*Pages 1--33 from  Microsoft Word - 15704*
 Federal  Communications  Commission  FCC  99-  70 
 Before  the  Federal  Communications  Commission 
 Washington,  D.  C.  20554 
 In  Matter  of  )  ) 
 Implementation  of  the  Local  Competition  )  CC  Docket  No.  96-  98  Provisions  in  the  Telecommunications  Act  ) 
 of  1996  )  ) 
 Interconnection  between  Local  Exchange  )  CC  Docket  No.  95-  185  Carriers  and  Commercial  Mobile  Radio  ) 
 Service  Providers  ) 


 SECOND  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING 


 Adopted:  April  8,  1999  Released:  April  16,  1999 
 By  the  Commission:  Chairman  Kennard,  Commissioners  Furchtgott-  Roth  and  Powell  issuing  separate  statements. 


 Comment  Date:  [30  Days  after  Publication  in  Federal  Register]  Reply  Date:  [45  Days  after  Publication  in  Federal  Register] 


 TABLE  OF  CONTENTS  Paragraph  Number 
 I.  INTRODUCTION  .....................................................................................................................................  3 
 II.  BACKGROUND  ......................................................................................................................................  4 
 III.  REQUEST  FOR  FURTHER  COMMENTS  ......................................................................................  6  A.  Identification  of  Unbundled  Network  Elements  on  a  Nationwide  Basis...................................  7 
 B.  .............................................  Interpretation  of  the  Term  "Proprietary"  in  Section  251(  d)(  2)(  A)  9  C.  .................................................................  Interpretation  of  "Necessary"  in  Section  251(  d)(  2)(  A)  9 
 D.  .......................................................................  Interpretation  of  "Impair"  in  Section  251(  d)(  2)(  B)  10  E.  ..........................................  The  Difference  Between  the  "Necessary"  and  "Impair"  Standards  10 
 F.................................................  Criteria  for  Determining  "Necessary"  and  "Impair"  Standards  11  1.  ...............................................................................................................  Essential  Facilities  Doctrine  12 
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 2.  Availability  and  Cost  of  Network  Elements  Outside  the  Incumbent  LEC's  Network................................................................................................................................................  12 
 G............................................................................................  Weight  to  be  Given  to  Various  Factors  14  H.  Application  of  Criteria  to  Previously  Identified  and  Other  Network  Elements....................  15 
 I.  Modifications  to  Unbundling  Requirements  ................................................................................  17  J.  ...........................................................................................................................  Additional  Questions  19 


 IV.  PROCEDURAL  ISSUES.....................................................................................................................  20  A.  .......................................................................................................................  Ex  Parte  Presentations  20 
 B.  ....................................................................  Supplemental  Initial  Regulatory  Flexibility  Analysis  21  C.  .............................................................................................................  Comment  Filing  Procedures  22 
 D.  ..........................................................................................................................  Further  Information  23 


 V.  ORDERING  CLAUSES........................................................................................................................  23 
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 I.  INTRODUCTION 
 1.1.1  On  January  25,  1999,  the  United  States  Supreme  Court  upheld  all  but  one  of  the  Commission's  local  competition  rules  that  had  been  challenged  before  the  United  States  Court  of 
 Appeals  for  the  Eighth  Circuit  (Eighth  Circuit).  The  Supreme  Court  rejected,  in  part,  the  Commission's  implementation  of  the  network  element  unbundling  obligations  set  forth  in  section 
 251(  c)(  3)  of  the  Telecommunications  Act  of  1996,  1  and  concluded  that  section  51.319  of  the  Commission's  rules  should  be  vacated.  2  Section  51.319,  which  was  adopted  in  the  Local 
 Competition  First  Report  and  Order,  CC  Docket  No.  96-  98,  3  sets  forth  the  minimum  set  of  network  elements  that  incumbent  local  exchange  carriers  (LECs)  must  make  available  on  an 
 unbundled  basis  to  requesting  carriers  pursuant  to  sections  251(  c)(  3)  and  251(  d)(  2).  The  Supreme  Court  found  that  the  Commission,  in  determining  which  network  elements  must  be 
 unbundled  pursuant  to  section  251(  c)(  3),  had  not  adequately  considered  the  "necessary"  and  "impair"  standards  of  section  251(  d)(  2).  4  By  this  Second  FNPRM,  we  seek  to  refresh  the  record 
 in  CC  Docket  96-  98,  specifically  on  the  issues  of:  (1)  how,  in  light  of  the  Supreme  Court  ruling,  the  Commission  should  interpret  the  standards  set  forth  in  section  251(  d)(  2);  and  (2)  which 
 specific  network  elements  the  Commission  should  require  incumbent  LECs  to  unbundle  under  section  251(  c)(  3). 


 1.1.2  The  ability  of  requesting  carriers  to  use  unbundled  network  elements,  including  combinations  of  unbundled  network  elements,  is  integral  to  achieving  Congress'  objective  of 
 promoting  rapid  competition  in  the  local  telecommunications  market.  Our  identification  of  the  network  elements  that  must  be  unbundled  pursuant  to  section  251  is  therefore  a  critical  tool  for 
 promoting  the  goals  of  the  1996  Act.  In  this  proceeding,  we  seek  to  move  forward  quickly  to  resolve  the  issue  of  which  network  elements  incumbent  LECs  must  make  available  on  an 
 unbundled  basis,  in  order  to  reduce  uncertainties  in  the  marketplace  and  to  allow  carriers  to  make  informed  and  rational  business  decisions  in  order  to  provide  service  on  a  competitive  basis  to 
 consumers. 
 1.1.3  We  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 
 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  Corp.,  et  al.  v.  Iowa  Utils.  Bd.  et  al.,  119  S.  Ct.  721  (1999). 
 3  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  (1996)  (  Local  Competition  First  Report  and  Order  ). 


 4  AT&  T  v.  Iowa  Utils.  Bd  .,  119  S.  Ct.  at  733-  36. 
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 innovative  technologies  to  meet  the  ever-  increasing  demand  for  high-  speed,  high-  capacity  advanced  services.  In  order  to  encourage  competition  among  carriers  to  develop  and  deploy  new 
 advanced  services,  it  is  critical  that  the  marketplace  for  these  services  be  conducive  to  investment,  innovation,  and  meeting  the  needs  of  consumers.  Accordingly,  as  we  revisit  our  rule 
 implementing  the  network  unbundling  obligations  of  the  Act,  we  will  consider,  as  well,  how  the  unbundling  obligations  of  the  Act  can  best  facilitate  the  rapid  and  efficient  deployment  of  all 
 telecommunications  services,  including  advanced  services. 
 1.1.4  We  need  to  move  quickly  in  this  proceeding  but,  as  always,  we  must  also  move  with  precision.  The  Supreme  Court's  opinion  requires  the  Commission  to  take  a  hard  look  at  the 
 question  of  when  an  incumbent  local  exchange  carrier  must  make  parts  of  its  network  available  to  competitors  at  cost-  based  rates.  In  the  words  of  the  Court,  we  are  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."  5  We  therefore  seek 
 further  comment  to  refresh  the  record  in  this  proceeding  in  order  to  identify  those  network  elements  to  which  incumbent  local  exchange  carriers  must  provide  nondiscriminatory  access  -- 
 giving  substance  to  the  requirements  of  section  251(  d)(  2). 
 II.  BACKGROUND 
 1.1.5  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  and  responsibilities  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.  6  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."  7 


 1.1.6  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 


 5  Id.  at  736. 


 6  Certain  rural  telephone  companies  may  be  exempt  from  the  unbundling  provisions  of  section  251.  See  47  U.  S.  C.    251(  f). 
 7  47  U.  S.  C.    251(  d)(  2). 
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 "an  element  is  a  prerequisite  for  competition,"  8  and  it  defined  "impair"  to  mean  "to  make  or  cause  to  become  worse;  diminish  in  value."  9  The  Commission  also  determined  that  a  requesting 
 carrier's  ability  to  offer  service  is  "impaired"  ("  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."  10 
 1.1.7  After  addressing  the  "necessary"  and  "impair"  standards,  the  Commission  adopted  rule  51.319,  which  sets  forth  the  network  elements  that  incumbent  LECs  must  make  available  to 
 requesting  carriers  on  an  unbundled  basis.  11  Section  51.319  of  the  Commission's  rules  required  incumbent  LECs  to  make  available,  on  an  unbundled  basis,  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.  12 
 1.1.8  Following  adoption  of  the  Local  Competition  First  Report  and  Order,  incumbent  LECs  and  state  commissions  filed  various  challenges  to  the  Commission's  rules;  these  appeals 
 were  consolidated  in  the  Eighth  Circuit.  Among  other  holdings,  the  Eighth  Circuit  rejected  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).  13  Accordingly,  the  Eighth  Circuit  upheld  section  51.319.  A  number  of 
 parties  sought  and  were  granted  review  of  the  Eighth  Circuit's  decision  by  the  Supreme  Court. 
 1.1.9  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.  14  The  Court  concluded  that  the  Commission  had  not  adequately  considered 


 8  Local  Competition  First  Report  and  Order  ,  11  FCC  Rcd  at  15641-  42,  para.  282. 
 9  Local  Competition  First  Report  and  Order  ,  11  FCC  Rcd  at  15643,  para.  285  (quoting  Random  House  College  Dictionary 
 665  (rev.  ed.  1984)). 


 10  Local  Competition  First  Report  and  Order  ,  11  FCC  Rcd  at  15643,  para.  285. 


 11  Local  Competition  First  Report  and  Order  ,  11  FCC  Rcd  at  15683,  para.  366. 
 12  47  C.  F.  R.    51.319.  We  note  that  the  Commission's  rules  allowed  states  to  impose  additional  unbundling  requirements 
 pursuant  to  the  Commission's  interpretation  of  section  251(  d)(  2).  Local  Competition  First  Report  and  Order  ,  11  FCC  Rcd  at  15641-  42,  paras.  281-  83. 


 13  Iowa  Utils.  Bd.  v.  FCC,  120  F.  3d  753,  808-  10  (8th  Cir.  1997)  (  Iowa  Utils.  Bd  .). 
 14  AT&  T  v.  Iowa  Utils.  Bd  .,  119  S.  Ct.  at  733-  36.  As  already  noted,  the  Supreme  Court  upheld  all  but  one  of  the  local  competition 
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 the  "necessary"  and  "impair"  standards  of  section  251(  d)(  2).  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."  15  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."  16  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.  17 
 III.  REQUEST  FOR  FURTHER  COMMENTS 
 1.1.10  In  response  to  the  Supreme  Court  ruling,  we  must  further  consider  the  "necessary"  and  "impair"  standards  of  section  251(  d)(  2)  in  identifying  network  elements  that  are  subject  to 
 the  unbundling  requirements  of  section  251(  c)(  3).  Although  we  retain  the  right  to  consider  and  rely  upon  comments  previously  filed  in  this  docket,  any  comments  parties  want  the  Commission 
 to  consider  on  this  issue  must  be  filed  in  response  to  this  Notice,  and  commenters  should  not  simply  incorporate  by  reference  previous  arguments  made  in  this  proceeding. 


 1.1.11  We  seek  comment  on  a  number  of  issues  related  to  the  interpretation  of  section  251(  d)(  2),  including  identification  of  unbundled  network  elements  on  a  nationwide  basis,  the 
 interpretation  of  the  "necessary"  and  "impair"  standards  of  section  251(  d)(  2),  and  the  criteria  the  Commission  and  states  should  consider  in  determining  whether  a  network  element  is  subject  to 


 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  the  Commission's  rulemaking  authority  extends  to  sections  251  and  252.  Specifically,  the  Court 
 found  that  the  Commission's  rules  governing  unbundled  access  are,  with  the  exception  of  identifying  unbundled  network  elements  under  section  251(  d)(  2),  consistent  with  the  1996  Act:  (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  within  the  features  and  services  that  must  be  provided  to  competitors,  is  reasonable;  (2)  the 
 Commission  reasonably  omitted  a  facilities-  ownership  requirement;  (3)  the  Commission's  rule  51.315(  b),  which  forbids  incumbents  to  separate  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.  724-  29. 


 15  AT&  T  v.  Iowa  Utils.  Bd  .,  119  S.  Ct.  at  735. 
 16  Id.  at  733-  36  (emphasis  in  original). 
 17  Id.  at  735. 
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 the  unbundling  obligations  of  section  251(  c)(  3)  of  the  1996  Act.  In  determining  which  network  elements  are  subject  to  the  unbundling  obligations  of  section  251(  c)(  3),  we  seek  comment  on  an 
 approach  that  would  allow  sunset  or  modification  of  the  unbundling  obligations  as  technology  and  market  conditions  evolve  over  time.  Such  an  approach  would  allow  the  Commission  and  the 
 states  to  identify  particular  network  elements  that  should  be  sunsetted  or  removed  from,  or  added  to,  the  initial  list  of  elements  subject  to  the  unbundling  obligations  of  the  Act,  as  warranted. 


 1.1.12  As  we  have  stated,  the  Supreme  Court  found  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.  More  generally,  we  note  that  application  of  the  "necessary"  and  "impair"  standards  that  we  develop  pursuant  to  section  251(  d)(  2)  may  be 
 relatively  fact-  intensive.  At  the  same  time,  we  recognize  that  in  resolving  these  fact-  intensive  questions,  particularly  in  an  expedited  time  frame,  it  may  be  beneficial  to  consider  what 
 evidentiary  standards  and  presumptions  are  most  appropriate,  both  in  the  context  of  the  initial  designation  of  network  elements  subject  to  unbundling  requirements,  and  any  subsequent 
 proceedings  to  modify  the  unbundling  obligations.  We  ask  parties  to  comment  on  the  types  of  evidentiary  standards  or  approaches  that  should  govern  application  of  the  section  251(  d)(  2) 
 standards  in  determining  which  network  elements  must  be  unbundled.  Commenters  should  address  which  parties  should  bear  the  burdens  of  proof  and  production,  whether  any 
 presumptions  should  apply,  and  why.  Commenters  are  also  requested  to  justify  the  evidentiary  standards  or  approaches  they  advocate,  especially  in  light  of  the  kinds  of  data  that  can  be  made 
 available  in  this  proceeding,  the  purposes  and  structure  of  the  Act,  and  the  identity  of  the  parties  most  likely  to  be  in  control  of  relevant  data. 


 A.  Identification  of  Unbundled  Network  Elements  on  a  Nationwide  Basis 
 1.1.13  In  the  Local  Competition  First  Report  and  Order,  the  Commission  concluded  that,  by  identifying  a  specific  list  of  network  elements  that  must  be  unbundled,  applicable 
 uniformly  in  all  states  and  territories,  we  would  best  further  the  "national  policy  framework"  18  established  by  Congress  to  promote  competition.  In  particular,  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  carriers'  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).  19  Accordingly,  the  Commission  adopted  a 
 minimum  list  of  network  elements  that  must  be  unbundled  on  a  national  basis,  and  permitted  states  to  impose  additional  unbundling  requirements.  20 


 18  S.  Conf.  Rep.  No.  104-  230,  104th  Cong.,  2d  Sess.  1  (1996)  (Joint  Explanatory  Statement). 
 19  Local  Competition  First  Report  and  Order  ,  11  FCC  Rcd  at  15616-  27. 
 20  Local  Competition  First  Report  and  Order  ,  11  FCC  Rcd  at  15616-  27,  paras  226-  48;  15641-  42,  paras.  281-  83. 
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 1.1.14  We  find  nothing  in  the  Supreme  Court's  decision  that  calls  into  question  our  decision  to  establish  minimum  national  unbundling  requirements.  We  therefore  tentatively 
 conclude  that  the  Commission  should  continue  to  identify  a  minimum  set  of  network  elements  that  must  be  unbundled  on  a  nationwide  basis.  We  seek  comment  on  this  tentative  conclusion. 
 We  also  seek  comment  on  whether  the  existence  of  geographic  variations  in  the  availability  of  elements  outside  the  incumbent  LEC's  network  is  relevant  to  a  decision  to  impose  minimum 
 national  unbundling  requirements.  We  also  seek  comment  on  the  relevance,  if  any,  to  the  interpretation  of  the  "necessary"  and  "impair"  standard,  that  we  are  reexamining  these  issues 
 today,  more  than  three  years  after  passage  of  the  Act.  We  note  that,  under  our  rules,  the  states  have  authority  to  impose  additional  unbundling  requirements,  pursuant  to  our  interpretation  of 
 section  251(  d)(  2).  21  We  do  not  propose  to  eliminate  the  states'  authority  to  impose  additional  unbundling  requirements,  pursuant  to  the  standards  and  criteria  we  adopt  in  this  proceeding.  In 
 addition,  we  seek  comment  on  whether  states  may,  consistent  with  the  Supreme  Court's  decision,  apply  our  interpretation  of  section  251(  d)(  2)  to  determine  in  the  first  instance  that  a  network 
 element  need  not  be  unbundled  in  light  of  the  availability  of  that  element  outside  the  incumbent's  network  in  that  state.  If  so,  under  what  circumstances,  if  any,  should  the  Commission  review 
 state  decisions? 


 21  Local  Competition  First  Report  and  Order  ,  11  FCC  Rcd  at  15641-  42,  paras.  281-  83;  47  C.  F.  R.    51.317.  Although  the 
 Supreme  Court's  analysis  of  section  251(  d)(  2)  may  have  a  bearing  on  Rule  317,  which  allowed  states  to  identify  additional  network  elements  for  unbundling,  the  court  did  not  directly  address  that  role.  The  Commission  has  asked  the  Eighth  Circuit 


 for  a  voluntary  remand  of  Rule  317  so  that  the  Commission  may  consider  it  further  in  light  of  the  Supreme  Court's  decision. 
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 B.  Interpretation  of  the  Term  "Proprietary"  in  Section  251(  d)(  2)(  A) 
 1.1.15  Section  251(  d)(  2)(  A)  refers  to  network  elements  that  are  "proprietary"  in  nature.  We  seek  comment  on  the  meaning  of  the  term  "proprietary"  for  purposes  of  this  section.  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."  22  The  Commission  also  concluded  that  the  incumbent  LEC's  signaling  protocols  that  adhere  to  Bellcore  standards  are  not  proprietary  in  nature  because 
 they  use  industry-  wide,  rather  than  LEC-  specific,  protocols.  23  We  seek  comment  on  whether  we  should  consider  network  elements  as  non-  proprietary  if  the  interfaces,  functions,  features,  and 
 capabilities  sought  by  the  requesting  carrier  are  defined  by  recognized  industry  standard-  setting  bodies  (e.  g.,  ITU,  ANSI,  or  IEEE),  are  defined  by  Bellcore  general  requirements,  or  otherwise 
 are  widely  available  from  vendors.  We  also  seek  comment  on  whether  non-  carrier  specific  standards  can  be  proprietary.  What  effect,  if  any,  could  Commission  action  have  on  whether  a 
 network  element  is  proprietary?  Commenters  should  discuss  whether  the  term  "proprietary"  should  be  limited  to  information,  software,  or  technology  that  can  be  protected  by  patents, 
 copyrights,  or  trade  secrecy  laws,  or  whether  it  can  also  apply  to  materials  that  do  not  qualify  for  such  legal  protection.  If  a  network  element  contains  what  parties  assert  to  be  proprietary 
 information,  but  access  to  that  information  is  not  accessible  by  third  parties  seeking  access  to  a  particular  element,  should  the  entire  element  be  considered  "proprietary"  for  purposes  of  section 
 251(  d)(  2)(  A)?  We  also  seek  comment  on  whether  the  term  "proprietary"  refers  solely  to  proprietary  interests  the  incumbent  LEC  may  have  in  an  element,  or  whether  it  may  also  refer  to 
 proprietary  interests  of  third  parties  (e.  g.,  vendors). 
 C.  Interpretation  of  "Necessary"  in  Section  251(  d)(  2)(  A) 
 1.1.16  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."  24  We  seek  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). 


 22  Id.  at  15641,  para.  282.  For  most  network  elements  required  to  be  unbundled  under  section  51.319,  the  Commission  noted 
 that  parties  had  not  identified  any  proprietary  concerns.  For  those  network  elements  where  parties  did  identify  proprietary  concerns,  the  Commission  found  that  access  to  such  networks  was  "necessary."  Id.  at  15694,  15697,  15710,  15720,  15739,  15744-  45, 


 15748,  15766,  15774,  paras.  388,  393,  419,  446,  481,  490,  497,  521,  539. 
 23  Id.  at  15739,  para.  481. 


 24  Id.  at  15641,  para.  282. 
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 D.  Interpretation  of  "Impair"  in  Section  251(  d)(  2)(  B) 
 1.1.17  Section  251(  d)(  2)(  B)  requires  us  to  consider  whether  the  failure  to  provide  access  to  an  element  would  "impair"  the  ability  of  a  new  entrant  to  provide  a  service  it  seeks  to  offer.  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."  25  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."  26  We  seek  comment  on  the  meaning  of  the  term  "impair."  Should  the  Commission  adopt  a  standard  by  which  we 
 examine  whether  the  new  entrant's  ability  to  offer  a  telecommunications  service  in  a  competitive  manner  is  materially  diminished  in  value?  Would  a  new  entrant  be  "impaired"  from  providing 
 service  in  a  certain  area  if  there  is  no  additional  collocation  space  available  in  the  incumbent  LEC's  central  office? 


 E.  The  Difference  Between  the  "Necessary"  and  "Impair"  Standards 
 1.1.18  We  seek  comment  on  the  difference  between  the  "necessary"  standard  under  section  251(  d)(  2)(  A)  and  the  "impair"  standard  of  section  251(  d)(  2)(  B).  Since  the  1996  Act 
 employs  two  different  terms,  must  the  Commission  apply  different  criteria  to  determine  whether  a  network  element  meets  these  standards?  To  the  extent  parties  propose  using  the  same  criteria, 
 we  seek  comment  on  the  legal  basis  for  applying  the  same  criteria  as  well  as  on  how  we  should  apply  the  criteria  to  differentiate  between  the  "necessary"  and  "impair"  standards. 


 1.1.19  In  the  Local  Competition  First  Report  and  Order,  the  Commission  found  that  the  "necessary"  standard  only  applies  to  "proprietary"  network  elements,  and  that  the  "impair" 
 standard  applies  to  "nonproprietary"  network  elements.  This  construction  was  also  applied  by  the  Eighth  Circuit  and,  apparently,  by  the  Supreme  Court  in  reviewing  the  Commission's 
 analysis  of  unbundling  requirements  under  section  251(  d)(  2).  27  We  seek  comment  on  whether  our  understanding  of  the  courts'  interpretation  should  govern  in  this  proceeding. 


 25  Id.  at  15643,  para.  285  (citing  Random  House  College  Dictionary  665  (rev.  ed.  1984)). 
 26  Id.  The  Commission  concluded  that  the  "impairment"  standard  of  section  251(  d)(  2)(  B)  "required  the  Commission  and  the 
 states,  when  evaluating  unbundled  requirements  beyond  those  identified  in  our  minimum  list,  to  consider  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,  compared  with  providing  that  service  over  other  unbundled  elements  in  the  incumbent  LEC's  network." 


 27  Iowa  Utils.  Bd.,  120  F.  3d  at  811  n.  31;  see  also  AT&  T  v.  Iowa  Utils.  Bd  .,  119  S.  Ct.  at  735  (stating  that  "the  Commission's 
 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"). 
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 F.  Criteria  for  Determining  "Necessary"  and  "Impair"  Standards 
 1.1.20  In  this  section,  we  seek  more  specific  comment  on  what  factors  or  criteria  the  Commission  should  adopt  in  determining  whether  access  to  network  elements  is  necessary  and 
 whether  failure  to  provide  such  access  would  impair  an  entrant's  ability  to  provide  service.  The  Supreme  Court  has  provided  some  guidance  in  this  respect.  The  Court  stated  that  "the  Act 
 requires  the  FCC  to  apply  some  limiting  standard,  rationally  related  to  the  goals  of  the  Act,  which  it  has  simply  failed  to  do."  28  The  Court  stated  further  that  "[  w]  e  cannot  avoid  the 
 conclusion  that,  if  Congress  had  wanted  to  give  blanket  access  to  incumbents'  networks  on  a  basis  as  unrestricted  as  the  scheme  the  Commission  has  come  up  with,  it  would  not  have 
 included  section  251(  d)(  2)  in  the  statute  at  all.  It  would  simply  have  said  (as  the  Commission  in  effect  has)  that  whatever  requested  element  can  be  provided  must  be  provided."  29 


 1.1.21  Although  the  Supreme  Court  acknowledged  incumbent  LEC  arguments  that  section  251(  d)(  2)  codifies  "something  akin"  to  the  essential  facilities  doctrine,  the  Court  did  not 
 find  that  section  251(  d)(  2)  mandates  that  standard.  We  nevertheless  seek  comment  on  the  significance  of  the  essential  facilities  standard  under  section  251(  d)(  2).  Next,  the  Supreme  Court 
 concluded  that  we  must  take  into  account  the  availability  of  substitutes  for  incumbent  LEC  network  elements  outside  of  the  incumbent's  network.  We  thus  seek  comment  on  when  we 
 should  deem  a  substitute  sufficiently  available  so  as  to  render  access  to  the  incumbent's  network  element  unnecessary.  Finally,  the  Court  found  that  the  Commission  erred  in  concluding  that 
 "any"  increase  in  cost  or  decrease  in  quality  resulting  from  the  failure  to  gain  access  to  a  network  element  satisfied  the  necessary  and  impair  standard.  We  therefore  seek  comment  on  whether  and 
 the  extent  to  which  an  increase  in  cost  or  decrease  in  quality  caused  by  the  inability  of  obtaining  access  to  an  incumbent's  network  element  meets  the  "necessary"  or  "impairment"  standard.  In 
 addressing  these  factors,  commenters  should  distinguish  between  the  "necessary"  and  "impair"  standards  if  appropriate  to  do  so  in  light  of  the  factor  being  discussed. 


 28  AT&  T  v.  Iowa  Utils.  Bd.  ,  119  S.  Ct.  at  734-  35. 
 29  Id.  at  735. 
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 1.  Essential  Facilities  Doctrine 
 1.1.22  In  their  arguments  before  the  Supreme  Court,  incumbent  LECs  asserted  that  section  251(  d)(  2)  codifies  a  standard  similar  to  the  "essential  facilities"  doctrine,  as  defined  in 
 antitrust  jurisprudence.  30  We  ask  parties  to  describe  this  doctrine  and  how  it  should  be  applied,  if  at  all,  to  the  determination  of  which  network  elements  incumbent  LECs  must  provide  on  an 
 unbundled  basis  pursuant  to  sections  251(  c)(  3)  and  251(  d)(  2).  Parties  should  also  cite  any  relevant  legislative  history  that  would  indicate  Congress'  views  on  this  standard  or  any  similar 
 standard. 
 1.1.23  In  discussing  the  "essential  facilities"  doctrine,  the  Supreme  Court  observed  that  "it  may  be  that  some  other  standard  would  provide  an  equivalent  or  better  criterion  for  the 
 limitation  upon  network-  element  availability  that  the  statute  has  in  mind."  31  Accordingly,  we  seek  comment  on  alternative  standards  that  should  be  considered  in  determining  which  network 
 elements  must  be  unbundled  pursuant  to  sections  251(  c)(  3)  and  251(  d)(  2). 
 2.  Availability  and  Cost  of  Network  Elements  Outside  the  Incumbent  LEC's  Network 


 1.1.24  The  Supreme  Court  stated  that,  in  determining  the  list  of  elements  that  incumbent  LECs  must  provide  on  an  unbundled  basis  pursuant  to  sections  251(  c)(  3)  and  251(  d)(  2)  of  the 
 Act,  the  Commission  must  take  into  consideration  the  availability  of  network  elements  outside  the  incumbent's  network.  32  We  seek  comment  on  how  the  Commission  should  consider  the 
 availability  of  network  elements  outside  of  the  incumbent's  network.  We  ask  commenters  to  discuss  potential  alternative  sources  of  network  elements  from  other  competing  carriers,  as  well 
 as  availability  of  network  elements  through  self-  provisioning.  We  also  ask  commenters  to  provide  information  on  the  costs  of  alternatives,  the  length  of  time  it  takes  to  obtain  alternatives, 
 and  the  extent  to  which  alternatives  to  unbundled  elements  are  being  utilized  now.  We  also  seek  comment  on  how  the  Commission,  in  assessing  potential  alternative  sources  of  network 
 elements,  should  evaluate  alternatives  available  from  other  competing  carriers  if  those  carriers  are  not  subject  to  unbundling  obligations  of  251(  c)(  3). 


 1.1.25  In  determining  whether  a  requesting  carrier's  ability  to  provide  a  service  would  be  impaired  if  it  did  not  obtain  a  network  element  on  an  unbundled  basis  from  the  incumbent  LEC, 
 how  should  we  assess  and  treat  the  additional  cost  of  utilizing  an  alternative  source  for  that  element?  The  Supreme  Court  found  insufficient  the  Commission's  "assumption  that  any  increase 


 30  AT&  T  v.  Iowa  Utils.  Bd  .,  119  S.  Ct.  at  734  (referencing  P.  Areeda  &  H.  Hovenkamp,  Antitrust  Law  at  771-  773  (1996)). 
 31  Id. 
 32  Id.  at  735. 
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 in  cost  would  impair  a  requesting  carrier's  ability  to  provide  service."  33  We  therefore  seek  comment  on  whether  and  the  extent  to  which  the  Commission  should  consider  differences  in 
 costs  between  obtaining  the  network  element  from  the  incumbent  versus  through  self-provisioning  or  from  an  alternative  source.  Should  the  Commission  adopt  a  standard  under 
 which  we  examine  whether  the  difference  in  cost  between  obtaining  a  network  element  from  an  incumbent  LEC  as  opposed  to  obtaining  it  through  self-  provisioning  or  from  an  alternative 
 source  is  a  "material"  difference?  If  so,  what  constitutes  a  "material"  difference?  For  example,  if  the  cost  of  obtaining  the  network  element  from  the  incumbent  LEC  is  half  of  the  cost  of 
 obtaining  it  from  another  source,  should  the  incumbent  be  required  to  unbundle  it?  How  would  this  work  in  practice?  Should  the  threshold  vary  by  the  network  element? 


 1.1.26  We  also  seek  comment  on  what  specific  cost  differences  the  Commission  should  include  in  evaluating  the  "necessary"  and  "impair"  standards.  In  the  Local  Competition  First 
 Report  and  Order,  the  Commission  stated  that  incumbent  LECs  "have  economies  of  density,  connectivity,  and  scale  .  .  .  [that  must]  be  shared  with  entrants."  34  We  seek  comment  on  the 
 extent  to  which  we  should  consider  cost  differences  based  on  economies  of  density,  connectivity,  and  scale  in  determining  whether  a  network  element  must  be  unbundled  pursuant  to  sections 
 251(  c)(  3)  and  251(  d)(  2).  We  also  seek  comment  on  whether  the  Commission  should  evaluate  "sunk"  costs  that  would  be  incurred  by  requesting  carriers  if  they  were  to  obtain  the  network 
 elements  through  self-  provisioning  or  from  other  sources  outside  the  incumbent  LEC's  network  (e.  g.,  those  costs  associated  with  entry  that  are  not  fully  recoverable  if  the  requesting  carrier  exits 
 the  market). 
 1.1.27  We  seek  comment  on  the  extent  to  which  we  should  consider  the  quantity  of  facilities  that  may  be  necessary  for  competitors  to  obtain  in  order  to  compete  effectively.  For 
 example,  a  competitor's  ability  to  compete  may  not  be  "impaired"  if  it  is  required  to  self-provision  only  one  switch.  With  respect  to  some  entry  strategies,  however,  in  order  to  compete 
 effectively,  the  new  entrant  may  need  to  obtain  multiple  switches.  Accordingly,  we  ask  parties  to  comment  on  the  extent  to  which  such  factors  as  economies  of  scale,  penetration  assumptions, 
 and  the  requesting  carrier's  particular  market  entry  strategies  should  be  considered  as  part  of  the  "necessary"  and  "impair"  analysis. 


 1.1.28  In  addition  to  cost,  we  seek  comment  on  other  factors  that  the  Commission  should  consider  in  evaluating  the  availability  of  network  elements  from  alternative  sources.  For 
 example,  how  should  the  Commission  assess  factors  such  as  the  difference  in  the  length  of  time  it  takes  to  obtain  a  network  element  from  an  incumbent  LEC  versus  obtaining  it  from  an 
 alternative  source.  We  seek  comment,  in  particular,  on  whether  and  the  extent  to  which  the  language  of  the  statute  and  the  Supreme  Court's  opinion  constrain  the  factors  that  we  can  or 


 33  Id. 
 34  Local  Competition  First  Report  and  Order  ,  11  FCC  Rcd  at  15508-  09,  para.  11. 
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 should  consider  in  evaluating  the  availability  of  elements  outside  the  incumbent's  network.  We  also  seek  comment  on  whether  differences  in  quality  that  result  from  acquiring  a  network 
 element  from  the  incumbent  LEC  compared  to  an  alternative  source  are  relevant  to  our  analysis  of  the  "necessary"  and  "impair"  standards  of  section  251(  d)(  2).  Parties  advocating  the 
 application  of  such  factors  for  analyzing  unbundling  requirements  under  the  "necessary"  and  "impair"  standards  of  section  251(  d)(  2)  should  discuss  specific  methods  for  measuring  and 
 applying  those  differences  to  specific  network  elements. 
 G.  Weight  to  be  Given  to  Various  Factors 
 1.1.29  Section  251(  d)(  2)  states  that  the  Commission  shall  "consider,  at  a  minimum"  whether  access  is  necessary  or  lack  of  access  would  impair  a  requesting  carrier's  ability  to 
 provide  service.  In  explaining  the  Commission's  duty  when  directed  by  Congress  to  "consider"  a  particular  factor,  the  D.  C.  Circuit  has  held:  "That  means  only  that  [the  Commission]  must  'reach 
 an  express  and  considered  conclusion'  about  the  bearing  of  a  factor,  but  is  not  required  'to  give  any  specific  weight'  to  it."  35  At  the  same  time,  the  Supreme  Court  observed  in  its  remand  of  the 
 Local  Competition  First  Report  and  Order  that,  in  determining  which  network  elements  must  be  unbundled,  "the  Commission  cannot  consistent  with  the  statute,  blind  itself  to  the  availability  of 
 elements  outside  the  incumbent's  network."  36  The  Court  also  observed  that  "giving  some  substance  to  the  "necessary"  and  "impair"  requirements  .  .  .  is  not  achieved  by  disregarding 
 entirely  the  availability  of  elements  outside  the  network  .  .  .  ."  37  What  weight,  then,  should  the  Commission  attach  to  the  'necessary'  and  'impair'  requirements  of  section  251(  d)(  2)?  In 
 particular,  commenters  should  address  how  much  weight  the  Commission  must  give  to  these  requirements  in  order  to  satisfy  section  251(  d)(  2)  and  the  Supreme  Court  decision. 


 1.1.30  We  also  seek  comment  on  what  other  factors  the  Commission  should  consider,  in  addition  to  the  "necessary"  and  "impair"  standards,  in  determining  whether  a  particular  network 
 element  should  be  unbundled,  and  on  how  any  proposed  additional  criteria  would  interrelate  with  the  "necessary"  and  "impair"  standards  set  forth  in  the  statute.  Commenters  should  specifically 
 identify  any  factors  deemed  sufficiently  important  in  meeting  the  goals  of  the  1996  Act  to  require  the  unbundling  of  a  network  element,  even  if  such  unbundling  did  not  otherwise  meet  the 
 "necessary"  or  "impair"  standards  of  sections  251(  d)(  2)(  A)  or  (B)  standing  alone. 


 35  Time  Warner  Entertainment  Co.  v.  FCC  ,  56  F.  3d  151,  175  (D.  C.  Cir.  1995)  (quoting  Central  Vermont  Ry.  v.  ICC  ,  711  F.  2d  331, 
 336  (D.  C.  Cir.  1983)). 


 36  AT&  T  v.  Iowa  Utils.  Bd.  ,  119  S.  Ct.  at  735. 


 37  Id.  at  736. 
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 1.1.31  Finally,  we  ask  commenters  addressing  particular  standards  and  criteria  for  interpreting  the  "necessary"  and  "impair"  standards  of  section  251(  d)(  2)  to  discuss  how  those 
 standards  and  criteria  are  consistent  with,  and  further  the  goals  of  the  1996  Act. 
 H.  Application  of  Criteria  to  Previously  Identified  and  Other  Network  Elements 
 1.1.32  As  discussed  above,  in  the  Local  Competition  First  Report  and  Order,  the  Commission  identified  seven  network  elements  that  were  subject  to  the  unbundling  obligations 
 of  section  251(  c)(  3).  38  We  note  that  in  the  Local  Competition  proceeding,  even  incumbent  LECs  agreed  that  the  local  loop  is  a  network  element  that  must  be  unbundled  pursuant  to  sections 
 251(  c)(  3)  and  251(  d)(  2)  of  the  Act.  39  It  is  our  strong  expectation  that  under  any  reasonable  interpretation  of  the  "necessary"  and  "impair"  standards  of  section  251(  d)(  2),  loops  will  be 
 generally  subject  to  the  section  251(  c)(  3)  unbundling  obligations.  We  seek  comment  on  this  analysis.  We  also  see  nothing  in  the  statute  or  the  Supreme  Court's  opinion  that  would  preclude 
 us  from  requiring  that  loops  that  must  be  unbundled  must  also  be  conditioned  in  a  manner  that  allows  requesting  carriers  supplying  the  necessary  electronics  to  provide  advanced 
 telecommunications  services,  such  as  digital  subscriber  line  technology  (xDSL).  40  We  seek  comment  on  this  analysis. 


 1.1.33  Parties  are  requested  to  apply  their  proposed  standards  and  criteria,  as  well  as  other  proposed  standards,  to  the  loop  and  the  other  six  network  elements  previously  identified  in 
 the  Local  Competition  First  Report  and  Order.  Parties  should  also  apply  their  proposed  standards  and  criteria  to  any  other  network  elements  they  contend  should  be  unbundled.  For 
 example,  we  seek  comment  on  whether,  due  to  technology  changes,  we  should  require  sub-  loop  unbundling  at  the  remote  terminal  or  at  other  points  within  the  incumbent  LEC's  network. 
 Parties  should  also  comment  on  situations  where  the  incumbent  LEC  owns  facilities  on  the  end  user's  side  of  the  network  demarcation  point  and  whether  those  facilities  should  be  unbundled 
 under  section  251(  c)(  3).  In  light  of  the  Supreme  Court  decision,  we  also  seek  comment  on  whether  the  Commission  can  require  incumbent  LECs  to  combine  unbundled  network  elements 
 that  they  do  not  already  combine  (e.  g.,  an  unbundled  loop  combined  with  unbundled  transport).  41 


 38  See  section  II,  supra  . 


 39  See,  e.  g.,  USTA  Initial  Comments  at  28;  GTE  Initial  Comments  at  32-  37;  BellSouth  Initial  Comments  at  37-  40;  and  Bell 
 Atlantic  Initial  Comments  at  22. 


 40  In  our  decision  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability  ,  CC  Docket  No.  98- 
 147,  Memorandum  Opinion  and  Order,  and  Notice  of  Proposed  Rulemaking,  FCC  98-  188,  para.  52  (released  Aug.  7,  1998),  we  concluded  that  under  section  251(  c)(  3)  and  our  rules,  incumbent  LECs  are  required  to  provide  unbundled  loops  conditioned  in  a 


 manner  that  allows  requesting  carriers  to  provide  advanced  services  such  as  xDSL. 
 41  Rule  315(  c)  required  incumbent  LECs  to  combine  network  elements  on  behalf  of  requesting  carriers.  47  CFR 
 51.315(  c).  The  Eighth  Circuit  vacated  Rule  315(  c)  because  the  Court  found  that  "the  plain  language  [of  section  251(  c)(  3)]  of  the 
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 To  the  extent  parties  advocate  that  certain  network  elements  fail  to  meet  the  "necessary"  or  "impair"  standard,  we  ask  that  parties  provide  the  Commission  sufficient  information  regarding 
 the  competitive  availability  of  alternatives  to  such  network  elements.  Parties  are  requested  to  include  specific  costs  and  availability  of  such  network  elements,  on  an  element-  by-  element  basis. 
 Additionally,  we  ask  commenters  to  provide  factual  information  comparing  the  quality  of  alternatives  to  those  network  elements  that  they  request  to  be  unbundled. 


 1.1.34  We  also  ask  parties  to  comment  on  whether,  in  light  of  technological  advances  or  experience  in  the  marketplace  since  adoption  of  the  Local  Competition  First  Report  and  Order, 
 the  Commission  should  modify  the  definition  of  any  of  its  previously  identified  network  elements.  For  example,  should  we  modify  the  definition  of  "loops"  or  "transport"  to  include  dark 
 fiber? 
 1.1.35  In  light  of  the  Supreme  Court  remand,  we  seek  additional  comment  on  whether  network  elements  used  in  the  provision  of  advanced  services  should  be  unbundled,  as  discussed 
 in  the  Advanced  Services  NPRM.  42  For  example,  parties  should  comment  on  whether  digital  subscriber  line  access  multiplexers  and/  or  packet  switches  should  be  unbundled  pursuant  to 
 section  251(  c)(  3).  Parties  should  also  comment  on  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  traditional  circuit-  switched  voice  services. 


 Act  indicates  that  the  requesting  carriers  will  combine  the  unbundled  elements  themselves[.]"  Iowa  Utilities  Bd  .  120  F.  3d  at  813.  The  Commission  has  filed  a  motion  before  the  Eighth  Circuit  seeking  a  voluntary  remand  of  the  Commission's  Rules  315  (c-  f) 
 and  311(  c).  Response  of  Federal  Respondents  to  Local  Exchange  Carriers'  Motion  Regarding  Further  Proceedings  on  Remand  and  Motion  for  Voluntary  Partial  Remand,  8th  Cir.  No.  96-  3321  (and  consolidated  cases),  (filed  Mar.  2,  1999).  This  motion  is  still 
 pending. 
 42  Id. 
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 I.  Modifications  to  Unbundling  Requirements 
 1.1.36  Given  that  technological,  competitive,  and  economic  factors  may,  over  time,  affect  the  availability  of  network  elements  from  sources  outside  the  incumbent  LEC's  network, 
 we  seek  comment  on  whether  the  Commission  should  adopt  a  mechanism  by  which  network  elements  would  no  longer  have  to  be  unbundled  at  a  future  date.  In  particular,  we  seek  comment 
 on  whether  affirmative  steps  by  the  parties  or  the  Commission  should  be  necessary  to  remove  a  particular  element  from  unbundling  requirements,  or  whether  affirmative  action  should  be 
 necessary  to  continue  requiring  the  unbundling  of  particular  elements.  Commenters  should  address  this  question  in  light  of  the  language  and  purposes  of  the  statute,  as  well  as  the  Supreme 
 Court's  opinion.  If  there  subsequently  is  a  modification  to  an  unbundling  requirement,  should  an  incumbent  LEC  be  required  to  continue  to  unbundle  that  element  identified  in  an  interconnection 
 agreement  until  the  date  that  the  agreement  expires?  Under  such  a  scenario,  should  an  incumbent  LEC  be  able  to  refuse  to  unbundle  a  network  element  that  is  no  longer  required  when 
 negotiating  a  new  contract  with  other  parties? 
 1.1.37  Parties  advocating  that  we  adopt  a  mechanism  for  removing  particular  elements  from  the  unbundling  requirements  should  provide  specific  details  and  explain  the  legal  basis 
 under  section  251(  d)(  2)  for  doing  so.  Parties  should  discuss  what  factors  the  Commission  should  consider  in  determining  whether  to  remove  an  element  from  the  unbundling  obligations  of 
 section  251(  c)(  3),  how  the  Commission  should  apply  those  factors  to  the  particular  element,  and  what  conditions  would  trigger  removal  from  the  unbundling  requirements.  If  the  Commission 
 adopts  a  mechanism  for  removing  the  unbundling  obligation  for  specified  network  elements,  to  what  extent  should  the  Commission  consider  whether  to  phase  out  the  use  of  such  unbundled 
 network  elements  in  a  manner  that  avoids  market  disruptions?  Should  the  incumbent  LEC  bear  the  burden  of  demonstrating  to  the  Commission  that  a  particular  network  element  no  longer  need 
 be  unbundled,  and  what  showing  should  be  necessary  to  overcome  any  presumption  in  favor  of  continuing  the  unbundling  requirement?  Alternatively,  should  competing  LECs  bear  the  burden 
 of  demonstrating  that  unbundling  is  still  required  pursuant  to  section  251(  d)(  2)?  Should  we  restrict  incumbents  from  seeking  removal  of  certain  network  elements  from  the  unbundling 
 requirements  for  a  specific  period  of  time  following  implementation  of  our  new  unbundling  rules  (e.  g.,  two  years),  or  in  the  case  of  regional  Bell  Operating  Companies  (BOCs),  until  after  section 
 271  authority  is  obtained? 
 1.1.38  We  also  seek  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  responsibility  for 
 removing  network  elements  from  any  national  unbundling  requirements,  applying  the  standards  of  section  251(  d)(  2)  we  adopt  in  this  proceeding.  If  we  were  to  delegate  such  responsibility  to 
 the  states,  what  procedure  should  apply  for  appeals  to  the  Commission  from  a  state's  determination  that  a  network  element  no  longer  qualified  for  unbundling  under  section 
 251(  c)(  3)? 
 1.1.39  We  also  seek  comment  on  whether  the  Commission  has  authority  to  adopt  a 
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 "sunset"  provision  under  which  unbundling  obligations  for  particular  elements  or  all  elements  would  no  longer  be  required,  upon  the  passage  of  time  or  occurrence  of  certain  events,  without 
 any  subsequent  action  by  the  Commission.  Inasmuch  as  Congress  included  "sunset"  provisions  in  other  parts  of  the  1996  Act,  how  does  the  lack  of  reference  to  one  here  affect  our  authority  to 
 adopt  such  a  provision?  We  seek  comment  on  specific  criteria  that  the  Commission  should  consider  in  determining  whether  to  "sunset"  a  requirement  to  provide  unbundled  network 
 elements,  if  the  Commission  has  such  authority.  Parties  should  comment  on  what  predictive  judgments  about  the  future  would  be  needed,  if  any,  and  they  should  provide  the  information  the 
 Commission  would  need  in  order  to  make  a  determination  that  a  "sunset"  provision  is  appropriate.  Parties  advocating  a  sunset  provision  should  address  any  possible  uncertainties  and 
 incentives  created  by  such  an  approach  and  any  possible  effects  on  local  competition  and  future  new  entrants. 


 1.1.40  We  also  seek  comment  on  the  extent  to  which  adoption  of  a  "sunset"  provision  would  constitute  forbearance  prohibited  under  section  10(  d)  of  the  Act.  Section  10(  d)  forbids 
 the  Commission  from  forbearing  "from  applying  the  requirements  of  section  251(  c)  or  271  .  .  .  until  it  determines  that  those  requirements  have  been  fully  implemented."  43  We  also  seek 
 comment  on  the  meaning  of  "fully  implemented"  in  this  provision  of  the  Act.  Would  it  be  considered  forbearance  if  unbundling  of  a  particular  element  were  no  longer  required  because 
 that  element  no  longer  satisfied  the  requirements  of  section  251(  d)(  2)? 


 43  47  U.  S.  C.    160(  d). 
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 J.  Additional  Questions 
 1.1.41  We  seek  comment  on  what  effect,  if  any,  the  fact  that  Congress  required  BOCs  seeking  in-  region  interLATA  authority  to  unbundle  certain  network  elements  should  have  on  our 
 interpretation  of  section  251(  d)(  2).  For  example,  should  there  be  a  presumption  that  the  network  elements  set  forth  in  the  competitive  checklist  of  section  271(  c)(  2)(  B)  are  subject  to  the 
 unbundling  obligation  contained  in  section  251(  c)(  3)?  44  Conversely,  what  would  be  the  effect  on  future  271  applications  of  concluding  that  a  network  element  identified  in  section  271(  c)(  2)(  B)  is 
 not  subject  to  the  251(  c)(  3)  unbundling  obligations?  For  example,  if  after  considering  the  "necessary"  and  "impair"  standards  of  section  251(  d)(  2)  we  determine  that  a  network  element 
 need  not  be  unbundled  pursuant  to  section  251(  c)(  3),  what  terms  and  conditions  would  still  apply  to  that  element  if  it  must  be  provided  as  part  of  the  competitive  checklist  of  section  271? 
 Commenters  should  address  what  pricing  standard,  if  any,  would  apply  in  such  a  situation,  and  what  pricing  rule  would  govern  in  arbitrations  where  the  parties  had  been  unable  to  negotiate  a 
 price.  45 
 1.1.42  In  addition,  we  seek  comment  on  whether  the  existence  of  a  competitive  market  for  a  network  element  is  necessary  to  demonstrate  that  an  element  is  sufficiently  available 
 outside  the  incumbent's  network  so  that  failure  of  the  incumbent  to  provide  the  element  would  not  be  "necessary"  or  would  not  "impair"  a  carrier's  ability  to  provide  service.  What  relevance  is 
 the  fact  that  those  entities  that  could  provide  alternative  sources  of  the  element  do  not  have  a  legal  obligation  to  unbundle  that  element?  For  example,  section  251(  b)(  3)  requires  all  local 
 exchange  carriers  to  provide  operator  services  and  directory  assistance  (OS/  DA)  to  competing  providers  of  telephone  exchange  carriers.  46  Assuming  there  is  a  competitive  market  for  OS/  DA, 
 and  LECs  are  obligated  to  provide  those  services  under  section  251(  b),  is  a  competitor's  ability  to  compete  "impaired"  if  these  functions  are  not  provided  by  incumbent  LECs  as  an  unbundled 
 network  element  under  section  251(  c)(  3)? 
 1.1.43  In  the  Local  Competition  First  Report  and  Order,  the  Commission  explicitly  rejected  the  argument  that  would  allow  incumbent  LECs  to  deny  access  to  unbundled  elements  if 
 the  element  is  equivalent  to  a  service  available  at  resale.  47  The  Commission  stated  that  such  a 
 44  Prior  to  obtaining  authority  to  provide  long  distance  service,  section  271(  c)(  2)(  B)  requires  Bell  Operating  Companies  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  signalling.  47  U.  S.  C.    271(  c)(  2)(  B). 


 45  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). 


 46  47  U.  S.  C.    251(  b)(  3). 


 47  Local  Competition  First  Report  and  Order  ,  11  FCC  Rcd  15644,  para.  287. 
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 conclusion  would  lead  to  impractical  results,  because  incumbents  could  completely  avoid  section  251(  c)(  3)  unbundling  obligations  by  offering  unbundled  elements  to  end  users  as  retail 
 services.  48  In  light  of  the  Supreme  Court  decision,  we  seek  comment  on  the  extent  to  which,  if  any,  the  availability  of  resold  services  obtained  from  the  incumbent  LEC  should  be  considered  in 
 determining  whether  a  particular  network  element  should  be  unbundled.  More  specifically,  we  ask  parties  to  apply  their  interpretations  of  the  "necessary"  and  "impair"  standards  in  light  of  the 
 availability  of  incumbent  LEC  resold  services.  Is  there  a  legal  or  policy  basis  for  concluding  that  the  inability  to  obtain  access  to  combinations  of  network  elements  could  impair  a  requesting 
 carrier's  ability  to  provide  service  to  residential  customers,  but  not  business  customers? 
 1.1.44  Parties  should  submit  the  text  of  any  proposed  rules  they  urge  the  Commission  to  adopt  as  part  of  their  filings  in  this  proceeding. 


 IV.  PROCEDURAL  ISSUES 
 A.  Ex  Parte  Presentations 
 1.1.45  The  matter  in  Docket  No.  96-  98,  initiated  by  this  Second  FNPRM,  shall  be  treated  as  a  "permit-  but-  disclose"  proceeding  in  accordance  with  the  Commission's  ex  parte  rules.  49 
 Persons  making  oral  ex  parte  presentations  are  reminded  that  memoranda  summarizing  the  presentations  must  contain  summaries  of  the  substance  of  the  presentations  and  not  merely  a 
 listing  of  the  subjects  discussed.  More  than  a  one  or  two  sentence  description  of  the  views  and  arguments  presented  is  generally  required.  50  Other  rules  pertaining  to  oral  and  written 
 presentations  are  set  forth  in  Section  1.1206(  b)  as  well.  Interested  parties  are  to  file  with  the  Secretary,  FCC,  and  serve  Janice  Myles  and  International  Transcription  Services  (ITS)  with 
 copies  of  any  written  ex  parte  presentations  or  summaries  of  oral  ex  parte  presentations  in  these  proceedings  in  the  manner  specified  below  for  filing  comments. 


 48  Id. 
 49  See  Amendment  of  47  C.  F.  R.    1.1200  et  seq.  Concerning  Ex  Parte  Presentations  in  Commission  Proceedings  ,  GC  Docket 
 No.  95-  21,  Report  and  Order,  12  FCC  Rcd  7348,  7356-  57,  para.  27  citing  47  C.  F.  R.    1.1204(  b)(  1)  (1997). 


 50  See  47  C.  F.  R.    1.1206(  b)(  2),  as  revised. 
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 B.  Supplemental  Initial  Regulatory  Flexibility  Analysis 
 1.1.46  In  the  Local  Competition  First  Report  and  Order,  the  Commission  prepared  a  Final  Regulatory  Flexibility  Analysis  (FRFA)  addressing  the  impact  of  the  local  competition 
 rules  on  small  businesses,  51  including  section  51.319.  52  In  AT&  T  v.  Iowa  Utils.  Bd.  the  Supreme  Court  vacated  section  51.319  because  it  found  that  the  Commission  had  not  properly  considered 
 and  applied  the  "necessary"  and  "impair"  standards  of  section  251(  d)(  2)  when  it  identified  network  elements  that  must  be  unbundled  pursuant  to  section  251(  c)(  3)  of  the  Act.  This 
 proceeding  will  further  consider,  in  light  of  the  Supreme  Court's  decision  in  AT&  T  v.  Iowa  Utils.  Bd.,  how  the  Commission  should  interpret  the  standards  set  forth  in  section  251(  d)(  2),  and  which 
 network  elements  should  be  unbundled  under  section  251(  c)(  3).  This  may  require  modification  of  the  portion  of  the  Local  Competition  First  Report  and  Order  FRFA  addressing  former  section 
 51.319.  Therefore,  we  have  prepared  this  Supplemental  Initial  Regulatory  Flexibility  Analysis  (SIRFA)  to  address  any  possible  significant  economic  impact  on  small  entities  that  may  result 
 from  our  further  consideration.  53  Written  public  comments  are  requested  on  this  SIRFA.  These  comments  must  be  filed  in  accordance  with  the  same  filing  deadlines  for  comments  on  the  rest  of 
 the  Second  FNPRM,  but  they  must  have  a  separate  and  distinct  heading,  designating  the  comments  as  responses  to  the  SIRFA.  The  Commission  will  send  a  copy  of  the  Second  FNPRM, 
 including  this  SIRFA,  to  the  Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration.  54  In  addition,  the  Second  FNPRM  and  SIRFA  (or  summaries  thereof)  will  be 
 published  in  the  Federal  Register.  55 
 1.1.47  Reason  for  Action:  This  further  proceeding  is  required  by  the  remand  following  the  Supreme  Court  order  vacating  section  51.319. 


 1.1.48  Objectives:  The  objective  of  this  Second  FNPRM  is  to  afford  the  public  the  opportunity  to  supplement  the  record  previously  adduced  concerning  the  "necessary"  and 
 "impair"  standards  of  section  251(  d)(  2)  and  the  identification  of  network  elements  that  are  subject  to  the  unbundling  requirements  of  section  251(  c)(  3). 


 1.1.49  Legal  Basis:  Sections  1-  4,  10,  201,  202,  251-  254,  271,  and  303(  r)  of  the 
 51  Local  Competition  First  Report  and  Order  ,  11  FCC  Rcd  at  16143-  79. 
 52  Id.  at  16161-  64,  paras.  1374-  83. 
 53  See  5  U.  S.  C.    603. 
 54  5  U.  S.  C.    603(  a). 
 55  Id. 
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 Communications  Act,  as  amended,  47  U.  S.  C.    151-  154,  160,  201,  202,  251-  254,  271,  and  303(  r). 
 1.1.50  Description  and  estimate  of  the  number  of  small  entities  affected:  We  anticipate  no  change  in  the  description  and  estimate  of  the  number  of  small  entities  that  might  be  affected 
 by  our  further  consideration  from  the  description  and  estimate  adopted  in  the  Local  Competition  Report  and  Order  FRFA.  56 


 1.1.51  Description  of  projected  reporting,  recordkeeping,  and  other  compliance  requirements.  None  are  anticipated  from  the  further  consideration. 
 1.1.52  Federal  rules  that  may  duplicate,  overlap,  or  conflict  with  the  proposed  rule:  None. 
 1.1.53  Any  significant  alternatives  minimizing  the  impact  on  small  entities  consistent  with  the  stated  objectives:  We  have  outlined  and  sought  comment  on  the  many  issues  involved 
 in  the  further  consideration.  We  seek  comment  on  any  interpretation  of  the  "necessary"  and  "impair"  standards  of  section  251(  d)(  2)  used  to  identify  network  elements  that  are  subject  to  the 
 unbundling  requirements  of  section  251(  c)(  3)  that  would  minimize  the  impact  on  small  entities. 
 C.  Comment  Filing  Procedures 
 1.1.54  Interested  parties  may  file  any  comments  in  response  to  this  Second  FNPRM  to  no  later  than  [30  days  after  Publication  in  the  Federal  Register],  with  the  Secretary,  FCC,  at 
 445  12th  Street,  S.  W.,  Washington,  D.  C.  20554.  Oppositions  or  responses  to  these  comments  and  petitions  may  be  filed  with  the  Secretary,  FCC,  no  later  than  [45  days  after  Publication  in 
 Federal  Register].  All  pleadings  are  to  reference  CC  Docket  No.  96-  98.  Interested  parties  should  file  an  original  and  12  copies  of  all  pleadings.  An  additional  copy  of  all  pleadings  must 
 also  be  sent  to  Janice  M.  Myles,  Common  Carrier  Bureau,  FCC,  445  12th  Street,  S.  W.,  Room  5-  C327,  Washington,  D.  C.  20554,  and  to  the  Commission's  contractor  for  public  service  records 
 duplication,  ITS,  1231  20th  Street,  N.  W.,  Washington,  D.  C.  20036.  Comments  and  reply  comments  will  be  available  for  inspection  and  copying  during  normal  business  hours  in  the 
 FCC's  Reference  Center,  445  12th  Street,  S.  W.,  Washington,  D.  C.  20554.  Copies  also  can  be  obtained  from  ITS  at  1231  20th  Street,  N.  W.,  Washington,  D.  C.  20036,  or  by  calling  ITS  at 
 (202)  857-  3800  or  faxing  ITS  at  (202)  857-  3805. 
 1.1.55  Parties  are  required  to  file  a  copy  of  all  pleadings  electronically  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  for  each 
 docket  or  rulemaking  number  referenced  in  the  caption.  In  completing  the  transmittal  screen, 
 56  See  11  FCC  Rcd  at  16149-  57;  see  also  id.  at  16144-  49  (discussing  our  treatment  of  small  LECs). 
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 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. 
 D.  Further  Information 
 1.1.56  For  further  information,  contact  Jake  Jennings  or  Claudia  Fox,  Policy  and  Program  Planning  Division,  Common  Carrier  Bureau,  at  (202)  418-  1580. 


 V.  ORDERING  CLAUSES 
 1.1.57  Accordingly,  IT  IS  ORDERED  that  pursuant  to  Sections  1,  3,  4,  201-  205,  251,  256,  271  of  the  Communications  Act  of  1934,  as  amended,  47  U.  S.  C.    151,  153,  154,  201-  205, 
 251,  252,  256,  and  271,  the  SECOND  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING  is  hereby  ADOPTED. 


 1.1.58  IT  IS  FURTHER  ORDERED  that,  the  Secretary  shall  send  a  copy  of  this  SECOND  FURTHER  NOTICE  OF  PROPOSED  RULEMAKING,  including  the  SIRFA,  to  the 
 Chief  Counsel  for  Advocacy  of  the  Small  Business  Administration,  in  accordance  with  section  603(  a)  of  the  Regulatory  Flexibility  Act,  5  U.  S.  C.    601  et  seq.  (1981). 


 FEDERAL  COMMUNICATIONS  COMMISSION 


 Magalie  Roman  Salas  Secretary 
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 SEPARATE  STATEMENT  OF  CHAIRMAN  WILLIAM  E.  KENNARD 
 Re:  Second  Further  Notice  of  Proposed  Rulemaking,  Implementation  of  the  Local  Competition  Provisions  in  the  Telecommunications  Act  of  1996 
 (CC  Docket  No.  96-  98) 


 I  am  pleased  that  we  are  initiating  this  proceeding  in  response  to  the  Supreme  Court's  directive  that  we  re-  consider  the  manner  in  which  we  identify  those  network  elements  that  an 
 incumbent  local  exchange  carrier  must  unbundle  for  use  by  competing  carriers  under  sections  251(  c)(  3)  and  251(  d)(  2)  of  the  Communications  Act. 


 I  wish  to  note  my  strong  support  for  our  tentative  conclusion  that  the  Commission  should  adopt  a  uniform,  national  list  of  network  elements  that  must  be  available  from  all  incumbent 
 carriers.  In  the  Telecommunications  Act  of  1996,  Congress  designed,  and  directed  this  Commission  to  implement,  a  "national  policy  framework"  to  promote  competition.  57  Our 
 establishment,  in  1996,  of  a  uniform  list  of  network  elements  has  helped  allow  new  entrants  to  develop  business  plans  calling  for  competitive  entry  on  a  national,  regional,  or  state-  wide  basis, 
 secure  in  the  knowledge  that  the  rules  of  competition  would  not  vary  significantly,  or  arbitrarily,  depending  upon  which  of  these  entry  strategies  they  choose.  I  believe  that  this  regulatory 
 certainty,  established  at  the  federal  level,  best  serves  the  national,  pro-  competitive  framework  established  by  Congress. 


 The  Supreme  Court  has  now  affirmed  that  Congress  intended  federal  implementation  of  the  1996  Act,  rather  than  a  state-  by-  state  approach,  and  that  the  1996  Act  "requires  the 
 Commission  to  determine  on  a  rational  basis  which  network  elements  must  be  made  available  .  .  .  ."  58  While  the  Supreme  Court  directed  us  to  reconsider  the  manner  in  which  we  determined 
 which  specific  network  elements  should  be  on  the  list  of  available  elements,  at  no  point  did  the  Supreme  Court  question  the  establishment  of  a  single,  national  list.  Therefore,  in  considering  the 
 "necessary"  and  "impair"  standards,  we  properly  have  decided  to  begin  with  the  assumption  that  those  standards  should  inform,  not  undermine,  the  creation  of  a  uniform  national  list  of  available 
 elements. 
 Further,  I  am  quite  comfortable  with  our  prediction  that  the  local  loop  will  be  on  that  list.  In  light  of  my  assessment  that  the  1996  Act  calls  for  a  national  list  of  available  elements,  it  is 
 inconceivable  to  me  that  the  local  loop  would  not  be  on  that  list,  under  any  rational  application  of  the  "necessary"  and  "impair"  standards. 


 57  S.  Conf.  Rep.  No.  104-  230,  104th  Cong.,  2d  Sess.  1  (1996)  (Joint  Explanatory  Statement). 
 58  AT&  T  Corp.  v.  Iowa  Utils.  Bd.  ,  119  S.  Ct.  721  (1999). 
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 I  share  my  colleagues'  sense  of  urgency  concerning  the  need  to  complete  this  proceeding  as  quickly  as  we  can.  Indeed,  another  benefit  of  articulating  tentative  conclusions  is  that  they 
 help  focus  the  record  and  thus  are  conducive  to  a  more  prompt  resolution  of  the  issues. 
 Finally,  I  would  like  to  thank  the  staff  of  the  Common  Carrier  Bureau  for  their  diligent  work  in  support  of  this  effort. 
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 SEPARATE  STATEMENT  OF  COMMISSIONER  HAROLD  FURCHTGOTT-  ROTH 
 Re:  In  the  Matter  of  Implementation  of  the  Local  Competition  Provisions  in  the  Telecommunications  Act  of  1996;  Interconnection  between  Local  Exchange  Carriers  and 
 Commercial  Mobile  Radio  Service  Providers;  (CC  Docket  Nos.  96-  98,  95-  185). 
 While  I  support  this  Order,  I  write  separately  to  express  my  reservations  with  reaching  any  tentative  conclusions  at  this  time.  I  may  ultimately  agree  with  these  conclusions,  but  I 
 would  first  like  the  benefit  of  a  public  record.  I  believe  the  Commission  should  have  first  sought  comment  on  the  standard  for  unbundling  network  elements  consistent  with  the  Supreme  Court's 
 remand,  prior  to  concluding,  even  tentatively,  that  there  should  be  nationwide  unbundling  or  what  any  particular  unbundled  network  element  might  be.  Indeed,  even  such  tentative 
 conclusions  may  fail  to  adequately  take  into  account  the  Supreme  Court's  mandate  that  we  look  at  the  competitive  availability  of  elements  in  determining  our  approach  to  the  necessary  and 
 impair  standard.  Instead,  the  Commission  should  have  sought  general  comments  immediately  after  the  Supreme  Court  issued  its  opinion.  The  Commission  could  have  issued  a  Public  Notice 
 promptly  after  the  Supreme  Court  issued  its  opinion  on  January  25,  1999,  simply  asking  for  any  and  all  comments  on  how  the  Court's  opinion  should  impact  the  Commission's  unbundling  rules, 
 without  reaching  any  tentative  conclusions.  Unfortunately,  that  is  not  the  path  the  Commission  chose.  Instead,  the  Commission  has  wasted  valuable  time,  potentially  delaying  our  ultimate 
 resolution  of  issues  that  are  vital  to  local  competition. 
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 STATEMENT  OF  COMMISSIONER  MICHAEL  K.  POWELL 
 Re:  Second  Further  Notice  of  Proposed  Rulemaking,  Implementation  of  the  Local  Competition  Provisions  in  the  Telecommunications  Act  of  1996  (CC  Docket  No.  96-  98). 
 I  firmly  support  the  Commission's  decision  to  open  a  record  in  response  to  the  Supreme  Court's  decision  in  AT&  T  Corp.  v.  Iowa  Utilities  to  vacate  our  unbundled  network  element  Rule 
 319  and  remand  the  issue  for  further  consideration.  59  As  I  have  said  on  a  number  of  occasions,  this  proceeding  must  be  considered  "priority  one"  in  this  Commission's  ongoing  efforts  to 
 promote  local  competition. 
 I  disagree  sharply,  however,  with  today's  action  to  the  extent  it  tentatively  concludes,  at  the  inception  of  this  proceeding,  that  we  should  designate  the  same  elements  of  the  incumbent's 
 network  for  unbundling  in  every  region  of  the  nation.  Although  I  have  no  objection  to  setting  national  unbundling  standards  pursuant  to  section  251(  d)(  2).  60  I  fail  to  see  how  we  can 
 tentatively  conclude  that  those  standards  will  yield  precisely  the  same  results  nationwide  without  first  addressing  how  such  a  "one-  size-  fits-  all"  approach  can  faithfully  accommodate  the  Court's 
 demand  that  we  consider  the  availability  of  elements  outside  the  incumbent's  network.  Thus,  notwithstanding  the  commendable  efforts  that  went  into  preparing  this  Notice,  I  do  not  fully 
 support  it. 


 59  See  AT&  T  Corp.  et  al.  v.  Iowa  Utils.  Bd.  et  al.,  119  S.  Ct.  721  (1999). 
 60  Section  251(  d)(  2)  provides: 


 [i]  n  determining  what  network  elements  should  be  made  available  for  purposes  of  subsection  (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  elements  would  impair  the  ability  of  the 
 telecommunications  carrier  seeking  access  to  provide  the  services  that  it  seeks  to  offer. 


 See  47  U.  S.  C.    251(  d)(  2)  (1999)  (emphasis  added).  The  Court  concluded  that  the  Commission  did  not  adequately  consider  the  "necessary"  and  "impair"  requirements  when,  by  adopting 
 section  51.319  of  the  Commission's  rules,  it  gave  requesting  telecommunications  carriers  blanket  access  to  virtually  all  network  elements.  The  court  vacated  Rule  319  and  remanded  the  issue  to 
 the  Commission. 
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 As  Explained  by  the  Court,  Congress  Recognized  That  Fundamental  Principles  of  Competition  Necessitate  Limiting  Access  to  Essential  Elements  of  the  Incumbent's 
 Network. 
 In  Iowa  Utilities  Board,  the  Supreme  Court  found  that  section  251(  d)(  2)  establishes  a  "limiting  standard"  that  restricts  entrants'  access  to  the  incumbent's  network  elements.  61  The 
 Court  recognized  that  section  251(  d)(  2)  evidences  Congress'  understanding  that,  although  requiring  access  to  incumbent  carriers'  facilities  may  be  useful  (e.  g.,  overcoming  insurmountable 
 economies  of  scale),  unconstrained  access  would  eviscerate  incentives  for  entrants  to  install  their  own  facilities  and  thereby  inhibit  the  type  of  competition  most  likely  to  spur  innovation,  provide 
 price  discipline  and  otherwise  benefit  consumers.  62  Indeed,  underlying  the  Court's  insistence  that  section  251(  d)(  2)  establishes  a  limiting  standard  is  its  understanding  that  facilitating 
 competition  under  the  1996  Act  requires  a  careful  balance  between  aiding  new  entrants  and  not  making  access  to  the  incumbent's  facilities  too  easy.  Making  such  access  too  easy  or  attractive 


 61  The  Court  stated: 
 [T]  he  Act  requires  the  FCC  to  apply  some  limiting  standard,  rationally  related  to  the  goals  of  the  Act,  which  it  has  simply  failed  to  do. 


 119  S.  Ct.  at  734-  35  (emphasis  added).  The  Court  stated  further  that: 
 [w]  e  cannot  avoid  the  conclusion  that,  if  Congress  had  wanted  to  give  blanket  access  to  incumbents'  networks  on  a  basis  as  unrestricted  as  the  scheme  the  Commission  has  come 
 up  with,  it  would  not  have  included    251(  d)(  2)  in  the  statute  at  all.  It  would  simply  have  said  (as  the  Commission  in  effect  has)  that  whatever  requested  element  can  be  provided 
 must  be  provided. 
 119  S.  Ct.  at  735.  In  addition,  the  court  concluded  that  the  Commission  was  "undoubtedly  wrong"  in  its  belief  that  the  requirement  for  incumbent  LECs  to  unbundle  "at  any  technically 
 feasible  point"  meant  that  every  element  that  can  be  unbundled  must  be  unbundled.  Thus,  the  Court  harshly  criticized  whether  the  Commission  could  sweep  all  elements  of  the  incumbent's 
 network  into  the  unbundling  requirements  consistent  with  the  statute. 
 62  See  cf.,  John  T.  Soma  et  al.,  The  Essential  Facilities  Doctrine  in  the  Deregulated 
 Telecommunications  Industry,  13  Berkeley  Tech.  L.  J.  565,  607  (1998)  (arguing  that  unbundling  requirements  may  "discourage  incumbents  and  competitors  from  directing  their  efforts  toward 


 alternative  technologies  and  delivery  systems");  J.  Gregory  Sidak  &  Daniel  F.  Sperber,  Deregulation  and  Managed  Competition  in  Network  Industries,  15  Yale  J.  on  Reg.  117,  145 
 (1998)  (indicating  that  certain  forms  of  unbundling  "will  induce  inefficient  decisions  by  entrants  concerning  whether  to  build  facilities  or  merely  resell  services  that  use  the  incumbent's  existing 
 facilities"). 
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 will  only  ensure  that  the  entrant's  relationship  to  the  incumbent  is  characterized  more  by  one-sided  dependence  than  true  rivalry.  63 
 Justice  Breyer's  concurrence  in  Iowa  Utilities  insightfully  describes  this  fundamental  tenet  of  competition.  As  he  says  succinctly: 
 It  is  in  the  unshared,  not  the  shared,  portions  of  the  enterprise  that  meaningful  competition  would  likely  emerge.  Rules  that  force  firms  to  share  every  resource  or  element  of  a 
 business  would  create,  not  competition,  but  pervasive  regulation,  for  the  regulators,  not  the  marketplace,  would  set  the  relevant  terms.  64 


 By  his  words,  Justice  Breyer  correctly  recognizes  that  meaningful,  robust  competition  requires  that  rival  firms  vie  for  customers  based  on  the  distinct  assets  and  capabilities  each  brings  to  the 
 market.  Justice  Breyer's  view  is  consistent  with  Justice  Scalia's  indication,  in  the  majority  opinion,  that  the  limiting  standard  under  section  251(  d)(  2)  would  be  akin  to  the  "essential 
 facilities"  doctrine  in  antitrust,  where  access  to  a  private  firm's  assets  is  mandated  when  those  assets  are  essential  to  the  provision  of  a  competing  service.  65  This  view  is  also  consistent  with 
 the  Court's  indication,  twice  in  the  majority  opinion,  that  issues  related  to  virtually  unlimited  access  to  the  incumbent's  facilities  (such  as  under  the  so-  called  unbundled  network  element 
 "platform"  or  "UNE-  P")  could  easily  become  irrelevant  if  the  Commission  gives  meaningful  effect  to  the  "necessary"  and  "impair"  standards  of  section  251(  d)(  2).  66 


 63  As  Justice  Breyer  indicates,  for  example,  pervasive  dependence  by  new  entrants  on 
 incumbent  carriers'  facilities  would  require  regulators  to  intervene  constantly  to  establish  reasonable  terms  and  condition:  "Rules  that  force  firms  to  share  every  resource  or  element  of  a 


 business  would  create,  not  competition,  but  pervasive  regulation,  for  the  regulators,  not  the  marketplace,  would  set  the  relevant  terms."  119  S.  Ct.  at  754.  Thus,  overdependency  by 
 entrants  on  the  incumbent's  network  elements  will  likely  prove  inconsistent  with  the  Act's  procompetitive,  deregulatory  purpose. 


 64  See  Iowa  Util.  Bd.,  119  S.  Ct.  at  754  (citing  3A  P.  Areeda  &  H.  Hovenkamp,  Antitrust 
 Law  771-  73  (1996))  (emphasis  added). 


 65  119  S.  Ct.  at  734. 


 66  Under  the  Commission's  original  pricing  principles,  the  merits  of  which  are  currently 
 under  consideration  by  the  Eighth  Circuit  Court  of  Appeals,  access  to  the  UNE-  P  by  competitors  generally  would  have  allowed  them  essentially  to  resell  the  incumbent's  service  at  deeper 


 discounts  than  the  statute  prescribes  for  purposes  of  resale.  Though  the  court  agreed  that  the  statute  did  not  prevent  the  Commission  from  requiring  the  UNE-  P  consistent  with  the  statute,  it 
 twice  suggested  that  the  platform  question  may  be  largely  "academic."  119  S.  Ct.  at  736,  737.  These  two  references,  taken  together  with  Justice  Breyer's  concurrence,  evidence  the  Court's 
 expectation  that,  if  the  Commission  limits  unbundling  by  giving  meaningful  effect  to  the 
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 Thus,  the  Commission's  charge  on  remand  is  to  give  real  effect  to  the  limiting  principles  established  in  section  251(  d)(  2)  in  a  manner  that  will  foster,  rather  than  inhibit,  meaningful 
 competition. 


 The  Court  Insisted  That  Any  Meaningful  Limiting  Standard  Would  Have  to  Account  for  the  Availability  of  Elements  Outside  the  Incumbent's  Network. 
 My  objection  to  the  tentative  conclusion  in  favor  of  a  nationwide  approach  to  designating  unbundled  network  elements  derives  from  several  concerns. 
 As  a  preliminary  matter,  I  note  that  making  this  tentative  conclusion  at  this  stage  of  the  proceeding  appears  to  conflict  directly  with  the  logical  progression  by  which  the  Court 
 envisioned  network  elements  would  be  designated  for  unbundling.  The  Court  concluded  that  the  previous  Commission  had  not  interpreted  or  applied  section  251(  d)(  2)  in  a  reasonable  fashion 
 because  it  had  not  developed  and  then  applied  standards  pursuant  to  that  section  that  gave  meaningful  effect  to  the  ordinary  and  fair  meaning  of  the  terms  "necessary"  and  "impair." 
 Fundamentally,  then,  the  Court's  remand  requires  that  we  correct  this  deficiency  by  first  developing  and  then  applying  a  standard  pursuant  to  section  251(  d)(  2)  that  can  be  used  to 
 determine  whether  access  to  particular  proprietary  elements  is  "necessary"  and  whether  the  unavailability  of  non-  proprietary  elements  would  "impair"  a  competitor's  ability  to  provision 
 service.  Making  a  tentative  conclusion  in  favor  of  unbundling  the  same  elements  nationwide  disregards  the  fact  that  we  have  not  yet  developed  (or  received  adequate  public  input  regarding) 
 interpretations  of  the  "necessary"  and  "impair"  standards  under  section  251(  d)(  2).  Consequently,  I  worry  that  this  tentative  conclusion  will  amount,  in  the  Court's  mind,  to  putting  our  analytical 
 "cart"  before  the  horse. 
 My  considerable  discomfort  with  the  tentative  conclusion  in  favor  of  unbundling  the  same  elements  nationwide  extends  beyond  mere  concerns  of  logic,  however.  Rather,  this 
 discomfort  encompasses  more  troubling  concerns  regarding  the  Commission's  role  in  promoting  competition  pursuant  to  the  Act. 


 The  primary  manifestation  of  the  Commission's  failure  to  articulate  a  limiting  standard  pursuant  to  section  251(  d)(  2)  was  the  Commission's  failure,  in  the  Court's  view,  to  consider 
 whether  elements  were  available  to  entrants  from  sources  outside  the  incumbent's  network.  The  Court  stated: 


 "necessary"  and  "impair"  standards,  there  would  not  be  a  full  platform  for  competitors  to  buy. 
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 The  Commission  cannot,  consistent  with  the  statute,  blind  itself  to  the  availability  of  elements  outside  the  incumbent's  network.  That  failing  alone  would  require  the  Commission's  rule 
 to  be  set  aside.  67 
 Thus,  under  the  Court's  interpretation,  the  Act  requires  that  the  Commission,  at  a  minimum,  examine  the  extent  to  which  elements  are  available  from  sources  other  than  the  incumbent. 


 The  availability  of  elements  outside  the  incumbent's  network  could  potentially  turn  on  many  factors,  such  as  the  existence  of  vendors  and  distribution  channels,  the  presence  of 
 competing  facilities-  based  LECs  and  the  price  of  non-  incumbent  elements  relative  to  the  requesting  competitor's  ability  to  pay.  These  factors  are  likely  to  vary  significantly  from  one 
 market  to  the  next.  It  is  beyond  question,  for  example,  that  given  the  presence  of  facilities-  based  competitors  in  the  ore  lucrative  urban  markets,  68  a  new  entrant  to  an  urban  market  will  be  faced 
 with  many  more  potential  sellers  of  leased  switching  capacity  than  a  new  entrant  to  less  dense  and  rural  areas  where  competition  has  not  yet  taken  hold.  Further,  to  the  extent  other  facilities-based 
 competitors  do  not  use  elements  of  the  incumbent's  network,  the  presence  of  those  competitors  in  a  particular  market  should  be  probative  in  evaluating  whether  other  firms  would 
 be  "impaired"  in  their  ability  to  provide  service  in  that  market  absent  mandated  access  to  the  incumbent's  elements.  It  follows  directly,  then,  that  assessments  of  whether  an  element  is 
 necessary  to  provide  service  or  whether  failing  to  mandate  access  to  that  element  would  impair  a  new  entrant's  ability  to  provide  service  will  vary  significantly  among  different  markets,  states 
 and  regions.  69 


 Regardless  of  the  Merits  of  National  Rules,  Such  Rules  Must  Account  for  Potentially  Widespread  Variation  in  the  Availability  of  Elements. 
 Accordingly,  as  the  Commission  attempts  to  apply  the  limiting  standard  it  will  develop  pursuant  to  section  251(  d)(  2)  and  the  Court's  remand,  one  important  question  we  will  have  to 
 67  119  S.  Ct.  at  735. 
 68  Common  Carrier  Bureau  Industry  Analysis  Division,  Federal  Communications 
 Commission,  Local  Competition  2  (1998)  ("  Facilities-  based  [new  entrants]  appear  to  have  concentrated  in  more  urbanized  areas.  For  example,  the  Atlanta,  Dallas,  Los  Angeles,  and  New 


 York  City  LATAs  each  have  more  than  20  [entrants]  .  .  .,  while  30  of  the  nation's  more  rural  LATAs  have  no  such  [entrants]."). 


 69  It  also  seems  likely  that  an  assessment  of  whether  an  element  is  necessary  to  provide 
 service  or  whether  failing  to  mandate  access  to  that  element  would  impair  a  new  entrant's  ability  to  provide  service  will  vary  considerably  among  firms,  as  each  firm  brings  to  market  a  unique 


 complement  of  assets  and  capabilities.  I  do  not,  however,  address  this  issue  further  here. 
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 address  is  whether  the  Commission  can  defensibly  require  the  unbundling  of  specific  elements  on  a  categorical,  nationwide  basis.  I  am  somewhat  skeptical  that  the  Commission  can  give 
 meaningful  effect  to  the  requirement  that  we  assess  the  availability  of  non-  incumbent  elements  and  related  geographic  variation  for  all  areas  and  markets  in  the  nation.  Although  I  think  the 
 Commission  could  potentially  conduct  such  a  sweeping  assessment,  at  least  in  theory,  that  project  would  likely  necessitate  an  exhaustive,  fact-  intensive  inquiry  to  which  I  fear  the 
 Commission  would  devote  inadequate  time  and  resources.  This  raises  such  questions  as:  (1)  whether  regional,  state  or  market-  specific  approaches  to  designating  elements  for  unbundling  are 
 necessary  to  meaningfully  assess  the  availability  of  non-  incumbent  network  elements;  and  (2)  whether  regulators  with  closer  proximity  and  more  intimate  knowledge  of  the  availability  of 
 non-  incumbent  elements  (e.  g.,  state  commissions)  should  take  a  leading  role  in  that  analysis. 
 The  substance  and  spirit  of  the  Court's  command  that  we  assess  the  availability  of  non-incumbent  elements  and  the  strong  likelihood  that  such  availability  will  vary  with  geography 
 convince  me  that  any  interpretations  of  the  "necessary"  and  "impair"  standards  we  adopt  must  somehow  address  (or,  at  the  very  least,  methodically  discount)  these  geographic  variations.  The 
 tentative  conclusion  in  favor  of  unbundling  the  same  elements  nationwide  does  neither.  Indeed,  the  Notice  seeks  comment  on  the  issue  of  geographic  variation  in  availability  almost  as 
 afterthought,  with  no  clear  explanation  or  suggestion  of  how  unbundling  the  same  elements  nationwide  could  possibly  address  such  obvious  variation.  At  best,  the  Notice  itself  requests 
 information  that  the  commission  might  use  to  address  geographic  variation  in  availability,  and  obviously  we  have  not  yet  received  that  information. 


 Given  that  we  currently  lack  information  by  which  we  could  measure  or  discount  geographic  variations  in  element  availability,  as  well  as  the  fact  we  have  not  yet  developed  a 
 record  for  proposes  of  helping  us  to  develop  the  "necessary"  and  "impair"  standards  of  section  251(  d)(  2),  I  do  not  yet  share  the  majority's  confidence  that  unbundling  the  same  elements 
 nationwide  will  adequately  fulfill  the  Court's  mandate.  As  I  have  said  in  another  context,  70  I  feel  we  should  make  tentative  conclusions  only  when  we  are  more  sure  than  not  that  those  tentative 
 conclusions  should  be  the  ultimate  outcome.  I  fully  recognize  the  many  potential  benefits  of  unbundling  the  same  elements  nationwide.  In  light  of  the  substantial  likelihood  of  geographic 
 variation  in  the  availability  of  non-  incumbent  elements,  however,  I  feel  it  is  incumbent  on  me  to  reserve  judgment  entirely  until  we  develop  a  record  that  will  enable  us  thoughtfully  to  address 
 this  issue.  71 
 70  See,  e.  g.,  Deployment  of  Wireline  Services  Offering  Advanced  Telecommunications  Capability, 
 First  Report  and  Order  and  Further  Notice  of  Proposed  Rulemaking,  CC  Dkt.  No.  98-  147,  FCC  99-  48  (rel.  Mar.  31,  1999)  (statement  of  Commissioner  Michael  K.  Powell,  concurring  in  part). 


 71  I  reject,  furthermore,  any  suggestion  that  such  a  record  cannot  be  built  on  the  excellent 
 questions  and  observations  made  in  this  Notice  unless  we  also  make  tentative  conclusions.  This  notion  is  a  red  herring  and,  in  any  event,  is  unsupported.  Although  tentative  conclusions  may 


 allow  regulators  to  "send  signals"  as  to  how  they  will  ultimately  decide  an  issue,  they  add  nothing  from  an  evidentiary  standpoint  to  a  Notice  of  this  caliber,  in  which  the  specificity  of  the 
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 Federal  Communications  Commission  FCC  99-  70 
 10 
 Conclusion 
 In  closing,  I  wish  to  reiterate  that  my  opposition  to  making  a  tentative  conclusion  in  favor  of  unbundling  the  same  elements  nationwide  in  no  way  indicates  that  I  could  not  be  persuaded 
 that  a  final  ruling  along  these  lines  is  appropriate  in  light  of  the  record  we  will  develop  and  the  requirements  of  the  statute  as  interpreted  by  the  Court.  I  believe,  however,  that  the  majority's 
 tentative  conclusions  here  are  premature.  Our  task  in  responding  to  the  Court's  remand  must  be  to  interpret  and  apply  section  251(  d)(  2)  anew,  giving  full  effect  to  the  Court's  guidance  and 
 building  an  unbundling  regime  from  the  ground  up,  not  the  top  down.  If  we  fail  in  this  task,  we  will,  at  the  very  least,  incur  substantial  litigation  risk  on  judicial  review  of  this  action  and 
 possibly  subject  the  industry  to  yet  another  court  battle,  ending  in  a  further  shift  in  our  implementation  of  the  Act.  At  worst,  we  will  fail  to  give  real  effect  to  the  specific  regulatory 
 framework  erected  by  Congress  and  possibly  delay  the  myriad  consumer  benefits  of  meaningful  competition  that  I  believe  the  Act  and  section  251(  d)(  2)  can  make  possible  if  faithfully  executed. 


 It  is  because  I  find  the  tentative  conclusion  in  favor  of  unbundling  the  same  elements  nationwide  fundamentally  inconsistent  with  building  a  rational  unbundling  regime  from  the 
 bottom  up  that  I  cannot  fully  support  today's  action.  I  wish  to  commend  the  Common  Carrier  Bureau  and  my  colleagues,  however,  on  their  excellent  contributions  to  this  Notice. 


 proposals  and  discussion  themselves  is  likely  to  lead  to  an  adequately  focused  record. 
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