ("we identify two distinct product
    markets, reflecting customers groups with different patters of
    demand: (1) residential customers and small business (mass market);
    and (2) medium-sized and large business customers (larger business
    market).").

[^577]: *See Access Charge Reform*, CC Docket No. 96-262 et al., First
    Report and Order, 12 FCC Rcd 15982 (1997) (Access Charge Reform
    Order), aff\'d sub nom. Southwestern Bell Tel. Co. v. Fed.
    Communications Comm\'n, \_\_\_ F.3d \_\_\_ (8th Cir., Aug. 19,
    1998); Order on Reconsideration, 12 FCC Rcd 10119 (1997), Second
    Order on Reconsideration and Memorandum Opinion and Order, 12 FCC
    Rcd 16606 (1997) (distinguishing between primary residences, single
    line business and multi-line business customers).

[^578]: *See supra* para. 268*.* We note that for medium and large
    business customers in dense wire centers, many requesting carriers
    serve these customers with their own SONET rings and thus incur no
    additional hot cut costs, delays or service quality impairments.

[^579]: For example, coordinated cutovers that do not occur during
    normal business hours may not disrupt the operations of a business
    customer.

[^580]: For example, a competitive LEC may use a sales force instead of
    mass market advertising to control the demand for its services and
    thus the number of coordinated cutovers required to serve its
    customers.

[^581]: In Ameritech's territory, the market segment for business
    customers with three lines or less accounts for approximately 72
    percent of Ameritech's business customer base. *See* Letter from
    James K. Smith, Director, Federal Relations, Ameritech, to Magalie
    R. Salas, Secretary, Federal Communications Commission, CC Docket
    No. 96-98 (filed September 8, 1999)("Ameritech Business Customer
    Base by Line Size").

[^582]: Furthermore, requesting carriers and incumbent LECs have
    developed routine provisioning processes to deploy the EEL using the
    ASR or Access Service Request process, and thus requesting carriers
    will not face material provisioning delays and costs to integrate
    the EEL into their networks.

[^583]: *See* Letter from Jonathan E. Canis, Counsel for ALTS,
    Intermedia, e.spire, to Magalie R. Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98 (filed August 27,
    1999).

[^584]: AT&T Reply Comments at 104 ("AT&T's two 5ESS switches in Dallas
    . . . are not being used 'to reach . . . as much as 98 percent . . .
    of the addressable business and residential market' as GTE claims is
    the case. \[citations omitted\]. Rather, those switches like AT&T's
    DMS-100 in Washington, D.C. are being used to offer service to
    business customers. The same is true for each of AT&T's local
    switching in other markets, such as Los Angeles, Denver, Detroit and
    Tampa.").

[^585]: *Local Competition First Report and Order*, 11 FCC Rcd. at
    15713, para. 427.

[^586]: *Notice* at para 35.

[^587]: SBC Reply Comments at 26-27, 74, 76-77; US WEST Comments at
    57-58; BellSouth Comments at 32-33; Bell Atlantic Comments at 40.
    *See also* Ameritech Comments at 118; GTE Comments at 73 (Incumbent
    LECs should not have to unbundle packet switches because CLECs and
    cable companies lead in the deployment of such services.).

[^588]: Allegiance Comments at 16; Cable & Wireless Comments at 4; Covad
    Comments at 6; GSA Comments at 6; KMC Comments at 25-26; Net2000
    Comments at 130; Qwest Reply Comments at 66.

[^589]: US WEST Comments at 56, n. 122.

[^590]: *See US WEST v. Federal Communications Commission*, Order No.
    98-1410 (D.C. Cir. Aug. 25, 1999).

[^591]: *See* Comments Requested in Connection with Court Remand of
    August 1998 Advanced Services Order, *Public Notice*, CC Docket Nos.
    98-11, 98-26, 98-32, 98-78, 98-91, 98-147 (rel. September 9, 1999).

[^592]: *Advanced Services Memorandum Opinion and Order and NPRM*, 13
    FCC Rcd at 24032, at para. 40.

[^593]: With packet switching, the packet switches place data units on
    inter-switch trunks only when there are active communications
    between network users. When users are not sending each other
    messages or packets, no bandwidth is used on the trunks between
    packet switches. By contrast, with voice connections between circuit
    switches, when both users are silent, the digital trunks carry
    digitally encoded silence. Inter-switch bandwidth is required even
    when no information is being exchanged.

[^594]: *Local Competition First Report and Order*, 11 FCC Rcd. at
    15633, para. 262.

[^595]: ALTS Reply Comments at 57.

[^596]: CompTel Comments at 37-38; Qwest Reply Comments at 66.

[^597]: CompTel proposed a definition that includes the "assembling,
    disassembling, addressing, conversion or routing of digital
    information in packet form. The packet switching capability network
    element shall include all features, functions and capabilities of
    the packet switching and/or routing devices." CompTel Comments,
    Appendix A at 5.

[^598]: e.spire Joint Comments at 30-31.

[^599]: *See* MGC Comments at 21; Net2000 Comments at 13-14; Rhythms
    Comments at 19; TRA Comments at 12.

[^600]: USTA UNE Report at VI-1 to 8. *706 Report*, 14 FCC Rcd at 2398.
    In the *706 Report*, we concluded that incumbents and competitive
    carriers alike have made tens of billions of dollars of investment
    in broadband facilities. Incumbent LECs alone have announced plans
    to offer broadband, xDSL services to approximately twenty million
    homes in 1999. *706 Report*, 14 FCC Rcd at 2419-20, para 42.

[^601]: *See* *706 Report*, 14 FCC Rcd at 2423-24, para. 48. *See also*
    Comments of GTE at 74.

[^602]: Rhythms Comments at 1 ("By the end of 1999, Rhythms plans to
    collocate networking equipment in at least 1,000 central offices and
    be operational in 33 metropolitan markets.").

[^603]: Covad Comments at 2 ("Covad's planned network deployment by the
    end of 1999 will cover 51 MSAs, more than 25% of the nation's homes
    and businesses").

[^604]: NorthPoint Comments at 2 ("In the past year alone, for example,
    NorthPoint has begun offering service in 17 new markets in the
    United States, including San Francisco, New York, Chicago,
    Pittsburgh and Cleveland."). *See also* Letter from John J.
    Heitmann, Counsel for Intermedia/e.spire to Magalie R. Salas,
    Secretary, Federal Communications Commission (filed July 21, 1999).
    ("e.spire has deployed 66 data switches nationwide and Intermedia
    has deployed 175 data switches").

[^605]: NorthPoint Launches DSL Service in the Twin Cities; Offering the
    Speediest Business-Class DSL Service Around, August 3, 1999
    \<\<http://www.northpoint.net/press/press_990803.html\>\>.
    NorthPoint Brings DSL Internet Access to Baltimore, PRNewswire,
    March 30, 1999.

[^606]: *Qwest Launches Digital Subscriber Line Service,* Cambridge
    Telecom Report, August 1, 1999 available at 1999 WL 8103900.

[^607]: Telephony, Communications Daily, July 15, 1999, at 11.

[^608]: Telephony, Communications Daily, June 8, 1999, at 10.

[^609]: Northpoint Comments at 18-19 (stating that when competitive LECs
    have access to loops and collocation, any competitive LEC can
    provide the necessary infrastructure, *i.e*. DSLAMs and packet
    switches); Rhythms Comments at 26 (stating that incumbent LECs "must
    make their DSLAMs available on an unbundled basis when advanced
    service providers are unable to access a full clean copper loop.");
    Ohio PUC Comments at 15.

[^610]: *See* ITIC Comments at 6-7 ("ILECs' competitors can acquire and
    install equipment for advanced services on a relatively equal
    footing with the incumbent LECs. The relevant electronic equipment
    is produced by numerous vendors, establishing a competitive
    equipment market that can effectively discipline prices,
    provisioning and other service terms for the foreseeable future.").

[^611]: *See supra* Section (V(D)(1).

[^612]: *See supra* Section IV.

[^613]: *See* NorthPoint Comments at 14-15.

[^614]: e.spire/Intermedia Comments at 29.

[^615]: *See* Letter from John J. Heitmann, Counsel for
    Intermedia/e.spire, to Magalie R. Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98 (filed July 21, 1999)
    *(Frame Relay and Data UNEs Ex Parte*).

[^616]: *Id.*

[^617]: *See* Ohio PUC Comments at 14-15; Covad Comments at 40;
    Northpoint Comments at 19; Rhythms Comments at 15-16.

[^618]: Level 3 Comments at 23; NorthPoint Comments at 18-19; Rhythms
    Comments at 27.

[^619]: BellSouth Comments at 32-33; Bell Atlantic Comments at 43-45; U
    S WEST Comments at 57-58; SBC Comments at 74. We note that incumbent
    LECs made similar claims in response to our *Notice* in the Advanced
    Services docket. *See Advanced Services Memorandum Opinion and Order
    and NPRM*, 13 FCC Rcd 24012.

[^620]: See US West at
    [http://www.uswest.com/about/communicator/vol2no1/7.html]{.underline}
    (US WEST launched ADSL service in 40 in-region metropolitan areas
    during the first half of 1998).

[^621]: See BellSouth Rolls Out ADSL to ISP, CLEC, & IXCs, RBOC Update,
    Oct. 1, 1998.

[^622]: *See* Telephony, Communications Daily, Jan. 13, 1998. See also,
    *Bell Atlantic and SBC Push Merger Plans to Analysts*,
    Communications Daily, Nov. 17, 1998.

[^623]: See Bell Atlantic to Offer Special ADSL Service for AOL, Comm.
    Daily, November 17, 1998 at 1.

[^624]: See Communications Daily, July 21, 1999.

[^625]: See *Advanced Services Memorandum Opinion and Order and NPRM*,
    13 FCC Rcd at 24054-63 paras. 92-115. Furthermore, it is widely
    believed that incumbent LECs' recent moves to offer broadband to
    residential customers are primarily a reaction to other companies'
    entry into broadband. In the 706 proceeding, U S West noted that
    when cable television-based broadband was available in three cities
    it served, it announced competing service in 14 states and 43
    cities. Reply Comments of U S West Communications, Inc. filed in CC
    Docket No. 98-147, at 6 n. 9.

[^626]: The Commission emphasized the need for caution by regulators
    when it stated "we need to be particularly careful about any action
    we take to promote broadband deployment, given the nascent nature of
    the residential market for broadband. At this time, the dimensions
    of broadband and the upper limits of market-based supply and demand
    are unclear." *Advanced Services First Report and Order and FNPRM*,
    14 FCC Rcd. at 2436-37, para. 74.

[^627]: *Local Competition First Report and Order*, 11 FCC Rcd at 15717,
    para. 439. See also *Third Reconsideration Order*, 12 FCC Rcd at
    12475, para. 25.

[^628]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15717-18, para. 439.

[^629]: *Id.* at 15722, para. 450. Dark fiber is deployed fiber optic
    cable connecting two points within the incumbent LEC's network. It
    is "dark" because it does not have electronics on either end of the
    dark fiber segment to energize it to transmit a telecommunications
    service.

[^630]: *Notice* at para. 33.

[^631]: *Id*.

[^632]: *Id.* at para. 34.

[^633]: Ameritech Comments at 88; Bell Atlantic Comments at 30;
    BellSouth Comments at 53; GTE Comments at 10, 59; SBC Comments at
    50.

[^634]: Ad Hoc Comments at 3; Cable & Wireless Comments at 37-38; Choice
    One Joint Comments at 14, 18; CoreComm Comments at 25; Excel
    Comments at 4; KMC Comments at 12, 15; ; MGC Comments at 2, 9, 21;
    NorthPoint Comments at 19; Net2000 Comments at 10,14; Prism Comments
    at 17; TRA Comments at 12,15;

[^635]: Connecticut DPUC Comments at 4; Florida PSC Comments at 11;
    Illinois Commission Comments at 13; Iowa Comments at 6-7; Kentucky
    PSC Comments at 2; Oregon PUC Comments at 2; Texas PUC Comments at
    14.

[^636]: *Local Competition First Report and Order*, 11 FCC Rcd at 15718,
    para. 440.

[^637]: *Id.*

[^638]: Incumbent LECs often deploy equipment such as the NEC RC-28D,
    Lucent DDM2000 and GR-303 to provide capacity-related services.
    *See* BellSouth Comments, Attachment A at 1.

[^639]: For example, in Atlanta, Allegiance argues that the sole
    alternative transport network serves only three incumbent LEC
    central offices and that the provider is unwilling or unable to
    provision sufficient bandwidth to meet Allegiance's requirements.
    Allegiance Comments at 19. *See also* Covad Comments at 47
    (requesting that the Commission recognize that interoffice bandwidth
    is not unlimited and given Covad's bandwidth requirements, there
    will be an insufficient supply of interoffice transport if an
    incumbent LEC is no longer required to unbundle transport); CompTel
    Comments at 42 (requesting unbundled access to high-capacity or
    packet transport services.)

[^640]: Sprint Comments at 38.

[^641]: *Local Competition First Report and Order*, 11 FCC Rcd at 15722,
    para. 451.

[^642]: *See* *supra* Section (V)(A)(2).

[^643]: Choice One Joint Comments at 25; CO Space Comments at 2; KMC
    Comments at 21.

[^644]: *See, e.g.,* Petition for Arbitration of an Interconnection
    Agreement Between AT&T Communications of the Pacific Northwest, Inc.
    and GTE Northwest, Incorporated, Washington UTC Docket No.
    UT-960307, Commission Order Approving Interconnection Agreement, at
    19-20 (1997) ("As a form of spare capacity, "dark" fiber is not
    fundamentally different than "dead" copper."). *See also* Comments
    of CO Space at 12, (citing a New Hampshire commission finding that
    "the fact that dark fiber is not currently used in the provision of
    service to customers for a fee does not distinguish itself from
    other network elements.") (citation omitted).

[^645]: Illinois Commission Comments at 10; Iowa Comments at 9; GSA
    Comments at 7,10; Cable and Wireless Comments at 34; CO Space
    Comments at 7; Waller Creek Comments at 17; *See also* Texas
    Commission Comments at 16; KMC Comments at 21.

[^646]: 47 U.S.C. § 3(29) provides that: "The term 'network element'
    means a facility or equipment used in the provision of a
    telecommunications service. Such term also includes features,
    functions, and capabilities that are provided by means of such
    facility or equipment, including subscribers numbers, databases,
    signaling systems, and information sufficient for billing and
    collection or used in the transmission, routing, or other provision
    of a telecommunications service." 47 U.S.C. § 3(29). *See also,*
    *Local Competition First Report and Order,* 11 FCC Rcd at 15631,
    para. 258.

[^647]: *Iowa Utils. Bd.,* 119 S. Ct. at 731.

[^648]: CO Space Comments at 3 (and cases cited therein).

[^649]: *See* CO Space Reply Comments at 3 (and cases cited therein).

[^650]: GTE Comments at 64, 80; US WEST Comments at 39-40; Bell Atlantic
    Reply Comments at 31.

[^651]: *MCI Corp.: Petition for Arbitration Pursuant to Section 252(b)
    of the Telecomms. Act of 1996 to Establish an Interconnection
    Agreement with Central Tel. Co. of Ill*., 96 AB-009, 1997 Ill. PUC
    LEXIS 61, at \*7 (Feb. 5, 1997) (emphasis added).

[^652]: *See, e.g.,* "As a form of spare capacity, "dark" fiber is not
    fundamentally different than "dead" copper." In the matter of the
    Petition for Arbitration of an Interconnection Agreement Between
    AT&T Communications of the Pacific Northwest, Inc. and GTE
    Northwest, Incorporated, Washington UTC Docket No. UT-960307,
    Commission Order Approving Interconnection Agreement, at 19-20
    (1997).

[^653]: 47 U.S.C. § 153(29).

[^654]: *Ameritech Michigan 271 Order*, 12 FCC Rcd at 20601-02, para.
    110.

[^655]: Id.

[^656]: GTE Comments at 64.

[^657]: Id.

[^658]: 47 U.S.C. § 13(29). We address incumbent LEC concerns about
    their special need for fiber reserves below. *See* *infra* Section
    V.E.2.

[^659]: The Commission reaffirmed this conclusion in the *Local
    Competition* *Third Reconsideration Order,* 12 FCC Rcd at
    12480-12481, para 32.

[^660]: In 1985, New York state regulators granted Teleport authority to
    provide interoffice services in New York City. See Case 28891,
    *Teleport Communications* (NYDPS Jan., 7, 1985).

[^661]: Among the competitors with the most extensive fiber networks are
    AT&T, MCI, Sprint, Qwest, Level 3, Enron, MFN, Williams, Frontier,
    IXC, NEXTLINK, Intermedia, Hyperion, RCN, GST, ICG, Electric
    Lightwave and e.spire. *See* *USTA UNE Report* at II.

[^662]: *USTA UNE Report* Appendix B at II-6.

[^663]: Id.

[^664]: *Id.*

[^665]: The *USTA UNE Report* argues that there is a close correlation
    between collocation and the presence of competitive fiber facilities
    in these dense wire centers. *USTA UNE Report* at I-8.

[^666]: USTA UNE Report at II-20.

[^667]: *Id.*

[^668]: *Id.* at II-8.

[^669]: *See* Letter from Dee May, Federal Regulatory - Bell Atlantic,
    to Magalie R. Salas, Secretary, Federal Communications Commission,
    Docket 96-98 (filed July 13, 1999).

[^670]: *See* MCI WorldCom August 13, 1999 *Ex Parte*.

[^671]: Letter from Chuck Goldfarb, Director Law and Public Policy MCI
    WorldCom, to Larry Strickling, Chief, Common Carrier Bureau, Federal
    Communications Commission, CC Docket No. 96-98 (filed August 16,
    1999). MCI WorldCom contends that this level of collocation
    evidences an "astonishingly small amount of transport competition."
    *Id.*

[^672]: Letter from A. Richard Metzger, Jr., attorney for NorthPoint
    Communications, to Magalie R. Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98 (filed August 13,
    1999) (NorthPoint submits data that in Atlanta, the incumbent LEC is
    the only transport alternative for 78% of COs where it is
    collocated. In the San Francisco metropolitan area, the incumbent
    LEC is the sole transport provider in 70% of COs where it is
    collocated. In New York, the number is 75%; Chicago, 71%, Los
    Angeles, 77% and Seattle, 73%. ). MCI WorldCom submitted an *Ex
    Parte* showing that out of approximately 20,000 incumbent LEC
    central offices nationwide, there are two end offices with five
    competitor collocations; 28 end offices with four competitor
    collocations and 63 end offices with three competitor collocations
    offering competitive transport. *See* Letter from Chuck Goldfarb,
    Director Law and Public Policy MCI WorldCom to Larry Strickling,
    Chief, Common Carrier Bureau, Federal Communications Commission, CC
    Docket No. 96-98 (filed August 13, 1999.).

[^673]: Sprint Comments at 32-33.

[^674]: As discussed above, we recognize that the Commission has
    established a framework for incumbent LEC pricing flexibility in
    areas where competition for dedicated transport and most special
    access services has developed. Competition evidenced by the
    satisfaction of certain triggers, to the extent they are met,
    however, does not demonstrate that a requesting carrier is not
    impaired without access to unbundled dedicated transport. The
    Commission's pricing flexibility rules provide for flexibility where
    one requesting carrier is collocated in a serving wire center. These
    rules allow incumbent LECs to meet competitive transport entry with
    pricing flexibility. They do not, however, describe market
    conditions where requesting carriers would not be impaired without
    access to unbundled transport. Furthermore, even in those areas
    where competition for special access services is present and where,
    presumably the triggers for pricing flexibility have been met, the
    price differentials between TELRIC-priced transport and special
    access may persist for an indefinite period of time because the
    differential between unbundled transport and retail special access
    services are significant. According to one commenter, in the San
    Francisco Bay Area, PacBell's monthly access charge for a DS3
    special access service is more than 50% higher than unbundled
    transport. In New York City, Bell Atlantic's monthly DS3 tariff rate
    is 258% higher than the comparable unbundled network element
    transport rate. In Miami, BellSouth's DS3 tariff rate is 353% higher
    than comparable unbundled network element interoffice transport
    rates. *See* Covad Comments at 45, Attachment 3, Aff. of Mark
    Shipley and David Rauschenberg, at para. 22-23.

[^675]: USTA UNE Report at II-8.

[^676]: *Id.*

[^677]: GTE Comments at 10, 59 (stating that the Commission should not
    unbundle transport in wire centers with 15,000 or more access lines
    and the presence of one or more collocation arrangements); Ameritech
    Comments at 88 (stating that the Commission should not unbundle
    dedicated transport in dense wire centers with one or more
    collocation arrangements); SBC Comments at 50 (stating that the
    Commission should not unbundle dedicated transport in dense wire
    centers with one or more collocation arrangements); BellSouth
    Comments at 53 (stating that the Commission should not require
    unbundling of dedicated transport in Zone 1 and Zone 2); Bell
    Atlantic Comments at 30 (stating that the Commission should not
    require unbundling of dedicated transport in any area here at least
    one carrier has deployed its own network and there is the presence
    of one collocation arrangement); US WEST Comments at 48 (stating
    that the Commission should establish a presumption that incumbent
    LECs do not have to unbundle transport to or from wire centers with
    20,000 or more loops and have one or more collocation arrangements).

[^678]: *USTA UNE Report* at II-6. Covad states that it is dependent on
    incumbent LEC inter-office transport for 83 percent of its transport
    requirements and that it has a choice of transport providers for
    less than 7 percent of its collocation facilities. Covad Comments at
    44. AT&T argues that it purchases 82% of its dedicated transport
    requirements from incumbent LECs because competitive offerings are
    not ubiquitously available. AT&T Comments at 122.

[^679]: Letter from Robert Shanahan, Vice President, New England Voice &
    Data, to Magalie R. Salas, Secretary, Federal Communications
    Commission, Docket 96-98 (filed July 15, 1999) (describing
    Manchester, N.H. to Nashua, N.H. fiber buildout and increase of 11
    miles over incumbent LEC's route if a competitive transport
    alternative is selected).

[^680]: See supra Section (IV)(B)(4).

[^681]: *See* Letter from Susanne Guyer, Assistant Vice President, Bell
    Atlantic, to Magalie R. Salas, Esq., Secretary, Federal
    Communications Commission, CC Docket No. 96-98 (filed August 25,
    1999) (Bell Atlantic August 25 *Ex Parte*); Letter from Kathleen B.
    Levitz, Vice President -- Federal Regulatory, BellSouth, to Magalie
    R. Salas, Esq., Secretary, Federal Communications Commission, CC
    Docket No. 96-98 (filed August 16, 1999) (BellSouth August 16, 1999
    *Ex Parte*).

[^682]: *See* Bell Atlantic August 25, 1999 *Ex Parte.*

[^683]: *See* BellSouth August 16, 1999 *Ex Parte.*

[^684]: We note that, in addition, Bell Atlantic, Intermedia, Allegiance
    and Time Warner argue, in a joint *Ex Parte* filing, that the
    Commission should establish a limitation on loop transport
    combinations to prevent substitution of special access service for
    unbundled loop transport combinations in this segment of the
    transport market. Letter from Edward D. Young, Associate General
    Counsel, Bell Atlantic, Heather B. Gold, Vice President, Industry
    Policy, Intermedia Communications, Robert W. McCausland, Vice
    President, Regulatory and Interconnection, Allegiance Telecom, Inc.,
    Don Shepheard, Vice President, Federal Regulatory, Time Warner
    Telecom, to Honorable William E. Kennard, Chairman, Federal
    Communications Commission, CC Docket No. 96-98 (filed September 2,
    1999). ALTS agrees and supports excluding entrance facilities from
    an incumbent LEC's transport obligation where a given point-to-point
    route does not meet the impair standard. Letter from Jonathan Askin,
    Vice President, ALTS, to Magalie R. Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98 (filed September 3,
    1999).

[^685]: Bell Atlantic Comments at 31-32; GTE Comments at 82; US WEST
    Comments at 39-40. These carriers argue that the evidence of
    competitively deployed fiber has created a "wholesale market" for
    dark fiber.

[^686]: Bell Atlantic Comments at 31; BellSouth Comments at 51; GTE
    Comments at 61.

[^687]: *See* Letter from Kathleen B. Levitz, Vice President-Federal
    Regulatory, BellSouth to Jake Jennings, Special Advisor, Common
    Carrier Bureau, Federal Communications Commission, CC Docket No.
    96-98 (filed July 22, 1999).

[^688]: AT&T Comments at 122; CompTel Comments at 42; ALTS Comments at
    51.

[^689]: AT&T Reply Comments at 128; Covad Comments at 44-45; Waller
    Creek Reply Comments at 11.

[^690]: For Example, New England Voice & Data argues that substituting
    lit OC-48 fiber for unbundled dark fiber would result in a material
    decrease in the reliability of its network because it would
    introduce three additional multiplexers, and thus three additional
    potential points of failure, at each collocation. In addition, New
    England Voice & Data claims that if it were required to purchase lit
    transport, New England Voice & Data's control and management of its
    interconnection links would become totally dependent upon incumbent
    LECs. In contrast, if New England Voice & Data is able to obtain
    access to unbundled dark fiber, it installs its own multiplexers to
    complete its SONET ring architecture and therefore controls its own
    provisioning, surveillance and repair. Thus, according to New
    England Voice & Data, substituting lit fiber for unbundled dark
    fiber in the interoffice transport segment of the network prevents
    it from installing a highly reliable SONET ring architecture to
    offer ring-based services and introduces additional failure points
    in a requesting carrier's end to end transport service. New England
    Voice & Data Comments at 12-13.

[^691]: Because AT&T controls TCG and MCI WorldCom controls MFS, Sprint
    notes that it has considerable reluctance to shifting its access
    dependence from potential long distance competitors, the RBOCs, to
    its current long distance competitors. Sprint Comments at 34.

[^692]: GTE Comments at 83-84.

[^693]: *Id.* at 84.

[^694]: Dense Wavelength Division Multiplexing (DWDM) is a multiplexing
    technique that permits multiple SONET or other optical signal
    formats to be carried on one fiber on different wavelengths. The
    capacity of existing DWDM systems now exceeds several hundred
    gigabits per second (Gbps), and has been approximately doubling each
    year for the past several years. DWDM allows carriers to extend the
    capacity of their embedded fiber.

[^695]: For example, the Texas Commission allows incumbent LECs, upon
    establishing need to the satisfaction of the state commission, to
    revoke leased fiber from competitive LECs with 12 months notice. The
    Texas commission's dark fiber unbundling rules also allow incumbent
    LECs to take back underused (less than OC-12) fiber, and forbid
    competitors in any two year period from leasing more than 25% of the
    dark fiber in a given segment of the network. We believe the
    measures established by the Texas PUC address the incumbent LEC's
    legitimate concerns. Texas PUC Comments at 16-17. We note that MGC,
    a competitive LEC that urges the Commission to unbundle dark fiber,
    also supports limitations such as those adopted in Texas. *See*
    Letter from Scott A. Sarem, Assistant Vice President, Regulatory,
    MGC Communications, to Christopher Libertelli, Attorney, Common
    Carrier Bureau, Federal Communications Commission, CC Docket No.
    96-98 (filed August 12, 1999).

[^696]: Bell Atlantic Comments at 30.

[^697]: NEXTLINK Reply Comments at 27.

[^698]: GTE Comments at 61. *See also* Letter from Melissa Newman, Vice
    President -- Federal Regulatory, US West, to Magalie R. Salas,
    Secretary, Federal Communications Commission, CC Docket No. 96-98 at
    Pg. 2 (filed August 18, 1999) (arguing that the relevance of
    tariffed services as a substitute for unbundled transport in the
    *Local Competition First Report and Order* is "no longer valid
    precedent.").

[^699]: *See* *supra* Section (IV)(B)(4).

[^700]: *Local Competition First Report and Order*, 11 FCC Rcd at 15644,
    para. 287.

[^701]: California PUC Comments at 4-5; AT&T Comments at 96; Cable and
    Wireless Comments at 36; CompTel Comments at 40; CPI Comments at 21;
    Sprint Comments at 34-36. *See also* Letter from John J. Heitmann,
    representing ALTS, to Magalie R. Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98 (filed Aug 6, 1999).

[^702]: *Local Competition First Report and Order*, 11 FCC Rcd at 15718,
    para. 441.

[^703]: This can include such things as fiber distribution panels,
    optical terminating equipment, multiplexers, digital cross connects,
    test access equipment, digital loop carrier equipment, power
    distribution panels, and cable racks.

[^704]: AT&T Comments at 121.

[^705]: *Id.* at 120.

[^706]: GTE Comments at Exhibit B, page 32.

[^707]: *See* CompTel Comments at 39 (arguing that total cost of switch
    installation is \$4-6 million).

[^708]: AT&T Comments at 96. *See also* Bell South Comments, Attachment
    A at 1 (describing \$128,700 cost of purchasing necessary equipment
    for one collocation arrangement.).

[^709]: NEXTLINK states that to obtain a telecommunications franchise
    from the City of New York, it was required to pay "exorbitant fees"
    to deploy facilities in public rights of way. NEXTLINK Reply
    Comments at 29 (arguing that the City of New York assesses
    exorbitant fees and assesses a multitude of discriminatory,
    non-competitively neutral requirements that are not imposed on Bell
    Atlantic.); AT&T Comments at 121 (citing Beans Affidavit at para 12,
    describing 4% gross revenue fees associated with Dearborn, Michigan
    franchise). *See also* Allegiance Comments at 19; Sprint Comments at
    33; Network Access Solutions Reply Comments at 11; NEXTLINK Reply
    Comments at 29; Qwest Reply Comments at 72-77;.

[^710]: Sprint Comments at 34.

[^711]: CompTel Comments at 42

[^712]: *See, e.g*., *USTA UNE Report* at II-1; GTE Comments at Exhibit
    B, at 22-33 (Network Engineering Consultants Inc.'s "Analysis of
    Alternative Network Elements Available to CLECs"); Bell Atlantic
    Comments at Exhibit C; Decl. of R. Dean Foremann/Charles L. Jackson,
    at 11-18. BellSouth analyzes AT&T's existing transport facilities in
    one representative market, Atlanta, and estimates that AT&T could
    build out its existing facilities to deploy a ubiquitous transport
    network for an estimated average cost per month of \$36 per DS1
    transport facility. *See* Letter from Kathleen Levitz, Vice
    President -- Federal Regulatory BellSouth, to Magalie R. Salas,
    Secretary, Federal Communications Commission (filed July 30, 1999)
    (BellSouth estimates MCI's cost per DS1 transport at \$35 per month;
    ICG's cost per DS1 transport at \$36 per month; and e.spire's cost
    per DS1 transport at \$38 per month). *See also* Comments of Bell
    Atlantic at 26; Comments of GTE at 48 (Appendix D).

[^713]: *See* Letter from Kathleen Levitz, Vice President -- Federal
    Regulatory BellSouth, to Magalie R. Salas, Esq., Secretary, Federal
    Communications Commission (filed July 30, 1999).

[^714]: *See* *generally* *Commission Takes Action to Reform Universal
    Service Support for Non-Rural Carriers Providing Service in
    High-Cost Areas and Commission Adopts Framework for Federal
    Universal Service High-Cost support Mechanism; Commission Seeks
    Comment on the Input Values for the Forward-Looking Cost Model*, CC
    Docket No. 96-45; 96-262; 97-160, FCC No. 99-17 (released May 27,
    1999).

[^715]: BellSouth's fill factor assumption of 75% may also not be
    representative of actual market conditions for requesting carriers.

[^716]: Ameritech Fitzsimmons Aff. at pg. 32.

[^717]: *Iowa Utils. Bd.*, 119 S. Ct. 721, 734 ("An entrant whose
    anticipated annual profits from the proposed service are reduced
    from 100% of investment to 99% of investment has perhaps been
    "impaired" in its ability to amass earnings, but has not ipso facto
    been 'impair\[ed\] . . . in its ability to provide the services it
    seeks to offer.").

[^718]: *See* *supra* Section (IV)(B)(2).

[^719]: *See* *supra* Section (V)(D)(1). AT&T Comments at 91 (citing
    collocation delays of six to eight months); CompTel Comments at 40
    (stating that collocation takes several months at a minimum); MCI
    WorldCom Reply Comments at 52 (stating that collocation takes 6
    months to a year). New England Voice & Data notes that it took six
    months to gain access to conduit space to pull cable 11,000 feet of
    fiber from Bell Atlantic's switch to New England Voice & Data's
    switch. New England Voice & Data Comments at 14.

[^720]: MCI WorldCom estimates that establishing a single collocation
    arrangement requires approximately five months before the
    arrangement is in place. MCI WorldCom also argues, however, that if
    a requesting carrier seeks to expand the scope of its services by
    requesting collocation arrangements, the collocation delay amounts
    to several years before it can provide service. MCI WorldCom
    Comments, Herold Declaration, at para. 10-11.

[^721]: Ameritech Comments at 28, 77; SBC Reply Comments at 16; US WEST
    Reply Comments at 44; Bell Atlantic Reply Comments at 14; BellSouth
    Reply Comments at 36. SBC submitted an *Ex Parte* presentation which
    states that the average caged collocation interval in Texas is 90
    days and 55-70 days for cageless collocation. In California, the
    average caged collocation interval is 120 days and 110 days for
    cageless. *See* Letter from Lincoln E. Brown, Director -- Federal
    Regulatory, SBC, to Magalie R. Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98 (filed July 15,
    1999).

[^722]: *See* Letter from John J. Heitmann, representing ALTS, to
    Magalie R. Salas, Secretary, Federal Communications Commission, CC
    Docket No. 96-98 (filed Aug 6, 1999).

[^723]: See id.

[^724]: New England Voice & Data Comments at 14; NEXTLINK Reply Comments
    at 28.

[^725]: NEXTLINK Reply Comments at 29.

[^726]: Sprint notes that nationwide, incumbent LECs meet transport
    provisioning deadlines 90 percent of the time; while CLECs meet
    these dates between 48 and 68 percent of the time. Sprint Comments
    at 34 and Appendix B, Decl. of Kevin E. Brauer, at 4.

[^727]: Sprint Comments, Appendix D, "Sprint Experience with BellSouth,"
    at 4.

[^728]: *Local Competition First Report and Order*, 11 FCC Rcd.
    15718-15719, at para 441.

[^729]: 47 U.S.C. § 271(2)(B)(v).

[^730]: Sprint contends that better financial results, over the long
    run, should be achievable by increasing the return from capital
    dollars spend rather than continuing to expense to multiple third
    party transport providers. Sprint argues that dependence upon
    external vendors also increases the business uncertainties and risks
    (in terms of pricing fluctuations, quality control, choice of
    vendors, changes in vendor business strategy) associated with third
    party transport provisioning. Sprint Comments, Declaration of Kevin
    Brauer, at 4.

[^731]: *See* Letter from Ernest L. Bush, Jr., Assistant Vice President
    -- BellSouth Telecommunications, to Lawrence Strickling, Chief,
    Common Carrier Bureau, Federal Communications Commission, CC Docket
    No. 96-98 (filed August 16, 1999) (arguing that the "entrance
    facilities" or POP to incumbent LEC wire center segment of the
    transport market has developed to such an extent that requesting
    carriers are not impaired without access to unbundled transport in
    this market segment.).

[^732]: We note at the outset that a requesting carrier that uses its
    own self-provisioned switch, rather than unbundled local switches
    obtained from an incumbent LEC, to provide local exchange and
    exchange access service would use dedicated transport facilities to
    carry traffic between its network and the incumbent LEC's network.
    Thus, the only carrier that would need shared transport facilities
    would be one that was using an unbundled local switch. Requesting
    carriers may also utilize unbundled tandem switching to substitute
    shared transport for common transport in situations where the
    requesting carrier is not providing local service to the end user.
    We note that this use of shared transport is currently pending
    before the Commission and we expect to address it in connection with
    the *Further Notice* adopted in this proceeding.

[^733]: The definition of shared transport includes shared transport
    from one end office to another end office. See 47 C.F.R. §
    51.319(d)(1)(ii). It does not include the provision of shared
    transport from an end office to an end user. *See* Centennial Joint
    Comments at 5.

[^734]: *Local Competition Third Reconsideration Order*, 12 FCC Rcd
    12453, at para. 27.

[^735]: Ameritech Comments at 94-96.

[^736]: *Id.*.

[^737]: *Iowa Utils. Bd*., 119 S. Ct. at 737.

[^738]: *Southwestern Bell Tel. Co. v. Federal Communications
    Commission*, 153 F.3d 597, 603 (8th Cir. 1998).

[^739]: *See supra* Section (V)(D)(1).

[^740]: AT&T Comments at 99; Centennial Joint Comments at 7; TRA
    Comments at 39.

[^741]: We recognize that competitors face significant demand
    uncertainty, particularly in the early stages of entry, but as the
    local exchange market matures, competitors will be required to
    assume the normal business risks of forecasting demand and
    provisioning transport to meet this demand.

[^742]: *Local Competition Third Reconsideration Order***,** 12 FCC Rcd
    at 12488, para 50. In the *Third Reconsideration* proceeding, AT&T
    contended that the cost is \$.041767 per minute for dedicated
    transport plus associated non-recurring charges. AT&T claimed that
    Ameritech would charge a total of \$5008.58 per DS1 and \$58,552.87
    per switch. AT&T argued that this compares with \$.000776 per minute
    for unbundled shared transport. Ameritech responded that the correct
    price for tandem routed dedicated facilities cost is \$.0031148 per
    minute plus associated NRCs. *Id*.

[^743]: Ameritech Comments at 72.

[^744]: *See* *supra* Section (IV)(B)(4). There are also substantial
    questions concerning whether Ameritech's EOI includes the transport
    and termination charges Ameritech would levy on top of the
    per-minute fees and the non-recurring charges that Ameritech would
    impose for establishing its EOI service.

[^745]: MCI WorldCom Comments 62 and Tab 4, Decl. of John M. Wimmer, at
    para. 28; AT&T Reply Comments at 108.

[^746]: *Local Competition Third Reconsideration Order*, 12 FCC Rcd at
    12488, para 51 (citing William W. Sharkey, The Theory of Natural
    Monopoly, 184-85 (1982) ("that for a given number of circuits the
    economies \[of scale\] are more pronounced at higher grades of
    service (lower blocking probability). The economics of scale,
    however, decline substantially as the number of circuits increases.
    Therefore for small demands, a fragmentation of the network could
    result in a significant cost penalty because more circuits would be
    required to maintain the same grade of service. At large demands,
    the costs of fragmentation are less pronounced.") *Id.*

[^747]: *Local Competition First Report and Order*, 11 FCC Rcd at 15738,
    para. 479. These networks are referred to as "out of band" signaling
    networks, and they simultaneously carry signaling messages for
    multiple calls. In general, most LECs' signaling networks adhere to
    a Bellcore standard Signaling System 7 (SS7) protocol. SS7 networks
    use signaling links to transmit routing messages between switches,
    and between switches and call-related databases (such as the Line
    Information Database, Toll Free Calling Database, and Advanced
    Intelligent Network databases). These links enable a switch to send
    queries via the SS7 network to call-related databases, which return
    customer information or instructions for call routing to the switch.
    A typical SS7 network includes a signaling link that transmits
    signaling information in packets, from a local switch to a signaling
    transfer point (STP), which is a high-capacity packet switch. The
    STP switches packets onto other links according to the address
    information contained in the packet. These additional links extend
    to other switches, databases, and STPs in the incumbent LECs'
    networks. A switch routing a call to another switch will initiate a
    series of signaling messages via signaling links through a STP to
    establish a call path on the voice network between the switches.
    *Id.* at paras 479-483.

[^748]: *Id.* at 15738, para. 479.

[^749]: *Id.* at 15738-41, paras. 479-483.

[^750]: *Notice* at para. 33.

[^751]: *Id.*.

[^752]: *See* Florida PSC Comments at 6-7; Illinois Commission Comments
    at 14; Iowa Comments at 6; Kentucky PSC Comments at 2; Allegiance
    Comments at 20; Cable & Wireless Comments at 37-38; Choice One Joint
    Comments at 18; Cox Comments at 34-36; KMC Comments at 16-17; Level
    3 Comments at 15-16; Net 2000 Comments at 15-16. *But see* MGC
    Comments at 31.

[^753]: *See* Ameritech Comments at 114-116; BellSouth Comments at 76;
    GTE Comments at 54-56; SBC Comments at 43; US WEST Comments at 47;
    USTA UNE Report, Tab 5, at 1-5.

[^754]: *Local Competition First Report and Order*, 11 FCC Rcd at 15724,
    para. 456.

[^755]: *Id.* at 15723-24, para. 455.

[^756]: *See, e.g.,* Allegiance Comments at 19-20; Cox Comments at
    34-35; e-spire Joint Comments at 26.

[^757]: *Local Competition First Report and Order*, 11 FCC Rcd at 15739,
    para. 481.

[^758]: BellSouth Comments at 76. *See also* Ameritech Comments at 114
    n.326 (citing James H. Green, *The Irwin Handbook of
    Telecommunications* 297 (3^rd^ Ed. 1997) (" he SS7 network routes
    messages on a point-to point basis using unique originating and
    terminating point codes. Each node in the network is identified by
    its own unique point code/network address. When a call is set up
    between two end office switches, the originating end office
    formulates an initial address message (IAM) to the terminating end
    office. The IAM includes the originating telephone number,
    originating point code, terminating telephone number, and
    terminating point code. To route a signaling packet successfully,
    the STP must associate each point code with a particular end office.
    Existing technology, therefore, permits routing over only a single
    set of A-links, (links between a specific end office and the SS7
    network), for any given point code.").

[^759]: *See, e.g.,* SBC Comments at 43 ("Signaling is a servant to
    switching. . . current technology requires each local switch to link
    to one-and only one-signaling network. To the extent that a CLEC
    purchases unbundled switching from an RBOC or GTE, it must
    necessarily connect to that same ILEC\'s signaling network."). *See
    also* BellSouth Comments at 76; MCI WorldCom Comments at 55; US WEST
    Comments at 47; USTA UNE Report, Tab 5, at 1.

[^760]: *See Local Competition First Report and Order*, 11 FCC Rcd at
    15740, para. 483.

[^761]: BellSouth Comments at 76; USTA UNE Report, Tab 5, at 1.

[^762]: USTA UNE Report at V-5.

[^763]: GTE Comments at 55.

[^764]: *Id.* at 54.

[^765]: *See supra* Section (IV)(B)(4) (discussing the "impair" standard
    of section 251(d)(2)(B)).

[^766]: *Id.*

[^767]: *See* MGC Comments at 31 (stating SS7 signaling "is made
    generally available on a national basis and in a cost-effective
    manner.").

[^768]: Time Warner Reply Comments at 3. *See also* Illinois Commission
    Comments at 13 (The Illinois Commission noted that utilization of
    the incumbent LECs switching signaling is required for the
    completion of a call, and that a replication of the incumbent's
    in-place network would be extremely costly, thereby posing an
    impediment to competition.); Letter from Jonathan Askin, Vice
    President -- Law, ALTS, to Magalie Roman Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98, at 2 (filed July 29,
    1999) (ALTS July 29, 1999 *Ex Parte*) ("Start-up CLECs do not have
    big enough SS7 message volumes to justify volume discounts that hub
    providers may offer to larger firms, creating a significant barrier
    to entry since the CLECs cannot approach the low unit costs that the
    ILECs achieve with their own volumes.); CoreComm Comments at 30
    (CoreComm notes that requiring new entrants to incur the cost of
    deploying redundant network architecture would significantly impair
    the ability of requesting carriers to compete.); Letter from Tina S.
    Pyle, Executive Director, Public Policy, MediaOne, to Jake E.
    Jennings, Policy and Programming Division, Common Carrier Bureau,
    Federal Communications Commission, CC Docket No. 96-98, Signaling
    Attachment at 1-2 (filed August 12, 1999) (MediaOne August 12, 1999
    *Ex Parte*) (stating that "MediaOne cannot economically
    self-provision a signaling system;" and estimating that "the point
    at which the costs of providing the SS7 network first were less than
    the cost of obtaining the SS7 network was the time period at which
    MediaOne forecast slightly more than one million subscriber
    lines."). We note that MediaOne did not submit cost data in the
    record to support this claim.

[^769]: *See, e.g.,* Ameritech Comments at 114, n.326.

[^770]: *See* MGC Comments at 31.

[^771]: *See, e.g.,* ALTS July 29 *Ex Parte* at 2-3 (stating that any
    CLEC ordering A-Link connectivity "from the local ILEC can expect to
    pay for a local T1 within a few miles or so from their central
    office for transport of the 56-kb signal. On the other hand, a CLEC
    ordering its 'A-Links' from an alternative provider can expect to
    order a T1 for transport of several hundred miles from an IXC
    carrier."); John J. Heitmann, Net 2000, to Jake E. Jennings, Policy
    and Programming Division, Common Carrier Bureau, Federal
    Communications Commission, CC Docket No. 96-98, Presentation at 2, 5
    (filed August 13, 1999) (Net 2000 August 13, 1999 *Ex Parte*)
    (stating that regional STP pairs require long transport links for
    connectivity, and longer transport links lead to higher costs in
    smaller markets where connectivity with a single pair of ILEC STPs
    would be required).

[^772]: MCI WorldCom Reply Comments at 55-56. MCI WorldCom also noted
    "\[i\]f a CLEC wishes to offer ubiquitous, high-quality local
    services, it must, as a practical matter, tap into the ILECs'
    signaling networks and databases." *Id.* at 55. *See also* Time
    Warner Reply Comments at 16 (stating that alternative SS7 vendors
    "do not offer anything close to an adequate substitute" for
    incumbent LECs' SS7 signaling networks).

[^773]: USTA UNE Report at V-1. *See also* MCI WorldCom Reply Comments
    at 55 ("No third party vendor owns a signaling network in every
    Local Access Transport Area ("LATA"), nor do they provide direct
    connectivity with the ILECs' switches."); Time Warner Reply Comments
    at 17 ("ILEC signaling systems contain many STP pairs (typically one
    per LATA.").

[^774]: *See, e.g.,* KMC Comments at 16-17 (noting that independent
    signaling vendors do not offer signaling services everywhere); Time
    Warner Reply Comments at 17; Letter from Thomas Jones, Counsel for
    Time Warner Telecom, to Magalie Roman Salas, Secretary, Federal
    Communications Commission, CC Docket 96-98, Attachment at 3 (filed
    July 15, 1999) (Time Warner July 15, 1999 *Ex Parte*) (noting
    "\[m\]ost CLECs who have deployed switches have not deployed their
    own regional or national signaling networks.").

[^775]: A number of requesting carriers argue that they have experienced
    customer outages as a result of utilizing alternative signaling
    providers. A single fiber cut, which affected 132 DS3s for nearly
    seven hours, and an outage which disrupted service to 800 customers
    in four markets, demonstrated the material decrease in quality
    experienced by Time Warner when it utilized an alternative signaling
    provider. The cut caused the vendor's SS7 network to block
    Integrated Switched Digital Network User Part (call set-up) messages
    originating at Time Warner's Memphis switch. Thus, no call
    originating at a line served by the Memphis switch and terminating
    at a line served by another switch could be completed. Time Warner's
    problem with its 800 number service was caused by the failure of
    four of 19 T1s in the vendor's network. The problem lasted for
    approximately five hours. Time Warner also cited outages in
    Rochester, New York, Memphis, Tennessee, and Raleigh, North
    Carolina, which caused its customers to lose service and "seriously
    damaged \[its\] reputation for high-quality, reliable service."
    Letter from Thomas Jones, Counsel for Time Warner Telecom, to
    Magalie Roman Salas, Secretary, Federal Communications Commission,
    CC Docket 96-98, Attachment at 1-3 (filed July 27, 1999) (Time
    Warner July 27, 1999 *Ex Parte*).

[^776]: Time Warner Reply Comments at 16-18; Time Warner July 15, 1999
    *Ex Parte*, Attachment at 3. *See also* Time Warner Reply Comments
    at 16 ("Signaling systems typically aggregate their traffic from
    each STP pair to a regional STP pair, where additional information
    is stored in a call-related database. The messages traveling between
    STP pairs are carried over signaling links. These signaling links
    are crucial to the signal system networks, and signaling links must
    travel over diverse paths in order to be considered properly
    redundant, and therefore reliable.").

[^777]: Time Warner July 27, 1999 *Ex Parte* at Attachment at 3.

[^778]: *See, e.g.* Time Warner Reply Comments at 17. ALTS July 29, 1999
    *Ex Parte* at 2, Attachment at 1 (citing alternative vendors'
    inability to attain personnel with the requisite skill and
    experience to operate a reliable SS7 signaling network); Cox
    Comments at 35 (stating that "use of third party vendors can result
    in delays and errors that would not result if a CLEC is connected
    directly with the ILEC signaling system."); ALTS July 29 *Ex Parte*
    at 3 (citing an ALTS member that has A-Link connectivity to three
    signaling providers, one incumbent LEC and two alternative
    providers. The member stated that it has been materially impaired in
    obtaining signaling service due to significant obstacles it has
    encountered with personnel, equipment, and ubiquity in its dealings
    with the two alternative providers. The member asserted that it has
    maintained connectivity to the incumbent LEC because the alternative
    providers did not have any capacity.).

[^779]: *See, e.g.,* MediaOne August 12, 1999 *Ex Parte*, Signaling
    Attachment at 1 (citing a failure at an alternative signaling
    vendor's STP, which caused signaling traffic to be re-routed to the
    vendor's other STP. Software problems at the second STP produced
    service degradation and an eventual outage of six hours, which
    affected a number of carriers nationwide.). MediaOne also cited
    another STP failure by the same provider, which resulted in an
    outage of nearly seven hours. *Id.*

[^780]: ALTS July 29, 1999 *Ex Parte* at 3.

[^781]: *Local Competition First Report and Order,* 11 FCC Rcd at 15741,
    para. 484. Call-related databases are those SS7 databases used for
    billing and collection or used in transmission, routing, or other
    provision of a telecommunications service. *Id.* at n.1126.

[^782]: *Id.* at 15743-45, paras. 488-491.

[^783]: *Notice* at para. 33.

[^784]: *See,* *e.g.,* Allegiance Comments at 20; Cable & Wireless
    Comments at 37-38; KMC Comments at 16-17; TRA Comments at 41.

[^785]: *See, e.g.,* Ameritech Comments at 116-118; BellSouth Comments
    at 76; SBC Comments at 44-45.

[^786]: *Local Competition First Report and Order*, 11 FCC Rcd at 15741
    n.1126.

[^787]: *Id.* at 15741-42, para. 484.

[^788]: *Id.* at 15724-25, para. 459.

[^789]: An SMS interconnects to the SCP to send information and call
    processing instructions that are needed for a network switch to
    process and complete a telephone call. It also provides carriers
    with the capability of entering and storing data regarding the
    processing and completing of a telephone call.

[^790]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15724-25, para. 459.

[^791]: *Id.*

[^792]: Id.

[^793]: *See* MCI WorldCom Comments at 60-62 (citing CNAM as the
    "Customer Name" database); MediaOne Comments at 15-16. *See also*
    AT&T Comments at 110 (citing CNAM as the "Caller Name" database);
    Cox Comments at 36.

[^794]: *See* MCI WorldCom Comments at 60; MediaOne Comments at 15.

[^795]: *Local Competition First Report and Order,* 11 FCC Rcd at 15741,
    n.1126. Updating or compiling the information in these databases
    takes place through a separate process involving different
    equipment. Carriers input information directly into a service
    management system (SMS), which downloads such information into the
    appropriate database.

[^796]: *Id.*.

[^797]: Low Tech Comments at 14.

[^798]: Id.

[^799]: Ameritech Comments, Tab A, Joint Affidavit of Debra J.
    Aron/Robert G. Harris (Ameritech Aron & Harris Aff.) at 20 (citing
    Ameritech's new service, "Privacy Manager," as an example of AIN
    software the merits evaluation pursuant to the "necessary" standard
    of section 251(d)(2)(A)); BellSouth Comments at 80-81.

[^800]: When a call is received and Caller ID cannot identify the caller
    because the number is "blocked," "unavailable," "out of the area,"
    or "private," Privacy Manager intercepts the call before the
    telephone rings, and informs the caller that the number he or she
    has dialed does not accept calls from unidentified numbers. The
    caller is then prompted to say his or her name or the company he or
    she represents in order to complete the call. "If no name is given,
    the call is disconnected. If a name is given, the call rings
    through, and the recorded name is played to the called party." The
    called party is given the option of accepting the call, declining
    the call or refusing a sales call." Letter from John T. Lenahan,
    Assistant General Counsel, Ameritech, to Magalie Roman Salas,
    Secretary, Federal Communications Commission, CC Docket 96-98,
    Proprietary Network Elements Attachment at 4-5 (filed July 30, 1999)
    (Ameritech July 30, 1999 *Ex Parte*).

[^801]: *Id.*

[^802]: *Id.* at 5-6.

[^803]: We note that BellSouth states that it has invested heavily in
    internally developing proprietary applications software that runs on
    its AIN platform, and that it has received patents on many of its
    developments. BellSouth Comments at 80.

[^804]: *See supra* Section (IV)(B)(4) (discussing the "impair" standard
    of section 251(d)(2)(B)).

[^805]: *See, e.g.,* Allegiance Comments at 20 ("In particular, the 800
    database, local number portability database, and AIN platform are
    inherently related to the signaling network.").

[^806]: Similarly, if we had initially concluded that call-related
    databases must be unbundled, we would have been led to unbundle
    signaling networks.

[^807]: *See also* Cable & Wireless Comments at 38; Net 2000 Comments at
    15.

[^808]: Qwest Comments at 82.

[^809]: *Local Competition First Report and Order*, 11 FCC Rcd at 15746,
    para. 494.

[^810]: *Id.* at 15747-48, para. 495.

[^811]: 47 U.S.C. § 222.

[^812]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15743-44, 15748, paras. 488, 496.

[^813]: SBC Comments at 44.

[^814]: BellSouth Comments at 76; GTE Comments, Appendix B at 47-51. GTE
    cites third party providers of call related databases including,
    Illuminet, SNET, GTE Intelligent Network Services, and Revcom. GTE
    Comments, Appendix B at 48-49.

[^815]: *See, e.g.,* CompTel Comments at 44; CoreComm Comments at 30;
    KMC Comments at 16-17; MediaOne Comments at 12-13, 15-16; Qwest
    Comments at 83.

[^816]: MediaOne Comments at 12-13 (stating that MediaOne asked three
    alternative providers for quotes for LIDB validation, and the
    providers submitted prices ranging from 5 cents to 10 cents per
    transaction, compared to an average of .034 cents per transaction
    for incumbent LECs). MediaOne also stated that "BellSouth proposed
    to charge MediaOne a rate of 1 cent per query for access to its CNAM
    database in Florida, but only charges about 5 cents per line per
    month in Georgia. This means that with an average subscriber
    receiving approximately 225 calls per month, the Florida rate works
    out to \$2.25 per line per month, or 45 times the Georgia rate."
    *Id.* at 15.

[^817]: *See* Cox Comments at 35. Cox notes that access to incumbent LEC
    call related databases is necessary to ensure proper call flow when
    an incumbent LEC customer is using call forwarding features. *Id.*

[^818]: *See* Cox Comments at 36 (Cox notes that "ILEC CNAM databases
    give access to information about both the ILEC subscribers and
    subscribers of other local exchange carriers that choose to store
    this information in the CNAM database. In Cox's experience, third
    party vendors do not have access to this information, with the
    result that customers simply do not receive the caller name
    information they expect."); MediaOne Comments at 15-16; Letter from
    MediaOne, to Jake E. Jennings, Federal Communications Commission, CC
    Docket No. 96-98 (filed August 11, 1999) (MediaOne August 11, 1999
    *Ex Parte*) ("While others can provide access to the ILECs' CNAM
    databases, only the ILECs have a database with their customers'
    names."). *But see* SBC Comments at 44 (stating that "CLECs that
    provide their own switches also do not need access to SBC's Line
    Information databases at TELRIC prices. Switch-based CLECs can
    readily store their data in any Line Information (LIDB) or Name
    Information (CNAM) database in the nation.").

[^819]: *See* Cox Comments at 36.

[^820]: *See, e.g.,* Iowa Comments at 8 (stating that "service
    management systems are integrally related to signaling networks and
    call related databases," and noting that the failure to unbundle
    service management systems would eliminate a competitor's ability to
    provide service); Allegiance Comments at 20-21 ("Because AIN is a
    service platform that incumbent LECs use to build their own
    services, CLECs cannot offer comparable services without access to
    AIN capabilities."); KMC Comments at 17 (stating that access to the
    SMS is "necessary for competitors to effectively use call related
    databases."); MCI WorldCom Comments at Tab 6, Decl. of Bernard Ku,
    at para. 8 ("CLEC access to AIN databases, ILEC Service Creation
    Environment, and Service Management System is critical if the CLECs
    are to develop and deploy new and innovative services. These
    services require interoperability; and one critical aspect of this
    testing, field deployment testing, cannot be duplicated outside the
    ILEC AIN environment.").

[^821]: Ameritech Comments at 128.

[^822]: Ameritech Aron & Harris Aff. at 20; BellSouth Comments at 80.

[^823]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15763-68, paras. 516-28. OSS are composed of various "back office"
    systems, databases and personnel that an incumbent LEC uses to
    commercially provision telecommunications service to its customers,
    resellers, and the purchasers of unbundled network elements. *Id.*
    at 15766-67, para. 523.

[^824]: *Id.* at 15767-68, paras. 524-25. The Commission affirmed these
    obligations in the *Local Competition Second Reconsideration Order*,
    11 FCC Rcd at 19740-45, paras. 5-12. The interface design system is
    an electronic gateway used to electronically access OSS information
    such as telephone number, address validation, order receipt notice,
    etc.

[^825]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15763-64, para. 518; *Local Competition Second Reconsideration
    Order*, 11 FCC Rcd at 19741-43, paras. 6-10.

[^826]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15763-64, paras. 516-518.

[^827]: *Iowa Utils. Bd*., 119 S. Ct. at 733-34.

[^828]: *Notice* at para. 33.

[^829]: *See, e.g.*, California PUC Comments at 5 (stating that OSS is
    "where the rubber meets the road" in developing a competitive
    market); Cox Comments at 31 (stating that the inability to access
    incumbent LEC OSS functionalities would have a "devastating" effect
    on competitive LECs); Qwest Comments at 84 (stating that lack of
    access to incumbent LEC's OSS would drastically increase costs and
    delays of competitors); Pilgrim Reply Comments at 8 (stating that a
    broad array of incumbent LEC OSS functionalities are required to
    provide virtually any competitive telecommunications service).

[^830]: *See, e.g.*, GTE Comments at 71 (competitive LECs may have
    access to OSS when reselling incumbent LEC service or purchasing
    unbundled incumbent LEC elements, but retail use of incumbent OSS by
    competitors should not be required); SBC Comments at 56-57
    (incumbent LECs need not provide OSS functions to a competitive LEC
    to enable that competitive LEC to obtain a service of facility from
    a non-incumbent LEC source);); U S WEST Comments at 41 (incumbent
    LECs are only required to provide unbundled OSS access to network
    elements that meet the necessary and impair standards).

[^831]: *See, e.g.*, MCI WorldCom Reply Comments at 62.

[^832]: *See, e.g.*, ALTS Comments at 60-61; Covad Comments at 53-54;
    Prism Comments at 22-23; Rhythms Comments at 22-24.

[^833]: Letter from Jonathan Askin, ALTS, to Magalie Roman Salas,
    Secretary, Federal Communications Commission, CC Docket No. 96-98
    (filed July 30, 1999) (ALTS July 30, 1999 *Ex Parte*).

[^834]: 47 C.F.R. § 51.319(f)(1).

[^835]: MCI WorldCom Comments at 67-68. *See also* *Local Competition
    First Report and Order*, 11 FCC Rcd at 15763-64, paras. 517-18.

[^836]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15764-66, paras. 518, 523. OSS are composed of varied systems,
    databases and personnel that an incumbent LEC uses to commercially
    provision telecommunications service to its customers, resellers and
    the purchasers of unbundled network elements.

[^837]: AT&T Comments at 134; Cable & Wireless Comments at 39; CompTel
    Comments at 45; MediaOne Comments at 14.

[^838]: *See, e.g.*, Covad Comments at 54.

[^839]: *Local Competition First Report and Order*, 13 FCC Rcd at
    15766-68, para. 523-28.

[^840]: ALTS Comments at 60-61; Covad Comments at 53-54; Prism
    Communications Comments at 23. As described in Part (V)(A) *supra*,
    Digital Loop Carrier (DLC) systems digitally encode and aggregate,
    *i.e.* \"multiplex\", the traffic from subscribers\' loops into DS1
    signals or higher for more efficient transmission or more extended
    range than traditionally permitted by copper loops. The analog
    signals are carried from customer premises to a remote terminal (RT)
    where they are converted to digital, mixed with other signals, and
    carried, generally over fiber, to the LEC central office*.*

[^841]: ALTS Comments at 60-61; Covad Comments at 53-54; Prism Comments
    at 23; Rhythms Comments at 22-24.

[^842]: Covad Comments at 54.

[^843]: Letter from Michael Olsen, Deputy General Counsel, NorthPoint
    Communications, to Carol E. Mattey, Chief, Policy and Program
    Planning Division, Common Carrier Bureau, Federal Communications
    Commission, (filed August 19, 1999)(NorthPoint August 19, 1999 *Ex
    Parte*)

[^844]: NorthPoint August 19, 1999 *Ex Parte*. *See also* Rhythms
    Comments at 23 (stating that incumbent LECs routinely provide
    competitor with a "yes" or "no" answer as to whether the incumbent
    believes a given loop is ADSL capable).

[^845]: Covad Comments at 54.

[^846]: *See* ALTS Comments at 59.

[^847]: *See, e.g.*, California PUC Comments at 5-6; Florida PSC
    Comments at 7; Illinois Commission Comments at 6-7; ALTS Comments at
    59-61; AT&T Comments at 134-35; CompTel Comments at 45-46; e.spire
    Joint Comments at 20-22; Focal Comments at 8; MCI WorldCom Comments
    at 67-70; MGC Comments at 27-28; Net2000 Comments at 16-17; Network
    Access Solutions Comments at 19; NEXTLINK Comments at 40-41;
    NorthPoint Comments at 20.

[^848]: ALTS Comments at 58; AT&T Comments at 134; Covad Comments at 53;
    GTE Comments at 71; MCI WorldCom Comments at 68-69; Rhythms Comments
    at 21.

[^849]: ALTS Comments at 58-60 (citing the *Local Competition First
    Report and Order*, 11 FCC Rcd at 15763-64, para. 518); AT&T Comments
    at 134-35.

[^850]: Iowa Comments at 7; CompTel Comments at 45-46; Cox Comments at
    30-31; e.spire/Intermedia Comments at 21-22; Focal Comments at 8;
    MediaOne Comments at 14; Qwest Comments at 84-85. *See* *also* AT&T
    Comments at 135; Level 3 Comments at 17; MCI WorldCom Comments at
    69; RCN Comments at 18-19.

[^851]: GTE Comments at 71 (stating that 19 OSS vendors---including
    Lucent, IBM, Ascend, and Nortel---market database systems and other
    products to perform all OSS functions)(citation omitted); US West
    Comments at 41-42 (stating that OSS vendors include Metasolv,
    Visionael, Remedy, Nortel, and Lucent).

[^852]: CompTel Comments at 45; Cox Comments at 31; MCI WorldCom, Tab 7,
    Decl. of John Sivori, at para. 5. *See also* AT&T Comments at 135.

[^853]: *See, e.g.*, SBC Comments at 56-57 (stating that incumbent LECs
    need not provide OSS functions to a competitive LEC to enable that
    competitive LEC to obtain a service or facility from a non-incumbent
    LEC source); GTE Comments at 71 (stating that competitive LECs may
    have access to OSS when reselling incumbent LEC service or
    purchasing unbundled incumbent LEC elements, but retail use of
    incumbent OSS by competitors should not be required); US West
    Comments at 41 (stating that incumbent LECs are only required to
    provide unbundled OSS access to network elements that meet the
    "necessary" and "impair" standards).

[^854]: ALTS July 30, 1999 *Ex Parte* (stating that, for example, if
    CLEC A takes a customer from CLEC B, CLEC A may need access to the
    ILEC's OSS where CLEC B had provisioned service to that customer
    using an unbundled loop. The loop would have to be disconnected from
    the ILEC's main distribution frame from CLEC B and reconnected to
    CLEC A. The timing of the loop cutover and issues of number
    portability require coordination).

[^855]: For instance, the incumbent LEC must not discriminate in the
    provision of services necessary for customer changes. "Winback" is
    an example of a situation requiring such customer changes, where the
    incumbent LEC wins back a former customer from a competitor. The
    incumbent would be under a concomitant duty to perform customer
    changes for requesting carriers on a basis equal to that which it
    provides for itself.

[^856]: CPI Comments at 30; MCI WorldCom Comments at 70; Media One
    Comments at 14; Prism Comments at 23.

[^857]: MCI WorldCom Comments at 70, Tab 7, Decl. of John Sivori, at
    para. 8.

[^858]: *See Local Competition Second Reconsideration Order*, 11 FCC Rcd
    at 19744, para. 11.

[^859]: *Local Competition First Report and Order*, 11 FCC Rcd at 15774,
    para. 539.

[^860]: *Id.* 11 FCC Rcd at 15774, para. 540.

[^861]: *Id.* at 15773-74, para. 538.

[^862]: *Iowa Utils. Bd.,* 119 S. Ct. at 733-34.

[^863]: *Notice* at paras. 15, 34.

[^864]: *Id.* at para. 33.

[^865]: *Notice* at para. 42. Section 251(b)(3) imposes on each
    telecommunications carrier, including incumbent LECs, "the duty to
    provide dialing parity to competing providers of telephone exchange
    service and telephone toll service, and the duty to permit all such
    providers to have nondiscriminatory access to telephone numbers,
    operator services, directory assistance, and directory listing, with
    no unreasonable dialing delays." 47 U.S.C. § 251(b)(3).

[^866]: *See, e.g.*, Kentucky PSC Comments at para. 2; Allegiance
    Comments at 23-24; AT&T Comments at 126-134; AT&T Reply Comments at
    136-42; Choice One Joint Comments at 20; CompTel Comments at 46-47;
    GSA Comments at 4-6.

[^867]: Ohio PUC Comments at 11-13; Bell Atlantic Comments at 32-36;
    BellSouth Comments at 77-79; Cincinnati Bell Comments at 7; GTE
    Comments at 49-54; MGC Comments at 31; USTA UNE Report at IV-1 to
    10.

[^868]: Customized routing permits requesting carriers to designate the
    particular outgoing trunks associated with unbundled switching
    provided by the incumbent, which will carry certain classes of
    traffic originating from the requesting provider's customers. This
    feature would allow the requesting carrier to specify that OS/DA
    traffic from its customers be routed over designated trunks which
    terminate at the requesting carrier's OS/DA platform or a third
    party's OS/DA platform.

[^869]: *Local Competition Second Report and Order*, 11 FCC Rcd at,
    19448, para. 110 (citing 47 U.S.C. § 226(a)(7)). The Commission also
    concluded that busy line verification, emergency interrupt, and
    operator-assisted directory assistance are forms of "operator
    services." Id. at para. 110, citing 47 U.S.C. § 226(a)(7).

[^870]: *Performance Measurements Notice*, 13 FCC Rcd at 12823, n.14.

[^871]: *Local Competition Second Report and Order* at 19455, paras.
    128-29 (operator services) and 19463, para. 148 (directory
    assistance); 47 C.F.R. § 51.217(d).

[^872]: *Implementation of the Telecommunications Act of 1996:
    Telecommunications Carriers' Use of Customer Proprietary Network
    Information and Other Customer Information, Implementation of the
    Local Competition Provisions of the Telecommunications Act of 1996,
    Provision of Directory Listing Information under the
    Telecommunications Act of 1934, As Amended*, CC Docket Nos. 96-115,
    96-98, 99-273, Third Report and Order, Second Order on
    Reconsideration, and Notice of Proposed Rulemaking, FCC 99-227,
    paras. 141-148 (rel. September 9, 1999) (*Directory Listing
    Information Order*).

[^873]: *See* RCN Comments at 20 (stating that incumbent LECs should be
    required to rebrand OS/DA services for the requesting carrier).

[^874]: *See, e.g.,* AT&T Comments at 134; MCI WorldCom Comments at
    71-74; MediaOne Comments at 13; Metro One Comments at 17-18.

[^875]: We note that while Metro One argues that directory assistance is
    not proprietary and should be unbundled, it identifies unpublished
    directory assistance listings as the only conceivably "proprietary"
    aspect of the incumbent LECs' OS/DA services. Metro One, however,
    does not describe the intellectual property concerns associated with
    unpublished listings and does not claim a need for unbundled access
    to unpublished listings under the "necessary" standard in section
    251(d)(2)(A). Metro One simply states that incumbent LECs have
    refused to make unpublished listings available to requesting
    carriers, while they enjoy access to unpublished listings in the
    provision of directory assistance to their customers. Metro One
    Comments at 10-11. Metro One requests that in lieu of providing the
    "non-published" customer's name and address, the incumbent LEC
    provide the name of the customer without the telephone number or
    address with a notation that the listing is non-published. *Id.* We
    note that pursuant to rule 51.217(c)(3)(iii), however, LECs cannot
    provide access to unlisted telephone numbers or other information
    customers have asked a LEC not to make available. 47 C.F.R. §
    51.217(c)(3)(iii). Conversely, section 251(c)(3) requires LECs to
    provide nondiscriminatory access to directory assistance. 47 U.S.C.
    § 251(c)(3). The Commission recently resolved any potential
    inconsistency by requiring a LEC to make available to requesting
    carriers the names and addresses of unlisted or unpublished
    subscriber information to the extent its own operators have access
    to this information. For example, if subscriber information is not
    available to the incumbent's operator, then no access need be given
    to the competitor. *See* *Directory Listing Information Order* at
    paras. 164-169.

[^876]: *See, e.g.*, Cox Comments at 30 (stating that OS/DA are not
    proprietary, so they should be subject to the "impair" test).

[^877]: Bell Atlantic Comments at 32-36; Cincinnati Bell Comments at 7;
    MGC Comments at 31; Ohio PUC Comments at 11-13.

[^878]: *See* Cincinnati Bell Comments at 7 (attests that the market for
    OS/DA has been competitive for years because it has purchased OS/DA
    services from competitive providers for that long); USTA UNE Report
    at IV-1.

[^879]: *Feist v. Rural Telephone Service Co.,* 499 U.S. 340, 111 S. Ct.
    1282 (1991).

[^880]: SBC Reply Comments at 22. *See also* Cincinnati Bell Comments at
    7 (reports awareness of 17 competitive providers of operator
    services and 13 directory assistance providers).

[^881]: Bell Atlantic Comments at 32. Bell Atlantic also asserts that
    there is an over-capacity in the OS/DA market that has resulted in
    an increased competitiveness within the market, a trend it expects
    to continue for the next two to three years. *Id*. at 32-33.

[^882]: Rural Telephone Coalition Comments at 10-11. *See also*
    Cincinnati Bell Comments at 7.

[^883]: Bell Atlantic Comments at 34 (stating that InfoNXX provides
    OS/DA services for a variety of telecommunications service
    providers, including Bell Atlantic's wireless subscribers).

[^884]: MGC Comments at 31. MGC, however, currently purchases OS/DA
    services from the incumbent LECs. Letter from Scott A. Sarem,
    Assistant Vice President, Regulatory, MGC, to Christopher
    Libertelli, Common Carrier Bureau, Policy Division, Federal
    Communications Commission, CC Docket Nos. 96-98, 95-185 (filed
    August 12, 1999).

[^885]: *See* Bell Atlantic Comments at 33. Bell Atlantic also points
    out that MCI WorldCom, AT&T and Sprint offer operator services and
    directory assistance as both wholesale and retail services. *Id*.

[^886]: USTA UNE Report IV-9.

[^887]: *Id.* at IV-2, 5.

[^888]: *Id.* at IV-2, 5 (citation omitted).

[^889]: *See* Bell Atlantic Comments at Ex. 4. In addition, various
    Internet sites provide national directory listings at no charge,
    including Alta Vista People Search, At Hand, Big Yellow, Bigbook,
    555-1212.com, InfoSpace, InfoUSA, Switchboard.com, Smartpages,
    WhoWhere People Finder, Worldpages, Yahoo! People Finder, and Zip2.
    *See* USTA UNE Report at IV-1 to 6.

[^890]: SBC Comments at 64.

[^891]: USTA UNE Report at IV-6.

[^892]: Bell Atlantic Comments at 34-35. *See also* USTA UNE Report at
    IV-6 (citing that Bell Atlantic lost approximately 60 percent of its
    wholesale DA calls between 1994 and 1997).

[^893]: Bell Atlantic Comments at 33 (citation omitted).

[^894]: *See, e.g.,* CompTel Comments at 46-47.

[^895]: By use of the term "facility," we refer to the real estate,
    employees, and computers used in the provision of OS/DA call
    centers.

[^896]: *See, e.g*., USTA UNE Report at IV-9 to 10.

[^897]: Cox Comments at 32.

[^898]: *See, e.g*., Bell Atlantic Comments 35-36; GTE Comments at 53;
    USTA UNE Report at IV-9 to 10.

[^899]: We note that whether the requesting carrier is purchasing OS/DA
    from a third-party provider or the incumbent LEC, the costs would
    include the cost of the underlying subscriber information contained
    in the OS/DA databases (which is generally subject to various
    pricing schemes and includes the cost of the facilities) and the
    cost of transport to the OS/DA call center.

[^900]: MediaOne Comments at 13.

[^901]: Time Warner states that it migrated to the incumbent LEC's OS/DA
    services, in part, to reduce transport expenses. Time Warner July
    15, 1999 *Ex Parte,* Attachment at 1.

[^902]: *See, e.g.,* MediaOne Comments at 12-13.

[^903]: USTA UNE Report at IV-9 to 10. *See also* Letter from John T.
    Lenahan, Assistant General Counsel, Ameritech, to Magalie Roman
    Salas, Secretary, Federal Communications Commission, CC Docket No.
    96-98, at 2 (filed July 30, 1999) (Ameritech July 30 *Ex Parte*).

[^904]: Teltrust Comments at 3-4.

[^905]: *See, e.g.*, Ameritech July 30, 1999 *Ex Parte* at 2-3.

[^906]: Letter from Dee May, Director Federal Regulatory Affairs, Bell
    Atlantic, to Magalie Roman Salas, Secretary, Federal Communications
    Commission, CC Docket No. 96-98, Attachments (filed August 30,
    1999).

[^907]: *See* Rural Telephone Coalition Comments at 10-11

[^908]: *See* Qwest Reply Comments at 83-85.

[^909]: *See* *supra* Section (IV)(B)(4).

[^910]: Section 251(b)(3) requires incumbent LECs to "provide dialing
    parity to competing providers of telephone exchange service and
    telephone toll service, and the duty to permit all such providers to
    have nondiscriminatory access to telephone numbers, operator
    service, directory assistance, and directory listing, with no
    unreasonable dialing delays." 47 U.S.C. § 251(b)(3).

[^911]: *See, e.g.*, AT&T Comments at 130; Allegiance Comments at 23;
    Cox Comments at 33; MCI WorldCom Comments at 72; MediaOne Comments
    at 12; Metro One Comments at 3-4.

[^912]: AT&T Comments at 130; AT&T Reply Comments at 140-141. *See also*
    Cox Comments at 33.

[^913]: AT&T Comments at 130-131; Metro One Comments at 3-4. *See also*
    Cox Comments at 33.

[^914]: Teltrust asserts that it has been unable to obtain
    nondiscriminatory access to incumbent LEC database information
    because it is not a telecommunications carrier. Teltrust claims that
    there are compelling reasons why alternative OS/DA providers are
    currently precluded from competing effectively against incumbent
    LECs, including blocked access to incumbent LEC databases and high
    tariff rates. Teltrust urges the Commission to clarify our access
    obligations to require incumbent LECs to make their OS/DA databases
    available to third parties that provide OS/DA as outsourced
    functions for requesting telecommunications carriers. Teltrust
    Comments at 9. We do not have a full record on this issue in this
    docket and therefore decline to address Teltrust's arguments at this
    time. We recently sought comment on whether the Commission can and
    should grant nondiscriminatory access to LEC directory assistance
    databases to those directory assistance providers that are not
    themselves exchange service providers or toll service providers.
    *Directory Listing Information Order* at paras. 155-156.
    Accordingly, we will address these issues in that proceeding.

[^915]: Bell Atlantic Comments at 33-34 and Exhibit 4.

[^916]: *See, e.g.*, Letter from Lincoln E. Brown, Director-Federal
    Regulatory, SBC, to Magalie Roman Salas, Secretary, Federal
    Communications Commission, CC Docket No. 96-98, at 2 (filed July 26,
    1999); Letter from Loretta Garcia, Counsel for Teltrust, to Magalie
    Roman Salas, Secretary, Federal Communications Commission, CC Docket
    No. 96-98 at 1 (Teltrust obtains most of its OS/DA database
    information from Experian. Teltrust believes that "Experian buys its
    data from most of the RBOCs.") (filed August 12, 1999) (Teltrust
    August 12, 1999 *Ex Parte*).

[^917]: MediaOne Comments at 12. *See also* Allegiance Comments at 24
    (local operators may have language skills that are useful in serving
    ethnic communities in their service areas).

[^918]: Teltrust August 12, 1999 *Ex Parte* at 2.

[^919]: For example, Bell Atlantic provides directory assistance for New
    York from a call center located in Massachusetts. Bell Atlantic
    August 30, 1999 *Ex Parte* Attachment. *See also,* Cincinnati Bell
    Comments at 7 ("Neither operator services nor directory assistance
    have a geographically distinct market").

[^920]: Cox Comments at 33. *See also* Teligent Reply Comments at 6.

[^921]: *See* 47 U.S.C. § 251(d)(2)(B).

[^922]: Teltrust August 12, 1999 *Ex Parte* at 2.

[^923]: AT&T argues that competitive LECs need updated and accurate
    information on PSAPs on the same terms that incumbent LECs provide
    such updates to themselves. AT&T Comments at 129-130. The obligation
    of a LEC to provide such listings and updates to competing providers
    in readily accessible formats in a timely fashion upon request, is
    already contained in rule 51.217(c)(3)(ii), implementing the
    nondiscriminatory access requirements in section 251(b)(3). 47
    C.F.R. § 51.217(c)(3)(ii); 47 U.S.C. § 251(b)(3).

[^924]: MediaOne Comments at 12.

[^925]: AT&T Comments at 126-28. AT&T reports that it took two years in
    Texas and one year in Connecticut to resolve customize routing
    issues. AT&T claims that customized routing solutions, either
    through AIN or line class codes, can take up to two years to
    implement. According to AT&T, either approach requires the entrant
    and the ILEC to: (1) negotiate the technical details; (2) design a
    test plan; (3) deploy the facilities and perform the necessary
    changes in switch software; (4) perform the testing; and (5) resolve
    problems encountered in the test. The solution must then be deployed
    at all switches where customized routing is necessary. Until
    customized routing solutions have been tested and broadly deployed,
    AT&T urges the Commission to require incumbent LECs to unbundle
    their OS/DA services. *Id*.

[^926]: Letter from Kathleen B. Levitz, Vice President-Federal
    Regulatory, BellSouth, to Jake Jennings, Policy and Program Planning
    Division, Common Carrier Bureau, Federal Communications Commission,
    CC Docket No. 96-98 (filed July 26, 1999) (BellSouth July 26, 1999
    *Ex Parte*) (Georgia from June, 5, 1997 to September 14, 1997; South
    Florida from August 21, 1997 to December 19, 1997; Tennessee from
    August 21, 1997 to week of December 8, 1997).

[^927]: The Commission has required incumbent LECs to implement
    customized routing where it is technically feasible. *Local
    Competition First Report and Order*, 11 FCC Rcd at 15709, 15773,
    paras. 418, 536.

[^928]: *See, e.g.*, Qwest Comments at 87-88.

[^929]: CompTel Reply Comments at 24.

[^930]: MCI WorldCom Comments at 73. MCI WorldCom asserts that Feature
    Group D signaling protocol is already being used to route traffic
    between the ILEC switch and other carriers. MCI WorldCom adds that
    it would be extremely costly to accommodate "mass signaling"
    protocol, and that the expense is unnecessary because another
    protocol is available to meet competitive LECs' needs. *Id.* *See
    also* CompTel Reply Comments at 24.

[^931]: Qwest Reply Comments at 84.

[^932]: SBC Reply Comments at 26.

[^933]: BellSouth July 26, 1999 *Ex Parte* (explaining the technical
    solutions used to resolve the compatibility issues surrounding MCI
    WorldCom's use of Feature Group D signaling).

[^934]: MediaOne supports the Commission's decision not to require
    incumbents to unbundle OS/DA, provided the Commission reaffirms the
    requirement for nondiscriminatory access under section 251(b)(3),
    including the requirement that a LEC not discriminate in favor of
    its own use of these services. Letter from Tina S. Pyle, Executive
    Director, Public Policy, MediaOne, to Jake Jennings, Policy and
    Program Planning Division, Common Carrier Bureau, Federal
    Communications Commission, CC Docket No. 96-98 (filed August 12,
    1999).

[^935]: 47 U.S.C. § 271(c)(2)(B).

[^936]: Id.

[^937]: *Notice* at para. 41.

[^938]: *Id.*

[^939]: *See* Ameritech Comments at 52-53; Ameritech Joint Reply
    Comments at 23.

[^940]: MCI WorldCom Comments at 23; Qwest Comments at 56-57; Sprint
    Comments at 27.

[^941]: *See supra* Sections (V)(D)(1) and (V)(E)(2)(b).

[^942]: Network elements unbundled pursuant to section 251(c) must
    comply with the pricing standards of section 252(d)(1). 47 U.S.C. §
    251(c)(3).

[^943]: *Iowa Utils. Bd.*, 119 S. Ct. at 732.

[^944]: Id.

[^945]: 47 U.S.C. § 201(b).

[^946]: 47 U.S.C. § 202(a).

[^947]: 47 U.S.C. § 271(c)(2)(B).

[^948]: *See supra* Section (V)(D)(1)(b).

[^949]: *See* Ameritech Joint Reply Comments at 23.

[^950]: ALTS Comments at 62-67; CompTel Comments at 47-53; e.spire Joint
    Comments at 28; Level 3 Comments at 20; McLeod Comments at 8.

[^951]: Bell Atlantic Reply Comments at 26; SBC Reply Comments at 28.

[^952]: Letter from William B. Barfield, Associate General Counsel,
    BellSouth Corporation, to Lawrence E. Strickling, Chief, Common
    Carrier Bureau, Federal Communications Commission, CC Docket No.
    96-98, at 1,6 (filed Aug. 9, 1999)(BellSouth Aug. 9, 1999 *Ex
    Parte*); Letter from Susanne Guyer, Assistant Vice President,
    Federal Regulatory, Bell Atlantic, to Magalie R. Salas, Secretary,
    Federal Communications Commission, CC Docket No. 96-98 (filed Aug.
    25, 1999); Letter from J. Richard Teel, Vice President, BellSouth,
    to Lawrence E. Strickling, Chief, Common Carrier Bureau, Federal
    Communications Commission, CC Docket 96-98, at 2 (filed Sept. 8,
    1999)(BellSouth Sept. 8, 1999 *Ex Parte*). *See also* Letter from
    Kathleen B. Levitz, Vice President-Federal Regulatory, BellSouth
    Corporation, to Magalie R. Salas, Secretary, Federal Communications
    Commission, CC Docket No. 96-98, at 4 (filed August 26, 1999).

[^953]: Rule 51.315(b) states: "Except upon request, an incumbent LEC
    shall not separate requested network elements that the incumbent LEC
    currently combines."

[^954]: Rule 51.315(c)-(f) states:

    > \(c\) Upon request, an incumbent LEC shall perform the functions
    > necessary to combine unbundled network elements in any manner,
    > even if those elements are not ordinarily combined in the
    > incumbent LEC's network, provided that such combination is:
    >
    > \(1\) Technically feasible; and
    >
    > \(2\) Would not impair the ability of other carriers to obtain
    > access to the unbundled network elements or to interconnect with
    > the incumbent LEC's network.
    >
    > \(d\) Upon request, an incumbent LEC shall perform the functions
    > necessary to combine unbundled network elements with elements
    > possessed by the requesting telecommunications carrier in any
    > technically feasible manner.
    >
    > \(e\) An incumbent LEC that denies a request to combine elements
    > pursuant to paragraph (c)(1) or paragraph (d) of this section must
    > prove to the state commission that the requested combination in
    > not technically feasible.
    >
    > \(f\) An incumbent LEC that denies a request to combine elements
    > pursuant to paragraph (c)(2) of this section must prove to the
    > state commissions that the requested combination would impair the
    > ability of other carriers to obtain access to unbundled network
    > elements or to interconnect with the incumbent LEC's network.

    47 C.F.R. §§ 51.315(c)-(f).

[^955]: *Iowa Utils. Bd. v. FCC*, 120 F.3d at 813.

[^956]: *Iowa Utils. Bd*., 119 S.Ct at 736-738.

[^957]: *Iowa Utils. Bd. v. FCC,* Brief for Respondents at 79-87 (Oral
    argument was held on September 17, 1999. To date, no decision has
    been announced).

[^958]: *Notice* at para. 33.

[^959]: *Id.*

[^960]: AT&T Comments at 136-37; Cable & Wireless Comments at 40-41;
    Choice One Joint Comments at 23. *See also* California PUC Comments
    at 6; ALTS Comments at 62; CoreComm Comments at 36-37.

[^961]: *See, e.g.*, GTE Comments at 84-85; Ameritech Joint Reply
    Comments at 26-28.

[^962]: ALTS Comments at 79-80. *See also* Excel Comments at 14; Net2000
    Comments at 22; NEXTLINK Comments at 42-43; e.spire Joint Reply
    Comments at 17-18; GSA Reply Comments at 17.

[^963]: *Local Competition First Report and Order*, 11 FCC Rcd at 15648,
    para. 296.

[^964]: GTE Reply Comments at 84-85; SBC Reply Comments at 28.

[^965]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15689-93, 15718, paras. 377-85, 440.

[^966]: *See* 47 U.S.C. § 252(d)(1).

[^967]: *Iowa Utils. Bd*., 119 S.Ct at 737. *See also Local Competition
    First Report and Order*, 11 FCC Rcd. at 15658, para. 312; 47 C.F.R.
    § 51.311(b).

[^968]: ALTS Reply Comments at 53; GTE Comments at 85.

[^969]: *See, e.g.*, GTE Comments at 85; ALTS Reply Comments at 53.

[^970]: *Iowa Utils. Bd. v. FCC*, 120 F.3d at 813.

[^971]: *Iowa Utils. Bd*., 119 S. Ct. at 737.

[^972]: *Id.*

[^973]: *Iowa Utils. Bd. v. FCC*, 120 F.3d at 813.

[^974]: *See, e.g.,* AT&T Comments at 141-42. We note that we held
    previously in *BellSouth 271 Louisiana II* that incumbent LECs may
    not limit a competitor's ability to access network elements in order
    to combine them to collocation arrangements. Specifically, we stated
    that "BellSouth's offering in Louisiana of collocation as the sole
    method for combining unbundled network elements is inconsistent with
    section 251(c)(3)." *Application of BellSouth Corporation, BellSouth
    Telecommunications, Inc., and BellSouth Long Distance, Inc. for
    Provision of In-Region, InterLATA Services in* Louisiana, 13 FCC Rcd
    20599, 20703-05, para. 168. This decision was based on our rule that
    requesting carriers are entitled to request any "technically
    feasible" methods of accessing and combining unbundled network
    elements. We found that section 251(c)(3) required incumbent LECs to
    provide "nondiscriminatory access to network elements on an
    unbundled basis at any technically feasible point . . .," which was
    not limited to collocation arrangements. *Id.*

[^975]: BellSouth Aug. 9, 1999 *Ex Parte* at 1, 4-5; Letter from Martin
    E. Grambow, Vice President and General Counsel, SBC, to Lawrence F.
    Strickling, Chief, Common Carrier Bureau, Federal Communications
    Commission, CC Docket No. 96-98, at 1, Att. 1-9 (filed Aug. 11,
    1999) (SBC August 11, 1999 *Ex Parte*).

[^976]: BellSouth Sept. 8 *Ex Parte* at 1; Letter from Lincoln E. Brown,
    Director-Federal Regulatory, SBC, to Magalie Roman Salas, Secretary,
    Federal Communications Commission, CC Docket 96-98, Att. at 2, 6-7
    (filed Sept. 9, 1999)(SBC Sept. 9, 1999 *Ex Parte*). Alternatively,
    BellSouth argues that the Commission should decline to unbundle
    transport facilities between a requesting carrier's switch and the
    incumbent LEC's switch. BellSouth Sept. 8, 1999 *Ex Parte* at 1.
    *See also* SBC Sept. 9, 1999 *Ex Parte* Att. at 2-5. As discussed
    Section (V)(E) *supra*, we reject the incumbent LECs' argument not
    to unbundle such dedicated transport links.

[^977]: *See, e.g.*, e.spire Joint Comments at 13-18; ALTS Reply
    Comments at 54.

[^978]: 47 U.S.C. § 251(c)(3).

[^979]: *Local Competition First Report and Order*, 11 FCC Rcd. at
    15679, para.356.

[^980]: *Id.* at 15679, para.356.

[^981]: *Id.* at 15680, para.359 (citation omitted).

[^982]: 47 C.F.R. § 51.309(a).

[^983]: BellSouth August 9, 1999 *Ex Parte* at 1.

[^984]: Letter from Ernest L. Bush, Jr., Assistant Vice President,
    BellSouth, to Lawrence Strickling, Chief, Common Carrier Bureau,
    Federal Communications Commission, CC Docket No. 96-98, at 1, (filed
    August 16, 1999) (BellSouth August 16, 1999 *Ex Parte*)

[^985]: *See* 47 C.F.R. §§ 51.309(a), 51.315(b).

[^986]: *Iowa Utils. Bd.*, 119 S. Ct. at 736-38. We note, however, that
    any substitution of unbundled network elements for special access
    would require the requesting carrier to pay any appropriate
    termination penalties required under volume or term contracts.

[^987]: *Local Competition First Report and Order*, 11 FCC Rcd at 15657,
    para. 309.

[^988]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15763-64. We note that rule 51.311(c) is currently before the Court
    of Appeals for the Eighth Circuit.

[^989]: *See Ameritech Michigan Order*, 12 FCC Rcd at 20619; *Local
    Competition First Report and Order*, 11 FCC Rcd at 15660; *Local
    Competition Second Reconsideration Order*, 11 FCC Rcd at 19742.

[^990]: *Local Competition First Report and Order*, 11 FCC Rcd at
    15658-59, para. 313.

[^991]: *Id.* at 15864-66, paras. 721-25. The Commission selected June
    30, 1997 as the ultimate end date for this transitional time period.

[^992]: *CompTel v. FCC*, 117 F.3d at 1073-75.

[^993]: *Local Competition Third Reconsideration Order*, 12 FCC Rcd. at
    12462, para.3.

[^994]: *Id.* at 12462, 12495-96, paras. 3, 60-61. This Further Notice
    remains pending.

[^995]: We note that in a recent Notice of Proposed Rulemaking in the
    *Access Reform and Universal Service* proceeding, we tentatively
    concluded that when non-rural local exchange carriers receive
    explicit interstate universal service support, they should eliminate
    implicit support by reducing switched access common line rates. We
    did not propose to treat special access services as if the current
    prices of those services included implicit support for universal
    service. *Federal-State Joint Board on Universal Service*, CC Docket
    96-45, Seventh Report and Order and Thirteenth Order on
    Reconsideration in CC Docket No. 96-45, Fourth Report and Order in
    CC Docket No. 96-262 and Further Notice of Proposed Rulemaking, 14
    FCC Rcd 8078, 8138-8139, para. 128-131 (May 28, 1999).

[^996]: *Local Competition Third Reconsideration Order*, 12 FCC Rcd. at
    12462, para. 3.

[^997]: *See* 5 U.S.C. § 603. The RFA, *see* 5 U.S.C. § 601 *et. seq*.,
    has been amended by the Contract With America Advancement Act of
    1996, Pub. L. No. 104-121, 110 Stat. 847 (1996) (CWAAA). Title II of
    the CWAAA is the Small Business Regulatory Enforcement Fairness Act
    of 1996 (SBREFA).

[^998]: *Notice* at paras. 46-53.

[^999]: *See* 5 U.S.C. § 604.

[^1000]: *Iowa Utils. Bd.*, 119 S. Ct. at 734-36.

[^1001]: *Local Competition First Report and Order*, 11 FCC Rcd at
    16150-56, paras. 1343-57.

[^1002]: 5 U.S.C. §§ 603(b)(3), 604(a)(3).

[^1003]: 5 U.S.C. § 601(6).

[^1004]: 15 U.S.C. § 632.

[^1005]: 5 U.S.C. § 601(3) (incorporating by reference the definition of
    \"small business concern\" in 5 U.S.C. § 632).

[^1006]: 15 U.S.C. § 632.

[^1007]: 5 U.S.C. § 601(3).

[^1008]: Letter from Jere W. Glover, Chief Counsel for Advocacy, SBA, to
    William E. Kennard, Chairman, Federal Communications Commission (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. *Local Competition
    First Report and Order*, 11 FCC Rcd at 16144‑45, paras. 1328-30.

[^1009]: United States Department of Commerce, Bureau of the Census,
    1992 Census of Transportation, Communications, and Utilities:
    Establishment and Firm Size, at Firm Size 1‑123 (1995) (1992
    Census).

[^1010]: 15 U.S.C. § 632(a)(1).

[^1011]: *1992 Census*, *supra* note Error: Reference source not found,
    at Firm Size 1‑123.

[^1012]: 13 C.F.R. § 121.201, Standard Industrial Classification (SIC)
    Code 4812.

[^1013]: Federal Communications Commission, Carrier Locator: Interstate
    Service Providers, Fig. 1 (Jan. 1999) (*Carrier Locator Report*).

[^1014]: 47 U.S.C. § 251(f).

[^1015]: *Iowa Utilities Bd*., 119 S. Ct. at 734.

[^1016]: *See supra* Section (V)(A).

[^1017]: *See supra* Section (V)(B).

[^1018]: *See supra* Section (V)(C).

[^1019]: *See supra* Section (V)(D). Incumbent LECs must offer unbundled
    access to local circuit switching, except for switching used to
    serve end users with four or more lines in access density zone 1
    (the densest areas) in the top 50 Metropolitan Statistical Areas
    (MSAs), provided that the incumbent LEC provides non-discriminatory,
    cost-based access to the enhanced extended link. (An enhanced
    extended link (EEL) consists of a combination of an unbundled loop,
    multiplexing/concentrating equipment, and dedicated transport. The
    EEL allows new entrants to serve customers without having to
    collocate in every central office in the incumbent's territory.).

[^1020]: *See supra* Section (V)(E).

[^1021]: *See supra* Section (V)(F).

[^1022]: *See supra* Section (V)(G).

[^1023]: *See supra* Section (V)(D)(2). In circumstances where a
    requesting carrier is unable to install its DSLAM at the remote
    terminal or obtain spare copper loops, and the incumbent LEC has
    deployed packet switching for its own use, an incumbent LEC must
    provide a requesting carrier with access to unbundled packet
    switching.

[^1024]: *See supra* Section (IV)(E).

[^1025]: *Local Competition First Report and Order*, 11 FCC Rcd at
    16157-58, para. 1364.

[^1026]: *See supra* Section (IV)(D).

[^1027]: *See supra* Section (IV)(E).

[^1028]: *See* 5 U.S.C. § 801(a)(1)(A).

[^1029]: *See* 5 U.S.C. § 604(b).

[^1030]: *See supra* note Error: Reference source not found.

[^1031]: *See* 5 U.S.C. § 603(a).

[^1032]: *See id*.

[^1033]: *Local Competition Third Reconsideration Order*, 12 FCC Rcd. at
    12462, para.3.

[^1034]: *See supra* paras. 500-504.

[^1035]: *See supra* paras. 500-504.

[^1036]: Report, *Local Competition: August 1999*, at 45, Table 4.1
    (This report is an update of the *Local Competition* *Report* issued
    in December of 1998. The report was compiled by the Industry
    Analysis Division of the Common Carrier Bureau of the Federal
    Communications Commission. This report is available in the
    Commission's Reference Information Center at 445 12^th^ Street,
    S.W., Courtyard Level, Washington, DC. Copies may be purchased from
    the International Transcription Services, Inc., at (202) 857-3800.
    It can also be downloaded, file name LCOMP99-1.PDF or LCOMP99-1ZIP,
    from the Commission's internet site at
    http://www.fcc.gov/ccb/stats.)

[^1037]: *Carrier Locator Report* at Fig. 1. This figure also includes
    competitive LECs, as determined by TRS filings.

[^1038]: *See supra* Section VII.

[^1039]: 47 C.F.R. § 1.1206(b), as revised.

[^1040]: See id. at § 1.1206(b)(2).

[^1041]: These delineated requirements were not contained in § 51.319
    prior to the rule being vacated by the Supreme Court in *Iowa Utils.
    Bd.*