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    Before the
        Federal Communications Commission
              Washington, D.C. 20554
     In the Matter of                   )
     Implementation of the             )       CC Docket No. 96-98
     Local Competition Provisions       )
     of the Telecommunications Act of 1996         )
           THIRD REPORT AND ORDER AND
   FOURTH FURTHER NOTICE OF PROPOSED RULEMAKING
                                             Adopted:      September 15, 1999                          Released:      November 5, 1999
  Comment Date:      January 12, 2000
  Reply Date:      February 11, 2000
  By the Commission:  Commissioner Ness issuing a statement; Commissioner Furchtgott-
  Roth concurring in part, dissenting in part and issuing a statement; Commissioner Powell
  dissenting in part and issuing a statement.
                     TABLE OF CONTENTS
                                                  Paragraph
  I. INTRODUCTION. . . . . . . . . . . . . . . . . . . . . . . . .1
  II.                                                    EXECUTIVE SUMMARY . . . . . 16
  III.                                                   BACKGROUND. . . . . . .17
  IV.                                                    FRAMEWORK FOR DECIDING WHAT NETWORK ELEMENTS MUST BE
  UNBUNDLED PURSUANT TO SECTION 251. . . . . . . . . . . . . . . 22
    A. Overview. . . . . . . . . . . . . . . . . . . . . . . . . 22
    B. The "Necessary" and "Impair" Standards of Section 251(d)(2) . . . . . . .30
     1.  Application of the "necessary" and "impair" standards to proprietary and non-
     proprietary elements under Section 251(d)(2) . . . . . . . .30
       a.                                                Background . . . . . . 30
       b.                                                Discussion . . . . . . 32
     2.  Definition of "Proprietary in Nature". . . . . . . . . .33
       a.                                                Background . . . . . . 33
       b.                                                Discussion . . . . . . 35
     3.  The "Necessary" Standard of Section 251(d)(2)(A) . . . . . . 42
       a.                                                Background . . . . . . 42
       b.                                                Discussion . . . . . . 45
     4.  The "Impair" Standard of Section 251(d)(2)(b). . . . . .49
       a.                                                Background . . . . . . 49
       b.                                                Discussion . . . . . . 52
    C. Adoption of a National List of Unbundled Network Elements . . . . .118
     1.  Background . . . . . . . . . . . . . . . . . . . . . . 118
     2.  Discussion . . . . . . . . . . . . . . . . . . . . . . 121
       a.                                                Legal Authority. . . . . . 122
       b.                                                Goals of the Act . . . . . 125
    D. Modification of the National List . . . . . . . . . . . .145
     1.  Background . . . . . . . . . . . . . . . . . . . . . . 145
     2.  Discussion . . . . . . . . . . . . . . . . . . . . . . 149
       a.                                                Modification of the National List by the Commission. . . . . .149
       b.                                                Modification of the National List by the States. . . . . 154
  V. APPLICATION OF THE STANDARD TO INDIVIDUAL NETWORK ELEMENTS. . . . . .163
    A. Loops . . . . . . . . . . . . . . . . . . . . . . . . . .163
     1.  Background . . . . . . . . . . . . . . . . . . . . . . 163
     2.  Discussion . . . . . . . . . . . . . . . . . . . . . . 166
       a.                                                Definition . . . . . .167
       b.                                                Proprietary Concerns Associated with the Loop. . . . . . 181
       c.                                                Unbundling Analysis for the Loop in General. . . . . . . 182
    B. The Subloop . . . . . . . . . . . . . . . . . . . . . . .203
     1.  Background . . . . . . . . . . . . . . . . . . . . . . 203
     2.  Discussion . . . . . . . . . . . . . . . . . . . . . . 206
       a.                                                Definition of the Subloop. . . . . . 207
       b.                                                Proprietary Concerns Associated with Subloops. . . . . . 209
       c.                                                Unbundling Analysis for Subloops . . . . .210
       d.                                                Technical Feasibility. . . . . .221
    C. Network Interface Devices (NIDs). . . . . . . . . . . . .231
     1.  Background . . . . . . . . . . . . . . . . . . . . . . 231
     2.  Discussion . . . . . . . . . . . . . . . . . . . . . . 233
       a.                                                Definition of the NID. . . . . .234
       b.                                                Proprietary Concerns Associated with the NID . . . . . . 237
       c.                                                Unbundling  Analysis . . . . . .238
    D. Local Switching . . . . . . . . . . . . . . . . . . . . .242
     1.  Local Circuit Switching. . . . . . . . . . . . . . . . 242
       a.                                                Background . . . . . .242
       b.                                                Discussion . . . . . .245
     2.  Packet Switching . . . . . . . . . . . . . . . . . . . 301
       a.                                                Background . . . . . .301
       b.                                                Discussion . . . . . .303
    E. Interoffice Transmission Facilities . . . . . . . . . . .319
     1.  Background . . . . . . . . . . . . . . . . . . . . . . 319
     2.  Discussion . . . . . . . . . . . . . . . . . . . . . . 322
       a.                                                Dedicated Transport. . . . . . .323
       b.                                                Shared Transport . . . . . 370
    F. Signaling Networks and Call-Related Databases . . . . . .381
     1.  Signaling Networks . . . . . . . . . . . . . . . . . . 381
       a.                                                Background . . . . . .381
       b.                                                Discussion . . . . . .384
     2.  Call-Related Databases . . . . . . . . . . . . . . . . 401
       a.                                                Background . . . . . .401
       b.                                                Discussion . . . . . .403
    G. Operations Support Systems. . . . . . . . . . . . . . . .422
     1.  Background . . . . . . . . . . . . . . . . . . . . . . 422
     2.  Discussion . . . . . . . . . . . . . . . . . . . . . . 425
       a.                                                Definition of OSS. . . . . 426
       b.                                                Proprietary Concerns Associated with OSS . . . . . .433
       c.                                                Unbundling Analysis for OSS. . . . . 434
    H. Operator Services and Directory Assistance. . . . . . . .439
     1.  Background . . . . . . . . . . . . . . . . . . . . . . 439
     2.  Discussion . . . . . . . . . . . . . . . . . . . . . . 442
       a.                                                Definition of Operator Services and Directory Assistance . . . . . 444
       b.                                                Proprietary Concerns Associated with OS/DA . . . . .446
       c.                                                Unbundling Analysis. . . . . . .447
  VI.                                                    MISCELLANEOUS ISSUES. . . . . . 466
    A. Section 271-Related Issues. . . . . . . . . . . . . . . .466
     1.  Background . . . . . . . . . . . . . . . . . . . . . . 466
     2.  Discussion . . . . . . . . . . . . . . . . . . . . . . 469
    B. Combinations of Unbundled Loops and Transport Network Elements. . . . . 475
     1.  Enhanced Extended Link . . . . . . . . . . . . . . . . 476
       a.                                                Background . . . . . .476
       b.                                                Discussion . . . . . .479
     2.  Use of unbundled network elements to provide exchange access services. . . . . .484
       a.                                                Background . . . . . .484
       b.                                                Discussion . . . . . .485
    C. Nondiscrimination Obligations of Incumbent LECs . . . . .491
  VII.                                                   FOURTH FURTHER NOTICE OF PROPOSED RULEMAKING. . . . . . .493
    A. Background. . . . . . . . . . . . . . . . . . . . . . . .493
    B. Discussion. . . . . . . . . . . . . . . . . . . . . . . .495
  VIII.                                                  PROCEDURAL ISSUES . . . . .498
    A. Final Regulatory Flexibility Analysis . . . . . . . . . .498
     1.  Need for, and Objectives of, the Third Report and Order. . . . . 499
     2.  Summary of Significant Issues Raised by the Public Comments in Response to the IRFA. . . . . . 500
     3.  Description and Estimate of the Number of Small Entities to which Rules will Apply . . . . . . 501
     4.  Description of Projected Reporting, Recordkeeping, and Other Compliance
     Requirements . . . . . . . . . . . . . . . . . . . . . . . 506
     5.  Steps Taken to Minimize the Economic Impact of this Order on Small Entities, and
     Alternatives Considered. . . . . . . . . . . . . . . . . . 507
     6.  Report to Congress . . . . . . . . . . . . . . . . . . 510
    B. Initial Regulatory Flexibility Analysis (IRFA). . . . . .511
     1.  Need for, and Objectives of, the Proposed Rules. . . . 512
     2.  Legal Basis. . . . . . . . . . . . . . . . . . . . . . 514
     3.  Description and Estimate of the Number of Small Entities to Which the Proposed Rules
     Will Apply . . . . . . . . . . . . . . . . . . . . . . . . 515
     4.  Description of Projected Reporting, Recordkeeping, and Other Compliance
     Requirements . . . . . . . . . . . . . . . . . . . . . . . 518
     5.  Steps Taken to Minimize Significant Economic Impact on Small Entities, and Significant
     Alternatives Considered. . . . . . . . . . . . . . . . . . 519
     6.  Federal Rules that May Duplicate, Overlap, or Conflict with the Proposed Rules . . . . . .520
  IX.                                                    ORDERING CLAUSES. . . . . .521
  APPENDIX A -- LIST OF COMMENTERS
  Appendix B -- top 50 metropolitan statistical areas
  APPENDIX C -- final rules
  APPENDIX D -- current unbundled network elements
       I.   INTRODUCTION
       1.   In this proceeding, we respond to the Supreme Court's January 1999 decision that
       directs us to reevaluate the unbundling obligations of section 251 of the
       Telecommunications Act of 1996 (1996 Act).  The Supreme Court's decision
       removed many of the uncertainties surrounding the requirements of section 251 by
       upholding the majority of the Commission's rules implementing that section of the
       Act, including the Commission's jurisdiction to implement sections 251 and 252 of
       the Act, the Commission's definitions of network elements, and the Commission's
       rule requiring incumbent local exchange carriers (LECs) to offer combinations of
       unbundled network elements that are already combined.  The Court has directed us,
       however, to revise the standards under which the unbundling obligations of section
       251(c)(3) are determined.  Specifically, the Court has required us to give some
       substance to the "necessary" and "impair" standards in section 251(d)(2), and to
       develop a limiting standard that is "rationally related to the goals of the Act."  In
       addition, as we develop the "necessary" and "impair" standards, the Court has
       required us to consider the availability of alternative network elements outside the
       incumbent's network.
       2.   In passing the 1996 Act, Congress overhauled many aspects of federal regulation of
       telecommunications services by establishing a pro-competitive and deregulatory
       framework designed to benefit "all Americans by opening all telecommunications
       markets to competition."  Two of the fundamental goals of the 1996 Act are to
       open the local exchange and exchange access markets to competition and to
       promote innovation and investment by all participants in the telecommunications
       marketplace.  Congress sought to foster this competition by fundamentally
       changing the conditions and incentives for market entry and by attempting to open
       any remaining local service bottlenecks.  As a result, the provisions of the 1996 Act
       set the stage for a new competitive paradigm in which carriers in previously
       segmented markets are able to compete in a dynamic and integrated
       telecommunications market that promises lower prices and more innovative services
       to consumers.
       3.   Central to the new statutory scheme is section 251 of the Act, which seeks generally
       to reduce inherent economic and operational advantages possessed by incumbent
       local exchange carriers.  Toward this end, section 251 imposes specific market-
       opening mechanisms, such as mandatory interconnection, unbundling, and resale
       requirements on incumbent LECs, in order to break the incumbents' control over
       local facilities.  Congress directed the Commission to implement the provisions of
       section 251, and to specifically determine which network elements should be
       unbundled pursuant to section 251(c)(3).
       4.   Pursuant to our statutory mandate and the directives of the Supreme Court, we
       reevaluate the unbundling obligations of incumbent LECs, pursuant to sections
       251(c)(3) and 251(d)(2).  The new standards and framework we adopt in this Order
       for determining which network elements incumbent LECs must make available on
       an unbundled basis will remove the uncertainties surrounding the incumbents'
       unbundling obligations since passage of the Act.  More importantly, however, they
       will define the competitive landscape of telecommunications markets for the
       foreseeable future.
       5.   The standards and unbundling obligations that we adopt in this Order are designed
       to create incentives for both incumbent and competitive LECs to innovate and invest
       in technologies and services that will benefit consumers through increased choices
       of telecommunications services and lower prices.  We recognize that there will be a
       continuing need for all three of the arrangements Congress set forth in section 251 to
       remain available to competitors so that they can serve different types of customers in
       different geographic areas.  We continue to believe that the ability of requesting
       carriers to use unbundled network elements, including various combinations of
       unbundled network elements, is integral to achieving Congress' objective of
       promoting rapid competition to all consumers in the local telecommunications
       market.  Moreover, in some areas, we believe that the greatest benefits may be
       achieved through facilities-based competition, and that the ability of requesting
       carriers to use unbundled network elements, including various combinations of
       unbundled network elements, is a necessary precondition to the subsequent
       deployment of self-provisioned network facilities.
       6.   Although Congress did not express explicitly a preference for one particular
       competitive arrangement, it recognized implicitly that the purchase of unbundled
       network elements would, at least in some situations, serve as a transitional
       arrangement until fledgling competitors could develop a customer base and
       complete the construction of their own networks.  In particular, Congress stated:
       "[I]t is unlikely that competitors will have a fully redundant network in place when
       they initially offer local service because the investment necessary is so significant.
       Some facilities and capabilities . . . will likely need to be obtained from the
       incumbent [LEC] as network elements pursuant to new section 251."  Implicit in
       this recognition, and in section 271's requirement that the Bell Operating
       Companies (BOCs) provide access and interconnection to their network facilities in
       accordance with the requirements in the competitive checklist, is Congress's
       expectation that new competitors would use unbundled elements from the
       incumbent LEC until it was practical and economically feasible to construct their
       own networks.
       7.   We fully expect that over time competitors will prefer to deploy their own facilities
       in markets where it is economically feasible to do so, because it is only through
       owning and operating their own facilities that competitors have control over the
       competitive and operational characteristics of their service, and have the incentive to
       invest and innovate in new technologies that will distinguish their services from
       those of the incumbent.  Unbundling rules that encourage competitors to deploy
       their own facilities in the long run will provide incentives for both incumbents and
       competitors to invest and innovate, and will allow the Commission and the states to
       reduce regulation once effective facilities-based competition develops.
       Accordingly, the unbundling rules we adopt in this proceeding seek to promote the
       development of facilities-based competition.
       8.   We believe that the "necessary" and "impair" standards we adopt below address the
       Supreme Court's mandate and implement the statutory language and goals of the
       Act.  The standards we adopt take into consideration alternatives outside the
       incumbent LEC's network, and whether those alternatives are actually available to
       the requesting carrier as a practical, economic, and operational matter.  We consider
       not only the direct costs, but also other costs and impediments associated with using
       alternative elements that may constitute barriers to entry.  We believe the
       Commission must assess these factors to determine the availability of alternatives,
       and whether access to the incumbent's network element thereby satisfies the
       "necessary" and "impair" standards of section 251(d)(2).
       9.   The unbundling standards we adopt in this Order also seek to encourage the rapid
       introduction of competition in all markets, including residential and small business
       markets.  They seeks to create incentives for both incumbents and requesting
       carriers to invest and innovate in new technologies by establishing a mechanism by
       which regulatory obligations to provide access to network elements will be reduced
       as alternatives to the incumbent LECs' network elements become available in the
       future.  In addition, the standards provide reasonable certainty regarding the
       availability of unbundled elements, thereby allowing requesting carriers to attract
       investment capital and move forward with implementing national and regional
       business plans that will allow them to serve the greatest number of consumers
       10.  To date, we have seen the development of facilities-based competition among
       providers of particular services in certain sectors of the market.  For example, as
       discussed in more detail below, competitors have deployed their own fiber rings and
       approximately 700 circuit switches to provide local exchange and exchange access
       services primarily to medium and large business customers in high-density
       metropolitan areas.  In addition, the record in this proceeding suggests that a
       growing number of carriers are deploying packet switches to provide data services
       in a number of markets, particularly for end users with substantial
       telecommunications needs.
       11.  Other local markets, however, particularly the residential and small business
       markets, and geographic markets outside of major metropolitan areas, have seen
       minimal competition.  This may be due to the uncertainty surrounding the ability of
       competitive LECs to use reasonably priced unbundled network elements to serve
       these areas as a result of litigation concerning the Commission's unbundling rules.
       Because unbundled network elements have not been made fully available to
       requesting carriers as the Commission expected in 1996, we do not yet know the
       extent to which competition will develop once all of the unbundling rules are
       actually implemented by incumbent LECs.
       12.  Only recently have incumbent LECs provided access to combinations of unbundled
       loops, switches, and transport elements, often referred to as "the platform."  Since
       these combinations of unbundled network elements have become available in
       certain areas, competitive LECs have started offering service in the residential mass
       market in those areas.  For example, in January of this year, Bell Atlantic, as part of
       an agreement with the New York Public Service Commission, began offering the
       unbundled network element platform out of particular end offices in New York
       City.  As a result, MCI WorldCom had acquired upwards of 60,000 new local
       residential customers in New York as of June 1999.  AT&T also plans to serve
       local residential customers over the platform in Texas.
       13.  For effective competition to develop as envisioned by Congress, competitors must
       have access to incumbent LEC facilities in a manner that allows them to provide the
       services that they seek to offer, as contemplated in section 251(d)(2) of the Act.
       Despite the development of competition in some markets, incumbents still control
       the vast majority of the facilities that comprise the local telecommunications
       network, giving them advantages of economies of scale and scope not enjoyed by
       competitive LECs.  Because competitors do not yet enjoy the same economies of
       scale, scope and ubiquity as the incumbent, they may be impaired if they do not
       have access, at least initially, to certain network elements supplied by the incumbent
       LEC.  For example, without access to unbundled network elements, a competitive
       LEC may choose not to enter a particular market because the cost and delays
       associated with deploying its own facilities would be too high given the revenues
       obtainable from that market and the relative attractiveness of other potential new
       markets.  Similarly, a competitive LEC may decline to enter a market because
       certain of their facilities are subject to economies of scale and scope such that the
       competitor would need a larger market share than it is likely to have initially.  In
       such cases, competitors may choose to enter a certain market if they can obtain
       access to particular unbundled network elements on sufficiently favorable terms that
       such scale economies are overcome, and other potential markets no longer appear
       more attractive.
       14.  The standards and rules we adopt in this Order seek to build on industry experience
       and technological changes that have occurred in the telecommunications
       marketplace since the 1996 Act was enacted three years ago.  Today, both
       incumbent LECs and requesting carriers are at the early stages of deploying
       innovative technologies to meet the ever-increasing demand for high-speed, high-
       capacity advanced services.  To encourage competition among carriers to develop
       and deploy new advanced services, the marketplace for these services must be
       conducive to investment, innovation, and meeting the needs of consumers.
       Accordingly, our unbundling rules are designed to facilitate the rapid and efficient
       deployment of all telecommunications services, including advanced services.
       Specifically, unbundling rules that are based on a preference for development of
       facilities-based competition in the long run will provide incentives for both
       incumbents and competitors to invest and innovate, and should allow the
       Commission to reduce regulation once true facilities-based competition develops.
       15.  The unbundling standards we adopt in this order also are designed to be
       administratively practical and respond to changes in the marketplace as alternatives
       to the incumbent LECs' network elements become available. We are committed to
       reviewing the unbundling obligations in three years, and as the marketplace changes
       with the development of new technologies and increased facilities-based
       competition, we will modify the list of unbundled elements, as warranted.
       XVI. EXECUTIVE SUMMARY
   Section 251(d)(2)'s "Necessary" and "Impair" Standards.  Section
   251(d)(2)(A)'s "necessary" standard is a stricter standard that applies to proprietary
   network elements.  Section 251(d)(2)(B)'s "impair" standard applies to non-proprietary
   network elements.  Applying a stricter standard to proprietary network elements is
   consistent with Congress' intention to spur innovation and investment by both incumbent
   and competitive LECs.  In applying these standards, we look first to what is occurring in
   the marketplace today.
      Necessary.  A proprietary network element is "necessary" within the meaning of
     section 251(d)(2)(A) if, taking into consideration the availability of alternative
     elements outside the incumbent's network, including self-provisioning by a
     requesting carrier or acquiring an alternative from a third party supplier, lack of
     access to that element would, as a practical, economic, and operational matter,
     preclude a requesting carrier from providing the services it seeks to offer.  There
     are limited circumstances under which we may unbundle proprietary
     information or functionalities even if those elements are not strictly "necessary,"
     as long as the "impair" standard is met.  These circumstances are: (1) where an
     incumbent LEC, for the primary purpose of causing a particular network to be
     evaluated under the stricter "necessary" standard in order to avoid its unbundling
     obligation, implements only a minor modification to the network element to
     make the element proprietary; (2) where an incumbent LEC cannot demonstrate
     that the information or functionality that it claims is proprietary differentiates its
     services from its competitors' services, or is otherwise competitively significant;
     or (3) where lack of access to the proprietary element would jeopardize the goal
     of the 1996 Act to bring rapid competition to the greatest number of consumers.
      Impair.  The incumbent LECs' failure to provide access to a non-proprietary
     network element "impairs" a requesting carrier within the meaning of section
     251(d)(2)(B) if, taking into consideration the availability of alternative elements
     outside the incumbent's network, including self-provisioning by a requesting
     carrier or acquiring an alternative from a third-party supplier, lack of access to
     that element materially diminishes a requesting carrier's ability to provide the
     services it seeks to offer.  In order to evaluate whether there are alternatives
     actually available to the requesting carrier as a practical, economic, and
     operational matter, we look at the totality of the circumstances associated with
     using an alternative.  In particular, our "impair" analysis considers the cost,
     timeliness, quality, ubiquity, and operational issues associated with use of the
     alternative.
  Goals of the Act.  We also interpret the obligations imposed in section 251(d)(2) within
  the larger statutory framework of the 1996 Act. Congress apparently contemplated that
  we would consider additional factors by directing the Commission, in section 251(d)(2),
  to "consider at a minimum" the "necessary" and "impair" standards.  The Supreme Court
  decision requires us to apply a limiting standard "rationally related to the goals of the
  Act."  Accordingly, in addition to the factors set forth above, we may consider the
  following factors:
      Rapid Introduction of Competition in All Markets.  We may consider whether the
     availability of an unbundled network element is likely to encourage requesting
     carriers to enter the local market in order to serve the greatest number of consumers as
     rapidly as possible. We also note that Congress required Bell Operating Companies to
     demonstrate that they are providing loops, switching, transport, signaling and
     databases, and operator services/directory assistance in order to obtain in-region,
     interLATA approval.  While the section 271 checklist does not determine definitively
     which elements all incumbent LECs are required to unbundle pursuant to section 251,
     it sheds some light on what Congress believed was required to open local markets to
     competition.  Accordingly, we believe that we may consider whether requiring all
     incumbent LECs to unbundle these same elements would promote the rapid
     introduction of competition on a nationwide basis.
      Promotion of Facilities-Based Competition, Investment, and Innovation.  We may
     consider the extent to which the unbundling obligations we adopt will encourage the
     development of facilities-based competition by competitive LECs, and innovation and
     investment by both incumbent LECs and competitive LECs, especially for the
     provision of advanced services.
      Reduced Regulation.  We may consider the extent to which we can encourage
     investment and innovation by reducing regulatory obligations to provide access to
     network elements, as alternatives to the incumbent LECs' network elements become
     available in the future.
      Certainty in the Market.  We may consider how the unbundling obligations we adopt
     can provide the uniformity and predictability that new entrants and fledgling
     competitors need to develop national and regional business plans.  We also consider
     whether the rules we adopt provide financial markets with reasonable certainty so that
     carriers can attract the capital they need to execute their business plans to serve the
     greatest number of consumers.
      Administrative Practicality.  We may consider whether the unbundling
     obligations we adopt are administratively practical to apply.
  Modification of the National List.
      The Order recognizes that rapid changes in technology, competition, and the
     economic conditions of the telecommunications market will require a
     reevaluation of the national unbundling rules periodically.  In order to encourage
     a reasonable period of certainty in the market, the Commission expects to
     reexamine the national list of unbundled network elements in three years.
      Section 251(d)(3) permits state commissions to require incumbent LECs to
     unbundle additional elements as long as the obligations are consistent with the
     requirements of section 251 and the national policy framework instituted in this
     Order.
      Removal of elements from the national list on a state-by-state basis would not be
     consistent with section 251 and the goals of the Act.
  Network Elements that Must be Unbundled.  Applying the above factors, the Order
  concludes that the following network elements must be unbundled:
      Loops.  Incumbent local exchange carriers (LECs) must offer unbundled access
     to loops, including high-capacity lines, xDSL-capable loops, dark fiber, and
     inside wire owned by the incumbent LEC. The unbundling of the high frequency
     portion of the loop is being considered in another proceeding.
      Subloops.  Incumbent LECs must offer unbundled access to subloops, or
     portions of the loop, at any accessible point.  Such points include, for example, a
     pole or pedestal, the network interface device, the minimum point of entry to the
     customer premises, and the feeder distribution interface located in, for example,
     a utility room, a remote terminal, or a controlled environment vault.  The Order
     establishes a rebuttable presumption that incumbent LECs must offer unbundled
     access to subloops at any accessible terminal in their outside loop plant.
      To the extent there is not currently a single point of interconnection that can be
     feasibly accessed by a requesting carrier, we encourage parties to cooperate in
     any reconfiguration of the network necessary to create one.  If parties are unable
     to negotiate a reconfigured single point of interconnection at multi-unit
     premises, we require the incumbent to construct a single point of
     interconnection that will be fully accessible and suitable for use by multiple
     carriers.
      Network Interface Device (NID).  Incumbent LECs must offer unbundled access
     to NIDs.  The NID includes any potential means of interconnection with
     customer premises inside wiring at the point where the carrier's local loop
     facilities end, such as at a cross connect device used to connect the loop to
     customer-controlled inside wiring.  This includes all features, functions, and
     capabilities of the facilities used to connect the loop to premises wiring,
     regardless of the specific mechanical design.
      Circuit Switching.  Incumbent LECs must offer unbundled access to local circuit
     switching, except for local circuit switching used to serve end users with four or
     more lines in access density zone 1 in the top 50 Metropolitan Statistical Areas
     (MSAs), provided that the incumbent LEC provides non-discriminatory, cost-
     based access to the enhanced extended link throughout zone 1.  (An enhanced
     extended link (EEL) consists of a combination of an unbundled loop,
     multiplexing/concentrating equipment, and dedicated transport.  The EEL
     allows new entrants to serve customers without having to collocate in every
     central office in the incumbent's territory.)  Local circuit switching includes the
     basic function of connecting lines and trunks on the line-side and port-side of
     the switch.  The definition of the local switching element encompasses all of the
     features, functionalities, and capabilities of the switch.
      Packet Switching.  Incumbent LECs must offer unbundled access to packet
     switching only in limited circumstances in which the incumbent has placed
     digital loop carrier systems in the feeder section of the loop or has its Digital
     Subscriber Line Access Multiplexer (DSLAM) in a remote terminal.  The
     incumbent will be relieved of this obligation, however, if it permits a requesting
     carrier to collocate its DSLAM in the incumbent's remote terminal on the same
     terms and conditions that apply to its own DSLAM.  Packet switching is defined
     as the function of routing individual data message units based on address or
     other routing information contained in the data units, including the necessary
     electronics (e.g., DSLAMs).
      Interoffice Transmission Facilities.  Incumbent LECs must offer unbundled
     access to dedicated interoffice transmission facilities, or transport, including
     dark fiber.  Dedicated interoffice transmission facilities are defined as
     incumbent LEC transmission facilities dedicated to a particular customer or
     carrier that provide telecommunications between wire centers owned by the
     incumbent LECs or requesting telecommunications carriers, or between
     switches owned by incumbent LECs or requesting telecommunications carriers.
     State commissions are free to establish reasonable limits governing access to
     dark fiber if incumbent LECs can show that they need to maintain fiber reserves.
      Incumbent LECs must also offer unbundled access to shared transport where
     unbundled local circuit switching is provided.  Shared transport is defined as
     transmission facilities shared by more than one carrier, including the incumbent
     LEC, between end office switches, between end office switches and tandem
     switches, and between tandem switches in the incumbent LEC's network.
      Signaling and Call-Related Databases.  Incumbent LECs must offer unbundled
     access to signaling links and signaling transfer points (STPs) in conjunction with
     unbundled switching, and on a stand-alone basis.  The signaling network
     element includes, but is not limited to, signaling links and STPs.  Incumbent
     LECs must also offer unbundled access to call-related databases, including, but
     not limited to, the Line Information database (LIDB), Toll Free Calling
     database, Number Portability database, Calling Name (CNAM) database,
     Operator Services/Directory Assistance databases, Advanced Intelligent
     Network (AIN) databases, and the AIN platform and architecture.  We do not
     require incumbent LECs to unbundle access to certain AIN software that qualify
     for proprietary treatment.
      Operations Support Systems (OSS).  Incumbent LECs must offer unbundled
     access to their operations support systems.  OSS consists of pre-ordering,
     ordering, provisioning, maintenance and repair, and billing functions supported
     by an incumbent LEC's databases and information.  The OSS element includes
     access to all loop qualification information contained in any of the incumbent
     LEC's databases or other records, including information on whether a particular
     loop is capable of providing advanced services.
  Network Elements that Need Not be Unbundled.  The following network
  elements need not be unbundled:
      Operator Services and Directory Assistance (OS/DA).  Incumbent LECs are not
     required to unbundle their OS/DA services pursuant to section 251(c)(3), except
     in the limited circumstance where an incumbent LEC does not provide
     customized routing to a requesting carrier to allow it to route traffic to
     alternative OS/DA providers.  Operator services are any automatic or live
     assistance to a consumer to arrange for billing or completion of a telephone call.
     Directory assistance is a service that allows subscribers to retrieve telephone
     numbers of other subscribers.  Incumbent LECs, however, remain obligated
     under the non-discrimination requirements of section 251(b)(3) to comply with
     the reasonable request of a carrier that purchases the incumbents' OS/DA
     services to rebrand or unbrand those services, and to provide directory assistance
     listing updates in daily electronic batch files.
      Shared Transport where Circuit Switching is not Unbundled.  Incumbent LECs
     are not required to unbundle shared transport where they are not required to
     offer unbundled local circuit switching, as described above.
      Packet Switching.  Incumbent LECs are not required to unbundle packet
     switching, except in a limited circumstance.  Competitive LECs are actively
     deploying packet switches to serve high-volume customers, and are not impaired
     in their ability to offer service to such customers without access to the
     incumbent LEC's facilities.  Competitive LECs are impaired, however, in their
     ability to provide services to small-volume users without access to unbundled
     packet switching.  Nonetheless, we consider the other goals of the Act in making
     our unbundling determination, and conclude that given the nascent nature of the
     advanced services market and the Act's goal to provide incentives to all carriers
     to invest and innovate, incumbent LECs are generally not required to unbundle
     packet switching.
     Section 271-Related Issues.
      If a network element on the section 271 competitive checklist is not required to
     be unbundled pursuant to section 251(c)(3) (i.e., local circuit switching and
     shared transport in certain circumstances), Bell Operating Companies are not
     required to offer unbundled access to any such checklist items in compliance
     with the Commission's pricing rules.  While the applicable price, terms, and
     conditions for that element are subject to section 201(b) and 202(a) of the Act, it
     would be counterproductive to mandate that incumbents offer elements at
     forward looking prices when the market price, rather than a regulated rate,
     should prevail in circumstances when an element is not unbundled.
     Combinations of Network Elements.
      Given the pendency of litigation in the Court of Appeals for the Eighth Circuit,
     the Order declines to define the enhanced extended link as a separate network
     element, nor does it address whether an incumbent LEC must combine network
     elements that are not already combined in the network.
  Further Notice of Proposed Rulemaking:  Use of Unbundled Network
  Elements to Provide Exchange Access Service.
      The Further Notice seeks comment on whether there is any basis in the statute or
     our rules under which incumbent LECs could decline to provide entrance
     facilities (the link between an interexchange carrier's point of presence and an
     incumbent's switch or serving wire center) at unbundled network element
     prices.
      The Further Notice also invites parties to refresh the record on whether
     requesting carriers may use unbundled dedicated or shared transport facilities in
     conjunction with unbundled switching to originate or terminate interstate toll
     traffic to customers to whom the requesting carrier does not provide local
     exchange service.
       XXVI.     BACKGROUND
       27.  On August 8, 1996, the Commission adopted the Local Competition First Report
       and Order, implementing the local competition provisions of the 1996 Act.  In that
       order, the Commission established rules governing the obligations of incumbent
       LECs to open their local networks to competition pursuant to the requirements of
       section 251 of the 1996 Act.  Among other things, the order adopted rules
       implementing the network unbundling requirements of sections 251(c)(3) and
       251(d)(2) of the 1996 Act.  Section 251(c)(3) imposes a duty on all incumbent LECs
       to provide to competitors access to network elements on an unbundled basis.
       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."
       28.  In the Local Competition First Report and Order, the Commission applied its
       interpretation of the "necessary" and "impair" standards of section 251(d)(2) to the
       unbundling requirements of section 251(c)(3).  Specifically, the Commission
       defined "necessary" to mean "an element is a prerequisite for competition," and it
       defined "impair" to mean "to make or cause to become worse; diminish in value."
       The Commission also determined that a requesting carrier's ability to offer service is
       "impaired" or "diminished in value" if "the quality of the service the entrant can
       offer, absent access to the requested element, declines" or if "the cost of providing
       the service rises."
       29.  After addressing the "necessary" and "impair" standards, the Commission adopted
       rule 51.319, which sets forth the network elements that incumbent LECs were
       required to make available to requesting carriers on an unbundled basis.  Section
       51.319 of the Commission's rules required incumbent LECs to offer unbundled
       access to the following network elements:  (1) local loops; (2) network interface
       devices; (3) local switching; (4) interoffice transmission facilities; (5) signaling
       networks and call-related databases; (6) operations support systems; and (7) operator
       services and directory assistance.  Section 51.317 of the Commission's rules
       allowed states to impose additional unbundling requirements pursuant to the
       Commission's interpretation of section 251(d)(2).
       30.  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.  The Eighth Circuit, among
       other holdings, rejected the incumbent LECs' argument that, in determining which
       elements were subject to the unbundling requirements, the Commission had not
       properly applied the "necessary" and "impair" standards of section 251(d)(2).
       Accordingly, the Eighth Circuit upheld section 51.319.  The Supreme Court granted
       several parties' requests to review the Eighth Circuit's decision.
       31.  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.  While the Court affirmed that the Commission
       has jurisdiction to implement the local competition provisions of the 1996 Act,
       including the unbundling requirements in section 251, it concluded that the
       Commission had not adequately considered the "necessary" and "impair" standards
       of section 251(d)(2).  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."  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. . ."  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.  On April 16, 1999, we released a Second Further Notice in this
       docket seeking comment on the appropriate unbundling standard, and which
       network elements should be unbundled.
       XXXII.    FRAMEWORK FOR DECIDING WHAT NETWORK
       ELEMENTS MUST BE UNBUNDLED PURSUANT TO SECTION
       251
            A.   Overview
       33.  In this section, we discuss our framework for determining whether a particular
       network element should be unbundled.  We interpret the terms "necessary,"
       "impair," and "proprietary" in section 251(d)(2) in a manner that gives substance to
       those terms.  We then discuss how we will evaluate alternative elements that are
       available through self-provisioning or from third-party suppliers.  In considering
       whether to unbundle a particular network element, we look first to what is occurring
       in the marketplace today.  For some network elements, we are beginning to see
       competitors using alternatives in discrete situations.  In order to determine whether
       these alternative sources of network elements are actually available as a practical,
       economic, and operational matter, so that incumbents should be free of any
       unbundling obligations for that element, we look at several factors, including cost,
       ubiquity, quality, timeliness, and operational impediments.
       34.  We acknowledge that given the complexity associated with a competitive LEC's
       decision to enter a certain market, it is extremely difficult to identify one particular
       factor that is dispositive of whether or not a competitor will seek to offer a particular
       service in any given market.  For example, even where a competitive LEC's costs to
       provide a service may be comparable to the incumbent's costs to provide a similar
       service, the competitive LEC, because it cannot enter all markets simultaneously,
       may choose not to enter a particular market at a particular time because there are
       other markets that are relatively more profitable to serve.  The competitive LEC
       might also be dissuaded from entering a market because of subsidy distortions or
       other regulatory factors.  Conversely, notwithstanding the fact that a competitive
       LEC's infrastructure costs in a particular market may be materially different from
       the incumbent LECs' costs, the competitive LEC may still choose to enter that
       market if it can provide more services over its network infrastructure, or offer
       marketing, service, or technical innovations for which customers will pay a
       premium.
       35.  Although we may not be able to identify with precision a competitor's incentives, or
       lack of incentives to enter a particular market, we nonetheless find that evidence
       demonstrating the lack of competition in certain areas of the country and among
       certain classes of customers is a strong indicator that there may exist economic and
       other types of barriers that may, at a minimum, impair a competitor's ability to
       compete vis--vis the incumbent.  Accordingly, based on evidence provided in the
       record, we use our administrative judgment to identify several factors, including
       cost, ubiquity, quality, timeliness, and operational impediments, that we find
       particularly helpful in explaining whether a competitor's ability to provide the
       service it seeks to offer is impaired without access to a particular unbundled network
       element.  Based on the actual state of competition, we look at these factors and their
       relationship to alternative sources of network elements to determine whether the
       alternatives are actually available as a practical, economic, and operational matter.
       36.  In particular, we examine both the direct and other costs a carrier incurs to substitute
       the alternative network element for the incumbent LEC's network element.  We also
       consider whether self-provisioning or purchasing a network element from a third-
       party supplier would prevent a requesting carrier from entering the market within a
       reasonable time, or from expanding its operations to meet promptly the demand of
       its customers.  In addition to costs and delays, we consider whether using alternative
       sources of network elements introduces quality differences or operational or
       technical impediments that may impair a requesting carrier's ability to provide the
       services that it seeks to offer.  Specifically, we assess whether use of an alternative
       source of the network element would cause a requesting carrier's customers to
       experience degraded service.
       37.  We also consider the extent to which a requesting carrier can compete for customers
       on a wide-spread basis using alternative sources of the elements outside the
       incumbent's network.  In some cases, to compete effectively with the incumbent
       LEC for the same customers, competitive LECs must be able to attain similar
       economies of scale that can only be achieved by serving a broad base of customers
       within a geographic area.  Although theoretically, all or part, of an incumbent LEC's
       network can be replicated at some cost, as a practical matter, replication of elements
       in a ubiquitous manner may impair a requesting carrier's ability to compete vis--vis
       the incumbent.  If the competitive LEC must deploy multiple facilities in order to be
       able to bring competition to a broad base of customers within a geographic area, the
       costs and delays associated with deploying facilities will likely be magnified, and
       could "materially diminish" that competitor's ability to provide the services that it
       seeks to offer.
       38.  We find that the language of section 251(d)(2) and the Supreme Court decision
       suggest that we should consider, in addition to the "necessary" and "impair"
       standards, the overall goals of the 1996 Act.  Section 251(d)(2) states that the
       Commission shall "consider, at a minimum," the "necessary" and "impair"
       standards, thus leaving the Commission free to consider other relevant factors.  In
       addition, the Supreme Court decision requires us to apply a limiting standard
       "rationally related to the goals of the Act."  Moreover, as a policy matter, we believe
       that we may consider additional factors to ensure that the unbundling requirements
       promote the goals of the Act.
       39.  Accordingly, we may consider, in addition to the "necessary" and "impair"
       standards, whether the unbundling obligations we adopt are likely to: (1) encourage
       competitive LECs to rapidly enter the local market and serve the greatest number of
       consumers; (2) advance the development of facilities-based competition by
       competitive LECs, and encourage investment and innovation in new technologies
       and new services by both incumbent and competitive LECs; (3) reduce regulation of
       unbundled network elements as alternatives to the incumbent LECs' network
       elements become available in the future, (4) provide certainty in the marketplace
       that will allow new entrants and fledgling competitors to develop national and
       regional business plans and bring the benefits of competition to the greatest number
       of consumers; and (5) be administratively practical to apply.  We conclude that these
       important policy goals can only be furthered by adoption of a national list of
       unbundled elements that takes into consideration, where appropriate, discrete
       geographic and product market variations that create exceptions to the incumbent
       LECs' general duty to unbundle the elements on the list.
       40.  We do not assign any particular weight to the factors we identify above.  Rather, we
       consider the relationship among the various factors to determine whether an
       incumbent LEC's network element should be unbundled.  Indeed, there may be
       circumstances in which there is significant evidence that competitors are impaired
       without unbundled access to a particular element, but requiring incumbent LECs to
       unbundle that element would be inconsistent with the goals of the Act.
            A.   The "Necessary" and "Impair" Standards of Section 251(d)(2)
                 1.   Application of the "necessary" and "impair" standards
                 to proprietary and non-proprietary elements under
                 Section 251(d)(2)
                      a.   Background
       41.  In the Local Competition First Report and Order, the Commission concluded that
       section 251(d)(2) establishes separate standards that apply to proprietary and non-
       proprietary network elements.  Specifically, the Commission determined that the
       "necessary" standard of section 251(d)(2)(A) applies to proprietary elements, and
       that the "impair" standard in section 251(d)(2)(B) applies to non-proprietary
       elements.  In the Notice, we sought comment on this interpretation of section
       251(d)(2).  In particular, we asked parties to comment on the difference between the
       "necessary" and "impair" standards.  Noting that the Act employs two different
       terms, we asked if the Commission must apply different criteria to determine
       whether a network element meets these standards.
       42.  Only a couple of commenters dispute the Commission's previous decision to apply
       the "necessary" standard to proprietary elements and the "impair" standard to non-
       proprietary elements.  In particular, Sprint argues that the "necessary" and "impair"
       standards apply only to proprietary elements and thus, all non-proprietary elements
       must be unbundled.
                      a.   Discussion
       43.  We find no reason to change our framework for analyzing network elements under
       section 251(d)(2).  In subpart (A) of section 251(d)(2), "necessary' modifies
       elements that are "proprietary in nature" while in subpart (B), "impair" modifies all
       other network elements.  We agree with the majority of commenters that the
       "necessary" standard of section 251(d)(2)(A) is a higher standard that applies to
       proprietary network elements or to proprietary functions within an element.  We
       believe that our conclusion that section 251(d)(2) establishes a higher standard for
       proprietary network elements than for non-proprietary elements is consistent with
       both the language of the statute and the goals of the 1996 Act to encourage
       incumbent LECs and competitive LECs to innovate and invest in new technologies.
       Specifically, incumbent LECs will have an on-going incentive to innovate if we
       ensure that their investment in the proprietary portions of their network is protected.
       While competitive LECs will have access to the incumbent LEC's proprietary
       network elements where necessary, they will not have unlimited access to those
       elements.  We believe that this balanced approach provides competitive LECs with
       an incentive to innovate and invest in new technologies that will differentiate their
       services from the incumbents' services.  We note that applying the "necessary"
       standard to proprietary elements, and the "impair" standard to non-proprietary
       elements is also consistent with the Commission's previous interpretation of this
       section that was implicitly adopted by the Supreme Court.
                 1.   Definition of "Proprietary in Nature"
                      a.   Background
       44.  Section 251(d)(2)(A) states that "[i]n determining what network elements should be
       made available for purposes of subsection (c)(3), the Commission shall consider, at
       a minimum, whether . . . . access to such network elements as are proprietary in
       nature is necessary."  In the Local Competition First Report and Order, the
       Commission referred to proprietary network elements as including, for example,
       "those elements with proprietary protocols or elements containing proprietary
       information."  The Commission found in the Local Competition First Report and
       Order that for most network elements subject to the unbundling obligations of
       section 51.319, parties had not identified any proprietary concerns.  For those
       network elements where parties did identify proprietary concerns, the Commission
       found that access to those network elements was "necessary."
       45.  In the Notice, we sought comment on whether we should consider network elements
       as non-proprietary if the interfaces, functions, features and capabilities of the
       elements sought by the requesting carrier are defined by recognized standard-setting
       bodies (e.g. ITU, ANSI, or IEEE), are defined by Bellcore requirements, or
       otherwise are widely available from vendors.  We further requested comment on
       whether the term "proprietary" should be limited to information, software, or
       technology that can be protected by patents, copyright or trade secret laws.  There
       is general agreement among the parties that the Commission should define
       proprietary, under section 251(d)(2)(A), consistent with intellectual property
       categories.  Several competitive LECs maintain that we must define the term
       "proprietary" narrowly so as not to create incentives for incumbent LECs to attempt
       to deny access to unbundled network elements on proprietary grounds.
                      a.   Discussion
       46.  In this Order, we adopt a limited definition of the phrase "proprietary in nature" that
       tracks the intellectual property categories of patent, copyright, and trade secrets.
       The majority of parties addressing this issue support using intellectual property law
       as a basis for defining "proprietary in nature."  We agree, and find that the
       intellectual property laws governing patent, copyright and trade secrets find a
       common purpose in Congress' intention to protect proprietary interests under
       section 251(d)(2).  The intellectual property laws are designed to protect the
       incentives of authors and inventors to innovate.  Similarly, Congress recognized
       that an incumbent LEC's incentive to innovate could be adversely affected by
       requiring incumbent LECs to unbundle proprietary portions of network elements to
       requesting carrier-competitors.  Congress therefore required the Commission to
       consider whether unbundling in such instances is "necessary."
       47.  We find that if an incumbent LEC can demonstrate that it has invested resources
       (time, material, or personnel) to develop proprietary information or network
       elements that are protected by patent, copyright, or trade secret law, the product of
       such an investment is "proprietary in nature" within the meaning of section
       251(d)(2)(A).  This definition is consistent with the 1996 Act's policy of preserving
       the incumbent LECs' innovation incentives.  It is also consistent with the
       Commission's conclusion, in the Local Competition First Report and Order, that in
       some instances it will be "necessary" for new entrants to obtain access to proprietary
       elements.  Finally, our decision to define interests that are "proprietary in nature"
       along established intellectual property categories is consistent with the Department
       of Justice and Federal Trade Commission Guidelines for the Licensing of
       Intellectual Property.
       48.  Our definition excludes elements that are based on widely accepted industry
       documents or on standards commonly used by a standards-setting body (e.g. ITU,
       ANSI, IEEE) or by vendors.  There are few innovation incentives associated with
       elements that are based on well-recognized standards that are widely available in the
       market, and we therefore are not required to scrutinize such elements under the
       higher "necessary" standard.
       49.  Section 251(d)(2) directs the Commission to "consider, at a minimum" whether
       access to proprietary elements is necessary.  As discussed below, this discretionary
       language permits us to consider other factors, in addition to the "necessary"
       standard, in making our unbundling determination.  We find that there are several
       circumstances which, if they exist with regard to information or functionalities that
       the incumbent LEC claims are proprietary, will permit us to order unbundling of the
       proprietary information or functionalities even if unbundled access to the element is
       not strictly "necessary," as long as the "impair" standard is met.  The first
       circumstance is where an incumbent LEC, for the primary purpose of causing a
       particular network to be evaluated under the stricter "necessary" standard in order to
       avoid its unbundling obligation, implements only a minor modification to the
       network element to make the element "proprietary in nature."  Denying a
       requesting carrier access to the element in this circumstance would not encourage
       innovation and investment by the incumbent LEC, which is one of the goals of the
       1996 Act, and would reduce consumer benefits by failing to facilitate rapid
       deployment of competitive services.  The second circumstance is where an
       incumbent LEC cannot demonstrate that the information or functionality that it
       claims is proprietary differentiates its services from its competitors' services, or is
       otherwise competitively significant.  Information or functionalities that do not
       distinguish an incumbent LEC's service from that of its competitors are unlikely to
       be the focus of an incumbent LEC's efforts to innovate, and therefore do not require
       the high level of protection normally afforded to proprietary elements under the
       "necessary" standard.  The third circumstance is where we find that lack of access to
       the proprietary element would jeopardize the goal of the 1996 Act to bring rapid
       competition to the greatest number of customers.  In such a circumstance, we may
       find that the incumbent LEC's asserted proprietary interest is outweighed by the
       benefits of facilitating more rapid deployment of competition for the greatest
       number of consumers.  Given the significance of the incumbent LECs' proprietary
       interests, and our commitment to do nothing to discourage innovation and
       investment by all carriers, we do not envision, outside of these limited
       circumstances, unbundling a proprietary network element unless the "necessary"
       standard is satisfied.  Moreover, we cannot imagine a situation where we would
       order unbundling of a proprietary element unless the "impair" standard has been
       met.
       50.  We agree with those commenters that argue that "proprietary in nature" applies only
       to the proprietary interests of the incumbent LEC and not to proprietary interests of
       third parties.  Limiting the definition of "proprietary" to interests held by the
       incumbent LEC is consistent with section 251(d)(2)(A)'s goal of preserving the
       incumbent LECs' incentives to innovate.  Moreover, sections 251(c) and 251(d)(2),
       by their terms, apply only to the proprietary interests of those parties subject to the
       Act's unbundling obligations -- incumbent LECs.  Thus, section 251(d)(2) only
       indirectly affects, if at all, the innovation incentives of third parties.
       51.  Finally, we reject CompTel's argument that we should limit the application of
       proprietary network elements to those circumstances in which the incumbent LEC
       "discloses" proprietary information.  CompTel argues that if unbundling merely
       provides a requesting carrier with the "use" of a proprietary methodology, but does
       not "disclose" or access the proprietary information itself, the element is not
       proprietary.  We find that the "use" or "disclosure" rationale does not promote the
       goal of the Act to encourage investment and innovation, and thus is at odds with our
       decision to define "proprietary" along intellectual property categories.
       52.  Pursuant to patent law, patent holders trade monopoly rights in their inventions in
       exchange for a requirement that they disclose the technical details underlying the
       patent.  Patent holders thus recover their investments by obtaining a monopoly on
       the "use" of their protected intellectual property.  We agree with Ameritech that
       limiting the definition of "proprietary" to requests that would reveal proprietary
       information would turn intellectual property law and incentives to innovate on their
       head; "instead of granting exclusivity in exchange for disclosure, it would withhold
       exclusivity unless needed to avoid disclosure."  Similarly, under copyright laws, an
       illegal copy or "use" of a protected work can damage an author's incentive to
       produce the work.  We note, however, that the disclosure of sensitive customer
       information contained in unbundled network element must be consistent with the
       requirements of section 222.
                 1.   The "Necessary" Standard of Section 251(d)(2)(A)
                      a.   Background
       53.  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."  It also acknowledged that prohibiting incumbents from
       refusing access to proprietary elements could reduce their incentives to offer
       innovative services.  The Commission did not identify any proprietary elements
       subject to unbundling in the Local Competition First Report and Order, except that
       it acknowledged the claims of several parties that access to the incumbent LECs'
       advanced intelligent network (AIN) may raise proprietary concerns.  It nevertheless
       concluded that access to AIN is "necessary" within the meaning of section
       251(d)(2)(A).
       54.  In the Notice, the Commission sought comment on the definition of "necessary" for
       the purpose of determining proprietary network elements that must be unbundled
       pursuant to the requirements of section 251(d)(2)(A), as well as on what factors or
       criteria the Commission should apply in determining whether access to a network
       element is "necessary."
       55.  Several competitive LECs assert that in determining whether unbundling of a
       proprietary network element is "necessary," the Commission must evaluate whether
       the requesting carrier can obtain comparable functionality from an alternative
       network element.  They maintain that if the requesting carrier would experience a
       material loss in functionality without the network element that that the incumbent
       LEC claims is proprietary, then the incumbent LEC's network element is
       "necessary" within the meaning of section 251(d)(2)(A).  The incumbent LECs
       assert generally that both the "necessary" and "impair" standards require an analysis
       of whether lack of access to their networks elements, taking into consideration
       alternatives outside the incumbent's network, would deny an efficient competitor a
       meaningful opportunity to compete.  These commenters argue that the "necessary"
       standard requires the Commission to accept a higher degree of proof that
       alternatives to the element are not available.
                      a.   Discussion
       56.  We conclude that a proprietary network element is "necessary" within the meaning
       of section 251(d)(2)(A) if, taking into consideration the availability of alternative
       elements outside the incumbent's network, including self-provisioning by a
       requesting carrier or acquiring an alternative from a third-party supplier, lack of
       access to that element would, as a practical, economic, and operational matter,
       preclude a requesting carrier from providing the services it seeks to offer.  We agree
       with NTIA that the proper focus of the "necessary" standard is whether access to the
       incumbent LEC's proprietary element is absolutely required for the competitor's
       provision of its intended service.  We find, therefore, that an incumbent LEC must
       provide access to a proprietary element, if withholding access to the element would
       prevent a competitor from providing the service it seeks to offer.  In other words, we
       conclude that an incumbent LEC's proprietary network element would only be
       available to a competitor if the competitor is unable to offer service, without access
       to the element, because no practical, economic, and operational alternative is
       available, either by self-provisioning or from other sources.
       57.  The standard we assign to the term "necessary," as used in section 251(d)(2)(A), is
       consistent with the Supreme Court's decision because it considers alternatives
       available outside the incumbent's network and gives substance to the meaning of
       "necessary."  Moreover, insofar as the standard focuses on the competitor's ability
       to furnish a desired service, and not merely on whether profits are increased by
       using the incumbent's network, the standard is also consistent with the Court's
       instruction that we must "apply some limiting standard, rationally related to the
       goals of the Act."
       58.  This "necessary" standard differs from the "impair" standard we adopt below
       because a "necessary" element would, if withheld, prevent a carrier from offering
       service, while an element subject to the "impair" standard would, if withheld,
       merely limit a carrier's ability to provide the services it seeks to offer.  We
       therefore disagree with the standards proposed by ALTS and other competitive
       LECs that access to a proprietary element is "necessary" if the entrant would
       experience a material loss in functionality without access to the element.  A
       standard based on a test of "material loss" in functionality requires only that the
       competitive LEC's ability to compete be materially affected in some way, as
       opposed to precluded, and ignores the higher degree of protection normally afforded
       intellectual property rights.  The incumbent LECs argue that the "necessary"
       standard is a higher standard that is intended to preserve their incentive to invest in
       proprietary protocols, and that access to a proprietary element is "necessary" only
       if lack of access to that element would deny an efficient competitor a meaningful
       opportunity to compete.  We agree with the incumbent LECs' concerns regarding
       the preservation of their investment incentives.  We believe that our standard, by
       requiring that a requesting carrier be precluded as a practical, economic, and
       operational matter from providing service without access to the proprietary
       information, sufficiently protects the incumbents' proprietary property from
       nonessential access by competitors.
       59.  We reject, however, the incumbent LECs' proposal to base the "necessary" standard
       on the requirements of an efficient competitor.  As we explain below in our
       discussion of the "impair" standard, we do not affirmatively base our unbundling
       standard on an efficient competitor because we conclude that the marketplace is
       better able than regulators to distinguish efficient competitors from inefficient
       competitors.  We also note that GTE and SBC state that few, if any, network
       elements are entirely proprietary in nature.  Other commenters point out that most
       network equipment and services are non-proprietary because of the need for
       interoperability of networks.  We therefore expect that the "necessary" standard
       will be invoked only when there is a serious question of whether access to the
       element will infringe upon the incumbent's intellectual property.
                 1.   The "Impair" Standard of Section 251(d)(2)(b)
                      a.   Background
       60.  In the Local Competition First Report and Order, the Commission adopted a
       dictionary definition of  the term "impair" that means "to make or cause to become
       worse; diminish in value."  The Commission stated that "generally . . . an entrant's
       ability to offer a telecommunications service is 'diminished in value' if the quality
       of the service the entrant can offer, absent access to the requested element, declines
       and/or the cost of providing the service rises."  In particular, the Commission
       interpreted the "impair" standard as requiring an evaluation of whether the failure of
       an incumbent to provide access to a network element would decrease the quality, or
       increase the financial or administrative cost of the service a requesting carrier seeks
       to offer.
       61.  In the Notice, we sought comment on the meaning of the term "impair," and asked
       whether we should adopt a standard under which we examine whether the new
       entrant's ability to offer a telecommunications service in a competitive manner is
       materially diminished in value.  We also sought comment on the factors or criteria
       we should adopt to determine whether failure to provide access to the incumbent
       LEC's network elements would impair an entrant's ability to provide service within
       the meaning of section 251(d)(2).
       62.  The incumbent LECs argue generally that a requesting carrier is impaired if, after
       taking into account the availability of elements from alternative sources outside the
       incumbent's network, lack of access to the requested element would deny a
       competitor a meaningful opportunity to compete.  This standard is similar to the
       standard the incumbent LECs propose for the "necessary" standard under section
       251(d)(2)(A).  GTE argues that failure to provide access to a network element
       would impair a requesting carrier's ability to provide service only where the element
       is essential to competition, and there is convincing evidence that the carrier cannot
       compete effectively using an alternative network element.  Several incumbent also
       maintain that we must consider all available alternatives, including those available
       from other suppliers and through self-provisioning by the requesting carrier.  The
       Texas PUC proposes that a competitor is impaired if, looking at the marketplace as
       a whole, lack of access to the incumbent's network element causes it to incur an
       increase in cost such that the competitor does not have a meaningful opportunity to
       compete.   The competitive LECs and the Illinois Commerce Commission propose
       a standard by which a carrier would be impaired if, after taking into account the
       availability of elements from alternative sources outside the incumbent's network,
       lack of access to the requested element would materially diminish the requesting
       carrier's ability to provide service.  The difference between the standard proposed
       by the competitive LECs and the standard proposed by the incumbent LECs is
       essentially the difference between whether lack of access to an unbundled network
       element "denies" or "materially diminishes" the ability of a competitor to provide
       the services it seeks to offer.  Many competitive LECs also assert that the incumbent
       LECs' failure to provide access to an element would impair a requesting carrier's
       ability to provide service where there is no competitive wholesale market for the
       requested element.
                      a.   Discussion
                      (i)  The "Impair" analysis
       63.  We conclude that the failure to provide access to a network element would "impair"
       the ability of a requesting carrier to provide the services it seeks to offer if, taking
       into consideration the availability of alternative elements outside the incumbent's
       network, including self-provisioning by a requesting carrier or acquiring an
       alternative from a third-party supplier, lack of access to that element materially
       diminishes a requesting carrier's ability to provide the services it seeks to offer.  We
       find that a materiality component, although it cannot be quantified precisely,
       requires that there be substantive differences between the alternative outside the
       incumbent LEC's network and the incumbent LEC's network element that,
       collectively, "impair" a competitive LEC's ability to provide service within the
       meaning of section 251(d)(2).  We therefore agree with the Illinois Commerce
       Commission that where a competing LEC's "ability to offer a telecommunications
       service in a competitive manner is materially diminished in value without access to
       that element," the competitor's ability to provide its desired services would be
       impaired.
       64.  We believe that a standard that includes a "materiality" component gives substance
       to the "impair" standard of section 251(d)(2)(B), and responds to the Supreme
       Court's concern that we "apply some limiting standard, rationally related to the
       goals of the Act."  A standard that includes a materiality component preserves
       requesting carriers' ability to provide service using unbundled elements, as
       contemplated by the Act, and encourages them to invest and innovate.  As
       envisioned by Congress, requesting carriers may need each of the three separate
       means of providing service (resale of the incumbent LEC's service, use of
       unbundled incumbent LEC network elements, deployment of self-provisioned
       facilities), or various combinations of these means, in order to serve different
       customer classes in different areas.  The purchase of unbundled network elements
       from the incumbent should serve as a transitional strategy that will provide
       requesting carriers with the ability to gain a sufficient volume of business to justify
       economical deployment of their own facilities.
       65.  Although we recognize that the existence of some significant level of competitive
       LEC facilities deployment is probative of whether competitive LECs are impaired
       from providing service within the meaning of section 251(d)(2), we decline to adopt
       the incumbent LECs' position that the presence of a single competitor providing
       service, without using the incumbent's unbundled network elements, is dispositive
       evidence that a competitor's ability to provide service generally would not be
       impaired without access to such elements.  According to Bell Atlantic, if an
       efficient competitor can and does provide service without access to the incumbent's
       network element, it is irrelevant whether a less efficient competitor might claim that
       it would be impaired without access to the element.  We find that the "efficiency"
       argument raised by Bell Atlantic and other incumbent LECs is more relevant to the
       length of time a competitor has been in business than to the efficiencies created by
       the competitor's inherent capabilities or cost structure.  More importantly, however,
       we agree with MCI WorldCom that the Act is not calibrated to the performance of
       the company whose business plan allows it to rely the least on the incumbent LEC's
       network elements.  The provisions of the 1996 Act do not contemplate that either
       the incumbent LEC or the regulator will determine whether a particular carrier is
       "efficient."  Rather, the Act is designed to create a regulatory framework that
       requires incumbent LECs to make network elements subject to the unbundling
       obligations of section 251 available to all requesting carriers, subject to the
       requirements of section 251(d)(2), and allows the marketplace to determine
       ultimately which competitors thrive or survive.
       66.  Moreover, the ability of one or more competitors to serve certain customers in a
       particular market is not dispositive of whether competitive LECs without unbundled
       access to the incumbent LEC's facilities are able to compete for other customers in
       the same market or for customers in other markets.  In some markets, particularly
       those markets serving high-volume business customers, it may be practical and
       economical for competitive LECs to compete using self-provisioned facilities.  In
       other markets, however, typically those markets consisting of residential consumers
       and small businesses, the delay and costs associated with self-provisioning a
       network element will preclude those same competitors, or others, from assuming the
       risk of entry, unless they can purchase unbundled elements from the incumbent.
       We agree with the commenters that point out that we cannot evaluate the needs of
       every potential carrier seeking access to each network element on a case-by-case
       basis.  We conclude, however, that we should not adopt rules that would deny
       access to network elements to all competitors based on the presence of a single
       competitor that has been able to enter without the use of a particular unbundled
       network element from the incumbent LEC.
       67.  We believe that Congress rejected implicitly the argument that the presence of a
       single competitor, alone, should be dispositive of whether a competitive LEC would
       be "impaired" within the meaning of section 251(d)(2).  For example, although
       Congress fully expected cable companies to enter the local exchange market using
       their own facilities, including self-provisioned loops, Congress still contemplated
       that incumbent LECs would be required to offer unbundled loops to requesting
       carriers.  A standard that would be satisfied by the existence of a single
       competitive LEC using a non-incumbent LEC element to serve a specific market,
       without reference to whether other competitive LECs are "impaired" under section
       251(d)(2), would be inconsistent with the Act's goal of creating robust competition
       in telecommunications.  In particular, such a standard would not create competition
       among multiple providers of local service that would drive down prices to
       competitive levels.  Indeed, such a standard would more likely create stagnant
       duopolies comprised of the incumbent LEC and the first new entrant in a particular
       market.  An absence of multiple providers serving various markets would
       significantly limit the benefits of competition that would otherwise flow to
       consumers.
       68.  On the other hand, we are not persuaded by arguments of competitive LECs that the
       "impair" standard is met only once it is determined that a wholesale market exists
       for a particular element.  We agree with the incumbent LECs that basing the
       "impair" standard on the existence of a wholesale market does not take into
       consideration self-provisioning as a viable substitute to the incumbent LECs'
       network elements.   The Supreme Court decision in Iowa Utils. Bd. expressly
       faulted the Commission's analysis in the Local Competition First Report and Order
       for not comparing use of the incumbent LEC's element with "self-provision" or
       with "purchas[ed elements] from another provider."  We find that, in order to
       thoroughly evaluate the availability of alternative elements outside of the incumbent
       LEC's network, we must consider elements available from all sources, including
       those elements available from third-party suppliers and through self-provisioning.
       69.  Several of the incumbent LECs argue that our standard should be based on an
       analysis similar to the one used by courts in determining whether, according to the
       essential facilities doctrine, a firm must share its facilities with competitors.  We
       disagree.  Although we acknowledge that the Supreme Court referred to the
       possibility of adopting a limiting standard based on the essential facilities
       doctrine, we find nothing in the legislative history or statutory language of the
       1996 Act, or in the Court's decision that requires us to apply that doctrine in
       determining which network elements the incumbent LECs must unbundle.  Indeed,
       the Court expressly declined to decide, as a matter of law, whether the essential
       facilities doctrine is mandated by section 251(d).  Further, we believe that the
       standard under section 251(d) better reflects the overall goals of the Act.
       Accordingly, as discussed more fully below, we describe several factors that should
       be considered in determining whether a particular network element must be
       unbundled pursuant to section 251(c)(3).
       70.  As an initial matter, the legislative history and statutory language of the Act indicate
       that Congress did not intend to codify the essential facilities doctrine when it
       enacted section 251(d)(2).  Specifically, the legislative history indicates that
       Congress was aware of antitrust principles and the essential facilities doctrine, in
       particular, when it considered the 1996 Act.  At least since 1991, the Senate had
       considered telecommunications legislation that expressly referred to "essential
       facilities."  Yet, in spite of its awareness of this doctrine, Congress did not adopt
       an essential facilities test for unbundling of network elements.  Congress chose,
       instead, to adopt unbundling requirements that are based upon the "necessary" and
       "impair" standards of section 251(d)(2).  Moreover, section 601(b)(1) of the Act
       expressly preserves the existing antitrust laws, indicating that Congress intended for
       the Act to augment, not replace, traditional antitrust rules.
       71.  The essential facilities doctrine is an antitrust doctrine that imposes an obligation on
       a firm that controls facilities that are essential for the existence of competition
       between itself and a competitor to share such facilities on non-discriminatory
       terms.  The doctrine creates a narrow exception to the general antitrust
       presumption that a single firm may decline to deal with another firm.  Under the
       essential facilities doctrine, a court may require a firm possessing monopoly control
       over an essential input to deal with a competitor, if it is shown that the monopolist is
       misusing control of an essential facility to foreclose competition in a downstream
       market.
       72.  Although we find that the essential facilities doctrine promotes the same economic
       and policy goals embodied in the 1996 Act, we find it to be of limited assistance in
       our analysis of the unbundling obligations of the Act because, as NTIA explains, the
       Act plainly imposes on incumbent LECs a broader duty to deal with competitors
       than does the essential facilities doctrine.  In particular, the essential facilities
       doctrine differs from the analysis the Commission must undertake under section
       251(d)(2) because Congress has already created an affirmative obligation for
       incumbent LECs to make their facilities available to competitors.  Specifically,
       section 251(c)(3) imposes on incumbent LECs a general obligation to provide
       access on an unbundled basis to any network elements that the Commission
       identifies under section 251(d)(2).  This obligation is not limited to situations in
       which the incumbent is misusing control of a unique facility to foreclose
       competition in a downstream market.  Rather, section 251(d)(2) requires incumbents
       to share their facilities if competitors are merely "impaired" in their ability to
       provide services they seek to offer.  In addition, sections 251(c)(3) and 251(d)(2)
       require incumbent LECs to make their facilities available at cost-based rates,
       whereas the essential facilities doctrine allows monopolists to continue charging
       monopoly rates for use of their facilities.
       73.  It is particularly notable that although the essential facilities doctrine is referenced in
       several Supreme Court rulings, the Supreme Court has never explicitly adopted the
       doctrine.  Moreover, because antitrust jurisprudence has not clearly defined the
       contours of the essential facilities doctrine, the doctrine provides limited guidance in
       developing a limiting standard under section 251(d)(2).  In order to establish liability
       under the essential facilities doctrine, a plaintiff must establish the existence of five
       elements: 1) a monopolist controls an essential facility; 2) the competitor is unable
       to practically or reasonably duplicate the essential facility; 3) the monopolist denies
       a competitor use of the facility; 4) the monopolist can feasibly provide the facility;
       and 5) there is no legitimate business justification for denying access to the facility
       the monopolist controls.  Although the second prong of this test resembles the
       inquiry the Commission must undertake to evaluate the availability of alternative
       elements outside of the incumbent LEC's network, it does not establish a standard
       by which the Commission can measure the extent to which the cost of duplicating
       the element is economically infeasible, which, as described below, is a significant
       part of the our unbundling analysis.
                      (i)  Factors for Determining Availability of
                      Alternative Network Elements
       74.  In order to respond to the Supreme Court's decision, we consider whether a
       requesting carrier's ability to provide the services that it seeks to offer would be
       materially diminished if it were required to use an alternative element available
       outside the incumbent LEC's network.  We agree with those parties that argue that
       we must consider the totality of the circumstances to determine whether an
       alternative to the incumbent LEC's network element is available in such a manner
       that a requesting carrier can realistically be expected to actually provide service
       using the alternative.  We therefore take into account alternatives that are
       available through both self-provisioning and from third-party suppliers, and we
       consider the extent to which these alternatives are available as a practical, economic,
       and operational matter.
       75.  We are not persuaded by the incumbents' argument that we must look at each
       element in isolation to determine whether or not that element independently satisfies
       section 251(d)(2).  Such an analysis fails to reflect the manner in which carriers
       interconnect their networks, and ignores factors that would impair a requesting
       carrier's ability to actually provide service, which is the focus of section
       251(d)(2)(B).  Even if a particular element may be purchased outside of the
       incumbent LEC's network at reasonable prices, other factors, including the costs
       and delays associated with collocation arrangements, as well as additional costs and
       operational impediments associated with the manual processes used to interconnect
       certain network elements, may make it impossible as a practical, economic, and
       operational matter for a competitor to provide services in the local market quickly
       and on a wide-spread basis.
       76.  We acknowledge that some of the factors we consider in our analysis may implicate
       other proceedings or provisions of the statute.  We therefore remain open to the
       possibility that issues that we address under our "impair" analysis, (e.g.,
       collocation), could be addressed in other contexts, such as in enforcement
       proceedings.
       77.  Although we recognize that the factors of cost, timeliness, quality, ubiquity, and
       operational factors are only some of the factors that may influence a carrier's
       decision to enter a particular market, we agree with the California PUC that these
       factors are relevant to an inquiry of whether alternative sources of network elements
       are reasonably available from other sources, and thus, in many cases, whether
       requesting carriers are able to actually provide service using the alternative
       element.  We also agree with the commenters that point out that we cannot
       evaluate the needs of every potential entrant for every network element on a carrier-
       by-carrier, market-by-market, week-by-week (or other time period) basis.  We
       therefore will not analyze the availability of alternative elements, including those
       provided through self-provisioning, from the perspective of a carrier using any
       specific competitive strategy in a particular geographic market.
       78.  Although we find it reasonable to consider cost, time, quality, ubiquity, and other
       factors associated with self-provisioning or acquiring an element from a third-party
       provider, we do not base our decision on cost models or on the theoretical
       availability of alternatives from other sources.  Rather, we find the marketplace to be
       the most persuasive evidence of the actual availability of alternatives as a practical,
       economic, and operational matter.  As the Texas PUC stated, the Commission and
       the states should "base their decisions on marketplace information, while
       recognizing that minor increases in a competitor's costs must be weighed against
       other factors such as service quality, technological innovation, and the loss of
       efficiency in a rapidly changing marketplace."  Discerning the practical,
       economic, and operational viability of self-provisioning or obtaining alternative
       elements from third-party providers is technical, complex, and subject to
       considerable uncertainty.  We believe, however, that an examination of the factors
       we have identified provides the Commission with the ability to identify, through the
       exercise of its administrative judgment, discernable material differences between
       using the incumbent's unbundled network elements and those available from other
       sources that ultimately will affect a requesting carrier's ability to provide the
       services it seeks to offer.
       79.  We assign little weight in our "impair" analysis to the ability of a requesting carrier
       to use the incumbent LECs' resold or retail tariffed services as alternatives to
       unbundled network elements.  In the Local Competition First Report and Order, the
       Commission expressly rejected the incumbent LECs' argument that requesting
       carriers are not impaired in their ability to provide service if they can provide their
       proposed service by purchasing the service at wholesale rates from the incumbent
       LEC.  As the Commission concluded in that Order, allowing incumbent LECs to
       deny access to unbundled elements solely, or primarily, on the grounds that an
       element is equivalent to a service available at resale would lead to impractical
       results; incumbent LECs could completely avoid section 251(c)(3)'s unbundling
       obligations by offering unbundled elements to end users as retail services.  In
       other words, denying access to unbundled elements on the grounds that an
       incumbent LEC offers an equivalent retail service could force requesting carriers to
       purchase, for example, an unbundled loop and switching out of an incumbent's
       retail tariff at a wholesale discount, subject to all of the associated tariff restrictions.
       US West maintains that it need not unbundle local transport because requesting
       carriers can purchase its tariffed special access services.  In light of the little
       weight we assign to the availability of resold services in our analysis, we reject US
       West's argument.  This argument would foreclose competitive LECs from taking
       advantage of the distinct opportunity Congress gave them, through section
       251(c)(3), to use unbundled network elements.
       80.  As the Commission explained in the Local Competition First Report and Order,
       using unbundled network elements and resold services present different
       opportunities, risks, and costs, in connection with providing local telephone service.
       These differences influence the entry strategies of potential competitors.  The
       Commission stated that carriers using unbundled elements will have greater
       opportunities to offer services that are different from those services offered by the
       incumbents.  More specifically, carriers reselling incumbent LEC services are
       limited to offering the same service an incumbent LEC offers at retail.  While
       competitive LECs using unbundled elements may have greater competitive
       opportunities than carriers offering services available for resale, they also face
       greater risks.  A carrier purchasing unbundled elements must pay for the cost of the
       element, pursuant to terms and conditions agreed to in negotiations or ordered by
       states in arbitrations.  Thus, the competitive LEC faces the risk that end-user
       customers will not demand a sufficient number of services to allow the competitive
       LEC to recoup the costs it incurs using the unbundled element; a carrier that resells
       the incumbent LEC's services does not face the same risk.  The 1996 Act grants
       competitive LECs the option of using either the incumbent LEC's unbundled
       network elements or resold services, thereby allowing the competitors to balance the
       risks and opportunities associated with each.
       81.  In addition, even if we agreed with US West that an incumbent LEC's retail tariff
       provided competitive LECs with a viable alternative to the incumbent LEC's
       unbundled network element, competitors would have no assurance that the
       incumbent LEC would not change the tariff in such a manner that the competitive
       LEC could no longer rely on it to provide the services it seeks to offer.  Most
       services that competitive LECs purchase for resale are contained in state tariffs, and
       are subject to the states' tariff approval process.  Relying on these state-approved
       tariffs would compromise our ability to determine which network elements must be
       unbundled pursuant to section 251(d)(2) because we would not be able to evaluate
       each incumbent LEC retail tariff as a possible alternative for every network element.
       In addition to being administratively unworkable for us to evaluate every state tariff
       filed by the incumbent LECs, relying on these tariffs as alternatives to the
       incumbent LECs' unbundled network elements would create inconsistent
       unbundling rules among the states, a result that, as we explain further below, would
       not promote the development of competition for all consumers.
       82.  Moreover, we do not find the Supreme Court's decision requiring us to consider the
       availability of elements outside the incumbent LECs' network to be at all
       inconsistent with our decision to consider alternatives available through self-
       provisioning or from third-party suppliers.  The Supreme Court required us to
       compare the use of unbundled network elements with "self-provision, or with
       purchase from another provider."  If we were to construe the Supreme Court's
       opinion in the manner suggested by US West, we would have to consider whether
       an incumbent LEC's duty to unbundle an element would be limited by the existence
       of an alternative service that the incumbent LEC provides itself, whether or not there
       are other competitively-supplied alternatives.  In other words, under US West's
       argument, the existence of its retail tariffs alone would be sufficient to eliminate its
       obligation to unbundle certain elements.  The Supreme Court's opinion does not
       require us to ignore whether there are other non-incumbent LEC alternatives to the
       incumbent LEC's unbundled network elements, proposed by US West.
       83.  We believe that the "impair" standard we adopt in this Order will encourage the
       development of facilities-based competition.  Specifically, as competitors acquire
       more customers, and the material differences in cost, time, quality, and operational
       impediments diminish, competitors will gradually reduce their reliance on the
       incumbent LECs' facilities.  Competitors will also deploy more of their own
       facilities as it becomes practical to do so.  As the material differences decrease, the
       Commission will be able to apply the same standard to remove elements from the
       national unbundling obligations.
       84.  Cost.  In addition to the direct cost of purchasing the element, we consider all of the
       costs that requesting carriers would incur using an alternative element to provide the
       services it seeks to offer.  Although not dispositive, the costs associated with self-
       provisioning or purchasing alternative elements from third-party suppliers are
       relevant to our determination of whether the element is a practical and economical
       alternative to the incumbent LEC's unbundled network element.
       85.  We believe that an "impair" standard based on cost is more appropriate than a
       standard based on profitability, because profit margins for both new and existing
       carriers will depend on the degree of competition that exists in the market.  If the
       cost of the alternative element is materially greater than the cost of obtaining the
       corresponding element from the incumbent, the requesting carrier will not be able to
       provide service at prices that are competitive with the incumbent's prevailing retail
       prices.
       86.  In determining whether the cost of self-provisioning or purchasing an element from
       a third-party source is materially higher than using the incumbent LEC's unbundled
       network element, we evaluate the difference between the cost to the requesting
       carrier of obtaining the unbundled element from the incumbent LEC at forward-
       looking costs and the cost of an alternative element.  Because the Commission's
       rules require that network elements be priced based on forward-looking economic
       costs, we believe that forward-looking costs are the appropriate costs to consider in
       our analysis.
       87.  In order to provide service using its own facilities, a competitor will incur the costs
       of purchasing, installing, and provisioning the equipment it needs to provide service
       using its own loop or by interconnecting with the incumbent's network.  The record
       in this proceeding addresses several types of costs associated with using an
       alternative element.  These include the direct costs of provisioning the element,
       including fixed and sunk costs, as well as other costs that are likely to materially
       affect the requesting carrier's ability to provide the services it seeks to offer.  "Fixed
       costs" are costs that do not vary with the level of output.  A "sunk cost," on the
       other hand, is a cost that, once incurred, cannot be recouped if the firm ceases
       production.  To the extent that a competitive LEC incurs significant fixed costs or
       sunk costs when it uses its own facilities or acquires facilities from a third party,
       these costs can disadvantage the competitor relative to the incumbent.
       88.  Fixed costs are frequently associated with economies of scale.  Specifically, where a
       firm faces both a fixed cost and a constant or declining variable cost, the firm's
       average unit cost will fall as output increases, and the firm's cost structure is said to
       exhibit economies of scale.  For example, the cost a competitive LEC incurs to
       construct its own fiber transport ring would constitute a fixed cost, because, at least
       in the short run, this cost would not vary as the competitive LEC's output changed.
         If a competitive LEC incurs significant fixed costs when it uses a particular
       facility, in its early stages of development it would have a significantly higher
       average unit cost than the incumbent LEC, which has a significantly larger output
       and customer base over which to spread the fixed cost.  Since the Commission's
       rules require unbundled transport to be priced based on forward-looking costs (a
       form of long-run average incremental cost), leasing the incumbent's unbundled
       transport facilities is likely to be significantly less costly than deploying one's own
       transport facilities when the competitor has a relatively small volume of traffic, and
       thus its output would be small relative to that of the incumbent.
       89.  Certain network facilities also involve sunk costs, because the facilities cannot be
       easily re-deployed or sold should the competitor decide to cease offering service
       over those facilities.  For example, the cost of the loop serving a customer's home
       is largely a sunk cost because it cannot be recovered if the carrier ceases serving the
       customer.  It is generally recognized that the need to incur sunk costs can constitute
       a barrier to entry.  Specifically, where an incumbent has already deployed sunk
       facilities to serve all customers, a competitive LEC may be unwilling to sink the
       costs of duplicative facilities, either because it may be unable to lure customers
       away from the incumbent and generate enough revenue to recover these sunk costs,
       or because resulting competition between itself and the incumbent LEC would drive
       prices so low that, even if the competitive LEC won a significant number of
       customers, it would still be unable to recover its sunk costs.  In such situations, the
       incumbent has a "first mover" advantage.
       90.  The non-recurring costs of collocating equipment in the incumbent's end offices,
       including the costs of connecting the incumbent LEC's unbundled loops to the
       competitor's switch, and the fees required to obtain rights-of-ways, also constitute
       sunk costs.   Unlike the costs associated with purchasing portable equipment, such
       as multiplexers or switches, the non-recurring costs incurred to collocate equipment
       and connect network elements to the competitive LEC's collocated equipment in an
       incumbent's central office are sunk costs and cannot be recovered if, for whatever
       reason, the carrier exits that market.
       91.  Additional costs, such as the costs a competitive LEC incurs to connect its own
       facilities to the incumbent LEC's unbundled network elements, affect the extent to
       which an alternative element is available as a practical and economic matter, such
       that a requesting carrier can actually use the element to provide the service it seeks
       to offer.  For example, when a competitive LEC deploys its own switch but
       purchases the customer's unbundled loop from the incumbent, the competitive LEC
       may incur significant costs to connect the customer's loop, located in the incumbent
       LEC's central office, to its own switch.  When these cutover costs are added to the
       costs of collocation, a competitor's ability to provide service in an efficient manner,
       when using its own switch for unbundled switching, could be materially diminished.
       We thus look at all of the costs a competitor must incur when using alternatives to
       the incumbent LEC's network element.
       92.  We find that significant fixed and sunk costs associated with using alternatives
       outside the incumbent LEC's network contribute to a finding that lack of access to
       the incumbent's unbundled network elements impairs the requesting carrier's ability
       to provide the service it seeks to offer.  This is particularly true for a new
       competitive LEC that has few customers from which it can recover these costs.
       Because the per-customer costs decrease as the number of subscribers served by the
       carrier increases, a carrier must acquire a sufficient customer base if it is to recover
       substantial costs associated with deploying its own facilities.  It is reasonable,
       therefore,  that a competitive LEC, at a minimum, would want to serve a substantial
       number of business and/or residential customers within a particular Metropolitan
       Statistical Area (MSA).  If the competitor must collocate its own switches in
       multiple central offices throughout the MSA in order to serve those customers, the
       costs associated with collocation may impair the competitor's ability to provide the
       services it seeks to offer, even if the cost of purchasing the individual equipment
       hardware is not excessive.
       93.  In addition, we find that the type of customers that a competitive LEC seeks to serve
       is relevant to our analysis of whether the cost of self-provisioning or acquiring an
       element from a third-party supplier impairs the ability of a requesting carrier to
       provide the services it seeks to offer.  Section 251(d)(2)(B) requires us to consider
       whether lack of access to the incumbent LEC's network elements would impair the
       ability of the carrier to provide the services it seeks to offer.  Consistent with the
       Act, we define the term "services" as it is used in section 251(d)(2)(B), to mean
       "telecommunications service," as it is defined in section 153(46) of the Act.
       Section 251(c)(3) of the Act places an affirmative duty on the incumbent LEC to
       provide unbundled elements to "any requesting telecommunications carrier for the
       provision of a telecommunications service."  Section 251(d)(2)(B), in turn,
       requires that a requesting carrier should not have access to unbundled elements
       unless it would be impaired in its ability to provide "the services that it seeks to
       offer."  Different types of customers use different services (e.g., large business
       customers order different services than residential customers).  We therefore
       conclude that it is appropriate for us to consider the particular types of customers
       that the carrier seeks to serve.
       94.  Competitive LECs generally seek to provide service to residential and small
       business customers and/or to large business customers.  The different revenue-
       generating potential of these different customer groups will often determine whether
       or not a competitive LEC can afford to incur the costs of self-provisioning a facility
       or of acquiring it from a third-party supplier, to the extent that it is available from a
       third-party provider.  For example, a model submitted by MCI WorldCom that
       compares the costs of serving residential customers using unbundled elements from
       the incumbent LEC with the costs of serving the customers using its own facilities
       indicates that, at low market penetration levels, the costs of collocation would
       impair a competitive LEC's ability to serve residential customers using its own
       facilities.  The model further demonstrates, however, that using the incumbent
       LEC's unbundled network elements, the entrant would be able provide service, even
       at the same low market-penetration levels.
       95.  Although the model submitted by MCI WorldCom is clearly not dispositive, we
       note it to illustrate that a requesting carrier's ability to serve residential and small
       business customers may be materially diminished without access to the incumbent
       LEC's network.  Larger business customers, on the other hand, may generate
       sufficient revenue to allow the requesting carrier to serve the customer using certain
       self-provisioned facilities or facilities acquired from third-party sources.
       96.  We also consider, as part of our analysis, the economies of scale and scope that the
       incumbents have due to their ubiquitous network.  The record demonstrates that,
       although facilities-based competition has developed in particular markets (primarily
       for large business customers in high-density areas), incumbent LECs continue to
       enjoy significant economies of scale and density not enjoyed by competitive
       LECs.  Because these economies lower the incumbent's per-customer costs of
       providing service, vis--vis their competitors, we find these economies relevant to
       our inquiry of the extent to which costs of using alternative elements impair a
       requesting carrier's ability to provide the services it seeks to provide.
       97.  We are not persuaded by the argument of BellSouth and other incumbent LECs that
       we should not consider the impact of the incumbents' economies of scale because
       competitors are capable of matching or exceeding the incumbent LECs' economies
       by building their own facilities.  The Commission has concluded previously that
       an incumbent LEC's existing infrastructure generally enables it to serve new
       customers at a much lower cost than a requesting carrier that must install its own
       switches, trunking, and loops to serve its customers, and that Congress has
       addressed this problem by mandating that incumbent LECs share their economies of
       scale and density with competitors.
       98.  We continue to believe that one important purpose of the unbundling provisions of
       the Act is to permit competitive LECs to compete with the same economies as the
       incumbents, especially in the early stages of local competition, when their networks
       are limited in their reach, and their customer bases are necessarily small.  The
       incumbent LECs still enjoy cost advantages and superiority of economies of scale,
       scope, and ubiquity as a result of their historic, government-sanctioned monopolies.
       These economies are now critical competitive attributes and would belong
       unquestionably to the incumbent LECs if they had "earned" them by superior
       competitive skills.  These advantages of economies, however, were obtained by the
       incumbents by virtue of their status as government-sanctioned and protected
       monopolies.  We believe that these government-sanctioned advantages remain
       barriers to the requesting carriers' ability to provide a range of services to a wide
       array of customers, and that their existence justifies placing a duty on the incumbent
       carriers to share their network facilities.  Indeed, Congress, in section 259 of the
       Act, recognized expressly the benefits that the incumbent LECs have as a result of
       their economies of scale and scope.  Section 259 requires the Commission to ensure
       that incumbent LECs make their infrastructure available to qualifying carriers on
       terms and conditions that permit the qualifying carriers to "fully benefit from the
       economies of scale and scope of such [incumbent] local exchange carrier."
       Although section 259 of the Act is different from section 251 in that qualifying
       carriers obtaining infrastructure from the incumbent LEC pursuant to a section 259
       agreement may not use such infrastructure to compete with the incumbent LEC in
       its service territory, both sections make the incumbent LECs' broad economies of
       scale and scope available to other carriers by requiring them to grant other carriers
       access to their networks.
       99.  We do not agree with Ameritech that competitive LECs are not impaired in their
       ability to provide service because they have cost efficiencies which the incumbent
       LECs do not have.  Although we agree that competitors may have certain cost
       advantages, we find that these advantages are likely to be outweighed by other costs
       that competitive LECs, but not incumbent LECs, incur to provide service.  For
       example, many competitive LECs are likely to incur higher costs than the incumbent
       LECs to attract customers, because unlike the incumbent, many competitive LECs
       must establish a brand name and develop a reputation for service quality before they
       can overcome the incumbents' long-standing relationships with their customers.
       Similarly, competitive LECs must incur the initial costs of setting up their
       operations and developing their back-office systems.  AT&T also points out that
       new entrants face a high level of risk when they enter the local market, because they
       enter without the incumbent LEC's knowledge of local operating costs (e.g.,
       location and quality of outside plant facilities) and consumer demand (e.g., peak
       traffic volumes over certain facilities and demand growth).
       100. We recognize that a new entrant in many industries will face disadvantages arising
       from economies of scale.  We further recognize that, even after competition in local
       telecommunications markets is well-established, and the Commission can eliminate
       certain unbundling requirements, smaller competitors will be at a disadvantage to
       the extent that incumbent LECs continue to enjoy significant economies of scale in
       the provision of local telephone service.  Nonetheless, we believe that the existence
       of economies of scale, as well as sunk costs, are relevant factors to consider in our
       assessment of whether failure to provide access to a particular unbundled network
       element will impair a requesting carriers' ability to provide the services it seeks to
       offer.  Although we find economies of scale to be a relevant factor in our analysis,
       we note that we are not basing our determination of whether competitive LECs are
       "impaired" within the meaning of section 251(d)(2) solely on the existence of scale
       economies, nor do we assume that the incumbent LEC's scale economies are
       insurmountable in all circumstances.
       101. Timeliness. We also conclude that  the time associated with using alternative
       elements is relevant to a determination of whether a requesting carrier would be
       impaired in its ability to provide the services it seeks to offer.  A thorough
       evaluation of the delays associated with using alternative elements requires an
       analysis of both the start-up time required for a competitor to enter a market and
       serve a substantial number of customers in an MSA, as well as the time it would
       take a competitor that has already entered the market to expand its operations to
       serve more customers.  We conclude that delays caused by the unavailability of
       unbundled network elements that exceed six months to one year may, taken together
       with other factors, materially diminish the ability of competitive LECs to provide
       the services that they seek to offer.
       102. We recognize that the deployment of alternative elements, whether through self-
       provisioning facilities or by acquiring them from third-party suppliers, will require a
       reasonable amount of time.  The delays associated with using alternative network
       elements will exist whether the requesting carrier is either just beginning to
       provision service or whether it is deploying additional facilities to expand its
       operations to serve more customers.  Commenters differ in their opinions as to what
       constitutes a reasonable time to self-provision facilities.  There is considerable
       evidence in the record, however, that indicates that it takes between six months and
       one year to engineer, furnish, and install a switch, including the time needed to
       obtain collocation space in the incumbent LEC's central offices where the switch
       will be connected to unbundled loops.  Also, NTIA argues that we should
       consider as nontrivial any delay in service provisioning in excess of six months as
       compared to the time it would take for a competitive LEC to begin provisioning a
       service using an incumbent LEC's network element.
       103. Based on the record before us, we conclude that it is reasonable to expect that a
       competitive LEC will need between six months and one year to provide service
       using a self-provisioned facility or one acquired from an alternative source.  The
       local telecommunications market grows at an extremely rapid pace for many
       products and services.  Indeed, we have reported that the demand for certain services
       has increased significantly from year to year since the passage of the 1996 Act and
       that we expect this trend to continue, particularly for advanced services.  We
       believe that any delay that a competitive LEC experiences in serving this fast-paced,
       high-growth market can impair its ability to provide its desired services.  Although
       we cannot quantify precisely how much of a delay associated with an alternative
       network element will materially diminish the ability of a competitor to provide its
       desired services, we find that delays that exceed six months to one year may, taken
       together with other factors, materially diminish the ability of a competitive LEC to
       provide the services it seeks to offer because it prevents the competitive LEC from
       responding quickly to the demand for its services in a rapidly changing market.
       Moreover, we agree with NTIA that incumbent LECs can take advantage of delays
       caused by the unavailability of unbundled network elements by using their "unique
       access to most customers to gain a foothold in new markets, and, in markets where
       services may be offered pursuant to long term-contracts (e.g., DSL and other
       advanced data services), to 'lock-up' customers in advance of competitive entry."
       104. We disagree with Ameritech that a competitor is not impaired in its ability to
       provide a service if it can deploy alternative facilities within two years of its
       decision to do so.  Congress made unbundled elements available to competitive
       LECs to avoid the time it would take competitive LECs to duplicate the incumbents'
       networks, thereby promoting the rapid development of competition for all
       consumers.  We believe that requiring consumers to wait up to two years to have
       access to a choice of competitive service offerings, while competitors attempt to
       provide service without access to unbundled elements, is unreasonable and
       inconsistent with the objectives of the Act.
       105. We also disagree with US West's claim that we should not consider the amount of
       time required for a competitive LEC to self-provision an element or acquire it from
       a third-party supplier because there are always inherent provisioning delays
       associated with using alternative elements.  We believe the amount of time it
       takes a competitive LEC to self-provision an element or acquire an alternative from
       a third-party supplier is highly relevant to its ability to provide the services it seeks
       to offer.  In particular, we agree with commenters that in order to compete
       effectively, competitive LECs must be able to initiate service promptly upon the
       request of their customers.  We also agree with NTIA that delays in the
       introduction of competitive services caused by the unavailability of unbundled
       elements from the incumbent LEC would give the incumbent valuable time to
       entrench itself with existing customers.
       106. Although we agree with US West that self-provisioning or acquiring alternative
       network elements from third-party suppliers involves normal delays incurred when
       starting or expanding a business, we find that significant delays will materially
       diminish a requesting carrier's ability to provide the services it seeks to offer.  In
       addition, we have accounted for the inherent provisioning period to which US West
       refers by determining that it will take competitors approximately six months to one
       year to provide service, and that delays that exceed that time period would
       materially diminish a requesting carrier's ability to provide a competitive service.
       107. We disagree with US West that it would be too administratively complex to
       consider the differences between the time it would take a competitor to obtain an
       element from the incumbent LEC and the time it would take to self-provision an
       element.  We do not find it to be too administratively complex to consider
       whether a delay associated with using an alternative network element exceeds the
       six month to one year timeframe we identified above.  As we stated above, the
       "impair" standard does not mandate precise quantification; nor does it involve an
       analysis of the delay suffered by every carrier.  It requires instead a consideration of
       whether, as a general matter, there is an identifiable difference in the amount of time
       required to provide service using an alternative element and the amount of time
       required to provide service using the incumbent LEC's element, such that the delay
       would materially diminish the competitor's ability to provide the services that it
       seeks to offer.
       108. Quality. We also conclude that the quality of alternative network elements available
       to the competitive LEC is relevant to a determination of whether a requesting
       carrier's ability to provide service is impaired.  We agree with the California PUC
       and other commenters that a material degradation in service quality associated with
       using an alternative element will materially diminish a competitor's ability to
       effectively provide service.  Examples of diminished quality presented in the
       record include greater dialtone delay, higher blocking rates, elevated noise on a
       telephone line and increased failure rates.  These types of quality problems, all of
       which are recognizable by the end-user customer may, taken together with other
       factors, materially diminish the ability of the competitor to provide the services that
       it seeks to offer.  In addition, we believe that the type of service a competitor seeks
       to provide is also relevant to the quality factor.  For example, end users may be
       much less tolerant of problems that affect data services, than they would be for
       voice service.
       109. Ubiquity.  We conclude that we should also consider the extent to which the
       competitive LEC can serve customers ubiquitously using its own facilities or those
       acquired from third-party suppliers.  We agree with competitive LECs that they may
       be impaired if lack of access to an unbundled element materially restricts the
       number or geographic scope of the customers they can serve.  For example,
       incumbent LECs own 98 percent of all access lines in Texas and have deployed
       1538 switches throughout the state.  According to the Texas PUC, if a competitive
       carrier seeks to provide local telephone service throughout the state, it would be
       impractical, if not impossible, for the carrier to replicate the incumbents'
       networks.
       110. Although we acknowledge that not all competitive LECs will want to provide
       ubiquitous service across broad geographic areas, those that do will likely be
       disadvantaged vis--vis the incumbent, especially in the early stages of deployment,
       because the incumbent LECs still enjoy advantages of a ubiquitous network that
       provide them with economies of scale and the ability to reach all consumers in their
       service territories.  It is reasonable to expect that, in many cases, competitors would
       want to provide ubiquitous service in order to achieve similar economies of scale
       that will allow them to spread the costs of construction, equipment, and marketing
       across as many customers as possible.  It is also reasonable to expect that in some
       cases, the ability to serve ubiquitously will be necessary to meet consumer demand
       for competitive alternatives in broad geographic areas.  It such cases, lack of access
       to the incumbent's unbundled network elements could significantly thwart the
       competitor's ability to respond to consumer demand.  Denying access to the
       incumbent's unbundled network elements, when use of alternative sources would
       materially diminish the competitors' ability to serve their intended geographic area,
       would be inconsistent with the goal of the 1996 Act to bring competition to the
       greatest number of customers.  Indeed, the inability to provide service ubiquitously
       may be especially important for competitive LECs seeking to serve residential and
       small business customers located throughout a state.
       111. Impact on Network Operation. We find that we should also consider how self-
       provisioning a network element or obtaining it from a third-party supplier may
       affect the technical manner in which the competitor can operate its network.  We
       agree with the Washington Utilities Commission that overall network performance
       is an important consideration in our "impair" analysis.  In order to compete with
       the incumbent, competitive LECs must be able to connect alternative elements
       either to their own networks or to other incumbent LEC elements that they use to
       provide service.  Thus, material operational or technical differences in functionality
       that arise from interconnecting alternative elements may also impair a requesting
       carrier's ability to provide its desired services.
       112. As we stated above, the incumbent LECs' relative advantages regarding costs,
       ubiquity, timeliness, and quality comprise only a part of a determination of whether
       or not a competitive LEC's ability to provide a competitive service is impaired.
       Indeed, as stated above, competitive LECs may have reasons for not entering a
       particular market that have nothing to do with whether lack of access to the
       incumbent's network would or would not impair their ability to offer service in that
       market.  For example, it is likely that not all competitive LECs intend to invest in
       their own facilities to serve residential customers.  Congress, however, clearly
       intended for competition to develop in these markets, as well as in the business
       markets, and we see as one of the primary goals of section 251, to facilitate
       competition in these markets.  Because the ground work for competition is still
       uncharted, and we have seen very limited competition in the residential market to
       date, we seek to remove economic and other barriers that may forestall the
       development of competition for these consumers.  Accordingly, we unbundle
       elements in a manner that we believe will have the desired effect of promoting
       competition in all markets as quickly as possible.
                      (i)  Other Factors to Be Weighed in Our
                      Unbundling Analysis
       113. We conclude that, in addition to the necessary" and "impair" standards, section
       251(d)(2) permits us to consider other factors that are consistent with the objectives
       of the Act in making our unbundling determination.  Section 251(d)(2) states that,
       "[i]n determining what network elements should be made available for purposes of
       subsection 251(c)(3), the Commission shall consider, at a minimum" the
       "necessary" and "impair" standards."  This language implies clearly that other
       factors may be considered as long as we consider the "necessary" and "impair"
       standards.  Moreover, as the D.C. Circuit has held, when Congress requires an
       agency to "consider" several listed factors, it may also consider additional factors in
       making its decision.  For example, in Central Vermont Railway, Inc. v. Interstate
       Commerce Commission, the D.C. Circuit found that the language of a statute
       addressing railroad mergers that directed the Interstate Commerce Commission to
       "consider at least the following [factors]," also allowed the agency to consider
       factors other than those specifically listed.  In a later case that cited Central
       Vermont Railway, the court explained that an agency's duty to "consider' specific
       factors means only that it must "reach an 'express and considered conclusion' about
       the bearing of a factor, but is not required to give 'any specific weight' to the
       factor."
       114. In the Local Competition First Report and Order, the Commission stated that it
       agreed with several incumbent LECs that the plain import of the "at a minimum"
       language in section 251(d)(2) requires the Commission to consider the standards
       enumerated there, "as well as other standards we believe are consistent with the
       objectives of the 1996 Act."  The Supreme Court did not dispute this
       determination.  In fact, it directed us to adopt "some limiting standard rationally
       related to the goals of the Act."  We are therefore not persuaded by the argument
       of the incumbent LECs that we may now require unbundling only where the
       "necessary" or "impair" standards have been met.  If Congress had intended to
       require the incumbent LECs to unbundle an element only when it was "necessary"
       to, or would "impair" the requesting carrier's ability to provide its desired service,
       Congress would not have used the discretionary phrase "consider at a minimum."
       Rather, Congress would have required the Commission to apply the "necessary" and
       "impair" standard, without consideration of any additional factors.
       115. Accordingly, in addition to the "necessary" and "impair" standard, we conclude that
       we may consider several factors, set out below, that further the goals of the Act in
       accordance with the Supreme Court's directive.  Two fundamental goals of the Act
       are to open the local exchange and exchange access markets to competition and to
       promote innovation and investment by all participants in the telecommunications
       marketplace.  To further the goal of opening the local market to competition, we
       may consider how access to specific unbundled network elements will encourage
       the rapid introduction of local competition to the benefit of the greatest number of
       consumers.
       116. We may also consider how the unbundling rules we adopt will promote facilities-
       based competition by competitive LECs.  We believe that it is the development of
       facilities-based competition that will provide both incumbent and competitive LECs
       with the incentives to innovate and invest in new technologies.  Such innovation and
       investment will bring greater choices of telecommunication services and lower
       prices to a greater number of consumers.  We may also consider the extent to which
       we can reduce regulatory obligations to provide access to network elements as
       alternatives to the incumbent LECs' network elements become available in the
       future.
       117. We may further consider whether unbundling particular network elements will
       provide certainty in the market so that competitive LECs can attract investment
       capital and execute their business plans.  We may also take into account how we can
       make the unbundling rules administratively manageable for the Commission and the
       states to apply.  The adoption of administratively workable unbundling rules will
       enable the Commission and the states to implement and enforce such rules, thereby
       facilitating the ability of competitive LECs to enter the market as quickly and
       efficiently as possible.
       118. We do not give particular weight to any of the factors we identify.  Rather, we
       consider the relationship among the factors we take into account for a particular
       network element, and determine whether the sum total of the effect of the factors
       require a finding that the element must be unbundled.  Thus, we do not require that
       all of the factors be met before we decide whether or not to require incumbent LECs
       to unbundle a particular network element.  Indeed, there may be circumstances in
       which there is significant evidence that competitors are impaired without unbundled
       access to a particular element, but that unbundling the element would not further the
       goals of the Act.  In the final analysis, as we explain in more detail below, we
       consider the effect of these factors in order to develop unbundling obligations that
       are most consistent with Congressional intent.
       119. Rapid Introduction of Competition in All Markets. Congress has emphasized that a
       major goal of  the 1996 Act is to accelerate the development of local competition.
       Indeed, the preamble to the Act states that it  provides a "pro-competitive, de-
       regulatory national policy framework designed to accelerate rapidly" deployment of
       advanced telecommunications technologies by opening all markets to
       competition.  With regard to unbundled network elements, in particular, the
       Eighth Circuit Court of Appeals found that the use of unbundled elements promotes
       the prompt development of competition, as intended by the Act.  The court stated
       that the Act "provides for unbundled access to incumbent LECs' network elements
       as a way to jumpstart competition in the local telecommunications industry."  We
       therefore find that we may consider whether an unbundling obligation is likely to
       encourage requesting carriers to rapidly enter the local market and serve the greatest
       number of customers.  Conversely, we may also consider whether the failure to
       require unbundling will cause any class of consumers to wait unnecessarily for
       competitive alternatives.
       120. We also note that Congress specified certain network elements in the section 271
       checklist that BOCs are required to unbundle before they obtain in-region
       interLATA relief.  In particular, the checklist requires BOCs to demonstrate that
       they are providing loops, switching, transport, signaling and databases, and operator
       services/directory assistance.  Accordingly, we may consider whether requiring all
       incumbent LECs to unbundle these same elements would promote the rapid
       introduction of competition on a nationwide basis.
       121. We agree with NTIA that there is a common purpose between sections 251 and 271
       of the Act of opening the incumbents' monopoly local exchange networks to
       competition.  We believe that Congress intended section 251(c)(3) of the Act and
       the competitive checklist to contain similar, if not identical, obligations.  Although
       we do not conclude that the checklist determines definitively that all incumbent
       LECs are required, pursuant to section 251, to unbundle the items enumerated in
       section 271, we find that section 271 sheds some light on what elements Congress
       believed should be unbundled in order to open local markets to competition.  We
       may therefore consider whether an element is among the elements identified in the
       competitive checklist as we make our determination of which network elements
       incumbent LECs must provide on an unbundled basis.
       122. Promotion of Facilities-Based Competition, Investment, and Innovation.  A
       fundamental goal of the Act is to promote investment and innovation by all
       participants in the telecommunications marketplace, and, in particular, to encourage
       rapid deployment of new telecommunications technologies.  As the Commission
       has stated, the construction of new local exchange networks "will not only lead to
       innovation by the new competitors, but should also spur [the incumbent LECs] to
       upgrade their systems and offer a broader array of desired service options to meet
       consumers' demands."  By promoting innovation both by the incumbent LECs
       and competitive LECs, the Act enables these carriers to produce innovative new
       services for consumers.  Specifically, consumers benefit when carriers invest in their
       own facilities because such carriers can exercise greater control over their networks,
       thereby promoting the availability of new products that differentiate their services in
       terms of price and quality.  We may therefore consider the extent to which the
       unbundling obligations we adopt will advance the development of facilities-based
       competition and will encourage innovation by both incumbent and competitive
       LECs.
       123. We seek to adopt unbundling requirements that are broad enough to provide
       requesting carriers with the elements they need to ramp up towards facilities
       deployment.  At the same time, we remain cognizant of the Supreme Court's
       mandate against granting blanket access to the incumbents' network in a manner
       that is inconsistent with the "necessary" and "impair" standards of section 251(d)(2),
       or with the goals of the 1996 Act.  We believe that the standards we articulate in
       this Order will strike the appropriate balance by unbundling only those network
       elements without which a competitive LEC's ability to provide service will be
       materially diminished.
       124. We agree with the competitive LECs that argue that unbundled access to certain
       incumbents' network elements will accelerate initially competitors' development of
       alternative networks because it will allow them to acquire sufficient customers and
       the necessary market information to justify the construction of new facilities.
       Indeed, many commenters in this proceeding emphasize that they plan to deploy
       alternative facilities as soon as it is technically and economically possible to do so at
       a cost that is close to the incumbent LECs' prices for network elements.
       According to these commenters, competitive LECs prefer to use their own facilities
       or alternatives outside of the incumbent's network when they are able to do so, in
       order to reduce their reliance on a primary competitor.  We find this explanation
       to be reasonable.  Use of the incumbent LEC's network elements requires
       competitive LECs to disclose details about their customers to their chief competitor.
       Moreover, it is reasonable to expect that competitive LECs would prefer to have
       direct control of their networks to ensure the quality of their service and to offer
       products and pricing packages that differentiate their services from the perspective
       of end users.
       125. Reduced Regulation.  Another goal of the Act is to deregulate where market
       conditions warrant.  We may therefore consider the extent to which we can reduce
       regulatory obligations to provide access to network elements as alternatives to the
       incumbent LECs' network elements become available in the future.
       126. Certainty in the Market.  Among other things, the Act seeks to promote competition
       by eliminating barriers to entry into the local market.  We may therefore consider
       how the unbundling obligations we adopt in this Order facilitate competitive entry.
       Accordingly, we find that the unbundling requirements we adopt should typically
       provide the uniformity and predictability new entrants and fledgling competitors
       need to develop and implement national and regional business plans.  In addition,
       uniform and predictable unbundling rules will provide financial markets with
       reasonable certainty so that competitive LECs can attract the investment capital they
       need to execute their business plans.  Specifically, uniform and predictable
       unbundling rules reduce substantially competitive LECs' risk of underutilized
       investment or cash flow drain by providing financial markets with some certainty
       that the competitors will be able to execute their business plans.
       127. We also find that we should, whenever possible, adopt unbundling obligations that
       can be included easily in interconnection agreements between the incumbents and
       the competitive LECs, with as little risk of subsequent litigation as possible.
       Litigation over the incumbents' unbundling obligations requires the parties to these
       agreements, and the state commissions that approve them, to expend vast amounts
       of time and resources, ultimately impairing the ability of competitive LECs to
       execute their business plans.
       128. Administrative Practicality . We may also consider whether the unbundling rules we
       adopt are administratively practical to apply.  Any rule adopted in an administrative
       proceeding runs the risk of being potentially overinclusive in some situations and
       under-inclusive in other situations.  A rule of general applicability rarely will neatly
       fit all situations.  Nonetheless, administrative agencies are entitled to proceed by
       rulemaking as well as by adjudication.  In addition, the goal of administrative
       efficiency has widespread support from diverse segments of the industry, even
       where they disagree on the substantive outcome of the proceeding.  We therefore
       seek to adopt unbundling rules that provide for administrative ease in addressing the
       incumbents' unbundling obligations today, as well as in the future, as alternatives to
       incumbent LEC network elements become available.  We believe that adopting
       rules that are administratively practical to apply will also enhance certainty in the
       marketplace by allowing us to apply the rules efficiently to respond to changes in the
       marketplace.
            A.   Adoption of a National List of Unbundled Network Elements
                 1.   Background
       129. In the Local Competition First Report and Order, the Commission concluded that
       identifying a specific list of network elements that must be unbundled, applicable in
       all states and territories, would best further the "national policy framework"
       Congress established to promote competition in local markets.  In particular, the
       Commission found that a national list would: (1) allow requesting carriers, including
       small entities, to take advantage of economies of scale; (2) provide financial markets
       with greater certainty in assessing requesting carrier's business plans; (3) facilitate
       the states' ability to conduct arbitrations; and (4) reduce the likelihood of litigation
       regarding the requirements of section 251(c)(3).
       130. In the Notice, we stated that we found nothing in the Supreme Court's decision that
       would require us to eliminate national unbundling requirements.  We tentatively
       concluded that we should continue to identify a minimum set of network elements
       that must be unbundled on a nationwide basis, and sought comment on this
       conclusion.  We also sought comment on whether the existence of geographic
       variations in the availability of elements outside of the incumbent LEC's network is
       relevant to a decision to impose minimum national unbundling requirements.
       131. Nearly all of the state commissions commenting in this proceeding, and all of the
       competitive LECs, assert that we should adopt a national list of unbundled
       elements.  The state commissions agree that the Commission has authority to adopt
       such a list, and that it should implement a process for the states to modify the list in
       the future, based on conditions that exist in a particular state.  The New York
       Commission also proposes that, in establishing the national list, we should evaluate
       whether to exclude an element from the unbundling obligations in discrete market
       areas where commercially viable alternatives are available.  The incumbent LECs
       argue, on the other hand, that the Supreme Court's decision in Iowa Utils. Bd.
       requires a geographic market-by-market analysis that will ultimately not result in a
       national list of unbundled elements.  These carriers propose that the Commission
       adopt national standards to be applied by state commissions on a market-by-market
       basis.
                 1.   Discussion
       132. We adopt our tentative conclusion to identify a minimum list of network elements
       that should be unbundled on a national basis.  Similar to New York's proposal, we
       also conclude, as explained below, that we must apply discrete geographic and
       product market exceptions to the incumbent's duty to unbundle the elements on the
       national list, where appropriate.  We conclude that the Commission has the legal
       authority to adopt a national list of network elements that must be made available on
       an unbundled basis, and that the other factors we identify above, such as rapid
       introduction of competition, certainty in the marketplace, administrative practicality,
       and promotion of facilities-based competition, can only be furthered by adoption of
       a national list.
                      a.   Legal Authority
       133. The Supreme Court decision in Iowa Utils. Bd., the statutory language of section
       251(d)(2), and the legislative history of the 1996 Act support our authority to
       develop a national list of unbundled elements.  In particular, the Supreme Court
       upheld explicitly the Commission's jurisdiction to adopt minimum national rules to
       implement each subsection of the 1996 Act.  Consistent with the language in the
       statute, the Supreme Court stated that section 251(d)(2) ". . . requires the
       Commission to determine on a rational basis which network elements must be made
       available, taking into account the objectives of the Act and giving some substance
       to the 'necessary' and 'impair' requirements."  The Court stated that some of the
       national unbundling rules the Commission adopted originally in the Local
       Competition First Report and Order might have been supported by the standard
       required by section 251(d)(2).  The Court stated however, that because the standard
       was not consistently applied, it was forced to vacate Rule 319.  As explained
       above, we have adopted a limiting standard that we believe responds to the Supreme
       Court's concerns.  We have also applied the standard consistently to derive a list
       of network elements that must be made available on an unbundled basis nationwide.
       134. In addition, we do not find that the Supreme Court decision in Iowa Utils. Bd.
       requires us to determine, on a localized state-by-state or market-by-market basis
       which unbundled elements are to be made available.  The Commission examined
       the conditions in the nation as a whole to determine, in the Local Competition First
       Report and Order, that the incumbent LECs must make available a minimum list of
       elements.  The Commission also concluded that it would not adopt an exhaustive
       list of elements, but that the states would identify additional unbundling obligations
       based on local market conditions.  The Supreme Court did not take issue with this
       determination.  The Court held that the Commission must determine on a rational
       basis which network elements must be made available, taking into account "the
       objectives of the Act and giving some substance to the 'necessary' and 'impair'
       requirements of section 251(d)(2)."  Although this language permits the
       Commission to undertake a market-by-market assessment of alternatives, it plainly
       does not mandate such an approach.  Rather, it provides the Commission with the
       discretion to look at the nation as a whole and to identify differences in the
       availability of alternatives outside of the incumbent's network that may exist in
       discrete geographic areas.
       135. However the Commission chooses to limit the incumbent LEC's duty to unbundle
       in accordance with the Supreme Court's opinion, Congress has charged the
       Commission in section 251(d)(2) with "determining what network elements should
       be made available for purposes of subsection [251](c)(3)."  We thus have the
       authority to identify a minimum list of network elements that must be unbundled on
       a nationwide basis.  In addition, the legislative history indicates that Congress
       specifically contemplated that the Commission would open the last monopoly
       bottleneck strongholds in telecommunications by requiring incumbents to share
       their local exchange facilities, including "the equipment with capabilities of routing
       and signaling calls, network capacity, and network standards."  This legislative
       history indicates that Congress expected the Commission would identify a national
       list of unbundled network elements that would include, at a minimum, these basic
       network elements.
                      a.   Goals of the Act
       136. We find that adoption of a national list of unbundled network elements furthers the
       statutory purpose and design of section 251(d)(2) to provide competitive LECs with
       access to unbundled network elements that will allow them to provide the services
       they seek to offer.  Moreover, we find that adoption of a national list is supported by
       the factors we identify above as being important to further the fundamental goals of
       the Act.
       137. Rapid Introduction of Competition. We find that a national list of unbundled
       elements will encourage the rapid introduction of competition in the greatest
       number of markets because it will provide competitive LECs with certainty
       regarding the availability of network elements.   In fact, the record reflects that many
       competitive LECs are poised to begin providing service using unbundled elements,
       particularly for residential and small business customers, as soon as the elements are
       available with a reasonable degree of certainty.  Thus, we believe that the certainty
       that adoption of a national list will bring to the market will benefit the greatest
       number of consumers, particularly residential and small business customers.
       138. We agree with AT&T that the lack of nationwide access to unbundled elements will
       hinder mass market competition during the time it would take competitive LECs to
       construct alternative networks capable of serving all residential customers and most
       business customers in a community.  Even in areas where competitors are able to
       provide facilities-based service in specific wire centers, their ability to provide
       service on an MSA, LATA, or state-wide basis, for all classes of customers, is
       impaired without access to the incumbent's elements on a broader basis.  A national
       list of unbundled elements will allow requesting carriers to enter local markets in a
       manner that will allow them to approach the incumbent LECs' historic economies
       of scale, scope, and ubiquity, thereby promoting rapid competition for all customers,
       including residential and small business customers, in all areas of the country.
       139. According to the FCC Local Competition Report, competitors provide only about
       1.8 percent of local services to end users.  The record in this proceeding indicates
       that requesting carriers have not yet been able to obtain unbundled elements on a
       wide-spread basis nationwide, which may have prevented competitive LECs from
       serving a greater number of end users.  For example, only recently has unbundled
       switching been made available in combination with other unbundled network
       elements in certain states.  MCI WorldCom observes that, with the availability of
       unbundled switching in New York, it has been able to provide local service to
       upwards of 60,000 residential customers since January, 1999.  We believe that by
       re-establishing a national list, with certain geographic and product market
       exceptions that are consistent with the standards of section 251(d)(2), we will best
       promote efficient, rapid, and widespread entry by carriers using unbundled network
       elements.  Competitive market entry and service expansion on a widespread basis is
       a necessary precondition to construction of self-provisioned facilities.
       140. Moreover, as the Illinois Commerce Commission; California PUC, and Connecticut
       Department of Public Utility Control all assert, a national list will allow competition
       to proceed quickly because it will reduce the number of issues that the states must
       address in upcoming arbitrations under section 252(b) of the Act.  This is
       significant because many states will be conducting arbitrations and reviewing
       interconnection agreements as the initial agreements that they approved in 1996 and
       1997 begin to expire.
       141. We are not persuaded by Ameritech's argument that adoption of national standards
       containing bright-line tests, as opposed to a national list of unbundled elements,
       would facilitate arbitrations.  Using the bright-line test proposed by Ameritech is
       inappropriate because the test does not allow us to consider the totality of the
       circumstances to determine whether alternative elements are actually available as a
       practical, economic, and operational matter.  Moreover, the resources and time that
       requesting carriers would be required to devote to individual regulatory proceedings
       designed to determine if the bright-line criteria had been met in every market would
       delay the introduction of competition.  The outcomes of each proceeding would
       likely vary across the country, thereby making it more difficult for competing
       carriers to execute reasonably uniform national or regional business plans.   We
       believe that a national list of elements will better allow carriers to enter the market
       and to expand their businesses as rapidly as possible.
       142. As explained below, we will revisit our unbundling rules in three years.  Although
       we recognize that due to changes in the market and new technologies, the national
       list will likely be modified over time, we do not find that we should delay the onset
       of meaningful competition while we require the incumbent LECs and the
       competitors to produce voluminous amounts of data and participate in multiple
       proceedings to determine whether alternatives to the incumbent's network are
       available and being used in every market.  We believe that a national list (that
       accounts for discrete geographic and product market exceptions) that can be applied
       at this time, with the least amount of regulatory involvement, will allow carriers to
       deploy resources to provide service to the greatest number of consumers instead of
       conducting regulatory proceedings.
       143. We note that we established recently collocation-based triggers to determine when it
       would be appropriate to grant incumbent LECs pricing flexibility for certain
       interstate access services based on the existence of competition for those services.
       In the Pricing Flexibility Order, we stated that the triggers we adopted were policy
       determinations based on our agency expertise and our interpretation of the record
       before us in that proceeding.  We acknowledged, however, that the use of triggers to
       measure competition precisely is not an exact science, particularly because we lack
       verifiable data from competitors concerning the deployment of their facilities.
       Given this constraint, and our desire not to impose heavy administrative burdens on
       the industry or conduct protracted proceedings to determine the extent of
       competition, we devised pricing flexibility triggers based on "objectively
       measurable criteria," such as the number of collocation arrangements in a given
       wire center.  We found that it is appropriate to give incumbent LECs pricing
       flexibility when competitors have made an irreversible, sunk investment in facilities,
       and that collocation by competitors in incumbent LEC wire centers is a reliable
       indication of sunk investment by competitors.  Specifically, to obtain pricing
       flexibility, we required incumbent LECs to show that "at least one competitor relies
       on transport facilities provided by a transport provider other than the incumbent at
       each wire center listed in the incumbent's pricing flexibility petition as the site of an
       operational collocation arrangement."
       144. It is not appropriate to use these types of triggers to determine whether alternative
       sources of network elements are actually available as a practical, economic, and
       operational matter.  As we explain above, the ability of one competitor to serve
       certain customers in a particular market is not indicative of whether, without
       unbundled access to the incumbent LEC's facilities, competitive LECs could
       provide service to other customers in the same market or to customers in other
       markets.  While the triggers we adopted in the Pricing Flexibility Order allow us to
       determine when an incumbent LEC can re-price its services to respond to
       competition, they do not allow us to evaluate whether the incumbent LEC can
       withhold access to the inputs that requesting carriers need to provide competitive
       services in the first place.  In order to undertake this evaluation, we must consider
       the cost, timeliness, quality, ubiquity and operational characteristics of alternative
       elements.  As we explain above, discerning the practical, economic, and operational
       viability of these alternatives is technical, complex, and subject to considerable
       uncertainty.  Based on the record before us, we do not believe that we can develop
       reliable triggers based on objectively measurable criteria to make this determination.
       In particular, the administrative difficulty associated with developing triggers that
       capture the cost, timeliness, quality, ubiquity, and operational factors of alternatives
       in every wire center throughout an incumbent LEC's service territory requires us to
       reject such an approach.  Indeed, the Commission chose precisely to adopt triggers
       in the Pricing Flexibility Order, because we found that they were administratively
       easy to apply.  Conversely, it would not be administratively easy to apply triggers to
       determine which network elements the incumbent LECs must unbundle.  Moreover,
       the use of triggers also does not allow us to evaluate whether the unbundling
       obligations we adopt are consistent with the goals of the Act, as the Supreme Court
       has required us to do.
       145. Moreover, a national list of unbundled network elements will facilitate the
       introduction of rapid competition by eliminating needless litigation that would result
       from unbundling requirements that differ in every market.  Such litigation would
       require incumbent LECs, competitive LECs, and the state commissions to expend
       considerable time and resources to litigate issues surrounding whether a particular
       unbundled network element should be available to individual carriers seeking to
       serve specific customers or specific areas of the state.  Although there has been
       significant litigation over the past three years regarding the incumbent's duty to
       unbundle elements under section 251(c)(3), we believe that re-establishing a
       national list, subject to the Supreme Court's mandate to include a rational limiting
       standard, will reduce the likelihood of further litigation and its accompanying delays
       and costs, in all fifty states.
       146. Promotion of Facilities-Based Competition, Investment, and Innovation. We find
       that adoption of a national list will facilitate the deployment by competitors of their
       own facilities.  Permitting competitors to obtain access to unbundled elements on a
       broad basis will allow these carriers to acquire sufficient customers and essential
       market information to enable them to determine whether construction of new
       facilities is justified.  We believe that it is through self-provisioning their own
       facilities that competitive LECs will have a greater ability to serve all classes of
       customers.
       147. Ameritech claims that the Commission "dismissed outright" the principal goal of
       the 1996 Act to encourage new investment and innovation by all competitors in the
       market when it adopted national unbundling rules.  According to Ameritech, the
       national unbundling rules adopted in 1996 protected inefficient competitors and
       discouraged efficient entrants from investing and innovating in telecommunications
       services as the Act intended.  Based on the incumbents' own evidence, we find
       this argument lacking in credibility.
       148. The incumbent LECs have submitted a market study in this proceeding, the USTA
       UNE Report, that details the competitive LECs' investment in their own facilities on
       an element-by-element basis since the passage of the 1996 Act, and during the time
       that the Commission's national unbundling rules have been in effect.  Although
       the Commission's unbundling rules have been the subject of extensive litigation,
       none of the parties dispute that competitors have used unbundled elements,
       particularly unbundled loops and transport, where these elements have been made
       available.  Yet, the incumbents' UNE Report shows that competitors have built
       nearly 30,000 miles of fiber within the top 50 MSAs, serving nearly 15 percent of
       all commercial office buildings.
       149. The USTA UNE Report also states that competitors have deployed approximately
       700 switches to serve medium and large business customers.  The report indicates
       that these carriers have deployed fixed wireless connections to extend their fiber
       networks out to many more customers.  The incumbents also assert that many
       competitors are providing advanced services by attaching their own facilities to the
       incumbent LEC's unbundled copper loops.  Overall, the incumbents estimate that
       competitive LECs are offering service over approximately 2.5 million facilities-
       based lines in the incumbents' service territories.  As explained more fully below,
       these facilities are still not available broadly enough to prevent competitive LECs, in
       most cases, from being impaired in their ability to provide service without access to
       the incumbent's network.  Nonetheless, the data presented by the incumbents shows
       significant and growing investment by the competitive LECs.  Accordingly, we find
       no merit in the claim made by Ameritech and other incumbent LECs that
       unbundling elements will impede the Act's goal of encouraging new investment and
       innovation in telecommunications services.
       150. The incumbents also claim that national unbundling requirements will discourage
       them from investing and innovating, particularly if they have to unbundle elements
       for the provision of advanced services.  While we desire to do nothing to
       discourage investment and innovation by all carriers, we note that the Commission's
       national unbundling policy has clearly not discouraged incumbent LECs from
       seeking to serve new markets.  Although in the Local Competition First Report and
       Order, the Commission did not order unbundling of certain equipment used in
       providing advanced services, it made clear that the states could extend the
       incumbents' unbundling obligations as necessary to account for changes in
       technology and to address local conditions.  Incumbent LECs have therefore
       known since 1996 that they might eventually be required to unbundle elements used
       to provide advanced services.  Moreover, last year, in the Advanced Services Order
       and NPRM, we sought specifically comment on whether to unbundle facilities used
       to provide advanced services.  Notwithstanding the fact that the incumbents have
       been on notice that they could be required to unbundle facilities used to provide
       advanced services, the incumbents have announced aggressive rollout plans for
       xDSL service.  In  fact, a recent financial analyst's report indicates that advanced
       data services currently comprise an average of 9.9 percent of the revenues of the
       BOCs and GTE.  Although the incumbents claim that competitors have deployed
       more advanced services equipment than the incumbents have deployed, they
       nevertheless acknowledge that the incumbent LECs are offering advanced services
       in 7 of the 10 largest MSAs and in 22 of the top 50 MSAs.  We find these
       statistics to be significant because they demonstrate that the development of
       competition, and the threat of losing revenue and customers to carriers offering
       advanced services, provides a powerful incentive for carriers to invest.
       151. We therefore conclude, as the Commission did in the Local Competition First
       Report and Order, that by adopting a national list of elements, and by giving the
       states the flexibility to add elements as technology and local market conditions
       change, we will not discourage incumbent LECs from investing and deploying
       innovative services.  The incumbent LECs will have an increased incentive to
       reduce their operating and capital costs and to introduce new and innovative
       services that will increase the overall usage level of their networks as they face
       competition for all of their services.  Moreover, the Commission's pricing
       methodology includes a risk-adjusted return on capital and economic depreciation
       for the incumbent as part of the forward-looking rate.  As we indicated above, we
       are also adopting a "necessary" standard that fully protects the incumbents'
       intellectual property associated with proprietary network elements when those
       elements are used by the incumbent to differentiate its products from those of its
       competitors.  We therefore do not find merit in arguments that the adoption of a
       list of network elements that must be unbundled nationwide will discourage
       innovation and investment by incumbent or competitive LECs.
       152. Certainty in the Marketplace.  We find that a national list of unbundled elements
       will provide uniformity and predictability that will facilitate the development and
       implementation of national and regional business plans by competitive LECs,
       thereby extending the benefits of competition for the greatest number of consumers.
       We agree with the California PUC that a national list will allow multi-state
       competitors to create a national business plan with the knowledge that a set of
       network elements will be available in all states.  Indeed, we find that the
       unavailability of elements on a nationwide basis would jeopardize the usefulness of
       unbundled elements as a method of serving the maximum number of consumers.
       153. We also continue to believe that national unbundling requirements will provide
       financial markets with greater certainty regarding the elements that are available to
       competitive LECs.  Such certainty should reduce the risk of entry, thereby making
       more capital available at less cost to new entrants and fledgling competitors.  We
       do not agree with Ameritech that a national list would perpetuate uncertainty in
       capital markets because carriers would challenge the list regardless of what elements
       it contains.  As stated above, we believe that a national list will actually reduce the
       risk of litigation.
       154. Administrative Practicality. We find that a national list of unbundled elements is
       administratively easier for the Commission, the states, and the industry to apply than
       a list that varies on a state-by-state or market-by-market basis.  As we stated in the
       Notice, application of the "necessary" and "impair" standard is fact-intensive.
       Determining the availability of practical alternatives to the incumbents' network
       elements on a market-by-market  basis, even through the use of bright-line tests as
       proposed by the incumbent LECs, would potentially require the Commission or the
       states to analyze the availability of alternatives in almost every wire center.  In
       addition to creating uncertainty in the market, such a proposal would consume
       enormous amounts of resources and time, thereby undermining the goal of the Act
       to bring the benefits of rapid competition to all consumers.  Such an approach would
       also require a new analysis each time a new carrier sought to initiate service in a
       particular market, and would likely lead to additional litigation by adversely affected
       carriers.  We do not believe that Congress or the Supreme Court had in mind the
       adoption of a procedure that would impose such an undue and
       unworkable administrative burden on the Commission, the states, or the industry.
       155. Reduced Regulation.  We believe that a national list of elements that contains
       discrete geographic and product market exceptions will result immediately in
       reduced regulation.  Moreover, a national framework under which elements can be
       removed from the national list is consistent with the deregulatory goals of the Act.
       Reduced regulation will occur as we remove elements from the list as requesting
       carriers are no longer impaired without access to those elements, and it otherwise
       does not further the goals of the Act to continue requiring incumbent LECs to
       unbundle them.
            A.   Modification of the National List
                 1.   Background
       156. In the Local Competition Order First Report and Order, the Commission
       acknowledged that the rapid pace and ever-changing nature of technological
       advancement in the telecommunications industry made it essential that the
       Commission retain the ability to revise the rules as circumstances change.  The
       Commission noted that, absent such ability, its rules might impede technological
       change and frustrate the 1996 Act's overriding goal of bringing the benefits of
       competition to consumers of local phone service.  Accordingly, the Commission
       determined that, in addition to identifying unbundled network elements that
       incumbent LECs were required to make available at the time the original rules were
       adopted, it had the authority to identify additional or different unbundling
       requirements that would apply to incumbent LECs in the future.
       157. In the Local Competition Order First Report and Order, the Commission also
       determined that state commissions could impose additional unbundling
       requirements, as long as the requirements were consistent with the 1996 Act and our
       regulations.  The Commission codified this grant of authority in section 51.317 of
       its rules.  The Commission believed that the states' authority to impose additional
       requirements, combined with its ability to modify the national unbundling rules,
       provided the necessary flexibility to accommodate any truly unique conditions that
       might exist.  The Commission, however, did not address the issue of whether
       states could remove elements from the national list.
       158. In the Notice we sought comment on whether the Commission should adopt an
       approach that would allow sunset or modification of the section 253(c)(3)
       unbundling obligations as technology and market conditions evolve over time.
       We noted that, under our rules, states have the authority to impose additional
       unbundling requirements.  We sought comment on whether section 251(d)(2), or
       any other provision of the Act, provides the Commission with the authority to
       delegate to the states the responsibility of removing network elements from any
       national requirement.  We sought comment on proposals for a mechanism for
       removal, including which party should bear the burden of proof.  We asked
       whether the Commission should consider a phase-out period for network elements
       removed from the national list.  Further, we asked whether we should institute a
       period of time during which incumbents could not seek removal of network
       elements from our new unbundling rules.  We also asked whether we could adopt
       a "sunset" provision.
       159. Several of the state commissions argue that they have the authority to add and
       subtract elements from the national list, while the Vermont and Illinois state
       commissions argue that the Commission should establish a set of unbundling
       obligations to which the state may add additional unbundling obligations.
       BellSouth argues that states should be able to add or remove unbundled elements in
       a particular zone.  SBC and GTE oppose allowing the states to add or subtract
       elements.  US West argues that states should be able to determine whether
       network elements no longer need to be unbundled, but that they not be allowed to
       add network elements.  The vast majority of competitive LECs that commented in
       this proceeding, as well as NTIA and ALTS, argue that the states should be allowed
       to add, but not to remove, elements from the national list.
                 
                 1.   Discussion
                      a.   Modification of the National List by the
                      Commission
       160. As discussed above, section 251(d)(2) grants the Commission authority to establish
       a national list of network elements that are subject to the unbundling requirements
       of the Act.  Given the rapid changes in technology, competition, and the economic
       conditions of the telecommunications market, we expect that the list of unbundled
       network elements that meets the standards of section 251(d)(2) will change over
       time.  We therefore agree with commenters that we will need to reevaluate our
       national rules periodically.
       161. The need to reassess periodically the availability of elements outside the
       incumbent's network is borne out by the changes that have taken place since we first
       adopted our unbundling rules three years ago.  For example, the evidence in this
       proceeding indicates that competition is developing in some geographic markets for
       certain customer groups, (e.g., medium and large businesses in major metropolitan
       areas).  Only by periodically reevaluating the availability of alternative network
       elements outside the incumbent's network can we truly determine whether the
       incumbent's network should be unbundled in order to meet the requirements of
       section 251 and the goals of the Act. We therefore conclude that as market
       conditions change and new technologies develop, we will periodically revisit the
       issue of what elements are subject to the unbundling obligations of the Act.
       162. Although we will periodically revisit our unbundling rules, we believe that it would
       be inconsistent with our overall policy goals to consider petitions to remove
       elements from the national list immediately upon adoption of this order.
       Specifically, as discussed above, the rules we adopt today seek to provide a measure
       of certainty to ensure that new entrants and fledgling competitors can design
       networks, attract investment capital, and have sufficient time to attempt to
       implement their business plans.  Entertaining, on an ad hoc basis, numerous
       petitions to remove elements from the list, either generally or in particular
       circumstances, would threaten the certainty that we believe is necessary to bring
       rapid competition to the greatest number of consumers.  In addition, entertaining
       numerous petitions on an ad hoc basis would undermine the goal of implementing
       unbundling rules that are administratively practical to apply.
       163. We expect to reexamine our national list of network elements that are subject to the
       unbundling obligations of the Act every three years.  We note that many of the
       first interconnection agreements negotiated in 1996 are now approaching expiration
       of their typical three-year terms and will be eligible for renewal.  We expect parties
       to implement the requirements of this Order as they negotiate new interconnection
       agreements.  We find that a similar three-year time frame for reevaluating the
       unbundling obligations is warranted to provide competitors with reasonable
       certainty for a period of time that is sufficient time to implement their plans.
       Revisiting our rules in three years should provide sufficient certainty to the carriers
       and capital markets and should provide carriers with sufficient time to implement
       their plans.
       164. We decline to adopt a rule mandating that elements will not be subject to
       unbundling after a date certain in the future.  Several parties have suggested that it
       would be extremely difficult for us to predict a date at which a particular network
       element would no longer meet the "necessary" and "impair" standards of section
       251(d)(2).  As noted by the Illinois Commission, in the three years since the Act
       was implemented, no BOC has demonstrated that it satisfies the competitive
       checklist in section 271.  In 1996, few would have expected that three years later
       BOCs would not have qualified for section 271 approval.  This suggests that it
       would be similarly very difficult for us to predict, at this time, the date at which
       incumbent network elements would no longer be subject to unbundling obligations
       under section 251.  Moreover, we note that we find no basis in the record before us
       to make predictive judgments about when an unbundling standard will no longer be
       met for particular network elements.  Thus, at this point in time, we do not have
       enough information and experience to determine what events would lead to an
       automatic sunset of one of our unbundling requirements.  Accordingly, at this time,
       we  decline to adopt a sunset provision for removing network elements from the
       national list adopted in this Order.
                      a.   Modification of the National List by the States
       165. We agree with commenters that section 251(d)(3) provides state commissions with
       the ability to establish additional unbundling obligations, as long as the obligations
       comply with subsections 251(d)(3)(B) and (C).  Section 251(d)(3) states that:
            In prescribing and enforcing regulations to implement the
            requirements of this section, the Commission shall not preclude the
            enforcement of any regulation, order, or policy of a State
            commission that
               (A)  establishes access and interconnection obligations of local
      exchange carriers;
               (B)  is consistent with the requirements of this section; and
            (C)  does not substantially prevent implementation of the     requirements
            of this section and the purposes of this part.
       166. This section of the statute allows state commissions to establish access obligations
       of local exchange carriers that are consistent with our rules implementing section
       251.  We believe that section 251(d)(3) grants state commissions the authority to
       impose additional obligations upon incumbent LECs beyond those imposed by the
       national list, as long as they meet the requirements of section 251 and the national
       policy framework instituted in this Order.  As explained below however, we find
       that state-by-state removal of elements from the national list would substantially
       prevent implementation of the requirements and purposes of this section of the Act.
       167. Section 51.317 of the Commission's rules codifies the standards state commissions
       must apply to add elements to the national list of network elements we adopt in this
       Order.  In its current form, Rule 51.317 reflects the Commission's interpretation
       of the necessary and impair standards adopted in the Local Competition First Report
       and Order.  Inasmuch as we have modified the "necessary" and "impair" standard to
       respond to the Supreme Court's directive, we must also amend Rule 51.317 to
       reflect the new standards.  Accordingly, we modify Rule 51.317, to bring it into
       compliance with our new standards and the Supreme Court's decision.
       Modification of this rule will enable state commissions to add additional unbundling
       obligations consistent with sections 251(d)(3)(B) and(C) of the Act.
       168. We agree with the California PUC that states have the authority to remove network
       elements added by the states.  Thus, if a state commission, pursuant to section
       251(d)(3), adds a network element to the list of network elements an incumbent
       LEC must provide, state commissions also have the authority subsequently to
       remove those elements they add.  As discussed above, section 251(d)(3)(A)
       allows state commissions to impose additional unbundling obligations as long as
       they comply with subsections 251(d)(3)(B) and (C).  If a state commission
       determines that the additional unbundling obligations it imposed no longer comply
       with section 251, it must remove those obligations pursuant to section 251(d)(3).
       Beyond ensuring that removal of those state-imposed obligations are consistent with
       sections 251 and 253 of the Act, the Commission has no authority to prevent a state
       from removing a state-imposed unbundling obligation.  Furthermore, state
       commissions that have imposed additional unbundling requirements, pursuant to
       section 51.317 of our rules, will need to periodically revisit such decisions to
       determine whether such decisions continue to comply with the standards articulated
       in this Order.
       169. We conclude that, at this time, removing network elements from the unbundling
       obligations established in this Order on a state-by-state basis would not be
       consistent with the goals of the 1996 Act.  Specifically, in this proceeding, we have
       examined each network element identified previously by the Commission or by the
       parties, and we have made an affirmative finding as to whether or not the particular
       element now satisfies the unbundling standards of the Act as clarified by the
       Supreme Court.  Moreover, we have considered how unbundling these elements
       will affect the development of competition in the local markets as contemplated by
       Congress, and whether unbundling particular elements will further the goals of the
       Act.  Indeed, we have found that unbundling particular network elements is
       necessary to further the goals of the Act.  Consequently, at this time, state decisions
       to remove these network elements from the national unbundling obligations would
       "substantially prevent implementation of the requirements of section 251," as
       prohibited by subsection 251(d)(3)(C).
       170. Furthermore, we find that there are compelling policy reasons for not removing
       elements from the national list on a state-by-state basis at this time.  Unbundling
       obligations that vary from state to state in the near future would substantially
       undermine the reasons discussed above for implementing a national list in the first
       instance.  We agree with commenters that argue that state-by-state removal of
       network elements from the national list, at least in the near future, would lead to
       greater uncertainty in the market and would hinder the development of competition.
         As discussed above, we have determined that national unbundling rules promote
       competition in telecommunications market by guaranteeing that a specific set of
       network elements will be available nationwide for a minimum amount of time.
       171. We agree with the California PUC and other state commissions that having a
       guaranteed list of network elements provides enough certainty to allow competitive
       LECs to develop and implement regional and national business plans.  Creating
       certainty and predictability in the market will also benefit competition by enabling
       competitors to raise capital at lower cost to create and enhance their networks.  If
       each state could remove immediately the unbundling obligations established in this
       Order, competitors would not have the benefit of knowing how long an element
       would be available on an unbundled basis in any given locale.  The resulting
       uncertainty would frustrate the ability of carriers to plan and implement competitive
       entry strategies developed to serve customers on a regional or national basis.
       172. We also agree with commenters that state-by-state removal of network elements
       from the national list would complicate negotiation of interconnection agreements
       and would most likely lead to increased litigation.  Indeed, it could force
       competitive LECs, each time they seek to enter into an interconnection agreement,
       to demonstrate that the identified elements continue to meet the standards of the
       Act.  Once an incumbent LEC is able to convince a state commission that the
       element no longer meets our unbundling standard, the ruling would likely set a
       precedent for other LECs.  In addition, the possibility that a state decision in one
       interconnection proceeding could affect all interconnection agreements would
       require competitive LECs to monitor the status of these arbitrations even if they are
       not participants in the arbitration. We therefore agree with the Illinois Commission
       that having only this Commission remove elements from the national list makes it
       easier for the states to resolve disputed issues during inter-carrier negotiations and
       arbitrations.
       173. We believe that incumbent LECs have more of an incentive than competitive LECs
       to challenge the unbundling obligations set forth in this Order.  In addition to the
       delay and uncertainty created by litigating the unbundling obligations of incumbent
       LECs, state commissions, as well as incumbent LECs and competitors, would be
       faced with the additional costs of litigation.  Many state commissions and small
       carriers have limited resources and would be unduly burdened if they were have to
       finance on-going litigation of the unbundling rules.  Moreover, as several state
       commenters and NARUC note, section 252(e)(6) appears to limit review of state
       commission decisions to federal district court.  Thus, each state decision could
       eventually lead to litigation in the federal courts, creating even more uncertainty and
       further delaying the benefits of competition to consumers.
       CLXXIV.   APPLICATION OF THE STANDARD TO INDIVIDUAL
       NETWORK ELEMENTS
            A.   Loops
                 1.   Background
       175. In the Local Competition First Report and Order, the Commission found that
       incumbent LECs must provide local loops on an unbundled basis to requesting
       carriers.  The Commission concluded that such access was technically feasible
       and would promote competition in the local exchange market.  The Commission,
       at that time, did not require subloop unbundling, or specify whether "dark fiber" fell
       within the definition of the loop.  The Local Competition First Report and Order
       also did not address the status of "inside wire" (wiring located inside the customer
       premises but owned by the incumbent).
       176. In the Notice, we stated that it was our strong expectation that, under any reasonable
       interpretation of the "necessary" and "impair" standards of section 251(d)(2), loops
       would be subject to the section 251(c)(3) unbundling obligations.  The Notice also
       requested that parties discuss specific costs and analyze the availability of
       alternative sources of the loop facilities.
       177. In general, incumbent LECs contend that the definition of the loop should not
       include high-capacity loops that serve large business customers, dark fiber, inside
       wire, and loop conditioning.  State regulatory commissions and competitive LECs
       argue that loops should be unbundled.  The state commissions disagree among
       themselves as to whether or not competitive providers are impaired without access
       to dark fiber.  They also disagree as to whether dark fiber should be included within
       the loop and transport unbundled network elements definitions or be unbundled as a
       separate network element.
                 1.   Discussion
       178. We conclude that LECs must provide access to unbundled loops, including high-
       capacity loops, nationwide. We find that requesting carriers are impaired without
       access to loops, and that loops include high-capacity lines, dark fiber, line
       conditioning, and certain inside wire. Requiring carriers to obtain loops from
       alternative sources would materially raise entry costs, delay broad-based entry, and
       limit the scope and timeliness of the competitor's service offerings.  As described
       below, we conclude that neither self-provisioning loops nor obtaining loops from
       third-party sources is a sufficient substitute that would justify excluding loops from
       an incumbent LEC's unbundling obligation under section 251(c)(3).
                      a.   Definition
       179. In the Local Competition First Report and Order, the Commission defined the loop
       as "a transmission facility between a distribution frame, or its equivalent, in an
       incumbent LEC central office, and the network interface device at the customer
       premises."  The Commission also stated that the definition included, for example,
       two-wire and four-wire analog voice-grade loops, and two-wire and four-wire loops
       that are conditioned to transmit digital signals, such as xDSL.  The Commission
       did not, however, specify whether "dark fiber" fell within the definition of the
       loop.
       180. We modify the definition of the loop network element to include all features,
       functions, and capabilities of the transmission facilities, including dark fiber  and
       attached electronics (except those used for the provision of advanced services, such
       as DSLAMs) owned by the incumbent LEC, between an incumbent LEC's central
       office and the loop demarcation point at the customer premises.  In order to secure
       access to the loop's full functions and capabilities, we require incumbent LECs to
       condition loops.  This broad approach accords with section 3(29) of the Act, which
       defines network elements to include their "features, functions and capabilities."
       Our intention is to ensure that the loop definition will apply to new as well as
       current technologies, and to ensure that competitors will continue to be able to
       access loops as an unbundled network element as long as that access is required
       pursuant to section 251(d)(2) standards.
       181. Termination of the Loop. The loop definition the Commission adopted in the Local
       Competition First Report and Order defined the loop as terminating at the network
       interface device (NID) at the customer premises.  We find the demarcation point
       preferable to the NID in defining the termination point of the loop because, in some
       cases, the NID does not mark the end of the incumbent's control of the loop
       facility. Where incumbents maintain ownership and control over a portion of the
       loop beyond the NID, the definition of the loop as set forth by the Commission in
       the Local Competition First Report and Order may not provide the competitor with
       actual access to the subscriber.
       182. Section 68.3 of our rules defines the demarcation point as that point on the loop
       where the telephone company's control of the wire ceases, and the subscriber's
       control (or, in the case of some multiunit premises, the landlord's control) of the
       wire begins.  Thus, the demarcation point is defined by control; it is not a fixed
       location on the network, but rather a point where an incumbent's and a property
       owner's responsibilities meet.  The demarcation point is often, but not always,
       located at the minimum point of entry (MPOE), which is the closest practicable
       point to where the wire crosses a property line or enters a building.  In multiunit
       premises, there may be either a single demarcation point for the entire building or
       separate demarcation points for each tenant, located at any of several locations,
       depending on the date the inside wire was installed, the local carrier's reasonable
       and nondiscriminatory practices, and the property owner's preferences.  Thus,
       depending on the circumstances, the demarcation point may be located either at the
       NID, outside the NID, or inside the NID.
       183. Although inside wire typically consists of junction and utility boxes, riser cable, and
       horizontal distribution wiring within an apartment building, it can also include the
       loop facility within a campus, a commercial park, or a garden apartment complex.
       We note that Teligent prefers the term "intra-building wiring," to emphasize that the
       plant in question is not always inside the customer premises, but may, especially in
       multiunit buildings, exist primarily within the landlord's, rather that the
       subscriber's, premises. Yet even the term "intra-building wire" may suggest
       limitations that do not apply in some situations, because "inside" wire is often out-
       of-doors, as is the case at garden apartments and campuses, among other places.
       Thus, although we refer to "inside wire" and "customer premises," for the sake of
       convenience, we acknowledge that the wire may be out-of-doors, and the
       "customer" may be a subscriber, a landlord, a condominium, a university, and so on.
       184. Defining the loop to terminate at the same point as the incumbent LEC's control
       over facilities that it owns, will ensure that the competitor will be able to gain access
       to the entire loop, including inside wire.  We note that, in our Access to
       Competitive Networks proceeding, we are seeking additional comment on the legal
       and technical issues arising from unbundled inside wiring and premises facilities.
       We also note that Section 251(d)(2) imposes obligations only on incumbent local
       exchange carriers and not, for instance, on third parties (such as the owners of multi-
       tenant buildings).  Thus, the rules adopted in this Order are not intended to give
       competitive service providers any additional legal rights vis-a-vis such third parties,
       including access to a multi-unit building over the objection of the property owner.
       Those issues are being addressed in other proceedings before the Commission.
       185. Conditioned Loops. We clarify that incumbent LECs are required to condition loops
       so as to allow requesting carriers to offer advanced services.  The terms
       "conditioned," "clean copper," "xDSL-capable" and "basic" loops all describe
       copper loops from which bridge taps, low-pass filters, range extenders, and similar
       devices have been removed.  Incumbent LECs add these devices to the basic copper
       loop to gain architectural flexibility and improve voice transmission capability.
       Such devices, however, diminish the loop's capacity to deliver advanced services,
       and thus preclude the requesting carrier from gaining full use of the loop's
       capabilities.  Loop conditioning requires the incumbent LEC to remove these
       devices, paring down the loop to its basic form.
       186. GTE contends that the Eighth Circuit, in the Iowa Utils. Bd. v. FCC  decision,
       overturned the rules established in the Local Competition First Report and Order
       that required incumbents to provide competing carriers with conditioned loops
       capable of supporting advanced services even where the incumbent is not itself
       providing advanced services to those customers.  We disagree.  Although the
       Eighth Circuit overturned certain rules to the extent those rules required incumbent
       LECs to provide access to unbundled network elements at levels of quality superior
       to those the incumbent LECs provide themselves, the court also expressly affirmed
       the Commission's determination that section 251(c)(3) requires incumbent LECs to
       provide modifications to their facilities to the extent necessary to accommodate
       access to network elements.  We find that loop conditioning, rather than providing
       a "superior quality" loop, in fact enables a requesting carrier to use the basic loop.
       Because competitors cannot access the loop with all its native "features, functions,
       and capabilities" unless it has been stripped of accreted devices, we conclude that
       loop conditioning falls within the definition of the loop network element, and is also
       consistent with the Eighth Circuit opinion.
       187. Dark Fiber.  We also modify the loop definition to specify that the loop facility
       includes dark fiber.  Dark fiber is fiber that has not been activated through
       connection to the electronics that "light" it, and thereby render it capable of carrying
       communications services.  Because it is in place and easily called into service, we
       find that dark fiber is analogous to "dead count" or "vacant" copper wire that
       carriers keep dormant but ready for service.  Thus, we disagree with GTE's
       argument that, unlike vacant copper, dark fiber does not qualify as loop plant.
       GTE maintains that extra "copper cable is installed to provide optimum flexibility"
       and contrasts this copper to dark fiber, which GTE terms "unused inventory."  GTE
       clarifies that "[t]hese fibers remain dark until they are needed."  We find this to be
       a distinction without a difference, and conclude that both copper and fiber alike
       represent unused loop capacity.  We find, therefore, that dark fiber and extra copper
       both fall within the loop network element's "facilities, functions, and
       capabilities."
       188. Attached Electronics. We conclude that, with the exception of Digital Subscriber
       Line Access Multiplexers (DSLAMs), the loop includes attached electronics,
       including multiplexing equipment used to derive the loop transmission capacity.
       The definition of a network element is not limited to facilities, but includes features,
       functions, and capabilities as well.  Some loops, such as integrated digital loop
       carrier (IDLC), are equipped with multiplexing devices, without which they cannot
       be used to provide service to end users.  Because excluding such equipment from
       the definition of the loop would limit the functionality of the loop, we include the
       attached electronics (with the exception of DSLAMs) within the loop definition.  By
       contrast, and as we discuss below, we find that the DSLAM is a component of the
       packet switch network element.
       189. High-Capacity Loops.  We disagree with incumbent LECs that high-capacity loops
       should be excluded from the definition of the loop.  High-capacity loops retain the
       essential characteristic of the loop: they transmit a signal from the central office to
       the subscriber, or vice versa.  In a DS1 loop, for example, the attached electronics
       boost the wire's capacity, but the wire facility used for transmission of the traffic is
       indistinguishable from any other copper wire. Although it may be more profitable to
       serve customers over higher capacity lines, such differences do not support a
       modification of the loop definition to exclude high-capacity lines.  Whether the
       Commission should refrain from unbundling high-capacity loops is another matter,
       which we discuss below in our unbundling analysis.
       190. For similar reasons, we reject US West's argument that we should exclude from the
       definition the loop facilities that underlie private line and special access
       interconnection, because providing these services to competitors at lower-than-
       tariffed rates would "promote regulatory arbitrage and serve no valid statutory or
       public purpose."  The Commission has not previously found that the requirements
       of section 251(c)(3) are limited to any particular kind of service.  Moreover,
       section 251(d)(2) of the Act refers to a " . . . carrier seeking access to provide the
       services that it seeks to offer."  We find no basis for placing a restriction on what
       services a carrier may offer using the loop network element.  Indeed, the prospect of
       competition among carriers to provide services over the loop at prices that more
       closely reflect the provider's costs seems to us to accord fully with Congress's intent
       in passing the 1996 Act.  We do not now decide whether or not this analysis may
       extend to the enhanced extended loop (EEL), but rather seek comment on that issue
       in the Further Notice of Proposed Rulemaking, below.
       191. Cross Connects.  In the Local Competition First Report and Order, the Commission
       concluded that incumbent LECs must provide cross connect facilities between an
       unbundled loop and a requesting carrier's collocated equipment.  The
       Commission emphasized this requirement because of its concern that incumbent
       LECs might have imposed unreasonable rates, terms, and conditions for such cross
       connect facilities in the past.  Nothing in this Order disturbs the Commission's
       findings regarding cross connect facilities.  In particular, we continue our policy that
       incumbent LECs may recover the cost of providing such facilities in accordance
       with our rules governing the costs of  interconnection and unbundling.  Charges for
       cross connect facilities must meet the cost-based standard provided in section
       252(d)(1), and the terms and conditions of providing cross connect facilities must be
       reasonable and nondiscriminatory under section 251(c)(3).
       192.  Because we agree with the Commission's analysis of cross connect facilities in the
       Local Competition First Report and Order, we decline to include cross connect
       facilities within the definition of the loop network element.  We continue to view
       the cross connect as a means of interconnection with a network element, rather than
       as part of the network element.  We require, however, that incumbents provide cross
       connect facilities according to sections 252(d)(1) and 251(c)(3) at any technically
       feasible point that a requesting carrier seeks access to the loop.  We conclude that
       such a requirement is needed wherever a competitor seeks access to the loop,
       because cross connection offers a potential bottleneck, and incumbents may have
       the incentive to impose unreasonable rates, terms, and conditions for cross-connect
       facilities.
                      a.   Proprietary Concerns Associated with the Loop
       193. In the Local Competition First Report and Order, the Commission concluded that
       the technology associated with the loop is not proprietary in nature.  Parties in this
       proceeding have not identified any proprietary concerns associated with unbundled
       loops, and we find none.  We therefore apply the "impair" standard of section
       251(d)(2), rather than the "necessary" standard, to determine whether loops are
       subject to the unbundling obligations of the Act.
                      a.   Unbundling Analysis for the Loop in General
       194. We require incumbent LECs to provide unbundled access to loops nationwide.  The
       record demonstrates that lack of access to unbundled loops impairs a carrier's ability
       to provide the services it seeks to offer because requiring carriers to self-provision
       loops would materially raise entry costs, delay broad-based entry, and limit the
       scope and quality of the competitor's offerings.  We conclude that neither self-
       provisioning loops nor obtaining loops from third-party sources is an adequate
       alternative for loops that a carrier can obtain from an incumbent LEC under the
       section 251(c) unbundling obligation.  We analyze the obligation to unbundle
       separable elements of the loop, such as inside wire, when we discuss subloop
       unbundling, below.  We defer a decision on whether to unbundle the high frequency
       portion of the loop to a further proceeding.
       195. Cost and Timeliness.  We agree with the argument that self-provisioning is not a
       viable alternative to the incumbent's unbundled loops because replicating an
       incumbent's vast and ubiquitous network would be prohibitively expensive and
       delay competitive entry.  We find the reasons for unbundling the loop that the
       Commission articulated in the Local Competition First Report and Order are still
       valid three years later.  In that order, the Commission recognized that, without
       access to unbundled loops, competitors would need to invest immediately in
       duplicative facilities in order to compete for most customers, and that such
       investment and construction would likely delay, if not prohibit, market entry and
       postpone, perhaps indefinitely, the benefits of  telephone competition for consumers.
       Moreover, the Commission found that without access to unbundled loops,
       competitive LECs would be required to sink a large initial investment in loop
       facilities before they had a customer base large enough to justify such an
       expenditure, thereby increasing the risk of entry and raising the competitive LEC's
       cost of capital.  By contrast, permitting a competitor to purchase unbundled loops
       from the incumbent LEC allows the competitive LEC to build facilities gradually,
       and to deploy loops for its customers where it is efficient to do so.
       196. Nothing in the record of this proceeding leads us to a different conclusion.  To the
       contrary, we find that, as a practical matter, building loop plant continues to be, in
       most cases, prohibitively expensive and time-consuming.  Because of the size of
       their networks, incumbent LECs enjoy advantages of scope that competitors cannot
       replicate.  We find that it would be unreasonable to expect a competitive LEC to
       invest the large sums of capital needed to build out ubiquitous loop plant before the
       competitive LEC has established a substantial and secure customer base.  Unlike
       switches, which can be scaled to need, relocated if the business fails to develop, and
       which can accommodate a fluctuating customer base, much of the loop is often
       dedicated to a particular location.  In addition, if the competitive LEC loses the
       customer back to the incumbent or to another competitor, the competitive LEC
       would probably bear the full loss of its sunk investment in the redundant loop.
       197. We disagree with incumbents' assertions that we should not unbundle high-capacity
       loops because competitive LECs have successfully self-provisioned loops to certain
       large business customers.  According to these commenters, the call concentration
       and revenue potential of  "high-capacity" lines (DS1 and higher) make self-
       provisioning high-capacity lines an economically viable alternative to the incumbent
       LECs' unbundled high-capacity loops.  Building out any loop is expensive and
       time-consuming, regardless of its capacity.  That some competitive LECs, in
       certain instances, have found it economical to serve certain customers using their
       own loops suggests to us only that carriers are unimpaired in their ability to serve
       those particular customers.  This evidence tells us nothing about the customer the
       competitor would like to serve but cannot because the cost of building a loop from
       the customer premises to the competitive LEC's switch is prohibitive.
       198. For similar reasons, we reject BellSouth's proposal that we not require incumbent
       LECs to unbundle larger business loops in Special Access Pricing zones 1 and 2.
       Because of the expense inherent in building loops, we find that it would be
       extremely difficult for competitive LECs to overbuild the ubiquitous loop plant that
       the incumbents have built up over decades, even to serve businesses in urban
       districts.  The enormous sunk investment required to install loops would inevitably
       lead to competition in patches, rather than the seamless competitive service of a
       fully competitive market.  Moreover, we find that using Special Access Pricing
       zones, as recently modified by the Commission, would provide incumbent LECs
       with discretion to define their own loop unbundling obligations.  We agree with
       MCI WorldCom that the Special Access Pricing zone approach would grant
       incumbent LECs latitude to "change their methodologies for defining zones to upset
       their competitor's business plans."  We find that premising an incumbent LEC's
       loop unbundling obligation on a geographic boundary defined, to a large degree, by
       the incumbent LEC itself could allow an incumbent LEC to minimize its
       unbundling obligation, and would not respond to a requesting carrier's need for
       access to unbundled loops.
       199. In addition to the large costs of building loop plant, we agree with commenters in
       this phase of the proceeding that overbuilding the incumbent LEC's loops would
       embroil the competitor in lengthy rights-of-way disputes, and would require the
       unnecessary digging up of streets.  Thus, we find that even if competitors were
       able to finance the replication of the incumbents' loop plant, construction of new
       facilities would   at the least   materially delay competitors' ability to bring their
       services to consumers.  Such delays would frustrate the competitor's ability to offer
       timely service to prospective customers.  Although competitive LECs have
       successfully constructed loops in some circumstances, we find that the cost, risk,
       disruption, and delay of self-provisioning loop plant would, for many consumers,
       foreclose the benefits of competition.
       200. Moreover, in the Local Competition First Report and Order, the Commission
       specified that the definition of the loop includes various grades of loops to allow
       transmission of digital signals needed to provide multiple services and DS1-level
       signals.  The Commission reasoned that the ability to offer various functions in
       competition with incumbent LECs could benefit small entities serving niche
       markets.  We continue to believe that access to these high-capacity lines is
       necessary for ubiquitous deployment of high-speed services, including high-speed
       Internet access.  We therefore agree with competitive LECs that failing to assure
       access to high-capacity loops would impair their ability to provide the services that
       they seek to offer in broadband service markets.
       201. Ubiquity and Quality.  We disagree with parties that argue that mobile telephones
       and fixed wireless offer an alternative to the incumbent's loop, and that loops
       therefore should not be unbundled.  Although we find these technologies
       promising, we conclude that they are not yet viable alternatives to the incumbent's
       wireline loop facilities.  In particular, we find that alternative loop technologies are
       not as widespread as the incumbent's ubiquitous network.  These alternatives do not
       offer the same functionality as wireline service, and the data capabilities of these
       mobile services are generally inferior to wireline loops' data transmission
       capabilities.  Cellular and PCS telephone footprints, though expanding, are not
       ubiquitous.  Indeed, millions of Americans are not yet served by mobile wireless
       carriers.  Moreover, the sound quality of cellular and PCS service is not always
       equal to wireline service.   Fixed wireless cannot yet offer more than four lines, or
       high-speed Internet connection.
       202. We also disagree with the incumbent LECs' argument that cable television service
       offers a viable alternative to the incumbent's unbundled loop.  Cable service is
       largely restricted to residential subscribers, and generally supports only one-way
       service, not the two-way communications telephony requires.  Moreover, we
       conclude that declining to unbundle loops in areas where cable telephony is
       available would be inconsistent with the Act's goal of encouraging entry by multiple
       providers.  Given that neither mobile nor fixed wireless can yet replace wireline
       service, if we were to take the incumbents' approach, consumers might be left to a
       choose between only the cable company and the incumbent LEC.
       203. Loops Capable of Providing High-Speed Data Services.   We conclude that
       permitting incumbents to deny access to basic loops stripped of accreted devices,
       i.e., "conditioned" loops, would preclude the ability of competitors to offer high-
       speed data services.  Such unencumbered copper wire is necessary for requesting
       carriers to provide most types of xDSL service.  While some "flavors" of xDSL
       can be provided over loops with a limited number of impediments, as a general rule
       the quality of such service   particularly the speed   is significantly diminished,
       compared to the service provided over unencumbered wires.  DSL-capable loops
       provide end users with broadband data transmission, which allows rapid access to
       the Internet.  Unbundling basic loops, with their full capacity preserved, allows
       competitors to provide xDSL services.  This in turn will foster investment,
       innovation, and competition in the local telecommunications marketplace.  Without
       access to these loops, competitors would be at a significant disadvantage, and the
       incumbent LEC, rather than the marketplace, would dictate the pace of the
       deployment of advanced services.  We also note that the availability of
       conditioned loops enables competitors to deploy xDSL service beyond the major
       metropolitan areas.  Finally, we note our obligation under section 706 to
       encourage the deployment of advanced services by, among other means, promoting
       competition in the telecommunications market.
       204.  As the Commission stated in the Local Competition First Report and Order,
       requiring incumbents to provide conditioned loops will, in some instances, require
       the incumbent LEC to take affirmative steps to enable requesting carriers to provide
       services that the incumbent does not currently provide.  We now clarify that we
       require the incumbent to provide loops with all their capabilities intact, that is, to
       provide conditioned loops, wherever a competitor requests, even if the incumbent is
       not itself offering xDSL to the end-user customer on that loop.  Thus, incumbent
       LECs cannot refuse a competitive LEC's request for conditioned loops on the
       grounds that they themselves are not planning to offer xDSL to that customer.
       205. In the Local Competition First Report and Order, the Commission also stated that
       requesting carriers would compensate the incumbent LECs for the cost of
       conditioning the loop.  Covad and Rhythms argue that, because loops under
       18,000 feet generally should not require devices to enhance voice-transmission, the
       requesting party should not be required to compensate the incumbent for removing
       such devices on lines of that length or shorter.
       206. We agree that networks built today normally should not require voice-transmission
       enhancing devices on loops of 18,000 feet or shorter.  Nevertheless, the devices
       are sometimes present on such loops, and the incumbent LEC may incur costs in
       removing them.  Thus, under our rules, the incumbent should be able to charge for
       conditioning such loops.
       207. We recognize, however, that the charges incumbent LECs impose to condition loops
       represent sunk costs to the competitive LEC, and that these costs may constitute a
       barrier to offering xDSL services.  We also recognize that incumbent LECs may
       have an incentive to inflate the charge for line conditioning by including additional
       common and overhead costs, as well as profits.  We defer to the states to ensure that
       the costs incumbents impose on competitors for line conditioning are in compliance
       with our pricing rules for nonrecurring costs.
       208. In addition, we agree with commenters that argue that incumbent LECs must
       provide "trouble reports" to the competitive LECs for any function or capability of
       the accessed loop element, and that the incumbent may not limit such reports to
       voice-transmission trouble only.  Not knowing whether or not the accessed line is
       functioning properly impairs a competitive LEC's ability to provide service, because
       subscribers may tend to blame the new competitor, rather than the familiar
       incumbent, for any lapse or degradation of service.  Thus, we conclude that, in so far
       as it is technically feasible, the incumbent must test and report trouble on
       conditioned lines, if requested by the competitor, for all of the line's features,
       functions, and capabilities, and may not restrict its testing to voice-transmission
       only.
       209. Dark Fiber.  We agree with commenters that argue that, because dark fiber provides
       high transmission capabilities at relatively low cost, unbundling dark fiber is
       essential for competition in the provision of advanced services.  We reject the
       incumbents' reasoning that, because competitive LECs have installed lit fiber to
       certain high-volume customers, they could also install their own dark fiber, and
       therefore are not impaired without access to the incumbent's dark fiber.  As with
       other loops, we decline to infer from competitive LEC self-provisioning in certain
       circumstances that, as a general matter, the expense and delay involved in laying
       fiber do not impair the ability of entrants and other competitive LECs to provide the
       services they seek to offer.  We see no reason to distinguish dark fiber from our
       general unbundling analysis for loops.
       210. US West argues that competitors do not need the incumbent LECs' fiber because a
       wholesale market exists in loop fiber.  We find, however, that the nascent
       wholesale market in fiber loop facilities is not yet extensive enough for us to
       conclude that competitors are not impaired without access to incumbent LECs'
       unbundled dark fiber loops.  We also agree with the argument that unbundled
       loops, including fiber, allow competitive LECs to build out their networks
       gradually.  By supplementing their own facilities with unbundled fiber loops, a
       competitive LEC can offer advanced services ubiquitously and not limit its service
       offering to small areas of concentrated demand.
       211. Because fiber is currently a more significant component of interoffice transport than
       the loop network element, we discuss aspects of dark fiber common to both
       elements when we discuss interoffice transport below.  We note here, however,
       that GTE raises concerns that incumbents, because of their carrier-of-last-resort
       obligations, have a special need for fiber reserves.  As we explain in greater detail
       below, we find these concerns exaggerated, because the capacity of fiber can be
       increased many fold simply by increasing the power of the electronics that light it.
       We find, therefore, that a shortage of fiber capacity caused by unbundling is highly
       unlikely.
       212. In addition, GTE and the Telecommunications Industry Association argue that
       requiring incumbent LECs to unbundle fiber will reduce their incentive to build
       fiber loops in the first place.  We remain skeptical that this is the case, because
       incumbents face loop unbundling obligations no matter which technology they
       deploy.  We note, however, that the Texas commission has already established
       moderate restrictions governing the availability dark fiber.   We do not wish to
       disturb the reasonable limitations and technical parameters for dark fiber unbundling
       that Texas or other states may have in place.  If incumbent LECs are able to
       demonstrate to the state commission that unlimited access to unbundled dark fiber
       threatens their ability to provide service as a carrier of last resort, state commissions
       retain the flexibility to establish reasonable limitations governing access to dark
       fiber loops in their states.
       213. Goals of the Act.  We conclude that access to the full capabilities of incumbent
       LECs' loop plant nationwide will further the goals of the Act. Requiring access to
       unbundled loops will promote the rapid development of competition and bring the
       benefits of competition to greater numbers of consumers.  Access to unbundled
       loops will also encourage competition to provide broadband services.  We are
       convinced that greater, not fewer, options for procuring loops will facilitate entry by
       competitors, and that Congress intended for competitors to have these options
       available."  We find that the benefits of uniform loop unbundling outweigh the
       costs of creating a patchwork regime in which incumbents will seek to litigate
       whether particular loops should be unbundled or where an alternative to the
       incumbent LEC's loop is arguably substitutable.  For these reasons, incumbent
       LECs must provide unbundled access to their loop network element nationwide.
       214. Spectrum Unbundling.  A number of parties request that the Commission identify
       loop spectrum as a separate unbundled network element.  In particular, they argue
       that requesting carriers need access to the high-frequency loop spectrum on an
       unbundled basis in order to provide advanced telecommunications services,
       including xDSL.  We decline, at this time, to identify loop spectrum as a separate
       unbundled network element.  In the Advanced Services First Report and Order and
       FNPRM, we will consider whether the high-frequency spectrum of the loop
       qualifies as an unbundled network element and the operational issues associated
       with such unbundling.  We believe that the record developed in that proceeding
       more fully addresses the issues associated with spectrum unbundling, and we
       therefore decline to address those issues in this proceeding.
                                  A.   The Subloop
                 1.   Background
       215. In the Local Competition First Report and Order, the Commission declined to
       identify the feeder, feeder/distribution interface (FDI), and distribution components
       of the loops as individual network elements.  The Commission noted, however,
       that subloop unbundling could provide competitors flexibility in deploying some
       portions of loop facilities, while elsewhere relying on the incumbent LEC's
       facilities.  In addition, the Commission noted that carriers would need access at
       points along the loop closer to the customer premises to provide some high
       bandwidth services, such as ADSL.  The Commission also found that, although
       the record presented evidence mainly of logistical, rather than technical,
       impediments to subloop unbundling, proponents of subloop unbundling did not
       address technical issues raised by incumbent LECs.  The Commission stated that
       it would revisit subloop unbundling when the record on the issue had been more
       fully developed
       216. In the Notice, we sought comment on whether, due to technological changes, we
       should require subloop unbundling at the remote terminal or at other points within
       the incumbent LEC's network.  We sought comment on whether to unbundle
       incumbent-owned facilities on the end-user side of the NID. We asked commenters
       to apply the "necessary" and "impair" standards and to discuss costs and availability
       on an element-by-element basis.  We also asked those commenters requesting
       further unbundling of the local loop to discuss possible alternatives.
       217. Competitive LECs argue generally that they need unbundled access to subloop
       elements in order to:  (1) connect their own facilities to the incumbent's inside wire;
       (2) access loops that an incumbent LEC provides over integrated digital loop carrier
       (IDLC) technology; and (3) provide advanced services over xDSL.  These
       commenters argue that they are also financially burdened if they must pay for an
       entire loop when they need to use only a portion of it.  Incumbents argue generally
       that competitors are not impaired without access to subloops; that technical and
       logistical impediments prevent subloop unbundling; and that network architectures
       differ too broadly to adopt an unbundling rule that applies nationwide.  Several
       state commissions argue that subloop unbundling requires a case-by-case analysis
       that the states are in the best position to perform.  For example, Texas states that
       subloop unbundling meets the "impair" standard of section 251(d)(2) and requires
       subloop unbundling at the remote terminal.
                 1.   Discussion
       218. We find that lack of access to unbundled subloops materially diminishes a
       requesting carrier's ability to provide services that it seeks to offer.  We also
       conclude that access to subloop elements is likely to be the catalyst that will allow
       competitors, over time, to deploy their own complementary subloop facilities, and
       eventually to develop competitive loops.  Lack of access to subloops discourages
       competitive LECs from attempting to combine their own feeder plant with the
       incumbent's distribution plant to minimize their reliance on the incumbents'
       facilities. We also find that lack of unbundled access to the incumbent's subloops
       would preclude competitors from offering some broadband services. Accordingly,
       we conclude that incumbent LECs must provide unbundled access to subloops
       nationwide, where technically feasible.
                      a.   Definition of the Subloop
       219. We define subloops as portions of the loop that can be accessed at terminals in the
       incumbent's outside plant.  An accessible terminal is a point on the loop where
       technicians can access the wire or fiber within the cable without removing a splice
       case to reach the wire or fiber within.  These would include a technically feasible
       point near the customer premises, such as the pole or pedestal, the NID (which we
       discuss below), or the minimum point of entry to the customer premises (MPOE).
       Another point of access would be the feeder distribution interface (FDI), which is
       where the trunk line, or "feeder," leading back to the central office, and the
       "distribution" plant, branching out to the subscribers, meet, and "interface."  The
       FDI might be located in the utility room in a multi-dwelling unit, in a remote
       terminal, or in a controlled environment vault (CEV).  We acknowledge that some
       FDIs are more accessible than others; utility rooms are generally more spacious than
       vaults.  A third point of access is, of course, the main distribution frame in the
       incumbent's central office.
       220. We believe that a broad definition of the subloop that allows requesting carriers
       maximum flexibility to interconnect their own facilities at these points where
       technically feasible will best promote the goals of the Act.  Access to portions of the
       loop element at these points, i.e., access to the subloop, will facilitate rapid
       development of competition, encourage facilities-based competition, and promote
       the deployment of advanced services.  Our intention is to ensure that the subloop
       definition will apply to new as well as current technologies, and to ensure that
       competitors will continue to be able to access subloop unbundled network elements
       as long as that access is required pursuant to section 251(d)(2) standards.
                      a.   Proprietary Concerns Associated with Subloops
       221. The record does not indicate, nor do commenters argue, that subloops are
       proprietary.  Moreover, we do not discern any copyright, patent, or trademark or
       trade secrecy implications to subloop unbundling. We therefore apply the "impair"
       standard of section of 251(d)(2)(B) to determine whether subloops are subject to the
       unbundling requirements of the Act.
                      a.   Unbundling Analysis for Subloops
       222. We conclude that incumbent LECs must provide unbundled access to subloops.
       Applying our unbundling analysis, we conclude that lack of access to unbundled
       subloops at technically feasible points throughout the incumbent's loop plant will
       impair a competitor's ability to provide services that it seeks to offer.  We agree
       with commenters that self-provisioning subloop elements, like the loop itself, would
       materially raise entry costs, delay broad-based entry, and limit the scope and quality
       of the competitive LEC's service offerings.  In addition, we find that access to
       subloop elements promotes self-provisioning of part of the loop, and thus will
       encourage competitors, over time, to deploy their own loop facilities and eventually
       to develop competitive loops where it is cost efficient to do so.
       223. We clarify that "technically feasible points" would include a point near the customer
       premises, such as the point of interconnection between the drop and the distribution
       cable, the NID, or the MPOE.  Such access would give competitors unbundled
       access to the inside wire subloop element, in cases where the incumbent owns and
       controls wire inside the customer premises.  It would also include any FDI, whether
       the FDI is located at a cabinet, CEV, remote terminal, utility room in a multi-
       dwelling unit, or any other accessible terminal.
       224. Cost and Timeliness.  We agree with commenters that loop facilities, including
       subloop elements, are the most time-consuming and expensive network element to
       duplicate on a pervasive scale, and that the cost of self-provisioning subloops can be
       prohibitively expensive.  Self-provisioning subloops would require requesting
       carriers to incur significant sunk costs prior to offering services to end users.
       Requiring competitors to expend such sums would, at a minimum, delay entry and
       thus postpone the benefits of competition for consumers.
       225. We are not persuaded by GTE's argument that, because the whole loop is an
       acceptable substitute, a competitor is not impaired without access to the subloop.
       First, as we explain below, the undivided loop does not always afford competitors
       access to subscribers, as is the case with IDLC loops. Also, as a rule, requesting
       carriers that supply their own facilities cannot afford to pay twice   first for the
       facilities they self-provision, and again for the incumbent's loop, including the
       portion that they do not utilize.  We agree with the Illinois Commission that
       unbundling subloops provides greater efficiency for the requesting carrier because
       the carrier will not have to buy the entire loop to interconnect its own facilities with
       wiring on the customer premises.  If competing carriers that need only a portion of
       the loop must either pay for the entire loop or forego access to that loop altogether,
       many consumers will be denied the benefits of competition.
       226. GTE contends that possible rights-of-way, zoning, power supply, and similar
       alleged impediments should prevent us from requiring the incumbent to provide
       loop sub-elements on an unbundled basis.  We assume that GTE is referring to
       potential obstacles that the requesting carrier may encounter from cities, counties,
       electric power companies, and similar third parties when it seeks to interconnect its
       equipment at subloop access points.  We find that such obstacles, however, to the
       extent they develop, are for the competitive LEC to resolve with the municipality or
       utility.  Such obstacles are not relevant to our determination of whether the
       competitor is impaired without unbundled access to the incumbent's subloop
       elements, and do not absolve the incumbent from its obligation to provide
       unbundled access to those elements.
       227. Impact on Network Operations.  In order to encourage the development of facilities-
       based competition, requesting carriers must be able to interconnect their networks
       with the incumbent's network facilities that are designed to provide similar services.
       228. First, if those competitors that are attempting to rely primarily on their own facilities
       are unable to interconnect near the customer premises, the end users those
       competitors target would have to forego the benefits of competition and new
       technology those competitors offer.  We agree with several state regulatory
       commissions that argue that, to the extent that requesting carriers are denied
       flexibility in connecting their facilities to the local loop, these carriers are impaired
       from developing their own network infrastructure.  In those instances where
       competitive carriers are able to self-provision a portion of the loop, lack of access to
       the part of the incumbent's loop they need could impede the competitors' ability to
       develop their own network architecture and provide new service offerings.  On the
       other hand, the gradual self-provisioning that such access encourages could lead, in
       time, to conditions that would permit the eventual elimination of the loop element
       from the unbundling obligations of the Act.
       229. For example, wireless providers may require only the final leg of loop distribution
       plant before the wire passes to customer control at the demarcation point.  In
       particular, a facilities-based provider's ability to offer service in a multi-unit
       building or campus may be severely impaired if it must install duplicative inside
       wiring.  We agree with the argument that requiring competitive LECs to convince
       landlords and customers to permit the construction of redundant inside wiring would
       substantially impede market entry and competition.  Even if permission were
       obtained, over-building inside wire might be sufficiently expensive and time-
       consuming to deter potential competitors.  Thus, we conclude that access to these
       subloop elements at technically-feasible interconnection points is necessary for
       successful competition by facilities-based competitors.
       230. Second, carriers need unbundled subloops to serve subscribers currently served by
       IDLC loops.  IDLC technology allows a carrier to "multiplex" and "de-multiplex"
       (combine and separate) traffic at a remote concentration point, or remote terminal,
       and to deliver the combined traffic directly into the switch, without first separating
       the traffic from the individual lines.  In such cases, competitors generally cannot
       access IDLC loops at the incumbent's central office.  In order to reach subscribers
       served by the incumbent's IDLC loops, a requesting carrier usually must have
       access to those loops before the point where the traffic is multiplexed.  That is
       where the end-user's distribution subloop can be diverted to the competitive LEC's
       feeder, before the signal is mixed with the traffic from the incumbent LEC's other
       distribution subloops for transport through the incumbent's IDLC feeder.
       Accordingly, we find that denying access at this point may preclude a requesting
       carrier from competing to provide service to customers served by the incumbent's
       IDLC facilities.  This would particularly affect consumers in rural areas, where
       incumbent LECs use the greatest proportion of DLC loops.
       231. Third, competitors seeking to offer services using xDSL technology need to access
       the copper wire portion of the loop.  In cases where the incumbent multiplexes its
       copper loops at a remote terminal to transport the traffic to the central office over
       fiber DLC facilities, a requesting carrier's ability to offer xDSL service to customers
       served over those facilities will be precluded, unless the competitor can gain access
       to the customer's copper loop before the traffic on that loop is multiplexed.  Thus,
       we note that the remote terminal has, to a substantial degree, assumed the role and
       significance traditionally associated with the central office.  In addition, in order
       to use its own facilities to provide xDSL service to a customer, a carrier must locate
       its DSLAM within a reasonable distance of the customer premises, usually less than
       18,000 feet.  In both of these situations, a requesting carrier needs access to
       copper wire relatively close to the subscriber in order to serve the incumbent's
       customer.
       232. Goals of the Act.  Access to unbundled subloop elements allows competitive LECs
       to self-provision part of the loop, and thus, over time, to deploy their own loop
       facilities, and eventually to develop competitive loops.  If requesting carriers can
       reduce their reliance on the incumbent by interconnecting their own facilities closer
       to the customer, their ability to provide service using their own facilities will be
       greatly enhanced, thereby furthering the goal of the 1996 Act to promote facilities-
       based competition.  Failure to unbundle the subloop would cause residential and
       small business consumers to wait unnecessarily for competitive alternatives.  We
       also find that the availability of unbundled subloops will accelerate the development
       of alternative networks, because it will allow requesting carriers efficiently to
       connect their facilities with the incumbent's loop plant.  Thus, our decision to
       unbundle subloops is consistent with the 1996 Act's goals of rapid introduction of
       competition and the promotion of facilities-based entry.
                      a.   Technical Feasibility
       233. We note that parties commenting in this proceeding disagree as to the technical
       feasibility of accessing various points of the loop.  For example, SBC contends that
       incumbents should not be required to unbundle subloops at the CEV because the
       CEV is a small, protected environment that is not designed for access by multiple
       parties.  SBC also argues that unbundling at the cabinet will jeopardize network
       security.   Competitive LECs, on the other hand, argue that SBC exaggerates these
       impediments, which they maintain are not insurmountable.
       234. MGC asserts, and we agree, that our collocation rules, which we recently clarified in
       the Advanced Services First Report and Order, apply to collocation at any
       technically feasible point, from the largest central office to the most compact FDI.
       This is because our collocation rules concern methods and standards of obtaining
       interconnection and access to unbundled network elements under section 251 of the
       Act, and thus are not directed to any one type of facility.  Although we intend to
       make collocation available at all accessible terminals on the loop, we acknowledge
       that the incumbent's network was not designed to house additional equipment of
       competitors.  Our rules do not require incumbents to build additional space.  Nor do
       our rules, however, preclude requesting carriers from constructing their own
       facilities adjacent to the incumbent's equipment.  Moreover, in some cases,
       technicians may not need to enter the cabinet or vault at all because virtual
       collocation arrangements will satisfy the needs of all parties.  We note that, prior
       to adoption of rules requiring incumbent LECs to offer collocation to competitors,
       incumbent LECs raised similar doubts as to whether collocation would be feasible at
       central offices.  As indicated by the number of collocation arrangements in place
       today, these doubts were not well-founded.
       235.  The record indicates that the space available for collocating and interconnecting at
       various subloop access points will vary depending on the incumbent's existing plant
       at a particular location.  For example, the feeder/distribution interface for a
       business park could be located in a room that contains a mini-MDF, racks of
       equipment, and enough unoccupied space to accommodate easily the requesting
       carrier's equipment.  In other situations, such as at a remote terminal in a cabinet,
       the FDI may be housed in a facility that has no spare space at all.  We note that
       Texas supports unbundling the subloop, but has not ordered unbundling at the FDI
       due to technical problems that, according to Texas, would threaten the integrity of
       the network. Ohio states that copper loops are still the dominant technology in its
       state, and that it has not seen evidence to suggest that it is technically feasible to
       unbundle copper subloops.  Ohio also points out that the technical feasibility of
       unbundling subloops at particular points on the network may change with the
       introduction of new technologies.
       236. As we explain above, however, we conclude that the goals of the Act are best served
       by determining unbundling rules that apply to network elements nationwide.  In
       adopting a rule that requires incumbents to unbundle subloops at the points
       identified above, we seek to provide requesting carriers maximum flexibility to
       interconnect with the incumbent's network at technically feasible points in order to
       allow competitors to serve customers efficiently.  Accordingly, we establish a
       rebuttable presumption that the subloop can be unbundled at any accessible terminal
       in the outside loop plant.  If the parties are unable to reach an agreement pursuant to
       voluntary negotiations about the availability of space or the technical feasibility of
       unbundling the subloop at one of the points identified above, the incumbent will
       have the burden of demonstrating to the state, in the context of a section 252
       arbitration proceeding, that there is no space available or that it is not technically
       feasible to unbundle the subloop at these points.
       237. Our approach to subloop unbundling permits evaluation of the technical feasibility
       of subloop unbundling on a case-by-case basis, and takes into account the different
       loop plant that has been deployed in different states.  We find that the questions of
       technical feasibility, including the question of whether or not sufficient space exists
       to make interconnection feasible at assorted huts, vaults, and terminals, and whether
       such interconnection would pose a significant threat to the operation of the network,
       are fact specific.  Such issues of technical feasibility are best determined by state
       commissions, because state commissions can examine the incumbent's specific
       architecture and the particular technology used over the loop, and thus determine
       whether, in reality, it is technically feasible to unbundle the subloop where a
       competing carrier requests.   We also note we are considering legal issues
       regarding access to premises in the Access to Competitive Networks proceeding.
       238. We further note that SBC proposes to avoid difficulties associated with competing
       carriers serving multi-unit premises by eliminating multiple demarcation points in
       favor of a single demarcation point, which, according to SBC, would remedy
       competitive LECs' concerns.  OpTel similarly suggests that the incumbent should
       provide a single point of interconnection at or near the property line of multi-unit
       premises.   OpTel further maintains that the cost of any network reconfiguration
       required to create a point of interconnection that would be accessible to multiple
       carriers should be shared by all the carriers concerned.
       239. Although we do not amend our rules governing the demarcation point in the context
       of this proceeding, we agree that the availability of a single point of interconnection
       will promote competition.  To the extent there is not currently a single point of
       interconnection that can be feasibly accessed by a requesting carrier, we encourage
       parties to cooperate in any reconfiguration of the network necessary to create one.  If
       parties are unable to negotiate a reconfigured single point of interconnection at
       multi-unit premises, we require the incumbent to construct a single point of
       interconnection that will be fully accessible and suitable for use by multiple
       carriers.  Any disputes regarding the implementation of this requirement,
       including the provision of compensation to the incumbent LEC under forward-
       looking pricing principles, shall be subject to the usual dispute resolution process
       under section 252.  We emphasize that this principle in no way diminishes a
       carrier's right to access the loop at any technically feasible point, including other
       points at or near the customer premises.  We also note that unbundling inside wire,
       and access to premises facilities in general, present specific technical issues, and that
       we have sought additional comment on these issues in our Access to Competitive
       Networks proceeding.  If the record developed in that proceeding demonstrates the
       need for additional federal guidance on legal or technical feasibility issues related to
       subloop unbundling, we will provide such additional guidance, consistent with the
       policies established in this Order.
       240. Our approach to subloop unbundling reflects the network as it exists today.
       Technology may develop, however, in ways that would render this approach too
       limiting.  For that reason, we establish a further rebuttable presumption that, once
       one state has determined that it is technically feasible to unbundle subloops at a
       designated point, it will be presumed that it is technically feasible for any incumbent
       LEC, in any other state, to unbundle the loop at the same point everywhere.  If the
       conditions surrounding a request for unbundling at a similar point differ to such an
       extent that it is not technically feasible for the incumbent to provide unbundled
       access to that subloop element, the incumbent will have the burden of demonstrating
       in a section 252 arbitration proceeding that such an arrangement is indeed not
       technically feasible under those different conditions.  For example, Texas requires
       subloop unbundling at the remote terminal.  If a competitive LEC seeks
       unbundled access to a subloop at the remote terminal from an incumbent LEC in
       New York, the burden rests with the New York incumbent LEC to prove that its
       own situation differs to such an extent that the Texas arrangement is not technically
       feasible.  We believe that this "best practices" approach insures that incumbent
       LECs do not limit access to subloops based on unforeseeable technological and
       infrastructure developments.
       241. In addition to arguing that remote terminals will in some cases be inaccessible, SBC
       also argues that, by separating feeder plant from distribution plant, the ability to
       perform mechanized testing and monitoring of the loop from the incumbent's switch
       would be lost.  We do not believe that this technical issue precludes us from
       establishing unbundling obligations for subloops.  Once the competitor has acquired
       the customer from the incumbent, the competitor will have the incentive to ensure
       that there is a method by which the customer's loop can be tested.  The technical
       method by which this testing is accomplished is a matter for the parties to decide
       through negotiations.  If the incumbent can demonstrate to the satisfaction of the
       state regulatory commission that it would incur increased expenses associated with
       testing the subloop network element, we presume such expenses would be included
       in the forward-looking price of the element.  For similar reasons, we reject the
       argument that subloop unbundling is not feasible because it may create additional
       administrative costs.
       242. Accordingly, we are not persuaded by incumbents' arguments that technical
       feasibility issues require us to find that subloops are not subject to the unbundling
       obligations of the Act.  We note that incumbent LECs advanced similar arguments
       against collocation at central offices; we continue to reject those arguments in the
       subloop context as well.  To the extent disputes arise over the feasibility of
       interconnecting at various points on the loop, states will address these issues as part
       of the arbitration process under section 252.
            A.   Network Interface Devices (NIDs)
                 1.   Background
       243. In the Local Competition First Report and Order, the Commission concluded that
       incumbent LECs must offer unbundled access to the network interface device
       (NID).  It defined the NID network element as a cross-connect device used to
       connect loop facilities to inside wiring.  In that order, the Commission noted that a
       competitor deploying its own loops must be able to connect those loops to
       customers' inside wiring in order to provide service, especially to customers in
       multi-tenant buildings.  The Commission also concluded that a requesting carrier is
       entitled to connect its loops, via its own NID, to the incumbent LEC's NID.
       244. In the Notice, we sought comment on application of the "necessary" and "impair"
       standards of section 251(d)(2) to the network elements previously identified in the
       Local Competition First Report and Order, including the NID.  Incumbent LECs
       argue that NIDs are off-the-shelf devices that can be purchased inexpensively.
       Competitive LECs argue that self-provisioning the NID is economically
       impracticable at the level of ubiquity needed to deploy service on a widespread
       basis.
                 1.   Discussion
       245. We conclude that lack of unbundled access to the incumbent's NID impairs the
       ability of requesting carriers to provide the services that they seek to offer.  As
       described below, we conclude that the competitor's ability to self-provision NIDs
       does not constitute a viable alternative to unbundled access to the incumbent's NID
       element.  Although the physical structure of the NID is widely available, it is access
       to the function, rather than the hardware itself, that competitors rely upon. The
       record indicates that requiring a requesting carrier to self-provision NIDs for all
       customers it seeks to serve would materially raise the cost of entry, delay broad
       facilities-based market entry, and materially limit the scope and quality of the
       competitor's service offerings. Accordingly, we require incumbent LECs to
       provide unbundled access to NIDs nationwide.
                      a.   Definition of the NID
       246. In the Local Competition First Report and Order, the Commission defined the NID
       as a cross-connect device used to connect loop facilities to inside wiring.  We
       modify that definition of the NID to include all features, functions, and capabilities
       of the facilities used to connect the loop distribution plant to the customer premises
       wiring, regardless of the particular design of the NID mechanism.  Specifically, we
       define the NID to include any means of interconnection of customer premises wiring
       to the incumbent LEC's distribution plant, such as a cross-connect device used for
       that purpose.
       247. We conclude that the NID definition, for the purposes of our unbundling analysis,
       should be flexible and technology-neutral.  The Commission's rules permit
       considerable variation in the interconnection facilities between carrier and customer-
       controlled facilities.  Furthermore, evolution in network design and technology
       will likely cause additional design variations among the hardware interfaces
       between carrier and customer premises facilities.  Accordingly, we define the NID
       broadly to ensure that competitors will be able to obtain access to any of these
       facilities as an unbundled network element.  Our intention is to ensure that the NID
       definition will apply to new technologies, as well as current technologies, and to
       ensure that competitors will continue to be able to access customer premises
       facilities as an unbundled network element, as long as that access is required
       pursuant to section 251(d)(2) standards.
       248. We decline to adopt parties' proposals to include the NID in the definition of the
       loop.  Similarly, we reject arguments that we should include inside wiring in the
       definition of the NID in order to permit facilities-based competitors access to inside
       wiring.  Although competitors may choose to access the inside wire via the NID,
       in some circumstances they may choose to access the inside wire at another point,
       such as the minimum point of entry.  By continuing to identify the NID as an
       independent unbundled network element, we underscore the need for the
       competitive LEC to have flexibility in choosing where best to access the loop.
       Competitors purchasing a subloop at the NID, however, will acquire the
       functionality of the NID for the subloop portion they purchase.  We therefore find
       no need to include inside wiring in the definition of the NID, or to include the NID
       as part of any other subloop element.
                      a.   Proprietary Concerns Associated with the NID
       249. In the Local Competition First Report and Order, the Commission did not identify
       any proprietary concerns associated with NIDs.  No parties in this proceeding
       identify any proprietary concerns associated with the NID, and we find none.  We
       therefore apply the "impair" standard of section 251(d)(2)(A) to determine whether
       NIDs are subject to the unbundling obligations of the Act.
                      a.   Unbundling  Analysis
       250. We find that lack of access to the NID would materially diminish a competitor's
       ability to provide the services it seeks to offer.  In particular, we find that requesting
       carriers would be impaired without access to NIDs because self-provisioning NIDs
       would materially raise entry costs, delay broad facilities-based entry, and materially
       limit the scope and quality of the competitor's service offerings.  Accordingly, we
       require incumbent carriers to provide unbundled access to their NIDs nationwide.
       Specifically, an incumbent LEC must permit a requesting carrier to connect its own
       loop facilities to the inside wire of the premises through the incumbent LEC's
       network interface device, or at any other technically feasible point, to access the
       inside wire subloop network element.
       251. Cost and Timeliness.  We agree with those commenters that maintain that there are
       no economic or practical alternatives to the NID that would otherwise enable
       requesting carriers to provide service.   NIDs are individually dedicated to specific
       customer premises, and are often difficult to replace.  Requesting carriers' ability to
       provide service to their customers would be materially diminished if they had to self
       provision NIDs because of the significant labor and construction costs involved in
       visiting the premises of each customer and installing the device.  This is true for all
       customers, but is particularly evident for residential and small business markets
       because of the greater number of NIDs required to provide service to each customer.
         We therefore conclude that requiring competitors to install numerous, redundant
       NIDs at the interface to customer premises wiring would constitute a substantial
       economic and practical barrier to market entry, and a needless waste of carrier
       resources.
       252. Ubiquity.  We conclude that self-provisioning NIDs is not economically practical at
       the level of ubiquity at which incumbent LECs' NIDs are currently deployed.  We
       disagree with GTE's argument that the NID should not be unbundled because the
       hardware is inexpensive and available from a multitude of non-incumbent LEC
       sources.  Specifically, GTE claims that the NID hardware costs between $25 and
       $40, and that requesting carriers can purchase NIDs from the same sources that
       incumbent LECs use.  We do not find that the cost and availability of NID
       hardware is dispositive of the need to unbundle access to incumbent LEC-installed
       NIDs.  As with other network elements, in conducting our unbundling analysis
       under section 251(d)(2), we do not consider the cost and availability of network
       elements in isolation.  Rather, we examine whether, after applying the factors we
       explained in the unbundling standard above, a requesting carrier is able, as a
       practical, economic, and operational matter, to use alternatives for the incumbent's
       network elements.  Although the record indicates that NID hardware may be
       available from alternative sources and that NIDs are affordable individually, it is the
       aggregate cost and difficulty of installing duplicate NIDs at every potential customer
       location that substantially impairs a requesting carrier from offering services.
       253. Goals of the Act.  Access to unbundled NIDs furthers the Act's goals of promoting
       innovation, the rapid introduction of competition, and the development of facilities-
       based competition.  If requesting carriers can reduce their reliance on the incumbent
       by interconnecting their own facilities closer to the customer, their ability to provide
       services using their own facilities will be greatly enhanced, thereby furthering the
       goal of the 1996 Act to promote facilities-based competition.  We find that the
       availability of unbundled NIDs will accelerate the development of alternative
       networks, because it will allow requesting carriers efficiently to connect their
       facilities with the incumbent's loop plant.  Thus, our decision to unbundle NIDs is
       consistent with the 1996 Act's goals of rapid introduction of competition and the
       promotion of facilities-based entry.  We recognize that there may be situations
       where a competitive LEC could successfully self-provision NIDs.  We find,
       however, that the benefits of unbundling the NID on a nationwide basis outweigh
       the costs of creating a patchwork regime in which incumbents will seek to litigate
       whether particular NIDs should be unbundled or whether an alternative to the
       incumbent LEC's NID is arguably available as a practical, economic, and
       operational matter.
            A.   Local Switching
                 1.   Local Circuit Switching
                      a.   Background
       254. In the Local Competition First Report and Order, the Commission concluded that
       incumbent LECs must provide local circuit switching as an unbundled network
       element.  The Commission found that denying access to the local circuit
       switching element would "substantially impair the ability of many competing
       carriers to provide switched telecommunications services."
       255. In the Notice, we sought comment on the application of the "necessary" and
       "impair" standards to previously identified unbundled network elements, including
       the switch.   The Notice requested that parties include specific costs and an
       analysis of the availability of alternative sources of switching.
       256. Incumbent LECs argue that a market-by-market analysis of the availability of local
       circuit switching requires a finding that requesting carriers are not impaired without
       access to unbundled switching in certain areas.  Conversely, a number of
       requesting carriers argue that they are impaired without unbundled local circuit
       switching nationwide primarily because of the operational impairment associated
       with obtaining collocation and coordinated hot cuts.  We note also that at least
       nine of the eleven states participating in this proceeding agree that the Commission
       should unbundle local circuit switching.
                      a.   Discussion
                      (i)  Definition of Local Circuit Switching
       257. In the Local Competition First Report and Order, the Commission defined local
       circuit switching as including the basic function of connecting lines and trunks.
       In addition to line-side and trunk-side facilities, the definition of the local switching
       element encompasses all the features, functions and capabilities of the switch.
       With the exception of MCI WorldCom, no commenter proposes that we modify the
       current definition of local switching.  We disagree with MCI WorldCom, and find
       no reason to alter our current definition of local circuit switching.
       258. MCI WorldCom proposes that we modify our definition of local circuit switching to
       omit the line-side/trunk-side distinction in favor of a technologically-neutral
       definition that connects "loop access points" and "transport access points" to the
       "switching facility," regardless of whether a given switch has equipment that could
       be identified as line port cards or trunk port cards.  MCI WorldCom suggests that
       we should take into account the increasing use of switches to connect to facilities
       other than home run copper loops, including DLCs. We cannot find, on the basis
       of the record before us, that incumbent LEC circuit switching technologies have
       changed in such a way as to warrant modification of our circuit switching
       definition.  Furthermore, adopting MCI WorldCom's proposed changes could
       require state commissions to re-evaluate their current pricing analysis of unbundled
       circuit switching.  Replacing the existing definition of switching with "loop access
       points" or the "switching facility" could lead to uncertainty and different cost
       determinations in state pricing proceedings.  We find no procompetitive basis on
       which to require states to modify their settled state proceedings that have addressed
       forward-looking pricing for unbundled switching.  Accordingly, we decline to
       modify our definition of local circuit switching.
                      (i)  Proprietary Concerns Associated With
                      Local Circuit Switching
       259. We conclude that incumbent LECs may not withhold access to switch routing tables
       as part of the unbundled local circuit switching element under section 251(d)(2)(A).
       With the exception of Ameritech, no commenter identifies any proprietary concerns
       associated with local circuit switching.  Ameritech argues that, if we conclude that
       local switching qualifies as an unbundled network element, we should decline to
       require incumbent LECs to make their switch routing tables available to requesting
       carriers because these tables are "proprietary," within the meaning of section
       251(d)(2)(A).  According to Ameritech, routing tables are "part of the computer
       software that instructs a switch how to route network traffic," and contain
       "extremely valuable information" that is not "necessary" to a requesting carrier
       under section 251(d)(2)(A).  Ameritech further argues that its routing tables meet
       the legal requirements for trade secret protection from unauthorized disclosure.
       260. Ameritech contends that, because it has invested resources in creating economic
       value in its routing tables, and it takes reasonable steps to protect its routing tables
       from unauthorized disclosure, switch routing tables meet the general requirements
       for trade secret protection.  No opposing party addresses whether Ameritech's
       routing table meets the legal requirements for trade secret protection.  CompTel
       avers that switch routing tables merely perform a function that allows a switch to
       operate in a network, and as such, switch routing tables are not proprietary and
       should be included within the unbundled switching element.  On the basis of
       Ameritech's uncontested assertion that its routing tables qualify for trade secret
       protection, we find that Ameritech's routing table may qualify for trade secret
       protection.  Thus, it appears that the routing aspect of the local circuit switching
       element may be proprietary.
       261. The "Necessary" Standard.  As previously discussed, there are several
       circumstances which, if they exist with respect to information or functionalities that
       the incumbent LEC claims are proprietary, will permit us to order unbundling of the
       proprietary information or functionality even if such unbundling is not strictly
       "necessary."  Access to the incumbent LEC's routing tables may be necessary for
       some carriers because they would be precluded, as an economic matter, from
       providing service to certain classes of customers if they were forced to self-
       provision their own routing tables.  Requesting carriers would be economically
       precluded from providing service because of the costs associated with developing
       their own routing tables and the additional non-recurring and administrative costs of
       substituting dedicated transport unbundled network elements for shared transport.
       As we found in the Local Competition Third Reconsideration Order, the high costs
       that requesting carriers would incur without access to shared transport would deter
       entry and impose significant costs on new entrants without any corresponding, direct
       benefits.
       262. Even if it is not strictly necessary for all carriers to have access to the incumbent
       LECs' routing tables, we find that they should be required to unbundle them
       because two of the three circumstances that we identified previously exist, and
       because requesting carriers would be impaired without access to routing tables as
       part of the unbundled local circuit switching element.
       263. Specifically, we find that it is unlikely that Ameritech will compete for end-user
       customers based on the ability to send a call to an appropriate destination, or that its
       routing tables allow it to differentiate its services from its competitors' services.  As
       we stated above, information or functionalities that do not distinguish an incumbent
       LEC's service from that of its competitor's services are unlikely to be the focus of
       an incumbent LEC's efforts to innovate, and therefore do not require the higher
       level of protection normally afforded to proprietary elements under the "necessary"
       standard.
       264. Moreover, we find that incumbent LECs may not withhold access to switch routing
       tables as part of the unbundled local switching element because doing so would
       jeopardize the goal of the 1996 Act to bring rapid competition to the greatest
       number of customers.  One of the most essential functions a switch performs is to
       provide routing information that sends a call to the appropriate destination.
       Requiring requesting carriers to engage in the potentially lengthy process of
       compiling traffic studies and populating routing tables with data in the incumbent
       LEC's unbundled switch would frustrate a requesting carrier's ability to use
       unbundled local circuit switching to serve customers quickly.
       265. As described below, we conclude that carriers would be impaired without access to
       routing tables as part of the unbundled local circuit switching element.  Requesting
       carriers have not generally deployed self-provisioned local circuit switches to serve
       the mass market.  We conclude that requesting carriers are impaired without
       access to unbundled local circuit switching to serve certain customer classes in
       discrete geographic areas.  We therefore order incumbent LECs to provide access to
       unbundled local circuit switching in these circumstances.  We note that requesting
       carriers will request unbundled access to local circuit switching when, in the
       judgment of the requesting carrier, the costs and delays associated with self-
       provisioning switching do not warrant purchase and installation of a local circuit
       switch.  Accordingly, because of the circumstances identified above, and because
       requesting carriers would be impaired without access to routing tables as part of the
       local circuit switching element, we find that incumbent LECs may not, pursuant to
       section 251(d)(2)(A), withhold access to switch routing tables.
                      (i)  General Unbundling Analysis for Local
                      Circuit Switching
       266. We conclude that, as a general matter, unbundled local circuit switching meets the
       "impair" standard set forth in section 251(d)(2).   Accordingly, we require
       incumbent LECs to provide local switching as an unbundled network element.
       Based on the record, we find that, in general, lack of access to unbundled local
       switching materially raises entry costs, delays broad-based entry, and limits the
       scope and quality of the new entrant's service offerings.  As discussed in detail
       below, our unbundling analysis focuses upon the ability of a requesting carrier to
       self-supply switching because the record does not support a finding that requesting
       carriers, as a general matter, can obtain switching from carriers other than the
       incumbent LEC.  We find, however, that an exception to this rule is required
       under certain market circumstances.  We find that, where incumbent LECs have
       provided nondiscriminatory, cost-based access to combinations of loop and
       transport unbundled network elements, known as the enhanced extended link (EEL),
       requesting carriers are not impaired without access to unbundled switching for end
       users with four or more lines within density zone 1 in the top 50 metropolitan
       statistical areas (MSAs).
       267. Alternatives Outside the Incumbent's Network.  As of March 1999, approximately
       167 different competitors have deployed approximately 700 switches throughout the
       country.   According to USTA, approximately 320 cities are served by at least one
       competitive switch.  SBC, using a methodology that tracks requesting carriers'
       switches by examining migration of lines using ported numbers, contends that
       within the 50 largest MSAs, competitors' switches currently serve approximately 75
       percent of all BOC and GTE rate exchange areas.  Although certain requesting
       carriers argue that incumbent LEC statistics are not precise,  the record indicates
       that a significant number of competitive switches have been deployed.  Our
       examination of switching investments in the market shows that requesting carriers
       have self-provisioned a significant number of switches, but that this investment
       represents only a small fraction of the number of switches deployed by the
       incumbent LECs.
       268. Since the Commission adopted the Local Competition First Report and Order,
       competition has continued to develop in certain geographic markets, particularly for
       large business customers or other users with substantial telecommunications
       needs.  The pattern of switch deployment by competitors suggests that the costs
       and operational delays of self-provisioning switching do not preclude requesting
       carriers from serving certain customer classes in certain geographic markets.  In
       general, however, we conclude that requesting carriers are impaired in their ability
       to provide service in most markets, primarily because of the costs of self-
       provisioning switching in those markets.  We find that section 251(d)(2)(B)
       requires consideration not simply of whether denial of access to unbundled
       switching would impair a competitor's ability to serve the high-volume business
       market that many requesting carriers are already serving, but whether the requesting
       carrier is impaired in its ability to provide the "services that it seeks to offer,"
       including services to residential and small business markets.  Although the
       groundwork for residential local competition is evolving, and competition, to date,
       has focused upon users with substantial telecommunications needs, we do have
       some evidence that some requesting carriers will seek to offer residential phone
       service to the mass market where unbundled switching is available.   Accordingly,
       we find that our unbundling analysis should take into account the possibility that
       carriers will offer residential service.  We find that, taking into account the cost,
       quality, ubiquity and timeliness factors in our "impair" standard as well as the goals
       of the Act, lack of access to unbundled switching as a general matter, impairs the
       ability of a requesting carrier to provide service to consumers.
       269. Incumbent LECs use the geographic dispersion of deployed local circuit switches to
       argue for a geographic or market-specific approach to circuit switch unbundling.
       Certain incumbent LECs further argue that the presence of one competitor's switch
       and collocation in a given market is dispositive of whether requesting carriers
       generally will be impaired without access to unbundled switching.  We reject this
       argument.  Just as the Supreme Court made clear that the "impair" standard is not
       triggered by any increase in cost or decrease in quality, we find that switch
       unbundling cannot turn on whether a single carrier has self-provisioned switching.
       The fact that a single carrier is collocated in a particular central office and is not
       using unbundled switching does not conclusively demonstrate that a variety of
       carriers can self-provision switches without significant cost or other impediments
       that diminish a collocating carrier's ability to provide the services it seeks to offer.
       Indeed, based on financial analysts' reports of competitive LECs' operations, a
       significant number of requesting carriers currently self-provisioning switches are not
       generating net income (i.e., profits).  Thus, it is too early to know whether self-
       provisioning is economically viable in the long run, although capital markets appear
       to be supplying requesting carriers with access to capital in the absence of
       demonstrated profitability.
       270. Incumbent LECs have provided business case analyses that purport to demonstrate
       that a requesting carrier could expect to earn profits upon entry using self-provided
       switching by comparing the revenues that could be expected from self-provisioning
       switching with the full costs of entry.  As discussed in Section IV above, we favor
       an analytical approach that considers the totality of the circumstances a requesting
       carrier will face, rather than a specific business case analysis, to determine whether
       lack of access to particular network elements materially diminishes a requesting
       carrier's ability to provide the services it seeks to offer.  Adopting a business case
       approach would require the Commission to conduct a detailed analysis of the
       profitability of entry for a representative firm using various business strategies in
       each possible market.  Such an approach would also require the Commission to
       make specific assumptions regarding the competitor's business model, including
       which technology a competitor would choose to deploy, which market a competitor
       would choose to enter (e.g., business and/or residential), and what services a
       competitor would choose to offer.  In addition, a business case approach would
       require the Commission to forecast revenues that a requesting carrier would earn if
       it entered a particular market.  Whereas the actual costs of network elements such as
       switches are quantifiable, revenues may fluctuate according to evolving competitive
       conditions in the local telecommunications market.
       271. Although we do not adopt an approach that is based on a business case analysis for
       determining whether a particular entity is impaired, we do make several general
       observations regarding the direct cost that bear on a requesting carrier's decision to
       self-provision a switch.  Fixed costs are the largest portion of the cost of a switch.
       The average cost of providing service to customers decreases as the number of
       customers served increases.  As a general rule, we find that scale economies are
       more pronounced when switches operate at full utilization.  Because incumbent
       LEC switches serve the majority of customers for local exchange service, they are
       likely to be able to take advantage of substantially greater economies of scale than
       the competitor would using its own switches.  We find however, that facilities-
       based competitors need not deploy switches in exactly the same network
       configuration as an incumbent, thus allowing competitors to achieve their own
       unique and competitive efficiencies by deploying their own switches.
       272. Cost.  We find, as a general matter, that the total costs of self-provisioning a switch
       impose on the requesting carrier a significant cost disadvantage relative to the
       incumbent LEC, particularly in its early stages of entry.  We emphasize that cost is
       only one factor we examine in our "impair" analysis.  The evidence of circuit
       switching direct costs submitted in the record varies significantly.  For example,
       incumbent LECs provide evidence that the direct costs to competitors of self-
       provisioning switches is between $100,000 and $814,000 and that the incremental
       cost is between $110 and $146 per line. AT&T counters that incumbent LEC
       models exaggerate the efficiencies associated with requesting carrier switches.
       Independent sources, however, estimate the fixed cost per host switch to be
       $447,000 and the per-line cost to be $83. The disparity in switching costs
       contained in the record appear to depend on the technical attributes of the switch at
       issue.  The more critical aspect of our "impair" analysis is not the costs of
       purchasing a local circuit switch, but rather the economies of scale that may
       characterize local circuit switching and the additional costs that requesting carriers
       incur when placing their self-provisioned switches into operation.
       273. We find that incumbent LECs retain material scale advantages with regard to
       provisioning and operating local circuit switches.  Requesting carriers therefore will
       encounter generally greater direct costs per subscriber when provisioning their own
       switches, particularly in the early stages of entry when requesting carriers may not
       have the large number of customers that is necessary to increase their switch
       utilization rates significantly.  When we examine the market as a whole, we find that
       requesting carriers incur higher costs due to their inability to realize economies of
       scale using circuit switching equipment.  We find that the scalability of a switch
       mitigates but does not eliminate the incumbent LEC's scale advantages and reduces
       but does not eliminate competitor's sunk costs and entry barriers.   For example, it is
       generally less expensive to purchase a 20,000 line switch rather than four
       increments of 5000 lines.    Furthermore, the advantages of incumbent LEC scale
       economies are more pronounced when requesting carriers provide switch-based
       service to a relatively small number of customers through a self-provisioned
       switch.  For example, competitor's switching costs per minute at a 10%
       penetration level are slightly more than twice the cost of an incumbent LEC serving
       the remaining 90% of the market with its own switch.   We find that, as a general
       proposition, requesting carriers will incur a materially greater cost when self-
       provisioning switching at low penetration levels.   As a requesting carrier's switch
       utilization rates increase, the difference between the switching costs incurred by
       competitive and incumbent LECs decreases, but the impact of this difference does
       not become irrelevant in the impair analysis until incumbent LEC and competitor's
       switch utilization levels are more comparable. Market facts show that that
       competitors have made inroads into the local telecommunications markets, but they
       have garnered only between 2.6 percent to 5 percent of the market for switched
       telecommunications services.  A significant portion of these figures represent
       service to medium and large business customers, rather than to the mass market.
       Accordingly, we find that as a general matter, requesting carriers have not gained
       sufficient market share to generate switch utilization rates and economies of scale
       comparable to the incumbent LEC, particularly to serve the mass market.
       274. We recognize that switches deployed by competitive LECs may be able to serve a
       larger geographic area than switches deployed by the incumbent LEC, thereby
       reducing the direct, fixed cost of purchasing circuit switching capacity and allowing
       requesting carriers to create their own switching efficiencies.  If a competitor uses a
       single switch to serve a rate area consisting of 10-15 incumbent LEC switches, the
       average utilization of the competitor's one switch can be as high, or higher, than
       many, or even all, of the incumbent LEC switches.  This dynamic mitigates, to a
       varying degree, incumbent LEC advantages of scale, but does not enable
       competitive LECs to achieve comparable scale economies, particularly in the early
       stages of entry.  Incumbent LECs contend that once a requesting carrier incurs the
       costs to deploy a switch, it can economically extend the reach of the switch to serve
       broader markets.  We find, however, that switch capacity, distance-sensitive
       transport costs, and collocation costs significantly impair a requesting carrier from
       fully exploiting this market entry strategy.  We note that, for smaller carriers, an
       inability to achieve switching scale economies may have greater effect upon their
       ability to offer service than it does for larger carriers.  For example, TRA contends
       that, without access to unbundled switching, smaller requesting carriers with
       targeted entry plans deploy their own switch to serve approximately 3,000 lines will
       incur a direct additional cost of $300,000 annually without access to unbundled
       local switching.  We find that utilizing unbundled switching is likely to mitigate
       this early-stage entry barrier and is consistent with Congress' intention that
       requesting carriers use unbundled network elements as a transitional market entry
       strategy.
       275. We find, as a general matter, that the costs of self-provisioning switching also
       materially diminish a requesting carrier's ability to provide the services it seeks to
       offer.  Our standard recognizes that the full costs of using self-provisioned circuit
       switching must include the costs incurred by a competitor to substitute its local
       circuit switch for that of the incumbent LEC.  These costs include the costs of
       collocating in an incumbent LEC's central office from which the requesting carrier
       accesses unbundled loops to serve its end-user customers.  Requesting carriers
       require collocation because they have not yet duplicated the incumbent LEC's loop
       plant to provide "last mile" connectivity to end users.  Obtaining unbundled loops
       and connecting these loops to collocated equipment is therefore the only reasonable
       and economically rational manner by which requesting carriers can provide
       connectivity to their end users.
       276. We agree with parties that argue that collocation imposes materially greater costs on
       requesting carriers than use of the incumbent LEC's switching.  Based on the
       record, it appears that the current range for non-recurring charges for obtaining
       physical collocation is between $15,000 and $508,000 for each central office from
       which  a competitor serves customers using the incumbent LEC's unbundled
       loops.  This additional cost increases the costs of the equipment installed in the
       cage by between 15 to 20 percent.  We find that due in part to these non-recurring
       charges, a requesting carrier's decision to collocate presumes significant market
       penetration, even in dense wire centers.  For example, data submitted by MCI
       WorldCom for New York City suggests that collocation in dense wire centers is not
       profitable until a requesting carrier's market penetration exceeds 8-15 percent.
       We agree that the costs associated with collocation and the revenue opportunities
       associated with a given wire center may not justify establishing a collocation
       arrangement with the incumbent LEC in many central offices.
       277. Accordingly, we find that as a general matter, collocation costs materially diminish
       the ability of a requesting carrier to offer service using self-provisioned switching.
       Although the collocation rules we adopted in our Advanced Services First Report
       and Order and FNPRM are intended, and expected, to reduce the costs and
       operational delays associated with collocation, our revised rules do not eliminate
       altogether the cost and delay associated with collocation.  We recognize that
       incumbent LECs still have an incentive and the ability to raise a requesting carrier's
       cost of collocation, and thus raise the total cost of self-provisioning switching.
       278. In addition to the costs of establishing collocation arrangements with the incumbent
       LEC, requesting carriers incur additional costs to extend unbundled loops to their
       collocation cage.  The manual work of extending a loop to a requesting carrier's
       collocation cage is known as a coordinated loop cutover.  A coordinated loop
       cutover requires incumbent LEC technicians to disconnect the subscriber's loop
       from the incumbent LEC's main distribution frame and rapidly cross-connect it to
       the competitor's facilities.  From the time the technician disconnects the
       subscriber's loop until the competitor re-establishes service, the subscriber is
       without service.  Simultaneously, incumbent LEC and competitor technicians must
       coordinate to ensure that the subscriber's telephone number is "ported" to the
       competitor's switch so that inbound calls are properly routed to the requesting
       carrier's switch.
       279. The coordinated cutover process imposes a non-recurring cost on competitive
       carriers that connect their own switches to unbundled loops.  For example, AT&T
       contends that the non-recurring, per-line charge for a coordinated cutover is
       approximately $45 in New York.  CompTel argues that a manual loop and
       switching port migration costs between $59.91 and $218.62 per unbundled loop.
       We acknowledge that incumbent LECs may incur coordinated cutover costs when
       they win customers from competitive LECs.  The record does not demonstrate,
       however, that incumbent LECs are incurring coordinated cutover costs in the same
       or substantially similar volumes as competitive LECs.  We find that the additional
       cost of coordinated loop cutovers, when added to the costs of collocation, materially
       diminishes a competitor's ability to substitute its own switch for unbundled
       switching.  Although this per-line non-recurring cost is likely to vary between
       incumbent LECs, it represents a significant cost to those requesting carriers seeking
       to provide service to the mass market due to the large number of individual loop
       cutovers that are necessary to serve this market.
       280. Ubiquity and Timeliness.  In addition to the costs associated with accessing
       individual unbundled loops in multiple end offices, we find that collocation and the
       coordinated loop cutover process imposes a material delay on competitive LECs that
       offer services using self-provisioned switches, and materially limits the scope of
       customers a requesting carrier may serve quickly.  The delay includes the total
       amount of time required to purchase, install, turn up a switch, and obtain
       collocation, as well as the amount of time needed for incumbent LECs to complete
       coordinated loop cutovers.
       281. In order to self-provision a switch, a requesting carrier must order, test the switch,
       and integrate it into its network and internal operations support systems.
       Incumbent LECs claim that a switch can be fully provisioned in as little as 40
       days.   Although this may be theoretically possible, there is evidence in the record
       that the time frame for provisioning a switch is significantly longer.  Furthermore,
       incumbent LECs focus their analysis on the time to purchase a switch rather than the
       time required to put a switch into operation.  Actual delivery of a switch is only one
       part of the process of self-provisioning switching.  Requesting carriers assert that
       it takes approximately six months to one year to engineer, furnish and install a
       switch.
       282. Related to the time required to provision a switch is the time required to provision
       collocation.  Incumbents and requesting carriers offer conflicting assertions
       regarding the time required to provision collocation in incumbent LEC central
       offices.  We are troubled by anecdotal evidence that collocation imposes a delay of
       six, nine or twelve months on the provision of ubiquitous service.  MCI
       WorldCom for example, argues that collocating on a broad scale to provide
       ubiquitous service results in lengthy collocation delays.  NorthPoint maintains that
       some incumbent LECs have imposed "governors" on the number of collocation
       applications they will accept, thereby delaying ubiquitous rollout of services.
       Incumbent LECs counter that they have, and will continue to, provision collocation
       on a broad scale and in a timely fashion.  Ameritech specifically contends that
       competitive LECs have established collocation arrangements in rate centers in
       which 70 percent of Ameritech's access lines are located.  The presence of one
       collocator, in and of itself, however, does not establish how long it will take to
       accommodate subsequent collocators.  We find nothing in the record to demonstrate
       conclusively that incumbent LECs have committed to and satisfied a collocation
       provisioning interval of less than six months.
       283. We therefore find incumbent LEC arguments that requesting carriers do not
       experience collocation delays contradicted by the actual experiences of requesting
       carriers.  Incumbent LECs do not appear to include such things as the collocation
       application process in their analysis of collocation delays.  We are persuaded by
       those commenters that assert that collocation, examined from the time a requesting
       carrier initiates the collocation process until a collocation arrangement is delivered,
       generally imposes a delay of approximately six months on the provision of
       service.   We conclude that, although the delays associated with provisioning
       collocation arrangements will vary from incumbent LEC to incumbent LEC and by
       requesting carrier, as a general matter, collocation delays materially diminish the
       ability of a requesting carrier to provide the services it seeks to offer.  As discussed
       in Section IV above, although we cannot quantify precisely how much of a delay
       associated with collocation and self-provisioning switching will materially diminish
       the ability of a competitor to provide the services it seeks to offer, we find that
       delays that exceed six months to one year materially diminish the ability of a
       competitive LEC to provide the services it seeks to offer because such delay
       prevents the competitive LEC from responding quickly to the demand for its
       services in a rapidly changing market.
       284. As noted above, requesting carriers must also wait for coordinated cutovers before
       providing service with their own switch.  We disagree with BellSouth, GTE,
       Ameritech, and other commenters that argue that the Commission should not
       consider coordinated cutover delays and service-quality issues in its impair
       analysis.  Without coordinated loop cutovers, requesting carriers self-provisioning
       switching and accessing unbundled loops cannot provide the services they seek to
       offer.  To date, incumbent LECs have provisioned relatively small volumes of
       coordinated loop cutovers compared to anticipated demands.  Incumbent LECs
       counter that they have instituted procedures to provide timely coordinated cutovers
       to requesting carriers.  Where incumbent LECs have undergone comprehensive
       testing of their loop provisioning processes, however, independent auditors have
       found difficulties regarding coordinated loop cutover performance.  Furthermore,
       because broad-based residential competition is at best nascent, incumbent LECs
       generally have not successfully provisioned coordinated loop cutovers in the
       volumes necessary for requesting carriers to serve the mass market.  We therefore
       find incumbent LEC promises of future hot cut performance insufficient to support a
       Commission finding that the coordinated loop cutover process does not impair the
       ability of a requesting carrier to provide the service it seeks to offer without
       unbundled circuit switching.  We recognize that the hot cut process requires
       manual processing, which likely creates delays between the time a requesting carrier
       wins a customer and the time it can provide service to that customer.  Accordingly,
       we find that the coordinated loop cutover process impairs the ability of a requesting
       carrier to provide timely service.
       285. Goals of the 1996 Act.  As noted above, our unbundling analysis takes into account
       whether unbundling a particular network element is consistent with the goals of the
       1996 Act.  We find our decision to unbundle local circuit switching is consistent
       with the 1996 Act's goals of rapid introduction of competition and the promotion of
       facilities-based entry.
       286. Our unbundling analysis considers how the switch unbundling obligation we adopt
       will encourage requesting carriers to rapidly enter the local market in order to serve
       the greatest number of customers, and whether the failure to require unbundling will
       cause any class of consumers to wait unnecessarily for competitive alternatives.
       Failure to unbundle local circuit switching would cause residential and small
       business consumers to wait unnecessarily for competitive alternatives.  As discussed
       above, the costs and operational delays associated with collocating in multiple end
       offices and provisioning delays caused by the inability of a requesting carrier to gain
       access to unbundled local circuit switching will cause residential and small business
       customers to wait for service.  Requiring incumbent LECs to provide access to
       unbundled switching, and to use unbundled switching in combination with other
       network elements, will allow requesting carriers to serve the greatest number of
       customers, without incurring collocation and switch provisioning delays.   Where
       unbundled switching has been made available, requesting carriers have gained
       market share in the residential and small business markets.  Accordingly, we find
       that requiring incumbent LECs to provide access to unbundled switching will allow
       requesting carriers to rapidly enter local markets.
       287. We also find that the availability of unbundled switching will also accelerate the
       development of alternative networks because it will allow requesting carriers to
       generate revenues to justify the construction of new switching facilities.  As noted
       above, many carriers emphasize that they plan to deploy alternative facilities as soon
       as it is technically and economically possible to do so at a cost close to the
       incumbent LECs' prices for network elements.  Granting requesting carriers
       access to unbundled switching will allow these carriers to serve customers in areas
       where traffic volumes and customer densities make it difficult initially to justify
       deploying a switch.  Furthermore, allowing requesting carriers to purchase
       unbundled switching will allow new entrants to test market demand for circuit
       switched services before deploying their own facilities.  As requesting carriers
       obtain customers using unbundled switching, we expect that the revenues generated
       from this activity will enable requesting carriers to extend the reach of their existing
       switching capabilities or deploy switching capability to serve the residential and
       small business market.
       288. On balance, we conclude that local circuit switching should be unbundled
       nationwide.  We now consider whether it would be appropriate to establish an
       exception to the national unbundling requirement.
                      (i)  Exception to National Unbundling
                      Requirement
       289. As discussed in section IV above, we do not limit our unbundling analysis to the
       cost, timeliness, ubiquity and quality factors described above.   Rather, we look at
       the totality of the circumstances and marketplace developments when considering
       whether a requesting carrier is impaired without access to unbundled local circuit
       switching.  In addition to examining where requesting carriers have deployed
       switches, we look to the marketplace to see which customers are receiving service
       from facilities-based competitors.  To the extent the market shows that requesting
       carriers are not serving a market segment with self-provisioned switches, we find
       that this fact is probative evidence that for a discrete market segment requesting
       carriers are impaired without access to unbundled local circuit switching.
       Conversely, to the extent that the market shows that requesting carriers are generally
       providing service in particular situations with their own switches, we find this fact
       to be probative evidence that requesting carriers are not impaired without access to
       unbundled local circuit switching.  The task before us is to develop an
       administratively simple rule that reflects marketplace developments and provides
       certainty to market participants.  We seek to adopt a rule that serves as a reasonable
       proxy for when competitors are indeed impaired in their ability to provide the
       services they seek to offer.
       290. In their initial and reply comments in this proceeding, the parties take sharply
       diverging positions regarding the circumstances and geographic areas where local
       circuit switches should be unbundled, if at all.  Incumbent LECs generally support
       elimination of their obligation to unbundle local circuit switches in a geographic
       area where one requesting carrier has deployed a single local circuit switch.
       Competitive LECs oppose the incumbent LEC proposals for elimination of the
       circuit switch unbundling obligation and argue that local circuit switching should be
       unbundled on a national basis.  In several ex parte presentations after the record
       closed, a number of parties softened their initial positions and propose a more
       narrowly tailored rule for determining when circuit switching need not be
       unbundled.  A number of other parties respond to these fall-back positions in
       subsequent ex parte presentations.
       291. Despite our conclusion that, in general, requesting carriers are impaired without
       access to unbundled switching, we conclude that it is appropriate to establish a more
       narrowly tailored rule to reflect significant marketplace developments.  As described
       more fully below, we find that requesting carriers are not impaired without access to
       unbundled local circuit switching when they serve customers with four or more lines
       in density zone 1 in the top 50 metropolitan statistical areas (MSAs), as set forth in
       Appendix B, where incumbent LECs have provided nondiscriminatory, cost-based
       access to the enhanced extended link (EEL) throughout density zone 1.
       292. Top 50 MSAs.  We conclude that it is appropriate to create an exception to the
       switching unbundling obligation in certain circumstances in the top 50 MSAs, as
       they are defined by the Office of Management and Budget.  We thus respond to
       various suggestions in the record that an exception from the switching unbundling
       obligation should encompass the top 29, top 35 and top 100 MSAs in the United
       States.
       293. As previously noted, as of March, 1999, approximately 167 different competitors
       have deployed approximately 700 switches throughout the country. When we
       analyze where requesting carriers have deployed these switches, we find that most
       of these switches have been deployed within the confines of the top 50 MSAs.
       According to USTA's data, which relies on the Local Exchange Routing Guide,
       approximately 61 percent of all requesting carrier switches nationwide have been
       deployed in the top 50 MSAs.   More significantly, the vast majority of these
       MSAs contain multiple switches owned by competitors.  In particular, four or more
       competitive switches have been deployed in 96 percent of the top 50 MSAs.
       According to USTA's data, only two MSAs in the top 50 -- Cincinnati and Las
       Vegas -- have less than three requesting carrier switches serving an incumbent LEC
       rate exchange area within the MSA.
       294. Based on the evidence in the record, we conclude that exempting incumbent LECs
       from unbundling local circuit switching in certain circumstances in the top 50
       MSAs is reasonable because nearly all of the top 50 MSAs contain a significant
       number of competitive switches.  In contrast, MSAs below the top 50 typically
       contain fewer competitive switches.   For example, in US WEST's territory, no
       MSA between 50 and 150 contains more than three competitive switches.  In the
       top 100 MSAs in Ameritech's territory, only six percent of Ameritech's wire centers
       are served by four or more competitive switches.
       295. We recognize that drawing the line at the top 50 MSAs means that incumbent LECs
       serving more rural territories, which have fewer MSAs that are in the top 50 MSAs,
       will continue to be subject to an unbundled switching obligation.  We nonetheless
       believe that this is a reasonable exercise of our administrative discretion.  Extending
       an incumbent LEC's switch unbundling exemption to include more than the top 50
       MSAs would require us to find that requesting carriers are not impaired without
       unbundled access to local circuit switching in these MSAs.  We have no basis in the
       record before us to make such a finding because there are relatively few competitive
       switches outside of the top 50 MSAs.
       296. We note that collocation costs and delay, as compared to revenue potential, may
       contribute to the relative lack of robust competitive switch deployment in areas
       outside of the top 50 MSAs.  As discussed above, the total costs of a competitor
       using self-provisioned local circuit switching on an MSA basis include the costs
       incurred in providing service to every customer that the competitor seeks to serve.
       We concluded above that collocation imposes indirect costs on carriers installing
       their own switches.  We also found that the amount of collocation cost are likely
       to vary according to individual requesting carriers.   We believe that the revenue
       potential of serving less dense markets outside the top 50 MSAs is unlikely to
       outweigh the costs of collocating in these markets, and accordingly, competitors are
       impaired without access to unbundled local switching.
       297. Density Zone 1.  When we examine the deployment of switches by competitors at a
       more granular level, we find that, based on the record before us, requesting carriers
       have deployed greater numbers of switches in areas of high customer density.
       Several incumbent LECs argue that switching should not be unbundled in dense
       wire centers, but each proffers its own geographic market definition for our local
       circuit switch unbundling analysis.  BellSouth proposes, and other incumbent
       LECs support, the use of density zones 1 and 2 to capture the areas in which
       competitors have deployed switches and where incumbent LECs need not unbundle
       switching.
       298. We conclude that it is appropriate to create an exception to the local circuit
       switching unbundling obligation only in density zone 1, within the top 50 MSAs.
       The exception applies to density zone 1 as it was defined on January 1, 1999.  Based
       on the limited evidence in the record, we believe that density zone 1 closely reflects
       the wire centers where competitive LEC switches are located.  In particular, of the
       seven markets in the top 50 MSAs served by BellSouth, each MSA contains at least
       one density zone 1 where approximately 97 percent of all competitive LEC
       switches have been deployed.  We recognize that only one commenter, BellSouth,
       provided detailed data to describe where requesting carriers have deployed switches
       in density zone 1.  The record does not contain similar data for other incumbent
       LECs.  Given the record before us and the need to provide a measure of certainty to
       the market, we believe that drawing a line at density zone 1 within the top 50 MSAs
       represents a reasonable approximation of where requesting carriers are not impaired
       without access to unbundled local circuit switching.
       299. In order to prevent incumbent LECs from modifying their density zones to limit
       their unbundling obligation for local circuit switching, we freeze, for unbundling
       purposes, the incumbent LECs' density zone 1 as it was defined on January 1, 1999.
       Otherwise, incumbent LECs would retain significant discretion to define their
       density zone boundaries in the future.  The Commission reviews incumbent LEC
       zone density pricing plans under a  "reasonableness" standard.  For example, our
       rules allow incumbent LECs to define zone boundaries upon a showing that "the
       assignment of central offices to each of the zones reflects cost-related
       characteristics, such as traffic density or some measure of traffic through each
       office."  MCI WorldCom argues that using the zone approach would allow
       incumbent LECs to "redefine breakpoints to put more central offices into zones in
       which the incumbent LECs were not required to provide switching as an unbundled
       network element" and would allow incumbent LECs to "change their methodologies
       for defining zones to upset their competitor's business plans."   To address the
       possibility that incumbent LECs, going forward, could amend their density zones to
       minimize their unbundling obligations, we create an exception to the unbundling
       obligation in the density zones as they existed on January 1, 1999.  We believe
       that freezing the zones as of January 1, 1999, for purposes of section 251
       unbundling obligations, addresses MCI WorldCom's concerns.
       300. As discussed in our unbundling analysis above, as requesting carriers' switch
       utilization rates increase, the difference between the switching costs incurred by
       competitive and incumbent LECs decreases, and the per line switching costs will
       decrease as a requesting carrier's customer base grows.   Because of increased
       demand for telecommunications services and the enhanced revenue opportunities
       associated with serving customers in high-density areas, such as density zone 1, we
       find that requesting carriers serving these dense areas are able to make more
       efficient use of their switching facilities, and can thus counter incumbent LEC scale
       economies.  We therefore find that the cost of purchasing a circuit switch does not
       impair a requesting carrier's ability to provide the services it seeks to offer in density
       zone 1, in certain circumstances.
       301. Need for Enhanced Extended Link.  Our conclusion that competitors are not
       impaired in certain circumstances without access to unbundled switching in density
       zone 1 in the top 50 MSAs also is predicated upon the availability of the enhanced
       extended link (EEL).  As noted in section VI(B) above, the EEL allows requesting
       carriers to serve a customer by extending a customer's loop from the end office
       serving that customer to a different end office in which the competitor is already
       collocated.  The EEL therefore allows requesting carriers to aggregate loops at fewer
       collocation locations and increase their efficiencies by transporting aggregated loops
       over efficient-high capacity facilities to their central switching location.  Thus, the
       cost of collocation can be diminished through the use of the EEL.  We agree with
       ALTS that, if requesting carriers can obtain nondiscriminatory, cost-based access to
       the enhanced extended link, their collocation costs would decrease, and they would
       need to collocate in as few as one incumbent LEC central office in an MSA to
       provide service.
       302. We are not persuaded by arguments that use of the EEL produces only a short term
       advantage over collocation.  Although we agree with SBC that distance-sensitive
       EEL costs can exceed the costs associated with collocation over time, we find that
       the ability of a requesting carrier to provision EELs more quickly than collocation
       arrangements, without the substantial upfront costs of establishing collocation in
       multiple central offices, can reduce significantly the costs of self-provisioning a
       switch in the initial phase of an entry strategy.  When projected EEL costs exceed
       projected collocation costs, competitive LECs may reconfigure their networks to
       ensure the continued efficiency of their networks.  We conclude that requesting
       carriers, reacting to marketplace demands and their own network topologies, are
       better able to weigh the costs and benefits of EELs compared to collocation and
       adjust their plans accordingly.  Where a requesting carrier chooses the EEL, we find
       that it reduces a requesting carrier's reliance on collocation.
       303. Customers with Four or More Lines. Our analysis of an incumbent LEC's local
       circuit switching obligation has focused primarily upon the geographic areas where
       competitive carriers have deployed switches.  We now consider whether, within
       these geographic areas, market facts demonstrate that requesting carriers are not
       impaired without access to local circuit switching for discrete market segments or
       customer classes.
       304. We conclude that without access to unbundled local circuit switching, requesting
       carriers are impaired in their ability to serve the mass market.  As discussed above,
       our unbundling analysis takes into account market conditions to determine whether
       a requesting carrier is impaired without access to unbundled local circuit switching.
       Since the Commission adopted the Local Competition First Report and Order,
       competition has continued to develop, primarily for business customers or users
       with substantial telecommunications needs.  Commenters in this proceeding
       generally argue that requesting carriers have deployed switches to serve medium and
       large business customers and are not yet serving mass market customers, which
       largely are residential customers.   No party in this proceeding, however, identifies
       the characteristics that distinguish medium and large business customers from the
       mass market.
       305. There are several methods we could use to distinguish between the mass market and
       the medium and large business market for purposes of our unbundling analysis.  For
       example, we could use revenues, number of employees, number of lines, or some
       other factor to distinguish between the mass market and the medium and large
       business market.
       306. We find, however, that a rule that provides access to unbundled local switching for
       requesting carriers when they serve customers with three lines or less captures a
       significant portion of the mass market.  First, virtually all residential customers
       would be captured by such a rule.  While an increasing number of American homes
       are served by second lines, we believe it is a rare case in which residences have
       three lines, and even more unusual for a home to have four or more lines.  Second,
       any business that has three or fewer lines is likely to share more characteristics of
       the mass market customer than a medium and large business.  In particular, small
       businesses are likely to use the same number of lines as many residential subscribers
       and purchase similar volumes and types of telecommunications services.
       307. We recognize that a rule that removes unbundling obligations based on line count
       will be marginally overinclusive or underinclusive given individual factual
       circumstances.  We find, however, that in our expert judgment, a rule that
       distinguishes customers with four lines or more from those with three lines or less
       reasonably captures the division between the mass market   where competition is
       nascent   and the medium and large business market   where competition is
       beginning to broaden.
       308. Our decision to examine mass market and larger business markets separately is
       consistent with the Commission's merger review analysis and the Commission's
       reform of the interstate access charge regime.  In the MCI-WorldCom merger, we
       identified two distinct product markets   residential and small business, which we
       described as one market, and medium and large business customers, which we
       described as the larger business market.  In the Access Reform proceeding, the
       Commission distinguished between primary residences and single line businesses
       which constitute a large portion of the mass market, and multi-line business
       customers which constitute the medium and large business markets.  We therefore
       conclude that it is appropriate to make a similar distinction between mass market
       customers and larger business customers in creating an exception to the unbundling
       obligation for local circuit switching.
       309. As discussed above, a requesting carrier is materially diminished in its ability to
       offer service to mass market customers without access to unbundled switching
       because it will face materially greater costs, materially greater delay, and will lack
       the same ubiquitous reach as the incumbent LEC's network.  In addition to the costs
       of establishing a collocation arrangement with the incumbent LEC, we noted above
       that requesting carriers incur additional costs and face service quality impediments
       when extending a customer's loop to their collocation cages.
       310. In contrast, marketplace developments suggest that competitors are not impaired in
       their ability to serve certain high-volume customers in the densest areas.  We believe
       that the coordinated cutover process will not necessarily impair the ability of a
       requesting carrier to serve an end user in density zone 1.  Medium and large
       business customers are often sophisticated users of telecommunications services that
       are able to order their operations in a manner that minimizes disruptions that may be
       caused by coordinated cutovers.  For example, requesting carriers seeking to
       provide service to medium and large business customers may engage in direct
       outbound marketing in such a way as to control coordinated cutover order flows to
       the incumbent LEC.  In addition, to the extent that incumbent LECs provide
       requesting carriers with unbundled switching to serve the mass market, requesting
       carriers will require fewer coordinated loop cutovers in the aggregate and incumbent
       LECs can focus their efforts on coordinated cutovers for customers not served with
       unbundled local circuit switching.  Finally, because business customers generate
       comparably greater revenues than residential customers, requesting carriers may be
       more willing to incur the provisioning difficulties that may be present in the
       coordinated cutover process.
       311. We conclude that carriers will not be impaired in their ability to serve high volume
       users only when the EEL is provided throughout density zone 1.  While some
       customers in this area already are being served by facilities-based carriers without
       the EEL, the availability of the EEL will ensure that requesting carriers are able to
       serve customers ubiquitously throughout the area.  If the EEL is available and a
       requesting carrier seeks to serve a high volume business, the incumbent LEC can
       provision the high capacity loop and connect directly to a requesting carrier's
       collocation cage.  In this scenario, the requesting carrier need not initiate a
       coordinated loop cutover.  Moreover, the availability of the EEL substantially
       reduces the delay a requesting carrier would experience before it is able to actually
       provide service.
       312. Goals of the 1996 Act.  As noted above, our unbundling analysis considers how the
       switching unbundling obligation we adopt will encourage requesting carriers to
       rapidly enter the local market and whether the failure to require unbundling will
       cause any class of consumers to wait unnecessarily for competitive alternatives.  Our
       decision to relieve incumbent LECs of their unbundling obligations in the
       circumstances described above will not require medium and large businesses to wait
       unnecessarily for competitive alternatives.  We find that requesting carriers have
       deployed a large number of switches to serve medium and large business customers
       in the densest areas of the top 50 MSAs, and these medium and large business
       customers by and large, have a choice in their local service provider.
       Accordingly, we find that relieving incumbent LECs of their unbundled switching
       obligation, as set forth herein, will not require medium and small business
       consumers to wait unnecessarily for competitive alternatives because they are
       largely available today.  Furthermore, eliminating an incumbent LEC's local circuit
       switching obligation in these circumstances is consistent with our goal to reduce
       regulation when possible.   Our decision also provides requesting carriers with
       access to the elements they need to ramp up towards continued deployment of self-
       provisioned switches and is therefore consistent with our policies of encouraging
       facilities-based competition and encouraging innovation.
                 1.   Packet Switching
                      a.   Background
       313. In the Local Competition First Report and Order, the Commission declined to find
       that incumbent LEC packet switches should be identified as unbundled network
       elements because the Commission did not have an adequate record to support such a
       conclusion.  In the Notice, we sought comment on whether "packet switches
       should be unbundled pursuant to section 251(c)(3), and whether there is "any basis
       for treating network elements used in the provisioning of packet-switched advanced
       services any differently than those used in the provisioning of circuit-switched voice
       services."  Incumbent LECs argue that they generally trail in the deployment of
       packet switches, and therefore should not be subject to unbundling requirements that
       might eliminate their incentives to invest in equipment used to provide advanced
       services.  Several competitors argue in favor of unbundling packet switching to
       encourage the broad-based deployment of advanced services.
       314. We are aware, however, that US WEST has argued that section 251(c)(3) does not
       apply to any network elements, such as packet switches, used to provide advanced
       services, such as xDSL.  We note that the Commission has requested, and has
       received, a remand from the United States Court of Appeals for the District of
       Columbia Circuit to address US WEST's argument that the Commission is without
       statutory authority to require incumbent LECs to provide access to unbundled
       elements used in the provision of advanced services.  After receiving a more
       complete administrative record, we intend to fully address US WEST's arguments
       in the Advanced Services Memorandum Opinion and Order and NPRM remand
       proceeding.  In remanding back to the agency, the court declined to vacate
       portions of the Advanced Services Memorandum Opinion and Order and NPRM
       challenged by US WEST.  Accordingly, our decision in that Order that xDSL
       services are "either" telephone exchange service or exchange access service remains
       in effect during the pendency of the Advanced Services Memorandum Opinion and
       Order and NPRM remand proceeding.  We therefore may consider whether
       packet switching should be unbundled under the framework established in this
       proceeding.
                      a.   Discussion
                      (i)  Definition of Packet Switching
       315. As a threshold matter, we must define the functionality of the packet switching
       unbundled network element.  In packet-switched networks, messages between
       network users are divided into units, commonly referred to as packets, frames, or
       cells.  These individual units are then routed between network users.  The switches
       that provide this routing function are "packet switches," and the function of routing
       individual data units based on address or other routing information contained in the
       units is "packet switching."
       316. We find that a component of the packet switching functionality, and included in our
       definition of packet switching is the Digital Subscriber Line Access Multiplexer
       (DSLAM).  The DSLAM splits voice (low band) and data (high band) signals
       carried over a copper twisted pair.  DSLAM equipment sometimes includes a
       splitter.  If not, a separate splitter device separates voice and data traffic.  The voice
       signal is transmitted toward a circuit switch, and the data from multiple lines is
       combined in packet or cell format and is transmitted to a packet switch, typically
       ATM or IP.  The DSLAM combines: (1) the ability to terminate copper customer
       loops (which includes both a low-band voice channel and a high-band data channel,
       or solely a data channel); (2) the ability to forward the voice channels, if present, to
       a circuit switch or multiple circuit switches; (3) the ability to extract data units from
       the data channels on the loops; and (4) the ability to combine data units from
       multiple loops onto one or more trunks that connect to a packet switch or packet
       switches.
       317. We define packet switching as the function of routing individual data units, or
       "packets," based on address or other routing information contained in the packets.
       The packet switching network element includes the necessary electronics (e.g.,
       routers and DSLAMs).  We find that packet switching qualifies as a network
       element because it includes "all features, functions and capabilities . . . sufficient . . .
       for transmission, routing or other provision of a telecommunications service."
       Because packet switching and DSLAMs are used to provide telecommunications
       services, packet switching qualifies as a network element.  We adopt a definition
       of packet switching that does not favor or disadvantage one packet switching
       technology over another.  Our intention is to define packet switching in such a way
       as to capture the functionality of packet networks, without regard to a particular
       "packetizing" technology that an incumbent LEC has deployed in its network.
       Several parties propose definitions of packet switching which elaborate on the
       Commission's existing circuit switching definition.  We decline to adopt
       proposed definitions of packet switching that exclude DSLAMs from the packet
       switching functionality.  We further decline to adopt equipment-specific packet
       switching network elements, as proposed by Intermedia and e.spire.  We find that
       with today's technology, packetizing is an integral function of the DSLAM.
       Accordingly, we include the DSLAM functionality, with the routing and addressing
       functions of packet switches, in our functional definition of packet switching.
                      (i)  Proprietary Concerns Associated With
                      Packet Switching
       318. No party alleged that packet switching was proprietary within the meaning of
       section 251(d)(2).  We find that the record provides no basis for withholding packet
       switching from competitors based on proprietary considerations or subjecting packet
       switching to the more demanding "necessary" standard set forth in section
       251(d)(2)(A).   Instead we examine packet switching under the "impair" standard
       of section 251(d)(2)(B).
                      (i)  Unbundling Analysis for Packet Switching
       319. We decline at this time to unbundle the packet switching functionality, except in
       limited circumstances.  Among other potential factors, we recognize that the
       presence of multiple requesting carriers providing service with their own packet
       switches is probative of whether they are impaired without access to unbundled
       packet switching.  The record demonstrates that competitors are actively deploying
       facilities used to provide advanced services to serve certain segments of the market
         namely, medium and large business   and hence they cannot be said to be
       impaired in their ability to offer service, at least to these segments without access to
       the incumbent's facilities.  In other segments of the market, namely, residential and
       small business, we conclude that competitors may be impaired in their ability to
       offer service without access to incumbent LEC facilities due, in part, to the cost and
       delay of obtaining collocation in every central office where the requesting carrier
       provides service using unbundled loops.  We conclude, however, that given the
       nascent nature of the advanced services marketplace, we will not order unbundling
       of the packet switching functionality as a general matter.
       320. Both the record in this proceeding, and our findings in the 706 Report, establish that
       advanced services providers are actively deploying facilities to offer advanced
       services such as xDSL across the country.  Competitive LECs and cable
       companies appear to be leading the incumbent LECs in their deployment of
       advanced services.  For example, in 1999, Rhythms expects to roll out xDSL
       services in 1,000 end offices nation wide.  Covad's planned network deployment
       is expected to reach 51 MSAs by the end of 1999.  In the past year, NorthPoint
       deployed facilities capable of transmitting xDSL signals in 17 metropolitan
       markets.  NorthPoint plans to expand its DSL-based local networks from 25
       major markets, representing 37 metropolitan statistical areas (MSAs), to 28 markets,
       or 61 MSAs, by the end of 1999. Qwest announced in August 1999, that it is now
       providing DSL service in 13 U.S. markets and plans to expand to more than 30
       major markets by the end of 1999.  In addition, EarthLink has partnered with
       Sprint to offer nationwide xDSL service.  KMC Telecom Inc. announced
       aggressive rollout of DSL services with plans to introduce additional broadband
       applications by year-end. Marketplace developments like the ones described
       above suggest that requesting carriers have been able to secure the necessary inputs
       to provide advanced services to end users in accordance with their business plans.
       This evidence indicates that carriers are deploying advanced services to the business
       market initially as well as the residential and small business markets.
       321. Several parties, in addition to the incumbent LECs, argue that the Commission
       should not unbundle packet switching or DSLAMS generally.  We recognize that
       equipment needed to provide advanced services, such as DSLAMS and packet
       switches, are available on the open market at comparable prices to incumbents and
       requesting carriers alike.  Incumbent LECs and their competitors are both in the
       early stages of packet switch deployment, and thus face relatively similar utilization
       rates of their packet switching capacity.  Packet switching utilization rates will differ
       from circuit switching utilization rates because of the incumbent LEC's monopoly
       position as carrier of last resort.  Incumbent LEC circuit switches, because they
       serve upwards of 90 percent of the circuit switched market, may achieve higher
       utilization rates than the circuit switches of requesting carriers.  Because the
       incumbent LEC does not retain a monopoly position in the advanced services
       market, packet switch utilization rates are likely to be more equal as between
       requesting carriers and incumbent LECs.  It therefore does not appear that
       incumbent LECs possess significant economies of scale in their packet switches
       compared to the requesting carriers.
       322. Collocating in incumbent LEC central offices imposes material costs and delays on
       a requesting carrier and materially diminishes a requesting carrier's ability to
       provide the services it seeks to offer.  As discussed above, we identified the costs
       and delays associated with collocation as factors that impair a requesting carrier's
       ability to self-provision circuit switches to serve residential and small business
       market.   We see no reason to distinguish a requesting carrier's collocation-related
       costs and delays to provide circuit-switched service from those collocation costs and
       delays incurred by requesting carriers to provide packet-switched services.  These
       costs and delays lead us to find that competitors are impaired in their ability to offer
       advanced services without access to incumbent LEC facilities.  As discussed in
       more detail below, that conclusion is not dispositive of whether unbundling is
       appropriate at this time under section 251(d)(2).  As discussed in section IV above,
       in addition to the "impair" standard we consider whether unbundling will open local
       markets to competition and how access to a given network element will encourage
       the rapid introduction of local competition to the benefit of the greatest number of
       customers.
       323. NorthPoint argues that an additional impediment it faces when providing advanced
       services using xDSL technologies is the absence of line sharing.  Currently, many
       incumbent LECs offer advanced services over the high-frequency range of the same
       loops they use to offer voice services.  Although the incumbent LEC may use a
       single copper pair to provide xDSL services, in the absence of line sharing,
       requesting carriers providing xDSL services must purchase an additional unbundled
       loop to serve their customers, thereby incurring additional non-trivial costs.  In light
       of the substantial number of packet switches deployed by competitive LECs, even in
       comparison to incumbent LEC deployment, we conclude that these non-trivial costs
       are substantial enough to impair the requesting carrier's ability to provide the
       services it seeks to offer within the meaning of section 251(d)(2).  Unlike circuit
       switching services, however, requesting carriers providing data services do not face
       the operational impediment of obtaining a coordinated cutover of the loop on a
       timely basis, because they typically are providing service over a second line.
       Because such carriers purchase an additional unbundled copper loop to serve the
       customer, the customer's voice service is never disconnected, and the requesting
       carrier faces none of the timing and quality impediments associated with the "hot
       cut" process.
       324. We further decline to unbundle specific packet switching technologies incumbent
       LECs may have deployed in their networks.  E.spire/Intermedia request that we
       require incumbent LECs to unbundle: (1) the ports on their data switches or routers;
       and (2) the connectivity, including the switching fabric and associated software
       functions, between such ports at capacities ranging from DS0 to DS3.
       E.spire/Intermedia focus their request upon a particular packet-switching technology
       -- frame relay.  E.spire/Intermedia argue that they are impaired without access to
       these data unbundled network elements to complete "virtual circuits" because they
       lack the incumbent LEC's economies of density and the ability to statistically
       multiplex data traffic to make efficient use of transport facilities.
       325. We reject e.spire/Intermedia's request for a packet switching or frame relay
       unbundled network element.  First, as discussed above, we will define unbundled
       network elements, to the extent practicable, in a technologically neutral manner so
       as to not favor one particular packet switching technology over another.  Defining
       an unbundled network element according to a particular packet switching
       technology, such as frame relay, violates this principle of technological neutrality.
       Furthermore, defining packet switching elements according to a specific technology
       creates the possibility that as innovative packet switching technologies are deployed,
       they may or may not fall within our definition of packet switching.  Second,
       e.spire/Intermedia have not provided any specific information to support a finding
       that requesting carriers are impaired without access to unbundled frame relay.  We
       note, however, that e.spire/Intermedia are free to demonstrate to a state commission
       that lack of unbundled access to the incumbent's frame relay network element
       impairs their ability to provide the services they seeks to offer.  A state commission
       is empowered to require incumbent LECs to unbundle specific network elements
       used to provide frame relay service, consistent with the principles set forth in this
       order.
       326. We do find, however, one limited exception to our decision to decline to unbundle
       packet switching.  Access to packetized services to provide xDSL service requires
       "clean" copper loops without bridge taps or other impediments.   Furthermore,
       xDSL services generally may not be provisioned over fiber facilities.  In locations
       where the incumbent has deployed digital loop carrier (DLC) systems, an
       uninterrupted copper loop is replaced with a fiber segment or shared copper in the
       distribution section of the loop.  In this situation, and where no spare copper
       facilities are available, competitors are effectively precluded altogether from
       offering xDSL service if they do not have access to unbundled packet switching.
       Moreover, if there are spare copper facilities available, these facilities may not meet
       the necessary technical requirements for the provision of certain advanced services.
       For example, if the loop length exceeds 18,000 feet, the provision of ADSL service
       is technically infeasible.  When an incumbent has deployed DLC systems,
       requesting carriers must install DSLAMs at the remote terminal instead of at the
       central office in order to provide advanced services.  We agree that, if a requesting
       carrier is unable to install its DSLAM at the remote terminal or obtain spare copper
       loops necessary to offer the same level of quality for advanced services, the
       incumbent LEC can effectively deny competitors entry into the packet switching
       market. We find that in this limited situation, requesting carriers are impaired
       without access to unbundled packet switching.  Accordingly, incumbent LECs must
       provide requesting carriers with access to unbundled packet switching in situations
       in which the incumbent has placed its DSLAM in a remote terminal.  This
       obligation exists as of the effective date of the rules adopted in this Order.  The
       incumbent will be relieved of this unbundling obligation only if it permits a
       requesting carrier to collocate its DSLAM in the incumbent's remote terminal, on
       the same terms and conditions that apply to its own DSLAM.  Incumbents may not
       unreasonably limit the deployment of alternative technologies when requesting
       carriers seek to collocate their own DSLAMs in the remote terminal.
       327. Policy Goals.  Incumbent LECs argue in this proceeding that their incentive to
       invest and innovate in new technologies capable of providing advanced services will
       be curtailed if we mandate unbundling.  We note that investments in facilities
       used to provide service to nascent markets are inherently more risky than
       investments in well established markets.  Customer demand for advanced services is
       also more difficult to predict accurately than is the demand for well established
       services, such as traditional plain old telephone service (POTS).
       328. We acknowledge that the incumbent LEC argument that unbundling may adversely
       affect innovation is consistent with economic theory, but events in the marketplace
       suggest that other factors may be driving incumbent LECs to invest in xDSL
       technologies, notwithstanding the economic theory.  For example, in January 1998,
       U S WEST announced a rollout of ADSL service to 40 in-region metropolitan
       areas.  In October 1998, BellSouth announced its plans to offer ADSL service to
       1.7 million customers in 30 markets by the end of 1998, and 23 additional markets
       in 1999.  In January 1998, SBC announced a "massive rollout" of ADSL,
       "targeting more than 500 central offices and 9.5 million residential and business
       customers by year-end."  In January 1999, Bell Atlantic announced plans to
       rollout ADSL service in several states and entered into a marketing alliance with
       America On-Line in which Bell Atlantic hopes, by the end of 1999 to make ADSL
       available to seven million subscribers. Combined, Bell Atlantic and GTE have
       stated that the number of xDSL capable-lines available in region will be 17 million
       and they will have ADSL capability in 550 central offices, allowing them to serve as
       many as 6.1 million xDSL customers.  Such investments have been planned and
       undertaken notwithstanding the fact that we sought comment in August 1998 on
       whether facilities used to provide advanced services must be unbundled pursuant to
       section 251.
       329. Despite the encouraging signs of investment in facilities used to provide advanced
       services described above, we are mindful that regulatory action should not alter the
       successful deployment of advanced services that has occurred to date.  Our decision
       to decline to unbundle packet switching therefore reflects our concern that we not
       stifle burgeoning competition in the advanced service market. We are mindful that,
       in such a dynamic and evolving market, regulatory restraint on our part may be the
       most prudent course of action in order to further the Act's goal of encouraging
       facilities-based investment and innovation.
       330. Our overriding objective, consistent with the congressional directive in section 706,
       is to ensure that advanced services are deployed on a timely basis to all Americans
       so that consumers across America have the full benefits of the "Information Age."
       The advanced services marketplace is a nascent one.  Although some investment has
       occurred to date, much more investment in the future is necessary in order to ensure
       that all Americans will have access to these services.  We remain concerned about
       the lack of deployment in rural areas.  We note that we will carefully monitor the
       deployment of broadband services to ensure that the objectives of section 706 and
       the Act are being met.  We decline to unbundle packet switching at this time, except
       for the limited exception described above.
            A.   Interoffice Transmission Facilities
                 1.   Background
       331. In the Local Competition First Report and Order, the Commission concluded that
       incumbent LECs must provide interoffice transmission facilities on an unbundled
       basis to requesting carriers.  In particular, the Commission required incumbent
       LECs to provide dedicated and shared transport as an unbundled network element
       pursuant to section 251(c)(3).  The Commission found that such access was
       technically feasible and would promote competition in the local exchange market.
       In that order, however, the Commission declined to address the unbundling of
       incumbent LEC dark fiber because the record provided insufficient evidence to
       decide that issue.
       332. In the Notice, we sought comment on the application of the "necessary" and
       "impair" standards to previously identified unbundled network elements, including
       interoffice transport facilities.   The Notice requested that parties include specific
       costs and an analysis of the availability of alternative sources of  transport supply.
       We also sought comment on whether, in light of technological advances or
       experience in the marketplace since adoption of the Local Competition First Report
       and Order, we should modify the definition of any of the previously identified
       network elements including, for example, the definition of "transport," to include
       dark fiber.
       333. Incumbent LECs generally argue that interoffice transport should not be unbundled
       where a single alternative source of transport is available.  Competitive LECs
       argue that because alternative sources of transport supply are largely unavailable,
       requesting carriers are impaired without access to unbundled transport.  Most of
       the state commissions addressing this issue agree that transport should remain an
       unbundled network element.
                 1.   Discussion
       334. We find that requesting carriers are impaired without access to unbundled dedicated
       and shared transport network element.  In particular, self-provisioning ubiquitous
       interoffice transmission facilities, or acquiring these facilities from non-incumbent
       LEC sources, materially increases a requesting carrier's costs of entering a market or
       of expanding the scope of its service, delays broad-based entry, and materially limits
       the scope and quality of a requesting carrier's service offerings.  Although the record
       indicates that competitive LECs have deployed transport facilities along certain
       point-to-point routes, the record also demonstrates that self-provisioned transport, or
       transport from non-incumbent LEC sources, is not sufficiently available as a
       practical, economic, and operational matter to warrant exclusion of interoffice
       transport from an incumbent LEC's unbundling obligations at this time.
       Accordingly, we conclude that incumbent LECs must offer unbundled access to
       their interoffice transmission facilities nationwide.
                      a.   Dedicated Transport
                      (i)  Definition
       335. In the Local Competition First Report and Order, the Commission defined
       dedicated interoffice transmission facilities as "incumbent LEC transmission
       facilities dedicated to a particular customer or carrier that provide
       telecommunications between wire centers owned by incumbent LECs or requesting
       telecommunications carriers, or between switches owned by incumbent LECs or
       requesting telecommunications carriers."  The Commission further concluded that
       incumbent LECs must provide all technically feasible capacity-related services such
       as DS1-DS3 and OC3-OC96 services.
       336. High-Capacity Transmission.  We reaffirm that the definition of dedicated transport
       set forth in the Local Competition First Report and Order includes all technically
       feasible capacity-related services such as DS1-DS3 and OC3-OC96 dedicated
       transport services.  We clarify that this definition includes all technically feasible
       capacity-related services, including those provided by electronics that are necessary
       components of the functionality of capacity-related services and are used to
       originate and terminate telecommunications services.   We find that unbundling
       high-capacity dedicated transport offerings will encourage competition and facilitate
       the deployment of advanced services. Unbundling high-capacity dedicated transport
       offerings also addresses claims by CompTel and other parties that non-incumbent
       LEC facilities cannot provision sufficient bandwidth for data-intensive services.
       Accordingly, we modify section 319(d)(ii) of our rules to clarify that incumbent
       LEC must unbundle DS1 through OC192 dedicated transport offerings and such
       higher capacities as evolve over time.  Our intention is to ensure that the definition
       of interoffice transmission will apply to new, as well as current technologies, and to
       ensure that competitors will continue to be able to access these facilities as
       unbundled network elements as long as that access is required pursuant to section
       251(d)(2).
       337. Notwithstanding the fact that we require incumbents to unbundle high-capacity
       transmission facilities, we reject Sprint's proposal to require incumbent LECs to
       provide unbundled access to SONET rings.  In the Local Competition First
       Report and Order, the Commission limited an incumbent LEC's transport
       unbundling obligation to existing facilities, and did not require incumbent LECs to
       construct facilities to meet a requesting carrier's requirements where the incumbent
       LEC has not deployed transport facilities for its own use. Although we conclude
       that an incumbent LEC's unbundling obligation extends throughout its ubiquitous
       transport network, including ring transport architectures, we do not require
       incumbent LECs to construct new transport facilities to meet specific competitive
       LEC point-to-point demand requirements for facilities that the incumbent LEC has
       not deployed for its own use.
       338. Dark Fiber.  In addition, we modify the definition of dedicated transport to include
       dark fiber.  Dark fiber is deployed, unlit fiber optic cable that connects two points
       within the incumbent LEC's network.  As discussed above, dark or "unlit" fiber,
       unlike "lit" fiber, does not have electronics on either end of the dark fiber segment
       to energize it to transmit a telecommunications service.  Thus, dark fiber is fiber
       which has not been activated through connection to the electronics that "light" it and
       render it capable of carrying telecommunications services.  To provide additional
       capacity, new electronics are attached to previously "lit" fiber or to previously
       "dark" fiber.  Because dark fiber is already installed and easily called into service,
       we find that it is similar to the unused capacity of other network elements, such as
       switches or "dead count" or "vacant" copper wire that is dormant until carriers put it
       in service.
       339. We agree with state commissions and competitive LECs that dark fiber meets the
       statutory definition of a network element, and therefore is included within the
       definition of the dedicated interoffice transport network element.  Section 153(29)
       of the Act defines the term "network element" as a "facility or equipment used in
       the provision of a telecommunications service, including "features, functions, and
       capabilities that are provided by means of such facility or equipment."  The
       Supreme Court upheld this broad definition of a network element and acknowledged
       that it includes not only physical elements but non-physical elements as well.
       Because dark fiber is unused transport capacity, we find that it is "a feature,
       function, and capability of facilities used to provide telecommunications
       services."  In addition, we note that since the Commission released its Local
       Competition First Report and Order, several states, acting through arbitration
       proceedings, have required incumbent LECs to unbundle dark fiber interoffice
       transport facilities, and several federal district courts, in affirming state commission
       decisions, have held that dark fiber meets the statutory definition of an unbundled
       network element.
       340. We reject incumbent LECs' arguments that because dark fiber is transport that is not
       currently "used" in the provision of a telecommunications service, within the
       meaning of section 153(29), it does not meet the statutory definition of a network
       element or the definition of interoffice transport.  Rather, we agree with the
       Illinois Commission that the term "used in the provision of telecommunications
       service" in section 153(29) refers to network facilities or equipment that is
       "customarily employed for the purpose" of providing a telecommunications
       service.  Although particular dark fiber facilities may not be "lit" they constitute
       network facilities dedicated for use in the provision of telecommunications service,
       as contemplated by the Act.  Indeed, most other network elements have surplus
       capacity or can be upgraded to provide additional capacity and therefore are not
       always "currently used" as the term is interpreted by incumbent LECs.  For
       example, switches, loops, and other network elements each may have spare, unused
       capacity, yet each meets the definition of a network element.
       341. We acknowledge that it would be problematic if some facilities that the incumbent
       LEC customarily uses to provide service were deemed to constitute network
       elements (e.g., unused copper wire stored in a spool in a warehouse).  Defining such
       facilities as network elements would read the "used in the provision" language of
       section 153(29) too broadly.  Dark fiber, however, is distinguishable from this
       situation in that it is physically connected to the incumbent's network and is easily
       called into service.  Thus, as indicated above, we conclude that dark fiber falls
       within the statutory definition of a network element.
       342. We also note that our reading of the term "used" comports with the Commission's
       interpretation of the term "provide" in the context of section 271.  Specifically, in
       the order denying Ameritech's application to provide long distance service pursuant
       to section 271 of the Act, the Commission rejected competitors' arguments that the
       term "provide" requires the BOC to "actually furnish" a checklist item.  Rather,
       the Commission concluded that the term "provide" requires incumbent LECs to
       "make available" to requesting carriers the checklist item in question upon
       reasonable demand.   Similarly, we interpret the term "used" in the definition of a
       network element to mean "capable of being used" in the provision of a
       telecommunications service.
       343. We do not agree with GTE that, unlike vacant copper, dark fiber does not qualify as
       interoffice transport.  According to GTE, dark fiber differs from extra copper pairs
       in a cable because dark fiber is "unused inventory," whereas copper cable is
       installed to provide maximum flexibility.  We find this to be a distinction without
       a difference.  Whether located in the loop plant or in the transport network of an
       incumbent LEC, both copper and fiber represent unused capacity.  Accordingly, we
       conclude that dark fiber falls within the dedicated transport network element's
       "facilities, functions, and capabilities."
                      (i)  Proprietary Concerns Associated with
                      Dedicated Transport
       344. In the Local Competition First Report and Order, the Commission did not identify
       any proprietary concerns associated with dedicated transport.  No party has
       identified any proprietary concerns associated with unbundled dedicated transport in
       this phase of the proceeding, and we find none.  We therefore apply the "impair"
       standard of section 251(d)(2) to determine whether dedicated transport is subject to
       the unbundling obligations of the Act.
                      (i)   Unbundling Analysis
       345. We conclude that lack of access to unbundled interoffice transport impairs a
       carrier's ability to provide the services it seeks to offer.  Requiring carriers to self-
       provision, or acquire from third-party providers, extensive interoffice transmission
       facilities materially increases the costs of market entry or of expanding service,
       delays broad-based entry, and limits the scope and quality of the competitor's service
       offerings.  Neither self-provisioning interoffice transport facilities nor obtaining
       these facilities from third-party sources is an adequate alternative to the ubiquitous
       transmission facilities that a competitor can obtain from the incumbent LEC under
       section 251's unbundling obligations.  Accordingly, we require incumbent LECs to
       provide unbundled access to their interoffice transmission facilities.
       346. Although the record indicates that competitive LECs have deployed interoffice
       transport facilities along selected point-to-point routes, primarily in dense market
       areas, we find that the these facilities are not available, as a practical, economic, and
       operational matter, such that a requesting carrier's ability to provide the services it
       seeks to offer would not be impaired without access to the incumbent's ubiquitous
       interoffice transmission facilities.  Specifically, the competitive transport facilities
       that currently exist do not interconnect all of an incumbent LEC's central offices
       and all interexchange carrier's points of presence within an MSA, or a substantial
       portion thereof.
       347. Availability of Alternatives Outside the Incumbent's Network.  Local competitors
       began deploying fiber networks in urban markets approximately 15 years ago.
       Incumbent LECs have provided a significant amount of data indicating the location
       of transport facilities deployed by competitive LECs.  For example, the incumbents
       submitted, through the USTA UNE Report, data that indicates that, by the end of
       1998, competitive LECs had deployed interoffice transport in approximately 300
       cities.  According to the USTA UNE Report, competitors have deployed nearly
       30,000 route miles of fiber within the top 50 MSAs.
       348. In addition, the USTA UNE Report states that of the top 50 MSAs, forty-seven are
       served by at least three competitors; 29 are served by five or more competitors; and
       16 are served by seven or more competitors.  The USTA Report also asserts that
       requesting carriers have deployed fiber in all but 15 of the MSAs ranked between 50
       and 150 and that competitors have centered their deployment of competitive fiber
       around "dense" wire centers, which USTA defines as wire centers with 40,000 or
       more access lines.  The USTA UNE Report also maintains that as of March 1999,
       incumbent LECs have the following number of wire centers that are served by at
       least one competitive fiber provider: Ameritech 161; Bell Atlantic 274; BellSouth
       136; GTE 70; SBC 284; US WEST 118.
       349. The incumbents also provide evidence of the number of collocation arrangements in
       many of their wire centers.  Relying on this data, the incumbents argue that there are
       significant alternatives to interoffice transport services available. According to
       USTA, the fact that competitors have operational collocation arrangements in
       approximately 874 dense wire centers implies the presence of competitive fiber
       "nearby."  In particular, according to the USTA UNE Report, of the wire centers
       with 20,000 or more lines, 90 percent in the SBC region, 72 percent in the Bell
       Atlantic region, and 74 percent in the US West region have collocation, which the
       incumbents assert signifies competitive transport is available.
       350. Bell Atlantic also argues that its Competitive Alternative Transport Terminal
       (CATT) service, currently offered on a trial basis with Metromedia Fiber Network
       Services (MFN), offers high capacity interoffice dedicated transport services to any
       collocated carrier.  Bell Atlantic claims that MFN has entered into this CATT
       arrangement in a large number of end offices and that CATT will be generally
       available to other carriers pursuant to tariff.
       351. Other evidence in the record, however, undermines the incumbents' suggestion that
       competitive fiber is sufficiently available that transport should not be unbundled.
       MCI WorldCom, for example, provides information about the number of transport
       providers in the six major cities included in the USTA survey.  According to MCI
       WorldCom, only eight of  the 138 wire centers in Los Angeles have three or more
       collocators that provide transport.   Similarly, MCI WorldCom states that only
       four of 64 wire centers in Seattle have three or more collocators providing transport
       and only one of 25 wire centers in San Jose has three or more collocators providing
       transport.  In addition, MCI WorldCom reports that, in Minneapolis, Richmond and
       Washington DC with 135, 51, and 158 wire centers respectively, no end office has
       three collocators providing transport.
       352. In addition, NorthPoint  reports that the incumbent LEC is the only source of
       transport for at least 70% of central offices in which NorthPoint is collocated, even
       in dense wire centers in large metropolitan areas.  Similarly, Sprint asserts that in
       New York City, which is considered the most mature market in the country, Sprint
       continues to use the incumbent LEC extensively for transport because competitive
       fiber is not available in sufficient numbers of incumbent LEC central offices for it to
       offer a ubiquitous service in this area.
       353. Ubiquity.  We conclude that, despite the evidence of some competitively deployed
       interoffice transmission facilities, lack of access to the incumbent's dedicated
       transmission facilities impairs a requesting carrier's ability to provide the services it
       seeks to offer.  The alternatives cited in the evidence submitted by the incumbents
       are not ubiquitously available, and therefore competitive transport if not available as
       a practical, economic and operational matter.
       354. As an initial matter, we are not persuaded that the incumbents' data accurately
       reflects the extent to which alternatives are actually available to competitors.  In
       particular, we find that only at a granular, wire center-by-wire center level does the
       record show the presence of competitive alternatives to the incumbent's interoffice
       transport, albeit on a non-ubiquitous basis.   Thus, without access to unbundled
       dedicated transport, requesting carriers would be forced to create a patchwork of
       alternative network facilities, where they have been deployed and are being offered
       to other carriers, or alternatively to construct their own transport facilities.  The
       USTA UNE Report based its analysis on the markets that have attracted the most
       competitive transport entry.  For example, the USTA UNE Report states that "[I]n
       the Los Angeles MSA, 72 wire centers serve 40,000 + lines.  Of these, 20 have at
       least one collocated competitive LEC.  An analysis of fiber route maps shows that
       CLEC fiber passes through at least 15 of 20 wire center areas with collocation."
       Thus, according to USTA's data, 15 of 72 dense wire centers or approximately 21%
       of dense wire centers in the Los Angeles MSA include competitive fiber "nearby."
       355. We note that the incumbents do not explain what is meant by fiber that is "nearby."
       Nor do incumbents explain how having fiber "nearby" reflects the availability of
       ubiquitous transport alternatives. In addition, however, because the incumbents'
       data focuses only on the most dense wire centers, the data provides little to no
       information about the availability of transport in less dense wire centers in the same
       cities.  If the analysis were expanded to include less dense wire centers, or wire
       centers serving less than 40,000 lines, the analysis would presumably show a lower
       percentage of competitive alternatives for the entire MSA than is reflected by the
       data provided by the incumbents.
       356. Incumbents rely on the evidence of competitively deployed transport submitted in
       the USTA UNE Report to argue that competitive LECs are not impaired without
       access to unbundled transport facilities in locations where competitive LECs have
       already deployed transport.  Specifically, the incumbents argue that the Commission
       should exclude dedicated transport from an incumbent LEC's unbundling
       obligations in any area where at least one requesting carrier has deployed transport
       facilities and has collocated its own transmission equipment in an incumbent LEC
       central office.  We reject this argument.  Although the incumbents' evidence
       shows that nearly 30,000 route miles of fiber have been deployed in the top 50
       MSAs, there are few, if any alternative transport facilities outside the incumbent
       LECs' networks that connect all or most of an incumbent LEC's central offices and
       interexchange carriers' points of presence within an MSA.  Even where
       competitive alternatives exist, the alternatives generally do not travel the same
       routes as the incumbent's facilities.  Thus, even if competitors were able to purchase
       indirect routing from alternative providers, to the extent alternatives exist,
       competitors more than likely have to route their traffic along indirect, inefficient
       routing patterns, thereby increasing their costs of transport.  Thus, contrary to
       arguments made by incumbent LECs, we find that the evidence demonstrates that a
       significant number of central offices in a given MSA are not effectively served by
       competitive fiber facilities.
       357. We reject any bright-line test that triggers elimination of an incumbent LEC's
       unbundling obligation based on the presence of a single competitor that has self-
       provisioned transport in a particular market. As discussed above, in order to
       determine whether or not a requesting carrier's ability to provide the services it
       seeks to offer is "impaired" within the meaning of section 251(d)(2), we must
       determine whether alternatives outside the incumbent's network are available as a
       practical, economic, and operational matter, and determine whether unbundling a
       particular element is consistent with the goals of the Act.
       358. In particular, we find that basing our unbundling rules on the bright-line proposed
       by the incumbents does not address whether lack of unbundled access to the
       incumbent's ubiquitous transport facilities would impair other requesting carriers'
       ability to provide the services they seek to offer.  Indeed, under the test proposed by
       the incumbents, the first new entrant to deploy transport facilities in any particular
       market would determine the degree and pace of competition in that market as well
       as the scope of an incumbent LEC's unbundling obligation, and would potentially
       result in the presence of only two competitors in the market (e.g. a duopoly).
       Limiting the development of competition in such a manner is contrary to the goals
       of the Act and is inconsistent with the purpose of our unbundling rules.
       359. In order to provide service, competitive LECs require dedicated transport facilities
       that are more extensive than those that are currently deployed along the point-to-
       point routes.  The competitive alternatives that are available along limited point-to-
       point routes do not necessarily allow competitive LECs to connect their collocation
       arrangements or switching nodes according to the needs of their individual network
       designs.  These carriers also require dedicated transport to deliver traffic from their
       own traffic aggregation points to the incumbent LEC's network for purposes of
       interconnection.  Without access to the incumbent's ubiquitous transport facilities,
       competitive LECs are faced with the delays and costs of deploying their own
       transport facilities to meet the demand.  Alternatively, competitive LEC's must
       utilize a patchwork of competitive alternatives, where available, to collect and route
       traffic to the required destination.
       360. Entrance Facilities.  Bell Atlantic and BellSouth specifically argue that extensive
       deployment by competitive LECs of the transport link between the interexchange
       carrier point of presence and an incumbent's serving wire center (the "entrance
       facility"), requires us to find that requesting carriers are not impaired in their ability
       to serve these point-to-point markets.  According to Bell Atlantic, for example,
       there are competitors that serve approximately 90 percent of Bell Atlantic's special
       access transport customers.  According to BellSouth, 19 percent of their wire
       centers have at least one actual or pending collocation arrangement and one actual
       or pending entrance facility.
       361. We acknowledge that, based on the record before us, the entrance facility market
       appears to be the most mature segment of the interoffice transport market, and thus
       may, in some situations, provide requesting carriers with effective alternatives to
       unbundled transport for certain point-to-point routes.  The record does not
       indicate, however, the extent to which these facilities are available to other
       requesting carriers or whether the location of these facilities serve the transport
       needs of requesting carriers seeking to provide service to particular locations.  In
       particular, the incumbents' data does not indicate the locations at which competitive
       entrance facilities terminate, or whether the facilities connect incumbent LEC
       serving wire centers to all or substantially all of the interexchange carrier points of
       presence.  Accordingly, we cannot conclude, based on the record before us, that the
       competitive entrance facility market is providing requesting carriers with effective
       alternatives to unbundled transport for all, or substantially all of the routes
       requesting carriers would need in order to provide the services they seek to offer.
       362. Dark Fiber.  Incumbent LECs argue that some competitive LECs have deployed
       significant amounts of fiber to meet the growing demand for transport services, and
       that competitive LECs are not impaired without access to the incumbent's
       unbundled dark fiber.  Incumbent LECs further argue that the presence of
       competitive fiber in dense wire centers is evidence of a wholesale market for
       dedicated transport, and support this claim by providing anecdotal evidence that
       competitors are swapping fiber capacity with each other.  We disagree.  Rather,
       we agree with those commenters that argue that a competitive wholesale market for
       alternative network elements has not developed for dedicated transport, in part
       because of the lack of ubiquitous transport alternatives.
       363.  Although there is evidence of transport deployment by non-incumbent providers
       along some point-to-point routes, the record does not support a general finding that
       requesting carriers can, on a ubiquitous basis, practically and effectively substitute
       transport services provided by other competitive carriers for unbundled transport.
       Indeed, the record indicates that the "fiber frenzy" and "bandwidth markets" cited
       by incumbent LECs are largely limited to portions of inter-city, long-haul networks
       that do not ubiquitously reach the interoffice segments of the incumbent LEC's
       network.  Lack of access to ubiquitous transport alternatives, which allow
       competitive LECs to interconnect their networks with all the central offices serving
       their customers, will impair these carriers' ability to provide the services they seek
       to offer. Accordingly, we reject the incumbent LECs' argument that the presence
       of a competitive transport alternatives along certain routes is evidence that
       requesting carriers generally are not impaired without access to the incumbents'
       unbundled dark fiber.
       364. In addition, to the extent that there may be excess capacity along these fiber routes,
       non-incumbent providers of competitive transport facilities are under no legal
       obligation to offer their excess capacity to their competitors.  Moreover,
       interexchange carriers (IXCs) operate both as access customers of the incumbent
       LEC, as well as the incumbent's competitor in the local exchange market.  These
       inter-carrier relationships complicate the functioning of an effective wholesale
       transport market because the alternative provider of transport is also a significant
       competitor.  In these circumstances, it is possible that local affiliates of IXCs could
       potentially discriminate against unaffiliated requesting carriers seeking access to
       competitive transport facilities by denying access altogether.
       365. Although we include dark fiber in the unbundling obligations of section 251(c)(3),
       we note that GTE argues that it must maintain control of its dark fiber reserves
       because, as a carrier of last resort, it is obliged to provide service to any and all
       customers as the need arises.   GTE also argues that requiring incumbent LECs to
       make their reserve capacity available to new entrants discourages long term business
       planning and deprives the incumbents of the fruits of their investment.  We note
       that with the addition of electronics such as Dense Wave Division Multiplexing
       (DWDM) equipment, incumbent and competitive carriers alike can expand the
       bandwidth of existing capacity without installing new dark fiber.  We find that
       technological solutions such as these largely address GTE's concern that unbundled
       access to dark fiber may adversely affect its ability to provide service.  In addition,
       however, if incumbent LECs are able to demonstrate to a state commission that
       unbundling dark fiber threatens their ability to provide service as a "carrier of last
       resort," states have the flexibility to establish reasonable limitations and technical
       parameters for dark fiber unbundling.  We conclude, however, that for a limitation
       on dark fiber to be reasonable, it must relate to a likely and foreseeable threat to an
       incumbent LEC's ability to provide service as a carrier of last resort.  In establishing
       reasonable limitations and technical parameters for dark fiber, states should
       acknowledge that requesting carriers require regulatory certainty in order to
       implement their business plans.
       366. Other Technologies. We reject Bell Atlantic's proposal that the Commission
       consider the availability of wireless transport in our unbundling analysis.  The
       record does not demonstrate that wireless transport options are available across any
       particular MSA.  Nor does the record address the question of whether integrating
       wireless transport offerings into a wireline transport network allows providers to
       offer service of the same quality and functionality as they would be able to offer
       using wireline alternatives.  Notably, NEXTLINK, the largest Local Multipoint
       Distribution Service (LMDS) licensee and a potential source of competitive wireless
       transport, supports the continued availability of unbundled dedicated transport
       network elements.
       367. Tariffed Offerings.  We also reject GTE and US West's argument that competitive
       LECs have access to ubiquitous transport through the use of the incumbents' special
       access tariff arrangements.  As discussed above, we give little weight to the
       incumbent LEC's special access tariffs.  Moreover, the Commission previously
       rejected this argument in the Local Competition First Report and Order.  For
       reasons the Commission articulated in that order, we reject the incumbents'
       argument here.  If we were to adopt the incumbents' approach, the incumbents could
       effectively avoid all of the 1996 Act's unbundling and pricing requirements by
       offering tariffed services that, according to the incumbents, would qualify as
       alternatives to unbundled network elements.  This would effectively eliminate the
       unbundled network element option for requesting carriers, which would be
       inconsistent with Congress' intent to make available to requesting carriers three
       different competitive strategies, including access to unbundled network elements.
       368. Cost.  We conclude that the costs of self-provisioning dedicated transport facilities
       materially diminish a requesting carrier's ability to provide the services it seeks to
       offer.  We agree with commenters that argue that replicating the incumbent's vast
       and ubiquitous transport network would be prohibitively expensive, and delay
       competitive entry.  In the Local Competition First Report and Order, the
       Commission concluded that a requesting carrier would incur "much higher costs" if
       it "had to construct all of its own facilities" to match the scope of an incumbent
       LEC's interoffice transport network.  Nothing has changed in the intervening
       three years to cause us to alter this conclusion.   Indeed, based on the record before
       us, we conclude that the material costs and delays associated with self-provisioning
       duplicate, ubiquitous transport facilities would impair a competitive LEC's ability to
       offer services to a broad base of consumers.  Accordingly, we require incumbent
       LECs to offer unbundled access to their dedicated transport facilities.
       369. Self-provisioning dedicated transport requires competitive LECs to incur significant
       direct and other costs, including the cost of fiber, the cost of deploying fiber in
       public rights of way, trenching and the cost of purchasing and collocating the
       necessary transmission equipment.  For example, the record indicates that the
       direct equipment costs of purchasing interoffice transport equipment exceeds $300
       per line, and that the cost of constructing alternative transport facilities (e.g.,
       digging and backfilling trench) are between $200,000 - $300,000 per mile in densely
       populated areas.   According to GTE, the direct cost of constructing a one hundred
       mile dedicated transport facility is close to $3 million.
       370. In addition, in order to use alternative transport facilities, either through self-
       provisioning or through third-party providers, a competitive LEC must collocate at
       the incumbent's central office.  Collocating in each end office imposes materially
       greater costs on requesting carriers than would the purchase of the incumbent's
       interoffice transport facilities.  Based on the record, it appears that the current range
       for non-recurring charges for provisioning physical collocation arrangements is
       between $15,000 and $508,000 for each central office where a competitor serves
       customers with unbundled loops.  This results in an increase of between 15 and 20
       percent to the costs of the equipment installed in the cage.  In addition to the
       substantial costs of constructing and collocating self-provisioned transport facilities,
       competitive LECs must incur additional of negotiating and obtaining municipal
       rights-of-way permissions.
       371. If a competitive LEC were required to obtain transport from multiple, non-
       ubiquitous alternative providers of transport, to the extent it is available, they would
       incur additional costs associated with coordinating back office billing and collection
       arrangements, as well as the costs associated with coordinating operational issues
       arising out of use of multiple vendors. While we acknowledge that the precise
       level of costs  will vary according to the business plans of each competitive LEC,
       we conclude that contracting with third-parties to coordinate among multiple
       carriers in order to serve ubiquitously would materially diminish the ability of a
       requesting carrier to provide the services it seeks to offer.  Moreover, because
       purchasing transport capacity is generally less expensive at higher levels of capacity,
       competitive LECs using multiple providers would lose efficiencies they would
       otherwise achieve if they were able to aggregate their traffic over the facilities of one
       ubiquitous provider.
       372. We reject the incumbent LECs' cost models that purport to demonstrate that the fact
       that competitors have deployed a significant amount of fiber in downtown business
       districts is evidence that the cost of self-provisioning transport facilities does not
       impair a competitive LEC's ability to provide the service it seeks to offer.  We
       find that cost models estimating the costs of self-provisioning transport are highly
       sensitive to assumptions that are not necessarily representative of the actual market
       place.  For example, BellSouth provides a cost model that analyzes the transport
       networks of several competitive LECs located in Atlanta, and projects that the costs
       to the competitive LECs of extending the scope of their network to reach all central
       offices within that city is between $35 and $38 per DS1.  BellSouth does not
       explain the difference between its model's cost estimate of $35-$38 per month, per
       dedicated DS1 and the cost estimate of $84 per month, per dedicated DS1 generated
       by a model the Commission developed in its universal service proceeding.   Nor
       does BellSouth explain why the costs generated by its model are significantly lower
       than the costs generated by the model developed by Hatfield Associates, Inc., which
       shows the cost of a DS-1 to be  $110 per month.  Moreover, it is not clear whether
       BellSouth's cost estimates assume full utilization of the transport facilities.  For
       competitive LECs entering the market that have little usage, the relevant comparison
       between the costs of self-provisioning and purchasing unbundled transport from the
       incumbent should be based on the number of DS1s actually carried, not on the
       number of DS1s that could potentially be used by the requesting carrier.
       373. Ameritech proposes the use of a model that, it asserts, shows that in two second tier
       cities in Ameritech's territory, it is economical for competitive LECs to build
       ubiquitous transport networks of less than 100 miles to wire centers with a total of
       100,000 access lines.  Even assuming, arguendo, that Ameritech's model
       accurately projects the theoretical viability or profitability of extending a
       competitive LEC's transport network, as noted by the Supreme Court, the ability to
       "amass earnings" alone is not dispositive of whether or not a requesting carrier is
       impaired without access to the incumbent's unbundled transport. We therefore
       find that cost models proposed by BellSouth, Ameritech, and others do not
       accurately indicate the extent to which the costs associated with self-provisioning
       transport materially diminish a requesting carrier's ability to provide the services it
       seeks to offer.  Finally, as discussed above, we do not base our unbundling analysis
       on individual business case analyses.
       374. Timeliness.  We conclude that lack of access to the incumbent's interoffice transport
       network would materially delay a requesting carrier entry into the local market or
       alternatively delay expansion of an existing carrier's service offerings.  Whether
       requesting carriers self-provision interoffice transport, or purchase it from third-
       party providers, they must collocate their own equipment at the incumbent's central
       office.  Thus, collocation is an essential prerequisite to self-provisioned and third-
       party provisioned transport, and the time required to collocate affects a requesting
       carrier's ability to provide service using dedicated transport.
       375. Incumbents and requesting carriers provide different estimates about the time
       required to implement a single collocation arrangements in an incumbent LEC's
       central office.  In general, competitive LECs argue that each collocation
       arrangement requires between six months and a year to provision.  In addition,
       these carriers argue that the delay associated with implementing collocation
       arrangements is compounded as competitive LECs expand their networks and seek
       to establish more collocation arrangements.  Incumbent LECs respond that they
       have provisioned collocation to requesting carriers in a timely fashion and on a
       broad scale.
       376. We acknowledge that collocation arrangements necessarily require some time to
       implement, and that the amount of time required to order and provision a
       collocation arrangement will vary from incumbent LEC to incumbent LEC and by
       requesting carrier.  Accordingly, we do not attempt to specifically quantify what
       constitutes a reasonable provisioning interval for a single collocation arrangement.
       We agree, however, with commenters that provisioning the multiple collocation
       arrangements needed to provide a ubiquitous transport network within an MSA
       would compound significantly the inherent delays associated with provisioning a
       single collocation arrangement.  NorthPoint contends that most incumbent LECs
       have imposed "governors" on the number of collocation applications they will
       accept.  Specifically, BellSouth has limited the number of collocation applications
       a requesting carrier may file to five per month, thereby delaying ubiquitous rollout
       of services.  Requiring requesting carriers to collocate in numerous end offices in
       order to obtain ubiquitous transport facilities would materially delay the ability of
       requesting carriers to enter a market or to expand its service offerings to the greatest
       number of consumers.
       377. Several carriers argue that the process of securing necessary access to rights-of-way,
       pole attachments, and conduit space significantly delays their ability to compete.
       For example, NEXTLINK notes that it took two years to negotiate and obtain a
       telecommunications franchise from the City of New York before it could deploy
       competitive facilities, and that it must negotiate separate agreements with each
       municipality traversed by its fiber ring. We find that the delays of this magnitude
       associated with obtaining authority to access public rights-of-way materially delay
       the ability of a requesting carrier to self-provision transport.
       378. Functionality and Quality. We conclude that requiring carriers to utilize alternative
       sources of transport imposes functional and quality disadvantages that materially
       diminish a requesting carrier's opportunity to provide the services it seeks to offer. If
       the Commission were to adopt the incumbent LEC proposals to eliminate
       unbundled access to interoffice transport in areas where there are one or more
       alternative suppliers in the market, carriers would have to use multiple alternative
       suppliers, where available, for their transport requirements. Using a patchwork of
       transport offerings consisting of facilities acquired from competitive
       LEC/competitive access providers and the incumbent LEC, in lieu of ubiquitous
       incumbent LEC transport facilities, would introduce additional complexity into a
       ubiquitous end-to-end transport network.  For example, Sprint notes that when
       facilities of more than one carrier are involved, repair times are roughly three times
       longer than if the entire transport network were controlled by one carrier or
       provisioned exclusively through unbundled transport.  In addition, Sprint argues
       that an end-to-end transport offering provisioned by multiple providers may require
       several digital-to-analog and analog-to-digital conversions or protocol conversions,
       which could lower total connection speeds otherwise achievable with a single
       provider transport offering. Although we do not conclude that digital-to-analog or
       analog-to-digital protocol conversions result in a material quality degradation, we
       find that, as a general matter, requiring requesting carriers to utilize a patchwork of
       competitive alternatives, to the extent they are available, to collect and route traffic
       to the required destination can result in a material degradation of quality in the
       service the requesting carrier to seeks to provide.
       379. Goals of the Act.  We recognize that requiring incumbent LECs to unbundle
       dedicated transport may be marginally overinclusive because of the presence of
       some alternative fiber along selected point-to-point routes in dense markets.  We
       believe, however, that the benefits of uniform transport unbundling outweigh the
       costs of creating a patchwork regime in which incumbent LECs would likely seek to
       litigate its transport unbundling obligation on particular point-to-point routes where
       transport alternatives are arguably available. As we stated above, unbundling
       requirements that provide uniformity and certainty to the market will allow new
       entrants and fledgling competitors to implement national and regional business
       plans and attract capital investment. Litigation over the incumbents' unbundling
       obligations requires the parties to these agreements and the state commissions that
       approve them to expend vast amounts of time and resources and would impede the
       development of competition.
       380. Creating a patchwork of transport unbundling obligations would be inconsistent
       with the goal of the 1996 Act to facilitate rapid entry into the local exchange market.
       We reiterate the Commission's conclusion in the Local Competition First Report
       and Order that "[w]e recognize that there are alternative suppliers of interoffice
       facilities in certain areas.  We are convinced, however, that entry will be facilitated
       if competitors have greater, not fewer, options for procuring interoffice facilities as
       part of their local networks, and that Congress intended for competitors to have
       these options available from competitors."  Furthermore, we believe that our
       decision to unbundle interoffice transport is consistent with Congress' recognition,
       in section 271, that providing unbundled access to interoffice transport would
       encourage rapid entry into the local exchange market.
       381. We further find that the allegations of the competitive harms resulting from a
       uniform transport unbundling obligation are overstated.  We believe that there are
       significant operational and technical incentives for a requesting carrier to eliminate
       its reliance upon transport provided by incumbent LECs over the long term.
       Where alternative providers build transport facilities to areas exclusively served by
       the incumbent LEC's facilities, requesting carriers may substitute those alternative
       sources of transport as they become available.  We therefore expect the need for
       unbundled transport will decrease as competitive transport networks become more
       ubiquitous. We will closely monitor the developments in the transport market to
       determine whether the transport market, or a particular segment of this market, is
       supplying requesting carriers with effective alternatives to the incumbent LEC's
       unbundled network elements when we reexamine these rules in three years.
                      a.   Shared Transport
       382. We find that lack of unbundled access to incumbent's shared transport would impair
       the requesting carrier's ability to use unbundled switching.  In particular, without
       access to unbundled shared transport, a requesting carrier would have to self-
       provision or purchase dedicated transport from the incumbent, which would
       materially increase the costs and decrease the quality of services the requesting
       carrier could provide, and would materially limit the carrier's ability to serve a broad
       base of customers.  Accordingly, where an incumbent LEC provides requesting
       carriers with access to unbundled switching, we require incumbent LECs also to
       provide access to unbundled shared transport services.
                      (i)  Definition
       383. In the Local Competition Third Reconsideration Order, the Commission defined
       shared transport as transmission facilities shared by more than one carrier, including
       the incumbent LEC, between end office switches, between end office switches and
       tandem switches, and between tandem switches in the incumbent LEC's network.
       The Commission clarified in that proceeding that incumbent LECs are not required
       to provide shared transport between incumbent LEC switches and serving wire
       centers. No commenter in this phase of the proceeding specifically addressed the
       definition of shared transport and the record provides no basis for modifying our
       definition of shared transport.
       384. Ameritech, however, argues that shared transport is not an "unbundled" network
       element within the meaning of section 251(c)(3).  Specifically, Ameritech argues
       that under the Supreme Court's ruling, incumbent LECs must provide to requesting
       carriers pre-assembled combinations of individual unbundled network elements if
       the element can be purchased separately.  Because shared transport is technically
       inseparable from unbundled switching requesting carriers do not have the option of
       using unbundled shared transport without also taking unbundled local switching.
       Thus, according to Ameritech, the shared transport element is not an "unbundled"
       element within the meaning of section 251(c)(3).
       385. We reject Ameritech's arguments.   The Supreme Court upheld the Commission's
       interpretation that the phrase "on an unbundled basis" in section 251(c) does not
       refer to physically separated elements but rather to separately priced elements.
       Shared transport is an "unbundled" element because it consists of separately priced
       switching and transport network elements.  The fact it is technically infeasible for a
       competitor to use shared transport with self-provisioned switching is irrelevant to
       whether an element is "unbundled" pursuant to section 251(c)(3).  In addition, the
       Eighth Circuit, in affirming our decision in the Local Competition Third
       Reconsideration Order, rejected Ameritech's argument when it held that shared
       transport meets the definition of an unbundled network element because it is a
       "feature, function, [or] capability," that is provided by facilities and equipment used
       in the provision of a telecommunications service.  Accordingly, we conclude that
       shared transport meets the definition of an unbundled network element.
                      (i)  Proprietary Concerns Associated With
                      Shared Transport
       386. Ameritech asserts that its routing table used to provide shared transport is
       proprietary.  As discussed above, we reject Ameritech's claim because we find that
       incumbent LECs may not withhold access to unbundled local switching on the
       grounds that switch routing tables are proprietary in nature under section
       251(d)(2)(A).  With the exception of Ameritech, no commenter identifies any
       proprietary concerns associated with the provision of shared transport, and we
       identify none.  Accordingly, we analyze shared transport under the "impair"
       standard of section 251(d)(2)(B).
                      (i)  Unbundling Analysis
       387. We conclude that a requesting carrier's ability to provide the services it seeks to
       offer is impaired without access to the incumbent's unbundled shared transport.
       Without access to unbundled shared transport, a requesting carrier would have to
       self-provision or purchase dedicated transport from the incumbent, which would
       materially increase the costs and decrease the quality of services the requesting
       carrier could provide, and would materially limit the carrier's ability to serve a broad
       base of customers.  Accordingly, we conclude that incumbent LECs must provide
       unbundled access to shared transport.
       388. Costs and Quality. We find that lack of unbundled access to the incumbent's shared
       transport facilities materially increases a requesting carrier's costs of providing
       service.  As described above, we find that there is a lack of ubiquitous transport
       alternatives available to requesting carriers.  Thus, without access to the
       incumbent's shared transport facilities, a requesting carriers must either deploy its
       own dedicated facilities or purchase dedicated transport from the incumbent.
       Because requesting carriers, in the early stages of entering the local market, may not
       yet have sufficient market information to forecast accurately their traffic volumes,
       they may miscalculate the amount of dedicated transport capacity they will need.
       Specifically, an inability to reasonably forecast traffic volumes would likely cause a
       requesting carrier to purchase an insufficient amount, or conversely, too much
       dedicated transport capacity.  In shared transport arrangements, the switch routes the
       competitor's traffic through the most efficient trunking group available.  The
       trunking group is shared among many users, including the incumbent LEC's end
       users, thereby reducing requesting carrier costs and utilizing capacity only when
       necessary to route and complete a call.
       389.  In addition, as traffic demands increase, a requesting carrier will incur a non-
       recurring charge each time it purchases additional transport capacity.  In contrast,
       where a requesting carrier purchases unbundled shared transport to meet increased
       customer demand, it effectively purchases the entire capacity of the incumbent
       LEC's network and will not incur non-recurring charges for additional increments of
       dedicated transport capacity.  Purchasing only those increments of capacity that the
       requesting carrier requires to meet demand eliminates inefficient use of dedicated
       transport facilities.  In addition, at low volumes requesting carriers will incur
       significantly higher recurring, per-minute costs to substitute dedicated transport for
       shared transport arrangements at low volumes.  We reiterate the Commission's
       conclusion in the Third Order on Reconsideration that "the relative costs of
       dedicated transport, including the associated NRCs [non-recurring charges], is an
       unnecessary barrier to entry for competing carriers."
       390. According to Ameritech, competitive LECs have the option of using its end office
       integration (EOI) service, a tariffed, retail service that Ameritech claims will carry,
       on a minute-of-use basis, whatever interoffice transport traffic the competitive LEC
       delivers to its point of interconnection.  Under this plan, Ameritech would not
       require requesting carriers to order dedicated transport facilities until their actual
       volume levels justified provisioning a dedicated trunk.  Consistent with the little
       weight we afford the incumbents' tariffed offerings for consideration as an
       alternative to dedicated transport, we reject the argument that Ameritech's tariffed
       EOI service eliminates the obligation to unbundle shared transport.
       391. We agree with commenters that argue that the ability to obtain access to shared
       transport enables them to handle traffic at peak loads and maintain call blockage
       levels that are at parity with those of the incumbent LECs.  As the Commission
       stated in the Local Competition Third Reconsideration Order, a new entrant
       entering the local market with smaller traffic volumes would have to maintain
       greater excess transport capacity relative to the incumbent LEC in order to provide
       the same level of service quality (i.e. same level of successful call completion) as
       the incumbent LEC.   We conclude a requesting carrier would be impaired
       without access to unbundled shared transport because it would have to choose
       between purchasing excess capacity or incurring increased call blockage rates.
       392. Goals of the Act.  We find that requiring incumbent LECs to provide unbundled
       access to shared transport is consistent with the Act's goal of encouraging
       requesting carriers to rapidly enter the local market and serve the greatest number of
       customers.  Requiring unbundled access to shared transport is particularly important
       because it addresses the transport needs of requesting carriers in the early stages of
       competitive entry by allowing competitors to efficiently purchase transport facilities
       as they ramp up toward higher-capacity dedicated transport requirements.
       Furthermore, when used in conjunction with unbundled switching, requesting
       carriers may find it economical to serve the small business and residential markets
       using shared transport because these market segments may not always support
       traffic volumes that justify using dedicated transport services.  Accordingly, we find
       that requiring unbundled access to shared transport promotes the prompt
       development of competition to serve the greatest number of customers, as intended
       by the Act.
            A.   Signaling Networks and Call-Related Databases
                 1.   Signaling Networks
                      a.   Background
       393. In the Local Competition First Report and Order, the Commission concluded that
       incumbent LECs, upon request, must provide nondiscriminatory access to their
       signaling networks on an unbundled basis.  The Commission stated that it was
       technically feasible for incumbent LECs to provide such access, and that such
       access was critical to entry in the local exchange market.  The Commission
       concluded that incumbent LECs must provide unbundled access to signaling
       networks as part of the unbundled switch network element as well as on a
       standalone basis.
       394. In the Notice, we sought comment on the application of the "necessary" and
       "impair" standards to previously identified unbundled network elements, including
       signaling networks.  The Notice also requested that parties include specific costs
       and an analysis of the availability of alternative signaling facilities.
       395. The majority of state commissions and competitive LECs commenting in this phase
       of the proceeding argue that the incumbent LECs' signaling networks should be
       unbundled because alternatives to the incumbents' signaling networks are more
       costly, have lower quality, and do not provide the ubiquity of the incumbents'
       networks.  The incumbent LECs argue that based on the availability of alternative
       signaling providers, requesting carriers are not impaired in their ability to provide
       services.
                      a.   Discussion
       396. We conclude that without unbundled access to the incumbent LECs' signaling
       networks, a requesting carrier's ability to provide the services it seeks to offer is
       impaired.  Requiring a requesting carrier to obtain signaling from alternative sources
       would materially diminish its ability to provide the services it seeks to offer, due to
       the quality differences between the signaling networks available from the incumbent
       LEC and those available from alternative providers of signaling.  As described
       below, we conclude that neither self-provisioning signaling networks, nor obtaining
       this element from third-party sources, is a sufficient substitute that would justify
       excluding signaling networks from the incumbent LECs' unbundling obligation
       under section 251(c)(3).  We therefore  require incumbent LECs to provide
       requesting carriers with unbundled access to their signaling networks.
                      
                      (i)  Definition
       397. In the Local Competition First Report and Order, the Commission defined the
       signaling network element as including, but not limited to, signaling links and
       signaling transfer points (STPs).  No party commenting in this phase of the
       proceeding has asked us to modify our definition, and we find no marketplace
       developments that would cause us to re-evaluate our definition of the signaling
       network element.  Accordingly, we reaffirm the definition of signaling networks that
       was adopted in the Local Competition First Report and Order.
                      (i)  Proprietary Analysis
       398. We agree with commenters that signaling links and STPs are not proprietary.
       Moreover, we do not discern any copyright, patent, or trade secret implications to
       unbundling signaling links and STPs, and carriers do not generally rely upon their
       signaling links and STPs to differentiate themselves from their competitors.  In
       addition, SS7 signaling networks generally adhere to Bellcore standards rather than
       LEC-specific protocols, and provide seamless connectivity between networks.
       We therefore conclude that signaling links and STPs are not proprietary elements,
       and we analyze signaling networks under the "impair" standard of section
       251(d)(2)(B).
                      (i)  Unbundling Analysis
       399. Current switch technology requires each local switch to connect to a single STP.
       All parties, including incumbent LECs, agree that because the incumbent LECs'
       switching networks are already connected to a STP, a carrier that purchases
       unbundled switching from an incumbent LEC must also purchase signaling from
       that incumbent LEC.  In such cases, the incumbent LEC must provide access to its
       signaling network from that switch in the same manner in which it obtains such
       access itself.
       400. A requesting carrier that has deployed its own switch, or has purchased switching
       from an alternative source, however, may purchase signaling from an incumbent
       LEC and link its switch to the incumbent LEC's signaling network.  Alternatively,
       the requesting carrier may self-provision signaling or purchase signaling from an
       alternative provider.  Thus, the only issue left to be resolved is whether competitive
       LECs that do not purchase switching from an incumbent LEC are impaired without
       unbundled access to the incumbent's signaling network element.
       401. We conclude that regardless of whether a requesting carrier self-provisions its own
       switching, or purchases switching from an alternative source, the incumbent LEC
       must provide the requesting carrier with unbundled access to the incumbent's
       signaling network, pursuant to section 251(c)(3).  Consistent with our framework
       for unbundling as set forth above, we find that in such situations, lack of access to
       unbundled signaling systems materially diminishes the ability of a requesting carrier
       to provide the services it seeks to offer.  In particular, requiring a competitor to self-
       provision or use alternative sources of signaling materially degrades the quality of
       its service to end users and materially restricts its ability to provide service on a
       ubiquitous basis.  We therefore require incumbent LECs to provide requesting
       carriers that have deployed their own switching facilities access to the incumbent
       LEC's unbundled signaling network for each of the requesting carrier's switches.
       This connection shall be made in the same manner as an incumbent LEC connects
       one of its own switches to a signaling transfer point.
       402. Alternatives in the Market.  The record indicates that there are several alternatives to
       the incumbent LECs' signaling networks available in the market.  In particular,
       there are six major facilities-based SS7 network providers (AT&T, MCI
       WorldCom, Illuminet, TNX, GTE-INS, and SBC/SNET) and four mid-sized
       facilities-based SS7 network providers (GST, ICG, Intermedia and US LEC), that
       operate regional SS7 networks.  In GTE's service area, twelve competitive LECs
       have opted to build their own signaling networks.  In addition, there are several
       suppliers of the equipment used to operate a signaling network: Lucent, Tekelec,
       Nortel, Alcatel, IEX Corporation, SummaFour, and Siemens.  We also note that
       the equipment produced by these companies is based on standard interfaces and
       protocols.
       403. As discussed above, however, the mere existence of alternatives outside the network
       does not mean that requesting carriers are not impaired without unbundled access to
       the incumbent LEC's network.  Based on our analysis of the factors identified
       above, we find that a requesting carrier is materially diminished in its ability to offer
       service if it is not able to purchase signaling as an unbundled network element.
       404. Cost.     In light of the significant evidence of multiple third-party providers of
       signaling, we disagree with parties that assert that self-provisioning signaling, or
       obtaining signaling from alternative providers, would involve substantial and
       material cost and would delay competition in the local market.  Although several
       states and competitive LECs argue that replication of the incumbent LEC's
       signaling network would be "extremely costly," they have not submitted cost data in
       the record to support their claims.
       405. Unlike self-provisioning a switch or network elements that are dedicated to
       individual subscribers (i.e. the NID), deploying a signaling network does not require
       a requesting carrier to incur substantial sunk and fixed costs, because a carrier does
       not need multiple signaling facilities in order to establish a signaling network that is
       capable of providing service to a broad base of customers.  Rather, existing
       technology permits the carrier that is using its own switch to route signals over a
       single set of A-links (links between a specific end office and the SS7 network for
       any given point code).  The carrier's single STP can serve its entire network.
       Alternatively, a competitive LEC can purchase signaling from the non-incumbent
       sources mentioned above.  We agree with MGC that cost-effective SS7 signaling
       networks are generally available on a national basis.
       406. Several parties argue that because alternative signaling providers have not
       established the ubiquitous presence to match the incumbent LECs' signaling
       footprint, the cost of transport to an alternative provider's signaling network
       materially increases the requesting carrier's cost.  Replicating the ubiquitous
       signaling networks of the incumbent LECs may be prohibitively expensive for some
       competitive LECs.  In addition, new entrants in the local market most likely do not
       have the scale necessary to justify the investment needed to replicate the incumbent
       LECs' signaling networks.  We do not find sufficient evidence in the record,
       however, to support a conclusion that the cost of self-provisioning or purchasing
       signaling from alternative sources, in and of itself, would require us to unbundle the
       incumbent's signaling network.  Accordingly, we find that the cost of non-
       incumbent LEC alternative signaling networks is not dispositive of whether or not a
       competitive LEC's ability to provide the services it seeks to offer is materially
       diminished.  For reasons we discuss below, however, we do find that competitive
       LECs need to have access to a ubiquitous signaling network in order to ensure the
       same quality of service as the incumbents.
       407. Ubiquity and Quality.  Although we do not conclude that the cost of self-
       provisioning alternative signaling impairs a requesting carrier's ability to provide
       the services it seeks to offer, we find that lack of access to the incumbent LECs'
       ubiquitous networks materially diminishes this ability. We agree with commenters
       who argue that because alternative vendors of signaling networks only have a few
       geographically dispersed STPs, they cannot provide requesting carriers with
       signaling that is of comparable quality to that of the incumbent LECs' signaling
       networks.
       408. The ubiquitous nature of an incumbent LEC's signaling network provides it with
       advantages that competitive LECs cannot achieve through use of alternative
       signaling networks.  For example, the Bell Operating Companies have deployed at
       least one STP in every LATA.  Each of the incumbent LEC's STPs is connected
       to one or more incumbent switches serving customers limited to a particular
       geographic area within the incumbent LEC's region, while alternative signaling
       systems typically rely on a very few or even a single STP pair as a gateway to its
       signaling system.  Consequently, if a competitive LEC uses an alternative
       provider of signaling, the competitive LEC's entire customer base may be connected
       to a single STP pair.  If an outage occurs within the incumbent LEC's signaling
       network, only those customers served by switches connected to that particular STP
       will be adversely affected.  In contrast, where a competitive LEC relies on one or a
       small number of STPs to serve its entire network, a greater portion, if not all, of the
       competitive LECs' customers will be negatively affected by a network outage.
       The lack of access to a ubiquitous signaling network could adversely impact the
       competitive LEC's customer satisfaction, thereby placing the competitive LEC at a
       disadvantage vis--vis the incumbent.
       409. We note that Time Warner claims that alternative signaling networks lack diversity
       in signaling links that provide redundant signaling paths, and this lack of diversity
       reduces the reliability of the signaling network.  Time Warner argues that this lack
       of diversity also leads to more frequent outages that directly impact customer
       satisfaction.  Although we agree that lack of diversity in signaling networks could
       very likely result in greater numbers of customers affected by network outages,
       Time Warner has not provided evidence in this proceeding to support its specific
       claim.
       410. Other commenters identify similar quality issues associated with the use of
       alternative signaling networks.   We agree that a lack of redundant signaling paths
       may increase the likelihood that more customers may be affected by signaling
       outages.  We are, however, unable to conclude based on the record before us, if the
       outages attributed to a lack of diversity are isolated incidents, or if they are the result
       of an increased risk of failure.  Thus, we do not base our decision to unbundle the
       incumbent LECs signaling networks on the lack of diversity in alternative providers'
       signaling networks.  As discussed above, however, we find that a competitive
       LEC's ability to provide the service it seeks to offer is materially diminished,
       because alternative providers' signaling networks lack the ubiquity of the incumbent
       LECs' networks, and that larger portions of a requesting carrier's network would
       likely be affected by a single point of failure on the signaling network.
       411. Other quality problems identified by ALTS' members include poor customer service
       associated with utilizing alternative signaling providers.  While we agree that
       these quality concerns may materially decrease the ability of requesting carriers to
       provide the services it seeks to offer, we do not find them dispositive of whether
       requesting carriers are impaired in general.  In particular, it is not clear from the
       record whether these quality concerns are isolated instances, or alternatively, are
       prevalent throughout the industry.
       412. Goals of the 1996 Act.  We conclude that unbundling the incumbent LECs'
       signaling networks will promote the development of facilities-based competition
       and thereby encourage investment and innovation in new technologies and
       telecommunications services.  Competitive LECs deploying their own switches will
       not have the incentive to do so if they are faced with having to rely on less
       ubiquitous and less reliable alternatives for signaling.  Unbundling the incumbent
       LECs' signaling networks will give competitive LECs incentive to deploy their own
       switches, because they can be connected to the ubiquitous incumbent LECs'
       signaling networks.  The 1996 Act was designed to spur competition in the local
       market.  Our decision to unbundle incumbent LECs' signaling networks facilitates
       this goal, and creates options for consumers in their local telecommunications
       service.
                 1.   Call-Related Databases
                      a.   Background
       413. In the Local Competition Order, the Commission determined that access to call-
       related databases was technically feasible, and concluded that incumbent LECs must
       provide nondiscriminatory access to their call-related databases on an unbundled
       basis, for the purpose of switch query and database response through the SS7
       network. The Commission also required incumbent LECs to provide unbundled
       access to the Advanced Intelligence Network (AIN) platform.  The Commission
       found that such access was technically feasible, and that competitors would be
       impaired without access to the AIN platform.
       414. In the Notice, we asked parties to comment on unbundling the seven network
       elements we previously identified, including signaling and call-related databases.
       Most requesting carriers argue that the Commission should require incumbent LECs
       to provide access to call-related databases on an unbundled basis.  Incumbent
       LECs argue that access to call-related databases on an unbundled basis is not
       required under section 251(d)(2).
                      a.   Discussion
       415. We find that, as a general matter, requesting carriers' ability to provide the services
       they seek to offer is impaired without unbundled access to the incumbent LECs'
       call-related databases.  Thus, we require incumbent LECs, upon request, to provide
       nondiscriminatory access to their call-related databases on an unbundled basis, for
       the purpose of switch query and database response through the SS7 network.  We
       conclude that requesting carriers' ability to provide the services they seek to offer is
       impaired without unbundled access to the incumbent LECs' AIN platform and
       architecture.  Thus, we find that incumbent LECs, upon request, must provide
       nondiscriminatory access to their AIN platform and architecture.  We also conclude,
       however, that service software created in the AIN platform and architecture is
       proprietary and thus analyzed under the "necessary" standard of section
       251(d)(2)(A).  Based on our "necessary' standard, we conclude that incumbent
       LECs are not required to unbundle the services created in the AIN platform and
       architecture that qualify for proprietary treatment.
                      (i)  Definition
       416. In the Local Competition First Report and Order, the Commission defined call-
       related databases as "databases, other than operations support systems, that are used
       in signaling networks for billing and collection or the transmission, routing, or other
       provision of telecommunications service."  The Commission further required
       incumbent LECs to provide unbundled access to their call-related databases,
       including but not limited to: the Line Information database (LIDB), the Toll Free
       Calling database, the Local Number Portability database, and Advanced Intelligent
       Network databases.  No commenter in this phase of the proceeding challenges the
       definitions of call-related databases or AIN that were adopted in the Local
       Competition First Report and Order, and we find  no reason for modifying those
       definitions.  As discussed below, however, we clarify that the definition of call-
       related databases includes, but is not limited to, the calling name (CNAM) database,
       as well as the 911 and E911 databases.
       417. The Advanced Intelligent Network (AIN) uses distributed intelligence in centralized
       databases to control call processing and manage network information, eliminating
       the need for those functions to be performed at every switch.   The AIN database
       enables some call processing functions to be performed outside the switch.  There
       are two separate components of the AIN.  The first component is the AIN platform
       and architecture.  The AIN platform and architecture basically consists of an off-line
       computer known as the Service Creation Environment (SCE), Service Management
       System (SMS), and AIN software.  AIN services are designed and tested in the
       SCE.   Once a service is successfully tested, the software is transferred to a SMS
       that administers and supports service control point (SCP) databases in the
       network.  The SMS then regularly downloads software and information to a SCP
       where interaction with the voice network takes place via signaling links and STPs.
       418. When a software "trigger" is activated, an AIN capable switch uses the SS7 network
       to access databases, SCPs, that contain service software and subscriber information,
       for instruction on how to route, monitor, or terminate the call.  The second
       component of the AIN is the AIN service software that is developed in the AIN
       platform, and is used to provide telecommunications service.  Examples of AIN
       services include: deployment of number portability, wireless roaming, and advanced
       services such as same-number service (i.e. 500 number service) and voice
       recognition dialing.
       419. As a general matter, no commenter challenges the definitions of call-related
       databases or AIN that were adopted in the Local Competition First Report and
       Order.  Several commenters, however, request that the Calling Name (CNAM)
       database be classified as a call-related database.  The CNAM database contains
       the name of the customer associated with a particular telephone number and is used
       to provide Caller ID and related services.  We take this opportunity to clarify that
       the definition of call-related databases includes, but is not limited to, the calling
       name (CNAM) database, as well as the 911 and E911 databases.  Call-related
       databases are databases that supply information or instructions used for "billing and
       collection or used in the transmission, routing, or other provision of
       telecommunications service."  The CNAM, 911, and E911 databases are call-
       related databases, because they are used for "billing and collection, or used in the
       transmission, routing or other provision of a telecommunications service."
       CNAM databases are used to provide Caller ID and related telecommunications
       services, and the 911 and E911 databases are telecommunications services used to
       provide emergency assistance. We specifically identify the CNAM, 911 and E911
       databases as being illustrative of call-related databases, and not as a comprehensive
       list of all call-related databases.
       420. We note that Low Tech Designs requests that the Commission require AIN triggers
       and AIN trigger upgrades be made available to competitors on an unbundled
       basis.  We find that there is not enough evidence in the record to make a
       determination about the technical feasibility of unbundling AIN triggers.  We
       therefore decline to expand our definition of call-related databases to include AIN
       triggers, and reaffirm the definition of call-related databases in the Local
       Competition First Report and Order.  Low Tech Designs also requests that the
       Commission mandate the interconnection of  "CLEC-provided and other third-party
       AIN/SS7 Service Control Points and Intelligent Peripherals."  We decline this
       request because we find that there is not enough evidence in the record to make a
       determination as to the technical feasibility of interconnecting third-party SCPs and
       Intelligent Peripherals to incumbent LECs' signaling networks.  Our refusal to grant
       Low Tech Design's request in this proceeding does not affect the ability of any state
       commission to address this issue.
                      (i)  Proprietary Concerns Associated with
                      Call-Related Databases
       421. With the exception of AIN service software, commenters do not identify proprietary
       concerns associated with the provision of call-related databases.  Moreover, with the
       exception of AIN service software, we do not discern any copyright, patent, or trade
       secret implications to unbundling call-related databases.  Thus, with the exception
       of AIN service software, we analyze call-related databases under the "impair"
       standard of section 251(d)(2)(B).
       422. Because certain services created in the AIN platform and architecture are
       proprietary, we agree with Ameritech and BellSouth that if competitive LECs
       receive unbundled access to incumbent LECs' AIN platforms, access to AIN service
       software should not be unbundled.  Ameritech cites a new proprietary service,
       "Privacy Manager," to illustrate why its AIN service software qualifies as a
       proprietary network element.  Privacy Manager is derived from the SCE, and allows
       consumers to screen telemarketing calls.  Ameritech asserts that Privacy Manager
       "includes several new and useful improvements" that are subject to patent
       protection, and are the subject of several pending patent applications.  Ameritech
       adds that Privacy Manager is currently a trade secret because it has independent
       economic value, is not generally known by or readily discernable to Ameritech's
       competitors, and has been the subject of reasonable security measures.  We agree
       with Ameritech that services such as Privacy Manager qualify as "proprietary"
       treatment.  We also agree that software services such as Privacy Manager are new
       and innovative products used to differentiate the incumbent LECs' service offering.
       As such, they should be evaluated under the "necessary" standard of section
       251(d)(2)(A).
                      (i)  Unbundling Analysis for Call-Related
                      Databases
                           (a)       The "Impair" Standard
       423. Consistent with our framework for unbundling set forth above, we find that lack of
       access to call-related databases on an unbundled basis would materially impair the
       ability of a requesting carrier to provide the services it seeks to offer in the local
       telecommunications market.  In particular, we are persuaded that there are no
       alternatives of comparable quality and ubiquity available to requesting carriers, as a
       practical, economic, and operational matter, for the incumbent LECs' call-related
       databases.  Thus, we require incumbent LECs to provide non discriminatory access
       to their call-related databases, including, but not limited to, the CNAM Database,
       the 911 Database, the LIDB, Toll Free Calling Database, AIN databases, and
       downstream number portability databases, by means of physical access at the
       signaling transfer point linked to the unbundled databases.  Incumbent LECs must
       allow requesting carriers that have purchased an incumbent LEC's local switching
       capability to use the incumbent LEC's service control point element in the same
       manner, and via the same signaling links, as the incumbent LEC itself.  An
       incumbent LEC must allow a requesting carrier that has deployed its own switch
       and has linked that switch to an incumbent LEC's signaling system to gain access to
       the incumbent LEC's service control point in a manner that allows the requesting
       carrier to provide any call-related database-supported services to customers served
       by the requesting carrier's switch.
       424. We note that our analysis of call-related databases is intertwined with our analysis of
       signaling, because signaling is necessary to obtain access to certain call-related
       databases.  Thus, our decision to unbundle the signaling network leads us to
       unbundle call-related databases as well.  We believe that access to call-related
       databases, such as the LIDB, Toll Free calling, CNAM and Number Portability
       databases, encourages efficient network architecture deployment and promotes the
       ability of new entrants and established competitors to provide service in the local
       exchange market.  We also agree with commenters that access to the incumbent
       LECs' call-related databases is critical to permitting the seamless routing and
       completion of traffic both among competitors and between competitors and the
       incumbent LEC.
       425. With respect to AIN specifically, the Commission found in the Local Competition
       First Report and Order that requesting carriers need equivalent access to the
       incumbent LECs' SMSs to populate their own information in call-related databases.
       The Commission explained that information bound for many call-related databases
       is entered into an SMS that then downloads the information to the databases for
       real-time use on the network.  To ensure efficient access to the incumbent LECs'
       databases, we affirm that incumbent LECs must provide a requesting
       telecommunications carrier with the information necessary to enter correctly, or
       format for entry, the information relevant for input into the incumbent LECs' SMS.
       The Commission also found in the Local Competition First Report and Order, that
       it is technically feasible to access the SMS, through the SCE, to deploy AIN
       services.  There is no evidence in this record to suggest otherwise, and we
       therefore affirm the finding in the Local Competition First Report and Order that
       incumbent LECs must provide a requesting carrier the same access to design, create,
       test, and deploy AIN-based services at the SMS, through a SCE, that the incumbent
       LEC provides to itself.  Incumbent LECs must also provide requesting carriers with
       access to call-related databases and access to the SMS in a manner that complies
       with the privacy requirements in section 222 of the Act.
       426. As we further found in the Local Competition First Report and Order, access to the
       incumbent LECs' SCPs, SMS and SCE for the creation and deployment of AIN
       services may require incumbent LECs and requesting carriers to develop measures
       to protect the incumbent LECs' facilities and data.  We continue to believe that
       there may be mediation issues that need to be addressed before a competing carrier
       obtains access to these databases.  Accordingly, if parties are unable to agree to
       appropriate mediation mechanisms through negotiations, we conclude that during
       arbitration of such issues, state commissions (or the Commission acting pursuant to
       section 252(e)(5)) must consider whether such mediation is necessary, and if so,
       whether it will protect adequately against intentional or unintentional misuse of the
       incumbent LEC's AIN facilities.
       427. SBC argues that requesting carriers have access to alternative call-related databases
       to store their data in any LIDB in the nation.  Similarly, BellSouth and GTE claim
       that requesting carriers can obtain call-related database capabilities from alternative
       sources.  Despite these assertions, we find that as with signaling networks,
       requesting carriers are impaired without unbundled access to incumbent LECs call-
       related databases pursuant to section 251(d)(2).
       428. Cost and Quality. Several commenters argue that it would be costly for requesting
       carriers to replicate the incumbent LECs' call-related databases, or obtain call-
       related database services from alternative vendors.  MediaOne submitted data to
       support these claims for the LIDB and CNAM databases.  Other commenters,
       however, generally have not submitted sufficient cost data in the record to support
       their claims that it would be extremely costly to replicate the incumbent LECs' call-
       related databases, or obtain call-related database services from alternative providers.
       Based on the record before us, we find that the cost incurred by a requesting carrier
       to self-provision or use alternative databases does not appear to materially diminish
       the carrier's ability to provide the services it seeks to offer.
       429. We conclude that unbundled access to incumbent LECs' call-related databases is
       required in some instances for requesting carriers to offer the telecommunications
       services they seek to provide.  For example, in some cases, access to incumbent
       LEC databases is the only practical way to ensure proper call flow.  Specifically,
       incumbent LECs are the only providers of CNAM database information.
       Incumbent LECs' CNAM databases provide information about customers of both
       requesting carriers and incumbent LECs.  Therefore, in order for a switch-based
       competitor to provide caller ID to its customers, it must have access to the
       incumbent LEC's CNAM database.  Such access is critical, especially because a
       majority of calls to a competitor's customers originate from the incumbent.
       430. Goals of the Act.  Requiring incumbent LECs to provide access to call-related
       databases, including access to the AIN databases, will foster investment and
       innovation in the local telecommunications marketplace.  Requesting carriers
       require access to call-related databases and AIN databases to provide the services
       they seek to offer in the local telecommunications market.  Requesting carriers also
       require access to the AIN platform and architecture, so that they may have the
       opportunity to devise innovative AIN services that will spur competition and benefit
       consumers through greater choices of telecommunications services.
                           (a)       The "Necessary" Standard
       431. As discussed above, we find that AIN service software qualifies as a proprietary
       network element, and therefore, should be analyzed under the "necessary" standard.
       Our interpretation of the "necessary" standard requires the Commission to
       determine whether, after taking into consideration alternatives outside the
       incumbent's network, lack of access to that element would, as a practical, economic,
       and operational matter, preclude the requesting carrier from providing the services it
       seeks to offer.
       432. We agree with Ameritech that unbundling AIN service software such as "Privacy
       Manager" is not "necessary" within the meaning of the standard in section
       251(d)(2)(A).  In particular, a requesting carrier does not need to use an incumbent
       LEC's AIN service software to design, test, and implement a similar service of its
       own.  Because we are unbundling the incumbent LECs' AIN databases, SCE,
       SMS, and STPs, requesting carriers that provision their own switches or purchase
       unbundled switching from the incumbent will be able to use these databases to
       create their own AIN software solutions to provide services similar to Ameritech's
       "Privacy Manager."  They therefore would not be precluded from providing service
       without access to it.  Thus, we agree with Ameritech and BellSouth that AIN service
       software should not be unbundled.
       433. We believe that excluding AIN service software, such as "Privacy Manager," from
       the unbundling requirements of section 251(d)(2), will protect incentives for the
       incumbent LEC to invest and deploy new and innovate services.  We also believe
       that such protection, in conjunction with our decision to unbundle the AIN platform
       and architecture, will promote innovation and deployment of new services by
       requesting carriers.
            A.   Operations Support Systems
                 1.   Background
       434. In the Local Competition First Report and Order, the Commission concluded that
       incumbent LECs must provide access to operations support systems (OSS)
       functions on an unbundled basis to requesting carriers.  The Commission also
       required incumbent LECs to make modifications to their OSS as necessary in order
       to offer nondiscriminatory access to these functions, including access to interface
       design systems.  Specifically, the Commission determined in the Local
       Competition First Report and Order that the provision of access to OSS functions
       and the information they contain is integral to the ability of competing carriers to
       enter the local exchange market.  The Commission further concluded that a
       requesting carrier that lacks access to the incumbent's OSS "will be severely
       disadvantaged, if not precluded altogether, from fairly competing."  In Iowa Utils.
       Bd., the Supreme Court expressly affirmed the Eighth Circuit's holding that the
       Commission's designation of operations support systems as a network element was
       an "eminently reasonable" interpretation of the 1996 Act.
       435. In the Notice, we sought comment on the application of the "necessary" and
       "impair" standards to previously identified unbundled network elements, including
       OSS.  The Notice also requested comment on whether the Commission should
       modify the definition of OSS.
       436. All commenters to this proceeding agree that OSS qualifies as an unbundled
       network element.  Incumbent LECs, however, argue that the Commission should
       limit access to OSS functions to those instances when a requesting carrier purchases
       another network element, an interconnection offering, or resold services from the
       incumbent LEC.  Competitors, on the other hand, argue that OSS qualifies as an
       independent unbundled network element and therefore is not subject to any such
       limitations.  Additionally, they argue that an incumbent LEC's duty to provide
       unbundled access to OSS includes an obligation to provide loop qualification
       information.  ALTS requests that the Commission require incumbent LECs to
       provide access to OSS functions for carrier-to-carrier transactions.
                 1.   Discussion
       437. We find that requesting carriers are impaired without access to the incumbent LEC's
       OSS as an unbundled network element.  The record demonstrates that, in general,
       lack of access to OSS as an unbundled network element materially diminishes a
       requesting carrier's ability to provide the services it seeks to offer.  We also clarify
       that the definition of OSS includes access to loop qualification information.  Finally,
       we reject the incumbent LECs' proposal to limit access to OSS to situations where
       the requesting carrier is ordering other unbundled network elements or resold
       services.
                      a.   Definition of OSS
       438. In the Local Competition First Report and Order, the Commission defined OSS as
       consisting of pre-ordering, ordering, provisioning, maintenance and repair, and
       billing functions supported by an incumbent LEC's databases and information.
       OSS includes the manual, computerized, and automated systems, together with
       associated business processes and the up-to-date data maintained in those systems.
       Because of the varied, and largely non-standardized, development of incumbent
       LECs' OSS, the Commission identified certain functions needed by competitive
       carriers to deliver local exchange and exchange access services at the level expected
       by customers and state commissions.  Specifically, the Commission identified the
       five functions of OSS that incumbent LECs must make available to competitors on
       an unbundled basis:  pre-ordering, ordering, provisioning, repair and maintenance,
       and billing.
       439. We find no reason to modify our definition of OSS.  The majority of commenters
       support the existing definition of OSS.  A few parties request that we broaden the
       definition of OSS to include access to the incumbent LEC's electronic interface and
       gateways to enable the processing of orders without manual intervention.
       Because these requests focus on the method by which competitors access incumbent
       LEC OSS, we believe that interface and gateway issues are already captured in the
       nondiscriminatory access requirements of the Local Competition First Report and
       Order. Accordingly, we find it unnecessary to modify our definition of OSS in
       this manner.  We agree with ALTS, however, that the Commission should clarify
       that the pre-ordering function includes access to loop qualification information.
       Loop qualification information identifies the physical attributes of the loop plant
       (such as loop length, the presence of analog load coils and bridge taps, and the
       presence and type of Digital Loop Carrier) that enable carriers to determine whether
       the loop is capable of supporting xDSL and other advanced technologies.  This
       information is needed by carriers seeking to provide advanced services over those
       loops through the use of packet switches and DSLAMs.
       440. We clarify that pursuant to our existing rules, an incumbent LEC must provide the
       requesting carrier with nondiscriminatory access to the same detailed information
       about the loop that is available to the incumbent, so that the requesting carrier can
       make an independent judgment about whether the loop is capable of supporting the
       advanced services equipment the requesting carrier intends to install.  Based on
       these existing obligations, we conclude that, at a minimum, incumbent LECs must
       provide requesting carriers the same underlying information that the incumbent LEC
       has in any of its own databases or other internal records.  For example, the
       incumbent LEC must provide to requesting carriers the following:  (1) the
       composition of the loop material, including, but not limited to, fiber optics, copper;
       (2) the existence, location and type of any electronic or other equipment on the loop,
       including but not limited to, digital loop carrier or other remote concentration
       devices, feeder/distribution interfaces, bridge taps, load coils, pair-gain devices,
       disturbers in the same or adjacent binder groups; (3) the loop length, including the
       length and location of each type of transmission media;  (4) the wire gauge(s) of the
       loop; and (5) the electrical parameters of the loop, which may determine the
       suitability of the loop for various technologies.  Consistent with our
       nondiscriminatory access obligations, the incumbent LEC must provide loop
       qualification information based, for example, on an individual address or zip code of
       the end users in a particular wire center, NXX code, or on any other basis that the
       incumbent provides such information to itself.
       441. In addition, we agree with Covad that an incumbent LEC should not be permitted to
       deny a requesting carrier access to loop qualification information for particular
       customers simply because the incumbent is not providing xDSL or other services
       from a particular end office.  We also agree with commenters that an incumbent
       must provide access to the underlying loop information and may not filter or digest
       such information to provide only that information that is useful in the provision of a
       particular type of xDSL that the incumbent chooses to offer.   For example, SBC
       provides ADSL service to its customers, which has a general limitation of use for
       loops less than 18,000 feet.  In order to determine whether a particular loop is less
       than 18,000 feet, SBC has developed a database used by its retail representatives
       that indicates only whether the loop falls into a "green, yellow, or red" category.
       Under our nondiscrimination requirement, an incumbent LEC can not limit access
       to loop qualification information to such a "green, yellow, or red" indicator.
       Instead, the incumbent LEC must provide access to the underlying loop qualification
       information contained in its engineering records, plant records, and other back office
       systems so that requesting carriers can make their own judgments about whether
       those loops are suitable for the services the requesting carriers seek to offer.
       Otherwise, incumbent LECs would be able to discriminate against other xDSL
       technologies in favor of their own xDSL technology.
       442. We disagree, however, with Covad's unqualified request that the Commission
       require incumbent LECs to catalogue, inventory, and make available to competitors
       loop qualification information through automated OSS even when it has no such
       information available to itself.  If an incumbent LEC has not compiled such
       information for itself, we do not require the incumbent to conduct a plant inventory
       and construct a database on behalf of requesting carriers.  We find, however, that an
       incumbent LEC that has manual access to this sort of information for itself, or any
       affiliate, must also provide access to it to a requesting competitor on a non-
       discriminatory basis.  In addition, we expect that incumbent LECs will be updating
       their electronic database for their own xDSL deployment and, to the extent their
       employees have access to the information in an electronic format, that same format
       should be made available to new entrants via an electronic interface.
       443. We also clarify that under our existing rules, the relevant inquiry is not whether the
       retail arm of the incumbent has access to the underlying loop qualification
       information, but rather whether such information exists anywhere within the
       incumbent's back office and can be accessed by any of the incumbent LEC's
       personnel.  Denying competitors access to such information, where the incumbent
       (or an affiliate, if one exists) is able to obtain the relevant information for itself, will
       impede the efficient deployment of advanced services.  To permit an incumbent
       LEC to preclude requesting carriers from obtaining information about the
       underlying capabilities of the loop plant in the same manner as the incumbent LEC's
       personnel would be contrary to the goals of the Act to promote innovation and
       deployment of new technologies by multiple parties.
       444. Consistent with the framework we adopted in the Local Competition First Report
       and Order, we conclude that access to loop qualification information must be
       provided to competitors within the same time intervals it is provided to the
       incumbent LEC's retail operations.  To the extent such information is not normally
       provided to the incumbent LEC's retail personnel, but can be obtained by contacting
       incumbent back office personnel, it must be provided to requesting carriers within
       the same time frame that any incumbent personnel are able to obtain such
       information.  It would be unreasonable, for instance, if the requesting carrier had to
       wait several days to receive such information from the incumbent in the
       incumbent's personnel have the ability to obtain such information in several hours.
       In order to provide local exchange and exchange access service, a competitor needs
       such information quickly to be able to determine whether a particular loop will
       support xDSL service.
                      a.   Proprietary Concerns Associated with OSS
       445. The record does not indicate, nor do commenters argue, that OSS is  proprietary.
       Moreover, we do not discern any copyright, patent, or trademark or trade secrecy
       implications to unbundling OSS.  We therefore conclude that OSS should be
       evaluated under the "impair" standard.
                      a.   Unbundling Analysis for OSS
       446. We conclude that lack of access to the incumbent LEC's OSS impairs the ability of
       requesting carriers to provide the services they seek to offer.  The incumbents' OSS
       provides access to key information that is unavailable outside the incumbents'
       networks and is critical to the ability of other carriers to provide local exchange and
       exchange access service.  We therefore require incumbent LECs to offer unbundled
       access to their OSS nationwide.
       447. Commenters overwhelmingly agree that the unbundling of OSS satisfies the
       "impair" standard of section 251(d)(2).  OSS is a precondition to accessing other
       unbundled network elements and resold services because competitors must utilize
       the incumbent LEC's OSS to order all network elements and resold services.
       Thus, the success of local competition depends on the availability of access to the
       incumbent LEC's OSS.  Without unbundled access to the incumbent LEC's OSS,
       competitors would not be able to provide their customers comparable, competitive
       service, and hence would have to operate at a material disadvantage.  While we
       acknowledge that a competitive market is developing for OSS systems, these
       alternative providers do not provide substitutable alternatives to the incumbent
       LEC's OSS functionality.  Alternative OSS vendors provide requesting carriers
       with an electronic interface that allow competitive LECs to access the incumbent
       LEC's OSS and internal customer care systems.  These vendors cannot provide a
       sufficient substitute for the incumbent LEC's underlying OSS because incumbent
       LECs have access to exclusive information and functionalities needed to provide
       service (e.g., customer service record information, provisioning of orders for
       unbundled network element and resold services, ability to initiate repairs for
       unbundled network elements and resold services, etc.).
       448. We reject the incumbent LECs' arguments to limit the scope of a requesting
       carrier's access to the incumbent's OSS functions to situations where the competitor
       is ordering other unbundled network elements or resold services from the incumbent
       LEC.  We find such limitations to be discriminatory because access to the same
       information and support functions as the incumbent LEC is needed by requesting
       carriers to provide quality service over their own facilities.  For example, the
       incumbent LEC has access to unique information about the customer's service, and a
       competitor's ability to provide service is materially diminished without access to
       that information.  This is true regardless of whether the competitor is providing
       service entirely through its own facilities, entirely over the incumbent's, or using
       some combination of the two.  In particular, the full facilities-based competitor runs
       the risk of offering a lower quality service from the perspective of the end user if it
       does not know all the details of the customer's current service offering.  As another
       example, carriers may also need to access the repair and maintenance function in the
       incumbent's OSS to submit trouble tickets for interconnection trunks.
       449. We do not decide ALTS' request at this time that incumbent LECs provide access to
       OSS functions even when the incumbent is no longer the retail provider of local
       service to an end user.  The record has not been sufficiently developed to establish
       how, absent access to incumbent LEC OSS, requesting LECs ability to provide the
       services they seek to offer would be materially diminished when the incumbent LEC
       is not involved in providing service to a retail customer.  The most apparent
       example of this situation would be customer changeovers where competitive LECs
       are serving customers through resale of the incumbent's services or use of the
       incumbent's unbundled network elements.  This appears to us to be an industry-
       wide issue.  Thus, as a first step, we encourage the industry to develop guidelines
       and standards to facilitate the orderly transition of customers from one carrier to
       another.  We note that any solution to this problem must adhere to the requirements
       of the Act, including the nondiscriminatory access requirements of section 251(c)(3)
       and the CPNI obligations of section 222.
       450. We reject commenters' proposal that the Commission establish and ensure that
       incumbent LECs meet OSS performance standards, both quantitative and
       qualitative, to demonstrate parity under the rules.   Failure to satisfy these
       performance standards, according to MCI WorldCom, should automatically trigger a
       process to identify and correct the root cause of the OSS problem.  We decline to
       adopt performance standards in this proceeding.  The issue before us in this
       proceeding is whether OSS is subject to the unbundling obligations of section 251,
       not whether the Commission should establish performance standards and penalties
       to determine if an incumbent is providing nondiscriminatory access to its OSS
       functions.  We note that the states have primary authority under section 252 for
       setting schedules and resolving disputes concerning access to OSS functions as
       unbundled network elements.  In addition, in the Second Order on Reconsideration ,
       the Commission did not preclude requesting carriers from bringing enforcement
       actions against incumbent LECs to the Commission for consideration.   Thus,
       more appropriate forums exist for the resolution of specific allegations of
       noncompliance with our unbundling rules.  Accordingly, we find it unnecessary, at
       this time, to modify our rules in the manner suggested.
            A.   Operator Services and Directory Assistance
                 1.   Background
       451. In the Local Competition First Report and Order, the Commission required
       incumbent LECs to provide unbundled access to their operator services and
       directory assistance (OS/DA).  The Commission found that access to the systems
       supporting both operator call completion services and directory assistance was
       necessary, under section 251(d)(2)(A) for new entrants to provide competing local
       exchange service.  The Commission also concluded that a competitor's ability to
       provide service would be significantly impaired, under section 251(d)(2)(B), if it did
       not have access to the incumbent LECs' operator call completion services and
       directory assistance.  The Commission therefore required incumbent LECs to
       provide unbundled access to the databases used in the provision of both call
       completion services and directory assistance.  In Iowa Utils. Bd., the Supreme
       Court expressly affirmed the Eighth Circuit's holding that the Commission's
       designation of operator services and directory assistance as a network element was
       an "eminently reasonable" interpretation of the 1996 Act.
       452. In the Notice, we sought comment on whether the definition of OS/DA should be
       modified and whether there are any proprietary concerns associated with OS/DA
       systems.  We also sought comment on whether OS/DA should remain an
       unbundled network element.  We sought further comment on the implications of
       an incumbent LEC's obligations to provide OS/DA services under the
       nondiscriminatory access provisions of section 251(b)(3) if those services are not
       provided by incumbent LECs as unbundled network elements under section
       251(c)(3).
       453. Commenters generally support the existing definition of operator services and
       directory assistance and do not identify proprietary concerns associated with OS/DA
       systems.  The majority of commenters, including competitive LECs, interexchange
       carriers, alternative OS/DA providers, and most state commissions, argue that
       incumbents should provide unbundled access to their OS/DA services.  The
       incumbent LECs, MGC (a facilities-based competitive LEC), and the Ohio PUC
       note the general availability of third-party OS/DA alternatives as evidence of a
       wholesale market and argue that the Commission should not unbundle the
       incumbent LECs' OS/DA services.
                 1.   Discussion
       454. We find that where incumbent LECs provide customized routing, lack of access to
       the incumbents' OS/DA service on an unbundled basis does not materially diminish
       a requesting carrier's ability to offer telecommunications service.  The record
       provides significant evidence of a wholesale market in the provision of OS/DA
       services and opportunities for self-provisioning OS/DA services.  Moreover, we do
       not find that the evidence regarding the differences in cost, timeliness, quality,
       interoperability and ubiquity between the incumbent's OS/DA service and
       alternative OS/DA services, provided either through self-provisioning or third-party
       alternatives, is sufficient to conclude that lack of unbundled access to the
       incumbent's OS/DA service would materially diminish a requesting carrier's ability
       to offer the services it seeks to provide. We note that nondiscriminatory access to
       the incumbent's underlying databases used in the provision of OS/DA is required
       under section 251(b)(3) of the 1996 Act.  The additional nondiscrimination
       requirements of section 251(b)(3), coupled with evidence of multiple alternative
       providers of OS/DA service in the marketplace, provide strong evidence that
       competitors are not impaired without access to the incumbent's OS/DA service as
       an unbundled network element.
       455. Accordingly, incumbent LECs need not provide access to its OS/DA as an
       unbundled network element.  All LECs, however, must continue to provide their
       competitors with nondiscriminatory access to their OS/DA, pursuant to section
       251(b), as implemented by the Commission. We believe that this outcome best
       comports with the realities of a growing OS/DA marketplace, embraces a
       deregulatory approach where justified, and does not unduly confine the entry
       strategies of competitive carriers.
                      a.   Definition of Operator Services and Directory
                      Assistance
       456. The Commission has defined operator services as "any automatic or live assistance
       to a consumer to arrange for billing or completion, or both, of a telephone call,"
       and has stated that directory assistance is a service that allows "subscribers to
       retrieve telephone numbers of other subscribers."  In the Local Competition
       Second Report and Order, the Commission clarified that the nondiscriminatory
       requirements of section 251(b)(3) included the obligation of LECs to comply with
       the reasonable request of a competing provider to rebrand or unbrand its OS/DA
       services.  We recently reaffirmed this holding in the Directory Listing Information
       Order, where we stated that to the extent technically feasible, a LEC must identify
       and rebrand the traffic it provides to its competitors.
       457. We decline to expand the definition of OS/DA, as proposed by some commenters,
       to include an affirmative obligation to rebrand OS/DA and to provide directory
       assistance listing updates in daily electronic batch files.  We find such
       modifications unnecessary because, as mentioned above, these obligations already
       exist under section 251(b)(3), and the relevant rules promulgated thereunder.
                      a.   Proprietary Concerns Associated with OS/DA
       458. With the exception of one commenter, no parties identify proprietary concerns
       associated with OS/DA, and we find none.   Moreover, we do not discern any
       copyright, patent, or trademark or trade secrecy implications associated with
       OS/DA.  Accordingly, we analyze incumbent LECs' obligations to provide
       unbundled access to its OS/DA under the "impair" standard.
                      a.   Unbundling Analysis
       459. Consistent with the unbundling analysis set forth above, we conclude that where an
       incumbent LEC provides customized routing to the requesting carrier as part of the
       unbundled switching element, lack of access to the incumbent's OS/DA on an
       unbundled basis does not materially diminish a requesting carrier's ability to
       provide the services it seeks to offer.  The record demonstrates that a variety of
       alternative providers of OS/DA offer services at comparable cost and quality to
       those of the incumbents. We agree with the incumbent LECs, MGC, and the Ohio
       PUC that the incumbents enjoy no material advantage obtaining the key inputs for
       OS/DA services.  Certain commenters point to differences in cost and the amount
       of time required to implement services provided by these alternative sources to
       support their arguments that competing carriers are impaired without access to the
       incumbents' OS/DA services.  The majority of these commenters, however, focus
       on the differences in the quality and accessibility of the information in the
       incumbent LECs' OS/DA databases relative to that available from third-party
       sources.  As discussed more fully below, we find that these quality differences are
       addressed adequately by other sections of the Act.
       460. Alternatives in the Marketplace.  Competition in the provision of operator services
       and directory assistance has existed since divestiture.  Such competition has
       accelerated in the directory assistance market as a result of the Supreme Court's
       decision to allow copying of carriers' white pages listings in their entirety.  For
       example, according to SBC, more than 30 competitive LECs presently provide their
       own OS/DA services or resell the services of non-incumbent LECs.  In Bell
       Atlantic's region, only 70 out of 400 interconnection agreements require Bell
       Atlantic to provide OS/DA as an unbundled network element.  Thus, in more than
       80% of Bell Atlantic's interconnection arrangements, competitive LECs have
       chosen to provide OS/DA for themselves or to obtain such service from wholesale
       providers.  According to the Rural Telephone Coalition, rural incumbent LECs have
       obtained OS/DA services from outside sources for many years because they find
       third-party sources to be cost-effective.  In addition, Bell Atlantic reports that its
       wireless affiliate, Bell Atlantic Mobile, relies on a third-party OS/DA provider.
       MGC advocates that OS/DA not be unbundled because, in its view, competitive
       LECs can purchase OS/DA from a number of vendors offering cost-effective
       nationwide alternatives to those of the incumbent LECs.
       461. Even requesting carriers advocating the unbundling of operator and directory
       assistance services acknowledge that there exists a substantial number of alternative
       providers of operator and directory assistance services.  For example, AT&T, MCI
       WorldCom, and Sprint have already established national operator services via toll-
       free numbers.   McLeod USA self-provisions nationwide directory assistance
       service.  Metro One provides OS/DA services to ALLTEL and GST Telecom.
       Cox and Omnipoint obtain OS/DA service from Teltrust, and WinStar obtains these
       services from Frontier.  Requesting carriers may also obtain OS/DA services and
       directory listings from numerous wholesale providers, including CenturyTel
       Telecommunications, Clifton Forge, Consolidated Communications, Excell,
       Experian's TEC Group, Frontier, HebCom, InfoNXX, Metro One, Quest411 and
       Teltrust.
       462. It appears that this increasing availability of competitive OS/DA providers coincides
       with a decrease in incumbent LEC OS/DA call volumes.  Evidence in the record
       indicates that call volumes to incumbent OS/DA services have declined steadily
       over the past few years.  For example, SBC claims directory assistance call volumes
       have decreased almost 30 percent since 1995, and SBC operator-assisted calls have
       dropped by over 50 percent during the same period.  Similarly, BellSouth's
       operator-assisted call volumes have declined over 60 percent in the past eight
       years.  According to Bell Atlantic, it lost greater than 67 percent of its wholesale
       directory assistance calls between 1994 and 1998.  In fact, Bell Atlantic claims
       that interexchange carriers accounted for over 68% of the operator services market
       in 1998 and represented 72% of the wholesale operator services market by 1997.
       This trend, combined with the number of alternative operator services and directory
       assistance providers outside the incumbent LECs' networks, strongly suggests that
       requesting carriers are not impaired without access to the incumbent LECs' OS/DA
       service.  Significantly, we find that the existence of multiple alternative providers of
       OS/DA service in the marketplace, coupled with evidence of competitors'
       decreasing reliance on incumbent OS/DA services, demonstrates that requesting
       carriers' ability to provide the services it seeks to offer is not materially diminished
       without access to the incumbent's OS/DA service on an unbundled basis.
       463. Cost.  In light of the significant evidence of multiple third-party providers of
       OS/DA, we find unpersuasive assertions that replication of OS/DA service facilities
       and functionalities would involve substantial and material cost and would delay
       competitive entry into the local market.  The costs associated with self-
       provisioning OS/DA include: (1) the cost of the facility, including employees, real
       estate, computers; (2) the cost of transporting traffic to the facilities; and (3) the
       cost of obtaining the underlying subscriber information contained in OS/DA
       databases.  We acknowledge that, in some situations, depending on the type of
       OS/DA service a requesting carrier seeks to provide, OS/DA service may be more
       expensive if it is purchased from third-party providers than it would be if purchased
       from the incumbent.  We find, however, that such differences will not materially
       diminish a requesting carrier's ability to provide local exchange or exchange access
       service.
       464. We are unpersuaded by Cox's argument that OS/DA service should be unbundled
       because incumbents enjoy economies of scale and scope that greatly reduce the cost
       of providing these services to their own customers.  In light of the number of
       alternative providers currently providing OS/DA service and the competitive market
       that is developing for long distance transport, we find this argument unconvincing.
       We also find that incumbents do not have any particular advantage in obtaining the
       facilities needed to create a call center, including employees, real estate and
       computers.  In addition, unlike many other network elements, such as switching or
       transport, the ability to provide a nationwide OS/DA service does not require large
       amounts of sunk and fixed costs in facilities that must be deployed ubiquitously in
       order to serve a broad customer base.  Rather, a requesting carrier can establish one
       call center or a few regional centers to which it can transport all of the calls on its
       network and provide OS/DA service nationwide.  Moreover, we believe that a
       competitive LEC or a group of competitive LECs can achieve economies of scale by
       aggregating demand for OS/DA services over various regions by processing them
       through a single call center.  Unlike the self-provisioning of switches, or other such
       network elements, self-provisioning a single OS/DA platform would not require the
       competitive carrier to deploy equipment throughout the network to ubiquitously
       serve its customers.
       465. Certain competitive LECs assert that purchasing long-haul DS1 facilities to
       alternative OS/DA call centers is more expensive than purchasing local loops to
       access OS/DA services provided by incumbent LECs.  In particular, Time Warner
       claims that special access rates to trunk its OS/DA calls to a vendor's national call
       center are approximately $500,000 a year.  MediaOne estimates that remote long-
       haul facilities cost $1500-$2000 per month for a DS1 compared to local loops
       provisioned by the incumbent LEC for about $500 per month.
       466. While, on its face, the disparity between transport costs to carry OS/DA traffic
       between the competitor's switch and a self-provisioned call center appears
       significant, it does not persuade us that transport costs associated with self-
       provisioning or purchasing OS/DA from third-party vendors materially diminishes
       the ability of requesting carriers to provide local exchange service. The record
       reveals a number of alternative OS/DA providers with multiple call centers located
       throughout the country.  For example, HebCom operates five regional call centers,
       Excell operates six regional call centers and InfoNXX operates four.  Teltrust
       operates a national OS/DA service with several call centers.  The availability of
       multiple locations of alternative providers, both regional and national, allows
       competitors to choose a service that will be most cost-efficient, depending on the
       area in which it provides service.  It is not clear from the record whether Time
       Warner considered the availability of these regional solutions to its OS/DA needs
       when making its initial decision to transport calls.  Additionally, the incumbent
       LEC itself often maintains regional call centers that are outside the local calling area
       of a particular call center.  Bell Atlantic, for example, offers directory assistance for
       most of New England (Rhode Island, Vermont, New Hampshire, Maine and western
       Massachusetts) out of its Providence, RI, Burlington, VT and Portland, ME offices,
       with all calls routed through a switch in Manchester, NH.  In such cases, the
       incumbent may also incur long-haul transport costs to trunk its OS/DA traffic to the
       call center.
       467. Regardless of the OS/DA provider, the cost of transporting traffic to the call center
       is factored into the overall price of OS/DA services.  Where a competitive LEC
       obtains OS/DA services from an incumbent LEC, even at cost-based rates, the
       incumbent charges the competitive LEC for transport, either separately or as part of
       the total cost for OS/DA service.  Similarly, where a competitive LEC obtains
       OS/DA from an alternative OS/DA provider, the carrier or OS/DA provider must
       pay for transport to the call center.  It is notable that rural incumbent LECs, which
       arguably have to haul traffic the furthest, find third-party OS/DA sources cost-
       effective.  The fact that rural LECs and a significant number of competitive LECs
       and interexchange carriers presently either self-provision these services or rely on
       wholesale providers for their OS/DA services constitutes substantial evidence that
       the cost of transport does not materially diminish the ability to provide service.
       468. Because OS/DA databases are available on a value added and nondiscriminatory
       basis under section 251(b)(3) of the Act, a competing carrier need only provide
       transport to an incumbent's LEC's database.  We acknowledge that self-
       provisioning OS/DA service may require competing carriers to incur substantial
       start-up costs that may represent a high percentage of overall expenses until call
       volumes and customer penetration levels rise.   We find, however that the costs of
       self-provisioning OS/DA do not impair a requesting carrier's ability to provide
       service because in addition to self-provisioning, there are multiple alternatives
       available in the market.  In addition, regional or nationwide OS/DA call centers
       enable competitive carriers to aggregate call volume to reach sufficient economies
       of scale.  We note too that carriers are not limited to self-provisioning.  Carriers may
       choose instead to use alternative OS/DA providers, reducing the fixed costs of
       provisioning OS/DA services.  Moreover, competitive carriers who wish to obtain
       OS/DA from the incumbent may do so consistent with the incumbent LEC's
       nondiscriminatory access obligations under section 251(b)(3).
       469. Quality. We find that the functionality of third-party supplied OS/DA is sufficiently
       equivalent to that of the incumbent's services such that a requesting carrier's ability
       to provide the services it seeks to offer is not impaired without access to the
       incumbent's OS/DA service.  Although we acknowledge that differences in quality
       may exist, we find that, in light of the full scope of OS/DA options available to
       requesting carriers, the differences identified in this proceeding do not materially
       diminish a requesting carrier's ability to offer local exchange or exchange access
       service.
       470. Specifically, we find that lack of unbundled OS/DA service from the incumbent
       LEC does not materially diminish the ability of requesting carriers to provide the
       service they seek to offer; several carriers have successfully self-provisioned
       OS/DA, while other carriers rely upon alternative providers of OS/DA services.
       Requesting carriers, however, complain that the alternative sources for operator
       services and directory assistance are inferior because the information provided to
       customers is not as complete, and is not updated as frequently, as incumbent LEC
       databases.   According to several commenters, incumbent LECs update their
       directory listing databases daily, and often on a real-time basis, as they complete
       service order processes.  In contrast, alternative providers may obtain their data
       from sources such as yellow pages databases, scanned white page listings, postal
       service change of address forms, motor vehicle registration records, and voter
       registration records, which are not updated as often.  Requesting carriers,
       however, have the ability, under section 251(b)(3), to obtain nondiscriminatory
       access to the incumbent LEC's, or any other competing LEC's, databases used in
       the provision of OS/DA.  Where competitive LECs may obtain OS/DA
       information and services, directly or indirectly, from incumbent LEC sources, we do
       not find cognizable differences in the quality of that information or services.  The
       record indicates that carriers that are entitled to access to incumbent LEC database
       information and updates, such as competitive LECs and interexchange carriers like
       MCI WorldCom, Sprint and AT&T, offer directory assistance on a wholesale basis
       to other competitive LECs.  Additionally, we note that third-party OS/DA
       providers are often able to purchase incumbent LEC OS/DA database information
       and updates.  We are therefore not persuaded that lack of  unbundled access to
       incumbent LEC databases used in the provision of OS/DA necessarily results in
       quality differences that would materially diminish a requesting carrier's ability to
       offer service.
       471. MediaOne claims that operators of alternative OS/DA providers may be unfamiliar
       with the names of the local communities because their call centers are often
       distantly located.  We do not believe that this constitutes a material difference in
       quality.  First, we note that MediaOne does not explain how an operator's proximity
       to the customer results in a difference in OS/DA service quality.  Search strategies
       used by OS/DA operators can be based on fuzzy logic queries and phonetic
       spellings that enable operators to retrieve information without the exact spelling of,
       or familiarity with, a place or proper name.  For local directory assistance,
       alternative providers also train their call center operators to be familiar with the
       localities and any necessary variations on word pronunciations.  In addition,
       incumbents often maintain remote or regional call centers that are located outside
       the local calling area of a large percentage of the incumbent LEC's own
       customers  Thus, the incumbent's operators may have no more familiarity with
       the names of particular locales in a geographic area than do the operators of a
       competitor.  Thus, if a competitor wants to ensure that the operators it is utilizing are
       trained for a particular area, it can best achieve this result by self-provisioning
       OS/DA service and training its own operators.  Alternatively, a competitive carrier
       may also select an alternative OS/DA provider with a call center closer to the
       carrier's customer base than the incumbent's call center or contract with the
       provider for special operator training to cover the names of locales within the
       specific geographic markets the competitive carrier serves.  We are satisfied that
       operator-training disparities between vendor-provided operators and those of the
       incumbent LEC do not materially diminish a requesting carrier's ability to offer
       service.
       472. We reject arguments that we should unbundle access to the incumbent's OS/DA
       service because national operator services have limited ability to connect to local
       public safety answering points (PSAPs) in emergency situations.  Specifically,
       certain commenters argue that in such situations, national operator services usually
       advise the caller to hang-up and dial 911.   While issues of public safety are of
       paramount concern, the standard by which we decide to unbundle a non-proprietary
       network element focuses on whether a carrier's ability to provide the services that it
       seeks to offer is impaired by lack of access to that element.  Accordingly, we look
       to whether the ability or inability to connect OS/DA calls to a PSAP impairs the
       ability of a carrier to offer local exchange services.  We conclude that it does not.
       473. Although subscribers may mistakenly dial OS/DA to reach emergency assistance,
       the ability to connect a misdirected call to a PSAP is unlikely to result in a
       competitive advantage in the provision of local exchange service.  At least one
       third-party provider of OS/DA service, Teltrust, states that it requires its customers
       to provide the emergency number of the PSAP for the originating caller so that it
       knows which agency to call.  In cases where it receives an incoming call from an
       800 number and does not have an emergency number associated with the calling
       party's location, the operator can call emergency services if the calling party can
       provide the name of the location.  Should a competitive carrier decide to obtain
       OS/DA services for its customers from the incumbent on a nondiscriminatory basis,
       under section 251(b)(3), it will be able to connect its customers to the PSAP in the
       same manner as the incumbent.  Moreover, it is not clear whether all incumbent
       LEC OS/DA call centers, especially those with remote OS/DA call centers, have the
       ability to connect their own customers to every PSAP.   Thus, even if a requesting
       carrier had unbundled access to the incumbent's OS/DA service, its subscribers may
       receive instructions from the incumbent's operator that do not measurably differ
       from the instructions it would receive from an alternative provider's operator.
       Indeed the only way in which a competitor can retain control over the quality of
       OS/DA service is to self-provide its own OS/DA call center and train its own
       operators.  By self-providing its own call centers it can require its customers to
       provide it with detailed emergency information and populate its database
       accordingly.
       474. We find insufficient evidence in the record to suggest that, based on performance
       measurements, there is a material difference in the timelines with which an
       incumbent's operator, compared to third-party operators, can respond to an inquiry.
       MediaOne asserts that the average speed to answer OS/DA calls for competitors is
       15-18 seconds, while the incumbent commits to answering calls to its OS/DA
       platform in less than six seconds.  The data MediaOne provides, while helpful, is
       inconclusive.  Specifically, the data, which consists of the performance of one
       incumbent and a few competitors, provides too small a sample size for us to
       extrapolate these results over the entire OS/DA industry and conclude that
       competitive carriers' ability to provide service is impaired.  While we acknowledge
       that there are likely to be some measurable differences among OS/DA providers for
       particular OS/DA components, we do not find sufficient record evidence to
       conclude that a requesting carrier is impaired without access to the incumbent's
       OS/DA service.  Moreover, applying the unbundling standard we set forth above,
       the question of whether lack of access to the incumbent's network element
       materially diminishes a requesting carrier's ability to provide the services it seeks to
       offer is determined based on the totality of the circumstances.  Thus, while relevant,
       we cannot say that the proffered average speed to answer calls, or other OS/DA
       quality issues, contribute significantly to a competitor's overall ability to provide
       local exchange and exchange access service.
       475. Timeliness.  We do not find any impediments associated with self-provisioning
       OS/DA services that would delay a requesting carrier's entry into the local exchange
       or exchange access market.  Although AT&T identifies delays associated with
       implementing the customized routing necessary to use alternative OS/DA
       providers, the record indicates that AT&T's customized routing issues have been
       resolved.  We are unaware of any ongoing problems that create material delays
       when competing carriers purchase OS/DA service from alternative providers.  We
       agree that customized routing is necessary to access alternative sources of OS/DA
       for competitors not deploying their own switches.  Commenters state that a key
       component of providing carriers with a choice of competitive OS/DA suppliers is
       the availability of line class codes in the unbundled switching element.  Lack of a
       customized routing solution that enables competitors to route traffic to alternative
       OS/DA providers would therefore effectively preclude competitive LECs from
       using such alternative providers.  Thus, if an incumbent LEC does not provide
       customized routing to requesting carriers that use the incumbent's unbundled
       switching element, it must provide unbundled access to its OS/DA service.
       476. Impact on Network Operations.  We conclude that the interoperability issues
       identified in the record do not materially diminish a requesting carrier's ability to
       provide local exchange or exchange access service.  In particular, MCI WorldCom
       complains that incumbent LECs should implement Feature Group D signaling,
       instead of outdated legacy signaling protocol.  According to MCI WorldCom, to
       use the incumbent LECs' signaling protocol instead of Feature Group D, most
       competitive LECs would have to either deploy new customized operator platforms
       or modify their existing platforms, both of which impose substantial costs.  SBC
       responds that the customized routing of Feature Group D is not technically feasible
       in all end-office switches.  BellSouth, however, offers a technical solution to MCI
       WorldCom's concern in some of its offices and states its willingness to deploy these
       solutions throughout its network.   In instances where the requesting carrier
       obtains the unbundled switching element from the incumbent, the lack of
       customized routing effectively precludes requesting carriers from using alternative
       OS/DA providers and, consequently, would materially diminish the requesting
       carrier's ability to provide the services it seeks to offer.  Thus, we require incumbent
       LECs, to the extent they have not accommodated technologies used for customized
       routing, to offer OS/DA as an unbundled network element.
       477. Finally, we find that the ability to obtain nondiscriminatory access to operator
       services and directory assistance under section 251(b)(3) significantly mitigates any
       potential impairment a requesting carrier may experience if denied access to the
       incumbent's OS/DA services as an unbundled network element.  There are a
       substantial number of regional and national alternative providers of OS/DA service
       that are serving a variety of customers, including some incumbent LECs and IXCs.
       We do not find differences in cost, quality, timeliness, and ubiquity that would lead
       to the conclusion that requesting carriers' ability to provide local exchange and
       exchange access services would be materially diminished without access to the
       incumbent's OS/DA service as an unbundled network element.  Rather, we find that
       these alternative sources of OS/DA service are available as a practical, economic,
       and operational matter.  Moreover, we believe that not requiring that incumbent
       LECs to unbundle OS/DA service is consistent with the goals of the Act, because it
       will reduce competitors' reliance on the incumbent's network and create new
       opportunities for competitors of OS/DA service to differentiate their services
       through increased quality and decreased prices.
       CDLXXVIII.     MISCELLANEOUS ISSUES
            A.   Section 271-Related Issues
                 1.   Background
       479. Section 271(c)(2)(B) enumerates a competitive checklist that BOCs must comply
       with to obtain interLATA authority.  In particular, prior to obtaining authority to
       provide long distance service, section 271(c)(2)(B) requires BOCs to demonstrate,
       among other things, that they are providing or "generally offering" to requesting
       carriers the following network elements: local loops, transport, switching, databases
       and signaling.
       480. In the Notice, we sought comment on the interplay between the unbundling
       obligations of section 251(c), and the competitive checklist network elements of
       section 271.  Among other things, we sought comment on what pricing standards
       would apply if a checklist network element were no longer required to be unbundled
       pursuant to section 251(c)(3), after considering the "necessary" and "impair"
       standards of section 251(d)(2).
       481. Ameritech argues that if a network element on the checklist no longer needs to be
       unbundled, the item need not be provided to requesting carriers at prices predicated
       on our forward looking costs.  Other commenters counter that the inclusion of
       network elements on the checklist is presumptive evidence that these elements must
       be unbundled, and thus, provided to requesting carriers at prices predicated on our
       forward looking costs.
                 1.   Discussion
       482. In this Order, we conclude that circuit switching and shared transport need not be
       unbundled in certain circumstances.  Nonetheless, providing access and
       interconnection to these elements remains an obligation for BOCs seeking long
       distance approval.  We therefore must decide what prices, terms, and conditions
       apply to these elements that no longer need to be unbundled.
       483. We conclude that the prices, terms, and conditions set forth under sections 251 and
       252 do not presumptively apply to the network elements on the competitive
       checklist of section 271.
       484.  The Commission must consider unbundling network elements in accordance with
       section 251(c)(3), while according due deference to the "necessary" and "impair"
       standards articulated in section 251(d)(2), and by the Supreme Court.  The
       Commission must evaluate the network elements on the competitive checklist under
       the auspices of section 271.  If a checklist network element is unbundled, the
       applicable prices, terms and conditions are determined in accordance with sections
       251 and 252.  If a checklist network element does not satisfy the unbundling
       standards in section 251(d)(2), the applicable prices, terms and conditions for that
       element are determined in accordance with sections 201(b) and 202(a).
       485. Although section 271 does not specify that the checklist network elements must be
       provided in accordance with section 251(c)(3), the Commission nonetheless has
       independent authority to ensure that items (iv)-(vi) of the checklist are provided on a
       reasonable, nondiscriminatory basis.  In Iowa Utils. Bd., the Supreme Court
       affirmed the Commission's regulatory authority over the pricing of section 251
       unbundled network elements, rejecting the claim that this matter is reserved to the
       states.  In reaching this conclusion, the Court held that the Commission's pricing
       authority resides broadly in section 201(b), which grants the agency authority to
       prescribe rules and regulations "as may be necessary in the public interest to carry
       out the provisions of this Act."
       486. Section 201(b) provides a basis for the Commission to scrutinize the prices, terms,
       and conditions under which the checklist network elements are offered. Section
       201(b) states that "[a]ll charges, practices, classifications, and regulations for and in
       connection with such communication services, shall be just and reasonable, and any
       such charge, practice, classification, or regulation that is unjust or unreasonable is
       hereby declared unlawful."  Section 202(a) mandates that "[i]t shall be unlawful
       for any common carrier to make any unjust or unreasonable discrimination in
       charges, practices, classifications, regulations, facilities, or services for or in
       connection with like communication service."  In addition, checklist items (vii)
       and (x) explicitly require "nondiscriminatory access" to OS/DA, databases, and
       signaling.
       487. In circumstances where a checklist network element is no longer unbundled, we
       have determined that a competitor is not impaired in its ability to offer services
       without access to that element.  Such a finding in the case of switching for large
       volume customers is predicated in large part upon the fact that competitors can
       acquire switching in the marketplace at a price set by the marketplace.  Under
       these circumstances, it would be counterproductive to mandate that the incumbent
       offers the element at forward-looking prices.  Rather, the market price should
       prevail, as opposed to a regulated rate which, at best, is designed to reflect the
       pricing of a competitive market.
            A.   Combinations of Unbundled Loops and Transport Network
            Elements
       488. A number of parties identify issues surrounding combinations of loop and transport
       network elements.  In particular, several competitive LECs argue that the
       Commission should identify the "enhanced extended link" (EEL) as a separate
       network element or require incumbent LECs to provide requesting carriers access to
       loop and transport elements in combination, even if those elements are not currently
       combined. Incumbent LECs argue that, for loop transport elements that are
       currently combined requesting carriers should not be allowed to substitute such
       combinations of elements for existing, regulated special access services.
       According to incumbent LECs, allowing this substitution would either force them to
       increase local rates or undermine universal service.
                 1.   Enhanced Extended Link
                      a.   Background
       489. In the Local Competition Order, the Commission identified loops and transport as
       network elements subject to the unbundling obligation of section 251(c)(3).  In rule
       51.315(b), the Commission prohibited incumbents from separating network
       elements that are currently combined.  In addition, the Commission adopted rules
       51.315(c)   (f) requiring incumbent LECs to combine unbundled network elements
       in any manner, even if those elements are not currently combined.  The Eighth
       Circuit overturned a number of the Commission's rules, including rules 51.315(b)
       (f).  Rule 51.315(b), however, was reinstated by the Supreme Court.   In light of
       the reasoning set forth in the Court's opinion, the Commission asked the Eighth
       Circuit to reinstate rules 51.315(c)   (f).
       490. In the Notice, we sought comment on whether we should identify additional
       network elements beyond the seven listed in the Local Competition First Report and
       Order.  We also sought comment on whether, in light of the Supreme Court's
       decision, we could require incumbent LECs to combine network elements that are
       not currently combined, such as an unbundled loop with unbundled transport.
       491. In response to the Notice, a number of parties, including competitive LECs and state
       commissions, argue that we should either identify a new network element comprised
       of unbundled loop, multiplexing/concentrating equipment, and dedicated transport
       (the enhanced extended link or "EEL") or, alternatively, reinstate rules 51.315(c)
       (f) which require incumbent LECs to provide unbundled loop and transport
       elements on a combined basis.  Incumbent LECs argue that we should not identify
       the EEL as a separate network element because it would constitute an unlawful
       combination of two or more elements not currently combined.  The incumbent
       LECs also argue that we cannot reinstate rules 51.315(c)   (f) because they are
       currently pending before the Eighth Circuit.
                      a.   Discussion
       492. We decline to define the EEL as a separate network element in this Order.  As
       discussed above, the Eighth Circuit is currently reviewing whether rules 51.315(c)
       (f) should be reinstated.  We see no reason to decide now whether the EEL should
       be a separate network element, in light of the Eighth Circuit's review of those rules.
       493.  A number of commenters argue that we should reaffirm the Commission's decision
       in the  Local Competition First Report and Order.   In that order the Commission
       concluded that the proper reading of "currently combines" in rule 51.315(b) means
       "ordinarily combined within their network, in the manner which they are typically
       combined."  Incumbent LECs, on the other hand, argue that rule 51.315(b) only
       applies to unbundled network elements that are currently combined and not to
       elements that are "normally" combined.  Again, because this matter is currently
       pending before the Eighth Circuit, we decline to address these arguments at this
       time.
       494. We note that in the Local Competition First Report and Order, and again in this
       proceeding, we identify the loop and dedicated transport as separate unbundled
       network elements.  In particular, as discussed above, we define the loop as the
       functionality that extends from the customer demarcation point to the main
       distribution frame associated with the incumbent LEC's central office switch.  We
       define dedicated transport as the transmission facilities dedicated to a particular
       customer between wire centers owned by the incumbent LECs or requesting
       telecommunications carriers, or between switches owned by incumbent LECs or
       requesting carriers.  To the extent an unbundled loop is in fact connected to
       unbundled dedicated transport, the statute and our rule 51.315(b) require the
       incumbent to provide such elements to requesting carriers in combined form.  Thus,
       although in this Order, we neither define the EEL as a separate unbundled network
       element nor interpret rule 51.315(b) as requiring incumbents to combine unbundled
       network elements that are "ordinarily combined," we note that in specific
       circumstances, the incumbent is presently obligated to provide access to the EEL.  In
       particular, the incumbent LECs may not separate loop and transport elements that
       are currently combined and purchased through the special access tariffs.  Moreover,
       requesting carriers are entitled to obtain such existing loop-transport combinations
       at unbundled network element prices.
       495. We also decline at this time to reinstate rules 51.315(c)   (f).  As discussed above,
       this issue is currently pending before the Eighth Circuit.  As a general matter,
       however, we believe that the reasoning of the Supreme Court's decision to reinstate
       rule 51.315(b) based on the nondiscrimination language of section 251(c)(3) applies
       equally to rules 51.315(c)   (f).  Specifically, the Court held that section 251(c)(3)'s
       nondiscrimination requirement means that access provided by the incumbent LEC
       must be at least equal in quality to that which the incumbent LEC provides to
       itself.  We note that incumbent LECs routinely combine loop and transport
       elements for themselves.  For example, incumbent LECs routinely provide
       combinations of loop and transport elements for themselves in order to:  (1) deliver
       data traffic to their own packet switches; (2) provide private line services; and (3)
       provide foreign exchange service.  In addition, we note that incumbent LECs
       routinely provide the functional equivalent of the EEL through their special access
       offerings.
       496. We believe that the basis upon which the Eighth Circuit invalidated rules 51.315(c)
         (f) has been called into question by the Supreme Court's decision.  In particular,
       the Eighth Circuit determined that "unbundled" meant physical separation of
       network elements.  The Supreme Court clarified that "unbundled" means
       "separate prices."  The Supreme Court also stated that section 251(c) "does not
       say, or even remotely imply, that elements must be provided [in discrete pieces, and
       never in combined form.]"  We also note that an additional basis for the Eighth
       Circuit's decision to invalidate rules 51.315(b)   (f) was its understanding that
       incumbents "would rather grant their competitors access to their facilities" than
       combine elements on behalf of requesting carriers.  Experience over the last year
       demonstrates that incumbent LECs have refused to provide access to network
       elements so that competitors could combine them, except in situations where
       competitive LECs have collocated in the incumbent's central offices.
       Accordingly, we believe that section 251(c)(3) provides a sound basis for reinstating
       rules 51.315(c)   (f).
                 1.   Use of unbundled network elements to provide exchange
                 access services
                      a.   Background
       497. As discussed above, in some situations in the incumbent's network, loops and
       dedicated transport network elements are already combined to provide special
       access services for interexchange carriers.  In ex parte filings, incumbent LECs,
       including BellSouth and SBC, argue that the Commission should restrict a
       requesting carrier from obtaining such combined facilities as unbundled network
       elements in order to prevent requesting carriers from by-passing existing special
       access services.  BellSouth and SBC both argue that such a restriction is necessary
       to prevent interexchange carriers from benefiting from the difference between
       special access rates and unbundled network element prices and thus, protect the
       incumbent LECs' current exchange access revenue streams.  Competitive LECs
       respond that the plain language of section 251(c)(3) precludes the Commission from
       imposing any restrictions on the use of unbundled network elements.
                      a.   Discussion
       498. Section 251(c)(3) of the Act requires incumbent LECs to provide to requesting
       carriers access to unbundled network elements "for the provision of a
       telecommunications service . . . ."   In the Local Competition First Report and
       Order, the Commission found that section 251(c)(3) "permits interexchange carriers
       and all other requesting carriers, to purchase unbundled elements for the purpose of
       offering exchange access services, or for the purpose of providing exchange access
       services to themselves in order to provide interexchange services to consumers."
       In particular, the Commission found that its conclusion not to impose restrictions on
       the use of unbundled network elements was "compelled by the plain language of the
       1996 Act" because exchange access and interexchange services are
       "telecommunications services."  Moreover, in the Local Competition First Report
       and Order, the Commission found that "the language of section 251(c)(3), which
       provides that telecommunications carriers may purchase unbundled elements in
       order to provide a telecommunications service, is not ambiguous."  This
       conclusion that the Act does not permit usage restrictions was codified in Rule
       51.309(a), which provides that "[a]n incumbent LEC shall not impose limitations,
       restrictions, or requirements on request for, or the use of, unbundled network
       elements that would impair the ability of a requesting telecommunications carrier to
       offer a telecommunications service in the manner the requesting
       telecommunications carrier intends."    That rule was not challenged in court by
       any party.
       499. Parties have raised again arguments that allowing requesting carriers to use
       unbundled network elements to provide exchange access would have significant
       policy ramifications.  As BellSouth explains, existing combinations of unbundled
       loops and transport network elements are a "direct (and often physically identical)
       substitute for the incumbent LEC's regulated access services . . . ," but priced
       significantly lower than tariffed special access services.  The special access
       service that BellSouth and SBC refer to consists of entrance facilities from the
       interexchange carrier's point of presence (POP)  to an incumbent LEC's switch or
       serving wire center (SWC), a dedicated transport link from the SWC to an end
       office, and a channel termination facility from the end office to the end user.
       500. As an initial matter, under existing law, a requesting carrier is entitled to obtain
       existing combinations of loop and transport between the end user and the incumbent
       LEC's serving wire center on an unrestricted basis at unbundled network element
       prices.  In particular, any requesting carrier that is collocated in a serving wire
       center is free to order loops and transport to that serving wire center as unbundled
       network elements because those elements meet the unbundling standard, as
       discussed above.  Moreover, to the extent those unbundled network elements are
       already combined as a special access circuit, the incumbent may not separate them
       under rule 51.315(b), which was reinstated by the Supreme Court.  In such
       situations, it would be impermissible for an incumbent LEC to require that a
       requesting carrier provide a certain amount of local service over such facilities.
       501. Moreover, we wish to make clear that in situations where the requesting carrier is
       collocated and has self-provisioned transport or obtained transport from an
       alternative provider, but is purchasing unbundled loops, that carrier may provide
       only exchange access over those facilities.  Thus, for instance, a requesting carrier is
       entitled to purchase unbundled loops in order to provide advanced services (e.g.,
       interstate special access xDSL service).
       502. Finally, we clarify that interexchange carriers are entitled to use unbundled
       dedicated transport from their POP to a serving wire center in order to provide local
       telephone exchange service.  Such carriers are entitled to obtain such dedicated
       transport links pursuant to the unbundling standard discussed above.  The fact that
       such carriers may also provide exchange access over those facilities does not alter
       our conclusion.
       503. We conclude that the record in this phase of the proceeding is insufficient for us to
       determine whether or how our rules should apply in the discrete situation involving
       the use of dedicated transport links between the incumbent LEC's serving wire
       center and an interexchange carrier's switch or point of presence (or "entrance
       facilities").  Only a handful of parties commented on the special access arbitrage
       issue that was first raised by BellSouth's August 9, 1999, ex parte filing.  We
       believe that we should fully explore the policy ramifications of applying our rules in
       a way that potentially could cause a significant reduction of the incumbent LECs'
       special access revenues prior to full implementation of access charge and universal
       service reform.  Therefore, we set certain discrete issues for further comment below.
            A.   Nondiscrimination Obligations of Incumbent LECs
       504. We reaffirm the conclusion the Commission adopted in the Local Competition First
       Report and Order that national rules defining "nondiscriminatory access" to
       unbundled network elements will reduce the costs of entry and speed the
       development of competition in local telecommunications markets.  We find that
       the phrase "nondiscriminatory access" in section 251(c)(3) means at least two
       things: first, the quality of an unbundled network element that an incumbent LEC
       provides, as well as the access provided to that element, must be equal between all
       carriers requesting access to that element; second, where technically feasible, the
       access and unbundled network element provided by an incumbent LEC must be
       provided in "substantially the same time and manner" to that which the incumbent
       provides to itself.
       505. In those situations where an incumbent LEC does not provide access to network
       elements to itself, we reaffirm our requirement that incumbent LECs must provide
       access in a manner that provides a requesting carrier with a meaningful opportunity
       to compete.  Because we believe that the technical infeasibility problem will arise
       rarely, we expect incumbent LECs to fulfill the non-discrimination requirement in
       nearly all instances where they provision unbundled network elements.  In the rare
       instances where technical feasibility issues arise, incumbent LECs must prove to a
       state commission that it is technically infeasible to provide access to unbundled
       elements at the same level of quality that the incumbent LEC provides to itself.
       DVI. FOURTH FURTHER NOTICE OF PROPOSED RULEMAKING
            A.   Background
       507. As noted above, in the Local Competition First Report and Order, the Commission
       held that for all unbundled network elements, including combinations of network
       elements, incumbent LECs may not impose any usage restriction on the use of such
       elements, or combinations thereof.  In that order, however, the Commission
       imposed a temporary access charge on the purchase of unbundled switching.  In
       particular, the Commission required requesting carriers to pay, for a limited time
       period, the carrier common line charge (CCL) and 75 percent of the Tandem
       Interconnection Charge (TIC).  The Commission found that it had discretion
       under the Act "to adopt a limited, transitional plan to address public policy concerns
       raised by the bypass of access charges via unbundled elements."  This decision was
       upheld by the Eighth Circuit, which found that the Commission decision was
       reasonable.
       508. In the Third Order on Reconsideration, the Commission required incumbent LECs
       to provide access to shared transport as an unbundled network element in
       conjunction with local and tandem switching.  In that order, the Commission limited
       the obligation of incumbent LECs to provision shared transport to end users to
       whom the requesting carrier was providing local exchange service.  The
       Commission sought comment on whether requesting carriers may use unbundled
       dedicated or shared transport facilities in conjunction with unbundled switching, to
       originate or terminate interstate toll traffic to customers to whom the requesting
       carrier does not provide local exchange service.  Specifically, the Further Notice
       of Proposed Rulemaking requested comment on the "intensely interrelated" question
       of whether such use would conflict with the Commission's implementation of
       access charge reform and universal service.
            A.   Discussion
       509. Parties have argued in this proceeding that allowing requesting carriers to obtain
       combinations of loop and transport unbundled network elements based on forward-
       looking cost would provide opportunities for arbitrage of special access services.
       We are cognizant that special access pre-dates passage of the 1996
       Telecommunications Act and has historically been provided by incumbent LECs at
       prices that are higher than the unbundled network element pricing scheme of section
       252(d)(1).  Accordingly, in this Further Notice we consider whether there is any
       basis in the statute or our rules under which incumbent LECs could decline to
       provide entrance facilities at unbundled network element prices.
       510. We seek comment on the argument that the "just and reasonable" terms of section
       251(c) or section 251(g) permit the Commission to establish a usage restriction on
       entrance facilities.  Parties should also address whether there is any other statutory
       basis for limiting an incumbent LEC's obligation to provide entrance facilities as an
       unbundled network element.
       511. We acknowledge that resolution of this issue potentially could have large financial
       impact on incumbent local exchange carriers.  We seek comment on this issue, and
       on the extent to which any such impact should be considered in reaching a decision
       on this issue.  We seek comment on the policy implications, if any, of a significant
       reduction in special access revenues for our universal service program.  Finally,
       because the record developed in the Further Notice of Proposed Rulemaking in the
       Shared Transport Order is two years old, we invite parties to refresh the record on
       whether requesting carriers may use unbundled dedicated or shared transport
       facilities in conjunction with unbundled switching to originate or terminate
       interstate toll traffic to customers to whom the requesting carrier does not provide
       local exchange service.
       DXII.     PROCEDURAL ISSUES
            A.   Final Regulatory Flexibility Analysis
       513. As required by the Regulatory Flexibility Act (RFA), an Initial Regulatory
       Flexibility Analysis (IRFA) was incorporated in the Notice in CC Docket No. 96-
       98.  The Commission sought written public comments on the proposals in the
       Notice, including comments on the IRFA.  This present Final Regulatory Flexibility
       Analysis (FRFA) conforms to the RFA.
                 1.   Need for, and Objectives of, the Third Report and Order
       514. This Order responds to the Supreme Court's January, 1999, decision that directs the
       Commission to revise the standards used to determine which network elements
       incumbent LECs must unbundle pursuant to section 251 of the Act.  More
       specifically, this Order gives substance to the "necessary" and "impair" standards in
       section 251(d)(2) of the Act.  Applying these standards, and considering the
       availability of elements outside of the incumbent's network, this Order adopts a list
       of network elements that must be unbundled on a national basis, subject to certain
       discrete geographic and product market exceptions.  This Order also announces that
       the Commission will reexamine the national list of unbundled network elements in
       three years.  It reaffirms a state commission's authority to require incumbent LECs
       to unbundle additional elements, as long as the unbundling obligations: (1) are
       consistent with the requirements of section 251; (2) do not substantially prevent
       implementation of the requirements of that section and the purposes of the Act; and
       (3) are consistent with the national policy framework established in this Order.
       Finally the Order reaffirms that incumbent LECs are obligated to offer combinations
       of network elements that are already combined, including combinations of loop,
       multiplexing/concentrating equipment, and dedicated transport if they are currently
       combined.
                 1.   Summary of Significant Issues Raised by the Public
                 Comments in Response to the IRFA
       515. We received no comments in response to the IRFA in the Notice.  We did, however,
       receive some general small-business-related comments which are discussed
       throughout the Order and are summarized in subsection 5 of the FRFA, infra.
                 1.   Description and Estimate of the Number of Small
                 Entities to which Rules will Apply
       516. In the FRFA to the Commission's Local Competition First Report and Order, we
       adopted the analysis and definitions set forth in determining the small entities
       affected by this Order for purposes of this FRFA.  The RFA directs agencies to
       provide a description of and, where feasible, an estimate of the number of small
       entities that will be affected by rules.  The RFA generally defines the term "small
       entity" as having the same meaning as the terms "small business," "small
       organization," and "small governmental jurisdiction."  The RFA defines a "small
       business" to be the same as a "small business concern" under the Small Business
       Act, unless the Commission has developed one or more definitions that are
       appropriate to its activities.  Under the Small Business Act, a "small business
       concern" is one that:  (1) is independently owned and operated; (2) is not dominant
       in its field of operation; and (3) meets any additional criteria established by the
       Small Business Administration (SBA).  Below we further describe and estimate
       the number of small entities that may be affected by the rules adopted in this Order.
       517. We have included small incumbent LECs in this RFA analysis.  As noted above, a
       "small business" under the RFA is one that, inter alia, meets the pertinent small
       business size standard (e.g., a telephone communications business having 1,500 or
       fewer employees), and "is not dominant in its field of operation."  The SBA's
       Office of Advocacy contends that, for RFA purposes, small incumbent LECs are not
       dominant in their field of operation because any such dominance is not national in
       scope.  We have therefore included small incumbent LECs in this RFA analysis,
       although we emphasize that this RFA action has no effect on the Commission's
       analyses and determinations in other non-RFA contexts.
       518. The United States Bureau of the Census (the Census Bureau) reports that at the end
       of 1992, there were 3,497 firms engaged in providing telephone services, as defined
       therein, for at least one year.  These firms include a variety of different categories
       of carriers, including LECs, interexchange carriers, competitive access providers,
       wireless providers, operator service providers, pay telephone operators, wireless
       providers, and resellers.  At least some of these 3,497 telephone service firms may
       not qualify as small entities because they are not "independently owned and
       operated."  For example, a wireless provider that is affiliated with a LEC having
       more than 1,500 employees would not meet the definition of a small business.  It
       seems reasonable to conclude, therefore, that fewer than 3,497 of these telephone
       service firms are small entities that may be affected by this Order.  Since 1992,
       however, many new carriers have entered the telephone services marketplace.  At
       least some of these new entrants may be small entities that are affected by this
       Order.
       519. The SBA has developed a definition of small entities for telephone communications
       companies other than radiotelephone (wireless) companies.  The Census Bureau
       reports that there were 2,321 such telephone companies that had been operating for
       at least one year at the end of 1992.  According to the SBA's definition, a wireline
       telephone company is a small business if it employs no more than 1,500 persons.
       All but 26 of the 2,321 wireline companies listed by the Census Bureau were
       reported to have fewer than 1,000 employees.  Thus, even if all 26 of those
       companies had more than 1,500 employees, there would still be 2,295 wireline
       companies that might qualify as small entities.  Although it seems certain that some
       of these carriers are not independently owned and operated, we are unable at this
       time to estimate with greater precision the number of wireline carriers and service
       providers that would qualify as small business concerns under the SBA's definition.
       Consequently, we estimate that fewer than 2,295 of these wireline companies are
       small entities that this Order may affect.  Since 1992, however, many wireline
       carriers have entered the telephone services marketplace.  Many of these new
       entrants may be small entities that are affected by this Order.
       520. Incumbent Local Exchange Carriers.  Neither the Commission nor the SBA has
       developed a definition specifically directed toward small incumbent LECs.  The
       closest applicable definition under SBA rules is for telephone communications
       companies other than radiotelephone (wireless) companies.  The most reliable
       source of information regarding the number of LECs nationwide of which we are
       aware appears to be the data that we collect annually in connection with the
       Telecommunications Relay Service (TRS).  According to our most recent data,
       1,410 companies reported that they were engaged in the provision of local exchange
       services.  Although it seems certain that some of these carriers are not
       independently owned and operated or have more than 1,500 employees, we are
       unable at this time to estimate with greater precision the number of small incumbent
       LECs that would qualify as small business concerns under SBA's definition.
       Consequently, we estimate that there are fewer than 1,410 small incumbent LECs
       that may be affected by the decisions and rules adopted in this Order.
                 1.   Description of Projected Reporting, Recordkeeping, and
                 Other Compliance Requirements
       521. Pursuant to sections 251(c) and (d) of the 1996 Act, incumbent LECs, including
       those that qualify as small entities, are required to provide nondiscriminatory access
       to unbundled network elements.  The only exception to this rule is those carriers
       that qualify and have gone through the process of obtaining an exemption,
       suspension or modification pursuant to section 251(f) of the Act.  This Order
       interprets the necessary and impair standards of section 251(d)(2) in such a way that
       it fulfills the Supreme Court's requirement that we apply some limiting standard to
       an incumbent LEC's 251(c) obligations.  In this Order, we identify a minimum
       set of network elements that incumbent LECs are obligated to offer to requesting
       carriers on an unbundled basis nationwide: (1) local loops, including dark fiber and
       high-capacity loops; (2) subloops; (3) network interface devices; (4) local
       switching, except under certain conditions; (5) interoffice transport; (6)
       signaling and call-related databases; (7) operations support systems; and (8) in
       very limited situations, packet switching.  State commissions may require
       incumbent LECs to provide additional network elements on an unbundled basis.
       The Order also clarifies that incumbent LECs are obligated to provide access to
       combinations of loop, multiplexing/concentrating equipment and dedicated
       transport if they are currently combined.  Compliance with the rules and decisions
       adopted in this Order may require the use of engineering, technical, operational,
       accounting, billing, and legal skills.
                 1.   Steps Taken to Minimize the Economic Impact of this
                 Order on Small Entities, and Alternatives Considered
       522. As we concluded in the original FRFA, and as discussed more thoroughly
       above, we believe that our actions establishing a minimum national list of
       unbundled network elements in this Order facilitates the development of
       competition in the local exchange and exchange access markets.  This decision
       decreases entry barriers and provides reasonable opportunities for all carriers,
       including small entities, to provide local exchange and exchange access services.
       523. National requirements for unbundling allows requesting carriers, including small
       entities, to take advantage of economies of scale in network.  Requesting carriers,
       which may include small entities, should have access to the same technologies and
       economies of scale and scope available to incumbent LECs.  Having such access
       will facilitate competition and help lower prices for all consumers, including
       individuals and small entities.  A minimum national list of unbundled network
       elements also should facilitate the development of consistent standards and help
       resolve issues without imposing additional litigation costs on parties, including
       small entities.
       524. Establishing a minimum national list of unbundled network elements facilitates
       negotiations and reduces regulatory burdens for all parties, including small entities.
       Adopting a national list lowers requesting carrier's cost by enabling them to
       implement regional and/or national business plans.  In reaching this conclusion we
       considered one proposal to adopt national standards that would be applied by state
       commissions on a market-by-market basis.  We concluded that this approach would
       lead to greater uncertainty in the market and would hinder the development of
       competition.  We also found that it would complicate the negotiation of
       interconnection agreements and lead to increased litigation.  Furthermore, this
       approach would increase the administrative burden on state commissions and parties
       arbitrating interconnection agreements before these state commissions.  All of
       these factors would slow the development of competition.  Therefore we reaffirmed
       our decision in the Local Competition First Report and Order to adopt a national
       list.
                 1.   Report to Congress
       525. The Commission will send a copy of the Third Report and Order, including this
       FRFA, in a report to be sent to Congress pursuant to the Small Business Regulatory
       Enforcement Fairness Act of 1996.  In addition, the Commission will send a copy
       of the Third Report and Order, including the FRFA, to the Chief Counsel for
       Advocacy of the Small Business Administration.  The Third Report and Order and
       FRFA, or summaries thereof, will also be published in the Federal Register.
            A.   Initial Regulatory Flexibility Analysis (IRFA)
       526. As required by the RFA, the Commission has prepared this present Initial
       Regulatory Flexibility Analysis (IRFA) of the possible significant economic impact
       on small entities by the policies and rules proposed in this Fourth Further Notice of
       Proposed Rulemaking.  Written public comments are requested on this IRFA.
       Comments must be identified as responses to the IRFA and must be filed by the
       deadlines for comments on the Fourth Further Notice of Proposed Rulemaking
       provided above in section VII.  The Commission will send a copy of the Fourth
       Further Notice of Proposed Rulemaking, including this IRFA, to the Chief Counsel
       for Advocacy of the Small Business Administration.  In addition, the Fourth
       Further Notice of Proposed Rulemaking and IRFA, or summaries thereof, will be
       published in the Federal Register.
                 1.   Need for, and Objectives of, the Proposed Rules
       527. In this proceeding commenters have argued that allowing requesting carriers to
       obtain combinations of loop and transport unbundled network elements based on
       forward-looking cost would provide opportunities for arbitrage of special access
       services. We recognize that special access has historically been provided by
       incumbent LECs at prices that are higher than the unbundled network element
       pricing scheme of section 252(d)(1).  Accordingly, in this Fourth Further Notice, the
       Commission seeks comment on the legal and policy bases for precluding requesting
       carriers from substituting dedicated transport for special access entrance facilities.
       We ask whether there is any basis in the statute or our rules under which incumbent
       LECs could decline to provide entrance facilities at unbundled network element
       prices.
       528. Finally, because the record developed in the Further Notice of Proposed
       Rulemaking in the Shared Transport Order is two years old, we invite parties to
       refresh the record on whether requesting carriers may use unbundled dedicated or
       shared transport facilities in conjunction with unbundled switching to originate or
       terminate interstate toll traffic to customers to whom the requesting carrier does not
       provide local exchange service.
                 1.   Legal Basis
       529. Sections 1-4, 10, 201, 202, 251-254, 271, and 303(r) of the Communications Act, as
       amended, 47 U.S.C.  151-54, 160, 201, 202, 251-54, 271, and 303(r).
                 
                 1.   Description and Estimate of the Number of Small
                 Entities to Which the Proposed Rules Will Apply
       530. In the FRFA in the Third Report and Order,  supra, we have described the entities
       possibly affected by that decision.  We anticipate that the same entities, as well as
       those described below, could be affected by any action taken in response to the
       Fourth Further Notice.  We therefore incorporate the description and estimates used
       in the FRFA in the Third Report and Order,  and add the following descriptions.
       531. Competitive Local Exchange Carriers.  Neither the Commission nor SBA has
       developed a definition of small entities specifically directed toward providers of
       competitive local exchange services.  The most reliable source of information
       regarding the number of competitive LECs nationwide of which we are aware
       appears to be the data we collected in the August, 1999 Local Competition Report.
       According to our most recent data, 158 companies reported that they were local
       service competitors holding numbering codes.  Although it seems certain that
       some of these carriers are not independently owned and operated, or have more than
       1,500 employees, we are unable at this time to estimate with greater precision the
       number of competitive LECs that would qualify as small business concerns under
       SBA's definition.  Consequently, we estimate that there are fewer than 158 small
       entity competitive LECs that may be affected by the decisions and rules adopted in
       response to the Fourth Further Notice of Proposed Rulemaking.
       532. Competitive Access Providers.  Neither the Commission nor SBA has developed a
       definition of small entities specifically directed toward providers of competitive
       access services (CAPs).  The closest applicable definition under SBA rules is for
       telephone communications companies other than radiotelephone (wireless)
       companies.  The most reliable source of information regarding the number of CAPs
       nationwide of which we are aware appears to be the data that we collect annually in
       connection with the TRS Worksheet.  According to our most recent data, 129
       companies reported that they were engaged in the provision of competitive access
       services.  Although it seems certain that some of these carriers are not
       independently owned and operated, or have more than 1,500 employees, we are
       unable at this time to estimate with greater precision the number of competitive
       LECs that would qualify as small business concerns under SBA's definition.
       Consequently, we estimate that there are fewer than 129 small entity competitive
       LECs that may be affected by the decisions and rules adopted in response to the
       Fourth Further Notice of Proposed Rulemaking.
                 1.   Description of Projected Reporting, Recordkeeping, and
                 Other Compliance Requirements
       533. If the Commission does not establish any restrictions on the use of unbundled
       network elements or combinations of network elements, no additional compliance
       requirements are anticipated from further consideration of this issue.  If, however,
       restrictions on access to network elements are imposed, and depending on how the
       restrictions are imposed, competitive LECs, CAPs and other purchasers of
       unbundled network elements, including small entities, may be subject to additional
       reporting, recordkeeping and other compliance requirements.  Incumbent LECs,
       including small incumbent LECs, would also be impacted because they would have
       to keep track of competitive LEC filings and whether the use of the unbundled
       network element changed in such a way that a restriction would attach.  If
       restrictions are placed on the use of unbundled network elements or combinations of
       such elements, compliance with these requests may require the use of engineering,
       technical, operational, accounting, billing, and legal skills.
                 1.   Steps Taken to Minimize Significant Economic Impact
                 on Small Entities, and Significant Alternatives
                 Considered
       534. If requesting carriers can substitute unbundled network elements, such as transport,
       for entrance facilities, incumbent LECs, including small entities, may be
       significantly economically impacted.  On the other hand, substituting unbundled
       network elements for entrance facilities could benefit competitive LECs, CAPs, and
       other purchasers of unbundled network elements.  The Commission will evaluate in
       this proceeding whether there are legal grounds for restricting such access.  If no
       such grounds exist, and instead if the statute requires unrestricted access to these
       unbundled network elements or combinations, then the Commission will have no
       alternative other than implementation of the statutory requirements for unrestricted
       access.
                 1.   Federal Rules that May Duplicate, Overlap, or Conflict
                 with the Proposed Rules
       535. None.
                        DXXXVI.   ADMINISTRATIVE MATTERS
       537. Pursuant to Sections 1.415 and 1.419 of the Commission's rules, 47 C.F.R. 
       1.415, 1.419, interested parties may file comments on or before January 12, 2000
       and reply comments on or before February 11, 2000.  Comments may be filed using
       the Commission's Electronic Comment Filing System (ECFS) or by filing paper
       copies.  See Electronic Filing of Documents in Rulemaking Proceedings, 63 Fed.
       Reg. 24,121 (1998).
       538. Comments filed through the ECFS can be sent as an electronic file via the Internet
       to <http://www.fcc.gov/e-file/ecfs.html>.  Generally, only one copy of an electronic
       submission must be filed.  If multiple docket or rulemaking numbers appear in the
       caption of this proceeding, however, commenters must transmit one electronic copy
       of the comments to each docket or rulemaking number referenced in the caption.  In
       completing the transmittal screen, commenters should include their full name,
       Postal Service mailing address, and the applicable docket or rulemaking number.
       Parties may also submit an electronic comment by Internet e-mail.  To get filing
       instructions for e-mail comments, commenters should send an e-mail to
       ecfs@fcc.gov, and should include the following words in the body of the message,
       "get form <your e-mail address."  A sample form and directions will be sent in
       reply.
       539. Parties who choose to file by paper must file an original and four copies of each
       filing.  If you want each Commissioner to receive a personal copy of your
       comments, you must file an original plus eleven copies.  All filings must be sent to
       the Commission's Secretary, Magalie Roman Salas, Office of the Secretary, TW-
       A306, Federal Communications Commission, 445 12th Street, S.W., Washington,
       D.C. 20554.  The Common Carrier Bureau contact for this proceeding is Jodie
       Donovan-May at 202-418-1580.  If more than one docket or rulemaking number
       appear in the caption of this proceeding, commenters must submit two additional
       copies for each additional docket or rulemaking number.
       540. Parties who choose to file by paper should also submit their comments on diskette.
       These diskettes should be submitted to:  Jodie Donovan-May, Federal
       Communications Commission, 445 12th Street, S.W., Washington, D.C. 20554.
       Such a submission should be on a 3.5 inch diskette formatted in an IBM compatible
       format using Word for Windows or compatible software.  The diskette should be
       accompanied by a cover letter and should be submitted in "read only" mode.  The
       diskette should be clearly labeled with the commenter's name, proceeding (including
       the lead docket number in this case, Docket No. 96-98, type of pleading (comment
       or reply comment), date of submission, and the name of the electronic file on the
       diskette.  The label should also include the following phrase "Disk Copy - Not an
       Original."  Each diskette should contain only one party's pleadings, preferably in a
       single electronic file.  In addition, commenters must send diskette copies to the
       Commission's copy contractor, International Transcription Service, Inc., 1231 20th
       Street, N.W., Washington, D.C.  20037.
       541. Ex Parte Rules.  This proceeding will be treated as a "permit-but-disclose"
       proceeding subject of the "permit-but-disclose" requirements under Section
       1.1206(b) of the Commission's rules.  Ex parte presentations are permissible if
       disclosed in accordance with Commission rules, except during the Sunshine Agenda
       period when ex parte or otherwise, are generally prohibited.  Person making oral ex
       parte presentations are reminded that a memorandum summarizing a presentation
       must contain a summary of the substance of the presentation and not merely a listing
       of the subjects discussed.  More than a one or two sentence description of the view
       are arguments presented is generally required.  Additional rules pertaining to oral
       and written presentations are set forth in Section 1.1206(b).
       DXLII.    ORDERING CLAUSES
       543. Accordingly, IT IS ORDERED that pursuant to Sections 1, 3, 4, 201-205, 251, 256,
       271, 303(r) of the Communications Act of 1934, as amended, 47 U.S.C.  151,
       153, 154, 201-205, 251, 252, 256, 271, 303(r) the THIRD REPORT AND ORDER
       AND FOURTH FURTHER NOTICE OF PROPOSED RULEMAKING is hereby
       ADOPTED.
       544. IT IS FURTHER ORDERED that section 51.317 of the Commission's Rules, 47
       C.F.R.  51.317, as set forth in Appendix C hereto, is effective 30 days after
       publication in the Federal Register.
       545. IT IS FURTHER ORDERED that  51.319 of the Commission's Rules , 47 C.F.R.
        51.319, as set forth in Appendix C hereto, is effective 30 days after publication in
       the Federal Register, with the exception of only the following requirements, which
       are effective 120 days after publication in the Federal Register: the requirement to
       provide access on an unbundled basis to dark fiber as set forth in  51.319(a)(1); the
       requirement to provide access on an unbundled basis to subloops and inside wire as
       set forth in  51.319(a)(2); the requirement to provide access on an unbundled basis
       to packet switching in the limited circumstances set forth in  51.319(c)(5); the
       requirement to provide access on an unbundled basis to dark fiber transport as set
       forth in  51.319(d)(1)(ii); the requirement to provide access on an unbundled basis
       to the Calling Name Database, 911 Database, and E911 Database as set forth in
       51.319(e)(2)(i); and the requirement to provide access on an unbundled basis to
       loop qualification information as set forth in  51.319(g).
       546. IT IS FURTHER ORDERED that the Commission's Office of Public Affairs,
       Reference Operations Division, SHALL SEND a copy of this THIRD REPORT
       AND ORDER, including the Final Regulatory Flexibility Analysis, to the Chief
       Counsel for Advocacy of the Small Business Administration.
       547. IT IS FURTHER ORDERED that the Commission's Office of Public Affairs,
       Reference Operations Division, SHALL SEND a copy of this FOURTH FURTHER
       NOTICE OF PROPOSED RULEMAKING, including the Initial Regulatory
       Flexibility Analysis, to the Chief Counsel for Advocacy of the Small Business
       Administration.
                 FEDERAL COMMUNICATIONS COMMISSION
                 Magalie Roman Salas
                 Secretary
                           APPENDIX A
         List of Commenters in CC Docket No. 96-98
  Ad Hoc Telecommunications Users Committee (Ad Hoc)
  Allegiance Telecom, Inc. (Allegiance)
  Ameritech (Ameritech)
  Association for Local Telecommunications Services (ALTS)
  AT&T Corp. (AT&T)
  Bell Atlantic Telephone Companies (Bell Atlantic)
  BellSouth Corporation/BellSouth Telecommunications, Inc. (BellSouth)
  Cable and Wireless USA, Inc. (Cable & Wireless)
  Centennial Cellular Corporation, CenturyTel Wireless, Inc., Thumb Cellular     Limited
  Partnership, and Trillium Cellular Corporation (Centennial Joint)
  Choice One Communications, Network Plus, Inc., GST Telecom Inc., CTSI, Inc., and
  Hyperion Telecommunications, Inc. (Choice One Joint)
  Cincinnati Bell Telephone Company (Cincinnati Bell)
  CO Space Services, Inc. (CO Space)
  Columbia Telecommunications, Inc. (Columbia)
  Competition Policy Institute (CPI)
  Competitive Telecommunications Association (CompTel)
  Connecticut Department of Public Utility Control (Connecticut DPUC)
  Corecomm Limited (Corecomm)
  Covad Communications Company (Covad)
  Cox Communications, Inc. (Cox)
  e.spire Communications, Inc. and Intermedia Communications Inc. (e.spire Joint)
  Excel Communications, Inc. (Excel)
  Florida Public Service Commission (Florida PSC)
  Focal Communications Corporation (Focal)
  General Services Administration (GSA)
  GTE Service Corporation (GTE)
  Illinois Commerce Commission (Illinois Commission)
  Information Technology Industry Council (ITIC)
  Inline Connection Corporation (Inline)
  Iowa Utilities Board (Iowa)
  Joint Consumer Advocates (Joint Consumer Advocates)
  Kentucky Public Service Commission (Kentucky PSC)
  KMC Telecom Inc. (KMC)
  Level 3 Communications, Inc. (Level 3)
  Low Tech Designs, Inc. (Low Tech)
  MCI WorldCom, Inc. (MCI WorldCom)
  McLeodUSA Telecommunications Services, Inc. (McLeod)
  Mediaone Group, Inc. (Mediaone)
  Metro One Telecommunications, Inc. (Metro One)
  Metromedia Fiber Network Services, Inc. (MFN)
  MGC Communications, Inc.  (MGC)
  National Association of Regulatory Utility Commissioners  (NARUC)
  National Telecommunications and Information Administration (NTIA)
  Net2000 Communications, Inc. (Net2000)
  Network Access Solutions Corporation (NAS)
  New England Voice & Data, LLC (New England Voice & Data)
  New Jersey Division of the Ratepayer Advocate (New Jersey DRA)
  New York State Department of Public Service (New York DPS)
  NEXTLINK Communications, Inc. (NEXTLINK)
  Northpoint Communications, Inc. (Northpoint)
  Ohio Public Utilities Commission (Ohio PUC)
  Optel, Inc. (OpTel)
  People of the State of California and the California Public Utilities Commission
  (California PUC)
  Pennsylvania Public Utility Commission (Pennsylvania PUC)
  Pilgrim Telephone, Inc. (Pilgrim)
  Prism Communications Services, Inc. (Prism)
  Oregon Public Utility Commission (Oregon PUC)
  Qwest Communications Corp. (Qwest)
  RCN Telecom Services, Inc. (RCN)
  Rhythms Netconnections Inc. (Rhythms)
  Rural Telephone Coalition (Rural Telephone Coalition)
  SBC Telecommunications, Inc. (SBC)
  Sprint Corporation (Sprint)
  Strategic Policy Research (SPR)
  Telecommunications Resellers Association (TRA)
  TelTrust, Inc. (TelTrust)
  Teligent, Inc. (Teligent)
  Texas Public Utility Commission (Texas PUC)
  Time Warner Telecom (Time Warner)
  United States Telephone Association  (USTA)
  US WEST, Inc. (US West)
  UTC, The Telecommunications Association (UTC)
  Vermont Public Service Board  (Vermont PSB)
  Waller Creek Communications, Inc. (Waller Creek)
  Washington Utilities and Transportation Commission (Washington UTC)
  Weingarten, Michael (Weingarten)
  WinStar Communications, Inc. (WinStar)
  Wisconsin Public Service Commission (Wisconsin PSC)
  
                    Appendix B
   Top 50 Metropolitan Statistical Areas (MSAs)
       1.   Los Angeles   Long Beach
       2.   New York
       3.   Chicago
       4.   Philadelphia
       5.   Washington, D.C.
       6.   Detroit
       7.   Houston
       8.   Atlanta
       9.   Boston
       10.  Dallas
       11.  Riverside   San Bernardino
       12.  Phoenix   Mesa
       13.  Minneapolis   St. Paul
       14.  San Diego
       15.  Orange County
       16.  Nassau   Suffolk
       17.  St. Louis
       18.  Baltimore
       19.  Pittsburgh
       20.  Oakland
       21.  Seattle   Bellevue   Everett
       22.  Tampa   St. Petersburg   Clearwater
       23.  Cleveland   Lorain   Elyria
       24.  Miami
       25.  Newark
       26.  Denver
       27.  Portland   Vancouver
       28.  San Francisco
       29.  Kansas City
       30.  San Jose
       31.  Cincinnati
       32.  Fort Worth   Arlington
       33.  Norfolk   Virginia Beach   Newport News
       34.  Sacramento
       35.  San Antonio
       36.  Indianapolis
       37.  Orlando
       38.  Milwaukee   Waukesha
       39.  Fort Lauderdale
       40.  Columbus, OH
       41.  Las Vegas
       42.  Charlotte   Gastonia   Rock Hill
       43.  Bergen   Passaic
       44.  New Orleans
       45.  Salt Lake City   Ogden
       46.  Buffalo   Niagara Falls
       47.  Greensboro   Winston Salem   High Point
       48.  Nashville
       49.  Hartford
       50.  Providence   Fall River   Warwick
  Source:  March 1999 LERG; USTA UNE Report at I-22.
  
                    APPENDIX C
                                             APPENDIX D